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Hyperheal Hyperbarics, Inc. v. Shapiro

United States District Court, D. Maryland

August 2, 2019

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

          MEMORANDUM OPINION

          RICHARD D. BENNETT UNITED STATES DISTRICT JUDGE

         Plaintiff, Hyperheal Hyperbarics, Inc. (“Hyperheal”) filed suit against Defendant Eric Shapiro (“Shapiro”), the initial founder of Hyperheal and a former employee, seeking to enjoin his efforts to use and trademark the Hyperheal name. (Am. Compl., ECF No. 14.) Hyperheal brought six causes of action against Shapiro, including breach of his employment contract, tortious interference with business relations, unfair competition, and Lanham Act[1] violations. (Id.) A temporary restraining order was initially granted, followed by a Preliminary Injunction, which issued on September 6, 2018. (ECF Nos. 19, 44, 45.) Now pending before this Court are two motions for summary judgment: (1) Hyperheal Hyperbarics, Inc.'s Motion for Partial Summary Judgment (ECF No. 83); and (2) Defendant Eric Shapiro's Motion for Summary Judgment (ECF No. 91). A hearing was held on July 11, 2019. See Local Rule 105.6 (D. Md. 2018). For the reasons that follow, Hyperheal Hyperbarics, Inc.'s Motion for Partial Summary Judgment (ECF No. 83) shall be GRANTED IN PART and DENIED IN PART, and Shapiro's Motion for Summary Judgment (ECF No. 91) shall be DENIED.

         Specifically, judgment as a matter of law that Shapiro breached the Employment Agreement shall be GRANTED, and the remedy of specific performance shall be GRANTED with regard to the Pre-Termination Domain Names and social media accounts. Further, a permanent injunction (Count IV) shall be GRANTED, but the geographic scope of Hyperheal's trademark protection remains pending the jury resolution of material factual disputes. Summary judgment shall be DENIED as to Tortious Interference (Count II), Unfair Competition-Misappropriation (Count III), Lanham Act claims (Count V), and Declaratory Relief Regarding Trademark Rights (Count VI). Counts II, III, and V shall proceed to trial by jury, scheduled to commence on August 19, 2019. Based on the jury's findings of fact, this Court will issue its rulings of law related to Specific Performance, Permanent Injunction, and Declaratory Relief Regarding Trademark Rights.

         Shapiro's request for judgment as a matter of law regarding his ownership of the Post-Termination Domain Names and the federally-registered trademarks is DENIED.

         BACKGROUND

         In May 2007, Eric Shapiro formed Hyperheal Hyperbarics, LLC to provide hyperbaric oxygen therapy.[2] (Am. Compl. ¶ 5, ECF No. 14; ECF No. 14-1.) The LLC's corporate status was forfeited in October 2008. (Am. Compl. ¶ 7, ECF No. 14; ECF No. 14-1.) A few years later, in July 2012, Shapiro formed Hyperheal Hyperbarics, Inc. as majority owner and one of three directors. (Am. Compl. ¶ 8, ECF No. 14.) The Hyperheal name has been continuously registered in Maryland since that time. (Mem. Op. 2, ECF No. 44.) At the same time, through GoDaddy.com, a domain registrar, Shapiro purchased multiple internet domain names containing the Hyperheal name.[3] (Am. Compl. ¶ 9, ECF No. 14; ECF No. 83-4 at ¶¶ 2-4.) Shapiro paid the registration fees for all the domains through June 2018. (Am. Compl. ¶ 9, ECF No. 14.) Hyperheal also created a LinkedIn webpage profile, a Facebook account, and a Twitter account. (Id. at ¶ 10.) At that time, Shapiro was one of three directors and the majority owner of Hyperheal. (Id. at ¶ 8.)

         On December 18, 2013, Dr. Tommy Love (“Dr. Love”), from the state of Utah, filed a trademark application with the United States Patent and Trademark Office (“USPTO”) for “Hyperheal” and “Hyperheal O2.” (Pl.'s Mot. Exs. 6, 7, ECF Nos. 83-8, 83-9.) The applications included a declaration that “to the best of his[] knowledge and belief no other person, firm, corporation, or association ha[d] the right to use the mark in commerce . . . .” (Id.) The USPTO issued a notice to Dr. Love requesting that he specifically disclaim the O2 portion of the requested marks because it is an acronym for oxygen. (Id.) The notice to Dr. Love included what was purported to be a capture of Dr. Love's website, but it was in actuality, Hyperheal's website including its Maryland address and phone number. (Id.) In Dr. Love's response to the USPTO disclaiming the O2 portion of the mark, he did not notify the USPTO that the website did not belong to Dr. Love and did not establish prior use. (Id.) Ultimately, in March 2015, the USPTO issued Notices of Allowance for the Hyperheal trademark to Dr. Love, and on May 31, 2016, the USPTO issued the Hyperheal trademark and identified the first use as April 2014.[4] (Id.)

         During this same span of time, Shapiro's business was failing. (Am. Compl. ¶ 11, ECF No. 14.) On February 1, 2014, Hyperheal requested Dr. Samer Saiedy, M.D. (“Dr. Saiedy”) to provide a cash infusion, which resulted in Dr. Saiedy becoming a minority owner of Hyperheal, and Shapiro's ownership was reduced to 31%. (Id.) In September 2015, Dr. Saiedy provided another large cash infusion and became 97.62% majority owner of Hyperheal with Shapiro retaining 2.38% as a minority owner. (Id. at ¶ 12.) Shapiro was also retained as an Hyperheal employee. (Id.) In October 2016, Shapiro was terminated from Hyperheal, although he remained a minority owner. (Mem. Op. 3, ECF No. 44.) On November 2, 2016, Shapiro filed an application with the USPTO to trademark Hyperheal Hyperbarics, Inc., stating that he had been using the mark since March 7, 2007, and the first use in commerce was at least as early as May 11, 2012. (Am. Compl. ¶ 61, ECF No. 14; ECF No. 14-11.) He used his personal contact information, although with his eric@hyperheal.org email address, and included digital images from the Hyperheal website as a specimen of the mark's use in commerce. (Id.) On February 10, 2017, the USPTO sent Shapiro a Notice of Office Action stating that the registration of the mark was refused because it was likely to be confused with Dr. Love's existing trademark. (See Mem. Op. 4, ECF No. 44 (citing Def.'s Ex. 12).) Shapiro did not respond to the notice, and the application was ultimately considered abandoned. (Id. at 4, 6; see also Am. Compl. ¶ 62, ECF No. 14; ECF No. 14-12.)

         On March 6, 2017, Hyperheal rehired Shapiro to work in the company as a technician, and they entered into an Employment Agreement. (Am. Compl. ¶ 14, ECF No. 14; ECF No. 14-3.) Under the Employment Agreement, Shapiro expressly agreed to do and refrain from doing several things, including:

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 and to give [Hyperheal] complete control exclusive control over such property and accounts, and you will not, without [Hyperheal's] express written consent, act as [Hyperheal's] representative or agent with respect to any such property or any other matter . . . .
While employed by [Hyperheal], you shall not engage in any work related to hyperbarics in Maryland without the express written permission . . . .
You will immediately turn over, provide, and relinquish to [Hyperheal] all property, documents, and materials that have ever been used in [Hyperheal's] business and that are or may be in your possession, custody, or control. . . .
You shall immediately turn over to [Hyperheal] and permanently relinquish control of any DME license and any other license, certificate, or other government or private right you may have related to [Hyperheal].

         (ECF No. 14-3.) Under “effect of termination, ” the Employment 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.)

         Pursuant to the Employment Agreement, Shapiro met with Scott Hughey, Hyperheal's Director of Information Technology, on March 9, 2017 and initiated transfers of the usernames and passwords to Hyperheal's accounts at GoDaddy.com, LinkedIn, Facebook, and Twitter. (Am. Compl. ¶ 16, ECF No. 14.) Hyperheal contends that Shapiro did not mention or make any effort to assign his trademark application, nor did he mention the USPTO's Notice of Office Action or that he had spoken with various investors about the trademark. (See Mem. Op. 6, ECF No. 44.) Shapiro testified at his deposition that he discussed the trademark application with Hyperheal staff, Dr. Ziad Mirza and Jennifer Parmenter. (Def.'s Resp. Mem. 18, ECF No. 91-1 (citing Exs. 19, 20, 21).) There is clearly a factual dispute on this question.

         A little more than a year later, on March 23, 2018, Hyperheal terminated Shapiro's employment for “unprofessional, unethical or fraudulent conduct” related to improper billing practices. (Am. Compl. ¶¶ 13, 17-18, ECF No. 14.) On April 18, 2018, counsel for Shapiro sent a letter to Hyperheal complaining that Shapiro had incurred charges of $273.29 for the maintenance of four domains[5] between January 8, 2018 and February 12, 2018. (ECF No. 14-6.) Shapiro requested reimbursement and confirmation that the domains had been fully transferred and would be maintained by Hyperheal. (Id.) Two days later, on April 20, 2018, Shapiro sent an email to GoDaddy.com stating that he had retained counsel to resolve a violation of his employment agreement, requesting control and access to his domains[6] or alternately, that they be frozen until resolved. (Pl.'s Mot. Ex. 15, ECF No. 83-17.) He further indicated that the purchase of hyperhealhyperbarics.com by Hyperheal “violates the anti-cyber squatting act.” (Id.) He used an email address of eric.hyperheal@gmail.com and included a signature line with the Hyperheal company name and logo, identifying himself as “Founder.” (Id.) In response to a request from GoDaddy.com, Shapiro provided Hyperheal's May 2012 IRS assignment of an Employer Identification Number. (Pl.'s Mot. Ex. 16, ECF No. 83-18.) As a result, GoDaddy.com notified Scott Hughey at Hyperheal that the domains[7] were being transferred to Shapiro, and the transfer completed on May 2, 2018. (Pl.'s Mot. Ex. 17-18, ECF Nos. 83-19, 83-20.)

         Also on May 2, 2018, Shapiro registered with GoDaddy.com an additional 17 domain names that contained the name “Hyperheal”.[8] (Pl.'s Ex. 19, ECF No. 83-21.) That same day, he contacted LinkedIn, seeking full administrative access to the site and declaring that he was the owner of the Hyperheal name as well as 20 URL[9] variants of the name. (See Pl.'s Ex. 22, ECF No. 83-24.) Shapiro also contacted Twitter and filed a case of “brand impersonation” against Hyperheal causing the removal of the Twitter account. (See Pl.'s Ex. 24, ECF No. 83-26.)

         Additionally, Shapiro filed a new application with the USPTO on May 1, 2018 to trademark Hyperheal Hyperbarics, Inc., stating that he had been using the mark since March 7, 2007, and the first use in commerce was at least as early as May 11, 2012.[10] (Pl.'s Mot. Ex. 12, ECF No. 83-14.) Shapiro approached Dr. Love and arranged to purchase Dr. Love's Hyperheal trademark, which was assigned to Shapiro on May 16, 2018 and recorded with the USPTO. (See Pl.'s Mot. Ex. 13, ECF No. 83-15.) Shapiro then amended his trademark application on May 21, 2018 to advise that he now owned Dr. Love's trademark, which should resolve any conflict issues. (Id.)

         Ultimately, Shapiro's activities resulted in Hyperheal taking legal action in an effort to reinstate its access to the website domains, LinkedIn and Twitter accounts, and a cease-and-desist letter to Shapiro on May 18, 2018. (ECF No. 14-8.) Shapiro responded to Hyperheal's demands with his own demands, which led to Hyperheal's filing of a lawsuit against Shapiro in the Circuit Court for Baltimore County on May 30, 2018. A Temporary Restraining Order (“TRO”) issued on May 30, 2018, restraining Shapiro from his attempts to control the name “Hyperheal, ” the Hyperheal domain names, and the social media accounts. (TRO, ECF No. 5.) It also ordered Shapiro to transfer to Hyperheal all domain names, the LinkedIn webpage, and “any other intellectual property using the name ‘Hyperheal' that Shapiro now controls” and it enjoined Shapiro from pursuing the “Hyperheal Hyperbarics, Inc.” trademark application. (Id.)

         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.[11] (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[12] 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). (Am. Compl., ECF No. 14.)

         Upon Hyperheal's deposit of $25, 000 with the Clerk of the Court to act as a bond, the TRO was extended until this Court had an opportunity to hold a Preliminary Injunction hearing. (See ECF Nos. 19, 22, 23.) In mid-August 2018, this Court held two days of hearings with witness testimony, exhibits, and arguments of counsel, and on September 9, 2018, this Court entered a preliminary injunction order, which continues to enjoin Shapiro from the same activities as the TRO until this Court or a jury renders a final judgment on the merits of Hyperheal's claims. (ECF No. 45.)

         On January 11, 2019, Hyperheal filed a motion to modify the preliminary injunction and for sanctions against Shapiro. (ECF No. 49.) Because this Court was in the middle of a multi-week bench trial, the motion was referred to a Magistrate Judge for issuance of a report and recommendation pursuant to Local Rule 301.5(a)-(b) (D. Md. 2018); 28 U.S.C. § 636(b)(1)(A) and (B). Judge Copperthite of this Court issued his report and recommendation on March 29, 2019, and it was adopted without objection on April 23, 2019, thereby denying Hyperheal's motion. (ECF Nos. 82, 92.) During this process, on April 5, 2019, the parties entered a Joint Stipulation (ECF Nos. 88, 97) under which Shapiro permanently released all control over the “Pre-Termination Domain Names.”[13] and waived all rights to them. Shapiro now only claims ownership in the “Post-Termination Domain Names”[14] that he purchased after his termination on March 23, 2018, but he claims no ownership interest in any other domain names that include the word “Hyperheal” in the name. (Stip., ECF No. 88.) Control over the Post-Termination Domain Names was temporarily provided to Hyperheal. (Id.)

         Now pending before this Court is Hyperheal's Motion for Partial Summary Judgment (ECF No. 83), and Shapiro's Motion for Summary Judgment (ECF No. 91). Both motions have been fully briefed, and a motions hearing was held on July 11, 2019. For the reasons that follow, Hyperheal's motion shall be GRANTED IN PART and DENIED IN PART, and Shapiro's motion shall be DENIED.

         Specifically, judgment as a matter of law that Shapiro breached the Employment Agreement shall be GRANTED, and the remedy of specific performance shall be GRANTED with regard to the Pre-Termination Domain Names and social media accounts. Further, a permanent injunction (Count IV) shall be GRANTED, but the geographic scope of Hyperheal's trademark protection remains pending the jury resolution of material factual disputes. Summary judgment shall be DENIED as to Tortious Interference (Count II), Unfair Competition-Misappropriation (Count III), Lanham Act claims (Count V), and Declaratory Relief Regarding Trademark Rights (Count VI). Counts II, III, and V shall proceed to trial by jury, scheduled to commence on August 19, 2019. Based on the jury's findings of fact, this Court will issue its rulings of law related to Specific Performance, Permanent Injunction, and Declaratory Relief Regarding Trademark Rights.

         Shapiro's request for judgment as a matter of law that he owns the Post-Termination Domain Names is DENIED, and judgment as a matter of law that he owns the federally-registered trademarks is DENIED.

         STANDARD OF REVIEW

         Rule 56 of the Federal Rules of Civil Procedure provides that a court “shall grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(c). A material fact is one that “might affect the outcome of the suit under the governing law.” Libertarian Party of Va. v. Judd, 718 F.3d 308, 313 (4th Cir. 2013) (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986)). A genuine issue over a material fact exists “if the evidence is such that a reasonable jury could return a verdict for the nonmoving party.” Anderson, 477 U.S. at 248. When considering a motion for summary judgment, a judge's function is limited to determining whether sufficient evidence exists on a claimed factual dispute to warrant submission of the matter for resolution at trial. Id. at 249. Trial courts in the Fourth Circuit have an “affirmative obligation . . . to prevent factually unsupported claims and defenses from proceeding to trial.” Bouchat v. Balt. Ravens Football Club, Inc., 346 F.3d 514, 526 (4th Cir. 2003) (quoting Drewitt v. Pratt, 999 F.2d 774, 778-79 (4th Cir. 1993)).

         In undertaking this inquiry, this Court must consider the facts and all reasonable inferences in the light most favorable to the nonmoving party. Libertarian Party of Va., 718 F.3d at 312; see also Scott v. Harris, 550 U.S. 372, 378 (2007). This Court “must not weigh evidence or make credibility determinations.” Foster v. University of Md.-Eastern Shore, 787 F.3d 243, 248 (4th Cir. 2015) (citing Mercantile Peninsula Bank v. French, 499 F.3d 345, 352 (4th Cir. 2007)); see also Jacobs v. N.C. Admin. Office of the Courts, 780 F.3d 562, 569 (4th Cir. 2015) (explaining that the trial court may not make credibility determinations at the summary judgment stage). Indeed, it is the function of the fact-finder to resolve factual disputes, including issues of witness credibility. See Tolan v. Cotton, 572 U.S. 650, 656-59 (2014).

         When both parties file motions for summary judgment, as here, this Court applies the same standard of review to both motions, considering “‘each motion separately on its own merits to determine whether either of the parties deserves judgment as a matter of law.'” Defenders of Wildlife v. North Carolina Dept. of Transp., 762 F.3d 374, 392 (4th Cir. 2014) (quoting Bacon v. City of Richmond, Va., 475 F.3d 633, 638 (4th Cir. 2007)). “[B]y the filing of a motion [for summary judgment, ] a party concedes that no issue of fact exists under the theory he is advancing, but he does not thereby so concede that no issues remain in the event his adversary's theory is adopted.” Brown v. Perez, 835 F.3d 1223, 1230 n.3 (10th Cir. 2016) (citation omitted); see also Sherwood v. Washington Post, 871 F.2d 1144, 1148 n.4 (D.C. Cir. 1989) (“[N]either party waives the right to a full trial on the merits by filing its own motion.”). “However, when cross-motions for summary judgment demonstrate a basic agreement concerning what legal theories and material facts are dispositive, they “‘may be probative of the non-existence of a factual dispute.” Syncrude Canada Ltd. v. Highland Consulting Group, Inc., 916 F.Supp.2d 620 (D. Md. 2013) (quoting Shook v. United States, 713 F.2d 662, 665 (11th Cir. 1983)); Georgia State Conference of NAACP v. Fayette County Bd. of Comm'rs, 775 F.3d 1336, 1345 (11th Cir. 2015).

         ANALYSIS

         Hyperheal seeks a judgment against Shapiro for: (i) Shapiro's breach of his employment agreement and specific performance of his contract obligations; (ii) Shapiro's liability for his tortious conduct; (iii) Shapiro's Lanham Act violations including cancelation of the registered trademarks Shapiro obtained; and (iv) permanent injunctive relief against Shapiro relative to Hyperheal's intellectual property. (Pl.'s Mot. Mem. 2, ECF No. 83-1.) Although not listed in this summary, it appears that Hyperheal also seeks summary judgment on Count III - Unfair Competition - Misappropriation of Products under Maryland law. (See Id. at 23-24, ECF No. 83-1.) Hyperheal suggests that the only issues remaining for trial are compensatory and punitive damages for Shapiro's tort liability. (Id. at 2.) By his motion, Shapiro seeks to keep the trademarks and domains that he purchased after his termination from Hyperheal (see Stip., ECF No. 88).

         I. Breach of ...


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