The Best Label Company v. Custom Label & Decal, LLC et al, No. 3:2019cv03051 - Document 211 (N.D. Cal. 2022)

Court Description: ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS' MOTION FOR SUMMARY JUDGMENT granting 181 Administrative Motion to File Under Seal; granting in part and denying in part 182 Motion for Summary Judgment; granting 191 Administrative Motion to File Under Seal; granting 206 Administrative Motion to File Under Seal; denying 207 Motion to Amend/Correct ;. (Illston, Susan) (Filed on 4/20/2022)

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The Best Label Company v. Custom Label & Decal, LLC et al Doc. 211 Case 3:19-cv-03051-SI Document 211 Filed 04/20/22 Page 1 of 12 1 2 3 4 5 UNITED STATES DISTRICT COURT 6 NORTHERN DISTRICT OF CALIFORNIA 7 8 THE BEST LABEL COMPANY, Plaintiff, 9 v. 10 United States District Court Northern District of California 11 Case No. 19-cv-03051-SI CUSTOM LABEL & DECAL, LLC, et al., Defendants. 12 ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS’ MOTION FOR SUMMMARY JUDGMENT Dkt. Nos. 181, 182, 191, 206, 207 13 On March 17, 2022, the Court heard argument on defendants’ motion for partial summary 14 15 judgment. Defendants seek summary judgment as to 7 out of 11 of plaintiff’s claims, namely: 16 - Misappropriation of Trade Secrets (1st cause of action) 17 - Breach of Duty of Loyalty (2nd cause of action) 18 - Unlawful Interference w/ Prospective Economic Advantage (5th cause of action) 19 - Statutory Unfair Competition (6th cause of action) 20 - Violation of California Penal Code Section 502 (9th cause of action) 21 - Federal and common law trademark infringement (10th and 11th causes of action) 22 Having taken lengthy oral argument, considered the parties’ briefs, and reviewed the 23 substantial evidence filed in support thereof the Court hereby GRANTS in part and DENIES in part 24 defendants’ motion as detailed below. 25 BACKGROUND 26 27 28 Best Label Company, Inc. (“BLCI”) was a label company based in Union City, California. Dkt. No. 1-1 ¶ 10. Dockets.Justia.com United States District Court Northern District of California Case 3:19-cv-03051-SI Document 211 Filed 04/20/22 Page 2 of 12 1 In February 2018, negotiations began for the purchase of BLCI by Resource Label Group, 2 LLC (“RLG”). Dkt. No. 182-2 at 321-3231 (John Crammer Depo. Testimony). On November 15, 3 2018, RLG acquired BLCI through an asset purchase agreement (“the Acquisition”). Dkt. No. 181- 4 5 (Asset Purchase Agreement Dated November 5, 2018). To complete the transaction, RLG formed 5 plaintiff, Best Label Company, LLC (“BLC LLC” or plaintiff). 6 (Opposition). A term of the Acquisition included that on November 14, 2018, when BLCI 7 transferred its assets to BLC LLC, all BLCI employees would be terminated with the expectation 8 that BLC LLC would extend employment offers to the terminated employees shortly thereafter (“the 9 Termination Clause”). Dkt. No. 181-5 at 45 (Asset Purchase Agreement). All of the individual 10 defendants, except defendant Daniel Crammer, were subject to the Acquisition’s Termination 11 Clause because, as discussed below, they were employed by BLCI when its assets were acquired. Dkt. No. 191-2 at 14-15 12 The rehiring process of former BLCI employees involved extending formal offer letters to 13 each former BLCI employee. Dkt. No. 181-5 at 45 (Asset Purchase Agreement) (“Purchaser or one 14 of its Affiliates shall, effective as of the Closing Date, extend offers of employment to all actively 15 employed employees of Seller engaged in the Business…”). The parties hotly dispute whether 16 during this time, after the Acquisition but when individual defendants Mr. Gilkey, Mr. Cole, and 17 Mr. McKean had not signed formal offer letters, the three of them were employees of BLC LLC. 18 Dkt. No. 181-3 at 20-212 (MSJ); Dkt. No. 191-2 at 14-153 (Opposition). 19 The parties agree Daniel Crammer and others learned of the Acquisition prior to the 20 21 22 23 24 25 26 27 28 1 For ease of reference, page number citations refer to the ECF branded number in the upper right corner of the page. “Although Plaintiff may claim Mr. McKean, Mr. Gilkey, and Mr. Cole ‘implicitly accepted’ a job with BLC LLC by pointing to income they received from BLC LLC, the income Mr. Cole, Mr. Gilkey, and Mr. McKean received was for the work they had performed for BLCI prior to BLCI’s transfer of assets to BLC LLC. Importantly, BLC LLC was still negotiating with Mr. McKean, Mr. Gilkey, and Mr. Cole over issues related to their potential positions, including salary and other incentives. That clearly demonstrates that Mr. McKean, Mr. Cole, and Mr. Gilkey had not accepted any position at BLC LLC. Because none of the Individual Defendants were hired by BLC LLC, Individual Defendants had no relationship with BLC LLC that would give rise to a duty of loyalty.” 2 “Plaintiff hired BLCI’s employees. Notably, Gilkey, McKean, and Cole all continued employment.” (emphasis in original). 2 3 United States District Court Northern District of California Case 3:19-cv-03051-SI Document 211 Filed 04/20/22 Page 3 of 12 1 Acquisition’s consummation and public announcement. Dkt. No. 182-2 at 28-29 (Daniel Crammer 2 Depo. Testimony). BLCI’s Hayward, California competitor, defendant Custom Label & Design 3 LLC (“CLD”), also learned of the impending Acquisition well before it was consummated and took 4 steps to attract BLCI employees to come work for defendant CLD. Dkt. No. 1-1 ¶ 11; Dkt. No. 5 192-2 at 424-425 (Daniel Crammer Depo. Testimony). 6 Individual defendant Daniel Crammer worked for BLCI for over 10 years before his October 7 30, 2018 resignation, approximately two weeks prior to the Acquisition. Dkt. No. 182-2 at 7, 9-10 8 (Daniel Crammer Depo. Excerpts). Defendants admit “Mr. Crammer continued to work with BLCI 9 for a couple of weeks after he had technically left BLCI’s employment to help keep the business 10 running and to assist with the transition.” Dkt. No. 181-3 at 12 (MSJ); Dkt. No. 182-2 at 82-88 11 (Daniel Crammer Depo. Testimony). On October 31, 2018, CLD announced Dan Crammer as its 12 Vice President of Operations. Dkt. No. 191-7 at 348 (Internal CLD Email). 13 Individual defendant Travis Gilkey was employed by BLCI for close to 20 years prior to the 14 Acquisition. Dkt. No. 182-2 at 135-136 (Travis Gilkey Depo. Excerpts). On November 28, 2018, 15 Mr. Gilkey began working for defendant CLD after receiving a commission check and general 16 manager salary from BLCI and after “report[ing] to the Best Label facility” from “November 15, 17 2018 through November 28, 2018.” Dkt. No. 182-2 at 141-145, 155-156 (Travis Gilkey Depo. 18 Excerpts). 19 Individual defendant Scott McKean worked for BLCI for more than seven years before the 20 Acquisition. Dkt. No. 182-2 at 226-228. On November 26, 2018, Mr. McKean began work at 21 defendant CLD after receiving his final check for his work at BLCI. Dkt. No. 182-2 at 304 (Scott 22 McKean Depo. Testimony). 23 Individual defendant Gareth Cole joined BLCI in May 2018 and had been with the company 24 for approximately 6 months prior to the Acquisition. Dkt. No. 182-2 at 195-196 (Gareth Cole Depo. 25 Testimony). On November 20, 2018, Mr. Cole received a final payment from BLCI and began 26 working at defendant CLD. Dkt. No. 182-2 at 213, 217 (Gareth Cole Depo. Testimony). 27 28 3 Case 3:19-cv-03051-SI Document 211 Filed 04/20/22 Page 4 of 12 1 I. Facts re Misappropriation of Trade Secret Allegations 2 Plaintiff alleges defendants stole four categories of trade secrets, namely: (1) information 3 about BLC LLC’s customers and prospective customers; (2) information about BLC LLC’s 4 marketing and strategic planning documents, (3) Information about BLC LLC’s label making 5 processes specific to customers, and (4) Information regarding salary and compensation packages 6 for its employees. Defendants do not seek summary judgment on category (1) and plaintiff states 7 its misappropriation of trade secret claim “does not depend on the misappropriation of marketing 8 and strategic planning documents,” category (2). Dkt. No. 191-2 at 32 (Opposition). Therefore, for 9 the purposes of this motion, the only categories for the Court to analyze are (3) and (4). 10 United States District Court Northern District of California 11 II. Facts re Trademark Infringement Allegations 12 The parties do not dispute that, during his employment with BLCI, defendant Scott McKean 13 created and used the “Beer Labels Done Right” logo and “Beer Labels Done Right” graphic (“BLDR 14 Trademarks”). Dkt. No. 182-2 at 229-230, 234-235, 236-238, 243-246 (Scott McKean Depo. 15 Testimony). It is also undisputed that neither BLC LLC nor RLG has used the BLDR Trademarks 16 since Mr. McKean left the company in 2018; indeed, plaintiff’s counsel admitted as much during 17 the March 17, 2022 hearing on the instant motion. 18 Mr. McKean continued to use BLDR Trademarks in his signature line associated with his 19 email address at CLD, simply removing the text reference to Best Label from the design. Dkt. No. 20 182-3 at 110 (November 29, 2018 email showing Scott McKean using BLDR Trademark on his 21 email signature while working at CLD). Days after leaving BLCI, Mr. McKean filed a U.S. 22 Trademark Application, Serial No. 88214311, claiming ownership of the BLDR Trademarks, and 23 contending his first use was on November 1, 2015. Dkt. No. 182-2 at 247 (Scott McKean Depo. 24 Testimony); Dkt. No. 191-8 at 282 (Trademark Application Principal Register filed on December 25 3, 2018 naming Scott McKean as “Owner of Mark”). In that filing, Mr. McKean admitted the BLDR 26 trademark was created and used during his employment with BLCI. Dkt. No. 191-8 at 282 27 (Trademark Application Principal Register listing the mark’s “First Use In Commerce Date” as 28 November 1, 2015 – when Mr. McKean was working for BLCI). 4 Case 3:19-cv-03051-SI Document 211 Filed 04/20/22 Page 5 of 12 LEGAL STANDARD United States District Court Northern District of California 1 2 Summary judgment is proper if “the movant shows there is no genuine dispute [of] material 3 fact and the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a). The moving 4 party bears the initial burden of demonstrating the absence of a genuine issue of material fact. 5 Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). The moving party, however, has no burden to 6 disprove that which the non-moving party will have the burden of proof at trial. The moving party 7 need only demonstrate an absence of evidence to support the non-moving party’s case. Id. at 325. 8 Once the moving party has met its burden, the burden shifts to the non-moving party to “set 9 out ‘specific facts showing a genuine issue for trial.’” Id. at 324 (quoting then-Fed. R. Civ. P. 56(e)). 10 To carry this burden, the non-moving party must “do more than simply show there is some 11 metaphysical doubt as to the material facts.” Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio 12 Corp., 475 U.S. 574, 586 (1986). “The mere existence of a scintilla of evidence . . . will be 13 insufficient; there must be evidence on which the jury could reasonably find for the [non-moving 14 party].” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 252 (1986). 15 In deciding summary judgment, the court must view evidence in the light most favorable to 16 the non-moving party and draw all justifiable inferences in its favor. Id. at 255. “Credibility 17 determinations, the weighing of the evidence, and the drawing of legitimate inferences from the 18 facts are jury functions, not those of a judge” ruling on a summary judgment motion. Id. However, 19 conclusory, speculative testimony in affidavits and moving papers is insufficient to raise genuine 20 issues of fact to defeat summary judgment. Thornhill Publ'g Co., Inc. v. GTE Corp., 594 F.2d 730, 21 738 (9th Cir. 1979). The evidence parties present must be admissible. Fed. R. Civ. P. 56(c). 22 DISCUSSION 23 24 25 26 I. Claims Defendants Allege are Superseded by CUTSA A. The Second, Fifth, and Sixth Causes of Action are Not Superseded by California’s Uniform Trade Secret Act (“CUTSA”) Defendants argue the second, fifth, and sixth causes of action, for breach of duty of loyalty, 27 unlawful interference with prospective economic advantage, and statutory unfair competition, 28 5 United States District Court Northern District of California Case 3:19-cv-03051-SI Document 211 Filed 04/20/22 Page 6 of 12 1 respectively, are superseded by CUTSA. While it is true that CUTSA can supersede other claims, 2 it only does so if the claim(s) are “based on the same nucleus of facts as the misappropriation of 3 trade secrets claim for relief.” K.C. Multimedia, Inc. v. Bank of Am. Tech. & Operations, Inc., 171 4 Cal. App. 4th 939, 958 (2009) (internal citation omitted). 5 Plaintiff argues these claims are not premised upon it trade secret allegations. Rather, 6 plaintiff argues it premises these claims on defendants’ alleged statements made to divert business 7 to plaintiff’s competitor, defendant CLD, while the individual defendants still worked for plaintiff. 8 Dkt. No. 191-7 at 1794, 182-1835, 184-189 (Cole Depo. Testimony); Dkt. No. 191-7 at 610-6116 9 (Gilkey Depo. Testimony); Dkt. No. 191-7 at 569-5787 (Exhibit from McKean Depo.); Dkt. No. 10 191-7 at 378 (Exhibit from Daniel Crammer Depo.). Plaintiff also premises these causes of action 11 upon defendants’ alleged solicitation of BLCI/BLC LLC employees to join its competitor, defendant 12 CLD, while defendants were still employed by BLCI/BLC LLC. Dkt. No. 191-7 at 409 (Exhibit 13 from Daniel Crammer Depo.). These allegations may be tangential to the CUTSA claim, and may 14 very well be unsuccessful at trial. But they stand as independent claims, supported by alleged facts 15 beyond misappropriation of trade secrets, and therefore are not superseded by CUTSA. 16 17 18 19 20 21 22 23 24 25 26 27 28 4 Mr. Cole testified he gave a business opportunity to CLD on November 13, 2018 (prior to the Acquisition). 5 Mr. Cole testified he approached CLD about a project for a customer on or before November 16, 2018, when plaintiff argues Mr. Cole was employed by plaintiff. 6 Mr. Gilkey admitted he began checking his CLD email and communicating with CLD about business and customers’ orders on November 24, 2018 – four days prior to when he officially started working for CLD and during the period of time plaintiff alleges he was still plaintiff’s employee. 7 Email chain starting on November 26, 2018 between Scott McKean and a former BLCI customer about moving their business over to CLD. 8 October 19, 2018 email sent from CLD representative to Daniel Crammer negotiating Mr. Crammer’s compensation from CLD while he was still working for BLCI. Specifically, CLD was promising Mr. Crammer an incentive bonus if his “former customers” buy from CLD. 9 Email chain spanning October 18-October 20, 2018 between Daniel Crammer and CLD representative. At this time Mr. Crammer was still employed by BLCI (his last day was October 30, 2018). The CLD representative informs Mr. Crammer the representative is “chipping away” at recruiting then BLCI employee Travis Gilkey. Mr. Crammer responds with “Very cool! I’ll keep chipping from my end too! I think we’ll be yelling ‘timber’ soon.” 6 Case 3:19-cv-03051-SI Document 211 Filed 04/20/22 Page 7 of 12 United States District Court Northern District of California 1 B. The Ninth Cause of Action for Violation of California Penal Code §502 Is Superseded by CUTSA 2 California Penal Code section 502, the Comprehensive Computer Data Access and Fraud 3 Act, imposes liability on any person who “knowingly accesses and without permission takes, copies, 4 or makes use of any data from a computer, computer system, or computer network . . . .” Cal. Penal 5 Code § 502(c)(2). Defendants argue the §502 claim is preempted by plaintiff’s CUTSA claim 6 because both causes of action involve the exact same nucleus of facts. Dkt. No. 181-3 at 25 (MSJ). 7 Section 502(c)(2) has two requirements: (1) the defendant knowingly accesses a computer system; 8 and (2) without permission takes, copies, or makes use of the data therein. 9 Plaintiff devoted two paragraphs in its opposition to this issue and failed to identify any 10 evidence showing how its §502 claim differs from its CUTSA claim. Dkt. No. 191-2 at 26-27 11 (Opposition). In highly similar instances, courts have found the CUTSA claim supersedes the §502 12 claim. Henry Schein, Inc. v. Cook, No. 16-cv-03166-JST, 2017 U.S. Dist. LEXIS 29183, at *11 13 (N.D. Cal. Mar. 1, 2017). In the Henry Schein case, with facts strikingly similar to the case at bar, 14 Judge Tigar found: 17 HSI alleges that Cook knowingly accessed HSI’s password-protected computer system after she terminated her employment, which then enabled her to copy and make use of HSI’s trade secrets. HSI cannot plausibly allege the second ‘use’ element of section 502(c)(2) without relying on facts from its CUTSA claim. Therefore, the CUTSA preempts HSI’s section 502 claim. 18 Henry Schein, Inc. v. Cook, No. 16-cv-03166-JST, 2017 U.S. Dist. LEXIS 29183, at *13 (N.D. Cal. 19 Mar. 1, 2017). Likewise, plaintiff cannot allege the second “use” element without relying on facts 20 from its CUTSA claim. Indeed, the examples plaintiff gives in its opposition of alleged §502 21 violations are the exact conduct underlying its CUTSA claim. 22 (Opposition). As such, the Court finds plaintiff’s §502 claim is superseded by its CUTSA claim 23 and therefore GRANTS summary judgment as to the ninth cause of action. 15 16 See Dkt. No. 191-2 at 2710 24 25 26 27 28 Plaintiff’s Opposition states: “Individual Defendants clearly abused their access by using data on Plaintiff’s computer system for competition against Plaintiff. Indeed, McKean used information in Plaintiff’s computer system to create a Google Doc with over 1,150 lines of customer information for his reference at Custom Label. Cole testified that he took data from Plaintiff’s computer system and used it to divert customers to Custom Label. There are clearly genuine issues regarding Defendants’ illicit use of the data on Plaintiff’s computer system.” (internal citations omitted) (emphasis added). 7 10 Case 3:19-cv-03051-SI Document 211 Filed 04/20/22 Page 8 of 12 United States District Court Northern District of California 1 II. First Cause of Action – Misappropriation of Trade Secrets 2 Plaintiff alleges defendants stole four categories of trade secrets, namely: (1) information 3 about BLC LLC’s customers and prospective customers; (2) information about BLC LLC’s 4 marketing and strategic planning documents, (3) Information about BLC LLC’s label making 5 processes specific to customers, and (4) Information regarding salary and compensation packages 6 for its employees. Defendants only seek summary judgment on categories 2-4 arguing plaintiff has 7 “not sufficiently and particularly described, or otherwise evidenced, what these supposed trade 8 secrets entail that would give Defendants any indication of what trade secret is at issue.” Dkt. No. 9 181-3 at 28 (MSJ). In its opposition, plaintiff states its “claim for misappropriation of trade secrets 10 does not depend on misappropriation of marketing and strategic planning documents.” Dkt. No. 11 191-2 at 32 (Opposition). Therefore, the Court need only analyze categories 3 and 4. 12 For categories 3 and 4, plaintiff has not differentiated the alleged trade secrets from general 13 knowledge those skilled in the trade would have. Indeed, plaintiff’s entire opposition to these two 14 categories constitutes one paragraph, stating: 15 19 Defendants claims [sic] that Plaintiff does not have protectable label making processes or salary and compensation information that can be protected as trade secrets. All of this information is identifiable and was kept secret and secured on Plaintiff’s password-protected computer systems. Plaintiff’s salary information is kept secret. Plaintiff’s label making processes included specific configurations and label constructions unique to each customer. Defendants’ feigning ignorance of which information they stole is remarkably unconvincing. 20 Dkt. No. 191-2 at 32 (Opposition). Plaintiff does not attempt to explain what purported trade secret 21 “unique to each customer” is at issue. Plaintiff does not describe the alleged trade secret “with 22 sufficient particularity to separate it from matters of general knowledge in the trade or of special 23 knowledge to those persons who are skilled in the trade.” Mattel, Inc. v. MGA Ent’mt, Inc., 782 F. 24 Supp. 2d 911, 967 (C.D. Cal. 2011) (quoting Whyte v. Schlage Lock Co., 101 Cal. App. 4th 1443, 25 1453 (2002)). Defendants put forth evidence showing label making processes are essentially similar 26 and defendants garnered this expertise from many years of experience in the industry. Dkt. No. 27 182-2 at 11-21 (Daniel Crammer Depo. Testimony re specifics of label making). Plaintiff did not 28 refute this evidence or otherwise provide any conflicting on this point – rather, plaintiff simply wrote 16 17 18 8 United States District Court Northern District of California Case 3:19-cv-03051-SI Document 211 Filed 04/20/22 Page 9 of 12 1 the paragraph above. Finally, it is axiomatic that simply because information is password protected, 2 that does not automatically render it a trade secret. California Civil Code § 3426.1(d)(2) does require 3 secrecy to establish something as a trade secret, but it also requires the trade secret to be something 4 from which the holder can derive independent economic value “from not being generally known.” 5 See §3426.1(d)(2). Plaintiff does not offer any evidence as to the latter or refute defendants’ 6 evidence that the alleged trade secrets are actually generally known information to those skilled in 7 the trade of label making. 8 As such, summary judgment is GRANTED with respect to plaintiff’s misappropriation of 9 trade secret claims based on categories 2, 3, and 4 for information about BLC LLC’s marketing and 10 strategic planning documents, information about BLC LLC’s label making processes specific to 11 customers, and information regarding salary and compensation packages for its employees, 12 respectfully. 13 14 III. Second Cause of Action: Duty of Loyalty 15 “The elements of a cause of action for breach of a duty of loyalty . . . are as follows: (1) the 16 existence of a relationship giving rise to a duty of loyalty; (2) one or more breaches of that duty; and 17 (3) damage proximately caused by that breach.” Huong Que, Inc. v. Luu, 150 Cal. App. 4th 400, 18 410 (2007) (citation omitted). California courts have held that “[a]n employee does not breach his 19 duty of loyalty by preparing to compete with his employer.” Mamou v. Trendwest Resorts, Inc., 20 165 Cal. App. 4th 686, 719 (2008) (citations omitted). 21 22 The parties’ arguments focus on elements (1) and (2) – whether the individual defendants owed a duty to BLCI/BLC LLC and, if there was a duty, whether it was breached. 23 24 A. 25 Defendants powerfully argue Mr. Gilkey, Mr. Cole, and Mr. McKean were never employees 26 of BLC LLC because they were terminated pursuant to the Asset Purchase Agreement and never 27 signed employment agreements with BLC LLC; therefore, they did not owe BLCI a duty as of 28 November 14, 2018 when the Termination Clause went into effect and never owed a duty to BLC Existence of a Duty of Loyalty 9 Case 3:19-cv-03051-SI Document 211 Filed 04/20/22 Page 10 of 12 1 LLC, a company defendants argue they never worked for. Dkt. No. 181-3 at 20-21 (MSJ). While 2 the Court finds defendants’ argument regarding the Termination Clause compelling, plaintiffs have 3 put forth enough evidence to create an issue of fact to defeat summary judgment. As discussed 4 above, Mr. McKean, Mr. Cole, and Mr. Gilkey all continued going into the office and received pay 5 checks after the asset purchase was completed. e.g., Dkt. No. 182-2 at 14311 Travis Gilkey Depo 6 Testimony); Dkt. No. 182-2 at 30412 (Scott McKean Depo. Testimony); Dkt. No. 182-2 at 213, 21713 7 (Gareth Cole Depo. Testimony). While the Court finds defendants’ argument persuasive, plaintiff 8 has carried its burden to create a dispute of fact as to whether Mr. Gilkey, Mr. Cole, and Mr. McKean 9 could have been employed by BLC, LLC and therefore owed BLC LLC a duty. With respect to Mr. Crammer, it is undisputed he owed BLCI a duty of loyalty prior to his 10 United States District Court Northern District of California 11 resignation on October 30, 2018. 12 13 B. 14 As discussed above, plaintiff has created disputes of fact regarding whether the individual 15 defendants, while still working for plaintiff, diverted business opportunities and/or improperly 16 solicited BLCI/BLC LLC employees to work for defendant CLD. The Court believes this cause of 17 action is a very close call and finds plaintiff has barely met its burden of showing material disputes 18 of fact. 19 20 Breach of the Duty of Loyalty As such, summary judgment is DENIED as to the second cause of action for breach of duty of loyalty. 21 22 23 24 25 26 27 28 11 Mr. Gilkey testified he received a paycheck from Resource Label Group (BLC LLC) between November 15, 2018 – November 28, 2018 (after the Acquisition closed) at least in part for his “general manager salary.” This contradicts defendants’ argument at the hearing that all payments to the individual defendants after November 14, 2018 were merely commission payments. 12 Scott McKean deposition testimony confirming he began work for CLD on November 26, 2018, after receiving his final check for his work at BLCI. 13 Gareth Cole deposition testimony confirming he received a final payment from BLCI on November 20, 2018, and began working at defendant CLD. 10 Case 3:19-cv-03051-SI Document 211 Filed 04/20/22 Page 11 of 12 1 Tenth and Eleventh Causes of Action: Trademark Infringement 2 To establish a claim for trademark infringement under 15 U.S.C. § 1125(a), plaintiff must 3 prove: (1) that Plaintiff owns a valid and protectable trademark; and (2) that Defendants’ use of the 4 mark is likely to cause consumer confusion. See Airs Aromatics, LLC v. Victoria’s Secret Store 5 Brand Mgmt., Inc., 744 F.3d 595, 599 (9th Cir. 2014). The Lanham Act identifies abandonment as 6 an affirmative defense to a trademark infringement claim, defining “abandonment as: (1) 7 discontinuance of trademark use and (2) intent not to resume such use.” Electro Source, Ltd. Liab. 8 Co. v. Brandess-Kalt-Aetna Grp., Inc., 458 F.3d 931, 935 (9th Cir. 2006) (emphasis in original); 15 9 U.S.C. § 1127. Three consecutive years of non-use is “prima facie evidence of abandonment.” 15 10 United States District Court Northern District of California IV. U.S.C. § 1127. 11 Plaintiff argues defendants’ abandonment argument fails for two reasons: (1) plaintiff 12 intends to use the mark in the future and (2) plaintiff has not used the mark only because it has been 13 “stymied by [defendant Scott] McKean’s contested ownership” of the trademark rights. Dkt. No. 14 191-2 at 22 FN 98 (Opposition). However, plaintiff does not set forth any evidence that it intends 15 to use the trademark in the future. See Dkt. No. 191-2 20-22 (Opposition). Further, there has been 16 nothing stopping plaintiff from using the mark if it wanted to. It seems plaintiff simply has not used 17 it and plaintiff’s counsel admitted as much during the March 17, 2022 hearing on the instant motion. 18 There is no dispute Mr. McKean created the trademark during his employment with plaintiff well 19 before 2018. While Mr. McKean disabled the social media accounts and website using the mark, 20 plaintiff could have easily created new accounts or used the mark in other contexts. There is no 21 evidence plaintiff has done so. 22 23 As such, summary judgment is GRANTED with respect to the tenth and eleventh causes of action. 14 24 25 26 27 28 14 The parties’ motions to file under seal are GRANTED. See Dkt. Nos. 181, 191, 206. Plaintiff’s motion to supplement the record is DENIED. Dkt. No. 207. The motion to supplement the record was filed by plaintiff over a month after defendants’ reply brief was filed and nearly two months after plaintiff’s opposition was filed. All of the evidence plaintiff seeks to submit in the supplemental record was available to plaintiff when it submitted its opposition. The supplemental evidence is untimely and will not be considered. 11 Case 3:19-cv-03051-SI Document 211 Filed 04/20/22 Page 12 of 12 CONCLUSION 1 2 3 4 5 6 7 8 9 10 United States District Court Northern District of California 11 For the foregoing reasons and for good cause shown, the Court rules as follows: First Cause of Action: Misappropriation of Trade Secrets 1. Information about BLC LLC’s customers, prospective customers – NOT at issue. Summary judgment is NOT granted. 2. Information about BLC LLC’s marketing and strategic planning documents – summary judgment is GRANTED. 3. Information about BLC LLC’s label making processes specific to customers – summary judgment is GRANTED. 4. Information regarding salary and compensation packages for its employees – summary judgment is GRANTED. 12 Second Cause of Action: Breach of Duty of Loyalty – summary judgment is DENIED 13 Fifth Cause of Action: Unlawful Interference with Prospective Economic Advantage – summary 14 judgment is DENIED. 15 Sixth Cause of Action: Statutory Unfair Competition – summary judgment is DENIED. 16 Ninth Cause of Action: Violation of Penal Code Section 502 – summary judgment is 17 GRANTED. 18 Tenth/Eleventh Causes of Action: Trademark Infringement – summary judgment is GRANTED. 19 20 21 22 23 24 IT IS SO ORDERED. Dated: April 20, 2022 ______________________________________ SUSAN ILLSTON United States District Judge 25 26 27 28 12

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