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Phoenix Entertainment Partners, LLC v. J-V Successors, Inc.

United States District Court, S.D. New York

March 31, 2018

PHOENIX ENTERTAINMENT PARTNERS, LLC, Plaintiff,
v.
J-V SUCCESSORS, INC., d/b/a Keats, a/k/a Keats Bar, Defendant.

          OPINION AND ORDER

          GREGORY H. WOODS United States District Judge.

         Sore throats. Ringing ears. Embarrassed friends. The longest version of Bohemian Rhapsody, ever. These perils of karaoke are widely known. Keats Bar on Second Avenue is facing a lesser known peril of the industry: a trademark infringement and unfair competition lawsuit in federal court. Plaintiff alleges that the use of copied versions of its karaoke accompaniment tracks violates its trademarks and service marks, and is pursuing these claims as trademark rather than copyright claims because it does not own the relevant copyrights. Defendant has moved to dismiss Plaintiff's complaint in its entirety. Because the use of a goods trademark to protect against copying the tracks raises the spectre of the “species of mutant copyright law” about which the Supreme Court cautioned in Dastar Corp. v. Twentieth Century Fox Film Corp., Plaintiff's Lanham Act claims based on its goods marks are dismissed. The same rationale does not apply to the service mark claims, but Plaintiff has failed to plausibly allege that the copied tracks at issue here are of diminished quality, so its claims based on service marks are also dismissed.

         I. BACKGROUND

         Karaoke as it is known today is made possible by “karaoke accompaniment tracks, ” which are re-recorded versions of popular songs without the corresponding vocals and with a corresponding visual component displaying the lyrics to the songs and visual cues for the performer. Dkt. No. 1, Complaint (“Compl.”) ¶ 11. Plaintiff Phoenix Entertainment Partners, LLC's predecessor in interest, Slep-Tone Entertainment Corporation, produced more than 16, 500 such tracks “on special compact discs known as CD (‘compact disc plus graphics') discs and, more recently, a subset of that catalog in another common karaoke format, MP3 (‘MP3 plus graphics') on compact discs.” Id. ¶ 17. These tracks are all branded under the trademark “Sound Choice, ” a mark for which Plaintiff owns several trademarks and service marks. Id. ¶¶ 16-17. According to Plaintiff, Sound Choice-branded karaoke tracks are “wildly popular” and may make up more than half of all karaoke tracks played across the United States. Id. ¶ 18. The reason for Sound Choice tracks' popularity, Plaintiff alleges, is that they are “usually the most faithful to the sound of the original recording” and because they provide accurate visual cues during the performances. Id. ¶¶ 19-20.

         Sound Choice tracks are only released on compact discs, and not through any other format like hard drives or internet downloads. Id. ¶ 21. At some point, users of Sound Choice tracks began transferring the tracks from CD to “alternative media, such as computer hard drives.” Id. ¶ 22. This process is referred to as “media-shifting” or “format-shifting.”[1] Id. ¶ 24. According to the complaint, media shifting results in “degraded” and “inferior” copies of the tracks compared to the original tracks on CD due to the digital compression of the tracks. Id. ¶ 23. Plaintiff does not explicitly allege that Defendant media-shifted Sound Choice tracks from CD to hard drives, but rather alleges that Defendant possesses karaoke accompaniment tracks that are “marked with the Sound Choice Mark and are specifically identified in the computer system that contains them, by name or other symbol, as SOUND CHOICE tracks” and that those tracks “were not made by Phoenix.” Id. ¶¶ 38-39. As a result, Plaintiff concludes, any karaoke accompaniment tracks that Defendant supplies to their patrons and that were marked with the Sound Choice Marks “were and are counterfeit.” Id. at ¶ 42. In its opposition brief, Plaintiff clarifies that it intended to allege that Defendant “engaged in a process called ‘media shifting' a/k/a ‘ripping' because the information is being copied from one medium to another, and ‘format-shifting' because the information is being modified from one format to another. . . .” Dkt. No. 24, Mem. of Law in Opp'n to Mot. to Dismiss (“Pl.'s Mem.”) at 15.

         Plaintiff alleges that consumers will view the display of the Sound Choice mark in connection with karaoke shows “as an indicator of the affiliation, connection, or association of the Defendant with [Plaintiff], or of [Plaintiff's] sponsorship or approval of the services and related commercial activities, rather than merely as indicating [Plaintiff] as the creator of the underlying communicative content of any particular song being performed.” Compl. ¶ 45. Similarly, Plaintiff alleges that consumers are “likely to be confused regarding the origin or sponsorship of the goods being supplied and regarding the affiliation or connection of the Defendant with [Plaintiff], based on their mistaken belief that the goods being supplied were made by [Plaintiff] and that the services being provided are provided with [Plaintiff's] knowledge and approval.” Id. ¶ 47. In sum, Plaintiff alleges that consumers are likely to be confused when media-shifted karaoke accompaniment tracks bearing Sound Choice marks are played at Defendant's karaoke shows.

         Many of the unusual elements of Plaintiff's claims in this case may be best understood as trademark claims brought in the absence of a copyright to protect against the unauthorized copying of Plaintiff's karaoke accompaniment tracks. As the Seventh Circuit observed in a nearly identical case brought by the same Plaintiff, “there is no doubt that, on the facts alleged, [Plaintiff] would have a perfectly viable claim for copyright infringement against the defendants, if [Plaintiff] owned the copyright on these tracks. We are told it does not. [Plaintiff] does own the Sound Choice trademarks and associated trade dress, which explains why [Plaintiff] has cast its lot with trademark rather than copyright law.” Phoenix Entertainment Partners v. Rumsey, 829 F.3d 817, 824 (7th Cir. 2016).[2] The Seventh Circuit's observations are equally relevant here because all of the conduct to which Plaintiff objects in this case stems from unauthorized copying.

         II. PROCEDURAL HISTORY

         On December 7, 2016, Plaintiff brought this action against Defendant J-V Successors, Inc., a corporation that operates a bar and restaurant called Keats Bar in New York City. Compl. ¶ 8. Plaintiff asserts federal claims for trademark infringement and unfair competition under the Lanham Act, and several state law claims. As relief, Plaintiff seeks a permanent injunction barring Defendant from further unauthorized use or copying of Sound Choice tracks, as well as compensatory and punitive damages. Id. at 16-17. On February 8, 2017, Defendant moved to dismiss the complaint. Dkt. No. 25, Mot. To Dismiss; Dkt. No. 26, Mem. of Law in Supp. Of Mot. To Dismiss (“Def.'s Mem.”). Plaintiff filed an opposition brief on March 1, 2017, Pl.'s Mem., and Defendant filed a reply brief on March 13, 2017, Dkt. No. 27, Reply Mem. of Law in Supp. Of Mot. to Dismiss (“Def.'s Reply Mem.”).

         III. LEGAL STANDARDS

         Under Federal Rule of Civil Procedure 8(a)(2), a complaint must contain “a short and plain statement of the claim showing that the pleader is entitled to relief.” Fed.R.Civ.P. 8(a)(2). Rule 8 “does not require ‘detailed factual allegations, ' but it demands more than an unadorned, the-defendant-unlawfully-harmed-me accusation.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007)). To survive a motion to dismiss pursuant to Rule 12(b)(6), a complaint “must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.'” Id. at 678 (quoting Twombly, 550 U.S. at 570). “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id. (citing Twombly, 550 U.S. at 556). “To survive dismissal, the plaintiff must provide the grounds upon which his claim rests through factual allegations sufficient ‘to raise a right to relief above the speculative level.'” ATSI Commc'ns, Inc. v. Shaar Fund, Ltd., 493 F.3d 87, 98 (2d Cir. 2007) (quoting Twombly, 550 U.S. at 555).

         Determining whether a complaint states a plausible claim is a “context-specific task that requires the reviewing court to draw on its judicial experience and common sense.” Iqbal, 556 U.S. at 679. The court must accept all facts alleged in the complaint as true and draw all reasonable inferences in the plaintiff's favor. Burch v. Pioneer Credit Recovery, Inc., 551 F.3d 122, 124 (2d Cir. 2008) (per curiam). However, a complaint that offers “labels and conclusions” or “naked assertion[s]” without “further factual enhancement” will not survive a motion to dismiss. Iqbal, 556 U.S. at 678 (citing Twombly, 550 U.S. at 555, 557).

         IV. DISCUSSION

         Plaintiff's claims against Defendant arise out of its four federally registered trademarks and service marks. A trademark is “any word, name, symbol, or device . . . used by a person . . . to identify and distinguish his or her goods, including a unique product, from those manufactured or sold by others and to indicate the source of the goods . . . .” 15 U.S.C. § 1127. The two trademarks at issue here are for “[p]re-recorded . . . compact discs containing musical compositions and compact discs containing video related to musical compositions.” Compl. at 18. A service mark is “any word, name, symbol, or device, or any combination thereof . . . used by a person . . . to identify and distinguish the services of one person, including a unique service, from the services of others and to indicate the source of the services.” 15 U.S.C. § 1127. The two service marks at issue here are for “[c]onducting entertainment exhibitions in the nature of karaoke ...


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