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`Case 1:22-cv-01583-RGA Document 29 Filed 10/18/23 Page 1 of 13 PageID #: 494
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`IN THE UNITED STATES DISTRICT COURT
`FOR THE DISTRICT OF DELAWARE
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`HOMEVESTORSOF AMERICA,INC.
`
`Plaintiff,
`
`Vv.
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`WARNER BROS. DISCOVERY, INC.
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`Defendant.
`
`meeeeeeeeeeea
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`Civil Action No. 22-1583-RGA
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`REPORT AND RECOMMENDATION
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`HomeVestors of America,
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`Inc.
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`(“HomeVestors”)
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`filed suit against Warner Bros.
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`Discovery, Inc. (“WBD”)alleging trademark infringement and dilution because of WBD’s use of
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`the title “Ugliest House in America” in connection with a TV show on one of WBD’s networks.
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`(D.I. 1, 14). WBD movesto dismiss the First Amended Complaint pursuant to Rule 12(b)(6) on
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`the groundsthat its First Amendmentaffirmative defense immunizesit from liability.
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`(D.1. 15).
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`The motion is fully briefed (D.I. 16, 18, 21), including sur-replies (D.I. 26, 27), and I heard
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`argument on September 7, 2023. For the following reasons, I recommend that WBD’s Motion to
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`Dismiss be DENIED.
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`FILED
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`OCT 18 2023
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`U.S. DISTRICT COURT DISTRICT OF DF! AWARE
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`

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`I. Background!
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`HomeVestors is the franchisor of a business system relating to buying, renovating, and
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`selling homes.
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`(D.I. 14 at 2-3). As part of this business system, HomeVestors owns more than
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`30 trademarks involving the word “ugly” in connection with houses.
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`(/d. at 7). These marks
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`include “THE UGLIEST HOUSE OF THE YEAR,”a markthat is used primarily in connection
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`with a yearly home renovation contest that showcases one extreme home makeover, as voted on
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`by the public. (/d. at 3, 6).
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`HomeVestors alleges that it was contacted by Big Fish Entertainment on behalf of WBD
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`in June 2020 regardingthe possibility of collaborating on a new show for WBD’s HGTVnetwork.
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`(id. at 10). Big Fish Entertainment said they were “on the hunt for homeownersof the ugliest
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`houses in America”and they indicated that they wanted to use HomeVestors’ network and brand
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`to find homeowners to appear on the show.
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`(/d.). Big Fish Entertainment subsequently put
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`conversations with HomeVestors on hold and ultimately chose not
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`to collaborate with
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`HomeVestors.
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`(Cd. at 11).
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`In 2022, HGTV premiered a new showcalled “Ugliest House in America.” (/d. at 12).
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`HGTValso ran a contest that coincided with the premiere of its new show, called “HGTV’s
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`UGLIEST $5k GIVEAWAY,” emphasizing the word “ugliest.” Gd. at 13). HomeVestors
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`contacted WBD in January and February of 2022 regarding the likelihood of confusion as to
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`whether the HGTV showis affiliated with or sponsored by HomeVestors.
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`(Jd. at 14-15). When
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`The facts set forth herein are taken from the allegations in the First Amended Complaint,
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`which I assumeto be true for purposes of resolving the motion to dismiss. Ashcroft v. Iqbal, 556
`U.S. 662, 678 (2009).
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`2
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`

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`HomeVestors found WBD’s response unsatisfactory,
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`it filed this lawsuit claiming trademark
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`infringement, unfair competition, and, under both federal and Delaware law, trademark dilution.
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`(id, at 17-20).
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`In response to Defendant’s February 17, 2023 Motion to Dismiss, (D.I. 11),
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`HomeVestors filed a First Amended Complaint.
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`(D.I. 14). Defendant again moved to dismiss.
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`(D.I. 15). After briefing was complete, the Supreme Court issued its decision in Jack Daniel’s
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`Properties, Inc. v. VIP Prod. LLC, 599 U.S. 140 (2023). At the request of the parties, the Court
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`allowed supplemental briefing to address the impact of Jack Daniel’s on the pending motion to
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`dismiss. (D.I. 25, 26, 27).
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`II. Legal Standards
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`A. Motion to Dismiss
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`In reviewing a motion filed under Rule 12(b)(6), the Court must “accept all factual
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`allegations as true [and] construe the complaint in the light most favorable to the plaintiff.”
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`Phillips v. Cnty. OfAllegheny, 515 F.3d 224, 233 (3d Cir. 2008) (internal quotations omitted). A
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`Rule 12(b)(6) motion may be granted only if, accepting the well-pleaded allegations in the
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`complaint as true and viewing them in the light most favorable to the complainant, a court
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`concludes that those allegations “could not raise a claim ofentitlement to relief.” Bell Atl. Corp.
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`v. Twombly, 550 U.S. 544, 558 (2007). The complaint need not contain detailed factual allegations,
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`but conclusory allegations and “formulaic recitation[s] of the elements of a cause of action” are
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`insufficient to give the defendantfair notice ofthe nature of and groundsfor the claim. Twombly,
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`550 U.S. at 555. A complainant must plead facts sufficient to show that a claim has “substantive
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`plausibility.”
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`Johnson v. City of Shelby, 574 U.S. 10, 12 (2014) (per curiam). While this
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`plausibility standard requires more of the complaint
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`than allegations supporting the mere
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`possibility that the defendant is liable as alleged, plausibility should not be taken to mean
`3
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`

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`probability. Twombly, 550 U.S. at 545. A claim is facially plausible, and the standard is satisfied,
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`whenthe claim’s factual allegations, accepted as true, allow the court to reasonably infer that the
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`defendantis liable as alleged. Ashcroft v. Iqbal, 556 U.S. 662, 1948 (2009).
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`B. TrademarkInfringement
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`To prove trademark infringement under the Lanham Act, 15 U.S.C. § 1114, “a plaintiff
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`must show that: (1) the mark is valid and legally protectable; (2) the mark is ownedby theplaintiff
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`and (3) the defendant’s use of the mark to identify goods or servicesis likely to create confusion
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`concerning the origin of the goods or services.” Fisons Horticulture, Inc. v. Vigoro Indus., Inc.,
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`30 F.3d 466, 472 (3d Cir. 1994).
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`Recognizing that an overly expansive application of trademark law mightrestrict free
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`expression under the First Amendment, however, the Second Circuit set forth a test in Rogers v.
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`Grimaldi, 875 F.2d 994 (2d Cir. 1989) to determine whetheran alleged infringer’s use is protected.
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`Under Rogers and its progeny, a trademark used in an accused expressive work infringes only if
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`(1) the mark has “noartistic relevance”to the accused work,and (2) the use ofthe markis explicitly
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`misleading as to the source or the content of the work. Jd. at 999.
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`In response to an alleged infringer’s argument that its artistically expressive use of a
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`trademark may be protected by the First Amendment, several circuits adopted the Rogerstest. See,
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`e.g., Parks v. LaFace Records, 329 F.3d 437, 451-52 (6th Cir. 2003) (applying Rogers to a song
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`title), Mattel, Inc. v. MCA Records, Inc., 296 F.3d 894, 902 (9th Cir. 2002) (same); Sugar Busters
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`LLC v. Brennan, 177 F.3d 258, 269 & n. 7 (Sth Cir. 1999) (adopting Rogers in a case concerning
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`

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`a booktitle). The Third Circuit has not explicitly adopted or rejected Rogers.
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`It did, however,
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`summarily affirm at least one case in which a lower court applied Rogers. See Seale v. Grammercy
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`Pictures, Inc., 156 F.3d 1225 (3d Cir. 1998)(affirming Seale v. Gramercy Pictures, 949 F. Supp.
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`331 (E.D. Pa, 1996) without opinion).
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`Rogers does notinsulate all expressive works from liability for trademark infringement.
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`The Supreme Court’s recent decision in Jack Daniel’s clarifies the circumstances under which
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`thresholdtests like Rogers may apply.
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`In Jack Daniel’s, the Court considered whether the First
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`Amendmentinsulated the manufacturer of a dogtoy that parodied a well-known brand ofwhiskey
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`from liability for trademark infringement. Jack Daniel’s, 599 U.S. at 144-45. The Court held that
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`threshold tests for infringement like Rogers do not apply “when the accused infringer has used a
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`trademark to designate the source of its own goods—in other words, has used a trademark as a
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`trademark” regardless of whether the use communicated some other message beyond source
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`identification. Jd. at 145.
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`C. Federal and State TrademarkDilution
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`To state a claim for dilution under the Lanham Act, a plaintiff must plead facts to show
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`(1) the plaintiff is the owner of a mark that qualifies as a ‘famous’ markin light ofthe totality of
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`The legislative history of subsequent amendments to the Lanham Act suggests that
`2
`Congress has also endorsed Rogersorat least expects that Rogers is good law in most places. See
`H.R. Rep. No. 116-645, at 20 (2020) (“In enacting this legislation, the Committee intends and
`expects that courts will continue to apply the Rogers standard to cabin the reach of the Lanham
`Act in cases involving expressive works.”). The Supreme Court, in Jack Daniel’s, however,
`declined to weigh in on whether Rogers is an appropriate test. Jack Daniel’s, 599 U.S. at 155
`(“The point is that whatever you make of Rogers—and again, we take no position on that issue—it
`has always been a cabined doctrine.”).
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`5
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`

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`the four factors listed in § 1125(c)(2)(a); (2) the defendant is making commercialusein interstate
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`commerce of a mark or trade name; (3) defendant’s use began after the plaintiff's mark became
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`famous; and (4) defendant’s use causesdilution by lessening the capacity of the plaintiffs mark
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`to identify and distinguish goodsorservices.” Lingo v. Lingo, 785 F. Supp. 2d 443, 455 (D. Del.
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`2011) (citing Times Mirror Magazines, Inc. v. Las Vegas Sports News, 212 F.3d 157, 163 (3d Cir.
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`2000)).
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`Delaware’s Trademark Act provides “[L]ikelihood of injury to business reputation or of
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`dilution of the distinctive quality of a mark registered under this chapter, or a mark valid at
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`common law,shall be a ground for injunctive relief notwithstanding the absence of competition
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`between the parties, or the absence of confusion as to the source of goodsor services.” 6 Del. C.
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`§ 3313. “Proofofdistinctiveness necessary to satisfy the anti-dilution statutes typically is the same
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`proof used to show inherent or acquired distinctiveness for infringement purposes under the
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`Lanham Act.” Barnes Group, Inc. v. Connell Ltd. P’ship, 793 F. Supp. 1277, 1304 (D. Del. 1992).
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`III. Discussion
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`A. Trademark Infringement
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`WBDseeks dismissal of HomeVestors’ claim for trademark infringement on the grounds
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`that its First Amendmentaffirmative defense precludes liability under the Lanham Act.
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`(D.I. 16
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`at 2). WBDarguesthat this Court should apply Rogers, and that the Supreme Court’s opinion in
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`Jack Daniel’s does not meaningfully alter the analysis because the holding in Jack Daniel’s
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`concerns “branded, consumerproduct[s],” not “the descriptive title of a television series.” (D.I.
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`27 at 1). Stated more plainly, WBD does not contest (at least for purposes of its motion) thatit
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`uses HomeVestors’ mark; instead, it argues that its use of the mark cannotbe infringing under
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`Rogers becauseits useis in the title of a TV show, which is an expressive work. (Hr’g Tr. 8:12—
`6
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`21, Sept. 7, 2023 (“Tr.”)).3 But, I do not read Jack Daniel’s to be compatible with a blanket rule
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`that any title alleged to infringe another’s mark is necessarily entitled to a Rogers analysis oris
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`necessarily non-infringing.
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`Instead, Jack Daniel’s makes clear that a First Amendment defense
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`under Rogers doesnot apply if an alleged infringer’s use of the mark is source-identifying.
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`As a result, the critical issue here is whether WBD’s use ofthe title “Ugliest House in
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`America” is source-identifying—‘in other words, has [WBD] used a trademark as a trademark.”
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`Jack Daniel’s, 599 U.S. at 145. If it is, following Jack Daniel’s, a threshold test like Rogers does
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`not apply.’ Rogers was the sole basis on which WBD movedto dismiss (see D.I. 16, 21, and 27;
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`Tr. 3:12-23); thus, ifWBD’s use ofHomeVestors’ mark is source-identifying, then WBD’s motion
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`to dismiss must be denied. Because this dispute is before me on a motion to dismiss pursuant to
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`Rule 12(b)(6), however, I do not need to conclusively determine whether WBD’s use of the mark
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`is source-identifying. Rather, at the moment, I only need to determine whether WBD’s First
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`Amendment defense warrants dismissal of the First Amended Complaint.
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`In Jack Daniel’s, there was no dispute betweenthe parties that VIP Products was using the
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`mark in a source-identifying way. Not so here. However, neither party couldarticulate a test or
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`And, I note that HomeVestors’ claims in the First Amended Complaint appear to extend
`3
`beyondjust the title of the show to include the renovation contest, recruiting homeownersfor the
`contest, and the $5k giveaway—which, arguably, would not benefit from whatever protective
`standard maybe associated with thetitle of an expressive work. See D.I. 14 at 13-16; see also Tr.
`44:2-24.
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`I take no position on the broader issue of whether Rogers applies in the Third Circuit.
`4
`Instead, my references to Rogers andits test (or tests like it) are offered to contextualize and frame
`the argument advanced by Defendant.
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`method for determining, at the motion to dismiss stage or otherwise, whether an allegedly
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`infringing mark is being used in a source-identifying way.° And, at argument, the parties disputed
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`whether the determination of such is a question of law, question of fact, or a mixed question of
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`law and fact. (Tr. 8:22-9:1, 41:67). Even if the determination is not ultimately a question of fact
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`(though it very well may be), the question ofwhether the use of a mark is source-identifying likely
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`contains underlying questionsof fact.® See, e.g., Jack Daniel's, 599 U.S. at 160 (citing, among
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`WEDarguedat the hearing that there were three possible ways to look at the question of
`5
`whether a mark is being used in a source-identifying way. (Tr. 5:10-12). None ofthe identified
`waysare particularly helpful in this case, however. WBD’s first identified method was to look at
`the facts of Jack Daniel's. Ud.), But, in Jack Daniel’s, there was no dispute that the mark was
`being used in a source-identifying way so the Court did not undertake an extensive analysis on that
`issue. Second, WBDargued, I should look to Mattel, which precedes Jack Daniel's. (Id. at 6:6—
`7:13). But in Mattel, source-identification was not the issue. Instead, the Matte! court found that
`the song was non-infringing because of parody—“[t]he song does not rely on the Barbie mark to
`poke fun at another subject but targets Barbie herself.” Matte/, 296 F.3d at 901. The allegation in
`this case is meaningfully different; it is that WBD is using HomeVestors’ mark for the purpose of
`exploiting its recognizable brand. Last, WBD arguedthat the general principles of trademark law
`should inform my conclusion that WBD’s markis not being used in a source-identifying way. (id.
`at 7:20-8:21). Specifically, Defendant argued that “you have to look at Defendant’s use of the
`phrase. And here, it is a purely descriptive use.” (/d. at 8:15—19). While WBD mayultimately
`be correct, at this stage, HomeVestors pleads facts—that I must take as true-showing otherwise.
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`This notion is consistent with the law governing trademark prosecution. When determining
`6
`whether a proposed markis eligible for trademark status, an examinerplaces it into one of several
`categories reflecting the nature of the proposed mark. Real Foods Pty Ltd. v. Frito-Lay N. Am.,
`Inc., 906 F.3d 965, 971-72 (Fed. Cir. 2018). Specifically, proposed marks may be categorized,in
`ascending orderofentitlement to protection, as generic, merely descriptive, suggestive, or fanciful.
`Id. at 972. How well the proposed mark serves as a source indicator is an important consideration
`underlying this categorization, with generic marks, for example, being incapable of serving as
`source indicators and therefore ineligible for trademark protection. See id. The determination of
`which category a proposed mark falls into is a question offact. Id.
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`8
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`other things, the appearance of the tag and the alleged infringers’ treatment of other marks for
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`similar products in concluding that the use ofthe mark was source-identifying).
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`Whether the determination is one of fact, law, or mixed, and whatever the “test” may be,
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`HomeVestors argues that it sufficiently pled facts in its First Amended Complaint that, if taken as
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`true, could plausibly allow the Court to infer that WBD’s use of HomeVestors’ mark was source-
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`identifying. (D.I. 26 at 2).
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`I agree. Specifically, HomeVestors alleges that the marks are similar
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`(D.I. 14 at 12), that both parties run a contest related to ugliest homes (/d.), that internet searches
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`for HomeVestors’ marks return results for WBD’s show,(/d. at 15), that promotional materials for
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`the show emphasize the words in common with HomeVestors’ marks, (/d. at 12-13), that WBD,
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`either itself or through its agent, initially sought to take advantage of consumer recognition of
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`HomeVestors’ brand for casting purposes (/d. at 11), and that WBD is actively competing with
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`HomeVestors franchisees for houses and homeowners(/d. at 14).
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`WBDresponds that HomeVestors failed to assert facts to support the conclusion thatits
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`use of the mark is source-identifying because, essentially, its use of the mark in a title renders its
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`use non-source-identifying.
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`(Tr. 12:22-13:5). WBD has not provided me with any authority
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`holding that use of a mark in a title of a TV show is always non-source-identifying. And, in this
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`case, HomeVestors has alleged facts to support the conclusion that WBD’s use is source-
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`identifying, rather than merely expressive: HomeVestors points not only to the similarity of the
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`marks, likelihood of customer confusion, and its allegation that the parties are competitors, but
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`also to the fact that WBDinitially tried to partner with HomeVestors for the purpose ofcapitalizing
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`on HomeVestors’ brand.
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`In addition, WBD objects to considering customers’ likelihood of confusion, or whether
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`the two parties are competitors, on the issue of whether a mark is source-identifying becauseit
`9
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`argues that Rogers is designed to short-cut any sort of fact intensive inquiry.
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`(D.I. 27 at 1, Tr.
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`23:15-25). Maybe so, but Jack Daniel’s makes clear that Rogers does not apply if a mark is
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`used in a source-identifying way. So while I note WBD’sinsistence that consideration of such
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`facts would be “self-defeating,” (Tr. 63:12),
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`I also note that WBD could not tell me exactly
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`what the Court should take into account at this stage in determining whether a mark is used in
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`a source-identifying way.
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`In this same vein, WBDalso argues that it would be inappropriate to do anything other
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`than determine source identification “on its face,” with the “default assumption [being]thata title
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`is not source identifying.” (Tr. 64:7-16). An “on its face” determination may be possible or
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`appropriate in some cases. For example, with respect to Jack Daniel's, a majority of people may
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`be familiar with the iconic shape ofthe whiskey bottle, especially when combined withthe distinct
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`lettering curved over a number appearing in a circle. As counsel for WBD putit, “it’s like you
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`knowit when youseeit,” where “it” is whether something is source-identifying or not. (Tr. 65:21—
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`22). For Jack Daniel's and similarly situated products and marks, I agree. But what about other
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`marks? Surely the test cannot be whether the judge recognizes the use of the mark? Or whether
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`the judge merely thinks the marks look similar? At any rate, I disagree with WBD that the law
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`requires me to makea “default assumption” to dismiss HomeVestors’ First Amended Complaint.’
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`Cf Attentive Mobile Inc. v. 317 Labs, Inc., C.A. No. 22-1163-CJB, 2023 WL 6215825, at
`7
`*8 (D. Del. Sept. 25, 2023) (“Here, though, Defendants are asking the Court to grant a motion to
`dismiss based on the uncontroverted presence of a winning affirmative defense. And [yet] the
`record is unclear as to the[se] key points.[I]f the Court is asked to assume that something has to
`be true [as to a material matter], then the motion should not be granted.”).
`10
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`Instead, it seems to methat any recommendationthat I make must be groundedin the facts
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`pled in the First Amended Complaint and whether suchfacts are sufficient to support a plausible
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`inference that WBD’s use of the mark is source-identifying—thus precluding WBD’s Rogers
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`defense. Stated differently, a motion to dismiss based onaffirmative defense, as is the case here,
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`is only appropriate when defenseis “apparent on the face of the complaint and documentsrelied
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`on in the complaint.” Bohus v. Restaurant.com, Inc., 784 F.3d 918, 923 n.2 (3d Cir. 2015) (citation
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`omitted). Here, in consideration of the facts set forth in the First Amended Complaint, I cannot
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`say that WBD’s use of HomeVestors’ mark is so clearly non-source-identifying as to be apparent
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`on the face of the First Amended Complaint.
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`Instead, I find that HomeVestors’ First Amended
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`Complaint contains plausible allegations that would allow the Court to reasonably infer that the
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`title “Ugliest House in America”is, in fact, source-identifying. As set forth above, HomeVestors
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`avers that the marks are similar (D.I. 14. at 12), that both parties run a contest related to ugliest
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`homes(/d.), that internet searches for HomeVestors’ marks return results for WBD’s show,(/d. at
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`15), that promotional materials for the show emphasize the words in common with HomeVestors’
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`marks, (/d. at 12-13), that WBD,either itselfor throughits agent, initially sought to take advantage
`
`of consumerrecognition of HomeVestors’ brand for casting purposes (/d. at 11), and that WBDis
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`actively competing with HomeVestors franchisees for houses and homeowners (/d. at 14).
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`B. Federal and State Dilution
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`WBD also asks the Court to dismiss both the federal and the state law dilution claims on
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`the same groundsthat it seeks to dismiss the infringement claim. Specifically, for federal dilution,
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`WBDarguesthat the First Amendmentinsulates it from liability because its use of HomeVestors’
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`mark is “noncommercial.”
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`(D.I. 16 at 15 (citing 15 U.S.C. § 1125(c)(3)(C)).
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`I disagree.
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`HomeVestors’ First Amended Complaint pleads facts sufficient to plausibly conclude that WBD
`1]
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`is using HomeVestors’ mark in a commercial manner. Specifically, HomeVestors alleges that
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`WBDusedits confusingly similar mark in advertising and marketing materials to divert potential
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`customers away from HomeVestors for WBD’s benefit (D.I. 14 at 12-14) and that WBDusesthe
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`mark to suggest an affiliation or sponsorship of the show by HomeVestors that does not exist (Jd.
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`at 16). Iam persuadedthat these facts are sufficient to allow the federal dilution claim to withstand
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`a motion to dismiss on First Amendment grounds.
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`Regarding WBD’s motion to dismiss HomeVestors’ state dilution claims, WBD admits
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`that case law regarding 6 Del. C. § 3313 is “sparse,” and suggests that I may analyze the state
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`dilution claims together with the federal dilution claim.
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`(D.I. 16 at 15). If WBDis correct, then
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`its motion to dismiss the state dilution claims fails for the same reasons as its motion to dismiss
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`the federal dilution claim. That is, ] do not find that HomeVestors’ claims are barred by the First
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`Amendment given the facts pled to support
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`the plausible inference that WBD’s use of
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`HomeVestors’ mark is commercial rather than merely expressive. WBD does not moveto dismiss
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`the state dilution claims on any otherbasis.
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`IV. Conclusion
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`For the foregoing reasons, I recommendthat the District Court DENY WBD’s Motion to
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`Dismiss.
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`This Report and Recommendationis filed pursuant to 28 U.S.C. § 636(b)(1)(B), (C), Fed.
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`R. Civ. P. 72(b)(I), and D. Del. LR 72.1. Any objections to the Report and Recommendationshall
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`be filed within fourteen days and limited to ten pages. Any responseshall be filed within fourteen
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`days thereafter and limited to ten pages. The failure of a party to object to legal conclusions may
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`result in the loss of the right to de novo review in the District Court.
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`12
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`Case 1:22-cv-01583-RGA Document 29 Filed 10/18/23 Page 13 of 13 PagelD #: 506
`Case 1:22-cv-01583-RGA Document 29 Filed 10/18/23 Page 13 of 13 PageID #: 506
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`Theparties are directed to the Court’s “Standing Order for Objections Filed Under Fed. R.
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`Civ. P. 72,” dated March 7, 2022, a copy of whichis available on the Court’s website.
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`AN (TED STATES MAGISTRATE JUDGE
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`Dated: October 18, 2023
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`13
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