Antitrust Law Daily Wrap Up, ANTITRUST—N.D. Ill.: Karaoke venue’s conspiracy, price discrimination claims fall flat, (May 4, 2015)

By Greg Hammond, J.D.

A karaoke venue failed to vocalize counterclaims that a karaoke accompaniment track manufacturer agreed to restrain trade or engaged in price discrimination. In dismissing the Sherman Act and Clayton Act counterclaims, the federal district court in Chicago determined that there were no facts of any agreement or conspiracy, or from which an inference of price discrimination could be drawn (Slep-Tone Entertainment Corp. v. Elwood Enterprises, Inc., May 1, 2015, Blakey, J.).

Background. Slep-Tone Entertainment Corp. manufactures karaoke accompaniment tracks and graphics containing its “Sound Choice” trademark. Elwood Enterprises, Inc. operates the Mecca Supper Club where karaoke services are provided by karaoke operators. Slep-Tone brought claims against Elwood for trademark infringement and unfair competition, alleging that Elwood hired karaoke operators who displayed Slep-Tone’s “Sound Choice” mark without authorization. Elwood subsequently filed counterclaims, alleging that Slep-Tone violated the Sherman and Clayton Acts by using the threat of litigation to intimidate venue owners into hiring only karaoke jockeys licensed through Slep-Tone; that Slep-Tone’s actions drove up the price of service, allowing Slep-Tone to charge more and eliminate competition; and that Elwood has lost revenue and suffered reputational injury. Elwood also brought claims for (1) a declaration that Slep-Tone’s trademarks are invalid and unenforceable because they were procured by fraud; (2) a declaration of non-infringement; (3) cancellation of the trademarks; and (4) fraudulent procurement of registration. Slep-Tone moved to dismiss the counterclaims.

Antitrust counterclaims. Elwood’s allegations that Slep-Tone attempted to control venues and karaoke jockeys through harassment and threats of litigation did not constitute a per se violation of Section 1 of the Sherman Act, the court determined, finding that Elwood failed to allege that Slep-Tone participated in any type of agreement, let alone one that fixes prices. The allegations also failed under the “rule of reason” because Elwood failed to allege the existence of any agreement to restrain trade or to identify a relevant market. The karaoke venue’s price discrimination claim under the Clayton Act similarly failed because no facts were alleged from which an inference of price discrimination could be drawn. The court consequently granted Slep-Tone’s motion to dismiss with regard to the antitrust counterclaims.

Trademark counterclaims. Conversely, the court denied Slep-Tone’s motion to dismiss Elwood’s trademark counterclaims, citing similar decisions in Slep-Tone Entertainment Corp. v. Teddy O’Brian’s, Inc. and Slep-Tone Entertainment Corp. v. Kalamata, Inc. In both decisions, the court found that there was not enough information to determine whether Slep-Tone complied with the disclosure requirements because it was unclear what language is sufficient to disclose “use in commerce” through licensees. Because the actions are nearly identical, the court found that there was no reason to depart from its earlier analysis. The only description of the mark in Slep-Tone’s application is as “digital photographs of a performance of the services by a licensee,” the court noted, finding that this statement, alone, is not enough to determine whether the company met the “use in commerce” disclosure requirements in its application.

In addition, allegations that Slep-Tone committed fraud, on or about November 29, 2011, by materially misrepresenting its mark as “used in commerce” in its application to the U.S. Patent and Trademark Office, were sufficient to state a claim for fraudulent procurement under the specificity requirements of Federal Rule of Civil Procedure 9(b).

The case number is 13 C 7346.

Attorneys: Vivek Jayaram (Jayaram Law Group) for Slep-Tone Entertainment Corp. Matthew M. Saffar (Law Offices of Matthew M. Saffar) for Elwood Enterprises, Inc.

Companies: Slep-Tone Entertainment Corp.; Elwood Enterprises, Inc.

Cases: Antitrust IllinoisNews