NSI Int'l, Inc. v. Horizon Grp. U.S.
| Decision Date | 10 June 2022 |
| Docket Number | 20-CV-8389 (JGK) |
| Parties | NSI INTERNATIONAL, INC., Plaintiff, v. HORIZON GROUP USA, INC., Defendant. |
| Court | U.S. District Court — Southern District of New York |
The plaintiff, NSI International, Inc., brought this action against Horizon Group USA, Inc., for infringing NSI's trade dress in violation of the Lanham Act, 15 U.S.C. § 1125(a), and for related violations of New York state law. Horizon now moves to dismiss the action pursuant to Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim upon which relief can be granted. For the following reasons the motion to dismiss is granted in part and denied in part.
The following facts are taken from the Second Amended Complaint ("SAC"), and are accepted as true for the purposes of this motion.
NSI manufactures educational consumer products, including activity kits covering a number of topics. These kits are developed in conjunction with the Smithsonian Institution and are sold on NSI's website and by other retailers. Horizon also sells educational kits, including kits covering the same topics as some of the NSI kits.
In 2016, NSI sued Horizon, alleging copyright infringement and related claims. The suit was resolved by a settlement agreement. NSI does not contend that Horizon breached the settlement agreement.
Since at least 2017, NSI has allegedly marketed the kits using a uniform aesthetic comprised of the following elements:
The SAC states that these features make the kits' packaging inherently distinctive and that they are not functional.
NSI has allegedly invested substantial resources in developing and promoting the packaging of the kits, including over $5 million and thousands of man-hours. The kits are also featured in third-party gift guides, YouTube videos, and television segments, and have received several awards. The packaging of the kits is highlighted in NSI's marketing and in the third-party coverage. The SAC alleges that because of NSI's marketing and because the kits have been featured by third parties, consumers have come to associate NSI as the source of goods bearing these features, such that this combination of features has acquired secondary meaning in the market.
The SAC alleges that the packaging of the Horizon kits uses the same seven elements as those employed on the packaging of the NSI kits. Below are examples of analogous kits sold by NSI (left) and Horizon (right):
Image Omitted
The SAC alleges that Horizon's use of these elements has created confusion among consumers. The SAC alleges that "[t]here is no functional need" for Horizon to use these elements, noting that Horizon's packaging previously did not use the elements of NSI's alleged trade dress, and identifying other analogous products that use alternative designs. The SAC alleges that Horizon intentionally changed its packaging to resemble more closely NSI's packaging.
In 2020, NSI brought this action, alleging copyright infringement and related claims. NSI later filed a First Amended Complaint ("FAC"). In response to Horizon's motion, the Court dismissed the First Amended Complaint with leave to amend. The Court noted that the FAC did not mention trade dress infringement, let alone articulate a trade dress with the requisite specificity. NSI then filed the SAC, bringing claims for trade dress infringement under the Lanham Act, and unfair competition and unjust enrichment under New York state law. Horizon now moves to dismiss the SAC.
The Court has subject matter jurisdiction over the claims brought under the Lanham Act pursuant to 28 U.S.C. § 1331. The Court has supplemental subject matter jurisdiction over the state law claims pursuant to 28 U.S.C. § 1367(a) because those claims arise from the same "common nucleus of operative fact" as the claims that arise under federal law, and therefore "form part of the same case or controversy." See City of Chicago v. Int'l Coll, of Surgeons, 522 U.S. 156, 165 (1997).[1]
In deciding a motion to dismiss pursuant to Rule 12(b)(6), the allegations in the complaint are accepted as true and all reasonable inferences must be drawn in the plaintiff's favor. McCarthy v. Dun & Bradstreet Corp., 482 F.3d 184, 191 (2d Cir. 2007). The Court's function on a motion to dismiss is "not to weigh the evidence that might be presented at a trial but merely to determine whether the complaint itself is legally sufficient." Goldman v. Belden, 754 F.2d 1059, 1067 (2d Cir. 1985). The Court should not dismiss the complaint if the plaintiff has stated "enough facts to state a claim to relief that is plausible on its face." Bell Atl. Corp, v. Twombly, 550 U.S. 544, 570 (2007). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009).
In support of its motion to dismiss, Horizon submitted a number of exhibits. However, on a motion to dismiss pursuant to Rule 12(b)(6), the Court should consider only the allegations in the complaint, documents referred to in the complaint or that are integral to the complaint or matters of which judicial notice can be taken. See Chambers v. Time Warner, Inc., 282 F.3d 147, 153 (2d Cir. 2002). Horizon has not explained how the Court may take judicial notice of the exhibits and the Court therefore does not consider them.
NSI brings a claim for trade dress infringement in violation of the Lanham Act. 15 U.S.C. § 1125(a)(1)(A) provides for liability against:
[a]ny person who, on or in connection with any goods or services, or any container for goods, uses in commerce any word, term, name, symbol, or device, or any combination thereof, or any false designation of origin, . . . which is likely to cause confusion, or to cause mistake, or to deceive as to the affiliation, connection, or association of such person with another person, or as to the origin, sponsorship, or approval of . his or her goods, services, or. commercial activities by another person.
Under this provision, a plaintiff may seek redress for infringement of "trade dress," which is "a product's total image and overall appearance, as defined by its overall composition and design, including size, shape, color, texture, and graphics." Jeffrey Milstein, Inc, v. Greger, Lawlor, Roth, Inc., 58 F.3d 27, 31 (2d Cir. 1995). To prevail on such a claim, a plaintiff must first "identify the specific elements of its trade dress." Yurman Design, Inc, v. PAJ, Inc., 262 F.3d 101, 118 (2d Cir. 2001). A plaintiff must then show "that (1) the trade dress is distinctive as to the source of the good, (2) there is a likelihood of confusion between its good and defendant's, and (3) the trade dress is not functional." Luv N' Care, Ltd, v. Walgreen Co., 695 F.Supp.2d 125, 130 (S.D.N.Y. 2010).
In this case, NSI has identified the elements of its trade dress with the requisite specificity. The SAC describes seven elements as constituting its trade dress. Such a granular list is sufficient to delineate NSI's trademark. See, e.g., Shandong Shinho Food Indus. Co. v. May Flower Int'l, 521 F.Supp.3d 222, 256 (E.D.N.Y. 2021); Sambonet Paderno Industrie, S.P.A. v. Sur La Table, Inc., No. 14-CV-9473, 2015 WL 4498795, at *4 (C.D. Cal. July 23, .2015).
NSI has adequately alleged distinctiveness. A plaintiff may allege distinctiveness by alleging that the trade dress has attained "secondary meaning." Shandong, 521 F.Supp.3d at 255. "Trade dress is considered to have attained a secondary meaning when a consumer immediately associates the dress of the product with its source." Urb. Grp. Exercise Consultants, Ltd, v. Dick's Sporting Goods, Inc., 12-cv-3599, 2013 WL 866867, at *3 (S.D.N.Y. Mar. 8, 2013). In considering whether a plaintiff has adequately pleaded secondary meaning, courts in this Circuit consider the following factors: "(1) advertising expenditures, (2) consumer studies linking the mark to a source, (3) unsolicited media coverage of the product, (4) sales success, (5) attempts to plagiarize the mark, and, (6) length and exclusivity of the mark's use." Shandong, 521 F.Supp.3d at 258.
Courts have found a trade dress claim adequately pleaded where three of these factors were properly alleged. See, e . g., id. at 258-59.
In this case, NSI has adequately pleaded secondary meaning. NSI alleges that it has spent over $5 million in development and advertising expenditures, and that such advertising often highlights the packaging of the kits. NSI alleges unsolicited media coverage in the form of awards, television shows, and YouTube videos, some of which focus on the boxes of the kits. NSI alleges that YouTube videos featuring the kits have received millions of views. The sales success of the packaging can be inferred from its extensive media coverage. And NSI alleges that it has used the same packaging since at least 2017, which is a long enough period of time to allege secondary meaning. See, e.g., Eliya, Inc, v Kohl's Dep't Stores, No. 06-cv-195, 2006 WL 2645196, at *1, 4 (S.D.N.Y. Sept. 13, 2006) (). NSI has therefore alleged the first, third, fourth and sixth factors in the secondary meaning inquiry, which is sufficient to survive...
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