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Academy, Ltd. v. CWGS Group, LLC

United States District Court, S.D. Texas, Houston Division

October 31, 2019

ACADEMY, LTD., Plaintiff,
v.
CWGS GROUP, LLC and GANDER OUTDOORS, LLC, Defendants.

          MEMORANDUM AND ORDER

         Pending is Defendants' Motion to Dismiss Count III of Plaintiff's Amended Complaint Pursuant to Fed.R.Civ.P. 12(b)(6) (Document No. 30) . After carefully considering the motion, response, reply, and applicable law, the Court concludes for the following reasons that the motion should be denied.

         I. Background

         Plaintiff Academy, Ltd. d/b/a Academy Sports Outdoors ("Academy") sells sporting and outdoor goods online and in more than 250 retail stores in sixteen states.[1] After one of Academy's longtime competitors, Gander Mountain, filed for bankruptcy in 2017, Defendants CWGS Group, LLC and Gander Outdoors, LLC (collectively "Gander") acquired Gander Mountain's retail store leases and intellectual property rights and launched a campaign to rebrand Gander Mountain as Gander Outdoors, with a new logo and a new look and feel for its stores.[2] Gander has opened at least sixty retail locations in nineteen states, representing a 75 percent overlap with Academy's market.[3]

         Academy alleges that its trade dress consists of storefronts with a white facade and a primary logo in "Academy's distinctive blue color ('Academy-blue')" with Academy-blue accents; a utilitarian interior that forgoes "experiential amenities typically present in other sporting goods stores"; largely unadorned white walls with an industrial ceiling and white lights; Academy-blue signs with white letters and red accents; and Academy-blue employee uniform shirts featuring the Academy logo in white letters.[4]Before Gander's rebranding, Gander Mountain stores operated under the red and white Gander Mountain logo, with a red, brown, and green color scheme; dark tile and wood floors and finishes; a "reserved cabin-type look and feel, including wall mounts of deer and other game animals"; and employees wearing forest green and khaki vests.[5] Academy alleges that Gander copied Academy's logo and trade dress, and that Gander Outdoors stores now feature a white and Academy-blue color scheme, storefronts with a white facade and Academy-blue accents, white and Academy-blue in-store signage, a utilitarian interior forgoing amenities and the previous mounted animals, and employees dressed in Academy-blue shirts with white text.[6]

         Academy alleges that the new Gander Outdoors logo infringes Academy's trademarks and that Gander's store redesign copies the look and feel of Academy's stores to take advantage of Academy's goodwill and reputation for value. Academy alleges claims for (1) federal trademark infringement, (2) federal unfair competition, (3) federal trade dress infringement, (4) trademark infringement and unfair competition under Texas common law, and (5) injury to business reputation under Texas Business and Commerce Code § 16.29.[7] This motion is directed only at Academy's claim for trade dress infringement under Rule 12(b)(6).[8]

         II. Legal Standard

         Rule 12(b)(6) provides for dismissal of an action for "failure to state a claim upon which relief can be granted." Fed.R.Civ.P. 12(b) (6). When a district court reviews the sufficiency of a complaint before it receives any evidence either by affidavit or admission, its task is inevitably a limited one. See Scheuer v. Rhodes, 94 S.Ct. 1683, 1686 (1974), abrogated on other grounds by Harlow v. Fitzgerald, 102 S.Ct. 2727 (1982) . The issue is not whether the plaintiff ultimately will prevail, but whether the plaintiff is entitled to offer evidence to support the claims. Id.

         In considering a motion to dismiss under Rule 12(b)(6), the district court must construe the allegations in the complaint favorably to the pleader and must accept as true all well-pleaded facts in the complaint. See Lowrey v. Tex. A&M Univ. Sys., 117 F.3d 242, 247 (5th Cir. 1997). To survive dismissal, a complaint must plead "enough facts to state a claim to relief that is plausible on its face." Bell Atl. Corp. v. Twombly, 127 S.Ct. 1955, 1974 (2007) . "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949 (2009). While a complaint "does not need detailed factual allegations . . . [the] allegations must be enough to raise a right to relief above the speculative level, on the assumption that all the allegations in the complaint are true (even if doubtful in fact)." Twombly, 127 S.Ct. at 1964-65.

         III. Discussion

         "Trade dress refers to the total image and overall appearance of a product and may include features such as the size, shape, color, color combinations, textures, graphics, and even sales techniques that characterize a particular product." Amazing Spaces, Inc. v. Metro Mini Storage, 608 F.3d 225, 251 (5th Cir. 2010) (citation omitted). Trade dress protection may apply to the look and feel of a business, such as the overall "motif" of a restaurant. Id. (citing Two Pesos, Inc. v. Taco Cabana, Inc., 112 S.Ct. 2753, 2555 (1992)) . "The purpose of trade dress protection, like trademark protection, is to 'secure the owner of the [trade dress] the goodwill of his business and to protect the ability of consumers to distinguish among competing products.'" Eppendorf-Netheler-Hinz GMBH v. Ritter GMBH, 289 F.3d 351, 355 (5th Cir. 2002) (quoting Two Pesos, 112 S.Ct. at 2760). To succeed on a claim for trade dress infringement, the plaintiff must show that "(1) the dress qualifies for protection, which requires considering functionality, distinctiveness, and secondary meaning; and (2) that the dress has been infringed, which requires considering the likelihood of confusion." Taco Cabana Int'l, Inc. v. Two Pesos, Inc., 932 F.2d 1113, 1117-18 (5th Cir. 1991) (citation omitted), aff'd, 112 S.Ct. 2753 (1992).

         Gander's sole argument is that Academy's trade dress infringement claim in Count III must be dismissed because Academy's pleading admits that Academy's trade dress is functional.[9] See 15 U.S.C. § 1125(a)(3) ("In a civil action for trade dress infringement under this chapter for trade dress not registered on the principal register, the person who asserts trade dress protection has the burden of proving that the matter sought to be protected is not functional."); TrafFix Devices, Inc. v. Mktg. Displays, Inc., 121 S.Ct. 1255, 1259 (2001) ("This burden of proof gives force to the well-established rule that trade dress protection may not be claimed for product features that are functional.") .

         Under the "traditional" definition of functionality, "a product feature is functional, and cannot serve as a trademark, 'if it is essential to the use or purpose of the article or if it affects the cost or quality of an article, '" such that "if a product feature isvthe reason the device works,' then the feature is functional." Eppendorf-Netheler-Hinz, 289 F.3d at 355 (quoting TrafFix, 121 S.Ct. at 1261-62). Additionally, under the "competitive necessity" test, "a functional feature is one the 'exclusive use of which would put competitors at a significant non-reputation-related disadvantage.'" Id. at 356 (quoting TrafFix, 121 S.Ct. at 1261). Although functional features cannot be protected as trade dress, "a particular arbitrary combination of functional features, the combination of which is not itself functional, properly enjoys protection." Taco Cabana, 932 F.2d at 1119 (citations omitted).

         Academy alleges that the trade dress of its stores consists of the following features (which are illustrated by color photographs in paragraph 37 of Academy's First Amended Complaint):

(a) a storefront with a white facade, and primary logo that is set off by Academy-blue with accents that ...

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