ORDER re: Plaintiff's Motion to Dismiss Defendants' Amended Counterclaim Against Ketab Corp. and Bijan Khalili [120]

RONALD S.W. LEW, Senior District Judge.

INTRODUCTION

Currently before the Court is Plaintiff and Counterdefendant Ketab Corp. ("Ketab") and Counterdefendant Bijan Khalili's (collectively, "Plaintiff" or "Counterdefendants") Motion to Dismiss Defendants and Counterclaimants Melli Yellow Pages, Inc., Studio Cinegraphic Los Angeles, Inc., and Seyed Ali Limonadi's (collectively, "Limonadi Defendants" or "Counterclaimants") Amended Counterclaim [115], which alleges against Plaintiff a violation of Cal. Bus. & Prof. Code § 17200 et seq. and petitions for cancellation of Plaintiff's registered trademarks. Upon review of all papers submitted and pertaining to this Motion [120], the Court GRANTS Plaintiff's Motion to Dismiss [120] as follows.

I. BACKGROUND

A. Factual Background

The Counterclaim [115] at issue relates to Plaintiff Ketab Corp.'s various trademark-related claims against Limonadi Defendants in the underlying action. See Second Amend. COmpl. ("SAC"), ECF No. 106.

Plaintiff Ketab Corp. is a California corporation based in Los Angeles that is "in the business of providing telephone directory and marketing services ... to the Iranian community in Southern California, ... and around the world, who live outside of Iran." SAC ¶ 12. Counterclaimants allege that Bijan Khalili is an individual residing in Los Angeles County, California, and the owner and principal of Ketab Corp. Amend. Countercl. ("ACC") ¶ 3, ECF No. 115.

Defendant and Counterclaimant Melli Yellowpages, Inc. ("Melli Yellowpages") is a California corporation based in Studio City, California, that provides telephone directory and marketing services to the Iranian community in the Los Angeles area. Id. ¶¶ 1, 11. Defendant and Counterclaimant Studio Cinegraphic Los Angeles, dba IRTV ("IRTV") is a California corporation based in Studio City, California, and an Iranian television channel that provides local news as well as information and data on Iranian businesses, activities, and cultural and commercial events. Id. ¶¶ 1, 8. Defendant and Counterclaimant Seyed Ali Limonadi ("Limonadi") is an individual residing in Los Angeles who owns Melli Yellowpages. Id. ¶ 1.

Counterclaimants allege that IRTV, established in 1979, "has been recognized as the information center of the Iranian community." Id. ¶ 8. Counterclaimants allege that in 1994, IRTV published Melli Yellowpages, which IRTV termed, "The National Directory of Iranian-Americans." Id. ¶ 10. Counterclaimants allege that Melli Yellowpages and Ketab are "the only two competitors who provide telephone directory and marketing services . . . to the Iranian community in the Los Angeles area." Id. ¶ 11.

Counterclaimants allege two claims against Counterdefendants: (1) Violation of Cal. Bus. & Prof. Code § 17200 et seq. and (2) Cancellation of Registration of federally registered trademarks.

B. Procedural Background

On September 16, 2014, Plaintiff filed its Complaint against Counterclaimants and other defendants [1]. On October 23, 2014, Limonadi Defendants filed their Answer [24], which included the two present counterclaims. On March, 2, 2015, Plaintiff filed its First Amended Complaint [53]. See Dckt. # 59. On March 16, 2015, Limonadi Defendants filed their Answer [65] to the First Amended Complaint, which contained the two present counterclaims.

On March 31, 2015, Counterdefendants filed a Motion to Dismiss Counterclaims [79], which the Court granted with leave to amend because Limonadi Defendants failed to timely oppose the motion. See Dckt. # 101. On May 22, 2015, Limonadi Defendants filed their Amended Counterclaim [105]. On the same day, Plaintiff filed its Second Amended Complaint [106]. On June 5, 2015, Limonadi Defendants filed their Answer to Plaintiff's Second Amended Complaint [115], which contained the two present counterclaims.

On June 12, 2015, Counterdefendants filed the present Motion to Dismiss [120]. The Opposition [124] and Reply [128] were timely filed. The Motion was set for hearing on July 14, 2015, and was taken under submission on July 1, 2015 [131].

II. LEGAL STANDARD

A. Rule 12(b)(6) Motion to Dismiss

Federal Rule of Civil Procedure 12(b)(6) allows a party to move for dismissal of one or more claims if the pleading fails to state a claim upon which relief can be granted. Fed. R. Civ. P. 12(b)(6). Dismissal can be based on a "lack of a cognizable legal theory or the absence of sufficient facts alleged under a cognizable legal theory." Balistreri v. Pacifica Police Dep't, 901 F.2d 696, 699 (9th Cir. 1990). A complaint must "contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (internal quotation marks omitted); Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). The question presented by a motion to dismiss is not whether the plaintiff will ultimately prevail, but whether the plaintiff has alleged sufficient factual grounds to support a plausible claim to relief, thereby entitling the plaintiff to offer evidence in support of its claim. Iqbal, 556 U.S. at 678; Swierkiewicz v. Sorema N.A., 534 U.S. 506, 511 (2002).

III. DISCUSSION

A. Plaintiff's Requests for Judicial Notice

Rule 201 of the Federal Rules of Evidence states that the court "may judicially notice a fact that is not subject to reasonable dispute because it: (1) is generally known . . .; or (2) can be accurately and readily determined from sources whose accuracy cannot reasonably be questioned." Fed. R. Evid. 201(b).

Generally, when "`ruling on a Rule 12(b)(6) motion,'" "`a district court may not consider any material beyond the pleadings.'" Lee v. City of L.A., 250 F.3d 668, 688 (9th Cir. 2001). However, two exceptions exist. Id.First, "a court may consider `material which is properly submitted as part of the complaint' on a motion to dismiss without converting the motion to dismiss into a motion for summary judgment," and if the documents are not physically attached to the complaint, the documents "may be considered if the documents' authenticity is not contested and [if] the plaintiff's complaint necessarily relies on [the documents]." Id. (internal quotation marks and alterations omitted). Second, "a court may take judicial notice of `matters of public record'" under Federal Rule of Evidence 201. Id.

Plaintiff requests that the Court take judicial notice of five exhibits, all of which are records from the U.S. Patent and Trademark Office (USPTO). See Dctk. ## 121, 129. Because the exhibits can all be "accurately and readily determined from sources whose accuracy cannot reasonably be questioned," Fed. R. Evid. 201(b), and because the exhibits are all "matter[s] of public record," Lee, 250 F.3d at 688, the Court GRANTS Plaintiff's Requests [121, 129] for judicial notice and takes judicial notice of the fact and content of the five attached exhibits.

B. Motion to Dismiss

1. Cal. Bus. & Prof. Code § 17200 Claim

"California's Unfair Competition Law ("UCL") prohibits any `unlawful, unfair or fraudulent business act or practice.'" Cal. Bus. & Prof. Code § 17200; Williams v. Gerber Prods. Co., 552 F.3d 934, 938 (9th Cir. 2008). As such, to state a cause of action under the UCL, the claimant must allege either an unlawful, unfair, or fraudulent business activity. Williams, 552 F.3d at 938; VP Racing Fuels, Inc. v. Gen. Petroleum Corp., 673 F.Supp.2d 1073, 1086-88 (E.D. Cal. 2009).

The statute of limitations for an unfair competition claim is "four years after the cause of action accrued." Cal. Bus. & Prof. Code § 17208; see Kayne v. Thomas Kinkade Co., No. C 07-4721-SI, 2007 WL 4287364, at *6 (N.D. Cal. Dec. 5, 2007). The movant has the burden to show that the claimant's UCL claim is barred by Section 17208's limitations period, but thereafter, the burden shifts to the claimant to demonstrate that his claims survive Section 17208 "based on one or more nonstatutory exceptions to the basic limitations period." Aryeh v. Canon Bus. Solutions, Inc., 292 P.3d 871, 879 (Cal. 2013).

a. Standing

"[A] private person has standing to sue [for unfair competition under California law] only if he or she `has suffered injury in fact and has lost money or property as a result of such unfair competition.'" Californians For Disability Rights v. Mervyn's LLC, 138 P.3d 207, 209 (Cal. 2006).

Counterclaimants' ACC alleges that Plaintiff's present action against them is "costing [Counterclaimants] damages from not only the inability to descriptively advertise its services, resulting in lower sales, but costs through the abusive use of the court system through baseless proceedings . . . [which has] resulted in [Counterclaimants] being forced to defend the claims set forth in Ketab's Second Amended Complaint and expend funds on attorney's fees on generic and/or descriptive terms that should be allowed to be used in the market." ACC ¶ 31.

Such an allegation is sufficient at the motion to dismiss stage to assert an injury in fact as a result of what Counterclaimants allege is unfair competition under California law.

b. Fraud Prong

A "fraudulent act" under the UCL "may include a false statement, or one which, though strictly accurate, nonetheless has the likely effect of misleading or deceiving the public." Zeltiq Aesthetics, Inc. v. BTL Indus., Inc., No. 13-cv-05473-JCS, 2014 WL 1245222, at *9 (N.D. Cal. Mar. 25, 2014).

Counterclaimants allege that Plaintiff placed an ® symbol next to its "08" design mark (Registration No. 3,271,704) prior to October 16, 2006, when that mark was filed for registration with the USPTO and, in so doing, deceived Counterclaimants and the public by representing that its "08" mark was a registered mark when the mark was not yet registered. ACC ¶ 30. Plaintiff argues that this allegation is barred by the UCL's four-year statute of limitations. Because Counterclaimants' original counterclaim was filed October 23, 2014, see Dckt. # 24, Counterclaimants' allegations regarding Plaintiff's activities prior to October 2006 is barred by the UCL's statute of limitations. Cal. Bus. & Prof. Code § 17208. Because Counterclaimants do not show that their fraud allegations survive Section 17208 under any applicable exception, Counterclaimants' fraud allegations cannot support its UCL claim. See Aryeh, 292 P.3d at 879.

c. Unlawful Prong

To claim a violation of the UCL based on an "unlawful" act, the claimant must prove the defendant violated some underlying law. VP Racing, 673 F. Supp. 2d at 1086-88. Plaintiff argues that Counterclaimants have not identified a violation of any specific law in the ACC. Though Counterclaimants allege that Counterdefendants have violated a specific statute in their Opposition, such allegations are not in the ACC and thus will not be considered by the Court. See Lee, 250 F.3d at 688. Because Counterclaimants fail to identify any specific law violated by Plaintiff's alleged activity, Counterclaimants' UCL claim cannot be based on the unlawful prong.

d. Unfair Prong

While there is a split among California appellate courts as to the proper standard for an "unfair" act under the UCL, Graham v. Bank of Am., N.A., 172 Cal.Rptr.3d 218, 233 (Ct. App. 2014), the California Supreme Court has established the standard for an unfair competition claim asserted against a competitor1:

Cel-Tech Commc'ns, Inc. v. L.A. Cellular Tel. Co., 973 P.2d 527, 20 Cal.4th 548, 186-87 (1999).

Counterclaimants must allege that Plaintiff's conduct "threatens an incipient violation of an antitrust law, or violates the policy or spirit of one of those laws." Id. Counterclaimants' ACC does not mention any law, much less an antitrust law. As such, Counterclaimants' UCL claim cannot be based upon the unfair prong.

Because Counterclaimants' ACC does not allege sufficient facts under any of the three prongs of an unfair competition claim, the Court GRANTS Counterdefendants' Motion to Dismiss [120] this claim.

Because Counterclaimants could allege additional facts to support an unfair competition claim, the Court DISMISSES this claim WITH TWENTY (20) DAYS LEAVE TO AMEND from the date this Order is issued. See Eminence Capital, LLC v. Aspeon, Inc., 316 F.3d 1048, 1051 (9th Cir. 2003) (stating that Fed. R. Civ. P. 15(a)'s policy that "`leave shall be freely given when justice so requires'" should be "`applied with extreme liberality'"). Because Counterclaimants have had multiple opportunities to amend their Counterclaim, this will be Counterclaimants' FINAL opportunity to amend the Counterclaim.

2. Cancellation Claim

a. Standing

"In order to bring a claim for trademark cancellation, the cancellation petitioner must plead and prove facts showing a `real interest' in the proceedings in order to establish standing" and "must show that he is `more than an intermeddler' but rather has a personal interest, and that `there is a real controversy between the parties.'" Hokto Kinoko Co. v. Concord Farms, Inc., 810 F.Supp.2d 1013, 1034 (C.D. Cal. 2011).

Counterclaimants allege that Counterclaimant Melli Yellowpages and Plaintiff Ketab Corp. are "the only two competitors who provide telephone directory and marketing services . . . to the Iranian community in the Los Angeles area." ACC ¶ 11. Counterclaimants allege that Plaintiff's "attempt to enforce" Plaintiff's generic and/or descriptive marks "prevent [the marks'] descriptive use in the market" and is "an attempt to disrupt . . . the business and financial resources of the Melli Defendants." Id. ¶ 26. Counterclaimants allege they have suffered "damages from . . . the inability to descriptively advertise [their] services, resulting in lower sales." Id. ¶ 31. Counterclaimants do not assert any other facts showing a real interest in the cancellation claim. As such, Counterclaimants' standing to bring their cancellation claim depends entirely on Counterclaimants' allegations that certain marks are "generic and/or descriptive."2

However, Counterclaimants cannot establish standing on the basis of their allegations of the generic or descriptive nature of the marks for the following reason. The ACC alleges that the following marks are generic and/or descriptive: "Iranian Information Center" and "Yellow Page-Iranian." ACC ¶¶ 14, 16-21. However, Counterclaimants do not seek to cancel those marks, but, rather, the following registered marks, which the ACC does not anywhere allege are generic and/or descriptive: an Arabian design mark that translates to "Iranian pocket yellow pages" (Registration No. 3,337,567); an "08" mark (Registration No. 3,271,704); and a design mark that consists only of an image of what appears to be an open book (Registration No. 3,246,367). ACC ¶¶ 25, 32-42.

Because Counterclaimants do not allege sufficient facts to show they have standing to bring their cancellation claim, see Hokto Kinoko, 810 F. Supp. 2d at 1034, the Court GRANTS Counterdefendants' Motion to Dismiss [120] this claim.

Because Counterclaimants could allege additional facts to support their cancellation claim, the Court DISMISSES this claim WITH TWENTY (20) DAYS LEAVE TO AMEND from the date this Order is issued. See Eminence Capital, 316 F.3d at 1051. Because Counterclaimants have had multiple opportunities to amend their Counterclaim, this will be Counterclaimants' FINAL opportunity to amend the Counterclaim.

IV. CONCLUSION

For the foregoing reasons, the Court HEREBY GRANTS Plaintiff's Motion to Dismiss Defendants' Amended Counterclaim Against Ketab Corp. and Bijan Khalili [120].

The Court HEREBY DISMISSES WITH TWENTY (20) DAYS LEAVE TO AMEND from the date of this Order the following claims asserted by Counterclaimants in their Counterclaim [115]:

(1) Violation of Cal. Bus. & Prof. Code § 17200;

(2) Cancellation of Registration.

IT IS SO ORDERED.