Atallah Group US Inc. v. GMA Accessories Inc.
1:22-cv-07438
S.D.N.Y.Sep 7, 2023Background
- Atallah Group US Inc. (owner of SSENSE) sued GMA Accessories, Inc., alleging GMA entered into trademark settlement and reinstatement agreements that violate § 1 of the Sherman Act by restraining competition. The court considered a Rule 12(b)(6) motion to dismiss.
- GMA holds multiple federal registrations for the mark CHARLOTTE. The TTAB cancelled two of GMA’s registrations as abandoned (no use 2011–2015).
- GMA settled with Charlotte Olympia Holdings, Ltd. via a “Reinstatement Agreement” that resulted in vacatur of the TTAB abandonment order and restoration of GMA’s registrations.
- Atallah alleges GMA then used the reinstated marks to bring vexatious infringement suits (including one against Atallah), forced some retailers to stop selling products, and caused price increases (e.g., Charlotte Knowles raised prices to cover litigation costs).
- The Complaint also contended that GMA’s ordinary Settlement Agreements with competitors funded further litigation. Plaintiff moved to amend; the motion failed. GMA sought leave to bring a Rule 11 motion and costs/fees.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether § 1 claim is pleaded as to the Reinstatement Agreement | Reinstatement improperly revived abandoned trademarks and enabled bad-faith litigation that harmed competition and raised prices | The agreement serves legitimate trademark protection and is procompetitive; procompetitive justification is for later stages | Claim survives as to the Reinstatement Agreement — complaint plausibly alleges a direct adverse effect on competition |
| Whether § 1 claim is pleaded as to ordinary Settlement Agreements | Settlement payments were funneled to fund additional litigation, thereby restraining trade | Settlement payments are ordinary, procompetitive, and too attenuated to show causal anticompetitive effect | Claim dismissed as to the Settlement Agreements — funding argument is too attenuated and no anticompetitive terms were pleaded |
| Whether GMA may pursue Rule 11 or recover costs/fees | (N/A) | Sought leave to file Rule 11 motion and costs/fees against Atallah | Denied — requests for Rule 11 relief and for costs/fees were denied |
Key Cases Cited
- 1-800 Contacts, Inc. v. Fed. Trade Comm’n, 1 F.4th 102 (2d Cir. 2021) (trademark settlement agreements evaluated under the rule of reason; not every agreement is procompetitive)
- Ohio v. Am. Express Co., 138 S. Ct. 2274 (2018) (sets out the three-step rule-of-reason burden-shifting framework)
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) (pleading must be plausible, not merely conceivable)
- Ashcroft v. Iqbal, 556 U.S. 662 (2009) (court need not accept conclusory legal allegations as true)
- North Am. Soccer League LLC v. U.S. Soccer Fed’n, 883 F.3d 32 (2d Cir. 2018) (ways to plead adverse competitive effects at pleading stage)
- Clorox Co. v. Sterling Winthrop, Inc., 117 F.3d 50 (2d Cir. 1997) (example of anticompetitive terms in trademark settlements)
- Anderson News, L.L.C. v. Am. Media, Inc., 899 F.3d 87 (2d Cir. 2018) (elements required for a § 1 Sherman Act claim)