United States District Court, E.D. Texas, Marshall Division
MEMORANDUM OPINION AND ORDER
W. SCHROEDER, III UNITED STATES DISTRICT JUDGE
trademark case, the Court now considers Plaintiff's
Objections to Memorandum and Order Denying Leave to Amend
(Docket No. 210). For the reasons set forth below, the Court
will OVERRULE Plaintiff's Objections and ADOPT the
Magistrate Judge's Memorandum Order (Docket No. 206),
which vacated his earlier grant of Plaintiff's Motion for
Leave to File Third Am. Compl. (Docket No. 135).
Industries, Inc. (“DLI”) is the owner of United
States Registration 3, 361, 849 for the trademark LOTS OF
HUGS. Second Am. Compl. (Docket No. 46) at ¶ 9. Since
1997, DLI has sold stuffed toy bear products branded with the
LOTS OF HUGS mark. Id. at ¶ 13.
2010, Disney released Toy Story 3, an animated film
featuring Disney heroes Sherriff Woody and Buzz Lightyear.
Id. at ¶¶ 20-21. In the film, Woody and
Buzz battle Lots-O'-Huggin' Bear (Lotso for short), a
hot pink teddy bear with a big nose and a southern accent.
The film received five Academy Award nominations, won two
Academy Awards, grossed over $1 billion worldwide, became the
highest-grossing film of 2010 and the third highest-grossing
animated film of all time, and was the first animated film to
generate $1 billion in ticket sales. Id. at ¶
28. One source estimated Toy Story 3 merchandise
would generate more than $7.3 billion in retail sales.
dispute relates to that merchandising revenue and, more
specifically, Disney's marketing and sales of
Lots-O'-Huggin' merchandise. DLI alleges Disney's
sales of Lots-O'-Huggin' merchandise infringes its
LOTS OF HUGS trademark. Id. at ¶ 38. DLI
further alleges its property rights in the LOTS OF HUGS mark
have been destroyed by the overwhelming success of Toy
Story 3 and related infringing sales of
Lots-O'-Huggin' merchandise. Id. at ¶
relevant procedural history concerns DLI's Second and
Third Amended Complaints. DLI lodged its Second Amended
Complaint in January 2014, in which it alleged Defendants
Disney Store and Disney Shopping infringed DLI's
trademark rights by using LOTS-O'-HUGGIN' and LOTSO
on labels, signs, prints, packages, products wrappers,
receptacles, and advertisements. Second Am. Compl. (Docket
No. 46) at ¶ 38.
November 2014, DLI asked for leave to file its Third Amended
Complaint. Docket No. 135. Relative to the Second Amended
Complaint, DLI sought to join ten additional Disney-related
parties. Docket No. 136 at ¶¶ 6-15. The Third
Amended Complaint also expanded the allegedly infringing
activities to use of the Lotso character at parks and
resorts, on cruise ships, during touring ice shows, and in
books and gaming products. Id. at 6-10 (¶¶
e.-n.). Disney opposed leave, arguing that DLI's Third
Amended Complaint would create jurisdictional and
venue-related problems and significantly alter the nature and
scope of the case. Docket No. 143. In particular, Disney
noted all ten prospective defendants have Southern California
offices, the overwhelming preponderance of evidence is in
California, there is no evidence in Texas, and there are no
fact witnesses in Texas. Id. at 13. Disney also
asserted there was no admissible evidence of any kind to
establish jurisdiction in Texas. Id.
Payne granted leave to amend, concluding that there would be
substantial efficiencies in addressing DLI's claims
against all defendants together. Docket No. 149 at 3.
after the Third Amended Complaint became operative, the ten
newly joined defendants moved to dismiss under Fed.R.Civ.P.
12(b) (Docket No. 164) and to transfer the case to the
Central District of California (Docket No. 165). In opposing
the motions, DLI did not address the new defendants'
evidence and instead advanced a “unified entity”
theory of personal jurisdiction-that all defendants are
“one big company” for purposes of personal
jurisdiction. Docket No. 168 at 5. The Disney defendants
rejected this “unified entity” theory, arguing it
required the untenable result that “wherever
any Disney company is subject to personal
jurisdiction, every Disney company is subject to
personal jurisdiction.” Docket No. 172 at 5 (emphasis
considering the motions to dismiss and transfer, Judge Payne
concluded the Third Amended Complaint “changed the
nature of this case” and reconsidered his prior order
Recent proceedings have made clear that the added claims bear
less connection to the original claims than the Court
originally perceived. Even Plaintiff's recent papers have
made this evident to the Court. (See Dkt. No. 192 at
3 (“Although no case law was found directly on
point”); Dkt. No. 192 at 4 (“Because of the
somewhat sui generis circumstances of this case, no
case law on point was discovered.”).
The Defendants have raised serious issues of personal
jurisdiction and venue that the Court finds are not
adequately addressed by the “unified entity”
theory advanced by Plaintiff. Even though the factual issues
are examined through a prima facie prism, the Court
has serious doubts about the factual underpinnings ...