Case 2:11-cv AC-MKM Document 9 Filed 01/21/11 Page 1 of 15 UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION

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1 Case 2:11-cv AC-MKM Document 9 Filed 01/21/11 Page 1 of 15 UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION COUNCIL ON AMERICAN-ISLAMIC RELATIONS ACTION NETWORK, INC., a/k/a, CAIR, a 501(c)(4) corporation, CAIR-FOUNDATION, a nonprofit corporation, a/k/a, CAIR, and COUNCIL ON AMERICAN-ISLAMIC RELATIONS, MICHIGAN, a/k/a CAIR-MI, a Michigan nonprofit corporation, Case No. 11-cv Hon. Avern Cohn Magistrate: Mona K. Majzoub LAW OFFICES SOMMERS SCHWARTZ, P.C TOWN CENTER SUITE 900 SOUTHFIELD, MICHIGAN (248) vs. Plaintiffs, DEBORAH K. SCHLUSSEL, an individual, CAIR MICHIGAN, INC., d/b/a CAIR, CAIR-MICHIGAN, CAIR MICH, CAIR MI, COUNCIL ON AMERICAN-ISLAMIC RELATIONS, COUNCIL ON AMERICAN-ISLAMIC RELATIONS MICHIGAN, COUNCIL ON AMERICAN-ISLAMIC RELATIONS MI, COUNCIL ON AMERICAN-ISLAMIC RELATIONS MICH, MICH COUNCIL ON AMERICAN- ISLAMIC RELATIONS, MI COUNCIL ON AMERICAN- ISLAMIC RELATIONS, MICHIGAN COUNCIL ON AMERICAN-ISLAMIC RELATIONS, CAIRMI MICHIGAN CAIR, MI CAIR, MICH CAIR, MICAIR and MICHCAIR, a Michigan nonprofit corporation, CAIR DETROIT, INC., a Michigan nonprofit corporation, THE LAW OFFICES OF DEBBIE SCHLUSSEL, and Defendants. / [CORRECTED] DEFENDANTS MOTION TO DISMISS Defendants Deborah Schlussel, et al, by and through their attorneys Sommers Schwartz, P.C., brings this motion under Fed. R. Civ. P. 12(b)(1) and 12(b)(6), seeking dismissal of Plaintiffs Complaint allegedly brought pursuant to the Lanham Act, 15 U.S.C. 1114(1) and 1125(a), and the unfair competition law of Michigan. The basis of this Motion is that given the allegations in the

2 Case 2:11-cv AC-MKM Document 9 Filed 01/21/11 Page 2 of 15 Complaint, together with records that the Court may take judicial notice over, none of the parties representing themselves as Plaintiffs have shown they have standing to bring this action. In accordance with Local Rule 7.1(a), Defendants counsel sent an to Plaintiffs counsel on January 20, 2011, in which defense counsel explained the nature and legal basis of Defendants Motion and sought concurrence in the relief requested therein. Defense counsel did not receive a response to its by the time this motion was filed with the Court. LAW OFFICES SOMMERS SCHWARTZ, P.C TOWN CENTER SUITE 900 SOUTHFIELD, MICHIGAN (248) Dated: January 21, 2011 CERTIFICATE OF SERVICE Respectfully submitted, SOMMERS SCHWARTZ, P.C. /s/ Andrew Kochanowski (P55117) Attorney for Defendants 2000 Town Center, Suite 900 Southfield, MI (248) akochanowski@sommerspc.com I certify that on January 21, 2011, I electronically filed the forgoing paper with the Clerk of the Court using the ECF system which will send notification of such filing to all counsel of record on the ECF Service List. /s/andrew Kochanowski (P55117) Sommers Schwartz, P.C Town Center, Suite 900 Southfield, MI (248) akochanowski@sommerspc.com 2

3 Case 2:11-cv AC-MKM Document 9 Filed 01/21/11 Page 3 of 15 UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION COUNCIL ON AMERICAN-ISLAMIC RELATIONS ACTION NETWORK, INC., a/k/a, CAIR, a 501(c)(4) corporation, CAIR-FOUNDATION, a nonprofit corporation, a/k/a, CAIR, and COUNCIL ON AMERICAN-ISLAMIC RELATIONS, MICHIGAN, a/k/a CAIR-MI, a Michigan nonprofit corporation, Case No. 11-cv Hon. Avern Cohn Magistrate: Mona K. Majzoub LAW OFFICES SOMMERS SCHWARTZ, P.C TOWN CENTER SUITE 900 SOUTHFIELD, MICHIGAN (248) vs. Plaintiffs, DEBORAH K. SCHLUSSEL, an individual, CAIR MICHIGAN, INC., d/b/a CAIR, CAIR-MICHIGAN, CAIR MICH, CAIR MI, COUNCIL ON AMERICAN-ISLAMIC RELATIONS, COUNCIL ON AMERICAN-ISLAMIC RELATIONS MICHIGAN, COUNCIL ON AMERICAN-ISLAMIC RELATIONS MI, COUNCIL ON AMERICAN-ISLAMIC RELATIONS MICH, MICH COUNCIL ON AMERICAN- ISLAMIC RELATIONS, MI COUNCIL ON AMERICAN- ISLAMIC RELATIONS, MICHIGAN COUNCIL ON AMERICAN-ISLAMIC RELATIONS, CAIRMI MICHIGAN CAIR, MI CAIR, MICH CAIR, MICAIR and MICHCAIR, a Michigan nonprofit corporation, CAIR DETROIT, INC., a Michigan nonprofit corporation, THE LAW OFFICES OF DEBBIE SCHLUSSEL, and Defendants. / [CORRECTED] DEFENDANTS BRIEF IN SUPPORT OF MOTION TO DISMISS

4 Case 2:11-cv AC-MKM Document 9 Filed 01/21/11 Page 4 of 15 TABLE OF CONTENTS INDEX OF AUTHORITIES... ii ISSUE PRESENTED... iii CONTROLLING AND MOST APPROPRAITE AUTHORITY... iv FACTS... 1 LAW OFFICES SOMMERS SCHWARTZ, P.C TOWN CENTER SUITE 900 SOUTHFIELD, MICHIGAN (248) ARGUMENT... 5 A. THE COMPLAINT MUST BE DISMISSED AS TO PLAINTIFF CAIR- FOUNDATION SINCE IT IS NOT A REGISTRANT OR LICENSEE OF ANY MARK... 6 B. CAIR HAS ADMITTED EXCLUSIVELY LICENSING THE MARKS TO CAIR-MI THUS TERMINATING ITS RIGHTS TO BRING AN ACTION IN ITS OWN NAME... 6 C. CAIR-MI HAS NO STANDING SINCE IT IS NOT A REGISTRANT, AND HAS NOT SHOWN A PROPERTY INTEREST IN THE FEDERAL MARKS... 7 D. TO THE EXTENT THE STATE UNFAIR COMPETITION CLAIM ARISES OUT OF PUTATIVE OWNERSHIP OF FEDERAL MARKS, IT CANNOT BE ASSERTED WITHOUT A SHOWING THAT ANY PLAINTIFF HAS STANDING... 7 i

5 Case 2:11-cv AC-MKM Document 9 Filed 01/21/11 Page 5 of 15 CASES INDEX OF AUTHORITIES Bliss Clearing Niagara, Inc. v. Midwest Brake Bond Company, 339 F.2d 2nd 944 (W.D. Mich. 2004).. 7 Fin. Inv. Co. (Bermuda) Ltd. v. Geberit AG, 165 F.3d 526 (7 th Cir. 1998)... 6 Great Lakes Intellectual Prop. v. Sakar Int l, Inc., 516 F. Supp. 2d 880 (E.D. Mich. 2007)... 5 Kia Motors of America v. Autowerks Distributors, Inc., 2007 US Dist. Lexis 90419, 2007 Westlaw (D. Minn., December 7, 2007)... 6 LAW OFFICES SOMMERS SCHWARTZ, P.C TOWN CENTER SUITE 900 SOUTHFIELD, MICHIGAN (248) Moon Bros., Inc. v. Moon, 300 Mich. 150, 1 N.W.2d 488 (Mich. 1942)... 7 Ruzitz v. Serbian Nat'l Home Soc., 315 Mich 292, 24 NW2d 125 (1946)... 5 STATUTES 15 U.S.C. 1114(1)... 1, 6 15 U.S.C. 1125(a)... 1, 6 MCL iv, 4 MCL iv RULES Fed. R. Civ. P. 12(b)(1)... iii, iv, 1, 7 Fed. R. Civ. P. 12(b)(6)... iii, iv, 1 ii

6 Case 2:11-cv AC-MKM Document 9 Filed 01/21/11 Page 6 of 15 ISSUE PRESENTED 1. Should Plaintiffs Complaint be dismissed pursuant to Fed. R. Civ. P. 12(b)(1) and Fed. R. Civ. P. 12(b)(6) because the allegations in Plaintiffs Complaint (together with the documents over which the Court may take judicial notice) fail to show that a single Plaintiff has standing to bring this lawsuit? Defendants Answer: Yes. LAW OFFICES SOMMERS SCHWARTZ, P.C TOWN CENTER SUITE 900 SOUTHFIELD, MICHIGAN (248) iii

7 Case 2:11-cv AC-MKM Document 9 Filed 01/21/11 Page 7 of 15 CONTROLLING AND MOST APPROPRAITE AUTHORITY 1. Fed. R. Civ. P. 12(b)(1) 2. Fed. R. Civ. P. 12(b)(6) 3. MCL MCL LAW OFFICES SOMMERS SCHWARTZ, P.C TOWN CENTER SUITE 900 SOUTHFIELD, MICHIGAN (248) iv

8 Case 2:11-cv AC-MKM Document 9 Filed 01/21/11 Page 8 of 15 Defendants Deborah K. Schlussel, et al ( Schlussel ) bring this motion pursuant to Fed. R. Civ. P. 12(b)(1) and Fed. R. Civ. P. 12(b)(6) over the claims of Plaintiffs Council on American-Islamic Relations Action Network, Inc. ( CAIR ), CAIR-Foundation, a non-profit corporation, and Council on American-Islamic Relations, Michigan ( CAIR-MI ) allegedly brought pursuant to the Lanham Act, 15 U.S.C. 1114(1) and 15 U.S.C. 1125(a), and the unfair competition law of Michigan. The basis of this motion is that given the allegations in the Complaint, together with records that the Court may take LAW OFFICES SOMMERS SCHWARTZ, P.C TOWN CENTER SUITE 900 SOUTHFIELD, MICHIGAN (248) judicial notice over, none of the parties representing themselves as plaintiffs have shown they have standing to bring this action. FACTS According to the Complaint filed by Plaintiffs, Plaintiff CAIR (but not CAIR-Foundation or CAIR-MI) is the owner of three federal trademarks, bearing registration numbers , , and (Complaint at 12). 1 A search of the United States Trademark and Patent Office site reveals that these correspond to the following Marks, all assigned to CAIR (but not the other named plaintiffs) 2 : 1 In their recently-filed Supplemental Brief (Dkt #7), Plaintiffs assert that they own these marks, attaching in their exhibits the federal registration referenced in the Complaint. Curiously, their Supplemental Brief also claims ownership of a common law mark to CAIR Michigan. 2 More precisely, the actual named registrant is an entity named Council on American-Islamic Relations, Inc., however, it is believed that this was a predecessor name to the entity listed as Council on American-Islamic Relations Action Network, Inc. 1

9 Case 2:11-cv AC-MKM Document 9 Filed 01/21/11 Page 9 of 15 LAW OFFICES SOMMERS SCHWARTZ, P.C TOWN CENTER SUITE 900 SOUTHFIELD, MICHIGAN (248) and 2

10 Case 2:11-cv AC-MKM Document 9 Filed 01/21/11 Page 10 of 15 LAW OFFICES SOMMERS SCHWARTZ, P.C TOWN CENTER SUITE 900 SOUTHFIELD, MICHIGAN (248) According to the Plaintiffs own Complaint, the entity formally identified in the Complaint as Council on American-Islamic Relations, Michigan, a/k/a CAIR-MI, a Michigan nonprofit corporation, has been the exclusive licensee and authorized user of CAIR s U.S. registrations in the State of Michigan. (Complaint at 16, emphasis added). The Complaint, however, does not attach a copy of the license agreement upon which CAIR-MI standing is predicated. 3 The Complaint does not allege that the entity called CAIR-Foundation is the owner, assignee, or exclusive licensee of any of the alleged trademarks, and no registration on its face reveals that this entity has any rights to the asserted marks. 3 Neither does the Supplemental Brief, even though at the TRO hearing Defendants very clearly challenged standing as an initial matter. 3

11 Case 2:11-cv AC-MKM Document 9 Filed 01/21/11 Page 11 of 15 A search of the registered records of the State of Michigan reveals that there is no such entity as Council on American-Islamic Relations, Michigan, the entity to whom the (alleged) exclusive license was assigned. What the Michigan Department of Energy, Labor & Economic Growth records DO show is that an entity corresponding to the business ID number referenced in the Complaint (#749442) called CAIR Michigan, Inc. filed articles with the state in May, (Exhibit 1) 4. That entity failed to file any annual reports with the state for ten years, leading to the automatic dissolution of the corporation by LAW OFFICES SOMMERS SCHWARTZ, P.C TOWN CENTER SUITE 900 SOUTHFIELD, MICHIGAN (248) the state. (See MCL ; MCL ). 5 In August, 2010, an entity calling itself CAIR-Michigan Chapter, Inc., (not a plaintiff) filed a change of name from CAIR MICHIGAN, Inc., under the tax ID number originally assigned to CAIR Michigan, Inc., the not for profit corporation. That new entity, under the new name, then filed certificates of assumed name to transact business under various names such as PITFA. (Exhibit 2). None of those names match the name of the plaintiff entity claiming an exclusive license to the three registrations. (Id.). Thus, the only record with the State of Michigan for an entity transacting business under the tax ID number alleged in the Complaint is the new CAIR-Michigan Chapter, Inc., which is not a party of record in this case. 6 4 More precisely, another entity called CAIR Michigan, Inc., on May 1, 2000 registered as a for-profit corporation under tax ID # 38895A, and later filed papers to conduct business under the assumed name of Council on American-Islamic Relations Michigan, Inc., a for-profit corporation. (Exhibit 1). That entity is not listed as a plaintiff in this action. 5 Under the statutes, a notice of dissolution would have been sent after the company failed to file the returns. Thus, the Michigan entity that purports to own trademarks had notice for many years that it did not exist under the law. 6 Of course, this litigation concerns the fact that Defendant Deborah Schlussel, after realizing that the original Michigan CAIR not-for-profit had been dissolved because it failed to file its returns for nearly ten years, properly and legally formed a new company under the names at issue in April, 2010, months before the new entity filed the new assumed name certificates. 4

12 Case 2:11-cv AC-MKM Document 9 Filed 01/21/11 Page 12 of 15 ARGUMENT There are two general principles relevant to the status of the named plaintiffs in this action. First, to the extent that some of the named plaintiffs claim standing to enforce a federal registration issued to another party (even another plaintiff) the means to achieve that standing, i.e., the written license under which the plaintiff claims rights to enforce the federal mark, must be a part of the well-pleaded complaint. The party asserting that it has all substantial rights in the [intellectual property] must LAW OFFICES SOMMERS SCHWARTZ, P.C TOWN CENTER SUITE 900 SOUTHFIELD, MICHIGAN (248) produce... written instruments documenting the transfer of proprietary right. Great Lakes Intellectual Prop. v. Sakar Int l, Inc., 516 F. Supp. 2d 880 (E.D. Mich. 2007). Second, as to at least one of the named plaintiffs, the failure to have paid annual fees and to have filed annual reports for nearly ten years resulted in an automatic dissolution of the company, and putting aside any question whether a newly-formed company is in fact the named entity (as shown below, it is not), under Michigan law, that newly-formed entity is NOT automatically recognized as a successor to the dissolved corporation and cannot automatically assume its property, including any license to practice the federal registration. See, Ruzitz v Serbian Nat l Home Soc., 315 Mich. 292, 24 NW2d 125 (1946) (when charter of nonprofit corporation became void for failure to file annual report and pay fee, and majority of members of corporation formed new corporation with like name and purpose, asserting, in articles, ownership of property of old corporation, new corporation was not reorganization of old, and, without transfer of assets by old corporation, no interest therein was acquired by new corporation). 5

13 Case 2:11-cv AC-MKM Document 9 Filed 01/21/11 Page 13 of 15 A. THE COMPLAINT MUST BE DISMISSED AS TO PLAINTIFF CAIR- FOUNDATION SINCE IT IS NOT A REGISTRANT OR LICENSEE OF ANY MARK Section 1114 of the Lanham Act creates a cause of action only for registrants of a trademark. The face of the three federal registrations reveals that the entity called CAIR-Foundation is not a registrant. The Complaint must be dismissed as to CAIR-Foundation as there are no allegations that this entity is the registrant or has a license to use the registrations. LAW OFFICES SOMMERS SCHWARTZ, P.C TOWN CENTER SUITE 900 SOUTHFIELD, MICHIGAN (248) B. CAIR HAS ADMITTED EXCLUSIVELY LICENSING THE MARKS TO CAIR-MI THUS TERMINATING ITS RIGHTS TO BRING AN ACTION IN ITS OWN NAME The Complaint, based on Sections 1114 and 1125 of the Lanham Act, must be dismissed as to the sole named registrant, CAIR, the listed federal registrant of the marks at issue, since the Complaint alleges and admits that the marks are exclusively licensed to another entity, CAIR-MI. Under the Lanham Act, licensees like the alleged CAIR-MI entity typically do not have standing to assert a claim under Section However, a truly exclusive licensee may assert a claim under Section 1114 where the terms of the license agreement are in fact a total assignment of the mark. See, e.g., Fin. Inv. Co. (Bermuda) Ltd. v. Geberit AG, 165 F.3d 526, 531 (7 th Cir. 1998). To equate to an assignment such as that contemplated under section 1127 of the Lanham Act, the licensor must essentially grant the licensee a property interest in the trademark. Kia Motors of America v. Autowerks Distributors, Inc., 2007 US Dist. Lexis 90419, 2007 Westlaw at page 2 (D. Minn., December 7, 2007). In turn, to rise to the level of a property interest, the license must be exclusive in that the licensor retains no rights to use the mark such that the licensee can exclude the licensor from use. Bliss Clearing Niagara, Inc. v. Midwest Brake Bond Company, 339 F.2d 2nd 944, 6

14 Case 2:11-cv AC-MKM Document 9 Filed 01/21/11 Page 14 of (W.D. Mich. 2004). Thus, the denomination of the license as exclusive brings with it a presumption that the rights were terminated as to the federal registrant, CAIR. C. CAIR-MI HAS NO STANDING SINCE IT IS NOT A REGISTRANT, AND HAS NOT SHOWN A PROPERTY INTEREST IN THE FEDERAL MARKS The Complaint must also be dismissed as to the CAIR-MI entity as there is (1) no evidence from the Complaint as to the scope of the alleged exclusive license, and (2) the actual entity named as LAW OFFICES SOMMERS SCHWARTZ, P.C TOWN CENTER SUITE 900 SOUTHFIELD, MICHIGAN (248) the plaintiff does not appear to exist as a Michigan corporation. Thus, the Complaint fails to show that this entity has a property interest in the federal trademarks, and accordingly lacks standing to pursue the claims asserted. D. TO THE EXTENT THE STATE UNFAIR COMPETITION CLAIM ARISES OUT OF PUTATIVE OWNERSHIP OF FEDERAL MARKS, IT CANNOT BE ASSERTED WITHOUT A SHOWING THAT ANY PLAINTIFF HAS STANDING The third count of the Complaint, based on state unfair competition law, is also articulated on the basis of the various plaintiffs alleged rights in the federally-registered marks. 7 Accordingly, pursuant to Rules 12(b)(1) and (6), Defendants ask this Court to dismiss the above action with prejudice. Without standing to assert the federal marks, these plaintiffs also lack standing to assert state-law unfair competition. 7 Unfair competition ordinarily consists in the simulation by one person, for the purpose of deceiving the public, of the name, symbols, or devices employed by a business rival, or the substitution of the goods or wares of one person for those of another, thus falsely inducing the purchase of his wares and thereby obtaining for himself the benefits properly belonging to his competitor. Moon Bros., Inc. v. Moon, 300 Mich. 150, 1 N.W.2d 488, 493 (Mich. 1942). Once the standing, if any, of any plaintiff is sorted out, the unfair competition claim will be dismissible on preemption grounds. 7

15 Case 2:11-cv AC-MKM Document 9 Filed 01/21/11 Page 15 of 15 Respectfully submitted, SOMMERS SCHWARTZ, P.C. LAW OFFICES SOMMERS SCHWARTZ, P.C TOWN CENTER SUITE 900 SOUTHFIELD, MICHIGAN (248) Dated: January 21, 2011 CERTIFICATE OF SERVICE /s/ Andrew Kochanowski (P55117) Attorney for Defendants 2000 Town Center, Suite 900 Southfield, MI (248) akochanowski@sommerspc.com I certify that on January 21, 2011, I electronically filed the forgoing paper with the Clerk of the Court using the ECF system which will send notification of such filing to all counsel of record on the ECF Service List. s/andrew Kochanowski (P55117) Sommers Schwartz, P.C Town Center, Suite 900 Southfield, MI (248) akochanowski@sommerspc.com 8

16 Case 2:11-cv AC-MKM Document 9-1 Filed 01/21/11 Page 1 of 1 INDEX OF EXHIBITS EXHIBIT 1: CAIR Michigan, Inc. Filings EXHIBIT 2: CAIR-Michigan Chapter, Inc. Filings

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