E-commerce platform Elliot’s complaint against Vander Groups gets dismissed in United States District Court Southern District of New York

Date Published: Jun 24, 2021

Hello I Am Elliot (“Elliot”),is a start-up with a global ecommerce platform called “Elliot” which connects merchants to a global marketplace to sell and ship products across multiple platforms. Vander Group is another ecommerce company. Sine, the managing director of Vander Group met Villasenor and started to collaborate. However, Elliot found out that sometime in 2019, Sine sent emails to shareholders and employees of Elliot claiming that Villasenor was involved in a legal battle between Sine and Sine’s ex-girlfriend, Kathryn Kosmides (“Kosmides”). These emails sent out by Sine allegedly contained false and defamatory statements while also making use of the “ELLIOT” mark. Elliot filed a Complaint in the United States District Court Southern District of New York (“the Court”) (Hello I Am Elliot Inc v Sne, 19 Civ. 6905 (PAE) (S.D.N.Y. Jul. 2, 2020). The Court dismissed the Complaint and rejected Elliot’s arguments on multiple counts. 

In January 2017, Villasenor founded Hello I Am Elliot, a start-up with a global ecommerce platform called “Elliot.” Elliot connects merchants to a global marketplace to sell and ship products across multiple platforms. By March 2017, Hello I Am Elliot was consistently using the “ELLIOT” mark in connection with the Elliot platform.On March 22, 2017, Villasenor met Sine, managing director of Vander Group, another e-commerce company. The two discussed collaborating and together formed Vander International Corp. Vander International Corp. was involved in active business for only two months between May and July 2017. During the said period, Sine and the Vander Entities made several posts using the “ELLIOT” mark.

On August 1, 2017, Elliot and Vander Group entered into a referral affiliate agreement (“Affiliate Agreement”), the only agreement between the companies. The Affiliate Agreement prohibited Vander Group from using the “ELLIOT” mark in a way that would “deceive others, create a likelihood of confusion or destroy or diminish “ELLIOTs” goodwill.” The Affiliate Agreement did not grant Vander Group or Sine the right to claim ownership of the Elliot platform or the ELLIOT mark. The Vander Entities and Sine never had access to the Elliot software, or the skills to recreate the code.

Elliot found out that sometime in 2019, Sine sent emails to shareholders and employees of Elliot claiming that Villasenor was involved in a legal battle between Sine and Sine’s ex-girlfriend, Kathryn Kosmides (“Kosmides”). These emails sent out by Sine allegedly contained false and defamatory statements while also making use of the “ELLIOT” mark.

On September 6, 2017 and June 20, 2019, Elliot sent Sine and the Vander Entities cease-and-desist letters demanding that they stop infringing on its trademark and copyright.On July 24, 2019, plaintiffs filed their initial complaint inUnited States District Court Southern District of New York (“the Court”). On November 1, 2019, Vander Group filed a motion to dismiss the complaint filed by Elliot. On November 4, 2019, the Court instructed Elliot to either amend their complaint or oppose the motion. Elliot amended their complaint and filed it again.

However, the Court granted the motion to dismiss, hence dismissing the two federal claims for (1)trademark infringement and a declaratory judgment as to copyright ownership, and (2) declining to exercise jurisdiction over Elliot’s state law claims, for defamation and tortious interference.The Court dismissed the Amended Complaint without prejudice, granting Elliot leave to amend these claims by July 16, 2020. The Court also denied the motion for a preliminary injunction, with prejudice.

On July 23, 2020, after plaintiffs did not file a second amended complaint, the Court issued an order directing the Clerk of Court to close the present case.On August 5, 2020, the Court entered judgment dismissing the federal claims with prejudice, and dismissing the state law claims brought by Elliotwithout prejudice to their right to pursue them in the state court.

The Court dismissed Elliot’s trademark infringement claim for failing to allege that the “ELLIOT” mark is protectable under the Lanham Act because the mark at the time, was unregistered. The Court assessed the mark’s distinctiveness as The Second Circuit has held that names are generally descriptive in Tonawanda St. Corp. v. Fay’s Drug Co., 842 F.2d 643, 648 (2d Cir. 1988), the Court held that, because the Amended Complaint did not allege that the mark referred to something other than a common first name, the mark was descriptive.

The Court also dismissed Elliot’s claim for a declaratory judgment that Elliot was the sole owner of the Elliot code. This claim failed for two reasons: (1) it did not allege an actual controversy; and (2) it did not supply a cause of action independent of the Declaratory Judgment Act. As to the former, Elliot had not pled a “real and substantial prospect” that Vander Groups alleged ownership of the Elliot software could impact Elliot’s legal rights.

Apart from Sine’s post on the Vander Entities’ website claiming to own the Elliot platform, Elliot did not allege that Vander Groups had used or infringed their copyright in Elliot platform code, and the Amended Complaint conceded that Vander Group could not use its software because they lacked access to Elliot’s code.

As to the second point, the Court held that even if Elliot had alleged an actual controversy, they could not bring such a suit under the Copyright Act because they had not registered their copyright in the Elliot software.

The Court also denied Elliot’s motion for a preliminary injunction barring defendants from using the ELLIOT mark, suggesting ownership, sponsorship, or association with the ELLIOT mark, and claiming ownership of the Elliot platform and underlying softwarebecause the Amended Complaint did not state a claim, the preliminary-injunction motion based on its claims necessarily failed. The Court held that Elliot’s two-and-a-half-year delay in pursuing preliminary relief undermined their claim that, without an injunction, they would suffer irreparable harm and Elliot did not have a good reason for the delay nor did they show why injunctive relief was urgent.

Hello I Am Elliot Inc v Sne, 19 Civ. 6905 (PAE) (S.D.N.Y. Jul. 2, 2020)