System1 Research Limited v. System1 LLC

Background

System1 Research Limited and System1 Research Inc. sued System1 LLC over its use of the SYSTEM1 name. The plaintiffs alleged that Research Limited had used SYSTEM1-related marks since 2006 for advertising, branding, and market-research services, and that Research Limited owned federal registrations for SYSTEM1 RESEARCH, SYSTEM1 GROUP, SYSTEM1 AD RATINGS, and SYSTEM1 MARKETING. The plaintiffs alleged that System1 LLC also offered advertising, marketing, branding, and online customer-acquisition services under the SYSTEM1 name.

The complaint alleged that System1 LLC had applied to register SYSTEM1 with the United States Patent and Trademark Office. The agency initially refused the application because of a possible likelihood of confusion with Research Limited’s marks, later refused it again, and System1 LLC abandoned the application in 2019. The plaintiffs alleged that System1 LLC continued using SYSTEM1 after receiving a cease-and-desist letter in July 2021.

Claims and Motion

The plaintiffs sought an order stopping System1 LLC from using SYSTEM1 or a confusingly similar mark, destruction of products bearing the marks, and damages or other relief on claims under federal trademark law, New York common law, and New York General Business Law. System1 LLC moved to dismiss the complaint for failure to state a claim under Federal Rule of Civil Procedure 12(b)(6). On that motion, the court had to accept well-pleaded factual allegations as true and decide whether they plausibly supported relief.

Trademark Claims

Trademark infringement, false-designation, and unfair-competition claims generally require a plausible allegation that the defendant’s use of a mark is likely to confuse consumers about the source, sponsorship, or approval of goods or services. The court considered the factors commonly used in this circuit to evaluate likely confusion, including the strength and similarity of the marks, the relationship between the parties’ services, evidence of actual confusion, the defendant’s intent, product quality, and consumer sophistication.

The court found that the plaintiffs had made a strong showing of similarity because both parties used the identical SYSTEM1 name, even though their logos and visual presentations differed. It also found the parties’ services sufficiently related at the pleading stage because both operated in online marketing, targeted similar customers, and sought to help clients acquire customers. The remaining factors favored System1 LLC, including the absence of alleged actual confusion, the lack of concrete allegations of bad faith, the absence of allegations about product quality, and the likely sophistication of the customers.

The court nevertheless concluded that the plaintiffs had adequately pleaded likely consumer confusion. It emphasized the strength of the plaintiffs’ mark, the identical name, and the parties’ related industry and customer base. The court therefore denied the motion to dismiss the plaintiffs’ federal and New York common-law trademark-infringement claims.

New York Consumer-Protection Claim

For a claim under New York General Business Law § 349, a commercial plaintiff must allege a materially misleading act or practice and harm to consumers or the public interest. The court followed what it described as the majority approach in the circuit: ordinary trademark confusion, without a specific and substantial injury to the public interest beyond ordinary infringement or dilution, is not enough.

Because the plaintiffs alleged confusion but did not allege the additional public-interest injury required under § 349, the court granted the motion to dismiss that claim. The court also granted the plaintiffs leave to amend by October 14, 2022, finding that a valid § 349 claim might still be stated. The opinion text provided does not separately explain the disposition of the claim under New York General Business Law § 133 or every other claim listed in the complaint.

Disposition

The court ordered that Defendant’s motion to dismiss was denied in part and granted in part. It directed the clerk to terminate the motions identified as Documents 21 and 32.