Tracfone Wireless, Inc. v. Clear Choice Connections, Inc.

102 F.Supp.3d 1321

TRACFONE WIRELESS, INC., Plaintiff,

v.CLEAR CHOICE CONNECTIONS, INC., CCC, Inc., and Amy Suleiman, Defendants.

Case No. 13–CV–23066.

United States District Court, S.D. Florida.

Signed April 23, 2015.

Filed April 27, 2015.

Ethan Horwitz, Carlton Fields Jorden Burt, P.A., New York, NY, James Blaker Baldinger, West Palm Beach, FL, Morgan Lowery Swing, Carlton Fields, P.A., Jonathan Joseph Rodriguez, Greenberg Traurig, Miami, FL, for Plaintiff.

Charles A. Nemer, Michael W. Vary, McCarthy, Lebit, Crystal & Liffman Co., L.P.A., Cleveland, OH, Joseph William Bain, Shutts & Bowen LLP, West Palm Beach, FL, for Defendants.

ORDER GRANTING PLAINTIFF'S MOTION FOR PRELIMINARY INJUNCTION

KATHLEEN M. WILLIAMS, District Judge.

THIS MATTER is before the Court on Plaintiff's Renewed Motion for Preliminary Injunction [D.E. 74]. Defendants have filed a response in opposition to the motion [D.E. 82], and Plaintiff has filed a reply in support of the motion [D.E. 87]. The Court heard oral arguments on this motion at a hearing on April 9, 2015. For the reasons stated below, the Motion [D.E. 74] is GRANTED.

I. Background

Plaintiff TracFone is the “largest provider of pre-paid wireless telephone services in the United States” [D.E. 30 ¶ 10]. Defendant Clear Choice Connections is an Ohio corporation that has marketed TracFone products through five websites it maintains under six domain names [D.E. 16 at 1–2]. TracFone alleges that Clear Choice has infringed on its marks by including the marks in Clear Choice's Internet domain names, thereby causing confusion among consumers as to the source, sponsorship or affiliation of the websites [D.E. 74 at 8]. With this motion TracFone seeks a preliminary injunction barring Clear Choice from using TracFone marks or similar marks in their domain names during the pendency of this action.¹

In opposing this motion, Clear Choice argues that it had an implied license to use TracFone's marks, by virtue of an agreement with Cellucom Distribution, Inc., a “master agent” of TracFone's [D.E. 82 at 9–11]. Clear Choice further argues that it was entitled to use the marks under nominative fair use doctrine and the “naked license” doctrine because TracFone had effectively abandoned their marks. Id.

II. Standard of Review

A district court may grant a preliminary injunction only if the moving party shows that: “(1) it has a substantial likelihood of success on the merits; (2) irreparable injury will be suffered unless the injunction issues; (3) the threatened injury to the movant outweighs whatever damage the proposed injunction may cause the opposing party; and (4) if issued, the injunction would not be adverse to the public interest.”America's Health Ins. Plans v. Hudgens,742 F.3d 1319, 1329 (11th Cir.2014)(internal citation omitted). A preliminary injunction is considered “an extraordinary and drastic remedy not to be granted unless the movant clearly established the burden of persuasion for each prong of the analysis.” Id.(internal quotations and citations omitted).

To establish a substantial likelihood of success on the merits, a plaintiff must demonstrate a likelihood of success at trial as to both its prima faciecase and the affirmative defenses asserted by the defendant. See Original Appalachian Artworks, Inc. v. Topps Chewing Gum, Inc.,642 F.Supp. 1031, 1034 (N.D.Ga.1986); see also Metro–Goldwyn–Mayer, Inc. (MGM) v. Showcase Atlanta Cooperative Productions, Inc.,479 F.Supp. 351, 355 (N.D.Ga.1979)(citing Canal Authority of St. of Fla. v. Callaway,489 F.2d 567 (5th Cir.1974)).

III. Analysis

A. Likelihood of Success on the Merits

TracFone argues that likelihood of success on the merits is apparent because it has a valid mark, and it has adequately established a prima faciecase of trademark infringement [D.E. 74 at 8–16]. Clear Choice argues that its affirmative defenses of nominative fair use, license and naked license should defeat TracFone's infringement claims, and TracFone is therefore not likely to succeed on the merits [D.E. 82 at 6–13].²

1. Clear Choice's Nominative Fair Use Defense

The Nominative Fair Use Doctrine “requires a defendant to show that: (1) the plaintiff's mark is necessary to identify plaintiffs product; (2) in doing so defendant does not use more of plaintiffs mark than necessary; and (3) the defendant's conduct or language reflect[s] the true and accurate relationship between plaintiff and defendant's products or services.” Ford Motor Co. v. O.E. Wheel Distrib., LLC,868 F.Supp.2d 1350, 1368 (M.D.Fla.2012)(internal citations omitted). TracFone argues that this defense is meritless because Clear Choice's use of the marks in its domain names was not the minimum use necessary to identify TracFone's products [D.E. 74 at 11]. The Court agrees. Clear Choice's use of TracFone's marks in Internet domain names goes beyond what is necessary to identify TracFone's products. See PACCAR Inc. v. TeleScan Techs., L.L.C.,319 F.3d 243, 256 (6th Cir.2003)(finding that a defendant's use of a plaintiff's marks in domain names does not qualify as nominative fair use). The Court finds that TracFone's infringement claims are likely to withstand this defense.

2. Clear Choice's Licensing and Naked Licensing Defenses

Clear Choice argues that it is entitled to use TracFone's marks pursuant to an implied license granted as part of its “agreement” with Cellucom to be a dealer/distributor of TracFone's products [D.E. 82 at 9–10].³TracFone asserts that Clear Choice and other retailers may only use specific artwork to promote TracFone's products, and that the allowable use of this artwork does not create an implied license to use its marks in domain names or in any other way [D.E. 87 at 5–7].

A court may find an implied license “when such a license can be reasonably inferred from the objective conduct of the parties.” Ford,868 F.Supp.2d at 1370. An implied license may be created by “any language used by the owner of the [intellectual property] or any conduct on his part exhibited to another from which that other may properly infer that the owner consents to his use of the [intellectual property] in making or using it, or selling it, upon which the other acts, constitutes a license and a defense to an action.”Pandora Jewelers 1995, Inc. v. Pandora Jewelry, LLC,No. 09–61490–CIV, 2011 WL 2174012, at *6 (S.D.Fla. June 2, 2011). The existence of an implied license is a fact question for the jury, as is the scope of an implied license. Bangkok Broadcasting v. IPTV Corp.,742 F.Supp.2d 1101, 1113 (C.D.Cal.2010); Natkin v. Winfrey,111 F.Supp.2d 1003, 1012 (N.D.Ill.2000).

The only conduct that Clear Choice cites as evidence of an implied license is the fact that Cellucom, TracFone's master wholesaler, appeared to agree to allow Clear Choice to be a retailer of TracFone products, that Clear Choice was provided access to designated TracFone artwork and an Internet portal of customer accounts, and that TracFone allowed Cellucom to select the retailers of TracFone's products [D.E. 82 at 9–11]. Even if the Court were to conclude that a factfinder could find an implied license based on these limited facts, Clear Choice has not shown how its use of TracFone's marks would fall within the scope of this implied license. A license is “a limited grant of authority to use a trademark in a defined way. Another use is not authorized by the grant and is a breach [of the license].” Bunn–O–Matic Corp. v. Bunn Coffee Serv., Inc.,88 F.Supp.2d 914, 921–22 (C.D.Ill.2000); see also4 McCarthy on Trademarks § 25:30(“[t]he licensee's use of the mark in a composite or format appearance other than that permitted by the license constitutes an infringement”). Because there has been no evidence presented that would allow a reasonable factfinder to conclude that Clear Choice's use of the marks in its domain names was within the scope of an implied license (assuming that there is sufficient evidence of the existence of an implied license), the Court finds that TracFone's infringement claims are likely to defeat this defense.

Nor does Clear Choice's naked license defense appear likely to succeed. Clear Choice argues that TracFone has failed to exercise control over its marks, and TracFone is therefore estopped from challenging Clear Choice's use of the marks [D.E. 82 at 11–12]. “It is true that the law imposes a duty upon a licensor (such as a franchisor) to supervise a licensee's use of the licensor's own trademark.” Mini Maid Servs. Co. v. Maid Brigade Sys., Inc.,967 F.2d 1516, 1519 (11th Cir.1992)(citing Ron Matusalem & Matusa, Inc. v. Ron Matusalem, Inc.,872 F.2d 1547, 1551 (11th Cir.1989)). Most circuits, including the Eleventh Circuit, have held that such “naked licensing” may lead to abandonment of the mark. See Mini Maid,967 F.2d at 1519(“[the] duty of supervision derives from the Lanham Act's abandonment provisions, which specify that a registrant's mark may be canceled if the registrant fails to control its licensees' use of the licensed mark”); see also Babbit Elecs., Inc. v. Dynascan Corp.,38 F.3d 1161, 1180 (11th Cir.1994); Exxon Corp. v. Oxxford Clothes, Inc.,109 F.3d 1070, 1075–76 (5th Cir.1997); Doeblers' Penn. Hybrids, Inc. v. Doebler,442 F.3d 812, 823 (3d Cir.2006); Dawn Donut Co. v. Hart's Food Stores,267 F.2d 358, 367 (2d Cir.1959). But “because a finding of abandonment works an involuntary forfeiture of rights, federal courts uniformly agree that defendants asserting an abandonment defense face a ‘stringent,’ ‘heavy’ or ‘strict burden of proof.’ ” Cumulus Media, Inc. v. Clear Channel Commc'ns,304 F.3d 1167, 1175 (11th Cir.2002). Given the “heavy” burden required to show that TracFone abandoned its marks by naked licensing, and the minimal evidence of an implied license from TracFone to Clear Choice, the Court finds that TracFone's infringement claims are likely to prevail over Clear Choice's naked licensing defense.

3. TracFone's Trademark Infringement Claim

To demonstrate a likelihood of success on the merits of a trademark infringement...