Court: District Court, E.D. Missouri; January 22, 2018; Federal District Court
Phoenix Entertainment Partners, LLC has initiated legal action against Sports Legends LLC (d/b/a Blarney Stone Sports Bar & Grill), Kann Inc. (d/b/a KT's Smokehouse Saloon), Borgettis Bar & Grill, Inc., and individual Anthony Utz, owner of Mo' Karaoke DJ Service. The suit alleges violations of the Lanham Act (specifically 42 U.S.C. §§ 1114(1) and 1125(a)) for trademark infringement and unfair competition, as well as breaches of Missouri's anti-dilution statute (Mo.Rev.Stat. § 417.061) and common law unfair competition. Defendants have filed motions to dismiss based on Rule 12(b)(6) for failure to state a claim.
Phoenix owns two federal service marks, "SOUND CHOICE" and "SOUND CHOICE. Design," which are well-known in the karaoke industry for their high-quality accompaniment tracks, often used in commercial settings. These tracks are identified by a specific logo and are estimated to represent over half of karaoke tracks played in the U.S. Their popularity is linked to their fidelity to original recordings and accurate singing cues, enhancing the perceived legitimacy and professionalism of venues that use them.
The Defendants contract with Utz to host karaoke shows, where the SOUND CHOICE marks are displayed frequently and prominently, serving as advertisements for the services provided. However, none of the Defendants have permission from Phoenix to use the SOUND CHOICE tracks, which Utz allegedly sourced illicitly. Phoenix claims that the repeated use of its marks leads patrons to mistakenly believe there is a connection or endorsement between the Defendants and Phoenix, causing confusion about the origin and sponsorship of the karaoke services offered.
Defendants are profiting from the unauthorized display of the Sound Choice marks during karaoke shows, causing damage to Phoenix, which seeks to hold Utz directly liable and the Venue Defendants (Sports, Kann, and Borgettis) secondarily liable. Phoenix is requesting both equitable and injunctive relief against all Defendants. The Court will first consider Utz's motion to dismiss.
Under Rule 12(b)(6), a complaint must present sufficient factual matter, accepted as true, to establish a plausible claim for relief. This requires more than mere possibility of unlawful conduct; the plaintiff must provide content that allows a reasonable inference of defendant liability. Determining the plausibility of a claim requires context-specific judicial experience and common sense.
Count I pertains to trademark infringement under 15 U.S.C. 1114(1). It defines karaoke and the role of a karaoke jockey. Phoenix claims that its SOUND CHOICE service marks were infringed by Defendants through their displays during karaoke shows, allegedly causing confusion among patrons regarding the origin and sponsorship of services. A trademark identifies goods, while a service mark identifies services, both governed by the same infringement standards. Utz contends that the infringement claims should be dismissed, arguing that Phoenix's claims are essentially a copyright issue disguised as trademark infringement, citing the Supreme Court's ruling in Dastar Corp. v. Twentieth Century Fox Film Corp.
Phoenix asserts that the Dastar case is not applicable to its claims, which involve service marks rather than trademarks related to goods. Courts have previously encountered similar Dastar defenses in cases involving Phoenix's SOUND CHOICE marks. In Dastar, the Supreme Court ruled that "origin of goods" refers to the producer of tangible goods rather than the creator of the content within those goods, indicating that claims of unauthorized content use are not valid under the Lanham Act. Following this precedent, various courts have concluded that Phoenix's claims regarding unauthorized copying of its karaoke tracks do not fall under the Lanham Act. However, an exception exists where a court declined to apply Dastar to Phoenix's trademark infringement claims. Phoenix argues its claims focus on the unauthorized use of its SOUND CHOICE marks and the service quality associated with them, rather than the creative content. Specifically, Utz's retention of the SOUND CHOICE marks on inferior copies misleads consumers about the quality of the services provided. Phoenix's allegations also reflect unauthorized copying and quality deterioration in the context of marks for goods. Similar cases have discussed the unauthorized copying of karaoke tracks as distinct goods improperly passed off as genuine products.
Trademark infringement and unfair competition hinge on the likelihood of confusion among consumers, as established in Wired for Sound. Key factors include the similarity of the trademarks, the competition between the services, the intent of the alleged infringer to confuse the public, and the expected degree of care from consumers. In evaluating Phoenix's claims, the analysis finds minimal similarity and competition with Utz’s services. Previous cases, such as Boyte and Star Music, illustrate that sufficient allegations of competition can support claims of confusion, as in Boyte where Sound Choice directly competed in the karaoke market. However, Phoenix fails to present similar allegations against Utz, leading to the conclusion that confusion is unlikely. The court noted that Phoenix's claims about potential confusion were speculative, emphasizing the lack of specific evidence regarding the frequency of Utz’s use of Phoenix’s tracks. Additionally, Phoenix's vague references to the use of its service marks by the defendants do not meet the criteria for a plausible claim. The discussion also references the Lanham Act and the criteria for defining a "service" as per the Trademark Manual, underscoring the need for clear definitions in trademark claims.
A valid service must involve a real activity performed for someone other than the applicant, and it must differ qualitatively from the sale of the applicant's goods or other services. Phoenix's allegations that Defendants used its Sound Choice marks in advertising fail to establish a distinct service activity, thus not meeting the criteria for service mark infringement under 15 U.S.C. § 1114(1). Consequently, Phoenix's claims against Utz are dismissed. In Count II, Phoenix argues that Defendants’ use of its marks in karaoke services harms its revenue and control over the marks, violating 15 U.S.C. § 1125(a). However, the claims under § 43(a) are similarly dismissed, as the same standards apply to both claims of infringement and unfair competition. Count III addresses a Missouri statute, Mo.Rev.Stat. § 417.061, which prohibits the use of counterfeit marks. The statute requires proof that the defendant's mark use adversely affects the plaintiff's mark's value and distinctiveness. Phoenix's inability to substantiate a claim of service mark infringement undermines its dilution claim. Count IV reiterates the common law unfair competition claims, which rely on the same facts as Count II and are therefore also dismissed. The defendants' motions to dismiss argue they cannot be held liable as there is no underlying liability from Utz. The Lanham Act permits two forms of secondary liability: vicarious and contributory.
Vicarious liability necessitates either an actual or apparent partnership between the defendant and the infringer, the authority to bind each other in transactions, or joint ownership or control over the infringing product. For contributory infringement to be established, there must be direct infringement by a party other than the secondarily liable defendant. Phoenix failed to state a viable claim against Utz across all counts, resulting in the dismissal of its claims against the Venue Defendants. The court referenced a precedent where similar claims were dismissed due to insufficient allegations of plausible infringement under the Lanham Act. Utz has filed a six-count counterclaim challenging the validity and abandonment of two registered service marks, while Sports Legends and Borgettis have filed a similar four-count counterclaim. Given Phoenix's failure to assert a valid claim, the counter-claimants must justify why their counterclaims should not be dismissed as moot. The ruling concludes that Phoenix's claims stem from alleged unauthorized use of SOUND CHOICE marks in karaoke services provided by Utz, but it insufficiently alleged infringement. Consequently, motions by Utz and the Venue Defendants to dismiss the amended complaint are granted, while earlier motions to dismiss the original complaint are denied as moot. The counterclaims must be addressed by February 12, 2018, to determine their status. Section 32 of the Lanham Act outlines liability for unauthorized use of registered marks likely to cause confusion in commerce.
Section 43 of the Lanham Act, 15 U.S.C. 1125, outlines liability for individuals using any word, term, or symbol in commerce that may cause confusion regarding the affiliation or origin of goods or services. Phoenix's infringement claims under this section are discussed, referencing the case Slep-Tone Entm't Corp. v. Johnson, where the Eleventh Circuit declined to apply the Dastar ruling. The court noted that the appeal concerned damages awarded after a bench trial and that a motion to dismiss was filed but denied. It emphasized that the motion and its denial did not raise Dastar-related issues. Two additional factors—trademark strength and evidence of actual confusion—are acknowledged but not contested in this context. The Court accepts Phoenix's assertion that its SOUND CHOICE marks are strong, and deems evidence of confusion premature at this stage.
Phoenix cites case law to argue that prior rulings do not apply to its service mark infringement claims, specifically mentioning Phoenix Entm't Partners, LLC v. Jorgensen, where service mark claims were allowed to proceed. However, the Court finds the reasoning in Star Music more persuasive than the brief treatment in Jorgensen. Additionally, Phoenix Entm't Partners, LLC v. Milligan, Inc. also denied dismissal of service mark claims, but the issue of whether karaoke services qualify as a "service" under the Lanham Act was not briefed there, unlike in the current case. Phoenix asserts it is the sole member of a company providing karaoke services, but the amended complaint lacks details about the specific venues at issue.
Defendant Kann seeks dismissal of state law claims based on the failure of underlying infringement claims, while other defendants urge the Court to decline supplemental jurisdiction over these claims. Phoenix also claims diversity jurisdiction over its state law claims. The same legal representation is noted for the opposing parties in a related case, but the dismissal of counterclaims was not addressed in the appeal.
