Slep-Tone Ent. Corp. v. Elmwood Enterprises, Inc., No. 13 C 7346, Slip Op. (N.D. Ill. Apr. 21, 2014) (Lefkow, J.).

Judge Lefkow denied defendant Elmwood’s Fed. R. Civ. P. 12(b)(6) & (7) motion to dismiss plaintiff Slep-Tone’s Lanham Act claims related to its SOUND CHOICE marks used in connection with its karaoke accompaniment tracks.  Of particular note, the Court held as follows:

Slep-Tone sufficiently pled Elmwood’s alleged use in commerce by claiming that Elmwood used karaoke services as an inducement for its customers’ patronage and purchase of food and drink. Slep-Tone sufficiently pled likelihood of confusion.  It was sufficient to plead likely confusion of karaoke patrons, even though Slep-Tone’s direct customers were the “KJs” that purchase the tracks and play them for the consumers who do the karaoke, not those consumers.  The two markets were sufficiently related, and Slep-Tone’s sales to KJs ultimately met the needs of the consumers it alleged were likely to be confused. Pursuant to the Seventh Circuit’s Hard Rock test, a supplier of goods or services can be liable for contributory infringement even without an affirmative duty to prevent trademark violation.  The supplier does have a duty “to understand what a reasonably prudent person would understand.”  Based upon that standard, Slep-Tone sufficiently pled contributory infringement.  Slept-Tone pled that Elmwood hires and may control its KJs and that Elmwood had actual knowledge of the infringing materials. Elmwood’s nominative fair use defense failed.  First, Northern District judges have held that nominative fair use could not be decided on a Rule 12(b) motion.  Second, the defense failed substantively based upon Slep-Tone’s allegations.  Slep-Tone alleged that the KJs used the SOUND CHOICE mark on bootleg versions of Slep-Tone’s tracks.  That would suggest affiliation, sponsorship or endorsement, which makes the nominative fair use doctrine inapplicable. Dastar was not applicable to this case.  Slep-Tone was not using its SOUND CHOICE marks to control the content of the tracks.  Slep-Tone’s claims were not focused upon the music.  They were focused upon the use of Slep-Tone’s marks in connection with tracks allegedly from third parties. Slep-Tone’s state law unfair competition law claims survived the motion to dismiss for the same reasons as the Lanham Act claims did. The KJs were not necessary parties to the litigation.  Slep-Tone’s claims could be addressed fully without the inclusion of the KJs.