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Arrowpoint Capital Corp. v. Arrowpoint Asset Management, LLC

United States District Court, D. Delaware

May 20, 2014

ARROWPOINT CAPITAL CORP., Plaintiff,
v.
ARROWPOINT ASSET MANAGEMENT, LLC; ARROWPOINT PARTNERS GP, LLC; ARROWPOINT PARTNERS GP2, LLC; ARROWPOINT FUNDAMENTAL OPPORTUNITY FUND, LP; and ARROWPOINT STRUCTURED OPPORTUNITY FUND, LP, Defendants.

MEMORANDUM

GREGORY M. SLEET, District Judge.

I. INTRODUCTION

On February 26, 2010, Arrowpoint Capital Corp. ("the plaintiff') filed a complaint against Arrowpoint Asset Management, LLC ("AAM"), Arrowpoint Partners GP, LLC, Arrowpoint Partners GP2, LLC, Arrowpoint Fundamental Opportunity Fund, LP, and Arrowpoint Structured Opportunity Fund, LP (collectively, "the defendants"). (D.I. 1.) The plaintiff alleges that the defendants' uses of the "Arrowpoint" name and the logo (the "AAM Logo") in connection with investment-related products and services constitute trademark infringement under the common law and Section 32 of the Lanham Act, 15 U.S.C. § 1114, and unfair competition and false advertising under Section 43(a) of the Lanham Act, 15 U.S.C. § 1125(a), and the Delaware Deceptive Trade Practices Act ("DTPA"), 6 Del. C. §§ 2531, et seq. (2009). ( Id. ) Presently before the court is the plaintiffs motion for a preliminary and permanent injunction to enjoin the defendants from using the AAM Logo, the "Arrowpoint" element in their names, and any other name or logo similar to the plaintiff's trademarks[1] in connection with investment related products and services. (D.I. 4.) For the reasons discussed below, the plaintiff fails to establish a fundamental requirement for injunctive relief. Therefore, the court denies the plaintiff's motion.

II. BACKGROUND

The plaintiff is a holding corporation organized under the laws of Delaware. (D.I. 1, ¶¶ 1, 2.) The plaintiff's subsidiaries Arrowood Indemnity Company and Arrowood Surplus Lines Insurance Company (collectively, "Arrowood") "provide insurance and investment-related financial services for customers throughout the United States" under the trade name "Arrowpoint Capital." ( Id., ¶ 2.) In 2007, the plaintiff acquired the United States insurance operations of Royal Sun Alliance and Storage Group plc ("Royal") and began managing the run-off of Royal's United States policies. ( Id., ¶ 3.) As part of that business, the plaintiff asserts that it "manage[s] assets derived from policy premiums." ( Id. ) The plaintiff claims that its "primary source of income is the investment of its reserves in fixed-income securities, "[2] which enables it "to pay its operating costs and meet its financial obligations to policyholders." (D.I. 48 at 1.) The plaintiff also purports to have "provided investment management services to an unaffiliated insurer from March 4, 2007, until October 15, 2009, " and marketed its investment management services to other insurers and pension funds.[3] ( Id. at 1-2; see also D.I. 1, ¶ 3).

The defendants consist of limited liability companies and limited partnership organized under the laws of Delaware that have their principal places of business in Denver, Colorado. ( Id., ¶¶ 4-8.) The defendants' entities were formed between December 2007 and April 2009. ( Id. ) The defendants provide investment-related services including individual investment management accounts and three separate private investment funds, commonly referred tot as "hedge funds." (D.I. 58 at 3.) They manage over $1.5 billion in assets and their customer base consists of "high net worth individuals, companies operating primarily for the benefit of wealthy individuals, family foundations, or trusts." ( Id. at 2.)

In August 2008, the plaintiff obtained federal registrations from the U.S. Patent and Trademark Office (the "PTO") for the word mark ARROWPOINT CAPITAL and design mark "(AC Logo") (collectively, "Arrowpoint Marks") in International Classification ("I.C.") 36 "in connection with insurance-related products and services."[4] (D.I. 1, ¶¶ 16-17.) Both registration were based on use in interstate commerce since March 4, 2007. ( Id. ) In September 2009, after learning of the alleged defendants' infringement, the plaintiff filed an application to register the word mark ARROWPOINT CAPITAL in I.C. 36 for "investment management services."[5] ( Id., 23; D.I. 48 at 2.) AAM opposed that application, and the proceedings before the Trademark Trial and Appeal Board are currently suspended pending the conclusion of the present litigation. (D.I. 58 at 8.)

The defendants first used word marks containing the ARROWPOINT element in December 2007[6] and adopted the AAM Log in January 2009. ( Id. at 3.) The defendants state that they "selected its marks after a clearance procedure that included counsel's review of a full U.S. availability trademark search report." ( Id. ) In June 2008, the defendants filed a statement of trade name with the Colorado Secretary of State, which indicated that they intended to transact business under the trade name "Arrowpoint Partners." (D.I. 5 at 4.) In or about February 2008, the defendants began promoting the recognition of their word mark through websites using domain names that include the ARROWPOINT element.[7] ( Id. )

III. STANDARD OF REVIEW

"The decision to grant or deny... injunctive relief is an act of equitable discretion by the district court." eBay, Inc. v. MercExchange, L.L.C., 547 U.S. 388, 391 (2006). "Preliminary injunctive relief is an extraordinary remedy' and should be granted only in limited circumstances.'" Kos Pharms., Inc. v. Andrx Corp., 369 F.3d 700, 708 (3d Cir. 2004) (quoting AT&T Co. v. Winback & Conserve Program, Inc., 42 F.3d 1421, 1426-27 (3d Cir. 1994)). The moving party seeking a preliminary injunction must establish (1) a likelihood of success on the merits; (2) that it will suffer irreparable harm if the injunction is denied; (3) the balance of equities tips in the moving party's favor; and (4) an injunction is in the public interest. Winter v. NDRC, Inc., 555 U.S. 7, 20 (2008). The issuance of a preliminary injunction is only appropriate when the moving party produces sufficient evidence to establish every element in its favor. See P.C. Yonkers, Inc. v. Celebrations, the Party and Seasonal Superstore, LLC, 428 F.3d 504, 508 (3d Cir. 2005). "If either or both of the fundamental requirements - likelihood of success on the merits and probability of irreparable harm if relief is not granted - are absent, an injunction cannot issue." Capriotti's Sandwich Shop, Inc. v. Taylor Family Holdings, Inc., 857 F.Supp.2d 489, 499 (D. Del. 2012) ( citing McKeesport Hosp. v. Accreditation Council for Graduate Med. Educ., 24 F.3d 519, 523 (3d Cir. 1994)).

IV. DISCUSSION

The plaintiff argues that it has established rights in its Arrowpoint Marks through valid federal registrations and continuous use in interstate commerce dating back to March 2007, and that its registrations for insurance-related services protects it from the defendants' infringement because investment management is a "fundamental aspect of insurance." (D.I. 73 at 2-3.) As such, it alleges the defendants' unauthorized use of the AAM Logo and Arrowpoint element in connection with the same type of services has caused actual confusion and irreparable harm for which there is no adequate remedy at law. (D.I 48 at 10.) Therefore, the plaintiff argues it is entitled to a preliminary injunction based on: (1) its trademark infringement claims under the Section 32 of the Lanham Act, [8] Delaware common law, and the DTPA; and (2) unfair competition and false advertising claims under Section 43(a) of the Lanham Act[9] and the DTPA. (D.I. 5; D.I. 48.) In response, the defendants argue that the plaintiff's trademark registrations for insurance-related services do not give it the right to block the defendants from using their marks for the distinctly different business of investment management services. (D.I. 58 at 9.) In addition, the defendants contend that the plaintiff does not provide investment management services to any bona fide third parties, and only manages investments of insurance premiums and other funds for itself and affiliated insurers. ( Id. at 5-6.)

A. Likelihood of Success on the Merits - Trademark infringement and unfair competition under the Lanham Act

"The law of trademark protects trademark owners in the exclusive use of their marks when use by another would be likely to cause confusion." Freedom Card, Inc. v. J.P. Morgan Chase & Co., 432 F.3d 463, 470 (3d Cir. 2005) (quoting Fisons Horticulture, Inc. v. Vigoro Indus., Inc., 30 F.3d 466, 472 (3d Cir. 1994)). A plaintiff establishes trademark infringement and unfair competition under the Lanham Act by proving that: "(1) the mark is valid and legally protectable; (2) the mark is owned by the plaintiff; and (3) the defendant's use of the mark is likely to create confusion concerning the origin of the goods or services." Id. (quoting A&H Sportswear, Inc. v. Victoria's Secret Stores, Inc., 166 F.3d 197, 202 (3d Cir. 1999)).

1. Validity, protectability, and ownership

Federal registration of a mark is prima facie evidence of validity, protectability, and ownership. See 15 U.S.C. §§ 1057(b). However, the presumption of validity only extends to "the goods or services specified in the certificate, subject to any conditions or limitations stated in the certificate." Id. ; Natural Footwear Ltd. v. Hart, Schaffner & Marx, 760 F.2d 1383, 1396 (3d Cir. 1985) (quoting Mushroom Makers, Inc. v. R.G. Barry Corp., 580 F.2d 44, 48 (2d Cir. 1978) ("[E]ven if a mark is registered, the presumptive right to use it extends only so far as the goods or services noted in the registration certificate."). "If the [registered] mark... has not achieved incontestability, [10] then validity depends on proof of secondary meaning, unless the... contestable mark is inherently distinctive.'" Commerce Nat'l Ins. Servs., Inc. v. Commerce Ins. Agency, Inc., 214 F.3d 432, 438 (3d Cir. 2000) (quoting Ford Motor Co. v. Summit Motor Prods., 930 F.2d 277, 292 (3d Cir. 1991)). "A mark is inherently distinctive if it may be fairly characterized as arbitrary, fanciful, or suggestive." Id. at 438 n.5.

Here, the defendants argue that the plaintiff cannot establish the first two elements for trademark infringement under the Lanham Act because insurance and investment management services are "two distinctly different businesses." (D.I. 58 at 9.) The court disagrees. The plaintiff's Arrowpoint Marks were federally registered on August 12, 2008. (D.I. 1, Ex. A.) Both certificates of registration expressly state that the marks are "for: writing property casualty insurance; underwriting in the fields of property and casualty insurance; insurance claims processing; insurance claims servicing, namely, claims administration and premium rate computing; actuarial services; and insurance consulting services." (D.I. 1, Ex. A.) As such, the plaintiff's certificates of registration specify purely insurance-related services, and are devoid of any indication that the Arrowpoint Marks are used for investment management services. Thus, the plaintiff's Arrowpoint Marks do not carry a presumption of validity in the area of investment management services. Nonetheless, the plaintiff argues, and the defendants do not dispute, that the Arrowpoint Marks are inherently distinctive. ( See D.I. 48 at 13 ("Arrowpoint Marks are arbitrary"); D.I. 58 at 12 ("ARROWPOINT is suggestive").) Therefore, the court finds that the plaintiff owns valid marks, which are legally protectable against the defendants' alleged infringement if a likelihood of confusion exists between the parties' marks. See Interpace Cord v. Lapp, Inc., 721 F.2d 460, 462 (3d Cir. 1983) (finding the use of mark "Lapp" on wire and cable infringed on the plaintiff's rights to that mark as applied to ceramic insulators); Scott Paper Co. v. Scott's Liquid Gold, Inc., 589 F.2d 1255, 1228 (3d Cir. 1978) (finding the use of name "Scott" on household cleaners did not infringe the use of that mark on paper products).

2. Likelihood of confusion

"To prove likelihood of confusion, plaintiffs must show that consumers viewing the mark would probably assume the product or service it represents is associated with the source of a different product or service identified by a similar mark."" Checkpoint Sys. v. Check Point Software Tech., 269 F.3d 270, 279 (3d Cir. 2001) (quoting Scott Paper, 589 F.2d at 1229). The Third Circuit has adopted a ten-factor test, known as the "Lapp test, " to determine likelihood of ...


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