APP Grp. (Canada) Inc. v. Rudsak USA Inc.

22-1965 APP Grp. (Canada) Inc. v. Rudsak USA Inc. UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT SUMMARY ORDER RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A SUMMARY ORDER FILED ON OR AFTER JANUARY 1, 2007, IS PERMITTED AND IS GOVERNED BY FEDERAL RULE OF APPELLATE PROCEDURE 32.1 AND THIS COURT’S LOCAL RULE 32.1.1. WHEN CITING A SUMMARY ORDER IN A DOCUMENT FILED WITH THIS COURT, A PARTY MUST CITE EITHER THE FEDERAL APPENDIX OR AN ELECTRONIC DATABASE (WITH THE NOTATION “SUMMARY ORDER”). A PARTY CITING A SUMMARY ORDER MUST SERVE A COPY OF IT ON ANY PARTY NOT REPRESENTED BY COUNSEL. 1 At a stated term of the United States Court of Appeals for the Second Circuit, 2 held at the Thurgood Marshall United States Courthouse, 40 Foley Square, in the City of 3 New York, on the 9th day of January, two thousand twenty-four. — 4 — 5 PRESENT: 6 GERARD E. LYNCH, 7 MICHAEL H. PARK, 8 STEVEN J. MENASHI 9 Circuit Judges. 10 _____________________________________ — 11 — 12 APP Group (Canada) Inc., DBA Mackage, 13 A.P.P. Group Inc., DBA Mackage, — 14 — 15 Plaintiffs-Appellants, — 16 — 17 v. 22-1965 — 18 — 19 Rudsak USA Inc., — 20 — 21 Defendant-Appellee. 22 _____________________________________ — 23 — 24 FOR PLAINTIFFS-APPELLANTS: GLEN LENIHAM (Darren Oved and 25 Aaron Solomon, on the brief), Oved 26 & Oved LLP, New York, NY. — 27 — 28 FOR DEFENDANT-APPELLEE: DAVID DONAHUE (Jason D. Jones and 29 Shelby P. Rokito, on the brief), Fross 30 Zelnick Lehrman & Zissu, P.C., New 31 York, NY. — 32 — 1 Appeal from a judgment of the United States District Court for the Southern District of 2 New York (Caproni, J.). 3 UPON DUE CONSIDERATION, IT IS HEREBY ORDERED, ADJUDGED, AND 4 DECREED that the judgment of the district court is AFFIRMED IN PART, VACATED IN 5 PART, AND REMANDED for further proceedings. 6 APP Group (Canada) Inc. and A.P.P. Group Inc. (collectively “Mackage”), owners of the 7 fashion label Mackage, bring claims for trade dress infringement, trade dress dilution, and common 8 law unfair competition against Rudsak USA Inc. (“Rudsak”). Mackage alleges that Rudsak 9 produces and sells knock-off coats featuring Mackage’s designs and engages in wrongful and 10 willful misappropriation of proprietary information to produce and sell the knock-offs. Mackage 11 argues that the district court erred both in dismissing its claims for failure to state a claim and in 12 denying leave to amend its Complaint. We assume the parties’ familiarity with the underlying 13 facts, the procedural history of the case, and the issues on appeal. 14 “We review the grant of a motion to dismiss under Rule 12(b)(6) de novo.” Elias v. 15 Rolling Stone LLC, 872 F.3d 97, 104 (2d Cir. 2017). “We review a district court’s denial of leave 16 to amend for abuse of discretion, unless the denial was based on an interpretation of law, such as 17 futility, in which we review the legal conclusion de novo.” Panther Partners Inc. v. Ikanos 18 Commc’ns, Inc., 681 F.3d 114, 119 (2d Cir. 2012). 19 I. Trade Dress Infringement 20 Mackage argues that it stated a claim for trade dress infringement. “To plead a claim of 21 trade dress infringement involving the overall appearance of a product, a plaintiff must offer (1) a 22 precise expression of the character and scope of the claimed trade dress,” and “must also allege — 2 — 1 that (2) the claimed trade dress is non-functional; (3) the claimed trade dress has secondary 2 meaning; and (4) there is a likelihood of confusion between the plaintiff’s goods and the 3 defendant’s.” Eliya, Inc. v. Steven Madden, Ltd., 749 F. App’x 43 , 46 (2d Cir. 2018) (citing 4 Landscape Forms, Inc. v. Columbia Cascade Co., 113 F.3d 373, 381 (2d Cir. 1997) and Yurman 5 Design, Inc. v. PAJ, Inc., 262 F.3d 101, 115-16 (2d Cir. 2001)). We address the first three 6 elements of Mackage’s trade dress infringement claim; the fourth is not in dispute. 7 A. Precise Description 8 Mackage alleges that it adequately describes its trade dress in its Complaint, enumerating 9 the design elements and supplementing them with photographs. To allege “a precise expression 10 of the character and scope of the claimed trade dress,” Mackage must “be able to point to the 11 elements and features that distinguish its trade dress,” Yurman Design, 262 F.3d at 117 , and explain 12 “how they are distinctive,” Eliya, 749 F. App’x at 47. These requirements allow courts to “shape 13 narrowly-tailored relief” with knowledge of “what distinctive combination of ingredients deserves 14 protection”; otherwise, “a plaintiff’s inability to explain to a court exactly which aspects of its 15 product design(s) merit protection may indicate that its claim is pitched at an improper level of 16 generality, i.e., the claimant seeks protection for an unprotectable style, theme or idea.” 17 Landscape Forms, 113 F.3d at 381 . 18 Mackage provides the following description in its Complaint: 19 The Mackage products, in particular the Mackage coats and jackets, incorporate 20 non-functional product trade dress constituting a combination of distinctive 21 features that identify the goods as originating from Mackage, including: (i) the 22 signature v-shaped fur-collar/hood used on the many of its best-selling coats (the 23 “V-Shaped Collar”); and/or (ii) the asymmetrical zipper used to close several of its — 3 — 1 coats (the “Asymmetrical Zipper”) (the V-Shaped Collar and Asymmetrical Zipper 2 as referred to individually and collectively as the “Trade Dress”). 3 A-8 to -9. The district court held that this description does not sufficiently specify features or 4 elements of the trade dress. Cf. GeigTech East Bay LLC v. Lutron Elecs. Co., 352 F. Supp. 3d 5 265, 277 (S.D.N.Y. 2018) (providing a precise description by detailing each individual element of 6 the trade dress and showing how its trade dress is distinctive); Eliya, Inc., 749 F. App’x at 45 7 (same). Central to this holding was the language of Mackage’s Complaint identifying the trade 8 dress as including the V-Shaped Collar “and/or” the Asymmetrical Zipper. A-9. The ambiguity 9 of this language caused the Complaint’s description to “denote categories of features, not the 10 features themselves,” signaling that these features are “overbroad and unprotectible.” Cardinal 11 Motors, Inc. v. H&H Sports Prot. USA, Inc., No. 1:20-cv-07899-PAC, 2021 WL 1758881 , at *4 12 (S.D.N.Y. May 4, 2021). Mackage’s inclusion of photographs does not salvage the insufficient 13 description because pictures are not a substitute for a precise description. See Int’l Leisure Prods., 14 Inc. v. FUNBOY LLC, 747 F. App’x 23 , 26 (2d Cir. 2018) (“[A] visual representation of the 15 asserted trade dress does not excuse ‘the party seeking protection’ from its burden of ‘point[ing] 16 to the elements and features that distinguish its trade dress.”) (citing Yurman Design, 262 F.3d at 17 117). 18 Mackage now describes its trade dress as “the combination of (i) Mackage’s unique, 19 signature V-shaped fur-collar/hood; and (ii) two (2) asymmetrical zippers.” Appellants’ Br. at 2 20 (emphasis added). But these changes alter the nature of the trade dress, so we do not consider the 21 new description on appeal. See Robinson v. Harvard Prot. Servs., 495 F. App’x 140, 141-42 (2d 22 Cir. 2012) (“[Plaintiff] seeks to introduce facts that were not part of his complaint . . . . Under the — 4 — 1 circumstances, ‘we see no reason to allow [him] to effectively amend [his] complaint on appeal.’” 2 (quoting Kendall v. Emps. Ret. Plan of Avon Prods., 561 F.3d 112, 117 (2d Cir. 2009)). 3 B. Functionality 4 Only non-functional trade dress is eligible for trademark protection. There are two types 5 of functionality—utilitarian and aesthetic. Utilitarian functionality turns on whether a product 6 feature is “(1) essential to the use or purpose of the article, or if it (2) affects the cost or quality of 7 the article.” Christian Louboutin S.A. v. Yves Saint Laurent Am. Holdings, Inc., 696 F.3d 206 , 8 219 (2d Cir. 2012) (internal quotations marks omitted). Aesthetic functionality depends on 9 whether “trademark protection would significantly hinder competition by limiting the range of 10 adequate alternative designs.” Id. at 222 . Mackage argues that its trade dress is non-functional 11 because it does not have any utility and because alternative designs perform the same function. 12 The district court did not err in finding that Mackage failed to allege non-functionality. 13 Throughout its Complaint, Mackage makes only conclusory statements asserting that its trade 14 dress is non-functional because “it does not have any utility” and offers photos as its only support. 15 But the Complaint does not identify which aspects of the photos are evidence of non-functionality. 16 Although Mackage offers some arguments on appeal suggesting that the V-Shaped Collar and 17 Asymmetrical Zipper have no utilitarian functionality, we again do not consider facts not pleaded 18 in the Complaint. See Robinson, 495 F. App’x at 141-42 . 19 C. Secondary Meaning 20 Mackage claims that its trade dress acquired secondary meaning because it satisfies all the 21 elements relevant to secondary meaning. A claimed trade dress has secondary meaning when “in 22 the minds of the public, the primary significance of a product feature . . . is to identify the source — 5 — 1 of the product rather than the product itself.” Christian Louboutin, 696 F.3d at 216 . “The crucial 2 question in a case involving secondary meaning always is whether the public is moved in any 3 degree to buy an article because of its source.” Id. at 226 . Relevant factors include “(1) 4 advertising expenditures, (2) consumer studies linking the mark to a source, (3) unsolicited media 5 coverage of the product, (4) sales success, (5) attempts to plagiarize the mark, and (6) length and 6 exclusivity of the mark’s use.” Id. (internal quotation marks omitted). 7 The district court correctly held that Mackage’s Complaint did not plausibly allege 8 secondary meaning. Mackage concedes that it does not allege facts as to the first two factors— 9 advertising expenditures and consumer surveys. As to the fourth factor, the vague statement that 10 “Mackage’s Trade Dress is used on a significant portion of its core collection and represents its 11 best-selling styles year after year,” A-10, is insufficient to show sales success. See Carson 12 Optical, Inc. v. Prym Consumer USA, Inc., 11 F. Supp. 3d 317, 344 (E.D.N.Y. 2014) (concluding 13 plaintiffs’ blanket assertion of sales and marketing success without any details fails to support 14 secondary meaning). As to the fifth factor, Mackage’s allegations of attempts to plagiarize its 15 trade dress are comprised of only a conclusory reiteration of its trade dress infringement claim and 16 so are “not entitled to be assumed true.” Vedder Software Grp. Ltd. v. Ins. Servs. Off., Inc., 545 17 F. App’x 30, 33 (2d Cir. 2013). Weighing these factors, we conclude that the district court did 18 not err in concluding that, on balance, Mackage’s Complaint did not sufficiently allege that its 19 trade dress had acquired secondary meaning. 20 In summary, the district court did not err by dismissing the trade dress infringement claim 21 based on Mackage’s failure to provide a precise description of its trade dress or to allege the 22 elements of non-functionality and acquired secondary meaning in its Complaint. — 6 — 1 II. Trade Dress Dilution 2 Mackage alleges that its trade dress is famous and well-recognized by the general 3 consuming public. Mackage also alleges that its trade dress is distinctive and has acquired 4 secondary meaning. Under the Lanham Act, “an owner of a famous, distinctive mark is entitled 5 to an injunction against the user of a mark that is likely to cause dilution of the famous mark.” 6 Starbucks Corp. v. Wolfe’s Borough Coffee, Inc., 588 F.3d 97, 105 (2d Cir. 2009). “[A] mark is 7 famous if it is widely recognized by the general consuming public of the United States as a 8 designation of source of the goods or services of the mark’s owner.” 15 U.S.C. § 1125 (c). Under 9 New York state law, a party alleging trade dress dilution “must prove (1) that the trademark is 10 truly distinctive or has acquired secondary meaning; (2) a likelihood of dilution either as a result 11 of blurring or tarnishing; and (3) predatory intent.” Paco Sport, Ltd. v. Paco Rabanne Perfumes, 12 No. 00-7344, 2000 WL 1721126 , at *7 (2d Cir. Nov. 16, 2000)). Failure to state a claim that 13 plaintiff has a protectable trade dress is a failure to state a claim of dilution under federal and state 14 law. Int’l Leisure Prods., 747 F. App’x at 26. 15 Because Mackage’s Complaint failed to state a claim for trade dress infringement, it also 16 fails to allege trade dress dilution under federal and state law. We thus affirm the district court’s 17 order dismissing Mackage’s trade dress dilution claim. 18 III. Unfair Competition Under New York Common Law 19 Mackage argues that its “Complaint alleges a viable common law unfair competition claim 20 that is not premised solely on [Rudsak’s] infringement of Mackage’s Trade Dress, but rather 21 independently arose from [Rudsak’s] unlawful and deceptive trade practices in the manufacture 22 and sale of the Unfairly-Competing Coats that did not incorporate the Trade Dress,” which include — 7 — 1 misappropriation of “Mackage’s labor, skill, expenditures, and goodwill—as well as Mackage’s 2 Proprietary Information.” Appellants’ Br. at 29, 31. “A common law unfair competition claim 3 under New York law is generally ‘the bad faith misappropriation of the labors and expenditures of 4 another, likely to cause confusion or to deceive purchasers as to the origin of the goods.” Crye 5 Precision LLC v. Duro Textiles, LLC, 689 F. App’x 104, 108 (2d Cir. 2017); see Genesee Brewing 6 Co., Inc. v. Stroh Brewing Co., 124 F.3d 137, 149 (2d Cir. 1997) (same). 7 The district court dismissed Mackage’s claim for unfair competition under New York 8 common law on the ground that the claim was based solely on the same trade dress theory as its 9 federal claim, so it failed for the same reason as did that claim. In the Complaint, however, 10 Mackage alleged that Rudsak misappropriates its proprietary information by “deliberately” hiring 11 former Mackage employees and utilizing them to “copy Mackage’s style nearly verbatim 12 (including the Trade Dress) (the ‘Defendant’s Offending Coats’)” and by purchasing Mackage 13 coats and instructing employees to copy them. A-19 to -20 (emphasis added). In support of this 14 claim, Mackage included images of the “Offending Coats,” some of which do not include both 15 alleged trade dress elements (the V-Collar and the Asymmetrical Zipper) and some of which 16 include neither. A-21 to -26. The District Court failed to address the unfair competition claim 17 to the extent that it was predicated on misappropriation of proprietary interests other than the trade 18 dress. 19 We thus remand to permit the district court to decide in the first instance whether Mackage 20 has sufficiently pleaded factual allegations to state a claim for unfair competition based on the 21 misappropriation of proprietary information. — 8 — 1 IV. Leave To Amend 2 Finally, Mackage argues that the district court erred by declining to grant an 3 opportunity to amend its complaint. We agree. As we have written: 4 Federal Rule of Civil Procedure 15(a)(2) states that court[s] should freely give leave 5 [to amend] when justice so requires. We have upheld Rule 15(a)(2)’s liberal 6 standard as consistent with our strong preference for resolving disputes on the 7 merits. We have been particularly skeptical of denials of requests to amend when 8 a plaintiff did not previously have a district court’s ruling on a relevant issue, 9 reasoning that [w]ithout the benefit of a ruling, many a plaintiff will not see the 10 necessity of amendment or be in a position to weigh the practicality and possible 11 means of curing specific deficiencies. However, denial of leave to amend is proper 12 if amendment would be futile. In particular, [a] plaintiff need not be given leave 13 to amend if it fails to specify either to the district court or to the court of appeals 14 how amendment would cure the pleading deficiencies in its complaint. 15 Attestor Value Master Fund v. Republic of Argentina, 940 F.3d 825, 833 (2d Cir. 2019) (citations 16 and internal quotation marks omitted). 17 Mackage was not provided an opportunity to amend deficiencies that it claims it could fix. 18 See Loreley Fin. (Jersey) No. 3 Ltd. v. Wells Fargo Secs., LLC, 797 F.3d 160, 190 (2d Cir. 2015) 19 (finding it improper to provide plaintiffs with “a Hobson’s choice: agree to cure deficiencies not 20 yet fully briefed and decided or forfeit the opportunity to replead”); Cresci v. Mohawk Valley Cmty. 21 Coll., 693 F. App’x 21, 25 (2d Cir. 2017) (holding that the district court erred in denying leave to 22 amend when it “granted the defendant’s motion to dismiss, identif[ied] the flaws it found in 23 [plaintiff’s] complaint, and denied [plaintiff] leave to replead, faulting him for having failed to 24 submit a proposed amended complaint in the time between the defendant’s motion to dismiss and 25 the court’s ruling on it.”). Here, in a footnote, the district court concluded that amendment would 26 be futile “because all of Mackage’s claims are predicated on a protectable trade dress” which — 9 — 1 Mackage has been unable to describe. APP Grp. (Canada) Inc. v. Rudsak USA Inc., No. 21-CV2 7712, 2022 WL 3227861 , at *7 n.13 (S.D.N.Y. Aug. 10, 2023). 3 Mackage specifies in its reply brief how it could amend its Complaint and cure various 4 deficiencies. It explains how it could: clarify its description of the trade dress and how the trade 5 dress is distinctive; specify its allegations of non-functionality; add to the elements of secondary 6 meaning; and clarify the basis for the state-law claim for unfair competition. Although we do not 7 address whether such amendments would be sufficient, they are not clearly futile, so we vacate the 8 district court’s denial of leave to amend. 1 9 * * * 10 We have considered all of Mackage’s remaining arguments and find them to be without 11 merit. For the foregoing reasons, we AFFIRM the judgment of the district court dismissing 12 Mackage’s trade dress infringement and trade dress dilution claims. We VACATE the district 13 court’s dismissal of Mackage’s unfair competition claim and denial of leave to amend and 14 REMAND for further proceedings consistent with this order. — 15 — 16 FOR THE COURT: 17 Catherine O’Hagan Wolfe, Clerk of Court — 18 — — 1 — We accordingly deny Rudsak’s motion to strike a portion of Mackage’s reply brief. Mackage’s proposed amendments are not new issues raised for the first time in a reply brief, rather they are a response to an argument made by Rudsak on existing issues. See United States v. Bari, 599 F.3d 176 , 180 n.6 (2d Cir. 2010) (“We note that although we normally will not consider issues raised only in reply briefs, we will consider arguments raised in response to arguments made in appellee’s brief.”). — 10 —