Carter v. Oath Holdings Inc., No. 4:2017cv07086 - Document 68 (N.D. Cal. 2018)

Court Description: ORDER GRANTING 17 DEFENDANT'S MOTION TO DISMISS WITH LEAVE TO AMEND, MOTION FOR A MORE DEFINITE STATEMENT, AND 48 MOTION FOR A PROTECTIVE ORDER STAYING DISCOVERY. Signed by Judge Beth Labson Freeman on 6/21/2018. (blflc4S, COURT STAFF) (Filed on 6/21/2018)
Download PDF
1 2 UNITED STATES DISTRICT COURT 3 NORTHERN DISTRICT OF CALIFORNIA 4 SAN JOSE DIVISION 5 6 BRIAN K. CARTER, Plaintiff, 7 v. 8 9 OATH HOLDINGS, INC., Defendant. 10 11 United States District Court Northern District of California Case No. 17-cv-07086-BLF ORDER GRANTING DEFENDANT'S MOTION TO DISMISS WITH LEAVE TO AMEND, MOTION FOR A MORE DEFINITE STATEMENT, AND MOTION FOR A PROTECTIVE ORDER STAYING DISCOVERY [Re: ECF 17, 48] 12 13 Plaintiff Brian K. Carter brings this trademark infringement action against Defendant Oath 14 Holdings, Inc. Compl., ECF 1-1. Defendant filed a motion to dismiss the complaint pursuant to 15 Federal Rule of Civil Procedure 12(b)(6), or in the alternative, for a more definite statement 16 pursuant to Federal Rule of Civil Procedure 12(e). Mot. to Dismiss, ECF 17. Defendant also filed 17 a motion for a protective order staying discovery. Mot. for Stay of Discovery, ECF 48. Pursuant 18 to Civil Local Rule 7-1(b), the Court finds Defendant’s motions to be suitable for submission 19 without oral argument. For the reasons stated below, Defendant’s motion to dismiss is 20 GRANTED with LEAVE TO AMEND, motion for a more definite statement is GRANTED, and 21 motion for a protective order staying discovery is GRANTED. 22 23 I. BACKGROUND Plaintiff resides in Ohio and allegedly owns a trademark registration for “The House of 24 Figurine Sculptures.com.” Compl. at iii, ECF 1-1. Plaintiff initiated this trademark infringement 25 action in state court naming “Yahoo Incorporate” as the defendant. See Compl. On December 13, 26 2017, Defendant removed this action based on federal question jurisdiction. Notice of Removal, 27 ECF 1. In its notice of removal, Defendant states that “Yahoo Incorporate” does not exist. Id. at 1 28 n.1. Defendant further states that insofar as Plaintiff’s Complaint identifies “Yahoo! Inc.” as the 1 defendant, “Yahoo! Inc.” transferred all liabilities relevant to Plaintiff’s claims to “Yahoo 2 Holdings, Inc.” Id. On May 5, 2018, Defendant filed a notice stating that it has changed its name 3 to “Oath Holdings, Inc.” ECF 47. 4 Defendant provides a search engine (“Yahoo Search”) that allows people to search the 5 Internet. The Court takes judicial notice of the well-known fact that internet search engines index 6 third-party web content and dynamically return relevant search results in response to user-entered 7 search terms. Fed. R. Evid. 201(b)(1); Perfect 10, Inc. v. Giganews, Inc., No. CV11-07098, 2013 8 WL 2109963, at *1 (C.D. Cal. Mar. 8, 2013), aff'd, 847 F.3d 657 (9th Cir. 2017) (taking judicial 9 notice of how content is searched and stored in an online network service). 10 Plaintiff’s Complaint alleges that Defendant uses “two active counterfeit marks identical to United States District Court Northern District of California 11 Plaintiff[’s] genuine mark” titled “The House of Figurine Sculptures - Image Result” and “More 12 The House of Figurine Sculptures Images.” Compl. at iv. The Complaint attaches the following 13 screenshot of an internet search result: 14 . 15 16 17 18 19 20 21 22 23 24 25 26 27 28 2 1 As best understood, Plaintiff alleges that Defendant has “counterfeit marks” shown as images in 2 the screenshot displayed above. Compl. at vii. Plaintiff also alleges that he has no connection to 3 “those goods and services sold” and that Defendant’s “counterfeit marks misrepresent [the] 4 designation of origin” of the goods and services. Id. According to Plaintiff, Defendant has 5 “created false sponsorships and endorsements that do not exist” and their “counterfeit marks [are] 6 deceptive, confusing, and is likely to cause mistake on the part of [the] consuming public.” Id. at 7 viii. In addition, Plaintiff alleges that he conducted business with Defendant “through the 8 9 purchase of an e-commerce webhosting (WH) website.” Compl. at x. “The House of Figurine Scultpures.com” was the “domain name [and] register service mark applied to the website 11 United States District Court Northern District of California 10 purchased from Defendant.” Id. Plaintiff further pleads that Defendant did not have authorization 12 to use or sell Plaintiff’s “principal register service mark” or his “business identity in commerce.” 13 Id. at xii. Based on the above allegations, the Complaint asserts three causes of action under the 14 15 Lanham Act: (1) trademark infringement (15 U.S.C. § 1114), (2) false designation of origin (15 16 U.S.C. § 1125), and (3) counterfeiting under the Trademark Counterfeiting Act of 1984. 17 18 II. DEFENDANT’S MOTION TO DISMISS 19 A. 20 “To survive a motion to dismiss, a complaint must contain sufficient factual matter, Legal Standard 21 accepted as true, to ‘state a claim to relief that is plausible on its face.’” Ashcroft v. Iqbal, 556 22 U.S. 662, 678 (2009) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007)). When 23 considering such a motion, the Court “accept[s] factual allegations in the complaint as true and 24 construe[s] the pleadings in the light most favorable to the nonmoving party.” Manzarek v. St. 25 Paul Fire & Marine Ins. Co., 519 F.3d 1025, 1031 (9th Cir. 2008). However, “[t]hreadbare 26 recitals of the elements of a cause of action, supported by mere conclusory statements, do not 27 suffice.” Iqbal, 556 U.S. at 678 (citing Twombly, 550 U.S. at 555). 28 3 1 B. Discussion Defendant raises several arguments why the Complaint fails to state a claim. In particular, 2 Defendant asserts that Plaintiff must allege that Defendant “uses” a mark to state a claim for 3 trademark infringement, false designation of origin, or counterfeiting. Mot. to Dismiss 6. 4 Defendant also contends that the Complaint does not allege a likelihood of confusion. Id. at 10. 5 Defendant further argues that Plaintiff’s theory of liability is inconsistent with the Ninth Circuit’s 6 views on search engine functionality. Id. at 9. 7 Plaintiff filed an “objection to Defendant’s dismissal.” Opp’n to Mot. to Dismiss, ECF 50. 8 After summarizing his view of the history of the case, Plaintiff argues that the Complaint only 9 10 United States District Court Northern District of California 11 12 addresses “Defendant’s intentional development of two active counterfeit marks [that are] identical to Plaintiff[’s] genuine mark” but not Yahoo’s entire web search engine result. Id. at 7. In addition, Plaintiff contends that Defendant accepted “the allegations in the original complaint in its current written state.” Id. at 8. Plaintiff, however, does not address the merits of Defendant’s 13 arguments based on the Lanham Act. 14 15 16 After reviewing the parties’ briefing, the Court agrees with Defendant that the Complaint fails to state a claim. First, the Complaint fails to sufficiently plead that Defendant “uses” Plaintiff’s mark under the meaning of the Lanham Act. To state a claim for trademark 17 infringement, false designation of origin, or counterfeiting, a plaintiff must allege that the 18 19 defendant “uses” the mark at issue in commerce. See 15 U.S.C. § 1114(a); 15 U.S.C. § 1125(a)(1). Courts have held that an online provider does not “use” a mark under the meaning of 20 the Lanham Act when its search engine returns a search result based on an input of a consumer. 21 Perfect 10, 2013 WL 2109963, at *14 (“Defendants do not ‘use’ Plaintiff’s marks in a commercial 22 transaction by merely offering a search function that allows third parties to search for images 23 using Plaintiff’s marks as search terms.”). As such, merely returning search results to purportedly 24 display a trademark does not show that Defendant is liable under the Lanham Act. Although the 25 26 Complaint alleges that Defendant “use[s] . . . two active counterfeit marks identical to Plaintiff[’s] genuine mark,” that allegation is conclusory and is “not entitled to be assumed true.” Iqbal, 556 27 U.S. at 681. 28 4 1 Second, the Complaint fails to sufficiently allege a likelihood of confusion. To state a 2 claim under the Lanham Act, a plaintiff must allege a likelihood of confusion. Two Pesos, Inc. v. 3 Taco Cabana, Inc., 505 U.S. 763, 780 (1992). Here, the Complaint merely alleges that 4 Defendant’s “counterfeit marks misrepresent [the] designation of origin” and that their 5 “counterfeit marks [are] deceptive, confusing, and is likely to cause mistake on the part of [the] 6 consuming public.” Compl. at vii, viii. Such allegations are legal conclusions and are “not 7 entitled to be assumed true.” Iqbal, 556 U.S. at 681. Indeed, “[t]hreadbare recitals of the elements 8 of a cause of action, supported by mere conclusory statements, do not suffice” to survive a motion 9 to dismiss. Id. at 678. 10 For the foregoing reasons, the Court concludes that the Complaint fails to sufficiently United States District Court Northern District of California 11 allege claims for (1) trademark infringement (15 U.S.C. § 1114), (2) false designation of origin 12 (15 U.S.C. § 1125), and (3) counterfeiting under the Trademark Counterfeiting Act of 1984. The 13 Court therefore GRANTS Defendant’s motion to dismiss the complaint. 14 C. 15 The dismissal of the complaint is with leave to amend. Manzarek v. St. Paul Fire & Leave to Amend 16 Marine Ins. Co., 519 F.3d 1025, 1031 (9th Cir. 2008) (holding that a court granting a motion to 17 dismiss should permit leave to amend unless it would be clearly futile). At this time, the Court is 18 unable to determine that allowing Plaintiff to amend the complaint would be clearly futile. 19 Plaintiff may have facts to overcome the deficiencies in the dismissed complaint. However, as a 20 pro se litigant, Plaintiff may not have been aware that he must plead those facts to state a viable 21 claim. As such, Plaintiff shall have a further opportunity to amend the complaint in light of the 22 pleading standard articulated in this order. 23 The Court notes that insofar as Plaintiff alleges that Defendant is liable for trademark 24 infringement unless its search engine returns only search results from Plaintiff’s own website, 25 Plaintiff’s theory is inconsistent with the Ninth Circuit’s view of search engine functionality. See 26 Toyota Motor Sales, U.S.A., Inc. v. Tabari, 610 F.3d 1171, 1176–77 (9th Cir. 2010) (holding that 27 disallowing the use of trademarks to accurately describe goods and services in the context of 28 nominative fair use would stifle competition). If Plaintiff seeks to file an amended complaint, his 5 1 allegations must be consistent with trademark infringement liability under Ninth Circuit law to 2 state a viable claim. The Court will allow Plaintiff to file an amended complaint on or before July 23, 2018. 3 4 III. DEFENDANT’S MOTION FOR A MORE DEFINITE STATEMENT “If a pleading fails to specify the allegations in a manner that provides sufficient notice, a 5 6 defendant can move for a more definite statement under Rule 12(e) before responding.” 7 Swierkiewicz v. Sorema N.A., 534 U.S. 506, 514 (2002). Defendant argues that Plaintiff should provide a more definite statement as to all three 8 9 causes of action. Mot. to Dismiss 12. The Court agrees. While the Complaint mentions the causes of action by name, it fails to provide Defendant sufficient notice as to the basis for 11 United States District Court Northern District of California 10 Plaintiff’s claims. The Court therefore GRANTS Defendant’s request for a more definite 12 statement. In amending the Complaint, Plaintiff shall clearly plead separate causes of action and 13 indicate which allegations support each cause of action. 14 IV. 15 DEFENDANT’S MOTION FOR A PROTECTIVE ORDER STAYING DISCOVERY A district court has “wide discretion in controlling discovery,” Little v. City of Seattle, 863 16 F.2d 681, 685 (9th Cir. 1988), and that discretion extends to staying discovery upon a showing of 17 18 “good cause,” see Fed. R. Civ. P. 26(c)(1)(A). Good cause for staying discovery may exist when the district court is “‘convinced that the plaintiff will be unable to state a claim for relief.’” 19 Wenger v. Monroe, 282 F.3d 1068, 1077 (9th Cir. 2002) (quoting Wood v. McEwen, 644 F.2d 797, 20 801 (9th Cir. 1981)); see also Tradebay, LLC v. eBay, Inc., 278 F.R.D. 597, 601 (D. Nev. 2011) 21 (“Staying discovery when a court is convinced that the plaintiff will be unable to state a claim for 22 relief furthers the goal of efficiency for the court and the litigants.”). 23 Courts in this district have applied a two-pronged test to determine whether discovery 24 should be stayed pending resolution of a dispositive motion. See, e.g., Gibbs v. Carson, No. C-1325 0860, 2014 WL172187, at *3 (N.D. Cal. Jan. 15, 2014); Hamilton v. Rhoads, No. C 11-0227 26 RMW (PR), 2011 WL 5085504, at *1 (N.D. Cal. Oct. 25, 2011); Pac. Lumber Co. v. Nat’l Union 27 Fire Ins. Co. of Pittsburgh, PA, 220 F.R.D. 349, 351 (N.D. Cal. 2003). First, a pending motion 28 6 1 must be potentially dispositive of the entire case, or at least dispositive on the issue at which 2 discovery is directed. Pac. Lumber Co., 220 F.R.D. at 351 (citation omitted). Second, the court 3 must determine whether the pending motion can be decided absent discovery. Id. at 352 (citation 4 omitted). “If the Court answers these two questions in the affirmative, a protective order may 5 issue. However, if either prong of this test is not established, discovery proceeds.” Id. In 6 applying this two-factor test, the court must take a “preliminary peek” at the merits of the pending 7 dispositive motion to assess whether a stay is warranted. Tradebay, 278 F.R.D. at 602. The Court has considered the merits of Defendant’s motion to dismiss in considering 8 9 whether a limited stay of discovery is warranted in this case. Tradebay, 278 F.R.D. at 602. Defendant’s motion is dispositive because every claim in the complaint is subject to dismissal. 11 United States District Court Northern District of California 10 Second, discovery is unnecessary for resolution of the motion to dismiss, and as set forth above, 12 the Court has dismissed the complaint. The Court therefore concludes that the two-prong test is 13 satisfied. Plaintiff’s arguments do not compel an opposition conclusion. Although Plaintiff filed an 14 15 opposition, he fails to argue that the two-prongs are not satisfied. See Opp’n to Mot. for Stay of 16 Discovery, ECF 57. Instead, Plaintiff merely contends that discovery should continue as 17 scheduled and reiterates some arguments contained in his opposition to Defendant’s motion to 18 dismiss. See generally id. Those arguments do not persuade the Court to change its conclusion 19 that the two-prong test is satisfied. Accordingly, under Ninth Circuit law and the two-pronged approach applied by courts in 20 21 this district, the Court finds that good cause exists to stay discovery until Plaintiff’s allegations are 22 adequately pled. See Fed. R. Civ. P. 26(c)(1)(A). This discovery stay furthers the goal of 23 efficiency for the court and the litigants. The Court therefore STAYS discovery in this case until 24 Defendant files an answer to the operative complaint. 25 V. ORDER 26 For the foregoing reasons, IT IS HEREBY ORDERED that: 27 (1) Defendant’s motion to dismiss the complaint is GRANTED WITH LEAVE TO 28 AMEND. 7 1 (2) Defendant’s motion for a more definite statement is GRANTED. 2 (3) Defendant’s motion for a protective order staying discovery is GRANTED. Discovery 3 4 5 is STAYED until Defendant files an answer to the operative complaint. (4) If Plaintiff seeks to further pursue this action, he must file an amended complaint on or before July 23, 2018. 6 7 IT IS SO ORDERED. 8 9 10 United States District Court Northern District of California 11 Dated: June 21, 2018 ______________________________________ BETH LABSON FREEMAN United States District Judge 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 8