M. SMITH, Circuit Judge:
We are confronted with an appeal of a procedurally curious nature. Plaintiff-Appellant Applied Underwriters, Inc. (Plaintiff) appealed the district court's dismissal of its claims for trademark infringement and unfair competition, on the apparent belief that the court dismissed the complaint pursuant to Federal Rule of Civil Procedure 12(b)(6). When we asked the district court to clarify its grounds for dismissal, however, it explained that it actually dismissed Plaintiff's complaint as a sanction pursuant to Federal Rule of Civil Procedure 41(b).
Although we conclude that the district court abused its discretion when it sanctioned Plaintiff and dismissed the case pursuant to Rule 41(b) absent an order requiring Plaintiff to file an amended complaint, we nevertheless affirm the district court's earlier Rule 12(b)(6) dismissal because the use of Plaintiff's trademarks by Defendants-Appellees Larry J. Lichtenegger, J. Dale Debber, and Providence Publications, LLC (Defendants) constituted nominative fair use.
Plaintiff is "a financial services company that provides payroll processing services and, through affiliated insurance companies, offers programs through which workers' compensation insurance is offered and provided to employers throughout the United States." It began to use the "Applied Underwriters" mark in October 2001,
In its complaint, Plaintiff asserted that these registrations are currently in force and uncontestable, and that it "aggressively advertises and promotes its marks and its services," having "spent millions of dollars advertising" them.
Defendant Providence Publications, LLC publishes various online news
Plaintiff alleged that, beginning in November 2015, Defendants began offering a seminar (both online and on DVD) that "uses the APPLIED UNDERWRITERS and EQUITYCOMP marks in the title of the webcast." The marks were also featured in various promotional materials, including a widely distributed email advertisement. Defendants used these marks "without Applied Underwriters' authority or permission and in reckless disregard of [its] federal trademark registrations and its rights." Plaintiff also claimed that Defendants "specifically and intentionally target[ed] their marketing and advertising ... to independent brokers and the business organizations that they serve who use Plaintiff's services." In its complaint, Plaintiff averred that "[a]s a result of the likelihood of confusion caused by Defendants' unauthorized use of" the marks, "Defendants are able to attract customers who mistakenly believe that they will attend a program sponsored or affiliated with Applied Underwriters," leading to dilution of the marks.
Plaintiff filed a complaint asserting causes of action for federal trademark infringement and dilution, false designation of origin under the Lanham Act, and federal and state unfair competition. The next day, Plaintiff filed a motion for a temporary restraining order, which the district court denied.
Defendants moved to dismiss under Rule 12(b)(6), arguing that their use of Plaintiff's marks was protected under the First Amendment, constituted nominal fair use, and satisfied the statutory defenses to trademark dilution. Defendants also filed a request for judicial notice that the district court granted in part and denied in part, taking judicial notice only of the DVD of the seminar. Plaintiff in turn filed an opposition to Defendants' motion to dismiss, accompanied by a declaration and additional evidence not included in its complaint.
On July 6, 2017, the district court granted Defendants' motion to dismiss, concluding that "Defendants' use of the Trademarks is nominative fair use." At Plaintiff's request, the court granted leave to amend the complaint within 30 days. The district court docket confirms that Plaintiff neither filed an amended complaint (timely or otherwise) nor announced an intent not to do so. Consequently, on August 10, 2017, the district court issued a minute order that read: "In light of Plaintiff's failure to file an Amended Complaint pursuant to the Court's Order (ECF No. [31]), this case is hereby DISMISSED. CASE CLOSED." The clerk of court subsequently entered judgment "in accordance with the Court's Order filed on 8/10/2017."
This appeal followed. In their briefs, Plaintiff and Defendants disputed whether the district court dismissed Plaintiff's complaint pursuant to Rule 12(b)(6), in which case we would review the sufficiency of the complaint de novo, Starr v. Baca, 652 F.3d 1202, 1205 (9th Cir. 2011), or as a sanction under Rule 41(b), which we would review for abuse of discretion, Yourish v. Cal. Amplifier, 191 F.3d 983, 986 (9th Cir. 1999). To remedy this confusion, we remanded
Before oral argument in this appeal, the district court responded with a clarification order, in which it explained that it dismissed Plaintiff's complaint as a sanction pursuant to Rule 41(b), and analyzed the five pertinent factors as enumerated in Yourish. It concluded that "[t]hree of the five factors strongly favored dismissal, and this Court dismissed the case under Rule 41(b) as a sanction for failure to comply with the Court's order."
"We review de novo a district court's dismissal of a complaint under [Rule] 12(b)(6) for failure to state a claim," Starr, 652 F.3d at 1205, and "[w]e review the district court's dismissal of a complaint pursuant to Rule 41(b) for abuse of discretion," Yourish, 191 F.3d at 986. We have jurisdiction pursuant to 28 U.S.C. § 1291 — regardless of the basis for the district court's dismissal of Plaintiff's complaint, its entry of judgment constituted a final decision of the court. Cf. De Tie v. Orange County, 152 F.3d 1109, 1111 (9th Cir. 1998) ("The dismissal of an action, even when it is without prejudice, is a final order.").
Under Rule 41(b), "[i]f the plaintiff fails to prosecute or to comply with ... a court order" — such as by failing to file an amended complaint after being ordered to do so — "a defendant may move to dismiss the action or any claim against it. Unless the dismissal order states otherwise, [such] a dismissal ... operates as an adjudication on the merits." Fed. R. Civ. P. 41(b). We have noted that "[w]hen a district court dismisses an action because the plaintiff has not filed an amended complaint after being given leave to do so and has not notified the court of his intention not to file an amended complaint, we may deem the dismissal to be for failure to comply with a court order based on Federal Rule of Civil Procedure 41(b)." Harris v. Mangum, 863 F.3d 1133, 1142 (9th Cir. 2017).
In the order clarifying its dismissal of Plaintiff's complaint, the district court analyzed the five factors that must be considered before dismissing a case pursuant to Rule 41(b): "(1) the public's interest in expeditious resolution of litigation; (2) the court's need to manage its docket; (3) the risk of prejudice to the defendants; (4) the public policy favoring disposition of cases on their merits; and (5) the availability of less drastic alternatives." Yourish, 191 F.3d at 990 (quoting Hernandez v. City of El Monte, 138 F.3d 393, 399 (9th Cir. 1998)).
We are not the first panel to address this question. See, e.g., Yourish, 191 F.3d at 986 n.4 ("This approach is somewhat problematic because a plaintiff's failure to amend a complaint is not easily described as disobeying a court order because the plaintiff has the right simply to allow the complaint to be dismissed."). Decades ago, the Fifth Circuit considered a similar factual scenario and concluded that
Mann v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 488 F.2d 75, 76 (5th Cir. 1973) (per curiam) (citations omitted). More recently, dissenting in Brown v. Rawson-Neal Psychiatric Hospital, Judge Graber concluded that a district court's dismissal with prejudice under Rule 41(b) "was an abuse of discretion for the simple reason that, under our precedents, Plaintiff did not fail to comply with a court order." 840 F.3d 1146, 1150 (9th Cir. 2016) (Graber, J., dissenting). Judge Graber noted that our precedent makes clear that "[w]hen a district court requires a plaintiff to file an amended complaint, the court may dismiss the case under Rule 41(b) if the plaintiff fails to follow the requirement." Id.; see also Edwards v. Marin Park, Inc., 356 F.3d 1058, 1065 (9th Cir. 2004) ("The failure of the plaintiff eventually to respond to the court's ultimatum — either by amending the complaint or by indicating to the court that it will not do so — is properly met with the sanction of a Rule 41(b) dismissal." (emphasis added)); Yourish, 191 F.3d at 986 n.2 (noting that the district court order stated that an "[a]mended complaint shall be filed within 60 days" (emphasis added)); Ferdik v. Bonzelet, 963 F.2d 1258, 1260 (9th Cir. 1992) (stating that the court "ordered" and "required" the filing of a second amended complaint). However, in Brown, as in this case,
840 F.3d at 1151 (Graber, J., dissenting).
We agree with Judge Graber's reasoning. By its plain text, a Rule 41(b) dismissal under these circumstances requires "a court order" with which an offending plaintiff failed to comply. Fed. R. Civ. P. 41(b).
The district court's dismissal under Rule 41(b) required noncompliance with a court order. A grant of leave to amend is not an order to amend. Therefore, Rule 41(b) did not apply here, and the district court's dismissal on this ground constituted an abuse of discretion.
Having concluded that the district court abused its discretion when it dismissed Plaintiff's complaint as a sanction pursuant to Rule 41(b), we must now determine the proper course of action moving forward.
One option is to remand. Upon remand, the district court would presumably either again dismiss Plaintiff's complaint under Rule 12(b)(6), based on reasoning articulated in its prior order, or again grant Plaintiff leave to amend — an opportunity of which Plaintiff would not avail itself, given its stated desire to appeal the district court's original Rule 12(b)(6) dismissal. Remand would therefore require the parties to engage in additional and redundant briefing, and would add years to their litigation. Nothing substantive would be gained, and "remand ... would be an unnecessary waste of judicial and litigant resources." O'Reilly v. Bd. of Appeals, 942 F.2d 281, 284 (4th Cir. 1991).
We conclude that remand would not serve the interest of judicial economy, and fortunately, it is not required. As the Supreme Court explained,
SEC v. Chenery Corp., 318 U.S. 80, 88, 63 S.Ct. 454, 87 S.Ct. 626 (1943) (citation omitted) (quoting Helvering v. Gowran, 302 U.S. 238, 245, 58 S.Ct. 154, 82 S.Ct. 224 (1937)); see also Alcaraz v. Block, 746 F.2d 593, 602 (9th Cir. 1984) ("We will affirm the district court's correct legal results, even if reached for the wrong reasons."). Here, we have before us the correct result; as discussed below, Defendants' use of Plaintiff's marks constituted nominative fair use, and thus dismissal was required. We also have the district court's analysis in its Rule 12(b)(6) order, which still stands and has not been altered or retracted. Therefore, we conclude that dismissal of Plaintiff's complaint was the correct legal result, even if the district court reached it for the wrong reason — as a sanction under Rule 41(b) — instead of the correct reason — as a dismissal under Rule 12(b)(6). Accordingly, we do not need to remand the action, and will instead proceed with analysis of the district court's dismissal pursuant to Rule 12(b)(6).
Defendants maintain, as the district court concluded, that their use of Plaintiff's marks constituted nominative fair use. We agree.
Pursuant to this defense, the "nominative use of a mark — where the only word reasonably available to describe a particular thing is pressed into service — lies outside the strictures of trademark law: Because it does not implicate the source-identification function that is the purpose of trademark, it does not constitute unfair competition." New Kids on the Block v. News Am. Publ'g, Inc., 971 F.2d 302, 308 (9th Cir. 1992).
Id. (footnote omitted). If the nominative use of a mark satisfies these three factors, then there is no infringement; "[i]f 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." Toyota Motor Sales, U.S.A., Inc. v. Tabari, 610 F.3d 1171, 1176 (9th Cir. 2010).
Although Plaintiff's primary contention is that Defendants' use of its marks failed to satisfy the third New Kids factor, it challenges the district court's conclusions as to all three. We will thus consider each factor in turn.
Plaintiff contends that "Defendants did not need to use Plaintiff's trademarks to identify their Program." It concedes that "the Program apparently addresses Plaintiff's workers' compensation product in particular," but nonetheless argues that "Defendants could have come up with another readily understood generic or descriptive name."
The email attached to the complaint demonstrates that Defendants' seminar exclusively critiqued Plaintiff's EquityComp service. The title of the seminar was "Applied Underwriters' EquityComp® Program Like it, Leave it, or Let it be?" and its subtitle read, "Learn the best strategies for selling, competing with, or helping a prospect out of EquityComp® mid-term." We have previously determined that a descriptive alternative — such as Plaintiff's proposed "Risk Sharing Workers' Comp Program" or "Captive Workers'
610 F.3d at 1180; see also Playboy Enters., Inc. v. Welles, 279 F.3d 796, 802 (9th Cir. 2002) ("[T]here is no other way that Ms. Welles can identify or describe herself and her services without venturing into absurd descriptive phrases. To describe herself as the `nude model selected by Mr. Hefner's magazine as its number-one prototypical woman for the year 1981' would be impractical as well as ineffectual in identifying Terri Welles to the public.").
Such is the case here. The seminar did not discuss workers' compensation programs generally, but rather Plaintiff's specific offering. Therefore, Defendants "needed to communicate" that they critiqued the EquityComp program, and so using the mark in the title and description of the program "accomplished this goal." Toyota Motor Sales, 610 F.3d at 1180.
In its reply brief, Plaintiff makes the argument that, even if the use of the "EquityComp" mark satisfied the first New Kids factor, the use of the "Applied Underwriters" mark did not. Plaintiff suggests that "[t]he addition of the `Applied Underwriters' mark does nothing to identify the content of the seminar but instead serves solely to create the impression that Applied Underwriters is sponsoring or endorsing a seminar about its own EquityComp® product." It relies on Playboy Enterprises, in which we determined that while use of the trademarked phrase "Playboy Playmate of the Year 1981" was permissible because it was needed for identification purposes, use of another potentially protected phrase — "PMOY '81" — was not. 279 F.3d at 804. We reasoned that "[t]he repeated depiction of `PMOY '81' is not necessary to describe Welles. `Playboy Playmate of the Year 1981' is quite adequate." Id. Here, similarly, Plaintiff suggests that the "EquityComp" mark identified the service that Defendants analyzed in their seminar, and thus the "Applied Underwriters" mark did not serve that function. But this argument falls short. Defendants' use of the "Applied Underwriters" mark was not necessarily redundant because it was used to identify the company that offered EquityComp — a company that was itself critiqued in the seminar. We therefore find this case distinguishable from Playboy Enterprises, where use of the "PMOY '81" mark served no additional identification purpose.
Plaintiff argues that Defendants' use of its marks failed the second factor because the email attached to the complaint featured several uses of both marks. That argument relies on a misunderstanding of this factor. The second New Kids factor does not implicate the number of uses of a mark, but rather the nature of the uses. In clarifying it, we explained that "a soft drink competitor would be entitled to compare its product to Coca-Cola or Coke, but would not be entitled to use Coca-Cola's distinctive lettering." New Kids, 971 F.2d at 308 n.7; see also Playboy Enters., 279 F.3d at 802 ("Welles' banner advertisements and headlines satisfy this element because they use only the trademarked words, not the font or symbols associated with the trademarks."); Volkswagenwerk Aktiengesellschaft v. Church, 411 F.2d 350, 352 (9th Cir. 1969) (noting that defendant "did not use Volkswagen's distinctive lettering style or color scheme, nor did he display the encircled `VW' emblem"); cf. Toyota Motor Sales, 610 F.3d at 1181 ("Toyota suggests that use of the stylized Lexus mark and `Lexus L' logo was more use of the mark than necessary and suggested sponsorship or endorsement by Toyota. This is true: The Tabaris could adequately communicate their message without using the visual trappings of the Lexus brand."). Our case law demonstrates that analysis of this factor should focus not on the number of uses of Plaintiffs' marks, but on whether Defendants used more of each individual mark than was necessary in terms of font and stylization.
Here, Defendants correctly note that the email "did not use any part of Plaintiff's service marks, the distinctive lettering or design; rather they used only the term `Applied Underwriters' and `EquityComp' in describing its webcast." The email did not contain, for example, the illustration of a St. Bernard or the stylized lettering of Plaintiff's registered marks. It did not even employ the distinctive small-caps rendering of the "APPLIED UNDERWRITERS" and "EQUITYCOMP" marks. Defendants used only the words themselves, which were, as discussed above, necessary to identify Plaintiff's product. Therefore, the second New Kids factor was satisfied.
Plaintiff asserts that, "[s]imply put, Defendants' advertising creates confusion."
At the outset, it claims that "[t]he district court erred by ignoring Plaintiff's evidence of actual confusion in its Order, which nowhere mentions the actual confusion." However, in its complaint, Plaintiff pleaded no such facts of actual confusion. Instead, the complaint stated only that "Defendants' improper use of the APPLIED UNDERWRITERS IP has caused, and will continue to cause, damaging and actual confusion among the public." That conclusory statement constituted the only evidence of confusion contained in the complaint, and at no other point did Plaintiff plead facts suggesting that use of its marks led consumers to assume that it sponsored or endorsed Defendants' seminar.
This further suggested that it was WCE — not Plaintiff — that sponsored the seminar, which discounts the possibility of any confusion.
Furthermore, Defendants correctly argue that any likelihood of confusion is implausible due to the content of the email and the seminar itself. The text of the email referred to EquityComp as a "sophisticated yet controversial program," and Lichtenegger was billed as a lawyer who "for 15 years has specialized in Investment and Commercial Fraud recovery" and "represents a panoply of employers vs Applied and is well versed in their math and how their program works." Debber, for his part, was credited as the person "who broke the recent spate of stories about Applied Underwriters' EquityComp Program. Only that other mild mannered reporter, Clark Kent, exceeds Dale's commitment to `Truth, Justice and the American Way.'" The seminar's subtitle advertised that users can "[l]earn the best strategies for ... helping a prospect out
We have held that criticism of a product tends to negate the possibility of confusion as to sponsorship and endorsement. See New Kids, 971 F.2d at 308-09 ("[N]othing in the announcements suggests joint sponsorship or endorsement by the New Kids. The USA Today announcement implies quite the contrary by asking whether the New Kids might be `a turn off.'").
It is true, as Plaintiff notes, that "[t]he existence of consumer confusion is a fact-intensive analysis that does not lend itself to a motion to dismiss." See, e.g., Williams v. Gerber Prods. Co., 552 F.3d 934, 938-39 (9th Cir. 2008). Even so, based on the critical nature of the presentation, the disclaimer included in the text, and the fact that Defendants advertised the seminar under the WCE banner, we cannot conclude that a "reasonably prudent consumer" in the relevant marketplace, Toyota Motor Sales, 610 F.3d at 1176, could have interpreted Defendants' seminar as being endorsed or sponsored by Plaintiff. The complaint contained only scant, conclusory allegations of consumer confusion, which, even when considered in the light most favorable to Plaintiff, were belied by the allegedly infringing email attached to the complaint, which demonstrated nominative fair use. Although Plaintiff introduced additional evidence that might change this conclusion in its opposition to Defendants' motion to dismiss, those additional facts cannot be considered because they were not included in the operative pleading. The third New Kids factor was therefore satisfied.
Although it is a "rare situation in which granting a motion to dismiss is appropriate" when a case involves questions of consumer confusion, Williams, 552 F.3d at 939, the district court properly concluded that Plaintiff failed to state claims for which relief could be granted because, on the face of the complaint, it was clear that Defendants' alleged infringement constituted nominative fair use.
We conclude that the district court abused its discretion when it dismissed Plaintiff's complaint as a sanction pursuant
