Vital Pharm., Inc. v. Monster Energy Co.

VITAL PHARMACEUTICALS, INC.,d/b/a VPX Sports, a Florida Corporation, Plaintiff/Counterclaim-Defendant, v. MONSTER ENERGY COMPANY, a Delaware corporation, and REIGN BEVERAGE COMPANY, LLC,

a Delaware limited liability company, Defendants/Counterclaimants.

MONSTER ENERGY COMPANY, a Delaware corporation, and REIGN BEVERAGE COMPANY, LLC,a Delaware limited liability company, Crossclaimants, v. JHO INTELLECTUAL PROPERTY HOLDINGS, LLC, a Florida limited liability company, Crossclaim-Defendant.

CASE NO. 19-60809-CIV-ALTMAN/Hunt

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF FLORIDA

April 30, 2020

ORDER

Monster Energy Company and Reign Beverage Company LLC (collectively, "Monster") compete with Vital Pharmaceuticals, Inc. ("VPX") in the sale of energy drinks. Monster sells an energy drink called "Reign." So does VPX. Through its Motion for a Preliminary Injunction, Monster alleges trademark infringement and seeks to enjoin VPX from selling energy drinks under the "Reign" name. [ECF No. 141] (the "Motion").

This Court referred the Motion to the Magistrate Judge who, with the benefit of briefing and oral argument, promptly issued a Report and Recommendation, in which he suggested that this Court grant Monster's Motion. [ECF No. 230] (the "R&R"). VPX objected. [ECF No. 238] (the "Objections"). And Monster responded. [ECF No. 255] (the "Response"). For the reasons set out below, the Court now ADOPTS the R&R and GRANTS Monster's Motion for a Preliminary Injunction.

THE FACTS¹

Monster Energy Company is the developer and distributor of Monster Energy® drinks. See [ECF No. 141-1] ¶¶ 4-6. In February 2018, Monster Energy Company developed a new line of energy drinks to appeal to fitness-conscious consumers. Id. ¶ 7. After nearly a year of research, it chose to market these new drinks under the name "Reign." Id. To facilitate the launch and distribution of this new line, Monster Energy Company formed a subsidiary, Reign Beverage Company LLC. Id. ¶ 8. By February 2019, Monster began commercial sales of the Reign energy drink to distributors in nine states. Id. ¶ 12. The product appeared in stores shortly thereafter. Id. On March 25, 2019, Monster launched its Reign energy drink nationwide. Id. The drink is now sold in more than 159,000 stores, with gross sales exceeding $165 million. Id. ¶ 16. More than 80% of those sales come through convenience stores. Id. The Reign lineup is pictured below:

Image materials not available for display.

Id. ¶ 14.

Dash, LLC ("Dash"), not a party to this action, is the original applicant for and owner of the valid, registered trademark for the mark REIGN.² See [ECF No. 152-2] at Ex. 1 (the "REIGN Registration"). Dash began using the REIGN mark in 2015, well before the parties here created their Reign energy drinks. Id. The REIGN Registration applies to the use of the word "Reign" and governs the following goods: "Dietary and nutritional supplements; Dietary and nutritional supplements used for weight loss; Dietary supplement drink mixes; Herbal supplements; [and] Nutraceuticals for use as a dietary supplement . . . ." Id.

Under its REIGN mark, Dash manufactured and sold a powdered, fruit-flavored, pre-workout supplement. See [ECF No. 141-3] at Ex. 11. The powdered supplement was caffeinated and geared towards fitness-focused consumers. See Objections at 4. Dash primarily sold its Reign powder through nutrition stores, gyms, and fitness centers. See [ECF No. 170] at 42:3-4. Dash sold the powdered supplement in forty-serving containers for $59.99 each. See [ECF No. 141-3] at Ex. 11. Dash's product is pictured below:

Image materials not available for display.

Id.

On November 12, 2018, VPX's in-house counsel contacted Dash about acquiring the REIGN Registration. See [ECF No. 168-1] at Ex. 25. Months later, on March 11, 2019—just as Monster began its nationwide Reign rollout—VPX entered into a Trademark Purchase and Assignment Agreement (the "Agreement") with Dash to purchase the REIGN trademark. See [ECF No. 158] at Ex. 10.³ The Agreement contemplated that VPX would purchase from Dash the rights to the REIGN mark—and nothing else. Id. VPX did not acquire any product formula, equipment, technical knowledge, or other assets from Dash. Id. As Dash's CEO would later put it, Dash had no discussions with VPX about selling anything other than "Just 'Reign,' the five-letter word." [ECF No. 170] at 165:20-166:7. For this reason, Dash's CEO admitted that, after the transfer, he "didn't care what they were doing with" the trademark. Id. at 163:7-8.

Following the sale, Dash announced that it was discontinuing its Reign powder and that, in its place, it was substituting a powdered nutritional supplement called "Slay." [ECF No. 141-3] at Exs. 12-13. Dash described Slay as having a "similar formula to Reign." [ECF No. 168-1] atEx. 32. Dash's CEO confirmed, in fact, that the company was telling its customers that Slay was Reign's replacement, see [ECF No. 170] at 216:8-217:13, and that he wanted customers to transition from Reign to Slay, id. at 222:2-5. There is no evidence that Dash ever directed any consumer of its Reign powdered supplement to VPX. See R&R ¶ 20.

For VPX's part, once it purchased the REIGN trademark, it began marketing a new energy drink under its newly-acquired mark. Specifically, on March 28, 2019, three days after Monster's nationwide launch, VPX announced on Instagram that it, too, would be launching a Reign energy drink. See [ECF No. 141-3] ¶ 11. VPX began selling its competing Reign energy drink in eight-ounce containers on its website in April 2019. [ECF No. 63-5] ¶¶ 3-8. In October 2019, VPX informed its distributors that it would be introducing a new line of Reign energy drinks. [ECF No. 141-1] ¶ 17. These new drinks would be packaged in sixteen-ounce aluminum cans, the same medium Monster was using, and would be sold in convenience stores, the same venue through which Monster makes the bulk of its sales. See id.; R&R ¶ 25. These VPX Reign cans look like this:

Image materials not available for display.

[ECF No. 141-1] ¶ 17.

VPX's new line of energy drinks marked a significant deviation from the product Dash had sold under the REIGN mark. To be sure, VPX's new energy drink shares some similarities with Dash's powder: they are both caffeinated, fruit-flavored, pre-workout products that are marketed to fitness-focused consumers. [ECF No. 168-1] at Exs. 28-29. But, in other salient respects, VPXdesigned a completely different product: VPX's Reign, for instance, (1) is a ready-to-drink carbonated beverage, not a powdered supplement; and (2) contains no ingredients in common with Dash's Reign (other than caffeine). Id. So, while the two products' similarities may lead consumers to believe that they are one and the same, in fact, the products are completely different. And, as explained below, that is precisely the problem.

STANDARD OF REVIEW

Objections to a magistrate's report and recommendation are governed by 28 U.S.C. § 636(b). The Court reviews de novo those parts of a report and recommendation to which a party has objected. See 28 U.S.C. § 636(b); Macort v. Prem, Inc., 208 F. App'x 781, 783-84 (11th Cir. 2006). The Court reviews the remaining portions for clear error. Id. at 784 (holding that the court "must only satisfy itself that there is no clear error on the face of the record" when there is no objection). "A party filing objections must specifically identify those findings objected to and the specific basis for such objections." Hidalgo Corp. v. J. Kugel Designs, Inc., 2005 WL 8155948, at *1 (S.D. Fla. Sept. 21, 2005).

THE LAW

To secure a preliminary injunction, a movant must show: "(1) a substantial likelihood of success on the merits of the underlying case, (2) the movant will suffer irreparable harm in the absence of an injunction, (3) the harm suffered by the movant in the absence of an injunction would exceed the harm suffered by the opposing party if the injunction issued, and (4) an injunction would not disserve the public interest." Commodores Entm't Corp. v. McClary, 648 F. App'x 771, 774 (11th Cir. 2016). The movant must "clearly establish[] the burden of persuasion" for each of these four elements. Am.'s Health Ins. Plans v. Hudgens, 742 F.3d 1319, 1329 (11th Cir. 2014) (internal quotation marks omitted).

ANALYSIS

A. No Clear Error

The Magistrate Judge found that Monster had carried its burden as to each element of the preliminary injunction test and recommended that the Court enter the preliminary injunction. See R&R at 19-20. In its Objections, VPX challenges only one prong of the Magistrate Judge's analysis. Specifically, VPX argues that the Magistrate Judge erred in finding that Monster had "clearly" established "a substantial likelihood of success" on its trademark infringement claim. See Objections at 2.

To prevail on its trademark infringement claim, Monster must show "(1) ownership of the trademark, and (2) the likelihood of confusion of the parties' marks." R&R at 9.⁴ The Magistrate Judge determined that Monster is substantially likely to prevail on both elements of this test.⁵ VPX objects only to the first element: ownership. See Objections at 2. In VPX's view, because it purchased the REIGN trademark, it—not Monster—owns that mark. Id. And so, VPX says, Monster is infringing on its trademark. See [ECF No. 152] at 2.

This leaves the Court with two tasks: First, the Court must examine the portions of the R&R to which no party has objected for "clear error on the face of the record." Macort, 208 F. App'x at 784. The Court has done so and can find no error—much less clear error—in theMagistrate Judge's well-reasoned Report. See R&R at 9, 16-19. Second, the Court must examine de novo the part of the R&R to which VPX has objected—i.e., the Report's analysis on the question of ownership. Macort, 208 F. App'x at 783-84. The Court now turns to this second task.

B. Monster Used the REIGN Trademark First

"Rights in a trademark are determined by the date of the mark's first use in...