MARIA-ELENA JAMES, Magistrate Judge.
Pending before the Court are four motions for summary judgment. First, Plaintiff United Tactical Systems, LLC ("UTS") and Defendants and Counter-Claimants Real Action Paintball, Inc. and K.T. Tran (together, "Real Action" or "RAP") filed Cross-Motions for Summary Judgment on UTS's claims (the "Claims Motions"). UTS Claims Mot., Dkt. No. 379; RAP Claims Mot., Dkt. No. 412. UTS and Real Action filed Oppositions (UTS Claims Opp'n, Dkt. No. 427; RAP Claims Opp'n, Dkt. No. 430) and Replies to these Motions (UTS Claims Reply, Dkt. No. 454; RAP Claims Reply, Dkt. No. 450).
Second, UTS and related Counter-Defendants
The parties dispute nearly every fact about this case. See Joint Statement of Facts ("JSOF"), Dkt. No. 468.
PepperBall projectiles are small plastic spheres that contain a proprietary irritant powder that functions similarly to pepper spray. UTS and its predecessors have sold PepperBall projectiles to police and governmental agencies, militaries, and private security firms as a non-lethal force compliance tool.
On September 14, 1999, Jaycor, Inc. ("Jaycor") filed an application with the United States Patent and Trademark Office ("USPTO") to trademark the name "PepperBall." On October 27, 2000, Jaycor assigned the PepperBall trademark application to Jaycor Tactical Systems, Inc. ("Jaycor Tactical"). On December 31, 2001, Jaycor filed a confirmation of assignment of six trademark applications, including the PepperBall trademark, to Jaycor Tactical.
On May 13, 2003, the PepperBall trademark was registered under the number 2,716,025 (the "PepperBall mark") to Jaycor Tactical for use generally in connection with "NON-LETHAL WEAPONRY, NAMELY, NON-LETHAL PROJECTILES; LAUNCH DEVICES FOR NON-LETHAL PROJECTILES; NON-LETHAL SUBSTANCES FOR USE IN NON-LETHAL PROJECTILES, NAMELY, LIQUID AND NON-LIQUID MATERIALS, NAMELY, WATER, INERT OR IRRITANT POWDERS, OLEORESIN CAPSICUM, MARKER DYES, IRRITANTS AND POWDERED OR GRANULATED MATERIALS, NAMELY BISMUTH, IN CLASS 13 (U.S. CLS. 2 AND 9)."
Jaycor Tactical twice filed a change of name to PepperBall Technologies, Inc. ("PepperBall Technologies" or "PTI"), once on December 26, 2002 and again on July 23, 2003. PepperBall Technologies was registered as a Delaware corporation. The July 23, 2003 filing included an assignment of the PepperBall mark to PepperBall Technologies.
On January 15, 2010, PepperBall Technologies took out a loan from the James Simpson Foundation (the "Simpson Foundation Loan"), which provided a security interest in PepperBall Technologies' intellectual property, including its trademarks and associated goodwill. Under the terms of the Simpson Foundation Loan, "Borrower grants Lender a security interest in all of Borrower's personal property . . ., including without limitation all of the following: all accounts, cash, patents, copyrights, trademarks, goodwill, general intangibles. . . ." PepperBall Technologies also took out a loan from the J.A. & G.L. Simpson Trust (the "Simpson Trust Loan") (together with the Simpson Foundation Loan, the "Simpson Loans"), a related Simpson entity. The Simpson Trust Loan "contained substantially the same terms" as the Simpson Foundation Loan.
On October 25, 2011, the J.A. & G.L. Simpson Trust and the James Simpson Foundation (together, the "Lenders") and PepperBall Technologies amended the Simpson Loans to include PepperBall Technologies-CA, Inc. ("PepperBall Technologies-CA" or "PTI-CA") as a co-borrower. PepperBall Technologies-CA is a wholly owned subsidiary of PepperBall Technologies and is incorporated in Delaware. Both amendments provided that "the grant of security interest set forth in Section 2 of the Original Agreement shall be deemed for all purposes to include a grant of security interest by PepperBall Technologies-CA in its personal property[.]" PepperBall Technologies' and PepperBall Technologies-CA's chairman, as well the James Simpson Foundation's president, signed the amendments. The James Simpson Foundation filed two Uniform Commercial Code Financing Statements with the Delaware Secretary of State indicating it and the J.A. & G.L. Simpson Trust had a secured interest in "[a]ll of Borrower [PepperBall Technologies-CA]'s personal property . . . including without limitation all of the following: . . . patents, copyrights, trademarks, [and] goodwill[.]"
Phoenix International LLC ("Phoenix") acquired the Simpson Loans through an Assignment Agreement. In addition to the Simpson Loans, PepperBall Technologies and PepperBall Technologies-CA took out "second-tier debt" in the form of small loans from individuals and entities. PepperBall Technologies also gave a security interest to Agility Capital, LLC ("Agility Capital").
PTI and PTI-CA materially defaulted on the Simpson Loans. On January 9, 2012, Phoenix held a UCC foreclosure sale pursuant to the security interests in PepperBall Technologies and PepperBall Technologies-CA's secured assets, including the PepperBall trademark and goodwill. Notices of the UCC foreclosure sale were placed in the San Diego Daily Transcript on December 30, 2011 and January 6, 2012. Notice of the sale was made by multiple means and sent to each of PepperBall Technologies' secured creditors. PepperBall Technologies-CA received notice of the foreclosure sale indicating its assets were being foreclosed upon; it did not object to or challenge the sale. PepperBall Technologies and PepperBall Technologies-CA worked with Phoenix to ensure foreclosure proceedings included the proper entities.
On May 25, 2012, Phoenix changed its name to Advanced Tactical Ordinance Systems LLC and filed a second Certificate of Amendment to correct the name to Advanced Tactical Ordnance Systems LLC ("ATO"). On December 5, 2012, ATO filed with the USPTO a nunc pro tunc Bill of Sale memorializing the completed foreclosure sale. The Bill of Sale's identified property included the PepperBall mark as the property.
On May 13, 2009, the USPTO received a Declaration of Use regarding the PepperBall mark pursuant to Section 8 of the Lanham Act. The Section 8 Declaration, signed by Conrad Sun, lists "Jaycor Tactical Systems, Inc." as the current owner and "Pepperball Technologies, Inc." as the proposed owner. The USPTO accepted the Declaration on June 29, 2009.
On October 30, 2013, ATO filed a Section 8 Declaration of Use and a Section 9 Application for Renewal for the PepperBall mark. On November 4, 2013, the USPTO granted the Section 9 Renewal portion, but it rejected the Section 8 portion because "[o]ffice records do not show clear chain of title in the party [ATO] who filed the Section 8 Affidavit." That same day, ATO filed with the USPTO a statement confirming ATO had acquired the PepperBall mark in a foreclosure sale. On November 13, 2013, the USPTO issued a Notice of Acceptance under Section 8 and Registration Renewal under Section 9.
ATO's assets were transferred to UTS by written assignment. The PepperBall mark was included in the transfer of these assets.
Litigation over the PepperBall trademark has been extensive and fought in multiple courts.
In September 2012, ATO filed suit in the United States District Court for the Northern District of Indiana in a case styled Advanced Tactical Ordnance Systems, LLC v. Real Action Paintball, Inc., et al., Case No. 12-00296-JVB-RBC (N.D. Ind.), in which ATO sought and obtained a temporary restraining order ("TRO") against Real Action (the "Indiana Action").
Real Action appealed to the United States Court of Appeals for the Seventh Circuit. The Seventh Circuit found the district court lacked personal jurisdiction over Real Action and ordered the district court to vacate the preliminary injunction and dismiss the action. See Advanced Tactical Ordnance Sys., LLC v. Real Action Paintball, Inc., 751 F.3d 796, 799 (7th Cir. 2014), as corrected (May 12, 2014).
The parties have litigated the case in this Court since 2014. On May 27, 2014, Real Action sued ATO for claims arising out of the Indiana Action in a case styled Real Action Paintball, Inc. v. Adv. Tactical Ordnance Sys., Inc., et al., 14-cv-2435-MEJ (N.D. Cal.) (the "ATO Case"). On September 5, 2014, UTS filed the present suit against Real Action (the "UTS Case"). UTS asserts ten claims against Real Action: (1) infringement of a registered trademark pursuant to 15 U.S.C. § 1114; (2) infringement of a trademark pursuant to 15 U.S.C. § 1125(a); (3) common law trademark infringement and unfair competition; (4) deceptive comparative advertising in violation of 15 U.S.C. § 1125(a); (5) counterfeiting in violation of 15 U.S.C. § 1114, et seq.; (6) trade dress infringement; (7) trademark dilution; (8) misappropriation of trade secrets; (9) violation of California false advertising law, Cal. Bus. & Prof. Code § 17500; and (10) violation of California unfair competition law, Cal. Bus. & Prof. Code § 17200.
Real Action asserts sixteen affirmative defenses: (1) equitable and judicial estoppel; (2) fair use; (3) comparative advertising; (4) nominative fair use; (5) genericness; (6) fraud in the procurement and maintenance of trademark registrations; (7) unclean hands; (8) bad faith trademark enforcement; (9) lack of standing under the UCL; (10) privilege of competition; (11) "that Defendants advertising, marketing and business practices were not no false, misleading or deceptive" under California Business and Professions Code sections 17200 and 17500; (12) "that Defendants' business and advertising practices alleged are not unfair, unlawful, or fraudulent" under California Business and Professions Code sections 17200 and 17500, or were justified; (13) no reliance; (14) good faith; (15) mootness; and (16) First Amendment.
UTS moved for a TRO (Dkt. No. 27), which the Court construed as a Motion for a Preliminary Injunction (Dkt. No. 34 at 5). The Court ultimately granted it in part and denied it in part, and enjoined Real Action from using the PepperBall name to refer to its irritant projectiles. Prelim. Inj. Order, Dkt. No. 85; see United Tactical Sys., LLC v. Real Action Paintball, Inc., 2014 WL 6788310, at *1 (N.D. Cal. Dec. 2, 2014). Real Action then counter-sued UTS, asserting several counterclaims that were related to its claims against ATO. Dkt. No. 51. The Court subsequently consolidated the two actions under the UTS Case. Dkt. No. 140.
Real Action's operative Third Amended Counterclaim asserts thirteen counterclaims against Counter-Defendants. See Third Am. CC ¶¶ 71-192, Dkt. No. 281. Real Action asserts three federal claims: (1) wrongful seizure, 15 U.S.C. § 1116(d)(1); (2) false designation of origin, 15 U.S.C. § 1125; and (3) monopoly and combination in restraint of trade, 15 U.S.C. §§ 1-2. Id. ¶¶ 71-78, 111-36. Real Action also asserts seven claims under state law: (1) abuse of process under Indiana law; (2) intentional interference with contractual relations under Indiana and California laws; (3) intentional or negligent interference with prospective economic advantage under Indiana and California laws; (4) combination in restraint of trade under the California Cartwright Act, Cal. Bus. & Prof. Code § 16720 et seq.; (5) unfair competition and false advertising, Cal. Bus. & Prof. Code §§ 17200, 17500; (6) unjust enrichment under Indiana law; and (7) conspiracy under California and Indiana laws. Id. ¶¶ 79-108, 137-53, 165-78. Finally, Real Action seeks declaratory judgments (1) of no Lanham Act, common law trademark, or trade dress violations; (2) of no trade secret misappropriation; and (3) for the cancellation of the PepperBall registration. Id. ¶¶ 154-64, 180-92.
The parties previously moved for summary judgment on two issues: (1) whether the registered trademarks were validly transferred, and (2) whether the registered trademarks had lapsed prior to transfer. The Court granted Counter-Defendants' Motion and denied Real Action's Motion on the first issue and denied both Motions as to the second. See First MSJ Order, Dkt. No. 348.
Summary judgment is proper where the pleadings, discovery and affidavits demonstrate that there is "no genuine dispute as to any material fact and [that] the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a). The party moving for summary judgment bears the initial burden of identifying those portions of the pleadings, discovery and affidavits that demonstrate the absence of a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). Material facts are those that may affect the outcome of the case. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A dispute as to a material fact is genuine if there is sufficient evidence for a reasonable jury to return a verdict for the nonmoving party. Id.
Where the moving party will have the burden of proof on an issue at trial, it must affirmatively demonstrate that no reasonable trier of fact could find other than for the moving party. Soremekun v. Thrifty Payless, Inc., 509 F.3d 978, 984 (9th Cir. 2007). On an issue where the nonmoving party will bear the burden of proof at trial, the moving party can prevail merely by pointing out to the district court that there is an absence of evidence to support the nonmoving party's case. Celotex, 477 U.S. at 324-25.
If the moving party meets its initial burden, the opposing party must then set forth specific facts showing that there is some genuine issue for trial in order to defeat the motion. Fed. R. Civ. P. 56(c)(1); Anderson, 477 U.S. at 250. All reasonable inferences must be drawn in the light most favorable to the nonmoving party. Olsen v. Idaho State Bd. of Med., 363 F.3d 916, 922 (9th Cir. 2004). However, it is not the task of the Court to scour the record in search of a genuine issue of triable fact. Keenan v. Allan, 91 F.3d 1275, 1279 (9th Cir. 1996). The Court "rel[ies] on the nonmoving party to identify with reasonable particularity the evidence that precludes summary judgment." Id.; see also Simmons v. Navajo Cty., Ariz., 609 F.3d 1011, 1017 (9th Cir. 2010). Thus, "[t]he district court need not examine the entire file for evidence establishing a genuine issue of fact, where the evidence is not set forth in the opposing papers with adequate references so that it could conveniently be found." Carmen v. S.F. Unified Sch. Dist., 237 F.3d 1026, 1031 (9th Cir. 2001). If the nonmoving party fails to make this showing, "the moving party is entitled to a judgment as a matter of law." Celotex, 477 U.S. at 322 (internal quotations omitted).
Additionally, at the summary judgment stage, parties must set out facts they will be able to prove at trial. At this stage, courts "do not focus on the admissibility of the evidence's form. . . . [but] instead focus on the admissibility of its contents." Fraser v. Goodale, 342 F.3d 1032, 1036 (9th Cir. 2003) (citation omitted). "While the evidence presented at the summary judgment stage does not yet need to be in a form that would be admissible at trial, the proponent must set out facts that it will be able to prove through admissible evidence." Norse v. City of Santa Cruz, 629 F.3d 966, 973 (9th Cir. 2010) (citations omitted). Accordingly, "[t]o survive summary judgment, a party does not necessarily have to produce evidence in a form that would be admissible at trial, as long as the party satisfies the requirements of Federal Rules of Civil Procedure 56." Block v. City of L.A., 253 F.3d 410, 418-19 (9th Cir. 2001); Celotex, 477 U.S. at 324 (a party need not "produce evidence in a form that would be admissible at trial in order to avoid summary judgment."); see also Fed. R. Civ. P. 56(c)(4) ("An affidavit or declaration used to support or oppose a motion must be made on personal knowledge, set out facts that would be admissible in evidence, and show that the affiant or declarant is competent to testify on the matters stated.").
Under Federal Rule of Evidence 201(b), "[t]he court may judicially notice a fact that is not subject to reasonable dispute because it: (1) is generally known within the trial court's territorial jurisdiction; or (2) can be accurately and readily determined from sources whose accuracy cannot reasonably be questioned." Documents in the public record may be judicially noticed to show, for example, that a judicial proceeding occurred or that a document was filed in another case, but a court may not take judicial notice of findings of facts from another case. Lee v. City of L.A., 250 F.3d 668, 689 (9th Cir. 2001); Reyn's Pasta Bella, LLC v. Visa USA, Inc., 442 F.3d 741, 746 n.6 (9th Cir. 2006) (courts "may take judicial notice of court filings and other matters of public record."). Nor may a court take judicial notice of any matter that is in dispute. Lee, 250 F.3d at 689-90; see also Ruiz v. City of Santa Maria, 160 F.3d 543, 548 n.13 (9th Cir. 1998) (finding judicial notice inappropriate where the facts to be noticed were not relevant to the disposition of the issues before the court).
Counter-Defendants and Real Action filed five separate requests for judicial notice ("RJN"). See Dkt. Nos. 383, 411-2, 412-2, 427-2, 434. The Court discusses each below.
Counter-Defendants request the Court take judicial notice of the following: (1) documents filed in the Indiana Action, (2) documents filed with the USPTO or the SEC, and (3) documents filed with the Colorado and Delaware Secretaries of State. Counter-Defs. RJN No. 1, Dkt. No. 383; Counter-Defs. RJN No. 2, Dkt. No. 434.
Counter-Defendants seek judicial notice of ten documents filed in the Indiana Action. Counter-Defs. RJN Nos. 1 & 2 at 1-2; see First Glapsy Decl., Exs. 46, 48-50, 60-62, 64, 86-87, Dkt. No. 382. The Court
In addition, Exhibit 62 is the Seventh Circuit's opinion in Advanced Tactical Ordnance Systems, 751 F.3d. The Court judicially notices this document solely for its existence as part of the procedural history of this case. See Fed. R. Evid. 201(a) ("This rule governs judicial notice of an adjudicative fact only, not a legislative fact."); Fed. R. Evid. 201 advisory committee's note to 1972 amendment ("Adjudicative facts are simply the facts of the particular case. Legislative facts, on the other hand, are those which have relevance to legal reasoning and the lawmaking process, whether in the formulation of a legal principle or ruling by a judge or court or in the enactment of a legislative body.").
Counter-Defendants request the Court take judicial notice of 24 documents filed with the USPTO or the SEC. Counter-Defs. RJN No. 1 at 2-5; Counter-Defs. RJN No. 2 at 3-5; see Glaspy Mot. Decl., Exs. 41, 42, 43, 44, 45, 63, 65, Dkt. No. 382; Gibson Mot. Decl., Exs. 1-7, 18-19, 27, 30, 34-38, 66-67, Dkt. No. 381. As these documents are public records filed with the USPTO or the SEC, they are properly the subject of judicial notice. See Kelly v. Primco Mgmt., Inc., 2015 WL 10990368, at *4 (C.D. Cal. Jan. 12, 2015). But while "the USPTO [and the SEC] records may be subject to judicial notice, they are noticeable only for the limited purpose of demonstrating that the filings and actions described therein occurred on certain dates." Pinterest Inc. v. Pintrips Inc., 15 F.Supp.3d 992, 997 (N.D. Cal. 2014). The Court thus
Finally, Counter-Defendants seek judicial notice of two UCC financing statements filed with the Colorado and Delaware Secretaries of State. Counter-Defs. RJN Nos. 1 & 2 at 5; see Gibson Mot. Decl., Exs. 16-17. As these UCC financing statements are public records, the Court
Real Action filed three Requests for Judicial Notice with its Motions for Summary Judgment and Opposition to UTS' Motion for Summary Judgment.
Real Action requests the Court take judicial notice of the dictionary definitions cited in its Motion on UTS's claims and Motion on Real Action's counterclaims. RAP RJN Nos. 1 & 2 at 2; RAP RJN No. 3 at 2-3. Real Action does not list the definitions and fails to identify where in its Motions it refers to them. Nevertheless, a review of both of Real Action's Motions show Real Action quotes Merriam-Webster's definitions of the terms "ball", "pepper", and "pungent." RAP CC Mot. at 22; RAP Mot. at 22.
Real Action does not provide the pages from Merriam-Webster itself; rather, it simply quotes portions of definitions in its Motions and provides a citation to Merriam-Webster. See id. (both). To the extent Real Action seeks judicial notice of these terms as they appear in Merriam-Webster's dictionary, the Court
Real Action also requests the Court take judicial notice of definitions from Wikipedia, wordnik.com, and cyclopaedia.fr which are contained in Exhibits 1 and 5 to the Overhauser Declaration. RAP RJN No. 1 at 2-3; RAP RJN Nos. 2 & 3 at 3; Overhauser Decl., Ex. 1 at RAP4 11729-31 (wordnik.com), 11733-35 (cyclopaedia.fr), 11740 (wikipedia.org), Dkt. No. 409-22
The Court
Definitions from wordnik.com are also not suitable for judicial notice. As an initial matter, the documents from wordnik.com do not contain definitions of "pepperball" as Real Action contends. On the contrary, it states "Sorry, no definitions found." Overhauser Decl., Ex. 1 at RAP4 11729 (italics in original). This document instead provides examples of how the term "pepperball" has been used. See id. at RAP4 11729-30. Even if these examples could be considered definitions, they do not come from a source whose accuracy cannot be reasonably questioned. "Wordnik definitions . . . come from multiple sources, including[,]" among others, Wiktionary.com,
Finally, as it appears in Exhibit 1 to the Overhauser Declaration, cyclopaedia.fr take its definition of "Pepperball" from Wikipedia.
Real Action seeks judicial notice of "numerous media articles" that contain the word "pepperball." RJN Nos. 1-3 at 3-4; see Overhauser Decl., Ex. 1 at RAP4 11259-60, 11261-64, 11271-83, 11295-96, 11298-11305, 11307-19, 11321, 11323-24, 11326, 11327-33, 11335-42, 11708-13.
"Courts may take judicial notice of publications introduced to indicate what was in the public realm at the time, not whether the contents of those articles were in fact true." Von Saher v. Norton Simon Museum of Art at Pasadena, 592 F.3d 954, 960 (9th Cir. 2010) (internal quotation marks omitted). The Court
For these reasons, the Court cannot find these documents are from "sources whose accuracy cannot reasonably be questioned." Fed. R. Evid. 201(b)(2).
The Court otherwise
Real Action requests judicial notice of a federal purchase order. RAP RJN Nos. 1-3 at 4; see Overhauser Decl., Ex. 1 at RAP4 11346-47. This July 12, 2012 "Order for Supplies or Services" lists the issuing office as "DHS — Customs & Border Protection" and the contractor as "Pepperball Technologies Inc." Id. at RAP4 11346. This document also contains redactions. See id. at RAP4 11346-47 (redactions marked as "(b)(4)" or "(b)(6)").
Real Action argues "[c]ourts may take judicial notice of publicly available government records not subject to reasonable dispute." RJN Nos. 1-3 at 4 (citing Bank of N.Y. Mellon v. Hong Xuan Vo, 2015 WL 662221, at *1 n.1 (N.D. Cal. Feb. 12, 2015); GeoVector Corp. v. Samsung Elecs. Co., 234 F.Supp.3d 1009 (N.D. Cal. 2017)). But it does not argue that the federal government's purchase orders are publicly available documents, and the cases which Real Action cites do not concern federal purchase orders. See Bank of N.Y. Mellon, 2015 WL 662221, at *1 n.1 (taking judicial notice of trustee's deed upon trust, the plaintiff's state court complaint, and the proofs of service of the summons and complaint); GeoVector Corp., 234 F. Supp. 3d at 1016 n.2 (taking judicial notice of patent, Korean patent application, and certified translation of Korean patent application). Absent a showing the July 12 purchase order is in fact a public record, the Court
Real Action seeks judicial notice of an excerpt of a report by the U.S. Department of Justice's National Institute of Justice, Impact Munitions Use: Types, Targets, Effects. RJN Nos. 1-3 at 4-5; see Overhauser Decl., Ex. 7. The Court
Real Action asks the Court to take judicial notice of several court orders and opinions. RAP RJN Nos. 1-3 at 5; Overhauser Decl., Ex. 1 at RAP4 11348-688. Real Action fails to specifically identify the orders or opinions contained in the Exhibit, but it appears they are published and unpublished opinions from various Courts of Appeals and district court orders.
The Court
Real Action requests judicial notice of several internet advertisements. RJN Nos. 1-2 at 5; RJN No. 3 at 6; see Overhauser Decl., Ex. 1 at RAP4 11689-707. The Court
Real Action next "requests the Court to take judicial notice of the blog postings that are included in
Nonetheless, in reviewing Real Action's RJNs for media articles, the Court notes RAP4 11301 to Exhibit 1 appears to be a blog post. See Overhauser Decl., Ex. 1 at RAP4 11301 (document titled "Eastern District of California Blog"). But because Real Action does not provide a URL or web address for this document, the Court cannot find it is readily verifiable. As such, the Court
Real Action seeks judicial notice of the Erie County Department of Corrections policy titled "Armory and Security Equipment" (Overhauser Decl., Ex. 1 at RAP4 11720-28) and various police departments' use of force policies (id. at RAP4 11741-12125). The Court
Real Action requests the Court take judicial notice of Oregon Administrative Rule 291-013-0104(7)(c) and Florida Administrative Code section 33-602.210(15)(c). RAP RJN Nos. 1 & 2 at 6; RAP RJN No. 3 at 7; see Overhauser Decl., Ex. 9 (Or. Admin. R. 291-013-1040) & Ex. 1 (Fla. Admin. Code r. 33-602.210). The Court
Real Action seeks judicial notice of four documents filed in the Indiana Action. RAP RJN No. 2 at 7; RAP RJN No. 3 at 7-8; Overhauser Decl., Exs. 12-15. The Court
Both parties object to evidence submitted by the opposing side. "Instead of challenging the admissibility of . . . evidence, lawyers should challenge its sufficiency because a court can award summary judgment only when there is no genuine dispute of material fact." Dillon v. Cont'l Cas. Co., 2017 WL 4355070, at *2 (N.D. Cal. Sept. 29, 2017) (internal quotation marks and edits omitted). The Court nevertheless discusses certain objections where appropriate below.
UTS moves for summary judgment on its first, second, third, fourth, fifth and ninth claims. Real Action moves for summary judgment on each of UTS's claims.
In 2013, ATO and Conrad Sun; Tracs Pacific Corp.; Conrad Sun, LLC; and Tracs Pacific HK, Inc. (the "Sun Entities") entered into a settlement agreement (the "2013 Settlement") to resolve the Indiana action. See 2013 Settlement ¶ 11(a), Dkt. Nos. 130-4 (filed under seal). As is relevant here, the 2013 Settlement provided that ATO released Sun, his insurers, and his partners "from all claims whatsoever . . . without limitation." Id. Real Action argues it was an insurer and partner of Sun and is therefore included in this release.
The 2013 Settlement expressly provides that "[t]his release does not extend or apply to . . . K.T. Tran. . . ." 2013 Settlement ¶ 11(a). To the extent Real Action contends the 2013 Settlement's release provision applies to Tran, this argument is undermined by the very terms of the 2013 Settlement. Tran cannot avoid liability based on this Settlement.
The Court also cannot find summary judgment is appropriate as to Real Action Paintball on this ground. Neither party addresses the implications of the fact that ATO dismissed its claims against Sun and the Sun Entities, but not RAP or Tran, in the Indiana action upon the execution of the 2013 Settlement. See Advanced Tactical Ordnance Sys. LLC v. Real Action Paintball, Case No. 12-cv-293-JVB-SLC (N.D. Ind.), Dkt. No. 294. Had ATO intended to include RAP in the release, it would have dismissed its claims against RAP in the Indiana action as it did with its claims against Sun and the Sun entities. See Noble Roman's, Inc. v. Ward, 760 N.E.2d 1132, 1137 (Ind. Ct. App. 2002) ("The intent relevant in contract matters is not the parties' subjective intents but their outward manifestation of it. The cardinal rule of contract interpretation is to ascertain the intention of the parties from their expression of it. The court does not examine the hidden intentions secreted in the heart of a person but, rather, examines the final expression found in conduct." (citation omitted)). The record shows that the ATO, RAP, and Tran continued to litigate their claims after ATO and Sun executed the 2013 Settlement, eventually taking them to the Seventh Circuit. As such, a reasonable jury could find that neither ATO nor Sun intended to release RAP from all present and future claims.
UTS does argue that if RAP was a partner of Sun or the Sun Entities, the 2013 Settlement would prohibit RAP from bringing its Counterclaims. See 2013 Settlement ¶ 11(b) ("Conrad Sun, on his own behalf and on behalf of the companies owned by Conrad Sun and each of their respective . . . partners . . . hereby remises, releases, and forever discharges ATO, Perfect Circle, Tiberius Arms . . . from all claims whatsoever . . . without limitation. . . ."). Real Action cannot use the 2013 Settlement as both a sword and shield: it cannot be a partner for purposes of avoiding liability, yet simultaneously argue that Sun lacked authority to release RAP's claims, even though RAP is a partner. See RAP Claims Reply at 6.
Accordingly, the Court
"Real Action challenges UTS to come forward with evidence that Tran is directly liable to it for his own actions, not vicariously liable for actions by Real Action." RAP Claims Mot. at 8 (citing "Celotex, supra."). Real Action does not elaborate on this issue. To the extent this statement is Real Action's way of moving for summary judgment on the issue of Tran's liability, the Court finds this is deficient. Real Action does not cite any evidence showing there is no material dispute that Tran is vicariously, rather than directly, liable. See Celotex, 477 U.S. at 323 ("[A] party seeking summary judgment always bears the initial responsibility of informing the district court of the basis for its motion, and identifying those portions of the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, which it believes demonstrate the absence of a genuine issue of material fact." (internal quotation marks omitted)). This precludes a grant of summary judgment.
Before turning to the merits of UTS's Lanham Act claims, the Court considers whether these claims are barred by the statute of limitations.
"Because the Lanham Act does not have its own statute of limitations, [courts] borrow the most analogous statute of limitations from state law in order to determine whether the plaintiff's delay in filing suit was reasonable." Au-Tomotive Gold Inc. v. Volkswagen of Am., Inc., 603 F.3d 1133, 1140 (9th Cir. 2010). Courts apply the statute of limitations of the forum in which they sit. See In re Sterba, 852 F.3d 1175, 1179 (9th Cir. 2017) (acknowledging "the simple, well-established rule that a federal right of action for which no statute of limitations is provided is subject to the limitations period which the forum state applies to analogous claims" (citing Wilson v. Garcia, 471 U.S. 261, 266-67 (1985)); Eclectic Prod., Inc. v. Critzas Indus., Inc., 883 F.2d 1023 (9th Cir. 1989) (unpub.) ("Because the Lanham Act contains no statute of limitations for unfair competition or trademark infringement, the district court did not err in applying the statute of limitations of California, the forum state. . . ."); McCarthy on Trademarks and Unfair Competition § 31:33 (5th ed.) ("Where there is need of a statute of limitations in a suit based on the Federal Lanham Act, courts will look to the relevant forum state statute which best effectuates the federal policy at issue.").
Although the parties agree that the forum state's analogous statute of limitations applies to the Lanham Act, they dispute which state constitutes the forum. Real Action contends Indiana's statute of limitations for personal injury claims applies to UTS's Lanham Act claims because "Indiana is the original `forum' state" where ATO first brought these claims.
Real Action cites no authority for its proposition that Indiana law applies because ATO sued Real Action in that state in a separate action. Real Action's reliance on California Civil Procedure Code section 361 is misplaced. Section 361 provides that
Real Action argues that "from ATO's domicile, this action originally arose in Indiana and is barred by [Indiana] Code § 34-11-2-4(a)."
Accordingly, the Court finds no reason to deviate from the standard of applying the analogous statute of limitations of the forum state — in this case, California. The Ninth "[C]ircuit . . . has applied California's fraud statute of limitations to Lanham Act claims in California." Au-Tomotive Gold, 603 F.3d at 1140 (citing Karl Storz Endoscopy Am., Inc. v. Surgical Techs., Inc., 285 F.3d 848, 857 (9th Cir. 2002); Jarrow Formulas, Inc. v. Nutrition Now, Inc., 304 F.3d 829, 838 (9th Cir. 2002)). UTS's Complaint alleges that "[d]uring the second week of August 2012, ATO's officers . . . received an email from Defendant RAP4 which claimed RAP4 was selling PepperBall® projectiles." Compl. ¶ 19. Thus, the statute of limitations began to run in August 2012, when UTS had actual knowledge of the alleged infringement. See Karl Storz, 285 F.3d at 857. UTS filed its Complaint in this Court on September 5, 2014, well before the three-year deadline for doing so. As such, the Court finds UTS's first through seventh claims are not barred by the statute of limitations and
Having found UTS's claims are not barred for procedural reasons, the Court considers the merits of these claims.
UTS brings its first and second claims for infringement pursuant to Sections 32 and 43(a) of the Lanham Act, respectively. 15 U.S.C. §§ 1114, 1125(a).
"To prevail on a claim of trademark infringement under the Lanham Act, 15 U.S.C. § 1114, a party must prove: (1) that it has a protectible ownership interest in the mark; and (2) that the defendant's use of the mark is likely to cause consumer confusion." Network Automation, Inc. v. Advanced Sys. Concepts, Inc., 638 F.3d 1137, 1144 (9th Cir. 2011) (internal quotation marks omitted).
Section 43(a) "`protects against infringement of unregistered marks and trade dress as well as registered marks.'" S. Cal. Darts Ass'n v. Zaffina, 762 F.3d 921, 926 (9th Cir. 2014) (quoting Brookfield Commc'ns, Inc. v. W. Coast Entm't Corp., 174 F.3d 1036, 1046 n.8 (9th Cir. 1999)). It requires a plaintiff to "prove two basic elements: (1) it has a valid, protectable trademark, and (2) the defendant's use of the mark is likely to cause confusion." Id. at 929 (internal quotation marks and edits omitted). The first element requires the plaintiff to show "the mark's protectability and the plaintiff's ownership of the mark." Id. These elements, however, "do not include registration." Id. at 926; see GoTo.com, Inc. v. Walt Disney Co., 202 F.3d 1199, 1205 n.3 (9th Cir. 2000) ("While § 32 of the Lanham Act covers only registered marks, . . . § 43 . . . protects against infringement of unregistered marks and trade dress as well as registered marks.").
Thus, unlike claims under Section 32, claims under Section 43(a) do not require UTS to show ownership of the mark. "Regardless of this difference, the analysis under the two provisions is practically identical in this situation." GoTo.com, 202 F.3d at 1205 n.3.
Common law claims of infringement and unfair competition are also analyzed under the same standard. Silberstein v. Fox Entm't Grp., Inc., 2018 WL 1940050, at (9th Cir. Apr. 25, 2018) ("`The tests for infringement of a federally registered mark under § 32(1), 15 U.S.C. § 1114(1), infringement of a common law trademark, unfair competition under § 43(a), 15 U.S.C. § 1125(a), and common law unfair competition involving trademarks are the same.'" (quoting Grey v. Campbell Soup Co., 650 F.Supp. 1166, 1173 (C.D. Cal. 1986)).
Both Section 32 claims require UTS to prove it is the "registrant" of the PepperBall mark. See 15 U.S.C. § 1114 ("Any person who shall, without the consent of the registrant. . ." (emphasis added)). "The term[] `registrant' embrace[s] the legal representatives, predecessors, successors and assigns of such . . . registrant." 15 U.S.C. § 1127.
"Registration on the principal register . . . is prima facie evidence of the validity of the registered mark and of the registration of the mark, of the owner's ownership of the mark, and of the owner's exclusive right to use the registered mark in commerce on or in connection with the goods or services specified in the certificate[.]" Matal v. Tam, 137 S.Ct. 1744 (2017) (internal quotation marks omitted); see Park `N Fly, Inc. v. Dollar Park & Fly, Inc., 469 U.S. 189, 196 (1985) ("[R]egistration provides prima facie evidence of the registrant's exclusive right to use the mark in commerce." (citing 15 U.S.C. § 1115(a)).
The parties raise two issues regarding the ownership of the PepperBall mark. First, Real Action contends the PepperBall registration lapsed prior to its transfer at the UCC foreclosure sale because the owner of the mark failed to file a Section 8 Declaration in 2009. Second, UTS argues the PepperBall mark was validly transferred at the January 2012 UCC foreclosure sale.
Section 9 of the Trademark Act provides that a trademark "registration may be renewed for periods of 10 years at the end of each successive 10-year period following the date of registration." 15 U.S.C. § 1059(a); see In re Bose Corp., 580 F.3d 1240, 1242 n.1 (Fed. Cir. 2009) ("Federal trademark registrations issued on or after November 16, 1989, remain in force for ten years, and may be renewed for ten-year periods."). "To renew a registration, the owner must file an Application for Renewal under Section 9." In re Bose, 580 F.3d at 1242 n.1.
In addition, Section 8 requires the trademark's owner to file, before the fifth and tenth years of the registration, an affidavit or declaration stating the trademark is still in use, among other things. 15 U.S.C. § 1058(a), (b)(1)(A); see 37 C.F.R. § 2.160 ("[T]he owner of the registration must file an affidavit or declaration of continued use or excusable nonuse, or the registration will be cancelled . . . on or after the fifth anniversary and no later than the sixth anniversary after the date of registration"); id. § 2.161 ("A complete affidavit or declaration under section 8 of the Act must . . . [i]nclude a verified statement attesting to the use in commerce . . . within the period set forth in section 8 of the Act."). Failure to timely file a Section 8 affidavit automatically results in the trademark's cancellation. 15 U.S.C. § 1058(a) ("[T]he registration of any mark shall be canceled by the Director unless the owner of the registration files in the United States Patent and Trademark Office [Section 8] affidavits. . . ."); 37 C.F.R. § 2.164(b) ("If the affidavit or declaration is not filed within the time periods set forth in section 8 of the Act, the registration will be cancelled.").
"Registration of a mark is prima facie evidence of the validity of the mark, the registrant's ownership of the mark, and the registrant's exclusive right to use the mark in connection with the goods specified in the registration." Pom Wonderful LLC v. Hubbard, 775 F.3d 1118, 1124 (9th Cir. 2014) (citing 15 U.S.C. § 1115(a)); see Yellow Cab Co. of Sacramento v. Yellow Cab of Elk Grove, Inc., 419 F.3d 925, 928 (9th Cir. 2005) ("Federal registration of a mark constitutes prima facie evidence of the validity of the mark." (citing 15 U.S.C. § 1057(b)). "Therefore, the registrant is granted a presumption of ownership, dating to the filing date of the application for federal registration, and the challenger must overcome this presumption by a preponderance of the evidence." Sengoku Works Ltd. v. RMC Int'l, Ltd., 96 F.3d 1217, 1219 (9th Cir.), as modified, 97 F.3d 1460 (9th Cir. 1996).
As an initial matter, the Court granted summary judgment in favor of UTS on this issue in its First MSJ Order. Id. at 16-28. The Court found that
Id. at 23. Despite this defect,
Id. at 25-26.
Real Action offers no basis to relitigate the matter; to the extent Real Action seeks reconsideration of that Order, it fails to establish any of the bases set forth in Civil Local Rule 7-9. Real Action's cited authorities are also distinguishable. Accordingly, the Court
As is relevant here, the California UCC provides that "[a]fter default, a secured party may sell . . . or otherwise dispose of any or all of the collateral in its present condition or following any commercially reasonable preparation or processing." Cal. Com. Code § 9610(a). Prior to any sale, the secured party must "send an authenticated notification of disposition" of such to any debtor and secondary obligor. Cal. Com. Code § 9611(c)(1)-(2). In addition, "[i]f the collateral is other than consumer goods," notice must be sent to
Cal. Com. Code § 9611(c)(3).
UTS argues that because Real Action was not a secured creditor of PTI or PTI-CA, Real Action lacks standing to challenge the validity of the foreclosure sale. UTS Claims Mot. at 9; see also Dkt. No. 381-1 (Foreclosure Sale Tr.) at 5:22-6:22 (identifying secured creditors and not listing Real Action amongst them). Real Action does not address this argument in its Opposition. See generally RAP Claims Opp'n. Failure to address in an opposition arguments raised in an opening motion, as Real Action did here, constitutes waiver or concession of the argument. See Newton v. Am. Debt Servs., Inc., 75 F.Supp.3d 1048, 1063 (N.D. Cal. 2014) (finding moving party entitled to summary judgment where non-moving party did not respond to arguments raised in opening brief); see also Jenkins v. Cty. of Riverside, 398 F.3d 1093, 1095 n.4 (9th Cir. 2005) (plaintiff "abandoned her other two claims by not raising them in opposition to . . . motion for summary judgment"). Accordingly, the Court finds Real Action has waived the issue of standing and cannot challenge the validity of the foreclosure sale. See also Apace Commc'ns, Ltd. v. Burke, 17 F.Supp.3d 238, 245 (W.D.N.Y. 2014) ("Furthermore, even assuming that the inclusion of [the] assets [at a UCC foreclosure sale] was improper, I fail to see how [plaintiff] has standing to challenge that inclusion, since it has not submitted any proof that it is a creditor[.]").
Even if Real Action had established it had standing to challenge the foreclosure sale, UTS has produced evidence that secured creditors did receive notice. Gibson identifies several notices of the foreclosure sale that were sent directly to PTI and/or PTI-CA's secured creditors, as well as notices by publication, including notices published in the San Diego Daily Transcript on December 30, 2012 and January 6, 2012 (Gibson Mot. Decl. ¶ 51 & Exs. 23-25, Dkt. No. 381); a January 9, 2012 email from John Stiska, PTI's Chief Executive Officer (id. ¶ 52 & Ex. 26); and emails from Stiska to the second-tier debtholders of Pepperball Technologies (id. ¶ 55 & Exs. 71-72).
Real Action has not identified facts showing UTS is not the proper owner of the PepperBall mark. On the other hand, UTS has come forward with evidence that the UCC foreclosure sale was valid. Accordingly, the Court finds Real Action fails to create a triable issue of fact that UTS does not own the PepperBall mark.
There are "four categories of terms with regard to potential trademark protection: (1) generic, (2) descriptive, (3) suggestive, and (4) arbitrary or fanciful terms." Elliott v. Google, Inc., 860 F.3d 1151, 1155 (9th Cir.), cert. denied, 138 S.Ct. 362 (2017). As is relevant here, "[a] `generic' term is one that refers, or has come to be understood as referring, to the genus of which the particular product or service is a species." Surgicenters of Am., Inc. v. Med. Dental Surgeries, Co., 601 F.2d 1011, 1014 (9th Cir. 1979). A generic term "cannot become a trademark under any circumstances." Id.; see Elliott, 860 F.3d at 1155 ("Generic terms are not protectable because they do not identify the source of a product.").
"[T]he holder of a registered trademark benefits from a presumption of validity and has met its initial burden of demonstrating the lack of a genuine issue of material fact regarding genericide." Elliott, 860 F.3d at 1159. "[T]he presumption of validity is a strong one, and the burden on the defendant necessary to overcome that presumption at summary judgment is heavy." Zobmondo Entm't, LLC v. Falls Media, LLC, 602 F.3d 1108, 1115 (9th Cir. 2010).
However, a trademark may be cancelled "if the registered mark becomes the generic name for the goods or services, or a portion thereof, for which it is registered." 15 U.S.C. § 1064(3). "Genericide occurs when the public appropriates a trademark and uses it as a generic name for particular types of goods or services irrespective of its source." Elliott, 860 F.3d at 1156; see also id. (identifying "aspirin", "cellophane", and "escalator" as victims of genericide). "A trademark which becomes generic is not entitled to protection under the Lanham Act." Coca-Cola Co. v. Overland, Inc., 692 F.2d 1250, 1254 n.10 (9th Cir. 1982) (citing 15 U.S.C. §§ 1064(c), 1065(4), 1115(b)(4)).
"Whether a mark is generic is a question of fact." Yellow Cab Co. of Sacramento v. Yellow Cab of Elk Grove, Inc., 419 F.3d 925, 929 (9th Cir. 2005) (internal quotation marks omitted). To determine whether a mark is generic, the Ninth Circuit relies on the "who-are-you/what-are-you" test. Id. Under this test,
Elliott, 860 F.3d at 1156 (edits in original). In other words, "if the word is identified with all such goods or services, regardless of their suppliers, it is generic and so not a valid mark." Surgicenters, 601 F.2d 1016.
As the party seeking to cancel the trademark, Real Action bears the burden of showing genericide.
"The mere fact that the public sometimes uses a trademark as the name for a unique product does not immediately render the mark generic." Elliott, 860 F.3d at 1156 (citing 15 U.S.C. § 1064(3)). The Court finds that to be the case here. Real Action offers only assumptions, not evidence, that the public uses the term "PepperBall" to refer to a good other than the specific Pepperball at issue in this litigation. See, e.g., Elliott, 860 F.3d at 1158 n.3 ("We will not assume that a speaker has no brand in mind simply because he or she uses the trademark as a noun and asks for `a Kleenex.'").
Real Action offers numerous training videos, media articles, federal purchase documents, court opinions, advertisements, police policies, statutes, and dictionary definitions, and testimony which it argues shows generic usage of the term "PepperBall." RAP CC Mot. at 16-23. These do not permit a reasonable finder of fact to conclude "PepperBall" has fallen victim to genericide.
UTS's training materials fail to show "PepperBall" refers to the product, rather than the source. See Overhauer Decl., Exs. 2-4 (police training videos) & Ex. 8 (UTS presentation slides)). UTS's videos instruct trainees to shout "Pepperball!" prior to discharging the weapon. Given that these are UTS's own videos, a reasonable jury could find that the use of "Pepperball" in this context refers to the specific PepperBall-branded projectile which UTS sold.
Real Action also relies on UTS's presentation slides, which contain the words "PepperBall" and "Paintball." RAP CC Mot. at 18 (citing Overhauser Decl., Ex. 8 at ATO 1261). Real Action argues "`Paintball' is obviously a generic term, and UTS does not use the ® designation in comparing `pepperball' to `paintball.'" Id. Real Action cites no authority for the proposition that "Paintball" is an "obviously" generic term, and the Court declines to express an opinion as to whether this may be the case. In any event, this argument fails for the same reason that UTS's training videos do not evidence genericide: a reasonable jury could conclude that UTS's presentation refers to a specific source.
Real Action cites "174 generic references to `pepperball' or `pepper ball'" in various media articles, federal purchase documents, court opinions, advertisements, and police policies.
Most of these examples do not establish genericide because they fail to show "what [people] are thinking when using the term[.]" Coca-Cola Co., 692 F.2d at 1255 (rejecting affidavits by employees who were "not qualified to testify as to what their customers are thinking when using the term `Coke'" (citing Fed. R. Evid. 701) and finding, even if affidavits could be considered, "they [were] too speculative and insubstantial to establish the existence of a genuine issue of material fact with respect to the genericness of the trademark"); Elliot, 860 F.3d at 1158 (reiterating the "need for evidence regarding the customers' inner thought processes" to determine whether customers were using term in a generic sense). As noted earlier, Tran cannot attest to his buyers' thinking as he lacks personal knowledge about their thinking. See Fed. R. Evid. 701; Fed. R. Civ. P. 56(c)(4). Nor does Real Action submit declarations from those buyers themselves to show what they were thinking when they used the term "PepperBall."
On the other hand, Real Action cites a federal purchase document which it contends show "[t]he federal government uses `pepperball' when it needs to purchase irritant projectiles." RAP Claims Mot. at 19 (citing Overhauser Decl., Ex. 1 at RAP11346-47); RAP CC Mot. at 19 (citing same). This federal purchase document by DHS — Customs and Border Protection show a purchase of a "PepperBall SX Launcher" from PepperBall Technologies Inc. Overhauser Decl., Ex. 1 at RAP11346. Given that the purchaser is PepperBall Technologies, a reasonable jury could conclude that this use of "PepperBall" refers to a particular product from a specific source, i.e., PepperBall Technologies, rather than the product itself.
Real Action's reliance on ostensible dictionary definitions also does not show genericide. RAP CC Mot. at 22; see Advertise.com, Inc. v. AOL Advert., Inc., 616 F.3d 974, 978 (9th Cir. 2010) (relying on American Heritage Dictionary definition of "dot-com" and finding "the use of `advertising' and `.com' as a combination to refer to internet advertising is commonplace enough to be used as an example in a dictionary definition strongly suggests that ADVERTISING.COM is generic."); Elliott, 860 F.3d at 1161 (quoting McCarthy on Trademarks § 12:13 (4th ed. 1998) for proposition that "that dictionary definitions are `sometimes persuasive in determining public usage'"). Real Action cites Merriam-Webster's definitions for "ball," "pepper," and "pungent," but it does not explain why a combination of these words would be a generic word not subject to the protections of the Lanham Act. RAP CC Mot. at 22; see Surgicenters, 601 F.2d at 1017 ("We recognize that words which could not individually become a trademark may become one when taken together." (internal quotation marks omitted)).
To the extent Real Action argues the mere combination of "pepper" and "ball" cannot create a valid mark, the Court disagrees. In Surgicenters, the Ninth Circuit held that "the mere combination of words" was in and of itself not "sufficient . . . to make a mark registrable." 601 F.2d at 1018. The Surgicenter Court drew a distinction between the term "Startgrolay," which was used for poultry feed, and "Surgicenter." Id. Although the words comprising "Startgrolay" — "start," "grow," and "lay," — would not, on their own, constitute valid marks, the combination of those three words created a valid mark. Id.; see Application of Ada Mill. Co., 205 F.2d 315, 317 (C.C.P.A. 1953) (finding "Startgrolay" "capable of distinguishing applicant's goods from those of others"). In contrast, the Ninth Circuit concluded "`Surgicenter' . . . obviously mean[t] surgical center." Surgicenter, 601 F.2d at 1018.
First, while "pepper" and "ball" would not be registrable on their own, the Court cannot find, at this point, that Real Action has offered evidence that the combination of these words does not constitute a valid mark under these circumstances. Nothing in the record allows the conclusion that "pepper" obviously refers to the pepper-based irritant powder which fills a hollow sphere, rather than a plant from which the pepper condiment is derived or even a capsicum. Thus, unlike the term "Surgicenter" which the Ninth Circuit found to mean nothing more than a surgical center, a reasonable finder of fact could find, under these circumstances, that "Pepperball" has acquired a secondary meaning.
Second, Real Action identifies only Wikipedia, Wordnik, and Cyclopaedia.fr as "online dictionaries" which it argues "refer generically to `pepperballs.'" RAP CC Mot. at 23 (citing Overhauser Decl., Ex. 1 at RAP11729-31, 11733-35). To the extent these qualify as dictionaries, the Court cannot find they demonstrate genericide. First, a reasonable jury could conclude that these notoriously unreliable websites which allow anyone to edit them do not necessarily reflect how the public primarily understands the term. See Elliott, 860 F.3d at 1159 (focusing on how "the public primarily understands the word itself"). In other words, because these websites allow anyone to edit them, a reasonably jury could find the entries Real Action cites are nothing more than one user's perspective. Second, as discussed above, these "dictionary definitions" do not reveal anything about the user's understanding about the producer, rather than the product.
Real Action's strongest evidence of genericide is Conrad Sun's deposition testimony, when Sun was asked about his agreement with Real Action to have Real Action sell irritant projectiles:
Overhauser Decl., Ex. 6 (Sun Dep.) at 116:17-117:15; see also id. at 116:10-12 ("Section 1B says: `Tracs Pacific or Conrad will purchase [t]he pepperballs from Apon only.'").
Sun lays no foundation for his testimony that it was "common" for "people" to use "pepperball" to refer generally to irritant-filled projectiles. At most, this testimony reveals Sun's use of the term; it reveals nothing about the prevailing public use of the word. See Elliott, 860 F.3d at 1161 ("Documented examples of generic use might support a claim of genericide if they reveal a prevailing public consensus regarding the primary significance of a registered trademark." (emphasis added)).
Real Action's cited uses of "pepperball" do not demonstrate that public's primary understanding of the term refers to the product, rather than the source. See, e.g., Elliott, 860 F.3d at 1159 ("Even if we assume that the public uses the verb `google' in a generic and indiscriminate sense, this tells us nothing about how the public primarily understands the word itself . . . with regard to internet search engines."). Accordingly, a reasonable jury could find "PepperBall" is not a generic term and is therefore protectable.
"The `likelihood of confusion' inquiry generally considers whether a reasonably prudent consumer in the marketplace is likely to be confused as to the origin or source of the goods or services bearing one of the marks or names at issue in the case." Rearden LLC v. Rearden Commerce, Inc., 683 F.3d 1190, 1209 (9th Cir. 2012) (citation omitted).
The Ninth Circuit has articulated a non-exhaustive list of factors to consider when evaluating the likelihood of confusion by consumers. See AMF, Inc. v. Sleekcraft Boats, 599 F.2d 341, 348-49 (9th Circ. 1979).
The Court previously noted that "this is not a traditional trademark case; UTS alleges RAP4 used the actual PepperBall mark and name in its announcements and in metatags and hidden text on RAP4's website." Prelim. Inj. Order at 17. A nominative fair use case is one "where the use of the trademark does not attempt to capitalize on consumer confusion or to appropriate the cachet of one product for a different one." New Kids on the Block v. News Am. Pub., Inc., 971 F.2d 302, 308 (9th Cir. 1992). Under these circumstances, "the concern is avoiding confusion over whether the speaker is endorsed or sponsored by the trademark holder." Adobe Sys. Inc. v. Christenson, 809 F.3d 1071, 1081 (9th Cir. 2015). The Ninth Circuit explained that
Id.
Thus, where a defendant raises a nominative fair use defense, courts apply the New Kids test, which "ask[s] whether (1) the product was `readily identifiable' without use of the mark; (2) defendant used more of the mark than necessary; or (3) defendant falsely suggested he was sponsored or endorsed by the trademark holder." Toyota Motor Sales, U.S.A., Inc. v. Tabari, 610 F.3d 1171, 1175-76 (9th Cir. 2010); see New Kids, 971 F.2d at 308. The burden is on the plaintiff to establish the defendant's "use of the . . . mark was not nominative fair use." Toyota Motor Sales, 610 F.3d at 1182. "[I]f the nominative use satisfies the three-factor New Kids test, it doesn't infringe." Id. at 1176. But "[b]ecause the likelihood of confusion is often a fact-intensive inquiry, courts are generally reluctant to decide this issue at the summary judgment stage." Au-Tomotive Gold, Inc. v. Volkswagen of Am., Inc., 457 F.3d 1062, 1075 (9th Cir. 2006).
The New Kids test also applies where "a defendant has used the plaintiff's mark to describe the plaintiff's product, even if the defendant's ultimate goal is to describe his own product." Cairns v. Franklin Mint Co., 292 F.3d 1139, 1151 (9th Cir. 2002) (emphasis in original); see id. at 1151 ("Because Franklin Mint used the Fund's mark to describe the Fund's product, we apply the New Kids nominative fair use analysis, even though Franklin Mint's ultimate goal was to describe its own products."); see Prelim. Inj. Order at 17-18 (applying New Kids test to UTS' false association and infringement claims). Here, it is undisputed that Real Action ultimately used the PepperBall mark to describe its own projectiles.
Indeed, Real Action argues it "markets its projectiles using the trade mark `Less Lethal;' it has never used the term `pepperball' on its projectiles, or on labels or containers for its projectiles." RAP Claims Mot. at 26 (citing Tran Decl. ¶¶ 10-11, Dkt. No. 409-28). Real Action contends UTS's infringement claim "is predicated on announcements in which Real Action referred to the corporation `Pepperball Technologies, Inc.'" which is "a purely `nominative' use of `pepperball.'" Id. But "there is no evidence that Real Action ever used the term `pepperball' as a trademark, so it is entitled to summary judgment on UTS's trademark-related Counts 1-5 and 8." RAP Claims Mot. at 26 (emphasis in original).
UTS argues Real Action created confusion about the origin of Real Action's projectiles through announcements and emails to its consumers. UTS Claims Mot. at 13-16. UTS contends "the confusion created by Real Action's announcements intended to create an association between Real Action, which had a poor reputation, and PepperBall® which produced quality projectiles." UTS Claims Reply at 8. In support, UTS offers an internet post titled "RAP 4 Resumes PepperBall Technologies Inc. Production":
Gibson Mot. Decl., Ex. 68. This same announcement was also sent in an email. Id., Ex. 69.
The "RAP4 Team" also posted the following "Clarification about RAP4's Acquisition of Pepperball Technology":
Glaspy Mot. Decl., Ex. 79 at ECF p.2; Gibson Mot. Decl., Ex. 69 at ECF p.2 & Ex. 70 at ECF p.2. The following was also sent in an email:
Id. at ECF pp. 25, 30.
In his deposition, Tran explained that Real Action issued the clarification because "some customer[s] were confused . . . and we put it out to clarify that." Glaspy Mot. Decl., Ex. 75 ("Tran Dep.") at 128:4-5, 7; see id. at 129:8-11 ("Q. [] So it wasn't because ATO came to you, it was because customers were confused? A. Correct.").
UTS also offers emails which UTS contends indicate customer confusion:
Real Action objects to these statements "because some of the speakers are not identified, and UTS has not established that commenters were actual customers or users." RAP CC Opp'n at 15. This is not a basis to exclude this evidence. First, Real Action does not cite any authority for its proposition that there must be confusion only amongst people or entities that purchased the product, not the public as a whole. For instance, courts considering the seventh Sleekcraft factor — intent to deceive — have held that "[w]hen the alleged infringer knowingly adopts a mark similar to another's, reviewing courts presume that the defendant can accomplish his purpose: that is, that the public will be deceived." One Indus., LLC v. Jim O'Neal Distrib., Inc., 578 F.3d 1154, 1163 (9th Cir. 2009) (emphasis added; internal quotation marks omitted). Second, at least some of the emails indicate they were sent by actual or potential consumers. See Gibson Mot. Decl., Ex. 69 at ECF p.12 ("Is there any information you can give me regarding this email and the training and equipment we have been purchasing from you over the years?" (emphasis added); id. at ECF p.24 ("I have some ideas about adding items like pepper balls . . . in the future.").
Neither UTS nor Real Action argue the New Kids factors in detail. While UTS acknowledges the New Kids test in opposing Real Action's Claims Motion, it simply argues "the Court has already analyzed, and rejected [Real Action's] nominative fair use defense." UTS Claims Opp'n at 19. But the Court did so when it considered UTS's motion for a preliminary injunction and thus analyzed Real Action's nominative fair use defense under that standard, not under a summary judgment standard. Prelim. Inj. Order at 17-19; see Winter v. Nat. Res. Def. Council, Inc., 555 U.S. 7, 24 (2008) ("[A] plaintiff seeking a preliminary injunction must establish that he is likely to succeed on the merits, that he is likely to suffer irreparable harm in the absence of preliminary relief, that the balance of equities tips in his favor, and that an injunction is in the public interest."). The Ninth Circuit has recognized "important distinctions" between these two standards:
JL Beverage Co., LLC v. Jim Beam Brands Co., 828 F.3d 1098, 1105 (9th Cir. 2016). "While the district court must apply the correct standard in any case, the necessity to do so is heightened in cases turning on the likelihood of consumer confusion." Id. The Court therefore considers the merits of Real Action's nominative fair use defense anew.
As to the first and second New Kids factors, UTS does not identify evidence that Real Action could have referred to its projectiles without referring to PepperBalls or that Real Action used the mark more than necessary.
The third New Kids factor "requires that the user do nothing that would, in conjunction with the mark, suggest sponsorship or endorsement by the trademark holder." Playboy Enters., Inc. v. Welles, 279 F.3d 796, 803 (9th Cir. 2002) (internal quotation marks omitted). A reasonable jury could find that, even though Real Action put its own "less lethal live agent" label on its product, consumers believed Real Action was in fact producing the original PepperBall projectile. In other words, by stating it had "acquisitioned" PepperBall Technologies Inc.'s "machinery, recipes, and materials" and conformed its projectiles to "the original specifications," Real Action implied it was a new source of PepperBalls.
A reasonable jury could also find Real Action's disclaimers do not limit confusion, as these disclaimers are inconsistent with Real Action's messages. See Au-Tomotive Gold, Inc. v. Volkswagen of Am., Inc., 457 F.3d 1062, 1077 (9th Cir. 2006) (recognizing "the effectiveness of these disclaimers is undercut by their sometimes contradictory messages"). For instance, Real Action stated, "[a]ll rights to the name Pepperball belong to the new owners, which is Phoenix International," and "[w]e are in no way trying to confuse or deceive anyone as to the origin of our less lethal rounds and technology." Gibson Mot. Decl., Ex. 69 at ECF p.2. Yet earlier in this announcement, Real Action states it "acquisitioned" the "Original Recipe and machinery to produce pepperballs . . . to manufacture the original pepperball under the name of RAP4 Less Lethal." Id.
Real Action also represented it "is not associated nor affiliated with PepperBall Technologies Inc and Brands. All rights to the PepperBall Technologies and brands belong to its new owner. [¶] RAP 4 live rounds are NOT made by the current PepperBall Technologies Inc." Id. at ECF pp. 25, 30. This disclaimer is undercut by Real Action's representation that "RAP4 Less Lethal Live Rounds are produced by the original OEM manufacturer that once produced for PepperBall Technologies Inc." Id.
In both cases, the disclaimers contradict Real Action's message that it was, for all intents and purposes, producing the original PepperBall projectile, albeit under a different name. Indeed, UTS offers evidence that consumers were confused despite the disclaimers. Real Action, however, has not produced evidence that its disclaimers had any effect.
Where use of a trademark "does not implicate the source-identification function that is the purpose of trademark, it does not constitute unfair competition: such use is fair because it does not imply sponsorship or endorsement by the trademark holder." New Kids, 971 F.2d at 308. That is not the case here. On this record, a reasonable fact finder could conclude that Real Action's use of the PepperBall mark created confusion regarding the source of Real Action's product. This implies sponsorship. Cf. Mattel, Inc. v. Walking Mountain Prods., 353 F.3d 792, 810 (9th Cir. 2003) ("We recognize a fair use defense in claims brought under § 1125 where the use of the trademark `does not imply sponsorship or endorsement of the product because the mark is used only to describe the thing, rather than to identify its source.'" (quoting New Kids, 971 F.3d at 306)). On the other hand, nothing in the record suggests consumers were not confused about the origins of Real Action's projectiles. Absent such evidence, Real Action fails to create a triable issue of fact as to this factor.
To summarize, a reasonable fact finder could conclude the third New Kids factor favors UTS. But, as noted, UTS fails to produce evidence in support of the first and second New Kids factors, and Real Action likewise does not address these factors. At this juncture, there is insufficient evidence to allow a reasonable jury to determine there is or is not a likelihood of confusion in this nominative fair use case. This precludes summary judgment in either party's favor. See, e.g., Toyota Motor Sales, 610 F.3d at 1176 ("If the nominative use does not satisfy all the New Kids factors, the district court may order defendants to modify their use of the mark so that all three factors are satisfied; it may not enjoin nominative use of the mark altogether." (emphasis added)).
Ultimately, UTS fails to provide evidence in support of all three New Kids factors and thus fails to show a likelihood of confusion for purposes of establishing trademark infringement. The Court therefore
UTS brings its fourth claim for deceptive advertising under Section 43(a) of the Lanham Act. Both UTS and Real Action move for summary judgment on this claim.
As is relevant here, the Lanham Act provides that
15 U.S.C. § 1125(a)(1). "Section 1125(a) thus creates two distinct bases of liability: false association, § 1125(a)(1)(A), and false advertising, § 1125(a)(1)(B)." Lexmark Int'l, Inc. v. Static Control Components, Inc., 134 S.Ct. 1377, 1384 (2014). To succeed on a false advertising claim, a plaintiff must prove five elements:
Skydive Arizona, Inc. v. Quattrocchi, 673 F.3d 1105, 1110 (9th Cir. 2012).
Rather than offering its own evidence that its acts do not satisfy these five elements, Real Action simply "challenges UTS to come forward with summary judgment evidence to support its Count 4." RAP Claims Mot. at 27.
A plaintiff may establish the "falsity" of the advertisement in one of two ways. Southland Sod Farms v. Stover Seed Co., 108 F.3d 1134, 1139 (9th Cir. 1997). A "plaintiff may show that the statement was literally false, either on its face or by necessary implication, or that the statement was literally true but likely to mislead or confuse consumers." Id. (citing Castrol Inc. v. Pennzoil Co., 987 F.2d 939, 943, 946 (3d Cir. 1993)); see also Cook, Perkiss & Liehe, Inc. v. N. Cal. Collection Serv., Inc., 911 F.2d 242, 245 (9th Cir. 1990) ("[A] false advertising cause of action under the [Lanham] Act is not limited to literal falsehoods; it extends to false representations made by implication or innuendo."). "When evaluating whether an advertising claim is literally false, the claim must always be analyzed in its full context." Id. at 1139 (citing Castrol, 987 F.2d at 946). But "[e]ven if an advertisement is not literally false, relief is available under Lanham Act § 43(a) if it can be shown that the advertisement has misled, confused, or deceived the consuming public." Id. at 1140.
As discussed above, there is evidence that consumers were confused by Real Action's messages and clarifications, that is, there was confusion as to whether or not Real Action was the new source of PepperBall projectiles. Absent a showing under the other two New Kids factors, this was insufficient to establish a likelihood of confusion with regard to UTS's infringement claims. But considering this evidence with regard to UTS's false advertising claim, for the reasons stated above, a reasonable jury could find Real Action's statements could and misled consumers into believing Real Action sold, for all intents and purposes, PepperBalls. Furthermore, as noted, Real Action does not identify evidence that consumers were not confused as to what Real Action sold.
Accordingly, there is sufficient evidence to allow a reasonable jury to conclude Real Action made false statements of fact and that consumers were actually misled or deceived by such statements.
A finding that the advertisement was literally or facially false creates a presumption of consumer deception and materiality in a false advertising case. See Southland Sod, 108 F.3d at 1146; U-Haul Int'l, Inc. v. Jartran, Inc., 793 F.2d 1034, 1041 (9th Cir. 1986). "Although materiality in false advertising claims is `typically' proven through consumer surveys, nothing in the Lanham Act, nor under [Ninth Circuit] precedents, requires a plaintiff to use such surveys." Skydive Arizona, 673 F.3d at 1110.
As discussed above, there is evidence that Real Action's statements were facially false in that they misled or deceived consumers. But UTS does not identify evidence to support the presumption that this deception was material such that it influenced consumers' purchasing decisions. Cf. id. (district court did not err in finding materiality where plaintiff submitted "evidence of numerous consumers who telephoned or came to Skydive Arizona's facility after having been deceived into believing there was an affiliation between Skydive Arizona and SKYRIDE"). For instance, there is no evidence to allow a reasonable jury to find Real Action's statements caused consumers to purchase projectiles from Real Action rather than UTS because they believed Real Action produced original PepperBalls.
On the other hand, Real Action does not provide evidence that showing that consumers were not in fact influenced by its statements.
"[P]roof of injury incurred by the plaintiff" may be shown "either by loss of sales or lessening of goodwill associated with its products." Avid Identification Sys., Inc. v. Schering-Plough Corp., 33 F. App'x 854, 855 (9th Cir. 2002) (citing Southland Sod, 108 F.3d at 1139). The Ninth Circuit "generally presume[s] commercial injury when defendant and plaintiff are direct competitors and defendant's misrepresentation has a tendency to mislead consumers." TrafficSchool.com, Inc. v. Edriver Inc., 653 F.3d 820, 826 (9th Cir. 2011). Competitors are "persons endeavoring to do the same thing and each offering to perform the act, furnish the merchandise, or render the service better or cheaper than his rival." Brosnan v. Tradeline Sols., Inc., 681 F.Supp.2d 1094, 1101 (N.D. Cal. 2010). This presumption arises because "[c]ompetitors vie for the same dollars from the same consumer group, and a misleading ad can upset their relative competitive positions." TrafficSchool, 653 F.3d at 827 (internal quotation marks omitted); see id. ("[T]he Lanham Act is at heart a consumer protection statute.").
UTS relies on the fact that Real Action and UTS are competitors to argue it suffered an injury. UTS Claims Mot. at 17. Relying on the presumption was sufficient to obtain a preliminary injunction because "a competitor need not prove injury when suing to enjoin conduct that violates section 43(a)." Southland Sod, 108 F.3d at 1145; see Harper House, Inc. v. Thomas Nelson, Inc., 889 F.2d 197, 210 (9th Cir. 1989) ("[B]because of the possibility that a competitor may suffer future injury, as well as the additional rationale underlying section 43(a)—consumer protection—a competitor need not prove injury when suing to enjoin conduct that violates section 43(a)."); see Prelim. Inj. Order at 27. UTS does not submit evidence to permit a reasonable fact finder to conclude that it suffered an injury. For its part, Real Action does not offer evidence to rebut this presumption.
Defendants must have also "caused its false statement[s] to enter interstate commerce." Wells Fargo & Co. v. ABD Ins. & Fin. Servs., Inc., 758 F.3d 1069, 1071 (9th Cir. 2014), as amended (Mar. 11, 2014).
"The Internet is an international network of interconnected computers, . . . similar to-and often using-our national network of telephone lines." United States v. Sutcliffe, 505 F.3d 944, 952 (9th Cir. 2007) (citations omitted). Because "it can not be questioned that the nation's vast network of telephone lines constitutes interstate commerce . . ., a fortiori, it seems clear that use of the internet is intimately related to interstate commerce." Id. (citations omitted). The evidence also shows that Real Action made its communications via the internet posts and email. Real Action does not offer evidence to the contrary. As such, a reasonable jury could conclude Real Action caused its statements to enter into commerce. See SuccessFactors, Inc. v. Softscape, Inc., 544 F.Supp.2d 975, 982 (N.D. Cal. 2008) (considering motion for preliminary injunction and finding act of posting press release to website and sending email sufficiently established defendant made representations in commerce); Out of the Box Enters., LLC v. El Paseo Jewelry Exch., 2011 WL 13135643, at *5 (C.D. Cal. Feb. 24, 2011) (plaintiff sufficiently alleged defendants caused false statements to enter interstate commerce where defendants allegedly placed advertisements on publicly available website).
Accordingly, there is sufficient evidence to allow a reasonable jury to conclude Real Action's statements entered into commerce.
Based on the foregoing, there is sufficient evidence to allow a reasonable finder of fact to find Real Action's statements were false, were actually misleading, and had entered into commerce. However, nothing in the record allows the conclusion that Real Action's deception was material, or that UTS suffered an injury. For these reasons, the Court
Both parties move for summary judgment on UTS's fifth claim for counterfeiting, 15 U.S.C. § 1114.
Section 32 of the Lanham Act creates civil liability for counterfeiting. 15 U.S.C. § 1114. "Counterfeiting is a more specialized case of trademark infringement because a counterfeit `is a spurious mark which is identical with, or substantially indistinguishable from, a registered mark.'" UL LLC v. Space Chariot Inc., 250 F.Supp.3d 596, 607 (C.D. Cal. 2017) (quoting 15 U.S.C. § 1127).
"In the context of counterfeit goods, the elements constituting violation of 15 U.S.C. §§ 1114(1) and 1125(a) are the same. The elements of a claim are satisfied in each case where a plaintiff can show that `(1) it owns a valid and protectable trademark, and (2) the defendant used in commerce a similar mark without authorization in a manner likely to cause consumer confusion, deception or mistake.'" Yash Raj Films (USA), Inc. v. Sidhu, 2010 WL 1032792, at *6 (E.D. Cal. Mar. 19, 2010).
As discussed above, both UTS and Real Action fail to offer sufficient evidence regarding the likelihood of confusion among consumers. They therefore also fail show summary judgment is proper as to either party on UTS's counterfeiting claim. See Ketab Corp. v. Mesriani Law Grp., 2015 WL 2084469, at *3 n.6 (C.D. Cal. May 5, 2015) ("Section 1114 imposes liability for infringing use of `any reproduction, counterfeit, copy, or colorable imitation of a registered mark.' 15 U.S.C. § 1114 (emphasis added). Section 1127 defines a counterfeit mark as a `spurious mark which is identical with, or substantially indistinguishable from, a registered mark.' 15 U.S.C. § 1127. As such, a claim for `counterfeiting' under the Lanham Act must, by necessity, first establish a claim of trademark infringement."); Gucci Am., Inc. v. Guerrero, 2008 WL 11336190, at *4 (C.D. Cal. Nov. 4, 2008) (considering Lanham Act trademark and counterfeiting claims under the same standard). Accordingly, the Court
Real Action moves for summary judgment on UTS's sixth claim for trade dress infringement.
"Trade dress protection applies to `a combination of any elements in which a product is presented to a buyer,' including the shape and design of a product." Art Attacks Ink, LLC v. MGA Entm't Inc., 581 F.3d 1138, 1145 (9th Cir. 2009) (quoting McCarthy on Trademarks and Unfair Competition § 8:1, at 8-3 (4th ed. 2008)); see Vision Sports, Inc. v. Melville Corp., 888 F.2d 609, 613 (9th Cir. 1989) ("[T]trade dress involves the total image of a product and may include features such as size, shape, color, color combinations, texture, or graphics." (internal quotation marks omitted)). This is because "[t]he design or packaging of a product may acquire a distinctiveness which serves to identify the product with its manufacturer or source; and a design or package which acquires this secondary meaning, assuming other requisites are met, is a trade dress which may not be used in a manner likely to cause confusion as to the origin, sponsorship, or approval of the goods." TrafFix Devices, Inc. v. Mktg. Displays, Inc., 532 U.S. 23, 28 (2001).
To succeed on a claim for trade dress infringement, a plaintiff "must prove: (1) that its claimed dress is nonfunctional; (2) that its claimed dress serves a source-identifying role either because it is inherently distinctive or has acquired secondary meaning; and (3) that the defendant's product or service creates a likelihood of consumer confusion." Clicks Billiards, Inc. v. Sixshooters, Inc., 251 F.3d 1252, 1258 (9th Cir. 2001) (footnote omitted).
UTS's trade dress infringement claim is predicated on the red color of PepperBall projectiles.
Only nonfunctional design features are entitled to trade dress protection. Clicks Billiards, 251 F.3d at 1258. "[A] product feature is functional, and cannot serve as a trademark, if it is essential to the use or purpose of the article or if it affects the cost or quality of the article, that is, if exclusive use of the feature would put competitors at a significant non-reputation-related disadvantage." Qualitex Co. v. Jacobson Prod. Co., 514 U.S. 159, 164 (1995) (internal quotation marks omitted); see Inwood Labs., Inc. v. Ives Labs., Inc., 456 U.S. 844, 851 n.10 (1982) ("[A] product feature is functional if it is essential to the use or purpose of the article or if it affects the cost or quality of the article."). It is crucial that courts "evaluating functionality as well as the other elements of a trade dress claim . . . focus not on the individual elements, but rather on the overall visual impression that the combination and arrangement of those elements create." Clicks Billiards, 251 F.3d at 1259.
The Ninth Circuit has "outlined a four-factor functionality test: `(1) whether the design yields a utilitarian advantage, (2) whether alternative designs are available, (3) whether advertising touts the utilitarian advantages of the design, and (4) whether the particular design results from a comparatively simple or inexpensive method of manufacture.'" Millennium Labs., Inc. v. Ameritox, Ltd., 817 F.3d 1123, 1128 (9th Cir. 2016) (quoting Disc Golf Ass'n, Inc. v. Champion Discs, Inc., 158 F.3d 1002, 1006 (9th Cir. 1998)). "No one factor is dispositive; all should be weighed collectively." Disc Golf, 158 F.3d at 1006. The burden is on the party asserting trade dress protection to prove nonfunctionality. 15 U.S.C. § 1125(a)(3).
UTS explains "PepperBall Technologies[] had consistently used the red color scheme at issue in this case for several years as to both the standard strength (all red) projectile and the 10X round (half-red/half-black)." UTS Claims Opp'n at 29. The Supreme Court has made clear that "the doctrine of `functionality' does not create an absolute bar to the use of color alone as a mark." Qualitex, 514 U.S. at 165.
UTS does not offer any evidence showing that the red color of PepperBalls does not have a utilitarian advantage. On the other hand, Real Action argues a projectile's coloring has a utilitarian advantage because "[i]n high-stress situations, law enforcement personnel rely on a projectile's color to ensure they are loading their weapon with the correct projectile[.]" RAP Claims Mot. at 29. According to Real Action, "red is the `standard' color for a `live' projectile." Id.
Real Action's chief designer Omar Macy testified during the Indiana action that, "To my knowledge, all major manufacturers of capsaicin rounds, or pepper-filled rounds, . . . use a variation of [red or red-orange] to identify their live rounds." Macy Dep. at 467:6-8, Dkt. No. 45-15. Macy further testified that in "[r]ecent history, our clients do require that the colors be in red for live-fire for the reason that they have already successfully trained their personnel to identify [the projectile] by the colors used." Id. at 468:1-4.
Real Action also relies on a U.S. Department of Justice publication titled "Impact Munitions Use: Types, Targets, Effects." RAP Claims Mot. at 29 (citing Overhauser Decl., Ex. 7). This documents notes "[o]ther lethal munitions can also be misidentified as impact munitions. Distinctive markings and colorings on the different shells would help to more reliably distinguish lethal from less-lethal ones." Overhauser Decl., Ex. 7 at ECF p.2.
UTS argues "there is evidence that Sun's other customers requested projectiles in all sorts of colors and color schemes other than red and half-red/half-black and that other manufacturers use different colors from those used by United Tactical, which demonstrates no functionality in the use of the color red." UTS Claims Opp'n at 29 (citing Glaspy Opp'n Decl., Exs. 104-09, 125, 133-34). While these exhibits show that Real Action offered projectiles in other colors, these projectiles are not filled capsaicin powder like PepperBalls. See Glaspy Opp'n Decl., Exs. 104-09, 125, 133-34. Rather, the projectiles in other colors are rubber or powder training projectiles, glass breaking balls, nontoxic bismuth forward payload. See id.
On this record, a reasonable jury could conclude the red color serves a utilitarian purpose by identifying the type of projectile, i.e., a live pepper-based, irritant projectile.
As evidence of alternative designs, UTS relies on two emails from Sun to Tran. On April 16, 2012, Sun stated "We currently have three colors on hand. Red, Black, and Purple. If you want different colors let me know so I can order the color pigments. [] If you want to compete with Pepperball I would stay with their colors." Glaspy Opp'n Decl., Ex. 131, Dkt. No. 440. In an email to Tran dated April 18, 2012, Sun stated
Glaspy Opp'n Decl., Ex. 130. UTS also cites testimony from Tran, in which Tran discusses how he selected the coloring for Real Action's projectiles. UTS Claims Opp'n at 29 (citing Tran Dep. at 112:7-115:10, 117:1-25). Thus, a reasonable jury could find Real Action had other design options available to it, namely, Real Action could have made its projectiles black or purple instead.
UTS does not address whether its advertisements highlighted PepperBalls' red coloring. These factors are therefore neutral.
UTS does not address whether the red color is a manufacturing decision.
On this record, a reasonable jury could find the first Disc Golf factor weighs in favor of functionality, the second factor weighs against functionality, and the last two factors are neutral.
"[A] mark can be distinctive in one of two ways." Wal-Mart Stores, Inc. v. Samara Bros., 529 U.S. 205, 210 (2000). The Supreme Court explains that
Id. at 210-11 (internal quotation marks, brackets, and citations omitted). "To show secondary meaning, a plaintiff must demonstrate a mental recognition in buyers' and potential buyers' minds that products connected with the mark are associated with the same source." Art Attacks Ink, 581 F.3d at 1145 (internal quotation marks omitted). This "can be established in many ways, including (but not limited to) direct consumer testimony; survey evidence; exclusivity, manner, and length of use of a mark; amount and manner of advertising; amount of sales and number of customers; established place in the market; and proof of intentional copying by the defendant." Id. at 1145 (internal quotation marks omitted).
"[O]ver time, customers may come to treat a particular color on a product or its packaging (say, a color that in context seems unusual, such as pink on a firm's insulating material or red on the head of a large industrial bolt) as signifying a brand." Qualitex, 514 U.S. at 163. UTS contends Real Action deliberately elected to use a red colored projectile so it could compete with PepperBalls. UTS Claims Opp'n at 28. UTS again relies on the April 16 and 18, 2012 email, which argues this "`strongly supports an inference of secondary meaning.'" Id.; see Glaspy Opp'n Decl., Ex. 131. A reasonable jury could find that Sun's emails, and the fact that Tran followed his advice, suggests Real Action intentionally copied PepperBall's design to confuse consumers.
"Likelihood of confusion, a question of fact, . . . is the most important element of the three components of a protectable mark." Clicks Billiards, 251 F.3d at 1264-65 (internal citation and quotation marks omitted). "The factual elements that make up likelihood of confusion include evidence of actual confusion, the defendant's intent in adopting the mark, similarity of marks, similarity of goods and marketing channels, and the strength of the mark." Id. at 1265. "Evidence of actual confusion is persuasive proof that future confusion is likely." Fuddruckers, Inc. v. Doc's B.R. Others, Inc., 826 F.2d 837, 845 (9th Cir. 1987).
As discussed above, there is evidence that Real Action's emails and announcements caused consumer confusion. Those emails contained images of Real Action's red Less Lethal projectiles. See Gibson Mot. Decl., Ex. 69. With this evidence, a reasonable jury could find Real Action's projectiles, which looked similar to PepperBalls, likely created consumer confusion.
UTS has submitted sufficient evidence to create at triable issue as to whether Real Action infringed on UTS's trade dress. The Court therefore
Only Real Action moves for summary judgment as to UTS's seventh claim for trademark dilution.
The Lanham Act provides that
15 U.S.C. § 1125(c)(1).
"Dilution, which was not defined by the statute, has been described by the courts as `the gradual "whittling away" of a trademark's value.'" Playboy Enters., 279 F.3d at 805. To prove trademark dilution "a plaintiff must show that (1) the mark is famous and distinctive; (2) the defendant is making use of the mark in commerce; (3) the defendant's use began after the mark became famous; and (4) the defendant's use of the mark is likely to cause dilution by blurring or dilution by tarnishment." Jada Toys, Inc. v. Mattel, Inc., 518 F.3d 628, 634 (9th Cir. 2008) (citing 15 U.S.C. § 1125(c)(1); Cal. Bus. & Prof. Code § 14330).
"[A] mark is famous if it is widely recognized by the general consuming public of the United States as a designation of source of the goods or services of the mark's owner." 15 U.S.C. § 1125(c)(2)(A). A court determining whether a mark is famous may consider
15 U.S.C. § 1125(c)(2)(A)(i)-(iv).
Real Action relies on its genericness argument in support of summary judgment on this claim. RAP Claims Mot. at 31; see RAP Claims Reply at 17 ("Real Action stands on its genericness argument."). As discussed above, Real Action has not shown "pepperball" is a generic term.
Real Action further argues summary judgment is proper because "UTS is unable to come forward with evidence that the term `pepperball' is famous." RAP Claims Mot. at 31. In a footnote, UTS argues the PepperBall mark is famous for purposes of a trademark dilution claim and cites evidence in support thereof. UTS Claims Opp'n at 30 n.44. UTS does not discuss the factors set forth in § 1125(c)(2)(A). However, UTS offers Gibson's Declaration that "[p]rior to 2012, PTI spent substantial amounts of money and time in publicizing their trademark and selling the projectiles at issue in this litigation." Gibson Opp'n Decl. ¶ 79, Dkt. No. 435. Moreover, Real Action's own announcements recognize the "high-quality, highly effective less lethal ammunition like that originally manufactured by PepperBall Technologies Inc." Gibson Opp'n Decl., Ex. 68. Real Action does not offer evidence to rebut this, nor does it offer evidence of its own to show the PepperBall mark is not famous.
Accordingly, the Court finds there is a triable issue of material fact as to UTS's trademark dilution claim. The Court therefore
Real Action moves for summary judgment on UTS's eighth claim for misappropriation of trade secrets.
California's Uniform Trade Secrets Act ("CUTSA"), codified at California Civil Code sections 3426-3426.11, "authorizes a court to enjoin the actual or threatened misappropriation of trade secrets." Cytodyn, Inc. v. Amerimmune Pharmaceuticals, Inc., 160 Cal.App.4th 288, 296 (2008) (citing Cal. Civ. Code § 3426.2). "A plaintiff requesting injunctive relief has the burden to show that the information that was misappropriated constitutes a trade secret." Agency Solutions.Com, LLC v. TriZetto Grp., Inc., 819 F.Supp.2d 1001, 1015 (E.D. Cal. 2011) (citation omitted).
To state a claim for trade secret misappropriation, a plaintiff must show: "(1) the plaintiff owned a trade secret, (2) the defendant acquired, disclosed, or used the plaintiff's trade secret through improper means, and (3) the defendant's actions damaged the plaintiff." Cytodyn, 160 Cal. App. 4th at 297. Use or acquisition of "a trade secret by `"[i]mproper means' includes theft, bribery, misrepresentation, breach or inducement of a breach of a duty to maintain secrecy, or espionage through electronic or other means.'" DVD Copy Control Ass'n, Inc. v. Bunner, 31 Cal.4th 864, 875 (2003), as modified (Oct. 15, 2003) (citing Cal. Civ. Code § 3426.1, subd. (a)). "Reverse engineering or independent derivation alone," is not "considered improper means." Id. (citing Cal. Civ. Code § 3426.1, subd. (a)). "It is crucial to any CUTSA cause of action—and any defense—that the information claimed to have been misappropriated be clearly identified." Agency Solutions.Com, 819 F. Supp. 2d at 1015. The trade secret must be described "with sufficient particularity to separate it from matters of general knowledge in the trade or of special knowledge of those persons who are skilled in the trade and to permit the defendant to ascertain at least the boundaries within which the secret lies." Altavion, Inc. v. Konica Minolta Sys. Lab. Inc., 226 Cal.App.4th 26, 43-44 (2014), review denied (Aug. 20, 2014) (collecting cases).
A trade secret includes
Cal. Civ. Code § 3426.1(d)). "The plaintiff should describe the subject matter of the trade secret with sufficient particularity to separate it from matters of general knowledge in the trade or of special knowledge of those persons skilled in the trade." Imax Corp. v. Cinema Techs., Inc., 152 F.3d 1161, 1164-65 (9th Cir. 1998) (emphasis in original; internal quotation marks and ellipses omitted).
UTS argues that in the Court's Preliminary Approval Order, the Court identified the trade secrets at issue: (1) the formula and recipe used in PepperBall projectiles, (2) UTS's customer list, (3) market leads and market research. UTS Claims Opp'n at 31. But, as discussed above, the fact a preliminary injunction carries a different standard than summary judgment.
UTS lists its customer list and market leads and research as trade secrets. Customer lists may qualify as a trade secret under CUTSA if it meets the requirements of California Civil Code section 3426.1(d). See Reeves v. Hanlon, 33 Cal.4th 1140, 1155 (2004). "Marketing research can be trade secret if it explores the needs of numerous, diverse buyers, but is not protectible if it relates to a single prominent buyer that is presumably aware of its own needs." Whyte v. Schlage Lock Co., 101 Cal.App.4th 1443, 1456 (2002) (internal quotation marks and edits omitted).
UTS does not offer evidence or argument as to why its customer list, market leads, or market research qualify as trade secrets. "[L]abeling information `trade secret' or `confidential information' does not conclusively establish that the information fits this description." Morlife, Inc. v. Perry, 56 Cal.App.4th 1514, 1522 (1997); see San Jose Const., Inc. v. S.B.C.C., Inc., 155 Cal.App.4th 1528, 1543 (2007) ("[M]erely saying something is a trade secret in an employment agreement does not make it so."). There is nothing in the record to allow a reasonable jury to conclude UTS's customer list, market leads, or market research are trade secrets. Summary judgment is therefore appropriate on UTS's trade secrets misappropriation claim to the extent it is predicated on misappropriation of its customer list, market research, and market leads.
UTS does not offer evidence about the independent economic value of its formula; it describes only its efforts to keep its formula secret. Gibson's testimony given during a hearing in the Indiana action describes his efforts to keep the formula secret while it was in development:
Glaspy Opp'n Decl., Ex. 120 (Gibson Test.) at 72:12-21. Thus, not even Gibson knew what went into the formula:
Id. at 73:10-14.
Real Action, however, offers evidence that the formula was in fact disclosed to a third party, HS Defense, LLC. Overhauser Decl., Ex. 18 (May 8, 2012 Disclosure Agreement).
Accordingly, the Court finds there is a triable issue of fact as to whether reasonable efforts were made to keep the PepperBall formula secret.
To show misappropriation of the formula, UTS relies on Real Action's announcements, in which Real Action states "RAP4 is proud to announce the acquisition of . . . recipes . . . once used by PepperBall Technologies, Inc." and that "RAP acted immediately through acquisition and resume the . . . recipes . . . to continue production of our Less Lethal Live Rounds." Gibson Decl., Ex. 68. UTS also refers to a copy of the recipe that was produced to Real Action during the Indiana action. Glaspy Opp'n Decl., Ex. 142. Finally, Sun testified in his deposition that "immediately following PepperBall Technologies, Inc.'s foreclosure sale," he agreed to provide Apon with the powder's formula. Sun Dep. at 215:11-216:10.
Real Action does not address this evidence on Reply. See RAP Claims Reply at 18-19. This is sufficient evidence for a jury to conclude that Real Action acquired the formula.
Neither party addresses whether UTS was damaged by the misappropriation. UTS does not offer evidence it was injured, nor does Real Action submit evidence demonstrating a lack of injury.
Based on the foregoing, the Court
Both parties move for summary judgment on UTS's ninth claim brought under California's false advertising law ("FAL"), Cal. Bus. & Prof. Code § 17500, and tenth claim brought under California' Unfair Competition Law ("UCL"), Cal. Bus. & Prof. Code § 17200.
California's UCL "any unlawful, unfair or fraudulent business act or practice and unfair, deceptive, untrue or misleading advertising." Cal. Bus. & Prof. Code § 17200. California's "false advertising law prohibits any `unfair, deceptive, untrue, or misleading advertising.'" Williams v. Gerber Prod. Co., 552 F.3d 934, 938 (9th Cir. 2008) (quoting Cal. Bus. & Prof. Code § 17500). The California Supreme Court "has recognized that any violation of the false advertising law necessarily violates the UCL." Kasky v. Nike, Inc., 27 Cal.4th 939, 950 (2002), as modified (May 22, 2002) (internal quotation marks and ellipses omitted). "[U]nder either the UCL or the false advertising law, based on false advertising or promotional practices, it is necessary only to show that members of the public are likely to be deceived." Id. (internal quotation marks omitted). FAL and UCL claims are "evaluated from the vantage point of a `reasonable consumer'" which requires a plaintiff to "`show that members of the public are likely to be deceived.'" Reid v. Johnson & Johnson, 780 F.3d 952, 958 (9th Cir. 2015) (quoting Williams, 552 F.3d at 938).
The Ninth "Circuit has consistently held that state common law claims of unfair competition and actions pursuant to California Business and Professions Code section 17200 are substantially congruent to claims made under the Lanham Act." Cleary v. News Corp., 30 F.3d 1255, 1262-63 (9th Cir. 1994) (internal quotation marks omitted). Similarly, courts have held that claims brought under FAL claims are also "substantially congruent" to Lanham Act claims. Walker & Zanger, Inc. v. Paragon Indus., Inc., 549 F.Supp.2d 1168, 1182 (N.D. Cal. 2007); see Biolase, Inc. v. Fotona Proizvodnja Optoelektronskih Naprav D. D., 2014 WL 12577153, at *2 (C.D. Cal. Sept. 15, 2014) ("False advertising claims under Section 17500 are substantially congruent to claims made under the Lanham Act and thus rise or fall with Lanham Act claims." (internal quotation marks omitted)).
Because the Court finds summary judgment is not proper as to either party on UTS Lanham Act false advertising claim, it also
Real Action seeks summary judgment on UTS's UCL, FAL, and common law claims on the ground that UTS fails to identify damages. RAP Claims Mot. at 8-10. Real Action relies on UTS's interrogatory responses, which Real Action argues shows UTS cannot calculate damages. Id. For instance, Real Action cites UTS's response to Interrogatory No. 15 which states, in part, "Plaintiff is incapable of quantifying the damages caused to it at this point. Plaintiff's damages are incalculable because not all of the consumers who bought from RAP4 followed up with a call to Plaintiff or ATO to let them know that they had purchased from RAP4 because of RAP4's misrepresentations." Id. at 9 (quoting Overhauser Decl., Ex. 30 (UTS Rog. Resp.) at 32. This misrepresents UTS's response. In fact, UTS also stated that "Plaintiff and ATO are aware of one sale from 2012 that was lost during the pendency of the Indiana Court's restraining order was in place and was worth $20,000." UTS Rog. Resp. at 32. Eric Bratten reiterated this loss while testifying in the Indiana litigation. See Glaspy Decl., Ex. 125 at 509:19-21.
The record shows UTS is in fact capable of calculating at least some damages. The Court therefore
UTS also moves for summary judgment on Real Action's affirmative defenses. UTS Claims Mot. at 18-25. UTS relies on testimony from Tran, Real Action's Rule 30(b)(6) witness, who testified that, with the exception of the defense of genericness, he did not have a factual basis for Real Action's affirmative defenses. Id. at 18 (quoting Tran Dep. at 294:16-295:9).
Real Action argues certain of its affirmative defenses may be stricken or withdrawn because its second, fourth, and sixth through fifteenth affirmative defenses "merely negate elements of UTS' claims and thus can only be stricken." RAP Claims Opp'n at 22-23. In support, Real Action argues "`[i]f a purported affirmative defense only addresses the elements of the cause of action, it is not an affirmative defense and it will be stricken as redundant.'" Id. at 22 (quoting Gomez v. J. Jacobo Farm Labor Contractor, Inc., 188 F.Supp.3d 986, 990 (E.D. Cal. 2016)).
Real Action's reliance on Gomez is misplaced. The Gomez court faced a motion to strike under Rule 12(f), not a motion for summary judgment.
The Court previously dismissed Real Action's First, Second, Fifth, Eighth, and Ninth Counterclaims. Nov. 10, 2015 Order, Dkt. No. 47. Real Action now seeks summary judgment as to its Sixth, Seventh, Twelfth, Fourteenth, Seventeenth, and Nineteenth Counterclaims. RAP CC Mot. Real Action also seeks summary judgment on the issue of liability as to UTS, UTSH, and UTSIH as successors to ATO for any Counterclaim for which ATO is found liable. Id.
Counter-Defendants seek summary judgment as to Real Action's Third through Thirteenth, Seventeenth, and Nineteenth Counterclaims. Counter-Defs. CC Mot. In addition, Counter-Defendants move for summary judgment as to every counterclaim against UTH, UTSIH, Perfect Circle, Tactical Air Games, Gibson, and Tiberius. Id.
The parties do not move for summary judgment as to Real Action's Fifteenth Counterclaim for declaratory judgment of no trade secret misappropriation.
It is undisputed that UTSH, UTSIH, Perfect Circle, Tactical Air Games, Gibson and Tiberius were not parties to the Indiana Action. Counter-Defendants argue that because these Counter-Defendants did not participate in that litigation, they cannot be held liable for counterclaims arising from that proceeding.
"[S]uccessor liability is an equitable doctrine that applies when a purchasing corporation is merely a continuation of the selling corporation or the asset sale was fraudulently entered to escape debts and liabilities." Brown Bark III, L.P. v. Haver, 219 Cal.App.4th 809, 822 (2013). It "requires an underlying cause of action and merely extends the liability on that cause of action to a corporation that would not otherwise be liable." Id. "The general rule of successor liability is that a corporation that purchases all of the assets of another corporation is not liable for the former corporation's liabilities unless, among other theories, the purchasing corporation is a mere continuation of the selling corporation." Katzir's Floor & Home Design, Inc. v. M-MLS.com, 394 F.3d 1143, 1150 (9th Cir. 2004) (citing Ray v. Alad Corp., 19 Cal.3d 22, 28 (1977)).
To prove successor liability requires evidence of "(1) a lack of adequate consideration for acquisition of the former corporation's assets to be made available to creditors, or (2) one or more persons were officers, directors, or shareholders of both corporations." Id. (citing Ray, 19 Cal. 3d at 28).
Real Action maintains UTS, UTSH, and UTSIH are liable as successors to ATO, who was a party to the Indiana Action. RAP CC Mot. at 1; RAP CC Opp'n at 22-23. It is undisputed that UTS is ATO's successor. See Overhauser Decl., Ex. 39 at 5 (UTS "admits that it is the successor-in-interest to Advanced Tactical Ordnance Systems, LLC."); Counter-Defs. CC Opp'n at 35 n.72 ("United Tactical is the successor in interest to Advanced Tactical, a fact that his never been in dispute."). Accordingly, the Court
Real Action cites UTSH's and UTSIH's Answers as evidence that these Counter-Defendants are successors to ATO. RAP CC Mot. at 8 (citing RAP CC SUF 1-3, Dkt. No. 468).
UTSH and UTSIH both answer this allegation with: "Admitted that Counter-Defendant is the successor to ATO. As to all other allegations, denied." UTSH Answer ¶ 151, Dkt. No. 294; UTSIH Answer ¶ 151. Real Action argues this shows UTSH and UTSIH are successors of ATO.
But the TACC alleges "UTS, by its own description, is NOT PepperBall Tech, but is the successor of ATO. . . ." TACC ¶ 151 (italics added; capitalization in original). It does not allege UTSH or UTSIH are ATO's successors. Any admission therefore only applies to UTS as successor to ATO.
Real Action offers no evidence that UTSH's or UTSIH's officers, directors, or shareholders also held those roles as to ATO, nor does Real Action identify evidence showing a lack of adequate consideration for acquisition of ATO's assets to be made available to creditors. As such, there is nothing in the record that would allow a reasonable jury to find UTSH or UTSIH are in fact successors to ATO. The Court
Real Action argues Perfect Circle and Tactical Air Games may be held liable for ATO's conduct because they signed the Guaranty to the 2013 Settlement, which Sun required them to do. RAP CC Opp'n at 23; see Guaranty, Dkt. No. 419-9 (filed under seal).
Sun testified that he required the owners of ATO, Perfect Circle, and Tactical Air Games to guarantee payments under the 2013 Settlement between ATO and Sun. Sun Dep. at 22:18-23, Dkt. No. 409-6. But Real Action does not explain or offer evidence showing how signing the Guaranty renders Perfect Circle and Tactical Air Games — who were never parties to the Indiana Action — liable for ATO's conduct during that case. For instance, nothing in the record suggests Perfect Circle or Tactical Air Games were alter egos of ATO such that they may be held liable for ATO's actions. See, e.g., Sonora Diamond Corp. v. Superior Court, 83 Cal.App.4th 523, 538 (2000) ("Under the alter ego doctrine, . . . when the corporate form is used to perpetrate a fraud, circumvent a statute, or accomplish some other wrongful or inequitable purpose, the courts will ignore the corporate entity and deem the corporation's acts to be those of the persons or organizations actually controlling the corporation, in most instances the equitable owners.").
Without such facts, there is nothing to allow a reasonable finder of fact to conclude Perfect Circle or Tactical Air Games are liable for counterclaims arising out of the Indiana Action.
Real Action contends Gibson's and Tiberius's "personal actions subject them to liability." RAP CC Opp'n at 23. Real Action argues Gibson and Tiberius personally knew of Real Action's contract with Sun, were aware of Real Action's Exclusive Dealing Agreement with Sun, and "personally `approved'" ATO to sign the agreements giving rise to Real Action's Sixth and Seventh Counterclaims. Id.
Even if Gibson and Tiberius knew about Real Action's contract with Sun and "personally `approved'" the 2013 Settlement, Real Action fails to explain or offer evidence showing how this gives rise to liability. As noted, neither Gibson nor Tiberius was a party to the Indiana Action, and as with Perfect Circle and Tactical Air Games, Real Action identifies no facts connecting Gibson and Tiberius to ATO's conduct.
In sum, the Court
Counter-Defendants move for summary judgment as to Real Action's Third Counterclaim for wrongful seizure, 15 U.S.C. § 1116(d)(11), which Real Action asserts against ATO, Gibson, Tiberius, UTS, UTSIH, and UTSH . Counter-Defs. CC Mot. at 19-22; Third Am. CC at 16. Real Action does not move for summary judgment as to this Counterclaim.
As discussed above, the Court finds there is no evidence establishing liability as to UTSIH, UTSH, Gibson, or Tiberius. Thus, the question is whether summary judgment as to this Counterclaim is proper as to ATO and UTS.
In an action involving the use of a counterfeit trademark, a "court may, upon ex parte application, grant an order . . . providing for the seizure of goods and counterfeit marks involved in such violation and the means of making such marks, and records documenting the manufacture, sale, or receipt of things involved in such violation." 15 U.S.C. § 1116(d)(1)(A). "The purpose of the seizure order is to preserve the evidence necessary to bring trademark counterfeiters to justice." In re Lorillard Tobacco Co., 370 F.3d 982, 987 (9th Cir. 2004).
"A person who suffers damage by reason of a wrongful seizure . . . has a cause of action against the applicant for the order under which such seizure was made[.]" 15 U.S.C. § 1116(d)(11). To prevail on a wrongful seizure claim, a party must "establish (1) that it was the victim of an ex parte seizure; (2) that it was damaged by that seizure; and (3) either (a) that the seized goods were predominantly non-infringing or were otherwise legitimate merchandise, or (b) that the party seeking the seizure did so in bad faith." N. Atl. Operating Co., Inc. v. Desertstar Wholesale, 2015 WL 12777227, at *4 (C.D. Cal. Feb. 26, 2015) (quoting Prince of Peace Enters., Inc. v. Top Quality Food Mkt., LLC, 760 F.Supp.2d 384, 396 (S.D.N.Y. 2011)); see Chloe SAS v. Sawabeh Info. Servs. Co., 2014 WL 12599845, at *11 (C.D. Cal. Mar. 18, 2014) ("A seizure may be wrongful if (1) the application was brought in bad faith, or (2) the items seized are predominantly legitimate." (citing 5 McCarthy on Trademark and Unfair Competition § 30:44 (4th ed.))).
It is undisputed that on September 13, 2012, the Indiana Court granted ATO's motion to allow discovery and ordered Real Action to ship to ATO 500 pieces of three types of projectiles. Glaspy Mot. Decl., Ex. 87 (order); see id., Ex. 86 (motion); RAP CC Opp'n at 21 ("It is true that in the Indiana action, on September 1[3], 2012, ATO obtained a discovery order requiring Real Action to produce 500 of each of its types of projectiles."). "Real Action agrees this production was not a `seizure.'" RAP CC Opp'n at 21.
Real Action instead argues the seizure occurred when "ATO's attorney Piell showed up and served the TRO which required Real Action segregate and not `move' its projectiles. At Piell's direction, they were assembled on pallets, inventoried, and wrapped in plastic to prevent them from being distributed or sold." Id. at 21; see id. at 3 ("Counter-Defendants obtained a seizure of Real Action's property through an ex parte TRO seizure order." (citing Overhauser Decl., Ex. 42)); Indiana TRO, Dkt. No. 409-42. First, Real Action argues this was improper because the Indiana Court lacked personal jurisdiction over Real Action. RAP CC Opp'n at 3. Real Action does not cite any authority for this proposition. Second, Real Action contends the order was obtained through a fraudulent declaration.
Counter-Defendants do not directly address Real Action's arguments. Counter-Defendants instead argue that "[e]ven if the Court were to accept [Real Action's] statements as true," Piell's actions do not constitute a seizure under § 1116(d). Counter-Defs. CC Reply at 11.
The party seeking the seizure order must provide with its application "an affidavit or the verified complaint establishing facts sufficient to support the findings of fact and conclusions of law required for such order." 15 U.S.C. § 1116(d)(3)(A).
In support of the motion for a TRO filed with the Indiana court, Blumenthal declared
Blumenthal TRO Decl. ¶ 6. The Blumenthal TRO Declaration is dated August 29, 2012.
In arguing this was fraudulent, Real Action cites testimony from Gibson, Eric Bratten, and Tiberius given on September 20, 2012; December 7, 2012; and April 9, 2013, respectively. RAP CC Opp'n at 4 (citing Overhauser Decl., Ex. 53). Gibson, Bratten, and Tiberius each testified that they had never seen the word "PepperBall" written on a projectile sold by Real Action. Overhauser Decl., Ex. 53 at ECF pp. 3-4, 7-8, 11-12.
This does not show that Counter-Defendants knew Real Action's projectiles were not counterfeit. If anything, it appears that the fact that Real Action's projectiles did not have "PepperBall" written on it renders them more similar to the original PepperBall projectiles. Gibson also testified that "PepperBall doesn't say `PepperBall' on it either. [¶] The projectiles look identical and cannot be distinguished between each other." Id. at ECF p.4. Real Action does not address this testimony. Real Action's cited evidence does not permit a reasonable finder of fact to conclude that Counter-Defendants knew Real Action's projectiles were not counterfeit.
Even if this testimony did show Counter-Defendants knew Real Action's projectiles were not counterfeit, Gibson, Bratten, and Tiberius testified after Blumenthal filed his TRO Declaration with the Indiana court. First, Real Action offers no evidence that Blumenthal was aware that these three individuals had not seen "PepperBall" written on Real Action's projectiles at the time he filed his Declaration, such that he acted in bad faith. Second, Blumenthal did not declare Real Action's projectiles were counterfeit because they had "PepperBall" written on them. Blumenthal declared that "Defendants RAP4 and Tran [sold] the counterfeit product which they had originally claimed were original PepperBall® projectiles" and "modified their website to claim that their projectiles were `improved' over the PepperBall® projectiles." Blumenthal TRO Decl. ¶ 7. Blumenthal does not represent Real Action's projectiles were marked with the "PepperBall" name.
Accordingly, Real Action fails to offer evidence that Counter-Defendants acted in bad faith in obtaining the seizure order from the Indiana court.
"Any materials seized under [§ 1116] shall be taken into the custody of the court." 15 U.S.C.A. § 1116(d)(7). Section 1116 further requires a federal, state, or local law enforcement officer to "carry out the seizure under the [court's] order." 15 U.S.C. § 1116(d)(9).
Tran declares that "[o]n Friday, September 7, 2012, David Piell appeared at the office of RAP4 in San Jose, California and personally served me with a complaint, summons and [TRO]." Tran Decl. ¶ 23. He further declares, "Mr. Piell directed me to the TRO and told me that I was required to allow him to inspect and seize all the projectiles in the order." Id. ¶ 25. "Not wanting to violate a court order, I complied with Mr. Piell's demands that I collect the projectiles, inventory them, wrap them in plastic, and labelled them `DO NOT TOUCH.' Mr. Piell remained present during this time." Id. ¶ 29.
Counter-Defendants correctly note that "Real Action does not contend that the Indiana court's order was served and executed by U.S. Marshal[]s or other law enforcement officers. Rather, Real Action alleges that Real Action voluntarily submitted to the request of Advanced Tactical's representative when he served the order." Counter-Defs. CC Reply at 12. Herein lies the problem.
First, the Court cannot find that the fact that Real Action's projectiles were not taken into the Indiana court's custody means there was no seizure. "Seizures carried out pursuant to Section 1116(d) are subject to Fourth Amendment scrutiny." United States v. Shayota, 186 F.Supp.3d 1052, 1056 (N.D. Cal. 2016). Under the Fourth Amendment, "[a] `seizure' of property occurs when there is some meaningful interference with an individual's possessory interests in that property." United States v. Jacobsen, 466 U.S. 109, 113 (1984).
"As a result of the seizure, RAP4 was unable to ship or sell the projectiles, even though it had active orders for them." Tran Decl. ¶ 30. Even though Real Action's projectiles were not taken into the Indiana court's custody, a reasonable jury could find Real Action's inability to sell its projectiles constituted "meaningful interference" with its property and was therefore a seizure.
Second, a reasonable finder of fact could also find that Tran's compliance was not voluntary. Counter-Defendants argue "Real Action voluntarily submitted to the request of Advanced Tactical's representative when he served the order." Counter-Defs. CC Reply at 12. "[T]he Fourth Amendment[] require[s] that a consent not be coerced, by explicit or implicit means, by implied threat or covert force." Schneckloth v. Bustamonte, 412 U.S. 218, 228 (1973). Real Action offers evidence that Piell showed Tran the TRO and "remained present" while Tran "collect[ed] the projectiles, inventor[ied] them, wrap[ped] them in plastic, and labelled them `DO NOT TOUCH.'" Tran Decl. ¶ 29. A reasonable jury could conclude that this conduct was coercive.
Third, § 1116 "authorizes seizure only by `a federal law enforcement officer' or a `state or local law enforcement officer.' 15 U.S.C. § 1116(d)(9). This clearly does not include private parties acting under the supervision of law enforcement officers." World Wrestling Entm't, Inc. v. Does, 2015 WL 9690312, at *1 (N.D. Cal. Mar. 24, 2015) (internal quotation marks and brackets omitted); see NFL Props. LLC v. Does 1 through 100, 2016 WL 9223833, at *2 (N.D. Cal. Feb. 2, 2016) (Section 1116 "contemplates only seizures by federal, state or local law enforcement officers. [] [T]he Court sees no good reason to allow anyone other than an on-duty federal, state or local law enforcement officer to effectuate a seizure" (citing 15 U.S.C. § 1116(d)(9)); S. Rep. 98-526, at *17 ("It is important that law enforcement officials, and not private citizens, enforce seizure orders.").
In Warner Bros. Inc. v. Dae Rim Trading, Inc., the Second Circuit considered the propriety of a seizure conducted pursuant to § 503(a) of the Copyright Act, 17 U.S.C. § 503(a).
It is undisputed that Piell is not a federal, state, or local law enforcement officer, and nothing in the record indicates such an officer served the TRO on Real Action or seized Real Action's projectiles. Real Action has provided evidence that Piell served the TRO and conducted the seizure; if true, a reasonable jury could find Piell's actions did not comport with § 1116(d).
Counter-Defendants argue, without citation, that § 1116(d)'s requirements "are not mere formalities, but rather necessary pre-conditions to a finding that a seizure has occurred." Counter-Defs. CC Reply at 11. Not so. Section 1116(d) sets forth specific requirements as to how a seizure must be conducted, including, among other things, what must be included in an application for a seizure order, the specific findings a court must make before it can order a seizure, how a seizure order must be executed, and what happens to the seized goods. See Electronic Lab. Supply Co. v. Cullen, 977 F.2d 798, 802 (3d Cir. 1992) ("Section 1116(d)(1)-(10) specifies the rules and procedures for the granting of ex parte seizure orders under the Lanham Act[.]"). ATO and UTS cannot avoid liability as to Real Action's wrongful seizure counterclaim simply because they did not follow the statutory procedures.
The Court
Counter-Defendants seek summary judgment as to Real Action's fourth, sixth, seventh, eleventh, twelfth, thirteenth, sixteenth, and seventeenth counterclaims under the Noerr-Pennington doctrine. Counter-Defs. CC Mot. at 3-6.
"The essence of the Noerr-Pennington doctrine is that those who petition any department of the government for redress are immune from statutory liability for their petitioning conduct." Theme Promotions, Inc. v. News Am. Mktg. FSI, 546 F.3d 991, 1006 (9th Cir. 2008). This immunity "derives from the First Amendment's guarantee of `the right of the people . . . to petition the Government for a redress of grievances.'" Sosa v. DIRECTV, Inc., 437 F.3d 923, 929 (9th Cir. 2006) (quoting U.S. Const. amend. I). "Although the doctrine was developed in the antitrust context, in Eastern Railroad Presidents Conference v. Noerr Motor Freight, Inc., 365 U.S. 127 (1961), and United Mine Workers v. Pennington, 381 U.S. 657 (1965), it has since been extended to other statutory schemes." Nunag-Tanedo v. E. Baton Rouge Par. Sch. Bd., 711 F.3d 1136, 1139 (9th Cir. 2013). Thus, "the Noerr-Pennington doctrine stands for a generic rule of statutory construction, applicable to any statutory interpretation that could implicate the rights protected by the Petition Clause." Sosa, 437 F.3d at 931.
The Supreme Court carved out a "sham" exception to Noerr [which] encompasses situations in which persons use the governmental process—as opposed to the outcome of that process—as an anticompetitive weapon." City of Columbia v. Omni Outdoor Advert., Inc., 499 U.S. 365, 380 (1991). Sham litigation is defined in two parts:
Professional Real Estate Inv'rs, Inc. v. Columbia Pictures Indus., Inc., 508 U.S. 49, 60-61 (1993). The plaintiff bears the burden "to disprove the challenged lawsuit's legal viability before the court will entertain evidence of the suit's economic viability." Id. at 61 (emphasis in original). "Proof of a sham merely deprives the defendant of immunity; it does not relieve the plaintiff of the obligation to establish all other elements of his claim." Id.
Real Action's only argument against the applicability of the Noerr-Pennington doctrine is that Counter-Defendants waived their right to argue such immunity by failing to raise it as an affirmative defense.
The Ninth Circuit recognized in a footnote that "[e]ven assuming that Noerr-Pennington immunity is an affirmative defense—an assumption that may not be warranted—it would not be waived unless [plaintiffs] omitted it from their answer to [defendant]'s counterclaim." Int'l Longshore & Warehouse Union v. ICTSI Oregon, Inc., 863 F.3d 1178, 1187 n.6 (9th Cir. 2017), cert. denied, 2018 WL 1143835 (Mar. 5, 2018). However, the Ninth Circuit also noted that the Fifth Circuit "reject[ed] a waiver argument where plaintiff `knew Noerr-Pennington was a potential issue throughout most of the discovery process[.]'" Id. (quoting Bayou Fleet, Inc. v. Alexander, 234 F.3d 852, 861 (5th Cir. 2000)). Real Action has been aware that the Noerr-Pennington doctrine may be an issue as early as November 2015. Nov. 10, 2015 Order at 36 (noting "courts have found that activities unrelated to a `petitioning activity' are not limited by . . . the . . . Noerr-Pennington doctrine"); see also Dkt. No. 203 at 1-2, 7 (Counter-Defendants' December 14, 2015 motion to dismiss arguing Real Action failed to state Sherman Act claim under Noerr-Pennington doctrine); Feb. 10, 2016 Order at 6-13, Dkt. No. 211 (finding "Real Action may not maintain its antitrust claims against Counter-Defendants related to conduct based on the allegations in paragraph 126 [of the Second Amended Counterclaim] as Counter-Defendants are entitled to antitrust immunity under Professional Real Estate and the Noerr-Pennington doctrine"
Real Action does not address Counter-Defendants' substantive arguments regarding the applicability of the Noerr-Pennington doctrine, nor does it identify evidence that the Indiana Action was "objectively baseless" such the plaintiffs to that litigation could not "realistically expect success on the merits." See RAP CC Opp'n; Professional Real Estate, 508 U.S. at 60.
Real Action's tenth counterclaim asserts false designation of origin, 15 U.S.C. § 1125, against ATO, Gibson, Tiberius, UTS, UTSIH, and UTSH. TACC ¶¶ 111-21. Counter-Defendants, but not Real Action, move for summary judgment as to this Counterclaim. Counter-Defs. CC Mot. at 21-23.
As discussed above, Real Action fails to offer evidence that Gibson, Tiberius, UTSIH, or UTSH may be held liable as successors. The Court therefore
To prevail on a claim of false designation of origin under Section 43(a)(1)(A), 15 U.S.C. § 1125(a)(1)(A), a plaintiff must show the defendant "(1) use[d] in commerce (2) any word, false designation of origin, false or misleading description, or representation of fact, which (3) is likely to cause confusion or misrepresents the characteristics of his or another person's goods or services." Freecycle Network, Inc. v. Oey, 505 F.3d 898, 902 (9th Cir. 2007); see Int'l Order of Job's Daughters v. Lindeburg & Co., 633 F.2d 912, 917 (9th Cir. 1980) ("[T]he test for false designation of origin was similar to that for infringement of a registered trademark under 15 U.S.C. § 1114. Both statutes preclude the use of another's trademark in a manner likely to confuse the public about the origin of goods.").
Real Action argues two misrepresentations give rise to a false designation of origin claim. First, ATO and UTS masqueraded as "PepperBall Technologies, Inc." and "caused confusion by falsely claiming that they were `Pepperball Technologies, Inc.,' a long-established corporation." RAP CC Opp'n at 7-10. Second, ATO and UTS misrepresented their products were "proven safe and effective." Id. at 10-11.
Counter-Defendants argue "United Tactical acquired the PepperBall® trademark and all of Pepperball Technologies' assets in 2014 when it purchased all tangible and intangible assets of its predecessor Advanced Tactical." Counter-Defs. CC Mot. at 22. As discussed above, Real Action fails to show that this sale was invalid.
Real Action nevertheless argues "a corporate name is not transferrable the way a `trade name' is." RAP CC Opp'n at 7. Real Action cites Colorado law to distinguish between a "trade name" and a "true name." Id. at 7 ("PTI was a Colorado corporation. . . ."); id. at 8 (citing Colo. Rev. Stats. 7-90-102(63.3), (63.7)). Real Action thus contends that "a Colorado corporation's `true name' is not divestable; for a corporation to lose rights to its `true name,' it must amend its Articles of Incorporation to change its corporate name and file them with the Secretary of State." Id. at 8.
Real Action cites no authority in support of its proposition that a "true name" cannot be acquired through a UCC foreclosure sale, nor does it offer any evidence that PTI's "true name" did not transfer to ATO or UTS. This fails to create a triable issue of material fact.
Real Action challenges Counter-Defendants' representation that PepperBalls are "proven safe and effective by more than 5000 agencies." RAP CC Mot. at 10-11; see Overhauser Decl., Ex. 69 (March 2013 screenshot of ATO's website). Real Action argues "Counter-Defendants were unable to identify a single study showing that pepperball products were `proven safe and effective,' let alone studies by `more than 5,000 agencies.'" Id. at 10. Real Action also cites a study by David Grisham, an expert who "analyzed the projectile sales records produced by ATO and UTS and [who] concluded that the number of unique customers for projectiles that each company has was less." Id. (citing Overhauser Decl., Ex. 54 (Grisham Report)).
Counter-Defendants object to the Grisham report on the ground that it lacks foundation as to the basis for the opinions stated therein. Counter-Defs. CC Opp'n at 10 n.27. To the extent Real Action relies on the Grisham report to argue ATO and UTS had less than 5,000 customers, the Court agrees that this report does not support that conclusion. Mr. Grisham's analysis is limited to "customers for projectiles." Grisham Report at 12. But the statement posted on ATO's website referred to "pepperball products." Counter-Defendants point out that "PepperBall® products are not limited to projectiles, and include items such as launchers." Counter-Defs. CC Reply at 14. A reasonable jury could conclude that ATO's representation includes all PepperBall products, not just projectiles. Real Action does not offer any evidence as to how many agencies may have purchased PepperBall products in general.
Counter-Defendants also offer evidence that Real Action's contention with this statement not with the purported agency endorsements, but that ATO is "not PepperBall Technology." Tran Dep. at 242:12-18. As discussed above, there is no evidence ATO used the PepperBall name improperly.
In short, there is no evidence to allow a reasonable finder of fact to conclude Counter-Defendants are liable for false designation of origin.
Accordingly, the Court
Counter-Defendants move for summary judgment on Real Action's thirteenth counterclaim for UCL and FAL violations.
California's UCL prohibits "any unlawful, unfair or fraudulent business act or practice and unfair, deceptive, untrue or misleading advertising." Cal. Bus. & Prof. Code § 17200. California's "false advertising law prohibits any `unfair, deceptive, untrue, or misleading advertising.'" Williams v. Gerber Prod. Co., 552 F.3d 934, 938 (9th Cir. 2008) (quoting Cal. Bus. & Prof. Code § 17500). The California Supreme Court "has recognized that any violation of the false advertising law necessarily violates the UCL." Kasky v. Nike, Inc., 27 Cal.4th 939, 950 (2002), as modified (May 22, 2002) (internal quotation marks and ellipses omitted). "[U]nder either the UCL or the false advertising law, based on false advertising or promotional practices, it is necessary only to show that members of the public are likely to be deceived." Id. (internal quotation marks omitted). FAL and UCL claims are "evaluated from the vantage point of a `reasonable consumer'" which requires a plaintiff to "`show that members of the public are likely to be deceived.'" Reid v. Johnson & Johnson, 780 F.3d 952, 958 (9th Cir. 2015) (quoting Williams, 552 F.3d at 938).
Real Action's UCL and FAL claims are predicated on its third, sixth, seventh, tenth, eleventh, and twelfth counterclaims. Because the Court finds summary judgment is appropriate as to those counterclaims, Real Action's UCL and FAL claims cannot survive.
Real Action moves for summary judgment on its fourteenth counterclaim, which seeks a declaratory judgment that no Lanham Act violation took place. As discussed above, there are triable issues of material fact regarding UTS' Lanham Act claims. The Court therefore
Real Action and Counter-Defendants move for summary judgment as to Real Action's nineteenth counterclaim, which seeks a declaratory judgment for cancellation of the pepperball trademark registration. TACC ¶¶ 180-92. As discussed above, there is no evidence that the '025 registration lapsed or that the Counter-Defendants are not the owners of the mark. Accordingly, summary judgment in favor of Counter-Defendants and against Real Action is proper as to this counterclaim.
For the foregoing reasons, the Court
As to Real Action's affirmative defenses, the Court
Regarding Real Action's counterclaims, the Court
17 U.S.C. § 503 (West)
