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Diece-Lisa Industries, Inc. v. Disney Store USA, LLC

United States District Court, E.D. Texas, Marshall Division

July 10, 2017




         In this 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).

         I. BACKGROUND

         Deice-Lisa 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.

         In 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. Id.

         This 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 ¶ 39.


         The 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.

         In 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.

         Judge 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.

         Shortly 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 in original).

         While 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 granting leave:

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 ...

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