Little Kids, Inc. v. 18th Ave. Toys, Ltd., C.A. No. 18-533WES

LITTLE KIDS, INC., Plaintiff, v. 18TH AVENUE TOYS, LTD., Defendant.

C.A. No. 18-533WES

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF RHODE ISLAND

June 18, 2019

REPORT AND RECOMMENDATION

Patricia A. Sullivan, United States Magistrate Judge.

On September 25, 2018, Plaintiff Little Kids, Inc., initiated this trademark action against Defendant 18th Avenue Toys, Ltd., asserting six registered federal trademarks pursuant to the Lanham Act, 15 U.S.C. § 1051, et seq., and Rhode Island statutory and common law. ECF No. 1 ("Compl."). The parties in this case are both competitors in the children's toy industry. The accused product is Defendant's version of a "bubble solution product," Compl. ¶ 18, which Plaintiff has trademarked and sells as a BUBBLE BUCKET&reg.¹ Both Defendant's accused product and Plaintiff's BUBBLE BUCKET® are sold as toys that hold bubble solution and a wand children can use to blow bubbles. Shortly after the Complaint was filed, the Court issued a temporary restraining order prohibiting Defendant from selling or offering for sale products with terms related to, or products otherwise related to, Plaintiff's trademarks. ECF Nos. 10, 12, 13.

Defendant responded to the Complaint with denials and affirmative defenses, but also with a single-count Counterclaim. ECF No. 15 at 13-17 ("Countercl."). The Counterclaim seeks a judicial declaration that Plaintiff's purported trade dress is invalid. Id.; Compl. ¶¶ 29-31, 40,51, 55. In support of the assertion of invalidity, the Counterclaim alleges that Plaintiff's purported trade dress is functional, generic, not distinctive and unprotectable. Countercl. ¶¶ 6-8, 18.

Plaintiff now challenges the legal viability of the Counterclaim with a motion to dismiss pursuant to Fed. R. Civ. P. 12(b)(6). ECF No. 16. Plaintiff argues that Defendant could have sought a declaration of noninfringement of Plaintiff's trade dress, but that a counterclaim seeking a declaration of "invalidity of trade dress" is unavailable as a matter of law. In support of its motion, Plaintiff points out that its Complaint alleges four causes of action, each based on infringement and dilution of its trademarks, but that the Complaint does not assert an independent claim of trade dress infringement. Defendant counters that the Complaint purports to claim not only trademark infringement and dilution, but that it also includes the following allegations: that Defendant's versions of the toy are similar and in some cases identical to Plaintiff's "in appearance, sound, connotation and commercial impression"; that Plaintiff has demanded that Defendant cease from using Plaintiff's "trade dress," but Defendant has wrongly continued to do so; that Defendant has copied the style and shape of Plaintiff's toy; and that Defendant has knowingly and maliciously used a confusingly similar imitation to the toy in derogation of Plaintiff's rights in its trade dress. Compl. ¶¶ 29-31, 40, 51, 55. Defendant also points out that Plaintiff's lengthy prayer for relief includes a request for an injunction barring Defendant from using Plaintiff's trade dress and from using any design that is likely to dilute the distinctiveness of Plaintiff's trade dress. Id. at 9-10. In response to these allegations, Defendant's Counterclaim asks for a declaration that the toy's overall appearance is functional and generic and is therefore insufficiently distinctive as to amount to protectable trade dress. Countercl. at 17.

Plaintiff's Fed. R. Civ. P. 12(b)(6) motion has been referred to me for report and recommendation. 28 U.S.C. § 636(b)(1)(B). For the reasons that follow, I recommend that the motion be denied.

I. BACKGROUND²

Plaintiff is a Rhode Island toy manufacturer, which owns six registered federal trademarks related to the toy. Compl. ¶¶ 1, 5-10. Since acquiring the trademarks, Plaintiff has utilized them in the production and sale of the toy. See id. ¶¶ 11-14. Defendant is a New York corporation that is engaged in the toy business in New York and online. Id. ¶ 15; ECF No. 15 ¶ 15 ("Answer"). It has purchased Plaintiff's products for resale. Answer ¶¶ 16-17. According to Plaintiff, this buy-sell relationship allowed Defendant to become familiar with Plaintiff's toy; with this familiarity, Plaintiff alleges, Defendant intentionally commenced infringing Plaintiff's trademarks and manufacturing and selling products that are confusingly similar to the toy. See Compl. ¶¶ 18-21; Answer ¶¶ 18-21 (denying these allegations). Based on these contentions, Plaintiff's verified Complaint presents four claims:

Count I: Federal Trademark Infringement

Count II: False Designation and Representation of Services in Violation of Section 43(a) of the Lanham Act

Count III: Dilution of Trademarks

Count IV: Common Law Trademark Infringement and Unfair Competition

Compl. at 1, 6, 8. Plaintiff seeks injunctive relief ordering Defendant, inter alia, to stop selling and to impound allegedly infringing products; it also asks for an award of money damages, including punitive damages based on willful and deliberate infringement. Id. at 9-11.

While "trade dress" is not the basis for the claims set out in the four enumerated Counts, as summarized supra, there are multiple references to it in Counts I, II and IV. Id. ¶¶ 29-31, 40, 51, 55 (e.g., "similarity . . . of Defendant's and Little Kids' products and trade dress"; "cease and desist from using the Little Kids Marks, trade dress"; "deliberate and malicious use of a confusingly similar imitation of the Little Kids Marks and trade dress"). And Plaintiff's prayer for relief seeks to enjoin Defendant from using or diluting Plaintiff's "trade dress." Id. at 9-10. As relevant here, the Counterclaim contends that Plaintiff's purported trade dress is not protectable because the toy's shape and appearance are functional, generic and not distinctive, in that it is simply a bucket that prevents spills and has a handle. Countercl. ¶¶ 4-8. Corroborating this allegation is the factual assertion (with illustrations) that other competitors use the same or a similar bucket for their bubble solution products. Id. ¶¶ 14-15. Defendant has also raised trade dress invalidity as an affirmative defense. Answer at 12. The motion to dismiss challenges only the Counterclaim, not the trade dress invalidity affirmative defense.

II. LAW AND ANALYSIS

"Trade dress is 'the overall appearance . . . of a product.'" Bonazoli v. R.S.V.P. Int'l, Inc., 353 F. Supp. 2d 218, 226 (D.R.I. 2005) (quoting Black's Law Dictionary 1530 (8th ed. 2004)). It "includes the design and appearance . . . together with the elements making up the overall image that serves to identify the product presented to the consumer." I.P. Lund Trading ApS v. Kohler Co., 163 F.3d 27, 35 (1st Cir. 1998); see Schwinn Bicycle Co. v. Ross Bicycles, Inc., 870 F.2d 1176, 1182 (7th Cir. 1989) ("the product's size, shape, color, graphics, packaging, and label"). For example, the packaging and advertising of Marlboro cigarettes were held to be protectable trade dress because they are "inherently distinctive" in "evok[ing] the image of the American West for the purpose of selling a particular brand." Philip Morris Inc. v. Star TobaccoCorp., 879 F. Supp. 379, 383 (S.D.N.Y. 1995). A trademark, on the other hand, "is thought of as something more specific, such as a logo."³ Schwinn Bicycle, 870 F.2d at 1182. The Lanham Act establishes federal protection of trade dress. 15 U.S.C. § 1051, et seq.; Yankee Candle Co. v. Bridgewater Candle Co., LLC, 259 F.3d 25, 37-38 (1st Cir. 2001) ("The Lanham Act extends protection not only to words and symbols, but also to 'trade dress.'") (quoting Chrysler Corp. v. Silva, 118 F.3d 56, 58 (1st Cir. 1997)). "In order for trade dress to be protected . . . , a plaintiff must prove that the dress is: (i) used in commerce; (ii) non-functional; and (iii) distinctive." Yankee Candle, 259 F.3d at 38. The elements of non-functionality and distinctiveness "concern whether the trade dress is protectable and valid." Toyo Tire & Rubber Co., Ltd v. Doublestar Dong Feng Tyre Co., Ltd, No.: SACV 15-00246-CJC(JPRx), 2018 WL 1895696, at *3 (C.D. Cal. Apr. 12, 2018).

At the nub of Plaintiff's motion are two notions. First it contends that a party accused of trade dress infringement may respond with an affirmative defense of invalidity and/or with a counterclaim alleging noninfringement, but not with a counterclaim alleging invalidity, because, as a matter of law, the defense of trade dress invalidity may not be stated in a counterclaim. Its secondary argument seems to rest on the absence of a live case or controversy - that is, even if the law permits such a counterclaim, Defendant cannot assert it in this case, as Plaintiff has not brought a trade dress infringement claim. Either way, Plaintiff argues, Defendant cannot seek a judicial declaration that Plaintiff's trade dress is too functional and generic to be protectable.Although Plaintiff invokes Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009), and Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007), it has not challenged the sufficiency of the concrete factual allegations Defendant has set out in its Counterclaim to render facially plausible its claim of trade dress invalidity. Nor does Plaintiff argue that the Counterclaim breaches the Fed. R. Civ. P. 8(a)(2) requirement of a "short and plain statement of the claim."

Plaintiff's first argument - that the law does not recognize a declaratory action asserted as a counterclaim based on trade dress invalidity - fails in the face of the many cases allowing such a counterclaim, coupled with a complete dearth of contrary authority. For example, in Toyo Tire & Rubber Co. v. CIA Wheel Grp., No. SACV 15-246-JLS (DFMx), 2015 WL 4545187 (C.D. Cal. July 8, 2015), the court denied a motion to dismiss the defendant's "counterclaim for declaratory relief of trade dress invalidity." Id. at *4. Countless other courts similarly have entertained counterclaims for trade dress invalidity. See, e.g.,...