UMG Recordings, Inc. v. OpenDeal Inc.

Background

UMG Recordings, Inc. sued OpenDeal Inc., doing business as Republic, for trademark infringement, unfair competition, and false designation of origin under the federal Lanham Act, as well as related New York claims. For purposes of its motion, UMG relied only on its federal trademark-infringement and unfair-competition claims.

UMG owns Republic Records, a record label, and has trademark registrations for “Republic Records” and a stylized “Republic Records” flag logo covering music-related goods and services. UMG does not have a registration for the standalone word “Republic,” although it presented evidence that it had used a standalone “Republic” logo on some products in the early 2000s and that media coverage sometimes used “Republic” as a shortened reference to Republic Records.

OpenDeal operates the Republic crowdfunding investment platform through its wholly owned subsidiary, OpenDeal Portal, LLC. The platform offers investment opportunities in several industries. In October 2021, OpenDeal announced “Republic Music,” an investment service that allowed fans to invest in interests connected to artists’ songs or albums and potentially receive royalty payments. After receiving UMG’s cease-and-desist letter, OpenDeal stopped using “Republic Music” in its social-media, marketing, and website materials, removed its music-investment manifesto, added a disclaimer, and later deleted its music-investment webpage.

Legal standard

A preliminary injunction is an extraordinary temporary remedy. To obtain one, a plaintiff generally must show likely irreparable harm, either a likelihood of success on the merits or serious legal questions combined with a hardship balance strongly favoring the plaintiff, and that the injunction would serve the public interest. Irreparable harm means harm that cannot be adequately repaired with money damages and is likely to occur without the injunction.

For trademark infringement and related unfair-competition claims, the plaintiff must show a valid mark entitled to protection and a likelihood that the defendant’s use will confuse customers about the source of the goods or services.

Protectability of the marks

The court held that UMG’s registered “Republic Records” mark was protected. But the court rejected UMG’s showing that it had protectable common-law trademark rights in “Republic” alone. Unregistered trademark rights can arise from continuous commercial use, but UMG’s evidence of standalone use was largely nearly two decades old. More recent examples generally used “Republic” only as a shortened reference after prominently identifying “Republic Records.” The court concluded that this evidence did not show the continuous commercial use needed for common-law rights in the standalone mark.

The court also found that UMG had not shown that “Republic” had acquired secondary meaning. Secondary meaning exists when consumers associate a term with a particular source. UMG did not provide sufficient evidence of consumer studies, marketplace identification of its products by “Republic” alone, advertising and promotional expenditures, sales success, exclusive use, or third-party attempts to copy the mark.

Likelihood of customer confusion

The court applied the eight-factor test used in the Second Circuit to assess likely confusion. The factors include the strength of the mark, similarity of the marks, proximity of the parties’ products and services, actual confusion, bad faith, product quality, whether the senior user may enter the other market, and customer sophistication.

The court found that the main factors did not favor UMG. Although both parties used the word “Republic,” their logos differed in color, font, design, and layout. UMG’s branding used “Republic Records” and a black-and-white flag design, while OpenDeal used a blue rectangular logo with a prominent stylized “R.” The court also found that the word “Records” helped distinguish UMG’s music and entertainment services from OpenDeal’s investment platform.

The parties’ services were also materially different. Republic Records produces, manufactures, distributes, markets, and promotes sound recordings and music videos. OpenDeal’s Republic Platform offers securities-crowdfunding investment opportunities, including opportunities connected to songs or albums. UMG did not currently offer the type of investment opportunities provided by OpenDeal and did not show that the two businesses served essentially the same customer base.

The court considered UMG’s evidence of actual confusion minimal. At most, UMG identified five examples, and two of the cited articles expressly stated that Republic Records was not affiliated with OpenDeal’s investment offerings. The court found that these examples, without surveys, studies, expert testimony, or evidence that purchasing decisions were affected, were insufficient at the preliminary-injunction stage.

The court found no evidence that OpenDeal adopted “Republic” to benefit from UMG’s reputation. It also declined to infer bad faith from OpenDeal’s conduct after receiving the cease-and-desist letter because OpenDeal consulted counsel and took remedial steps. UMG likewise did not provide sufficient evidence that OpenDeal’s services were inferior in a way that threatened UMG’s reputation.

Balancing the factors, the court concluded that UMG had not shown a likelihood that a significant number of customers would be confused. Even assuming UMG had raised serious questions about the merits, the court found that the hardship balance did not strongly favor UMG because an injunction could require OpenDeal to rebrand its music-investment vertical and address related website and licensing complications.

Irreparable harm and disposition

Because UMG did not show a likelihood of success, it was not entitled to the statutory presumption of irreparable harm. The court also found that UMG’s evidence did not independently establish likely irreparable harm. General statements about reputational injury, the limited confusion evidence, and speculation about future harm were insufficient.

The court therefore denied UMG’s motion for a preliminary injunction and directed the Clerk of Court to terminate the motion at docket entry 23. The opinion did not state that the underlying lawsuit was dismissed or otherwise resolved.