Phoenix Entertainment's Appellate Brief

Case: 15-2844
Document: 12
Filed: 10/22/2015
Pages: 64
No. 15-2844
In the
United States Court of Appeals

for the Seventh Circuit
PHOENIX ENTERTAINMENT PARTNERS, LLC and SLEP-TONE ENTERTAINMENT
CORPORATION,
Plaintiffs-Appellants,
v.
DANNETTE RUMSEY and BASKET CASE PUB, INCORPORATED,

Defendants-Appellees.
_______________________________________
Appeal from the United States District Court
for the Central District of Illinois, No. 1:15-cv-01009-JBM-JEH.
The Honorable Joe Billy McDade, Judge Presiding.
BRIEF AND APPENDIX OF PLAINTIFFS-APPELLANTS
VIVEK JAYARAM
JAYARAM LAW GROUP, LTD.
33 North LaSalle Street
Suite 2900
Chicago, IL 60602
(312) 454-2859
JAMES M. HARRINGTON
(Counsel of Record)
HARRINGTON LAW, P.C.
12245 Nations Ford Road
Suite 506
Pineville, NC 28134-8444
(704) 635-6300
Attorneys for Plaintiffs-Appellants

Phoenix Entertainment Partners, LLC and Slep-Tone Entertainment Corporation
COUNSEL PRESS (866) 703-9373
PRINTED ON RECYCLED PAPER
Case: 15-2844
Document: 12
Filed: 10/22/2015
Pages: 64
$33($5$1&( CIRCUIT RULE 26.DISCLOSURE STATEMENT
Appellate Court No: 15-2844

Short Caption: Phoenix Entertainment Partners, LLC et al. v. Rumsey et al.
To enable the judges to determine whether recusal is necessary or appropriate, an attorney for a non-governmental party or
amicus curiae, or a private attorney representing a government party, must furnish a disclosure statement providing the
following information in compliance with Circuit Rule 26.1 and Fed. R. App. P. 26.1.
The Court prefers that the disclosure statement be filed immediately following docketing; but, the disclosure statement must
be filed within 21 days of docketing or upon the filing of a motion, response, petition, or answer in this court, whichever occurs
first. Attorneys are required to file an amended statement to reflect any material changes in the required information. The text
of the statement must also be included in front of the table of contents of the party's main brief. Counsel is required to
complete the entire statement and to use N/A for any information that is not applicable if this form is used.
[ ]
PLEASE CHECK HERE IF ANY INFORMATION ON THIS FORM IS NEW OR REVISED

AND INDICATE WHICH INFORMATION IS NEW OR REVISED.
(1) The full name of every party that the attorney represents in the case (if the party is a corporation, you must provide the
corporate disclosure information required by Fed. R. App. P 26.1 by completing item #3):
Phoenix Entertainment Partners, LLC, Plaintiff-Appellant
Slep-Tone Entertainment Corporation, Plaintiff-Appellant
(2) The names of all law firms whose partners or associates have appeared for the party in the case (including proceedings
in the district court or before an administrative agency) or are expected to appear for the party in this court:
Harrington Law, P.C. and Jayaram Law Group, Ltd. (new) - Will appear in this Court
Keith A. Vogt, Esq. - District court only
The Law Offices of Konrad Sherinian, LLC - District court only
(3) If the party or amicus is a corporation:

i) Identify all its parent corporations, if any; and
None (either party)
ii) list any publicly held company that owns 10% or more of the partys or amicus stock:
None (either party)
Attorney's Signature:
s/ James M. Harrington
Date: 10/22/2015
Attorney's Printed Name: James M. Harrington

Please indicate if you are Counsel of Record for the above listed parties pursuant to Circuit Rule 3(d).
Address:
Yes
No
12245 Nations Ford Road, Suite 506

Pineville, NC 28134-8444
Phone Number: (704) 635-6300
Fax Number: (none)
E-Mail Address: jh@hlpc.us
rev. 01/ *$
Case: 15-2844
Document: 12
Filed: 10/22/2015
Pages: 64
$33($5$1&( CIRCUIT RULE 26.DISCLOSURE STATEMENT
Appellate Court No: 15-2844

Short Caption: Phoenix Entertainment Partners, LLC et al. v. Rumsey et al.
To enable the judges to determine whether recusal is necessary or appropriate, an attorney for a non-governmental party or
amicus curiae, or a private attorney representing a government party, must furnish a disclosure statement providing the
following information in compliance with Circuit Rule 26.1 and Fed. R. App. P. 26.1.
The Court prefers that the disclosure statement be filed immediately following docketing; but, the disclosure statement must
be filed within 21 days of docketing or upon the filing of a motion, response, petition, or answer in this court, whichever occurs
first. Attorneys are required to file an amended statement to reflect any material changes in the required information. The text
of the statement must also be included in front of the table of contents of the party's main brief. Counsel is required to
complete the entire statement and to use N/A for any information that is not applicable if this form is used.
[ ]
PLEASE CHECK HERE IF ANY INFORMATION ON THIS FORM IS NEW OR REVISED

AND INDICATE WHICH INFORMATION IS NEW OR REVISED.
(1) The full name of every party that the attorney represents in the case (if the party is a corporation, you must provide the
corporate disclosure information required by Fed. R. App. P 26.1 by completing item #3):
Phoenix Entertainment Partners, LLC, Plaintiff-Appellant
Slep-Tone Entertainment Corporation, Plaintiff-Appellant
(2) The names of all law firms whose partners or associates have appeared for the party in the case (including proceedings
in the district court or before an administrative agency) or are expected to appear for the party in this court:
Harrington Law, P.C. and Jayaram Law Group, Ltd. (new) - Will appear in this Court
Keith A. Vogt, Esq. - District court only
The Law Offices of Konrad Sherinian, LLC - District court only
(3) If the party or amicus is a corporation:

i) Identify all its parent corporations, if any; and
None (either party)
ii) list any publicly held company that owns 10% or more of the partys or amicus stock:
None (either party)
Attorney's Signature:
s/ Vivek Jayaram
Date: 10/22/2015
Attorney's Printed Name: Vivek Jayaram

Please indicate if you are Counsel of Record for the above listed parties pursuant to Circuit Rule 3(d).
Address:
Yes
No
33 N. LaSalle Street Suite 2900

Chicago, IL 60602
Phone Number: 312-454-2859
Fax Number: 312-551-0322
E-Mail Address: vivek@jayaramlaw.com
rev. 01/ *$
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Filed: 10/22/2015
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TABLEOFCONTENTS
CIRCUITRULE26.1DISCLOSURESTATEMENTS...............................................................i
TABLEOFAUTHORITIES.........................................................................................................v
JURISDICTIONALSTATEMENT..............................................................................................1
STATEMENTOFISSUESPRESENTED....................................................................................2
STATEMENTOFTHECASE......................................................................................................3
SUMMARYOFARGUMENT.....................................................................................................6
ARGUMENT..................................................................................................................................8
I.
BasketCase,notSlepToneasthedistrictcourtconcluded,
istheoriginofthekaraoketracksBasketCaseused..................................8
A. Standardofreview....................................................................................8
B.
Oneimportantpurposeoftrademarksistoenable
consumerstoidentifythesourceororiginofgoods
andservices...............................................................................................9
C.
Adeterminationoftheoriginofgoodsandservicesis
essentialtotheresolutionoftrademarkinfringementclaims.........10
D.
BasketCaseisthelegaloriginofthegoodsitmadeand
wasusinginitsestablishmenttoprovidekaraoke
entertainmentservices...........................................................................12
E.
ThedistrictcourtsdeterminationthatSlepToneisthe
originofBasketCasesgoodswasanerroroflawand
shouldbereversed.................................................................................14
II.
BasketCasesunauthorizedcreation,offering,anduseofgoods
markedwiththeSOUNDCHOICEmarks,evenifusedfreeof
charge,issufficienttosupportclaimsfortrademarkinfringement...........15
iii
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A.
StandardofReview.................................................................................15
B.
Thedistrictcourtsdeterminationthatuserequiressale
wasbasedonanoverreadingofcaselaw..........................................15
C.
TheTrademarkActenvisionsactsotherthansales
thatarepredicateactsofinfringement...............................................16
D.
Thestatutorydefinitionofuseincommerceapplies
onlytoacquisitionofrights,nottoinfringement.............................17
III. Becauseitsdecisionwasfoundedonincorrectstatements
andapplicationofthelaw,thedistrictcourterredin
dismissingSlepTonesclaims.........................................................................21
A.
StandardofReview.................................................................................21
B.
Elementsofavalidtrademarkinfringementclaim...........................21
C.
Likelihoodofconfusionanalysisisthemostimportant
aspectofthetrademarkinfringementcalculus.................................22
D.
Applicationofthestandardtestforlikelihoodof
confusionshowsthatSlepTonehasstatedaclaim..........................26
E.
Thisdistrictcourtstandsaloneamongthecourtsofthis
districtindeterminingthatSlepTonefailedtostateaclaim..........29
IV. CONCLUSION....................................................................................................30
CERTIFICATEOFCOMPLIANCE
CERTIFICATEOFSERVICE
REQUIREDSHORTAPPENDIX...........................................................................................post
iv
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TABLEOFAUTHORITIES
Cases
ActiveDisposal,Inc.v.CityofDarien,635F.3d883(7thCir.2011)........................................21
Ashcroftv.Iqbal,556U.S.662,129S.Ct.1937,173L.Ed.2d868(2009)..............................21
BellAtl.Corp.v.Twombly,
550U.S.544,127S.Ct.1955,167L.Ed.2d929(2007)..........................................2122
Bd.ofRegentsofUniv.ofWis.Sys.v.Phx.IntlSoftware,Inc.,
653F.3d448(7thCir.2011)....................................................................................2223
BosleyMed.Inst.,Inc.v.Kremer,403F.3d672(9thCir.2005)..........................................1920
BrookfieldComms.,Inc.v.WestCoastEntmtCorp.,
174F.3d1036(9thCir.1999)...................................................................................2021
ChevronChem.Co.v.VoluntaryPurchasingGroups,Inc.,
659F.2d695(5thCir.1981).............................................................................................8
DastarCorp.v.TwentiethCenturyFoxFilmCorp.,539U.S.23(2003).................10,1214,15
DorrOliver,Inc.v.FluidQuip,Inc.,94F.3d376(7thCir.1996)..........................................10
EastlandMusicGrp.,LLCv.LionsgateEntmt,Inc.,
707F.3d869(7thCir.2013).....................................................................................1516
EliLilly&Co.v.NaturalAnswers,Inc.,233F.3d456(7thCir.2000)....................................22
FortresGrandCorp.v.WarnerBros.EntmtInc.,
763F.3d696(7thCir.2014)...........................................................................................21
ForumCorp.ofN.Am.v.Forum,Ltd.,903F.2d434(7thCir.1990).........................................8
JamesBurrough,Ltd.v.SignofBeefeater,Inc.,572F.2d574(7thCir.1978)............................8
Justicev.TownofCicero,577F.3d768(7thCir.2009).............................................................21
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KentuckyFriedChickenCorp.v.DiversifiedPackagingCorp.,
549F.2d368(5thCir.1977)...........................................................................................12
Merck&Co.,Inc.v.MediplanHealthConsulting,Inc.,
425F.Supp.2d402(S.D.N.Y.2006)...............................................................................23
N.Am.Med.Corp.v.AxiomWorldwide,Inc.,522F.3d1211(11thCir.2008).......................20
Packmanv.ChicagoTribuneCo.,267F.3d628(7thCir.2001)................................................22
PlayboyEnters.,Inc.v.NetscapeComms.Corp.,354F.3d1020(9thCir.2004).....................20
PromatekIndus.,Ltd.v.EquitracCorp.,300F.3d808(7thCir.2002).....................................19
Sands,Taylor&WoodCo.v.QuakerOatsCo.,978F.2d947(7thCir.1992).....................9,22
SchwinnBicycleCo.v.RossBicycles,Inc.,870F.2d1176(7thCir.1989).................................8
SlepToneEntmtCorp.v.AmericasBar&Grill,LLC,
2014WL4057442(N.D.Ill.Aug.15,2014)..................................................................29
SlepToneEntmtCorp.v.Coyne,41F.Supp.3d707(N.D.Ill.2014)................................23,29
SlepToneEntmtCorp.v.ElwoodEnts.,Inc.,
2014WL1612891(N.D.Ill.Apr.21,2014)..................................................................29
SlepToneEntmtCorp.v.Roberto,2013WL5748896(N.D.Ill.Oct.22,2013).....................29
SlepToneEntmtCorp.v.SellisEnts.,Inc.,87F.Supp.3d897(N.D.Ill.2015).......................29
SlepToneEntmtCorp.v.TeddyOBrians,Inc.,
2015WL249368(N.D.Ill.Jan.20,2015)......................................................................29
SmithFiberglassProds.,Inc.v.Ameron,Inc.,7F.3d1327(7thCir.1993)..............................22
TMTN.Am.,Inc.v.MagicTouchGmbH,124F.3d876(7thCir.1997)...........................10,12
Ty,Inc.v.JonesGrp.,Inc.,237F.3d891(7thCir.2001)..........................................................23
TyInc.v.Perryman,306F.3d509(7thCir.2002)......................................................................9
vi
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UnitedWeStandAm.,Inc.v.UnitedWeStand,Am.NewYork,Inc.,
128F.3d86(2dCir.1997)..............................................................................................20
VulcanGolf,LLCv.GoogleInc.,552F.Supp.2d752(N.D.Ill.2008).......................................23
WaltWestEnterprises,Inc.v.GannettCo.,695F.2d1050(7thCir.1982)............................10
StatutesandRules
15U.S.C.1051.............................................................................................................................2
15U.S.C.1114.....................................................................................................1,11,17,19,22
15U.S.C.1115.......................................................................................................................910
15U.S.C.1125.....................................................................................................1,11,17,19,22
15U.S.C.1127...............................................................................................................1719,22
28U.S.C.1291.............................................................................................................................1
28U.S.C.1331.............................................................................................................................1
28U.S.C.1338.............................................................................................................................1
28U.S.C.1367.............................................................................................................................1
Fed.R.Civ.P.12(b)(6)...........................................................................................................2,29
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JURISDICTIONALSTATEMENT
(1)
JurisdictionoftheDistrictCourt.
Jurisdictionofthedistrictcourtoverthesubjectmatterofthisactionwasbased
on28U.S.C.1331and1338(a),inthattheactionarisesunder32and43ofthe
Lanham(Trademark)Actof1946,anActofCongressrelatingtotrademarks,15U.S.C.
1114and1125(theTrademarkAct).Supplementaljurisdictionastotheclaim
underthelawsoftheStateofIllinoiswasfoundedon28U.S.C.1367(a),inthatthe
statelawclaimwassorelatedtothefederalclaimsastoformpartofthesamecaseor
controversy.
(2)
JurisdictionoftheAppellateCourt.
JurisdictionoftheAppellateCourtisbasedupon28U.S.C.1291,inthatthisis
anappealfromajudgmentfoundedonthefinaldecisionofadistrictjudgeofthe
CentralDistrictofIllinois,adistrictembracedbythisCourt,adjudicatingall
outstandingclaims.JudgmentwasenteredinthedistrictcourtonAugust4,2015.No
postjudgmentmotionsthatwouldtollthetimeinwhichtoappealwere
filed.TheNoticeofAppealwasfiledonAugust26,2015.
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STATEMENTOFISSUESPRESENTED
Theissuespresentedonappealare:
(1)
Whenadefendantcreatesgoodsconsistingofdigitalcopiesoftheexpressive
contentofgoodsbearingaplaintiffstrademarkandtradedress,forpurposesof
theTrademarkActof1946,15U.S.C.1051etseq.,whoistheoriginofthe
goodsthedefendantcreated?
(2)
Doesadefendantsunauthorizedcreationofgoodsbearingaplaintiffs
trademarkandtradedressandsubsequentofferinganduseofthosegoodsin
connectionwiththedefendantscommercialbusiness,unaccompaniedbyan
actualsaleofthegoods,constituteuseoftheplaintiffstrademarkandtrade
dresssufficienttosupportaclaimfortrademarkinfringementorunfair
competitionundertheTrademarkActof1946,15U.S.C.1051etseq.?
(3)
DidthedistrictcourterrindismissingthisactionunderFederalRuleofCivil
Procedure12(b)(6)onthebasisthattheSecondAmendedComplaintfailedto
statejusticiableclaimsfortrademarkinfringementandrelatedtortsbasedupon
itsdeterminations(a)thatnoconsumerconfusionbecausethelegaloriginofthe
goodswascorrectlyidentifiedbytheSOUNDCHOICEmarksasSlepTone,and
(b)thattrademarkinfringementrequiresasaleofthegoodsinuse?
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STATEMENTOFTHECASE
ThisisanappealfromthedismissalofallclaimsbythePlaintiff,SlepTone
EntertainmentCorporation(SlepTone)1,againstDefendantsDannetteRumseyand
hercorporation,BasketCasePub,Incorporated(together,BasketCase).Thedistrict
courtactionwasfortrademarkinfringementandrelatedtortsinvolvingtheallegeduse
ofkaraokeaccompanimenttracksbearingSlepTonestrademarksandtradedress
withoutauthorization.(SecondAmendedComplaint,May1,2015,R.20:1,7,5274.)2
SlepToneisaleadingproducerofkaraokeaccompanimenttracks.(R.20:16
17.)Karaokeaccompanimenttracksconsistofrerecordedversionsofpopularsongs
withouttheleadvocalsinaspecializedformatthatincludesagraphicalcomponent
containingalyricdisplay,cueinginformation,andotherinformationusefultoaperson
whosingsalong.(R.20:11.)SlepToneproducesitskaraoketracksunderitswell
knowntrademarkSOUNDCHOICE,whichithasfederallyregisteredinbothwords
onlyandlogoformats.(R.20:14,4243.)SlepTonealsoclaimsprotectionofcertain
distinctiveandprotectabletradedressconsistingofthetypeface,style,andvisual
1Afterthefilingofthislawsuit,SlepTonesassets,includingthetrademarksandtradedressin
suit,wereacquiredbyPhoenixEntertainmentPartners,LLC(Phoenix),whichthenjoinedin
thisactionasacoplaintiff.Forsimplicity,thisbriefwillrefertobothSlepToneandPhoenixas
SlepTone.
ReferencestoR.__:__indicatethedocketnumberandpagenumber(orparagraphnumber,
asapplicable)ofitemsfiledaspartofthedistrictcourtrecord;e.g.,R.20:1referstoDocket
No.20,paragraph1.ReferencestoA__indicatethelocationofthereferencedmaterialinthe
ShortAppendix.
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arrangementindisplayingthelyrics,thestyleofdisplayingentrycues,andother
elements.(R.20:46.)SlepToneskaraoketracksarecurrentlysoldand/ordistributed
onlyoncompactdiscs.(R.20:20.)
BasketCaseoperatesaneatinganddrinkingestablishmentofthesamename
locatedinPeoria,Illinois.(R.20:7.)BasketCaseprovideskaraokeentertainmentfor
patronsatitsestablishmentasafreeservicewiththecommercialpurposeofenticing
patronstovisittheestablishmentandpurchasefoodandbeverages.(R.20:7,12,52.)
Thepurchaseandconsumptionofalcoholicbeveragesinconnectionwithkaraoke
showsisparticularlyencouragedtoenablepatronstoovercomeinhibitionsagainst
singinginpublic.(R.20:13.)
Ratherthanofferingkaraokeentertainmentasanoccasionalservice,BasketCase
offerskaraokeshowssevendaysperweekatitsestablishment.(R.20:53.)
BasketCaseprovidesitskaraokeentertainmentservicesusingequipmentthatit
owns,includingasoundsystemwithmicrophones,displaysforthegraphical
componentofthekaraoketracksituses,andrelatedequipment.(R.20:54.)Basket
CaseuseskaraoketracksthataremarkedwithduplicatesofSlepTonestrademarks
andtradedress.(R.20:6465.)RatherthanusingoriginalSOUNDCHOICEdiscs
whichBasketCasemayormaynotevenownBasketCasehasstoredcopiesof
karaoketracksononeormorecomputerharddrives,anditusesthetracksonthehard
drivestoproduceaudioandvideoaspartofitskaraokeshows.(R.20:5657,6465.)
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Inotherwords,SlepToneallegesthatBasketCasehascreatednewgoods,duplicated
fromoriginaldiscsorfromanillicitsource,thathavebeenmarkedwithSlepTones
trademarksandtradedress.(R.20:5657,6365.)
BasketCasesactivitieswithrespecttoSOUNDCHOICEbrandedareknownin
theindustryasmediashifting,becausetheyinvolveusingcontentfromonemedium
(beitoriginaloranillicitcopy)asatemplateforanewcopyofthecontentona
differentmedium.(R.20:2123.)Priorto2007,SlepToneprohibitedcommercial
mediashiftingentirely.(R.20:27.)Beginningin2009,SlepToneestablishedapolicy
thatwouldpermitmediashiftingforcommercialpurposesundercontrolled
circumstances.(R.20:28.)SlepToneallegesthatBasketCasedidnotfollowSlep
Tonesoriginalpolicy(summedupasDontCopy),nordiditfollowSlepTones
mediashiftingpolicy,whenitcreatedandusedthekaraokeaccompanimenttracks
fromitscomputerharddrive.(R.20:58,61.)
SlepTonecommencedthissuitonJanuary10,2015,assertingclaimsfor
trademarkandtradedressinfringementandunfaircompetitionundertheTrademark
Actandrelatedstatelawclaims.(Complaint,R.1:1.)Aftersomeproceduralmatters
wereattendedto,SlepTonefiledtheSecondAmendedComplaintonMay1,2015.
(R.20:1.)InresponsetotheSecondAmendedComplaint,BasketCasecounterclaimed
forcancellationofthetrademarkregistrationsandforcertaindeclaratoryreliefand
movedtodismissthetrademarkclaimsunderFederalRuleofCivilProcedure12(b)(6).
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(Counterclaims,May26,2015,R.21:111;DefendantsMotiontoDismiss,May26,2015,
R.22:13.)OnAugust4,2015,thedistrictcourtgrantedthemotiontodismissastothe
federalclaims,declinedtoexercisesupplementaljurisdictionoverthestateclaims,and
dismissedthecounterclaimsasmootonitsownmotion.(OrderandOpinion,August4,
2015,R.36;A01etseq.)Judgmentwasenteredonthesamedayinfavorofthe
defendants.(Judgment,August4,2015,R.37;A22.)
SlepTonenowappealsfromthedistrictcourtsdismissalofitstrademark
claims.
SUMMARYOFARGUMENT
Thepurposeofatrademarkistopreventconsumerconfusionbyproviding
consumerswithareadyandreliablemeansofdeterminingtheoriginandqualityof
goodsandservices.Foritskaraokeshows,BasketCaseusedcopiedkaraoke
accompanimenttracksthatweremarkedwithSlepTonestrademarksandstoredon
computerharddrivesphysicalmediaandtracksthatSlepTonedidnotcreate.The
districtcourtdeterminedthatSlepToneistheoriginofthecopiedtracksforpurposes
oftheTrademarkAct.Thisdetermination,aconclusionoflaw,waserroneousbecause
bindingprecedentestablishesthattheoriginofgoodsisthepartythatmakesthem,
nottheauthoroftheunderlyingexpressivecontent.
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ThedistrictcourtalsodeterminedthatbecauseBasketCasewasnotaccusedof
sellingthecopiedtracks,butratherofallowingtheirfreeusebypatronsas
entertainment,BasketCasedidnotusethetrademarksforpurposesofinfringement
analysis.This,too,waserroneous.BasketCasesuseofthetrademarksandthecopied
trackswasintimatelytiedtoitscommercialactivities,thesaleoffoodandbeverages.
TheTrademarkActenvisionsanexpansivelistofpredicateactsoftrademark
infringement,includingselling,offeringtosell,distributing,oradvertisingofanygoods
orservices,aslongastheuseofthemarkislikelytocauseconfusion.Theactsofwhich
BasketCasestandsaccusedarewellwithintheambitoftheinfringementstatute.
Becausethedistrictcourtreachederroneousconclusionsoflawonthe
aforementionedpoints,itimproperlyeschewedthetraditionalanalysisoflikelihoodof
confusion.IfithadproperlyanalyzedthelikelihoodofconfusionarisingfromBasket
CasesuseofSlepTonesmarks,thedistrictcourtwouldhaveconcludedthatSlepTone
hadstatedaplausibleclaimforrelief,becausetheSecondAmendedComplaintcontains
amplewellpleadedfactualallegationsinsupportofallofthefactorsinthetraditional
analysis.Assuch,thegrantingofthemotiontodismisswasimproperandshouldbe
reversed.
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ARGUMENT
I.
BasketCase,notSlepToneasthedistrictcourtconcluded,istheoriginof
thekaraoketracksBasketCaseused.
A.
Standardofreview
Determinationsandstatementsofthelawbythedistrictcourtarereviewedde
novoforlegalerror,andthedistrictcourtsconclusionsarereviewedforsignsthatthe
courtsapplicationofthelawwasinfectedwithlegalerror,i.e.,anerroneousgeneral
principleaboutthewaythetestshouldbeapplied.ForumCorp.ofN.Am.v.Forum,
Ltd.,903F.2d434,438(7thCir.1990);seealsoSchwinnBicycleCo.v.RossBicycles,Inc.,870
F.2d1176,118788(7thCir.1989)(districtcourtserroneousstatementoflawand
furthererrorsoflawpreventedthecourtfromexertingitssounddiscretion);James
Burrough,Ltd.v.SignofBeefeater,Inc.,572F.2d574,577(7thCir.1978)(courts
applicationoflikelihoodofconfusiontestwasinfectedwithlegalerror);ChevronChem.
Co.v.VoluntaryPurchasingGroups,Inc.,659F.2d695,696(5thCir.1981),cert.denied,457
U.S.1126,102S.Ct.2947,73L.Ed.2d1342(1982)(districtcourtsapplicationoferroneous
legalstandardstrippedfactualdeterminationsandconclusionsoftheirentitlementto
deference).
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B.
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Oneimportantpurposeoftrademarksistoenableconsumerstoidentify
thesourceororiginofgoodsandservices.
Awordorphrasefunctionsasatrademarkwhenitisusedbyasourceofa
producttoidentifyitselftothepublicasthesourceofitsproductandtocreateinthe
publicconsciousnessanawarenessoftheuniquenessofthesourceandofitsproducts.
Sands,Taylor&WoodCo.v.QuakerOatsCo.,978F.2d947,953(7thCir.1992)(internal
quotationmarksomitted).
ThisCourthaspreviouslyarticulatedthepurposeoftheprotectionof
trademarks:
Thefundamentalpurposeofatrademarkistoreduceconsumer
searchcostsbyprovidingaconciseandunequivocalidentifierof
theparticularsourceofparticulargoods.Theconsumerwhoknows
ataglancewhosebrandheisbeingaskedtobuyknowswhomto
holdresponsibleifthebranddisappointsandwhoseproductto
buyinthefutureifthebrandpleases.Thisinturngivesproducers
anincentivetomaintainhighanduniformquality,sinceotherwise
theinvestmentintheirtrademarkmaybelostascustomersturn
awayindisappointmentfromthebrand.Asuccessfulbrand,
however,createsanincentiveinunsuccessfulcompetitorstopass
offtheirinferiorbrandasthesuccessfulbrandbyadoptinga
confusinglysimilartrademark,ineffectappropriatingthegoodwill
createdbytheproducerofthesuccessfulbrand.Thetraditionaland
stillcentralconcernoftrademarklawistoprovideremedies
againstthispractice.
TyInc.v.Perryman,306F.3d509,510(7thCir.2002).Thispolicyisembodiedinthe
protectionsaffordedbytheTrademarkActitself:
Anyregistrationofamarkregisteredontheprincipalregister
providedbythischapterandownedbyapartytoanactionshallbe
admissibleinevidenceandshallbeprimafacieevidenceofthe
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validityoftheregisteredmarkandoftheregistrationofthemark,
oftheregistrantsownershipofthemark,andoftheregistrants
exclusiverighttousetheregisteredmarkincommerceonorin
connectionwiththegoodsorservicesspecifiedintheregistration
subjecttoanyconditionsorlimitationsstatedtherein.
15U.S.C.1115(a).Atrademarkisanidentifierratherthanapropertyright,and
trademarksarethusprotectedonlytotheextentthattheygiveconsumersinformation
abouttheoriginorqualityofproducts.TMTN.Am.,Inc.v.MagicTouchGmbH,124
F.3d876,882(7thCir.1997)(internalquotationsomitted)(citingDorrOliver,Inc.v.
FluidQuip,Inc.,94F.3d376,380(7thCir.1996)andWaltWestEnterprises,Inc.v.Gannett
Co.,695F.2d1050,1057(7thCir.1982)).
C.
Adeterminationoftheoriginofgoodsandservicesisessentialtothe
resolutionoftrademarkinfringementclaims.
Forthatreason,particularlyinthecontextofdirectcopyingorcounterfeiting,a
properidentificationoftheoriginoftrademarkedgoodsisessentialtoaproper
resolutionofthecase.Indeed,theoriginorprovenanceofgoodsorservicesisthe
veryheartofatrademarkclaim.SeeDastarCorp.v.TwentiethCenturyFoxFilmCorp.,539
U.S.23,3435(2003).
Inthepresentcase,SlepToneallegesthatBasketCase(oranythirdpartywho
createdthefilesforBasketCase)istheoriginofthekaraoketracksitused(R.20:63);
thatthosetracksaremarkedwiththeSOUNDCHOICEmarksandrelatedtradedress
(R.20:64,67),whichasamatteroflawaresupposedtoindicateSlepToneasthe
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originofgoods;andthatasaresult,BasketCasesuseofkaraoketracksmarkedwith
theSOUNDCHOICEmarksandrelatedtradedressconstitutesafalsedesignationof
origin(R.20:67),whichisproscribedby43(a)oftheTrademarkAct(15U.S.C.
1125(a)).
Similarly,theoriginofgoodsplaysarole,albeitmoresubtly,intheproper
applicationofthatpartoftheTrademarkActwhichdealswithinfringementof
registeredmarks:
Anypersonwhoshall,withouttheconsentoftheregistrant
(a)useincommerceanyreproduction,counterfeit,copy,or
colorableimitationofaregisteredmarkinconnectionwith
thesale,offeringforsale,distribution,oradvertisingofany
goodsorservicesonorinconnectionwithwhichsuchuseis
likelytocauseconfusion,ortocausemistake,ortodeceive;
or
(b)reproduce,counterfeit,copy,orcolorablyimitatea
registeredmarkandapplysuchreproduction,counterfeit,
copy,orcolorableimitationtolabels,signs,prints,packages,
wrappers,receptaclesoradvertisementsintendedtobeused
incommerceuponorinconnectionwiththesale,offering
forsale,distribution,oradvertisingofgoodsorserviceson
orinconnectionwithwhichsuchuseislikelytocause
confusion,ortocausemistake,ortodeceive,
shallbeliableinacivilactionbytheregistrantfortheremedies
hereinafterprovided.
15U.S.C.1114(1).Thewordswithouttheconsentoftheregistrantarekeytoan
understandingoftheinterplaybetweentheoriginofgoodsandthelikelihoodof
confusionthattheTrademarkActisintendedtopresent.Whentheregistrantmakes
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andmarksitsowngoods,itistheoriginofthosegoods.Whentheregistrantauthorizes
someoneelsetomakeand/ormarktheirgoodswiththeregisteredtrademark,the
registrantisstandingwithitsownreputationbehindthequalityandattributesofthose
goods.Thatiswhyvalidtrademarklicensesthemethodbywhichconsentofthe
registrantisgivenmustprovideforqualitycontrol.SeeTMTN.Am.,supra,124F.3d
at885(quotingKentuckyFriedChickenCorp.v.DiversifiedPackagingCorp.,549F.2d368,
387(5thCir.1977)(Ifatrademarkownerallowslicenseestodepartfromitsquality
standards,thepublicwillbemisled,andthetrademarkwillceasetohaveutilityasan
informationaldevice)).
Useofatrademarkwithouttheconsentofthetrademarkownerisusewithout
thequalitycontrolthatconsentwouldentail,becauseatrademarkownercannotcontrol
thatwhichhedidnotauthorize.Whenaninfringerusesamarkthatissupposedto
conveytoconsumersacertainoriginandacertainlevelofquality,thepotentialfor
consumerstobedeceivedisthereforequitehigh.
D.
BasketCaseisthelegaloriginofthegoodsitmadeandwasusinginits
establishmenttoprovidekaraokeentertainmentservices.
InDastarCorp.,theSupremeCourtestablished,orperhapsconfirmed,abright
linerulethatforpurposesoftheTrademarkAct,theoriginofgoodsisthemakerof
thephysicalgoodsatissue,nottheauthoroftheunderlyingcontentofthosegoods.In
thatcase,theplaintiff,Fox,arguedthatbecauseitwastheownerofcopyrightinthe
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televisionseriesCrusadeinEurope,itwaslegallytheoriginofthegoodsthe
defendant,DastarCorp.,soldunderDastarsowntrademarks.SeeDastarCorp.,523
U.S.at28,31.Assuch,underFoxstheory,Dastarscreditingitselfastheproducerof
theseriesamountedtoafalsedesignationoforigin.Seeid.at31.
TheSupremeCourtdisagreed.Initscentralholding,theCourtstated:
Insum,readingthephraseoriginofgoodsintheLanhamActin
accordancewiththeActscommonlawfoundations(whichwere
notdesignedtoprotectoriginalityorcreativity),andinlightofthe
copyrightandpatentlaws(whichwere),weconcludethatthe
phrasereferstotheproducerofthetangiblegoodsthatareoffered
forsale,andnottotheauthorofanyidea,concept,or
communicationembodiedinthosegoods.
DastarCorp.,539U.S.at37.
Theaccusedgoodsatissueinthislitigationarethemediashiftedkaraoketracks
storedonharddrives,whichBasketCaseusestoprovidekaraokerelatedservices.
ThesegoodsaregoodsthatBasketCase,notSlepTone,made.3
Asamatteroflaw,BasketCase,notSlepTone,istheoriginofBasketCases
computerharddriveorofthecontentstoredonit,eventhoughSlepToneistheauthor
3Moreover,thekaraoketracksarenotevenunalteredmuchtothecontrary,evenifthe
contentissubstantiallythesame,thetracksexistonadifferentmediumandinadifferent,
inferiorformat,asnotedintheSecondAmendedComplaint:
22.Inmostcases,thecreationofsuchnonoriginaltracksresultsinan
imitationofaSOUNDCHOICEtrack,whichimitationisinferiortothe
originalbecauseofdigitalcompressionofthedataastheformatis
convertedfromnativeCD+Gaudioandgraphicstocompressedaudio
andgraphics.
(R.20:22.)
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ofthecontentthatappearsonthedrive.TheDastarCorp.Courtdeterminedthatthe
meaningoforigindoesnotvaryevenwhenthegoodsatissueareofakindthat
mightbedescribed,intheCourtswords,asacommunicativeproductonethatis
valuedfortheintellectualcontentthatitconveys.4Id.at33.
E.
ThedistrictcourtsdeterminationthatSlepToneistheoriginofBasket
Casesgoodswasanerroroflawandshouldbereversed.
InreachingitsconclusionoflawthatSlepToneistheoriginofthekaraoketracks
storedonBasketCasesdriveandusedbyBasketCasetoprovideitskaraoke
entertainmentservices,thedistrictcourtnotedthatifanything,[BasketCases]display
ofPlaintiffsmarkshasthesalutaryeffectofclearlyidentifyingtheoriginoftracksto
theendusingBasketCasePubpatron.(R.36:14,A14.)
Thedistrictcourtsconclusionisplainlyinerror.
4Cf.R.36:16,A16(theobjectofvaluedesiredbythebarpatronsandkaraokeoperatorsalikeis
nottheparticularmediumuponwhichthetrackispresentedforconsumption;rather,itisthe
underlyingtracksthemselves).
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BasketCasesunauthorizedcreation,offering,anduseofgoodsmarkedwith
theSOUNDCHOICEmarks,evenifusedfreeofcharge,issufficientto
supportclaimsfortrademarkinfringement.
A.
StandardofReview
Thedistrictcourtsdeterminationthatasaleofinfringinggoodsisrequiredfor
trademarkinfringementisalegalconclusion,subjecttoreviewdenovobythisCourt,
becauseitrequirestheinterpretationandapplicationoflegalauthority.SeesupraI,
partA,andcasescitedtherein.
B.
Thedistrictcourtsdeterminationthatuserequiressalewasbasedon
anoverreadingofcaselaw.
Thedistrictcourtbasedasubstantialportionofitsdecisionontheconclusion
thatBasketCasehasnotusedtheSOUNDCHOICEmarksincommercebecauseit
doesnotsellkaraoketrackstoanyone:
TherearenoallegationsintheSecondAmendedComplaintthat
Defendantssellorotherwisedistributetheirstoredmediashifted/
formatshiftedcopiesofthekaraoketrackstothepublicatlargeor
eventheirowncustomerswhovisittheirpub.Theallegationsin
theSecondAmendedComplaintarethatthesetracksareplayedor
madeavailabletobeplayedattheDefendantsvenue;notsold.
(Doc.20at12(Venuesthatofferkaraokeentertainmentdoso
primarilyasafreeservice....)).Thus,therearenoplausible
allegationsthatDefendantsareproducersofthetangibleproduct
soldinthemarketplace,whicharenecessaryelementsofLanham
ActclaimsunderEastlandMusicGrp.,LLC,707F.3d869,andDastar,
539U.S.23.
(R.36:12,A12.)
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ThedistrictcourtsrelianceonEastlandMusicinsupportofitspointismisplaced.
Nowhereinthatcasewasthereanissueaboutwhethertheallegedlyinfringingproduct
hadbeensold;theproductwasafilmwithatitlesimilartotheregisteredtrademark.
SeeEastlandMusicGrp.,LLCv.LionsgateEntmt,Inc.,707F.3d869,870(7thCir.2013)
(notingthatfilmhadbeenreleased,andthussold,in2011).
C.
TheTrademarkActenvisionsactsotherthansalesthatarepredicate
actsofinfringement.
Thedistrictcourtsmistakehighlightstheproblemsassociatedwithpresuming
thatshorthandthatfitsthefactsofaparticularcaseexcludesmatterthatdoesnotfitthe
shorthand.Becausemostcommercialactsinvolvethesalesofproducts(goodsor
services)ratherthanafreegiveaway,acourtopiningaboutsuchatransactionmight
omit,andprobablyshouldomit,thatotheractsmightqualify.Thatdoesnotmeanthat
EastlandMusicstandsforthepropositionthatasaleoftrademarkedgoodsisrequired.
Thequestion,then,isthis:Istheuseofamarkongoodsthataregivenawayin
connectionwithothercommercialtransactions,ratherthandirectlysold,sufficientto
qualifyasthepredicateactofatrademarkinfringement?BasketCasestandsaccusedof
makingcounterfeittracks,ortracksthataremarkedwiththeSOUNDCHOICEmarks
andtradedresswithoutSlepTonesauthorization,availableforthefreeuseoftheir
patronsasentertainmentwhilethosepatronspurchaseandconsumefoodand
beverages.(R.20:12.)
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TheTrademarkActspecifiesthattrademarkinfringementexistswhenany
reproduction,counterfeit,copy,orcolorableimitationofaregisteredmarkisusedin
commerceinconnectionwithpredicateactsincludingthesale,offeringforsale,
distribution,oradvertisingofanygoodsorservices,providedthatconfusionislikely.
15U.S.C.1114(1).Similarly,unfaircompetitionoccurswhenanyword,term,name,
symbol,ordevice,oranycombinationthereof,oranyfalsedesignationoforigin,false
ormisleadingdescriptionoffact,orfalseormisleadingrepresentationoffactisusedin
commerceinconnectionwithanygoodsorservices,providedthatconfusionislikely.
15U.S.C.1125(a).Theseprovisionsspecifythattheregulatoryintentofthe
TrademarkActisverybroadandintendedtoencompassmanytypesofcommercial
transactions,notmerelysales.
D.
Thestatutorydefinitionofuseincommerceappliesonlytoacquisition
ofrights,nottoinfringement.
Apotentiallimitingfactorcanbefoundinthedefinitionofuseincommerce:
Intheconstructionofthischapter,unlessthecontraryisplainly
apparentfromthecontext:
[]
Thetermuseincommercemeansthebonafideuseofamarkin
theordinarycourseoftrade,andnotmademerelytoreservea
rightinamark.Forpurposesofthischapter,amarkshallbe
deemedtobeinuseincommerce
(1)ongoodswhen
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(A)itisplacedinanymanneronthegoodsortheircontainersor
thedisplaysassociatedtherewithoronthetagsorlabelsaffixed
thereto,orifthenatureofthegoodsmakessuchplacement
impracticable,thenondocumentsassociatedwiththegoodsor
theirsale,and
(B)thegoodsaresoldortransportedincommerce,and
(2)onserviceswhenitisusedordisplayedinthesaleor
advertisingofservicesandtheservicesarerenderedincommerce,
ortheservicesarerenderedinmorethanoneStateorintheUnited
Statesandaforeigncountryandthepersonrenderingtheservices
isengagedincommerceinconnectionwiththeservices.
15U.S.C.1127.Itshouldbenoted,first,thatthestatutorydefinitionofusein
commerceis,onitsface,principallydirectedtothetypesofactivitiesthatcanresultin
theacquisitionoftrademarkrightsthebonafideuseofamarkintheordinarycourse
oftrade,andnotmademerelytoreservearightinamark.Id.Assuch,the
requirementthatgoodsbesoldortransportedincommerceisprincipallydesignedto
ensurethatthosewhoclaimtrademarkrightsareactuallyengagedintradeinvolving
markedgoods.
Itshouldalsobenotedthatthedefinitionofuseincommercein1127need
notbereadtorestrictuseincommercesolelytotheenumeratedacts;thedefinition
omitsthetermonlyandshouldnotbereadtoexcludeothermechanismsthatbring
theconductwithintheambitofcommercethatCongressmayregulate.Seeid.(defining
commerceasallcommercewhichmaylawfullyberegulatedbyCongress).
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Finally,andperhapsmostimportantly,theprefatoryclauseofthedefinitions
sectionstatesthatthegivendefinitionsaretobeusedunlessthecontraryisplainly
apparentfromthecontext.Id.
Astoinfringement,asopposedtotheacquisitionofrights,theuseoftheterm
useincommercein1114(1)and1125(a)is,incontext,intendedtobejurisdictional
(inthesenseofprovidingtheConstitutionalauthorityforCongresstoregulate
infringement)and,whenreadwiththelistofpredicateactsofinfringement,agreat
dealmoreexpansivethanthemorelimiteddefinitiongivenin1127.
Theleadingtreatiseontrademarksnotesthat1127definesthekindofuse
neededtoacquireregisterabletrademarkrightsnottoinfringethem.J.Thomas
McCarthy,McCarthyonTrademarksandUnfairCompetition23:11.50(4thed.2003).
ProfessorMcCarthyexplainsthatthedefinitionin1127originatedwiththecommon
lawaffixationrequirement,aformalprerequisitetoachievingtechnicalownershipof
atrademarkandtherighttosueforinfringement.Seeid.Bycontrast,1114(1)merely
requiresthataplaintiffsproofofinfringementestablishauseincommercein
connectionwiththesale...oradvertisingofanygoods,etc.,andcasesthatinterpret
thatsectiongenerallyignoretheaffixationpartofthedefinition.Seeid.;seealso
PromatekIndus.,Ltd.v.EquitracCorp.,300F.3d808,812(7thCir.2002)(plaintifflikelyto
succeedonmeritswhenallegedinfringementwasuseofplaintiffstrademarkas
metatagondefendantswebsite);BosleyMed.Inst.,Inc.v.Kremer,403F.3d672(9thCir.
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2005)(questionofinfringementrequiresthatuseofmarkbeinconnectionwithasale
ofgoodsorservices);N.Am.Med.Corp.v.AxiomWorldwide,Inc.,522F.3d1211,1220
(11thCir.2008)(useoftrademarksinwebsitemetatagsisauseincommercein
connectionwiththesaleoradvertisingofanygoods);PlayboyEnters.,Inc.v.
NetscapeComms.Corp.,354F.3d1020,1024n.11(9thCir.2004)(1127definitionofuse
incommerceappliesonlytoacquisitionofrights,notinfringement,anddoesnot
enterintoouranalysisofinfringementclaims);UnitedWeStandAm.,Inc.v.UnitedWe
Stand,Am.NewYork,Inc.,128F.3d86,9293(2dCir.1997)(useincommercedoesnot
requirethesaleofgoodsorservices;useofthephraseinvokestheCommerceClause
ratherthanlimitingtheActtoprofitmakingactivity).
SlepTonehaspledfactsthatshowthatBasketCaseusedBasketCasestracks,
markedwiththeSOUNDCHOICEmarks,inamannerthatisintimatelyconnected
withthecommerceinwhichBasketCasewasprincipallyengaged:Asanentertainment
offeredtoencouragepatronstovisittheestablishmentandpurchasefoodand
beverages.(R.20:12.)ThefactthatBasketCasedidnotchargemoneyforpatronsto
participateisnot,andshouldnotbe,dispositiveoftheessentialcommercialnatureof
thetransaction,particularlywhenitissodirectlyconnectedtoBasketCases
commercialactivitytheequivalentofpostingasignwith[SlepTone]strademarksin
frontof[BasketCase]sstore.BrookfieldComms.,Inc.v.WestCoastEntmtCorp.,174F.3d
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1036,1064(9thCir.1999).Assuch,thedistrictcourtbaseditsrulinginpartonan
erroneousconclusionoflaw.
III.
Becauseitsdecisionwasfoundedonincorrectstatementsandapplicationof
thelaw,thedistrictcourterredindismissingSlepTonesclaims.
A.
StandardofReview
TheCourtreviewsthegrantingofamotiontodismissdenovo.SeeFortresGrand
Corp.v.WarnerBros.EntmtInc.,763F.3d696,700(7thCir.2014)cert.denied,135S.Ct.
981,190L.Ed.2d890(2015).Ouranalysisrestsonthecomplaint,andweconstrueitin
thelightmostfavorabletotheplaintiffs,acceptingastrueallwellpleadedfactsalleged
anddrawingallpermissibleinferencesintheirfavor.ActiveDisposal,Inc.v.Cityof
Darien,635F.3d883,886(7thCir.2011)(citingJusticev.TownofCicero,577F.3d768,771
(7thCir.2009)).
B.
Elementsofavalidtrademarkinfringementclaim
TosurviveaRule12(b)(6)motion,thecomplaintmustnotonlyprovidethe
defendantwithfairnoticeofaclaimsbasisbutalsoprovidesufficientfactualdetailto
establishthattherighttotherequestedreliefisplausibleonitsface.SeeAshcroftv.Iqbal,
556U.S.662,678,129S.Ct.1937,173L.Ed.2d868(2009);BellAtl.Corp.v.Twombly,550
U.S.544,555,127S.Ct.1955,167L.Ed.2d929(2007).Theallegationsinthecomplaint
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mustbeenoughtoraisearightofreliefabovethespeculativelevel.Twombly,550U.S.
at555.
TheTrademarkActprotectsregisteredmarks,preventsunfaircompetition,and
protectsagainstfraudbytheuseofreproductions,copies,counterfeits,orcolorable
imitationsofregisteredmarks.15U.S.C.1127;EliLilly&Co.v.NaturalAnswers,Inc.,
233F.3d456,461(7thCir.2000).TostateavalidclaimundertheTrademarkAct,
regardlessoftheparticularclaiminquestion,aplaintiffmustallegefactssufficientthat
(1)themarkinsuitisprotectable,and(2)thedefendantsuseofthemarkislikelyto
causeconfusionamongconsumers.SeeEliLilly,233F.3dat461;Packmanv.Chicago
TribuneCo.,267F.3d628,638(7thCir.2001);SmithFiberglassProds.,Inc.v.Ameron,Inc.,7
F.3d1327,1329(7thCir.1993)(testsarethesameforinfringementunder15U.S.C.
1114(1)andunfaircompetitionunder15U.S.C.1125(a)).Assuch,alloftheclaimsat
issueriseorfalltogether.
C.
Likelihoodofconfusionanalysisisthemostimportantaspectofthe
trademarkinfringementcalculus.
Thekeystoneoftrademarkinfringementislikelihoodofconfusionasto
source,affiliation,connectionorsponsorshipofgoodsorservicesamongtherelevant
classofcustomersandpotentialcustomers.Sands,Taylor&WoodCo.,978F.2dat957.
Todecidewhetherthereisalikelihoodofconfusion...acourtmustaskwhether
consumers,andspecificallyconsumerswhowoulduseeitherproduct,wouldbelikely
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toattributethemtoasinglesource.Bd.ofRegentsofUniv.ofWis.Sys.v.Phx.Intl
Software,Inc.,653F.3d448,455(7thCir.2011).
Sevenfactorsarerelevanttothedeterminationofwhetherconfusionislikely:(1)
thesimilaritybetweenthemarksinappearanceandsuggestion;(2)thesimilarityofthe
products;(3)theareaandmannerofconcurrentuse;(4)thedegreeofcarelikelytobe
exercisedbyconsumers;(5)thestrengthoftheplaintiffsmark;(6)anyevidenceof
actualconfusion;and(7)theintentofthedefendanttopalmoffhisproductasthatof
another.Id.at454.Nosinglefactorisdispositive,butthreeareespeciallyimportant,
whenpresent:thesimilarityofthemarks,theintentofthedefendant,andevidenceof
actualconfusion.SeeTy,Inc.v.JonesGrp.,Inc.,237F.3d891,898(7thCir.2001).
Becausethelikelihoodofconfusiontestisafactintensiveanalysis,it
ordinarilydoesnotlenditselftoamotiontodismiss.SlepToneEntmtCorp.v.Coyne,
41F.Supp.3d707,715(N.D.Ill.2014)(quotingMerck&Co.,Inc.v.MediplanHealth
Consulting,Inc.,425F.Supp.2d402,412(S.D.N.Y.2006));seealsoVulcanGolf,LLCv.
GoogleInc.,552F.Supp.2d752,769(N.D.Ill.2008)(notingthatthelikelihoodof
confusiontestisafactspecificinquirybestleftfordecisionafterdiscovery).
AsnotedinsectionsIandIIabove,thedistrictcourtreachederroneouslegal
conclusionsconcerningtheoriginoftheaccusedtracksandthecommercialnatureof
BasketCasesallegedlyinfringingactivities.Theseerroneouslegalconclusionsledthe
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districtcourttoeschewtheapplicationofthestandardtestforlikelihoodofconfusion;
afterrecitingthefactors,thedistrictcourtexpresslydisavowedtheiruse:
Thesefactorsdonotapplyinthiscase.
Forexample,therearenoallegationsintheSecondAmended
ComplaintthatDefendantsaredisplayingcompetingmarksof
theirown,soonlyPlaintiffsmarksareatissuehere.Similarly,
thereisonlyoneproductatissuethekaraoketracksandthere
arenoallegationsthatDefendantsareselling,marketingor
otherwisedistributingtheirmedia/formatshiftedcopiesof
Plaintiffstrackstothepublic.Furthermore,theallegationsofthe
SecondAmendedComplaintaffirmthatDefendantshavenottaken
anystepstotrytopalmoffPlaintiffstracksastheirown;if
anything,theirdisplayofPlaintiffsmarkshasthesalutaryeffectof
clearlyidentifyingtheoriginoftrackstotheendusingBasketCase
Pubpatron.
(R.36:14,A14.)Thedistrictcourtsdecisionnottoapplythestandardtestisrootedin
itsmisunderstandingoftheprecisenatureoftheclaim.Becausethedistrictcourt
incorrectlyseesSlepToneastheoriginofthetracksBasketCasecreated,itwasunable
toseethatthereareindeedtwosetsofmarksatissueinthiscase:(1)SlepTonesown
legitimateSOUNDCHOICEmarks,and(2)BasketCasesapplicationofspuriouscopies
oftheSOUNDCHOICEmarkstoBasketCasesownproduct.Itwaslikewiseunableto
seethattherearetwoproductstobecompared:(1)SlepToneslegitimatecompact
discscontainingkaraoketracks,and(2)BasketCasescomputerharddrivecontaining
karaoketracks.
Thiscaseisnotsubstantivelydifferentfromoneinwhichacounterfeitercopiesa
luxurywatch,downtotheROLEXtrademarkthatappearsonit.Underthedistrict
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courtsflawedreasoning,themorescrupulouslydetailedthecopyingis,thelesslikely
theconfusion.Afterall,ifthecopyisgoodandthemarkisidentical,thedisplayof
ROLEXonthefakehasthesalutaryeffectofclearlyidentifyingthecompanywhose
intellectualpropertywascopied,whichthedistricthasimproperlydeemedtheorigin
ofthegoods.Butthemakingandsellingofcounterfeitwatchesisstillanactof
trademarkinfringement,eveniftheyareverygoodfakes,andeveniftheyaremarked
ROLEXinsteadofPOLEX.
ThefactthatthecontentBasketCasecopiediselectronic,ratherthanaphysical
object5likeawatch,doesnotmakethecopiesBasketCasecreatedanylessfakethanthe
counterfeitROLEXbrandedwatch.ThefactthatBasketCaseduplicatedtheSOUND
CHOICEmarksinsteadofapplyingadifferentmarktothetracksdoesnotmeanthatit
isnotspuriouslyapplyingtheSOUNDCHOICEmarkstoitsowngoods.
Instead,thedistrictcourtshouldhaveappliedthestandardtest.Ifithad
correctlydoneso,itwouldhaveconcludedthattheSecondAmendedComplaintdoes,
indeed,containtherecitationofsufficientfactualdetailstosupport,plausibly,that
thereisalikelihoodofconfusionarisingfromBasketCasescommercialacts.
5Inactuality,eventhecontentBasketCasecopiedisaphysicalobjectthatconsistsofthe
arrangementofphysicalitemsonacompactdisc,andthecopyisaphysicalobjectthatconsists
ofthearrangementofphysicalitemsonacomputerharddrive.Bothtechnicallyorientedand
nontechnicallyorientedpeoplecanhavedifficultyunderstandingthisconcept,ofcourse.
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Applicationofthestandardtestforlikelihoodofconfusionshowsthat
SlepTonehasstatedaclaim.
SlepToneallegesthatthemarksontheBasketCasetracksareidenticaltothe
SOUNDCHOICEmarks:
64.Oninformationandbelief,manyofthefilesstoredonthe
Defendantscomputerharddrivesarerepresentativeofkaraoke
tracksoriginallycreatedbyPlaintiffsandaremarkedwiththe
SoundChoiceMarks.
65.Whenplayedasintendedusingappropriatesoftware,those
filescausetheSoundChoiceMarksandtheTradeDresstobe
displayedaspartoftheassociatedvideocomponentofthekaraoke
trackstheyrepresent.
(R.20:6465.)SlepToneallegesthattheproductsaresimilar:
56.Oninformationandbelief,inordertoprovideservices,rather
thanusingoriginalkaraokediscsthatitpossesses(ifitindeed
possessessuchdiscs),Defendantsrelyupononeormorecomputer
harddrivesthatstorefilesrepresentingkaraokeaccompaniment
tracks.
[]
58.Oninformationandbelief,Defendantscreate,ordirectanother
tocreate,orotherwiseacquiredfromathirdpartythefilesthatare
storedonitscomputerharddrive(s).
[]
69.Defendantsfiles,whichfunctionaskaraokeaccompaniment
tracks,arealsocounterfeitsofgenuineSOUNDCHOICEbranded
tracks.
(R.20:56,58,69.)Inotherwords,BasketCasestracksaresosimilarinformand
functiontoSlepToneslegitimatetracksthattheyconstitutecounterfeits.
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SlepToneallegesthatitstracksandmarksarewellknownandhighlyused
throughouttheUnitedStates,includinginPeoria,Illinois,whereBasketCaseoperates:
7.[]DefendantTheBasketCasePubInc.operatesaneatingand
drinkingestablishmentknownasTheBasketCaseinPeoria,
Illinois.DefendantTheBasketCasePubInc.,provideskaraoke
entertainmentatthevenue.
[]
17.SOUNDCHOICEbrandedkaraoketracksarewildlypopular
amongkaraokeentertainmentproviders,patrons,andhome
consumers.Accordingtosomeestimates,morethanhalfofall
accompanimenttracksplayedatkaraokeshowsintheUnited
StatesoriginatedfromSlepTonesrecordings.
(R.20:7,17.)
SlepToneallegesthatconsumersofkaraokeservicesandthegoodsthatenable
themvaluethehighqualitytheSOUNDCHOICEbrandsignals:
18.ThepopularityofSOUNDCHOICEkaraoketracksderives
fromthemarketsperceptionthattherecordingsareusuallythe
mostfaithfultothesoundoftheoriginalrecordingartist,a
characteristichighlyvaluedbykaraokesingers.
(R.20:18.)
SlepToneallegesthatitsmarksandtradedressarestrong.Themarkshavebeen
federallyregisteredfor20and19years,respectively.(R.20:4243.)Thetradedress
hasbeenincontinuousandsubstantiallyexclusiveuseforaperiodofdecadesand
hasacquiredsecondarymeaning.(R.20:4749.)
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SlepTonealsoallegestheexistenceofactualconfusiononthepartofpatrons
withrespecttocopiedtracksspecifically,theinabilitytodistinguishSlepTones
productfromBasketCasesproduct:
23.Inatypicalbarorrestaurantenvironment,patronsareoften
unabletodistinguishtheimitationfromanoriginal,providedthat
thecompressionisnottooaggressive,becausethegoalisto
produceanacceptabledigitalsubstitute.
(R.20:23.)Indeed,eventhedistrictcourtwasconceptuallyunabletodistinguishSlep
TonesproductfromBasketCasesproduct:
[T]heobjectofvaluedesiredbythebarpatronsandkaraoke
operatorsalikeisnottheparticularmediumuponwhichthetrack
ispresentedforconsumption;rather,itistheunderlyingtracks
themselves.Theparticularmediumuponwhichthetracksare
storedismeaningless.
(R.36:16,A16.)
SlepTonealleges,additionally,thatBasketCaseundertookitsinfringing
activitiesintentionally,knowingthatitwasnotauthorizedtocreateorusefilesbearing
theSOUNDCHOICEmarksandthetradedress:
68.Atalltimesrelevanttothecausesofactionstatedherein,the
Defendantshaveknownthatthecreationanduseofkaraoke
accompanimenttracksorcomputerfilesrepresentativeofkaraoke
accompanimenttracksthatbeartheSoundChoiceMarksand/or
theTradeDressisnotauthorized.
[]
86.Oninformationandbelief,theactsofDefendantswerewillful,
knowing,andintentional.
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(R.20:68,86.)
Asnotedpreviously,inthecontextofamotiontodismiss,itisnotrequiredthat
SlepToneprovetheseelementsorevenshowthatalikelihoodofconfusionisprobable.
Rather,whatisrequiredisthatSlepTonehaveallegedsufficientfactstorenderit
plausiblethatthereisalikelihoodofconfusionarisingfromBasketCasesactivities.The
SecondAmendedComplaintamplymeetsthattest,andthedistrictcourterredby
dismissingtheactionunderRule12(b)(6).
E.
Thisdistrictcourtstandsaloneamongthecourtsofthisdistrictin
determiningthatSlepTonefailedtostateaclaim.
Whiletheproperresultinthisactionisnotthesubjectofamajorityvoteof
districtcourtdecisions,thefactthatthisdistrictcourtstandsaloneamongdistrictcourts
oftheSeventhCircuitinitsdeterminationtodismisssimilarclaimsshouldbe
considered.SeeSlepToneEntmtCorp.v.SellisEnts.,Inc.,87F.Supp.3d897(N.D.Ill.
2015)(denyingmotiontodismiss);SlepToneEntmtCorp.v.TeddyOBrians,Inc.,2015
WL249368(N.D.Ill.Jan.20,2015)(denyingmotiontodismiss);SlepToneEntmtCorp.v.
AmericasBar&Grill,LLC,2014WL4057442(N.D.Ill.Aug.15,2014)(denyingmotionto
dismiss);Coyne,supra,41F.Supp.3dat707(N.D.Ill.2014)(denyingmotiontodismiss);
SlepToneEntmtCorp.v.ElwoodEnts.,Inc.,2014WL1612891(N.D.Ill.Apr.21,2014)
(denyingmotiontodismiss);SlepToneEntmtCorp.v.Roberto,2013WL5748896(N.D.
Ill.Oct.22,2013)(denyingmotiontodismiss).
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IV.
CONCLUSION
Inviewofalloftheforegoing,SlepTonerespectfullyurgestheCourttoreverse
thejudgmentofthedistrictcourtandremandthismatterforfurtherproceedings.
Respectfullysubmittedthisthe22nddayofOctober,2015.
/s/JamesM.Harrington
JamesM.Harrington
HARRINGTONLAW,P.C.
12245NationsFordRoad,Suite506
Pineville,NC281348444
(704)6356300
VivekJayaram
JAYARAMLAWGROUP,LTD.
33NorthLasalleStreet,Suite2900
Chicago,IL60602
(312)4542859
AttorneysforPlaintiffsAppellantsPhoenix
EntertainmentPartners,LLCandSlepTone
EntertainmentCorporation
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CERTIFICATEOFCOMPLIANCE
TheundersignedcertifiesthattheforegoingBriefofPlaintiffsAppellants
PhoenixEntertainmentPartners,LLCandSlepToneEntertainmentCorporation
complieswiththetypevolumelimitationofFed.R.App.P.32(a)(7)(B)becauseit
contains7,157words,excludingthepartsofthebriefexemptedbyFed.R.App.P.
32(a)(7)(B)(iii).Theundersignedfurthercertifiesthatthisbriefcomplieswiththe
typefacerequirementsofFed.R.App.P.32(a)(5)andthetypestylerequirementsof
Fed.R.App.P.32(a)(6)becausethisbriefhasbeenpreparedinaproportionallyspaced
typefaceusingMicrosoftWordVersion2010in12pointPalatinoLinotypefont.
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CERTIFICATEOFSERVICE
IherebycertifythatonOctober22,2015,theBriefandAppendixofPlaintiffs
AppellantsPhoenixEntertainmentPartners,LLCandSlepToneEntertainment
CorporationwasfiledwiththeClerkoftheCourtfortheUnitedStatesCourtof
AppealsfortheSeventhCircuitbyusingtheappellateCM/ECFsystem.
ThefollowingparticipantsinthecaseareregisteredCM/ECFusersandwillbe
servedbytheappellateCM/ECFsystem:
JohnT.D.Bathke
JonathanL.A.Phillips
SHAYPHILLIPS,LTD.
456FultonSt.,Suite255
Peoria,IL61602
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APPENDIX
Pages: 64
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APPENDIXTABLEOFCONTENTS
OrderandOpinion(DocketNo.36,August4,2015).........................................A01
Judgment(DocketNo.37,August4,2015)..........................................................A22
CIRCUITRULE30(d)COMPLIANCESTATEMENT
PursuanttoCircuitRule30(d),PlaintiffsAppellantsPhoenixEntertainment
Partners,LLCandSlepToneEntertainmentCorporationstatethatallofthematerials
requiredbyCircuitRule30(a)areincludedintheAppendixboundwithAppellants
briefherewith.
Dated:October22,2015
HARRINGTONLAW,P.C.
By:_/s/JamesM.Harrington___
JamesM.Harrington
12245NationsFordRoad,Suite506
Pineville,NC281348444
Phone:(704)6356300
jharrington@harringtonlawpc.com
AttorneyforPlaintiffsAppellants
PhoenixEntertainmentPartners,
LLCandSlepToneEntertainment
Corporation
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E-FILED
Tuesday, 04 August, 2015 12:23:39 PM

Clerk, U.S. District Court, ILCD
UNITED STATES DISTRICT COURT

CENTRAL DISTRICT OF ILLINOIS
PEORIA DIVISION
SLEP-TONE ENTERTAINMENT
CORPORATION, a North Carolina
Corporation,
Plaintiff,
v.
THE BASKET CASE PUB, INC., an
Illinois Corporation, and DANNETTE
RUMSEY,
Defendants.
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)
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Case No. 15-cv-1009
O R D E R AND O P I N I O N
This matter is before the Court on Defendants Motion to Dismiss. (Doc. 22).
For the reasons stated below, the motion is GRANTED in part. Also pending is
Plaintiffs Motion For An Extension Of Time To Have Their Response To
Defendants Motion To Dismiss Accepted (Doc. 30). That motion is also GRANTED.
Also pending before this Court is Defendants/Counter-Plaintiffs Motion To Strike
Plaintiffs/Counterdefendants Affirmative Defenses (Doc. 32). For the reasons that
will be discussed herein, that motion is DENIED as moot.
FACTUAL BACKGROUND1
Slep-Tone Entertainment Corporation (Slep-Tone) was the manufacturer
and distributor of karaoke accompaniment tracks sold under the trademark Sound
Unless otherwise noted, the Court draws the facts in this section from the Second
Amended Complaint (Doc. 20), treating the Plaintiffs allegations as true and
drawing all reasonable inferences in their favor, in accordance with the motion to
dismiss standard described infra at p. 6.
1
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Choice. Phoenix Entertainment Partners, LLC (Phoenix) is the corporate

successor to Slep-Tone. Together they will be referred to as the Plaintiffs. 2 A
karaoke accompaniment track is a re-recorded version of a popular song without
the lead vocals in a specialized format that includes a graphical component
containing a lyric display, cueing information, and other information. The graphical
component is synchronized to the music and is displayed to the patron who is
performing, and typically, to the crowd as well. Plaintiffs sell their products
primarily on CD+G discs but more recently, also on MP3+G media. The +G refers
to the fact that these media are enhanced with graphics. The CD+G discs require
special players that are capable of decoding the CD+G format. Technology has
advanced such that the karaoke tracks stored on the CD+G and MP3+G formats
can be decoded and copied to computer hard drives or other storage devices. These
media-shifted copies have been duplicated from the original media and written to
non-original media. Karaoke operators now have the ability to store a large number
of karaoke accompaniment tracks on hard drives for convenient transport to their
karaoke shows, without also carrying large numbers of compact discs. Karaoke
operators have also used the available technology to copy one purchased disc to two
or more computer systems for simultaneous use; to copy their patrons discs to the
operators computer hard drive at a show; to swap song files with other operators;
Although Plaintiffs allege that Phoenix is the owner of the marks and has
succeeded Slep-Tone as to all rights in the Sound Choice brand, they nonetheless
maintain Slep-Tone as a separate and distinct entity in this lawsuit. If the Court
were disallowing the motion to dismiss and allowing this suit to proceed, it would
inquiry further into whether Slep-Tone is a real party-in-interest to this suit. But
since the motion to dismiss will be granted and this action dismissed with prejudice,
the point is moot.
2
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to obtain and share karaoke tracks via file-sharing sites and torrents (files sent
through what is called the BitTorrent protocol, which allows multiple computers to
transfer a single file); to purchase computer hard drives that were pre-loaded with
copies of karaoke tracks; and to sell3 off their original media in a secondary market
once they have copied tracks to a hard drive.
Plaintiffs permit karaoke operators, such as Defendants, to use purchased
CD+G discs to provide karaoke services to patrons under certain conditions.
However, Plaintiffs have a media-shifting policy (MSP) that imposes mandatory
rules for karaoke operators who use media-shifted copies of Sound Choice karaoke
tracks to provide commercial karaoke services. The MSP requires compliance with
four conditions: (1) 1:1 (one-to-one) correspondence, meaning that for every mediashifted Sound Choice karaoke track on a given medium such as a computer hard
drive, the operator owns and maintains possession of a lawful original Sound
Choice karaoke track on its original medium, on a one-copy-for-one-original basis;
(2) that the original media that form the basis for 1:1 correspondence are placed on
the shelf, i.e., not used for any purpose at all; (3) that the operator notify Plaintiffs
that he or she has media-shifted karaoke tracks; and (4) that the operator submit to
and be certified as having passed an audit of the operators systems to verify
complete compliance with the MSP. Nevertheless, karaoke operators have used the
available technology to copy one purchased disc to two or more computer systems
for simultaneous use and other similarly unauthorized uses disallowed by the MSP.
Plaintiffs do not allege these particular Defendants have sold any CD+G discs,
MP3+G media or media-shifted copies of Plaintiffs discs in a secondary market.
3
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Plaintiffs pay statutory and negotiated royalties to the owners of copyright in

the underlying musical works for its legitimate creation, copying, distribution, and
sales of compact discs containing karaoke accompaniment tracks. Unfortunately,
Plaintiffs have become victimized by the widespread creation, distribution, and
commercial use of counterfeit copies of Plaintiffs karaoke discs. For each of the
several recent releases of new karaoke tracks by Plaintiffs, dozens of illegitimate
copies of the contents of the disc have been created. Plaintiffs have lost a
considerable amount of money due to this widespread piracy.
Phoenix is the owner of U.S. Trademark Registration No. 1,923,448, issued
October 3, 1995, and renewed once, for the trademark Sound Choice, for prerecorded magnetic audio cassette tapes and compact discs containing musical
compositions and compact discs containing video related to musical compositions.
Phoenix is the owner of U.S. Trademark Registration No. 2,000,725, issued
September 17, 1996, and renewed once, for a display trademark as follows: for prerecorded magnetic audio cassette tapes and compact discs containing musical
compositions and compact discs containing video related to musical compositions.
Plaintiffs have, for the entire time its marks identified above have been
federally registered, provided the public with notice of those federal registrations
through the consistent display of the symbol with its marks as used. Principally,
the Sound Choice Marks are indicators of Plaintiffs as the origin of karaoke
accompaniment tracks, which means that those marks indicate that the tracks to
which they are applied were made and distributed by Plaintiffs or at their direction
and under their control. Plaintiffs are the owner of their trade dress. This
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distinctive and protectable trade dress includes, at a minimum, (1) the use of a
particular typeface, style, and visual arrangement in displaying the lyrics; (2) the
Sound Choice Marks; and (3) the use of particular styles in displaying entry cues
for singers, namely a series of vanishing rectangles to indicate the cue. Plaintiffs
have used their trade dress continuously and substantially exclusively for a period
of decades. The aforementioned trade dress serves to distinguish Plaintiffs tracks
from the tracks of their competitors, such that persons who are even minimally
frequent consumers of karaoke entertainment services such as those provided by
these Defendants are capable of identifying a particular karaoke track as
originating with Plaintiffs simply by examining the trade dress or any significant
portion thereof, whether or not the Sound Choice Marks are also displayed.
Defendants provide karaoke entertainment at their venue, The Basket Case,
in Peoria, Illinois. In order to provide these services, rather than using original
karaoke CD+G discs or MP3+G media, Defendants rely upon one or more computer
hard drives that store files containing karaoke accompaniment tracks. Defendants
did not pay royalties or fees to Plaintiffs or to the owners of copyright in the
underlying musical works for the privilege of using these materials. Defendants did
not pay any royalties or fees to Plaintiffs for the privilege of displaying the Sound
Choice Marks during their karaoke shows.
Moreover, Defendants do not comply with the MSP. The karaoke tracks used
by Defendants at their venue were created by or at the behest of the Defendants, or
by a third party unknown to Plaintiff. The files stored on the Defendants computer
hard drives are representative of karaoke tracks originally created by Plaintiffs and
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are marked with the Sound Choice Marks. When played as intended using
appropriate software, those files cause the Sound Choice Marks and the
distinctive and protectable trade dress associated with marks to be displayed as
part of the associated video component of the karaoke tracks they represent. SlepTone did not authorize the Defendants to create or use karaoke accompaniment
tracks or computer files representative of karaoke accompaniment tracks that bear
the Sound Choice Marks or the trade dress. The Defendants know that the
creation and use of karaoke accompaniment tracks or computer files representative
of karaoke accompaniment tracks that bear the Sound Choice Marks and/or the
trade dress was not authorized by Slep-Tone. A patron or unwitting customer of the
Defendants, when confronted with the display of the Sound Choice Marks and the
trade dress at one of the Defendants shows, is likely to believe that Plaintiffs
created the tracks in use or authorized their creation.
LEGAL STANDARDS
In ruling on a motion to dismiss for failure to state a claim pursuant to Rule
12(b)(6), the court must treat all well-pleaded allegations as true and draw all
inferences in favor of the non-moving party. In re marchFIRST Inc., 589 F.3d 901,
904 (7th Cir. 2009). The pleading must contain a short and plain statement of the
claim showing that the pleader is entitled to relief. Fed. R. Civ. P. 8(a)(2). To
survive a motion to dismiss, the challenged pleading must contain sufficient detail
to give notice of the claim, and the allegations must plausibly suggest that the
[non-movant] has a right to relief, raising that possibility above a speculative
level. EEOC v. Concentra Health Servs., Inc., 496 F.3d 773, 776 (7th Cir. 2007)
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(quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007)). The plausibility
standard requires enough facts to present a story that holds together, but does not
require a determination of probability. Swanson v. Citibank, N.A., 614 F.3d 400,
404 (7th Cir. 2010). Though detailed factual allegations are not needed, a formulaic
recitation of a cause of actions elements will not do. Twombly, 550 U.S. at 545.
DISCUSSION
As an initial matter, Plaintiffs state they are willing to dismiss all charges
against Dannette Rumsey without prejudice to their ability to refile an amended
complaint against her in the event discovery should warrant her being returned to
the case. Such concession is unnecessary because the federal claims against the
Defendants are not cognizable under the law and the Court declines to exercise its
supplemental jurisdiction over the remaining state law claims.
I.
Plaintiffs Federal Claims Are Not Barred By Dastar Corporation v.

Twentieth Century Fox Film Corporation.
As described by the Supreme Court in Dastar Corporation v. Twentieth
Century Fox Film Corporation, the Lanham Act was intended to make actionable
the deceptive and misleading use of marks, and to protect persons engaged in ...
commerce against unfair competition. 539 U.S. 23, 28 (2003) (internal quotations
and citations omitted). The Lanham Act, as codified in the United States Code,
provides in relevant part that
(1) Any person who shall, without the consent of the registrant-(a) use in commerce any reproduction, counterfeit, copy, or
colorable imitation of a registered mark in connection with the
sale, offering for sale, distribution, or advertising of any goods or
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services on or in connection with which such use is likely to

cause confusion, or to cause mistake, or to deceive; or
(b) reproduce, counterfeit, copy, or colorably imitate a registered
mark and apply such reproduction, counterfeit, copy, or
colorable imitation to labels, signs, prints, packages, wrappers,
receptacles or advertisements intended to be used in commerce
upon or in connection with the sale, offering for sale,
distribution, or advertising of goods or services on or in
connection with which such use is likely to cause confusion,
or to cause mistake, or to deceive,
shall be liable in a civil action by the registrant for the remedies
hereinafter provided.
15 U.S.C. 1114. Moreover, the statute also provides
(a) Civil action
(1) Any person who, on or in connection with any goods or services, or
any container for goods, uses in commerce any word, term, name,
symbol, or device, or any combination thereof, or any false designation
of origin, false or misleading description of fact, or false or misleading
representation of fact, which-(A) is likely to cause confusion, or to cause mistake, or to
deceive as to the affiliation, connection, or association of such
person with another person, or as to the origin, sponsorship, or
approval of his or her goods, services, or commercial activities by
another person, or
(B) in commercial advertising or promotion, misrepresents the
nature, characteristics, qualities, or geographic origin of his or
her or another person's goods, services, or commercial activities,
shall be liable in a civil action by any person who believes that he or
she is or is likely to be damaged by such act.
15 U.S.C. 1125.
In Dastar, the court was concerned with 15 U.S.C. 1125(a). 539 U.S. at 25.
The relevant facts are as follows: Fox owned the television rights of a television
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series but allowed the copyright in the television series to lapse. Id. at 26. Dastar
bought videotapes of the television series years later, copied them, edited the series
and marketed and sold the videos, which utilized much, if not all, of the video
footage originally contained in the Fox videos. Id. The question presented in Dastar
was whether Dastar violated the trademark rights of Fox under the Lanham Act by
marketing and selling its own product without acknowledging its nearly wholesale
reliance on Foxs product. Id. at 31. In other words, Dastar was selling videos that
largely incorporated Foxs intellectual property under Dastars marks without
giving the public any indication that its videos were making use of Foxs intellectual
property. Foxs theory of liability was that Dastars video contained a false
designation of origin, false or misleading description of fact, or false or misleading
representation of fact, which ... [was] likely to cause confusion ... as to the origin ...
of [Dastars] goods because the video footage came from Foxs videos but was being
sold by Dastar under Dastars trademarks. Id.
The Supreme Court rejected Foxs arguments and explained that Dastar had
merely taken a creative work in the public domain . . . copied it, made
modifications (arguably minor), and produced its very own series of videotapes. Id.
The Court held that the phrase origin of goods as used in the Lanham Act refers
to the producer of the tangible goods that are offered for sale, and not to the author
of any idea, concept, or communication embodied in those goods. 539 U.S. at 37
(emphasis added). As the phrase refers to the producer of the tangible goods that
are offered for sale, and not to the author of any idea, concept, or communication
embodied in those goods, id., Dastar was held to be the origin of its own videos and
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the holder of its own marks and so Fox could not maintain a Lanham Act claim
under 1125(a). Id. at 38. The Seventh Circuit interprets Dastar to instruct that
litigants are not to use trademark law to achieve what copyright law forbids. Only
a confusion about origin supports a trademark claim, and origin for this purpose
means the producer of the tangible product sold in the marketplace. Eastland
Music Grp., LLC v. Lionsgate Entm't, Inc., 707 F.3d 869, 872 (7th Cir. 2013)
(emphasis added), quoting 539 U.S. at 31.4
Plaintiffs argue that they are alleging Defendants copied and used the Sound
Choice trademarks without Plaintiffs permission in violation of the Lanham Act.
Plaintiffs specific claims here are that Defendants are making unauthorized uses of
their trademarks, not that Defendants have failed to attribute Plaintiffs for the
materials on the karaoke tracks. Given those specific allegations, the Court agrees
with Plaintiffs that Dastar and its progeny do not directly foreclose their claims
against Defendants because Plaintiffs are not seeking to enforce copyright rights via
the Lanham Act. Nevertheless, the Court is left to determine whether Plaintiffs
have pled the requisite elements of actionable Lanham Act claims.
II.
Plaintiffs Have Not Pled Allegations That Demonstrate Defendants

Use Of Media Shifted or Format Shifted Copies Of Plaintiffs Karaoke
Tracks Will Lead To A Likelihood Of Confusion.
As stated earlier, the Lanham Act was intended to make actionable the
deceptive and misleading use of marks, and to protect persons engaged in ...
As will be explained in more detail later in this Order and Opinion, there are no
allegations in the Second Amended Complaint that make it plausible a consumer
would view the karaoke tracks at issue and conclude that anyone other than
Plaintiff created them and was being credited for creating them.
4
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commerce against unfair competition. 539 U.S. at 28 (internal quotations and

citations omitted). The hallmark of trademark protection is to prevent consumer
deception and confusion. Platinum Home Mortgage Corp. v. Platinum Fin. Grp.,
Inc., 149 F.3d 722, 726 (7th Cir. 1998). Thus, in both claims under sections 1114
and 1125, a plaintiff must plead facts that make it plausible the defendants use of
the trademark is likely to cause confusion among consumers. Smith Fiberglass
Products, Inc. v. Ameron, Inc., 7 F.3d 1327, 1329 (7th Cir. 1993) (the central issue
is the likelihood of consumers in the relevant market confusing the infringers mark
with that of the complainant. (emphasis added)).
This case does touch upon consumer confusion through the unfair use of a
trademark at all. Instead, this is really a case about piracy, theft, and Defendants
dishonoring Plaintiffs MSP. Plaintiffs allege it produces karaoke tracks that it sells
on discs and mp3s to karaoke operators. (Doc. 20 at 20). Defendants are karaoke
operators who are in the business of providing a venue where karaoke tracks are
played as a service to entice patrons to patronize their establishment and buy their
liquor and ancillary pub fare. (Doc. 20 at 7, 12-13). There is no basis to conclude
that Plaintiffs and Defendants are engaged in the same business or even in
competition with one another.5
While it is true that companies need not be in direct competition in order to find
that an infringers unfair competition has harmed the Lanham Act plaintiff; there
still must be some showing that the plaintiff has suffered an injury to its
commercial interests proximately caused by the would-be infringers deceptions.
See Lexmark Int'l, Inc. v. Static Control Components, Inc., 134 S. Ct. 1377, 1395
(U.S. 2014). In the Second Amended Complaint, Plaintiffs allege Defendants use of
the false designations of origin . . . damages Plaintiffs by enabling Defendants to
provide or obtain karaoke services at a lower cost than persons who acquire those
materials legitimately, including Plaintiffs legitimate customers, can provide or
5
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There are no allegations in the Second Amended Complaint that Defendants

sell or otherwise distribute their stored media-shifted/ format shifted copies of the
karaoke tracks to the public at large or even their own customers who visit their
pub. The allegations in the Second Amended Complaint are that these tracks are
played or made available to be played at the Defendants venue; not sold. (Doc. 20 at
12 (Venues that offer karaoke entertainment do so primarily as a free service. . .
.)). Thus, there are no plausible allegations that Defendants are producers of the
tangible product sold in the marketplace, which are necessary elements of Lanham
Act claims under Eastland Music Grp., LLC, 707 F.3d 869, and Dastar, 539 U.S. 23.
In short, the allegations of the Second Amended Complaint merely suffice to
establish that Defendants used or are using Plaintiffs product without
authorization under the MSP; not selling Plaintiffs karaoke tracks as their own in a
marketplace. The Lanham Act is concerned with the latter conduct, not the former.
Moreover, the Second Amended Complaint makes clear that Plaintiffs are the
unquestionable origin of the karaoke tracks at issue here and Defendants alleged
activities are not capable of diminishing or otherwise confusing a consumers
perception of the origin of the tracks. Slep-Tone itself states the Sound Choice
Marks are indicators of Plaintiffs as the origin of karaoke accompaniment tracks,
meaning that those marks indicate that the tracks to which they are applied were
obtain them. This in turn is alleged to have caused [t]he consequential denial of
revenue from a legitimate market for Plaintiffs customers services and prevent
Plaintiffs customers from making purchases of material from Plaintiffs and is thus
a denial of revenue to Plaintiffs. (Doc. 20 at 99-100). This pathway of causation
from the alleged activities of the Defendants (and others like them) to Plaintiffs
damages can hardly be characterized as proximate, which means the cause of
something is close or immediate.
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made and distributed by Plaintiffs or at its direction and under its control. (Doc. 20
at 45). Patrons are often unable to distinguish the imitation from an
original. (Doc. 1 at 32 (emphasis added)). Thus, Plaintiffs allegations make it
abundantly clear that the Defendants patrons are viewing a screen that displays
Plaintiffs marks when the karaoke tracks at issue are played. If, as Plaintiffs
allege, the counterfeit tracks are virtually indistinguishable to the bar patrons from
the original tracks and display of Plaintiffs marks indicate to the viewer Plaintiffs
ownership of the tracks, then there can be no confusion. This is because the viewers
would see Plaintiffs marks and associate Plaintiffs as the tracks origin. The Second
Amended Complaint provides no basis for this Court to conclude customers would
credit the bar owner with creating the tracks. Nor is there any basis to conclude
that anyone other than Plaintiffs created the tracks. In short, these allegations
undermine any notion that the Defendants are trying to pass off the karaoke tracks
as originating from anyone other than Plaintiffs.
The parties both attempt to discuss whether the traditional factors involved
in a likelihood-of-confusion analysis are satisfied here, yet such factors do not fit the
facts of this case. The Seventh Circuit has outlined the following several factors for
use in determining the likelihood of consumer confusion: (1) the similarity between
the marks in appearance and suggestion, (2) the similarity of the products, (3) the
area and manner of concurrent use of the products, (4) the degree of care likely to be
exercised by consumers, (5) the strength of the complainants mark, (6) any evidence
of actual confusion, and (7) the defendants intent (or lack thereof) to palm off its
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product as that of another. Eli Lilly & Co. v. Natural Answers, Inc., 233 F.3d 456,
461-62 (7th Cir. 2000). These factors do not apply in this case.
For example, there are no allegations in the Second Amended Complaint that
Defendants are displaying competing marks of their own, so only Plaintiffs marks
are at issue here. Similarly, there is only one product at issuethe karaoke
tracksand there are no allegations that Defendants are selling, marketing or
otherwise distributing their media/format shifted copies of Plaintiffs tracks to the
public. Furthermore, the allegations of the Second Amended Complaint affirm that
Defendants have not taken any steps to try to palm off Plaintiffs tracks as their
own; if anything, their display of Plaintiffs marks has the salutary effect of clearly
identifying the origin of tracks to the end using Basket Case Pub patron. Slep-Tone
Entm't Corp. v. Canton Phoenix Inc., No. 3:14-CV-764-PK, 2014 WL 5824787, at *10
(D. Or. Sept. 4, 2014) report and recommendation adopted as modified, No. 3:14-CV00764-PK, 2014 WL 5817903 (D. Or. Nov. 7, 2014). In short, there can be no
likelihood of confusion at issue in this case because there are no issues of confusion,
competing marks or competing products.
III.
Dastars Hypothetical Does Not Sanction Plaintiffs Trademark

Claims Against Defendants.
In support of its opposition to the motion to dismiss, Plaintiffs cite a few
Northern District of Illinois opinions in which the courts found Dastar did not
foreclose its Lanham Act claims against other karaoke bar owners/operators. To be
clear, this Court agrees with those courts on that discrete issue. Given Dastars
limited holdingclaims arising under 15 U.S.C. 1125(a) do not extend to claims of
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unaccredited copying of uncopyrighted workthe Court does not find that

Plaintiffs Lanham Act claims are foreclosed by Dastar.
Nevertheless, the Court is aware that those district courts have also allowed
Plaintiffs to proceed with similar claims against other karaoke venue owners with
reference to Dastar. See, e.g., Slep-Tone Entm't Corp. v. Sellis Enterprises, Inc., No.
13 C 08070, 2015 WL 1593498 (N.D. Ill. Apr. 3, 2015); Slep-Tone Entm't Corp. v.
Coyne, 41 F. Supp. 3d 707, 711 (N.D. Ill. 2014); Slep-Tone Entm't Corp. v. Elwood
Enterprises, Inc., No. 13 C 7346, 2014 WL 1612891 (N.D. Ill. Apr. 21, 2014); SlepTone Entm't Corp. v. America's Bar & Grill, LLC, No. 13 C 8526, 2014 WL 4057442,
at *3 (N.D. Ill. Aug. 15, 2014).
Having read those cases, it is evident that those courts are operating under
the impression that defendants are creating a new good in the marketplace by
shifting the karaoke tracks from one medium to another. E.g., Sellis Enters., 2015
WL 1593498 at *5 (The media and format shifting operates as an independent
creation event, placing a new good in the marketplace.). In coming to that
conclusion, those courts rely on obiter dictum expressed in the Dastar opinion that
had defendant bought some of plaintiff's videotapes and merely repackaged them
as its own, this would have been a proper false designation of origin claim. 539
U.S. at 31. The Court does not conclude that this statement can be construed to
allow Plaintiffs claims here to proceed for the following two reasons.
First, what the Court did not state in its hypothetical, but should
nevertheless be apparent from its context, is that the hypothetical repackaged
videos would necessarily have to be sold in a marketplace or otherwise distributed
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to consumers in a marketplace in order for there to be an actionable Lanham Act

infringement violation. This is the crucial point that distinguishes Defendants
actions from the hypothetical infringement discussed in DastarDefendants are
not alleged to be selling or advertising or otherwise distributing their media shifted
copies of Plaintiffs karaoke tracks to anyone, whereas the hypothetical seller in
Dastar was understood to be selling the repackaged videos.6
Second, the idea that a new good has been created merely by shifting the
tracks from a disk to a hard drive is deeply flawed. In Sellis Enters., for example,
the court wrote:
if an individual were to take a SlepTone CD and copy the tracks onto
another CD, it is difficult to dispute that a new good has been made, a
good that SlepTone did not create. . . . [M]edia- and format-shifting
creates a new tangible good of which Slep-Tone is not the original
producer. Because the producer of the new good (karaoke jockeys) and
the mark-holder of the mark on the goods (Slep-Tone) do not match,
the alleged use of Slep-Tone's mark on the copied tracks is a false
designation of origin covered by the Lanham Act.
Sellis Enters., 2015 WL 1593498 at *5. This argument ignores that the object of
value desired by the bar patrons and karaoke operators alike is not the particular
medium upon which the track is presented for consumption; rather, it is the
underlying tracks themselves. The particular medium upon which the tracks are
stored is meaningless. Canton Phoenix Inc., 2014 WL 5817903, at *2 (The relevant
good in this case are the karaoke tracks themselves, and not the means by which
those goods are stored (e.g. CD vs. hard drive)). Plaintiffs have not alleged that
McCarthy on Trademarks and Unfair Competition regards the hypothetical to be

nothing more than an affirmation of the familiar use of 1125(a) claims to reach
instances where one party buys a product of another and falsely claims to have
produced or manufactured the goods. 27:78 (4th ed.).
6
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karaoke bar patrons give any concern whatsoever to how the tracks are stored or to
who created the tracks with which the patrons are singing along.7
Furthermore, the argument that Defendants have created some new product
in the marketplace also ignores the clear import of Dastars holding, which is that
[o]nly a confusion about origin supports a trademark claim, and origin for this
purpose means the producer of the tangible product sold in the marketplace.
Eastland Music Grp., LLC v. Lionsgate Entm't, Inc., 707 F.3d 869, 872 (7th Cir.)
(emphasis added), quoting 539 U.S. at 31. Again, this Second Amended Complaint
does not allege that Defendants are selling the media shifted copies of the karaoke
tracks in a marketplace.
Consequently, the Court finds that the Second Amended Complaint does not
allege a likelihood-of-confusion and does not state a cognizable claim of trademark
or trade dress infringement or unfair competition against the Defendants under
32 and 43 of the Trademark Act of 1946 codified at 15 U.S.C. 1114 and 1125.
Counts I and II are dismissed.
To be clear, Plaintiffs do not allege that Defendants piracy has caused the quality
of the tracks to be degraded such that consumers are viewing Plaintiffs marks
displayed by the media shifted copies and are left with the impression that
Plaintiffs produce inferior karaoke tracks. (See Doc. 20 at 22-23). Such
allegations would not be logical anyway in light of Plaintiffs allegations that the
popularity of SOUND CHOICE karaoke tracks derives from the markets perception
that the recordings are usually the most faithful to the sound of the original
recording artist and provide highly accurate singing cues as part of the video
display; characteristics Plaintiffs allege are highly valued by karaoke singers. (Doc.
20 at 18-19). If karaoke operators such as Defendants were offering inferior
quality tracks, then karaoke singers would ultimately abandon such operators over
time in favor of operators who chose to provide the tracks by way of the high quality
CD+G discs.
7
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When a court dismisses a claim pursuant to a Rule 12(b)(6) motion, the

dismissal must be with prejudice because the claim is not one upon which relief can
be granted. Remijas v. Neiman Marcus Grp., LLC, No. 14-3122, 2015 WL 4394814,
at *8 (7th Cir. July 20, 2015) (A dismissal under Rule 12(b)(6), in contrast, is a
dismissal with prejudice.); Kamelgard v. Macura, 585 F.3d 334, 339 (7th Cir. 2009).
Therefore, the Plaintiffs Counts I and II are dismissed with prejudice. The Court
expresses no judgment as to the propriety of Counts III and IV, Illinois state law
claims, because the Court declines to exercise its supplemental jurisdiction under
28 U.S.C. 1367(c).
IV.
Defendants/Counter-Plaintiffs Counterclaims Are Dismissed With

Prejudice.
Having dismissed the federal claims and declined to exercise supplemental
jurisdiction over the Illinois state law claims, the Court is left to determine what to
do with the Defendants/Counter-plaintiffs counterclaims (Doc. 21). Generally, the
dismissal of a complaint does not necessarily require dismissal of counterclaims.
However, jurisdiction under Article III of the Constitution must always be satisfied,
and such jurisdiction requires an actual case or controversy between the parties.
Flast v. Cohen, 392 U.S. 83, 94 (1968). This requirement extends to claims brought
under the Declaratory Judgment Act, 28 U.S.C. 2201, Aetna Life Ins. Co. of
Hartford,
Conn.
v.
Haworth,
300
U.S.
227,
239-40
(1937),
which
Defendants/Counter-plaintiffs cite as the source of their counterclaims. (Doc. 21 at

2). The counterclaims are as follows: In Count I, Defendants/Counter-plaintiffs seek
a judgment that Plaintiffs marks are invalid and unenforceable and should be
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cancelled pursuant to 15 U.S.C. 1119. (Doc. 21 at 5). In Count II, they seek the
same relief under a theory that Plaintiffs have failed to supervise the licensing of
their product. (Doc. 21 at 6). In Count III, Defendants/Counter-plaintiffs seek the
same relief under a theory that Plaintiffs have abandoned the marks. (Doc. 21 at 6).
Finally, in Count IV, they seek a judgment that Plaintiffs purported trade dress
features are not protectable.
These counterclaims must be dismissed at this point because there is no
longer an actual controversy between the parties. Plaintiffs suit alleged
infringement
of
trademarks
and
trade
dress.
(Doc.
20
at
14-15).
Defendants/Counter-plaintiffs counterclaims are all really nothing more than

affirmative defenses to Plaintiffs claims in that their purpose is to avoid liability for
the trademark and trade dress liability and unequivocally seek cancellation of the
marks under the Lanham Act. The Court has ruled that Plaintiffs cannot enforce
the marks sub judice against these Defendants for the complained conduct under
the Lanham Act. Thus, Defendants need not fear any further litigation (save
appellate litigation) based upon Lanham Act claims from the Plaintiffs for their use
of media shifted copies of the karaoke tracks.
In a particularly instructive case from the Northern District of Illinois, the
district court dismissed a counterclaim with prejudice requesting cancellation of a
trademark pursuant to 15 U.S.C. 1119 after the plaintiff voluntarily dismissed its
infringement and unfair competition claims based upon on the same mark. CIBER,
Inc. v. CIBER Consulting, Inc., 326 F. Supp. 2d 886 (N.D. Ill. 2004). The CIBER
court found that the dismissal of the plaintiff's claims with prejudice barred any
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suit based on the defendants current or past use of the mark at issue and that in
the absence of such an infringement suit, or the threat of such a suit, there was no
justiciable case or controversy. Id. at 889.
Similar circumstances exist here. The Courts dismissal of the federal claims
is with prejudice, which has the effect of barring any suit based on the Defendants
current or past alleged use of the mark at issue. See Kamelgard, 585 F.3d at 339 (A
dismissal for failure to state a claim is a dismissal on the merits, Fed.R.Civ.P. 41(b),
unless the dismissal order states otherwise; and a dismissal on the merits is
normally with prejudice and thus a bar to relitigation.). Therefore, there is no
justiciable case or controversy left here because there is no longer a real threat of an
infringement suit based upon the conduct at issue in this lawsuit and the Court
may properly dismiss the counterclaims with prejudice.
CONCLUSION
Defendants Motion to Dismiss (Doc. 22) is GRANTED as to Counts I and II
of the Second Amended Complaint ONLY. The Court expresses no judgment as to
the propriety of Counts III and IV, Illinois state law claims. The Court declines to
exercise supplemental jurisdiction under 28 U.S.C. 1367(c). Defendants/Counterplaintiffs
counterclaims
are
also
DISMISSED
with
prejudice
and
Defendants/Counter-Plaintiffs Motion To Strike Plaintiffs/Counterdefendants

Affirmative Defenses (Doc. 32) is DENIED as moot.
CASE TERMINATED
IT IS SO ORDERED.
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Entered this 4th day of August, 2015.
s/ Joe B. McDade
JOE BILLY McDADE
United States Senior District Judge
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E-FILED
Tuesday, 04 August, 2015 04:30:14 PM

Clerk, U.S. District Court, ILCD
A-22

Phoenix Entertainment&#39;s Appellate Brief

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Case: 15-2844

United States Court of Appeals

DANNETTE RUMSEY and BASKET CASE PUB, INCORPORATED,

BRIEF AND APPENDIX OF PLAINTIFFS-APPELLANTS

Attorneys for Plaintiffs-Appellants

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Tuesday, 04 August, 2015 12:23:39 PM

UNITED STATES DISTRICT COURT

Case No. 15-cv-1009

Choice. Phoenix Entertainment Partners, LLC (Phoenix) is the corporate

Plaintiffs pay statutory and negotiated royalties to the owners of copyright in

Plaintiffs Federal Claims Are Not Barred By Dastar Corporation v.

services on or in connection with which such use is likely to

Plaintiffs Have Not Pled Allegations That Demonstrate Defendants

commerce against unfair competition. 539 U.S. at 28 (internal quotations and

There are no allegations in the Second Amended Complaint that Defendants

Dastars Hypothetical Does Not Sanction Plaintiffs Trademark

unaccredited copying of uncopyrighted workthe Court does not find that

to consumers in a marketplace in order for there to be an actionable Lanham Act

McCarthy on Trademarks and Unfair Competition regards the hypothetical to be

When a court dismisses a claim pursuant to a Rule 12(b)(6) motion, the

Defendants/Counter-Plaintiffs Counterclaims Are Dismissed With

Defendants/Counter-plaintiffs cite as the source of their counterclaims. (Doc. 21 at

Defendants/Counter-plaintiffs counterclaims are all really nothing more than

Defendants/Counter-Plaintiffs Motion To Strike Plaintiffs/Counterdefendants

Entered this 4th day of August, 2015.

Tuesday, 04 August, 2015 04:30:14 PM

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Phoenix Entertainment's Appellate Brief

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