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Exist, Inc. v. The Vermont Country Store, Inc.

United States District Court, D. Vermont

October 21, 2019

EXIST, INC., Plaintiff,
v.
THE VERMONT COUNTRY STORE, INC., Defendant.

          OPINION AND ORDER DENYING PLAINTIFF'S MOTION TO DISMISS OR STRIKE DEFENDANT'S COUNTERCLAIM AND IN THE ALTERNATIVE MOTION TO TRANSFER AND GRANTING PLAINTIFF'S MOTION FOR VOLUNTARY DISMISSAL (DOCS. 31 &32)

          CHRISTINA REISS, DISTRICT JUDGE

         Plaintiff Exist, Inc. ("Plaintiff) is a Florida-based resort apparel company which filed suit in the United States District Court for the Southern District of Florida against Defendant The Vermont Country Store, Inc. ("Defendant") seeking a declaration of rights with regard to an alleged copyright infringement. On April 18, 2019, the case was transferred to this court after the Southern District of Florida determined it did not have personal jurisdiction over Defendant. Following the transfer, on April 19, 2019, Defendant filed an Answer to Plaintiffs Amended Complaint which interposed a counterclaim alleging copyright infringement and seeking injunctive relief and damages. (Doc. 25.)

         David M. Pocius, Esq. and Nancy J. Flint, Esq. represent Plaintiff. Mark F. Werle, Esq., Matthew Scott Nelles, Esq., and Stacy O. Stitham, Esq. represent Defendant.

         I. Factual and Procedural Background.

         A. Factual Allegations.

         The facts are derived from the parties' pleadings, briefing, and declarations. Plaintiff sells resort apparel imprinted with original fabric designs that are the subject of copyright registration with the United States Copyright Office. One such design is the Fish Print Design, which Plaintiff alleges was created in Florida in 1993 and was registered with the United States Copyright Office in 1997. The individual who created the Fish Print Design, Shaul Ashkenazy, is still employed by Plaintiff and located in Florida, as are all records related to the Fish Print Design.

         The Rock Fish Design was created and published in 1996 by Demy, Inc., d/b/a M. Mac, Inc., a now dissolved California corporation. Defendant acquired "all of the exclusive rights" to the Rock Fish Design through assignment in April of 2018. (Doc. 25 at 4, ¶ 8.) The timing of the creation date of the Fish Print Design and the publication date of the Rock Fish Design are disputed, as is whether Plaintiff had access to the Rock Fish Design and copied it.

         Plaintiff operates an interactive website through which apparel is available for purchase. Plaintiff also sends mail-order catalogs directly to merchants and attends a number of trade shows in the United States and other locations at which it advertises its apparel. Plaintiff asserts that it has not sent any catalogs to any entity or person in Vermont, is not registered to do business in Vermont, has not conducted any business in Vermont, and has no agents conducting business on its behalf in Vermont. Since 2015, Plaintiff has fulfilled one purchase order for $489.00 for a customer located in Vermont, which constituted less than 0.001% of Plaintiff s gross revenues for that year.

         In late summer 2018, Defendant "became aware" that Plaintiff was selling clothing items with the Fish Print Design. (Doc. 25 at 4, ¶ 9.) Defendant sent a cease and desist letter to Plaintiff in September of 2018 asserting that the Fish Print Design infringed upon the Rock Fish Design copyright. Thereafter, Plaintiff filed its declaratory judgment action in the Southern District of Florida "with respect to Defendant's threat of copyright infringement," seeking to clarify the parties' respective copyright rights. (Doc. 5 at 2, ¶7.)

         Plaintiff alleges that Defendant "has communicated an imminent threat to Plaintiff regarding the infringement of the Rock Fish Design copyright, which Plaintiff asserts was registered on June 2, 1998. Id. at 1, ¶ 5. It further alleges that Defendant "is not the owner of the ROCK FISH Fabric Design copyright" and thus "has no rights to enforce [it.]" Id. at 2, ¶ 6. In the alternative, Plaintiff claims that it "has not infringed any such alleged copyright," id., and that the 1998 registration is "invalid." Id. at 2, ¶ 9.

         B. Southern District of Florida Proceedings.

         On March 19, 2019, Defendant filed a motion to dismiss or transfer in the Southern District of Florida, seeking dismissal for lack of personal jurisdiction under Florida's long-arm statute and the Due Process Clause to the Fourteenth Amendment of the United States Constitution. Plaintiff opposed dismissal and transfer, arguing that the Southern District of Florida had specific jurisdiction over its copyright infringement claim and Defendant had sufficient minimum contacts with Florida because of its website. Plaintiff also asserted that the relevant factors for transfer under 28 U.S.C. § 1404(a) favored Florida over Vermont and addressed those factors at some length in its briefing. In opposing Defendant's motion to dismiss or transfer, Plaintiff did not argue that the District of Vermont lacked personal jurisdiction over Plaintiff, rendering that forum inappropriate as the transferee jurisdiction.

         On April 18, 2019, the Southern District of Florida granted Defendant's motion and transferred the case to the District of Vermont. In doing so, the Southern District of Florida analyzed Florida's long-arm statute, conducted a due process analysis pursuant to the Fourteenth Amendment, and concluded that it was "not a close call" to find that the court lacked personal jurisdiction over Defendant. (Doc. 21 at 4.) It ordered the case transferred to the District of Vermont.

         C. Defendant's Compulsory Counterclaim.

         On April 19, 2019, following transfer to this court, Defendant filed an Answer and compulsory counterclaim alleging that Plaintiffs distribution of clothing items with the Fish Print Design infringes on Defendant's right to use the Rock Fish Design copyright in violation of 17 U.S.C. § 501 et seq. and 17 U.S.C. § 106 of the Copyright Act of 1976. Defendant alleges that the creator of the Rock Fish Design "complied in all respects with the requirements of the Copyright Act" in applying for and receiving registration from the Register of Copyrights, and that Defendant is "the present owner of all of the exclusive rights to the 'ROCK FISH' copyright." (Doc. 25 at 4, ¶¶ 7-8.) While Plaintiff "had access" to and was "on notice" of the Rock Fish Design, Plaintiff, without authorization, allegedly "caused to be manufactured, has sold, continues to sell..., and is causing to be distributed items of clothing entitled 'Fish Print' that are copies of, and bear constituent elements of, the 'ROCK FISH' design." Id. at 5, ¶¶ 15-16. Defendant further asserts that Plaintiff acted willfully and recklessly and "has derived and continues to derive substantial revenues from the sale of its 'Fish Print' dresses and clothing." Id. at 6, ¶21.

         As a result of Plaintiff s alleged infringement, Defendant states that it "has suffered and continues to suffer irreparable harm, and is entitled to injunctive relief and an order impounding all infringing materials." Id. at 6, ¶ 22. Defendant seeks dismissal of Plaintiff s claim with prejudice and an award of reasonable attorney's fees incurred in defending against Plaintiffs action. For further relief, Defendant asks that Plaintiff "be enjoined and restrained during the pendency of this action, and permanently, from infringing in any manner the 'ROCK FISH' design" and from using the Fish Print Design. Id. at 6-7, ¶ 3. Defendant also seeks an award of actual damages pursuant to 17 U.S.C. § 504(b); "[p]rofits derived by [Plaintiff] ...


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