Summary
noting that "the owner or registrant of a trademark is not the only party with standing to bring a civil action under the Lanham Act" and specifically citing § 1120 and § 1064 as provisions that do not require ownership of a trademark to confer standing
Summary of this case from Fenwick v. DukhmanOpinion
Civil Action No. 04-cv-1904.
October 5, 2004
MEMORANDUM
I. Introduction
Presently before this Court is Defendants' Motion to Dismiss, pursuant to Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6). For the reasons set forth below, the Defendants' Motion to Dismiss the Complaint will be granted in part and denied in part.
II. Background A. Procedural Background
In its Complaint, the City of Philadelphia ("Plaintiff" or "the City") makes federal trademark infringement claims and related state law claims against EMI Earthmate, Inc., PRS Materials, Inc., Richard Turner, and Frank Boyer (collectively "Defendants"). Plaintiff seeks declaratory and injunctive relief as well as damages.
Defendant Frank Boyer is the President of EMI Earthmate, Inc. (Pl's Compl. at 4). Defendant Richard Turner is President of PRS Materials, Inc. (Pl's Compl. at 5).
On July 16, 2004, Defendants filed a Motion to Dismiss the claims of trademark infringement and claims against the individual Defendants Turner and Boyer, asserting that the court should dismiss Plaintiff's federal trademark infringement claims for lack of standing because the City does not currently own and has never been the registrant of the disputed trademark. Once the federal trademark claim is dismissed, Defendants request that the remaining state law claims be dismissed for lack of subject matter jurisdiction. Second, Defendants argue that Plaintiff has failed to state a claim upon which relief can be granted against the individual corporate officers, Defendants Turner and Boyer. On August 13, 2004, the Plaintiff filed a Response.
B. Allegations of the Parties
According to the Complaint, in 1995, Plaintiff and Defendant PRS entered into a contract pursuant to which PRS would market, sell and distribute Plaintiff's biosolids-based compost and derivative products. (Pl's Compl. at 8). The contract required "that any trademark or tradename established for Compost be registered in the name of the City of Philadelphia" (Pl's Compl. at 11 citing Contract at 5(B), p. 3). PRS eventually filed an application with the U.S. Patent and Trademark Office to register the name which it had given the compost, i.e., EarthMate (Pl's Compl. at 12). However, Plaintiff asserts the trademark was never transferred to Plaintiff and the failure to transfer the registration constituted trademark infringement and breach of contract causing Plaintiff damages.
In response, Defendants do not challenge any of the factual allegations but argue that because the EarthMate trademark is registered solely to Defendant EMI, the City lacks standing to bring its claim. (Defendants' Motion to Dismiss at 10). III. Discussion A. Jurisdiction and Rule 12(b)(1) Motion to Dismiss 1. Allegations
Plaintiff contends that this court has subject matter jurisdiction over its federal trademark claims (Pl's Compl., Count V) pursuant to the Lanham Act ("the Act"), 15 U.S.C. 1051et seq and supplemental jurisdiction over the related state law claims pursuant to 28 U.S.C. § 1367.
15 U.S.C. § 1121 states:
§ 1121. Jurisdiction of Federal courts; State and local requirements that registered trademarks be altered or displayed differently; prohibition.
(a) The district and territorial courts of the United States shall have original jurisdiction, [and] the courts of appeal of the United States (other than the United States Court of Appeals for the Federal Circuit) [and the United States Court of Appeals for the District of Columbia] shall have appellate jurisdiction, of all actions arising under this Act, without regard to the amount in controversy or to diversity or lack of diversity of the citizenship of the parties.
Defendants argue that Plaintiff lacks standing to bring a claim under the Lanham Act and therefore, Count V must be dismissed. As a result, only state law claims remain and thus, federal subject matter jurisdiction is destroyed requiring dismissal of the complaint pursuant to 28 U.S.C. § 1367(c).
Plaintiff responds that Defendants contracted to register the disputed trademark in the name of the Plaintiff and therefore, upon failing to do so, stole the trademark, causing Plaintiff harm. As the rightful owner of the trademark, Plaintiff claims to have standing.
2. Standing Pursuant to The Lanham Act
Contrary to Defendants' argument, the owner or registrant of a trademark is not the only party with standing to bring a civil action under the Lanham Act. The Act specifically authorizes civil actions by "any person" in several situations. For example, Section 1120 authorizes a civil suit by "any person injured" by another person's "procure[ment of a] registration in the Patent and Trademark Office of a mark by a false or fraudulent declaration or representation." 15 U.S.C. § 1120. Section 1125 also authorizes a civil action by any person who may be injured by false designations of origin or false descriptions. 15 U.S.C. § 1125. Finally, "any person who believes that he is or will be damaged" may file a petition to cancel a registration of a mark. 15 U.S.C. § 1064.
15 U.S.C. § 1127 states:
The term "person" and any other word or term used to designate the applicant or other entitled to a benefit or privilege or rendered liable under the provisions of this Act includes a juristic person as well as a natural person. The term "juristic person" includes a firm, corporation, union, association, or other organization capable of suing and being sued in a court of law. (Emphasis added).
Plaintiff notes Sections 1064 and 1120, but cites no cases to support its argument. Defendants fail to acknowledge any of these provisions in their brief. Moreover, the sole case on which Defendants rely is inapposite. In Reliable Tire Distributors, Inc. v. Kelly Springfield Tire Company, 592 F.Supp. 127 (E.D.Pa. 1984), plaintiff Reliable applied to the United States Patent Office for a registered mark in 1972; however, a certificate of registration was not issued until April 20, 1976, more than a year after the events in the suit took place. Because Reliable was not a registrant at the time the claimed infringement occurred, the court held that Reliable could not recover for lost profits and damages under 15 U.S.C. § 1117, which provides for remedies. Id. at 136. Reliable Tire is distinguishable from this case because it involved a trademark infringement claim by the rightful registrant of the trademark and did not address whether the remedies of Section 1117 are available in wrongful registration claims, as are alleged here.
Amendments to the Lanham Act in 1988 and 1999 expressly expanded the reach of section 1117 remedies, which are now available for all section 1125 violations. 15 U.S.C. § 1117 (West 2004).
Although there is no controlling Third Circuit precedent and the parties cite little law, several federal cases confirm a willingness to award damages based on considerations of equity, reason, and pragmatism. See Steele v. Bulova Watch Co., Inc., 344 U.S. 280, 284 (1952) (recognizing district court's authority to award relief according to principles of equity to prevent violation of any registrant's rights); Pioneer Leimel Fabrics, Inc. v. Rothman Indstries, Ltd. et al., 25 U.S.P.Q.2d 1096, 1105 (E.D.Pa. 1992), amended 1992 WL 174753 (July 21, 1992), aff'd, 993 F.2d 225 (3d Cir. 1993) (approving of damage award based on equitable factors). Also, 15 U.S.C. § 1120 independently imposes civil liability for damages sustained by a person injured as a result of the procurement of the registration of a mark by a false or fraudulent declaration.
Upon considering this statutory language and case law, Plaintiff's Complaint alleges sufficient facts to establish standing under the Lanham Act. The Complaint alleges that "Defendant PRS falsely registered the trademark EarthMate under its own name when it knew that its contract with the City required it to register the trademark under the City's name." (Pl's Compl. at 42). As a result of the false registration, Plaintiff alleges Defendant "infringed on the rights of plaintiff to have the trademark registered in its own name" (Pl's Compl. at 43) and "violated 15 U.S.C. Section 1051 et seq by applying to register a trademark of which it was not the owner." (Pl's Compl. at 44). As stated above, 15 U.S.C. § 1120 authorizes a civil action by any person making such allegations.
3. Constitutional Standing
Plaintiff has stated facts sufficient to meet the constitutional requirements for standing. In general, to establish standing to assert claim, a plaintiff must: 1) demonstrate injury in fact, which is concrete, distinct and palpable, and actual or imminent; 2) establish causal connection between injury and conduct complained of; and 3) show substantial likelihood that the requested relief will remedy the alleged injury in fact. See McConnell v. Federal Election Com'n, 540 U.S. 93 (2003) (affirming district court's dismissal for lack of standing). First, Plaintiff claims to be the rightful owner of a trademark and that Defendants' trademark infringement affects the City's ability to sell its compost products. (Pl's Compl. at 22). Second, Plaintiff alleges the Defendants' wrongful registration is the cause of the inability to sell its products. Finally, Plaintiff claims that the requested relief of declaratory relief, injunctive relief and damages will remedy the alleged injury.
For these reasons, Plaintiff has alleged sufficient facts to establish standing to state a claim of trademark infringement thus giving this court jurisdiction over the matter. This court, therefore, has supplemental jurisdiction over the related state law claims pursuant to 28 U.S.C. § 1367. The court also notes that although Plaintiff's claim is based in part on the charge of fraud, Defendants have not asserted any deficiency in the allegations.
B. Rule 12(b)(6) Motion to Dismiss 1. Allegations
Defendants also filed a Motion to Dismiss the claims against the individual defendants Turner and Boyer. The Defendants assert that the Complaint failed to state any facts to support imposing liability upon the corporate officers under either a participation theory or by piercing the corporate veil. Therefore, Defendants maintain that the Complaint must be dismissed against the individual defendants Turner and Boyer because it fails to state a claim upon which relief can be granted.
In response, Plaintiff contends that the Complaint alleges sufficient individual acts on the part of Defendants Turner and Boyer to demonstrate their participation in and liability for the tortious activity. (Pl's Memorandum in Opposition to Motion to Dismiss at p. 5).
2. Legal Standard
When deciding a motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6), the court may grant the motion only if, accepting all well-pleaded allegations in the complaint as true, and viewing them in the light most favorable to plaintiff, the plaintiff is not entitled to relief. Doug Grant, Inc. V. Greate Bay Casino Corp., 232 F.3d 173, 183 (3d Cir. 2000). Accordingly, a federal court may dismiss a complaint for failure to state a claim only if it is clear that no relief could be granted under any set of facts that could be proved consistent with the allegations. Doe v. Delie, 257 F.3d 309, 313 (3d Cir. 2001).
3. Sufficiency of the Complaint
Count I of Plaintiff's Complaint asserts a breach of contract claim against Defendants PRS and Turner. Because there is no allegation that Defendant Turner signed the contract in an individual capacity, Count I against him will be dismissed. Counts II-VI make claims for specific performance, declaratory judgment, trademark infringement, and tortious interference against all defendants, including the individual Defendants Turner and Boyer. The Complaint adequately states these claims and the Motion to Dismiss these Counts against the individual Defendants will be denied.
Count I claims a breach of contract by PRS and Defendant Turner. Plaintiff attached a copy of the contract to the Complaint. Review of the contract reveals that Defendant Turner signed the Bid Form, the Bid Bond, Bid Addendum and various other pages included in the contract. However, Turner only signed the contract in his official capacity as President of PRS, not in his individual capacity. There being no factual allegations that Turner was individually bound to the contract, Count I against him must be dismissed.
With regard to Counts II through VI, it is true that officers and directors are generally not held liable for the corporations's actions absent establishment of participation theory or the successful assertion of the equitable doctrine of piercing the corporate veil. First Realvest, Inc. v. Avery Builders, Inc., 600 A.2d 601, 603 (Pa.Super. 1991) (affirming order of trial court to dismiss Appellant's complaint because it alleged no facts that would support a claim based on participation theory). Accordingly, Defendants contend that Plaintiff has not alleged facts under either of these theories.
To impose liability on a corporate officer pursuant to the participation theory, a plaintiff must establish that the corporate officer engaged in misfeasance, i.e., "the improper performance of an act." Shay v. Flight C Helicopter Services, Inc., 822 A.2d 1, 17 (Pa.Super. 2003) (citing Brindley v. Woodland Vill. Rest., Inc., 652 A.2d 865, 868 (Pa.Super. 1995) (vacating judgment against company's president in his individual capacity)). Such liability attaches where the record establishes the individual's participation in the tortious activity. Id.
Plaintiff's Complaint alleges that the Defendants Turner and Boyer personally participated in the wrongful conduct. For instance, Plaintiff alleges that both Defendants Turner and Boyer made disparaging remarks to customers regarding the compost sold by the City. (Pl's Compl. at 20-21). These allegations are incorporated by reference into Counts I-V. Further, Plaintiff contends that both Defendants Boyer and Turner wrote to and threatened customers of the City. (Pl's Compl. at 46). These claims, if proven, could establish the individual participation by Defendants Turner and Boyer in the alleged wrongful activity.
For these reasons, Plaintiff adequately states claims against Defendants Turner and Boyer.
V. Conclusion
Plaintiff has alleged sufficient facts to establish standing and state a trademark infringement claim under the Lanham Act. Plaintiff has also stated sufficient facts to demonstrate the participation of the individual Defendants Turner and Boyer in the alleged wrongful activity. Plaintiff fails to state a claim against Defendant Turner for breach of contract. Therefore, the Court must grant Defendants' Motion for Dismissal of Count I against Defendant Turner and deny Defendants' Motion to Dismiss the remaining Counts against the Defendants Turner and Boyer.
An appropriate Order follows.
ORDER
AND NOW, this ________ day of __________, 2004, it is hereby ORDERED that Defendant's Motion to Dismiss Pursuant to Fed.R.Civ.P. 12(b)(1) and (6) (Doc. No. 2) be granted in part and denied in part. Defendant Turner is terminated as a party to Count I.