Vape Guys, Inc. v. Vape Guys Distribution, Inc.

VAPE GUYS, INC., Plaintiff, v. VAPE GUYS DISTRIBUTION, INC., Defendant.

Civil Action No. 3:19cv298

UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF VIRGINIA Richmond Division

March 2, 2020

MEMORANDUM OPINION

This matter comes before the Court on three motions:

(1) Plaintiff Vape Guys, Inc.'s ("Plaintiff") Motion for Referral to U.S. Magistrate Judge for Settlement Conference (the "Motion for Settlement"), (ECF No. 13);

(2) Defendant Vape Guys Distribution, Inc.'s ("Defendant") Motion to Dismiss, or in the Alternative, Transfer Venue (the "Motion to Dismiss"), (ECF No. 15); and,

(3) Plaintiff's Motion for Jurisdictional Discovery and to Stay Consideration of Defendant's Motion to Dismiss (the "Motion for Jurisdictional Discovery"), (ECF No. 21).

Defendant responded to the Motion for Settlement, (ECF No. 18), and Plaintiff replied, (ECF No. 19). Plaintiff responded to the Motion to Dismiss, (ECF No. 20), incorporating the Motion for Jurisdictional Discovery into its Response. Defendant replied to Plaintiff's response, (ECF No. 22), but did not respond to the Motion for Jurisdictional Discovery and the time to do so has expired. These matters are ripe for adjudication.

The Court dispenses with oral argument because the materials before it adequately present the facts and legal contentions, and argument would not aid the decisional process. The Court exercises jurisdiction pursuant to 28 U.S.C. §§ 1331¹ and 1367(a).² For the reasons that follow, the Court will deny the Motion to Dismiss, the Motion for Settlement, and Motion for Jurisdictional Discovery.

I. Procedural and Factual Background

A. Procedural History

Plaintiff brings the following claims in its Complaint:

Count I: Infringement of Federally Registered Trademark

Count II: Federal Unfair Competition and False Designation of Origin

Count III: Violation of Virginia Code § 59.1-92.12

Count IV: Common Law Unfair Competition

After filing its Complaint, Plaintiff filed the Motion for Settlement. Approximately two weeks later, Defendant opposed the Motion for Settlement³ and filed the Motion to Dismiss.Defendant brings the Motion to Dismiss on three grounds: (1) Rule 12(b)(2);⁴ (2) Rule 12(b)(3);⁵ and, (3) Rule 12(b)(6).⁶ As a fourth request in the Motion to Dismiss, Defendant seeks transfer to the United States District Court for the Eastern District of Virginia pursuant to 28 U.S.C. § 1404(a).⁷ Plaintiff filed its reply to the Motion for Settlement and filed the Motion for Jurisdictional Discovery in response to the Motion to Dismiss. Defendant replied to the Motion to Dismiss.

B. Factual Background⁸

The Court will first introduce the two companies in this dispute: Plaintiff Vape Guys, Inc. and Defendant Vape Guys Distribution, Inc. It will then turn to the conduct that Plaintiff alleges supports its trademark infringement claims.

1. Plaintiff and the Vape Guvs Mark

"Founded in 2014,"⁹ Plaintiff "sell[s] a wide range of products and accessories for retail consumers in the electronic cigarette, or 'vapor' industry." (Compl. ¶ 10, ECF No. 1.) Plaintiff makes these sales through its brick and mortar store, as a wholesale distributor, and through an online retail store accessible via "two (2) websites, 'Vape Guys VA' (www.VapeGuysVa.com), and "Vape Guys, Inc." (www.VapeGuysinc.com)." (Id. ¶¶ 10-12.) Plaintiff "ownsapproximately thirty (30) domain names, and uses two Instagram accounts and two Facebook accounts in connection with its business." (Id. ¶ 12.)

Plaintiff states that it "promotes its 'Vape Guys' brand and products through a variety of marketing platforms, including trade shows, its online retail store and direct marketing of its wholesale distribution services to retailers." (Id. ¶ 13.) Plaintiff "also maintains an active social media presence for its retail and wholesale business with over 4,000 followers on its Facebook page and nearly 7,000 followers on its Instagram feed." (Id.)

On February 21, 2017, Plaintiff "filed an application for trademark registration of its 'Vape Guys' brand with the United States Patent and Trademark Office" (the "USPTO"). (Id. ¶ 14.) "On September 12, 2017, the [USPTO] approved [Plaintiff's] application" and Plaintiff obtained its trademark (the "Vape Guys Mark"). (Id. ¶ 15.) "The services claimed by [Plaintiff] in its registration are 'retail store services featuring a wide variety of smokers' articles; online retail store services featuring a wide variety of smokers' articles; and wholesale distributorships featuring smokers' articles.'" (Id. (quoting Compl. Ex. A "Trademark Registration Certificate," ECF No. 1-1).) Plaintiff asserts that it has used the Vape Guys Mark "since at least as early as October of 2014." (Id. ¶ 16.)

Plaintiff maintains that it "has invested substantial time, effort, and resources in developing and maintaining the Vape Guys Mark and building the Vape Guys brand, and has used the Vape Guys Mark consistently in [its] marketing and promotion of its services since 2014." (Id. ¶ 19.) Therefore, Plaintiff avers that the Vape Guys Mark "is a valuable asset." (Id.)

2. Defendant

Similar to Plaintiff, Defendant "is a purveyor of electronic cigarette and related 'vapor' products in Brooklyn, New York." (Khodos Decl. ¶ 2, ECF No. 17.)¹⁰ Since 2016, approximately two years after Plaintiff was founded, "[Defendant] has sold its products at its physical location in Brooklyn as well as online through the e-commerce website hosted at the domain, www.vapeguysdistro.com." (Id.) Plaintiff states that Defendant's website "requires users to register and create an account in order to purchase the products advertised in Defendant's direct solicitations." (Compl. ¶ 8.) Defendant "maintains no [United States]-based offices, employees, agents, or property outside of New York [s]tate." (Khodos Decl. ¶ 7.) Defendant asserts that "[p]roducts sold through [Defendant's] e-commerce website are either delivered in New York or shipped from New York to the purchaser." (Id.)

As for its marketing strategy, Defendant uses social media and attends trade shows. Defendant states that it "maintains an active social media presence with approximately 5[,]000 followers on Instagram and Facebook." (Id. ¶ 3.) Defendant asserts that its "social media presence dates back to at least 2016. The social media posts primarily display [its] product line." (Id.) Defendant also "regularly attends industry trade shows around the country." (Id. ¶ 5.) Defendant asserts that "[a]side from New York," it "markets and promotes its products in various [United States] jurisdictions, including New Jersey, California, Texas, Illinois, Florida, and Nevada." (Id. ¶ 6.) Defendant maintains that "Virginia is not a commercially meaningfullocale for [Defendant] and, if enjoined from operating in Virginia by the Court, such event would not meaningfully impact [Defendant's] business." (Id.)

3. The Allegedly Infringing Conduct

Plaintiff states that "[u]pon information and belief, Defendant began its solicitation of [Plaintiff's] customers and suppliers no later than May 2018." (Compl. ¶ 22.) Plaintiff asserts that it "was unaware of Defendant's infringing conduct until late July 2018." (Id. ¶ 23.)

Plaintiff first discovered what it calls Defendant's infringement "when a customer in Roanoke Rapids, North Carolina (Cloud 9 Vapor[]) forwarded an email to . . . its sales representative at [Plaintiff], that the customer had received from Defendant." (Compl. ¶ 23.) The email stated: "I spoke to you yesterday regarding some of the brands we have in common. I do believe I can give you a lower rate for these products." (Id. (quoting Compl. Ex. B "Cloud 9 Vapors Email" 1, ECF No. 1-2.) "Cloud 9 Vapor also reported receiving a call from someone purporting to be [Plaintiff], stating that 'Anthony' was on vacation, but that Cloud 9 Vapor could place its order with the caller." (Id.) "Cloud 9 Vapor later determined that the caller worked for Defendant." (Id.)

Plaintiff maintains that "Defendant had directed similar solicitations" to Plaintiff's other Virginia customers around the same time Defendant contacted Cloud 9 Vapor. (Id. ¶ 24.) Plaintiff believed that Defendant "was using the similarity between its name and the Vape Guys Mark to obtain business from [Plaintiff's] customers." (Id. ¶ 25.) Plaintiff further claims that Defendant's email solicitations were "causing confusion among [Plaintiff's] wholesale customers and suppliers, thereby diminishing the strength of the Vape Guys Mark and damaging [Plaintiff's] reputation and business relationships with existing customers." (Id. ¶ 25.) For this reason, on September 10, 2018, Plaintiff issued a cease and desist letter to Defendant "notifyingDefendant of the federally-registered Vape Guys Mark, [Defendant's] unlawful infringement by use of the Vape Guys Mark, and demanding that Defendant cease all further use of the Vape Guys Mark." (Id. ¶ 26.)

Ten days later, on September 20, 2018, "Defendant changed its Facebook page to replace 'Vape Guys Distro' with 'Vape Distro.'" (Id. ¶ 27.) Plaintiff maintains that "upon information and belief, [Defendant] took no further corrective actions," but instead "knowingly continued infringing upon the Vape Guys Mark." (Id.)

As evidence of Defendant's continued infringement, Plaintiff points to an email it received on October 11, 2018, approximately one month after it sent the cease and desist letter to Defendant. Plaintiff received the email from Arc Distribution, Inc. ("Arc"), "one of its major suppliers of vapor product." (Id. ¶ 28.) The email stated:

We have had several complaints among our sales team about 2 sales reps from your company (Michael and Luke), who are deliberately finding clients that carry our products and offering lower pricing. I have 2 emails . . . that I want you to see and address with your sales team. We have lost a huge client base in Virginia and most of North East due to this. This is devaluing our company and setting a new standard in our pricing tiers. We have an

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