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Maui Jim, Inc. v. Smartbuy Guru Enterprises

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

January 23, 2018

MAUI JIM, INC., Plaintiff and Counterclaim Defendant,



         Presently before us is Plaintiff and Counterclaim Defendant Maui Jim, Inc.'s (“Maui Jim”) motion to dismiss Defendants and Counterclaimants SmartBuy Guru Enterprises, Motion Global Ltd., SmartBuyGlasses Societá a Responsabilitá Limitata, and SmartBuyGlasses Optical Limited's (collectively “SmartBuyGlasses”) counterclaims. (Dkt. No. 44.) For the reasons stated below, we grant Maui Jim's motion in part and deny it in part.


         At the motion to dismiss stage, we accept all well-pleaded factual allegations in the counterclaim as true and draw all inferences in the plaintiff's favor. Cole v. Milwaukee Area Tech. Coll. Dist., 634 F.3d 901, 903 (7th Cir. 2011). Maui Jim is a designer, manufacturer, and provider of prescription and non-prescription sunglasses. (Compl. (Dkt. No. 1) ¶ 15.) SmartBuyGlasses is an online retailer of luxury designer eyewear. (Counterclaim (Dkt. No. 20) ¶ 14.)[1] It sells products from more than 180 designer brands, including Maui Jim, on its websites in 30 countries. (Id. ¶¶ 14, 17.) SmartBuyGlasses alleges it “neither purchases nor sells to consumers eyewear that is not new or genuine.” (Id. ¶ 16.) It notifies customers that it is an independent retailer, and is not affiliated with the brands it sells unless it states otherwise. (Id.) It further asserts that all trademarks and brand names shown on its website “are the property of their respective companies which retain all rights.” (Id.)

         SmartBuyGlasses alleges it procures genuine Maui Jim sunglasses primarily through European affiliates and distributors that purchase directly from Maui Jim. (Id. ¶ 18.) It contends that its distribution channel “is not unknown to Maui Jim, ” as the executive leadership at Maui Jim has been aware of SmartBuyGlasses' supply chain since at least 2011. (Id.) SmartBuyGlasses further alleges it partners with at least one authorized distributor of Maui Jim sunglasses for its online sales. (Id.) Maui Jim never objected to its supply chain or otherwise questioned its authorization to procure Maui Jim sunglasses through its partners. (Id. ¶¶ 19-21.)

         Maui Jim brought suit against SmartBuyGlasses on October 17, 2016, asserting claims of trademark counterfeiting and infringement, unfair competition, false advertising, and trademark dilution in violation of the Lanham Act, 15 U.S.C. § 1051, et seq. (Counts I-III); copyright infringement in violation of the Copyright Act of 1976, 17 U.S.C. § 101, et seq. (Count IV); and unfair trade practices in violation of the Illinois Uniform Deceptive Trade Practices Act (“UDTPA”), 815 ILCS 5/10, et seq. (Count V). (Compl. ¶¶ 71-107.) Maui Jim alleges the SmartBuy entities have never been authorized retailers of Maui Jim sunglasses, yet they sold and offered for sale counterfeit sunglasses under Maui Jim's trademarks. (Id. ¶ 2.) Maui Jim contends SmartBuyGlasses “significantly alter[s] Plaintiff's genuine sunglasses by replacing the lenses-an integral part of sunglasses-with Defendants' own, lesser quality prescription lenses and offer[s] the counterfeit prescription sunglasses for sale under Plaintiff's registered marks, without Plaintiff's authorization.” (Id.)

         SmartBuyGlasses answered the complaint on March 3, 2017 and set forth 13 affirmative defenses. (Defs.' Answer, Affirmative Defenses, and Counterclaim (Dkt. No. 20).) SmartBuyGlasses also asserted counterclaims for unfair competition in violation of the UDTPA (Count I) and Illinois Consumer Fraud and Deceptive Practices Act (“CFA”), 815 ILCS § 505/1, et seq. (Count II); trade disparagement (Count III); trademark misuse (Count VII); and in the alternative, unjust enrichment (Count VIII). (Counterclaim ¶¶ 36-56, 71-81.) In addition, SmartBuyGlasses asserted declaratory judgment counterclaims for copyright invalidity (Count IV), non-infringement of copyrights (Count V), and non-infringement of trademarks (Count VI). (Id. ¶¶ 57-70.)

         SmartBuyGlasses does not contest that it sells Maui Jim prescription sunglasses without the genuine Maui Jim prescription lenses. (Id. ¶ 24.) Instead, SmartBuyGlasses asserts that “[e]ach customer purchasing Maui Jim prescription sunglasses from SmartBuyGlasses received 100% genuine Maui Jim frames and the genuine Maui Jim non-prescription lenses that came with the frame, ” and the “customers also received prescription lenses fabricated through SmartBuyGlasses by a premium optical laboratory.” (Id.) SmartBuyGlasses alleges customers are expressly advised regarding the lenses before they make their purchase, and its customers “were never promised prescription lenses through Maui Jim.” (Id. ¶ 25.) Instead, SmartBuyGlasses informed customers about its “prescription lens program, ” which states that the prescription lenses are made by “premium lens producer Essilor as well as our premium quality house brands.” (Id.) SmartBuyGlasses alleges that “[l]ike the non-prescription sunglasses, the Maui Jim prescription sunglasses SmartBuyGlasses sold to its customers were absolutely authentic.” (Id. ¶ 23.)

         SmartBuyGlasses alleges it brings its counterclaims “to expose and rectify Maui Jim's ongoing illegal campaign to stifle competition.” (Counterclaim ¶ 1.) According to SmartBuyGlasses, Maui Jim “seeks to eradicate lawful competition and monopolize control over its worldwide supply chain, allowing it to illegally prop up prices of its eyewear, ” calling the instant litigation “integral to such efforts.” (Id. ¶ 2.) SmartBuyGlasses further alleges Maui Jim's efforts to stifle competition from discount retailers include “the fabrication of baseless intellectual property claims against SmartBuyGlasses coupled with a xenophobic propaganda campaign that disparages SmartBuyGlasses' business by falsely asserting that they are counterfeiters.” (Id. ¶¶ 2, 28-29.) In furtherance of its efforts, SmartBuyGlasses alleges Maui Jim issued a press release dated January 23, 2017, “in which it publicized false allegations that comprise its complaint, adding false and disparaging commentary from its Vice President of Global Marketing.” (Id. ¶ 34.) Specifically, Maui Jim's press release included the following statement from Jay Black, Maui Jim Vice President, Global Marketing:

Companies that utilize these types of disingenuous and misleading sales practices undermine the integrity of the Maui Jim brand and the quality and technology it has come to represent . . . . This lawsuit was filed to protect our brand and the inherent value of its earned reputation, as well as our customers and our authorized retailers. We simply cannot allow our brand to be harmed by the sale of counterfeit or non-genuine Maui Jim products that do not live up to our-and most importantly our customers'-expectations.

(Id. ¶ 34; see also Press Release, Mem. in Support of Mot. to Dismiss, Ex. A (Dkt. No. 44-1) at 2-3.) SmartBuyGlasses alleges that as a result of the press release and Maui Jim's other actions, SmartBuyGlasses has been harmed in the marketplace. (Id. ¶ 35.)


         Federal Rule of Civil Procedure 12(b)(6) governs a motion to dismiss for failure to state a claim upon which relief may be granted. A motion to dismiss pursuant to Rule 12(b)(6) must be made before pleading if a responsive pleading is allowed. Fed.R.Civ.P. 12(b). “After the pleadings are closed-but early enough not to delay trial-a party may move for judgment on the pleadings. Fed.R.Civ.P. 12(c). Failure to state a claim upon which relief can be granted may be raised by motion under Rule 12(c). Fed.R.Civ.P. 12(h)(2)(B). We review a motion for judgment on the pleadings under the same standard as a motion to dismiss pursuant to Rule 12(b)(6). Lodholtz v. York Risk Servs. Grp., Inc., 778 F.3d 635, 639 (7th Cir. 2015); Adams v. City of Indianapolis, 742 F.3d 720, 727-28 (7th Cir. 2014).

         We accept “the allegations in the complaint as true unless they are ‘threadbare recitals of a cause of action's elements, supported by mere conclusory statements.'” Katz-Crank, 843 F.3d 641, 646 (7th Cir. 2016) (quoting Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 1949 (2009)). The pleading must state a claim that is plausible on its face to survive a motion to dismiss. Iqbal, 556 U.S. at 678, 129 S.Ct. at 1949; Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 1974 (2007); St. John v. Cach, LLC, 822 F.3d 388, 389 (7th Cir. 2016); Sarkis' Cafe, Inc. v. Sarks in the Park, LLC, 55 F.Supp.3d 1034, 1038 (N.D. Ill. 2014). “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Iqbal, 556 U.S. at 678, 129 S.Ct. at 1949. The plausibility standard “is not akin to a ‘probability requirement, ' but it asks for more than a sheer possibility that a defendant has acted unlawfully.” Id. at 1949 (quoting Twombly, ...

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