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Zip International Group, LLC v. Trilini Imports

February 22, 2010

ZIP INTERNATIONAL GROUP, LLC, PLAINTIFF,
v.
TRILINI IMPORTS, INC., A/K/A TRILINI IMPORTS, AND TGF PRODUCTION, LLC, DEFENDANTS.



The opinion of the court was delivered by: John Gleeson, United States District Judge

MEMORANDUM AND ORDER

Zip International Group, LLC, claiming to be the exclusive United States distributor and licensee of a Russian brand of sunflower seeds, brings this suit against a competitor, Trilini Imports, Inc. Trilini buys seeds of the same brand intended for sale to consumers in Russia and instead resells them in the United States, a practice informally referred to as "gray market" importing. According to Zip, Trilini is infringing Zip's trademark rights and misrepresenting the source of its seeds in violation of the Lanham Act, 15 U.S.C. § 1114 et seq., and New York law. Zip seeks injunctive relief, compensatory and punitive damages, and attorney's fees. Trilini moves to dismiss Zip's complaint under Federal Rule of Civil Procedure 12(b) for lack of subject-matter jurisdiction, failure to state a claim, and failure to join an indispensable party. For the reasons discussed below, the motion is denied.

BACKGROUND

The following allegations are taken from Zip's complaint.

Since 2007, Zip has sold sunflower seeds processed by OOO Troll Co. ("Troll"), a Russian company, in the United States under Troll's trademark. Zip's sales to date have totaled $3 million, and it spends roughly $150,000 per year to market and advertise the seeds. On September 28, 2009, Zip and Troll agreed in writing that: (1) Zip has an exclusive license to use Troll's trademarks in North America with respect to the importation, distribution, marketing, and sale of sunflower seeds specially seasoned by Troll for the North American market; (2) Zip has the sole right, to the exclusion of Troll, to enforce Troll's trademarks in North America; and (3) Zip has acquired a common law trademark in Troll's marks by virtue of its status as the first to market Troll's seeds in the United States and other parts of North America. The agreement is retroactively effective as of January 1, 2007 and expires on December 31, 2010.

Although Trilini knows or should know of Zip's exclusive United States license to the Troll mark, Trilini nevertheless buys Troll seeds in Russia, which are intended for sale in Russia, and sells them in the United States under the Troll trademark. Because the seeds Trilini imports are inferior to those intended for the North American market, which are produced according to a special recipe with higher quality ingredients, Trilini's sale of the seeds is confusing consumers and damaging Zip's goodwill. As a result of Trilini's competing sales, Zip is at risk of failing to sell the 100 tons of seeds it is obligated to purchase annually from Troll under their exclusive licensing agreement and Troll may choose not to renew the agreement when it expires.

DISCUSSION

Trilini moves to dismiss on three grounds: (1) lack of subject-matter jurisdiction under Federal Rule of Civil Procedure 12(b)(1); (2) failure to state a claim under Federal Rule of Civil Procedure 12(b)(6); and (3) failure to join an indispensable party under Federal Rule of Civil Procedure Rule 12(b)(7).

A. Subject-Matter Jurisdiction

Trilini argues that this Court lacks subject-matter jurisdiction to hear this dispute because Zip does not have standing to assert infringement claims under either federal or state law. A federal court may exercise jurisdiction over an action only if a plaintiff meets the standing requirements imposed by Article III's limitation of the judicial power of the United States to "cases" or controversies." See Bennett v. Spear, 520 U.S. 154, 167 (1997).To have constitutional standing, a plaintiff must allege that (1) she has suffered or imminently will suffer an injury; (2) the injury is fairly traceable to the defendant's conduct; and (3) the injury likely will be redressed by a favorable decision. See Lujan v. Defenders of Wildlife, 504 U.S. 555, 560-61 (1992). Zip has satisfied this requirement. It has alleged that its sales of sunflower seeds are suffering because Trilini is unfairly profiting from the goodwill Zip has built up as the exclusive United States licensee of the Troll mark by selling seeds under that mark without authorization. And the relief Zip seeks -- compensatory damages and an injunction barring Trilini from selling seeds under the Troll mark in the United States -- would redress its alleged injury. Trilini's motion to dismiss the complaint under Rule 12(b)(1) is denied.

Trilini's contention that Zip, as a mere licensee of trademarks owned by Troll, does not have standing to bring an enforcement action is better cast as an argument that the complaint should be dismissed for failure to state a claim because Zip lacks statutory standing.

Consequently, I consider this argument below as one made in support of Trilini's motion under Rule 12(b)(6).

B. Failure to State ...


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