Sam Horse Corporation v. TQL Trading Inc, No. 2:2014cv02354 - Document 29 (C.D. Cal. 2014)
Court Description: ORDER DENYING DEFENDANTS MOTION FOR JUDGMENT ON THE PLEADINGS 25 by Judge Otis D. Wright, II. (lc). Modified on 9/17/2014 (lc).
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Sam Horse Corporation v. TQL Trading Inc Doc. 29 O 1 2 3 4 5 6 7 United States District Court Central District of California 8 9 10 11 12 Plaintiff/Counterdefendant, 13 Case 2:14-cv-02354-ODW(FFMx) SAM HORSE CORPORATION, v. 14 ORDER DENYING DEFENDANT’S TQL TRADING INC., MOTION FOR JUDGMENT ON Defendant/Counterclaimant. 15 I. 16 THE PLEADINGS [25] INTRODUCTION 17 Plaintiff Sam Horse Corporation and Defendant TQL Trading Inc. both sell 18 audio speakers and other goods bearing the KAIDAER mark. They both buy their 19 goods from the KAIDAER manufacturer in China. In fact, their businesses are only a 20 few doors down from each other. Now they dispute ownership of the United States 21 Trademark Registration from the KAIDAER mark, which Sam Horse obtained in 22 January 2014. 23 Pleadings as a mini-trial of the issues involved in the action, complete with a 24 declaration from the Chinese manufacturer. But since the Court cannot consider this 25 evidence in deciding the Motion, the Court DENIES TQL Trading’s Motion for 26 Judgment on the Pleadings.1 (ECF No. 25.) TQL Trading attempts to use this Motion for Judgment on the 27 28 1 After carefully considering the papers filed in support of and in opposition to the Motion, the Court deems the matter appropriate for decision without oral argument. Fed. R. Civ. P. 78; L.R. 7-15. Dockets.Justia.com II. 1 FACTUAL BACKGROUND 2 Sam Horse and TQL Trading are both California corporations having their 3 principal place of business in Los Angeles, California—in fact, they are only a half a 4 block away from each other. (Compl. ¶¶ 4–5.) Sam Horse has been engaged in 5 selling audio speakers, MP3 players, and radios bearing the KAIDAER trademark. 6 (Id. ¶ 6.) On January 28, 2014, Sam Horse obtained a federal trademark registration 7 for the KAIDAER mark from the United States Patent and Trademark Office. 8 (Id. ¶ 7.) Sam Horse is the sole owner and authorized user of the trademark. (Id.) TQL Trading is a Sam Horse competitor. 9 TQL Trading also sells audio 10 products bearing the KAIDAER mark in identical packaging as Sam Horse uses. 11 (Id. ¶ 9.) But since Sam Horse has registered the KAIDAER mark and not authorized 12 TQL Trading to use it, Sam Horse contends that TQL Trading’s sales result in 13 consumer confusion. 14 On March 27, 2014, Sam Horse brought this action against TQL Trading, 15 alleging claims for trademark infringement, false designation of origin, false 16 description, and trademark dilution under the Lanham Act; common-law unfair 17 competition; and unfair competition under California’s Unfair Competition Law, Cal. 18 Bus. & Prof. Code § 17200. (ECF No. 1.) TQL Trading answered the Complaint and 19 brought a trademark-cancellation counterclaim. (ECF No. 17.) 20 On August 26, 2014, TQL Trading filed this Motion titled “Motion to Dismiss 21 and Motion for Judgment on the Pleadings.” (ECF No. 25.) Sam Horse timely 22 opposed. That Motion is now before the Court for decision. 23 III. LEGAL STANDARD 24 TQL Trading properly brings both a Rule 12(b)(6) and 12(c) motion. Rule 25 12(h)(2) provides that a party may bring a failure-to-state-a-claim motion essentially 26 at any time. 27 /// 28 /// 2 1 A. Motion to dismiss 2 A court may dismiss a complaint under Rule 12(b)(6) for lack of a cognizable 3 legal theory or insufficient facts pleaded to support an otherwise cognizable legal 4 theory. Balistreri v. Pacifica Police Dep’t, 901 F.2d 696, 699 (9th Cir. 1990). To 5 survive a dismissal motion, a complaint need only satisfy the minimal notice pleading 6 requirements of Rule 8(a)(2)—a short and plain statement of the claim. Porter v. 7 Jones, 319 F.3d 483, 494 (9th Cir. 2003). The factual “allegations must be enough to 8 raise a right to relief above the speculative level.” Bell Atl. Corp. v. Twombly, 550 9 U.S. 544, 555 (2007). That is, the complaint must “contain sufficient factual matter, 10 accepted as true, to state a claim to relief that is plausible on its face.” Ashcroft v. 11 Iqbal, 556 U.S. 662, 678 (2009). 12 The determination whether a complaint satisfies the plausibility standard is a 13 “context-specific task that requires the reviewing court to draw on its judicial 14 experience and common sense.” Id. at 679. A court is generally limited to the 15 pleadings and must construe all “factual allegations set forth in the complaint . . . as 16 true and . . . in the light most favorable” to the plaintiff. Lee v. City of L.A., 250 F.3d 17 668, 688 (9th Cir. 2001). But a court need not blindly accept conclusory allegations, 18 unwarranted deductions of fact, and unreasonable inferences. Sprewell v. Golden 19 State Warriors, 266 F.3d 979, 988 (9th Cir. 2001). 20 B. Motion for judgment on the pleadings 21 A motion for judgment on the pleadings is “functionally identical” to a Rule 22 12(b) motion to dismiss; the only major difference is that a Rule 12(c) motion is 23 properly brought “after the pleadings are closed and within such time as not to delay 24 the trial.” Mag Instrument, Inc. v. JS Prods., Inc., 595 F. Supp. 2d 1102, 1106–07 25 (C.D. Cal. 2008) (citing Dworkin v. Hustler Magazine, Inc., 867 F.2d 1188, 1192 (9th 26 Cir. 1989)). The allegations of the nonmoving party are accepted as true, denials of 27 these allegations by the moving party are assumed to be false, and all inferences 28 reasonably drawn from those facts must be construed in favor of the responding party. 3 1 Hal Roach Studios, Inc. v. Richard Feiner & Co., 896 F.2d 1542, 1550 (9th Cir. 2 1989). But conclusory allegations and unwarranted inferences are insufficient to 3 defeat a motion for judgment on the pleadings. In re Syntex Corp. Sec. Litig., 95 F.3d 4 922, 926 (9th Cir. 1996). A court should grant judgment on the pleadings when, even 5 if all material facts in the pleading under attack are true, the moving party is entitled to 6 judgment as a matter of law. Hal Roach Studios, 896 F.2d at 1550. 7 IV. DISCUSSION 8 TQL Trading moves to dismiss Sam Horse’s trademark-related claims based on 9 a declaration from the parties’ Chinese manufacturer. But Sam Horse correctly points 10 out that this declaration and accompanying exhibits are outside a Rule 12(c) motion’s 11 bounds—a conclusion fatal to all of TQL Trading’s arguments. 12 A. Evidentiary objections 13 In connection with its Motion, TQL Trading submitted the translated 14 declaration from Zheng Chugeng, a Chinese individual who produces and distributes 15 the KAIDAER products. Chugeng testifies that he registered the KAIDAER mark in 16 China in 2008, he first used the mark in the United States in 2011, and he never made 17 any company the exclusive distributor of KAIDAER goods. 18 submitted several exhibits appended to the Chugeng Declaration. Sam Horse objects 19 to this declaration and exhibits as evidence outside of the Complaint that the Court 20 cannot consider in ruling upon the Motion for Judgment on the Pleadings. 21 TQL Trading also The Court SUSTAINS Sam Horse’s objections and accordingly excludes the 22 Chugeng declaration and accompanying exhibits from consideration. 23 Circuit has made clear that “judgment on the pleadings is improper when the district 24 court goes beyond the pleadings to resolve an issue; such a proceeding must properly 25 be treated as a motion for summary judgment.” Hal Roach Studios, 896 F.2d at 1550; 26 see also Fed. R. Civ. P. 12(d). There is no indication that either party wants to launch 27 a full-scale summary judgment at this nascent stage of the litigation simply to consider 28 Chugeng’s declaration. 4 The Ninth 1 Neither are the declaration and exhibits the proper subject of judicial notice. 2 See Morgan v. Cnty. of Yolo, 436 F. Supp. 2d 1152, 1155 (E.D. Cal. 2006) (noting that 3 a court may consider materials subject to judicial notice in ruling upon a motion for 4 judgment on the pleadings). Chugeng’s declaration and exhibits, and the facts within 5 them, are neither generally known in the Central District of California nor able to be 6 accurately and readily determined by accurate sources. 7 Finally, Sam Horse did not incorporate the Chugeng declaration or exhibits by 8 reference or attach the declaration to its Complaint. See United States v. Ritchie, 342 9 F.3d 903, 908 (9th Cir. 2003) (permitting courts to consider such evidence without 10 converting the motion to one for summary judgment). Rather, TQL Trading 11 submitted the declaration and exhibits for the first time when filing its Motion. 12 B. Trademark infringement, false designation of origin, and false description 13 To prevail on a trademark-infringement claim under the Lanham Act, the 14 plaintiff must prove “(1) that it has a protectible ownership interest in the mark; and 15 (2) that the defendant’s use of the mark is likely to cause consumer confusion, thereby 16 infringing upon the [plaintiff’s] rights to the mark.” Dep’t of Parks & Recreation for 17 State of Cal. v. Bazaar Del Mundo Inc., 448 F.3d 1118, 1124 (9th Cir. 2006); see also 18 15 U.S.C. § 1114(a). The test for false designation of origin is essentially the same. 19 Int’l Order of Job’s Daughters v. Lindeburg & Co., 633 F.2d 912, 917 (9th Cir. 1980); 20 see also 15 U.S.C. § 1125(a). When a plaintiff has registered a trademark, the 21 registration is prima facie evidence that the plaintiff has a valid interest in the mark. 22 15 U.S.C. § 1057(b); Dep’t of Parks & Recreation, 448 F.3d at 1124; Sengoku Works 23 Ltd. v. RMC Int’l, Ltd., 96 F.3d 1217, 1219–20 (9th Cir. 1996). 24 But a party challenging a trademark registration’s validity may overcome this 25 presumption by a preponderance of the evidence. Sengoku Works, 96 F.3d at 1220. 26 One method of attacking a registration is by establishing that the challenger used the 27 mark in commerce before the registrant, as it “is axiomatic in trademark law that the 28 standard test of ownership is priority of use.” Id. at 1219. As the Ninth Circuit has 5 1 held, to “acquire ownership of a trademark it is not enough to have invented the mark 2 first or even to have registered it first; the party claiming ownership must have been 3 the first to actually use the mark in the sale of goods or services.” Id. 4 The Court must accept as true Sam Horse’s allegations that it registered the 5 KAIDAER mark with the USPTO in January 2014 and has not authorized TQL 6 Trading to use the mark. If TQL Trading is using the identical KAIDAER mark, then 7 that use is inherently likely to cause consumer confusion due to the identity between 8 the marks. 9 It is not enough for TQL Trading to file a motion for judgment on the pleadings 10 to simply disagree with the allegations in the Complaint—indeed, that is the nature of 11 most lawsuits. Rather, TQL Trading must engage in discovery and then test the 12 merits of Sam Horse’s allegations at summary judgment or trial. The Court thus 13 DENIES TQL Trading’s Motion on this ground. 14 C. Trademark dilution 15 The Lanham Act also prohibits a party from diluting a “famous” mark by either 16 blurring or tarnishment. 15 U.S.C. § 1125(c). A plaintiff invoking this provision 17 must establish “that its mark is famous and distinctive, that defendant began using its 18 mark in commerce after plaintiff’s mark became famous and distinctive, and that 19 defendant’s mark is likely to dilute plaintiff’s mark.” Visa Int’l Serv. Ass’n v. JSL 20 Corp., 610 F.3d 1088, 1089-90 (9th Cir. 2010). The Lanham Act sets forth several 21 factors a court should consider in determining whether a mark is famous, that is, 22 whether the mark is “widely recognized by the general consuming public of the 23 United States as a designation of source of the goods or services of the mark’s 24 owner:” 25 (i) The duration, extent, and geographic reach of advertising and 26 publicity of the mark, whether advertised or publicized by the owner or 27 third parties. 28 /// 6 1 (ii) The amount, volume, and geographic extent of sales of goods or 2 services offered under the mark. 3 (iii) The extent of actual recognition of the mark. 4 (iv) Whether the mark was registered under the Act of March 3, 1881, or 5 the Act of February 20, 1905, or on the principal register. 6 § 1125(c)(2)(A). 7 Certainly, the issue of whether the KAIDAER mark qualifies as “famous” 8 under the Lanham Act is an issue the parties and the Court will have to resolve. Sam 9 Horse has not provided much information in its Complaint to establish how the mark 10 is famous under the factors set forth in § 1125(c)(2)(A). But Sam Horse does allege 11 that the “‘KAIDAER’ trademark identifies high quality ‘audio products’ associated 12 with Plaintiff, and has become a famous and recognizable brand in the ‘audio product’ 13 market, thus making it a famous mark within the meaning of 15 U.S.C. § 1125(c).” 14 (Compl. ¶ 27.) While bare, this allegation at least puts TQL Trading on notice that 15 Sam Horse intends to seek damages for dilution of a famous trademark. TQL Trading 16 can accordingly seek discovery with respect to Sam Horse’s marketing and sales 17 efforts and other matters bearing upon the famousness inquiry. Lest the Court turn 18 this Motion into a mini-trial, the Court DENIES TQL Trading’s Motion on this 19 ground. 20 D. Necessary party 21 Federal Rule of Civil Procedure 19(a) sets forth “necessary” parties, that is, 22 those parties who “must be joined” if they will not deprive the court of subject-matter 23 jurisdiction. A party is necessary if, among others, disposing of the action in that 24 party’s absence may “as a practical matter impair or impede the person’s ability to 25 protect the interest; or . . . leave an existing party subject to a substantial risk of 26 incurring double, multiple, or otherwise inconsistent obligations because of the 27 interest.” Fed. R. Civ. P. 19(a)(1)(B). If a necessary party has not been joined, the 28 court “must order that the person be made a party” unless joinder is not feasible. 7 1 Id. (a)(2). If the court cannot join a necessary party, the court then determine whether 2 that person is “indispensable,” that is, “whether, in equity and good conscience, the 3 action should proceed among the existing parties or should be dismissed.” Id. (b). 4 The Rule then sets forth several factors a court should consider in making that the 5 indispensability inquiry. Id. 6 TQL Trading argues that complete relief is not possible unless the foreign 7 manufacturer is joined in the litigation. TQL Trading contends that if this action 8 proceeds without Chugeng, he could lose his intellectual-property rights without 9 having participated. Sam Horse opposes, asserting that even if Chugeng is a 10 necessary party, he is subject to service of process and can be joined in the litigation 11 without destroying jurisdiction. 12 TQL Trading misapprehends Rule 19’s purpose and requisites. The standard 13 for whether someone is a necessary party is not simply whether they colloquially 14 claim some general interest in the litigation’s subject matter. More specifically, it is 15 not enough that Chugeng claims an interest in the KAIDAER mark anywhere in the 16 world. For him to be a necessary party, he must claim an interest in Sam Horse’s 17 United States trademark for KAIDAER. And there is simply no indication that he 18 does. It only appears that Chugeng owns the Chinese KAIDAER mark. 19 So, for example, if this case continues to summary judgment or trial, and if the 20 Court were to invalidate Sam Horse’s United States trademark, nothing will have 21 changed for Chugeng. He will still have his Chinese mark and might still even be able 22 to claim the ability to register the United States mark. A judgment against TQL 23 Trading will change nothing for Chugeng except perhaps his general interest in selling 24 his products. The Court consequently finds that Chugeng is not a necessary party and thus 25 26 DENIES TQL Trading’s Motion on this ground. 27 /// 28 /// 8 V. 1 2 3 4 CONCLUSION For the reasons discussed above, the Court DENIES TQL Trading’s Motion to Dismiss and for Judgment on the Pleadings in its entirety. (ECF No. 25.) IT IS SO ORDERED. 5 6 September 17, 2014 7 8 9 ____________________________________ OTIS D. WRIGHT, II UNITED STATES DISTRICT JUDGE 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 9
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