Summary
The United States District Court for the Eastern District of Missouri considered NRRM, LLC’s motion to dismiss Defendant’s counterclaim seeking cancellation of trademarks for alleged fraud on the USPTO and to strike affirmative defenses. The court dismissed the counterclaim for failure to plead fraud with particularity and struck Defendant’s first affirmative defense for failure to state a claim, while declining to strike the second paragraph of the unclean-hands defense. The motion was therefore granted in part and denied in part.
Topics
Practice areas
Questions Presented
- Whether Empire adequately pleaded a Lanham Act counterclaim seeking cancellation of NRRM's trademark registrations for fraud on the USPTO under Rules 12(b)(6) and 9(b).
- Whether Empire's first affirmative defense, asserting failure to state a claim and lack of likelihood of confusion, was a legally sufficient affirmative defense or merely a general denial.
- Whether the second paragraph of Empire's unclean-hands defense should be stricken under Rule 12(f).
Holdings
- Empire failed to plead with the particularity required by Rule 9(b), and failed to allege facts plausibly showing materially false statements, deceptive intent, or that the alleged omission was material to the USPTO's registration decision. The fraud-based cancellation counterclaim was dismissed under Rule 12(b)(6).
- The first affirmative defense was legally insufficient and was stricken because failure to state a claim and lack of likelihood of confusion challenge elements of NRRM's prima facie claims rather than constitute independent affirmative defenses.
- The second paragraph of the second affirmative defense was not stricken because the allegations that NRRM's former attorney knew of Empire's keyword purchases fairly presented a potential factual or legal question and were not shown to be so unrelated to the claims as to warrant the drastic remedy of striking.
Key quotations
“Indeed, the very nature of the charge of fraud requires that it be proven ‘to the hilt’ with clear and convincing evidence. There is no room for speculation, inference or surmise and, obviously, any doubt must be resolved against the charging party.” (III.1)
“Failure to state a claim is not a proper affirmative defense but, rather, asserts a defect in Plaintiff’s prima facie case.” (III.2.a)
“A motion to strike a defense will be denied ... if it fairly presents a question of law or fact which the court ought to hear.” (III.2.b)
Factual background
NRRM, doing business as CarShield, alleged that Empire infringed its trademarks by paying internet search engines to display Empire's websites as sponsored advertisements when consumers searched for "CarShield." Empire counterclaimed that NRRM fraudulently obtained or maintained three trademark registrations by describing its services as "vehicle service contracts on vehicles manufactured by others for mechanical breakdown and servicing" without including the term "third party." Empire also asserted that NRRM's former attorney had represented Empire and knew of Empire's purchased keywords, which formed the basis for an unclean-hands defense.
Procedural history
NRRM filed a trademark-infringement action concerning Empire Auto Protect's purchase of the keyword "CarShield" for sponsored search advertisements. NRRM filed an amended complaint asserting four federal and state trademark claims. After the Court denied Empire's motion to dismiss, Empire answered and asserted a counterclaim seeking cancellation of NRRM's trademarks for fraud on the USPTO and affirmative defenses including failure to state a claim and unclean hands. The Court granted NRRM's motion in part, dismissing the counterclaim and striking the first affirmative defense, but denied the motion as to the second paragraph of the second affirmative defense.