Trademark Trial and Appeal Board Electronic Filing System. http://estta.uspto.gov ESTTA Tracking number: ESTTA1066254 Filing date: 07/06/2020 IN THE UNITED STATES PATENT AND TRADEMARK OFFICE BEFORE THE TRADEMARK TRIAL AND APPEAL BOARD Proceeding 92068985 Party Defendant Beats Electronics, LLC Correspondence MICHAEL G KELBER Address NEAL GERBER & EISENBERG LLP 2 NORTH LASALLE STREET, SUITE 1700 CHICAGO, IL 60602 UNITED STATES Primary Email: [email protected] Secondary Email(s): [email protected], [email protected], fwest- [email protected] 312-269-8000 Submission Opposition/Response to Motion Filer's Name Andrea S. Fuelleman Filer's email [email protected], [email protected], [email protected], docket- [email protected] Signature /Andrea S. Fuelleman/ Date 07/06/2020 Attachments Beats Response to Motion to Strike.pdf(132606 bytes ) Exhibit A to Response Brief_Answer to Third Amended Petition and AMEN DED Affirmative Defense _ Cancellation 92068985 _ Reg. 4814905 (bw)_REDLINE.pdf(247537 bytes ) ExhibitB_ROA_App_219_Page1-30.pdf(2890435 bytes ) ExhibitB_ROA_App_219_Page31-60.pdf(2133658 bytes ) ExhibitB_ROA_App_219_Page61-85.pdf(1846737 bytes ) ExhibitB_ROA_App_319_Page1-30.pdf(2898156 bytes ) ExhibitB_ROA_App_319_Page-31-60.pdf(1862444 bytes ) ExhibitB_ROA_App_319_Page61-94.pdf(2577029 bytes ) IN THE UNITED STATES PATENT AND TRADEMARK OFFICE BEFORE THE TRADEMARK TRIAL AND APPEAL BOARD BUZZ MEDIA, INC. ) ) Petitioner, ) Cancellation No. 92068985 v. ) ) BEATS ELECTRONICS, LLC , ) ) ) Respondent. ) BEATS’ RESPONSE IN OPPOSITION TO PETITIONER’S MOTION TO STRIKE BEATS’ AFFIRMATIVE DEFENSES On June 16, 2020, Petitioner Buzz Media, Inc. filed a Motion to Strike the unclean hands affirmative defense in Beats Electronics LLC’s (“Beats”) Third Amended Answer to the Petition to Cancel, arguing that the pleaded conduct is unrelated to the issues in this proceeding. Beats’ unclean hands affirmative defense is based on two grounds: (Ground 1) Petitioner’s bad faith use and adoption of a mark that is confusingly similar to Beats’ , , and marks, covered by Reg. Nos. 4814904, 4814905 and 5520056, respectfully; and (Ground 2) Petitioner’s bad faith conduct under the guise of a related company, Soho Beats, LLC (“Soho Beats”), in filing and prosecuting App. Nos. 88/454,219 for and 88/454,319 for BEATS (the “Soho Beats Applications”), which Petitioner knew were identical to Beats’ registered and BEATS marks. As to Ground 1, to streamline the prosecution of this proceeding and without conceding the merits of Petitioner’s motion, Beats hereby requests leave to file an Amended Affirmative Defense that removes the unclean hands defense based on Ground 1 (confusion with Beats’ prior registrations). A copy of Opposer’s proposed Amended Affirmative Defense, showing the proposed amendments in redline, is attached as Exhibit A. As to Beats’ unclean hands affirmative defense based on Ground 2 (bad faith adoption of the Soho Beats Applications), Petitioner’s bad faith and harassing conduct is central to the claims at issue here, because it reveals Petitioner’s bad-faith motivation in litigating this case, and should be considered in evaluating the merits of Petitioner’s Petition. I. LEAVE TO AMEND UNCLEAN HANDS AFFIRMATIVE DEFENSE TO REMOVE GROUND 1 Trademark Rule 2.115 and Rule 15(a) of the Federal Rules of Civil Procedure provide that a party to an inter partes proceeding may amend its pleading by consent of the adverse party or by leave of the Board. Fed. R. Civ. P. 15(a). “Amendments to pleadings should be allowed with great liberality at any stage of the proceeding . unless it is shown that entry of the proposed amendment would violate settled law or be prejudicial to the rights of any opposing parties.” Commodore Elecs. Ltd. v. CBM Kabushiki Kaisha, 26 USPQ2d 1503, 1505 (TTAB 1993). Accordingly, when deciding to grant a leave to amend,he tBoard must consider whether there is any undue prejudice to the petitioner. Commodore , 26 USPQ2d at 1505. The proposed Amended Affirmative Defense will not prejudice Petitioner because the amendments are consistent with the relief sought by Petitioner’s Motion to Strike. In addition, the proposed Amended Affirmative Defense does not change the opesc of discovery, rather, it narrows it. Microsoft Corp. v. Qantel Business Systems Inc., 16 USPQ2d 1732, 1733-34 (TTAB 1990) (proceeding still in the discovery stage and no undue prejudice shown). Therefore, Beats respectfully requests that it be given leave to file the attached Amended Affirmative Defense. II. THE BAD FAITH ACTIONS OF PETITIONER’S RELATED COMPANY GIVE RISE TO AN UNCLEAN AFFIRMATIVE DEFENSE. Petitioner’s argument that the actions by Soho Beats should be stricken as irrelevant are unfounded and premature. Beats has properly asserted an unclean hands affirmative defense by pleading that Petitioner’s related company had engaged in bad faith conduct directed to Beats’ -2- trademark rights, and that such misconduct is pertinent to the issues in this proceeding as it relates to Petitioner’s motivation in litigating its claims against Beats. See 25 TTABVUE at 18 (“on information and belief, Petitioner’s President, Khalid Mian, is a member of an entity called Soho Beats, LLC… with full knowledge of Beats’ rights in and to its BEATS and b logo Marks, Mr. Mian, on behalf of Soho Beats, LLC [signed the Soho Beats Applications that are] identical and confusingly similar to many of Beats’ registrations for its BEATS and b logo Marks…Mr. Mian’s conduct in filing and prosecuting the Soho Beats Applications further establishes Petitioner’s bad faith”). Petitioner’s argument that Soho Beats is not a party to this proceeding and that Beats is “jumping to improper conclusion” by alleging that Soho Beats is a related company is not a basis to strike this affirmative defense. At the motion to strike stage, the Board does not consider the merits of the claims, but only considers whether the pleading is sufficient to state a claim to relief that is plausible on its face. Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007); Libertyville Saddle Shop Inc. v. E. Jeffries & Sons, Ltd., 22 USPQ2d 1594, 1597 (TTAB 1992). Here, Petitioner objects to Beats’ unclean hands defense alleging that Petitioner and Soho Beats are not “related companies,” and argues that Soho Beats’ misconduct is irrelevant to the claims at issue in this cancellation proceeding. These arguments are premature because they go to the merits of the claim. Whether or not a company is a “related company” under the meaning of the Lanham Act is a fact question that requires an analysis of fact-intensiveconsiderations focusing on who controls exercise over the nature and quality of the goods or ervicess under the mark. See TMEP §1201.03; 15 U.S.C. § 1127. The Board has already explained that the determination of related companies is a matter for final hearing, and not one that should be decided in a motion to dismiss. See 21 TTABVUE at 8 (“Respondent’s argument [that Beats Music, LLC and -3- Respondent are related companies] goes to the merits of the claim. When determining a motion to dismiss, all of the plaintiff’s well-pleaded allegations must be accepted as true. Whether Petitioner can prevail is a matter for final hearing or summary judgment, after the parties have had an opportunity to submit evidence.”). Beats has adequately pleaded that Petitioner and Soho Beats are related companies. The fact that Mr. Mian is President and CEO (and perhaps the sole officer) of Petitioner and is also Soho Beats’ managing member and that he is handling trademark matters for both of them, if not establishing, strongly suggests that Mr. Mian controls the operations for both companies, rendering them related. See In re Hand, 231 U.S.P.Q. 487, 488 (TTAB 1986) (where a related company user is a wholly-owned subsidiary of applicant, sufficient control by applicant with use inuring to applicant's benefit may be assumed);In re Wella A.G., 5 USPQ2d 1359, 1361 (TTAB 1987) (finding that applicant owned substantially all of the stock of the registrant and that the applicant, thus controlled the activities of the registrant, including the selection, adoption and use of the trademarks). Accepting Beats’ well-pleaded allegations as true, the Board should find that that Petitioner and Soho Beats are related companies, such that the actions of one is relevant to the actions of the other, rendering this affirmative defense properly pleaded. Beats’ allegations of common ownership can, alone, support a finding that companies are related, particularly where the record shows that one controls the activities and operations of the other, such as the selection, adoption and use of the trademarks. See TMEP §§ 1201.07(b)(ii) and 1201.03(b). The cases cited by Petitioner are easily distinguishable as they each involve decisions on the merits made after the record had been fully developed and briefed, where, as here, the only consideration is whether Beats has properly pleaded a plausible defense, which it has. In particular, Petitioner cites Great Seats, Ltd. v. Great Seats, Inc., 84 USPQ2d 1235, 1243 (TTAB 2007), which resolved a cancellation proceeding on the merits after the case had been -4- fully briefed. This decision was based on the totality of the evidence of record including deposition and trial testimony. In Great Seats, the record was lacking evidence as to whether one company exercised control over the other, and on that basis, the Board determined that they were not related under the meaning of the Lanham Act. Similarly, the Board in In re Raven Marine, Inc., 217 USPQ 68, 69 (TTAB 1983) found that the trial record failed to establish that applicant controls or is controlled by the user of the mark, and that neither one is the subsidiary of the other. Both of these cases illustrate that common ownership is an important factor in determining whether they are related, and that the exercise of control between those two companies needs to be developed on the record to rule on the issue.