AMERICAN GRAPHICS INSTITUTE, LLC v. NOBLE DESKTOP NYC, LLC
Civil Action No. 22-cv-11404-ADB
UNITED STATES DISTRICT COURT DISTRICT OF MASSACHUSETTS
July 27, 2023
BURROUGHS, D.J.
BURROUGHS, D.J.
American Graphics Institute, LLC (“AGI“) brings this action against Noble Desktop NYC, LLC (“Noble“) alleging copyright and trademark infringement as well as unfair competition under Massachusetts common law and
I. BACKGROUND
A. Factual Background
The Court draws the following facts from the complaint and the affidavits and documents submitted in support of the motion to dismiss and compel arbitration, see Cullinane v. Uber Techs., Inc., 893 F.3d 53, 55 (1st Cir. 2018) (citation omitted), “construe[s] the record in the light most favorable to the non-moving party[,] and draw[s] all reasonable inferences in its favor,” Air-Con, Inc. v. Daikin Applied Latin Am., LLC, 21 F.4th 168, 175 (1st Cir. 2021).
1. The Parties
AGI is a Massachusetts limited liability company (“LLC“) that provides “professional development and technical training to companies, organizations, and employees on topics relating to graphics, design, and marketing.” [Am. Compl. ¶¶ 1, 12]. AGI hosts training sessions in suburban Boston and Philadelphia, in its own facilities, and across the country, in third-party facilities. [Id. ¶ 17]. Since at least 2002, AGI has also hosted live online classes. [Id.]. AGI‘s website, www.agitraining.com (“AGI Website“), “includes titles and descriptions for courses offered and sold by AGI” including classes on programs like Photoshop and InDesign, and classes on web design. [Id. ¶ 18]. AGI registered copyrights for its website on November 3, 2004, December 10, 2004, and February 4, 2022. [Id. ¶ 19].
AGI incorporated as a Massachusetts LLC in 2009, but a company operating under the trade names “American Graphics Institute” and “AGI,” has been in existence since 1995. [Am. Compl. ¶¶ 20-21].1 Since at least 1999, the company has “sold, and offered for sale, professional development training to companies, organizations, and individuals on topics relating to graphics, design, and marketing” using the trade name “American Graphics Institute” or “AGI.” [Id.]. The company has used the marks “AMERICAN GRAPHICS INSTITUTE” and “AGI,” continuously since October 1999. [Id. ¶ 24].
The company has also used the following stylized mark (“AGI Stylized Mark“), continuously since at least 2013. [Am. Compl. ¶ 26].
AGI‘s trade names and AGI marks “have become distinctly connected with AGI and its professional development training gоods and services.” [Am. Compl. ¶ 28].
Noble is a New York LLC. [Am. Compl. ¶ 13]. Noble operates a “professional development training business” that is “substantially similar” to AGI, in the state of New York. [Id. ¶ 33]. Like the AGI Website, Noble‘s website, www.nobledesktop.com (“Noble Website“), “lists course names and descriptions for professional development training classes,” though unlike those listed on AGI‘s website, these classes are offered both by Noble and third parties, including AGI. [Id.].
2. The April/May 2020 Agreements and the Arbitration Provision
Independent Contractor Agreement. As outlined in the Complaint, on May 1, 2020, Noble entered into an Independent Contractor Agreement (“ICA“) with AGI, in which Noble agreed to perform “some or all” of a number of services for AGI, including “assist[ing] with and consult[ing] on the roll-out of new website features and designs to optimize conversions” and “[a]ssist[ing] with digital ad placement and optimizаtion of online advertising.” [ECF No. 13-17 (“ICA“), Ex. A]; see also [Am. Compl. ¶ 44]. This contract does not have an arbitration provision.
AGI License and Purchase Agreements and the Arbitration Provision. Although not referenced in the Complaint, AGI and Noble executed several other agreements at the same time. First, as relevant here, the parties and their owners executed an agreement through which Noble purchased AGI‘s New York business and Noble‘s owner acquired an interest in AGI‘s remaining
As to the specific scope of the AGI License Agreement, it provides:
[S]ubject to the terms and conditions set out in this Agreement, [AGI] hereby grants to [Noblе] a limited, non-exclusive and non-transferable right by way of license to make, reproduce and use the Licensed Materials solely for preparation by the Licensee of Course Materials for use solely in the Territory during the Term and for the purposes set forth in Section 4.1 below.
[ECF No. 22-3 ¶ 2.1].2
Each of the parties hereto agrees that it will attempt to settle any dispute, claim or controversy arising under, out of, in connection with or relating in any way to this Agreement . . . through non-binding mediation administered by an established, neutral mediation service with experience in joint venture disputes. Any such dispute, claim or controversy that cannot be resolved by the parties through non-binding mediation within 60 days of notification to all the parties of the commencement of the dispute resolution procedures of this Section will then be resolved solely and exclusively by binding arbitration conducted in accordance with the then effective Commercial Arbitration Rules of the American Arbitrаtion Association by a sole arbitrator with experience in joint venture disputes and the provisions of this Section. . . .
[ECF No. 22-4 ¶ 6.3 (emphasis added)].4
The parties agree that Noble terminated the AGI License Agreement on April 26, 2021. [ECF No. 20 at 9; ECF No. 23 at 4].
3. Noble‘s Conduct following the April/May 2020 Agreements
AGI alleges that through its consulting services to AGI, Noble “learn[ed] [about AGI‘s] internal sales, marketing, promotional tactics, technical processes, and strategies,” and gained “aсcess to AGI‘s copyrighted works and branding efforts.” [Am. Compl. ¶ 9]. Noble then “expanded into a competing business” and used “AGI‘s well-known trademarks, copyrighted
4. The 2021 Arbitration
On April 29, 2021, Noble commenced an arbitration against AGI, raising various claims related to AGI‘s alleged breaches of several of the parties’ contracts, including the AGI License Agreement. [ECF No. 20 at 7]; see also Noble NYC, LLC, et al. v. Am. Graphics Inst., LLC, et al., No. 01-21-0003-6637 (AAA 2021) (“2021 Arbitration“). In the 2021 Arbitration, AGI asserted several counterclaims, including that Noblе breached the AGI License Agreement.
B. Procedural Background
After filing an original complaint on August 31, 2022, AGI filed an amended complaint on October 6, 2022, alleging copyright infringement (Count I), [Am. Compl. ¶¶ 64-73], false designation of origin, in violation of the Lanham Act (Count II), [id. ¶¶ 74-80], infringement of common law trademarks and trade name infringement (Counts III and IV), [id. ¶¶ 81-89], unfair competition under state common law (Count V), [id. ¶¶ 90-95], and unfair or deceptive acts, in violation of
This Court‘s review of Noble‘s motion is governed by the Federal Arbitration Act (“FAA“),
Thus, a party that attempts to compel arbitration “must show [1] that a valid agreement to arbitrate exists, [2] that the movant is entitled to invoke the arbitratiоn clause, [3] that the other party is bound by that clause, and [4] that the claim asserted comes within the clause‘s scope.” Hogan v. SPAR Grp., Inc., 914 F.3d 34, 38 (1st Cir. 2019) (quoting Ouadani v. TF Final Mile LLC, 876 F.3d 31, 36 (1st Cir. 2017)).
In “evaluat[ing] motions to compel arbitration under the FAA[,]” “district courts . . . apply the summary judgment standard.” Air-Con, 21 F.4th at 175. Under this standard, “[i]f the non-moving party puts forward materials that create a genuine issue of fact about a dispute‘s arbitrability, the district court ‘shall proceed summarily’ to trial to rеsolve that question.” Id. (citing
Noble asserts that each of the requirements to compel arbitration are met: (1) a valid arbitration agreement exists (2) Noble is entitled to invoke the arbitration clause, (3) AGI is bound by that clause, and (4) AGI‘s asserted claims comе within the clause‘s scope. [ECF No. 20 at 18-24]. Further, Noble argues AGI‘s claims are subject to arbitration because the “underlying facts (which are necessary elements of the claims) have already been arbitrated and decided between the exact same parties, as to the exact same ‘course descriptions’ (copyright) and ‘logos’ (trademark) on the exact same website . . . for the exact same period . . . .” [Id. at 5].
AGI responds that its “claims in this litigation are distinct from the terms in the AGI License Agreement due to; i) timing; ii) location; iii) content; and iv) manner of use [and] the AGI License has no relationship to any claims or defenses,” and therefore do not fall within the scope of the Arbitration Provision. [ECF No. 23 at 16]. AGI also argues that Desktop Noble‘s “mere assertions that the dispute about thе Defendants’ infringement of the AGI Website Copyrights is covered by the” Arbitration Provision are insufficient to trigger arbitration even as to the threshold issue of whether an arbitrator, not the Court, should decide the issue of arbitrability. [Id. at 2]. AGI also responds that the 2021 Arbitration has no bearing on this litigation, because AGI does not raise the same factual allegations or any of the same claims. [Id. at 16-19].
“When a dispute arises, the parties sometimes may disagree not only about the merits of the dispute but also about the threshold arbitrability question—that is, whether their arbitration agreement applies to the particular dispute.” Henry Schein, 139 S. Ct. at 527. In such a case,
[w]hen the parties’ contract delegates the arbitrability question to an arbitrator, a court may not override the contract. In those circumstances, a court possesses no power to decide the arbitrability issue. That is true even if the court thinks that the
argument that the arbitration agreement applies to a particular dispute is wholly groundless.
Henry Schein, 139 S. Ct. at 529.
“Where there is a clear and unmistakable delegation of arbitrability issues, the court‘s proper inquiry ‘before referring a dispute to an arbitrator’ is limited to ‘determin[ing] whether a valid arbitration agreement exists . . . . [I]f a valid agreement exists, and if the agreement delegates the arbitrability issue to an arbitrator, a court may not decide the arbitrability issue.‘” Bosse v. New York Life Ins. Co., 992 F.3d 20, 28 (1st Cir. 2021) (quoting Henry Schein, 139 S. Ct. at 530).
Although AGI argues that Noble‘s termination of the AGI License Agreement means that this dispute, involving conduct following that termination, is not covered by the Arbitration Provision, AGI does not specifically challenge the validity of the Arbitration Provision itself. Specifically, there is no suggestion that thе Arbitration Provision was invalid when formed. Further, to the extent that the termination of the AGI License Agreement could have also terminated the Arbitration Provision, an issue AGI describes as “immaterial,”5 the Court finds that there is no indication that it did.6
any dispute, claim or controversy arising under, out of, in connection with or relating in any way to this Agreement . . . that cannot be resolved by the parties through non-binding mediation . . . will then be resolved solely and exclusively by binding arbitration conducted in accordance with the then effective Commercial Arbitration Rules of the American Arbitration Association.
[ECF No. 22-4 ¶ 6.3 (emphasis added)].
Rule 7(a) of the AAA‘s Commercial Arbitration Rules and Mediation Procedures (“AAA Commercial Rules“), еffective at the time this litigation was filed, states that the “arbitrator shall have the power to rule on his or her own jurisdiction, including any objections with respect to the existence, scope, or validity of the arbitration agreement or to the arbitrability of any claim or counterclaim.” Am. Arb. Ass‘n, Com. Rules and Mediation Procs., Rule 7(a) (2013).7
Although the Supreme Court has not taken a position on whether the incorporation of the AAA Commercial Rules is clear and unmistakable evidence of intent to delegate arbitrability,8
Accordingly, Noble‘s motion to compel arbitration is GRANTED insofar as AGI must now submit its claims to an arbitrator for a decision as to arbitrability.
Noble further requests that if the Court grants its motion to compel arbitration, the Court also dismiss this case. [ECF No. 19].
Section 3 of the FAA requires that where issues brought before a court are arbitrable, the court shall “stay the trial of the action until such arbitration has been had in accordance with the terms of the [arbitration] agreement.” However, a court may dismiss, rather than stay, a case when all of the issues before the court are arbitrable.
Bercovitch v. Baldwin Sch., Inc., 133 F.3d 141, 156 n.21 (1st Cir. 1998) (citations omitted); see also Dialysis Access Ctr., LLC v. RMS Lifeline, Inc., 638 F.3d 367, 372 (1st Cir. 2011) (“Where one side is entitled to arbitration of a claim brought in court, in this circuit a district court can, in its discretion, choose to dismiss the law suit, if all claims asserted in the case are found arbitrable.” (internal quotation omitted)). Because the Court has found only that the threshold issue of arbitrability is arbitrable, the Court declines to exercise its discretion to dismiss the case, and Noble‘s motion to dismiss is therefore DENIED. Instead, this action is STAYED, pending a decision by an arbitrator as to the arbitrability of AGI‘s claims.
IV. CONCLUSION
For the above reasons, Noble‘s motion to compel arbitration, [ECF No. 19], is GRANTED in part and DENIED in part. Should AGI wish to proceed, it must submit its claims to an arbitrator for a decision as to arbitrability. The action is STAYED pending resolution of those proceedings.
July 27, 2023
/s/ Allison D. Burroughs
ALLISON D. BURROUGHS
U.S. DISTRICT JUDGE
Notes
[Id.] In turn, Schedule I defines “Licensed Materials” as “Design Curriculum Materials” and explains that this “means any course [AGI] is offering as a group class, private tutoring, or corporate training now or in the future.” [Id. at 8].all materials used to create the course, including, but not limited to, all text, editorial content, images, graphics, logos, illustrations, photographs, video, audio, and other mаterials, as well as the designs, icons, layout, “look and feel,” and all other graphical elements of the course and all copyrights, trademarks, service marks, tradenames, patents and other intellectual property rights in any of the foregoing.
Course Materials are defined as the “compilation of photocopied extracts of Licensed Materials, designed in advance to be used in support of a Course of Study.” [ECF No. 22-3 at 1].
Finally, Section 4.1 states that Noble may only “make, reproduce or use the Licensed Materials for preparation of Course Materiаls” for “instruction by [Noble‘s] instructors in relation to any Course of Study provided by [Noble] to [Noble‘s] students in [New York]” or “distribution to [Noble‘s] students for teaching, learning, discussion or classroom use in relation to any Course of Study provided by [Noble] in [New York].” [ECF No. 22-3 at 3]. It adds that “[Noble] may allow its instructors and students to retain the Course Materials for subsequent reference.” [Id.].
AGI has raised no such “independent challenge” here and the plain language of the AGI License Agreement supports that the parties did not intend to deviate from these presumptions. The “severability” provision of the Purchase Agreement, also incorporated into the AGI Licensе Agreement, expressly provides that “[t]he invalidity or unenforceability of any provision hereof shall in no way affect the validity or enforceability of any other provision.” [ECF No. 22-3 ¶ 11.1; ECF No. 22-4 ¶ 6.10]. Additionally, there is nothing in the broad Arbitration Provision indicating that the parties intended it to be time limited. Similarly, Rule 7(a) of the current AAA‘s Commercial Rules, effective September 2022, states that the “arbitrator shall have the pоwer to rule on his or her own jurisdiction, including any objections with respect to the existence, scope, or validity of the arbitration agreement or to the arbitrability of any claim or counterclaim, without any need to refer such matters first to a court.” Am. Arb. Ass‘n, Com. Rules and Mediation Procs., Rule 7(a) (2022).