Sunless, Inc. v. Selby Holdings, LLC
| Docket Number | 3:20-cv-00930 |
| Decision Date | 29 March 2022 |
| Parties | SUNLESS, INC., Plaintiff, v. SELBY HOLDINGS, LLC, |
| Court | U.S. District Court — Middle District of Tennessee |
Sunless Inc. has filed a Motion to Dismiss Second Counterclaim (Doc No. 56), to which Selby Holdings, LLC (“Selby”) has filed a Response (Doc. No. 62), and Sunless, Inc. has filed a Reply (Doc. No. 63). For the reasons set out herein the motion will be denied.
“The sunless tanning industry sells cosmetology products that purportedly offer the look of a suntan without the health risks associated with prolonged sun exposure.” Sun Style Int'l, LLC v. Sunless, Inc., No. 1:12-CV-00179, 2013 WL 3967923, at *1 (W.D. Ky. Aug. 1, 2013). One method for achieving that result is to receive a so-called “spray tan” in an automated “booth”- that is to say, a “large machine[] in which a solution of sunless tanning liquid is sprayed onto a user who is standing in the machine.” (Doc. No. 52 ¶¶ 11-12.) Such booths, which can be found in many commercial tanning salons, employ “spray nozzles, which are typically carried by moveable arms [that] move vertically along a pre-programmed” pattern of movement in order to fully and evenly coat the user's body. (Id. ¶ 13.) Given the complexity of such machines, they can take years to design, and, when a model finally reaches the market, the price for one is typically steep. (Id. ¶ 17.)
Sunless, Inc. is an Ohio-based Delaware corporation that owns “three well-known spray tan brands”: Mystic Tan, Norvell, and VersaSpa. (Doc. No. 23 ¶¶ 1-2.) Sunless, Inc. holds two patents relevant to this case, U.S. Patent No. 7, 297, 211 (“'211 patent”) and U.S. Patent No. 7, 387, 684 (“'684 patent”), each of which involves the application of liquids to the human body- that is to say, mechanisms for applying tanning spray. Sunless, Inc. uses those patent-protected technologies in the tanning booths it sells. (Id. ¶¶ 9-11.)
Selby is a Tennessee company that began selling spray tanning booths in competition with Sunless in 2019. (Doc. No. 52 ¶¶ 1, 30.) According to Selby, there are “no other companies” aside from Sunless, Inc. and Selby in the field of “manufactur[ing] . . . automated sunless tanning booths for sale to customers in the United States.” (Id. ¶¶ 18-19.) Sunless, Inc. is a great deal larger than Selby-so much larger, in fact, that, despite Selby's entry into the market a few years ago, Sunless, Inc. still boasts a U.S. market share “approaching 100%.” (Id. ¶ 22.) It attained that dominant market position through a combination of (1) merging with or acquiring competitors and (2) effectively forcing competitors out of the market with claims of patent infringement. (Id. ¶¶ 26- 30.)
On October 29, 2020, Sunless, Inc. filed a patent infringement Complaint against Selby (Doc. No. 1), which was followed by a First Amended Complaint (Doc. No. 23). The First Amended Complaint pleads four causes of action-one for direct infringement of the '211 patent, one for indirect infringement of the '211 patent, one for direct infringement of the '684 patent, and one for indirect infringement of the '684 patent. (Id. ¶¶ 23-80.) The court dismissed a portion of Sunless, Inc.'s request for damages (Doc. No. 33), but those claims otherwise remain pending.
On August 24, 2021, Selby filed an Answer to First Amended Complaint and Counterclaim (Doc. No. 34), followed by the “First Amended Counterclaim.” (Doc. No. 52.) Selby's counterclaims-of which there are two-focus not on the patent dispute that first precipitated this conflict, but, rather, actions surrounding the parties' respective trademarks. Selby holds a U.S. trademark registration for the mark SHEERSUNLESS, to be used in connection with “tanning booths.” (Id. ¶ 3.) Selby explains that it and other companies in the tanning field use the word “sunless” as a descriptive term to indicate that a particular tanning booth “do[es] not use ultraviolet radiation, ” not to imply any connection to Sunless, Inc. (Id. ¶ 15.) Sunless, Inc. uses a few different trademarks, including ones related to the more specific brands it owns and operates (e.g., VERSASPA and NORVELL), but the Sunless, Inc. trademarks relevant to this case are SUNLESSINC and the truncated SUNLESS, which are not registered. (Id. ¶¶ 29, 38.)
“[T]rademark rights stem from use, not registration, ” JBLU, Inc. v. United States, 813 F.3d 1377, 1381 (Fed. Cir. 2016) (citations omitted), and, as such, the user of a mark may have rights, despite not having registered the mark-and indeed may even have priority over another party that did register the mark or one similar to it. A party that believes that it has use-based trademark rights superior to a registrant can file a petition pursuant to Section 1064 of the Lanham Act, which allows “any person who believes that he is or will be damaged” by a registration to file “[a] petition to cancel” that registration. 15 U.S.C. § 1064; see NetJets Inc. v. IntelliJet Grp., LLC, 678 Fed.Appx. 343, 347 (6th Cir. 2017) ( cancellation process).On October 29, 2020, the very day that this suit was filed, Sunless, Inc. filed a Petition for Cancellation with the Trademark Trial & Appeal Board (“TTAB”) of the U.S. Patent & Trademark Office (“USPTO”), asking that agency to cancel Selby's SHEERSUNLESS registration on the ground that Selby's use of that mark would be likely to cause confusion with Sunless, Inc.'s unregistered SUNLESS mark. (Doc. No. 52 ¶¶ 36, 38.)
Sunless, Inc.'s petition also alleges that Selby (1) committed fraud on the PTO and (2) improperly sought registration of “sunless, ” a purely descriptive term. (Doc. No. 52-7 at 1.) “Fraud, ” in the context of trademark registration, typically involves either an applicant's lying in support of its application or the applicant's engaging in some kind of “willful withholding from the Patent and Trademark Office . . . of material information or facts which, if disclosed to the Office, would have resulted in the disallowance of the registration sought or to be maintained.” Smith Int'l, Inc. v. Olin Corp., 209 U.S.P.Q. 1033, at *7 (T.T.A.B. Jan. 23, 1981). The alleged fraud underlying Selby's registration was its failure to disclose Sunless, Inc.'s superior rights-making the second ground for cancellation, in large part, a reiteration of Sunless, Inc.'s first alleged ground for cancellation. (Doc. No. 52 ¶ 63.)
Selby alleges that Sunless, Inc.'s cancellation petition is “objectively baseless.” (Doc. No. 52 ¶ 39.) Selby notes that, in 2011, Sunless, Inc. tried to obtain its own registration for the SUNLESSINC mark, but the USPTO rejected its application on the ground that the term “sunless” was merely a description of the type of tanning involved. (Id. ¶ 41.) In a number of other instances, the USPTO did approve trademark registrations for word marks including the word “sunless, ” but, according to Selby, the agency, “[i]n most cases, ” required the registrant to disclaim any rights to the word “sunless” in isolation, due to the term's descriptive nature. (Id. ¶ 47.)
Selby argues that the USPTO's rejection of Sunless, Inc.'s attempted registration and the USPTO's required disclaimers of rights by other registrants-as well as simply Sunless, Inc.'s knowledge of the ordinary use of the word “sunless”-should have made it clear to Sunless, Inc. that it has no rights under the Lanham Act to expect any other company to refrain from using the word “sunless” in its name/word mark. See Sweats Fashions, Inc. v. Pannill Knitting Co., 833 F.2d 1560, 1565 n.1 (Fed. Cir. 1987) () (citations omitted). Selby also takes issue with Sunless, Inc.'s behavior in the USPTO proceedings, particularly its “stonewall[ing]” of discovery and its requests for irrelevant information about Selby's operations, finances, and business relationships. (Doc. No. 52 ¶¶ 89, 92.) Selby points out that, as a much smaller and newer company still trying to find a competitive foothold in the market already dominated by Sunless, Inc., Selby is particularly vulnerable to the drag of accumulated litigation expenses, whereas Sunless, Inc. is likely to be able to weather the costs of litigation-even litigation that it is destined to lose-far longer, if not indefinitely. (Id. ¶¶ 88-92.)
The First Amended Counterclaim states two causes of action. The first is for a declaratory judgment recognizing the validity of Selby's SHEERSUNLESS mark and decreeing pursuant to 15 U.S.C. § 1119 that the USPTO should maintain the registration of the mark. (Id. ¶¶ 73-83.) Sunless, Inc. is not currently challenging the sufficiency of Selby's pleading of that cause of action. The second cause of action, which Sunless, Inc. does challenge in the motion currently under consideration, is for attempted monopolization under the Sherman Act, 15 U.S.C. § 2. (Id. ¶¶ 84- 107.) Selby asserts that Sunless, Inc.'s still-pending attempt to cancel Selby's registration is an “objectively baseless” attempt “to drive [Selby] from the” sunless tanning booth market, in violation of antitrust laws. (Id. ¶¶ 86, 91.)
In deciding a motion to dismiss for failure to state a claim under Rule 12(b)(6), the court will “construe the complaint in the light most favorable to the plaintiff accept its allegations as true, and draw all reasonable inferences in favor of the plaintiff.” Directv, Inc. v. Treesh, 487 F.3d 471, 476 (6th Cir. 2007); Inge v. Rock Fin. Corp., 281 F.3d 613, 619 (6th Cir. 2002). The Federal Rules of Civil Procedure require only that the plaintiff p...
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