MidCap Bus. Credit v. MidCap Fin. Tr., 21 Civ. 7922 (AKH)

CourtUnited States District Courts. 2nd Circuit. United States District Courts. 2nd Circuit. Southern District of New York
Docket Number21 Civ. 7922 (AKH)
Decision Date08 March 2022



No. 21 Civ. 7922 (AKH)

United States District Court, S.D. New York

March 8, 2022


Alvin K. Hellerstein, United States District Judge

Plaintiff MidCap Business Credit, LLC (“Plaintiff”) brings this suit against MidCap Financial Trust, MidCap Financial Services, LLC, MidCap Financial Services Capital Management, LLC, MidCap FinCo Designated Activity Company, and Apollo Capital Management, L.P. (collectively “Defendants”), alleging violations of the Lanham Act, 15 U.S.C. § 101 et seq. ECF No. 1. Plaintiff owns a registered and incontestable mark in “MIDCAP BUSINESS CREDIT, ” Reg. No. 4, 797, 903 (registered August 2015), and has applied for, but not yet received, a registration for “MIDCAP” as a standalone mark.

Plaintiff asserts two types of federal claims-one under 15 U.S.C. § 1114, alleging infringement of Plaintiff's registered mark “MIDCAP FINANCIAL TRUST;” and the second, under 15 U.S.C. § 1125(a), alleging unfair competition and false designation of origin based on Plaintiff's rights in the unregistered mark “MIDCAP.” Plaintiff asserts similar claims under New York State law, N.Y. Gen. Bus. Law § 349, and under the common law.


Defendants move to dismiss the complaint for failure to state a claim under Rule 12(b)(6). They argue that although Plaintiff purports to be enforcing its rights in “MIDCAP BUSINESS CREDIT, ” Plaintiff actually seeks to enforce rights in the standalone mark “MIDCAP, ” which it cannot do because “MIDCAP” is generic, or at best, descriptive of Plaintiff's services. In essence, Defendants argue that Plaintiff cannot bootstrap a claim based upon its rights in “MIDCAP BUSINESS CREDIT” into a claim based upon the lesser included “MIDCAP.”

I agree with Defendants. The Complaint conflates “MIDCAP BUSINESS CREDIT” with “MIDCAP, ” and as to Plaintiff's rights in “MIDCAP, ” the Complaint is vague and conclusory. For this reason, and others provided below, the motion to dismiss is granted.


The Complaint alleges the facts as follow, which I accept as true for the purposes of deciding this motion. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009).

Plaintiff is a commercial finance company that works with and extends customized asset-based loans to small and mid-size manufacturers, distributors, wholesalers, service companies, and other commercial and industrial businesses throughout the United States. Compl. ¶ 1-2.[1] It provides working capital loans to companies generally unable to obtain traditional bank financing sufficient to support their growth or unique needs. ¶ 2. Plaintiff began offering services under its current name, MidCap Business Credit, LLC, in 2004, officially changing its name from Hartford Business Credit, LLC, better to reflect its national customer base and expansion plans. ¶ 3. Since that time, Plaintiff has used the trade names, marks, domain names, and social media handles “MIDCAP, ” “MIDCAP CREDIT, ” and “MIDCAP


BUSINESS CREDIT, ” and variants thereof to identify its financial services, defined as “the ‘MIDCAP MARKS.'” ¶ 3. At that time, Plaintiff operated the domain name midcapcredit.com and prominently displayed the following mark and logo: (Image Omitted) ¶ 3. In 2013, Plaintiff described its primary site as midcap.com; it retained the midcapcredit.com domain name, and automatically redirected visitors to its site, midcap.com. ¶¶ 4, 35.

In 2015, Plaintiff filed an application with the United States Patent and Trademark Office (“USPTO”) to register “MIDCAP BUSINESS CREDIT” as a Class 36 Service Mark. ¶ 44. Plaintiff disclaimed use of the phrase “BUSINESS CREDIT;” however, the USPTO initially rejected Plaintiff's application, finding the “MIDCAP BUSINESS CREDIT” mark not registrable because “MIDCAP” was descriptive of at least one feature of Plaintiff's services. See Ex. C, Declaration in Support of Motion, ECF No. 27-3.[2] Plaintiff responded that regardless of whether “MIDCAP” was descriptive of its services, the mark had acquired secondary meaning and submitted supplemental proofs. See Ex. D, Declaration in Support of Motion, ECF No. 27-4. On August 25, 2015, relying on Plaintiff's proofs, the USPTO approved the application. ¶ 54. Plaintiff claims that “MIDCAP BUSINESS CREDIT” became incontestable in September 2021, after Plaintiff made Section 8 and 15 filings attesting continuous use of the registered mark. ¶ 45.


Prior to initiating this suit, on July 23, 2021, Plaintiff also filed an application to register the standalone mark “MIDCAP” as a Class 36 Service Mark. ¶ 46. The application remains pending. ¶ 46.

Plaintiff alleges that it has developed and built goodwill in its mark. Over the past 17 years, and across five regional North American origination offices, Plaintiff has consummated over 375 loan transactions totaling more than $800 million, and now has a dozen different affiliates whom it has “authorized” “to adopt business names incorporating the MIDCAP Marks to bring them under its MIDCAP brand. ¶¶ 5, 36.

Plaintiff alleges that it engages in promotion and marketing activities. It self-distributes press releases and “tombstone” advertisements to announce deals and other noteworthy items such as new hires; it sends them to industry publications and its mailing list, as well as posts them on social media and its own website. ¶ 37. By way of example, Plaintiff annexes to the Complaint copies of representative press releases and marketing materials that it released in 2005, 2006, and 2007, all bearing its logo and titled MidCap Business Credit, LLC NEWS. See Ex. B, ECF No. 1-2. The broker, investment banker, financial advisor, or consultant who refers a deal to Plaintiff also frequently promotes it and Plaintiff's involvement. ¶ 37. In addition, Plaintiff regularly receives media coverage in industry publications such as The Asset Based Finance Journal, The Asset Based Lending Advisor, and The Secured Lender. Ex. C, ECF No. 1-3.

In addition, Plaintiff has participated in “virtually every annual national industry event, many interim national events, and nearly [sic] monthly regional events, sponsored by groups such as the Secured Finance Network and Turnaround Management Association.” ¶ 38. Plaintiff's employees regularly present at industry conferences and contribute to or are quoted in


industry publications. ¶ 38. Plaintiff uses direct marketing and emphasizes its creativity, flexibility, customized debt solutions, and experienced team of seasoned professionals. ¶ 39-40. Its primary sources of new business are professionals within commercial banks, investment banks, turn-around consulting firms, and in more recent years, private equity sponsors, and privately held wealth management companies, as well as attorneys and accountants. ¶ 39. Plaintiff, its transactions, and team members have received numerous nominations and awards. ¶ 41. For example, in 2021, Plaintiff's received the Secured Finance National Achievement Award and was inducted into its Hall of Fame. ¶ 41.

Defendant Midcap Financial Trust began operating in or about September 2008, under the trade name and mark “MIDCAP FINANCIAL” and utilizing the website midcapfinancial.com. ¶¶ 8, 47. At the time, it acted as a commercial lender specializing in providing debt solutions to health care companies, a heavily-regulated subspecialty in the finance industry which Plaintiff does not target. ¶ 47.

Plaintiff was not aware of Defendants in 2008, but at some point between 2008 and August 2012, Plaintiff learned that Defendants were using MIDCAP and MIDCAP FINANCIAL to identify their lending services. ¶¶ 47-48. On August 15, 2012, Plaintiff's then-CEO Jeff Black called Defendant Midcap Financial Trust's then-CEO Howard Widra (“Widra”) to discuss Plaintiff's concerns about possible confusion. ¶ 48. During that call, Widra stated that Midcap Financial had no plans or intention to extend beyond the healthcare industry, and also that his company was likely to be sold shortly, at which point, it would change its name and omit the term MIDCAP. ¶ 49.

In or about November 2013, unbeknownst to Plaintiff, Defendant Apollo Global Management, LLC acquired Defendant Midcap Financial Trust. ¶ 50. At some later date,


Plaintiff learned of the acquisition but trusted that the new owner would rebrand as Widra had represented. ¶ 50. In or about August 2014, however, Plaintiff learned that Defendants planned to offer asset-based lending to companies of all types, and that Midcap Financial had not changed its name or branding. ¶ 51. Consequently, on or about September 19, 2014, Plaintiff sent Defendants a demand letter, objecting to Defendants' use of their marks and noting that confusion would likely ensue, if it had not begun already. ¶ 52. The parties then commenced settlement negotiations, aiming to resolve the conflict amicably and exploring a series of different structures to achieve that end. ¶ 53. It was during the course of these negotiations that Plaintiff filed and the USPTO approved, the above-described application to register “MIDCAP BUSINESS CREDIT.” ¶ 54. The settlement negotiations have not succeeded. ¶ 55.

Infringing Conduct and Actual Confusion

Plaintiff alleges that Defendants have not only coopted Plaintiff's MIDCAP Marks, but have also coopted Plaintiff's brand positioning in the marketplace. ¶ 55. As evidence, Plaintiff points to statements on Defendants' website, midcapfinancial.com, which tout Defendants as “a middle market-focused, specialty finance firm that provides senior debt solutions to companies across all industries” “created to address the unmet need for flexible and creative debt solutions to the middle market.”...

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