SPIN MASTER, LTD. v. ACIPER

Background

Spin Master Ltd. and Spin Master Inc. alleged that approximately 50 defendants sold products resembling Spin Master’s “Zero Gravity Laser Racer” remote-controlled toys. The products were described as able to drive along floors, walls, and ceilings by following a beam of light. Spin Master alleged that it owned federally registered “WALL CLIMBER” and “ZERO GRAVITY” trademarks and several patents related to the products.

The Second Amended Complaint asserted three trademark-infringement claims under the federal Lanham Act, two related New York common-law claims for unfair competition and unjust enrichment, and five patent-infringement claims against Jscout. Jscout moved to dismiss all claims against it under Federal Rule of Civil Procedure 12(b)(6), which tests whether a complaint contains enough factual allegations to state a legally plausible claim.

Trademark and Related State-Law Claims

For purposes of Jscout’s motion, the parties focused on Jscout’s alleged use of Spin Master’s “WALL CLIMBER” mark, not the “ZERO GRAVITY” mark. Jscout’s product was sold through Amazon, and its manual used the phrase “Wall Climber Car.” The court held that Spin Master adequately alleged ownership and use of a protected mark at the pleading stage because its product packaging displayed “Real Wall Climber.”

The court nevertheless held that Spin Master had not adequately pleaded a likelihood of consumer confusion. Jscout’s only alleged use of the similar phrase appeared in a manual inside the product’s packaging, meaning consumers would see it only after purchasing and opening the product. The court found no plausible pre-sale or point-of-sale confusion. It also rejected Spin Master’s theories of initial-interest and post-sale confusion because the complaint did not allege that consumers were attracted to Jscout’s product by the phrase or that Spin Master’s toy had the kind of prestige or close association with the mark required for post-sale confusion.

The court further stated that Spin Master had not alleged that the toys’ design features were legally protected or that it had a protected interest in descriptive Amazon search terms that might cause both companies’ products to appear in search results. Because the parties agreed that dismissal of the trademark claims would also resolve the related state-law claims, the court dismissed those claims against Jscout as well.

Patent Claims

Jscout argued that Spin Master lacked the required right to bring the patent claims, relying on a license agreement that Jscout had produced. The court distinguished constitutional standing, which concerns federal jurisdiction, from statutory or “prudential” standing, which concerns whether a particular plaintiff may sue under a statute. The court held that the complaint stated a patent claim arising under federal patent law and that Spin Master Ltd.’s allegation that it was the exclusive licensee with the right to sue was sufficient at this stage.

The court therefore declined to examine the license agreement on the motion to dismiss. Jscout also argued that the case should be dismissed because necessary parties had not been joined under Federal Rule of Civil Procedure 19. The court declined to resolve that argument because doing so would require interpreting the license agreement, which the court could not do at this stage. The court noted that Jscout could plead a licensing issue as a defense in its answer if it wished to challenge Spin Master’s ability to recover on the merits.

Disposition

Judge Vernon S. Broderick granted in part and denied in part Jscout’s motion to dismiss. The first five causes of action in the Second Amended Complaint were dismissed as against Jscout, and the motion was granted as to those causes of action. The court found that Spin Master had plausibly alleged the five patent-infringement causes of action against Jscout and denied the motion as to those claims. The ruling addressed the sufficiency of the pleadings and did not decide whether Spin Master would ultimately prevail on the patent claims.