IP Law Daily, COPYRIGHT—S.D.N.Y.: Chinese toy merchant’s copyright misuse claims against U.S. toy manufacturer dismissed, (Nov 20, 2024)

By Saurabh Kashyap, B.A., LL.B., LL.M.

Plaintiff misrepresented defendant’s actions in a prior lawsuit by claiming enforcement of the generic term “fidget cube,” but evidence showed defendant acted on its copyrighted toy design.

The federal district court in New York dismissed multiple claims, including copyright misuse, brought by a Chinese toy merchant against Antsy Labs LLC—a U.S. toy manufacturer. The court determined that the plaintiff’s central allegation—that Antsy Labs improperly enforced rights over the generic term “fidget cube” in a prior lawsuit—was contradicted by evidence showing Antsy Labs' enforcement actions focused on its registered copyright for the Fidget Cube’s toy design, not on trademark rights or copyright over the term itself (Shenzhenshi Liangyuankeji Youxiangongsi v. Antsy Labs LLC, No. 24-CV-1223 (JMF) (S.D.N.Y. November 18, 2024)).

Background. The plaintiff, Shenzhenshi Liangyuankeji Youxiangongsi, is a Chinese toy seller operating under the name “Coogam” on Amazon.com. It primarily markets educational and entertainment toys. The defendant, Antsy Labs LLC, is a U.S.-based manufacturer recognized for its copyrighted stress-relief Fidget Cube toy.

The dispute originated when Antsy Labs filed a lawsuit in the Southern District of Florida, alleging that Coogam and other defendants had infringed the registered copyright for the Fidget Cube’s design. Antsy Labs obtained a temporary restraining order (TRO), freezing Coogam’s Amazon storefront and approximately $800,000 in business accounts. Coogam contended that the TRO was improperly secured based solely on its use of the phrase “fidget cube,” which it claimed was a generic term. Coogam alleged that Antsy Labs demanded $100,000 to lift the freeze. Following Coogam’s refusal to pay, Antsy Labs voluntarily dismissed its Florida case against Coogam.

Coogam subsequently filed the present action in New York, seeking a declaratory judgment that the term “fidget cube” was generic and not subject to copyright or trademark protection. It also sought monetary damages for fraud, tortious interference, malicious prosecution, and copyright misuse. Antsy Labs moved to dismiss, arguing that Coogam’s claims lacked merit and failed to state a claim under applicable legal standards.

Declaratory judgment. The court dismissed Coogam’s request for declaratory relief, finding no justiciable controversy regarding the term “fidget cube.” Antsy Labs had not claimed exclusive rights to the term in its Florida lawsuit, focusing instead on copyright infringement related to the toy’s design. The court held that Coogam’s claims were based on a misunderstanding of Antsy Labs’ legal filings. Relying on Am. Home Assur. Co. v. Merck & Co., Inc., 329 F. Supp. 2d 436 (S.D.N.Y. 2004), the court emphasized that declaratory relief requires a concrete dispute, which was absent in this case.

Fraud and tortious interference. Coogam’s fraud and tortious interference claims were dismissed for failing to meet essential legal elements. The court determined that Antsy Labs’ actions were consistent with good-faith enforcement of its copyright, and there was no evidence of material misrepresentation. Further, Coogam did not demonstrate detrimental reliance, as it had vigorously contested Antsy Labs’ allegations in the Florida case.

The tortious interference claim also failed because Coogam could not prove that Antsy Labs acted with wrongful intent or dishonest means. Citing FullSend, Inc. v. Nelk, Inc., 2023 WL 2710593 (E.D.N.Y. 2023), the court reiterated that enforcement of intellectual property rights, even if ultimately unsuccessful, does not constitute tortious interference absent evidence of malice or bad faith.

Malicious prosecution. The court dismissed Coogam’s malicious prosecution claim, holding that Coogam did not allege sufficient facts to demonstrate malice or improper motives behind Antsy Labs’ Florida lawsuit. The court explained that mere negligence or carelessness in pursuing legal claims does not meet the standard for malicious prosecution, referencing Bernard v. United States, 25 F.3d 98 (2d Cir. 1994).

Copyright misuse. Coogam’s claim for copyright misuse was also dismissed. The court noted that copyright misuse is not recognized as a standalone cause of action in the Second Circuit, relying on Lava Recs. LLC v. Amurao, 354 F. App’x 461 (2d Cir. 2009). While it may be raised as an affirmative defense in an infringement case, it cannot form the basis of an independent lawsuit.

Conclusion and costs. The court concluded that Coogam’s claims were legally deficient and denied leave to amend, finding that further amendments would be futile. Judgment was entered in favor of Antsy Labs, and Coogam was ordered to bear the litigation costs.

The Case is No. 1:24-cv-01223-JMF.

Judge: Furman, J.

Attorneys: Robert David Katz (Law Offices of Albert Wai-Kit Chan PLLC) for Shenzhenshi Liangyuankeji Youxiangongsi a/k/a Coogam Direct. Christopher Tom (Boies Schiller Flexner LLP) for Antsy Labs LLC.

Companies: Antsy Labs LLC

Cases: Copyright TechnologyInternet NewYorkNews