Blue Sky Endeavors, LLC et al v. Henderson County Hospital Corporation et al

IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF NORTH CAROLINA
ASHEVILLE DIVISION
CIVIL CASE NO. 1:23-cv-00097-MR
BLUE SKY ENDEAVORS, LLC AND )
LAMOND FAMILY MEDICINE, )
P.L.L.C., )
)
Plaintiffs, )
) MEMORANDUM OF
vs. ) DECISION AND ORDER
)
HENDERSON COUNTY HOSPITAL )
CORPORATION AND BLUE RIDGE )
COMMUNITY HEALTH SERVICES, )
INC., )
)
)
Defendants. )
THIS MATTER is before the Court on the Plaintiffs’ Motion for
Judgment on the Pleadings. [Doc. 31].
I. PROCEDURAL BACKGROUND
On April 6, 2023, the Plaintiff Blue Sky Endeavors, LLC (“Blue Sky”)
filed a Complaint in Henderson County Superior Court. [Doc. 1-1 at 1]. In
its Complaint, Blue Sky alleged that Henderson County Hospital Corporation
(“Pardee Hospital”) and Blue Ridge Community Health Services, Inc. (“Blue
Ridge”) (collectively, the “Defendants”) infringed Blue Sky’s trademark. [Id.
_______________________________ )
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at 10]. Four days later, the Defendants removed the case to this Court. [Doc.
1 at 1]. On February 28, 2024, Blue Sky amended its Complaint, adding
LaMond Family Medicine, P.L.L.C. (“LaMond Family Medicine”) (collectively
with Blue Sky, the “Plaintiffs”) as a plaintiff. [Doc. 26 at 1]. In its Amended
Complaint, the Plaintiffs assert three causes of action: (1) federal trademark
infringement, under 15 U.S.C. § 1114; (2) federal unfair competition, under
15 U.S.C. § 1125(a); (3) and state unfair and deceptive trade practices, under
N.C. Gen. Stat. § 75-1.1. [Doc. 26 at 9–11].
On March 12, 2024, the Defendants answered the Amended
Complaint, asserted defenses to the Plaintiffs’ claims, and asserted a
counterclaim against the Plaintiffs. [Doc. 28]. In its counterclaim, the
Defendants seek a declaratory judgment pursuant to the Declaratory
Judgment Act and 15 U.S.C. § 1120, that the Plaintiffs committed fraud on
the Trademark Office by fraudulently procuring and renewing its trademark.
[Id. at 12]. On July 29, 2024, the Plaintiffs filed a Motion for a Preliminary
Injunction. [Doc. 32]. Also on July 29, 2024, the Plaintiffs filed a Motion for
Judgment on the Pleadings (the “Motion”) seeking the dismissal of the
Defendants’ counterclaim. [Doc. 31]. On August 23, 2024, the Defendants
filed their Response to the Plaintiffs’ Motion. [Doc. 51]. On August 29, 2023,
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the Plaintiffs’ filed their Reply to the Plaintiffs’ Response. [Doc. 53]. This
matter is now ripe for disposition.
II. STANDARD OF REVIEW
Pleadings, including counterclaims, 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). “After the pleadings are closed—but early enough not to delay
trial—a party may move for judgment on the pleadings.” Fed. R. Civ. P. 12(c).
“A motion for judgment on the pleadings under Rule 12(c) is assessed under
the same standards as a motion to dismiss under Rule 12(b)(6).” Occupy
Columbia v. Haley, 738 F.3d 107, 115 (4th Cir. 2013) (citing Edwards v. City
of Goldsboro, 178 F.3d 231, 243 (4th Cir. 1999)). When evaluating a motion
under Rule 12(c), however, the Court considers the complaint the answer.
See Jones v. Penn Nat. Ins. Co., 835 F.Supp.2d 89, 95 (W.D.N.C. 2011).
To survive a motion to dismiss under Rule 12(b)(6), and thus, under
Rule 12(c), a counterclaim “must contain sufficient factual matter, accepted
as true, to ‘state a claim to relief that is plausible on its face.’” Ashcroft v.
Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S.
544, 570 (2007)). The Court must accept the counterclaimant’s alleged facts
as true and “draw all reasonable inferences in favor of the [counterclaimant].”
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See Nemet Chevrolet, Ltd. v. Consumeraffairs.com, Inc., 591 F.3d 250, 253
(4th Cir. 2009) (citing Edwards, 178 F.3d at 244).
III. FACTUAL BACKGROUND
Taking the Defendants’ allegations made in support of their
counterclaim as true, the following is a recitation of the relevant facts.
The original applicant of the BLUE SKY MD mark (Serial No.
85097780) was GHH Ventures, LLC, a Florida limited liability company
(“GHH”). GHH’s application was an “intent to use” application. [Doc. 28:
Counterclaim at ¶ 9]. On or about November 17, 2010, GHH authorized the
trademark examiner assigned to the BLUE SKY MD application to disclaim
the word “MD” from its application. [Id. at ¶ 10]. On July 19, 2011, the
Trademark Office issued a Notice of Allowance to GHH for the BLUE SKY
MD Application. [Id. at ¶ 11]. The Trademark Office would not have issued
the Notice of Allowance for the BLUE SKY MD application if GHH had not
disclaimed the use of MD. [Id. at ¶ 12].
On or about November 27, 2011, GHH assigned its interest in the
BLUE SKY MD application to Blue Sky MD, LLC, a Tennessee limited liability
company. [Id. at ¶ 13]. On January 12, 2012, Blue Sky MD, LLC submitted
a specimen to show its use of the BLUE SKY MD mark in commerce; a
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registration certificate was issued for the BLUE SKY MD mark on April 10,
2012. [Id. at ¶ 14].
On or about January 28, 2013, Blue Sky MD, LLC assigned its interest
in the BLUE SKY MD mark to the Plaintiff Blue Sky Endeavors, LLC (“Blue
Sky”). [Id. at ¶ 16]. Plaintiff Blue Sky has entered into a non-exclusive
licensing agreement with the Plaintiff LaMond Family Medicine enabling
LaMond Family Medicine to use BLUE SKY MD in connection with certain
services. [Id.].
Plaintiff Blue Sky submitted renewal filings with the Trademark Office
on June 15, 2017, and April 19, 2021. When Plaintiff Blue Sky submitted its
renewal filings, it was relying on the use of BLUE SKY MD by LaMond Family
Medicine. Plaintiff Blue Sky did not notify the Trademark Office in either of
these filings that it now claims trademark rights in the disclaimed term “MD.”
[Id. at 18]. To date, Plaintiff Blue Sky has not made any filings with the
Trademark Office to amend its registration and remove the disclaimer for the
term “MD.” [Id. at ¶ 19].
The Defendants allege that they have been injured by the Plaintiffs’
misrepresentations to the Trademark Mark regarding this disclosed term
Specifically, the Defendants allege that they are injured “because they are
having to defend against Plaintiffs’ infringement action based on a
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fraudulently renewed registration.” [Id. at ¶ 31]. The Defendants seek a
declaratory judgment that the Plaintiffs have fraudulently procured and
renewed its BLUE SKY MD mark, and that the Court declare the Plaintiffs’
trademark invalid. [Id. at ¶ 32].
IV. DISCUSSION
Section 1120 of Title 15 provides that any person who procures a
trademark by fraud “shall be liable in a civil action by any person injured
thereby for any damages sustained in consequence thereof.” 15 U.S.C. §
1120. “To prevail under this statute, it is not enough for the plaintiff merely to
establish fraud in the registration of the trademark; the plaintiff must also
show that [it] sustained some damage in consequence of the fraud.” Va.
Polytechnic Inst. & State Univ. v. Hokie Real Est., Inc., 813 F.Supp.2d 745,
755 (W.D. Va. 2011) (quoting in part Gilbert/Robinson, Inc. v. Carrie
Beverage–Missouri, Inc., 989 F.2d 985, 991 (8th Cir. 1993)).
Aligning with other jurisdictions, courts within this District have held that
§ 1120 does not “allow for attorney’s fees as damages” and that a claim
under § 1120 that claims attorney’s fees as a basis for damages fails as a
matter of law. High Voltage Beverages, LLC v. Coca-Cola Co., No.
3:08CV367, 2011 WL 831523, at *6 (W.D.N.C. Mar. 3, 2011) (Mullen, J.)
(collecting cases that hold that litigation fees and costs are unrecoverable
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damages under § 1120); see also United Phosphorus, Ltd. v. Midland
Fumigant, Inc., 205 F.3d 1219, 1232 (10th Cir. 2000) (“[Section] 1120 does
not allow for the award of attorney fees . . . .”); Hokie Real Est., 813
F.Supp.2d at 756 n.3 (quoting High Voltage and noting “that ‘reading §
1120 to allow for attorney’s fees would circumvent § 1117’”).
Here, the Defendants claim that they have been injured “by Plaintiffs’
misrepresentation because they are having to defend against Plaintiffs’
infringement action based on a fraudulently renewed registration.” [Doc. 28:
Counterclaim at ¶ 31]. The Defendants do not allege any other harm in their
counterclaim. Because § 1120 creates a cause of action for damages for
the fraudulent procurement of a trademark registration, and the Defendants
have alleged no damages, the Defendants have no claim arising under §
1120. Therefore, the counterclaim will be dismissed.
Apart from a § 1120 action for damages, however, the fraudulent
procuring of a registration constitutes an affirmative defense to an
infringement claim. As such, to the extent that the Defendants have asserted
an affirmative defense based on these facts, such affirmative defense is not
dismissed.
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ORDER
IT IS, THEREFORE, ORDERED that the Plaintiffs’ Motion for
Judgment on the Pleadings [Doc. 31] is hereby GRANTED. The Defendants’
allegations of fraudulent procurement of the registration remain as a basis
for an affirmative defense.
IT IS SO ORDERED.
Signed: 10/16/2024
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