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Vacation Rental Partners, LLC v. VacayStay Connect, LLC

United States District Court, N.D. Illinois, Eastern Division

March 28, 2017

Vacation Rental Partners, LLC, Plaintiff,
v.
VacayStay Connect, LLC, Defendant.

          MEMORANDUM OPINION AND ORDER

          Manish S. Shah, Judge

         Vacation Rental Partners, LLC, alleges trademark infringement and related claims against VacayStay Connect, LLC, arising out of the companies' respective VAYSTAYS and VACAYSTAY marks. Vacation Rental moves for summary judgment on all of its claims, except for Count III (a claim under the Anti-Cybersquatting Consumer Protection Act, 15 U.S.C. § 1125(d)). For the following reasons, the motion is granted.

         I. Legal Standards

         Summary judgment is appropriate if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law. Spurling v. C & M Fine Pack, Inc., 739 F.3d 1055, 1060 (7th Cir. 2014); Fed.R.Civ.P. 56(a). A genuine dispute as to any material fact exists if “the evidence is such that a reasonable jury could return a verdict for the nonmoving party.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). Justifiable inferences are drawn in the nonmovant's favor, id. at 255, and the party seeking summary judgment has the burden of establishing that there is no genuine dispute as to any material fact. See Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986).

         II. Background[1]

         Gameday Housing, LLC was formed in 2006. [50-1] ¶ 2.[2] Its business involved the online advertisement and booking of vacation and temporary rental properties. [50-1] ¶ 3. Initially, Gameday focused on properties near college campuses on weekends coinciding with major sporting events but eventually expanded its business to include other types of vacation rentals. [50-1] ¶ 3. Gameday intended to maintain its www.gamedayhousing.com website but also launch a new website at www.vaystays.com for luxury vacation rentals; it acquired www.vaystays.com in December 2013. [44] ¶ 11; [50-1] ¶¶ 3, 9. On February 12, 2014, Gameday filed a federal intent-to-use trademark application, Serial No. 86/192, 191, for the VAYSTAYS mark. [44] ¶ 12. The following month, the owners of Gameday formed a new entity, named Vacation Rental Partners, LLC. [50-1] ¶ 4. Gameday assigned its intent-to-use application to Vacation Rental, effective May 6, 2014 (although the assignment was not executed until September 11, 2014). [44] ¶ 12; [50-1] ¶¶ 3-5. Through a Contribution and Exchange Agreement dated May 7, 2014, Gameday's owners exchanged their interest in Gameday for interest in Vacation Rental, and Gameday was dissolved shortly thereafter. [50-1] ¶¶ 5-6.[3]Vacation Rental also kept Gameday's business location and employees. [50-1] ¶¶ 5- 7.

         Vacation Rental filed a statement of use on October 28, 2014, and on February 24, 2015, the application issued as U.S. Registration No. 4, 693, 380. [44] ¶ 14.[4] Among other things, the registration covers real estate listings and rental services for short-term and vacation property rentals. [44] ¶ 16. In connection with the VAYSTAYS mark, Vacation Rental serves a variety of property suppliers, from individual property owners to large hotel companies (such as Wyndham Hotels & Resorts). [44] ¶ 18. Through www.vaystays.com, Vacation Rental offers these properties to consumers for direct bookings. Vacation Rental also advertises and distributes properties through third-party websites such as www.homeaway.com and www.vrbo.com. [44] ¶¶ 17-18. When a consumer books a Vacation Rental property through a third-party website (e.g., Homeaway or VRBO), Vacation Rental handles the transaction and uses the VAYSTAYS mark in connection with the booking. [44] ¶¶ 17, 49. The VAYSTAYS mark appears on Vacation Rental's property listings, including listings on third-party websites, and Vacation Rental also uses its mark in communications with property managers and owners, and at trade shows. [44] ¶¶ 17-18.

         Defendant VacayStay Connect, LLC, also provides vacation rental services to property suppliers (including property owners, property managers, and resorts) and consumers who book the properties. [44] ¶ 35. The company was founded in December 2011 as Vacation Storebuilder, LLC. [44] ¶ 20. A few months prior to its founding, in September 2011, Vacation Storebuilder registered www.vacaystay.com. [44] ¶ 29. The website was placed under password protection because Vacation Storebuilder was focusing on property rental distribution through third-party channels, rather than using its own site to directly interact with consumers. [44] ¶¶ 29-34. The parties dispute whether www.vacaystay.com has been consistently password protected or if it was ever open to the public. For example, some employees of Interval International had password access to the website, and there are screenshots indicating VacayStay may have made it available to the public for a brief period after Vacation Rental filed suit. [44] ¶¶ 29-34.

         On September 30, 2014, Vacation Storebuilder changed its name to VacayStay Connect. [44] ¶ 21. In the weeks leading up to the name change, Vacation Storebuilder also registered two new websites: www.vacaystayconnect.com and www.vacaystaystorebuilder.com. [44] ¶ 36. VacayStay still operates these websites, and both use logos prominently featuring the VACAYSTAY mark. [44] ¶¶ 37-38.

         VacayStay distributes rental properties through Homeaway and other third-parties, working with property suppliers (individual homeowners, property managers, innkeepers, resorts, and property management companies) and consumers who book properties. [44] ¶¶ 35, 39, 44. VacayStay uses its VACAYSTAY mark while listing properties on third-party sites, including Homeaway and VRBO, and uses the VACAYSTAY mark while handling consumers' bookings. [44] ¶¶ 41, 43. VacayStay also works with Wyndham Hotels & Resorts. [44] ¶ 44. Both Vacation Rental and VacayStay compete for similar vacation rental inventory and corporate suppliers (such as Wyndham). [44] ¶¶ 44, 48.

         Around 2012 and 2013, when VacayStay was still operating under the name Vacation Storebuilder, it contracted with Interval International to develop a distribution platform for Interval's inventory of vacation rental properties. [44] ¶¶ 22-23. The first end-to-end booking on this platform occurred in May 2014, although the parties dispute whether the booking was merely a test booking for Interval or whether it involved an actual consumer reservation. [44] ¶ 24. (VacayStay does not argue or cite evidence to show that this May 2014 booking used the VACAYSTAY mark. The email confirmation shows “Vacation Storebuilder, ” not VACAYSTAY.) By September 16, 2014, however, VacayStay had a consumer reservation for a vacation rental, with the booking confirmation generated by reservations@vacaystay.com. [44] ¶ 24; [50] ¶ 12.[5]

         Vacation Rental first learned of www.vacaystayconnect.com in August 2015. [44] ¶ 19. At an industry exhibition a few months later, a potential third-party distributor confused Vacation Rental's representative and marketing materials (bearing the VAYSTAYS mark) with VacayStay's representative and materials (bearing the VACAYSTAY mark), which he had seen earlier in the day. [44] ¶ 47. By November 2015, Vacation Rental sued VacayStay for trademark infringement. [1]; [21]; [44] ¶ 45. VacayStay brought counterclaims for trademark infringement of its VACAYSTAY mark and for cancellation of Vacation Rental's mark. [22]. These counterclaims were dismissed without prejudice because VacayStay failed to allege any commercial bookings prior to February 12, 2014 (Vacation Rental's priority date)-at most, VacayStay's counterclaim alleged pre-marketing maneuvers insufficient to establish rights in a trademark. [32]. VacayStay did not move for leave to replead and never pled any affirmative defenses. After discovery, Vacation Rental moved for summary judgment on all claims except for Count III (a claim under the Anti-Cybersquatting Consumer Protection Act, 15 U.S.C. § 1125(d)). [35].

         III. Analysis

         Vacation Rental seeks summary judgment on its claims against VacayStay for trademark infringement under the Lanham Act (15 U.S.C. § 1114(1)(a)), unfair competition under the Lanham Act (15 U.S.C. § 1125(a)(1)(A)), violating the Illinois Uniform Deceptive Trade Practices Act (815 ILCS 510/1 et seq.), and violating the Illinois Consumer Fraud and Deceptive Business Practices Act (815 ILCS 505/1 et seq.). To prevail on either claim under the Lanham Act, a plaintiff must show (1) that its mark is protectable, and (2) that the defendant's use of that mark is likely to cause confusion among consumers. CAE, Inc. v. Clean Air Eng'g, Inc., 267 F.3d 660, 673 (7th Cir. 2001). The state law claims are also analyzed under the likelihood of confusion standard and mirror the infringement analysis. See AHP Subsidiary Holding Co. v. Stuart Hale Co., 1 F.3d 611, 619 (7th Cir. 1993); Aliano v. Ferriss, 2013 IL App (1st) 120242, ¶ 23; Chicago's Pizza, Inc. v. Chicago's Pizza Franchise Ltd. USA, 384 Ill.App.3d 849, 865 (1st Dist. 2008).

         Vacation Rental maintains that its federal trademark registration is prima facie evidence of its mark's validity and that the factual record demonstrates likelihood of confusion. VacayStay responds that Vacation Rental's trademark registration is void because the intent-to-use application was invalidly assigned and because VacayStay has priority of use. VacayStay also contends that there is a genuine factual dispute as to likelihood of confusion.

         A. Vacation Rental's VAYSTAYS Mark Is Protectable

         Whether a party has established protectable rights in a trademark is a case-by-case determination under the totality of the circumstances. Johnny Blastoff, Inc. v. Los Angeles Rams Football Co., 188 F.3d 427, 433 (7th Cir. 1999). A party may acquire a protectable right in a trademark only through use of the mark in connection with its product or service. Id. Federal registration of a mark is prima facie evidence of the validity and ownership of the mark, as of the application date. 15 U.S.C. § 1057(b); 15 U.S.C. § 1115(a); 2 McCarthy on Trademarks & Unfair Competition § 16:19 (4th ed.). Vacation Rental rests on its application and registration as prima facie evidence of its mark protectability and priority as of February 12, 2014. (VacayStay does not dispute that February 12, 2014 is Vacation Rental's nationwide priority date for the VAYSTAYS mark. [44] ¶ 15.) But “[r]egistration itself establishes only a rebuttable presumption of use as of the filing date, ” and a trademark application is always subject to previously established common law trademark rights of another party. Zazu Designs v. L'Oreal, S.A., 979 F.2d 499, 504 (7th Cir. 1992). An alleged infringer has the burden to rebut the presumption of a registered mark's validity. Publications Int'l, Ltd. v. Landoll, Inc., 164 F.3d 337, 340 (7th Cir. 1998).

         1. VacayStay's Unpled Affirmative Defense Is Not Waived

         As a threshold issue, Vacation Rental contends that VacayStay waived its affirmative defense to the validity of the VAYSTAYS trademark registration by failing to plead it as an affirmative defense and instead waiting until summary judgment to attack its validity. VacayStay argues that: (1) VacayStay used its mark in commerce in May and September 2014, before Vacation Rental's first use in commerce in October 2014, and (2) Gameday invalidly assigned the intent-to-use application to Vacation Rental, in violation of 15 U.S.C. § 1060(a)(1).

         Federal Rule of Civil Procedure 8(c) requires affirmative defenses to be pled. Because federal registration is prima facie evidence of the validity of the VAYSTAYS mark and ownership, challenging that validity is an affirmative matter outside the scope of Vacation Rental's prima facie case-it is VacayStay's burden to prove as an affirmative defense or counterclaim. See, e.g., Nasalok Coating Corp. v. Nylok Corp., 522 F.3d 1320, 1326 (Fed. Cir. 2008) (“Invalidity of the mark was an affirmative defense that could have been raised, not part of the plaintiff's cause of action [for trademark infringement].”); Publications Int'l, 164 F.3d at 340 (“[R]egistration creates a presumption of validity, implying that the defendant has the laboring oar on all issues relating to validity.”).

         While a defendant's failure to plead an affirmative defense may waive it, DeValk Lincoln Mercury, Inc. v. Ford Motor Co., 811 F.2d 326, 334 (7th Cir. 1987), courts find waiver of a defense “only if the plaintiff is harmed by the defendant's delay in asserting it.” Matthews v. Wisconsin Energy Corp., Inc., 642 F.3d 565, 570 (7th Cir. 2011) (marks omitted). Vacation Rental argues that it was harmed by the delay because, during discovery, it was unaware that these arguments would be raised. VacayStay's current priority argument is different than the priority argument formerly asserted in its counterclaims. But Vacation Rental was sufficiently aware of possible priority disputes and had the opportunity to prepare for this issue during discovery.

         The argument that Vacation Rental's trademark was invalidly assigned, however, was not pled or alluded to in any way until VacayStay's summary judgment response brief. This argument should have been pled as an affirmative defense. But Vacation Rental was able to sufficiently confront the issue in its reply brief (and by submitting an additional declaration) and therefore was not prejudiced by VacayStay's delay in raising it. Although VacayStay's decision to spring its affirmative defense in its response brief was ill-advised, the validity of Vacation Rental's trademark registration will be addressed on its merits. To defeat summary judgment on the protectability of the VAYSTAYS mark based on ...


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