Visual Dynamics, LLC v. Chaos Software Ltd.
| Decision Date | 12 February 2018 |
| Docket Number | CASE NO. 5:16–CV–5287 |
| Citation | 309 F.Supp.3d 609 |
| Parties | VISUAL DYNAMICS, LLC, Plaintiff/Counter–Defendant v. CHAOS SOFTWARE LTD. and Chaos Group, LLC, Defendants/Counter–Claimants |
| Court | U.S. District Court — Western District of Arkansas |
W. Asa Hutchinson, III, The Asa Hutchinson Law Group, PLC, Bentonville, AR, for Plaintiff/Counter–Defendant.
Cynthia A. Gierhart, Thomas W. Brooke, Holland Knight LLP, Washington, DC, G. Alan Wooten, Kerri E. Kobbeman, Conner & Winters, LLP, Fayetteville, AR, for Defendants/Counter–Claimants.
Currently before the Court are:
As further explained below, Chaos's Motion with respect to Visual Dynamics' claims is GRANTED, Chaos's Motion with respect to its own claims is GRANTED IN PART AND DENIED IN PART, and Visual Dynamics' Motion is GRANTED IN PART AND DENIED IN PART.
Chaos is a Bulgarian software developer that was founded in 1997. One of its products is a rendering software application that is sold under the "V–Ray" name and mark, which was first registered with the United States Patent and Trademark Office ("USPTO") on March 20, 2007. V–Ray is used to create realistic graphics and animation in a variety of industries, including video games, film and television, and architecture design. But Chaos does not sell V–Ray directly to the public; instead, it sells the product to a network of "authorized resellers," who in turn resell the product to the general public. Sometimes those resellers distribute the product to "sub-resellers," who then sub-resell it to the general public. Chaos contracts with its resellers, but it does not contract with sub-resellers. However, its contracts with its resellers require them to demand certain things of their sub-resellers, such as pricing limits.
Visual Dynamics is an Arkansas business that resells software from outside developers. In September of 2008, Visual Dynamics' owner, Scott Slauson, purchased the internet domain name registration for www.vray.com from a man named Vance Ray for $4,000, in anticipation of using vray.com to sell V–Ray products in the United States as one of Chaos's authorized resellers. After purchasing the vray.com domain, Mr. Slauson approached Chaos on behalf of Visual Dynamics, asking whether Chaos would make Visual Dynamics one of its authorized resellers. Chaos declined, explaining that it already had seven authorized resellers in the United States, and didn't want to oversaturate the American market or dilute its brand there. However, Chaos encouraged Visual Dynamics to go ahead and seek out one of its authorized resellers in order to become a sub-reseller of V–Ray products. Visual Dynamics did this, and sub-resold V–Ray products on vray.com, with Chaos's knowledge, from 2008 until May 26, 2011, when it finally became an authorized reseller of V–Ray products for Chaos.
The relationship between Visual Dynamics and Chaos was a complicated and frustrating one for both parties. On the one hand, Visual Dynamics made money for Chaos, and of course, for itself. On the other hand, Chaos experienced frequent complaints from customers about Visual Dynamics' customer service, and about the vray.com website. Eventually, Chaos had enough, and on October 11, 2012, Chaos terminated the parties' authorized-reseller relationship, effective on November 9, 2012. However, Visual Dynamics continued sub -reselling V–Ray products on vray.com. Then on June 3, 2013, Visual Dynamics was hit with a letter from Chaos's attorneys, demanding that it cease using the V–Ray mark and immediately turn over the registration of the vray.com domain to Chaos. Visual Dynamics declined, and instead continued sub-reselling V–Ray products on vray.com.
For the next three and a half years, an uneasy truce of sorts seems to have held between the parties. Chaos complained to consumers and to the public about Visual Dynamics and vray.com, and went out of its way to emphasize to anyone with questions about the matter that the two entities were not affiliated with each other. But Chaos took no legal action to follow up on its 2013 cease-and-desist letter. Mr. Slauson, however, fumed over the things Chaos was saying about Visual Dynamics to others, and on October 14, 2016, crossed the Rubicon by filing this lawsuit, claiming that Chaos was tortiously interfering with Visual Dynamics' business expectancy. In addition to that claim of tortious business interference, Visual Dynamics also asserted claims against Chaos for civil conspiracy and for a preliminary injunction, both of which were premised on the same conduct as the first claim. Chaos was apparently displeased with this turn of events, and responded by filing nine counterclaims against Visual Dynamics for trademark infringement, trademark dilution, false representation, false designation of origin, unfair competition, cyberpiracy, and deceptive trade practices, under various theories of federal and Arkansas law.
On October 30, 2017, the parties filed their summary judgment motions. Chaos filed two motions: one seeking summary judgment on its own claims against Visual Dynamics, and the other seeking dismissal of Visual Dynamics' claims against Chaos. Visual Dynamics filed one motion, seeking dismissal of Chaos's claims. All three of those motions are now ripe for adjudication. Trial of whatever claims survive these motions is set to begin on February 20, 2018. A final pretrial conference will be held tomorrow, February 13.
"The court shall grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a). When, as here, cross-motions for summary judgment are filed, each motion should be reviewed in its own right, with each side "entitled to the benefit of all inferences favorable to them which might reasonably be drawn from the record." Wermager v. Cormorant Twp. Bd. , 716 F.2d 1211, 1214 (8th Cir. 1983). The Court must view the facts in the light most favorable to the non-moving party, and give the non-moving party the benefit of any logical inferences that can be drawn from the facts. Canada v. Union Elec. Co. , 135 F.3d 1211, 1212–13 (8th Cir. 1997). The moving party bears the burden of proving the absence of any material factual disputes. Fed. R. Civ. P. 56(a) ; Matsushita Elec. Indus. Co. v. Zenith Radio Corp. , 475 U.S. 574, 586–87, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986).
If the moving party meets this burden, then the non-moving party must "come forward with ‘specific facts showing that there is a genuine issue for trial.’ " Matsushita , 475 U.S. at 587, 106 S.Ct. 1348 (quoting then– Fed. R. Civ. P. 56(e) ). These facts must be "such that a reasonable jury could return a verdict for the nonmoving party." Allison v. Flexway Trucking, Inc. , 28 F.3d 64, 66 (8th Cir. 1994) (quoting Anderson v. Liberty Lobby, Inc. , 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986) ). "The nonmoving party must do more than rely on allegations or denials in the pleadings, and the court should grant summary judgment if any essential element of the prima facie case is not supported by specific facts sufficient to raise a genuine issue for trial." Register v. Honeywell Fed. Mfg. & Techs., LLC , 397 F.3d 1130, 1136 (8th Cir. 2005) (citing Celotex Corp v. Catrett , 477 U.S. 317, 324, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986) ).
The Court is of the opinion that there can be no reasonable dispute as to certain facts in this case, regardless of whether the record is viewed in the light most favorable to Chaos or to Visual Dynamics. So before diving into the specific elements of any particular claim or defense by either party, it is useful to make certain factual findings and legal rulings flowing therefrom, that will have the effect of dramatically streamlining the analysis that follows.
Chaos does not claim that it is unlawful for Visual Dynamics to sub-resell V–Ray products. See, e.g. , Doc. 35, p. 5. And there is no reasonable dispute that Chaos gave Visual Dynamics permission to use the V–Ray logo in connection with the sale of V–Ray products, long before Visual Dynamics became an authorized reseller. See Doc. 28, p. 27. There is also no reasonable dispute that, long before Visual Dynamics became an authorized reseller, Chaos not only permitted Visual Dynamics to use the vray.com domain, but even encouraged Visual Dynamics to sell V–Ray products on the vray.com domain. See id. at 10–17, 27. True, Chaos conditioned this permission and encouragement on Visual Dynamics's compliance with requests, for example, that the vray.com domain explain that it was not Chaos's property, that it...
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