Soter Techs., LLC v. IP Video Corp.
| Decision Date | 26 February 2021 |
| Docket Number | 20-cv-5007 (LJL) |
| Court | United States District Courts. 2nd Circuit. United States District Courts. 2nd Circuit. Southern District of New York |
| Parties | SOTER TECHNOLOGIES, LLC, Plaintiff, v. IP VIDEO CORPORATION, A+ TECHNOLOGY & SECURITY SOLUTIONS, INC., and ADVANCE CONVERGENCE GROUP, INC., Defendants. |
Plaintiff Soter Technologies, LLC ("Plaintiff" or "Soter") brings this action against IP Video Corporation ("IP Video Corp."), A+ Technology & Security Solutions, Inc ("A+ Technology"), and Advance Convergence Group ("Advance") (collectively, "Defendants"), for cybersquatting in violation of 15 U.S.C. § 1125(d)(1); trademark infringement in violation of 15 U.S.C. § 1114(a); unfair competition, false association, and false designation of origin in violation of the Lanham Act, 15 U.S.C. § 1125(a)(1)(A); and trademark infringement, unfair competition, and product disparagement, under New York law. See Dkt. No. 35 ("Am. Compl." or "Amended Complaint").
Defendants move, pursuant to Fed. R. Civ. P. 12(b)(6), to dismiss all claims in the Amended Complaint against A+ Technology and Advance and to dismiss all claims except that for cybersquatting against IP Video Corp. For the reasons that follow, the motion is granted in part and denied in part.
Soter is a limited liability company organized under the laws of New York, with its principal place of business in New York. Soter manufactures and markets a vape detecting sensor device ("Flysense Device"), which it sells to school systems and other institutions for their use in detecting vape smoke and other activity that might violate the institution's rules. Id. ¶ 1. The device can be installed in an unobtrusive manner in school bathrooms and other locations where it can be used to identify the prohibited activity. Soter uses the FLYSENSE trademark ("Flysense Mark") in connection with the sale of the Flysense Device, suggesting a fly on the wall that can sense the vape smoke. Soter is the owner of all rights in and to the Flysense Mark, which is filed with the U.S. Patent and Trademark Office in connection with the following goods: "Environmental sensor for detecting vape, vapor, smoke, sound, motion, gas and total volatile organic compounds (TVOCs)." Id. ¶ 25. Registration for the Flysense Mark was filed with the USPTO on October 9, 2019 and issued on May 19, 2020. Id. ¶¶ 25, 26. The registration claims a date of first use at least as early as November 2017. Id. ¶ 26.
Defendants are three companies who allegedly make, sell, offer for sale and distribute a sensor device called HALO Smart Sensor ("HALO Device"), which can be installed in high school bathrooms. The HALO Device is alleged to compete with the Flysense Device. Id. ¶ 8. Little is alleged about the Defendants' identity or relationship with each other except that they are affiliates, each has a principal place of business in New York, and they advertise the HALO Device. All three Defendants are alleged to advertise the HALO Device on their respective websites, and Defendant IP Video Corp. is alleged to advertise the HALO Device at trade shows around the country. Id. ¶¶ 9-11. The three companies share office locations, resources and executives, including David Antar who is the President of IP Technology and A+ Technologyand Chief Executive Officer of Advance Convergence Group. Id. ¶ 12. The three companies are alleged to be engaged in interstate and foreign commerce. Id. ¶ 13.
Soter also owns the domain name www.flysense.net, which it uses to advertise its Flysense Device. Id. ¶ 33. Defendants knew of Soter's use of the Flysense Mark. After seeing the Flysense Device on network television on Good Morning America in 2017, Defendant A+ Technology tried to become a reseller of the device. Id. ¶ 39. Plaintiff alleges that while Defendants had constructive knowledge of Plaintiff's superior rights in and to the Flysense Mark, Defendants allegedly began using the Flysense Mark as part of a bad-faith scheme to confuse and deceive customers. Id. ¶ 38. Specifically, for a period from approximately September 9, 2019 to July 1, 2020 (i.e., into the period when the Flysense Mark was issued to Plaintiff), Defendants used the domain name www.flysense.com to divert for their own commercial gain an unknown number of purchasers and business opportunities away from Plaintiff. Customers who entered www.flysense.com into a browser were directed to Defendant IP Video Corp.'s website. Id. ¶ 35. On the website, IP Video Corp. displayed the HALO Device, and not the Flysense Device. Neither the Flysense Mark, nor anything that resembled it, appeared in the content of the website itself. Rather, in large bold letters, IP Video Corp.'s website refers to the HALO Smart Sensor. Id. ¶¶ 35-36.
Plaintiff alleges that "Defendants are individually or collectively the current registrant of record for the [www.flysense.com domain name]," id. ¶ 56, and "[a]t the time Defendants registered, acquired and/or began using the [domain name], Plaintiff had obtained prior and exclusive rights in the Flysense Mark," id. ¶ 57.
Plaintiff brings claims for federal and state trademark infringement, unfair competition, and cybersquatting.1 It alleges that by using the www.flysense.com domain name to direct customers to Defendants' website where the HALO Device was depicted, Defendants were "likely to create a false impression and deceive customers, the public and the trade into believing that there was a connection, association, affiliation, or sponsorship between Plaintiff's FlySense and Defendants' HALO Device—which there was not." Id. ¶ 40. It also alleges that "Defendants' cybersquatting caused Soter to lose purchasers and business opportunities" and that Defendants have made substantial profits and gains and Soter has suffered losses (of more than $2 million in lost sales) as a result of Defendants' unauthorized use of the FlySense mark as part of its domain name and other illicit acts. Id. ¶¶ 41-43. It claims that Defendants have sold their product to schools to which Soter would otherwise have sold their product, that Plaintiff has been forced to reduce the price of its device to compete with the HALO Device, and that it has suffered loss of sales of secondary educational products purchased alongside the Flysense Device. Id. ¶¶ 44-46.
Soter also alleges it has been the victim of unfair competition and product disparagement in connection with other verbal and written representations by Defendants. Id. ¶ 47. In support of that claim, it alleges that in 2019 a representative of Defendants told a potential customer of Plaintiff, a school on the west coast, that Plaintiff's device did not work, was associated with too many false positives, and was embroiled in litigation—all of which Plaintiff claims was disparaging and caused Plaintiff to lose at least one sale. Id. ¶¶ 48, 50. Plaintiff also alleges that IP Video Corp. made other false statements directly leading Soter to lose sales for which both Plaintiff and IP Video Corp. were competing. Id. ¶ 51. The sole example to which Plaintiffpoints is an alleged false representation that it claims IP Video Corp. made to the Mission Consolidated Independent School District in Mission, Texas2 ("Mission District") that Defendants' completing HALO Device was compatible with the Flysense platform, causing Soter to lose a sale of over $43,000. Id. ¶¶ 51-52. The Amended Complaint makes no reference to any particular agent of IP Video Corp. as having made the statement.
The alleged misrepresentation appeared in a response to a request for quote issued by the Mission District. Dkt. No. 59-6. That document is incorporated by reference and integral to the Amended Complaint. There is no dispute as to its authenticity. The quote form clearly indicates the name of the firm making the offer as ACP Creativ IT ("ACP") and the brand and model of the product being offered as "IPVIdeo Corp. HALO IOT Smart Sensor - Part # HALO-V2.00." Id. at 6. It attaches fifteen (15) pages of materials referring to the HALO Smart Sensor. Id. at 7-22. It does not refer to Plaintiff or the Flysense Device. It also does not indicate that any of the Defendants made the offer or prepared the response to the request for quote.
Plaintiffs initiated this action by a complaint and a motion for a Temporary Restraining Order and Preliminary Injunction filed on June 30, 2020. Dkt. No. 1 at 9-13. After hearing the parties, on July 2, 2021, the Court entered a Temporary Restraining Order enjoining Defendants for a period of fourteen (14) days from (1) resuming operation of the www.flysense.com domain name (which they had ceased using upon receiving notice of this action), and (2) from stating that the HALO Device is compatible with the Flysense proprietary software platform. Dkt. No. 28. The parties subsequently consented to converting the first restraint into a PreliminaryInjunction, which the Court so ordered on July 17, 2020. Dkt. No. 51. The Court scheduled a hearing on Plaintiff's motion to convert the second restraint into a Preliminary Injunction, but after exchanging initial discovery, Plaintiff withdrew its motion for a Preliminary Injunction as to that restraint. Dkt. No. 61. Defendant filed the instant motion to dismiss on July 31, 2021, Dkt. No. 57, the opposition was filed on August 17, 2020, Dkt. No. 64, and the reply was filed on August 31, 2020, Dkt. No. 70. The Court heard oral argument on February 4, 2021.
To survive a motion to dismiss for failure to state a claim, a complaint must include "sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 554, 570 (2007)). A complaint must offer more than "labels and conclusions," "a formulaic recitation of the elements of a cause of action," or "naked assertion[s]" devoid of "further factual enhancement" in order to...
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