Materialize, Inc. v. Materialise, N.V.

MATERIALIZE, INC., Plaintiff, v. MATERIALISE, N.V., and MATERIALISE USA LLC, Defendants.

No. 5:21-cv-12325

United States District Court, E.D. Michigan, Southern Division

April 11, 2022

Judith E. Levy United States District Judge

REPORT AND RECOMMENDATION TO GRANT IN PART AND DENY IN PART DEFENDANTS' MOTION TO DISMISS (ECF NO 12)

Curtis Ivy, Jr. United States Magistrate Judge

I. INTRODUCTION

Plaintiff and the defendants have very similar names. Unsurprisingly this similarity prompted discussions between the parties over the use of their names. Plaintiff Materialize, Inc., filed this declaratory judgment action on October 1, 2021, seeking a declaration that it has not infringed or diluted Defendants' trademark rights and that it has the right to use its MATERIALIZE mark in connection with its business. (ECF No. 1). Defendants Materalise, N.V. (“MNV”) and Materialise USA LLC (“MUSA”) responded with a motion to dismiss. (ECF No. 12). They argue the Court lacks subject matter jurisdiction because there is no case or controversy between the parties or, in the alternative, that the Court should decline to exercise its jurisdiction. (ECF No. 12). The motion is fully briefed (ECF Nos. 18, 20) and is ready for report and recommendation.

For the reasons explained below, the undersigned RECOMMENDS Defendants' motion to dismiss be GRANTED IN PART, DENIED IN PART.

II. COMPLAINT ALLEGATIONS

Plaintiff provides a streaming database service that processes real-time streaming data to inform their clients' business decisions, all under the trademark MATERIALIZE. (ECF No. 1, PageID.2, at ¶ 3). Plaintiff's consumers are technology specialists charged with designing and managing the company's software systems and who are computer programmers or engineers. (Id. at PageID.7, at ¶ 23). Plaintiff applied to register the word mark MATERIALIZE with the United States Patent and Trademark Office (“USPTO”) on April 15, 2019. The USPTO issued the registrations for the word mark on December 15, 2019. (Id. at PageID.8, at ¶ 25).

Defendant MNV is a Belgium corporation with its North American headquarters in Michigan. Defendant MUSA is, “upon information and belief, ” a licensee of MNV and so “may possess trademark rights sufficient to assert and claim rights in the MATERIALISE mark throughout the United States.” (Id. at PageID.4-5, at ¶¶ 12-16). Defendants have been in the business of 3D printing for approximately 30 years. Defendants do not offer a streaming data processing platform like Plaintiff's platform. (Id. at PageID.8-9, at ¶ 27-29). Defendants own three trademark registrations for the MATERIALISE mark. (Id. at PageID.9, at ¶ 32).

The dispute began with a January 22, 2021 cease and desist letter sent from “Defendant” to Plaintiff. The letter was written by attorneys for MNV. (ECF No. 1-1, PageID.19). MNV asserted Plaintiff's use of “Materialize” “is likely to cause confusion of potential customers and the relevant public.” (Id. at PageID.21). According to the letter, Plaintiff and MNV are in the same “market segment” because Plaintiff targets users of MNV's software products. (Id. at PageID.21-22). MNV wrote that Plaintiff's use of MATERIALIZE is a “knowing and willful infringement” of MNV's trademark, “as well as trademark dilution and unfair competition.” (Id. at PageID.23). The company “demand[ed]” Plaintiff cease using the name. Further, if Plaintiff did not comply with the demands, MNV warned it “may seek cancellation of your MATERIALIZE trademark registration in the USPTO and pursue legal action in federal district court for willful trademark infringement, trademark dilution and unfair competition.” (Id.).

On February 3, 2021, attorneys for both parties held a telephone conference discussing MNV's claims. (ECF No. 1, PageID.10, at ¶ 34). Plaintiff did not allege what occurred during this call. Plaintiff formally responded to the January letter on March 5, 2021, stating it did not agree its use of the mark infringed any of MNV's rights. (ECF No. 1-2, PageID.33). What follows the introductory paragraph of the response letter is a legal analysis of trademark infringement and unfair competition under federal law. (Id. at PageID.33-42). Plaintiff concluded the relevant legal factors weighed in its favor that there is no likelihood of confusion and the infringement and unfair competition claims lacked merit. Plaintiff further asserted dilution was inapplicable to MNV because the company had not attained “household name” status. (Id. at PageID.42).

MNV later obtained new counsel who responded to Plaintiff's letter on behalf of MNV in a letter dated April 13, 2021. MNV held to its position that Plaintiff's use of MATERIALIZE was likely to cause confusion among consumers and adversely affect MNV's “strong goodwill.” (ECF No. 1-3, PageID.44). “As such, [MNV would] not consider this matter closed until it is satisfied that Materialize will take all necessary steps to avoid confusion and to remedy any harm Materialize has caused to [MNV's] valuable trademark rights.” (Id.). In concluding the response letter, MNV stated, “Before the parties head down a path that could result in a contested proceeding or further escalation, we suggest the relevant business and decision-making persons for each party” participate in a conference call to explore a possible business solution. (Id. at PageID.46).

As no agreement had been made, MNV filed a Petition for Cancellation of the MATERIALIZE registration with the USPTO's Trademark Trial and Appeal Board (“TTAB”). (ECF No. 12-1, PageID.112). The parties again engaged in settlement discussion on September 14, 2021, but could not come to an agreement. (ECF No. 1, PageID.12, at ¶ 38).

Since the parties have not come to an agreement, Plaintiff asserts it “has been put in the untenable position of not knowing if or when Defendant may sue or take other action against” it. (Id. at ¶ 39). To resolve this dispute, Plaintiff brought this action for a declaratory judgment that

(i) its use of the MATERIALIZE Mark in connection with its streaming database business does not infringe any rights Defendant has in Defendant's Mark; (ii) there is no likelihood of confusion arising from Materialize's use or registration of the MATERIALIZE Mark in connection with its streaming database business; (iii) Defendant's MATERIALISE mark does not enjoy household fame in the United States; (iv) use of the MATERIALIZE Mark does not dilute Defendant's trademark; (v) Materialize has not engaged in any acts of unfair competition with Defendant; and (vi) Materialize has not violated any other purported rights of Defendant.

(Id. at PageID.12, at ¶ 40). The TTAB proceeding was suspended pending resolution of this case. (ECF No. 18, PageID.168).

III. ANALYSIS AND RECOMMENDATIONS

A. Subject Matter Jurisdiction

Rule 12(b)(1) provides for dismissing a claim for lack of subject matter jurisdiction. Fed.R.Civ.P. 12(b)(1). Subject matter jurisdiction is a threshold issue which a court must determine before reaching other issues. See Moir v. Greater Cleveland Reg'l Transit Auth., 895 F.2d 266, 269 (6th Cir. 1990). If subject matter jurisdiction is lacking, this Court cannot adjudicate the action. Ins. Corp. of Ireland, Ltd. v. Compagnie des Bauxites de Guinee, 456 U.S. 694, 702 (1982). “A Rule 12(b)(1) motion for lack of subject matter jurisdiction can challenge the sufficiency of the pleading itself (facial attack) or the factual existence of subject matter jurisdiction (factual attack).” Cartwright v. Garner, 751 F.3d 752, 759 (6th Cir. 2014) (citing United States v. Ritchie, 15 F.3d 592, 598 (6th Cir. 1994)). “A facial attack goes to the question of whether the plaintiff has alleged a basis for subject matter jurisdiction, and the court takes the allegations of the complaint as true for purposes of Rule 12(b)(1) analysis, ” but “[a] factual attack challenges the factual existence of subject matter jurisdiction.” Id.

Defendants raised a facial attack. When a court accepts the plaintiff's allegations as true, it can consider documents attached to and referenced in the complaint. See Gould Electronics Inc. v. United States, 220 F.3d 169, 176 (3d. Cir. 2000) (“In reviewing a facial attack, the court must only consider the allegations of the complaint and documents referenced therein and attached thereto, in the light most favorable to the plaintiff.”); Weiner, D.P.M. v. Klais & Co., 108 F.3d 86, 89 (6th Cir. 1997), overruled on other grounds by Swierkiewicz v. Sorema, N.A., 534 U.S. 506, 122 S.Ct. 992 (2002) (“[D]ocuments that a defendant attaches to a motion to dismiss are considered part of the pleadings if they are referred to in the [plaintiffs'] complaint and are central to [their] claim.”). Thus, in making this recommendation, the undersigned will consider the documents attached to the complaint and attached to the parties' briefs that are referenced in the complaint.^[1]

Under Article III of the Constitution, federal courts may adjudicate only actual, ongoing cases or controversies. Lewis v. Continental Bank Corp., 494 U.S. 472, 477 (1990). In that regard, the Declaratory Judgment Act authorizes federal courts to render declaratory relief in cases of “actual controversy.” 28 U.S.C. § 2201(a) (“[I]n a case of actual controversy within its jurisdiction . . . any court of the United States . . . may declare the rights and other legal relations of any interested party seeking such declaration.”). The reference to cases of “actual controversy” means “actual controversy in a constitutional sense.” Nat'l Rifle Ass'n of America v. Magaw, 132 F.3d 272, 279 (6th Cir. 1997). For a court to have jurisdiction, an actual controversy must exist both whenthe complaint is filed and throughout the pendency of the suit. Already, LLC v....