In a dispute over trademarks and other intellectual property involving the iconic actress Marilyn Monroe, X One X Movie Archives and V. International Fine Arts Publishing could proceed with trademark cancellation claims against The Estate of Marilyn Monroe LLC and Leonard Green & Partners (LGP), the federal district court in New York City has ruled. The claims survived a motion to dismiss because the functional character of the contested marks turned on materials that were outside of the pleadings, and because the generic character of the marks was a factual issue that was "best left for another day." The court also found that X One X and V. International could not proceed with their claims for fraud on the PTO, attempted monopolization under the Sherman Act and Nevada Unfair Trade Practices Act, and certain violations of state laws, including New York’s Deceptive Acts and Practices Law and Nevada’s common law of unfair competition. According to the court, those claims asserted many legal conclusions but few viable allegations (A.V.E.L.A. Inc. v. The Estate of Marilyn Monroe, LLC, March 13, 2017, Failla, K.).
V. International operated as a licensing agent for A.V.E.L.A. Inc., the original plaintiff in the case. X One X performed a similar function: it created new artistic works, obtained copyrights for those works, and then licensed the works to third parties. The Monroe Estate operated as a limited liability company, and LGP operated as a private equity firm. The parties disputed the rights to 12 word and design marks involving Marilyn Monroe, eight of which used the words "Marilyn" or "Marilyn Monroe."
X One X and V. International filed counterclaims against the Monroe Estate, Authentic Brands Group (ABG), and James Salter, the CEO of ABG and the Monroe Estate (collectively, the "Estate Movants"). They also brought counterclaims against LGP. Although the contested marks were registered by The Monroe Estate, the Estate Movants lacked "exclusive rights to intellectual property related to Marilyn Monroe," according to X One X and V. International. The ultimate goal of the Estate Movants, they alleged, was to "gain a monopoly over every use of Marilyn Monroe’s image, likeness, and/or name in commerce." In furtherance of that goal, the Estate Movants misused the contested marks and threatened to file—and did file—lawsuits against their licensees. Moreover, ABG tried to create a "vertical scheme," in conjunction with LGP, by assuring its licensees that the Marilyn Monroe-related products licensed by ABG would sell exclusively in LGP-owned retailers.
Alter ego argument. V. International argued that the court should hold ABG liable for the unlawful conduct of the Monroe Estate because the Estate was the alter ego of ABG. The court rejected that theory of liability because V. International failed to allege sufficient facts to substantiate it. The court acknowledged that the issue of disregarding the form of an LLC was "generally submitted to the jury," but it also found that V. International had fallen "far short" of plausibly alleging that the Monroe Estate was ABG’s alter ego. Because the company’s factual allegations were "scant and irrelevant," the alter ego theory was not viable.
Cancellation: lack of distinctiveness. Few facts were proffered to support the assertion that the contested marks should be cancelled for lack of distinctiveness, the court noted. Nevertheless, the issue was sufficiently fact-intensive that it could not be decided on a motion to dismiss. The court read the lack of distinctiveness claim as an argument that the contested marks were generic. However, the question of whether a mark was, or had become, generic was "generally one of fact." In this case, the court decided that the issue of whether the contested marks were, in fact, generic was "best left for another day," when a more robust record was available.
Cancellation: functional marks. A cancellation claim based on the functionality of the contested marks was "weak," the court observed, but the claim raised an issue that was "too fact-specific" to resolve at the pleading stage.
V. International alleged that countless entities sold products that bore the name, image, likeness and/or stylized signature of Marilyn Monroe, but that allegation provided little reason to conclude that protecting the contested marks would "significantly undermine" competition. And the conclusory assertion that the Estate Movants were stifling competition by stopping V. International from using Monroe’s image, likeness, or name did not fix that flaw. In any event, the issue of whether a particular trademark was functional was a question of fact for trial.
Significantly, the issue of whether the contested marks were functional turned on materials that were outside of the pleadings. For that reason, the court could not dismiss the cancellation claims, at the pleading stage, based on the asserted functionality of the marks.
Cancellation: Fraud on the PTO. A procurement-by-fraud claim reduced to five conclusory contentions that were insufficient to withstand scrutiny under either Rule 8 or Rule 9(b) of the Federal Rules of Civil Procedure. Because conclusory arguments were insufficient to prove fraud on the PTO, the claim was dismissed.
Sherman Act, attempted monopolization. V. International failed to meet its "heavy burden" of proving with particularity that the Estate Movants had fraudulently procured the contested marks, the court decided. As far as the court could tell, the market that the Estate Movants were allegedly attempting to monopolize was "merchandise bearing Monroe’s name, image, or likeness."
According to V. International, that market could not be defined—with respect to substitute products—because the Marilyn Monroe merchandise lacked substitutes. At best, V. International appeared to define the product market based on a single brand, an approach that was consistently rejected by courts in the Southern District of New York. Further, V. International failed to define a geographic market. In fact, it failed to mention of any geographic boundary to the market that the Estate Movants were allegedly attempting to monopolize.
Even if the relevant market had been defined, the Sherman Act claim did not suggest a dangerous probability that the Estate Movants would achieve a monopoly. Indeed, V. International had alleged that Marilyn Monroe products were sold "under countless brand names by countless companies." V. International may have believed that the Estate Movants were attempting to monopolize a market, but its Sherman Act counterclaim indicated that the Movants were "a long way from fruition."
X One X’s Sherman Act claim differed from V. International’s version in one important respect: X One X alleged that LGP had attempted to create a monopoly, and had conspired with the Estate Movants in support of that goal. Like V. International, however, X One X did not state a Sherman Act claim.
First, X One X’s Sherman Act claim failed for the same reasons as V. International’s claim: X One X did not define a relevant product or geographic market. Further, X One X provided no reason for the court to conclude that LGP or the Estate Movants were dangerously close to achieving a monopoly. For those reasons alone, X One X failed to plausibly allege that LGP or the Estate Movants had attempted to monopolize under Sherman Act Section Two.
Further, X One X did not allege that LGP was directly liable under Section Two. It did assert an attempted monopolization claim against LGP, but "almost no facts" were alleged to support the assertion of predatory or anticompetitive conduct by LGP. In fact, the claim contained only two direct allegations against LGP: (1) on information and belief, ABG sought to create a vertical scheme with LGP, which was a partial owner of ABG, and (2) LGP "continues to acquire retail chains with the intent to keep lawful competitors from licensing or selling Marilyn Monroe-related products in such retailers."
At most, those allegations suggested that X One X and ABG had entered into an exclusive dealing arrangement, and exclusive dealing was not uniformly anticompetitive. To plead exclusionary conduct through an exclusive dealing policy, a plaintiff had to allege a substantial foreclosure of competition in the relevant market. In this case, however, X One X did not define a relevant market. Nor did it plausibly allege that an entity had substantially foreclosed competition. Consequently, X One X failed to establish LGP’s direct liability for a Section Two violation.
In addition, X One X failed to plausibly allege that LGP had conspired with the Estate Movants. The company supported its conspiracy-to-monopolize claim with conclusory references to a "conspiracy to monopolize the market for Marilyn Monroe memorabilia." Legal conclusions, however, were insufficient to substantiate a conspiracy claim. Because the attempted monopolization claim failed under the Sherman Act, it also failed under Nevada’s Unfair Trade Practices Act.
State statutes. V. International alleged that the Estate Movants violated New York’s Deceptive Acts and Practices Law (DAPL)—General Business Law §349—by committing deceptive acts in furtherance of an attempt to dominate the market in Marilyn Monroe memorabilia. However, the company failed to allege that the asserted misconduct either targeted or harmed consumers. For that reason, V. International—and X One X—failed to plead a DAPL claim under Section 349. In addition, X One X failed to plausibly allege that LGP and the Estate Movants had violated the common law of Nevada by engaging in unfair competition.
The case is No. 12 Civ. 4828 (KPF).
Attorneys: Michael Ray Adele (Technology Litigation Center, APC) for A.V.E.L.A., Inc. and X One X Movie Archives Inc. Paul Wendell Garrity (Sheppard, Mullin, Richter & Hampton, LLP) and Gina I. Durham (DLA Piper US LLP) for The Estate of Marilyn Monroe, LLC. Michael Bergman (Mbergman Law) and Gregory Goodheart (Goodheart Law) for V. International Fine Arts Publishing, Inc.
Companies: A.V.E.L.A., Inc.; X One X Movie Archives, Inc.; The Estate of Marilyn Monroe, LLC; V. International Fine Arts Publishing, Inc.
MainStory: TopStory Trademark NewYorkNews