International Labels LLC v. Sportlife Brands LLC

Background

International Labels LLC sued Sportlife Brands LLC, Starwood Brands LLC, Forever Beauty NY LLC, Elie Levy, Eddie Dayan, Michael Kassin, several retailers, and unknown defendants. It alleged that the defendants improperly used the “DONNA L’OREN” and “PRETTY BABY BY DONNA LOREN” marks. The claims included trademark infringement, false designation of origin, unfair competition, and dilution under the federal Lanham Act and New York law. International Labels also asserted claims for trademark cancellation, a false and fraudulent trademark application, declaratory judgment, unjust enrichment, deceptive business practices, and false advertising.

The marks were originally developed and owned by Jump Shot Sportswear, Inc. Jump Shot assigned them to International Labels in 2005 for $25,000. The assignment document stated that it transferred the marks, the federal registrations, and the goodwill associated with the marks. The registrations were canceled by the U.S. Patent and Trademark Office in 2011 because required maintenance filings were not timely made. International Labels alleged that it later licensed the marks to several companies and that one licensee made two sales in New York in 2016 and published an advertisement before 2014. Sportlife Defendants later applied to register “Donna L’Oren,” and the Patent and Trademark Office granted one registration effective February 4, 2020.

Rule 12(b)(6) standard

The defendants moved to dismiss under Federal Rule of Civil Procedure 12(b)(6), which tests whether a complaint states enough factual matter to make a legally plausible claim. The court generally accepts well-pleaded facts as true but does not accept unsupported legal conclusions.

Trademark ownership

The court held that ownership of a valid trademark was required for International Labels’ trademark infringement, false designation of origin, unfair competition, and dilution claims. Because International Labels claimed ownership through an assignment, it had to plausibly allege that the assignment transferred the mark together with its goodwill and that International Labels continued, or intended within a reasonable time to continue, a business involving substantially similar goods.

The court found the allegations insufficient. The two 2016 sales and the advertisement made before 2014 were isolated events occurring years after the 2005 assignment. The statement that International Labels had continuously used the marks was too conclusory. The court also explained that licensing can support ownership when licensees actually use the mark, but International Labels had not adequately alleged that its licensees used the marks in a way that continued the prior business or that International Labels retained supervisory control over their use.

The court also rejected ownership based on prior and continuous use. The canceled registrations no longer supplied the statutory presumption of ownership, and International Labels could not rely on registrations previously held by Jump Shot without adequately pleading that it acquired ownership. The two sales, whose quantity and amount were not clearly alleged, and the unspecified advertisement did not plausibly show deliberate, continuous, and sufficiently public use.

Other federal claims

The court held that International Labels had not stated a trademark-cancellation claim because it had not plausibly alleged ownership or valid grounds for cancellation. It also held that the allegations did not plausibly show that the Sportlife Defendants knowingly made material false statements to the Patent and Trademark Office. The allegation that the businesses operated in the New York City garment trade and allegedly had offices in midtown Manhattan was insufficient to establish knowing fraud.

The court denied International Labels’ request for a declaratory judgment stating that it, rather than the Sportlife Defendants, owned the mark because International Labels had not shown that it owned the mark.

State-law claims

The court stated that the New York trademark and unfair-competition claims were inadequately pleaded for substantially the same reasons as the federal claims. For the remaining state-law claims, including unjust enrichment, the court declined to exercise supplemental jurisdiction after the federal claims failed.

Disposition

Judge Alison J. Nathan dismissed the false or fraudulent trademark-application claim with prejudice. The court granted International Labels leave to file a Third Amended Complaint addressing its remaining claims by April 14, 2021, because amendment might not be futile. The court continued the stay of discovery. If International Labels did not file an amended complaint by that date, the court stated that it would direct entry of judgment and close the case. The order resolved Docket Nos. 80, 99, 122, 124, and 129.