Wallack et al v. Idexx Laboratories, Inc et al, No. 3:2011cv02996 - Document 136 (S.D. Cal. 2015)

Court Description: ORDER Denying 103 IDEXX Defendants' Motion for Summary Judgment. The Court Grants Defendants' request for judicial notice. Signed by Judge Gonzalo P. Curiel on 10/13/2015. (srm)

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Wallack et al v. Idexx Laboratories, Inc et al Doc. 136 1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 SOUTHERN DISTRICT OF CALIFORNIA 10 11 SETH WALLACK and SAN DIEGO VETERINARY IMAGING, INC., 12 13 14 15 16 vs. Plaintiffs, IDEXX LABORATORIES, INC.; IDEXX REFERENCE LABORATORIES, INC.; MATTHEW WRIGHT; an individual; and STEPHEN WALTERS, an individual ORDER DENYING IDEXX DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT [Dkt. No. 103.] Defendants. 17 18 CASE NO. 11cv2996-GPC(KSC) Presently before the Court is Defendants IDEXX Laboratories, Inc. (“Idexx”) 19 and IDEXX Reference Laboratories, Inc.’s (“Idexx RL”) motion for summary 20 judgment. (Dkt. No. 103.) Plaintiffs Seth Wallack (“Wallack”) and San Diego 21 Veterinary Imaging, Inc. (“SDVI”) opposed the motion. (Dkt. No. 1331.) Defendants 22 filed a reply. (Dkt. No. 124.) Having considered the parties’ briefs, supporting 23 documentation, and the applicable law, the Court DENIES Defendants’ motion for 24 summary judgment. 25 / / / / 26 27 1 Plaintiffs filed a timely opposition on September 4, 2015; however, the opposition was stricken based on non-compliance with the local rules. (Dkt. No. 131.) 28 Plaintiffs corrected the errors and refiled the opposition on October 4, 2015. (Dkt. No. 133.) -1- [11cv2996-GPC(KSC)] Dockets.Justia.com 1 2 Procedural Background On December 22, 2011, Plaintiffs Wallack and SDVI filed a complaint against 3 Defendants Idexx, Idexx RL, (collectively “Idexx Defendants” or “Defendants”), 4 Matthew Wright (“Wright”) and Stephen Walters (“Walters”) alleging numerous 5 causes of action. (Dkt. No. 1.) After two rounds of motions to dismiss, the operative 6 second amended complaint, filed on September 26, 2013, asserts causes of action for: 7 (1) trademark infringement by Plaintiff SDVI against Idexx and Idexx RL; (2) breach 8 of fiduciary duty by Plaintiff Wallack against Wright and Walters; (3) civil conspiracy 9 by both Plaintiffs against all Defendants; and (4) request for declaratory relief by both 10 Plaintiffs against Idexx and Idexx RL. (Dkt. No. 50.) On April 14, 2014, the Court 11 denied Defendants Wright and Walters’ motion to dismiss the breach of fiduciary duty 12 claim; and granted Defendants’ motion to dismiss the civil conspiracy claim with 13 prejudice. (Dkt. No. 68.) On April 15, 2015, the Court granted Defendants Wright 14 and Walters’ motion for summary judgment on breach of fiduciary duty. (Dkt. No. 99.) 15 The remaining causes of action in the operative second amended complaint are 16 the first cause of action by SDVI against Idexx Defendants for trademark infringement, 17 and fourth cause of action by SDVI and Wallack against Idexx Defendants for 18 declaratory relief relating to the trademark.2 19 20 Factual Background Seth Wallack has been a licensed veterinary radiologist for over ten years. (Dkt. 21 No. 133-2, Wallack Decl. ¶ 2.) He has been the sole shareholder, and President and 22 CEO of San Diego Veterinary Imaging, Inc. (“SDVI”) since its formation in 2002. 23 (Dkt. No. 124-2, Concordance of UMF, No. 1.) Wallack conducted his veterinary 24 radiology practice under SDVI. (Dkt. No. 133-2, Wallack Decl. ¶ 8.) In the early 25 2000's, he became one of the first veterinary radiologist in the San Diego area to 26 2 On May 12, 2014, Idexx Defendants filed a counterclaim against Plaintiffs for 27 Declaratory Judgment under the Lanham Act, Declaratory Judgment under State Statutory and Common Law, and Cancellation of Plaintiff SDVI’s Trademark and 28 Rectification of the Principal Register. (Dkt. No. 73.) The claims in the counterclaim are not subject to the instant motion for summary judgment. -2- [11cv2996-GPC(KSC)] 1 promote the use of digital imagery. (Id. ¶ 3.) Traditionally, veterinary radiologists 2 would “make the rounds” by visiting veterinary offices, clinics and hospitals to 3 examine images and provide diagnoses and consultations, and would receive x-ray 4 images by messenger, overnight delivery, or regular mail. (Id.) As a result, the 5 radiologist would provide his diagnosis one or two days after the x-rays had been 6 taken. (Id.) In early 2004, Wallack contemplated the development of a software 7 program that would serve as a “platform” where veterinary radiologists could store 8 images, analyze and manipulate the images, and provide their consultations online. (Id. 9 ¶¶ 6, 7.) In 2004, SDVI hired Stephen Walters to assist in programming and coding the 10 computer platform/website. (Id. ¶ 9.) Wallack and Walters worked together for 11 months to develop the software platform. (Id.) They agreed that Walters would 12 eventually become 20% owner in any future company. (Id.) Walters also retained 13 ownership of the portions of the source code/programmed information he developed 14 related to the website. (Id.) In early 2005, Wallack named the software DVMInsight 15 and established a domain name and website called DVMInsight.com. (Id. ¶ 10.) On 16 April 20, 2005, Wallack filed a trademark application for DVMINSIGHT on behalf of 17 SDVI for “Veterinary services, namely providing teleradiology interpretation services 18 and consultation in the field of veterinary medicine via a global computer network” on 19 an intent-to-use basis. (Dkt. No. 124-2, Concordance of UMF, No. 20.) The 20 DVMINSIGHT service mark (“Trademark”) was assigned U.S. Registration No. 21 3,276,808 in early 2007. (Dkt. No. 133-2, Wallack Decl. ¶ 10.) 22 Walters and Wallack worked closely together in 2004 and 2005. (Id. ¶ 12.) In 23 July 2005, Wallack created and incorporated Veterinary Imaging Center of San Diego 24 (“VICSD”) which launched in December 2005. (Id. ¶ 13.) VICSD replaced SDVI for 25 some, but not all of Wallack’s work. (Id.) Wallack conducted conventional veterinary 26 radiology and tele-radiology under VICSD. (Id.) When performing tele-radiology, 27 Wallack used the name DVMInsight. (Id.) As a related company, SDVI allowed 28 VICSD to use the Trademark. (Id.) At the end of November 2005, Dr. Matthew -3- [11cv2996-GPC(KSC)] 1 Wright joined Wallack to work at VICSD to work on tele-radiology and to work on the 2 DVMInsight platform. (Id. ¶ 14.) In 2005 and 2006, Wright became the manager and 3 resident radiologist at VICSD, and Wallack spent his time “making the rounds” to 4 veterinary hospitals on behalf of VICSD. (Id.) Wright and Wallack became close 5 colleagues and they interacted with Walters in order to complete the development of 6 the software platform. (Id. ¶ 15.) 7 In September 2006, Wallack, Wright and Walters incorporated DVMInsight, Inc. 8 (“DVMI”) in California. (Dkt. No. 124-2, Concordance of UMF, No. 2.) At the time 9 of its incorporation, “DVMI was a company with a three-fold purpose: (1) the 10 development of a software platform (“DVMI platform”) that could be utilized by 11 veterinarians for teleradiology purposes; (2) the operation of a website at which clients 12 and providers could use the afore-mentioned software, and (3) the generation of 13 teleradiology work for Wallack and Wright.” (Id., No. 3.) At the time of DVMI’s 14 incorporation, Wallack and Wright each owned 40% of DVMI’s outstanding stock, and 15 Walters, a computer programmer responsible for the development of the DVMI 16 platform, owned the remaining 20%. (Id., No. 4.) 17 After DVMI was incorporated in September 2006, DVMI furnished 18 teleradiology services via the DVMInsight.com website and conducted its business 19 under the name DVMInsight, Inc. until 2011 when its assets were acquired by Idexx 20 RL. (Id., No. 7.) 21 On December 31, 2009, Wallack’s interest in DVMI was bought out by Walters 22 and Wright pursuant to a Stock Repurchase Agreement (“SRA”). (Dkt. No. 124-2, 23 Concordance of UMF, No. 5.) The Trademark was not subject to the SRA. (Dkt. No. 24 133-1, Ps’ NOL, Ex. H.) Then, in September 2011,3 IDEXX acquired the assets of 25 DVMI pursuant to an Asset Purchase Agreement (“APA”). (Dkt. No. 124-2, 26 Concordance of UMF, No. 6.) The Trademark was listed as an asset of DVMI in the 27 3 The Concordance of Undisputed Material Facts incorrectly states that IDEXX 28 acquired the assets of DVMI on September 9, 2009. (Dkt. No. 124-2, Concordance of UMF, No. 6.) -4- [11cv2996-GPC(KSC)] 1 APA. (Dkt. No. 133-11, Ps’ NOL, Ex. G at 33.) 2 After execution of the Stock Repurchase Agreement (“SRA”) in December 2009, 3 DVMI continued using the DVMINSIGHT trademark name and domain name. 4 Between execution of the SRA in December 2009 and the execution of the APA in 5 September 2011, SDVI did not question, control or object to DVMI’s continued use 6 of the DVMINSIGHT trademark, name or domain name, nor did SDVI seek payment 7 for such use. (Dkt. No. 124-2, Concordance of UMF, No. 19.) 8 9 A. 10 Discussion Legal Standard on Motion for Summary Judgment Federal Rule of Civil Procedure 56 empowers the Court to enter summary 11 judgment on factually unsupported claims or defenses, and thereby “secure the just, 12 speedy and inexpensive determination of every action.” Celotex Corp. v. Catrett, 477 13 U.S. 317, 325, 327 (1986). Summary judgment is appropriate if the “pleadings, 14 depositions, answers to interrogatories, and admissions on file, together with the 15 affidavits, if any, show that there is no genuine issue as to any material fact and that the 16 moving party is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(c). A fact 17 is material when it affects the outcome of the case. Anderson v. Liberty Lobby, Inc., 18 477 U.S. 242, 248 (1986). 19 The moving party bears the initial burden of demonstrating the absence of any 20 genuine issues of material fact. Celotex Corp., 477 U.S. at 323. The moving party can 21 satisfy this burden by demonstrating that the nonmoving party failed to make a 22 showing sufficient to establish an element of his or her claim on which that party will 23 bear the burden of proof at trial. Id. at 322-23. If the moving party fails to bear the 24 initial burden, summary judgment must be denied and the court need not consider the 25 nonmoving party’s evidence. Adickes v. S.H. Kress & Co., 398 U.S. 144, 159-60 26 (1970). 27 Once the moving party has satisfied this burden, the nonmoving party cannot rest 28 on the mere allegations or denials of his pleading, but must “go beyond the pleadings -5- [11cv2996-GPC(KSC)] 1 and by her own affidavits, or by the ‘depositions, answers to interrogatories, and 2 admissions on file’ designate ‘specific facts showing that there is a genuine issue for 3 trial.’” Celotex, 477 U.S. at 324. If the non-moving party fails to make a sufficient 4 showing of an element of its case, the moving party is entitled to judgment as a matter 5 of law. Id. at 325. “Where the record taken as a whole could not lead a rational trier 6 of fact to find for the nonmoving party, there is no ‘genuine issue for trial.’” 7 Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986). In 8 making this determination, the court must “view[] the evidence in the light most 9 favorable to the nonmoving party.” Fontana v. Haskin, 262 F.3d 871, 876 (9th Cir. 10 2001). The Court does not engage in credibility determinations, weighing of evidence, 11 or drawing of legitimate inferences from the facts; these functions are for the trier of 12 fact. Anderson, 477 U.S. at 255. 13 B. First Cause of Action - Trademark Infringement 14 To demonstrate trademark infringement, a plaintiff must show that it is “(1) the 15 owner of a valid, protectable mark, and (2) that the alleged infringer is using a 16 confusingly similar mark.” Herb Redd Enters., LLC v. Florida Entm’t Mgmt., Inc., 736 17 F.3d 1239, 1247 (9th Cir. 2013) (citing Grocery Outlet, Inc. v. Albertson’s, Inc., 497 18 F.3d 949, 951 (9th Cir. 2007)). Registration of a mark is prima facie evidence of the 19 owner’s ownership of the mark and exclusive use of the mark in commerce. 15 U.S.C. 20 § 1057(b). Once a mark has been registered for five years, it can become 21 “incontestable. 15 U.S.C. §§ 1065, 1115(b). 22 Wallack created the DVMINSIGHT name in early 2004. (Dkt. No. 133-2, 23 Wallack Decl. ¶ 10.) SDVI filed a trademark application on April 20, 2005. (Dkt. No. 24 133-6, Ps’ NOL, Ex. B.) The trademark, DVMINSIGHT, became registered in early 25 2007. (Dkt. No. 133-2, Wallack Decl. ¶ 10.) 26 Defendants do not dispute the elements of trademark infringement but raise the 27 affirmative defenses of abandonment, acquiescence, laches and estoppel. They argue 28 that SDVI abandoned the Trademark by allowing Idexx Defendants’ predecessor in -6- [11cv2996-GPC(KSC)] 1 interest, DVMI, to use the mark absent any cognizable or enforceable license. Second, 2 even if SDVI had licensed the mark to DVMI, SDVI abandoned its trademark rights 3 by engaging in naked licensing when it failed to exercise quality control over the 4 Trademark when DVMI was incorporated in September 2006 and continued to fail to 5 exercise quality control over the Trademark after Wallack sold his shares in DVMI to 6 Wright and Walters in December 2009. 7 C. Affirmative Defense - Abandonment 8 A trademark owner may grant a license and be protected as long as the licensor 9 exercises quality control of the goods and services sold under the Trademark by the 10 licencee. Barcamerica Int’l USA Trust v. Tyfield Importers, Inc., 289 F.3d 589, 595-96 11 (9th Cir. 2002). 12 A mark is deemed to be “abandoned” 13 (1) When its use has been discontinued with intent not to resume such use. Intent not to resume may be inferred from circumstances. Nonuse for 3 consecutive years shall be prima facie evidence of abandonment. “Use” of a mark means the bona fide use of such mark made in the ordinary course of trade, and not made merely to reserve a right in a mark. 14 15 16 17 18 19 20 [or] (2) When any course of conduct of the owner, including acts of omission as well as commission, causes the mark to become the generic name for the goods or services on or in connection with which it is used or otherwise to lose its significance as a mark. Purchaser motivation shall not be a test for determining abandonment under this paragraph. 21 15 U.S.C. § 1127. Language of abandonment under § 1127(2) reflects policy 22 considerations underlying the naked licensing defense. Exxon Corp., v. Oxxford 23 Clothes, Inc., 109 F.3d 1070, 1079 (5th Cir. 1997); see also Tumblebus, Inc. v. 24 Cranmer, 399 F.3d 754, 764 (6th Cir. 2005). Naked licensing is an “uncontrolled” 25 license where the licensor “fails to exercise adequate quality control over the licensee.” 26 Barcamerica Int’l USA Trust , 289 F.3d at 596. Abandonment through naked licensing 27 is “purely an ‘involuntary’ forfeiture of trademark rights” so no evidence of any 28 subjective intent to abandon the mark is required. Id. -7- [11cv2996-GPC(KSC)] 1 Defendants clarify in their reply that they do not argue that SDVI discontinued 2 use of the trademark with no intent to resume, (Dkt. No. 124, Reply Br. at 54 n.2), but 3 argue that SDVI failed to exercise quality control and failed to police or object to open 4 claims of ownership of the mark pursuant to 15 U.S.C. § 1127(2). 5 Abandonment must be strictly proved, Prudential Ins. Co. of America v. 6 Gibraltar Fin. Corp. of Calif., 694 F.2d 1150, 1156 (9th Cir. 1982), and is an issue of 7 fact. Star-Kist Foods, Inc. v. P.J. Rhodes & Co., 769 F.2d 1393, 1396 (9th Cir. 1985) 8 (“abandonment “is a factual issue, well within the domain of the district court.”). The 9 Ninth Circuit has not decided whether “strictly proved” means to prove by clear and 10 convincing evidence, but the burden of proof is high. Edwin K. Williams & Co., Inc. 11 v. Edwin K. Williams & Co.-East, 542 F.2d 1053, 1059 (9th Cir. 1976) (since naked 12 licensing may result in forfeiture of trade mark rights and since owner has no subjective 13 intent to abandon the mark, a high degree of proof is required); FreecycleSunnyvale v. 14 Freecycle Network, 626 F.3d 509, 514-515 (9th Cir. 2010) (proper burden of proof 15 need not be decided in this case because the result would be the same under the higher 16 standard of proof); Grocery Outlet Inc. v. Albertson’s Inc., 497 F.3d 949, 952-54 (9th 17 Cir. 2007) (concurring judges split on whether the test is “clear and convincing” or 18 “preponderance of the evidence.”); Cash Processing Servs. v. Ambient Entm’t, Inc., 19 418 F. Supp. 2d 1227, 1231-1232 (D. Nev. 2006) (“Strictly proved” means that 20 abandonment must be proven by clear and convincing evidence. Summary judgment 21 of abandonment was denied.); Electro Source, LLC v. Brandess-Kalt-Aetna Group, 22 Inc., 458 F.3d 931 (9th Cir. 2006) (court of appeals did not decide, but noted that a 23 district court had held that “strictly proved” means “clear and convincing evidence.”). 24 1. 25 Defendants first argue that SDVI abandoned its rights to the Trademark because Oral License 26 27 28 4 The pages cited are based on the CM/ECF pagination. -8- [11cv2996-GPC(KSC)] 1 there was never a cognizable oral license agreement between SDVI and DVMI.5 2 Plaintiffs argue that lack of an oral license agreement is not critical to the affirmative 3 defense of abandonment but argue there is an issue of fact as to whether there was an 4 oral license to use the Trademark when DVMI was incorporated. 5 “Licenses are contracts ‘governed by ordinary principles of state contract law.’” 6 Dep’t of Parks & Recreation for State of California v. Bazzar del Mundo Inc., 448 F.3d 7 1118, 1130 (9th Cir. 2006). The elements for an oral license is the same as a written 8 license. See Careau & Co. v. Security Pacific Bus. Credit, Inc., 222 Cal. App. 3d 1371, 9 1388 (1990) (breach of written and oral contract require the same elements). “The 10 consent of the parties to a contract must be: 1. Free; 2. Mutual; and, 3. Communicated 11 by each to the other.” Cal. Civ. Code § 1565. “An essential element of any contract 12 is ‘consent.’” Weddington Prods., Inc. v. Flick, 60 Cal. App. 4th 793, 811 (1998) 13 (citing Cal. Civ. Code § 1550). “Consent is not mutual, unless the parties all agree 14 upon the same thing in the same sense.” Cal. Civil Code § 1580. In order for a 15 contract to be enforceable, the terms of the contract must be sufficiently certain. 16 Weddington Prods., Inc., 60 Cal. App. 4th at 811. 17 Here, Wallack explained that when DVMI was first created, there was no clarity 18 from the beginning on many issues and everything was “very loose.” (Dkt. No. 103-10, 19 D’s NOL, Ex. H, Wallack Depo. at 246:5-19.) Plaintiff testified that there was never 20 any “sit-down” discussion as to how the new corporation, DVMI, would operate. (Id. 21 at 60:10-13.) He also testified that as to any agreement concerning the intellectual 22 property to be used by DVMI, it was “very loose oral arrangements regarding all of 23 these things that was very fluid based on the needs of the people.” (Dkt. No. 103-7, 24 Ds’ NOL, Ex. H, Wallack Depo. at 62:18-23.) Plaintiff does not recall any discussions 25 concerning licensing the mark, DVMINSIGHT, to DVMI. (Id. at 63:11-64:6.) He 26 testified that “it was common – common knowledge.” (Id. at 63:16-20.) When asked 27 28 5 The parties do not dispute that there was no written license agreement regarding DVMI’s use of the DVMINSIGHT trademark. -9- [11cv2996-GPC(KSC)] 1 whether there were any discussions on when he could terminate the license, he stated 2 that never came up. (Id. at 245:20-246:5.) 3 In opposition, Wallack states that in August 2005, prior to the incorporation of 4 DVMI, Walters, Wright and he met to discuss finalizing their business relationship 5 concerning the new tele-radiology website/platform venture. (Dkt. No. 133-2, Wallack 6 Decl. ¶ 16.) Initial discussions involved Wright to buy 40% stock interest in SDVI and 7 Walters would receive a 20% stock interest for his prior year efforts of programming 8 and source coding the platform. (Id. ¶ 16.) To support his assertion, Plaintiff 9 references the corporate minutes of SDVI in August 2006. (Dkt. No. 133-7, Ps’ NOL, 10 Ex. C.) He states, “[t]hose minutes clearly reflect our mutual agreement that SDVI 11 would retain ownership of the DVMInsight name and domain until such time that 12 Wright agreed to pay money to buy his stock interest.” (Id. ¶ 16.) The minutes of the 13 August 2006 board meeting state, “Transfer of ownership of DVMInsight to 14 DVMInsight.com. This transfer requires Dr. Matt Wright to pay up front for shares in 15 DVMInsight.com. Stephen Walters will get options for the value of 0.01. Transfer 16 will not happen until the shares are paid for. SDVI will retain rights to the name 17 DVMInsight.com, DVMInsight . . . .” (Dkt. No. 133-7, Ps’ NOL, Ex. C at 1.) 18 After the meeting, Wright refused to contribute money to DVMI, and therefore, 19 the Trademark remained an asset of SDVI. (Dkt. No. 133-2, Wallack Decl. ¶ 16.) 20 Instead, in early September 2006, Wright, Walters and Wallack agreed to incorporate 21 a new company called DVMInsight, Inc. (Dkt. No. 133-2, Wallack Decl. ¶ 17; Dkt. 22 No. 133-8, Ps’ NOL, Ex. D.) “DVMI’s business would be to complete the 23 development of the software, operate a website at which its clients and providers could 24 use the software, and, to a lesser extent, generate tele-radiology work for Wallack and 25 Wright at VICSD.” (Dkt. No. 133-2, Wallack Decl. ¶ 17.) Wright and Wallack 26 received 40% of DVMI’s outstanding stock and Walters received 20%. (Id.) All were 27 named officers and directors of DVMI. (Id.) Wallack was President and Wright was 28 Treasurer. (Id.) All three agreed that no personal business assets would be contributed - 10 - [11cv2996-GPC(KSC)] 1 to DVMI. (Id.) For example, SDVI would not contribute the domain name or 2 ownership of the Trademark once received from the USPTO, Walters would not 3 contribute his intellectual property in the source coding and programming of the 4 website, and Wright would not contribute Animal Insides6 to DVMI. (Id.) He states 5 that all knew that SDVI retained the ownership of the Trademark and had 6 allowed/licensed DVMI to use as an “affiliated company” under 15 U.S.C. § 7 1055(a)(3). (Id. ¶ 17.) According to Wallack, DVMI had no assets; it was a shell 8 company where everyone had a piece of but did not have to put money into. (Dkt. No. 9 133-5, Ps’ NOL, Ex. A, Wallack Depo. at 58:13-14.) 10 In reply, Defendants note that Wallack’s statement about the August 2006 11 minutes is patently false. First, Plaintiff does not provide the complete minutes of 12 August 30, 2006 and Defendants include it as an exhibit to their reply. (Dkt. No. 12413 1, McGrath Decl., Ex. B at 17.) Second, according to the handwritten minutes in 14 August 2006 of an SDVI shareholder meeting written by Wallack, he is the only 15 participant. (Id.) Voting passed with his single vote. (Id. at 18.) 16 In contrast, at his deposition, Wallack stated that Walters and Wright did not 17 attend the August 2006 SDVI board meeting. (Dkt. No. 124-1, McGrath Decl., Ex. A, 18 Wallack Depo. at 61:2-9.) Wallack also later confirmed that he, as the sole shareholder 19 of SDVI, was the only attendee at these board meetings including the one in August. 20 (Id. at 199-21:201:17.) 21 “The general rule in the Ninth Circuit is that a party cannot create an issue of fact 22 by an affidavit contradicting his prior deposition testimony.” Van Asdale v. Int’l Game 23 Tech., 577 F.3d 989, 998 (9th Cir. 2009) (citation omitted). Here, contrary to 24 Wallack’s declaration stating that Wright, Walters and Wallack had discussed licensing 25 the Trademark at the August 2006 SDVI board meeting, his deposition testimony and 26 the minutes themselves, state the contrary. Accordingly, the August 2006 board minute 27 28 6 Animal Insides, Inc. was an online commentary on veterinary radiology owned by Wright. (Dkt. No. 133-2, Wallack Decl. ¶ 15.) - 11 - [11cv2996-GPC(KSC)] 1 does not constitute a genuine issue of material fact that Wright, Wallack and Walters 2 were engaged in oral communications concerning SDVI’s ownership of the Trademark 3 and SDVI’s licensing of the Trademark to DVMI. 4 In his declaration, Wallack further states that all three agreed that no personal 5 business assets would be contributed to DVMI and that all knew the SDVI retained 6 ownership of the Trademark and had licensed DVMI to use it. (Dkt. No. 133-2, 7 Wallack Decl. ¶ 17.) Summary conclusion that all three knew that SDVI granted 8 DVMI a license does not demonstrate consent by the parties and does not show that the 9 terms of the license were sufficiently certain. See Weddington Prods., Inc., 60 Cal 10 App. 4th at 811. Accordingly, the Court concludes that Plaintiffs have not 11 demonstrated a genuine issue of fact as to whether there was an oral license agreement 12 concerning the use of DVMINSIGHT by DVMI. Even if there was not an oral license 13 agreement, Wallack contends that there was an implied license to use the Trademark. 14 2. 15 Plaintiffs assert there was an implied license to DVMI to use the Trademark Implied License - September 2006 through December 2009 16 based on the close relationship between the parties and conduct through 2009 as a 17 “related company.” (Dkt. No. 133-2, Wallack Decl. ¶ 17.) When DVMI’s assets were 18 sold to Idexx RL, SDVI terminated the implied license by filing the instant case. 19 Idexx Defendants argue that SDVI abandoned the DVMINSIGHT trademark through 20 “naked licensing” by failing to engage in quality control over the Trademark. They 21 argue that DVMI used the Trademark openly from its incorporation in September 2006 22 until September 2011, when it was acquired by Idexx. Therefore, DVMI was able to 23 assign the rights to the Trademark to Idexx RL based on DVMI’s abandonment of the 24 Trademark. 25 A licensor’s trademark rights in an express licensing agreement can be destroyed 26 through naked licensing when the licensor fails to exert quality control over the 27 trademark. See Barcamerica Int’l USA Trust, 289 F.3d at 595. Even if there is no 28 express written license agreement, the Ninth Circuit has held that a trademark license - 12 - [11cv2996-GPC(KSC)] 1 may be implied from the conduct of the parties. Dep’t of Parks & Recreation for State 2 of California, 448 F.3d at 1129-30; see also Doeblers’ Pennsylvania Hybrids, Inc. v. 3 Doebler, 442 F.3d 812, 824 (3d Cir. 2006) (in the absence of an express written license 4 agreement, a trademark license can be implied). In order to determine whether there 5 is an implied license, courts look to the parties’ course of conduct. Dep’t of Parks & 6 Recreation for State of California, 448 F.3d at 1129 (citing McCoy v. Mitsuboshi 7 Cutlery, Inc., 67 F.3d 917, 920, 922 (Fed. Cir. 1995)); Villanova Univ. v. Villanova 8 Alumni Educ. Fdn., Inc., 123 F. Supp. 2d 293, 308 (E.D. Pa. 2000) (“It is irrelevant 9 whether the parties thought of the arrangement at the time in terms of an implied 10 license. The test for whether or not an implied license existed is based solely on the 11 objective conduct of the parties.”) (citations omitted). A license is implied if the 12 licensor exercised a sufficient degree of control over the licensee’s operations. Dep’t 13 of Parks & Recreation for State of California, 448 F.3d at 1131. 14 Trademark owners have a duty to control the quality of their trademarks. 15 FreecycleSunnyvale v. Freecycle Network, 626 F.3d 509, 515 (9th Cir. 2010) (citing 16 McCarthy 18:48). A trademark owner may grant a license and be protected as long as 17 it maintains quality control of the goods and services sold under the trademark by the 18 licensee is maintained. Barcamerica Int’l USA Trust, 289 F.3d at 595 (affirming 19 dismissal on summary judgment where plaintiff licensed mark for use on wine with no 20 quality control provision in the license and plaintiff “played no meaningful role in 21 holding the wine to a standard of quality - good, bad or otherwise.”). “Naked 22 licensing” occurs when the licensor “fails to exercise adequate quality control over the 23 licensee.” Id. at 596. If a licensor fails to exercise adequate quality control over the 24 licensee, such a practice is “inherently deceptive and constitutes abandonment of any 25 rights to the trademark by the licensor.” Id. at 598 (quoting First Interstate Bancorp v. 26 Stenquist, 16 U.S.P.Q. 2d 1704 (N.D. Cal. 1990)). 27 Where a licensor fails to exercise adequate quality control over the licensee, the 28 court may find that trademark owner has abandoned the trademark in which case the - 13 - [11cv2996-GPC(KSC)] 1 owner would be estopped from asserting rights to the trademark. Barcamerica Int’l 2 USA Trust, 289 F.3d at 596; JIPC Mgm’t, Inc. v. Incredible Pizza Co., Inc., No. CV083 4310 MMM(PLAx), 2009 WL 8591607, at *28 (C.D. Cal. July 14, 2009) (quoting Blue 4 Magic Products, Inc. v. Blue Magic, Inc., No. Civ. S–001155WBSJFM, 2001 WL 5 34098657, *5 (E.D. Cal. Sept. 5, 2001) (“[C]ourts have found abandonment . . .when 6 a trademark owner enters into a ‘naked’ license, which is a ‘grant of permission to use 7 [the trademark owner’s] mark without attendant provisions to protect the quality of the 8 goods or services provided under the licensed mark.’”)). Because a showing of 9 subjective intent to abandon the mark is not required, “the proponent of a naked license 10 theory faces a stringent standard of proof.” Barcamerica Int’l USA Trust, 289 F.3d at 11 596. 12 “The purpose of the control requirement is the protection of the public. If a 13 licensor does not maintain control of his licensees in their use of the license, the public 14 may be damaged by products that, despite their trademark, do not have the normal 15 quality of such goods.” United States Jaycees v. Philadelphia Jaycees, 639 F.2d 134, 16 140 (3d Cir. 1981) (citing Edwin K. Williams & Co., Inc. v. Edwin K. Williams & 17 Co.-East, 542 F.2d 1053, 1059 (9th Cir. 1976)). The amount of control varies 18 depending on the circumstances. Id. (several year delay does not constitute loss of 19 control sufficient to prove abandonment in conjunction with no evidence that licensee 20 offered a lower quality of service); Sheila’s Shine Products, Inc. v. Sheila Shine, Inc., 21 486 F.2d 114, 125 (5th Cir. 1973) (three or four years lapse in exercise of control not 22 enough to work abandonment). 23 The Ninth Circuit has presented a method to analyze the affirmative defense of 24 naked licensing depending on the type of license. First, the court looks at whether the 25 license contains an express contractual right to inspect and supervise the licensee’s 26 operations. FreecycleSunnyvale, 626 F.3d at 516 (citing Barcamerica, 289 F.3d at 27 596). Second, if there is no express contractual right to inspect, then courts look at 28 whether the licensor demonstrated actual control over the trademark. Id. at 516-17. - 14 - [11cv2996-GPC(KSC)] 1 Third, if the licensor does not have actual control over the trademark, then courts ask 2 whether the “licensor is familiar with and relies upon the licensee’s own efforts to 3 control quality . . . .” Id. at 518. 4 Here, it is undisputed that there was no express contractual license agreement; 5 thus, there was no express contractual right to inspect and supervise. Second, as to 6 whether SDVI had actual control over the trademark, Defendants argue that SDVI 7 exercised no quality control and failed to police or object to open claims of ownership 8 of the mark by DMVI, on its Terms of Use webpage, for at least five years from 9 November 2006 until the purchase of DVMI from Idexx Defendants in September 10 2011. Plaintiffs oppose. 11 When the dvminsight.com website was first developed, Walters created a “Terms 12 of Use” page accessible to all users of the website. (Dkt. No.103-5, Walters Decl. ¶ 13 3.) In early 2006 the “Terms of Use” page bore the heading “San Diego Veterinary 14 Imaging, Inc.’s Terms of Use, Web Site Disclaimers and Legal Notices.” (Dkt. No. 15 103-5, Walters Decl. ¶ 3; Dkt. No. 103-10, Ds’ NOL, Ex. L, Butler Decl., Ex. 1 at 85.) 16 The “Terms of Use” page stated that “DVMInsight is a service mark of San Diego 17 Veterinary Imaging, Inc.” (Dkt. No. 103-10, Ds’ NOL, Ex. L, Butler Decl., Ex. 1 at 18 85.) 19 After DVMI was incorporated in September 2006, in November 2006,Walters 20 revised the webpage to “DVMInsight’s Inc.’s Terms of Use, Web Site Disclaimers and 21 Legal Notices.” (Dkt. No. 103-5, Walters Decl. ¶ 4; Dkt. No. 103-10, Ds’ NOL, Ex. 22 L, Butler Decl., Ex. 2 at 88.) This notice stated, “DVMInsight is a service mark of 23 DVMInsight.com.7 (Dkt. No. 103-10, Ds’ NOL, Ex. L, Butler Decl., Ex. 2 at 89.) The 24 “Terms of Use” page remained the same until September 2011, when Idexx acquired 25 DVMI’s assets. (Dkt. No. 103-5, Walters Decl. ¶ 5; Dkt. No. 103-10, Ds’ NOL, Ex. 26 L, Butler Decl., Ex. 3 at 91 (dated June 2010).) In a declaration, Walters states that 27 after the incorporation of DVMI, he revised the Terms of Use to acknowledge DVMI’s 28 7 It is undisputed that DVMinsight.com was owned by SDVI in 2006. - 15 - [11cv2996-GPC(KSC)] 1 ownership interest in the Trademark. (Dkt. No. 103-5, Walters Decl. ¶ 4.) However, 2 he “inadvertently” identified the “Company” as DVMInsight.com as the owner of the 3 service mark instead of DVMInsight, Inc. because he viewed both as the same. (Id.) 4 In opposition, Wallack testified that he never knew about the changes on the 5 Terms of Use page made by Wright until after 2011 or 2012. (Dkt. No. 103-10, Ds’ 6 NOL, Ex. H, Wallack Depo. at 272:12-22; 274:11-18.) However, even if he did know, 7 Wallack argues that the Terms of Use demonstrate that SDVI owned the service mark 8 because DVMInsight.com was owned by SDVI in November 2006. 9 The Court notes that while Walters’ designation of DVMInsight.com as the 10 owner of the Trademark may have been inadvertent, the Court concludes, in viewing 11 the fact in the light most favorable to SDVI, and the high burden of proof to 12 demonstrate abandonment, there is a genuine issue of material fact as to whether SDVI 13 knew about the Terms of Use page. In addition, the Court questions whether failing 14 to object to the Terms of Use was a failure to exercise quality control over the quality 15 of the service mark. See, e.g., Nat’l Grange of the Order of Patrons of Husbandry v. 16 California State Grange, –F. Supp. 3d –, 2015 WL 4369901, at *7 (E.D. Cal. July 14, 17 2015) (whether the Brooklyn Grange has referred to its license from plaintiff on its 18 website has no apparent connection to whether plaintiff has imposed so few restrictions 19 on the use of its mark that “Grange” has “ceased to function as a symbol of quality and 20 controlled source.”) 21 In opposition, Plaintiff also argues that as a “related company” it had control 22 over the mark based on the close working relationship. In his declaration, Wallack 23 states that he had constant input, control and oversight over the DVMInsight.com 24 website from 2006 through mid-2009. (Dkt. No. 133-2, Wallack Decl. ¶ 17.)8 In 25 26 8 Wallack states that all the times leading up to the stock repurchase agreement, he attended corporate board meetings and maintained as active as possible in exercising 27 control over DVMI business operations including quality control of the contends of the website/platform and cites to Exhibit A to NOL, Wallack Deposition, pp. 107:5-8; 28 146:2-6; 168:18-24. However, the Court notes that the citation to his deposition is not contained in the opposition as Ex. A of Plaintiffs’ NOL and cannot be used to oppose - 16 - [11cv2996-GPC(KSC)] 1 addition, SDVI and DVMI had offices in the same building which promoted the close 2 working relationship. (Id.) 3 “‘[R]elated company’ means any person whose use of a mark is controlled by the 4 owner of the mark with respect to the nature and quality of the goods or services on or 5 in connection with which the mark is used.” 15 U.S.C. § 1127. 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 Where a registered mark or a mark sought to be registered is or may be used legitimately by related companies, such use shall inure to the benefit of the registrant or applicant for registration, and such use shall not affect the validity of such mark or of its registration, provided such mark is not used in such manner as to deceive the public. If first use of a mark by a person is controlled by the registrant or applicant for registration of the mark with respect to the nature and quality of the goods or services, such first use shall inure to the benefit of the registrant or applicant, as the case may be. 15 U.S.C. § 1055. The test of a “related company” is the same as that used to determine whether adequate quality control is exercised over a trademark licensee” McCarthy 18:51. In order to demonstrate related companies doctrine, there must be a showing of a substantial relationship between the parties. Secular Organizations for Sobriety, 213 F.3d at 1131. The statute does not require formal corporate control but only control over the “use of a mark.” Estate of Coll-Monge v. Inner Peace Movement, 524 F.3d 1341, 1348 (D.C. Cir. 2008) (citing Turner v. HMH Pub. Co., 380 F.2d 224, 229 (5th Cir. 1967) (plaintiff as licensor “introduced ample evidence to show that [it] fully controlled and dictated the nature and quality of the goods and services used in connection with the trade and service marks by the several [independently owned] licensees”); 2 J. Thomas McCarthy, McCarthy on Trademarks and Unfair Competition § 18:51 (4th ed. 2005) (term “related” “is not limited to control of a company in general” but “simply refers to control over the ‘nature and quality of the goods and services in connection with which the mark is used.’”)). Defendants incorrectly argue that there needs to be formal type of relationship such as parent-subsidiary relationship or a partnership or a familial relationship in order 28 Defendants’ motion for summary judgment. - 17 - [11cv2996-GPC(KSC)] 1 to be a “related company” under 15 U.S.C. § 1055. As noted above, the focus is not 2 on corporate formality but on the quality control over the nature of the quality of the 3 service. 4 Here, starting in 2004, Wallack and Walters initially worked together for the 5 development of the software platform of DVMinsight.com, and then in 2005 Wright 6 joined the venture until their fall out in December 2009. SDVI had filed an application 7 to register the Trademark in April 2005 prior to the formation of DVMI. The new 8 venture required close collaboration and trust and all three became close colleagues. 9 They all had constant input, control and oversight over the DVMInsight.com website. 10 Based on this relationship, all three became owners and officers when DVMI was 11 incorporated in September 2006. SDVI and DVMI were also in the same building from 12 2006 through mid-2009. Idexx Defendants do not raise or dispute the close working 13 relationship between Wallack, and Wright and Walters during this time period. The 14 Court concludes that Plaintiff has raised an issue of material fact as to whether SDVI, 15 through Wallack, maintained actual control over the Trademark from 2006 through 16 2009. 17 Lastly, Wallack argues he also relied on the many years of close relationship 18 with the DVMI owners’ and their efforts to not abuse the use of the trademark . (Dkt. 19 No. 133-2, Wallack Decl. ¶ 22.) “Courts have upheld licensing agreements where the 20 licensor is familiar with and relies upon the licensee’s own efforts to control quality.” 21 Barcamerica, 289 F.3d at 596 (quoting Morgan Creek Prods., Inc. v. Capital 22 Cities/ABC, Inc., 22 U.S.P.Q.2d 1881, 1884, 1991 WL 352619 (C.D. Cal. 1991) (citing 23 Transgo, Inc. v. Ajac Transmission Parts Corp., 768 F.2d 1001, 1017-18 (9th Cir. 24 1985)); Hokto Kinoko Co. v. Concord Farms, Inc., 738 F.3d 1085, 1098 (9th Cir. 2013) 25 (“Even absent formal quality control provisions, a trademark owner does not abandon 26 its trademark where “the particular circumstances of the licensing arrangement” 27 suggest that the public will not be deceived” such as “where the licensor is familiar 28 with and relies upon the licensee’s own efforts to control quality.”). - 18 - [11cv2996-GPC(KSC)] 1 In order for a licensor to rely on the licensee’s quality control efforts, the Ninth 2 Circuit requires that the licensor and licensee be involved in a “close working 3 relationship” to establish adequate quality control in the absence of a formal agreement. 4 FreecycleSunnyvale, 626 F.3d at 518; Barcamerica Int’l USA Trust, 289 F. 3d at 597 5 (same) (citing Taco Cabana Int’l Inc. v. Two Pesos, Inc., 932 F.2d 1113, 1121 (5th Cir. 6 1991) (licensor and licensee enjoyed close working relationship for eight years); 7 Transgo, 768 F.2d at 1017-18 (finding that the licensor was entitled to rely on the 8 licensee’s own quality control where licensor was familiar with ability and integrity of 9 licensee); Edwin K. Williams & Co., Inc.,542 F.2d at 1059 (licensor’s knowledge of 10 licensee’s competency, in conjunction with highly personalized nature of the licensed 11 service, provided sufficient protection against public deception to preserve integrity of 12 licensed name); Taffy Original Designs, Inc. v. Taffy’s Inc., 161 U.S.P.Q. 707, 713 13 (N.D. Ill. 1966) (licensor and licensee were sisters in business together for seventeen 14 years, licensee’s business was a continuation of the licensor’s and licensee’s prior 15 business, licensor visited licensee's store from time to time and was satisfied with the 16 quality of the merchandise offered)). “The purpose of the quality-control requirement 17 is to prevent public deception that would ensue from variant quality standards under 18 the same mark.” Taco Cabana Int’l Inc. v. Two Pesos, Inc., 932 F.2d 1113, 1121 (5th 19 Cir. 1991). “Where the license parties have engaged in a close working relationship, 20 and may justifiably rely on each parties’ intimacy with standards and procedures to 21 ensure consistent quality, and no actual decline in quality standards is demonstrated, 22 we would depart from the purpose of the law to find an abandonment simply for want 23 of all the inspection and control formalities.” Id. 24 In Taco Cabana, the Fifth Circuit also considered whether there was any 25 evidence to indicate any decline in the level of quality. Id. at 1122 (no evidence to 26 indicate any decline in the level of quality or any other evidence that the licensing 27 arrangement diminished any proprietary rights in the trade dress); see also Land 28 O’Lakes Creameries, Inc. v. Oconomowoc Canning Co., 330 F.2d 667, 670 (7th Cir. - 19 - [11cv2996-GPC(KSC)] 1 1964) (noting that since there were no complaints about the quality of the goods, 2 reliance on the licensee’s control did not result in a naked license). 3 In this case, Wallack and Walters, starting in 2004, worked closely to develop 4 a new tele-radiology website/platform that became DVMInsight.com. Wright joined 5 them in November 2005 to work on both tele-radiology and the DVMInsight platform. 6 In 2005 and 2006, Wright became the manager and resident radiologist at VICSD. 7 DVMInsight, Inc. was incorporated in September 2006 where all three were named 8 officers and directors of DVMI. All three had a close working relationship and were 9 intimately involved in the creation of the software platform for about four year until the 10 relationship soured in 2009. Therefore, Plaintiff could reasonably rely on the 11 licensee’s own efforts at quality control. In addition, Defendants have not provided 12 any evidence that the quality of the service of DVMI has deteriorated or that any 13 veterinary radiologists complained about the service. 14 Thus, the Court concludes that SDVI has raised a genuine issue of material fact 15 whether there was an implied license granted to DVMI by SDVI from 2006 through 16 December 2009. 17 3. 18 Furthermore, Defendants argue that Wallack’s departure from DVMI in 2009 Implied License - January 2010-September 2011 19 after a deterioration of their relationship renders the Trademark abandoned based on 20 naked licensing since there was no longer a “close working relationship.” Wallack 21 contends he exercised quality control over the Trademark by using the website 22 hundreds of times from 2010 to 2014 and relied on the close relationship of SDVI and 23 DVMI, and DVMI’s expertise to not use the Trademark in such a way to confuse the 24 public or lessen the importance of its intended use.9 Further, Wallack asserts that 25 26 27 9 Plaintiffs also provide facts as to Wallack’s intent concerning use of the Trademark once the three year non-solicitation clause in the SRA expired. However, 28 a licensor’s intent is irrelevant to determining whether there was a naked license. See Barcamerica Int’l USA Trust , 289 F.3d at 596. - 20 - [11cv2996-GPC(KSC)] 1 throughout 2010 and 2011, SDVI and Wallack continued to monitor the ethos10 of the 2 Trademark and continued to use the DVMI platform through SDVI/VICSD, and 3 reviewed Wright’s monthly DVMInsight Insider Newsletters sent to Wallack via email. 4 (Dkt. No. 133-2, Wallack Decl. ¶ 22.) Once he learned that Idexx, a conglomerate 5 corporation, purchased DVMI, Wallack filed suit three months later in December 2011 6 because the sale was contrary to the ethos of DVMINSIGHT. (Dkt. No. 133-2, 7 Wallack Decl. ¶ 22.) 8 After the SRA in December 2009, DVMI continued using the Trademark, name 9 and domain name. (Dkt. No. 124-2, Concordance of SUF, No. 19.) Between 10 December 2009 and September 2011, when the APA was executed, SDVI did not 11 question, control or object to DVMI’s continued use of the Trademark, name or domain 12 name or seek payment for such use. (Id.) 13 The Court concludes that Plaintiffs have raised a genuine issue of material fact 14 as to whether an implied license existed after the relationship between Wallack, and 15 Wright and Walters deteriorated and the SPA was executed in December 2009. 16 Defendants cite to Original Rex LLC v. Beautiful Brands Int’l LLC, 792 F. Supp. 17 2d 1242, 1258 (N.D. Oklahoma 2011) for the proposition that a naked license can arise 18 if the licensor exits the business and ceases any control over the licensee. Therefore, 19 Defendants assert that when Wallack gave up his shares in DVMI in 2009, he ceased 20 any control over DVMI and a naked license ensued. However, the facts in Original 21 Rex, LLC are distinguishable because the licensor died and the trademark and business 22 was “passed completely out of the hands of his company” to another corporate entity. 23 Id. at 1258. In this case, Wallack sold his shares to his partners, who worked closely 24 with him for four to five years, and DVMI continued its operations with Walters and 25 Wright, two of the original owners. 26 27 The Court finds the case of Fusco Group, Inc. v. Loss Consultants Int’l, Inc., 462 10 Wallack described the ethos of DVMINSIGHT as “empowering the 28 independent veterinary radiologist, who is a small business professional.” (Dkt. No. 133-2, Wallack Decl. ¶ 22.) - 21 - [11cv2996-GPC(KSC)] 1 F. Supp. 2d 321 (N.D.N.Y. 2006) helpful. In Fusco Group, the plaintiffs and defendant 2 worked together collaboratively from 1997 to 2005 and promoted themselves as one 3 organization under the same trademark. Id. at 325. Defendant asserted that plaintiffs 4 were granted an oral, nonexclusive license to use the mark in connection with 5 plaintiffs’ respective businesses while plaintiffs contended that defendant simply 6 allowed the mark to be used by them in their respective markets and exercised no 7 control over their use of the mark. Id. Disagreement arose in 2005, which resulted in 8 litigation. In determining whether there was an abandonment based on lack of control, 9 the district court noted that relying on the integrity of the licensee is a basis to show the 10 control requirement where there is a history of trouble-free service. Id. at 331. In 11 ruling on a motion for preliminary injunction, the court held that plaintiffs failed to 12 demonstrate that defendant abandoned the mark because the“familial relationship of 13 the parties, the prior working relationship between Plaintiffs and Defendant prior to the 14 creation of Plaintiffs’ businesses, and the trouble-free collaborative effort between 15 Plaintiffs and Defendants from 1997 to 2005 all provided defendant a basis to rely on 16 Plaintiffs.” Id. at 331. Despite the falling out between plaintiffs and defendant, the 17 court looked at the history of the relationship and period of trouble-free working 18 relationship. 19 Similarly, in this case, while the relationship between Wallack, and Wright and 20 Walters deteriorated in the latter half of 2009, all three had a close and collaborative 21 relationship when they were developing the DVMInsight platform from 2004 through 22 2009. Therefore, this period of trouble-free period in their relationship can be a basis 23 on which a licensor can rely on the licensee’s integrity to fulfill the control 24 requirement. See id. 25 In sum, in viewing the evidence in light most favorable to Plaintiffs, and the high 26 burden of proof to demonstrate abandonment, the Court concludes that Plaintiffs have 27 demonstrated a genuine issue of material fact whether SDVI abandoned the 28 DVMINSIGHT Trademark based on naked licensing. - 22 - [11cv2996-GPC(KSC)] 1 D. Affirmative Defense - Acquiescence 2 Defendants argue that SDVI acquiesced to DVMI’s use of the mark, and thereby 3 acquiesced to use by DVMI’s successor in interest, the Idexx Defendants. Plaintiffs 4 oppose. 5 Acquiescence “limits a party’s right to bring suit following an affirmative act by 6 word or deed by the party that conveys implied consent to another.” Seller Agency 7 Council v. Kennedy Ctr. for Real Estate Educ., Inc., 621 F.3d 981, 988 (9th Cir. 2010). 8 It is analogous to an implied license to use the mark. Coach House Rest., Inc. v. Coach 9 and Six Rests., Inc., 934 F.2d 1551, 1563 (11th Cir. 1991). “While abandonment 10 results in a loss of rights as against the whole world, laches or acquiescence is a 11 personal defense which merely results in a loss of rights as against one defendant.” 12 Sweetheart Plastics, Inc. v. Detroit Forming, Inc., 743 F.2d 1039, 1046 (4th Cir. 1984) 13 (citing 2 J.T. McCarthy, Trademarks and Unfair Competition 31:15 at 587 (2d ed. 14 1984)). Acquiescence may be inferred from the trademark owner’s affirmative conduct 15 toward the defendant such as whether he was aware defendants were using the 16 trademark and whether he was also involved in selling ingredients to defendant for use 17 in its product. Ambrosia Chocolate Co. v. Ambrosia Cake Bakery, 165 F.2d 693 (4th 18 Cir. 1947). 19 The trial court has discretion to determine the applicability of the equitable 20 doctrine of acquiescence. Seller Agency Council, 621 F.3d at 986. “The elements of 21 a prima facie case for acquiescence are as follows: (1) the senior user actively 22 represented that it would not assert a right or a claim; (2) the delay between the active 23 representation and assertion of the right or claim was not excusable; and (3) the delay 24 caused the defendant undue prejudice.” Id. at 989. The “active representation” need 25 not be a “specific endorsement” or formal agreement, but an “implied acquiescence 26 may be inferred from a clear encouragement of the use of the allegedly infringing mark, 27 as when, for example, the plaintiff substantially contributes to the marketing of the 28 allegedly infringing products.” SunAmerica Corp. v. Sun Life Assurance Co. of - 23 - [11cv2996-GPC(KSC)] 1 Canada, 77 F.3d 1325, 1348 (11th Cir. 1996). In Coach House Restaurant, while there 2 was no formal agreement, there was evidence that the petitioner allowed the registrant 3 to use the mark as long as the registrant maintained the quality of the restaurant. 934 4 F.2d at 1563. In the case, registrant used the logo for at least 20 years and accumulated 5 extensive good will associated with the mark and relied on the lack of objection from 6 the petitioner. Id. at 1564. The underlying court found that the registrant would suffer 7 undue prejudice if it were forced to cease the mark. Id. 8 Here, Defendants allege that SDVI admits that it encouraged DVMI’s use of the 9 mark following its incorporation starting in September 2006 while Wallack was 10 involved with DVMI. (Dkt. No. 50, SAC ¶ 31.) Moreover, SDVI concedes that it 11 abstained from objecting to DVMI’s continued use of the Trademark after Wallack sold 12 his shares in DVMI. (Id. ¶ 50.) Lastly, Defendants summarily claim that the 13 “inexcusable delay created undue prejudice to both DVMI and Idexx Defendants who 14 relied upon the absence of any enforcement action in purchasing the rights to use and 15 sell services bearing the DVMINSIGHT name and trademark.” (Dkt. No. 103-1, Ds’ 16 Memo of P&A at 28.) In response, Plaintiff asserts that the defense of acquiescence 17 requires an intense factual inquiry and Defendants have failed to cite to any factual 18 assertion that SDVI actively represented that it would not assert a right or claim against 19 DVMI. However, active representation is not required for acquiescence but 20 acquiescence can be implied. See SunAmerica Corp., 77 F.3d at 1348. 21 As discussed above, the Court concluded that there is a genuine issue of material 22 fact as to whether there was an implied license granted to DVMI to use the Trademark. 23 Second, besides conclusory statements, Defendants have failed to provide any factual 24 evidence of undue prejudice to them. Accordingly, the Court DENIES Defendants’ 25 motion for summary judgment based on acquiescence. 26 E. Affirmative Defense - Laches 27 The Ninth Circuit has stated that acquiescence and laches are very similar. Seller 28 Agency Council, Inc., 621 F.3d at 988. “Laches is an equitable time limitation on a - 24 - [11cv2996-GPC(KSC)] 1 party’s right to bring suit resting on the maxim that one who seeks the help of a court 2 of equity must not sleep on his rights.” Id. (quoting Jarrow Formulas, Inc. v. Nutrition 3 Now, Inc., 304 F.3d 829, 835 (9th Cir. 2002) (citations and internal quotations marks 4 omitted)). “[A]cquiescence implies active consent, while laches implies a merely 5 passive consent.” Sara Lee Corp. v. Kayser-Roth Corp., 81 F.3d 455, 462 (4th Cir. 6 1996). 7 Laches requires a showing that “(1) [the] delay in filing suit was unreasonable, 8 and (2) [that party] would suffer prejudice caused by the delay if the suit were to 9 continue.” Jarrow Formulas, Inc. v. Nutrition Now, Inc., 304 F.3d 829, 838 (9th Cir. 10 2002). A party asserting laches must show that it suffered prejudice as a result of the 11 plaintiff's unreasonable delay in filing suit. Id. The limitations period for laches starts 12 “from the time the plaintiff knew or should have known about its potential cause of 13 action.” Tillamook Cntry. Smoker, Inc. v. Tillamook Cnty. Creamery Assoc., 465 F.3d 14 1102 (9th Cir. 2006). 15 Here, Defendants argue that there is a presumption of laches since SDVI waited 16 past the statute of limitations period to assert its rights. They assert it had notice in 17 November 2006 when the adverse statements of ownership was on the 18 DVMInsight.com website. Whether the statute of limitations is three year or four 19 years, the complaint filed in this case on December 20, 2011 indicates a presumption 20 of laches. However, there is an issue of material fact as to whether SDVI had notice 21 of the ownership on the “Terms of Use” webpage in November 2006. 22 As to the second factor, Idexx Defendants have not presented any facts of 23 prejudice to support their laches claim. They assert conclusory statements that Idexx 24 relied on SDVI’s inaction and acquired the rights to the dvminsight.com domain name 25 and engaged business development since acquiring DVMI. (Dkt. No. 103-1 at 29.) 26 However, no facts as to undue prejudice are alleged. See Hokto Kinoko Co. v. 27 Concord Farms, Inc., 810 F. Supp. 2d 1013, 1045 (C.D. Cal. 2011) (denying motion 28 for summary judgment as there was no factual support of prejudice for claim of laches). - 25 - [11cv2996-GPC(KSC)] 1 Accordingly, the Court DENIES Defendants’ motion for summary judgment 2 based on laches. 3 F. Affirmative Defense - Estoppel 4 Defendants argue that SDVI’s claim is also barred by estoppel based on its 5 conduct despite SDVI’s intent. They cite to Saverslak v. Davis-Cleaver Produce Co., 6 606 F.2d 208, 213-14 (7th Cir. 1979). Estoppel does not focus on the obligor’s intent 7 but looks at the effects of his conduct on the obligee. Id. at 213. “An estoppel . . . 8 arises only when a party’s conduct misleads another to believe that a right will not be 9 enforced and causes him to act to his detriment in reliance upon this belief.” Id. “Even 10 if the obligor has not waived a known right, he may be estopped from enforcing it.” 11 Id. The Ninth Circuit has stated that a determination on estoppel is a question of fact. 12 U.S. ex rel. Westinghouse Elec. v. James Stewart Co., 336 F.2d 777, 779 (9th Cir. 13 1964) (citation omitted). 14 Defendants maintain that DVMI and its successor in interest, the Idexx 15 Defendants relied on SDVI’s inaction and silence in the face of DVMI’s use and open 16 claims of ownership for over five years. However, as discussed with the other 17 affirmative defenses, there is an issue of material fact as to whether SDVI was aware 18 of DVMI’s open claim of ownership of the Trademark on its website. Accordingly, the 19 Court DENIES Defendants’ motion for summary judgment on the affir mative defense 20 of estoppel. 21 G. Fourth Cause of Action - Declaratory Relief 22 Because the Court denies Defendants’ motion for summary judgment on the 23 trademark infringement cause of action, the Court also DENIES Defendants’ motion 24 for summary judgment on the related claim for declaratory relief. 25 H. Request for Judicial Notice 26 Defendants filed a request for judicial notice of publically filed documents in this 27 case as well as the endorsed articles of incorporation of DVMI and declaration from 28 Christopher Butler concerning Internet Archive web pages. - 26 - (Dkt. No. 103-3.) [11cv2996-GPC(KSC)] 1 Plaintiffs did not file an opposition. 2 Under Federal Rule of Civil Procedure (“Rule”) 201, “[t]he court may judicially 3 notice a fact that is subject to reasonable dispute because it (1) is generally known 4 within the court’s territorial jurisdiction; or (2) can be accurately and readily 5 determined from sources whose accuracy cannot reasonably be questioned.” Fed. R. 6 Civ. P. 201(b). The court may take judicial notice of “court filings and other matters 7 of public record.” Reyn’s Pasta Bella, LLC v. Visa USA, Inc., 442 F.3d 741, 746 n. 8 6 (9th Cir. 2006). Articles of incorporation are also subject to judicial notice. See 9 eBay Inc. v. Digital Point Solutions, Inc., 608 F. Supp. 2d 1156, 1164 n.6 (N.D.Cal. 10 2009) (judicially noticing articles of incorporation). Lastly, courts have also taken 11 judicial notice of the contents of internet archives. In re Methyl Tertiary Butyl Ether 12 (MTBE) Products Liab. Litig., MDL No. 1358 (SAS), 2013 WL 6869410, at *4 n. 65 13 (S.D.N.Y. Dec. 30, 2013) (taking judicial notice of existence of reports as of a date 14 certain based on Internet Archive); Martins v. 3PD, Inc., Civil Action No. 15 11-11313-DPW, 2013 WL 1320454, at *16 n.8 (D. Mass. Mar. 28, 2013) (taking 16 judicial notice of various historical versions of website available on the Internet 17 Archive as facts readily determinable by resort to a source whose accuracy cannot 18 reasonably be questioned). Since Defendants’ documents are subject to judicial notice, 19 and no opposition having been filed, the Court GRANTS Defendants’ request for 20 judicial notice. 21 I. Evidentiary Objections 22 Defendants filed evidentiary objections to Plaintiff’s declaration. (Dkt. No. 124- 23 3.) The Court notes their objections. To the extent that the evidence is proper under 24 the Federal Rules of Evidence, the Court considered the evidence. To the extent that 25 the evidence is not proper, the Court did not consider it. 26 / / / / 27 / / / / 28 / / / / - 27 - [11cv2996-GPC(KSC)] 1 2 Conclusion Based on the above the Court DENIES Idexx Defendants’ motion for summary 3 judgment. 4 IT IS SO ORDERED. 5 6 DATED: October 13, 2015 7 8 HON. GONZALO P. CURIEL United States District Judge 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 - 28 - [11cv2996-GPC(KSC)]

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