General Linen Service, Inc. v. General Linen Service Co.
Docket: Civil No. 12-cv-111-LM
Court: District Court, D. New Hampshire; June 11, 2014; Federal District Court
General Linen Service, Inc. has filed a lawsuit against General Linen Service Co. Inc. on various state law grounds and under the Computer Fraud and Abuse Act. In response, the defendant has raised five counterclaims, which include requests for the cancellation of the plaintiff's trademark (Counts I and II) and violations of the New Hampshire Consumer Protection Act (Count III), intentional interference with contractual relationships (Count IV), and claims of unfair competition and deceptive trade practices under common law and the Lanham Act (Count V). The plaintiff seeks to dismiss Counts I, II, III, and V, while the defendant objects to this motion.
General Linen Service Co. Inc. (referred to as "GL Somersworth") is based in Somersworth, New Hampshire, providing linen and uniform rental services, similar to its competitor, General Linen Service, Inc. (referred to as "GL Newburyport") located in Newburyport, Massachusetts. GL Newburyport filed a federal trademark application for "GENERAL LINEN SERVICE" on October 27, 2005, asserting exclusive rights since January 1, 1933. The application was initially rejected by the PTO in May 2006 for being "merely descriptive." In response, GL Newburyport submitted an affidavit claiming the mark had become distinctive through continuous use. The PTO eventually granted the trademark on February 27, 2007, and later recognized its incontestability after GL Newburyport filed an affidavit of continued use.
GL Somersworth contends that GL Newburyport engaged in intentional misrepresentation throughout the trademark application process, asserting that GL Newburyport did not have "substantially exclusive" use of the GLS mark and that the terms "General," "Linen," and "Service" are too generic to qualify for trademark registration.
In a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6), the court must accept all factual allegations in the counterclaims as true, distinguishing between factual assertions and conclusory statements to determine if a plausible case for relief exists. GL Somersworth filed five counterclaims against GL Newburyport: (1) Cancellation of Trademark Registration for Fraudulent Procurement, (2) Cancellation for Genericness, (3) Violation of the New Hampshire Consumer Protection Act, (4) Intentional Interference with Contractual Relationships, and (5) Unfair Competition and Deceptive Trade Practices. GL Newburyport seeks dismissal of Counts I, II, III, and V.
For Count I, related to fraud in trademark procurement, GL Newburyport argues that the allegations are based on "information and belief" and that GL Somersworth lacks claims of superior rights to the mark or knowledge of such rights by GL Newburyport. Under 15 U.S.C. § 1064, any person believing they will be damaged may petition for cancellation of a mark obtained fraudulently. The elements for a fraud claim include: a false representation to the PTO, knowledge of its falsity, intent to induce reliance, and the PTO’s resulting deception. The Lanham Act mandates that applicants avoid knowingly false or misleading statements in their registration applications. Allegations of fraud must be pled with particularity per Federal Rule of Civil Procedure 9(b), requiring explicit details rather than implied claims.
Rule 9 establishes a heightened pleading standard for fraud allegations to ensure defendants are adequately notified of claims, protect their reputations from unfounded accusations, deter frivolous lawsuits, and prevent discovery fishing expeditions. GL Newburyport asserts that GL Somersworth failed to meet these heightened requirements, particularly arguing that claims based on "information and belief" must specify the factual basis for that belief. GL Newburyport cites an example from the counterclaims alleging that it knew it had not used the mark GENERAL LINEN SERVICE since 1933, arguing this does not provide sufficient factual support.
However, the court finds that GL Somersworth has met the pleading requirements. The allegation that GL Newburyport was aware of its lack of continuous use of the GLS mark since 1933 is corroborated by evidence from GL Newburyport's website and its use of a different mark since 2003. Additionally, GL Somersworth's claims, based on "information and belief," are supported by its status as a competitor that has used the same mark since at least 1938.
The court concludes that the counterclaims adequately allege fraudulent procurement of a trademark, citing that the allegations are not solely based on "information and belief" but also on investigative findings indicating that GL Newburyport was not using its mark for all listed goods during the relevant period. GL Newburyport's argument regarding the lack of specific allegations about knowing falsehoods in the trademark registration process is noted as not having been raised in a timely manner and is ultimately deemed meritless.
Counterclaims assert that GL Newburyport made misrepresentations to the Patent and Trademark Office (PTO) to unjustly obtain trademark registration, indicating intent to deceive and sufficient allegations of scienter. Allegations of scienter can be general, as established by case law, meaning specific details of fraudulent circumstances are not always necessary. A claim of fraud is sufficiently pled if it is shown that a known misrepresentation regarding material facts was made to procure a registration.
GL Newburyport contends that GL Somersworth's claim fails due to the lack of an assertion of superior legal rights to the GLS mark, which it claims is essential for a fraud claim in trademark procurement. GL Somersworth admits it did not claim superior rights but argues that such a claim is only necessary when the fraud claim is based on superior rights. Supporting case law clarifies that the requirement for alleging superior rights pertains specifically to claims asserting fraudulent procurement based on the existence of another similar mark at the time the oath was signed.
Moreover, fraudulent procurement claims can arise from various bases, not solely from failing to disclose another's use of a mark. The standard for proving fraud involves demonstrating the applicant's knowledge of another's superior rights and intent to mislead the PTO, but this standard does not apply universally to all fraudulent procurement claims.
GL Somersworth's counterclaims assert that GL Newburyport made several misrepresentations to the PTO regarding the continuous use of the trademark for five years, the distinctiveness of the terms "GENERAL" and "GENERAL LINEN SERVICE," and its status as the exclusive user of the mark in U.S. commerce. These claims suggest fraudulent procurement of the trademark, which do not mandatorily require proof of superior legal rights, as established in relevant case law. In response, GL Newburyport contends that allegations of third-party use of the mark are irrelevant unless those parties have superior rights, arguing that such claims should be dismissed based on the Intellimedia standard. However, the counterclaims are considered sufficient for alleging fraudulent procurement, with the issue of evidentiary support to be evaluated later during summary judgment.
Additionally, GL Somersworth claims the GLS mark is generic and lacks secondary meaning, which GL Newburyport seeks to dismiss, arguing that GL Somersworth has not provided evidence to support this assertion. Both parties agree that the determination of whether a mark is generic is a factual question based on public perception, requiring evidence such as consumer surveys and publications. While GL Newburyport asserts that GL Somersworth must allege the existence of this evidence, the court notes that no precedent necessitates such an obligation for pleading a claim of genericness.
GL Somersworth's claim for cancellation due to genericness cannot be dismissed simply due to a lack of specific evidence allegations. In Count III, GL Somersworth accuses GL Newburyport of violating the New Hampshire Consumer Protection Act (CPA) by sending a cease and desist letter regarding a mark that GL Newburyport knew to be generic and invalid. GL Newburyport seeks dismissal of this claim, arguing that the letter's receipt does not substantiate a CPA claim since GL Somersworth did not take it seriously and cannot claim deception or injury. The CPA prohibits unfair competition and deceptive practices in commerce, including misleading representations about goods or services. GL Somersworth's claim implies that GL Newburyport attempted to enforce a fraudulent trademark. GL Newburyport fails to cite authority against the validity of GL Somersworth's allegations under the CPA. New Hampshire courts often reference the Massachusetts CPA for guidance, and there is precedent supporting CPA claims based on fraudulent trademark registration. Furthermore, the CPA does not necessitate proof of actual damages for statutory minimums and attorney's fees. Consequently, GL Newburyport's motion to dismiss GL Somersworth’s CPA claim is not substantiated. In Count V, GL Somersworth alleges that GL Newburyport's actions, including pursuing unfounded claims for settlement, constitute unfair competition under the Lanham Act and New Hampshire common law. GL Newburyport moves to dismiss this count but offers no substantial argument against it.
GL Newburyport's motion to dismiss Count V is denied, as claims supporting the fraudulent procurement and Consumer Protection Act allegations remain valid when viewed favorably toward GL Somersworth. GL Somersworth's counterclaims assert that the PTO granted incontestable status to the GLS mark on February 27, 2007, although it could not obtain this status until February 27, 2012, following five years of continuous use. The court assumes the PTO granted incontestable status after October 24, 2012, when GL Newburyport filed an affidavit of continued use. Descriptiveness and genericness do not constitute fraud or mistake under the heightened pleading requirements of Federal Rule of Civil Procedure 9(b). Additionally, for a valid Consumer Protection Act claim under New Hampshire or Massachusetts law, the plaintiff must show injury from fraudulent misconduct or that a commercial transaction occurred. GL Newburyport's argument regarding the lack of injury is not addressed since it did not develop a counterargument regarding a commercial transaction.
