throbber
Case 1:17-cv-00773-AMD-ST Document 80 Filed 12/13/18 Page 1 of 11 PageID #: 744
`FILED
`
`UNITED STATES DISTRICT COURT
`EASTERN DISTRICT OF NEW YORK
`
`LIN'S WAHA INTERNATIONAL CORP.,
`
`IN CLERK'S OFFICE
`US DISTRICT COURT E.D.N.Y.
`
`H DEC 13 2018 I
`
`X
`
`BROOKLYN OFFICE
`
`Plaintiff,
`
`- against -
`
`MEMORANDUM
`
`DECISION AND ORDER
`17-CV-00773 (AMD) (ST)
`
`TINGYI (CAYMAN ISLANDS) HOLDING
`CORP.,
`
`Defendant.
`
`TINGYI (CAYMAN ISLANDS) HOLDING
`CORP.,
`
`Counterclaim-Plaintiff,
`
`- against -
`
`LIN'S WAHA INTERNATIONAL CORP.,
`KANG SHI FU USA INC., IZGU HOLDINGS
`GROUP LIMITED, LIN'S GROUP HOLDING
`CORP., LIN'S USA GROUP HOLDING LLC,
`JACKY LIN, XIU QING LIN, MEI QIN LIN
`and DOES 1-50,
`
`Counterclaim-Defendants.
`
`X
`ANN M, DONNELLY, United States District Judge:
`
`On February 10, 2017, the plaintiff, Lin's Waha International Corp., filed this action
`
`seeking a declaration that its use of certain marks "do[es] not infringe, dilute, or otherwise
`
`interfere with any asserted rights" of the defendant, Tingyi (Cayman Islands) Holding Corp.
`
`(ECF No. 1 at 1-2.) The plaintiff also seeks cancellation of Tingyi's trademark registrations
`
`based on abandonment and non-use. {Id. at 2.) On February 26, 2018, Tingyi asserted 11
`
`counterclaims, including a claim for declaratory judgment that Lin's Waha's copyrights are
`
`1
`
`

`

`Case 1:17-cv-00773-AMD-ST Document 80 Filed 12/13/18 Page 2 of 11 PageID #: 745
`
`invalid (Count VII). (EOF No. 45 at 23-44.) On March 30,2018, Lin's Waha moved to dismiss
`
`Count VII pursuant to Fed. R. Civ. P. 12(b)(1) and 12(b)(6), claiming lack of subject matter
`
`jurisdiction, failure to state a claim for relief, and failure to state a claim for attorneys' fees.
`
`(ECF No. 59.) For the reasons that follow, Lin's Waha's motion to dismiss Count VII of
`
`Tingyi's counterclaims is denied.
`
`BACKGROUND*
`
`This dispute arises from the parties' use of similar images—a chef and the words "Kang
`
`Shi Fu"—on food and beverage packaging. The counterclaim plaintiff, Tingyi (Cayman Islands)
`
`Holding Corp., is a food and beverage company, and specializes in the production and
`
`distribution of baked goods, beverages, and instant noodles. (ECF No. 45 at 12.) Tingyi markets
`
`and distributes goods in the United States and around the world under trademarks including the
`
`following logos: Kang Shi Fu in Chinese characters, a cartoon "chef man" design, and an image
`
`of the words "Mr. Kron." (Id at 12-13.) Tingyi also claims "extensive common law rights" in
`
`these images based on its continuous use of them in the United States and New York. (Id at 14.)
`
`Tingyi claims to be the "exclusive cop3night owner" of the "chef man" design, which was
`
`registered with the National Copyright Administration of the People's Republic of China (PRC
`
`Reg. No. 00108588, effective date January 2, 2014). (Id at 16.) Tingyi also owns trademark
`
`registrations of its Kang Shi Fu marks issued by the United States Patent and Trademark Office
`
`in 1996,1999, and 2008; the trademarks are for instant noodles, rice porridge, and tea-.
`
`' For purposes of this motion, I assume as true all factual allegations that Tingyi asserts in its
`counterclaims, and construe all inferences and ambiguities in Tingyi's favor. See Olagues v. Perceptive
`Advisors LLC^ 902 F.3d 121, 123 (2d Cir. 2018); Trodale Holdings LLC v. Bristol Healthcare Inv 'rs L.P.y
`No. 16-CV-4254,2018 WL 2980325, at *3 (S.D.N.Y. June 14,2018) ("When reviewing the sufficiency
`of counterclaims, the Court is required to 'draw all reasonable inferences in [the non-moving party's]
`favor, assume all well-pleaded factual allegations to be true, and determine whether they plausibly give
`rise to an entitlement to relief.'" (alteration in original)).
`
`

`

`Case 1:17-cv-00773-AMD-ST Document 80 Filed 12/13/18 Page 3 of 11 PageID #: 746
`
`chocolate-, and cocoa-based beverages, as well as cookies, pastries and crackers. (ECF No. 1 at
`
`4-6; see also ECF No, 45 at 14-15.)
`
`The counterclaim defendant, Lin's Waha Intemational Corp., also manufactures and sells
`
`food products, including instant noodles, beverages, baked goods, and jarred vegetables. (ECF
`
`No. 1 at 2.) Lin's Waha obtained copyright registrations with the United States Copyright Office
`
`for 11 images of "a cartoon version of a smiling, vsdde-eyed, potbellied chef wearing a chefs hat,
`
`neckerchief, cuffed short-sleeve shirt, apron, and sneakers." (ECF No. 45 at 19-20.) Lin's Waha
`
`also owns two trademark registrations issued by the United States Patent and Trademark Office
`
`in July of 2014, which contain the same cartoon chef next to the phrase "Kang Shi Fu;" the
`
`trademarks are for tea-based beverages and instant noodle soups. {Id. at 17-18.) Lin's Waha has
`
`one open trademark registration application for using the same mark on cakes, cookies, and
`
`pastries. (Id. at 17.)
`
`In March of 2016, Tingyi initiated a proceeding before the Trademark Trial and Appeal
`
`Board ("TTAB") to cancel Lin's Waha's Kang Shi Fu trademarks. (ECF No. 45 at 20.) The
`
`TTAB suspended the proceeding pending the outcome of this action. (Id.) On January 19,2017,
`
`Tingyi sent Lin's Waha a cease-and-desist letter charging that "Lin's Waha's use of the [Kang
`
`Shi Fu] Mark for instant noodles and tea beverages is a direct infringement of Tingyi's identical
`
`KANG SHI FU Marks" £uid "constitutes, inter alia, federal registered trademark infringement
`
`and unfair competition ...." (ECF No. 1-4 at 4 (emphasis in original); ECF No. 45 at 21.)
`
`Tingyi demanded that Lin's Waha cease using the Kang Shi Fu marks, (ECF No. 1-4 at 4-5;
`
`ECF No. 45 at 21.)
`
`On February 10, 2017, Lin's Waha commenced this action against Tingyi under the
`
`Declaratory Judgment Act, 28 U.S.C. §§ 2201, 2202, federal trademark laws, 15 U.S.C. § 1051
`
`

`

`Case 1:17-cv-00773-AMD-ST Document 80 Filed 12/13/18 Page 4 of 11 PageID #: 747
`
`et seq., and corresponding state law, seeking a declaration that Lin's Waha's use of marks
`
`covered by its trademark registrations does not infnnge or interfere with any of Tingyi's asserted
`
`rights. (See ECF No. 1 at 1-2.) Lin's Waha also requested cancellation of Tingyi's trademark
`
`registrations for abandonment and non-use. (Id at 2.)
`
`On February 26, 2018, Tingyi filed an Amended Complaint and Counterclaims, asserting
`
`11 counterclaims: federal trademark infringement (Count I), federal unfair competition (Count
`
`II), indirect/vicarious trademark infringement (Count III), contributory trademark infringement
`
`(Count IV), direct and indirect copyright infringement of Tingyi's copyrights (Counts V, VI), a
`
`declaratory judgment of invalidity of Lin's Waha's copyrights (Count VII), common law unfair
`
`competition (Count VIII), common law trademark infringement (Count IX), cancellation of Lin's
`
`Waha's trademark registration (Count X), and opposing Lin's Waha's federal trademark
`
`application. (ECF No. 45.)
`
`On March 30, 2018, Lin's Waha moved to dismiss Count VII of Tingyi's counterclaims
`
`for lack of subject matter jurisdiction and failure to state a claim. (ECF No. 59.) Tingyi
`
`responded on April 30, 2018, and Lin's Waha replied on May 18, 2018. (ECF Nos. 60, 61.)
`
`DISCUSSION
`
`Lin's Waha argues that I do not have subject matter jurisdiction over Count VII of
`
`Tingyi's counterclaims because it does not present an actual case or controversy. Lin's Waha
`
`also argues that Count VII fails to state a claim for relief under the Copyright Act because a
`
`declaratory judgment claim for copyright invalidity can only be brought as a defense to a claim
`
`for infringement, a claim Lin's Waha did not make. For the reasons that follow, I conclude that
`
`

`

`Case 1:17-cv-00773-AMD-ST Document 80 Filed 12/13/18 Page 5 of 11 PageID #: 748
`
`there is a justiciable case or controversy, and that Tingyi has stated a claim for relief under the
`
`Copyright Act. Accordingly, I deny Lin's Waha's motion to dismiss Count VII.^
`
`I.
`
`Fed. R, Civ. P. 12(b)(1)
`
`A. Standard of Review
`
`"A case is properly dismissed for lack of subject matter jurisdiction under Rule 12(b)(1)
`
`when the district court lacks the statutory or constitutional power to adjudicate it." Makarova v.
`
`United States, 201 F.3d 110,113 (2d Cir. 2000); see also Aurecchione v. Schoolman Transp.
`
`Sys., Inc., 426 F.3d 635, 638 (2d Cir. 2005) ("After construing all ambiguities and drawing all
`
`inferences in a plaintiffs favor, a district court may properly dismiss a case for lack of subject
`
`matter jurisdiction under Rule 12(b)(1) if it lacks the statutory or constitutional power to
`
`adjudicate it." (internal citations and quotation marks omitted)). "In resolving a motion to
`
`dismiss imder Rule 12(b)(1), the district court must take all imcontroverted facts in the
`
`[pleading]... as true, and draw all reasonable inferences in favor of the party asserting
`
`jurisdiction." Tandon v. Captain's Cove Marina of Bridgeport, Inc., 752 F.3d 239, 243 (2d Cir.
`
`^ Lin's Waha argues that Tingyi cannot recover attorneys' fees under Count VII because the claim "is not
`one for copyright infringement and does not purport to be based on any specific cause of action under the
`Copyright Act," and an award of attorneys' fees "would run afoul of 17 U.S.C. § 412." (ECF No. 59 at
`14.) Tingyi's ability to seek attorneys' fees is not a basis to dismiss the counterclaim. Moreover, a claim
`for a declaration of copyright invalidity arises under the Copyright Act because it requires construction of
`the Act. See Bassett v. Mashantucket Pequot Tribe, 2014 F.3d 343,349 (2d Cir. 2000) ("[A] suit 'arises
`under' the Copyright Act" if the pleading "asserts a claim requiring construction of the Act." (internal
`quotation marks and citation omitted).) Count Vll asserts that Lin's Waha's "Infringing Chef Design
`constitutes an unauthorized derivative work ... in violation of 17 U.S.C. §§101 and 103" of the
`Copyright Act. (ECF No. 45 at 35.) Section 412 forecloses attorneys' fee awards only for copyright
`infringement claims, which Lin's Waha agrees Count VII is not. See 17 U.S.C. § 412 ("In any action
`under this title,... no award of statutory damages or attorney's fees ... shall be made for... (1) any
`infringement ofcopyright in an unpublished work commenced before the effective date of its registration;
`or (2) any infringement of copyright commenced after first publication of the work and before the
`effective date of its registration, unless such registration is made within three months after the first
`publication of the work." (emphasis added)); cf. 16 Casa Duse, LLC v. Merkin, 791 F.3d 247,263 (2d
`Cir. 2015) ("There is nothing in the statute that prohibits fee awards in cases ... of non infringement."
`(intemal quotation marks and alterations omitted) (emphasis in original)).
`
`

`

`Case 1:17-cv-00773-AMD-ST Document 80 Filed 12/13/18 Page 6 of 11 PageID #: 749
`
`2014); see also Amidax Trading Grp. v. S.W.I.F.T SCRL, 671 F.3d 140,145 (2d Cir. 2011)("In
`
`reviewing a facial attack to the court's jurisdiction, [courts] draw all facts—^which [are]
`
`assume[d] to be true unless contradicted by more specific allegations or documentary evidence—
`
`from the complaint and from the exhibits attached thereto.")
`
`B. Actual Case or Controversy
`
`Lin's Waha argues that I should dismiss Count VII for lack of subject matter jiuisdiction
`
`because there is no "actual controversy." (ECF No. 59 at 7-12.) Specifically, Lin's Waha
`
`contends that it has not asserted its copyrights in the dispute with Tingyi, and has not made or
`
`threatened a claim against Tingyi based on its copyrights. (Id. at 10.) According to Lin's Waha,
`
`the "fact that Tingyi disputes the validity of Lin's Waha's copyright in and of itself is not a basis
`
`upon which to find an actual case or controversy." (Id.) Tingyi responds that "[cjourts have
`
`explicitly rejected this sort of intellectual property hair-splitting and have allowed litigants to
`
`pursue declaratory judgment claims involving one form of intellectual property, even if the
`
`underlying dispute involved an entirely different species of intellectual property protection."
`
`(ECF No. 60 at 13.) Tingyi argues that there is an actual controversy because Lin's Waha's
`
`copyright registration and use of the chef design constitute "actual interference with Tingyi's
`
`legal interests." (Id. at 13-15.)
`
`"In a case of actual controversy within its jurisdiction," a court "may declare the rights
`
`and other legal relations of any interested party seeking such declaration" pursuant to the
`
`Declaratory Judgment Act. 28 U.S.C. § 2201(a). "The Declaratory Judgment Act confers on
`
`federal courts 'unique and substantial discretion in deciding whether to declare the rights of
`
`litigants,"' but it does not extend the courts' subject matter jurisdiction. Peconic Baykeeper, Inc.
`
`

`

`Case 1:17-cv-00773-AMD-ST Document 80 Filed 12/13/18 Page 7 of 11 PageID #: 750
`
`V. Suffolk County, 600 F.3d 180,187 (2d Cir. 2010) (citation omitted); Medtronic, Inc. v.
`
`Mirowski Family Ventures, LLC, 571 U.S. 191,197 (2014).
`
`To satisfy the "actual controversy" standard, the dispute "must be definite and concrete,
`
`touching the legal relations of parties having adverse legal interests;" it must be "real and
`
`substantial and admit of specific relief through a decree of a conclusive character, as
`
`distinguished from an opinion advising what the law would be upon a hypothetical state of
`
`facts." Medlmmune, Inc. v. Genentech, Inc., 549 U.S. 118, 126-27 (2007) {(yiXQi\mg Aetna Life
`
`Ins. Co. V. Haworth, 300 U.S. 227, 240-41 (1937)) (internal quotation marks and alterations
`
`omitted). There must be '"a substantial controversy, between parties having adverse legal
`
`interests, of sufficient immediacy and reality to warrant the issuance of a declaratory
`
`judgment.'" Id. (quoting Maryland Casualty Co. v. Pacific Coal & Oil Co., 312 U.S. 270, 273
`
`(2d Cir. 1941)). Because "[djeclaratory judgment actions are particularly useful in resolving
`
`trademark disputes ... the finding of an actual controversy should be determined with some
`
`liberality." Starter Corp. v. Converse, Inc., 84 F.3d 592, 596 (2d Cir. 1996).
`
`Counterclaim Count VII presents an actual controversy. The crux of the instant litigation
`
`is the parties' rights to use the image of the chef and the Kang Shi Fu logo. Lin's Waha owns
`
`copyright and trademark registrations of the images, and Tingyi owns trademark registrations of
`
`similar images, and claims to own copyrights in the marks. Both parties use the images on
`
`products that they manufacture and distribute. Count VII of Tingyi's counterclaims seeks a
`
`declaratory judgment that Lin's Waha's copyrights are invalid. "The factual and legal
`
`dimensions of the dispute are well defined," and "nothing about the dispute would render it unfit
`
`for judicial resolution." Medlmmune, 549 U.S. at 128.
`
`

`

`Case 1:17-cv-00773-AMD-ST Document 80 Filed 12/13/18 Page 8 of 11 PageID #: 751
`
`The fact that Lin's Waha has not yet brought a specific claim for copyright infnngement
`
`does not nullify the controversy. "[E]ven when a defendant does not pursue an available
`
`copyright claim the court has subject-matter jurisdiction over a declaratory-judgment plaintiffs
`
`claim for copyright non-infringement as long as there is an actual controversy between the
`
`parties over intellectual property." See BHL Boresight, Inc. v. Geo-Steering Sols., Inc., No. 4:15-
`
`CV-00627,2017 WL 1177966, at *3 (S.D. Tex. Mar. 29, 2017) (citing Touchpoint
`
`Communications, LLC v. Dentalfone, LLC, 3:15-CV-05240-JRC, 2016 WL 524260, at *4 (W.D.
`
`Wash. Feb. 10,2016)).
`
`The cases that Lin's Waha cites for the proposition that "a determination of the validity
`
`of a party's intellectual property rights generally is unripe when such rights have not been
`
`asserted against the party seeking a declaratory judgment" are distinguishable. (ECF No. 59 at
`
`8.) The parties in Nike, Inc. v. Already, LLC and Velvet Underground v. Andy Warhol Found, for
`
`the Visual Arts, Inc. entered into a covenant not to sue, thus "vitiate [ing] any coercive force" that
`
`the copyrights would otherwise have. Velvet Underground, 890 F. Supp. 2d 398,405-07
`
`(S.D.N.Y. 2012) (covenant not to sue "divests [the] Court of declaratory judgment jurisdiction");
`
`Already, 663 F.3d 89, 97 (2d Cir. 2011) (there was no actual case or controversy where the non-
`
`moving party had executed a covenant not to sue). Lin's Waha has made no such promise.
`
`Thus, Lin's Waha's active copyright registrations place it in a position to remain "capable of
`
`taking some action that threatens to damage" Tingyi or "impair [TingyiJ's ability to exercise its
`
`rights." Velvet Underground, 890 F. Supp. 2d at 406.
`
`I also reject the argument that there is no controversy because "there is no imminent risk
`
`of suit." (ECF No. 59 at 8.) Medlmmune abrogated the "reasonable apprehension of imminent
`
`suit" standard in favor of a lowered standard in intellectual property-related declaratory judgment
`
`8
`
`

`

`Case 1:17-cv-00773-AMD-ST Document 80 Filed 12/13/18 Page 9 of 11 PageID #: 752
`
`cases. Gelmart Indus, v. Eveready Battery Co., 120 F. Supp. 3d 327, 331 (S.D.N.Y. 2014).
`
`"After Medlmmune, so long as the factual and legal dimensions of the dispute are well defined
`
`and nothing about the dispute would render it unfit for judicial resolution, jurisdiction is not
`
`defeated by a party's decision to refrain from taking some action and thus make what would
`
`otherwise be an imminent threat of suit at least remote, if not nonexistent." Id. (quoting
`
`Medlmmune, 549 U.S. at 128) (internal quotation marks and alterations omitted). As discussed
`
`above, that test has been met here.
`
`Accordingly, Lin's Waha's motion to dismiss Count VII of Tingyi's counterclaims for
`
`lack of subject matter jurisdiction is denied.
`
`11.
`
`Fed. R. Civ. P. 12(bI(6I
`
`A. Standard of Review
`
`A complaint must allege sufficient facts which, taken as true, state a plausible claim for
`
`relief, see Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555-56 (2007), but a court is not
`
`required to credit "mere conclusory statements" or "threadbare recitals of the elements of a cause
`
`of action." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing Twombly, 550 U.S. at 555). A
`
`claim has facial plausibility when it "pleads factual content that allows the court to draw the
`
`reasonable inference that the defendant is liable for the misconduct alleged;" the plausibility
`
`standard requires more than "a sheer possibility that a defendant has acted unlawfully." Id.
`
`(citing Twombly, 550 U.S. at 556, 570).
`
`A court considering a motion to dismiss for failure to state a claim pursuant to Rule
`
`12(b)(6) is limited to the factual allegations in the pleading, the documents attached to the
`
`pleading as exhibits or incorporated in it by reference, matters of which judicial notice may be
`
`taken, and documents either in the plaintiffs' possession or of which the plaintiffs had knowledge
`
`

`

`Case 1:17-cv-00773-AMD-ST Document 80 Filed 12/13/18 Page 10 of 11 PageID #: 753
`
`and relied on in bringing suit. Faconti v. Potter, 242 Fed, Appx. 775, 777 (2d Cir, 2007); Staehr
`
`V. Hartford Fin. Servs. Grp., Inc., 547 F.3d406,425 (2d Cir. 2008).
`
`B. Claim for Relief Under the Copyright Act
`
`Lin's Waha seeks dismissal of Count VII because "there is no support for Tingyi's claim
`
`that it may seek a declaration of copyright invalidity absent an affirmative copyright
`
`infringement claim by Lin's Waha or a dispute over the authorship or ownership of a single
`
`work." (ECF No. 59 at 12-13.) The cases upon which Lin's Waha relies, however, do not
`
`support its argument. See VaadL 'Hafotzas Sichos, Inc. v. Krinsky, 133 F. Supp. 3d 527
`
`(E.D.N.Y. 2015) (federal courts have no authority to cancel copyright registration because "there
`
`is no precedent supporting the use of a claim for fraud on the Copyright Office as an affirmative
`
`cause of action"); Kwan v. Schlein, 2008 U.S. Dist. LEXIS 87441 (S.D.N.Y. Oct. 30, 2008)
`
`("there is no precedent supporting the use of a claim for fraud on the Copyright Office as an
`
`affirmative cause of action, rather than as a defense to a copyright certificate's validity"). The
`
`plaintiffs in Vaad and Kwan sought cancellation of a copyright for fraud on the Copyright
`
`Office; Tingyi seeks a declaration that Lin's Waha's copyrights are invalid.
`
`Although the bulk of cases involving claims of declaratory judgment for copyright
`
`invalidity also involve claims of copyright infringement, Lin's Waha cites no authority to
`
`support its argument that a claim of copyright infringement is a pre-requisite to a claim for
`
`declaratory judgment for copyright invalidity. See, e.g., 16 Casa Duse, LLC v. Merkin, No. 12-
`
`CV-3492,2013 WL 5510770, at *11-12 (S.D.N.Y. Sept. 27, 20U), affd in part, rev'd inpart on
`
`other grounds and remanded, 791 F.3d 247 (2d Cir. 2015) (granting summary judgment for
`
`declaratory judgment of copyright invalidity in absence of copyright infringement action); 784
`
`8th St. Corp. V. Ruggiero, 2018 U.S. Dist. LEXIS 51234, at *14 (E.D.N.Y. Feb. 28, 2018)
`
`10
`
`

`

`Case 1:17-cv-00773-AMD-ST Document 80 Filed 12/13/18 Page 11 of 11 PageID #: 754
`
`(adopting report and recommendation granting summary judgment invalidating copyright
`
`registration); Pastime LLC v. Schreiber, No. 16-CV-8706, 2017 WL 6033434, at M (S.D.N.Y.
`
`Dec. 5, 2017) (distinguishing copyright cancellation from copyright invalidity and citing with
`
`approval federal court's authority to invalidate copyrights); Duncanson v. Wathen, 2016 U.S.
`
`Dist. LEXIS 183674, at *5 (M.D. Fla. Apr. 14, 2016) (noting correctness of plaintiffs assertion
`
`that "courts have allowed claims for a declaratory judgment that a copyright is invalid premised
`
`on fraud").
`
`Accordingly, Lin's Waha's motion to dismiss Count VII of Tingyi's counterclaims for
`
`failure to state a claim under the Copyright Act is denied.
`
`CONCLUSION
`
`Lin's Waha's motion to dismiss Count VII of Tingyi's counterclaims is denied in its
`
`entirety.
`
`SO ORDERED.
`
`Dated: Brooklyn, New York
`December 13, 2018
`
`s/Ann M. Donnelly
`TheTfphorable Ann M. Donnel
`United States District Judge
`
`11
`
`

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