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Cree, Inc. v. Chen

United States District Court, E.D. New York

July 27, 2017

CREE, INC., Plaintiff,
XIU PING CHEN, et al., Defendants.

          OPINION & ORDER

          NINA GERSHON United States District Judge.

         Plaintiff Cree, Inc. ("Cree") brings this action against Hang Feng Wu ("Wu"), Xiu Ping Chen ("Chen"), Enumber, Inc. ("Enumber"), and N&K Trading, Inc. ("N&K")-the successor in interest to Yall, Inc. ("Yall")-(collectively "defendants") for violations of the Lanham Act, 15 U.S.C. §§ 1051 et seq.[1]Plaintiff filed its initial complaint on October 15, 2015, in the Central District of California. Pursuant to the parties' stipulation, the case was transferred to this district on March 3, 2016. On December 29, 2016, plaintiff sought leave to file an amended complaint, which I granted on April 27, 2017. Plaintiff filed its amended complaint ("Am. Compl.") on May 1, 2017. Defendants now move for partial dismissal of the Amended Complaint pursuant to Federal Rule of Civil Procedure 12(b)(6). For the reasons set forth below, defendants' motion is granted in part and denied in part.

         I. Facts

         Plaintiff is a company incorporated in North Carolina that designs, develops, and manufactures light-emitting diodes ("LEDs"). Plaintiff manufactures and sells LED bulbs, LED lighting products, LED components, and LED chips to manufacturers, resellers, and retailers, and licenses its trademarks to manufacturers. Am. Compl. at ¶ 17.

         Plaintiff has obtained trademark registrations for the CREE word mark and the XLAMP word mark, and has an application pending for registration of the XM-L word mark. Id. at ¶ 18. Additionally, plaintiff has obtained trademark registrations for four Cree design marks (collectively with the word marks, the "Marks"). Id. at ¶ 19.[2] Cree alleges that its products have earned a reputation for "innovation, quality and performance, and Plaintiff has spent substantial time, [and] money on television, print, and online advertising in an effort to develop consumer recognition and awareness of its CREE LED Products and the CREE Trademarks." Id. at ¶ 20. Because of its extensive use of the Marks and because of the quality of its products, plaintiff contends that the Marks "have been prominently placed in the minds of the public . .. Indeed, the CREE Trademarks are famous in the United States and around the world." Id. at ¶¶ 21, 22. As part of its business model, plaintiff "authorizes third party product manufacturers that use CREE LEDs in their products to use the CREE Trademarks under license, including but not limited to third party product manufacturers of consumer portable and high-end portable lighting products such as flashlights, head lamps, lanterns, bike lights, tactical flashlights, and weapon lights." Id. at ¶24.

         Plaintiff claims defendants import non-genuine Cree products from China, sell them online, and then ship the products to the purchasing customer. Plaintiff alleges that defendants import the goods from the Chinese company (not named as a defendant) Fujian Zongteng Network Co., Ltd ("FZN") and store the goods in a warehouse owned by defendants. Then, defendants, in conjunction with FZN, register accounts on Amazon, eBay, and under various usernames to advertise and sell these non-genuine Cree products to the consuming public. The allegedly infringing products sold by defendants include, inter alia, flashlights, headlamps, and bike lights. Plaintiff claims that defendants intend to cause consumer confusion such that consumers will believe these are genuine Cree products. Id. at ¶ 38.

         According to the Amended Complaint, Wu was the chief executive officer of N&K and Enumber, and Chen was the president of N&K. These were the companies that processed the payments for and shipped the goods listed on eBay, Amazon, and Tmart. Given Wu and Chen's prominent positions within these companies, plaintiff claims that they financially benefitted from these transactions.

         When plaintiff moved to file the proposed amended complaint, it attached a declaration by Marcus Chaney ("Chaney Declaration"), a supplemental declaration by Marcus Chaney ("Supplemental Chaney Declaration") (collectively, "Chaney Declarations" or the "Declarations"), and exhibits to those declarations. See Dkt. Nos. 69-2, 77-1. The Chaney Declarations chronicle the purchases plaintiff made of items bearing the allegedly infringing Marks. Of the seven Marks identified in the Amended Complaint, the Declarations detail purchases of products bearing six of these seven Marks. See Chaney Declaration Exs. E, H, K, M, O (showing purchases bearing allegedly infringing Cree and XM-L Marks); Supplemental Chaney Declaration Ex. V (showing purchases bearing the four allegedly infringing design Marks). The only infringing Mark that the Chaney Declarations do not describe as being purchased from defendants is the XLAMP Mark.

         Specifically, on January 27, 2015, plaintiff authorized the purchase of a purported Cree flashlight from the eBay seller "yall-fr." Payment for this item was made to N&K. On the purchased item were allegedly non-genuine Cree and XM-L Marks, and the item was received in a package identifying N&K as the sender. See Chaney Declaration Ex. E. In total, plaintiff authorized the purchase of 12 allegedly infringing flashlights that were sold and distributed by N&K. Chaney Declaration at ¶ 7.

         On August 5, 2015, plaintiff authorized the purchase of a "4X Car Wedge LED Cree Reverse Light Bulb Signal Backup Lamp." Payment was made to N&K. This item also had allegedly non-genuine Cree Marks, and the item was received in a package identifying N&K as the sender. Id. Ex. H.

         On October 28, 2015, plaintiff authorized the purchase of an "1800 Lumens Super Bright LED Headlamp." The purchased item's user guide contained the XM-L Mark to describe the type of LED used to power the headlamp, and the item was received in a package identifying N&K as the sender. Id. Ex. K.

         This action commenced on October 15, 2015. Defendant Wu was served on October 28, 2015. On October 23, 2015, Enumber was incorporated and Wu was identified as the CEO, Secretary, CFO, and President. On March 24, 2016-five months after this action was initiated- plaintiff authorized the purchase of an "LED Headlight for Bicycle." The item's listing on eBay identified the LED emitter brand as "CREE" and the LED type as "XML." Id. at ¶ 16; Ex. M. Payment was made to Enumber. The purchased item had an allegedly non-genuine XM-L Mark, and the item was received in a package identifying N&K as the sender. Id. Ex. O.

         Based on this alleged conduct, plaintiff brings four claims in the Amended Complaint: (1) trademark infringement pursuant to 15 U.S.C. § 1114; (2) false designation of origin and unfair competition pursuant to 15 U.S.C. § 1125(a); (3) contributory trademark infringement; and (4) vicarious trademark infringement.[3] Defendants move for partial dismissal and argue that the Amended Complaint fails to state a claim: (1) as to the XM-L Mark; (2) as to the XLAMP Mark; (3) for false designation of origin as to all Marks; (4) for trademark infringement as to all Marks to the extent the claim relies on consumer confusion rather than counterfeiting; and (5) as to Enumber.

         II. Discussion

         A. Motion to Dismiss Standard

         In deciding a motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6), the court must accept as true all well-pleaded factual allegations and must draw all inferences in plaintiffs favor. Swiatkowski v. Citibank, 446 Fed.Appx. 360, 360-61 (2d Cir. 2011). To survive a motion to dismiss, a complaint must contain sufficient factual matter to "state a claim to relief that is plausible on its face." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting BellAtl. Corp. v. Twombfy, 550 U.S. 544, 570 (2007)). Facial plausibility exists when a plaintiff "pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id.

         In considering a motion to dismiss for failure to state a claim pursuant to Rule 12(b)(6), a district court may consider the facts alleged in the complaint, "documents attached to the complaint as an exhibit, " and documents incorporated by reference in the complaint. Chambers v. Time Warner, Inc., 282 F.3d 147, 153 (2d Cir. 2002). A court may also consider a document that is not incorporated by reference if "the complaint relies heavily upon its terms and effect, thereby rendering the document integral to the complaint." Id. (internal quotation omitted).[4]

         B. April 26, 2017 Conference

         On April 26, 2017, 1 held a conference regarding plaintiffs motion to amend its complaint. At that time, despite extensive briefing by the parties on many of plaintiff s claims, I limited my rulings to the ways in which plaintiff was seeking to amend its complaint, i.e., (1) to eliminate the California state law claim; (2) add a vicarious trademark infringement claim; (3) add a contributory trademark infringement claim; and (4) add Enumber as a defendant. I granted plaintiffs motion in its entirety. In support of its motion to amend, plaintiff included its proposed amended complaint. After granting plaintiff leave to amend, I directed plaintiff to file the Amended Complaint in the same form as the proposed amended complaint, which plaintiff ultimately did. See Transcript of April 26, 2017 Conference ("Transcript") at 19.

         In addition to addressing these four proposed amendments, the parties' briefs also extensively discussed the validity of other claims brought by plaintiff in its original complaint. Though I noted that deciding these issues on a motion to amend was improper and that a motion to dismiss was the proper mechanism to present these arguments, I attempted to provide guidance to the parties regarding the strength of their respective arguments. As a result, plaintiff agreed to dismiss its trademark dilution claim and stipulated that it was discontinuing its pursuit of a counterfeit theory as to the unregistered XM-L Mark. See Transcript at 13; Dkt. No. 87.

         Contrary to plaintiffs assertion in its opposition to defendants' motion to dismiss, I did not decide any issues presented by the pending motion to dismiss at the April 26 conference. Rather, I stated, "I think I should be addressing now just those things in the proposed amended complaint which would change the currently operative pleading. Unless I hear otherwise from you with regard to this, that's what I intend to do, address that first, and then I'm happy to discuss with you my sense of the validity or invalidity of the other claims." Transcript at 2. Accordingly, I will decide all of the issues defendants present in their pending motion.

         C. Likelihood of Confusion

         Turning to the substance of plaintiff s claims, I begin my analysis with whether plaintiff has sufficiently pled likelihood of confusion. Defendants argue that plaintiff has failed to plead likelihood of confusion, thus requiring dismissal of its false designation of origin claim in its entirety and its trademark infringement claim to the extent it relies on a theory of confusion rather than counterfeiting.

         Courts employ the same standard when analyzing claims for trademark infringement under the Lanham Act, 15 U.S.C. § 11 l4(1)(a), and false designation of origin under the Lanham Act, 15 U.S.C. § 1125(a). Virgin Enterps. Ltd. v. Nawab, 335 F.3d 141, 146 (2d Cir. 2003). As to an infringement claim, the Lanham Act prohibits the "use in commerce [of] any reproduction, counterfeit, copy, or colorable imitation of a registered mark in connection with the sale, offering for sale, distribution, or advertising of any goods or services on or in connection with which such use is likely to cause confusion, or to cause mistake, or to deceive." 15 U.S.C. § 11 l4(1)(a). The elements of trademark infringement are that: (1) the plaintiff holds a valid mark entitled to protection; (2) the defendant used the mark in commerce in connection with the sale or advertising of goods or services without the plaintiffs consent; and (3) the defendant's use is likely to cause confusion. See 1-800 Contacts, Inc. v. WhenU.Com, Inc., 414 F.3d 400, 406-07 (2d Cir. 2005).

         As to a false designation of origin claim, the Lanham Act prohibits any misleading representation of fact that is "likely to cause confusion, or to cause mistake, or to deceive as to the affiliation, connection, or association of such person with another person, or as to the origin, sponsorship, or approval of his or her goods, services, or commercial activities by another person." 15 U.S.C. § 1125(a)(1)(A). Though subject to the same standards as a trademark infringement claim, Section 1125(a) protects unregistered marks if they ...

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