Spiral Direct, Inc. v. Basic Sports Apparel, Inc.

• Decision Date: 24 November 2015
• Docket Number: Case No: 6:15–cv–641–Orl–28TBS
• Citation: 151 F.Supp.3d 1268
• Parties: Spiral Direct, Inc. and Spiral Direct, Ltd., Plaintiffs, v. Basic Sports Apparel, Inc., Defendant.
• Court: U.S. District Court — Middle District of Florida

151 F.Supp.3d 1268

Spiral Direct, Inc. and Spiral Direct, Ltd., Plaintiffs,

v.Basic Sports Apparel, Inc., Defendant.

Case No: 6:15–cv–641–Orl–28TBS

United States District Court, M.D. Florida, Orlando Division .

Signed November 24, 2015

David E. Cannella, Jill S. Riola, Carlton Fields Jorden Burt, PA, Orlando, FL, Stephen J. Leahu, Carlton Fields Jorden Burt, PA, Tampa, FL, for Plaintiff.

Edmund J. Gegan, BKN Murray, LLP, St. Petersburg, FL, for Defendant.

ORDER

JOHN ANTOON II

, United States District Judge

Plaintiffs Spiral Direct, Inc. (‘Spiral U.S.‘) and Spiral Direct, LTD. (‘Spiral U.K.‘) (collectively, ‘Plaintiffs‘) filed a seven-count complaint against Defendant Basic Sports Apparel, Inc. (“BSA”) arising from a dispute over the trademark ‘Spiral‘ on certain clothing. (See Am. Compl., Doc. 16). BSA moves to dismiss the Complaint, or, in the alternative, for a more definite statement of Counts Six and Seven. (Doc. 27). After considering the motion to dismiss, the alternative motion, and Plaintiffs' response (Doc. 35), I conclude that the motions must be denied.

I. Background

Plaintiffs are related companies with overlapping management and are in the business of manufacturing and distributing “Gothic” style clothing bearing the mark “Spiral” in a distinctive script (“Plaintiffs' mark”). (Am. Compl. at 3). Spiral U.K.'s immediate predecessor-in-interest is Spiral Design Partnership, which began selling clothing in the U.S. in 1993, and over the internet in 1997. (Id. at 3–4). In 1999, Spiral U.K. wholly acquired its predecessor. (Id. ).

On January 22, 2015, Plaintiffs received a cease and desist letter from BSA's attorney. (Am. Compl. at 4). The letter informed Plaintiffs that on January 19, 1999, the United States Patent and Trademark Office (“USPTO”) issued BSA a trademark under U.S. Registration No. 2,218,515 for the mark “Spiral” on various items of clothing (“BSA mark”). (Id. ). In its registration application, BSA stated that it first used the mark on June 15, 1997. (Id. ). The letter further claimed that Plaintiffs' “actions constitute trademark infringement and unfair competition under both state and federal law, including the Lanham Act,” (Ex. C to Am. Compl., Doc. 16–3), and requested that Plaintiffs “discontinue any and all use of the [i]nfringing [t]rademark with the marketing, sale, distribution, or identification of products or services,” (id. ). It further stated that “my client has instructed me to file suit unless you respond promptly and appropriately to this demand.” (Id. ).

BSA owns and operates a business that manufactures clothing for sporting retailers that is sold under the trademarks of those third-party retailers. (Id. at 5). Plaintiffs allege that “BSA may manufacture a few [goods bearing the BSA mark, but] only ... by using the remaining fabric from a particular job order.” (Id. ). BSA “does no publicity, marketing, or advertising” for any goods bearing the BSA mark, and only sells a “very limited quantity of a very limited number of items ... set forth in (their trademark registration].” (Id. ). Plaintiffs allege that at the time BSA applied for its trademark, it should have known that Plaintiffs' predecessor was using Plaintiffs' mark in commerce in the United States as early as 1993. (Id. ). For that reason and others, Plaintiffs allege that BSA fraudulently obtained its trademark from the USPTO.¹ (Id. at 5–6).

Under these circumstances, Plaintiffs sued BSA for (i) declaratory judgment of non-infringement under the Lanham Act (Count 1); (ii) declaratory judgment that BSA's claims are barred by the doctrine of laches (Count 2); (iii) declaratory judgment of invalidity of BSA's registered trademark for abandonment (Count 3) and for fraud on the USPTO (Count 4); and (iv) unfair competition arising from trademark infringement under the Lanham Act (Count 5),² the Florida Deceptive and Unfair Trade Practices Act (“FDUTPA”) (Count 6),³ and Florida common law (Count 7). (Id. at 9–15).

II. Legal Standard

Generally, “(a) pleading that states a claim for relief must contain ... a short and plain statement of the claim showing that the pleader is entitled to relief.” Fed. R. Civ.P. 8(a)(2)

. “[D]etailed factual allegations” are not required, but “[a] pleading that offers ‘labels and conclusions' or ‘a formulaic recitation of the elements of a cause of action will not do.’ ” Ashcroft v. lqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) ). “To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’ ” Id. (quoting Twombly

, 550 U.S. at 570, 127 S.Ct. 1955 ). At the motion to dismiss stage, a court must evaluate all plausible inferences derived from the facts of the complaint in favor of the plaintiff. Whitwam v. JetCard Plus

,

Inc., 34 F.Supp.3d 1257, 1259 (S.D.Fla.2014). One caveat to the general pleading standard of Rule 8 is that “[i]n alleging fraud .... a party must state with particularity the circumstances constituting fraud.” Fed. R. Civ.P. 9(b). In considering a motion to dismiss brought under Federal Rule of Civil Procedure 12(b)(6), a court limits its “consideration to the well-pleaded factual allegations, documents central to or referenced in the complaint, and matters judicially noticed.” La Grasta v. First Union Sec., Inc., 358 F.3d 840, 845 (11th Cir.2004).

III. Analysis

A. Shotgun Pleading

BSA argues that Plaintiffs' First Amended Complaint is a “shotgun pleading.” The purpose of the rule against shotgun pleadings is to ensure that a complaint gives “defendants adequate notice of the claims against them and the grounds upon which each claim rests.” Weiland v. Palm Beach Cty. Sheriff's Office, 792 F.3d 1313, 1323 (11th Cir.2015)

. The Eleventh Circuit condemns the practice of incorporating all preceding allegations in each successive count because it “lead[s] to a situation where most of the counts (i.e., all but the first) contain irrelevant factual allegations and legal conclusions.” Strategic Income Fund, L.L.C. v. Spear, Leeds & Kellogg Corp., 305 F.3d 1293, 1295 (11th Cir.2002). Here, although Plaintiffs incorporate paragraphs 1 through 37 in each of their seven counts, “(t]he allegations of each count are not rolled into every successive count on down the line.” Weiland, 792 F.3d at 1324. Plaintiffs' re-alleging of paragraphs 1 through 37 in each count is permissible so long as it does not “materially increase[ ] the burden of understanding the factual allegations underlying each count.” Id. Paragraphs 1 through 37 of the Complaint set forth the background allegations of Plaintiffs' claims and are not so voluminous, overlapping, or confusing that they materially increase the burden of understanding the grounds upon which Plaintiffs' claims rest. Therefore, BSA's motion must be denied on this ground.

B. Count One

Regarding Plaintiffs' claim for a declaration of non-infringement, BSA argues that Plaintiffs do not allege enough factual detail to overcome the incontestable status of BSA's trademark. A registered trademark is incontestable if it “has been in continuous use for five consecutive years subsequent to the date of such registration,” 15 U.S.C. § 1065

. When a right to use a mark has become incontestable—and BSA argues that its mark qualifies—registration of the mark is deemed conclusive evidence of the registrant's exclusive right to use the mark. 15 U.S.C. § 1115(b). Despite achieving five years of continuous use, however, a mark is not incontestable where “the use of the mark registered ... infringes a valid right acquired under the law of any State or Territory by use of a mark ... continuing from a date prior to the date of registration ”—the “prior use defense.” 15 U.S.C. § 1065 (emphasis added).

The elements to a so-called “prior use” defense under 15 U.S.C. § 1065

are: (i) acquisition of trademark rights under state law prior to the date of incontestable registration; (ii) continuance of use of ... the trademark from that date; and (iii) that the prior use is on goods or services which are in issue in the case [to which] infringement is proven.

Times Newspapers, Ltd. v. Times Publ'g Co. , No. 92–1435–ClV–T–15(A), 1993 WL 120614, at *3 (M.D.Fla. Jan. 13, 1993)

. Where a plaintiff holds only a common law trademark, as Plaintiffs allege that they do, “the scope of protection accorded [their] mark is coextensive only with the territory throughout which it is known and from which it has drawn its trade.” Tana v. Dantanna's, 611 F.3d 767, 780 (11th Cir.2010).

Plaintiffs have sufficiently pleaded each of the three elements of the “prior use” defense. As to the first element, Plaintiffs allege they “have been selling and offering for [sale] some or all of the [goods bearing the Spiral mark] in the [U.S.] under one or more of [their common law trademarks] since at least as early as 1993”—six years before BSA was issued its registered trademark in 1999. (Am. Compl. at 3–4). This satisfies the requirement that Plaintiffs obtained the trademark before BSA. Further, the allegation that Plaintiffs sold their products in the United States can reasonably be construed to mean that the geographic scope of their common law trademark extends to each state in which BSA sells the goods at issue. Finding otherwise would require a factual determination that cannot be made at this stage.

As to the second element, Plaintiffs allege that they “have been using one or more of their [trademarks] in the [U.S.] since at least 1993.” (Id. at 10 (emphasis added)). Accepted as true, Plaintiffs' “use” of their trademark since 1993 can be reasonably understood as continuous use. And finally, Plaintiffs sufficiently allege that they were selling the same goods at issue.⁴ Additional detailed factual information regarding the exact dates Plaintiffs began selling each type of garment is available...