Opinion
Case No: 6:20-cv-2354-GAP-EJK
2023-05-30
FLORIDA VIRTUAL SCHOOL, Plaintiff, v. K12, INC. and K12 Florida, LLC, Defendants
Stephen H. Luther, Luther Law PLLC, Orlando, FL, David Jeffrey D'Agata, Luis Remigio Guzman, Florida Virtual School, Orlando, FL, Sally Rogers Culley, Suzanne Barto Hill, Rumberger, Kirk & Caldwell, PA, Orlando, FL, Katharine Roth, Kyle William Mason, Thomas Edward Bishop, Bishop & Mills, Jacksonville, FL, Leonard J. Dietzen, III, Rumberger, Kirk & Caldwell, Tallahassee, FL, for Plaintiff. Steven P. Hollman, Abraham J. Shanedling, Charles H. Spencer-Davis, Sheppard Mullin Richter & Hampton LLC, Washington, DC, Daniel C. Johnson, Carlton Fields, P.A., Orlando, FL, Eleanor Martha Yost, Carlton Fields, PA, Tampa, FL, for Defendants.
Stephen H. Luther, Luther Law PLLC, Orlando, FL, David Jeffrey D'Agata, Luis Remigio Guzman, Florida Virtual School, Orlando, FL, Sally Rogers Culley, Suzanne Barto Hill, Rumberger, Kirk & Caldwell, PA, Orlando, FL, Katharine Roth, Kyle William Mason, Thomas Edward Bishop, Bishop & Mills, Jacksonville, FL, Leonard J. Dietzen, III, Rumberger, Kirk & Caldwell, Tallahassee, FL, for Plaintiff. Steven P. Hollman, Abraham J. Shanedling, Charles H. Spencer-Davis, Sheppard Mullin Richter & Hampton LLC, Washington, DC, Daniel C. Johnson, Carlton Fields, P.A., Orlando, FL, Eleanor Martha Yost, Carlton Fields, PA, Tampa, FL, for Defendants.
ORDER
GREGORY A. PRESNELL, UNITED STATES DISTRICT JUDGE
This cause came on for consideration without oral argument on Plaintiff's Motion to Dismiss Defendants' Counterclaim (Doc. 172). The Court has also considered Defendants' Response in Opposition (Doc. 194), Plaintiff's Reply (Doc. 214), Plaintiff's Supplemental Brief (Doc. 229), and Defendants' Supplemental Brief (Doc. 230).
See Doc. 155.
I. Background
Plaintiff Florida Virtual School ("Plaintiff") initially brought suit on December 22, 2020, against Defendants K12, Inc. and K12 Florida, LLC, dba Stride, Inc. ("Defendants"), for trademark infringement, unfair competition, and false advertising, in addition to breach of a 2015 Settlement Agreement ("Settlement Agreement") resolving prior litigation between the parties. Doc. 1. The dispute revolves around Defendants' alleged improper use of certain marks registered to the Plaintiff in 2010 and 2017. Id., ¶¶ 41-46; see also Doc. 1-1 at 1-19. The parties are competitors in the online educational services market. Doc. 155, ¶ 17.
Plaintiff is an agency of the Florida state government, formed under Fl. Stat. § 1002.37. Doc. 155, ¶ 6.
Defendants are a for-profit, nationwide provider of online and blended learning educational programs for public and private schools, school districts and charter boards. Doc. 155, ¶ 4.
After seeking leave from the Court, Defendants amended their Answer to include the instant Counterclaim on March 13, 2023. See id.; see also Doc. 153. Defendants seek to have Plaintiff's registered marks—which form the basis of Plaintiff's original claim against Defendant—cancelled because of alleged fraudulent misrepresentations it made to the U.S. Patent and Trademark Office ("PTO") during the registration process. Doc. 155, ¶ 55. The Counterclaim avers that Plaintiff made materially false representations that its marks were used in connection with services, namely to the pre-kindergarten ("pre-k") and kindergarten through fifth grade ("primary") markets, dating back to at least 2002 when, in fact, Plaintiff did not offer such services to those markets at that time. Id.
Plaintiff described itself as "an online secondary school" in a 2007-2008 Legislative Report and, according to its own Strategic Plan for 2014-2017, it had not even been authorized to serve elementary school students until 2008. Id., ¶¶13, 14. When Plaintiff finally did begin serving the pre-k and primary education markets (including grades six-eight) in 2008, it did so by contracting with Connections Academy, a for-profit corporate provider of online school products, to market its kindergarten through eighth grade services to Plaintiff's customers. Id., ¶ 15. Plaintiff eventually took control of the sixth-eighth grade educational services during the 2016-2017 fiscal year. Id., ¶ 16.
After Plaintiff filed its first application for registration of its mark with the PTO, it received a refusal under Section 2(e) of the Lanham Act because the terms "Florida" and "Virtual School" were geographic and "merely descriptive" in nature. Id., ¶ 23; see also 15 U.S.C. § 1502(e). It was then invited by the PTO to submit evidence to support the marks' potential entitlement to registration under Section 2(f) based on acquired distinctiveness. Doc. 155, ¶ 23; see also 15 U.S.C. § 1502(f). In response, Plaintiff altered its description of services to state that it established and developed online educational programs ". . . at the pre-kindergarten, primary, secondary, college levels." Doc. 155, ¶ 24. To further support its assertion of "acquired distinctiveness," Plaintiff's General Counsel filed a declaration that its marks had been in use at the pre-k, primary, secondary and college levels since 2002. Id., ¶ 27. The PTO subsequently approved Plaintiff's application after accepting the evidence it submitted to show acquired distinctiveness. Id., ¶ 34.
Plaintiff filed an application for registration of its principal mark on September 22, 2009. Doc. 155, ¶ 22.
In fact, Plaintiff was not using, nor was it authorized to use, its marks in connection with serving the pre-k and primary education markets before 2008. Id., ¶¶ 13-15, 30-32. Moreover, its representatives and attorneys knew these facts, or acted with reckless disregard of them, when making the above representations to the PTO, and in similar applications filed subsequently for the registration of the other related marks at issue. See, e.g., id., ¶ 33, 39. Because of Plaintiff's fraudulent conduct, Defendants' Counterclaim seeks to have the marks' registrations cancelled. Id., ¶ 55.
After the PTO granted registration of Plaintiff's first mark, Plaintiff filed another application for registration of a related mark on April 10, 2010. Doc. 155, ¶ 36. Subsequently, Plaintiff filed five additional applications for registration of other related marks on April 27, 2016. Id., ¶ 46.
The Court also notes that a parallel proceeding seeking the cancellation of Plaintiff's marks was filed by Defendants with the PTO Trademark Trial and Appeal Board ("TTAB"). See Stride Inc. and K12 Florida, LLC v. Florida Virtual School, Cancellation No. 92081347 (T.T.A.B. Mar. 7, 2023). The TTAB, however, suspended that proceeding, at Plaintiff's request, pending the final outcome of this case. Doc. 152-1.
II. Legal Standard
In ruling on a motion to dismiss, the Court must view the counterclaim in the light most favorable to the plaintiff, see, e.g., Jackson v. Okaloosa County, 21 F.3d 1531, 1534 (11th Cir. 1994), and must limit its consideration to the pleadings and any exhibits attached thereto. See Fed. R. Civ. P. 10(c); see also GSW, Inc. v. Long Cnty., 999 F.2d 1508, 1510 (11th Cir. 1993). The Court will liberally construe the counterclaim's allegations in the Plaintiff's favor. See Jenkins v. McKeithen, 395 U.S. 411, 421, 89 S.Ct. 1843, 23 L.Ed.2d 404 (1969). However, "conclusory allegations, unwarranted factual deductions or legal conclusions masquerading as facts will not prevent dismissal." Davila v. Delta Air Lines, Inc., 326 F.3d 1183, 1185 (11th Cir. 2003).
"A motion to dismiss a counterclaim under Fed. R. Civ. P. 12(b)(6) is evaluated in the same manner as a motion to dismiss a complaint." Whitney Information Network, Inc. v. Gagnon, 353 F.Supp.2d 1208, 1210 (M.D. Fla. 2005); see also Zurich Am. Ins. Co. v. Tavistock Rests. Grp., LLC, 2022 WL 16985151 (11th Cir. 2022).
In reviewing a counterclaim on a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6), "courts must be mindful that the Federal Rules require only that the [counterclaim] contain 'a short and plain statement of the claim showing that the pleader is entitled to relief.' " United States v. Baxter Int'l, Inc., 345 F.3d 866, 880 (11th Cir. 2003) (citing Fed. R. Civ. P. 8(a)). This is a liberal pleading requirement, one that does not require a plaintiff to plead with particularity every element of a cause of action. Roe v. Aware Woman Ctr. for Choice, Inc., 253 F.3d 678, 683 (11th Cir. 2001). However, a plaintiff's obligation to provide the grounds for his or her entitlement to relief requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do. Bell Atl. Corp. v. Twombly, 550 U.S. 544, 554-55, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). The counterclaim's factual allegations "must be enough to raise a right to relief above the speculative level," id. at 555, 127 S.Ct. 1955, and cross "the line from conceivable to plausible." Ashcroft v. Iqbal, 556 U.S. 662, 680, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009).
III. Analysis
In support of its Motion to Dismiss the Counterclaim, Plaintiff makes three principal arguments: (1) as a public state agency, it is immune from suit under the Eleventh Amendment; (2) the Counterclaim is precluded by res judicata and the release terms of the Settlement Agreement; and (3) the Counterclaim fails to state a claim under Fed. R. Civ. P. 12(b)(6). The Court addresses each argument in turn.
A. Sovereign Immunity
1. Statutory Waiver
The statutory framework does not make clear the extent to which Plaintiff may or may not be protected by the shield of sovereign immunity in this case. Plaintiff's enabling statute plainly grants it some measure of sovereign immunity. See Fl. Stat. § 1002.37(2) ("The board of trustees shall be a public agency entitled to sovereign immunity pursuant to s. 768.28, and board members shall be public officers who shall bear fiduciary responsibility for the Florida Virtual School."); see also Florida Virtual School v. D2L Corp., 2022 WL 3597043, *3 (M.D. Fla. 2022) ("Plaintiff's authorizing statute grants it sovereign immunity . . .").
The statute also states, however, that "[t]he board of trustees shall be a body corporate with all the powers of a body corporate . . ." § 1002.37(2)(l). Moreover, in Plaintiff's Bylaws, the Board is described as:
a public agency and body corporate of the State of Florida , with all the powers of a body corporate and such authority as is needed for the proper operation and improvement of the Florida Virtual School. As such, the Board has the power to enter into contracts; to sue and be sued ; to acquire, possess, and transact real, personal, tangible, and intangible property; . . .Bylaws, § 2.3 (3.) (Adopted: 03/02/2021; Amended: 03/02/2021; 06/14/2022), at https://www.flvs.net/docs/default-source/board-of-trustees/flvs-board-of-trustees-bylaws.pdf (emphasis added). The Bylaws make clear that Board Members are protected by sovereign immunity. Id. at § 2.5 (1.) ("Board Members are public officers of the State of Florida who are entitled to sovereign immunity in accordance with Chapter 768 of the Florida Statutes.") (emphasis added). Conspicuously, however, they do not expressly state anywhere that the agency itself engenders such wide-ranging protections. See id. at § 2.3 et seq.
Plaintiff clearly enjoys a substantial degree of immunity from suit in federal courts. See Fl. Stat. § 1002.37(2); D2L Corp., 2022 WL 3597043 at *3. And neither party asserts that the broad statutory waiver of sovereign immunity for tort actions under Fl. Stat. § 768 applies here. However, it is unclear from the statutory framework whether the legislature contemplated encompassing Plaintiff's present conduct within the cloak of sovereign immunity. Though it is a public agency, Plaintiff's express powers to own and manage trademarks, id. at § 1002.37(2)(c), and the power "to sue and be sued," Bylaws, § 2.3 (3.), bely conduct more befitting a private commercial enterprise.
Indeed, Plaintiff is granted the power to own and manage trademarks in the context of a directive that "[t]he board of trustees shall aggressively seek avenues to generate revenue to support its future endeavors, and shall enter into agreements with distance learning providers." Fl. Stat. § 1002.37(c).
This is especially true here where Plaintiff, operating as a business, seeks the protection of sovereign immunity to the disadvantage of a for-profit competitor. Whether a public agency may sue for trademark infringement and simultaneously assert sovereign immunity against any counterclaimant seeking to invalidate the subject mark is questionable. In this case, however, the issue of sovereign immunity is more simply answered by Plaintiff's litigation conduct.
2. Waiver by Litigation Conduct
"[A] State's voluntary appearance in federal court amount[s] to a waiver of its Eleventh Amendment immunity." Lapides v. Board of Regents of Univ. Sys. of Georgia, 535 U.S. 613, 619, 122 S.Ct. 1640, 152 L.Ed.2d 806 (2002) (citing Clark v. Barnard, 108 U.S. 436, 447, 2 S.Ct. 878, 27 L.Ed. 780 (1883)). "[A] state, if it chooses, can retain immunity from liability for a particular claim even if it waives its immunity from suit in federal courts." Stroud v. McIntosh, 722 F.3d 1294, 1301 (11th Cir. 2013) (holding that a state waived its defense of immunity from litigation in federal court when it removed to federal court, but did not waive its immunity from ADEA liability). However, "[o]nce jurisdiction is invoked . . . the federal court has jurisdiction over the entire case—not simply those claims that the complaint alleged at the time of removal." Green v. Graham, 906 F.3d 955, 962 (11th Cir. 2018) (quoting Stroud, 722 F.3d at 1302 n. 3).
Other courts in this district have recognized that "a state's waiver of its immunity is limited to relief that mirrors the relief sought by the state itself." Seminole Tribe of Florida v. Florida, 219 F.Supp.3d 1177, 1192 (N.D. Fla. 2016). Long-binding precedent in this Circuit describes the point most succinctly:
Our conclusion is that when the sovereign sues it waives immunity as to claims of the defendant which assert maters in recoupment—arising out of the same transaction or occurrence which is the subject matter of the government's suit, and to the extent of defeating the government's claim but not to the extent of a judgment against the government which is affirmative in the sense of involving relief different in kind or nature to that sought by the government or in the sense of exceeding the amount of the government's claims; but the sovereign does not waive immunity as to claims which do not meet the "same transaction or occurrence test" nor to claims of a different form or nature than that sought by it as plaintiff
nor to claims exceeding in amount that sought by it as plaintiff.Frederick v. U.S., 386 F.2d 481, 488 (5th Cir. 1967).
The Eleventh Circuit has adopted as binding precedent all Fifth Circuit decisions issued before October 1, 1981. Bonner v. City of Prichard, 661 F.2d 1206, 1209 (11th Cir. 1981) (en banc).
Unlike Stroud, where Alabama retained sovereign immunity from ADEA claims, there is no such justification for retaining immunity from the Counterclaim here. 722 F.3d at 1301. Plaintiff brought suit against Defendant under the Lanham Act for infringement of its registered marks. See Doc. 1. Defendant filed a Counterclaim seeking cancellation of these marks on the basis of fraud. See Doc. 155 at 52. Surely this Counterclaim—which, if successful, would "defeat[ ] the government's claim"— does not seek any affirmative judgment "involving relief different in kind or nature to that sought by the government." Frederick, 386 F.2d at 488.
Defendants' Counterclaim, also arises from the "same transaction or occurrence which is the subject matter of the government's suit." Id. As Plaintiff recognized in its Motion to Suspend in the TTAB proceeding, the cancellation action (which mirrors Defendants' Counterclaim in this litigation) "seek[s] to cancel the exact same seven federally registered trademarks" at issue in this lawsuit and "involve[s] exactly the same parties." Doc. 133-3 at 5. Defendants' Counterclaim seeks to have Plaintiff's trademarks, which it has been accused of infringing, cancelled. Doc. 155 at 52. This Counterclaim, which seeks to defeat Plaintiff's claim, is clearly one that arises out of the same transaction or occurrence which is the subject of the Plaintiff's suit. Frederick, 386 F.2d at 488.
See Potts v. B&R, LLC, 2014 WL 1612364 (M.D. Fla. 2014) ("In determining whether claims arise from the same transaction or occurrence, or series of transactions or occurrences, courts in the Eleventh Circuit apply the "logical relationship" test. See Smith v. Trans-Siberian Orchestra, 728 F.Supp.2d 1315, 1319 (M.D. Fla. 2010) (citing Republic Health Corp. v. Lifemark Hosps. of Fla., 755 F.2d 1453, 1455 (11th Cir. 1985)). "Under this test, a logical relationship exists if the claims rest on the same set of facts or the facts, on which one claim rests, activate additional legal rights supporting the other claim." Id. (citing Republic Health, 755 F.2d at 1455) . . . The "logical" relationship standard is a "loose" one "which permits a broad realistic interpretation in the interest of avoiding a multiplicity of suits." Plant v. Blazer Financial Services, Inc. of Georgia, 598 F.2d 1357, 1361 (5th Cir. 1979) (internal quotations omitted).").
Plaintiff here chose to avail itself of the federal courts by filing this suit. See Doc. 1. It then persuaded the TTAB to suspend Defendants' cancellation proceeding in deference to this Court's resolution of the issues. Doc. 152-1; see also Doc. 133-3. Now it seeks to dismiss Defendants' Counterclaim on grounds of sovereign immunity. See Docs. 172, 214. As the Lapides court stated, "[i]t would seem . . . inconsistent for a state both (1) to invoke federal jurisdiction . . . , and (2) to claim Eleventh Amendment immunity . . ." 535 U.S. at 619, 122 S.Ct. 1640. By bringing suit for trademark infringement and moving to suspend the parallel proceeding in the TTAB, Plaintiff has clearly waived sovereign immunity as it applies to Defendants' Counterclaim seeking cancellation of the marks under which they have been sued. See Frederick, 386 F.2d at 488.
See Doc. 133-3 at 3 ("Alternatively, litigating issues relating to [Plaintiff's] registered marks in two separate forums creates a risk of inconsistent decisions, and an unfavorable decision in the TTAB could be appealed to the Middle District of Florida where the case is already pending. See 37 CFR § 2.145(c). For all of these reasons and to avoid unnecessary duplication of effort and judicial resources, this cancellation proceeding should be suspended.")
B. Preclusion
Plaintiff next argues that the Counterclaim, as to the marks with Registration Numbers 3,830,765 and 3,873,393, should be dismissed because it is precluded by res judicata and by the releases in the Settlement Agreement. Doc. 172 at 8-14. Though Defendants contest the "same cause of action" element of res judicata , "[a] settlement agreement entered into in the context of a voluntary dismissal with prejudice under Rule 41 should be interpreted according to its express terms, rather than according to traditional principles of res judicata." Norfolk Southern Corp. v. Chevron, U.S.A., Inc., 371 F.3d 1285, 1291 (11th Cir. 2004); see also Doc. 194 at 14. Thus, in this context, the Court analyzes the issue of res judicata under the Settlement Agreement. See Norfolk Southern, 371 F.3d at 1288.
See Consumer Fin. Prot. Bureau v. Ocwen Fin. Corp., 30 F.4th 1079, 1083 (11th Cir. 2022) ("A claim is barred by res judicata . . . when (1) there is a final judgment on the merits; (2) the decision was rendered by a court of competent jurisdiction; (3) the parties, or those in privity with them, are identical in both suits; and (4) the same cause of action is involved in both cases.").
1. Reviewability
Defendants first contend that the Court should not consider the Settlement Agreement in its review because it is not "central" to its Counterclaim. Doc. 194 at n. 5. "[W]hen a court is considering a motion to dismiss under Rule 12(b)(6), documents attached to the motion to dismiss may be considered if the document is both central to the plaintiff's claim and its contents are undisputed." Horne v. Ameris Bank, 2023 WL 2908855, *3 (N.D. Ga. 2023) (citing SFM Holdings, Ltd. v. Banc of Am. Sec., LLC, 600 F.3d 1334, 1337 (11th Cir. 2010); Day v. Taylor, 400 F.3d 1272, 1276 (11th Cir. 2005); Horsley v. Feldt, 304 F.3d 1125, 1134 (11th Cir. 2002)). "Undisputed" means that the authenticity of the document is not challenged. Day, 400 F.3d at 1276. "Thus, if a document is both central to a plaintiff's claims and its authenticity is not challenged by any party, a court may consider it in resolving a motion to dismiss." Horne, 2023 WL 2908855 at *3 (citing Day, 400 F.3d at 1276 ("[A] document need not be physically attached to a pleading to be incorporated by reference into it; if the document's contents are alleged in a complaint and no party questions those contents, we may consider such a document provided it meets the centrality requirement . . .")).
Though Defendants argue against the Settlement Agreement's reviewability, they do not challenge its authenticity. See Doc. 194 at 12. Moreover, despite Plaintiff's allusion in its Complaint to the Settlement Agreement's reviewability as part of this litigation and its assertion that it is "subject to public disclosure pursuant to Chapter 119 of the Florida Statutes," Doc. 1, ¶ 33, it was ultimately Defendants who filed a copy of the Settlement Agreement with their initial Answer. See Doc. 29-1. Given Plaintiff's contention that Defendants' Counterclaim is precluded by the Settlement Agreement, this Court finds that it is sufficiently "central to the [Defendants' Counter]claim" to be considered. See Horne, 2023 WL 2908855 at *3.
2. Pertinence
Plaintiff then argues that the Settlement Agreement's release clauses bar Defendants' Counterclaim. Doc. 214 at 6. The language of the Settlement Agreement provides for Plaintiff's release from:
The Court recognizes that the Settlement Agreement also contains a Choice of Law provision designating that it is "governed and construed in accordance with the laws of the State of Florida." Doc. 29-1, ¶ 25.
. . . any and all actions, causes of action, counterclaims, obligations, suits debts, costs or liabilities, losses, public or private injunctive relief, disgorgement, restitution, or demands of any kind or nature whatsoever, in equity or otherwise whether known or unknown, which FLVS ever had, now has, or may hereafter claim to have had against K12 on or before the Effective Date arising out of or relating in any way to the Claims or the Litigation.Doc. 29-1 at 6.(b). It also states that the parties wish to release "any and all Claims which have been, could have been, or could be asserted by [the parties against one another] relating to or arising out of the Litigation." Id. at Recitals, C.
"[A] settlement agreement is essentially a contract and is subject to the traditional rules of contract interpretation." Norfolk Southern, 371 F.3d at 1290 (citing Monahan v. Comm'r, 321 F.3d 1063, 1068 (11th Cir. 2003) ("Principles governing general contract law apply to interpret settlement agreements.")). Florida law prohibits "a contractual waiver that exculpates a contracting party's fraudulent misconduct." Viridis Corp. v. TCA Global Credit Master Fund, LP, 721 F. App'x 865, 875 (11th Cir. 2018) (citing Oceanic Villas, Inc. v. Godson, 148 Fla. 454, 4 So.2d 689, 690-91 (1941) (holding that a contract provision cannot preclude a fraud claim unless the contract expressly states that it is incontestable on the ground of fraud)).
Plaintiff argues that Defendants' Counterclaim asserts a trademark cancellation claim under 15 U.S.C. § 1119—not an intentional tort—and thus the aforementioned case law is inapplicable and "there is no concern that the contract was induced by fraud on the contractual parties." Doc. 214 at 6-7. This argument ignores the forest for the trees. Defendants' Counterclaim asserts that Plaintiff's marks, which underlie not only this litigation but the prior litigation and Settlement Agreement, were obtained fraudulently. See Doc. 155, ¶¶ 75, A. Therefore, any settlement agreement arising from litigation over the use of fraudulently obtained marks would likewise have been "induced by fraud on the contractual parties." See Doc. 214 at 7.
As in Viridis, "[w]hile the release and waiver provisions in the [Settlement Agreement] are broad in the extreme, they do not state that they are incontestable on the ground of fraud." 721 F. App'x at 875-76. Because Defendants assert that Plaintiff obtained the marks at the heart of this now decades-long dispute fraudulently, the Settlement Agreement's release falls squarely within the ambit of this exception and does not preclude Defendants from bringing their Counterclaim. See id.
The Court recognizes Plaintiff's assertion that one of the claims that was settled in the Settlement Agreement was a claim for fraud on the PTO. Doc. 214 at 7. However, upon review, there is no specific mention of a fraud claim in the Settlement Agreement's Recitals, Doc. 29-1 at A., and neither the Settlement Agreement nor the attached joint stipulation of dismissal in the TTAB, id. at Exhibit 2, make any reference to a fraud claim. See generally id. Even if they did, however, without an express release of claims for fraud, they would not preclude Defendants' Counterclaim unless an identical claim had been pursued in the prior litigation, which has not been asserted. See Viridis, 721 F. App'x at 875-76; see also Doc. 229 at 4.
C. The Counterclaim
Federal courts have authority under the Lanham Act to cancel trademarks registered by the PTO. 15 U.S.C. § 1119. "In order to prosecute successfully a petition for cancellation, [a] petitioner must prove: (1) [t]hat it has standing to petition for cancellation because it is likely to be damaged, and (2) that there are valid grounds for discontinuing registration." Coach House Rest., Inc. v. Coach and Six Rests., Inc., 934 F.2d 1551, 1557 (11th Cir. 1991) (citing Lipton Industries, Inc. v. Ralston Purina Co., 670 F.2d 1024, 1026, 213 U.S.P.Q. 185, 187 (CCPA 1982)); see also 15 U.S.C. § 1064(3) ("A petition to cancel a registration of a mark . . . may . . . be filed . . . by any person who believes that he is or will be damaged . . . by the registration of a mark on the principal register . . . [a]t any time if the registered mark['s] . . . registration was obtained fraudulently . . .").
"At any time, a party may petition to cancel a registered mark on the ground that the registration was procured by fraud, even if that mark has become incontestable." Sovereign Mil. Hosp. Order of St. John v. Florida Priory of the Knights Hosp., 702 F.3d 1279, 1289 (11th Cir. 2012). "An applicant commits fraud when he 'knowingly makes false, material representations of fact in connection with an application for a registered mark.' " Id. (quoting Angel Flight of Ga., Inc. v. Angel Flight Am., Inc., 522 F.3d 1200, 1209 (11th Cir. 2008)). A petitioner must also show that the applicant had "a purpose or intent to deceive the PTO in the application for the mark." Sovereign Mil. Hosp., 702 F.3d at 1289. Any such claim must be proven by "clear and convincing evidence." Id.
1. Standing
Plaintiff does not challenge Defendants' standing to bring this cancellation Counterclaim and "the Lanham Act sets a low statutory-standing bar" which "is fairly easy to satisfy in the vast majority of cases." Royal Palm Properties, LLC v. Pink Palm Properties, LLC, 950 F.3d 776, 787 (11th Cir. 2020). This is one of those cases. Defendants clearly have a "direct and personal stake in the outcome" of this case—if Plaintiff's trademarks are cancelled Defendants will "be free to use the mark in their . . . materials, without fear of another lawsuit." Id. Defendants therefore have standing to bring this Counterclaim. See id.
2. Grounds for Discontinuing Registration
A viable counterclaim for cancellation must also allege "valid grounds for discontinuing registration." Coach House, 934 F.2d at 1557. Here, Defendants allege that Plaintiff made materially false representations to the PTO when they originally secured registration of the relevant marks. Doc. 155, ¶ 55. Specifically, they contend that Plaintiff misrepresented that it "used the marks in commerce in connection with services it claimed to have provided to the pre-kindergarten and kindergarten through fifth grade markets as early as 2002, despite the fact that it offered no services to those markets at that time." Id.
Plaintiff appears to concede that the Counterclaim states a claim as applied to its two marks registered in 2010. See Doc. 172 at 14 ("C. K12's cancellation allegations are fatally defective as to FLVS's five post-settlement registrations.") (emphasis added). Regarding the five post-settlement registrations, Plaintiff makes several arguments in support of its Motion, which the Court addresses in turn: (1) specific dates of first use are not required for every distinct good; (2) Plaintiff's post-settlement applications did not rely on its earlier registrations and Defendants' infectious invalidity arguments for the latter five registrations are fatally defective; and (3) that Defendants' alleged priority of trademark rights is not at issue. See Doc. 172 at 14-21. These contentions are insufficient to warrant dismissal at this stage.
a. Dates of First Use
First, Plaintiff argues that it was never required to provide specific dates of first use for each of its distinct services (i.e. kindergarten, primary, and secondary education services). Id. at 15 (citing 37 C.F.R. § 2.34(a)(1)(v) ("If the application specifies more than one item of goods or services in a class, the dates of use in paragraphs (a)(1)(ii) and (iii) of this section are required for only one item of goods or services specified in that class.")). Rather, "[i]f more than one item of goods or services is specified in a particular class, the date of first use anywhere and date of first use in commerce do not have to pertain to every item in the class." Id. (quoting Trademark Manual of Examining Procedure ("TMEP") § 903.08 (2022)). Consequently, Plaintiff contends that Defendants' allegations cannot amount to fraud as a matter of law. Id.
Relatedly, the Court requested the parties to explain their position regarding the proclamation in Angel Flight that "[a] misstatement of the date of first use in the application is not fatal to the securing of a valid registration as long as there has been valid use of the mark prior to the filing date." 522 F.3d at 1210 (citing Car Subx Serv. Sys., Inc. v. Exxon Corp., 215 U.S.P.Q. 345, 351 (P.T.O. T.T.A.B. 1982)). At first glance, this holding would seem to foreclose Defendants' Counterclaim; Plaintiff was undisputedly "providing at least high school services under its marks as of its stated date of first use in 2002." Doc. 229 at 5.
Upon careful examination, however, the instant facts are distinguishable from Plaintiff's reliance on Angel Flight. First, unlike the misrepresentations of the date of first use in the initial application in Angel Flight, here the allegations of fraud pertain to statements in responsive filings to the PTO after the initial application was rejected. See Doc. 155, ¶¶ 23-42. To overcome this rejection, Plaintiff was required to show "acquired distinctiveness." Id. Defendants allege that Plaintiff committed fraud at this stage of its application process, knowingly misrepresenting the breadth and coverage of its services in order to show an acquired distinctiveness. Id., ¶¶ 23-28. This process was outside of that contemplated by 37 C.F.R. § 2.34(a)(1)(v).
Second, even under the holding in Angel Flight, the marks must have been in "valid use" before the application was filed. 522 F.3d at 1210. Defendants allege that Plaintiff never made valid use of its marks with respect to the kindergarten and primary markets prior to filing its initial application. See Doc. 155, ¶¶ 15 (". . . in 2008, [Plaintiff] contracted with Connections Academy . . . to enable Connections Academy to offer its kindergarten through eighth grade education programs to [Plaintiff]'s customers.") (emphasis added), 16 ("[Plaintiff]'s Board of Directors later approved the transfer of the operation of the sixth through eighth grade portion of the Connections Academy program to [Plaintiff], effective in fiscal year 2016-2017."), 31-33. These allegations, if true, would render the holding in Angel Flight inapposite here.
Indeed, in a comparable context, the TTAB cancelled an entire mark for fraud based on misrepresentations about the services covered under the mark. See General Rent-A-Car, Inc. v. General Leaseways, Inc., TTAB Cancellation No. 14,870, May 2, 1988 slip op. at 10; General Car and Truck Leasing Systems Inc. v. General Rent-A-Car Inc., 1990 WL 359368, *2 (S.D. Fla. 1990) (affirming TTAB decision); see also McCarthy on Trademarks and Unfair Competition ("McCarthy") § 31:73 (5th ed.). To determine whether this case fits more squarely within the purview of Angel Flight or General Rent-A-Car may require the resolution of certain facts, which the Court cannot do at the pleading stage.
In the General Rent-A-Car cases, the registrant had represented that the mark GENERAL was in use in connection with the leasing of "automobiles, trucks, tractors, trailers, aircraft and boats and agricultural and commercial equipment and machinery." This was corroborated by affidavits from the registrant's Vice-President and General Counsel. The court found that the oaths were false and fraudulent in that the corporate officers knew that the mark had never been used on the lease of aircraft or boats. McCarthy, § 31.73 at n. 3; see also General Car and Truck Leasing Systems, 1990 WL 359368 at *1-*2.
b. Earlier Registrations & Infectious Invalidity
Plaintiff next contends that any infectious invalidity argument fails against the "FLVS acronym registrations . . . because there is no argument that [they] are descriptive." Doc. 172 at 19. However, this ignores the fact that Plaintiff's original application for the first Florida Virtual School-related mark was rejected precisely because it was deemed "merely descriptive." Doc. 155, ¶ 23. Vexingly, Plaintiff also argues that because the PTO did not look to any prior registrations in its first ever application for a Florida Virtual School-related mark—for which, needless to say, there were no prior registrations for the PTO to consult—there was no reason to assume it would do so in later registrations. Doc. 172 at 19. These arguments are unavailing.
Plaintiff cites to the TMEP for support, which says nothing more than that the PTO "is not bound by the decisions of examiners who examined the applications for the applicant's previously registered marks, based on different records." TMEP § 1216.01 (2022). It does not prohibit, nor make any mention of disfavoring, the PTO's consideration of prior registrations when reviewing applications. Id. One need not look to patent cases "for the applicable standard to analyze a claim for fraud on the PTO." See Sovereign Mil. Hosp., 702 F.3d at 1291. It follows logically that the existence of the first registered mark played a role in the PTOs assessment of subsequent applications to register marks related to and/or derivative of the original.
Which, here, was only registered after overcoming a descriptiveness rejection by allegedly making false representations regarding its "acquired distinctiveness," Doc. 155, ¶ 23-35.
Moreover, cases like In re Cordua Rests., Inc., 823 F.3d 594, 600 (Fed. Cir. 2016), are inapposite here. See Doc. 172 at 17. Defendants do not allege an instance of PTO error or inconsistency—the PTO did not mistakenly grant mark registration because of an oversight—they allege that Plaintiff deliberately misled the PTO. An assertion that trademark cases must "be decided on [their] own facts" does nothing to detract from the relevance and validity of Defendants' Counterclaim to Plaintiff's directly related, subsequently obtained marks. See TMEP § 1216.01 (2022).
c. Priority of Trademark Rights
Lastly, Plaintiff argues that because it owned all of Defendants' initially claimed trademark rights (pursuant to the Settlement Agreement) when it applied for all of the post-Settlement Agreement marks, Defendants may not allege priority of trademark rights as applied to an action to cancel those marks. Doc. 172 at 20-21. Plaintiff again forgets that if its initial marks were obtained fraudulently, as Defendants have alleged, then they may be due for cancellation. See Sovereign Mil. Hosp., 702 F.3d at 1289. In which case, as this Court has discussed, the Settlement Agreement and all of Plaintiff's subsequently registered marks will be vulnerable to attack. Plaintiff's reliance on its ownership—allegedly obtained fraudulently—of marks or claims to marks which lie at the heart of this dispute is misplaced.
IV. Conclusion
Accordingly, it is ORDERED that Plaintiff's motion to dismiss Defendant's Counterclaim is hereby DENIED.
DONE and ORDERED in Orlando, Florida on May 30, 2023.