Lifeguard Licensing Corp. v. Kozak

371 F.Supp.3d 114

LIFEGUARD LICENSING CORP. & Popularity Products, LLC, Plaintiffs,

v.Jerry KOZAK & Ann Arbor T-Shirt Co., LLC, Defendants.

15 Civ. 8459 (LGS)

United States District Court, S.D. New York.

Signed March 27, 2019

ORDER

Lorna G. Schofield, United States District JudgeWHEREAS, on March 12, 2019, Judge Lehrburger filed a Report and Recommendation (the "Report") recommending (1) dismissing Plaintiffs' Complaint with prejudice; (2) dismissing Defendants' counterclaims as moot without prejudice; (3) denying Defendants' request for summary judgment and (4) denying Defendants' request for an award of attorneys' fees;

WHEREAS, the Report stated that the parties "have fourteen (14) days to file written objections to this Report and Recommendation";

WHEREAS, no Objections were timely filed;

WHEREAS, in reviewing a Report and Recommendation of a magistrate judge, a district judge "may accept, reject, or modify, in whole or in part, the findings or recommendations made by the magistrate judge." 28 U.S.C. § 636(b)(1). "In a case such as this one, where no timely objection has been made, a district court need only satisfy itself that there is no clear error on the face of the record." Poulos, v. City of New York , No. 14 Civ. 3023, 2018 WL 3745661, at *1 (S.D.N.Y. Aug. 6, 2018) (internal quotation marks omitted);

WHEREAS, the Court finds no clear error on the face of the record. It is hereby

ORDERED that the Report is adopted. Plaintiffs' Motion to Dismiss the Complaint and Defendants' counterclaims is GRANTED. Defendants' motion for summary judgment is DENIED. Defendants' application for an award of attorneys' fees is DENIED. The Clerk of Court is directed to close the case.

REPORT AND RECOMMENDATION ON MOTION TO DISMISS

ROBERT W. LEHRBURGER, United States Magistrate Judge.

TO THE HONORABLE LORNA G. SCHOFIELD, United States District Judge:

This is a trademark infringement case. Plaintiffs, Lifeguard Licensing Corp. ("Lifeguard") and its licensee, Popularity Products, LLC ("Popularity"), claim that the Defendants, Ann Arbor T-Shirt Company ("Ann Arbor") and its owner Jerry Kozak, infringed Lifeguard's "LIFEGUARD" trademarks for apparel and other items (the "Trademarks" or "Lifeguard Trademarks"). The Defendants assert several counterclaims for declaratory relief, including that the Trademarks are generic and should be cancelled. Shortly after the deadline for filing trial materials, Plaintiffs presented Defendants with a covenant not to sue (the "Covenant"). Plaintiffs now move to voluntarily dismiss their own claims pursuant to Fed. R. Civ. P. 41(a)(2) and also dismiss Defendants' counterclaims pursuant to Fed. R. Civ. P. 12(b)(1) on the basis that the Covenant renders the counterclaims moot. Defendants oppose dismissal of their counterclaims and ask the Court to enter summary judgment against Plaintiffs on counterclaims for constructive abandonment, find this case to be exceptional, and award Defendants their attorneys' fees. For the reasons below, I recommend (i) dismissing Plaintiffs' complaint with prejudice; (ii) dismissing Defendants' counterclaims as moot without prejudice; (iii) denying Defendants' request for summary judgment; and (iv) denying Defendants' request for an award of attorneys' fees.

Background

A. The Parties and Their Products

Plaintiff Lifeguard owns four federally registered LIFEGUARD trademarks in the apparel category.¹ The Trademarks are incontestable as they have been in continuous use since registration.² See 15 U.S.C. § 1065. Plaintiff Popularity is Lifeguard's exclusive licensee of the Trademarks and sells summer and beachwear displaying the Trademarks, such as sweatshirts, t-shirts, hats, and tank-tops. (Complaint ¶¶ 22-24.) Most of Popularity's sales are on a wholesale level to airport souvenir shops, theme park stores, and beach town stores.³

Defendant Ann Arbor, based in Michigan, sells graphic t-shirts and other items.⁴ Defendant Kozak is Ann Arbor's founder and co-owner.⁵ (Kozak Decl. ¶ 3.) Among other items, Ann Arbor has sold t-shirts and tank-tops emblazoned with the word Lifeguard across the chest. (Kozak Decl. ¶¶ 4, 10.) Most all of Ann Arbor's sales have been made through Amazon.com. (Kozak Decl. ¶ 10.) In 2015, Ann Arbor's merchandise also automatically became available on eBay.com, although sales data indicates that no appreciable sales were made through eBay. (Kozak Decl. ¶¶ 18-19.)

Shortly after this dispute arose, Ann Arbor discontinued sales of its Lifeguard apparel. (Kozak Decl. ¶ 16.) For some time, however, Ann Arbor had been planning on expanding the items it offered imprinted with the word Lifeguard. (Kozak Decl. ¶ 55.) In that regard, Ann Arbor recently resumed sales of its shirts and now offers additional Lifeguard items, including hats, long-sleeved shirts, and hoodies. (Kozak Decl. ¶ 56.)

B. Start of the Litigation

This dispute began on September 25, 2015, when Plaintiffs sent Defendants a cease and desist letter, charging Defendants with "willful counterfeiting" of the Trademarks by selling LIFEGUARD branded apparel through Amazon.com.⁶ The letter threatened litigation if Defendants did not promptly and permanently stop selling the apparel and paid Plaintiffs.

Plaintiffs' demand letter prompted discussions between the parties' counsel about potential resolution. (Kozak Decl. ¶¶ 42-52.) Amidst those discussions, Ann Arbor filed a federal action in Michigan seeking declaratory relief against Lifeguard. (See Heed Decl. ¶ 44.) Plaintiffs then filed this action in New York and moved to dismiss the Michigan action based on lack of personal jurisdiction. (See Dkt. 43.) That motion succeeded. (Dkt. 52.)

The complaint in this case asserts five causes of action: (i) trademark infringement; (ii) trademark counterfeiting; (iii) false designation of origin; (iv) common law unfair competition; and (v) violation of New York deceptive practices act. (Complaint ¶¶ 36-69.) On June 2, 2016, Defendants filed five counterclaims, all of which seek only declaratory relief. (Dkt. 77.) The counterclaims request declaratory judgment that (i) the Trademarks are generic and therefore cancellable; (ii) Plaintiffs have constructively abandoned the Trademarks due to failure to police and control the marks; (iii) Plaintiffs have constructively abandoned the Trademarks due to naked licensing; (iv) Defendants use of the word "Lifeguard" is a fair or descriptive use; and (v) Defendants' use is a permissible functional use. (Dkt. 77 ¶¶ 163-94.) Defendants' prayer for relief with respect to its counterclaims is entirely declaratory in nature. (Dkt. at p. 29-30, Prayer for Relief B.)

C. The Parties' Motion Practice

The case progressed as one might expect, with both parties making motions and cross-motions. Each party obtained only partial success with their motions.

For instance, in November 2015, Defendants moved to dismiss the complaint for lack of subject matter jurisdiction and personal jurisdiction. (Dkt. 13.) The Court found the subject matter issue was rendered moot when the Michigan case was dismissed and denied the motion, finding that the complaint made a prima facie showing of personal jurisdiction. (Dkt. 88 at 1, 8.)

In April 2016, the parties filed dueling motions to compel production of documents from each other. (Dkt. 48, 55.) Plaintiffs' motion to compel was denied as moot because Defendants eventually responded to the requests at issue. (Dkt. 74.) Defendants' motion was granted in part and denied in part. (Dkt. 73.) The Magistrate Judge denied Defendants' application for sanctions and costs against Plaintiffs. (Dkt. 73 at 12-13.) As the Court explained, "the plaintiffs' position, even where I have rejected it, had a substantial justification." (Dkt. 73 at 13.)

Then, in August 2016, Defendants filed a second motion to compel production of documents from Plaintiffs. (Dkt. 95.) Defendants also once again moved for sanctions for Plaintiffs' non-compliance. Again, the motion was granted in part and denied in part. (Dkt. 103.) Although finding one of Plaintiffs' argument frivolous, the Magistrate Judge denied sanctions because of the split outcome. (Dkt. 103 at 11, 14.) Out of the several issues addressed in the decision, Plaintiffs objected to only one. (Dkt. 104.) The District Judge overruled the objection and affirmed. (Dkt. 112.)

Defendants then filed a motion for contempt sanctions, claiming that Plaintiffs had not complied with prior discovery orders. (Dkt. 107.) The Magistrate Judge denied this third request for sanctions as well, finding in part that "[a]gain, Ann Arbor does not have its facts exactly right." (Dkt. 162 at 9.)

Both parties also filed motions to preclude the testimony of each other's respective trademark survey experts. (Dkt. 134, 152.) The Magistrate Judge denied both motions. (Dkt. 167.) Each party objected to the ruling against them; the District Judge overruled the objections and affirmed. (Dkt. 182.)

Finally, both parties filed motions for summary judgment. (Dkt. 192, 201.) Defendants moved for summary judgment on all of Plaintiffs' claims based on the affirmative defenses of fair use, functional use and abandonment. Plaintiffs opposed and, with one exception, cross-moved for summary judgment on all of Defendants' affirmative defenses and counterclaims. The one exception was Defendants' defense and counterclaim that the Trademarks are generic; the Court had instructed the parties not to move on this issue since it was clearly an issue of disputed fact. (See Dkt. 229 at 2.)

The Court denied Defendants' motion seeking dismissal of Plaintiffs' claims. (Dkt. 229 at 21.) The Court granted Plaintiffs' motion in part and denied it in part, striking several affirmative defenses, including unclean hands, prior use and fraud. (Dkt. 229 at 21.) Accordingly, the case headed toward trial.

Having denied in part the motions for summary judgment, the Court issued a scheduling order setting dates for filing of motions in limine, jury materials, and other items, with a trial to take place...