Tacori Enters. v. Michael Joaillier, Inc.

207 F.Supp.3d 799

Tacori ENTERPRISES, Plaintiff,

v.MICHAEL JOAILLIER, INC. doing business as James Free Jewelers, Defendant.

Case No. 1:15cv497

United States District Court, S.D. Ohio, Western Division.

Filed September 15, 2016

Howard Kroll, Tucker Ellis LLP, Los Angeles, CA, Scott J. Stitt, Tucker Ellis LLP, Columbus, OH, for Plaintiff.

James Alan Dyer, Sebaly Shillito & Dyer, Matthew G. Bruce, Dayton, OH, for Defendant.

OPINION & ORDER

MICHAEL R. BARRETT, DISTRICT JUDGE

This matter is before the Court upon Defendant Michael Joaillier, Inc. d/b/a James Free Jewelers Motion for Dismiss (Doc. 8). Plaintiff Tacori Enterprises filed a Response in Opposition (Doc. 9) and Defendant filed a Reply (Doc. 11).

I. BACKGROUND

Plaintiff Tacori Enterprises ("Tacori") brings this civil action against Defendant Michael Joallier, Inc. d/b/a/ James Free Jewelers ("James Free") for trademark violations under the Lanham Act and other associated state law claims.

Plaintiff Tacori Enterprises is a designer, manufacturer, and marketer of fine jewelry. (Doc. 1, at PAGEID#: 2). Tacori owns a number of valid trademarks, including TACORI, TACORI TACORI TACORI, TACORI COLLECTION, TACORI GIRL, and TACORI TUESDAY (collectively, the "Tacori Trademarks"). (Id. at PAGEID#: 3-4). Among Tacori's original jewelry designs are pieces of jewelry that display crescents, known as "Tacori Crescent Jewelry." (Id. at PAGEID #: 2). Tacori sells this jewelry through authorized retailers, who receive licenses to display and use the various Tacori Trademarks. (Id. at PAGEID#: 5). These authorized retailers are licensed only to sell Tacori Crescent Jewelry to the general public and are prohibited from selling Tacori Crescent Jewelry to other distributors or retailers. (Id.)

In 2014 and 2015, Tacori sold select pieces from its Tacori Crescent Jewelry line to third-party distributor White Pine Trading, LLC ("White Pine"). (Id. at PAGEID#: 6; Doc. 8-1, at PAGEID#: 76). The agreement between Tacori and White Pine expressly permitted White Pine to sell this jewelry to dealers not authorized as Tacori retailers, but specifically disclaimed any and all Tacori warranties on the pieces sold to White Pine. (See Doc. 8-1, at PAGEID#: 76).

Defendant James Free is an independent retailer of fine jewelry and is in the business of marketing and selling jewelry. (Doc. 1, at PAGEID#: 5; Doc. 8, at PAGEID#: 60). From 2003 to 2006, James Free was an authorized retailer of Tacori jewelry, but James Free is no longer a Tacori-authorized retailer. (Doc. 1, at PAGEID#: 5-6; Doc. 8, at PAGEID#: 60). However, James Free currently advertises and sells Tacori jewelry. (Id.) Specifically, James Free advertises and sells select pieces of jewelry purchased from third-party distributor White Pine. (Doc. 1, at PAGEID#: 6, Doc. 8, at PAGEID#: 60).

There are factual allegations currently in dispute between the parties. First, Tacori alleges that James Free has "marketed and sold pieces of the Tacori Crescent Jewelry without informing customers that the Tacori Crescent Jewelry is being sold without a warranty from Tacori." (Doc. 1, at PAGEID#: 6, 7). James Free acknowledges that it has used the Tacori crest in its advertisements, (Doc. 11, at PAGEID#: 101), but expressly disputes the factual allegation that it has misinformed customers about the warranty. Instead, James Free claims that it has "expressly disclosed to any purchasers or potential purchasers of its Tacori merchandise that the jewelry is protected by James Free's warranty, not Tacori's." (Doc. 11, at PAGEID#: 104).

Second, Tacori alleges that James Free "is currently marketing, advertising and selling Tacori Crescent Jewelry that Tacori did not sell to that third party distributor," and that James Free purchased this jewelry either directly or indirectly "from authorized retail stores of Tacori in breach of Tacori's contract with its authorized retailers." (Doc. 1, at PAGEID #: 7). Defendant expressly disputes these factual allegations, claiming instead that James Free "purchased all of its Tacori merchandise from White Pine." (Doc. 11, at PAGEID#: 106).

Finally, Tacori alleges that James Free "modified and/or altered pieces of the Tacori Crescent Jewelry line that it purchased from third party sources," and then sold those pieces as "genuine and authentic Tacori Crescent Jewelry ... without informing the customer that the jewelry contains non-Tacori parts." (Doc. 1, at PAGEID#: 7). However, James Free expressly disputes these factual allegations, stating that "[a]t no time in its 75-year history has James Free ever wrongfully modified or altered jewelry." (Doc. 8, at PAGEID#: 63-64).

Tacori's Complaint asserts six causes of action against James Free: (1) counterfeiting, (2) trademark infringement, (3) trade dress infringement and false designation of origin, (4) violation of Ohio's Deceptive Trade Practices Act, (5) common law unfair competition, and (6) tortious interference with contract. (Doc. 1).

James Free has moved to dismiss all of Tacori's claims under Federal Rule of Civil Procedure 12(b)(6). (Doc. 8). James Free argues the merchandise being advertised and sold by James free is genuine, and under the "first sale" doctrine, trademark law does not reach the sale of genuine goods bearing a true mark even if such sale was without the owner's consent. James Free also argues that the conclusory allegations in the complaint fail to state a claim under Rule 12(b)(6).

II. ANALYSIS

A. Motion to Dismiss Standard

When reviewing a 12(b)(6) motion to dismiss for failure to state a claim, this Court must "construe the complaint in the light most favorable to the plaintiff, accept its allegations as true, and draw all reasonable inferences in favor of the plaintiff." Bassett v. National Collegiate Athletic Ass'n , 528 F.3d 426, 430 (6th Cir.2008) (quoting Directv, Inc. v. Treesh , 487 F.3d 471, 476 (6th Cir.2007) ). "[T]o survive a motion to dismiss, a complaint must contain (1) ‘enough facts to state a claim to relief that is plausible,’ (2) more than ‘a formulaic recitation of a cause of action's elements,’ and (3) allegations that suggest a ‘right to relief above a speculative level.’ " Tackett v. M&G Polymers, USA, LLC , 561 F.3d 478, 488 (6th Cir.2009) (quoting Bell Atlantic Corp. v. Twombly , 550 U.S. 544, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) ). A claim has facial plausibility when the pleaded factual content allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged. Ashcroft v. Iqbal , 556 U.S. 662, 663, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009).

B. First sale doctrine

James Free argues that any trademark claims should be dismissed because the Lanham Act does not apply to the genuine merchandise being advertised or sold by James Free.

Under the first sale doctrine, "resale by the first purchaser of the original trademarked item is generally neither trademark infringement nor unfair competition." Brilliance Audio, Inc. v. Haights Cross Communications, Inc. , 474 F.3d 365, 369 (6th Cir.2007) (citing Prestonettes, Inc. v. Coty , 264 U.S. 359, 368–69, 44 S.Ct. 350, 68 L.Ed. 731 (1924) ); Tumblebus Inc. v. Cranmer , 399 F.3d 754, 766 (6th Cir.2005) ("The first-sale doctrine provides that ‘a purchaser who does no more than stock, display, and resell a producer's product under the producer's trademark violates no right conferred upon the producer by the Lanham Act.’ ") (quoting Sebastian Int'l, Inc. v. Longs Drug Stores Corp. , 53 F.3d 1073, 1076 (9th Cir.1995), cert. denied , 516 U.S. 914, 116 S.Ct. 302, 133 L.Ed.2d 207 (1995) ). As the Sixth Circuit has explained, "[t]he rationale for the rule ‘is that trademark law is designed to prevent sellers from confusing or deceiving consumers about the origin or make of a product, which confusion ordinarily does not exist when a genuine article bearing a true mark is sold.’ " Id. (quoting NEC Elecs v. CAL Circuit Abco , 810 F.2d 1506, 1509 (9th Cir.1987) ).

However, the Sixth Circuit has recognized certain exceptions to the first sale doctrine. For instance, "[t]he first sale doctrine offers no defense when the reseller used the trademark in a manner likely to cause the public to believe the reseller was part of the producer's authorized sales force or one of its franchisees." (PACCAR Inc. v. TeleScan Techs. , LLC, 319 F.3d 243, 257 (6th Cir.2003), overruled on other grounds by KP Permanent Make–Up, Inc. v. Lasting Impression I, Inc. , 543 U.S. 111, 125 S.Ct. 542, 160 L.Ed.2d 440 (2004) ). Here, Tacori has alleged that James Free has used the Tacori trademarks and certificates of authenticity to create the false impression that James Free is an authorized Tacori retailer.

Another situation "in which the first sale doctrine does not apply is ‘when an alleged infringer sells trademarked goods that are materially different than those sold by the trademark owner.’ " Id. at 370 (quoting Davidoff & CIE, S.A. v. PLD Int'l Corp. , 263 F.3d 1297, 1302 (11th Cir.2001) ). In Brilliance Audio , the Sixth Circuit explicitly adopted this exception to the first sale doctrine, noting that the "rationale behind the Davidoff exception is that a material difference in a product is likely to cause consumer confusion and could dilute the value of the trademark." Id. "To be material, a difference must be ‘one that consumers consider relevant to a decision about whether to purchase a product.’ " Id. (quoting Davidoff , 263 F.3d at 1302 ). However, " ‘[b]ecause a myriad of considerations may influence consumer preferences, the threshold of materiality must be kept low to include even subtle differences between products.’ " Id. (quoting Davidoff , 263 F.3d at 1302 ). Thus, "the question of materiality is a fact-based inquiry requiring an examination of the products and markets at issue." Id. As such, "an allegation of a material difference cannot properly be dismissed on 12(b)(6) grounds." Id.

Tacori has alleged that James Free modified and/or altered pieces of Tacori jewelry and then...