By Dabney Carr
In a recent decision denying a motion to dismiss claims relating to a "poached" service mark, Judge Hudson set a lenient standard for pleading trademark infringement under Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007) [enhanced version available to lexis.com subscribers] and Ashcroft v. Iqbal, 129 S.Ct. 1937 (2009) [enhanced version available to lexis.com subscribers]. Diamonds Direct USA, Inc. v. BFJ Holdings, Inc., Civil Action No. 3:12CV303, 2012 U.S. Dist. LEXIS 90222 (E.D. Va. June 28, 2012), found here.
Diamonds Direct is a North Carolina jewelry company that alleged it had established a service mark over the name "Diamonds Direct" through continuous use of the mark over sixteen years in the southeastern United States, including Virginia, where it claimed to have over 700 customers.
When it learned that Diamonds Direct was expanding to Richmond, the defendant, Capri Jewelers, allegedly registered "Diamonds Direct" as a service mark in Virginia as a preemptive measure and began using the phrase "Diamonds Direct" in its advertising.
Capri claimed that Diamonds Direct did not advertise or provide services in Virginia to an extent necessary to demonstrate a common law right in the "Diamond Direct" mark and moved to dismiss all the counts in the Complaint.
Citing Twombly, Judge Hudson ruled that a Complaint for trademark infringement must "state a claim to relief that is plausible on its face." "A complaint achieves facial plausibility when the facts contained therein support a reasonable inference that the defendant is liable for the misconduct alleged." The inquiry is context-specific and requires the court to draw on its judicial experience and commons sense.
The alleged "fatal flaw" in the infringement claim was the absence of factually supported allegation of a valid and enforceable service mark. The Court disagreed. "Taken in its best light," Diamond Direct's allegation of use of the mark in Virginia and the southeastern U.S. was enough to state a "plausible" claim for relief.
The takeaway from Judge Hudson's decision is that courts will be unwilling to look beyond any "plausible" factual allegation at the pleadings stage. While purely conclusory allegations of continuous use of a mark may not meet the Twombly/Iqbal standard, factual allegations containing any detail will probably pass muster. Thus, as in patent infringement cases, Twombly/Iqbal will likely not pose substantial hurdles to trademark infringement plaintiffs.
Judge Hudson did, however, grant Capri's motion to dismiss Diamond Direct's claim under the Virginia Consumer Protection Act (VCPA), Va. Code § 59.1-196, holding that only members of the consuming public, not commercial competitors, could bring claims under the VCPA.
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