Case: 4:17-cv-01284-AGF Doc. #: 27 Filed: 07/17/17 Page: 1 of 13 PageID #: 151
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`UNITED STATES DISTRICT COURT
`EASTERN DISTRICT OF MISSOURI
`EASTERN DIVISION
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`ETRAILER CORPORATION,
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`) Case No. 4:17-CV-01284-AGF
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` Plaintiff,
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` vs.
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`ONYX ENTERPRISES, INT’L CORP.
`d/b/a CARiD.COM,
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` Defendant.
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`
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`MEMORANDUM AND ORDER
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`This copyright and unfair competition matter is before the Court on the motion of
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`Defendant Onyx Enterprises, International Corporation (“Onyx”), to dismiss Plaintiff
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`etrailer Corporation’s (“etrailer”) complaint. For the reasons set forth below, the motion
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`to dismiss will be denied in part as to etrailer’s copyright claims, and granted as to etrailer’s
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`unfair competition claims.
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`BACKGROUND
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`Etrailer is an online vendor of motor vehicle accessories such as trailer hitches,
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`trailer parts, and towing accessories. Etrailer uses its own high-quality photographs
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`(“Photos”) and videos to advertise and market the products it sells. Onyx, which does
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`business on the Internet as CARiD.com, is a direct competitor of etrailer in the online car
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`accessories sales market. Etrailer and Onyx sell many of the same products made by third
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`parties.
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`Etrailer’s complaint states that its Photos and videos either have copyright
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`registrations approved by the United States Copyright Office (“actual registrations”), or are
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`the subject of pending, completed copyright registration applications filed with the
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`Copyright Office (“applied-for registrations”). Etrailer claims that Onyx engaged in
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`willful copyright infringement in violation of the federal Copyright Act, 17 U.S.C. § 501,
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`by illegally copying and displaying thousands of etrailer’s Photos on CARiD.com to sell
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`the products depicted in the photos (Count I).
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`Etrailer additionally alleges that Onyx altered some of the Photos by removing
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`etrailer’s name or marks that originally appeared in the Photos on or near the products
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`depicted. Etrailer claims that this constituted false designation of origin in violation of
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`§ 43(a) of the Lanham Act, 15 U.S.C. § 1125(a) (Count II), and Missouri statutory and
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`common law (Count III).
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`For the copyright infringement claims, etrailer seeks an entry of judgment finding
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`that Onyx has infringed on etrailer’s rights; an order directing Onyx to provide proof of
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`destruction of unlawful copies of the Photos, or to allow etrailer to effect the same; a
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`permanent injunction against Onyx; monetary damages, pursuant to 17 U.S.C. § 504(c), of
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`$150,000 per infringement, or disgorgement of Onyx’s profits in an amount to be proven at
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`trial; and costs and attorney’s fees.
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`For the false designation of origin claims, etrailer seeks an entry of judgment;
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`reimbursement for advertising and other expenses necessary to dispel the public confusion
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`caused by Onyx’s unlawful acts; monetary damages in an amount to be proven at trial,
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`2
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`trebled, pursuant to 15 U.S.C. § 1117, on account of Onyx’s willfulness; and attorney’s
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`fees and costs.
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`To support its claims, etrailer attached to the complaint an exemplar list of 27 of its
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`actually registered “photo groups,” which contain Photos of vehicle accessories. Also
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`attached are side-by-side comparisons of 80 Photos, as posted on etrailer.com, and Onyx’s
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`posting of the identical, or slightly modified, Photos on CARiD.com or eBay.com. Of the
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`80 Photos included, 69 have actual registrations, and 11 are listed as “pending
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`registration.” In 21 of the Photos, the name “etrailer” appears on the product itself;
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`etrailer’s name has been removed in the allegedly infringing versions.
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`ARGUMENTS OF THE PARTIES
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`In support of its motion to dismiss the federal copyright claims, Onyx initially
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`argued that the court lacked subject matter jurisdiction over claims based on Photos with
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`only applied-for registrations.1 Onyx additionally asserts that etrailer failed to state a
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`claim with regards to false designation of origin under either federal or state law, as etrailer
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`is not the source of the products depicted in the Photos, and thus removing etrailer’s marks
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`from the Photos does not falsely designate the products’ origin.
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`In opposing Onyx’s motion to dismiss, etrailer notes that Onyx’s position on the
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`Court’s lack of subject matter jurisdiction relied on an incorrect statement of the law.
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`1 As Onyx had already filed an answer when this motion was filed, this motion is more
`accurately regarded as a motion for judgment on the pleadings. See, e.g., Free & Fair
`Election Fund v. Mo. Ethics Comm’n, No. 16-04332-CV-C-ODS, 2017 WL 2189657, at *3
`(W.D. Mo. May 17, 2017). The same standard that governs motions to dismiss also
`governs motions for judgment on the pleadings. Ellis v. City of Minneapolis, No.
`16-2019, 2017 WL 2735423, at *3 (8th Cir. June 27, 2017). For convenience, the Court
`will refer herein to the motion as one to dismiss.
`3
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`Etrailer cites Reed Elsevier, Inc. v. Muchnick, 559 U.S. 154, 157 (2010), which held that
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`registration of a copyright is not a jurisdictional issue, but rather a “precondition” to suit
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`under the Copyright Act. With respect to Counts II and III, etrailer first asserts that there
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`is no support in the complaint for Onyx’s argument that etrailer is not the origin of the
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`underlying products depicted. Etrailer further argues that its protectable interest in the
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`Photos is not dependent on etrailer being the source of the products depicted, and cites
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`cases to support the proposition that a defendant’s use of a plaintiff’s photographs in
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`advertising certain products is a false designation of origin. In addition, etrailer argues
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`that the Photos themselves are the products being falsely designated, and Onyx’s removal
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`of etrailer’s marks “from many of the [Photos]” is likely to cause confusion regarding the
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`Photos’ origin. ECF No. 18 at 7.
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`In reply, Onyx concedes that the Court has subject matter jurisdiction over the
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`infringement claims, but argues that Count I fails to state a claim based on any Photos for
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`which etrailer did not obtain actual registration. Regarding Counts II and III, Onyx points
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`to numerous references in the complaint to etrailer’s status as a vendor, and not the
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`manufacturer or producer, of the products etrailer sells. Onyx distinguishes the cases
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`etrailer relies on, as those cases involved photographs of products that were, in fact, the
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`plaintiff’s own goods. Onyx also asserts that the Photos cannot be “products” within the
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`definition of the Lanham Act or Missouri law on false designation, as the Photos are not
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`marketed to consumers.
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`By means of a sur-reply, filed with leave of Court, etrailer posits that Onyx waived
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`its opportunity to move to dismiss Count I for failure to state a claim by initially attacking
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`4
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`that count on subject matter jurisdiction grounds. Etrailer further argues that it has
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`satisfied any precondition to suit for infringement of Photos with either actual registration
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`or applied-for registration, based on Action Tapes, Inc. v. Mattson, 462 F.3d 1010 (8th Cir.
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`2006), which stated that infringement is actionable under the Copyright Act once the
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`owner has “delivered the deposit, application, and fee required for registration to the
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`United States Copyright Office.” Id. at 1013.
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`DISCUSSION
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`To survive a motion to dismiss for failure to state a claim, a pleader’s allegations
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`must contain “sufficient factual matter, accepted as true, to ‘state a claim to relief that is
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`plausible on its face.’” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl.
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`Corp. v. Twombly, 550 U.S. 544, 570 (2007)). “[A] formulaic recitation of the elements
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`of a cause of action will not do.” Twombly, 550 U.S. at 555. The Court is not required to
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`accept the legal conclusions the pleader draws from the facts alleged. Iqbal, 556 U.S. at
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`678; Retro Television Network, Inc. v. Luken Commc’ns, LLC, 696 F.3d 766, 768-69 (8th
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`Cir. 2012). However, the Court must assume the factual allegations of a complaint as true
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`and construed in favor of the plaintiff “even if it strikes a savvy judge that actual proof of
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`those facts is improbable.” Twombly, 550 U.S. at 556.
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`Count I: Federal Copyright Infringement
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`A copyright in a work “subsists from its creation.” 17 U.S.C. § 302.
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`“Registration” with the Copyright Office is optional, but is required to entitle a copyright
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`holder to bring an infringement action under the Copyright Act, and copyright holders
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`“frequently register specifically for the purpose of being able to bring suit” under the Act.
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`5
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`Cosmetic Ideas, Inc. v. IAC/Interactivecorp., 606 F.3d 612, 619 (9th Cir. 2010). This
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`precondition to suit is stated in 17 U.S.C. § 411(a), as follows: “no civil action for
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`infringement of the copyright in any United States work shall be instituted until
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`preregistration or registration of the copyright claim has been made in accordance with this
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`title.” See Reed Elsevier, Inc., 559 U.S. at 157-58.
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`The Copyright Act defines an infringer as “anyone who violates any of the
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`exclusive rights of the copyright owner as provided by sections 106 through 122.” 17
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`U.S.C. § 501(a). Exclusive rights in copyrighted works include the rights, per 17 U.S.C.
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`§ 106: “(1) to reproduce the copyrighted work in copies . . . ; [and] (2) to prepare derivative
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`works based upon the copyrighted work . . . .” Id. at § 106. To establish copyright
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`infringement, a plaintiff must demonstrate that (1) it owns a valid copyright, and (2) that
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`the defendant copied, displayed, or distributed protected elements of the copyrighted work
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`without authorization. Kennedy v. Gish, Sherwood & Friends, Inc., 143 F. Supp. 3d 898,
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`904 (E.D. Mo. 2015) (citing Mulchay v. Cheetah Learning LLC, 386 F.3d 849, 852 (8th
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`Cir. 2004)).
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`The Court first concludes that, procedurally, Onyx has not waived its opportunity to
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`argue for dismissal of etrailer’s copyright infringement claim for failure to state a claim.
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`While a reply memorandum in support of a motion to dismiss should generally not raise a
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`new argument for dismissal, courts may consider such an argument where, as here, the
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`nonmoving party has been given leave to file a surreply to address the new argument, and
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`did so. See, e.g., N. Ala. Fabricating Co. v. Bedeschi Mid-West Conveyor Co., No.
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`6
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`16-2740-DDC-TJJ, 2017 WL 1836973, at *6 (D. Kan. May 8, 2017); Prosser v.
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`Nagaldinne, No. 4:09CV2117 HEA, 2011 WL 250999, at *1 (E.D. Mo. Jan. 26, 2011).
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`As noted above, most of etrailer’s exemplar Photos are parts of actually registered
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`photo groups, and thus meet the § 411(a) precondition to sue. With respect to etrailer’s
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`remaining copyright infringement claims, there is currently a split among the federal
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`circuit courts on whether applied-for registration satisfies the precondition for an
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`infringement claim under the Copyright Act. Some courts have adopted the “application”
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`approach – allowing an infringement suit after filing a complete copyright application with
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`the Copyright Office – while other courts have adopted the “registration” approach –
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`requiring a complete application and either approval or rejection from the Copyright
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`Office. Compare, e.g., Cosmetic Ideas, Inc., 606 F.3d at 619 (concluding that the
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`application approach better fulfills Congress’s purpose), with, e.g., La Resolana Architects,
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`PA v. Clay Realtors Angel Fire, 416 F.3d 1195, 1205 (10th Cir. 2005) (concluding that
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`“registration” as used in § 411(a) does not occur until the Copyright Office takes action on
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`an application).
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`In Action Tapes, Inc., 462 F.3d at 1013, the Eighth Circuit stated, as noted above,
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`that “[a] copyright owner may not sue for infringement under the federal Copyright Act
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`until the owner has delivered ‘the deposit, application, and fee required for registration’ to
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`the United States Copyright Office.”2 Even if this statement in Action Tapes is just dicta,
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`2 The Court notes that a split on this question also exists within the Minnesota District
`Court. Compare Tri-Marketing, Inc. v. Mainstream Marketing Servs., Inc., No. CUV
`09-13DWFRLE, 2009 WL 1408741 at *3 (D. Minn. May 19, 2009) (adopting the
`application approach in denying a motion to dismiss), with Asche & Spencer Music, Inc. v.
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`the Court believes this approach is the better-reasoned one. As the Ninth Circuit
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`explained in Cosmetic Ideas, Inc., 606 F.3d at 619-21, the application approach avoids
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`unnecessary delays in infringement litigation based on the Copyright Office’s processing
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`an application, delays that may combine with the Copyright Act’s three-year statute of
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`limitations to prevent a copyright holder from ever bringing suit. Further, the application
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`approach is consistent with 17 U.S.C. § 410(d)’s mandate that an application’s effective
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`registration date is the day a completed application is received, not approved. Id. at 620.
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`And this approach “better fulfills Congress’s purpose of providing broad copyright
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`protection while maintaining a robust federal register.” Id. at 619.
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`Of course, at a later stage in this litigation, etrailer will have to specify which Photos
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`it claims were infringed and their registration status. While etrailer has not substantiated
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`its claim that “thousands” of Photos were infringed by Onyx, such complete factual
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`development is unnecessary to survive a motion to dismiss. See, e.g., Joint Stock Co.
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`Channel One Russia Worldwide v. Informir LLC, No. 16CV1318GBDBCM, 2017 WL
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`696126 at *14 (S.D.N.Y. Feb. 15, 2017) (explaining that where a copyright claim includes
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`a large number of works, an exhaustive list of copyrights allegedly infringed is not
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`necessary to survive a motion to dismiss, and that a “representative listing” will suffice).
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`In sum, Onyx’s motion to dismiss for failure to state a claim will be denied as to
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`Count I.
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`Principato-Young Entm’t, Inc., 147 F. Supp. 3d 833, 838 (D. Minn. 2015) (applying the
`registration approach in granting a motion to dismiss).
`8
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`Counts II and III: False Designation of Origin / Unfair Competition
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`The Lanham Act includes a statement of its purpose at 15 U.S.C. § 1127, which
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`provides, in relevant part, as follows:
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`The intent of this chapter is to regulate commerce within the control of
`Congress by making actionable the deceptive and misleading use of marks in
`such commerce; to protect registered marks used in such commerce from
`interference by State, or territorial legislation; to protect persons engaged in
`such commerce against unfair competition; to prevent fraud and deception in
`such commerce by the use of reproductions, copies, counterfeits, or
`colorable imitations of registered marks . . . .
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`Section 1125(a), entitled “False designations of origin, false descriptions, and
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`dilution forbidden,” “create[s] a federal remedy against a person who used in commerce
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`either ‘a false designation of origin, or any false description or representation’ in
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`connection with ‘any goods or services.’” Dastar Corp. v. Twentieth Century Fox Film
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`Corp., 539 U.S. 23, 29 (2003). This remedy “does not have boundless application . . . for
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`unfair trade practices,” and only applies to “certain unfair trade practices.” Id.
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`The most common false designation of origin claim is “palming off” – “where one
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`competitor tries to fool the consuming public into thinking that his product is really the
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`product of another.” Pampered Chef, Ltd. v. Magic Kitchen, Inc., 12 F. Supp. 2d 785, 794
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`(N.D. Ill. 1998). Also common is “reverse palming off” – “selling or offering for sale
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`another’s product that has been modified slightly and then labeled with a different name.”
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`McCardle v. Mattel Inc. 456 F. Supp 2d 769, 783 (E.D. Tex. 2006) (citation omitted).
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`An actionable claim requires that the infringing use be “likely to cause confusion or
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`to cause mistake . . . as to the origin . . . of goods, services, or commercial activities by
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`another person.” 15 U.S.C. § 1125(a)(1)(A). The phrase “origin of goods” under the
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`9
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`Lanham Act refers to “the producer of the tangible goods that are offered for sale.”
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`Dastar Corp., 539 U.S. at 37. A plaintiff must show, at least “likely . . . confusion to
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`consumers.” Sensient Techs. Corp. v. SensoryEffects Flavor Co., 636 F. Supp. 2d 891,
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`899 (E.D. Mo. 2009), aff’d, 613 F.3d 754 (8th Cir. 2010). As accepted by both parties, the
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`elements of Missouri’s unfair competition claims “substantially overlap with the federal . .
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`. false designation of origin claims,” and so will not be analyzed separately. See Steak n
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`Shake Co. v. Burger King Corp., 323 F. Supp. 2d 983, 991 (E.D. Mo. 2004).
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`Etrailer appears to be advancing two theories of recovery under the Lanham Act:
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`first, that Onyx unlawfully doctored some of the Photos to remove etrailer’s name from the
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`products depicted in the Photos in order to “cause confusion, mistake, and deception as to
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`the affiliation, connection, or association of the products with etrailer, or as to the
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`sponsorship or approval of said products by etrailer,” ECF Doc. 1 at 13; and second, that
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`Onyx improperly attempted to use etrailer’s Photos, “misbranded to appear as” Onyx’s,
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`ECF Doc. 18 at 7.
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`With respect to the doctoring claim, typically, the removal of a competitor’s marks
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`from a product is done in an attempt to “reverse palm off” an item, which occurs “when the
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`wrongdoer simply removes or otherwise obliterates the name of the manufacturer or source
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`and sells the product in an unbranded state.” See Smith v. Montoro, 648 F. 2d 602, 605
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`(9th Cir. 1981). For example, in a case cited by etrailer, Truck Equipment Services Co. v.
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`Fruehauf Corp., 536 F.2d 1210 (8th Cir. 1976), the defendant attempted to “reverse palm
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`off” its semi-trailer as the plaintiff’s similar Cornhusker 800 semi-trailer by copying
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`plaintiff’s exterior design and using images of the Cornhusker 800 to market the
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`10
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`defendant’s semi-trailer. The district court found, as affirmed by the Eighth Circuit, that
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`the defendant’s imitation of the Cornhusker 800 and use of Cornhusker 800 images caused
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`a likelihood of confusion in the marketplace, and “the unfairness of [the defendant’s]
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`conduct . . . must be seen as using the photograph of [the plaintiff’s] trailer to trade upon
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`the reputation of [the plaintiff] and to confuse potential customers as to the source of origin
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`of the trailer pictured on the sales literature.” Id. at 1216.
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`Here, however, it does not appear that etrailer is the “origin” of the underlying
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`products in the Photos – the motor vehicle accessories sold by both etrailer and Onyx. As
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`noted above, etrailer argues that Onyx has not shown sufficient support for the proposition
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`that etrailer was not, in fact, the origin of the goods in the Photos. The Court finds this
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`argument disingenuous, as etrailer has not alleged in the complaint or in its briefs that it
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`was the origin the products. Whether sold by etrailer or Onyx, the Court understands the
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`products to be produced by the same third-party sources. Thus, the Court agrees with
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`Onyx that the cases etrailer cites on the point at issue are unavailing as they all consider a
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`plaintiff’s photos of products for which the plaintiff was also the origin of the products
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`depicted therein.3
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`Etrailer’s theory that alteration of the Photos amounts to an attempt by Onyx to
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`reverse palm off etrailer’s Photos as Onyx’s, in violation of the Lanham Act, also does not
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`fare well. Quadratec, Inc. v. Turn 5, Inc., No. Civ.A. 13-6384, 2015 WL 4876314 (E.D.
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`3 In any event, Onyx cannot be said to falsely designate the origin of the goods it sells
`by removing etrailer’s marks in the Photos. Etrailer does not allege that Onyx removed
`etrailer’s logos from the actual products Onyx sells. Onyx’s alleged doctoring of the
`Photos, then, does not mislead consumers as to the underlying products’ origin.
`11
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`Pa. Aug. 13, 2015), presents a remarkably similar situation to that presented here. In that
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`case, the plaintiff alleged, inter alia, federal copyright infringement and false designation
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`of origin claims based on the defendant’s alleged use of the plaintiff’s registered online
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`photos and videos (“product presentations”) of third-party Jeep® accessories that both the
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`plaintiff and the defendant sold. The court denied the defendant’s motion to dismiss the
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`copyright claims, but granted dismissal of the plaintiff’s Lanham Act claims, explaining as
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`follows:
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`The tangible goods at issue here are the aftermarket Jeep® products.
`Plaintiff attempts to circumvent the prerequisites for maintaining a claim
`under Section 1125(a)(1)(A) by contending that the catalog services
`themselves are the goods at issue. However, it is not disputed that neither
`Plaintiff nor Defendant is in the business of selling catalog services. Instead,
`they are in the business of selling aftermarket Jeep® products. There can be
`no confusion as to the origin of these goods, because aftermarket Jeep®
`products—whether sold by Plaintiff or Defendant—are manufactured by the
`same source. Plaintiff essentially seeks protection of its marketing of its
`products. However, the Lanham Act does not protect originality or
`creativity, nor does it create a cause of action for, in effect, plagiarism. By
`copying Plaintiff’s Product Presentations, Defendant’s rights are protected
`under the Copyright Act. Plaintiff's claim under Section 1125(a)(1)(A) will
`be dismissed.
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`Id., 2015 WL 4876314 at *9 (internal citations omitted).
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`In sum, the Court finds that etrailer has failed to state a claim for false designation of
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`origin, and will grant Oynx’s motion to dismiss Counts II and III.4
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`4 In its memorandum in opposition to Defendant’s motion to dismiss, Plaintiff asserts
`that its unfair competition claims were “not merely [for] trademark infringement” or
`“reverse palming off.” However, as Plaintiff did not point to a basis for relief other than
`false designation, the Court limits its analysis to that claim.
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`CONCLUSION
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`Accordingly,
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`IT IS HEREBY ORDERED that the motion of Defendant Onyx to dismiss
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`Plaintiff’s complaint is DENIED with respect to Count I and GRANTED with respect to
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`Counts II and III.
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`Dated this 17th day of July, 2017.
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`_________________________________
`AUDREY G. FLEISSIG
`UNITED STATES DISTRICT JUDGE
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`13
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