Jackpocket, Inc. v. Lottomatrix NY LLC

645 F.Supp.3d 185

JACKPOCKET, INC., Plaintiff, v. LOTTOMATRIX NY LLC, Lottomatrix Corporation, Lottomatrix Operations Limited d/b/a Jackpot.com, Lottomatrix Malta Limited, and 99Dynamics Limited, Defendants.

22-cv-5772 (LJL)

United States District Court, S.D. New York

Signed December 7, 2022

Danny M. Awdeh, Douglas Anthony Rettew, Patrick J. Rodgers, Mary Catherine Brennan, Finnegan, Henderson, Farabow, Garrett & Dunner LLP, Washington, DC, Troy Viger, Atlanta, GA, for Plaintiff.

Carey Richard Ramos, Rachel Elizabeth Epstein, Donald J. Reinhard, Dylan I. Scher, Tai Hyun Park, Claudia T. Bogdanos, Todd Steven Anten, Quinn Emanuel Urquhart & Sullivan LLP, New York, NY, Sona De, Sidley Austin LLP, New York, NY, Brooke Shanelle Boll, Eric Schwartz, Rollin A. Ransom, Sidley Austin LLP, Los Angeles, CA, Stacylyn M. Doore, Quinn Emanuel Urquhart & Sullivan, LLP, Boston, MA, for Defendants.

OPINION AND ORDER

LEWIS J. LIMAN, United States District Judge:

This lawsuit concerns a dispute over a jackpot. Plaintiff Jackpocket, Inc. ("Plaintiff" or "Jackpocket") sells lottery tickets online in thirteen U.S. states and the District of Columbia. Defendants Lottomatrix NY LLC, Lottomatrix Corporation, Lottomatrix Operations Limited d/b/a Jackpot.com, Lottomatrix Malta Limited, and 99Dynamics Limited (collectively, "Defendants" or "Jackpot.com") operate an internet gambling website internationally and hope to sell lottery tickets electronically in the United States. Jackpocket brings claims of trademark infringement, unfair competition, and false designation of origin under the Lanham Act and New York common law and seeks to enjoin Defendants from using the designation "Jackpot" and "Jackpot.com" in connection with lottery courier services in the United States. Dkt. No. 1.

Jackpocket filed a motion for a preliminary injunction on July 19, 2022. Dkt. No. 19. The Court held an evidentiary hearing on October 11 and October 12, 2022. See Dkt. Nos. 98-99. The Court consolidated the motion for a preliminary injunction with a trial on the merits under Federal Rule of Civil Procedure 65 and held a half-day trial on November 17, 2022. See Dkt. No. 123.

This Opinion and Order constitutes the Court's findings of fact and conclusions of law for purposes of Federal Rule of Civil Procedure 52(a)(1). To the extent any statement labeled as a finding of fact is a conclusion of law, it shall be deemed a conclusion of law, and vice versa.

PROCEDURAL HISTORY

Plaintiff filed its complaint on July 7, 2022 ("Complaint"). Dkt. No. 1. The Complaint alleges five causes of action: (1) Federal Trademark Infringement under 15 U.S.C. § 1114(1) (First Cause of Action), id. ¶¶ 56-57; (2) Federal Trademark Infringement, False Designation of Origin, and Unfair Competition under 15 U.S.C. § 1125(a)(1)(A) (Second Cause of Action), id. ¶¶ 58-59; (3) Common-Law Trademark Infringement and Unfair Competition under New York common law (Third Cause of Action), id. ¶¶ 60-61; (4) Violation of the New York Deceptive Trade Practices Statute, New York General Business Law § 349 (Fourth Cause of Action), id. ¶¶ 62-63; and (5) Trademark Dilution under New York General Business Law § 360 (Fifth Cause of Action), id. ¶¶ 64-66.

On July 19, 2022, Plaintiff brought a motion for a preliminary injunction seeking to enjoin defendants from using the JACKPOT and JACKPOT.COM marks during the pendency of this action. Dkt. No. 19. Defendants filed their memorandum of law in opposition to the preliminary injunction on August 2, 2022, Dkt. No. 43, to which Plaintiff responded on August 9, 2022, Dkt. No. 55. After the preliminary injunction motion was fully briefed, Defendants filed a motion to dismiss the Complaint on August 29, 2022, Dkt. No. 64, and Plaintiff filed a response on September 12, 2022, Dkt. No. 80. The Court granted an extension for Defendants to file their reply memorandum of law on September 15, 2022. Dkt. No. 85.

On September 8, 2022, the Court granted Defendants' motion for limited expedited discovery and converted the oral argument scheduled for the preliminary injunction into an evidentiary hearing. Dkt. No. 79. The evidentiary hearing ("Evidentiary Hearing") was conducted on October 11 and October 12, 2022. See Dkt. Nos. 98-99. Before the Evidentiary Hearing, the Court received testimony on direct examination by declaration and rebuttal testimony, as applicable, of the following witnesses: Peter Sullivan, Jackpocket's founder and Chief Executive Officer ("Sullivan"), Yariv Ron, Jackpot.com's co-founder and CEO ("Ron"), Jackpocket's expert Dr. Michael Barone ("Barone"), and Jackpot.com's expert Dr. Itamar Simonson ("Simonson"). The Court also received briefs from both parties. At the Evidentiary Hearing, the parties called only Sullivan and Ron, whom they cross-examined. The Court heard closing arguments on the preliminary injunction on October 12, 2022.

During the Evidentiary Hearing, the Court indicated that it would consolidate the motion for a preliminary injunction with the trial on the merits under Federal Rule of Civil Procedure 65. Preliminary Injunction Evidentiary Hearing Transcript ("PI Tr.") at 347-48. On November 17, 2022, the Court conducted a half-day bench trial on Jackpocket's equitable claims and Jackpot.com's defenses.¹ See Dkt. No. 123. Before the trial on the merits, the Court received testimony on direct examination by declaration and rebuttal testimony, as applicable, of the following witnesses: Michelle Wong, Jackpocket's vice president of Marketing, Jackpocket experts Hal L. Poret, Jeff Anderson, and Michael Pollock, and Jackpot.com experts Dr. Scott D. Swain, Dr. Ward A. Hanson, Dr. Brian Wyman, and Simonson. See Dkt. Nos. 105. The Court again received briefs from both parties. At the trial, the Court held oral argument on the trial record.

FINDINGS OF FACT

I. The Internet Lottery Business

A. Internet Gambling and Lotteries

This case presents another chapter in the evolution of internet gambling. For most of history, human beings have gambled—they've placed wagers on uncertain outcomes for the prospect of a prize.² For most of that history, gambling has taken place in person: rolling of dice in a back-alley, placing a bet in an office sports pool, or wagering thousands of dollars in an opulent Las Vegas casino. It is big business. And just as the games that people play have evolved, so have the means through which bets are placed, from the parlor, to the telephone, and now to the internet.

In recent years, entire industries have developed that permit people to gamble (or engage in "interactive gaming" or "iGaming," as it is commonly known) in an electronic format, from their computers or their mobile phones, with a click of a button and without any direct human interaction. See Declaration of Yariv Ron ("Ron Decl.") ¶¶ 6-7. The games that can be played, and bets that can be placed, through the internet knows few limits. iGaming encompasses a broad array of activities, including sports betting, casino games, online poker, and bingos. See id.

As the facts of this case demonstrate, that evolution has included government and state-run lotteries pursuant to which gamblers purchase a ticket (frequently for a relatively low cash outlay) for the prospect of winning a large reward or, in the vernacular, a jackpot. See Expert Report of Brian Wyman, Ph.D. ("Wyman Rpt.") at 3. The word "jackpot," which denotes the top prize in a game of chance, is used in connection with gambling of all kinds, including lotteries.³ See Ron Decl. ¶¶ 9-10; Wyman Rpt. at 5. And lotteries, like jackpots, come in many forms. In draw lotteries, players purchase tickets with several pre-selected numbers and try to match an upcoming "draw" to win prizes; players of scratch-off games remove a latex covering from the ticket to instantly discover whether they've won prizes. Wyman Rpt. at 3-4; Ron Decl. ¶¶ 8-9; Declaration of Peter Sullivan ("Sullivan Decl.") ¶ 2. Lotteries are big business in the United States: sales totaled approximately $100 billion per year in 2021. Sullivan Decl. ¶ 87; Ron Decl. ¶ 8; November 3, 2022 Expert Report of Dr. Ward A. Hanson ("Hanson Rpt.") ¶ 11. Many U.S. lotteries are operated by states and state agencies. See Hanson Rpt. ¶ 13; id. fig. 4.3. New Hampshire was the first state to adopt a lottery in 1964; since then, all but five states have adopted state-run lotteries, the most recent of which was Mississippi in 2019. Id. ¶ 13. States have adopted lotteries in part because they provide a significant source of revenue, often for a widely supported government program. Id. ¶ 14. New York, for example, raised approximately $3.59 billion for educational services in New York State during the 2020-2021 fiscal year. Sullivan Decl. Ex. 6. Beginning in the 1980s, states formed multi-state lotteries, which evolved into the Mega Millions and Powerball multi-state lotteries. Hanson Rpt. ¶ 14.

Traditionally, like most games that have now become iGaming activities, lotteries have been played in-person. A person who wanted to play a lottery and take a chance to win prizes worth millions of dollars, and sometimes more than $1 billion, went to the local convenience store or gas station and bought a ticket in cash. Ron Decl. ¶ 8. That method of distribution imposes limits on the size of the market. Not everyone who is attracted by the allure of a multi-million-dollar prize will have the wherewithal to make it to the local convenience store to buy a ticket or will manage to do so while her interest is whetted. The excitement of a jackpot may fade and the purchasing impulse along with it. And so, as a result of the confluence of interests of big business, government, and consumers, lottery sales have increasingly moved online. As states have permitted tickets to be purchased online (or through brokers who resell the tickets online), the percentage of lottery sales done through the internet has increased. Online sales currently represent approximately 5-7% of all U.S....