Shenzhenshi Liangyuankeji Youxiangongsi v. Antsy Labs LLC

Background

Shenzhenshi Liangyuankeji Youxiangongsi, which does business as “Coogam” on Amazon.com, sued Antsy Labs LLC after Antsy Labs sued Coogam and other defendants in a Florida federal court for copyright infringement involving the Fidget Cube toy. Coogam alleged that Antsy Labs obtained a temporary restraining order based only on use of the phrase “fidget cube,” even though the phrase lacked copyright or trademark protection. Coogam alleged that the order locked its Amazon storefront and business accounts containing about $800,000, and that Antsy Labs demanded $100,000 to unfreeze them. Antsy Labs later voluntarily dismissed its claims against Coogam in the Florida action.

Coogam’s amended complaint sought declarations that Antsy Labs’s copyright registration did not protect the phrase “fidget cube,” that Antsy Labs engaged in copyright misuse, and that the phrase had no trademark or copyright protection. Coogam also sought damages for common-law fraud, tortious interference with business relationships, and malicious prosecution. Antsy Labs moved to dismiss under Rule 12(b)(6), the rule allowing dismissal when a complaint does not state a legally sufficient claim.

Court’s analysis

The court considered the amended complaint, the parties’ motion papers, and the complaint and other documents from the Florida action on which Coogam’s lawsuit was based. When a document incorporated into or integral to a complaint contradicts the complaint’s allegations, the court may rely on the document rather than accept the conflicting allegations as true.

The court found that Coogam’s central allegation was incorrect. The Florida complaint said that Antsy Labs sought to stop online sellers from selling products that infringed its copyright in the toy apparatus itself. Although the Florida complaint referred to defendants’ use of the “same name” as Antsy Labs’s Fidget Cube toys, the court read those references as supporting the allegation that defendants used both the same name and the same design. The court also found that referring to the Lanham Act in the Florida complaint did not mean that Antsy Labs had asserted a trademark-infringement claim. To the extent Antsy Labs asserted a false-designation claim, the court said it appeared to be based on alleged online stores’ appearance of being authorized retailers, not merely on use of the phrase “fidget cube.”

The court also considered a demand letter that Coogam cited. It held that the letter was not necessarily barred by Rule 408 of the Federal Rules of Evidence, but said the letter did not help Coogam because it accused Coogam of selling products embodying or substantially similar to Antsy Labs’s copyrighted work and using a confusingly similar name or mark. The court said that substance was consistent with the Florida complaint rather than with Coogam’s characterization of the dispute.

Claims and dispositions

The court dismissed the declaratory-judgment claims because Antsy Labs had not brought a claim in Florida for infringement of the phrase “fidget cube.” Without such a dispute, the court found no actual controversy, which is required for federal declaratory-judgment jurisdiction. The court said Coogam’s argument that its products did not resemble the copyrighted toy did not address the declaratory claims as pleaded, because those claims focused on Antsy Labs’s rights in the phrase.

The court dismissed the fraud claim because Coogam did not adequately allege a material misrepresentation or omission. The court stated that neither the Florida complaint nor later papers alleged that Antsy Labs owned the phrase “fidget cube” while lacking rights to it. The court also noted that Coogam had rejected Antsy Labs’s settlement offer through counsel, which, according to the court, undermined reliance on any alleged misrepresentation.

The court dismissed the tortious-interference claim because its theory of wrongful or improper conduct depended on the same unsupported fraud theory. The court also found no plausible allegation that Antsy Labs acted for a reason other than its sincerely held belief that Coogam was infringing its rights. The malicious-prosecution claim failed because the Florida action did not involve the type of prosecution Coogam alleged and because Coogam did not plead malice or specific ill will. The court explained that negligence or carelessness in reviewing evidence would not be enough.

Finally, the court stated that copyright misuse would fail for the reasons already discussed and, independently, that copyright misuse is not an independent cause of action in the Second Circuit. The court recognized that copyright misuse may sometimes be used as an affirmative defense to a copyright-infringement claim, but held that asserting it in a declaratory-judgment action did not transform it into such a defense.

Disposition

The court granted Antsy Labs’s motion to dismiss and dismissed all of Coogam’s claims. The court declined to grant Coogam leave to amend. It cited the largely substantive problems with the claims, Coogam’s failure to request amendment or identify facts that would cure the defects, and the fact that Coogam had already amended once after receiving notice of the problems. The clerk was directed to enter judgment for Antsy Labs and close the case.