SATISFY v. BLUESTAR ALLIANCE LLC and JUSTICE BRAND HOLDINGS LLC

Background

S.E. SATISFY, société par actions simplifiée (SAS) (“Satisfy”), brought the action under the federal Declaratory Judgment Act, asking the court to declare that Satisfy’s use of “Justice” did not infringe Justice Brand Holdings LLC’s (“JBH”) registered “JUSTICE” trademarks. Satisfy sells running and outdoor clothing and related accessories. JBH alleged that Satisfy used “Justice” as a trademark on products including “Justice Dyneema Trail Blend” shorts and “Justice Cordura 9” Half Tights.

JBH asserted counterclaims for trademark infringement under Section 32 of the Lanham Act, false designation of origin under Section 43(a) of the Lanham Act, dilution under New York General Business Law § 360-1, and trademark infringement and unfair competition under New York common law. Satisfy moved to dismiss all of JBH’s counterclaims under Federal Rule of Civil Procedure 12(b)(6), arguing that a likelihood of consumer confusion was implausible as a matter of law.

Legal standard

For a Rule 12(b)(6) motion, the court accepts non-conclusory factual allegations as true, draws reasonable inferences for the party asserting the claim, and asks whether the allegations plausibly state a claim for relief. The court generally considers the allegations in the challenged pleading, not factual assertions made only in legal briefs or another pleading.

Trademark infringement and false-designation claims under the Lanham Act require allegations that the mark is legally protected and that the challenged use is likely to confuse consumers about the source or sponsorship of the goods. In the Second Circuit, courts assess likely confusion using eight factors, including the strength and similarity of the marks, the proximity of the products, actual confusion, bad faith, product quality, and consumer sophistication. Likely confusion is ordinarily a factual question, although a claim may be dismissed at the pleading stage when confusion is implausible as a matter of law.

New York common-law trademark infringement and unfair competition generally use virtually the same standard as the Lanham Act, with the additional requirement that the defendant acted in bad faith. A New York dilution claim requires a strong mark and a likelihood of dilution by blurring or tarnishment.

Lanham Act counterclaims

Satisfy argued that confusion was impossible or implausible because its products were technical, expensive running goods marketed mainly to serious adult male runners, while JBH’s products were mass-market clothing and accessories associated with girls and young women. Satisfy also pointed to its selective distribution, different retailers, different prices, use of “Justice” next to its house mark, removal of the mark from products when tags were removed, and alleged coexistence of the marks for eight years.

The court found that these arguments relied on factual allegations from Satisfy’s complaint, while JBH’s answer denied many of those allegations. Considering the allegations in JBH’s counterclaims, the court held that JBH had sufficiently alleged that Satisfy sold activewear, including running apparel, using a mark identical to JBH’s registered mark in the same geographic area. Those allegations were enough at the pleading stage to prevent the court from concluding that confusion was impossible as a matter of law. The court therefore denied Satisfy’s motion to dismiss JBH’s Lanham Act counterclaims.

New York common-law claims

Satisfy argued that JBH’s New York common-law trademark infringement and unfair-competition claims should also be dismissed because JBH had not adequately alleged likely confusion. The court explained that these claims require an additional showing of bad faith.

The court held that JBH had adequately alleged that Satisfy knew about JBH’s “JUSTICE” mark and nevertheless used “Justice” on apparel in a way intended to cause consumers to believe that Satisfy’s goods were approved by or affiliated with JBH. The court also rejected Satisfy’s argument that knowledge of JBH’s trademark registration could not support bad faith because the registration listed different types of clothing. The registration also covered clothing items that could be used as running gear. Because the bad-faith allegations presented a factual dispute, the court denied Satisfy’s motion to dismiss JBH’s New York common-law trademark and unfair-competition claims.

New York dilution claim

JBH did not specify whether its dilution claim was based on blurring or tarnishment. The court concluded that JBH had not alleged that Satisfy’s products were inferior or that Satisfy’s use of “Justice” would create negative associations with JBH’s mark. The claim therefore could proceed only under a blurring theory.

Dilution by blurring concerns use of a mark that may weaken its ability to identify the trademark owner’s goods uniquely. The court held that JBH had alleged use of the same distinctive mark and competitive proximity between the parties’ products. Those allegations were sufficient at this stage because they raised the possibility that JBH’s mark could lose some of its identifying power. The court therefore denied Satisfy’s motion to dismiss JBH’s dilution counterclaim under New York General Business Law § 360-1.

Disposition

The court denied the motion to dismiss. The opinion does not determine whether Satisfy ultimately infringed JBH’s trademarks, acted in bad faith, or diluted JBH’s mark. It determines only that JBH’s counterclaims may proceed beyond the pleading stage.