NEW ENGLAND CORD BLOOD BANK

2004 | Cited 0 times | D. Massachusetts | January 21, 2004

MEMORANDUM AND ORDER

New England Cord Blood Bank, Inc. ("NECBB") filed this action againstAlpha Cord, Inc. ("Alpha Cord") and David P. Meyers ("Meyers") seekinginjunctive relief and damages for alleged breaches of contract, trademarkinfringement, and unfair competition arising out of a service agreementbetween the parties. A similar action arising out of the same serviceagreement is pending between the parties in the Northern District ofGeorgia. Before this Court are the defendants' motion to stay this actionand transfer it to the Northern District of Georgia and NECBB's motionfor a preliminary injunction. For the reasons that follow, both motionsare denied.

I. Background

NECBB is a Massachusetts corporation which processes, cryopreserves,and stores stem cells collected from the umbilical cords of newborns.Alpha Cord is a Georgia corporation which solicitsPage 2customers in the market for processing and storage of umbilical cordblood. Meyers is the president of Alpha Cord and is a resident of DeKalbCounty, Georgia. On or about July 1, 2002, NECBB and Alpha Cord enteredinto a Service Agreement (the "Agreement"), whereby NECBB agreed toprocess and store cord blood received from clients solicited by AlphaCord. The section of the Agreement entitled "Trademarks" states asfollows: 11.1 Each Party owns certain trademarks that may appear upon or in connection with the [cord blood extraction] Kits and certain labels, packages, containers and other materials. 11.2 Other than as provided above in Section 11.1, nothing in this Agreement shall be deemed to transfer to or confer upon the other Party any right to use the name of the other Party . . . or any trademark or trade name owned by the other party . . . unless consent is given to do so. Consent is given to [Alpha Cord] to only use [NECBB's] name and or contact information in order to provide full and ethical disclosure of the location of client's or potential client's Cord Blood.(Verified) Compl., Ex. 1. On its website, Alpha Cord indicates that ithas "established the nation's first network of Cord Blood Banks," andthat blood banks that are members of this network had to "offer preferredpricing to [Alpha Cord's] expectant parents in order to join the network."(Verified) Compl., Ex. 2. As of July, 2003, Alpha Cord's website listedNECBB as a member of its network of blood banks. After receiving noticeof NECBB's objection to the use of its name in this manner, Alpha Cordchanged the references to NECBB on its website to "Massachusetts StorageFacility." In solicitations mailed to prospective clients, Alpha Cordcontinues to list NECBB by name as a "member laboratory" from which AlphaCord obtains preferred pricing. Cetrulo Aff, Ex. A.

NECBB claims that by referring to NECBB as a member of a "network" ofblood banks which offer "preferred pricing," Alpha Cord has breached§ 11.2 of the Agreement and is liable for breach of contract,trademark infringement and unfair competition.

NECBB also claims that Alpha Cord has breached the Agreement by failingto providePage 3NECBB with client information, including the mother's date of birthor social security number, mother's address, and/or a copy of theclient's contract with respect to approximately sixty of the over twohundred clients received from Alpha Cord.

On August 22, 2003, Alpha Cord and Meyers filed an action against NECBBand its president, John Rizza, in Georgia state court seeking adeclaratory judgment, injunctive relief and damages. Approximately twoweeks later, NECBB filed the instant action. Simultaneous with filing itscomplaint, NECBB moved for a preliminary injunction, seeking to enjoinAlpha Cord and Meyers from referring to NECBB or the "MassachusettsStorage Facility" as a member of Alpha Cord's "network" of blood banks,or stating that NECBB offers Alpha Cord's clients preferred pricing.NECBB also asks this Court to direct Alpha Cord to provide NECBB withmissing client information.

On September 26, 2003, NECBB removed the Georgia action to federalcourt in the Northern District of Georgia and filed a motion to dismissin that court. That same day, Alpha Cord and Meyers filed their ownmotion for a preliminary injunction in the Georgia action. Alpha Cord andMeyers filed an answer and counterclaim to NECBB's complaint in theinstant action on September 29, 2003. On October 3, 2003, Alpha Cord andMeyers filed a motion to stay the proceedings in this Court and transferthis action to the Northern District of Georgia. Oral arguments werepresented on the motion to stay and transfer and NECBB's motion for apreliminary injunction.

II. Defendants' Motion to Stay and Transfer

Alpha Cord and Meyers seek to stay the action in this Court andtransfer it to the Northern District of Georgia, pursuant to28 U.S.C. § 1406(a). Section 1406 allows a federal court to transfera case, in the interests of justice, if venue is wrongly or improperlylaid. 28 U.S.C. § 1406(a).Page 4Section 1406 is unavailable if venue is proper. Having already admittedthat venue is proper in this district, see Defs.' Answer ¶ 8, thedefendants cannot now claim that venue is wrong. Moreover, by filing ananswer to NECBB's complaint prior to filing its motion to stay andtransfer, the defendants have waived their objection to venue. SeeManchester Knitted Fashions. Inc. v. Amalgamated Cotton Garment andAllied Indus. Fund, 967 F.2d 688, 691-92 (1st Cir. 1992) ("[I]t is clearunder [Rule 12] that defendants wishing to raise [a defense of impropervenue] must do so in their first defensive move, be it a Rule 12 motionor a responsive pleading.") (quoting Glater v. Eli Lilly & Co.712 F.2d 735, 738 (1st Cir. 1983)). The defendants' motion could bedenied on these bases alone. Nevertheless, the Court finds that venue isproper in this district.

Venue in trademark and unfair competition cases is proper in thejurisdictions where infringement is alleged to have occurred. Woodke v.Dahm, 70 F.3d 983, 985 (8th Cir. 1995); Cottman Transmission Svs., Inc.v. Martino, 36 F.3d 291, 294 (3d Cir. 1994); Pilates, Inc. v. PilatesInst. Inc., M 891 F. Supp. 175, 182 (S.D.N.Y. 1995). NECBB alleges thatAlpha Cord is misusing NECBB `s trade name and mark by, inter alia, Mfalsely designating, on both its website and in printed materials, thatNECBB is a member of Alpha Cord's network of blood banks, and offerspreferred pricing to Alpha Cord and its customers. Without resolvingwhether statements made on Alpha Cord's website are directed towardsMassachusetts residents, it is at least apparent that Alpha Cord sendsthe allegedly infringing printed promotional materials to persons in thisdistrict. See Cetrulo Aff.M ¶¶ 2, 3. Accordingly, a substantial partof the events giving rise to NECBB's claims occurred here.28 U.S.C. § 1391(b); see also Pilates, 891 F. Supp. at 183 (findingvenue was proper in district defendant allegedly targeted throughadvertising and direct-mail solicitation).

As venue is proper in this district, § 1406 is unavailable. Thedefendants do not argue that the case should be transferred pursuant to§ 1404 for the convenience of parties and witnesses.Page 5Instead, the defendants rely primarily on the "first filed" rule, whichstates that when parties file similar actions, the first filed action isgenerally preferred. Cianbro Corp. v. Curran-Lavoie. Inc., 814 F.2d 7, 11(1st Cir. 1987). While this is the general preference, the balance ofconveniences weighs in favor of the second action here. See Nortek, Inc.v. Molnar, 36 F. Supp.2d 63, 69-70 (D.R.I. 1999) ("[T]he forum where anaction is first filed is given priority over subsequent actions, unlessthere is a showing of balance of convenience in favor of the secondaction or there are special circumstances which justify giving priorityto the second.") (citation and internal quotations omitted). The firstfiled action in Georgia primarily seeks a declaratory judgment that AlphaCord has not breached the Agreement and that NECBB is required tocontinue to perform its contractual obligations. In the second filedaction in this Court, NECBB alleges affirmative breach of contract,trademark infringement and unfair competition. In addition, the Agreementprovides for the application of Massachusetts law to this dispute. For allthe foregoing reasons, the defendants' motion to stay and transfer isDENIED.

III. Plaintiffs Motion for Preliminary Injunction

The First Circuit has outlined four factors for district courts toconsider in determining whether to grant a preliminary injunction. Theyare: "(1) the movant's probability of success on the merits, (2) thelikelihood of irreparable harm absent preliminary injunctive relief, (3)a comparison between the harm to the movant if no injunction issues andthe harm to the objectors if one does issue, and (4) how the granting ordenial of an injunction will interact with the public interest." NewComm Wireless Servs., Inc. v. Sprintcom. Inc., M 287 F.3d 1, 8-9(1st Cir. 2002).

NECBB alleges that Alpha Cord engaged in trademark infringement andunfair competition in violation of § 43(a) of the Lanham Act, thecommon law, and chapters 93A and HOB of the Massachusetts General Laws.NECBB also asserts a cause of action for breach of contract, arising,Page 6in part, out of Alpha Cord's alleged misuse of NECBB's trade nameand mark.

A. Trademark Infringement and Unfair Competition Claims

NECBB's Lanham Act claims arise out of an alleged false designation oforigin under § 43(a)(1)(A).1 Specifically, NECBB alleges thatAlpha Cord's use of NECBB's trade name or mark is likely to causeconfusion, to cause mistake, or to deceive members of the public as tothe affiliation, connection, or association of Alpha Cord with NECBB, andthe origin, sponsorship, or approval of Alpha Cord's services with thoseof NECBB. See 15 U.S.C. § 1125(a)(1)(A).

Alpha Cord and Meyers argue that there can be no false designation oforigin because the statements made regarding the parties' relationshipare literally true. The defendants maintain that NECBB is one of a numberof blood banks in Alpha Cord's "hub and spoke network," which resemblesan HMO's network of medical providers. Also, NECBB offers Alpha Cord andits clients "preferred pricing" by providing its services to Alpha Cordat a "reduced rate" in accordance with the terms of the Agreement.Assuming, without deciding, that the defendants' representations aretrue, that is not the end of the inquiry. Section 43(a) is not confinedto literal falsehoods, and applies to false or misleading descriptions orrepresentations of fact. 15 U.S.C. § 1125(a)(1); 4 J. ThomasMcCarthy, McCarthy on Trademarks and Unfair Competition, § 27:53 (4thed. 2003). As with false advertising claims, a plaintiff can succeed on atrademark infringement claim if it can demonstrate that the defendant'srepresentations, while literally true, are misleading and likely to causeconfusion. See e.g., Clorox Co. Puerto Rico v. Proctor & GambleCommercial Co., 228 F.3d 24, 33 (1st Cir. 2000) ("A plaintiff can succeedon a false advertising claim by proving either that anPage 7advertisement is false on its face or that the advertisement is literallytrue or ambiguous but likely to mislead and confuse consumers."); Kingv. Innovation Books, 976 F.2d 824, 828 (2d Cir. 1992) ("[A] falsereference to the origin of a [good or service], or a reference which,while not literally false, is misleading or likely to confuse, may formthe basis of a claim under section 43(a) of the Lanham Act.").

The court typically considers eight factors in assessing likelihood ofconfusion: "(1) the similarity of the marks; (2) the similarity of thegoods [or services]; (3) the relationship between the parties' channelsof trade; (4) the relationship between the parties' advertising; (5) theclasses of prospective purchasers; (6) evidence of actual confusion; (7)the defendant's intent in adopting the mark; and (8) the strength of theplaintiff's mark." I.P. Lund Trading v. Kohler Co., M 163 F.3d 27, 43 (1stCir. 1998). The factors are non-exclusive, and the particular facts of acase may render certain factors irrelevant or difficult to apply. IAM, M103 F.3d at 203.

(1) Similarity of the marks.

When this dispute arose, Alpha Cord had been using NECBB's exact tradename on its website in connection with the promotion of both Alpha Cordand NECBB's services. Alpha Cord has since changed the online referenceto identify only a "Massachusetts Storage Facility." However, Alpha Cordcontinues to distribute printed promotional materials that use NECBB'strade name. See Cetrulo Aff. Ex. A.

(2) Similarity of the services.

Pursuant to the Agreement, the parties offer different services topersons interested in the preservation of cord blood. Alpha Cord solicitscustomers in the market for processing and storage of cord blood, andNECBB provides the processing and storage services. A customer maycontract directly with NECBB and need not go through Alpha Cord. TheAgreement, however, creates aPage 8relationship aimed at working together to generate business for bothparties.

(3)-(5) Channels of trade; Advertising; Classes of prospectivepurchasers. The court will examine these three factors together. IAM 103F.3d at 204. The parties are generally interested in the same class ofprospective purchasers and, in a sense, target the same channels oftrade. Indeed, the Agreement represents a coordinated effort to worktogether to target prospective purchasers interested in the processingand storage of cord blood. NECBB' s advertising is not in issue in thisaction, but Alpha Cord's is. It is Alpha Cord's use of NECBB's trade nameor mark to promote the parties' services which gives rise to the allegedconfusion as to the parties' affiliation.

(6) Evidence of actual confusion.

NECBB generally avers that "several members of the public have madeinquiry regarding the relationship between NECBB and Alpha Cord, andquestioned NECBB concerning the statements made in Alpha Cord's website."(Verified) Compl. ¶ 15. Besides this statement, there is no evidenceof actual confusion.

(7) Defendant's intent in adopting the mark.

NECBB has presented no evidence that Alpha Cord intended to misleadconsumers as to the parties' affiliation, connection, or association.Alpha Cord's use of NECBB's trade name or mark appears to be done withthe intent of generating business for both Alpha Cord and NECBB, ascontemplated by the Agreement. On its website and in its printedmaterials, Alpha Cord provides detailed information about the servicesthat NECBB provides for prospective customers, including processing andstorage of cord blood. Alpha Cord does not purport to offer thoseservices itself. It's characterization of NECBB as part of a "network ofmember laboratories" which offer "preferred pricing" to Alpha Cord or itscustomers was not likely intended to be misleading.Page 9

(8) Strength of the mark.

In December 2002, NECBB filed an application for registration of itstrademark, which remains pending. (Verified) Compl. ¶ 13. As NECBB'strade name or mark is unregistered, it is not entitled to a legalpresumption of validity. Equine Techs., Inc. v. Equitech., Inc.,68 F.3d 542, 544-45 (1st Cir. 1995). The record is otherwise inadequateto make a finding with respect to the strength of NECBB's mark. NECBBoffers no evidence, for example, regarding the length of time its markhas been used, the strength of the mark in NECBB's field of business, orNECBB's action in promoting the mark. See id. 68 F.3d at 547.

Without a copy of the Agreement in front of her, the ordinary consumeris not likely to know the exact nature of the business relationshipbetween NECBB and Alpha Cord. But, after considering all the relevantfactors as they apply to the circumstances of this case, I find no basisfor a likelihood of confusion as to the parties' affiliation, connection,or association, or the origin, sponsorship or approval of the parties'services. Because NECBB cannot demonstrate a likelihood of confusion, itcannot show a likelihood of success on the merits of its statutory andcommon law trademark and unfair competition claims.Page 10

B. Contract Claims

If NECBB were to ultimately succeed on its breach of contract claims,the remedy of an injunction would likely be available. Injunctive reliefrequiring performance of a contract may be granted (if otherprerequisites are met) if monetary damages will not afford completerelief, or if the harm caused by a breach is impossible to measureaccurately. Ocean Spray Cranberries. Inc. v. Pepsico. Inc., M 160 F.3d 58,61 (1st Cir. 1998). However, NECBB has not demonstrated that it is likelyto succeed on the merits of its contract claims.

There is no dispute that there is a contract. NECBB alleges that AlphaCord breached the Agreement by: (a) infringing upon NECBB's trade nameand mark; (b) failing to provide critical client information; (c) failingto provide NECBB with a certificate of insurance; and (d) failing toproperly account for, and pay storage fees to NECBB. (Verified) Compl.¶ 52. NECBB does not seek injunctive relief related to (c) or (d).With respect to (a), NECBB seeks to enjoin Alpha Cord from "using thedesignation or words New England Cord Blood Bank or otherwise falselyrepresenting that Alpha Cord has a continuing affiliation with a`Massachusetts Storage Facility' (or any other designated facility orprovider) that is likely to be confused with NECBB." Pl.'s Mot. forPrelim. Inj. at 3. With respect to (b), NECBB seeks an injunctionrequiring Alpha Cord to "immediately provide NECBB with contracts,addresses, and/or dates of birth or social security numbers, for eachAlpha Cord client that is missing this information." Id.

NECBB's trademark related contract claim is separate from its trademarkinfringement and unfair competition claims. The Agreement gives AlphaCord limited consent to use NECBB's name "in order to provide full andethical disclosure of the location of client's or potential client's CordBlood." (Verified) Compl., Ex. 1, § 11.2. NECBB claims that therepresentations made by Alpha Cord regarding the parties' affiliationexceeded the scope of this consent, and thereby breached thePage 11contract. Though Alpha Cord appears to go beyond the scope of consent,NECBB has not shown that this apparent breach is likely to be damaging toNECBB. The representations, perhaps inaccurately, refer to NECBB as partof a network of blood banks which offer preferred pricing, but they alsocontain complimentary statements that suggest that NECBB has a "provenhistory of quality service" and is one of "the most trusted names in CordBlood Preservation." Taken as a whole, these are hardly the kinds ofstatements which would tend to harm NECBB's goodwill.

NECBB is also unlikely to succeed on its claim that Alpha Cord is inbreach of the Agreement for having failed to provide all of the requiredclient information to NECBB. Though it appears Alpha Cord failed toensure that all of the cord blood it transported to NECBB was"accompanied by" the required client information, pursuant to § 3.1.2of the Agreement, Alpha Cord appears to have cured its breaches bysending NECBB the requested information within thirty days afterreceiving proper written notice of the breaches, pursuant to § 5.3.1of the Agreement. Furthermore, were I to give NECBB the benefit of thedoubt and find Alpha Cord's breaches remain uncured, NECBB's damages aremerely speculative, as explained more fully in Part Ill(C), below.

C. Irreparable Harm

Without a showing of damages, NECBB is unlikely to succeed on themerits of its contract claims. Inability to show a likelihood of successon the merits is alone enough to deny the motion for a preliminaryinjunction. Nonetheless, it follows that NECBB also cannot show theirreparable harm required for an injunction to issue. First, the disputedrepresentations made by Alpha Cord on its website and its promotionalmaterials are designed to generate more business for NECBB, and containcomplimentary statements that suggest that NECBB has a "proven history ofquality service" and is one of "the most trusted names in Cord BloodPreservation." As previously stated, these are not the kinds ofstatements which would tend to harm NECBB's goodwill. Second, "apreliminaryPage 12injunction is not warranted by a tenuous or overly speculative forecastof anticipated harm." Ross-Simons of Warwick. Inc. v. Baccarat. Inc., M102 F.3d 12, 19 (1st Cir. 1996): see also In re Rare Coin Galleries ofAmerica. Inc., M 862 F.2d 896, 902 (1st Cir. 1988) ("Speculation orunsubstantiated fears of what may happen in the future cannot provide thebasis for a preliminary injunction."). Thus, NECBB's contention that itwill suffer harm to its goodwill "in the event NECBB cannot identify acord blood sample when needed by distraught parents hoping to treat orcure a future medical condition affecting a member of their family," Pl'sMem. Supp. Mot. Prelim. Inj. at 10, does not support a finding ofirreparable harm.

IV. Conclusion

As the defendants waived their objection to venue, and venue is properin this district, the defendants' motion to stay and transfer is DENIED.Because the plaintiff is unable to demonstrate a probability of successon the merits of its claims, or the likelihood of irreparable harm absentpreliminary injunctive relief, its motion for a preliminary injunction isDENIED.

It is SO ORDERED.

1. It appears from the complaint that NECBB has not asserted a claimfor false advertising under § 1125(a)(1)(B). See generally. Int'lAss'n. of Machinists and Aerospace Workers ("IAM") v. Winship GreenNursing Ctr., M 103 F.3d 196, 208-09 (1st Cir. 1996) (Saris, Dist. J.,concurring) (discussing the different protections under prongs (A) and (B)of § 1125(a)(1)).Page 1

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