BOWLER, United States Magistrate Judge.
Pending before this court is a motion for summary judgment filed by defendants Drive USA 1, Inc., Drive USA 2, Inc., Drive USA 3, Inc. and Drive USA 4, Inc. ("Drive USA defendants" or "the Drive USA companies"),
Plaintiffs filed this action in October 2008. The five count complaint sets out trademark infringement, false designation of origin, unfair competition and trademark dilution claims under the Lanham Act, 15 U.S.C. §§ 1051 et seq. ("the Lanham Act"), in counts II and III and V. Count IV consists of claims for trademark infringement and unfair competition under Massachusetts statutory and common law.
In February 2009, defendants filed a four count counterclaim. Count I is a fraudulent procurement claim under the Lanham Act, 15 U.S.C. § 1120 ("section 1120"). Count II seeks declaratory relief under the Lanham Act. In Count III, defendants allege federal antitrust violations under the Sherman Antitrust Act, 15 U.S.C. §§ 1-7 ("the Sherman Act"), on the basis of plaintiffs' monopolistic and anticompetitive trademarks. Count IV alleges a chapter 93A violation.
Plaintiffs' trademarks, all registered, consist of the following: (1) registration number 2,503,943 ("registration 943"), which issued on November 6, 2001, for the mark DRIVE with a stylized D above the letter "V" for "financial services, namely, purchasing loans from automobile dealerships"; (2) registration number 2,503,946 ("registration 946"), which issued on November 6, 2001, for the mark D in a stylized format in relation to "financial services, namely, purchasing loans from automobile dealerships"; (3) registration number 2,514,867 ("registration 867"), which issued on December 4, 2001, for the mark DRIVE FINANCIAL SERVICES with financial services appearing underneath drive in a smaller typeset and a different font coupled with a stylized D appearing above the letter "V" in drive all in relation to "financial services, namely, purchasing loans from automobile dealerships"; (4) registration number 3,081,414 ("registration 414"), which issued on April 16, 2006, for the mark DRIVE FINANCIAL SERVICES in plain text for "financial services, namely, originating loans, purchasing loans and servicing auto loans"; and (5) registration number 3,081,262 ("registration 262"), which issued on April 18, 2006, for the mark DRIVE in plain text for "financial services, namely, originating loans, purchasing loans and servicing auto loans" (collectively: "the Drive Marks") (Docket Entry
Registrations 414 and 262 designate first use in 1999 whereas the remaining three registrations designate first use in 2000. The filing dates of registrations 414 and 262 are respectively March 10, 2005, and August 26, 2004. The applications leading to registration numbers 414 and 262 include declarations by DTH that, to the best of its knowledge and belief, no other person or corporation had the right to use the service marks in commerce in relation to automobile financial services. Registration 414 disclaims exclusive rights to the phrase financial services apart from the mark itself, i.e., DRIVE FINANCIAL SERVICES.
On July 2, 2004, Inofin filed application serial number 78445657 ("application 657") in the PTO directed to the mark DriveUSA for financing services, auto loans, vehicle loans and related services relative to international class 036, the same class as the Drive Marks. The application sought registration in additional classes for automobile related services.
The July 2004 filing date for application 657 precedes the March 2005 filing date of the application that led to registration 414 for the DRIVE FINANCIAL SERVICES mark. The July 2004 filing date for application 657 also precedes the August 2004 filing date of the application that led to registration 262 for the DRIVE mark.
Litigation ensued in the Trial and Trademark Appeal Board of the United States Patent and Trademark Office ("TTAB") when DTH opposed application 657 for international class 036. Plaintiffs also instituted suit against defendants in the United States District Court for the Northern District of Texas ("the Texas court"). (Docket Entry # 46, Ex. 3, ¶ 4).
In seeking summary judgment, defendants submit there is an absence of a likelihood of confusion between the DriveUSA mark and the Drive Marks. According to defendants, the absence forecloses relief on the federal and common law trademark infringement claims in counts II and IV, the federal, state and common law unfair competition claims in counts IV and V, the assertion of willful infringement and the false designation of origin claim in Count III.
In addition to dismissing the declaratory relief sought in Count I, defendants move for summary judgment on Count II of the counterclaim and seek a declaration that registrations 414 and 262 are invalid because the term drive is descriptive which, coupled with the disclaimed rights for financial services, is not entitled to trademark protection. They further maintain that the descriptive Drive Marks in these registrations lack secondary meaning. Accordingly, they are not subject to trademark protection.
As a final argument, defendants contend that the Drive Marks are neither famous nor distinctive and there is no likelihood of dilution. Accordingly, defendants move for summary judgment on the trademark dilution claims under Texas and Massachusetts law in Count V.
Summary judgment is designed "`to pierce the boilerplate of the pleadings and assay the parties' proof in order to determine whether trial is actually required.'" Davila v. Corporacion De Puerto Rico Para La Difusion Publica, 498 F.3d 9, 12 (1st Cir.2007). It is appropriate when the summary judgment record shows "there is no genuine issue of material fact, and the moving party is entitled to judgment as a matter of law." Rule 56(c), Fed.R.Civ.P. "A dispute is genuine if the evidence about the fact is such that a reasonable jury could resolve the point in the favor of the non-moving party." American Steel Erectors, Inc. v. Local Union No. 7, International Association of Bridge, Structural, Ornamental & Reinforcing Iron Workers, 536 F.3d 68, 75 (1st Cir.2008). "A fact is material if it carries with it the potential to affect the outcome of the suit under the applicable law." Id.
Defendants devote the majority of their arguments to the absence of a likelihood of confusion. Likelihood of confusion is an essential element of a trademark infringement claim under the Lanham Act. See Boston Duck Tours, LP v. Super Duck Tours, LLC, 531 F.3d 1, 12 (1st Cir.2008) ("[t]o succeed on a claim of trademark infringement, a plaintiff must establish . . . that the allegedly infringing use is likely to cause consumer confusion"). The same likelihood of confusion standard applies to the unfair competition and false designation of origin claims. See Venture Tape Corp. v. McGills Glass Warehouse, 540 F.3d 56, 61 n. 6 (1st Cir.2008) ("Venture's unfair competition claim (Count 2) and false designation claim (Count 3) are subject to the same legal standard-namely, `likelihood of confusion'—as its Count 1 infringement claim"). To survive summary judgment, plaintiffs must show "a substantial likelihood of confusion." Beacon Mut. Ins. Co. v. OneBeacon Ins. Group, 376 F.3d 8, 18 (1st Cir.2004) ("Beacon Mutual acknowledges that it must demonstrate a substantial likelihood of confusion to survive summary judgment"). The summary judgment inquiry therefore turns upon whether a "reasonable factfinder could find a substantial likelihood of confusion." Id. at 18.
The confusion must "`exist in the mind of a relevant person.'" Id. at 10. The relevant person is not only the actual or the potential buyer of the product. Id. at 16 ("likelihood of confusion inquiry is not limited to actual or potential purchasers, but also includes others whose confusion threatens the trademark owner's commercial interest in its mark"). Rather, it includes "the minds of persons in a position to influence the purchasing decision or persons whose confusion presents a significant risk to the sales, goodwill, or reputation of the trademark owner." Id. at 10. As such, the relevant persons include the individuals at the dealerships suggesting or initiating the financing as well as the automobile purchasers at the dealerships purchasing the financing.
The non-exclusive list of factors to assess likelihood of confusion under section 43(a) of the Lanham Act is:
"[S]imilarity is determined on the basis of the designation's total effect." International Ass'n of Machinists and Aerospace Workers, AFL-CIO v. Winship Green Nursing Center, 103 F.3d 196, 203 (1st Cir.1996); accord Beacon Mut. Ins. Co. v. OneBeacon Ins. Group, 376 F.3d at 18 (similarity "factor is evaluated based on the `the designation's total effect'"). More specifically, the inquiry turns upon the total effect examining the similarity "in sound, appearance, and meaning." Volkswagenwerk Aktiengesellschaft v. Wheeler, 814 F.2d 812, 817 (1st Cir.1987); accord Recot, Inc. v. Becton, 214 F.3d 1322, 1329 (Fed.Cir.2000) ("similarity or dissimilarity of the marks in their entirety is to be considered with respect to appearance, sound, and connotation").
In the case at bar, the overall appearances of the marks are somewhat similar. With the exception of the marks in registrations 946 and 414, the Drive Marks and the DriveUSA mark use larger and smaller fonts to emphasize the prominent portions which also overlap. Although the overall impressions both conjure strong and emphatic statements, the sight, sound and appearance of the more succinct "D" and the drive in the Drive Marks convey a stronger, more emphatic sound, sight and appearance than the DriveUSA mark. While this court recognizes that the ultimate determination is the total effect, a jury could readily find that the common portion of the marks, to wit, drive, is weak. See 4 Thomas McCarthy, McCarthy on Trademarks and Unfair Competition §§ 23.48 & 23.39 (4th ed.2008) (if "common element of conflicting marks is a word that is `weak' then this reduces the likelihood of confusion" and portion of "mark may be `weak' in the sense that such portion is descriptive, highly suggestive, or is in common use by many other sellers in the market"); see also Boston Duck Tours, LP v. Super Duck Tours, LLC, 531 F.3d at 24. On balance, a reasonable jury could find the total effect of the DriveUSA mark similar to the Drive Marks in registrations 414, 262, 867 and 943.
Examining the relevant factors and viewing the record in plaintiffs' favor, both parties provide services for dealer originated subprime financing for automobiles.
The channels of trade, advertising and classes of prospective purchasers similarly
Plaintiffs are a leading provider of automobile finance programs and, beginning in 1999 and 2000, began using the Drive Marks in connection with subprime financing services. Automobile dealers enter into dealer retail agreements ("dealer partners") with Santander and then communicate plaintiffs' financing services to consumers, including those located in Massachusetts and Rhode Island. A reasonable jury could find that the amount of care used by the relevant person purchasing subprime financing for an automobile is far less than the care used by the same person in deciding which automobile to purchase. Both plaintiffs and defendant advertise their respective marks on the internet. Using their marks, plaintiffs and defendants participate in the market of dealer generated subprime financing of automobile purchases. For example, defendants' internet advertisements include hyperlinks to complete an application for financing and note, "We are experts in the subprime market and really can help you purchase and finance a quality vehicle regardless of your credit." (Docket Entry # 46, Ex. 1-12b). Defendants also use the DriveUSA mark in print, radio, television and other advertising media. The classes of prospective purchasers as well as the channels of trade overlap albeit not to the degree or lack of degree asserted by either party.
The evidence of actual confusion, including the affidavit of Scott Joscelyn, strongly favors defendants. Furthermore, evidence of actual confusion is oftentimes "considered the most persuasive evidence of likelihood of confusion because past confusion is frequently a strong indicator of future confusion." Beacon Mut. Ins. Co. v. OneBeacon Ins. Group, 376 F.3d at 18. "[A]ctual confusion is not a prerequisite to a finding of likelihood of confusion," Visible Systems Corp. v. Unisys Corp., 551 F.3d 65, 74 (1st Cir.2008), however, and a consideration of all of the factors and the factual record as a whole record leads to a denial of summary judgment. As to the seventh factor, there is little, if any, evidence of bad faith in adopting the Drive USA mark.
The eighth factor of the strength of plaintiffs' marks entails assessing "`the length of time the mark has been used, its renown in the plaintiff's field of business, and the plaintiff's actions to promote the mark.'" Beacon Mut. Ins. Co. v. OneBeacon Ins. Group, 376 F.3d at 19. The Drive Marks are reasonably strong. In use since as early as 1999, plaintiffs have invested significant funds to promote the Drive Marks although there is little to indicate that the investment is targeted
In conclusion, assessing and weighing all of the relevant factors, summary judgment in defendants' favor on likelihood of confusion is not appropriate.
Defendants next maintain that the term drive is merely a descriptive term that lacks secondary meaning and therefore trademark protection. "Descriptive marks are those that convey an immediate idea of the ingredients, qualities or characteristics of the goods or services to which they are attached." Boston Duck Tours, LP v. Super Duck Tours, LLC, 531 F.3d at 13 (internal quotation marks and brackets omitted). Descriptive marks receive trademark protection only with secondary meaning. See Two Pesos, Inc. v. Taco Cabana, Inc., 505 U.S. 763, 768-769, 112 S.Ct. 2753, 120 L.Ed.2d 615 (1992); Boston Duck Tours, LP v. Super Duck Tours, LLC, 531 F.3d at 13; Boston Beer Co. Ltd. Partnership v. Slesar Bros. Brewing Co., Inc., 9 F.3d 175, 180 (1st Cir.1993).
For purposes of summary judgment only, this court assumes that the Drive Marks are descriptive. There is nonetheless sufficient evidence of secondary meaning to allow a reasonable jury to find in plaintiffs' favor.
"A mark is entitled to trademark protection if it is capable of functioning as a source-identifier of goods." Boston Duck Tours, LP v. Super Duck Tours, LLC, 531 F.3d at 12. For purposes of summary judgment, this court assumes that the Drive Marks convey an immediate idea of the ingredients, qualities or characteristics of the service, see id. at 13, in this instance dealer originated subprime automobile financing.
The plaintiff bears "the burden of proving that secondary meaning has attached
Secondary meaning customarily entails "weigh[ing] a number of factors." I.P. Lund Trading ApS v. Kohler Co., 163 F.3d 27, 42 (1st Cir.1998). In addition to direct evidence of customer copying, factors include "(1) the length or exclusivity of use of a mark; (2) the size or prominence of the plaintiff's enterprise; (3) the existence of substantial advertising by plaintiff; (4) the products established place in the market; and (5) proof of intentional copying." Bay State Sav. Bank v. Baystate Financial Services, LLC, 484 F.Supp.2d 205, 214 (D.Mass.2007) (citing I.P. Lund Trading v. Kohler Co., 163 F.3d at 42).
Examining the factors in the case at bar and viewing the facts in plaintiffs' favor, plaintiffs have used the marks in registrations 414 and 262 since 1999 as a means to distinguish their automobile financing services in the dealer originated subprime market. Plaintiffs have used the other marks since 2000. Indeed, plaintiffs use the Drive Marks in virtually all marketing efforts aimed at automobile dealerships, consumers who purchase automobiles using plaintiffs' financing services and consumers visiting industry trade shows.
Plaintiffs have a prominent enterprise. Approximately 10,500 dealer partners in 49 states, including Massachusetts and Rhode Island, actively communicate plaintiffs' financial services to consumers with materials that contain the Drive Marks. Plaintiffs have 25 dealer partners in Rhode Island, where defendants have a dealership. In Raynham, Massachusetts, where defendants formerly had a dealership, eight dealers partner with plaintiffs. Plaintiffs have ten dealer partners in the Springfield area and four dealer partners in Worcester where defendants anticipate opening a dealership in the fall 2010. In addition, "many dealers select the subprime automobile finance company that will originate the auto loans . . . based primarily on the dealer's profitability on the proposed sale" and plaintiffs are a leading provider of subprime automobile financing programs. (Docket Entry # 46, Ex. 1).
Plaintiffs continue to market themselves using the Drive Marks in statement stuffers in consumer billing statements. These inserts prominently feature a Drive Mark and identify plaintiffs as the single source.
From 2000 to 2004, plaintiffs expended at least $3.6 million, albeit not broken down geographically, to market and advertise their brand, which includes the Drive Marks. Plaintiffs publish two quarterly newsletters to dealer partners and employ sale managers in Massachusetts and Rhode Island. Santander's Communications Director details additional efforts which, along with the foregoing, provide circumstantial evidence that the Drive Marks have acquired secondary meaning.
On the other hand, there is little if any showing of intentional copying. Although consumer surveys and other direct evidence is lacking, the record is sufficient to
The summary judgment motion also seeks a declaration to disclaim the term drive from registrations 943 and 867 as requested in Count II of the counterclaim. "[T]he PTO requires disclaimers only for generic and other unregisterable elements in a composite mark." Boston Duck Tours, LP v. Super Duck Tours, LLC, 531 F.3d at 24 (citing 15 U.S.C. § 1056(a)). Thus, if the drive component of registrations 867 or 943 is merely descriptive without a secondary meaning, it is the proper subject of a disclaimer. As explained above, there is sufficient evidence of secondary meaning to allow a reasonable jury to find in plaintiffs' favor.
Defendants' argument that the absence of likelihood of confusion warrants summary judgment on the willful infringement claim (Docket Entry # 1, ¶¶ 82-83) is also unavailing for previously stated reasons. Moreover, defendants only reference willful infringement in the conclusion of the supporting memorandum. See L.R. 7.1.; see also Higgins v. New Balance Athletic Shoe, Inc., 194 F.3d 252, 260 (1st Cir.1999) ("district court is free to disregard arguments that are not adequately developed").
As a final argument, defendants maintain that the Drive Marks are neither famous nor distinctive. Defendants further submit that plaintiffs fail to show a likelihood of dilution. Accordingly, defendants seek summary judgment on the trademark dilution claims under Texas and Massachusetts law in Count V.
In order to succeed on a dilution claim under the Texas statute, section 16.29, the plaintiff "must show that it owns a distinctive mark and that there is a likelihood of dilution."
In order to determine whether a mark is distinctive under section 16.29:
Advantage Rent-A-Car, Inc. v. Enter. Rent-A-Car Co., 238 F.3d at 381 (internal citations, quotation marks and brackets omitted). Viewing the summary judgment record in plaintiffs' favor, a reasonable jury could find that the Drive Marks are distinctive. In particular, a jury could find that the Drive Marks are strong. Plaintiffs have used the Drive Marks for at least ten years. They advertise nationwide including in the Rhode Island and Massachusetts area using a variety of media. Plaintiffs also have numerous dealer partners in these states that promote the Drive Marks. A jury could also find that plaintiffs' reputation is widespread. Plaintiffs' long and extensive use of the Drive Marks together with their advertising and promotional efforts and reputation provide sufficient support to classify the marks as distinctive under section 16.29. See, e.g., Pebble Beach Co. v. Tour 18 I, Ltd., 942 F.Supp. 1513, 1565 (S.D.Tex.1996) ("plaintiff's long and extensive use of the marks, their national reputations, and their advertising and promotional efforts" provided basis for court to find the marks distinctive).
Turning to the dilution inquiry, section 16.29 does not require a showing of actual dilution. Scott Fetzer Co. v. House of Vacuums Inc., 381 F.3d at 490 n. 9 ("district court erroneously held that [section 16.29] requires a showing of actual dilution"). Rather, it requires the plaintiff to "establish `an act likely to injure a business reputation or to dilute the distinctive quality of a mark.'" Id.
"Dilution may occur through blurring or tarnishing." Id., 381 F.3d at 489; accord Express One Intern., Inc. v. Steinbeck, 53 S.W.3d 895, 899 (Tex.App.Ct. 2001) (same). Blurring is "`a diminution in the uniqueness or individuality of the mark.'"
A reasonable jury could find that the DriveUSA mark is very similar to the Drive Marks depicted in registrations 262, 943 and 867. The summary judgment record also supports a finding that defendants' use of the similar Drive USA mark in internet advertising and elsewhere in Rhode Island and Massachusetts is significant. Accordingly, defendants' arguments do not warrant summary judgment on the section 16.29 claim in Count V.
Turning to the Massachusetts anti-dilution statute, it requires the plaintiff to "show (1) that its mark is distinctive, and (2) that the defendant's use of a similar
Turning to the likelihood of dilution, it "can result from any one of three situations: (1) reduction of the value of the mark caused by actual or potential confusion; (2) injury resulting from a use of the mark that tarnishes the reputation associated with the plaintiff's mark; or (3) `diminution in the uniqueness and individuality of the mark.'" Hasbro, Inc. v. Clue Computing, Inc., 66 F.Supp.2d at 137. As similarly articulated by the First Circuit in Astra:
Astra Pharmaceutical Products, Inc. v. Beckman Instruments, Inc., 718 F.2d at 1209. The summary judgment record provides sufficient evidence to support a finding of potential confusion.
Plaintiffs move for judgment on the pleadings under Rule 12(c) on Count I (fraud in the procurement), Count III (Sherman Act) and Count IV (unfair competition) in the counterclaim. They also move to strike Count II (declaratory relief) in the counterclaim under Rule 12(f). (Docket Entry # 34). The district judge previously denied the motion to dismiss (Docket Entry # 13) the above counts filed under Rule 9(b), Fed.R.Civ.P. ("Rule 9(b)"), Rule 12(b)(6), Fed.R.Civ.P. ("Rule 12(b)(6)"), and Rule 12(f). (Docket Entry # 20). At the same time, he allowed defendants' motion to amend the counterclaim. (Docket Entry # 20).
A Rule 12(c) motion "is treated much like a Rule 12(b)(6) motion to dismiss." Perez-Acevedo v. Rivero-Cubano, 520 F.3d 26, 29 (1st Cir.2008) (citing Curran v. Cousins, 509 F.3d 36, 43-44 (1st Cir.2007)). Because a Rule 12(c) "motion calls for an assessment of the merits of the case at an embryonic stage, the court must view the facts contained in the pleadings in the light most favorable to the nonmovant and draw all reasonable inferences therefrom" in the nonmovant's behalf. R.G. Financial Corp. v. Vergara-Nunez, 446 F.3d 178, 182 (1st Cir.2006). In order to survive a Rule 12(c) motion, a complaint must contain factual allegations that "raise a right to relief above the speculative level, on the assumption that all the allegations in the complaint are true." Perez-Acevedo v. Rivero-Cubano, 520 F.3d at 29 (citing Bell Atlantic v. Twombly, 550 U.S. 544, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007), as stating standard applicable to Rule 12(b)(6) and "by extension, a Rule 12(c) motion"). As explained by the Court in Bell, a complaint must show "a plausible entitlement to relief." Bell Atlantic v. Twombly, 550 U.S. at 559, 127 S.Ct. 1955; accord Rodriguez-Ortiz v. Margo Caribe, Inc., 490 F.3d 92, 95 (1st Cir.2007) (quoting Bell in context of discussing Rule 12(b)(6) standard of review).
A Rule 12(c) motion, unlike a Rule 12(b)(6) motion, "implicates the pleadings as a whole." Aponte-Torres v. University of Puerto Rico, 445 F.3d 50, 55 (1st Cir. 2006). In evaluating a Rule 12(c) motion, a court may "consider `documents the authenticity of which are not disputed by the parties'" as well as "`documents central to plaintiffs' claim'" and "`documents sufficiently referred to in the [counterclaim].'" Curran v. Cousins, 509 F.3d at 44 (internal brackets omitted). The registrations attached to the complaint therefore form part of the Rule 12(c) record. See, e.g., Id. at 45 n. 5.
Count I sets out a fraudulent procurement claim under the Lanham Act. Plaintiffs assert that the claim fails to set out the necessary elements of causation and damages.
Count I alleges that plaintiffs fraudulently obtained registrations 414 and 262 because the applications stated that "services under the mark[s] included `originating loans'" and that DTH "believed that to the best of its knowledge and belief, no other person, firm, corporation, or association has the right to use the marks in commerce." (Docket Entry # 16, Ex. 1,
Section 1120 prescribes that, "Any person who shall procure registration in the Patent and Trademark Office of a mark by a false or fraudulent declaration or representation, oral or in writing, or by any false means, shall be liable in a civil action by any person injured thereby for any damages sustained in consequence thereof." 15 U.S.C. § 1120. In order to prevail on the section 1120 claim, defendants must prove inter alia "damages proximately resulting from" reliance on the misrepresentation. Stanfield v. Osborne Indus., Inc., 52 F.3d 867, 874 (10th Cir.1995); see also 6 Thomas McCarthy, McCarthy on Trademarks and Unfair Competition § 31.86 (4th ed.2008) ("[a]ny damage must be proximately caused by assertion or use of the fraudulently procured registration, not solely from the false declaration"); Hodgdon Powder Co., Inc. v. Alliant Techsystems, Inc., 497 F.Supp.2d 1221, 1234 (D.Kan.2007).
Plaintiffs argue that attorneys' fees and litigation costs are not recoverable damages under section 1120. (Docket Entry # 35, ¶ III(A)). Entitlement to attorneys' fees or other litigation costs as an element of recoverable damages under section 1120 is an issue of first impression in this circuit. Other circuits addressing the issue uniformly deny litigation costs and attorneys' fees as recoverable damages under section 1120. See Aromatique, Inc. v. Gold Seal, Inc., 28 F.3d 863, 876 (8th Cir.1994) ("fees are not included within damages awarded under Section 38"); Gilbert/Robinson, Inc. v. Carrie Beverage-Missouri, Inc., 989 F.2d 985, 991 n. 5 (8th Cir.1993) ("§ 1120 damage claim may not supplant the court's carefully circumscribed discretion to award fees under § 1117"); Exxon Corp. v. Exxene Corp., 696 F.2d 544, 550 (7th Cir.1982); see also United Phosphorus, Ltd. v. Midland Fumigant, Inc., 205 F.3d 1219, 1232 (10th Cir.2000) (noting, in context of discussing award of fees under 15 U.S.C. § 1117, that section "1120 does not allow for the award of attorney fees"); Ritz Hotel, Ltd. v. Shen Mfg. Co., Inc., 2009 WL 1119496, *2 (E.D.Pa. April 27, 2009) ("[l]itigation costs and attorneys' fees are not available as damages under § 38"); Zobmondo Entertainment LLC v. Falls Media LLC, 89 U.S.P.Q.2d 1048 (C.D.Cal.2008) (section 1120 plaintiffs cannot prove damages element "by alleging that they have been forced to expend attorneys' fees in defending against [the] defendants' trademark claims, since attorneys' fees are not properly part of damages under Section 38, and attorneys' fees alone thus cannot satisfy damages requirement"); United Phosphorus, Ltd. v. Midland Fumigant, Inc., 21 F.Supp.2d 1255, n. 5 1259 (D.Kan.1998) ("attorney fees are not recoverable for violations of [section 1120]"), aff'd in part and rev'd in part on other grounds, 205 F.3d 1219 (10th Cir.2000). Accordingly, defendants are not entitled to recover attorneys' fees or defense costs directly under section 1120.
Plaintiffs' remaining arguments do not provide a basis for dismissal under Rule 12(c) inasmuch as the count adequately pleads causation and damages. The temporal connection with the fraudulent registrations and the resulting damage
Plaintiffs next move to strike the declaratory judgment count under Rule 12(f). They submit that the declaratory judgment count "does not serve a useful purpose" and is simply a "mirror image" of the complaint and duplicates defendants' affirmative defenses asserting the invalidity and unenforceability of the Drive Marks. (Docket Entry # 35).
Plaintiffs, however, previously raised this exact same argument as a means to dismiss the declaratory judgment count in the counterclaim under Rule 12(f). (Docket Entry # 14, § IV). In fact, the supporting memorandum used the same language quoted above as well as a majority of the same cases to present the argument. By denying the motion in its entirety and allowing the motion to amend the answer and to bring the present counterclaim, the district judge necessarily determined the sufficiency of Count II under the same Rule 12(f) standard.
Defendants point out that the present motion "parallels in many respects their [prior] motion" (Docket Entry # 47) although they do not expressly request a denial of the motion based on the law of the case. Generally speaking, the law of the case constrains "but does not altogether prohibit[] reconsideration of orders within a single proceeding by a successor judge." Ellis v. United States, 313 F.3d 636, 646 (1st Cir.2002) (also explaining policies behind prohibition against reconsideration); accord Flibotte v. Pennsylvania Truck Lines, Inc., 131 F.3d 21, 25 (1st Cir.1997). With limited exceptions, once legal issues are decided expressly or inferentially, the law of the case precludes relitigation in subsequent stages of the action. See Cohen v. Brown University, 101 F.3d 155, 167-168 (1st Cir.1996); see also DeWeerth v. Baldinger, 38 F.3d 1266, 1271 (2nd Cir.1994) (recognizing that law of case doctrine applies to issues decided expressly or by necessary implication); Knotts v. United States, 893 F.2d 758, 761 (5th Cir.1990) (same).
Because the parties have not had the opportunity to address the law of the case issue as it applies to Count II of the counterclaim, this court refrains from denying the Rule 12(f) motion on this basis with prejudice or on the merits. Rather, this court will deny the motion without prejudice. Plaintiffs may renew the motion as long as they address the law of the case doctrine and provide a basis to overlook the district judge's denial of the same argument under the same standard of review.
Count III of the counterclaim sets out a violation of the Sherman Act. In seeking dismissal, plaintiffs contend that the claim fails to overcome the Noerr-Pennington bar and fails to allege the possession of monopoly power. Plaintiffs also argue that trademark misuse is not an independent cause of action.
The Noerr-Pennington doctrine shields from antitrust liability entities who petition governmental bodies including the courts for redress. See Davric Maine Corp. v. Rancourt, 216 F.3d 143, 147 (1st Cir.2000) (citing United Mine Workers v. Pennington, 381 U.S. 657, 670, 85 S.Ct. 1585, 14 L.Ed.2d 626 (1965), and Eastern R.R. Conference v. Noerr Motor Freight, 365 U.S. 127, 135-138, 81 S.Ct. 523, 5 L.Ed.2d 464 (1961)); Amgen, Inc. v. F. Hoffman-La Roche, Ltd, 480 F.Supp.2d 462, 469 (D.Mass.2007) (Noerr-Pennington doctrine "protects the right to petition to governmental bodies"). As one means to avoid Noerr-Pennington immunity, defendants rely on the sham litigation exception.
The sham litigation exception to the Noerr-Pennington doctrine requires:
Amgen, Inc. v. F. Hoffmann-La Roche Ltd., 480 F.Supp.2d at 469; see Professional Real Estate Investors, Inc. v. Columbia Pictures Industries, Inc., 508 U.S. 49, 60, 113 S.Ct. 1920, 123 L.Ed.2d 611 (1993) ("outlin[ing] a two-part definition of `sham' litigation"). Plaintiffs contend that both prongs are lacking.
Under the objective prong, "If an objective litigant could conclude that the suit is reasonably calculated to elicit a favorable outcome, the suit is immunized under Noerr, and an antitrust claim premised on the sham exception must fail." Professional Real Estate Investors, Inc. v. Columbia Pictures Industries, Inc., 508 U.S. at 60, 113 S.Ct. 1920. The objective prong incorporates "the notion of probable cause, as understood and applied in the common law tort of wrongful civil proceedings." Professional Real Estate Investors, Inc. v. Columbia Pictures Industries, Inc., 508 U.S. at 50 & 60, 113 S.Ct. 1920; In re Relafen Antitrust Litigation, 346 F.Supp.2d 349, 359 (D.Mass.2004). Put another way, "The existence of probable cause to institute legal proceedings precludes a finding that an antitrust defendant has engaged in sham litigation." Professional Real Estate Investors, Inc. v. Columbia Pictures Industries, Inc., 508 U.S. at 62, 113 S.Ct. 1920. Consequently, when a court finds that a Sherman Act defendant "claiming Noerr immunity had probable cause to sue, that finding compels the conclusion that a reasonable litigant in the defendant's position could realistically expect success on the merits of the challenged lawsuit." Id. at 63, 113 S.Ct. 1920. Probable cause amounts to "no more than `reasonable belief that there is a chance that a claim may be held valid upon adjudication.'" Id. at 62-63, 113 S.Ct. 1920 (internal brackets omitted).
The second prong is subjective. It focuses "on whether the baseless lawsuit conceals `an attempt to interfere directly with the business relationships of a competitor.'" Professional Real Estate Investors,
As set out in the counterclaim, DTH knew or should have known about the rightful use of the term drive by others in commerce. (Docket Entry # 16, Ex. 1(B)). More significantly, plaintiffs instituted suit in the Texas court where jurisdiction against Walsh and the Drive USA defendants was obviously lacking on May 20, 2008. They resorted to the Texas court after litigating in the TTAB proceeding opposing the application for the DriveUSA mark for two years and then voluntarily dismissed the action "on the day of trial."
In addition, at the time DTH filed the March 2005 application that led to registration 414 and the August 2004 application that led to registration 262 "multiple other persons, firms, corporations, or associations had the right to use the term DRIVE as a trademark in commerce, including in relation to automobile financial services." (Docket Entry # 16, Ex. 1, ¶ 7). Moreover, plaintiffs have initiated "other proceedings seeking unfairly and illegally to oppress other rightful trademark users and to expand whatever rights they might have in their marks with full knowledge of rightful and prior uses of the term DRIVE by others in relation to automobile services." (Docket Entry # 16, Ex. 1, ¶ 16). Although the showing is not overwhelming, the foregoing facts as well as other facts in the record and reasonable inferences in the pleadings and attached documents provide a plausible entitlement to avoid the Noerr-Pennington bar.
Plaintiffs also attack the Sherman Act count as failing to set out a section two Sherman Act claim because defendants do not define the relevant market. If the market is automobile financing services, they further contend that defendants fail to allege the possession of monopoly power.
Section two proscribes monopolization and attempts to monopolize. 15 U.S.C. § 2. A plaintiff asserting a section two monopolization claim must show "(1) the possession of monopoly power in the
An attempted monopolization claim requires the plaintiff to "prove (1) that the defendant has engaged in predatory or anticompetitive conduct with (2) a specific intent to monopolize and (3) a dangerous probability of achieving monopoly power." Spectrum Sports, Inc. v. McQuillan, 506 U.S. 447, 456, 113 S.Ct. 884, 122 L.Ed.2d 247 (1993). In an attempted monopolization claim, the plaintiff must therefore show inter alia "that the defendant had the specific intent to monopolize the relevant market." CVD, Inc. v. Raytheon Co., 769 F.2d 842, 851 (1st Cir.1985); see Boston Scientific Corp. v. Schneider (Europe) AG, 983 F.Supp. at 268.
In short, "`Defining the market is a necessary step in any analysis of market power and thus an indispensable element in the consideration of any monopolization or attempt case arising under section 2.'" Pacamor Bearings, Inc. v. Minebea Co., Ltd., 892 F.Supp. 347, 354 (D.N.H.1995) (quoting U.S. Anchor Mfg., Inc. v. Rule Industries, Inc., 7 F.3d 986, 994 (11th Cir. 1993), in parenthetical); see George R. Whitten, Jr., Inc. v. Paddock Pool Builders, Inc., 508 F.2d 547, 550 (1st Cir.1974) ("a section 2 attempt case, like a monopolization case, requires a definition of the relevant market"). The relevant market "is composed of (1) the product market and (2) the geographic area involved." Curtis Mfg. Co., Inc. v. Plasti-Clip Corp., 888 F.Supp. 1212, 1231 (D.N.H.1994); see Ticket Center, Inc. v. Banco Popular de Puerto Rico, 613 F.Supp.2d 162, 178 (D.P.R.2008) (the plaintiff has "burden to define the relevant geographic market and product market"). In order to withstand a motion to dismiss, the defendant must allege that the plaintiff "possesses an illegally acquired monopoly power in some relevant geographic and product market." DJ Mfg. Corp. v. Tex-Shield, Inc., 275 F.Supp.2d 109, 118 (D.P.R.2002).
"The relevant product market generally consists of products that have reasonable interchangeability for the purposes for which they are produced, taking into consideration price, use and quality." Eastern Food Services, Inc. v. Pontifical Catholic University of Puerto Rico Service Ass'n, Inc., 222 F.Supp.2d 131, 135 (D.P.R. 2002) (internal quotation marks omitted); see Sterling Merchandising, Inc. v. Nestle, S.A., 724 F.Supp.2d 245, 257 (D.P.R.2010) ("Supreme Court case law establishes that "[t]he outer boundaries of a product market are determined by the reasonable interchangeability of use or the cross-elasticity of demand between the product itself and substitutes for it""); see generally 6 Thomas McCarthy, McCarthy on Trademarks and Unfair Competition § 31.97 (4th ed.2008) (recognizing that the "trademark does not define its own relevant economic market"). Indulging reasonable inferences of fact in defendants' favor, a fair reading of the counterclaim depicts the relevant market as "automobile financial services." (Docket Entry # 16, Ex. 1, ¶¶ 8, 9, 16, 17, 18, 27 & 49). Defendants' answers to interrogatories may further refine the market to dealer originated automobile financing services but, for present purposes, the counterclaim adequately sets
The relevant geographic market is "`the geographic area in which the defendant faces competition and to which consumers can practically turn for alternative sources of the product.'" Coastal Fuels of Puerto Rico, Inc. v. Caribbean Petroleum Corp., 79 F.3d 182, 196 (1st Cir.1996); see U.S. v. E.I. du Pont de Nemours & Co., 351 U.S. 377, 404, 76 S.Ct. 994, 100 L.Ed. 1264 (1956); Eastern Food Services, Inc. v. Pontifical Catholic University of Puerto Rico Service Ass'n, Inc., 222 F.Supp.2d at 135. Except for describing plaintiffs as having a "`$4 billion non-prime auto portfolio'" (Docket Entry # 16, Ex. 1, ¶ 16), there is little to indicate the relevant geographic market in the counterclaim.
In lieu of dismissing Count III on this basis, however, this court will afford defendants 30 days to file a motion for leave to amend the counterclaim to allege the relevant geographic market. See generally Rodi v. Southern New England School of Law, 389 F.3d 5, 20 (1st Cir.2004) (setting out appropriate circumstances to allow leave to amend in the course of allowing a motion to dismiss); Eastern Food Services, Inc. v. Pontifical Catholic University Services Ass'n, Inc., 357 F.3d 1, 8 (1st Cir.2004) (same). Because the court previously allowed defendants leave to amend, defendants shall confine the amendment to adding a paragraph[s] relative only to the geographic market and, if necessary, a further refinement of the product market. Defendants shall not use this as an opportunity to amend or alter allegations relative to any other claim.
Plaintiffs also move to dismiss Count III insofar as it sets out a cause of action of trademark misuse. Defendants submit that a cause of action for trademark misuse is proper.
It is well settled that "trademark misuse is purely an affirmative defense and does not form the basis for an affirmative claim for recovery." 6 Thomas McCarthy, McCarthy on Trademarks and Unfair Competition § 31.44 (4th ed.2008) (comma omitted). Caselaw allows trademark misuse as an affirmative defense but not as an independent cause of action. See Dunn Computer Corp. v. Loudcloud, Inc., 133 F.Supp.2d 823, 831 (E.D.Va. 2001) ("[a]uthority is uniform in allowing trademark misuse only as an affirmative defense to a trademark infringement action"); see also Whitney Information Network, Inc. v. Gagnon, 353 F.Supp.2d 1208, 1212 (M.D.Fla.2005) ("courts uniformly allow trademark misuse only as an affirmative defense to a trademark infringement action"); Ford Motor Co. v. Obsolete Ford Parts, Inc., 318 F.Supp.2d 516, 521 (E.D.Mich.2004) (declining "to announce or create an independent cause of action for trademark misuse and find[ing] that [the] Defendant's claim is more appropriately cast as a potential affirmative defense" while also questioning the viability as an affirmative defense).
In addition, the Lanham Act provides that "conclusive evidence of the right to use the registered mark shall be subject to the following defenses or defects . . . (7) That the mark has been or is being used to violate the antitrust laws of the United States." 15 U.S.C. § 1115(b)(7) ("section 1115(b)(7)").
Count III of the counterclaim is therefore dismissed to the extent it states a trademark misuse cause of action.
With respect to Count IV, plaintiffs seek dismissal of the section 11 chapter 93A claim. They argue that the alleged "fraud in the procurement of trademark registration does not involve a commercial transaction between the parties." (Docket Entry # 35, § VI). Citing Milliken & Co. v. Duro Textiles, LLC, 451 Mass. 547, 887 N.E.2d 244 (2008), they also maintain that litigation itself does not "constitute `trade or commerce'" within the purview of chapter 93A. (Docket Entry # 35, § VI).
Whether liability under section 11 of chapter "93A applies to an `interaction between two parties'" requires a threshold, "`dual inquiry.'" States Resources Corp. v. The Architectural Team, Inc., 433 F.3d 73, 84 (1st Cir.2005) (quoting Linkage Corp. v. Trustees of Boston University, 425 Mass. 1, 679 N.E.2d 191, 206-207 (1997)); accord Linkage Corp. v. Trustees of Boston University, 679 N.E.2d at 206-207 ("applicability of G.L. c. 93A, §§ 2(a) and 11, to interaction between two parties requires a dual inquiry"). "`[F]irst, the court assesses whether the interaction is "commercial" in nature, and second, it evaluates whether the parties were both engaged in "trade or commerce," and therefore acting in a "business context."'" States Resources Corp. v. The Architectural Team, Inc., 433 F.3d 73, 84 (quoting Linkage Corp. v. Trustees of Boston University, 679 N.E.2d at 206-207); see Milliken & Co. v. Duro Textiles, LLC, 887 N.E.2d at 259 (section 11 requires "dual inquiry whether there was a commercial transaction between a person engaged in trade or commerce and another person engaged in trade or commerce, such that they were acting in a `business context'").
Although plaintiffs argue that the lack of a commercial transaction directly "between them" is fatal to the section 11 claim, the First Circuit in a post-Milliken case disagreed where, as here, the claim is a fraud suit under section 11. See In re Pharmaceutical Industry Average Wholesale Price Litigation, 582 F.3d 156, 192-193 (1st Cir.2009). Defendant AstraZeneca Pharmaceuticals LP ("AstraZeneca") argued that it did not have privity with third party payors ("TTPs") in a Medicare fraud suit because it did not directly interact with TTPs, a group that included insurance plans such as plaintiff Blue Cross Blue Shield of Massachusetts ("BCBS") which reimbursed Medicare beneficiaries for co-payments based on a drug's average wholesale price ("AWP"), a price that AstraZeneca purportedly inflated by not including kickbacks offered to physician providers. See In re Pharmaceutical Industry Average Wholesale Price Litigation, 582 F.3d at 161-162 & n.4 & 5. Examining Massachusetts appellate court cases, the Pharmaceutical court explained "that, in a fraud suit under § 11 where `the parties are engaged in more than a minor or insignificant business relationship,' such privity is not required." In re Pharmaceutical Industry Average Wholesale Price Litigation, 582 F.3d at 193.
Here too, defendants allege a fraudulent scheme under which plaintiffs engaged in misrepresentations, particularly with regard to the applications that led to registrations 414 and 262, before the PTO that they knew or should have known would restrict defendants' rightful use of the drive term and/or the rightful use by others of the term in relation to automobile financing services thereby unfairly harming defendants and others. The amended complaint also reasonably infers that the fraud by plaintiffs before the PTO significantly influenced the ability of defendants to capitalize on their drive term and to engage in the transactions between defendants and its dealer partners and/or the automobile financing purchasers at such dealerships. (Docket Entry # 16, Ex. 1). A Rule 12(c) dismissal based on the argument of a lack of commercial transaction between plaintiffs and defendants is not warranted.
Turning to the litigation argument, it is true, as plaintiffs point out, that the Milliken court states that, "[W]e have held that `the mere filing of litigation does not of itself constitute "trade or commerce."'" Milliken & Co. v. Duro Textiles, LLC, 887 N.E.2d at 260 (quoting First Enters., Ltd. v. Cooper, 425 Mass. 344, 680 N.E.2d 1163 (1997), citing Arthur D. Little, Inc. v. East Cambridge Sav. Bank, 35 Mass.App.Ct. 734, 625 N.E.2d 1383 (1994)). This aspect of the dual inquiry addresses the second part, to wit, whether the parties engaged in "trade or commerce" and were therefore acting in a business context. Id. at 260; see also Stop & Shop Supermarket Co. v. Loomer, 65 Mass.App.Ct. 169, 837 N.E.2d 712, 717-718 (2005). It takes place "only after it has been established that a `commercial transaction' exists." See also Stop & Shop Supermarket Co. v. Loomer, 837 N.E.2d at 717. Plaintiffs and defendants, however, were undeniably acting in a business context in the course of registering and asserting their marks. See generally Milliken & Co. v. Duro Textiles, LLC, 887 N.E.2d at 260 (discussing and applying the business context test discussed in Begelfer v. Najarian, 381 Mass. 177, 409 N.E.2d 167, 175-176 (1980)).
In any event, the fraud extends beyond the litigation between the parties. Cf. Arthur D. Little, Inc. v. East Cambridge Sav. Bank, 625 N.E.2d at 1389 ("allowing summary judgment because "[n]o commercial relationship ever existed between the parties; their only contact occurred in the context of this litigation""). The misconduct at issue involves the commercial interactions between the parties as competitors and as users of the drive term in providing automobile financing services. Accordingly, the filing of litigation argument does not provide a basis for a Rule 12(c) dismissal of Count IV.
Finally, in opposing dismissal of the section 11 claim, defendants address an argument not raised by plaintiffs in the present filing, i.e., that the misconduct did not take place "primarily and substantially" in Massachusetts.
Accordingly, the motion for summary judgment (Docket Entry # 37) is
