My Pillow, Inc. v. LMP Worldwide, Inc.

Background

My Pillow, Inc. brought the lawsuit against LMP Worldwide, Inc. alleging trademark infringement and breach of a settlement agreement from an earlier lawsuit. The settlement agreement, governed by Michigan law, allowed LMP to use its mark subject to certain limitations and stated that the permitted use was not confusingly similar to My Pillow’s mark.

LMP asserted nine counterclaims. The motion at issue sought dismissal of Counts III through VIII under Federal Rule of Civil Procedure 12(b)(6), which tests whether the pleadings allege enough facts to state a legally plausible claim. Counts III and IV sought cancellation of My Pillow’s second and first trademark registrations, respectively. Count V alleged false advertising under the federal Lanham Act. Count VI alleged violation of Minnesota’s Deceptive Trade Practices Act. Counts VII and VIII alleged unfair competition under Minnesota and Michigan law, respectively. The opinion notes that LMP’s answer labeled two counterclaims “Count III”; the court used the numbering reflected in the pleadings and briefing and treated the second one as Count III.

Trademark-registration counterclaims

The court granted the motion as to Count IV. LMP had previously asserted a counterclaim seeking cancellation of the first trademark registration in the Michigan lawsuit, and that counterclaim had been dismissed with prejudice. The court held that claim preclusion barred LMP from asserting the same claim again. Claim preclusion prevents relitigation when there was a prior final judgment on the merits by a court with authority to decide the matter, involving the same claim and the same parties or their legal equivalents.

The court denied the motion as to Count III, which sought cancellation of the second trademark registration. My Pillow argued that LMP’s allegations concerned use of the mark with pillows, while the second registration identified various other goods and services. The court held that the pleadings were sufficient at this stage because they alleged that “MYPILLOW” was generic or merely descriptive in connection with My Pillow’s pillow business and referred to products and services that included several items listed in the second registration.

False-advertising counterclaim

The court denied the motion as to Count V. LMP alleged that My Pillow’s advertising made false or misleading claims about discount offers, the involvement of a “sleep expert,” medical benefits, and a sleep study. My Pillow argued that LMP lacked constitutional and statutory standing and had not adequately alleged injury.

The court rejected those arguments at the pleading stage. LMP alleged that it competed directly with My Pillow and that the advertising damaged LMP’s reputation, reduced its sales, diverted potential retailers and purchasers, and caused customers to buy My Pillow products instead of LMP products. The court held that these allegations sufficiently alleged an actual and particularized injury, a connection between My Pillow’s conduct and the injury, and an injury that the court could redress. The court also held that LMP alleged the type of commercial or reputational injury that gives a competitor authority to sue under the Lanham Act.

The court further held that LMP adequately pleaded a false-advertising claim. Although My Pillow challenged particular allegations concerning the “sleep expert” and medical-benefits statements, the court explained that a motion to dismiss challenges an entire claim, while a motion to strike is the proper procedure for seeking removal of specific allegations. Because those arguments would not require dismissal of the entire counterclaim, the court declined to address them on this motion.

State-law counterclaims

The court denied the motion as to Count VI, alleging deceptive trade practices under Minnesota law, and Count VIII, alleging unfair competition under Michigan law. The court applied the same analysis used for the Lanham Act false-advertising claim and concluded that My Pillow had not identified an independent basis for dismissing either state-law counterclaim.

The court granted the motion as to Count VII, alleging unfair competition under Minnesota law. Minnesota unfair competition is a general category of tort claims rather than a tort with its own specific elements. LMP based this claim on alleged disparagement of its products and business, but the court held that those allegations duplicated the allegations supporting LMP’s false-advertising claim.

Disposition

The court granted in part and denied in part My Pillow’s motion to dismiss. It granted the motion as to LMP’s Counts IV and VII and denied it as to Counts III, V, VI, and VIII. The order did not decide whether the surviving counterclaims would ultimately succeed.