Summary
declining to apply Dastar to Phoenix's claims of trademark infringement
Summary of this case from Phx. Entm't Partners, LLC v. Sports Legends, LLCOpinion
Case No: 2:16-cv-449-FtM-38CM
10-23-2016
PHOENIX ENTERTAINMENT PARTNERS, LLC, a North Carolina LLC Plaintiff, v. ANDREA AGUAYO and FIREHOUSE SPORTS GRILL, LLC, Defendants.
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This matter comes before the Court on Defendant Andrea Aguayo's Amended Motion to Dismiss Plaintiff's Complaint (Doc. #21) filed on August 15, 2016. Plaintiff Phoenix Entertainment Partners, LLC filed a Response in Opposition on September 13, 2016. (Doc. #26). This Motion is now ripe for the Court's review.
Background
In June 2016, Plaintiff Phoenix Entertainment Partners, LLC ("Plaintiff") brought action against Defendants Andrea Aguayo ("Aguayo") and Firehouse Sports Grill, LLC ("Firehouse"), primarily alleging trademark infringement. (Doc. #1). Plaintiff owns Sound Choice, a brand that carries and provides karaoke accompaniment tracks to bars, restaurants and other such establishments. (Doc. #1 at ¶ 14). When Plaintiff eventually succeeded a business by the name of "Slep-Tone Entertainment Corporation" ("Slep-Tone"), it acquired rights over Sound Choice through assignment of interest. (Doc. #1 at ¶ 15). At the time Slep-Tone possessed ownership of Sound Choice, it re-recorded and released an excess of 16,500 popular songs on special compact discs that included graphics ("CD+G" discs). (Doc. #1 at ¶ 16). More recently, Slep-Tone released another subset of karaoke in MP3 format that also include graphics ("MP3+G"). (Doc. #1 at ¶ 16). Sound Choice prides itself on its karaoke recordings, allegedly known for its accurate singing cues and being the most faithful to the sound of the original recording artist. (Doc. #1 at ¶¶ 17-19). Both Slep-Tone and Plaintiff have released karaoke tracks to commercial users only on compact discs and not on any other form of carrier (e.g., computer hard drives, internet downloads, etc.). (Doc. #1 at ¶ 20).
Given modern technological advances, it is now possible to create karaoke accompaniment tracks using the Sound Choice CD based tracks as a template for purposes of storage on alternative media (e.g., computer hard drives). (Doc. #1 at ¶ 21). The creation of these tracks produce an imitation that is inferior to the original due to digital compression. (Doc. #1 at ¶ 22). Digital compression occurs where the original CD+G files are compressed into audio plus graphics files. (Doc. #1 at ¶ 22). Although the imitation is one of digital compression, most would be unable to detect variation in the sound quality. (Doc. #1 at ¶ 24). The aforementioned process is also known as "media-shifting" or "format-shifting" because information is being copied and shifted from one medium or format to another. (Doc. #1 at ¶ 25). Owners of karaoke establishments find complacent ease in using a media-shifted track as it allows them to both quickly access and store the files on a hard drive without inserting a disc. (Doc. #1 at ¶ 27). As an additional perk, storage of a karaoke file on a hard drive prevents users' discs from excessive wear, damage, loss, or theft. (Doc. #1 at ¶ 27).
Although Slep-Tone prohibited media-shifting and format-shifting back in 2007, it did enable a policy that allowed owners to media or format-shift if granted permission. (Doc. #1 at ¶ 29). The policy further holds users to a "1-to-1 correspondence," meaning shifting of content from one disc is restricted to one hard drive, not two or more. (Doc. #1 at ¶ 31). However, the easy duplication of tracks now means users have access to a widespread distribution of media-shifted karaoke tracks without ownership of any discs. (Doc. #1 at ¶ 35). Such widespread distribution means users gain a benefit without supplying payment for the original discs to companies like Sound Choice. (Doc. #1 at ¶ 36).
Aguayo is known as a karaoke jockey and provides karaoke entertainment service at various venues. (Doc. #1 at ¶ 7). Aguayo both promotes and advertises her services through her various Facebook pages. (Doc. #1 at ¶ 7). Prior to commencing this action, Plaintiff sent an initial cease and desist letter to Aguayo in March and another to Firehouse later in October. (Doc. #1 at ¶¶ 40-42). In response to the cease and desist, Aguayo disabled her "Rock and Soul Entertainment Facebook website" and Firehouse subsequently deleted "karaoke" from its website's "Event Calendar." (Doc. #1 at ¶¶ 41-43).
Plaintiff possesses ownership of four trademarks bearing the name SOUND CHOICE. See (Doc. #1 at Exhibits C, D, E, F, G, H). In particular, Plaintiff asserts protection over its distinctive trade dress, which includes, amongst other things, "(1) the use of a particular typeface, style, and visual arrangement in displaying the lyrics; (2) the Sound Choice Marks; and (3) the use of particular styles in displaying entry cues for singers, namely a series of vanishing rectangles to indicate the cue." (Doc. #1 at ¶ 52).
In the instant action, Plaintiff asserts the following eight counts against Aguayo and Firehouse: Count I—Trademark and Trade Dress Infringement Against Defendant Firehouse; Count II—Unfair Competition Against Defendant Firehouse; Count III—Violation of the Florida Deceptive and Unfair Trade Practices Act (FDUPTA) Against Defendant Firehouse; Count IV—Common Law Unfair Competition Against Defendant Firehouse; Count V—Trademark and Trade Dress Infringement Against Defendant Aguayo; Count VI—Unfair Competition Against Defendant Aguayo; Count VII—Violation of the Florida Deceptive and Unfair Trade Practices Act (FDUPTA) Against Defendant Aguayo; and Count VIII—Common Law Unfair Competition Against Defendant Aguayo. (Doc. #1 at ¶¶ 95-176). Aguayo now moves to dismiss, alleging failure to state a claim. (Doc. #21). In response, Plaintiff re-asserts its claims for trademark and trade dress infringement, unfair competition, and FDUPTA were properly plead. (Doc. #26).
Legal Standard
To survive a motion to dismiss under Rule 12(b)(6), "a [c]omplaint must contain sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). "A claim has facial plausibility when the pleaded factual content allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id. at 678. The issue in resolving such a motion is not whether the non-movant will ultimately prevail, but whether the non-movant is entitled to offer evidence to support his claims. See id. at 678-79.
"Determining whether a complaint states a plausible claim for relief [is] . . . a context-specific task that requires the reviewing court to draw on its judicial experience and common sense." Id. at 679 (citations omitted). Although legal conclusions can provide the framework for a complaint, factual allegations must support all claims. See id. Based on these allegations, the court will determine whether the plaintiff's pleadings plausibly give rise to an entitlement to relief. See id. at 678-79. Legal conclusions couched as factual allegations are not sufficient, nor are unwarranted inferences, unreasonable conclusions, or arguments. See Twombly, 550 U.S. at 555.
Rule 8 of the Federal Rules of Civil Procedure provides parallel pleading requirements that also must be satisfied. Under this rule, "a pleading must contain a short and plain statement of the claim showing that the pleader is entitled to relief." Fed. R. Civ. P. 8(a)(2). "[T]he pleading standard Rule 8 announces does not require 'detailed factual allegations,' but it demands more than an unadorned, the-defendant-unlawfully-harmed-me-accusation." Iqbal, 556 U.S. at 678 (quoting Twombly, 550 U.S. at 555). Labels, conclusions, and formulaic recitations of the elements of a cause of action are not sufficient. See id. at 678-79. Mere naked assertions are also inadequate. See id.
Discussion
Plaintiff alleges several causes of action against Aguayo including claims for trademark and trade dress infringement, unfair competition, and deceptive and unfair trade practices. (Doc. #1 at 21-26). In response, Aguayo moves to dismiss, contending (i) Plaintiff is bringing copyright claims masked as trademark violations; (ii) a failure to plead creation of a new good; (iii) the purported trade dress is functional; (iv) the allegations supporting unfair competition fail; (v) damages are not adequately plead; and (vi) pendent state law claims should be dismissed. (Doc. #21 at 1-2). In opposition, Plaintiff re-asserts its claim for unauthorized distribution and use of its Sound Choice-branded counterfeit tracks, trademarks, and trade dress in connection with Aguayo's karaoke services. (Doc. #26 at 3). The Court will now address each of these arguments in turn.
A. Copyright Piracy
Aguayo begins her Complaint by distinguishing trademark law from that of copyright law. (Doc. #21 at 3-4). She then discusses a landmark opinion in intellectual property law, Dastar Corp. v. Twentieth Century Fox Film Corp., 539 U.S. 23 (2003), and Dastar's applicability to recent Seventh Circuit opinion, Phoenix Entm't Partners v. Rumsey, 829 F.3d 817 (7th Cir. 2016). (Doc. #21 at 4-6). In essence, Aguayo instructs that the core of Plaintiff's claims is the substance of copyright law, not trademark law. (Doc. #21 at 7). Aguayo cautions the Court against extending copyright protection over Plaintiff's trademarks and trade dress. (Doc. #21 at 7).
Plaintiff insists it has properly plead its claims under trademark law. (Doc. #26 at 2). Plaintiff contends Slep-Tone is the producer of the tangible goods that are offered for sale and consequently, serves as the "origin of goods" for purposes of the Lanham Act. (Doc. #26 at 2-8). Although Aguayo does not hold herself out as being sponsored by or affiliated with Plaintiff, Plaintiff argues that Aguayo, within a four hour show, plays a sufficient amount of songs branded with the Sound Choice marks and trade dress. This display potentially confuses consumers into thinking Aguayo has paid for the Sound Choice-branded tracks associated with her services. (Doc. #26 at 7). The Court agrees with Plaintiff.
In Dastar, the Court was presented with both copyright and Lanham Act violations. The heart of the dispute centered around General Dwight D. Eisenhower's World War II book, Crusade in Europe, the copyright and exclusive television rights of which were granted exclusively to Twentieth Century Fox Film Corporation ("Fox"). Dastar, 539 U.S. at 23. Fox never renewed the copyright on the television series which culminated in the work being left in the public domain. Id. Petitioner Dastar later released a video set by the name of "World War II Campaigns in Europe." Id. The video set appropriated tapes from the original Crusade television series that Fox produced. Id. Respondents' claim alleged that Dastar made a "'false designation of origin, false or misleading description of fact, or false or misleading representation of fact, which...is likely to cause confusion ... as to the origin ... of his or her goods.'" Id. (internal citation omitted). Thereafter, the Court in Dastar addressed what constituted the origin of Dastar's product and consequently what the Lanham Act meant by the "origin of goods." Id. at 29-38.The Court tread carefully in its analysis as to avoid blurring the lines between copyright and trademark law. Ultimately, the Court concluded that the phrase "origin of goods" under section 43(a) of the Lanham Act refers "to the producer of the tangible goods that are offered for sale, and not to the author of any idea, concept, or communication embodied in those goods." Id. at 37.
Aguayo ties Dastar to the Seventh Circuit opinion in Phoenix Entm't Partners v. Rumsey, 829 F.3d 817 (7th Cir. 2016). Aguayo picks upon the latter as it addresses similar issues the ones posed in the case at hand. In Phoenix Entm't Partners, Slep-Tone and Phoenix Entertainment Partners, collectively, alleged that defendants, a pub and its owner, committed trademark infringement by digitally passing off unauthorized digital copies of Slep-Tone's karaoke tracks as genuine Slep-Tone tracks. Phoenix Entm't Partners, 829 F.3d at 819.The Seventh Circuit Court reasoned that the root of plaintiff's complaint stemmed from unauthorized copying and relied on Dastar as support. Id. To pinpoint whether plaintiff brought an actionable claim under the Lanham Act, the Seventh Circuit asked what is the tangible good and "whether the unauthorized use of the plaintiff's marks (including trade dress) might cause consumers to be confused about who produced that good. Or, is the real confusion, if any, about the source of the creative [content] contained within that good?" Id. If the latter, the action was not one brought under the Lanham Act. Id. The Court in Phoenix Entm't Partners concluded that plaintiff's action trespassed upon copyright law and was not actionable under the Lanham Act. Id.
Here, the Court does not find the Seventh Circuit opinion persuasive. Rather, this Court will follow precedent set by the Eleventh Circuit. See generally Slep-Tone Entm't Corp. v. Johnson, 518 F. App'x 815 (11th Cir. 2013) (where federal appellate court affirmed damages awarded to plaintiff Slep-Tone in an action against defendant bar and ruled it an abuse of discretion to deny producer an injunction against bars). Plaintiff is the successor producer of the tangible good, the CD+G discs, that are sold to various consumers, including karaoke jockeys and establishments. Only authorized consumers of Plaintiff's have the ability to media or format-shift the content within such CD+G discs. Thus, any unauthorized consumer playing illicit media or format-shifted songs during karaoke run the risk of having Sound Choice's trade dress appear on screen. Although the sound quality may not be discernible to those listening, it gives the impression that Plaintiff has authorized Aguayo to both play the song and display Sound Choice's trademarks and trade dress. At this stage in the proceedings, the Court finds that the unauthorized display of Plaintiff's marks in combination with potential consumer confusion sufficiently alleges a cause of action under the Lanham Act. See Iqbal, 556 U.S. at 678 (an allegation need only be plausible, not probable, to survive a motion to dismiss); Merck & Co., Inc. v. Mediplan Health Consulting, Inc., 425 F. Supp. 2d 402, 412 ("[t]he likelihood of confusion test is a fact intensive analysis that ordinarily does not lend itself to a motion to dismiss"). While it is often difficult to delineate between copyright law and trademark law, this Court draws Aguayo's attention to the fact that there is no allegation concerning infringement based on the content of the karaoke tracks. See Slep-Tone Entm't Corp., 518 F. App'x at n.1. For this reason, the Court denies dismissal of Plaintiff's claims for trademark and trade dress infringement.
B. Creation of New Goods
Aguayo alleges that Plaintiff cannot claim a creation of a new good when there is none. (Doc. #21 at 7-9). She argues that the "good" is the karaoke track itself that is merely moved to another format. (Doc. #21 at 8). As there is no dispute to Plaintiff being the "origin of goods," Aguayo concludes that no likelihood of confusion must therefore exist. (Doc. #21 at 8-9). In response, Plaintiff contends that tracks created using media or format-shifting are actually created new goods that serve as templates to the original track on the CD+G discs. (Doc. #26 at 8-9). Here, the Court finds that there are sufficient facts alleged to support a likelihood of confusion argument, but it remains unpersuaded as to any new good being created.
It is clear to the Court that Plaintiff's "good" is the karaoke track that may be converted to another format should Plaintiff grant such authorization. Aguayo's use of such converted tracks are unauthorized by Plaintiff. As discussed in the above analysis, when Aguayo plays such a track, the Sound Choice trade dress is on display. Such display potentially confuses consumers into thinking the playing and display of such track was authorized by Plaintiff. Although the likelihood of consumer confusion might be slim, Plaintiff still states claims that are plausible to survive the Motion to Dismiss. See Iqbal, 556 U.S. at 678 (an allegation need only be plausible, not probable, to survive a motion to dismiss).
C. Functional Trade Dress
Aguayo further alleges that Plaintiff's trade dress is functional and consequently, cannot be protected. (Doc. #21 at 9-10). Plaintiff re-alleges its trade dress' non-functionality, arguing that it meets both the "traditional" and "competitive necessity test" outlined in Dippin' Dots, Inc. v. Frosty Bites Distrib., LLC, 369 F.3d 1197 (11th Cir. 2004). (Doc. #26 at 9).
To prevail on a trade dress claim, there must be a finding that "(1) the trade dress of the two products is confusingly similar; (2) the features of the product design are primarily non-functional; and (3) the product design is inherently distinctive or has acquired secondary meaning." See Dippin' Dots, Inc., 369 F.3d at 1202 (citation omitted). Under the "competitive necessity" test, "a functional feature is one the 'exclusive use of [which] would put competitors at a significant non-reputation-related disadvantage.'" TrafFix Devices, Inc. v. Mktg. Displays, Inc., 532 U.S. 23, 32 (2001) (quoting Qualitex Co. v. Jacobson Prods. Co., 514 U.S. 159, 165 (1995)).
The features that must be analyzed in this case are "(1) the use of particular typeface, style, visual arrangement in displaying the lyrics; (2) the Sound Choice Marks; and (3) the use of particular styles in displaying entry cues for singers, namely a series of vanishing rectangles to indicate the cue." (Doc. #1 at 10). Plaintiff contends the individual and collected elements of the trade dress have acquired secondary meaning visually. (Doc. #1 at 10). Keeping in mind that Plaintiff need only bring a claim that entitles it to show evidence, the Court reiterates that Plaintiff states a plausible claim at this point in the proceedings. See Iqbal, 556 U.S. at 678 (an allegation need only be plausible, not probable, to survive a motion to dismiss). Consequently, Plaintiff alleges a trade dress violation sufficient to withstand this Motion to Dismiss.
D. Unfair Competition
Aguayo opposes Plaintiff's claim for unfair competition due to a lack of proximate cause. (Doc. #21 at 10-12). While Aguayo concedes that unfair competition does not require direct competition, she essentially argues that there is no nexus to tie her to damages. (Doc. #21 at 10). According to Aguayo, her unauthorized Sound Choice branded karaoke tracks may have caused her to potentially charge less to venues and consequently, such action might have caused venues to forego hiring other jockeys that may have charged more because of costs associated with legitimate purchases of Sound Choice branded tracks. (Doc. #21 at 11). But, Aguayo contends that this causal link is too long to be close or proximate to any loss Plaintiff suffered. (Doc. #21 at 11). Plaintiff responds, asserting its claims for FDUPTA and common law unfair competition are properly plead given Aguayo's use of its counterfeit karaoke tracks. (Doc. #26 at 9-10).
The Florida Deceptive and Unfair Trade Practices Act (FDUPTA) gives rise to claims that mirror claims brought under Section 43(a) of the Lanham Act. For the same reasons this Court declined to dismiss Plaintiff's claims brought under Section 43(a) of the Lanham Act, it similarly declines to dismiss Plaintiff's FDUPTA and common law unfair competition claims. See John H. Harland Co. v. Clarke Checks, Inc., 711 F.2d 966, 981 (11th Cir. 1983) (where an action for trademark infringement supports an action for unfair competition).
E. Alleging Damages
Aguayo further contends that Plaintiff has not plead any damages concerning its service mark registrations or damages associated with putting on a karaoke show. (Doc. #21 at 12). She again claims that Plaintiff is bringing a copyright claim and consequently, no presumption of damages exist. (Doc. #21 at 12). Plaintiff does not address Aguayo's argument. See (Doc. #26).
Here, the Court disagrees with Aguayo. Conducting a karaoke show with a jockey who does not pay Plaintiff for any CD+G discs could potentially impact sales of those discs. In regards to any copyright claim being brought, this Court emphasizes that Plaintiff does not allege infringement based on the content of the karaoke tracks. See Slep-Tone Entm't Corp., 518 F. App'x at n.1. At this point in the proceedings, the Court finds the Complaint states sufficient allegations to presume damages. (Doc. #1 at 27-28).
F. Pendent State Claims
Should the Court grant this Motion to Dismiss, Aguayo requests dismissal of state law claims. (Doc. #21 at 12-13). Since this Court denies the instant Motion, it will retain jurisdiction over any pendent state law claims. Cf. Raney v. Allstate Ins. Co., 370 F.3d 1086, 1088-89 (11th Cir. 2004) (urging dismissal of state law claims when federal claims are dismissed).
Accordingly, it is now
ORDERED:
Defendant Andrea Aguayo's Amended Motion to Dismiss Plaintiff's Complaint (Doc. #21) is DENIED.
DONE and ORDERED in Fort Myers, Florida this 23rd day of October, 2016.
/s/ _________
SHERI POLSTER CHAPPELL
UNITED STATES DISTRICT JUDGE Copies: All Parties of Record