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Hyperheal Hyperbarics, Inc. v. Shapiro

United States District Court, D. Maryland

September 6, 2018

HYPERHEAL HYPERBARICS, INC., Plaintiff,
v.
ERIC SHAPIRO, Defendant.

          MEMORANDUM OPINION

          Richard D. Bennett United States District Judge.

         On June 18, 2018, this Court entered a Temporary Restraining Order upon a motion by Plaintiff Hyperheal Hyperbarics, Inc. (“Plaintiff” or “Hyperheal”) against its founder, former employee, and current minority shareholder Defendant Eric Shapiro (“Defendant” or “Shapiro”), enjoining and restraining him from pursuing a trademark application for “Hyperheal Hyperbarics, Inc., ” attempting to control the name “Hyperheal, ” using in commerce the trademarks “Hyperheal O2” and “Hyperheal, ” and asserting control over various Hyperheal domain names and social media accounts. (ECF No. 19.) Subsequently, the Plaintiff filed a Motion for a Preliminary Injunction to continue to enjoin and restrain Shapiro from the same until a final judgment on the merits of this case. (ECF No. 31.) The issues are fully briefed, and this Court held hearings on August 15 and 17, 2018. (ECF Nos. 36, 39.)

         After two days of hearings, a review of witness testimony, exhibits presented, the parties' submissions, and argument of counsel, it is clear to this Court that Hyperheal is entitled to injunctive relief against Shapiro on Counts I-IV of the Amended Complaint, setting forth claims for breach of contract, tortious interference with business relations, unfair competition, and declaratory relief. While Shapiro has sought to cast this case as a trademark case in the context of Counts V and VI of the Amended Complaint, he faces abundant evidence of his willful breach of contract and self-dealing. Accordingly, for the following reasons, Plaintiff's Motion for a Preliminary Injunction (ECF No. 31) is GRANTED.[1]

         BACKGROUND

         I. Factual Background

         In 2012, Defendant Eric Shapiro (“Defendant” or “Shapiro”) founded Plaintiff Hyperheal Hyperbarics, Inc. (“Plaintiff” or “Hyperheal”) for the purpose of providing hyperbaric oxygen therapy.[2] (ECF No. 14-2.) A website was created for the company[3] and Shapiro registered various other domain names with GoDaddy.com to capture all variations of the primary website address. In addition, Shapiro created LinkedIn, Facebook, and Twitter accounts for the company. At this time, Shapiro was one of three directors and the majority owner of Hyperheal. (Am. Compl., ECF No. 14 at ¶ 8.)

         In February of 2014, with the business “failing, ” Samer Saiedy, M.D. (“Dr. Saiedy”), owner of Maryland Vascular Specialists and Vascular and Endovascular Surgery, agreed to provide a cash infusion to Hyperheal. (ECF No. 14 at ¶ 11.) As a result, Dr. Saiedy also became a minority owner of the business. (Id.) In September of 2015, Dr. Saiedy provided another large cash infusion. (Id.) As a result of the second cash infusion and purchase of stock from other minority shareholders, Dr. Saiedy's ownership percentage in Hyperheal increased to 97.62% and Shapiro's decreased to 2.38%. (Id.)

         In October of 2016, Shapiro was terminated from Hyperheal.[4] He remained, however, a 2.38% shareholder in the company. The next month, on November 11, 2016, Shapiro filed a Trademark Application for the name “Hyperheal Hyperbarics, Inc.” with the United States Patent and Trademark Office (“USPTO”). (ECF No. 14-11.) He filed the Trademark Application pursuant to 15 U.S.C. § 1051(a), representing that he was the owner of the trademark and using it in commerce on or in connection with hyperbaric oxygen services. (Id.) As a “specimen, ” he attached a photo of the hyperhealhyperbarics.com website and declared that the photo showed the mark being used in or connection with the hyperbaric oxygen services. (Id.) On the Application, he also represented that he was the “Owner” and that the mark had been used “in commerce” as early as May 11, 2012, and “anywhere” at least as early as March 7, 2007. (Id.) For his contact information, Shapiro listed his personal home address and cellphone, but listed the email eric@hyperheal.org. (Id.) Shapiro testified that he did not tell anyone at Hyperheal about this Trademark Application. (Aug. 15 Tr. 34:10-18.)

         Shapiro testified that shortly after he filed his Trademark Application, he received an email indicating that the trademark “was live.” (Aug. 15 Tr. 37:11-12.) Accordingly, he “believed at the time [he] had a trademark, ” and began trying to use the trademark in commerce. (Id. at 37:11-14, 19-20.) Specifically, he testified that he approached potential investors that he found through networking sites and that potential investors approached him about using the mark. (Id. at 37:21-38:5.) The potential investors were in various parts of the United States including Maryland, California, Florida, and Pennsylvania. (Id. at 40:15-19.)

         On February 10, 2017, the USPTO sent Shapiro a Notice of Office Action relating to his Trademark Application. (Def.'s Exh. 12.) The Notice stated “[r]egistration of the applied mark is refused because of a likelihood of confusion with the mark in U.S. Registration No. 4969176.” (Id.) The Notice went on to say that No. 4969176 was a trademark for “Hyperheal” that had been previously registered by Tommy Love on May 31, 2016. (Id.) The Notice indicates that it was sent to Shapiro's personal home address and the eric@hyperheal.org email address, and it gave Shapiro six months to respond or the USPTO would deem the Trademark Application abandoned.[5] (Id.) Shapiro testified that during this time, he was living at “multiple addresses” and did not recall receiving this Notice. (Aug. 17 Tr. 154:7-10.)

         One month later, on March 6, 2017, Plaintiff re-hired Shapiro as a Hyperbaric Oxygen Therapy (“HBOT”) Technician. (ECF No. 14-3.) Shapiro and Hyperheal entered into an employment agreement (the “Employment Agreement” or “the Agreement”) whereby Shapiro would receive a starting salary of $80, 000 per year, with an increase to $100, 000 per year after six months. (ECF No. 14-3.) Shapiro also still retained his 2.38% share in the company, and through the Employment Agreement agreed to the following:

You agree that you will not engage in any marketing on behalf of [Hyperheal] without the express permission of the COO or its delegate.
You will not participate on social media on behalf of [Hyperheal], including, but not limited to, email, Twitter, LinkedIn or Facebook. These social media accounts will need to be turned over to the COO, IT Director and or marketing department prior to the start of the job.
You hereby relinquish and transfer to [Hyperheal] any and all ownership or other rights, if any, that you have in any intellectual property (including without limitation trademarks, copyrights, and patents), social media accounts, . . . or other property, tangible or intangible, that has ever been used in or with respect to the business operated by [Hyperheal], regardless of whether or not title to such property is currently in the name of [Hyperheal]; you will immediately take such steps (by, among other things, providing passwords and access codes) as are necessary to provide [Hyperheal] with access to and complete control over all such property; and you will, at [Hyperheal's] request, sign such documents and take such other steps as may be necessary to confirm that [Hyperheal] is the owner of all such property and accounts . . ..

(ECF No. 14-3.) Under “effect of termination, ” the Agreement provided that “[u]pon termination of this agreement for any reason, neither party shall have any further rights, duties or obligations under this agreement, except to carry out the provisions which contemplate performance after termination or expiration.” (Id.) Notably, the Employment Agreement did not contain a non-compete clause.

         Subsequently, Defendant Shapiro met with Scott Hughey, Director of Information Technology for Hyperheal, to execute his obligations under the Employment Agreement to relinquish and transfer any of his ownership or other rights in intellectual property, social media accounts, or other property. Shapiro testified that during this meeting, he “gave up” his rights to the domain names. (Aug. 17 Tr. 152:15-17.) Specifically, he provided Hughey with the user name and password to the GoDaddy account associated with the registered Hyperheal domain names. Shapiro also provided Hughey with the passwords for the company's Facebook and LinkedIn pages, and Hughey removed Shapiro as an administrator on those accounts. Shapiro also provided Hughey with the password for the Twitter account.

         It is undisputed that Shapiro did not mention his Trademark Application for “Hyperheal Hyperbarics, Inc.” to Hughey or anyone else at Hyperheal during this meeting. Accordingly, he also did not provide or notify any Hyperheal personnel of the USPTO's Notice of Office Action indicating that the trademark “Hyperheal Hyperbarics, Inc.” conflicted with a Trademark already owned by Dr. Tommy Love. Shapiro did not mention this trademark even though, as explained above, he believed that he had a valid trademark and began trying to use it in commerce. Finally, Shapiro also did not tell anyone at Hyperheal about the various investors he had spoken to in Maryland and elsewhere.

         While employed by Plaintiff, Shapiro never responded to the USPTO's Notice of Office Action. Accordingly, on September 8, 2017, the USPTO issued a Notice of Abandonment for Shapiro's Trademark Application for “Hyperheal Hyperbarics, Inc.” (Def.'s Exh. 12.) The Notice of Abandonment indicates that, like the Notice of Office Action, it was sent to Shapiro's personal home address and eric@hyperheal.org email address. Shapiro testified, however, that he also did not recall receiving this Notice.[6] (Aug. 17 Tr. 153:13-23.) Shapiro repeatedly testified that it was his understanding that the contents of his email were turned over to the company when he entered into his Employment Agreement. (Id. at 138:18-19, 22-25.) Therefore, he asserts that the company would have had access to his email and could have reviewed both USPTO Notices. Scott Hughey testified, however, that Shapiro and Hughey did not discuss Shapiro's eric@hyperheal.org email address during their meeting. (Id. at 222:12-14.) Nor did Shapiro tell Hughey or anyone else at Hyperheal that he had listed his hyperheal.org email address as a point of contact for a trademark application. Rather, Hughey testified that he assumed Shapiro would still be using the email, he did not have Shapiro's password to the email account, and accordingly he did not examine Shapiro's email. (Id. at 222:1-18.) Therefore, no one at Hyperheal ever received notice of Shapiro's Trademark Application, the USPTO Notice of Office Action, or the USPTO Notice of Abandonment.

         A year after entering into his Employment Agreement, Shapiro was terminated in March of 2018 for “unprofessional, unethical or fraudulent conduct.” The Amended Complaint asserts that Shapiro was terminated because Hyperheal determined that he was responsible for improper billing practices that resulted in a federal investigation and Hyperheal agreeing to repay $278, 579.85 in March of 2018. (ECF No. 14 at ¶¶ 13, 17-18.) At the hearing, the parties agreed that this was the stated reason for his termination, although Shapiro continues to deny that he engaged in overbilling.

         After his termination, Shapiro took several actions related to the “Hyperheal” name. On May 1, 2018, he filed a new Trademark Application for “Hyperheal Hyperbarics, Inc.” (ECF No. 14-4.) He testified that he saw online that his previous application had been deemed abandoned and that no one currently owned the mark. (Aug. 15 Tr. 73:16-25.) For this application, he listed the email eric.hyperheal@gmail.com. (ECF No. 14-4.) Two weeks later, on May 16, 2018, Shapiro met with Dr. Love and bought the interests in the trademarks “HyperHeal” and “HyperHeal O2”. (Aug. 17 Tr. 148:15-16.) He testified that he learned of Dr. Love's marks by doing a search for “Hyperheal” on the USPTO's website. (Id. at 147:24-148:1.) He then contacted Dr. Love and purchased the two marks. Notably, the “Hyperheal” trademark was the mark that the USPTO determined created a likelihood of confusion with his first Trademark Application for “Hyperheal Hyperbarics, Inc.”[7]

         Shapiro also contacted GoDaddy.com and represented that he was the proper owner of the Hyperheal domain names that he had previously transferred and requested that they be transferred back into his account. Shapiro testified that he believed he was the proper owner because he was still paying fees for the domain names and Hyperheal had not taken over the payments since his termination. After Shapiro contacted GoDaddy, Scott Hughey received an email indicating that there was a pending transfer of the domain names out of Hyperheal's account to another account. (ECF No. 11-6.) Less than twenty-four hours later, he received another email indicating that the transfer had occurred. (Id.) The notification indicated that the new registrant's email was eric.hyperheal@gmail.com. (Id.) Hughey then filed a complaint with GoDaddy, stating that the domain names had been transferred incorrectly and requesting their return. Finally, Shapiro contacted LinkedIn and stated that Hyperheal was infringing on his trademark. Hughey testified that control of the site was almost immediately removed from Hyperheal. Shapiro also contacted Twitter and Facebook. (Aug. 17 Tr. 207:25-208:3.)

         II. Procedural Background

         On May 30, 2018, Plaintiff Hyperheal filed a Verified Complaint and Motion for Temporary Restraining Order in the Circuit Court for Baltimore County, Maryland. (ECF Nos. 2, 4.) That same day, the Circuit Court issued a Temporary Restraining Order: (1) enjoining and restraining Shapiro from asserting control over various Hyperheal domain names, the Hyperheal LinkedIn, Facebook, and Twitter accounts, and any other intellectual property using the name “Hyperheal”; (2) ordering him to transfer to Plaintiff any and all ownership in the same that Shapiro controlled; (3) enjoining and restraining Shapiro from pursuing his May 1, 2018 Trademark Application; and (4) enjoining and restraining him from attempting to control the name “Hyperheal.” (ECF No. 5.)

         On June 7, 2018, Shapiro removed the case to this Court on the basis of federal question jurisdiction under 28 U.S.C. §1331, given the Complaint's references to intellectual property and trademark law.[8] (ECF No. 1.) After this Court held a teleconference with the parties, Hyperheal filed an Amended Complaint and Supplemental Motion for Temporary Restraining Order. (ECF Nos. 14, 15.) The six-count[9] Amended Complaint asserts claims for: breach of contract (Count I), tortious interference with business relations (Count II), unfair competition- misappropriation of products (Count III), declaratory relief (Count IV), Lanham Act, 15 U.S.C. § 1501, et seq., violations (Count V), and declaratory relief regarding trademark rights (Count VI). (ECF No. 14.)

         On June 19, 2018, this Court held a hearing on Plaintiff's Supplemental Motion for Temporary Restraining Order and for the reasons stated on the record, granted the motion. (ECF No. 19; TRO Tr., ECF No. 30.) The Temporary Restraining Order issued by this Court ordered that Shapiro was enjoined and restrained, until further Order of this Court after a preliminary injunction hearing, from:

A. Asserting control over the Hyperheal domain names Hyperhealbarics.com, [various other domain names], any other web domains containing “Hyperheal, ” the Hyperheal LinkedIn webpage, Facebook page, and Twitter account and any other ...

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