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Zaletel v. Prisma Labs, Inc.

United States District Court, D. Delaware

March 6, 2017

MICHAEL ZALETEL, d/b/a I4SOFTWARE, Plaintiff,
v.
PRISMA LABS, INC., Defendant.

          MEMORANDUM

         At Wilmington this 6th day of March, 2017, having reviewed the papers filed in connection with plaintiffs motion for a preliminary injunction, and having heard oral argument on same, the court issues its decision to deny the motion, for the reasons that follow:

         1. Background. Plaintiff Michael Zaletel, d/b/a i4software ("plaintiff'), is a software developer in North Carolina who operates i4software as a sole proprietorship to develop and market apps for use in the smart phone market. (D.I. 71 at ¶¶ 2, 4) Since 2009, plaintiff has developed over 40 apps for use on Apple iPhones and other devices; at least three have been commercial hits, each generating sales of more than $750, 000. (Id. at ¶¶ 6-10; ex. 1) In August 2014, plaintiff launched his "Prizmia" app on the Apple App Store; according to plaintiff, the term "Prizmia" was coined for trademark use. (Id. at ¶¶ 11-14) When the "Prizmia" app was introduced in 2014, it cost consumers $4.99, a price that was later increased to $7.99.

         2. According to plaintiff, he invested 4, 900 hours of programmer time valued at $367, 500 in developing the "Prizmia" app. (Id. at ¶ 19) Plaintiff thereafter engaged in various promotional activities for his app, including marketing and creating a website (www.prizmia.com) (Id. at ¶¶ 20-25; exs. 3-5) Plaintiff asserts that, since August 2014, the "Prizmia" app has been downloaded between 15, 000 and 20, 000 times by customers, "most of whom paid for it." (Id. at ¶ 51)

         3. Plaintiff is the owner of the federally registered trademark Prizmia®, [1] Reg. No. 4, 682, 035, which was registered on the Principal Register by the U.S. Patent and Trademark Office ("PTO") on February 3, 2015. (Id., ex. 2) According to the PTO's records, the mark was first used commercially on June 10, 2014 for "downloadable software for use with mobile electronic devices for the purpose of photo and video capturing and editing; downloadable software in the nature of a mobile application for photo and video capturing and editing, in class 9 (U.S. C. 21, 23, 26, 36 and 38)." (Id.))

         4. Although plaintiff now describes the "Prizmia®" app as "allow[ing] users to modify photographs or videos with filters that alter the photo's style or add an artistic effect" (D.I. 67 at 3; D.I. 71 at ¶ 13; exs. 3-4), there can be no dispute that plaintiff launched the "Prizmia" app as "[a]n innovative, feature-loaded app that seamlessly connects to your GoPro" camera. Indeed, the app was marketed (including on plaintiff's Facebook page and promotional YouTube videos) as "Prizmia for GoPro." (D.I. 71, ex. 5; D.I. 75, exs. 12-15) More specifically, plaintiffs original webpage from August 20, 2014 described his commercial product as "Prizmia for GoPro - The Video Filters, Photo Effects, Slow Motion, Live Preview and 4K Sharing App for your Go Pro Camera." (D.I. 75, ex. 13 at 8/8) The marketing material used at its "worldwide" launch touted the "Prizmia" app as a "filmmaking app for GoPro filmmakers, " with the most "distinguishing feature" being "its full-screen, real-time preview, which can be seen directly on [an] iPhone, iPad or iPad Touch while filming with "[additional features" such as "more than 40 included professional filters and effects, independent color grading controls for contrast, saturation, gamma and brightness, optical slow motion speed adjustment, live filters preview, Direct GoPro media library access and full control over all GoPro settings and features." (D.I. 71, ex. 5) According to the marketing piece, plaintiff claimed that his "latest achievement, Prizmia for GoPro, has been in stealth development for over 18 months with the singular goal of becoming the very best accessory for GoPro cameras." (Id.) Plaintiff adopted the following logo for his app icon in the Apple App Store:

         (IMAGE OMITTED)

         (D.I. 75, ex. 13 at 8/8)

         5. On May 13, 2016, plaintiff pulled the "Prizmia for GoPro" app from the Apple App Store due to a complaint from GoPro, which had sent notice to Apple asserting that the "Prizmia for GoPro" app was infringing GoPro's copyright, trademark and app name. (D.I. 78, ex. 19) Plaintiff rebranded the name of his app from "Prizmia for GoPro" to "Prizmia, " and put a new version of the "Prizmia" app on the Apple App Store on July 25, 2016. (D.I. 78 at ¶ 35; ex. 30) The "Prizmia for GoPro" app was only downloaded 47 times in April 2016, and 23 times in May 2016. (D.I. 75 at ¶ 20) As indicated above, the "Prizmia" app was withdrawn from the Apple App Store from May 13 to July 25, 2016. (D.I. at¶¶ 31-36; exs. 26-30; D.I. 74, exs. 2-3) There is no evidence of record that plaintiffs product has ever been a commercial success.

         6. On or about June 11, 2016, defendant Prisma Labs, Inc. ("defendant") released an app on Apple's App Store and later on the Google Play Store for Android devices. The record indicates that defendant was started about a year before the Prisma app launched for the purpose of using "neural networks and artificial intelligence to turn a user's photographs into works of art by taking the user's photo and performing image processing to creating a new stylized image that resembles a particular style of art." (D.I. 74 at ¶¶ 2-6) Defendant markets its product as software that uses artificial intelligence to "transform[ ] your photos and videos into works of art using the styles of famous artists: Van Gogh, Picasso, Levitan, as well as world famous ornaments and patterns." (Id., ex. 1) Defendant choose the following logo for its app:

         (IMAGE OMITTED)

         (D.I. 72 at 6) According to defendant, the word "prisma" means "prism" in Russian. (Id. at ¶ 9) Defendant chose the domain name "prisma-ai.com" for its web domain because its "technology uses artificial intelligence to generate modified images." (Id. at ¶12; ex. 1) Defendant conducted a trademark search before finalizing the name "Prisma, " which search (according to defendant) did not turn up the "Prizmia®" mark. (Id. at ¶¶ 10-11)

         7. Defendant's app has been very successful. In the first two weeks of its release, it was downloaded about 2 million times. Since then, it has been downloaded over 70 million times across the world and over 8 million times in the United States. (Id. at ¶¶ 17-18) The "Prisma" app has been named "2016 App of the Year" by both Apple and Google Play, and has received substantial praise and publicity from other sources as well. (Id. at ¶¶ 19-21; D.I. 71, exs. 9-13)

         8. On August 31, 2016, after launching a revised "Prizmia®" app, plaintiff sent defendant a cease and desist letter; plaintiff initiated the instant lawsuit on September 29, 2016 in the United States District Court for the Eastern District of Virginia ("EDVA"). Plaintiff filed his motion for a preliminary injunction on November 22, 2016. (D.I. 17) Finding that it lacked personal jurisdiction over defendant, EDVA transferred the case to the District of Delaware on or about December 27, 2016. Plaintiff renewed his motion for a preliminary injunction on January 20, 2016. (D.I. 66) Briefing (along with the submission of various declarations) is complete, and oral argument has been heard.

         9. The parties do not dispute personal jurisdiction, as defendant is a Delaware corporation. The court has subject matter jurisdiction pursuant to 28 U.S.C. § 1338(a). Although plaintiff includes in his complaint allegations of unfair competition, in violation of 15 U.S.C. § ...


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