Dires, LLC v. Sleep Number Corporation

Background

Dires brought a single remaining antitrust claim against Sleep Number. Dires alleged that, after a jury verdict in an earlier trademark action, Sleep Number violated Minnesota antitrust laws by continuing to assert rights in “NUMBER BED,” interfering with Dires’s online advertising, and sending cease-and-desist letters to Dires and other competitors.

In the earlier trademark action, the jury found that Sleep Number did not have trademark rights in “NUMBER BED.” The appellate court left that part of the judgment undisturbed but sent other trademark issues back for further proceedings. Those remaining issues included whether Dires’s use of “NUMBER BED” in advertising was confusingly similar to Sleep Number’s separate “SLEEP NUMBER” trademark. The district court later ruled that those issues remained open for a jury to decide.

Dires had previously brought similar antitrust claims in another federal court, where the claims were dismissed under the Noerr-Pennington doctrine. In this case, the state court dismissed Dires’s claims concerning conduct before October 23, 2017, but allowed the claim concerning post-verdict conduct to proceed. The case was later removed to federal court and stayed while the related trademark appeal was pending.

Motion to Dismiss

Sleep Number moved to dismiss the remaining antitrust claim under Federal Rule of Civil Procedure 12(b)(6), which permits dismissal when a complaint does not state a legally sufficient claim. The court applied the rule that a complaint must contain enough factual allegations to make relief reasonably plausible, rather than relying on conclusions alone.

Sleep Number relied on the Noerr-Pennington doctrine. The doctrine generally protects a party from antitrust liability for petitioning the government, including filing lawsuits and, under the court’s discussion, related pre-suit communications such as trademark cease-and-desist letters. The protection does not apply to objectively baseless “sham” conduct—conduct that no reasonable litigant could expect to succeed on the merits.

The court concluded that Sleep Number’s post-verdict enforcement efforts were not objectively baseless. Although the jury had found that Sleep Number did not own trademark rights in “NUMBER BED,” the separate question remained whether Dires’s use of that phrase infringed or was confusingly similar to the protected “SLEEP NUMBER” mark. Because that trademark question remained unresolved and could still be decided in Sleep Number’s favor, Sleep Number had a reasonable basis for believing its trademark position might succeed.

The court therefore found that Dires failed to state a claim based on Sleep Number’s post-verdict conduct. It granted Sleep Number’s motion to dismiss and dismissed the action with prejudice.

Motion to Amend

Dires separately sought to amend its complaint to add claims under the Lanham Act, a federal trademark statute; a common-law business-disparagement claim; and a Sherman Act antitrust claim. Dires relied on Sleep Number’s communications with the United States Patent and Trademark Office, Google, and third-party competitors.

The court found that the cited communications showed Sleep Number was asserting that particular uses of “NUMBER BED” were confusingly similar to the “SLEEP NUMBER” trademark, rather than claiming ownership of trademark rights in “NUMBER BED” itself. The court also noted that Dires’s allegations indicated that Google disallowed an advertisement because it contained the trademarked term “sleep number.”

Because the proposed claims were based on conduct protected under the Noerr-Pennington doctrine, the court found the amendments futile. An amendment is futile when the proposed complaint could not survive a motion to dismiss. The court denied Dires’s motion to amend.

Disposition

Judge Donovan W. Frank ordered that Sleep Number’s motion to dismiss was granted, Dires’s motion to amend was denied, and the action was dismissed with prejudice. The court directed that judgment be entered.