MidCap Business Credit, LLC v. Midcap Financial Trust

Background

MidCap Business Credit, LLC sued Midcap Financial Trust, Midcap Financial Services, LLC, Midcap Financial Services Capital Management, LLC, Midcap FinCo Designated Activity Company, and Apollo Capital Management, L.P. The plaintiff alleged trademark infringement under Sections 32 and 43(a) of the federal Lanham Act, New York General Business Law § 349 violations, and common-law trademark infringement and unfair competition.

The plaintiff owns a registered and incontestable “MIDCAP BUSINESS CREDIT” mark and had a pending application to register “MIDCAP” by itself. It alleged that it had used “MIDCAP,” “MIDCAP CREDIT,” and “MIDCAP BUSINESS CREDIT,” along with variations, for its commercial-finance services. It claimed that defendants’ use of “MIDCAP” and “MIDCAP FINANCIAL” caused or was likely to cause confusion, citing several alleged misidentifications involving awards, employees, a nondisclosure agreement, news coverage, and a pitch book.

Defendants moved to dismiss under Federal Rule of Civil Procedure 12(b)(6), which asks whether a complaint states a legally sufficient claim. They argued that the plaintiff was attempting to enforce rights in the standalone term “MIDCAP,” even though the plaintiff’s registered mark was “MIDCAP BUSINESS CREDIT,” and that “MIDCAP” was generic or descriptive.

Laches

The court rejected defendants’ argument that laches barred the claims. Laches is an equitable defense based on a plaintiff’s knowledge of the challenged conduct, an unjustified delay, and prejudice to the defendant. Although the plaintiff knew of defendants’ use of the marks by 2012 or 2014 and waited more than six years to sue, the court held that the alleged settlement negotiations made the delay excusable. The court therefore did not dismiss the claims on that ground.

Registered Mark

For the registered “MIDCAP BUSINESS CREDIT” mark, the court treated the registration as initial evidence that the mark was valid and protectable. It focused on whether the complaint plausibly alleged a likelihood of consumer confusion.

The court held that the parties’ marks were not confusingly similar when viewed as a whole. The plaintiff used a stylized “MidCap” logo with a red square and white serif lettering. Defendants used “Midcap Financial” in different lettering, colors, arrangement, and with a separate cross-shaped logo. The court found that the parties shared only the word “MIDCAP,” which has a common meaning and is widely used in financial and lending services. It concluded that the differences in the marks made consumer confusion implausible. The motion was granted as to the plaintiff’s asserted rights in the registered “MIDCAP BUSINESS CREDIT” mark.

Unregistered Marks

The court also held that the plaintiff failed to plausibly allege a valid and protectable mark in “MIDCAP” or the related “MIDCAP Marks.” Trademark law classifies marks as generic, descriptive, suggestive, or arbitrary or fanciful. Generic terms identify a category of goods or services and receive no trademark protection. Descriptive terms may receive protection only if they acquire “secondary meaning,” meaning that consumers primarily associate the term with one source.

The court found that “MIDCAP” was generic because it was an ordinary term used in the financial-services industry to describe a market segment. Alternatively, the court found that the term was descriptive of at least part of the plaintiff’s services and target customers. Even under that alternative, the plaintiff had not plausibly alleged that “MIDCAP” acquired secondary meaning before defendants’ use began in 2008 or before the alleged infringing use between 2012 and 2014. The court noted the absence of consumer surveys, evidence of attempts to copy the mark, specific advertising expenditures, or facts linking the plaintiff’s transactions, publicity, and continuous use to consumers’ perceptions. The motion was granted as to the plaintiff’s asserted rights in “MIDCAP” and “the MIDCAP Marks.”

New York General Business Law § 349 Claim

The court separately dismissed Count III under New York General Business Law § 349. It held that trademark infringement generally is not actionable under that statute without a specific and substantial injury to the public beyond ordinary trademark infringement. The court found that most of the plaintiff’s examples did not show consumer confusion and that the one allegation involving a potential customer’s use of “Midcap Financial” on a nondisclosure agreement did not plausibly show the required broader public injury or lost sales. The motion was granted as to the § 349 claims.

Disposition

The court stated that defendants’ motion was granted in full. It canceled the March 9, 2022 argument and directed the Clerk of Court to terminate ECF No. 28 and close the case. Judge Alvin K. Hellerstein did not dismiss the claims based on laches; he granted the Rule 12(b)(6) motion because the complaint did not state legally sufficient trademark or New York consumer-protection claims.