Antitrust Law Daily Wrap Up, ANTITRUST—N.D. Ill.: Star naming company’s counterclaims fall on close viewing, (Aug 2, 2024)

By Justin Marcus Smith, J.D.

The court agreed with the plaintiff star registry’s primary argument that a competing U.K. -based defendant-counterclaimant failed to allege market or public harm.

In a dispute involving a mix of trademark infringement claims and antitrust counterclaims, a defendant “star registry” novelty gift service based in the United Kingdom sufficiently pleaded an Illinois state law counterclaim for tortious interference with prospective economic advantage, held the federal district court in Chicago. However, the U.K. defendant, which focused on its own injuries, failed to allege market harm antitrust injury sufficient to proceed with its antitrust counterclaims. Its unfair competition counterclaim also failed to encompass allegations that would shock the judicial conscience or violate standards of commercial morality. The court accordingly partly granted and partly denied the competing star registry’s motion to dismiss for failure to state counterclaims (International Star Registry of Illinois, Ltd. v. RGIFTS Ltd., No. 1:21-cv-06446 (N.D. Ill. July 31, 2024)).

International Star Registry of Illinois, Ltd. (ISR), an Illinois corporation, has been providing star naming services to the public since 1979. ISR said it owns a number of trademarks including: “INTERNATIONAL STAR REGISTRY”; STAR REGISTRY”; and “STARREGISTRY.COM”.

RGIFTS Limited (RGIFTS), based in the United Kingdom, has been providing star naming services to the public since 2014. Matei Supply Corp (Matei), based in California, fulfills RGIFTS orders for consumers in the United States.

In 2021, ISR filed a five-count complaint against RGIFTS and Matei alleging they infringed on ISR’s marks and used other “confusingly similar” marks and names to advertise and sell competing star naming services as though associated with ISR. RGIFTS generally countered that ISR has been trying to “stymie” RGIFTS.

The court previously denied ISR’s motion for a preliminary injunction for trademark infringement. Shortly thereafter, the court partly granted and partly denied ISR’s motion to dismiss pursuant to Fed. R. Civ. P. 12(b)(6).

Antitrust claims. The court agreed with ISR’s primary argument that RGIFTS’ antitrust claims failed to allege injury, so the court did not address ISR’s arguments, including its invocation of the Noerr-Pennington doctrine. Specifically, RGIFTS failed to allege that ISR’s conduct either reduced output or raised prices to consumers. RGIFTS focused on injury to itself while also alleging that ISR harmed some other competitors. The court noted the Sherman Act only addresses market harm. It does not protect injury to RGIFTS and a small group of competitors.

More importantly, RGIFTS did not allege any injury to the public in the form of decreased output or increased prices. RGIFTS did make one reference in its count 8 to competition as a whole, but the court called this an insufficient “formulaic recitation” of the elements of RGIFTS’ cause of action.

The court found RGIFTS’ pleading suffered from the additional defect of failure to plead ISR monopoly power in the relevant market. RGIFTS did attempt to define relevant submarkets, but it did not allege any facts pertinent to market share.

The court accordingly dismissed RGIFTS’ counterclaims without prejudice and with leave to amend.

State claims. The court determined that RGIFTS stated a claim for tortious interference with business relations. RGIFTS alleged ISR 1) disparaged RGIFTS as a “counterfeit” company and abused ISR’s registered marks; 2) attempted to interfere with RGIFTS’ relationship with social media sites; and, 3) entered into an anticompetitive written settlement agreement with a company the court did not identify (Company X).

The court concluded only the first of these three allegations “inartfully” supported a claim for tortious interference. RGIFTS did not name its customers involved, but the court could reasonably infer the alleged ISR disparagement of RGIFTS interfered with a reasonable RGIFTS expectancy of future business relations with its customers by casting a “shadow of illegitimacy” over RGIFTS. This was enough to state a claim for tortious interference with prospective economic advantage. The court accordingly denied ISR’s motion to dismiss the tortious interference claim based on ISR’s alleged interference with RGIFTS’ customers.

The allegations about interference with social media company relationships failed because RGIFTS again failed to plead injury. It failed to plead that such ISR conduct caused the termination of any RGIFTS social media company relationship. RGIFTS even called ISR’s conduct here “largely unsuccessful[.]”

Allegations about a written settlement with Company X, which agreed not to allow third parties to use certain ISR marks on its platform, also fell short of alleging that ISR’s conduct caused or induced the termination of business expectancy with Company X. RGIFTS also did not identify other discount market platforms that “completely excluded” RGIFTS as a result of ISR’s conduct.

Unfair competition. The court held RGIFTS’ unfair competition allegations were insufficient under the two underlying theories of interference with third party relations or unconscionability. The court referenced its earlier reasoning about the tortious interference with business relations counterclaim. More importantly, the court said the allegations fell short of unconscionability couched as either a shock to judicial sensibilities or a violation of the standards of commercial morality. The court concluded ISR’s assertion of its purported rights in this matter was simply not unfair competition. Whether ISR’s purported trademarks ought to be canceled would have to await disposition on the merits.

The Case is No. 1:21-cv-06446.

Judge: Cummings, J.

Attorneys: Adi Kanlic (O'Hagan Meyer LLC) for International Star Registry of Illinois Ltd. Konrad Val Sherinian (Law Offices of Konrad Sherinian LLC) for RGifts Ltd. and Matei Supply Corp.

Companies: International Star Registry of Illinois Ltd.; RGifts Ltd.; Matei Supply Corp.

Cases: Antitrust IllinoisNews