Intellectual Property Law

Motion to Stay Federal Action Denied; Parallel Proceedings in State and Federal Courts to Continue

By Brian Wm. Higgin

Summary: The U.S. District Court for Distict of Maryland denied motion to stay on abstention grounds in favor of a pending state court action in the Circuit Court for Montgomery County, MD, pursuant to Colorado River Water Conservation Dist. v. United States, 424 U.S. 800 (1976). In doing so, the Court found that Defendants had not overcome the “heavily weighted” balance in favor of retaining jurisdiction, and therefore Defendants had failed to establish the “extraordinary circumstances” necessary to justify Colorado River abstention. Memorandum Opinion published January 15, 2008.

Parallel proceedings

      This trademark dispute, captioned Extra Space Storage, LLC v. Maisel-Hollins Development Co. et al, No. 1:2007cv02351, involves two concurrent lawsuits arising out of the parties’ desire to use their respective service marks in Maryland.

     Extra Space registered its service mark, EXTRA SPACE STORAGE, with the United States Patent and Trademark Office in 1998 or 1999. Defendants’ predecessor in title registered its service mark, “EXTRA SPACE SELF STORAGE,” with the Maryland Office of the Secretary of State in 2003.

     On June 26, 2007, Maisel-Hollins filed its state court lawsuit against Extra Space Storage, a Delaware entity based in Salt Lake City, Utah. The lawsuit alleged violation of Maisel-Hollins’s common law and state registration rights.

     Extra Space filed its answer on September 5, 2007, but without counterclaims. Instead, also on September 5, 2007, Extra Space filed the above-captioned federal lawsuit, alleging infringement of its EXTRA SPACE STORAGE mark. Extra Space named the lone plaintiff in the state case, Maisel-Hollins, and five of its affiliates as Defendants.

     In is complaint, Extra Space alleged infringement of its federally-registered service mark in violation the Lanham Act (15 U.S.C. § 1114), common law service mark infringement and unfair competition, false designation of origin arising under the Lanham Act (15 U.S.C. § 1125(a)), false advertising arising under the Lanham Act, dilution arising under the Lanham Act (15 U.S.C. § 1125(c)), and fraudulent registration of the state service mark under Section 1-413 of the Maryland Code of Business Regulation, which states:

"A person who, for the person or for another, applies to register or registers a mark under this subtitle by knowingly making a false or fraudulent representation, orally or in writing, or by other fraudulent means is liable for any damages sustained as a result of the application or registration." 

     On November 12, 2007, the Defendants filed their answer and alleged counterclaims against Extra Space, and they also filed a motion to stay.

Abstention Two-Part Test

     The Defendants’ sole contention in their motion to stay is that the federal Court should abstain
from hearing Extra Space's federal case under the abstention doctrine articulated by SCOTUS in Colorado River on the grounds that a duplicative action is also currently pending in state court. 

     In his memorandum opinion, U.S. District Court Judge Bennett noted that a federal court may abstain from hearing a case over which it has jurisdiction in “exceptional circumstances where the order to the parties to repair to the state court would clearly serve an important countervailing interest.” Abstention under Colorado River is only appropriate, he wrote, if the federal court first determines that the federal and state suits are parallel. Next, the court must balance several factors to determine whether the case represents an “exceptional circumstance.”

     Judge Bennett found that Defendants failed to meet both prongs. First, the claim brought by Plaintiff in federal court is not a parallel proceeding to the one brought by Maisel-Hollins in state court for the purposes of Colorado River abstention. He made this determination after looking at 1) the parties; 2) the legal issues; and 3) the remedy sought, noting in particular that Extra Space has filed claims in federal Court under the Lanham Act and for common law service mark infringement that are not presently before the state court. 

     Second, Judge Bennet found that Defendants failed to overcome the heavy hurdle of establishing that Plaintiff’s case warrants abstention under the six factors articulated by the Fourth Circuit Court of Appeals:

(1) whether the subject matter of the litigation involves property where the first court may assume in rem jurisdiction to the exclusion of others;

(2) whether the federal forum is an inconvenient one;

(3) the desirability of avoiding piecemeal litigation;

(4) the relevant order in which the courts obtained jurisdiction and the progress achieved in each action;

(5) whether state law or federal law provides the rule of decision on the merits; and

(6) the adequacy of the state proceeding to protect the parties' rights.

     Holding: motion denied.

Full post as published by Maryland Intellectual Property Law Blog on January 24, 2008 (boomark / email).