Slep-Tone Ent. Corp. v. Elmwood Enterprises, Inc., No. 13 C 7346, Slip Op. (N.D. Ill. Apr. 21, 2014) (Lefkow, J.).

Judge Lefkow denied defendant Elmwood’s Fed. R. Civ. P. 12(b)(6) & (7) motion to dismiss plaintiff Slep-Tone’s Lanham Act claims related to its SOUND CHOICE marks used in connection with its karaoke accompaniment tracks.  Of particular note, the Court held as follows:

  • Slep-Tone sufficiently pled Elmwood’s alleged use in commerce by claiming that Elmwood used karaoke services as an inducement for its customers’ patronage and purchase of food and drink.
  • Slep-Tone sufficiently pled likelihood of confusion.  It was sufficient to plead likely confusion of karaoke patrons, even though Slep-Tone’s direct customers were the “KJs” that purchase the tracks and play them for the consumers who do the karaoke, not those consumers.  The two markets were sufficiently related, and Slep-Tone’s sales to KJs ultimately met the needs of the consumers it alleged were likely to be confused.
  • Pursuant to the Seventh Circuit’s Hard Rock test, a supplier of goods or services can be liable for contributory infringement even without an affirmative duty to prevent trademark violation.  The supplier does have a duty “to understand what a reasonably prudent person would understand.”  Based upon that standard, Slep-Tone sufficiently pled contributory infringement.  Slept-Tone pled that Elmwood hires and may control its KJs and that Elmwood had actual knowledge of the infringing materials.
  • Elmwood’s nominative fair use defense failed.  First, Northern District judges have held that nominative fair use could not be decided on a Rule 12(b) motion.  Second, the defense failed substantively based upon Slep-Tone’s allegations.  Slep-Tone alleged that the KJs used the SOUND CHOICE mark on bootleg versions of Slep-Tone’s tracks.  That would suggest affiliation, sponsorship or endorsement, which makes the nominative fair use doctrine inapplicable.
  • Dastar was not applicable to this case.  Slep-Tone was not using its SOUND CHOICE marks to control the content of the tracks.  Slep-Tone’s claims were not focused upon the music.  They were focused upon the use of Slep-Tone’s marks in connection with tracks allegedly from third parties.
  • Slep-Tone’s state law unfair competition law claims survived the motion to dismiss for the same reasons as the Lanham Act claims did.
  • The KJs were not necessary parties to the litigation.  Slep-Tone’s claims could be addressed fully without the inclusion of the KJs.