IP Law Daily, TRADEMARK—D.S.C.: Dietary supplement maker pursues trademark infringement claims in connection with Amazon sales, (Oct 30, 2024)

By Justin Marcus Smith, J.D.

The court acknowledged that much of the complaint was dross; however, the complaint did place the defendants on notice of the trademark infringement and other claims asserted against them.

A trademark holder plausibly pleaded trademark infringement claims and a state unfair competition claim in connection with allegedly unauthorized online sales, despite an overly long and unclear complaint, held the federal district court in Charleston, South Carolina. The plaintiff’s tortious interference claim did not necessarily depend on proving trademark infringement as a predicate act because it might turn instead on contracts independent of any trademark infringement. The court denied dismissal of the tortious interference claim. As to the rest of the complaint, the defendants argued the allegations of trademark infringement were insufficiently specific, but the court held they comported with the quality control and material difference exceptions. The complaint also placed the defendants on notice of the claims. The court mostly denied the defendants’ parallel motion to strike except for one paragraph the court deemed scandalous and probably irrelevant to the plaintiff’s claims (Thorne Research, Inc. v. Davachi, No. 2:24-cv-02356-DCN (D.S.C. Oct. 29, 2024)).

Background. Thorne Research, Inc. (Thorne), a maker of dietary supplements and at-home biomarker tests (the products), complained that defendants Rez Candles Inc. (Rez Candles), PBD Collectibles LLC (PBD), and associated natural persons misappropriated Thorne trademarks in connection with the sale of Thorne products sold on the internet. Specifically, Thorne accused the defendants of selling Thorne products through unauthorized online storefronts, including potentially 100,000 products sold through Amazon alone. Thorne said it suspected the defendants bought their inventory from authorized resellers while it only permits authorized sellers doing business online to sell products on their own pre-approved websites to protect against customer confusion.

Thorne asserted four claims: 1) trademark infringement in violation of the Lanham Act, 15 U.S.C. § 1114; 2) unfair competition in violation of the Lanham Act, 15 U.S.C. § 1125(a)(1)(A); 3) common law trademark infringement; 4) violation of the South Carolina Unfair Trade Practices Act (SCUPTA), S.C. Code § 39-50-10 et seq.; and, 5) tortious interference with contract and business expectancy.

The defendants filed a Fed. R. Civ. P. 12(b)(6) motion to dismiss for failure to state a claim, or, in the alternative, to strike the complaint and require Thorne to file an amended complaint under R. 12(e) and (f). The court found Thorne’s complaint was sufficient to state a claim, but the court elected to strike one paragraph that alleged one of the defendants had engaged in past criminal activity.

Tortious interference. The defendants argued that all five causes of action suffered from the same fatal defect that Thorne failed to allege trademark infringement claims. The first three causes of action required Thorne to demonstrate trademark infringement, which would also be a necessary predicate for the SCUPTA claim; however, the court agreed with Thorne that the tortious interference claim did not have to be based on trademark infringement. Tortious interference might be based instead on Thorne’s contractual provisions with authorized resellers prohibiting them from selling Thorne products to third parties, like the defendants, for unauthorized resale. The court therefore construed the defendants’ motion to dismiss as directed at only the first four causes of action, but it denied the motion anyway with respect to the tortious interference claim.

Trademark infringement. The defendants argued that Thorne’s allegations of trademark infringement failed for lack of specificity. They said Thorne did not allege any specific sales, sales of counterfeit products, that the defendants bought the products for resale unlawfully, or that Thorne had any contractual or direct relationship with the defendants. The defendants continued that lack of consent was not enough to establish liability because of the first sale doctrine. Thorne countered with the quality control and material difference exceptions to the doctrine.

First, the court found Thorne sufficiently alleged trademark infringement under the quality control exception. The defendants argued the alleged quality control failures were not related to the quality of the product itself. Thorne countered that it not only satisfied the Warner-Lambert test, conceded as not binding in the Fourth Circuit, but it also alleged that the defendants did not follow Thorne quality control standards and interfered with those standards. The court said these allegations could have been clearer, and it acknowledged that Thorne did not tie poor-quality product to a specific customer, but Thorne did allege at least 100,000 unauthorized sales against Thorne rules. Moreover, the court noted the Fourth Circuit has said that actual quality is irrelevant. What counts is the trademark holder’s right to control quality.

The court continued that Thorne pleaded that the defendants’ alleged sale of products through online storefronts was likely to cause confusion. The court said Thorne only needed to plead that confusion was likely to occur. All in all, Thorne’s allegations were sufficient to state a claim for trademark infringement under the quality control exception.

Next, the court agreed with Thorne that it plausibly pleaded that the defendants’ alleged practice of selling products without the Thorne Satisfaction Guarantee or subject to the Thorne quality standards might confuse customers under the material difference exception. That was all that was required to survive a motion to dismiss. In arguing this point, the defendants had urged that the purported material differences, i.e., both the lack of customer service and the Guarantee, were both known to the defendants’ customers. The defendants offered Amazon screenshots, but Thorne countered that the Guarantee was an important material benefit customers nonetheless expected. Having found Thorne’s allegations sufficient to state a claim for trademark infringement, the court denied the defendants’ motion to dismiss.

Partial strike. Although the court agreed with the defendants that Thorne’s complaint was “too long” and could have been more concise, it did not agree that the problems were serious enough to justify a strike of the entire pleading. The court found the complaint clear enough to put the defendants on notice of the allegations so they could know how to defend themselves.

However, the court ruled a paragraph about an alleged customer review that mentioned an alleged crime and guilty plea in connection with the one of the defendants was sufficiently “scandalous” to strike that paragraph only under R. 12(f) to. The court explained one reason was to prevent prejudice to the defendants. It was also not evident to the court that the customer tied either the complaint or the alleged crime to Thorne.

The Case is No. 2:24-cv-02356-DCN.

Judge: Norton, D.

Attorneys: Emma K. Morehart (Seymour and Pease LLP) for Thorne Research, Inc. Bijan Khaladj-Ghom (Saxton and Stump LLC) for Reza Davachi.

Companies: Thorne Research, Inc.

Cases: Trademark SouthCarolinaNews GCNNews