Santander Consumer U.S. Inc. v. Walsh

• Decision Date: 30 November 2010
• Docket Number: Civil Action No. 08–11778–MBB.
• Citation: 762 F.Supp.2d 217
• Parties: SANTANDER CONSUMER USA INC. and Drive Trademark Holdings, LP, Plaintiffs,v.Mark WALSH, Inofin, Inc, Drive USA 1, Inc. Drive USA 2, Inc. Drive USA 3, Inc. and Drive USA 4, Inc., Defendants.
• Court: U.S. District Court — District of Massachusetts

762 F.Supp.2d 217

SANTANDER CONSUMER USA INC. and Drive Trademark Holdings, LP, Plaintiffs,

v.Mark WALSH, Inofin, Inc, Drive USA 1, Inc. Drive USA 2, Inc. Drive USA 3, Inc. and Drive USA 4, Inc., Defendants.

Civil Action No. 08–11778–MBB.

United States District Court, D. Massachusetts.

Nov. 30, 2010.

Frank Alvarez, Hermes Sargent Bates, LLP, John F. Martin, John L. Turner, Jr., Gruber Hurst Johansen Hail LLP, Dallas, TX, Brian P. Voke, John A.K. Grunert, Campbell, Campbell, Edwards & Conroy, Boston, MA, for Plaintiffs.Thomas P. O'Connell, Arlington, MA, for Defendants.

MEMORANDUM AND ORDER RE: DEFENDANTS' MOTION FOR SUMMARY JUDGMENT (DOCKET ENTRY # 37); AND PLAINTIFFS' MOTION FOR JUDGMENT ON THE PLEADINGS UNDER FRCP 12(C) AND MOTION TO STRIKE DEFENDANTS' COUNTERCLAIMS (DOCKET ENTRY # 34)

BOWLER, United States Magistrate Judge.

Pending before this court is a motion for summary judgment filed by defendants Drive USA 1, Inc., Drive USA 2, Inc., Drive USA 3, Inc. and Drive USA 4, Inc. (“Drive USA defendants” or “the Drive USA companies”),¹ Mark Walsh (“Walsh”), President of Drive USA, and Inofin, Inc. (“Inofin”), a Massachusetts corporation with a principal place of business in Rockland, Massachusetts (collectively: “defendants”). (Docket Entry # 37). Defendants seek summary judgment in this trademark infringement action on all counts in the complaint as well as on Count II of a counterclaim for declaratory relief. Plaintiffs Santander Consumer USA Inc. (“Santander”), formerly known as Drive Financial Services, LP, and Drive Trademark Holdings LP (“DTH”) (collectively: “plaintiffs”), both having principal places of business in Texas, move for judgment on the pleadings under Rule 12(c), Fed.R.Civ.P. (“ Rule 12(c)”), on counts I, III and IV in the counterclaim. They also move to strike the declaratory judgment count in the counterclaim under Rule 12(f), Fed.R.Civ.P. (“ Rule 12(f)”). (Docket Entry # 34). After conducting a hearing, this court took the motions (Docket Entry 34 & 37) under advisement.

PROCEDURAL BACKGROUND

Plaintiffs filed this action in October 2008. The five count complaint sets out trademark infringement, false designation of origin, unfair competition and trademark dilution claims under the Lanham Act, 15 U.S.C. §§ 1051 et seq. (“the Lanham Act”), in counts II and III and V. Count IV consists of claims for trademark infringement and unfair competition under Massachusetts statutory and common law.² In addition to the Lanham Act claims under sections 43(a) and 32, Count V includes a claim that defendants violated Massachusetts General Laws chapter 93A, section 11 (“chapter 93A”). The count also contains claims for trademark dilution under the Texas Anti–Dilution Statute codified in section 16.29 of the Texas Business and Commerce Code (“ section 16.29”) and section 13 of Massachusetts General Laws chapter 110H (“chapter 110H”).³ Finally, Count I seeks declaratory relief under the Lanham Act.

In February 2009, defendants filed a four count counterclaim. Count I is a fraudulent procurement claim under the Lanham Act, 15 U.S.C. § 1120 (“section 1120”). Count II seeks declaratory relief under the Lanham Act. In Count III, defendants allege federal antitrust violations under the Sherman Antitrust Act, 15 U.S.C. §§ 1–7 (“the Sherman Act”), on the basis of plaintiffs' monopolistic and anticompetitive trademarks. Count IV alleges a chapter 93A violation.

THE TRADEMARKS

Plaintiffs' trademarks, all registered, consist of the following: (1) registration number 2,503,943 (“registration 943”), which issued on November 6, 2001, for the mark DRIVE with a stylized D above the letter “V” for “financial services, namely, purchasing loans from automobile dealerships”; (2) registration number 2,503,946 (“registration 946”), which issued on November 6, 2001, for the mark D in a stylized format in relation to “financial services, namely, purchasing loans from automobile dealerships”; (3) registration number 2,514,867 (“registration 867”), which issued on December 4, 2001, for the mark DRIVE FINANCIAL SERVICES with financial services appearing underneath drive in a smaller typeset and a different font coupled with a stylized D appearing above the letter “V” in drive all in relation to “financial services, namely, purchasing loans from automobile dealerships”; (4) registration number 3,081,414 (“registration 414”), which issued on April 16, 2006, for the mark DRIVE FINANCIAL SERVICES in plain text for “financial services, namely, originating loans, purchasing loans and servicing auto loans”; and (5) registration number 3,081,262 (“registration 262”), which issued on April 18, 2006, for the mark DRIVE in plain text for “financial services, namely, originating loans, purchasing loans and servicing auto loans” (collectively: “the Drive Marks”) (Docket Entry 16 & 21, ¶¶ 4; Docket Entry # 1, Ex. 1).

Registrations 414 and 262 designate first use in 1999 whereas the remaining three registrations designate first use in 2000. The filing dates of registrations 414 and 262 are respectively March 10, 2005, and August 26, 2004. The applications leading to registration numbers 414 and 262 include declarations by DTH that, to the best of its knowledge and belief, no other person or corporation had the right to use the service marks in commerce in relation to automobile financial services. Registration 414 disclaims exclusive rights to the phrase financial services apart from the mark itself, i.e., DRIVE FINANCIAL SERVICES.

On July 2, 2004, Inofin filed application serial number 78445657 (“application 657”) in the PTO directed to the mark DriveUSA for financing services, auto loans, vehicle loans and related services relative to international class 036, the same class as the Drive Marks. The application sought registration in additional classes for automobile related services.⁴ An amendment to the application identifies the first use of the mark as July 27, 2004. Inofin subsequently executed and recorded with the PTO an assignment of application 657 to Walsh.

The July 2004 filing date for application 657 precedes the March 2005 filing date of the application that led to registration 414 for the DRIVE FINANCIAL SERVICES mark. The July 2004 filing date for application 657 also precedes the August 2004 filing date of the application that led to registration 262 for the DRIVE mark.

Litigation ensued in the Trial and Trademark Appeal Board of the United States Patent and Trademark Office (“TTAB”) when DTH opposed application 657 for international class 036. Plaintiffs also instituted suit against defendants in the United States District Court for the Northern District of Texas (“the Texas court”). (Docket Entry # 46, Ex. 3, ¶ 4).

I. DEFENDANTS' MOTION FOR SUMMARY JUDGMENT (DOCKET ENTRY # 37)

In seeking summary judgment, defendants submit there is an absence of a likelihood of confusion between the DriveUSA mark and the Drive Marks. According to defendants, the absence forecloses relief on the federal and common law trademark infringement claims in counts II and IV, the federal, state and common law unfair competition claims in counts IV and V, the assertion of willful infringement and the false designation of origin claim in Count III.

In addition to dismissing the declaratory relief sought in Count I, defendants move for summary judgment on Count II of the counterclaim and seek a declaration that registrations 414 and 262 are invalid because the term drive is descriptive which, coupled with the disclaimed rights for financial services, is not entitled to trademark protection. They further maintain that the descriptive Drive Marks in these registrations lack secondary meaning. Accordingly, they are not subject to trademark protection.

As a final argument, defendants contend that the Drive Marks are neither famous nor distinctive and there is no likelihood of dilution. Accordingly, defendants move for summary judgment on the trademark dilution claims under Texas and Massachusetts law in Count V.

STANDARD OF REVIEW

Summary judgment is designed “ ‘to pierce the boilerplate of the pleadings and assay the parties' proof in order to determine whether trial is actually required.’ ” Davila v. Corporacion De Puerto Rico Para La Difusion Publica, 498 F.3d 9, 12 (1st Cir.2007). It is appropriate when the summary judgment record shows “there is no genuine issue of material fact, and the moving party is entitled to judgment as a matter of law.” Rule 56(c), Fed.R.Civ.P. “A dispute is genuine if the evidence about the fact is such that a reasonable jury could resolve the point in the favor of the non-moving party.” American Steel Erectors, Inc. v. Local Union No. 7, International Association of Bridge, Structural, Ornamental & Reinforcing Iron Workers, 536 F.3d 68, 75 (1st Cir.2008). “A fact is material if it carries with it the potential to affect the outcome of the suit under the applicable law.” Id.

DISCUSSION

A. Likelihood of Confusion

Defendants devote the majority of their arguments to the absence of a likelihood of confusion. Likelihood of confusion is an essential element of a trademark infringement claim under the Lanham Act. See Boston Duck Tours, LP v. Super Duck Tours, LLC, 531 F.3d 1, 12 (1st Cir.2008) (“[t]o succeed on a claim of trademark infringement, a plaintiff must establish ... that the allegedly infringing use is likely to cause consumer confusion”). The same likelihood of confusion standard applies to the unfair competition and false designation of origin claims. See Venture Tape Corp. v. McGills Glass Warehouse, 540 F.3d 56, 61 n. 6 (1st Cir.2008) (“Venture's unfair competition claim (Count 2) and false designation claim (Count 3) are subject to the same legal standard-namely, ‘likelihood of confusion’—as its Count 1 infringement claim”). To survive summary judgment, plaintiffs must show “a substantial likelihood of confusion.” Beacon Mut. Ins. Co. v. OneBeacon Ins. Group, 376 F.3d 8, 18 (1st Cir.2004) (“Beacon...