Breathe Ecig Corp v Breathe LLC

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UNITED STATES DISTRICT COURT EASTERN DISTRICT OF TENNESSEE

KNOXVILLE DIVISION BREATHE ECIGS CORP, ) )

Plaintiff, ) )

v. ) Civil Action No. 3:15-cv-00345 )

BREATHE LLC, ) Hon. Thomas A. Varlan )

Defendant. ) )

PLAINTIFFS SUPPLEMENTAL BRIEF IN OPPOSITION TO DEFENDANTS MOTION TO SET ASIDE ENTRY OF DEFAULT AND FOR A

30-DAY EXTENSION OF TIME TO FILE A RESPONSIVE PLEADING

Pursuant to this Courts Local Rule 7.1(d), Plaintiff Breathe eCigs Corp (Plaintiff)

hereby submits this Supplemental Brief in Opposition to Defendants Motion to Set Aside Entry

of Default and for a 30-Day Extension of Time to File a Responsive Pleading [ECF No. 14]

(hereinafter Defendants Motion) filed by Defendant Breathe LLC (Defendant). On

November 6, 2015, after Plaintiff submitted its Response Brief [ECF No. 17] in opposition to

Defendants Motion, but before Defendant submitted its Reply Brief [ECF No. 20], a hearing

was conducted in the United States District Court for the Southern District of New York in the

later-filed case, Breathe LLC v. Metro Tablet, Inc., Breathe eCigs Corp., and Joshua Kimmel,

Civil Action No. 1:15-cv-06403-AT (S.D.N.Y) (hereinafter the New York Action). The

purpose of the November 6, 2015 hearing was to rule on Breathe LLCs motion for a preliminary

injunction against Breathe eCigs Corp. pending before that Court. A copy of the transcript of the

November 6, 2015 hearing in the New York Action is attached hereto as Exhibit A.

As set forth in the attached transcript, the Court in the New York Action determined that:

Case 3:15-cv-00345-TAV-HBG Document 21 Filed 11/17/15 Page 1 of 5 PageID #: 224

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Defendants [Breathe eCigs Corp., et al] have submitted declarations from defendant Joshua Kimmel and documentary evidence demonstrating that Kimmel began distributing electronic cigarettes with Breathe mark to consumers in California, Florida, Nevada, New York, and Tennessee prior to September 27, 2013. Defendants evidence also suggests that Kimmel began advertising the branded electronic cigarettes via social media posts and a website he created prior to September 27, 2013.

See Exhibit A, Breathe LLC v. Metro Tablet, Inc., Breathe eCigs Corp., and Joshua Kimmel,

Civil Action No. 1:15-cv-06403-AT (S.D.N.Y) Hearing Tr., Nov. 6, 2015 at 22:13-20. The

Court in the New York Action went on to find that:

[Breathe eCigs Corp., et al] have adduced uncontroverted evidence showing that Kimmel began distributing, promoting, and advertising electronic cigarettes with the Breathe mark prior to September 27. Under the analogous use doctrine, this use may provide a basis for defendants to seek cancellation of plaintiffs trademark registration even in the absence of actual sales, thereby defeating plaintiffs trademark infringement claim.

Id. at 23:20-24:2 (emphasis added). It is noted that, under 15 U.S.C. 1127, [A] mark shall be

deemed to be in use in commerce (1) on goods when (A) it is placed in any manner on the

goods or their containers [] and (B) the goods are sold or transported in commerce. 15

U.S.C. 1127 (emphasis added).

Notwithstanding the above quoted findings of the Court in the New York Action on

November 6, 2015, on November 12, 2015, Defendant filed its Reply Brief [ECF No. 20] in this

Court, in which it alleged, for the first time in the briefing on the present motion, that Defendant

has a meritorious defense in that it was the first to use its BREATHE mark in commerce. This

allegation stands in direct contradiction to the findings of the Court in the New York Action

during the November 6, 2015 hearing. Furthermore, Defendant offers no evidence in its briefing

to support its position that it began using the BREATHE mark prior to Plaintiff.

The Court in the New York Action noted that, while the evidence submitted in opposition

to Breathe LLCs motion for preliminary injunction supported a finding that Breathe eCigs Corp.


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began using its BREATHE mark prior to Breathe LLC, such evidence did not include

documentation of actual sales by Breathe eCigs Corp. and its predecessors in interest. It is

respectfully submitted that such documentation is not necessary to prove use in commerce

under the Trademark Act. 15 U.S.C. 1127; see also, e.g., Chere Amie, Inc. v. Windstar

Apparel, Corp., 2002 U.S. Dist. LEXIS 4950, *11 (S.D.N.Y. 2002) ([A]ny evidence that a sale

or shipment was made for some legitimate marketing or other commercially reasonable reason

will support a finding that such activities constituted sufficient trademark use under the [use in

commerce] definition.) citing McCarthy on Trademarks and Unfair Competition 19:111 (4th

ed. 1998); Allard Enterprises, Inc. v. Advanced Programming Resources, 146 F.3d 350, 358 (6th

Cir. 1998) (As long as there is a genuine use of the mark in commerce, however, ownership

may be established even if the first uses are not extensive and do not result in deep market

penetration or widespread recognition.) However, to the extent documentation of actual sales

would be helpful in the present case to substantiate the New York Courts findings on November

6, 2015 and to further rebut Defendants erroneous allegation in its Reply Brief that it, and not

Plaintiff, is the senior user of the BREATHE mark, Plaintiff respectfully submits the attached

Supplemental Declaration of Joshua Kimmel (the Supplemental Declaration), attached hereto

as Exhibit B.

The attached Supplemental Declaration and its supporting exhibits provide

documentation that Plaintiff, and/or its predecessors in interest, were engaged in actual sales of

its BREATHE branded products at least as early as January 31, 20141. This date is clearly prior

1 It is important to note that Plaintiff does not allege that January 31, 2014 was the earliest date that Plaintiff engaged in actual sales of its BREATHE branded products. Rather, it is, and always has been, Plaintiffs position that Plaintiffs predecessor in interest, Mr. Joshua Kimmel, began selling BREATHE branded products at least as early as May/June of 2013. However, in the very short time since Defendant filed its Reply Brief, Plaintiff was able to locate the documentation attached to the Supplemental Declaration showing actual sales at least as early as January 31, 2014.


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to April 22, 2014, the date alleged in the 887 Registration and relied upon by Defendant as the

date Defendant first began using its BREATHE INTELLIGENT CIGARETTE & Design mark

in commerce. In view of this information, it is evident that Defendants statement in its Reply

Brief that Defendant has a meritorious defense in that it was the first to use its BREATHE mark

in commerce is without merit.

In light of the record and the newly-developed facts presented above, it is respectfully

submitted that Defendant has not shown that it has a meritorious defense to the allegations of

the Complaint in this action. Accordingly, Defendant has not shown good cause for setting

aside the entry of Default in this case, nor has it shown good cause for granting its request for a

30-day extension of time. Accordingly, Defendants Motion should be denied, and Plaintiffs

Motion for Entry of a Default Judgment should be granted. Such action is respectfully requested

by this Court.

Respectfully submitted, BREATHE ECIGS CORP

S/JACOB G. HORTON Robert E. Pitts (Tenn. BOPR# 01610) [email protected] Andrew C. Lake (Tenn. BOPR# 29952) [email protected] Jacob G. Horton (Tenn. BOPR# 25467) [email protected] Raymond E. Stephens (Tenn. BOPR# 15037) [email protected] PITTS & LAKE, P.C. P.O. Box 51295 Knoxville, Tennessee 37950-1295 Phone: (865) 584-0105 Fax: (865) 584-0104 Attorneys for Plaintiff


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CERTIFICATE OF SERVICE

I hereby certify that a true and exact copy of the foregoing PLAINTIFFS SUPPLEMENTAL BRIEF IN OPPOSITION TO DEFENDANTS MOTION TO SET ASIDE ENTRY OF DEFAULT AND FOR A 30-DAY EXTENSION OF TIME TO FILE A RESPONSIVE PLEADING, was filed electronically through the Courts ECF. Notice of this filing will be sent by operation of the Courts electronic filing system to all parties indicated on the electronic filing receipt. Parties may access this filing through the Court's electronic filing system.

This 17th day of November, 2015.

S/JACOB G. HORTON Robert E. Pitts (Tenn. BOPR# 01610) [email protected] Andrew C. Lake (Tenn. BOPR# 29952) [email protected] Jacob G. Horton (Tenn. BOPR# 25467) [email protected] Raymond E. Stephens (Tenn. BOPR# 15037) [email protected] PITTS & LAKE, P.C. P.O. Box 51295 Knoxville, Tennessee 37950-1295 Phone: (865) 584-0105 Fax: (865) 584-0104 Attorneys for Plaintiff


Exhibit A PLAINTIFFS SUPPLEMENTAL BRIEF IN OPPOSITION TO

DEFENDANTS MOTION TO SET ASIDE ENTRY OF DEFAULT AND FOR A 30-DAY EXTENSION OF TIME TO FILE A

RESPONSIVE PLEADING

Case 3:15-cv-00345-TAV-HBG Document 21-1 Filed 11/17/15 Page 1 of 28 PageID #: 229

1 Fb6WbreC 1 UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK 2 ------------------------------x 3 BREATHE LLC, 4 Plaintiff, 5 v. 15 Civ. 6403 (AT) 6 METRO TABLET, INC., BREATHE 7 ECIGS CORP., and JOSHUA KIMMEL, 8 9 Defendants. 10 ------------------------------x New York, N.Y. 11 November 6, 2015 10:00 a.m. 12 Before: 13 HON. ANALISA TORRES, 14 District Judge 15 16 APPEARANCES 17 BROWN & ROSEN LLC Attorneys for Plaintiff 18 BY: CHRISTOPHER L. BROWN 19 WHITE & CASE LLP Attorneys for Defendants 20 BY: JAMES S. TRAINOR, Jr. 21 22 23 24 25 SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300


2 Fb6WbreC 1 THE COURT: Good morning. 2 MR. BROWN: Good morning, your Honor. Christopher 3 Brown, on behalf of plaintiff. 4 MR. TRAINOR: Good morning, your Honor. James 5 Trainor, White & Case. I'm here on behalf of, I represent the 6 defendants on this motion. I think I'm representing the 7 defendant Mr. Joshua Kimmel, is my client with me today, and 8 the defendant Breathe eCigs Corp. 9 THE COURT: You may be seated. 10 MR. BROWN: And if I may, your Honor, Bill Huff of 11 Breathe LLC is here on behalf of plaintiff. 12 THE COURT: Do the parties wish to supplement their 13 written submissions? 14 MR. TRAINOR: Your Honor, for the defendants, I don't 15 believe that's necessary with respect to the PI per se. 16 However, if we were afforded the opportunity, I would like to 17 at least, I don't know if I need briefing, because the federal 18 rules don't suggest that this is done on motion; I think this 19 is done at the initiative of your Honor. But under Rule 20 65(a)(2) and also the Second Circuit's precedent in Reese 21 Publishing, there are grounds here. I believe that you can and 22 should in this case consolidate and accelerate this hearing 23 with a trial on the merits, given the limited dispute that is 24 here and as I believe will be the only dispute at trial. If we 25 could brief that for you supplementally, that's fine. I don't SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300


3 Fb6WbreC 1 expect, it wasn't raised in the briefing because, as I said, 2 the rules don't provide that you make it by motion. Of course 3 we are opposing the motion here, but that's all I would suggest 4 that we would need to provide in the way of supplemental 5 briefing, if your Honor requests it. 6 THE COURT: Anything from you? 7 MR. BROWN: Your Honor, I would oppose that. That's 8 not what we were here to argue, the merits of the entire case. 9 I think that the limited issue here is clear, as your Honor has 10 indicated in your October 19 order. The issue is extremely 11 small. However, there would be additional documents that I 12 would need to produce if we are actually going to have a trial, 13 if necessary. If this Court was for some reason to come to the 14 conclusion that my client's mark need not be registered, then 15 we would get into a common law dispute and those documents are 16 not something that are here before this Court, so I would 17 oppose an acceleration at this particular moment of the trial. 18 MR. TRAINOR: Your Honor, if I may. The complaint is 19 very clear within its four corners that the asserted 20 intellectual property here is a federally registered trademark. 21 The complaint doesn't plead anything with regard to common law 22 trademark rights. We have had correspondence pursuant to your 23 Honor's rules about deficiencies in the complaint. Plaintiff 24 has elected not to amend the complaint. We have another motion 25 set on the calendar for that. But our position would be, your SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300


4 Fb6WbreC 1 Honor, any trial would be a trial on what has been pled in this 2 case, which is the infringement of a federally registered 3 trademark. That would basically be a new cause of action. 4 THE COURT: So you're not making the motion that I 5 convert this proceeding right now into an accelerated trial, 6 are you? 7 MR. TRAINOR: Your Honor, what the rule provides is 8 that before or after the beginning of the hearing on a motion 9 for preliminary injunction, the court may advance the trial on 10 the merits and consolidate it with the hearing. Even when 11 consolidation is not ordered, evidence that is received on the 12 motion and that would be admissible at trial becomes part of 13 the trial record and need not be repeated at trial. And in the 14 Second Circuit's decision in Reese Publishing, we had almost 15 exactly the same posture here. You have a plaintiff who filed 16 a complaint, moved for a preliminary injunction, and what the 17 judge ordered in that case was not only a denial of the 18 preliminary injunction but said, I'm going to treat this as a 19 trial because there was only really one issue in that case, as 20 there is here, which is whether our client is the senior user 21 and had prior use prior to the September registration date. 22 We're not going to contest the issue of confusion. I 23 think both parties are alleging that their own marks are 24 confusing, so really that would be a stipulated matter. The 25 only issue here is, is the evidence that we've already SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300


5 Fb6WbreC 1 presented with respect to the preliminary injunction 2 demonstrating, I submit, that we are clearly the prior user, 3 which in this circumstance, because this mark does not enjoy 4 incontestable status having only been filed two years ago, 5 means that that mark is invalid, and it's more or less a 6 question of law. The questions of fact are in our evidence 7 from the declaration. My client's here today. He could 8 testify. He could cross-examine. We could do that another 9 date, but I just wanted to note for the record that we would 10 appreciate the Court's consideration treatment under this rule, 11 because in this circumstance, even though he's the movant, this 12 is really all the evidence this case is going to be about, at 13 least as it's been pled. 14 THE COURT: You're educating me on the rule and the 15 case law and I haven't had the benefit of reviewing the rule or 16 the case law, and I have the sense that neither has your 17 adversary. I will permit you to make the motion after my 18 ruling. 19 MR. TRAINOR: OK. But of course, on the pure issue of 20 the preliminary injunction, we don't see any need for further 21 briefing or any supplemental briefing. 22 THE COURT: Very well. 23 MR. BROWN: If I may, your Honor, in light of the fact 24 that I have received two particular assignments that didn't 25 exist before September 2 of 2015, I took the liberty of going SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300


6 Fb6WbreC 1 back and pulling additional SEC filings that have been made by 2 the defendants in order to ascertain if this document had ever 3 been identified. So I would want to provide a November 2014 4 Breathe eCigs filing indicating its acquisitions that occurred 5 between June and December of 2014 as its predecessor company, 6 DNA Precious Metals, which in no way identifies this assignment 7 associated with Breathe LLC's assignment to its eCigs Nevada, 8 not eCigs Tennessee. This is important to us because in its 9 website and in its previous SEC filings, eCigs contends that 10 Breathe LLC was sold as of December 2014. 11 THE COURT: Have you shared these documents with your 12 adversary? 13 MR. BROWN: I have not. 14 THE COURT: OK. That's what we're going to do now. 15 You have copies for him, I assume. 16 MR. BROWN: I do. 17 THE COURT: And you're going to review it, and when 18 you're ready I'll return. 19 MR. TRAINOR: Thank you, your Honor. 20 (Recess) 21 THE COURT: You may be seated. I have in front of me 22 two assignment documents. They're both dated September 2, 23 2015. There is an assignment of a trademark from Joshua Kimmel 24 to Breathe Limited Liability Company. There is also an 25 assignment from Breathe Limited Liability Company to Breathe SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300


7 Fb6WbreC 1 eCigs Corp. What's the issue? 2 MR. BROWN: The issue here, your Honor, is when you 3 look at the bill of sale and the various SEC documents that 4 have been filed by the defendants, Breathe LLC entered into a 5 bill of sale with eCigs Corp. of Tennessee. Breathe eCigs of 6 Tennessee was created in December of 2014. The problem here, 7 your Honor, is Breathe LLC was dissolved one day after this 8 assignment that was created two months ago, so August 9 Breathe 9 LLC was dissolved. 10 THE COURT: Are you saying the company was dissolved 11 before the assignment? 12 MR. BROWN: The company was dissolved one day after 13 the assignment, but the problem, your Honor, is the bill of 14 sale went to a company that hadn't existed. That's the 15 problem. Breathe eCigs of Tennessee was created on December 16 31, 2014. 17 THE COURT: I'm lost. Let's do this chronologically. 18 MR. BROWN: OK. 19 THE COURT: What happens first? 20 MR. BROWN: OK. Breathe LLC was created in Tennessee 21 in September 2013. Breathe LLC is dissolved August 9, 2014. 22 In various SEC filings between 2014 and 2015, the defendants 23 state that Breathe sold 100 percent of its assets to eCigs 24 Corp., which was formed December 31, 2014. That's in various 25 filings, and you can even see my Exhibit D to my affidavit. SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300


8 Fb6WbreC 1 That company was formed December 2014. The problem that they 2 have is they have just realized that since Breathe LLC was 3 dissolved on August 9, they had to put this trademark, this 4 common law trademark, somewhere. They couldn't put it into the 5 company they claim it was actually sold to on August 8, 2014, 6 because the company didn't exist until December 2014. So what 7 they did instead was, Well, we have eCigs, which was actually 8 called DNA Metals as of August 8, 2014, and they created two 9 months ago, this assignment, to do it direct from Breathe LLC 10 the day before it was dissolved. 11 THE COURT: What's the DNA company? 12 MR. BROWN: DNA is the mining company, which was 13 previous name of Breathe eCigs Nevada. 14 THE COURT: Is Breathe eCigs Nevada different from the 15 corporation formed in December 2014? 16 MR. BROWN: Yes. 17 THE COURT: You're confusing me. This is just too 18 difficult to follow. 19 MR. BROWN: I apologize, your Honor. Breathe eCigs 20 Nevada has been through three different name changes and was 21 created in 2006. 22 THE COURT: I'm going to ask defense counsel, maybe 23 you can explain the chronology of events. 24 MR. TRAINOR: The chronology of events, first of all, 25 I don't think any of this is really relevant. We don't object SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300


9 Fb6WbreC 1 to any of these documents. They don't change anything about 2 what we've said consistently. If I could try to simplify it 3 for you, your Honor. 4 THE COURT: Yes. 5 MR. TRAINOR: In terms of the trademark that we own 6 here, it was originally used by Mr. Kimmel as a sole 7 proprietor. It was then used by a Tennessee LLC, does not make 8 it SEC filings, an LLC corporation and then they moved to the 9 Nevada corporation. The Tennessee corporation is a red 10 herring. If he didn't name the Tennessee corporation as a 11 defendant, it would almost have nothing to do with this case. 12 The Tennessee corporation is an affiliate. It's a child 13 company of the parent Nevada company, and really what matters 14 here and what's being alleged is prior use. Even if this meant 15 anything, and I'm with you, your Honor, I can't follow it, it 16 would have to do with ownership, not the question of use. And 17 even if there's some discrepancy with this Tennessee 18 corporation as an affiliate of the Nevada corporation holding 19 the intellectual property, where is the issue. 20 These assignments, by the way, which I think your 21 Honor was correct to go right to, they're nunc pro tunc 22 assignments. These are very common with respect to trademarks 23 and IP assets, and this establishes the chain from Mr. Kimmel 24 as the sole proprietor, as he originally operated in early 25 2013, into the LLC corporation that was formed. There was a SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300


10 Fb6WbreC 1 Tennessee corporation that was formed, but the important thing 2 is that the assets of the LLC were merged and acquired by the 3 Nevada corporation. And I agree that it's confusing. 4 THE COURT: The date in question is December 27, 2013. 5 That's the key date here. 6 MR. TRAINOR: Absolutely, your Honor. 7 THE COURT: And Breathe LLC was started in September 8 of 2013 and was using the trademark at that time? 9 MR. TRAINOR: That is correct, your Honor. That is 10 correct. 11 THE COURT: OK. So what's the issue? 12 MR. BROWN: The issue here, your Honor, is when the 13 assets were sold of Breathe LLC Tennessee, they were sold to 14 eCigs Tennessee. But the problem, your Honor, is that eCigs 15 Tennessee was not created until December of 2014. Since 16 Breathe was dissolved in August of 2014, the bill of sale 17 clearly is not correct, as they have told us in all of the SEC 18 filings that eCigs purchased all of the assets of Breathe LLC 19 in December or January of 2015. The issue then becomes they 20 knew they had a problem because the company didn't exist. So 21 what they ended up doing was saying, OK, Breathe LLC, the day 22 before you are dissolved, we will now go back, predate it, and 23 assign this mark to the Nevada company, totally bypassing the 24 transaction that they have told everyone in the world that 25 transpired, because if they do that, that means from August to SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300


11 Fb6WbreC 1 December, well, they could not have in fact sold that asset, 2 because the company didn't exist to purchase that asset, which 3 would mean that it stayed in a dissolved entity and is hereby 4 abandoned. 5 MR. TRAINOR: Your Honor. 6 THE COURT: One moment, please. It's my understanding 7 that the defendants claim that they were using the Breathe mark 8 prior to September 27, 2013. What does it matter which of 9 these companies controlled by the defendants used the mark? 10 MR. BROWN: It's different from the fact that we 11 believe every bit of alleged interstate commerce use is not in 12 fact interstate commerce use in the first place. But when we 13 just look at the chain of title, there's a clear defect in this 14 assignment. 15 THE COURT: If there's a defect in this assignment, do 16 you have standing to raise that as a problem? 17 MR. BROWN: We would have standing to raise it because 18 if the mark is hereby abandoned, because when they tried to 19 transfer it, the transfer is in fact fraudulent in many 20 respects, because you can't transfer something which you have 21 told the SEC that you sold to a different company. 22 THE COURT: Isn't the question whether or not a 23 corporation controlled by Mr. Kimmel was using the mark? Isn't 24 that the issue? 25 MR. BROWN: To a certain degree, yes, but when the SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300


12 Fb6WbreC 1 company that Mr. Kimmel controlled that had the mark was hereby 2 dissolved, then that would cease any use, because it would be 3 abandoned at that point. It is our contention that on August 4 14 -- 5 THE COURT: You're saying that there's some sort of a 6 gap in the chain of title. 7 MR. BROWN: There's a big gap in the chain of title, a 8 big gap, and that's the problem, because it is very clear from 9 the SEC filings that it was sold 100 percent from Breathe LLC 10 to eCigs, a company created in December of 2014. Well, if it's 11 dissolved in August, you can't sell it in December. The 12 company didn't exist to buy it. 13 THE COURT: Can you explain the chain of title, 14 please. 15 MR. TRAINOR: I think I can, your Honor, but I'm not 16 sure where the dissolution comes from? I mean, how do you 17 acquire a company that doesn't exist. 18 MR. BROWN: Exactly. 19 MR. TRAINOR: Quite honestly, I'm not sure that I 20 understand that at all. I think you hit it right on the head, 21 which is the issue on this motion is whether we have presented 22 enough evidence to defeat a clear showing of a likelihood of 23 success on the merits, and we don't even seem to be disputing 24 prior use anymore. Today, and this just seems like it's the 25 next thing, today it's, Well, there's a gap in title, SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300


13 Fb6WbreC 1 continuous use. I'm not sure I follow that. We have the sole 2 proprietorship. It's converted to LLC. I think we have put 3 this in almost every paper we filed with you, your Honor. I 4 think I have it, for example, in our opposition brief here: 5 Factual background, September 17, Mr. Kimmel, who had until 6 that point but since at least the spring of that year, had been 7 operating as sole proprietor. 8 THE COURT: September 17 of? 9 MR. TRAINOR: 2013. 10 He formed the Tennessee LLC. He later forms this 11 Tennessee corporation, but assets that are acquired by the 12 Nevada company are from the LLC, which you wouldn't find in any 13 SEC filing, acquired all of the assets of the LLC. Later on, 14 it is a reverse merger that happened. It's a Nevada 15 corporation that used to be in some other business, spun them 16 off, found this opportunity, hits Breathe, they acquire those 17 existing assets. You hit it right on the head. What matters 18 here is there's a continuous use by Mr. Kimmel or one of his 19 companies, whether it's a limited liability company or 20 corporation, to this day. 21 That is exactly the issue, and this is the first time 22 we've heard this. But again, even if this demonstrated some 23 deficiency in title, you're absolutely correct, what is the 24 standing to challenge that. The issue here is use, has the use 25 been continuous. Correct? I mean, and in any event, if this SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300


14 Fb6WbreC 1 is the only evidence that he has, does that change at a 2 preliminary injunction that extreme relief is not in order? 3 There doesn't seem to be a dispute that there was prior use 4 extending back to at least April of 2013. And it's more of the 5 same, your Honor. There's just these cut and pastes in the 6 moving brief and we put in a declaration. The Baron Philippe 7 case that he cited says a declaration right there is enough. 8 If the declaration says prior use, then we provide the evidence 9 and then the question is there are no sales; there's only 10 advertising. We provide the law that says that doesn't matter 11 with respect to products, and now here we are and we're dealing 12 with this. 13 Every day we're hearing a different story. My client 14 is being crippled by all of this. The minute that this dispute 15 started, the market cap fell by thousands of percents. 16 Manufacturers, inventories being held, investors are pulling 17 out, and there's no basis for it. I mean, do we not trust the 18 13 exhibits that we have? I'm sorry. We don't. Then the 19 issue is credibility, and that's one for trial. Right? 20 THE COURT: I've heard enough from the defense. You 21 have your last shot. 22 MR. BROWN: Your Honor, when you look at the actual 23 exhibits, I think it's very clear that if they claim that 24 there's at $20 million at stake, they don't provide any 25 evidence of sale. Everything in this affidavit provided by SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300


15 Fb6WbreC 1 Mr. Kimmel does not support any interstate commerce. It 2 supports we are preparing a business. Even when you look at 3 Exhibit 12, it's clear evidence that we would like to help you 4 set up your website. They didn't even have a working website 5 as of September 2013. That's Exhibit 12 to Mr. Kimmel's 6 affidavit. When you look at their trademark application, as of 7 March 2015, they still didn't have a website that was able to 8 seel goods. That's one of the reasons their mark was, in fact, 9 denied. 10 When you look at all of the evidence, the way bill is 11 suspect. I actually contacted Mr. Trainor and I said, This way 12 bill doesn't exist, can you show me proof that this purchase 13 actually occurred, he declined. If they wanted to show that 14 any of these purchases from China for any of this inventory was 15 real, they could have supported that in any way. If they want 16 to claim $20 million is on the table, show me a purchase, show 17 me any of it. They cannot, they will not. 18 When you look at their SEC filings, everything is 19 forward looking: We're going to enter the market; we have this 20 innovative venture, nothing that suggests sales. When you look 21 at even their own evidence, and now we have an assignment 22 saying they were actually doing business in 2014, they don't 23 show any evidence in the SEC filings, and it's very clear they 24 have no money spent on purchase of goods, no revenue generated. 25 This is all in the SEC filings. You cannot show prior and SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300


16 Fb6WbreC 1 continuous use in any territory when you have nothing that 2 shows that the public is in any way identifying your product. 3 They don't show any sales. You must have some type of 4 commercial transaction. Use in commerce must be sufficiently 5 public to be identified and to distinguish the marks. That is 6 the law. That is as clear as a bell. 7 The question then becomes this internal use, that is 8 not in any way interstate commerce. That's preparation for 9 commerce. Creating your website is preparation for commerce. 10 Sending gift boxes to individuals, that's preparation for 11 commerce. None of these uses in any way suggest that the 12 before September 2013, that that use is sufficient in any way 13 to establish any prior use in commerce. It does show, if you 14 want to call it that, We are preparing samples of our 15 particular product. They show us quotes, but they don't show 16 us purchases. They could easily show purchases. If they want 17 to say that $20 million is on the table, you show a purchase. 18 You don't show a quotation. 19 THE COURT: Thank you. 20 MR. TRAINOR: Your Honor, may I please respond? 21 THE COURT: A very short response. 22 MR. TRAINOR: The allegation effectively is that we're 23 fabricating this evidence. That's a pretty serious allegation. 24 There's a big quantum of evidence. There are websites, social 25 media posts. I sent you a radio advertisement dating from SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300


17 Fb6WbreC 1 before that date. We have two websites before that date. So 2 you can't buy products from the website, that is irrelevant. 3 When you look at the law, the law that he cites, it says an 4 opposer of a mark that is not incontestable can show prior use 5 other than by evidence of sales. Now, there were sales. You 6 can put Mr. Kimmel on the stand; he can talk to you about 7 sales. He's a start-up company at that point. We had four 8 days to put this evidence together for your Honor, and we did 9 that. But we're talking about way, way more evidence than is 10 required to show prior use of a product. 11 All of these cases about advertising's not enough and 12 mere preparation, if you read those cases, your Honor, not only 13 do they concern service marks, but those cases, those courts go 14 out of their way to say this is distinguished from products, 15 and it makes sense. Right? If you're just going to prepare to 16 offer the service and don't ever offer the service, you can 17 never put your hands on anything. The evidence we have shows 18 you back and forth with the products large orders, the brand is 19 on it. I will sit down, your Honor, but with respect to 20 products, the law is clear. Sales do not need to be shown. 21 You need to have the branded mark on the product and it needs 22 to be transported. Not sold, transported. That is the 23 standard. 24 I would just say one other thing. He's confusing 25 burdens here. Where is the evidence of his harm? Where is the SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300


18 Fb6WbreC 1 evidence of the hardship that you must balance? There is 2 nothing to balance. If you read Worldwide Diamond from this 3 court, that case goes exhaustively into this. In that case, 4 the evidence they put forth: we're losing customers; they're 5 going to the infringer; it's hurting our relationship with XYZ 6 company; we lost a contract with a company in Malaysia, and the 7 court still said, That's not really supported by evidence, 8 you're just saying that. Compare at least that detail of the 9 harm that the movant was suffering with this detail, which is a 10 few people called me up and I didn't know what they were 11 talking about, to suggest that a preliminary injunction is in 12 order here -- 13 THE COURT: Counsel. 14 MR. TRAINOR: I'm sorry, your Honor. 15 THE COURT: Thank you. 16 MR. TRAINOR: I'm sorry. 17 THE COURT: We're here today in the matter of Breathe 18 LLC v. Metro Tablet Inc., Breathe eCigs Corp., and Joshua 19 Kimmel. Plaintiff Breathe LLC moves for an order preliminarily 20 enjoining the sale, marketing, distribution, and advertising of 21 electronic cigarettes being sold by defendants that infringe on 22 or dilute plaintiff's trademark within the meaning of the 23 Lanham Act. 24 As the Supreme Court has stated, "preliminary 25 injunction is an extraordinary remedy," Winter v. Natural Res. SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300


19 Fb6WbreC 1 Def. Council, 555 U.S. 724 (2008), and the party seeking the 2 injunction must demonstrate "by a clear showing" that the 3 necessary elements are satisfied, Mazurek v. Armstrong, 520 4 U.S. 968, 972 (1997). 5 When deciding whether to issue a preliminary 6 injunction in a trademark dispute, a court must undertake the 7 inquiry outlined in Salinger v. Colting, 607 F.3d 68 (2d Cir. 8 2010). First, the court may issue a preliminary injunction 9 only if the plaintiff has demonstrated "either (a) a likelihood 10 of success on the merits or (b) sufficiently serious questions 11 going to the merits to make them a fair ground for litigation 12 and a balance of hardships tipping decidedly in the plaintiff's 13 favor." Id. at 79. Second, the court may issue the injunction 14 only if the plaintiff had demonstrated "that he is likely to 15 suffer irreparable injury in the absence of an injunction." 16 Id. Third, "a court must consider the balance of hardships 17 between the plaintiff and defendant and issue the injunction 18 only if the balance of hardships tips in the plaintiff's 19 favor." Id. Finally, the court "must ensure that the 'public 20 interest would not be disserved' by the issuance of a 21 preliminary injunction." Id. at 80. Although Salinger only 22 expressly addressed the preliminary injunction standard 23 applicable in copyright cases, courts in this Circuit have 24 applied the Salinger analysis in trademark cases. See, e.g., 25 U.S. Polo Association, Inc. v. PRL USA Holdings, Inc., 800 SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300


20 Fb6WbreC 1 F.Supp.2d 515, 539-40 (S.D.N.Y. 2011). The Court agrees with 2 the reasoning articulated in these cases and adopts the 3 Salinger standard to determine whether a preliminary injunction 4 should issue in this trademark dispute. 5 Regarding the first step of the Salinger analysis, 6 plaintiff has failed to demonstrate a likelihood of success on 7 the merits on its trademark infringement and dilution claims. 8 In order to prevail on an infringement claim for a registered 9 trademark, a plaintiff must establish that it has a valid mark 10 that is entitled to protection under the Lanham Act, and that 11 defendant used the mark without plaintiff's consent in commerce 12 in connection with the sale or advertising of goods and 13 services. 1 800 Contacts, Inc. v. WhenU.com, Inc., 414 F.3d 14 400, 406-07 (2d Cir. 2005). In addition, the plaintiff must 15 show that "defendant's use of that mark 'is likely to cause 16 confusion...as to the affiliation, connection, or association 17 of defendant with plaintiff, or as to the origin, sponsorship, 18 or approval of the defendant's goods, services, or commercial 19 activity by plaintiff.'" Id. at 407. 20 Plaintiff holds a registered trademark with the United 21 States Patent and Trademark Office that consists of the words 22 "Breathe Intelligent Cigarette" and a zigzag image. This 23 registration was issued by that office in November 2014 after 24 plaintiff filed an "intent-to-use" application on September 27, 25 2013. Under the Lanham Act, because plaintiff's application SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300


21 Fb6WbreC 1 was successful, plaintiff was granted a "constructive use" date 2 of September 27, 2013. WarnerVision Entertainment Inc. v. 3 Empire of Carolina, Inc., 101 F.3d 259, 260 (2d Cir. 1996). 4 This means that plaintiff is protected against so-called 5 "junior users" who begin using a confusingly similar trademark 6 subsequent to the constructive use date. Id. at 262. This 7 does not, however, give plaintiff protection against those 8 parties who began using the trademark in commerce prior to the 9 constructive use date. Id. Thus, the success of plaintiff's 10 infringement claims hinges on whether defendants began using 11 their mark in commerce before September 27, 2013. 12 As a general matter, "the right to exclusive use of a 13 trademark derives from its preparation and subsequent use in 14 the marketplace." La Societe Anonyme des Parfums le Galion v. 15 John Patou, Inc., 495 F.2d 1265, 1271 (2d Cir. 1974). 16 Accordingly, "there can be no trademark absent goods sold," 17 American Express v. Goetz, 515 F.3d 156, 161 (2d Cir. 2008), 18 and "mere advertising and promotion of a mark...are not enough 19 to constitute 'use' of the mark 'in commerce,' so as to bring 20 the activity within the scope of the Lanham Act." Morningside 21 Group Limited v. Morningside Capital Group, L.L.C., 182 F.3d 22 133, 138 (2d Cir. 1999). 23 However, even short of a "use in commerce" sufficient 24 to confer trademark rights, a party "need not meet the 25 statutory requirement of use in interstate commerce to oppose, SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300


22 Fb6WbreC 1 or seek cancellation of, a registration based on confusion." 2 Patsy's Italian Rest., Inc. v. Banas, 658 F.3d 254, 267 (2d 3 Cir. 2011). Rather, use "analogous to trademark use" may "ease 4 the technical requirements for trademarks...in favor of a 5 competing claimant who asserts priority" where that analogous 6 use is "open and notorious" -- in other words, where it is "'of 7 such a nature and extent' that the mark has become 'popularized 8 in the public mind' so that the relevant segment of the public 9 identifies the marked goods with the mark's adopter." American 10 Express, 515 F.3d at 161-62; see also New Look Party Ltd. v. 11 Louise Paris Ltd., 11 Civ. 6433 2012 WL 251976, at *3 (S.D.N.Y. 12 Jan. 11, 2012) 13 Defendants have submitted declarations from defendant 14 Joshua Kimmel and documentary evidence demonstrating that 15 Kimmel began distributing electronic cigarettes with Breathe 16 mark to consumers in California, Florida, Nevada, New York, and 17 Tennessee prior to September 27, 2013. Defendants' evidence 18 also suggests that Kimmel began advertising the branded 19 electronic cigarettes via social media posts and a website he 20 created prior to September 27, 2003. It is unclear, however, 21 from defendants' submissions whether Kimmel in fact sold 22 electronic cigarettes to customers prior to September 27, as 23 opposed to providing complimentary samples. For example, 24 although defendants provide invoices from a Chinese 25 manufacturer of electronic cigarettes showing that Kimmel had SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300


23 Fb6WbreC 1 ordered thousands of electronic cigarettes with the "Breathe" 2 mark prior to September 27, defendants have not submitted 3 invoices demonstrating actual sales were consummated prior to 4 September 27. 5 Plaintiffs argue that Kimmel did not sell electronic 6 cigarettes with the "Breathe" mark prior to September 27 and 7 point to Breathe eCigs Corp.'s SEC filings in 2015, which state 8 "since formation, Breathe has operated as a development-stage 9 company, with the intentions of designing marketing and 10 distributing electronic cigarettes...vaporizers, 11 e-liquids...and related accessories." The filings state that 12 "as of December 31, 2014, Breathe had no revenue and limited 13 assets." Defendants argue that the public filings are 14 irrelevant, as they refer only to the revenues earned only by 15 Breathe eCigs Corp. and have no bearing on Breathe eCigs 16 Corp.'s predecessors in interests, Kimmel and Breathe Limited 17 Liability Company. 18 On the factual record at this early stage of the 19 proceedings, it is unclear whether Kimmel actually sold the 20 cigarettes prior to September 27. However, defendants have 21 adduced uncontroverted evidence showing that Kimmel began 22 distributing, promoting, and advertising electronic cigarettes 23 with the "Breathe" mark prior to September 27. Under the 24 analogous use doctrine, this use may provide a basis for 25 defendants to seek cancellation of plaintiff's trademark SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300


24 Fb6WbreC 1 registration even in the absence of actual sales, thereby 2 defeating plaintiff's trademark infringement claim. Therefore, 3 I find that plaintiff has not made a clear showing that it is 4 likely to succeed on the merits of its trademark infringement 5 claim, as currently styled. 6 To the extent that plaintiff seeks a preliminary 7 injunction barring defendants from using the "Breathe" mark in 8 U.S. states and territories other than California, Florida, 9 Nevada, New York, and Tennessee, the Court likewise finds that 10 the required showing has not been made as plaintiff has not 11 demonstrated that a likelihood of confusion might exist in 12 those dates. See Dawn Donut Co. v. Hart's Food Stores, Inc., 13 267 F.2d 358, 364-65 (2d Cir. 1959). 14 As for plaintiff's dilution claim, plaintiff has not 15 attempted to show that its mark is "famous" or "distinctive" as 16 required by the Lanham Act. Savin Corp. v. Savin Group, 391 17 F.3d 439, 449 (2d Cir. 2004). Therefore, there is no clear 18 showing of a likelihood of success on the merits on the 19 dilution claim. 20 Although I need not reach the remaining considerations 21 enumerated in Salinger, given plaintiff's failure to show a 22 likelihood of success on the merits, I have nonetheless 23 considered the other factors, and they do not weigh in favor of 24 the issuance of a preliminary injunction. Accordingly, 25 plaintiff's motion is denied. SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300


25 Fb6WbreC 1 Moving on to other matters, we currently have an 2 initial pretrial conference scheduled for November 12. I've 3 reviewed the joint letter and I understand that the parties 4 have been unable to agree on a proposed case management plan. 5 I see no exceptional circumstances warranting an extended fact 6 discovery period, and counsel are directed to submit a jointly 7 agreed-upon case management plan by November 11 with fact 8 discovery to be completed by March 11, 2016. The conference 9 scheduled for November 12 is adjourned. 10 Mr. Trainor, I understand that you have now been 11 formally retained by Metro Tablet Inc. and would like to file a 12 motion to dismiss on their behalf. That request is granted, to 13 the extent that any arguments you wish to make on behalf of 14 Metro Tablet shall be incorporated into the motion to dismiss 15 that you are already preparing on behalf of defendants Breathe 16 eCigs Corp. and Joshua Kimmel. 17 Are there any other applications? 18 MR. BROWN: Yes, your Honor. In light of the Court's 19 ruling, I will be seeking permission to file an amended 20 complaint in order to add a common law claim for my client's 21 trademark. 22 THE COURT: Fine. You'll do that by what date? 23 MR. BROWN: I can do that by the middle of next week, 24 November 11, your Honor. 25 THE COURT: OK. SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300


26 Fb6WbreC 1 MR. BROWN: Thank you. 2 MR. TRAINOR: Your Honor, no further applications. To 3 the extent that this amended complaint alters or calls for 4 supplementing our motion to dismiss, we would like leave to do 5 that to account for the complaint. 6 THE COURT: Of course. 7 MR. TRAINOR: Thank you, your Honor. 8 THE COURT: Anything further? 9 MR. BROWN: Thank you, your Honor. Nothing further. 10 MR. TRAINOR: No, your Honor. 11 THE COURT: Have a good weekend. 12 MR. TRAINOR: You too. 13 MR. BROWN: Thank you. 14 (Adjourned) 15 16 17 18 19 20 21 22 23 24 25 SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300


Breathe Ecig Corp v Breathe LLC

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