Mercado Latino Inc v. Indio Products Inc et al, No. 2:2013cv01027 - Document 45 (C.D. Cal. 2013)
Court Description: ORDER GRANTING DEFENDANTS MOTION TO DISMISS SECOND AMENDED COMPLAINT 33 by Judge Dean D. Pregerson: Plaintiffs trade dress claim is dismissed with prejudice. In all other respects, Defendants Motion to Dismiss is GRANTED, with limited leave to amend. Should Plaintiff desire to amend the SAC to include allegations relevant to the quality control exception to the First Sale Doctrine, it must do so within ten days of the date of this order. (lc). Modified on 9/24/2013 .(lc).
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Mercado Latino Inc v. Indio Products Inc et al Doc. 45 1 2 O 3 4 5 NO JS-6 6 7 8 UNITED STATES DISTRICT COURT 9 CENTRAL DISTRICT OF CALIFORNIA 10 11 MERCADO LATINO, INC. dba CONTINENTAL CANDLE COMPANY, 12 Plaintiff, 13 v. 14 15 INDIO PRODUCTS, INC., a California corporation, 16 Defendant. ___________________________ ) ) ) ) ) ) ) ) ) ) ) ) Case No. CV 13-01027 DDP (RNBx) ORDER GRANTING DEFENDANT’S MOTION TO DISMISS SECOND AMENDED COMPLAINT [Dkt. No.33] 17 18 Presently before the court is Defendant Indio Products, Inc. 19 (“Indio”)’s Motion to Dismiss the Second Amended Complaint. 20 Having considered the submissions of the parties and heard oral 21 argument, the court grants the motion and adopts the following 22 order. 23 I. 24 Background Indio and Plaintiff Mercado Latino, Inc. (“Mercado”) both sell 25 devotional prayer candles bearing images of saints and other 26 religious figures. 27 23.) 28 bearing a label depicting a religious icon within a “bullet” shape (Second Amended Complaint (“SAC”) ¶¶ 7, 12, Mercado’s “Sanctuary Series” candles are clear containers Dockets.Justia.com 1 in the style of a stained glass window, surrounded by a patterned 2 border of colorful, geometric shapes. 3 copyrights on “the original and distinctive artwork shown on 4 Sanctuary Series candles.” 5 trademarked the name “Sanctuary Series” and a design consisting of 6 three circles within a window. 7 owns trade dress featuring a combination of a clear container of 8 certain dimensions filled with a single color wax, a two-sided 9 “opaque die-cut label” with a bullet-shaped, black bordered (SAC ¶). (FAC ¶¶ 12-14.) Mercado obtained Mercado also (SAC ¶¶ 20-21.) Mercado allegedly 10 silhouette featuring various shapes, atop of which is placed an 11 image of a religious figure and a depiction of a scroll with the 12 figure’s name. 13 14 B. (SAC ¶ 12.) Procedural History In its First Amended Complaint, Mercado alleged that Defendant 15 Indio copied Mercado’s copyrights and passed off inferior Indio 16 candles as Mercado products. 17 alleged that Indio infringed upon Mercado’s Sanctuary Series trade 18 dress and trademarks. 19 federal unfair competition under 15 U.S.C. § 1125(a) and 20 intentional interference with prospective economic advantage. 21 (FAC ¶¶ 29-31.) The FAC further Mercado also alleged causes of action for Indio moved to dismiss all claims. The court dismissed 22 Mercado’s copyright claim, with prejudice. 23 to Dismiss at 6.) 24 under Section 43(a) of the Lanham Act, 15 U.S.C. § 1125(a), should 25 also be dismissed because it was premised upon the same facts as 26 its copyright claim. 27 claims that overlap with copyright claims are preempted when the (Order Granting Motion Indio argued that Mercado’s trade dress claim As this court explained, Lanham Act trademark 28 2 1 Copyright Act provides an adequate remedy. 2 Dastar Corp. v. Twentieth Cent. Fox Corp., 539 U.S. 23, 34 (2003); 3 Shaw v. Lindheim, 919 F.2d 1353, 1364-65 (9th Cir. 1990)).) 4 (Order at 8 (citing Mercado did not oppose Indio’s preemption argument. Instead, 5 Mercado asserted that Indio had engaged in wrongful conduct 6 independent of its alleged copyright violations. 7 noted, however, Mercado made no such allegations in the First 8 Amended Complaint. 9 contended that Indio was selling Mercado’s Sanctuary Series candles As the court Rather, by way of declaration, Mercado 10 in boxes labeled with Indio’s name. 11 confirmed that this purported repackaging was the purportedly 12 independent basis for its trade dress claim. 13 that Mercado would be able to amend its complaint to include 14 factual allegations regarding this repackaging, the court dismissed 15 Mercado’s trade dress claim with leave to do so. 16 dress claim is therefore dismissed, with leave to amend (Order at 8 17 (emphasis added).) 18 Mercado’s unfair competition, trademark, and interference with 19 economic advantage claims were also predicated upon the new 20 repackaging assertions, those claims were also dismissed with leave 21 to amend. 22 At oral argument, Mercado Because it appeared (Mercado’s trade The court further explained that because (Order at 9.) Mercado then filed its Second Amended Complaint. 23 moves to dismiss the SAC in its entirety. 24 II. Indio now 25 Legal Standard A complaint will survive a motion to dismiss when it contains 26 “sufficient factual matter, accepted as true, to state a claim to 27 relief that is plausible on its face.” Ashcroft v. Iqbal, 556 U.S. 28 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 3 1 570 (2007)). 2 “accept as true all allegations of material fact and must construe 3 those facts in the light most favorable to the plaintiff.” Resnick 4 v. Hayes, 213 F.3d 443, 447 (9th Cir. 2000). 5 need not include “detailed factual allegations,” it must offer 6 “more than an unadorned, the-defendant-unlawfully-harmed-me 7 accusation.” 8 allegations that are no more than a statement of a legal conclusion 9 “are not entitled to the assumption of truth.” Id. at 679. When considering a Rule 12(b)(6) motion, a court must Iqbal, 556 U.S. at 678. Although a complaint Conclusory allegations or In 10 other words, a pleading that merely offers “labels and 11 conclusions,” a “formulaic recitation of the elements,” or “naked 12 assertions” will not be sufficient to state a claim upon which 13 relief can be granted. 14 quotation marks omitted). 15 Id. at 678 (citations and internal “When there are well-pleaded factual allegations, a court should 16 assume their veracity and then determine whether they plausibly 17 give rise to an entitlement of relief.” Id. at 679. 18 must allege “plausible grounds to infer” that their claims rise 19 “above the speculative level.” Twombly, 550 U.S. at 555. 20 “Determining whether a complaint states a plausible claim for 21 relief” is a “context-specific task that requires the reviewing 22 court to draw on its judicial experience and common sense.” 23 556 U.S. at 679. 24 III. Discussion Plaintiffs Iqbal, 25 A. 26 Mercado’s trade dress claim, as previously pled, was premised Scope of Trade Dress Amendments 27 on the same facts as its copyright claim, and was therefore 28 preempted. As explained above, Mercado did not oppose dismissal on 4 1 preemption grounds. 2 however, because it claimed that it could allege facts regarding 3 Indio’s purported repackaging of Sanctuary Series candles in Indio 4 boxes. 5 The court granted Mercado leave to amend, Unlike the First Amended Complaint, the Second Amended 6 Complaint does include facts relating to repackaging. 7 32-41.) 8 same trade dress claims that this court previously dismissed as 9 preempted. (SAC ¶¶ 29, The Second Amended Complaint, however, also includes the The only significant difference between these claims, 10 as pled in the First and Second Amended Complaints, is that the SAC 11 includes additional elements of Mercado’s alleged trade dress, 12 including a clear, cylindrical container and a “solid color wax.” 13 (SAC ¶ 12.) 14 the leave to amend. 15 Indio argues that these amendments exceed the scope of The court agrees. At this stage, Mercado may only amend its complaint with 16 Indio’s leave or by leave of the court. 17 This court granted Mercado leave to amend its non-copyright claims 18 solely because Mercado identified an independent basis for its 19 claims: repackaging. 20 unrelated to the repackaging allegations. 21 specific authorization to cure certain deficiencies, courts will 22 dismiss or strike the new, improper allegations. 23 v. Baker Hughes, No. CV 12-07735 MMM (MRWx), 2013 WL 3353636 at *3 24 (C.D. Cal. Jun. 30, 2013) (collecting cases). 25 allegations unrelated to Indio’s repackaging of authentic Mercado 26 candles are stricken from the SAC. 27 court, nor does Mercado argue, that the newly alleged repackaging Fed. R. Civ. P. 15(a)(2). The SAC, however, pleads new facts wholly 28 5 When a plaintiff exceeds See, e.g. Benton Accordingly, all It is not apparent to the 1 facts provide any basis for a trade dress claim. 2 therefore, dismissed with prejudice. Count 1 is, 3 4 5 B. 6 Indio argues that all four of Mercado’s claims, insofar as First Sale Doctrine 7 they relate to Indio’s alleged repackaging, are barred by the First 8 Sale Doctrine.1 9 from confusing or deceiving consumers about the origin or make of a “[T]rademark law is designed to prevent sellers 10 product, which confusion ordinarily does not exist when a genuine 11 article bearing a true mark is sold.” 12 Circuit Abco, 810 F.2d 1506, 1509 (9th Cir. 1987). 13 sale of a real product under a true mark would not deceive 14 consumers, under the First Sale Doctrine, “resale by the first 15 purchaser of the original article under the producer’s trademark is 16 generally neither trademark infringement nor unfair competition.” 17 Enesco Corp. v. Price/Costco, Inc., 146 F.3d 1083, 1085 (9th Cir. 18 1998); Sebastian Int’l v. Longs Drug Stores Corp., 53 F.3d 1073, 19 1076 (9th Cir. 1995) (“It is the essence of the ‘first sale’ 20 doctrine that a purchaser who does no more than stock, display, and 21 resell a producer’s product under the producer’s trademark violates 22 no right conferred upon the producer by the Lanham Act.”). 23 24 NEC Electronics v. CAL Because the Here, the SAC alleges that Indio placed Mercado Sanctuary Series candles into boxes bearing Indio’s name and sold the boxes. 25 26 1 27 28 Mercado’s unfair competition claim is also based on Section 43(a) of the Lanham Act. Mercado’s intentional interference with economic advantage claim is based upon the alleged Lanham Act violations. 6 1 (SAC ¶¶ 29, 32).2 2 Mercado sell candles by the boxful, and that Indio is attempting to 3 “pass off” its own products as Mercado candles. 4 36.) 5 boxes “purchased 3/22/013 at Vernon Sales.” 6 contains twelve candles appearing to be Sanctuary Series candles. 7 The boxes appear to be brown cardboard shipping boxes, bearing 8 packing tape and large “Made in China” lettering. 9 nineteen of the twenty boxes are white labels with black lettering The SAC further alleges that both Indio and (SAC ¶¶ 33-34, Exhibit G to the SAC consists of several images of twenty (SAC Ex. G.) Id. Each box Affixed to 10 reading “INDIO PRODUCTS INC,” as well as “ITEM DESCRIP” and various 11 written combinations of colors and religious figures (e.g. “ST 12 MARTHA WHITE”). 13 Id. Mercado argues that the “material difference” exception to the 14 First Sale Doctrine applies.3 15 “quality control” exception, this theory posits that when products 16 are sold under a producer’s trademark but are distributed in a 17 manner that does not meet the trademark holder’s quality control 18 standards, there may be some hidden defect that tarnishes the mark. 19 Enesco, 146 F.3d at 1087; SoftMan Prods. Co., LLC v. Adobe Sys., 20 Inc., 171 F. Supp. 2d 1075, 1092 (C.D. Cal. 2001). 21 the non-conforming product should not be considered genuine, and (Opp. at 17-19.) Also known as the In such cases, 22 23 24 25 26 27 28 2 The SAC somewhat imprecisely alleges that Indio placed “candles bearing Mercado’s Sanctuary Series Trade Dress” in Indio boxes. (SAC ¶ 29.) The SAC appears, however, to refer to genuine Mercado products, rather than Indio products alleged to be similar in appearance. (SAC ¶¶ 29 (“Pictures of Mercado candles in Indio boxes . . . .”), 32 (“Defendants have sold Mercado candles . . . .”).) 3 At argument, the court specifically asked Mercado which, if any, of the exceptions to the First Sale Doctrine apply. Mercado identified and argued only the “material difference” exception. 7 1 the first sale doctrine will not apply. 2 at 1092. 3 SoftMan, 171 F. Supp. 2d The only related allegation in the SAC is that “Defendants’ 4 conduct is likely to cause confusion, mistake and deception among 5 the general purchasing public, and interfere with MERCADO’S ability 6 to use its mark to indicate a single quality controlled source of 7 goods and services.” 8 seeks to support its argument with facts not pled in the complaint. 9 Plaintiff submits the declaration of Mercado Vice President Richard 10 Rodriguez, who states that Mercado uses a patented device to ensure 11 that its candles’ wicks remain centered during shipping. 12 (Rodriguez Decl. ¶¶ 3-11.) 13 may shatter or explode. 14 from Vernon Sales in Indio boxes did not contain the wick-centering 15 device. 16 (SAC ¶ 52.) Beyond that, Mercado once again If the device is not used, lit candles (Id. ¶ 8.) The Mercado candles purchased (Id. 17.) Indio seems to suggest that absent an allegation of actual 17 product malfunction, the “quality control” exception cannot apply. 18 (Reply at 4.) 19 have recognized the quality control argument in trademark 20 infringement cases where there is some defect (or potential defect) 21 in the product itself that the customer would not be readily able 22 to detect.” 23 emphasis, internal quotation, and citation omitted). 24 As the Enesco court explained, however, “[c]ourts Enesco, 146 F.3d at 1087 (emphasis added) (original Thus, the facts alleged in the Rodriguez declaration might be 25 sufficient to warrant invocation of the material difference, had 26 they been alleged in the complaint. 27 however, Mercado’s allegation that Indio’s actions “interfere with 28 MERCADO’S ability to use its mark to indicate a single quality 8 Without such factual support, 1 controlled source of goods and services” is nothing more than a 2 conclusory assertion.4 3 pled, thus does not fall within the “material alteration” or 4 “quality control” exception to the First Sale Doctrine. 5 IV. 6 Mercado’s trademark claim, as currently Conclusion For the reasons stated above, Defendant’s Motion to Dismiss is 7 GRANTED. 8 prejudice. 9 GRANTED, with limited leave to amend. Plaintiff’s trade dress claim is dismissed with In all other respects, Defendant’s Motion to Dismiss is Should Plaintiff desire to 10 amend the SAC to include allegations relevant to the “quality 11 control” exception to the First Sale Doctrine, it must do so within 12 ten days of the date of this order. 13 14 15 16 17 IT IS SO ORDERED. 18 19 20 Dated: September 24, 2013 DEAN D. PREGERSON United States District Judge 21 22 23 24 25 26 27 28 4 Contrary to Indio’s argument, the Rodriguez Declaration does not state that Mercado purchased all of Vernon Sales’ inventory, and this action is not, therefore, moot. (Rodriguez Decl. ¶ 15 (“[O]ur representative observed a large quantity of other Sanctuary Series candles offered for sale in Indio’s 12 pack boxes.”).) 9
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