Tracfone Wireless, Inc. v. Access Telecom, Inc.

• Decision Date: 24 July 2009
• Docket Number: No. 09-20397-CIV.,09-20397-CIV.
• Citation: 642 F.Supp.2d 1354
• Parties: TRACFONE WIRELESS, INC., a Delaware corporation, Plaintiff, v. ACCESS TELECOM, INC., et al., Defendants.
• Court: U.S. District Court — Southern District of Florida

642 F.Supp.2d 1354

TRACFONE WIRELESS, INC., a Delaware corporation, Plaintiff, v. ACCESS TELECOM, INC., et al., Defendants.

No. 09-20397-CIV.

United States District Court, S.D. Florida.

July 24, 2009.

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Aaron Stenzler Weiss, Steven Jeffrey Brodie, Carlton & Fields PA, Maria C. Montenegro, Tracfone Wireless, Inc., Miami, F.L., James Blaker Baldinger, Carlton Fields PA, West Palm Beach, F.L., Gail Podolsky, Carlton Fields PA, Atlanta, GA, for Plaintiff.

Olivia D. Griffin, Olivia D. Griffin, Miami, F.L., for Defendants.

OMNIBUS ORDER DENYING MOTION TO DISMISS FOR LACK OF SUBJECT MATTER JURISDICTION: DENYING MOTION TO DISMISS FOR FAILURE TO STATE A CLAIM: DENYING MOTION TO STRIKE: DENYING MOTION FOR SANCTIONS

ALAN S. GOLD, District Judge.

This CAUSE is before the Court on Defendants' Motion to Dismiss for Failure to State a Claim [DE 17], Motion to Dismiss for Lack of Subject Matter Jurisdiction [DE 22], Motion to Strike Improper Allegations [DE 32], and Plaintiffs Motion for Rule 11 Sanctions [DE 35]. All Motions have been fully briefed, with the exception that a Reply was not filed in connection with Defendants' Motion to Dismiss for Failure to State a Claim, and oral argument was heard on July 17, 2009. I further considered Plaintiffs Supplemental Memorandum of Law [DE 64] filed after oral argument. For the following reasons, all Motions are denied.

I. Factual Background

Plaintiff Tracfone Wireless, Inc. ("Tracfone"), a Delaware corporation, filed the instant Complaint on January 17, 2009 seeking redress for violations of federal copyright and trademark infringement law and a number of related state claims. The facts as alleged in the Complaint, taken as true for the purposes of resolving a Motion to Dismiss, are as follows:

Plaintiff is a provider of prepaid wireless telephonic service in the United States branded as "TracFone" and "Net10." [DE 1 at ¶ 20]. Plaintiff enables its customers to prepay for their wireless service by purchasing TracFone phone cards, known as "airtime cards" and specially manufactured TracFone and Net10 wireless phones ("specialty phones"). Id. Plaintiff sells these specialty phones at substantially less than their costs and recoups this subsidy through profits earned on the sale of the prepaid airtime cards. Id. at ¶ 22. The specialty phones are installed with a special proprietary software ("TracFone Prepaid Software") which prevents them from being used without the use of airtime cards. Id. at ¶ 23.

Plaintiff alleges that Defendants have engaged in a practice, spanning June to November 2007, of buying specialty phones in bulk and rewiring them to allow the phones to be used as a regular wireless phones on other cellular networks without the need for Plaintiffs airtime cards. The specialty phones are removed from their original packaging, shipped overseas, and rewired. Id. at ¶ 36. By doing so, Defendant's conduct violates the Terms and Conditions that accompany each specialty phone. Id. at ¶¶ 27-32. The result of this conduct is that the phones become no longer operable within the Plaintiffs prepaid wireless virtual network and Plaintiff no longer has a revenue source. Id. at ¶ 38. Defendants further solicit others to purchase the phones in bulk in order to circumvent retailer policies limiting the number of specialty phones an individual may purchase at one time. Id. at ¶¶ 57-59.

Further, Plaintiff alleges that it is the owner of federally protected trademarks and copyrights. Specifically, Plaintiff is the owner of eight trademarks, four for TracFone and four for Net10. Id. at ¶ 24. In support, Plaintiff has filed with its Complaint certificates of registration for each of these marks issued by the U.S. Patent and Trademark Office [DE 1, Ex. A]. Finally, Plaintiff alleges it is the owner of a copyright on the TracFone Prepaid Software, for which it has also filed a certificate of registration in support. Id. at ¶ 26. By rewiring the specialty phones and selling them at a premium, as new, under Plaintiffs trademarks, Defendants have violated Plaintiffs trademarks and copyright. Id. at ¶¶ 17, 39. As a result of Defendant's conduct, Plaintiff has suffered economic loss, a dilution of its mark, and injury to its reputation in the marketplace. Id. at ¶¶ 64-70.

II. Jurisdiction

Plaintiff alleges jurisdiction based on federal question, as there is an absence of diversity between the parties in this action. 28 U.S.C. § 1331. As discussed below, Defendants challenge whether this Court has subject matter jurisdiction. Further, Plaintiff invokes this Court's supplemental jurisdiction over its state claims. 28 U.S.C. § 1367.

III. Standard of Review

In determining whether to grant a motion to dismiss, the court must accept all the factual allegations in the complaint as true and evaluate all inferences derived from those facts in the light most favorable to the plaintiff. Hoffend v. Villa, 261 F.3d 1148, 1150 (11th Cir.2001). While Federal Rules of Civil Procedure 8(a)(2) requires only "a short and plain statement of the claim showing that the pleader is entitled to relief," it "still requires a `showing,' rather than a blanket assertion, of entitlement to relief." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 127 S.Ct. 1955, 1965 n. 3, 167 L.Ed.2d 929 (2007). In order to survive a motion to dismiss, a plaintiffs pleading obligation requires "more than labels and conclusions." Id. at 1964-65. The Plaintiff must have "nudged [its] claims across the line from conceivable to plausible." Id. at 1960. While Rule 12(b)(6) does not permit dismissal of a well-pleaded complaint simply because "it strikes a savvy judge that actual proof of those facts is improbable, the factual allegations must be enough to raise a right to relief above the speculative level." Watts v. Fla. Int'l Univ., 495 F.3d 1289, 1295 (11th Cir.2007) (citing Bell Atl., 127 S.Ct. at 1965) (internal quotations omitted)).

The pleading requirements are different for certain matters. Federal Rules of Civil Procedure 9(b) provides that in "alleging fraud . . . a party must state with particularity the circumstances constituting fraud...." In order to comply with the requirements of Rule 9(b), Plaintiff must set forth (1) precisely what statements were made in what documents or oral representations or what omissions were made, (2) the time and place of each such statement and the person responsible for making (or, in the case of omissions, not making) same, (3) the content of such statements and the manner in which they misled the plaintiff, and (4) what the defendants obtained as a consequence of the fraud. Ziemba v. Cascade Int'l, Inc., 256 F.3d 1194, 1202 (11th Cir.2001) (quoting Brooks v. Blue Cross & Blue Shield of Fla., Inc., 116 F.3d 1364, 1371 (11th Cir. 1997)).

IV. Discussion

A. Motion to Dismiss for Lack of Subject Matter Jurisdiction

As a threshold matter, I address Defendant's Motion to Dismiss for Lack of Subject Matter Jurisdiction. Defendant claims that Plaintiff is in fact not the owner of the trademarks and copyright as alleged in the Complaint. Specifically, Defendant claims that the trademarks and copyright were registered by TracFone Wireless, Inc. (Florida), not the Plaintiff corporation TracFone Wireless, Inc. (Delaware). In support, Defendant points to two facts: (1) the representation in Plaintiffs Response to the Motion to Dismiss for Failure to State a Claim that on August 31, 2007, the Florida corporation assigned all its intellectual property rights to the Delaware corporation [DE 25 at 8-9]; and (2) that independent discovery by Defendants reveals that on August 31, 2007, the Florida corporation converted into a limited liability corporation named TracFone Wireless, LLC [DE 28-2].¹ Defendants argue that under Florida law, "[w]hen a conversion [of a domestic corporation into another business entity] becomes effective: [t]he title to all real property and other property, or any interest therein, owned by the domestic corporation at the time of its conversion into the other business entity remains vested in the converted entity. . . ." Fla. Stat. § 607.1114(2). Therefore, Defendants argue that on August 31, 2007, the owner of the intellectual property rights at issue was the converted entity TracFone Wireless, LLC, and TracFone Wireless, Inc. (Florida) could not have assigned the intellectual property rights to Plaintiff.²

Plaintiff does not dispute that the intellectual property rights initially belonged to the Florida corporation, but argues that the intellectual property rights belong to Plaintiff pursuant to the General Intellectual property Assignment agreement between the Florida and Delaware corporations, also signed on August 31, 2007.³ Plaintiff contends that the assignment of the intellectual property rights took place before the Florida corporation was converted into a limited liability corporation, a new and different business entity. In support, Plaintiff offers the declaration of Jill C. Garcia, Plaintiffs Senior Vice President Quality & Assurance [DE 26-6]. Ms. Garcia attests that the Florida corporation transferred the Florida corporation's assets, including all intellectual property rights, prior to executing the Certificate of Conversion. Id. at ¶ 2(b). The conversion therefore had no bearing on ownership of the intellectual property rights because the Florida corporation no longer had ownership of them. Further, Plaintiff submits a public governmental record from the U.S. Copyright Office that indicates that TraceFone Prepaid Software copyright is owned by Plaintiff, the Delaware corporation [DE 26-2].

Defendants offer no legal support for their position that under these circumstances, the conversion must be viewed as taking precedence over the assignment of assets that took place on the same day. Indeed, Fla. Stat. § 607.1114(2) has not been cited once in Florida courts or in the courts of the Eleventh Circuit. Defend...