Lokai Holdings LLC v. Twin Tiger USA LLC
306 F. Supp. 3d 629
S.D. Ill.2018Background
- Lokai Holdings, seller of beaded "Lokai" bracelets, sued Twin Tiger for trade dress infringement, unfair competition, and false advertising; Twin Tiger counterclaimed.
- Lokai's bracelets feature contrasting black and white beads claimed to contain Dead Sea mud and Mount Everest water respectively.
- Twin Tiger sold similar "Life Bracelets"; counterclaims allege Lokai failed to disclose that the water evaporates and that Lokai paid celebrities/influencers for endorsements.
- Twin Tiger asserted Lanham Act, California (UCL/FAL), and New York (G.B.L. § 349) false advertising/unfair competition counterclaims based on (1) the "Water Statement" and (2) failure to disclose paid endorsements.
- Twin Tiger also pleaded tortious interference claims based on Lokai’s cease-and-desist letters to Twin Tiger’s retailers, a counterclaim for attorney’s fees under 35 U.S.C. § 285, and an unclean-hands affirmative defense.
- Court granted Lokai’s motions: dismissed the false advertising, unfair competition, tortious interference, and § 285 counterclaims and struck the unclean-hands defense.
Issues
| Issue | Plaintiff's Argument (Lokai) | Defendant's Argument (Twin Tiger) | Held |
|---|---|---|---|
| 1) Lanham Act false advertising — "Water Statement" (literal or implied falsehood) | Statement not actionable; Lokai relied on pleadings standard and context/disclaimer | Water statement is literally false or misleading — suggests beads contain permanent Everest/Dead Sea elements | Dismissed: statement susceptible to multiple reasonable interpretations; no pleaded facts showing consumer confusion or materiality |
| 2) Lanham Act / related claims — failure to disclose paid endorsements | No affirmative duty to disclose under Lanham Act; FTC guidelines do not create private cause of action | Failure to disclose paid endorsements violates FTC guidance and is likely to mislead consumers | Dismissed: nondisclosure alone is not actionable under Lanham Act; FTC rules cannot create a Lanham private claim |
| 3) California UCL/FAL and NY GBL § 349 claims based on same allegations | Website context and explicit disclaimer (water may evaporate) defeat reasonable-consumer deception; no factual basis for consumer deception | FTC guidance and reasonable-consumer deception support claims; harm to Twin Tiger and consumers | Dismissed: reasonable-consumer standard unmet; disclaimer negates water claim; no facts showing consumer deception re: endorsements; competitor-only harm insufficient for § 349 |
| 4) Tortious interference (contracts & prospective relations) | Letters to retailers are lawful assertion of IP rights; claims lack detail | Lokai’s communications induced breaches/ harmed relationships with Rue21 and Five Below | Dismissed: Twin Tiger failed to plead existence and material terms of contracts/relationships with sufficient specificity; negligent-interference claim not recognized |
| 5) Counterclaim for attorney’s fees under 35 U.S.C. § 285 | § 285 is a remedy, not a standalone cause of action; fees must be sought by motion under Rule 54 | Preserved claim by pleading as counterclaim to avoid waiver | Dismissed: § 285 does not create a cause of action; fee request must be made by motion at case end |
| 6) Motion to strike unclean-hands affirmative defense | Unclean-hands defense is inapplicable because Twin Tiger’s alleged misconduct is not the same as Lokai’s asserted misconduct | Defense bars Lokai from equitable relief because Lokai engaged in deceptive practices | Struck: unclean-hands applies only where plaintiff engaged in same type of misconduct directly related to requested equitable relief; Twin Tiger’s allegations are unrelated or different in nature |
Key Cases Cited
- Ashcroft v. Iqbal, 556 U.S. 662 (pleading standard: plausibility required)
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (plausibility threshold for complaints)
- Merck Eprova AG v. Gnosis S.p.A., 760 F.3d 247 (Lanham Act: literal vs. implied falsity and materiality)
- Time Warner Cable, Inc. v. DIRECTV, Inc., 497 F.3d 144 (literal falsity and consumer deception presumptions)
- Schering Corp. v. Pfizer Inc., 189 F.3d 218 (implied falsity concept under Lanham Act)
- Alfred Dunhill Ltd. v. Interstate Cigar Co., Inc., 499 F.2d 232 (Lanham Act does not impose affirmative duty of disclosure)
- Octane Fitness, LLC v. ICON Health & Fitness, Inc., 572 U.S. 545 (§ 285 as fee-shifting/remedial provision)
- City of Pontiac Gen. Emp. Ret. Sys. v. MBIA, Inc., 637 F.3d 169 (accept factual allegations and draw inferences on motions to dismiss)