Amcrest Glob. Holdings v. Bona Fide Masks Corp.

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AMCREST GLOBAL HOLDINGS LIMITED, Plaintiff, v. BONA FIDE MASKS CORP., and BALL CHAIN MANUFACTURING CO., INC., Defendants.

BONA FIDE MASKS CORP., and BALL CHAIN MANUFACTURING CO., INC., Counterclaimants, v. AMCREST GLOBAL HOLDINGS LIMITED, BNX CONVERTING, LLC, and ACCUMED BIOTECH TECHNOLOGIES LLC, Counterclaim-Defendants.

Civil Action No. H-22-3786

United States District Court, S.D. Texas, Houston Division

May 5, 2023

MEMORANDUM OPINION AND ORDER

SIM LAKE, SENIOR UNITED STATES DISTRICT JUDGE

Plaintiff Amcrest Global Holdings Limited (“Plaintiff” or “Amcrest”), brings this action against Defendants, Bona Fide Masks Corp. (“BFM”) and Ball Chain Manufacturing Co., Inc. (“BCM”) (collectively, “Defendants” and “Counterclaimants”), for infringement of Registered Copyright Nos. VA0002238127 and VA0002238128 issued on February 20, 2021 (“the Claimed Copyrights”), in violation of the Copyright Act, to 17 U.S.C. § 101 et seq.^[1] Defendants not only deny Plaintiff's allegations of copyright infringement, but also assert the following seven counterclaims against Plaintiff, BNX Converting, LLC (“BNX”), and Accumed Biotech Technologies LLC (“Accumed”) (collectively, “Counterclaim-Defendants”): (1) false advertising in violation of § 43(a) of the Lanham Act, 15 U.S.C. § 1125(a); (2) trademark infringement in violation of § 32 of the Lanham Act, 15 U.S.C. § 1114; (3) unfair competition in violation of Texas common law; (4) declaratory judgment that the claimed copyrights are invalid because they do not comprise “original works of authorship” under 17 U.S.C. § 102(a); (5) a request pursuant to 17 U.S.C. § 411(b)(2) for cancellation of copyrights for willfully misstating or failing to state a fact that, if known, might have caused the Copyright Office to reject the applications for the Claimed Copyrights; (6) declaratory judgment that Counterclaim-Defendants' rights, if any, in the Claimed Copyrights are limited to the actual deposit copies; and (7) abuse of process.^[2] Counterclaim-Defendants not only deny these counterclaims, but also assert the following five counterclaims against BFM and BCM: (1) declaratory judgment that Counterclaimants have no standing to enforce the first second, third, and seventh counterclaims for false advertising, trademark infringement, unfair competition, and abuse of process, respectively, because these counterclaims are subject to mandatory arbitration; (2) declaratory judgment that Counterclaimants have no standing to sue under the POWECOM trademark; (3) false advertising because Counterclaimants' assertions that they are the exclusive distributors of POWECOM Mask Products in the United States are false, misleading, and violate § 43(a) of the Lanham Act, 15 U.S.C. § 1125(a); (4) unfair competition under Texas common law; and (5) abuse of process because Counterclaimants are using the court's process not seek justice but, instead, to harm Counterclaim-Defendants.^[3]

Pending before the court are four motions filed by Counterclaim-Defendants: (1) Counterclaim-Defendants' Motion to Dismiss and Compel Arbitration under Rule 12(b)(1) or 12(b)(3) (“Counterclaim-Defendants' Motion to Dismiss and Compel Arbitration”) (Docket Entry No. 36); (2) Counterclaim-Defendants' Motion to Dismiss Under Rule 12(b)(1) or Misjoinder of Parties Under F.R.C.P. Rule 21 (“Counterclaim-Defendants' Motion to Dismiss for Misjoinder”) (Docket Entry No. 37); (3) Counterclaim-Defendants' Motion to Dismiss Improper Party under F. R. Civ. P. 21 (“Counterclaim-Defendants' Motion to Dismiss Improper Party”) (Docket Entry No. 38); and (4) Counterclaim-Defendants' Motion for Judgment on the Pleadings as to Counterclaimants' First and Seventh Counterclaims Based on Counterclaimants' Inability to Prove False Advertising and Abuse of Process (“Counterclaim-Defendants' Motion for Judgment on the Pleadings”) (Docket Entry No. 40). For the reasons stated below Counterclaim-Defendants' Motion to Dismiss and Compel Arbitration will be granted as to the seventh counterclaim asserted against BNX and otherwise denied; Counterclaim-Defendants' motions to dismiss for misjoinder and improper party will be denied; and Counterclaim-Defendants' Motion for Judgment on the Pleadings will be denied as to the false advertising counterclaim and granted as to the abuse of process counterclaim.

I. Factual Allegations and Procedural Background

A. Procedural Background

Amcrest initiated this action on October 31, 2022, by filing a Complaint for Copyright Infringement (Docket Entry No. 1) that was never served. On January 11, 2023, Amcrest filed an Amended Complaint for Copyright Infringement, which asserts two counts of infringement, one for each of the Claimed Copyrights.^[4] On February 7, 2023, BFM and BCM filed their Answer, Affirmative Defenses, and Counterclaims, naming Amcrest, BNX, and Accumed as Counterclaim-Defendants (Docket Entry No. 21). On February 27, 2023, Counterclaim-Defendants filed the pending Motion to Dismiss and Compel Arbitration (Docket Entry No. 36), Motion to Dismiss for Misjoinder (Docket Entry No. 37), and Motion to Dismiss Improper Party (Docket Entry No. 38). On February 28, 2023, Amcrest, BNX, and Accumed filed Counterclaim-Defendant Counterclaimants Reply, Affirmative Defenses, and Counterclaims (Docket Entry No. 39), and the pending Motion for Judgment on the Pleadings (Docket Entry No. 40). On March 21, 2023, BFM and BCM filed Bona Fide Masks Corp. and Ball Chain Manufacturing Co., Inc.'s Answer to Counterclaim-Defendants' Counterclaims (“Answer to Counterclaim-Defendants' Counterclaims”) (Docket Entry No. 50).

B. Factual Allegations

1. Amcrest's Claims Against BFM and BCM

Asserting that “[a]mong the many business product and service offerings [it] makes available to its customers is a respirator mask,”^[5] Amcrest alleges that it commissioned commercial designer Mr. Efendi Egemen (“Egemen”) to create a unique image rendition of a respirator mask for use in marketing its respirator mask line of business. Amcrest alleges that on June 16, 2020, Egemen circulated an expressive creation titled “3D Rendition of Respirator Mask,” and that this image was published on June 19, 2020.^[6] Amcrest alleges that subsequently Egemen created derivative expressive creations titled “3D Rendition of Respirator Mask with Banner,” published June 19, 2020,^[7] “3D Rendition of Respirator Mask with Head Band Loops,” published on July 15, 2020,^[8] and “3D Rendition of Respirator Mask with Ear Loops,” published on July 16, 2020.^[9]Amcrest alleges that the four images are known collectively as “Egemen Creative Respirator Mask Images.”^[10]

Amcrest alleges that the Egemen Creative Respirator Mask Images were used by competitors without authorization, including by Defendants BFM and BCM, and that on December 16, 2020, it filed a Notice with GoDaddy to remove the Egemen Creative Respirator Mask Images from Defendants' Website.^[11] Amcrest alleges that it filed applications for copyright registration for the image “3D Rendition of Respirator Mask,” and the “3D Rendition of Respirator Mask with Banner.”^[12] On February 20, 2021, the United States Copyright Office issued to Amcrest Certificate of Registration No. VA000223817 for “3D Rendition of Respirator Mask,” and Certificate of Registration No. VA000223818, for “3D Rendition of Respirator Mask with Banner.” The effective date of both registrations is December 18, 2020.^[13]

Amcrest alleges that on January 15, 2021, Mr. Adam Ravat (“Ravat”) of Amcrest called Mr. William Taubner (“Taubner”) of BCM and demanded that Defendants stop using the copyrighted images, that Taubner agreed to remove the images from Defendants' Website, but instead of removing the images from the website, Defendants doctored the images with nominal alterations and continued to display the doctored images on their Website.^[14] Amcrest alleges that it has since made numerous complaints about Defendants' continued use of the doctored images to hosts of various websites.^[15]

2. BFM's and BCM's Answer, Affirmative Defenses, and Counterclaims Against Amcrest, BNX and Accumed

BFM and BCM deny Amcrest's allegations of copyright infringement^[16] and assert as Counterclaimants that the Claimed Copyrights are two depictions of Counterclaimants' POWECOM Mask Products^[17] and that Amcrest's Copyright Registrations are invalid.^[18] BFM and BCM allege that they and their predecessors-in-interest have long marketed masks and other personal protective equipment (“PPE”) under the name and mark POWECOM (the “POWECOM Trademark”), that BCM has registered the POWECOM Trademark with the United States Patent and Trademark Office under U.S. Trademark Reg. No. 6,003,980^[19] and that BFM has been and is the exclusive United States distributor of POWECOM Mask Products.^[20]

Counterclaimants allege that Amcrest sells N95 masks under the Amcrest brand, that Amcrest brand products are sold by “BNX Accumed,” and that Accumed is the authorized distributor of Amcrest brand products.^[21] Counterclaimants allege that BNX produces KN95 masks and PPE that compete directly with their POWECOM Mask Products,^[22] and that Accumed advertises, offers for sale, and sells products, including KN95 masks, under the Accumed brand.^[23]Counterclaimants also allege that “[u]pon information and belief, Counterclaim-Defendants Amcrest, BNX and Accumed are related entities, and/or share common interest or control.”^[24]

Counterclaimants allege that Accumed operates a website, the KN95 Mask Website, that advertises, offers for sale, and sells BNX products but fails to disclose the relationship between Accumed and BNX.^[25] They also allege that the KN95 Mask Website includes a Testing Comparison Site where Accumed “purports to ‘test every mask that we can get our...