The Scooter Store Inc. v. Spinlife.Com Llc

• Decision Date: 18 April 2011
• Docket Number: Case No. 2:10–cv–18.
• Citation: 777 F.Supp.2d 1102
• Parties: The SCOOTER STORE, INC., et al, Plaintiffs,v.SPINLIFE.COM, LLC, Defendant.
• Court: U.S. District Court — Southern District of Ohio

777 F.Supp.2d 1102

2011-1 Trade Cases P 77,432

The SCOOTER STORE, INC., et al, Plaintiffs,

v.SPINLIFE.COM, LLC, Defendant.

Case No. 2:10–cv–18.

United States District Court, S.D. Ohio, Eastern Division.

April 18, 2011.

Stephen Douglas Jones, Donald S. Scherzer, Jeremy Young, Roetzel & Andress, Columbus, OH, Lamont A. Jefferson, Haynes & Boone, LLP, San Antonio, TX, for Plaintiffs.Michael Hiram Carpenter, Angela M. Paul Whitfield, Timothy R. Bricker, Carpenter Lipps & Leland LLP, Columbus, OH, for Defendant.

AMENDED OPINION AND ORDER

ALGENON L. MARBLEY, District Judge.

I. INTRODUCTION

This matter is before the Court on Plaintiffs', The Scooter Store Inc. and The Scooter Store, Ltd., Partial Motion to Dismiss (Dkt. 64) Defendant's, SpinLife.com, LLC, First Amended Counterclaim (Dkt. 61). The Scooter Store, Inc. and The Scooter Store, Ltd. will be collectively referred to as “TSS.” TSS moves to dismiss counts one two, four, and six of SpinLife's First Amended Counterclaim for failure to state claims upon which relief can be granted. For the reasons stated below, TSS's Partial Motion to Dismiss is GRANTED in part and DENIED in part.

II. BACKGROUND

A. Factual Background

1. The Parties

Plaintiff, The Scooter Store, Inc., is a Nevada corporation whose principal place of business is Comal County, Texas. Plaintiff, The Scooter Store, Ltd., is a Texas limited partnership having its principal place of business in Coman County, Texas. Since it was founded in 1991, the majority of TSS's business has been in providing insurance claims processing services related to the purchase of electric wheelchairs and scooters by, and delivery and repairs to, the Medicare Part B Program, and its beneficiaries. In this regard, TSS owns four federal trademark registrations—Registration Nos. 2,710,502; 2,714, 979; 2,912, 774; and 3,017, 227—for the “insurance claims processing for others; maintenance and repair services for wheelchairs, power chairs, lift chairs and motorized scooters; delivery of wheelchairs, power chairs, lift chairs and motorized scooters.”

Defendant, SpinLife.com LLC, is an Ohio corporation having its principal place of business in Columbus, Ohio. SpinLife, since its founding in 1999, has been engaged in the retail sale of durable medical supplies through the internet. Unlike TSS, SpinLife does not accept assignments of its customers' Medicare claims, nor does Medicare pay SpinLife for the products it provides to its customers.

2. The Dispute

TSS initially filed suit in the Western District of Texas. TSS's allegations are based on purchases of Google AdWords. Google, like most Internet search engines, engages in advertising sales in which it auctions search keywords to advertisers. If a person searches on Google using one of the keywords, the advertiser's ad will appear next to the search results. This feature allows retailers to target potential customers searching for their products. TSS alleges that SpinLife purchased the phrase “the Scooter Store” from Google AdWords as part of a plan to confuse TSS's customers. SpinLife also placed these words in meta tags on its website, www. spinlife. com, and other places on the internet. These actions, TSS contends, are actionable trademark infringement and unfair competition.

SpinLife counterclaimed. In 2005, the United States Department of Justice (“DOJ”) alleged that TSS had engaged in improper business practices related to Medicare and its beneficiaries. TSS settled with the DOJ in 2007. Following the settlement, TSS expanded its services in the retail sales market. After the expansion, it approached SpinLife about acquiring the company, but no agreement was ever reached. In 2009, TSS again contacted SpinLife and indicated that it believed that SpinLife was violating its alleged trademark rights. SpinLife contends that TSS used the threat of litigation to force SpinLife to agree to anticompetitive terms. When SpinLife did not agree, TSS brought suit. SpinLife alleges that TSS is using litigation to eliminate competition and obtain a monopoly through the unjustified expansion of their trademarks. Further, SpinLife alleges that TSS seeks to use the costs of litigation to drive SpinLife out of the retail sales market for power mobility devices.

3. Alleged Misconduct Before the United States Patent and Trademark Office

SpinLife alleges that TSS committed fraud on the United States Patent and Trademark Office (“USPTO”) because it failed to report that it had knowledge of another state registration of “The Scooter Store” in its trademark application. In 1991, Edwin Trautman founded Ohio Mobility as a sole proprietorship in Akron, Ohio. The company sells and services durable medical equipment. During the 1990s, it started using the name “The Scooter Store,” and in 1995 it formally obtained and recorded the trade name “The Scooter Store” with the Ohio Secretary of State. In 1997, it incorporated as Ohio Mobility, Inc., d/b/a The Scooter Store. In 2002, the business began operating as a limited liability company, d/b/a Ohio Mobility, The Scooter Store. It continues to operate today.

During the 1990s, Trautman spoke by telephone several times with Doug Harrison, the President and CEO of TSS. During each of these conversations, Trautman introduced himself as from “Ohio Mobility, The Scooter Store.” At no time during these conversations did Harrison object to this use of “The Scooter Store”. In 2006 and 2008, Trautman retained attorneys to send communications to TSS, advising them that their use of “The Scooter Store” in the state of Ohio violated Ohio Mobility, The Scooter Store's trade name rights and requesting that they cease and desist their improper use.

In addition to these conversations, TSS had knowledge of Ohio Mobility, The Scooter Store as a result of investigations it undertook. In 2006, 2008, and 2008, TSS sent an investigator to look into Mr. Trautman's business.

In 2000, TSS applied for a trademark of “The Scooter Store” for use in insurance claims processing and retail sales. TSS did not disclose Trautman's Ohio trade name registration, actual use or right to use, to the USPTO when it filed its applications. The USPTO granted TSS's application for: insurance claims processing for others; maintenance and repair services for wheelchairs, power chairs, lift chairs, and motorized scooters; and delivery of wheelchairs, power chairs, lift chairs, and motorized scooters. TSS was assigned U.S. Registration Nos. 2,710,502; 2,714, 979; 2,912, 774; and 3,017,227. The USPTO denied TSS's application for a trademark of “The Scooter Store” in the retail sales market. It issued a determination finding “The Scooter Store” to be generic for retail sales, merely descriptive of the retail and mail order sale of scooters, and incapable of identifying The Scooter Store's services and distinguishing them from others. It refused registration of the proposed mark. Accordingly, TSS does not have a trademark registration for the retail sale of goods. Its trademarks, if valid and enforceable, are limited to insurance claims.

TSS did not disclose its knowledge of Trautman's Ohio registration when it applied for incontestability as to Registration Nos. 2,714,979 and 2,710,502 in 2008.

B. Procedural Background

In its Amended Complaint, TSS asserts the following claims: (1) Federal Unfair Competition; (2) State Unfair Competition (based on Texas law); (3) State dilution (based on Texas law); (4) Federal Trademark Infringement; (5) State Trademark Infringement (based on Texas law); and (6) Unjust Enrichment and Misappropriation. TSS requests punitive and exemplary damages, a declaratory judgment that SpinLife's actions are unlawful, and injunctive relief.

SpinLife moved to transfer venue to this Court. After the motion was granted, SpinLife filed an Amended Counterclaim, asserting: (1) a Sherman Act violation; and (2) Ohio Unfair Competition. SpinLife requests a declaratory judgment of non-infringement of Trademark Registration Nos. 2,710,502; 2,714, 979; 2,912, 774; and 3,017, 227 under the Lanham Act; a declaratory judgment that U.S. Registration Nos. 2,710,502; 2,714, 979; 2,912, 774; and 3,017, 227 are invalid; a declaratory judgment that purchase of “The,” “Scooter” and “Store” keywords and phrases does not infringe Trademark Registration Nos. 2,710,502; 2,714, 979; 2,912, 774; and 3,017, 227; and a declaratory judgment that Registration Nos. 2,710,502; 2,714, 979; 2,912, 774; and 3,017,227 are unenforceable.

TSS moves to dismiss counts one, two, four, and six of SpinLife's Amended Counterclaim. The motion has been fully briefed, and is now ripe for decision.

III. STANDARD OF REVIEW

A case may be dismissed if the complaint does not state a claim on which relief can be granted. Fed.R.Civ.P. 12(b)(6). A “motion to dismiss for failure to state a claim is a test of the plaintiff's cause of action as stated in the complaint, not a challenge to the plaintiff's factual allegations.” Golden v. City of Columbus, 404 F.3d 950, 958–59 (6th Cir.2005). Consequently, the Court must construe the complaint in the light most favorable to the non-moving party, accept all factual allegations as true, and make reasonable inferences in favor of the non-moving party. Total Benefits Planning Agency, Inc. v. Anthem Blue Cross & Blue Shield, 552 F.3d 430, 434 (6th Cir.2008); Murphy v. Sofamor Danek Gp., Inc., 123 F.3d 394, 400 (6th Cir.1997). The Court is not required, however, to accept as true mere legal conclusions unsupported by factual allegations. Ashcroft v. Iqbal, 556U.S. 662, 129 S.Ct. 1937, 1949, 173 L.Ed.2d 868 (2009) ( citing Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007)).

Although liberal, the Rule 12(b)(6) standard requires more than the bare assertion of legal conclusions to survive a motion to dismiss. Allard v. Weitzman, 991 F.2d 1236, 1240 (6th Cir.1993) (citation omitted). The complaint must “ ‘give the defendant fair notice of what the claim...