Diamond Collection, LLC v. Underwraps Costume Corp., 17-CV-0061(JS)(SIL)

THE DIAMOND COLLECTION, LLC, Plaintiff, v. UNDERWRAPS COSTUME CORPORATION, Defendant.

17-CV-0061(JS)(SIL)

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF NEW YORK

January 22, 2019

MEMORANDUM & ORDER

APPEARANCES

For Plaintiff:

Lynn Marcy Brown, Esq.

Kevin Schlosser, Esq.

Meyer Suozzi English & Klein P.C.

990 Stewart Avenue, Suite 300

Garden City, NY 11530

For Defendant:

Bryan A. McKenna, Esq.

1270 Avenue of the Americas

16th Floor

New York, NY 10020

Stewart L. Levy, Esq.

Eisenberg Tanchum & Levy

675 Third Avenue

New York, NY 10017

SEYBERT, District Judge:

Before the Court is a motion by Plaintiff the Diamond Collection, LLC ("Plaintiff" or "Diamond") to dismiss counterclaims (Pl.'s Mot., D.E. 37) in the Amended Answer of Defendant Underwraps Costume Corporation ("Defendant" or "Underwraps") (Am. Answer, D.E. 35).

For the following reasons, Plaintiff's motion is GRANTED IN PART and DENIED IN PART.

BACKGROUND

Diamond and Underwraps sell Halloween costumes. In December 2016, both companies attended a trade show. Underwraps observed Diamond distributing a catalog (the "catalog"). Underwraps believes that the catalog itself looked like Underwraps' catalog, and that the costumes in the catalog looked like Underwraps' costumes. This action concerns allegations of copyright and trade dress infringement with the catalog and the costumes.

I. Relevant Procedural History

Diamond filed a complaint in January 2017, seeking a declaratory judgment that Diamond had not and is not infringing on Underwraps' claimed intellectual property rights. (Compl., D.E. 1.) Diamond filed an Amended Complaint in February 2017. (Am. Compl., D.E. 13.) Underwraps filed its First Answer to the Amended Complaint in August 2017. (First Answer, D.E. 28.) The First Answer contained counterclaims for copyright infringement, trade dress infringement, false designation of origin, unfair competition, and trademark dilution under the Lanham Act, 16 U.S.C. § 1051 et seq., and the New York General Business Law § 360-1 (NYGBL); false endorsement under the Lanham Act; deceptive practices under the NYGBL § 349; misappropriation; and common law trademark infringement. Diamond moved to dismiss the counterclaims. (Pl.'s First Br., D.E. 29-6.)

The Court (Spatt, J.) granted Diamond's motion to dismiss in its entirety. Diamond Collection, LLC v. Underwraps Costume Corp., No. 17-CV-0061, 2018 WL 1832928 (E.D.N.Y. April 16, 2018) (Diamond 1, D.E. 32). The Court dismissed Underwraps' NYGBL counterclaims with prejudice, finding them "preempted by federal and trademark and copyright law." Id. at *8.¹ As to the remaining claims, however, the Court granted Underwraps leave to replead by filing an amended answer.

As to copyright infringement, the Court observed that Underwraps' First Answer did not describe any of its copyrighted patterns or Diamond's allegedly similar costumes and it was "left to speculate as to what [they] look like." Diamond 1, at *1. The Court also noted that the First Answer did not describe how the parties' catalogs were substantially similar. Though Underwraps had attached pages from the catalogs to its opposition to the motion to dismiss, the Court did not consider them because Underwraps, "as a represented party, should have attached the exhibits to its answer, not to its opposition to the motion to dismiss." Id. at *3. In any event, Underwraps had not stated that the pictures attached represented the copyrighted patterns.The Court could not "even begin to make the evaluation because [Underwraps] ha[d] neither described the patterns at issue nor . . . supplied photographs of those patterns to the Court." Id. at *5. "Simply stating that the costumes [and catalog] were 'identical or substantially similar' is a legal conclusion that [the] Court need not accept as true." Id. at *4.

With respect to trade dress, the Court noted that "when amending [Underwraps'] answer," images alone would not suffice, and that Underwraps must "'ultimately point to the distinctive elements,'" which it had not done. Id. at *6 (quoting Classic Touch Décor, Inc. v. Michael Aram, Inc., No. 15-CV-0453, 2015 WL 6442394, at *5 n.2 (E.D.N.Y. Oct. 23, 2015)). The Court further found that Underwraps "failed to allege how its marks are distinctive" and thus "failed to state claims for false designation of origin, unfair competition, or trademark dilution under the Lanham Act, and for trademark infringement under New York common law upon." Id. at *7.

Underwraps' Amended Answer contains four amended counterclaims, again alleging: (1) copyright infringement under 17 U.S.C. § 501 (the Copyright Act); (2) trade dress infringement, false designation of origin, unfair competition and trademark dilution under the Lanham Act; (3) false designation of origin and unfair competition under the Lanham Act; and (4) false endorsement under the Lanham Act. (See Am. Answer.) Diamond againmoves to dismiss the counterclaims. (See Pl.'s Mot.; Pl.'s Br., D.E. 39.) For the following reasons, Diamond's motion is GRANTED IN PART and DENIED IN PART.

DISCUSSION

I. Standard for Motions to Dismiss Counterclaims

"A motion to dismiss a counterclaim is evaluated under the same standard as a motion to dismiss a complaint." Diamond 1, 2018 WL 1832928, at *3. In deciding Rule 12(b)(6) motions to dismiss for failure to state a claim, the Court applies a "plausibility standard," which is guided by "[t]wo working principles." Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S. Ct. 1937, 1949, 173 L. Ed. 2d 868 (2009); accord Harris v. Mills, 572 F.3d 66, 71-72 (2d Cir. 2009). First, although the Court must accept all allegations as true, this "tenet" is "inapplicable to legal conclusions;" thus, "[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice." Iqbal, 556 U.S. at 678, 129 S. Ct. at 1949 (citing Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 127 S. Ct. 1955, 1965, 167 L. Ed. 2d 929 (2007)); see Harris, 572 F.3d at 72. Second, only complaints that state a "plausible claim for relief" can survive a Rule 12(b)(6) motion to dismiss. Iqbal, 556 U.S. at 679 (citing Twombly, 550 U.S. at 556). Determining whether a complaint does so is "a context-specific task that requires thereviewing court to draw on its judicial experience and common sense." Id. (citation omitted); accord Harris, 572 F.3d at 72.

In deciding a motion to dismiss, the Court is confined to "the allegations contained within the four corners of [the] complaint," Pani v. Empire Blue Cross Blue Shield, 152 F.3d 67, 71 (2d Cir. 1998), but this has been interpreted broadly to include any document attached to the complaint, any statements or documents incorporated in the complaint by reference, any document on which the complaint heavily relies, and anything of which judicial notice may be taken. See Chambers v. Time Warner, Inc., 282 F.3d 147, 152-52 (2d Cir. 2002); Kramer v. Time Warner, Inc., 937 F.2d 767, 773 (2d Cir. 1991).

II. Underwraps' Counterclaims

A. Copyright Infringement (First Counterclaim)

"To successfully plead a claim for copyright infringement, 'a plaintiff with a valid copyright must demonstrate that: (1) the defendant has actually copied the plaintiff's work; and (2) the copying is illegal because a substantial similarity exists between the defendant's work and the protectable elements of plaintiff's.'" Diamond 1, 2018 WL 1832928, at *4 (quoting Peter F. Gaito Architecture, LLC v. Simone Dev. Corp., 602 F.3d 57, 63 (2d Cir. 2010) (further quotation omitted). "Rule 8 requires that the alleged infringing acts be stated with some specificity."Palmer Kane LLC v. Scholastic Corp., No. 12-CV-3890, 2013 WL 709276, at *2 (S.D.N.Y. Feb. 27, 2013) (citation omitted).

Where a party claiming infringement attaches the works to its pleadings, "the works themselves supersede and control contrary descriptions of them, including any contrary allegations, conclusions or descriptions of the works contained in the pleadings." Wager v. Littell, No. 12-CV-1292, 2013 WL 1234951, at *2 (S.D.N.Y. Mar. 26, 2013) (aff'd 549 F. App'x 32 (2d Cir. 2014)); see also Well-Made Toy M'fg. Corp. v. Flowers, Inc., No. 16-CV-1380, 2016 WL 6537673, at *2 (E.D.N.Y. Nov. 3, 2016).

It is "entirely appropriate for the district court to consider the similarity between works [attached to the pleadings] in connection with a motion to dismiss" and properly resolve the issue at this stage. Peter F. Gaito Architecture, 602 F.3d at 64). "If the court considers the complaint and the works themselves and determines that 'the similarity between two works concerns only non-copyrightable elements of the plaintiff's work, or . . . no reasonable jury, properly instructed, could find that the two works are substantially similar,' the court may dismiss the complaint for failure to state a claim for copyright infringement." Kimberley v. Penguin Random House, No. 17-CV-5107, 2018 WL 1918614, at *2 (S.D.N.Y. Apr. 19, 2018) (quoting Peter F. Gaito Architecture, 602 F.3d at 63) (ellipsis in original). Here,however, in making the evaluation, the Court finds that the works are similar enough to survive a motion to dismiss.

At the outset, this time, Underwraps has attached photos of its copyrighted costumes and Diamond's costumes for comparison as exhibits to the Amended Answer. While Diamond makes much of the fact that Underwraps has not pleaded, in writing, "how [Diamond's] costumes are substantially similar to [Underwraps'] copyrighted patterns," (Pl.'s Br., at 2 (citing Diamond 1, 2018 WL 1832928, at *1)), the Court believes that in this case, photos are a more accurate and efficient way to demonstrate the similarities. Indeed, attaching photos of the copyrighted costume designs along with the allegedly infringing costumes was expressly contemplated by the prior order (see Diamond 1, 2018 WL 183298, at *5). It is certainly more effective here to show how two things look the same than to tell how two things look the same. As Diamond observes, "the works themselves...