Slep-Tone Entm't Corp. v. Coyne

• Decision Date: 08 May 2014
• Citation: 41 F.Supp.3d 707
• Parties: Slep–Tone Entertainment Corporation, Plaintiff, v. John Coyne d/b/a Extreme Karaoke and Absolute Disc Jockeys, Mitch Palmer, Allen Mando, Tony Gonzalez, Tim Thomas, Rachel Yackley, Angie Onthenic, Peter Garcia, and Kenny Seidman d/b/a DJ Kenny B, Defendants.
• Court: U.S. District Court — Northern District of Illinois

41 F.Supp.3d 707

Slep–Tone Entertainment Corporation, Plaintiff,

v.John Coyne d/b/a Extreme Karaoke and Absolute Disc Jockeys, Mitch Palmer, Allen Mando, Tony Gonzalez, Tim Thomas, Rachel Yackley, Angie Onthenic, Peter Garcia, and Kenny Seidman d/b/a DJ Kenny B, Defendants.

United States District Court, N.D. Illinois, Eastern Division.

13 C 2298

Signed May 8, 2014

Motion denied. Vivek Jayaram, Jayaram Law Group, Chicago, IL, for Plaintiff.

Matthew M. Saffar, Law Offices of Matthew M. Saffar, Palatine, IL, for Defendants.

Memorandum Opinion and Order

Gary Scott Feinerman, United States District Judge

Slep–Tone Entertainment Corporation alleges in this suit that John Coyne, Mitch Palmer, Allen Mando, Tony Gonzalez, Tim Thomas, Rachel Yackley, Angie Onthenic, Peter Garcia, and Kenny Seidmam engaged in the unauthorized use and display of Slep–Tone's product bearing its Sound Choice trademark, in violation of §§ 32 and 43 of the Lanham Act, 15 U.S.C. §§ 1114, 1125, and the Illinois Deceptive Trade Practices Act (“IDTPA”), 815 ILCS 510/1 et seq. Doc. 1. The claims against Thomas, Gonzalez, Palmer, and Onthenic have been voluntarily dismissed. Docs. 7, 34. Coyne, Mando, Garcia, Yackley, and Seidman (collectively, “Defendants”) have moved to dismiss the complaint under Federal Rule of Civil Procedure 12(b)(6). Docs. 15, 24, 31. The motion is denied.

Defendants are karaoke jockeys in the business of providing karaoke entertainment. Id. at ¶¶ 7–15. Defendants are affiliated, either as members or close associates, with a karaoke entertainment company known as “Extreme Karaoke” and “Absolute Disc Jockeys,” which is owned by Coyne. Id. at ¶ 6. After attending one or more public karaoke shows performed by Defendants and conducting an extensive investigation of their karaoke operations, Slep–Tone found that they possess unauthorized media-shifted and format-shifted copies of karaoke accompaniment tracks, all of which bear Slep–Tone's Sound Choice trademarks. Id. at ¶ 32.

Defendants have displayed Slep–Tone's Sound Choice trademark to their customers and potential customers for purposes of advertising “the quality and superiority that is associated with SLEP–TONE products.” Id. at ¶ 34. Defendants also have advertised their usage of Sound Choice tracks by identifying Sound Choice as the manufacturer of the tracks listed in their song booklet and other publications. Ibid. The media-shifted copies of Slep–Tone's accompaniment tracks appear “virtually indistinguishable” from authorized Slep–Tone tracks. Id. at ¶ 42. Slep–Tone did not give Defendants permission to shift its tracks from the original disc to an alternative medium, and was not notified by Defendants of their intent to conduct media-shifting for commercial purposes. Id. at ¶¶ 36, 66–67.

Defendants' use of media-shifted karaoke tracks allows them to provide karaoke services with a considerably lower overhead cost than other karaoke jockeys, who must pay the full price to acquire their Slep–Tone accompaniment tracks in various formats. Id. at ¶¶ 46–47. A large library of Slep–Tone accompaniment tracks would cost a karaoke jockey at least $25,000. Id. at ¶ 71. Defendants' ability to offer cheaper karaoke services and a larger number of tracks makes them more attractive to venues, to the detriment of karaoke jockeys who legitimately acquired Slep–Tone tracks and are unable to offer competitively priced shows. Id. at ¶ 48. Slep–Tone has spent “millions of dollars building and maintaining studios, hiring artists, building a distribution facility, [and] paying royalties to copyright owners,” id. at ¶ 40, and it has lost a significant amount of revenue due to the widespread creation, distribution, and commercial use of unauthorized copies, id. at ¶ 43.

Discussion

Slep–Tone alleges that Defendants' use of unauthorized, media-shifted Slep–Tone tracks bearing the Sound Choice mark constitutes trademark infringement and unfair competition under the Lanham Act, see 15 U.S.C. §§ 1114, 1125, and deceptive trade practices under the IDTPA. The motion to dismiss seeks dismissal of all three claims. Doc. 15. Defendants also seek dismissal of a trademark counterfeiting claim, id. at 19, but Slep–Tone denies bringing such a claim, Doc. 17 at 9. so counterfeiting need not be discussed.

Slep–Tone's three claims arise from the same allegedly infringing conduct, and Defendants' arguments for dismissal are the essentially the same for all three claims. This stands to reason, as “federal and state laws regarding trademarks and related claims of unfair competition are substantially congruent.” TMT N. Am., Inc. v. Magic Touch GmbH, 124 F.3d 876, 881 (7th Cir.1997) (internal quotation marks omitted); see also McGraw–Edison Co. v. Walt Disney Prods., 787 F.2d 1163, 1174 (7th Cir.1986) (holding that “[u]nder the [IDTPA,] a defendant is liable only if the plaintiff can establish a likelihood of confusion between the parties' products,” and noting that “ ‘[l]ikelihood of confusion’ has the same meaning in unfair competition cases under the [IDTPA] as it has in [trademark] infringement cases [under the Lanham Act]”) (internal quotation marks omitted); id. at 1167 (“15 U.S.C. §§ 1114, 1125 ... require that a plaintiff demonstrate that the defendant has created a likelihood of confusion as to the origin of his product”); E. & J. Gallo Winery v. Gallo Cattle Co., 967 F.2d 1280, 1288 n. 2 (9th Cir.1992) (“elements of infringement and unfair competition claims [under the Lanham Act] are essentially the same; the rulings stand or fall together”). Thus, analysis of all three claims may proceed simultaneously, and if the federal trademark claim survives dismissal, so do the two other claims.

Defendants assert three grounds for dismissing the federal trademark claim: (1) Slep–Tone has failed to plausibly allege the “use in commerce” and “likelihood of confusion” elements of the claim; (2) the doctrine of nominative fair use bars the claim; and (3) Dastar Corporation v. Twentieth Century Fox Film Corporation, 539 U.S. 23, 123 S.Ct. 2041, 156 L.Ed.2d 18 (2003), bars the claim.

I. Whether The Complaint Adequately Alleges Use In Commerce And Likelihood of ConfusionA. Use In Commerce

Defendants contend that the complaint does not sufficiently allege that they used the Sound Choice marks in commerce. Doc. 15 at 6. The Lanham Act defines “use in commerce” in relevant part as follows:

The term “use in commerce” means the bona fide use of a mark in the ordinary course of trade, and not made merely to reserve a right in a mark. For purposes of this chapter, a mark shall be deemed to be in use in commerce—

...

(2) on services when it is used or displayed in the sale or advertising of services and the services are rendered in commerce.

15 U.S.C. § 1127; see Central Mfg., Inc. v. Brett, 492 F.3d 876, 881 (7th Cir.2007) (holding that “[a]n action for trademark infringement can only succeed if, among other things, the plaintiff owns the mark,” and although “[r]egistration provides prima facie evidence of ownership ..., [u]ltimately, it is not the fact of registration that matters so much as the use of the mark in commerce”). The Supreme Court has held that the term “use in commerce” should be construed broadly “[i]n the light of the broad jurisdictional grant in the Lanham Act.” Steele v. Bulova Watch Co., 344 U.S. 280, 286, 73 S.Ct. 252, 97 L.Ed. 319 (1952); see also Scotch Whiskey Ass'n v. Barton Distilling Co., 489 F.2d 809, 812 (7th Cir.1973) (noting that Steele “upheld a broad concept of ‘commerce’ ”).

In Rescuecom Corp. v. Google Inc., 562 F.3d 123, 130 (2d Cir.2009), the Second Circuit held that “use in commerce” was adequately pleaded in a complaint analogous to Slep–Tone's. The plaintiff, Rescuecom, whose name was trademarked, was a national computer service franchising company that conducted a substantial amount of business over the internet. Id. at 126. Rescuecom advertised over the internet using Google's AdWords program, through which advertisers may purchase keywords. Ibid. Rescuecom filed a Lanham Act trademark infringement suit against Google, alleging that Google's AdWords had been recommending the Rescuecom trademark to Rescuecom's competitors as a keyword for purchase, thereby deceiving internet searchers into believing that competitors were endorsed by or affiliated with Rescuecom. Ibid. Citing the complaint's allegation that Google had displayed and sold the mark to its advertising customers, the Second Circuit held that “Google's utilization of Rescuecom's mark fits literally within the terms specified by 15 U.S.C. § 1127.” Id. at 129 (“Google uses and sells Rescuecom's mark ‘in the sale ... of [Google's advertising] services ... rendered in commerce”).

Defendants' alleged conduct likewise maps onto the definition of “use in commerce” of § 1127. Slep–Tone alleges that Defendants displayed Slep–Tone's registered trademarks to existing and potential customers during their public karaoke shows and through song booklets to “advertis[e] to their customers the quality and superiority that is associated with Slep–Tone products.” Doc. 1 at ¶¶ 32, 34. Slep–Tone further alleges that “Defendants display the registered marks to attract more customers and retain loyal customers.” Id. at ¶ 35. Just as Google displayed Rescuecom's mark in the course of selling Google's advertising services, Defendants displayed the Sound Choice mark as they sold their karaoke jockeying services. Defendants' argument that “at no time does Plaintiff assert that the Defendants are in any way selling his product” misses the point. Doc. 23 at 3. Section 1127 provides that “a mark shall be deemed to be in use in commerce ... on services when it is used or displayed in the sale or advertising of services and the services are rendered in commerce.” 15 U.S.C. § 1127. Nowhere does it specify that the advertised “services” must be those of the plaintiff. Indeed, Google displayed Rescuecom's mark not in the course...