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Weifang Tengyi Jewelry Trading Co. Ltd v. Intuii LLC

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

August 19, 2019

WEIFANG TENGYI JEWELRY TRADING CO. LTD., Plaintiff/Counter-Defendant,
v.
INTUII LLC and JENS SORENSEN, Defendants/Counter-Plaintiffs.

          MEMORANDUM OPINION AND ORDER

          GARY FEINERMAN JUDGE.

         Weifang Tengyi Jewelry Trading Co. Ltd. sued dozens of defendants under the Lanham Act, 15 U.S.C. § 1051 et seq., and the Illinois Uniform Deceptive Trade Practices Act (“IUDTPA”), 815 ILCS § 510/1 et seq., alleging that they sold counterfeit products bearing Weifang's registered ULOVEIDO trademark. Doc. 26. In their amended answer, Intuii LLC and its manager/owner Jens Sorensen (together, “Intuii”), now the sole remaining defendants, raised affirmative defenses and brought a counterclaim for abuse of process. Doc. 161. Weifang moves to strike Intuii's unclean hands, trademark misuse, and “no damages” affirmative defenses under Civil Rule 12(f) and to dismiss its abuse of process counterclaim under Rule 12(b)(6). Docs. 174-175. The motion to strike is granted in part and denied in part, and the motion to dismiss is denied.

         Background

         In resolving Weifang's Rule 12(b)(6) and Rule 12(f) motions, the court assumes the truth of the well-pleaded factual allegations in Intuii's pleadings, though not their legal conclusions, and draws all reasonable inferences in Intuii's favor. See Zahn v. N. Am. Power & Gas, LLC, 815 F.3d 1082, 1087 (7th Cir. 2016); United States v. 416.81 Acres of Land, 514 F.2d 627, 631 (7th Cir. 1975) (Clark, J.). The court must also consider “documents attached to the [pleadings], documents that are critical to the [pleadings] and referred to in [them], and information that is subject to proper judicial notice, ” along with additional facts set forth in Intuii's opposition briefs, so long as those facts “are consistent with the pleadings.” Phillips v. Prudential Ins. Co. of Am., 714 F.3d 1017, 1020 (7th Cir. 2013) (internal quotation marks omitted). The facts are set forth as favorably to Intuii as those materials allow. See Meade v. Moraine Valley Cmty. Coll., 770 F.3d 680, 682 (7th Cir. 2014). In setting forth the facts at this stage, the court does not vouch for their accuracy. See Goldberg v. United States, 881 F.3d 529, 531 (7th Cir. 2018).

         The court's prior opinion, familiarity with which is assumed, describes the background of this case. Doc. 197 (reported at 2019 WL 1200776 (N.D. Ill. Mar. 14, 2019)). In brief, the complaint alleged that Defendants were foreign nationals infringing on Weifang's ULOVEIDO trademark by selling counterfeit imitations of ULOVEIDO products. Doc. 1 at ¶¶ 1-41, pp. 12-14. Shortly after filing the complaint, Weifang moved ex parte for a sealed temporary restraining order (“TRO”), again reiterating that Defendants were foreign nationals selling counterfeit ULOVEIDO products. Docs. 8-13; Doc. 161 at p. 23, ¶¶ 10-11. Weifang attached to its TRO motion a declaration from Teng Guangyao, its founder, owner, and general manager. Doc. 10. Teng averred that he had determined that Defendants' products were counterfeit “through visual inspection of the products as they appeared on the Infringing Webstores, the price at which the Counterfeit Products were offered for sale, other features commonly associated with websites selling counterfeit products, … and because Defendants and the Infringing Websites do not conduct business with the Plaintiff and do not have the right or authority to use the ULOVEIDO mark for any reason.” Id. at ¶ 12. Teng further averred that he undertook or supervised “an investigation which … established” that Defendants sold “Counterfeit Products from foreign countries such as China to consumers in the United States.” Id. at ¶ 11. Based on Weifang's submissions, the court granted its motion and entered its proposed TRO. Docs. 15-16.

         The TRO provided in relevant part:

Defendants are reaching out to do business with Illinois residents by operating one or more commercial, interactive Internet Stores through which Illinois residents can purchase products bearing counterfeit versions of the ULOVEIDO Trademark. …
The Court … finds that issuing this Order without notice pursuant to Rule 65(b)(1) of the Federal Rules of Civil Procedure is appropriate because Plaintiff has presented specific facts in the Declaration of Teng Guangyao and the Declaration of L. Ford Banister, II and accompanying evidence clearly showing that immediate and irreparable injury, loss, or damage will result to the movant before the adverse party can be heard in opposition. Specifically, in the absence of an ex parte Order, Defendants could and likely would … move any assets from accounts in U.S.-based financial institutions, including PayPal accounts, to offshore accounts. … Accordingly, this court orders that:
1. Defendants, their affiliates, officers, agents, servants, employees, attorneys, confederates, and all persons acting for, with, by, through, under or in active concert with them … who receive actual notice of this Order, including, without limitation, any banks, financial institutions, credit card companies and payment processing agencies, such as PayPal, Inc. (“PayPal”) … be temporarily enjoined and restrained from:
b. passing off, inducing, or enabling others to sell or pass off any product as a genuine ULOVEIDO product … that is not Plaintiff's or not produced under the authorization, control or supervision of Plaintiff and approved by Plaintiff for sale under Plaintiff's ULOVEIDO Trademark;
g. using, linking to, transferring, selling, exercising control over, or otherwise owning the Online Marketplace Accounts, the Defendant Domain Names, or any other domain name or online marketplace account that is being used to sell or is the means by which Defendants could continue to sell Counterfeit ULOVEIDO Products; and
h. operating and/or hosting any websites at the Defendant Domain Names and any other domain names registered or operated by Defendants that are involved with the distribution, marketing, advertising, offering for sale, or sale of any product bearing Plaintiff's ULOVEIDO Trademark … that is not a genuine ULOVEIDO product or not authorized by Plaintiff to be sold in connection with Plaintiff's ULOVEIDO Trademark.

Doc. 16 at 1-4 (citations omitted).

         Intuii in fact was not a foreign counterfeiter, but rather a California-based business engaged in what the parties have called “drop shipping.” Doc. 161 at p. 22, ¶¶ 4-5; id. at p. 24, ¶ 16. Drop shipping is a business model under which the drop shipper identifies a genuine good offered for sale on Amazon.com (or another online marketplace); advertises that product on its own store at a slightly higher price; and, only after securing a buyer, purchases the product from Amazon.com and has it shipped directly to the buyer. 2019 WL 1200776, at *2. Intuii had offered for sale, but had not sold, two genuine ULOVEIDO products that it intended to buy from Weifang's official Amazon.com marketplace. Doc. 161 at p. 24, ¶ 16. Intuii alleges that Weifang made little to no effort to determine whether it and the other Defendants were in fact selling counterfeit ULOVEIDO products or in fact were foreign nationals. Id. at p. 23, ¶ 9. Rather, according to Intuii, Weifang's goal in suing Defendants was to quickly acquire a TRO to “lock up [their] assets while giving Weifang time to see what sums it could extort from the[m]” and to “block legitimate commerce and prevent consumers from accessing genuine [ULOVEIDO] goods from alternative marketplaces.” Id. at p. 20, ¶ 56; id. at p. 23, ΒΆ 19. As part of ...


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