My Pillow, Inc. v. LMP Worldwide, Inc., Case No. 18-cv-196 (WMW/SER)

My Pillow, Inc., a Minnesota corporation, Plaintiff, v. LMP Worldwide, Inc., a Michigan corporation, Defendant.

Case No. 18-cv-196 (WMW/SER)

UNITED STATES DISTRICT COURT DISTRICT OF MINNESOTA

December 13, 2018

ORDER

Lora M. Friedemann and Laura L. Myers, Fredrikson & Byron, P.A., 200 South Sixth Street, Suite 4000, Minneapolis MN 55402 (for Plaintiff); and

Matthew L. Woods and Peter N. Surdo, Robins Kaplan LLP, 800 LaSalle Avenue, Suite 2800, Minneapolis MN 55402, and A. Michael Palizzi and Michael C. Simoni, Miller, Canfield, Paddock and Stone, PLC, 150 West Jefferson Avenue, Suite 2500, Detroit MI 48226 (for Defendant).

This matter is before the Court on Plaintiff's Motion for Leave to Amend its Complaint. (ECF No. 43). For the reasons below, the motion is granted in part and denied in part.

I. PROCEDURAL BACKGROUND

Plaintiff My Pillow, Inc., and Defendant LMP Worldwide, Inc., are competitors in the pillow business. My Pillow, a Minnesota corporation, uses the word mark "MYPILLOW" in selling its pillows (hereinafter "MyPillow mark"), while LMP, a Michigan corporation, uses the design mark " Image materials not available for display. " in its sales (hereinafter "LMP mark"). (Compl. ¶¶ 6-9, 11, 13, ECF No. 1; Am. Compl. ¶¶ 6-10, 12, 14, ECF No. 46, Ex. A). My Pillow has used its registered trademark since 2009 and LMP has used its registered trademark since 2007. (Compl. ¶¶ 6-9, 11, 13; Am. Compl. ¶¶ 6-10, 12, 14).

In January 2012, My Pillow sued LMP in the United States District Court for the Eastern District of Michigan, alleging trademark infringement and unfair competition. (Compl. ¶ 16; Am. Compl. ¶ 15). The parties settled that lawsuit by entering into a settlement agreement establishing terms under which each party uses their respective marks. (Compl. ¶ 16; Am. Compl. ¶¶ 16-21).¹ The agreement contains the following provision: "The Parties agree that the [LMP mark], as used in the manner and form reflected in [the agreement], is not confusingly similar to and not likely to cause confusion with the My Pillow Mark." (Agreement § 1, Am. Compl. Ex. 4). The parties also agreed to the inverse: that the My Pillow mark is not confusingly similar to the LMP mark. (Agreement § 1). The agreement prohibits LMP from using the My Pillow mark in connection with pillows and from making any ad word purchase for the works "my" and "pillow," whether together or separate, unless accompanied by additional words. (Agreement § 2.1(c)). My Pillow likewise agreed not to purchase certain ad words related to the LMP mark. (Agreement § 4.1(c)).

My Pillow asserts that LMP violated the agreement and infringed the My Pillow mark. (Compl. ¶¶ 17-27; Am. Compl. ¶¶ 22-35). First, My Pillow alleges LMP purchased prohibited ad words without the accompaniment of additional words. (Compl.¶¶ 18-22; Am. Compl. ¶¶ 23-29). My Pillow notified LMP of this asserted breach in December 2016. (Compl. ¶¶ 18-22; Am. Compl. ¶¶ 23-29). LMP claimed it ceased purchasing the prohibited words, but My Pillow asserts LMP continued prohibited ad word purchasing. (Compl. ¶¶ 18-22; Am. Compl. ¶¶ 23-29). Second, My Pillow alleges that LMP used the My Pillow mark in connection with My Pillow goods and made false representations about My Pillow in an email to a wholesale customer. (Compl. ¶¶ 23-24; Am. Compl. ¶¶ 30-32). Third, My Pillow claims that LMP produced radio advertisements in Minnesota that were designed to cause confusion between My Pillow and LMP. (Compl. ¶¶ 25-27; Am. Compl. ¶¶ 33-35). My Pillow informed LMP of these alleged breaches on December 20, 2017, then terminated the agreement on January 23, 2018. (Compl. ¶ 28; Am. Compl. ¶¶ 36-38). The next day, My Pillow brought suit, alleging six counts: breach of contract, trademark infringement in violation of the Lanham Act, unfair competition and false representation in violation of the Lanham Act, common-law trademark infringement and unfair competition, unfair competition and false representation in violation of the Minnesota Deceptive Trade Practices Act ("MDTPA"), and trademark cancellation. (Compl. ¶¶ 29-71).

LMP moved, inter alia, to dismiss My Pillow's original complaint. (ECF No. 11). My Pillow's breach of contract, common law unfair competition, Lanham Act unfair competition, and MDTPA unfair competition claims survived. (Sept. 6, 2018 Order, ECFNo. 39).² As will be discussed in greater detail, My Pillow's claims of trademark infringement under the Lanham Act and common law, false advertising/representation under the under the Lanham Act and MDTPA, and trademark cancellation were dismissed without prejudice. Id.

My Pillow now moves to amend its complaint. (ECF No. 43). My Pillow asserts its amendments would "correct the pleading issues identified in the [Sept. 6, 2018 Order]" and "add another federal trademark registration owned by My Pillow as a basis for trademark infringement." (ECF No. 45, at 1). LMP opposes, arguing the proposed amendments are futile, particularly in light of the Sept. 6, 2018 Order.

II. ANALYSIS

A. Legal Standard

A court should "freely give leave" to amend a pleading before trial when "justice so requires." Fed. R. Civ. P. 15(a). Parties "do not have an absolute right to amend their pleadings, even under this liberal standard." Sherman v. Winco Fireworks, Inc., 532 F.3d 709, 715 (8th Cir. 2008). Leave to amend should not be given when there is "undue delay, bad faith or dilatory motive on the part of the movant, repeated failure to cure deficiencies by amendments previously allowed, undue prejudice to the opposing party by virtue of allowance of the amendment, [or] futility of amendment[.]" Foman v. Davis, 371 U.S. 178, 182 (1962).

Relevant here, "[f]utility is a valid basis for denying leave to amend." United States ex rel. Lee v. Fairview Health Sys., 413 F.2d 748, 749 (8th Cir. 2005). "Denial of a motion for leave to amend on the basis of futility means the district court has reached the legal conclusion that the amended complaint could not withstand a motion to dismiss under Rule 12(b)(6) of the Federal Rules of Civil Procedure." Zutz v. Nelson, 601 F.3d 842, 850 (8th Cir. 2010) (internal quotation marks omitted).

To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face. A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.

Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (internal quotation marks and citations omitted).

B. Futility Analysis

1. Amended Trademark Infringement Claim - Pillows

As the Court noted in the Sept. 6, 2018 Order, to prevail on its trademark infringement claims, My Pillow must prove it owns a registered trademark that LMP used or imitated in commerce in connection with the sale of goods, that LMP's use or imitation of the My Pillow mark was unauthorized, and that LMP's use or imitation is "likely to cause confusion, or to cause mistake, or to deceive." 15 U.S.C. § 1114(1)(a); ZW USA, Inc. v. PWD Sys., LLC, 889 F.3d 441, 446 (8th Cir. 2018).³

The Sept. 6, 2018 Order noted that, under the agreement, "LMP has rights to use the [LMP] Mark." (Sept. 6, 2018 Order, at 13) (alterations in original). While My Pillow claimed that LMP "continued to use the [LMP mark] contrary to the terms of the [agreement]," the complaint alleged no specific facts addressing this use. (Sept. 6, 2018 Order, at 13). The Order continued: "The complaint's only allegation pertaining to the LMP mark is a screen shot of LMP's website featuring the LMP mark and photographs of LMP pillows," but the Court noted that the "use of the LMP mark in the screen shot appears to be consistent with the agreement's example of permissible use of the LMP mark." (Sept. 6, 2018 Order, at 13-14). The Court found My Pillow failed to "explain how the use of the LMP mark in the screen shot is not authorized by the agreement." (Sept. 6, 2018 Order, at 14). The Court concluded that the "complaint fail[ed] to allege facts supporting a determination that LMP's use of the LMP mark was unauthorized." (Sept. 6, 2018 Order, at 14). The Court also noted that My Pillow argued that it is free to assert its trademark claims given that it terminated the agreement, but the Court found that argument had "no bearing on whether the Court applies the terms of the agreement to the parties' conduct during the agreement's duration" as "none of the conduct on which My Pillow relies occurred after the alleged termination of the agreement." (Sept. 6, 2018 Order, at 14 n.7). Thus, the Court dismissed My Pillow's Lanham Act and common law trademark infringement claims.⁴

My Pillow attempts to remedy its trademark infringement claims by alleging that its termination of the agreement rescinded any authorization LMP had in using the LMP mark or the words "my" and "pillow" in connection with pillows. (Am. Compl. ¶¶ 52-55). It follows, My Pillow asserts, that LMP's continued use of the LMP mark following the agreement's termination infringed upon the My Pillow mark. (Am. Compl. ¶¶ 52-55). Moreover, My Pillow attempts to further buttress its claims by arguing that any conduct breaching the agreement constituted infringement. (Am. Compl. ¶ 52). While My Pillow avoids saying it outright, this claim essentially revives the Michigan federal litigation that the parties settled, returning the parties to their pre-settlement positions, albeit in a different federal court.

The question now before this Court is whether My Pillow has sufficiently addressed the concerns raised in the Sept. 6, 2018 Order regarding trademark infringement. This Court concludes it has. My Pillow now alleges that LMP has infringed on the My Pillow mark beyond the agreement's termination. This amended allegation is not through any real change of facts, however, but instead the mere passage of time. My Pillow terminated the agreement on January 23,...