RE/MAX, LLC v. M.L. Jones & Associates, Ltd et al, No. 5:2012cv00768 - Document 26 (E.D.N.C. 2013)

Court Description: ORDER granting in part and denying in part 10 and 23 Motions to Dismiss. The court DISMISSES Jones's and FavoriteAgent.com's fourth, fifth, and sixth counterclaims and Jones's seventh counterclaim. Signed by Chief Judge James C. Dever III on 8/29/2013. A copy of the order was mailed to the pro se Defendant Matthew L. Jones. (Sawyer, D.)

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RE/MAX, LLC v. M.L. Jones & Associates, Ltd et al Doc. 26 IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF NORTH CAROLINA WESTERN DIVISION No. 5:12-CV-768-D REIMAXLLC, Plaintiff, v. M.L. JONES & ASSOCIATES, LTD., and MATTHEW L. JONES, Defendants. ) ) ) ) ) ) ) ) ) ) ORDER On November 26,2012, REIMAX LLC ("REIMAX") filed suit against defendants Matthew L. Jones ("Jones"), an individual, and M.L. Jones & Associates, Ltd. (doing business as "FavoriteAgent.com"), a collective business entity [D.E. 1]. REIMAX asserts claims based on defendants' alleged infringement ofREIMAX trademarks. See [D.E. 1] ~~ 23-41. On December 26, 2012, Jones filed an answer to the complaint and asserted seven counterclaims against REIMAX [D.E. 9]. On January 11,2013, RE!MAXfiledamotion to dismiss Jones's counterclaims [D.E. 10]. See Fed. R. Civ. P. 12(b)(6). Jones responded in opposition to REIMAX's motion to dismiss [D.E. 13], and REIMAX replied [D.E. 14]. On June 13, 2013, FavoriteAgent.com filed an answer to the complaint and asserted six counterclaims against REIMAX [D.E. 22]. On July 3, 2013, REIMAX filed a motion to dismiss FavoriteAgent.com's counterclaims [D.E. 23]. See Fed. R. Civ. P. 12(b)(6). FavoriteAgent.com responded in opposition [D.E. 25]. As explained below, the court grants in part and denies in part REIMAX' s motions to dismiss. I. REIMAX, a Delaware limited liability company, provides real estate brokerage services in the United States. See [D.E. 1] ~~ 2, 8; [D.E. 9] 1; [D.E. 22] 1. As part of its business, REIMAX Dockets.Justia.com registered two trademarks with the U.S. Patent and Trademark Office. See [D.E. 9] 12; [D.E. 22] 6. Trademark number 1,702,048 consists ofthree rectangular, solid-color bars, red-over-white-overblue. See [D.E. 9] 12; [D.E. 22] 6; see also [D.E. 1-1] 1. Trademark number 1,691,854 consists of a hot-air balloon in the upper, left-hand comer against the backdrop of the design in trademark number 1,702,048. See [D.E. 9] 12; [D.E. 22] 6; see also [D.E. 1-1] 2. FavoriteAgent.com is a North Carolina corporation that Jones founded. See [D.E. 9] 1-2; [D.E. 22] 1. As part of its activities, FavoriteAgent.com has used "red-over-white-over-blue ... real estate yard signs." [D.E. 22] 6. REIMAX learned ofFavoriteAgent.com's signs and filed this suit, alleging trademark infringement. In response, Jones and FavoriteAgent.com filed numerous counterclaims under federal and state law against REIMAX. As for the claims under federal law, Jones and FavoriteAgent.com seek a declaratory judgment that REIMAX's trademarks are invalid under 15 U.S.C. § 1052(b) (count 1), see [D.E. 9] 12-14; [D.E. 22] 7-8; cancellationofREIMAX's trademarks under 15 U.S.C. § 1119 (count 2), see [D.E. 9] 14; [D.E. 22] 8; and a declaratory judgment that FavoriteAgent.com's signs do not infringe on REIMAX's trademarks (count 3). See [D.E. 9] 14; [D.E. 22] 8-9. Jones and FavoriteAgent.com also assert claims under the Sherman Antitrust Act, 15 U.S.C. §§ 1-7 (counts 4 and 5). See [D.E. 9] 14-15; [D.E. 22] 9. As for the state law claims, Jones and FavoriteAgent.com assert a violation of North Carolina's Unfair and Deceptive Trade Practices Act ("UDTPA"), N.C. Gen. Stat. § 75-1.1 (count 6). See [D.E. 9] 15-16; [D.E. 22] 10. Jones alone brings a claim of common law unfair competition (count 7). See [D.E. 9] 16. Only these counterclaims, and not REIMAX's original claims, are presently at issue. In analyzing a motion to dismiss under Rule 12(b)(6), a court must determine whether the complaint is legally and factually sufficient to state a plausible claim for relief. See Ashcroft v. Iqbal, 556 U.S. 662, 678-79 (2009); Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555-56 (2007); 2 Coleman v. Md. Court of Aweals, 626 F.3d 187, 190 (4th Cir. 2010), aff'd, 132 S. Ct. 1327 (2012); Giarratano v. Johnson, 521 F.3d 298, 302 (4th Cir. 2008). A court need not accept a complaint's "legal conclusions, elements of a cause of action, and bare assertions devoid of further factual enhancement." Nemet Chevrolet. Ltd. v. Consumeraffairs.com. Inc., 591 F.3d 250, 255 (4th Cir. 2009); see Iqbal, 556 U.S. at 678-79. Similarly, a court "need not accept as true unwarranted inferences, unreasonable conclusions, or arguments." Giarratano, 521 F.3d at 302 (quotation omitted); see Iqbal, 556 U.S. at 678-79. In analyzing a motion to dismiss, the court may consider extrinsic documents that were explicitly discussed in the complaint. See, ~' Am. Chiropractic Ass'n v. Trigon Healthcare. Inc., 367 F.3d 212, 234 (4th Cir. 2004). As for the first and second counterclaims, Jones and FavoriteAgent.com request a declaratory judgment that REIMAX trademark numbers 1,691,854 and 1, 702,048 are invalid under 15 U.S.C. § 1052(b) and seek cancellation of the trademarks. Section 1052(b) requires, in part, that a trademark not be registered if it "[c]onsists of or comprises the flag or coat of arms or other insignia ... of any foreign nation, or any simulation thereof." 15 U.S. C. § 1052(b). Jones and FavoriteAgent.com contend that REIMAX's trademarks are invalid because they comprise the flag of the Netherlands. See [D.E. 9] 13; [D.E. 22] 7-8. REIMAX responds that these counterclaims should be dismissed because its trademarks have become incontestable under 15 U.S.C. § 1065. See [D.E. 11] 4-5; [D.E. 24] 4-5. A trademark "becomes incontestable after it has been registered and in continuous use for five years and meets four other requirements" enumerated in section 1065. Shakespeare Co. v. Silstar Corp. of Am., 9 F.3d 1091, 1094 & n.2 (4th Cir. 1993); see,~' Lone Star Steakhouse & Saloon. Inc. v. Alpha of Va.. Inc., 43 F.3d 922, 930 (4th Cir. 1995). A trademark's incontestable status is "conclusive evidence of the validity of the registered mark and of the registration of the mark, of the registrant's 3 ownership of the mark, and of the registrant's exclusive right to use the registered mark in commerce." 15 U.S.C. § 1115(b); see Lone Star, 43 F.3d at 930. However, a district court may cancel an incontestable trademark under 15 U.S.C. § 1119 if the cancellation is based on a ground listed in 15 U.S.C. § 1064. See Retail Servs .. Inc. v. Freebies Publ'g, 364 F.3d 535, 548 (4th Cir. 2004); Shakespeare, 9 F .3d at 1097-99. Among other bases for cancellation of a trademark, section 1064 provides for cancellation if the trademark was obtained contrary to section 1052(b), which prohibits registrations of foreign flags or their simulations. See 15 U.S.C. § 1064(3). Thus, even assuming that REIMAX's trademarks have become incontestable within the meaning of 15 U.S.C. § 1065, such status alone does not compel dismissal of the counterclaims where the counterclaims are premised upon a plausible ground for cancellation of an incontestable trademark. To support their first two counterclaims, Jones and FavoriteAgent.com allege that REIMAX's trademarks impermissibly comprise the flag of the Netherlands. Specifically, Jones and FavoriteAgent.com identify the similarities between the trademarks and the flag ofthe Netherlands's red-over-white-over-blue horizontal bars. See [D.E. 9] 12-14; [D.E. 22] 7-8. Jones and FavoriteAgent.com have plausibly alleged their first two counterclaims. See Iqbal, 556 U.S. at 678-79. Whether Jones and FavoriteAgent.com can prove these counterclaims is an issue for another day. As for the third counterclaim, Jones and FavoriteAgent.com seek a declaratory judgment that FavoriteAgent.com' s yard sign does not infringe on any REIMAX trademark. See [D.E. 9] 14; [D.E. 22] 8-9. This counterclaim is simply the inverse of REIMAX's claim against Jones and FavoriteAgent.com for trademark infringement. Whether to grant a declaratory judgment is committed to the sound discretion of the court. See Centennial Life Ins. Co. v. Poston, 88 F.3d 255, 256-58 (4th Cir. 1996). On the current record, the court declines to dismiss the third counterclaim. 4 As for the fourth and fifth counterclaims, Jones and FavoriteAgent.com allege that REIMAX's suit is sham litigation and an abuse of process in violation of the Sherman Act. See [D .E. 9] 14-15; [D .E. 22] 9. RE!MAX responds that this lawsuit is protected from antitrust liability under the Noerr-Pennington doctrine. See [D.E. 11] 11-17; [D.E. 24] 11-17. "The NoerrPennington doctrine guarantees citizens their First Amendment right to petition the government for redress without fear of antitrust liability." Bait. Scrap Com. v. David J. Joseph Co., 237 F.3d 394, 398 (4th Cir. 2001); see Waugh ChapelS .. LLC v. United Food & Commercial Workers Union Local27, No. 12-1429,2013 WL 4505288, at *7 (4th Cir. Aug. 26, 2013); IGEN Int'l. Inc. v. Roche Diagnostics GmbH, 335 F.3d 303,310 (4th Cir. 2003). Immunity under Noerr-Pennington extends to litigation, see, ~' IGEN Int'l, 335 F.3d at 310, as well as "pre-litigation communications." Globetrotter Software. Inc. v. Elan Computer Gr,p .• Inc., 362 F.3d 1367, 1376 (Fed. Cir. 2004) (collecting cases). Whether Noerr-Pennington applies is a question oflaw. IGEN Int'l, 335 F.3d at 310. However, an exception to Noerr-Pennington immunity exists for those engaging in sham litigation. See,~' Profl Real Estate Investors. Inc. v. Columbia Pictures Indus .. Inc., 508 U.S. 49, 60--61 (1993); Waugh ChapelS .. LLC, 2013 WL 4505288, at *7-11; Bait. Scrap, 237 F.3d at 399. The definition of sham litigation has two parts. The first part requires that the "lawsuit must be objectively baseless in the sense that no reasonable litigant could realistically expect success on the merits." Profl Real Estate, 508 U.S. at 60; see Bait. Scrap, 237 F.3d at 399. A lawsuit is not objectively baseless if its proponent had probable cause to bring suit. Profl Real Estate, 508 U.S. at 62. "Only if challenged litigation is objectively meritless may a court" move on to the second issue-the "litigant's subjective motivation." ld. at 60. The court need only concern itself here with the frrst part. 5 In examining whether REIMAX had probable cause to file suit, a party claiming trademark infringement must show (1) a valid, registered trademark and (2) a likelihood of confusion between the trademark and the allegedly infringing mark. See 15 U.S.C. § 1114(1)(a). The Fourth Circuit has described a number of factors relevant to determining whether there is a likelihood of confusion, including ''the strength or distinctiveness of the mark," ''the similarity of the two marks," ''the similarity of the goods and services that the marks identify," and ''the similarity of the advertising the two parties use." Lone Star, 43 F.3d at 933; see Pizzeria Uno Corp. v. Temple, 747 F.2d 1522, 1527 (4th Cir. 1984). The allegations in REIMAX' s complaint confirm that REIMAX had probable cause to file a trademark-infringement action against Jones and FavoriteAgent.com. 1 Jones and FavoriteAgent.com have failed to plausibly allege that "no reasonable litigant could realistically expect success" based on the allegations in the complaint. See Prof'l Real Estate, 508 U.S. at 60; see also Iqbal, 556 U.S. at 678-79. Thus, the court dismisses the fourth and fifth counterclaims. As for the sixth counterclaim, Jones and FavoriteAgent.com allege that REIMAX violated the UDTPA by filing this lawsuit to intimidate and coerce a competitor. See [D.E. 9] 15-16; [D.E. 22] 10. A party alleging a UDTPA violation must show: "(1) an unfair or deceptive act or practice; (2) in or affecting commerce; and (3) that plaintiff was injured thereby." Gupton v. Son-Lan Dev. Co., 205 N.C. App. 133, 143,695 S.E.2d 763,771 (2010). "The institution ofalawsuitmaybe the basis for an unfair trade practices claim if the lawsuit is a mere sham to cover what is actually nothing more than an attempt to interfere directly with the business relationships of a competitor." United States v. Ward, 618 F. Supp. 884, 907 (E.D.N.C. 1985). As discussed, REIMAX had 1 The court's probable-cause determination is not an opinion on the merits of REIMAX' s claims. The court merely concludes that REIMAX's lawsuit is not "objectively baseless" and a sham. Prof'l Real Estate, 508 U.S. at 60. 6 probable cause to file this lawsuit and the action is not objectively baseless. Thus, the lawsuit is not an unfair act prohibited by the UDTPA. See id.; Gupton, 205 N.C. App. at 143-44, 695 S.E.2d at 771. Accordingly, Jones and FavoriteAgent.com have failed to plausibly allege a UDTPA claim. See Iqbal, 556 U.S. at 678-79. Finally, Jones brought a seventh counterclaim alleging that REIMAX committed the North Carolina common law tort of unfair competition. See [D.E. 9] 16. The tort of unfair competition seeks to protect "a business from misappropriation of its commercial advantage earned through organization, skill, labor, and money.'' Henderson v. U.S. Fid. & Guar. Co., 346 N.C. 741, 749, 488 S.E.2d 234, 240 (1997). "The standard which a plaintiff must meet to recover on an unfair competition claim under the common law is not appreciably different" from a UDTPA claim. BellSouth Corp. v. White Directozy Publishers. Inc., 42 F. Supp. 2d 598,615 (M.D.N.C. 1999); see Blue Rhino Global Sourcing. Inc. v. Well Traveled Imports. Inc., 888 F. Supp. 2d 718, 721 n.1 (M.D.N.C. 2012). Jones's unfair competition counterclaim duplicates his UDTPA counterclaim and meets the same fate. Jones has failed to plausibly allege a claim for unfair competition. See Iqbal, 556 U.S. at 678-79. II. In sum, REIMAX's motions to dismiss [D.E. 10, 23] are GRANTED IN PART and DENIED IN PART. The court DISMISSES Jones's and FavoriteAgent.com's fourth, fifth, and sixth counterclaims and Jones's seventh counterclaim. SO ORDERED. This _2j_ day of August 2013. J S C. DEVER III Chief United States District Judge 7

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