GS Holistic, LLC v. Waleed Smoke Shop Inc ( 2023 )

1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 FOR THE EASTERN DISTRICT OF CALIFORNIA 10 11 GS HOLISTIC, LLC No. 2:22-cv-2086-WBS-KJN 12 Plaintiff, ORDER 13 v. 14 WALEED SMOKE SHOP INC. D/B/A SMOKERS GIFT SHOP, ET AL., 15 Defendants. 16 17 18 Presently pending before the court is plaintiff GS Holistic, LLC’s (“plaintiff’s”) motion 19 for default judgment against defendant Waleed Smoke Shop Inc., d/b/a Smokers Gift Shop, and 20 defendant Waleed Abdul Rashid (“defendants”).1 (ECF No. 14.) To date, defendants have not 21 opposed plaintiff’s motion or otherwise made appearances in this action. 22 For the reasons set forth below, the court DENIES plaintiff’s motion without prejudice. 23 //////// 24 //////// 25 //////// 26 //////// 27 1 This motion is referred to the undersigned pursuant to 28 U.S.C. § 636(b)(1)(B), Federal Rule of 28 Civil Procedure 72, and Local Rule 302(c)(19). 1 I. Relevant Background 2 Plaintiff is a Delaware company with its principal place of business in California. (ECF 3 No. 1 at ¶ 5.) Plaintiff makes and sells smoking products and is the registered owner of three 4 “Stündenglass” trademarks: 5 • U.S. Trademark Registration Number 6,633,884 for the standard character mark 6 “Stündenglass” in association with goods further identified in registration in 7 international class 011. 8 • U.S. Trademark Registration Number 6,174,292 for the design plus words mark “S” 9 and its logo in association with goods further identified in the registration in 10 international class 034. 11 • U.S. Trademark Registration Number 6,174,291 for the standard character mark 12 “Stündenglass” in association with goods further identified in registration in 13 international class 034. 14 (Id. at ¶¶ 9, 11.) 15 Plaintiff alleges that on October 20, 2022, defendants sold a glass infuser affixed with a 16 Stündenglass Mark to plaintiff’s investigator. (Id. at ¶¶ 29-30.) “Images and/or the physical unit” 17 of the glass infuser “were inspected by [plaintiff’s] agent to determine its authenticity.” (Id. at ¶ 18 31.) Upon inspection, plaintiff determined the glass infuser “was a Counterfeit Good with an 19 Infringing Mark affixed to it.” (Id.) The complaint states “[t]he marks … are identical with, or 20 substantially indistinguishable from, the Stündenglass Trademarks.” (Id. at ¶ 28.) The complaint 21 does not state which of the three Stündenglass Marks was affixed to the glass diffuser or allege 22 any facts showing that the marks on defendants’ product were identical or substantially 23 indistinguishable from the trademark. 24 Plaintiff filed this action on November 17, 2022, presenting claims of trademark 25 infringement (15 U.S.C. § 1114), and false advertising (15 U.S.C. § 1125(a)). (Id. at 10-13.) 26 Plaintiff served defendants on February 8, 2023. (ECF Nos. 4, 5.) Defendants failed to answer 27 the complaint, after which the clerk entered default against defendants. (ECF No. 13.) Plaintiff 28 moved for default judgment on April 10, 2023, seeking an award of $150,000.00 in statutory 1 damages ($50,000 per Mark), an injunction, and costs of $921.73. (ECF No. 14 at 10.) 2 Defendants have not appeared or filed any response. 3 II. Legal Standard – Default Judgment 4 Pursuant to Federal Rule of Civil Procedure 55, default may be entered against a party 5 against whom a judgment for affirmative relief is sought who fails to plead or otherwise defend 6 against the action. See Fed. R. Civ. P. 55(a). However, “[a] defendant's default does not 7 automatically entitle the plaintiff to a court-ordered judgment.” PepsiCo, Inc. v. Cal. Sec. Cans, 8 238 F.Supp.2d 1172, 1174 (C.D. Cal. 2002) (citing Draper v. Coombs, 792 F.2d 915, 924-25 (9th 9 Cir. 1986)); see Fed. R. Civ. P. 55(b) (governing the entry of default judgments). Instead, the 10 decision to grant or deny an application for default judgment lies within the district court's sound 11 discretion. Aldabe v. Aldabe, 616 F.2d 1089, 1092 (9th Cir. 1980). 12 In making this determination, the court may consider the following factors: (1) the 13 possibility of prejudice to the plaintiff; (2) the merits of plaintiff's substantive claim; (3) the 14 sufficiency of the complaint; (4) the sum of money at stake in the action; (5) the possibility of a 15 dispute concerning material facts; (6) whether the default was due to excusable neglect; and (7) 16 the strong policy underlying the Federal Rules of Civil Procedure favoring decisions on the 17 merits. Eitel v. McCool, 782 F.2d 1470, 1471-72 (9th Cir. 1986). Default judgments are 18 ordinarily disfavored. Id. at 1472. 19 As a general rule, once default is entered, well-pleaded factual allegations in the operative 20 complaint are taken as true, except for those allegations relating to damages. TeleVideo Sys., Inc. 21 v. Heidenthal, 826 F.2d 915, 917-18 (9th Cir. 1987) (per curiam) (citing Geddes v. United Fin. 22 Group, 559 F.2d 557, 560 (9th Cir. 1977) (per curiam)); see also Fair Housing of Marin v. 23 Combs, 285 F.3d 899, 906 (9th Cir. 2002). Although well-pleaded allegations in the complaint 24 are admitted by a defendant's failure to respond, “necessary facts not contained in the pleadings, 25 and claims which are legally insufficient, are not established by default.” Cripps v. Life Ins. Co. 26 of N. Am., 980 F.2d 1261, 1267 (9th Cir. 1992) (citing Danning v. Lavine, 572 F.2d 1386, 1388 27 (9th Cir. 1978)); accord DIRECTV, Inc. v. Huynh, 503 F.3d 847, 854 (9th Cir. 2007) (“[A] 28 defendant is not held to admit facts that are not well-pleaded or to admit conclusions of law”) 1 (citation and quotation marks omitted); Abney v. Alameida, 334 F.Supp.2d 1221, 1235 (S.D. Cal. 2 2004) (“[A] default judgment may not be entered on a legally insufficient claim.”). 3 III. Analysis 4 The court denies plaintiff’s motion for default judgement because plaintiff has not 5 satisfied the second and third Eitel factors; i.e., the merits of plaintiff’s substantive claim and the 6 sufficiency of the complaint. See Eitel, 782 F.2d at 1471-72. See also GS Holistic, LLC v. 7 Raven Smoke Shop, Inc., No. 22-7199, 2023 WL 5504964, at *5 (C.D. Cal. July 10, 2023) 8 (denying motion for default judgment based on inadequate pleadings); Abney, 334 F. Supp. 2d at 9 1235 (“[A] default judgment may not be entered on a legally insufficient claim.”) 10 Plaintiff alleges trademark infringement and false designation of origin. (ECF No. 1 at 11 10-13.) To state either claim, plaintiff must adequately allege 1) the existence of a valid 12 trademark, 2) the defendant used the mark, and 3) the defendant’s use of the mark is likely to 13 cause confusion. Applied Info. Scis. Corp. v. eBay, Inc., 511 F.3d 966, 969 (9th Cir. 2007). See 14 Jada Toys, Inc. v. Mattel, Inc., 518 F.3d 628, 632 (9th Cir. 2008) (using the same likelihood of 15 confusion test to analyze trademark infringement and false designation of origin). 16 A. Existence of a Valid Trademark 17 Registration of a mark “on the Principal Register in the Patent and Trademark Office 18 constitutes prima facie evidence of the validity of the registered mark and of [the registrant's] 19 exclusive right to use the mark on the goods and services specified in the registration.” Applied 20 Info., 511 F.3d at 970 (internal citation omitted). Here, plaintiff has sufficiently alleged that he 21 has three valid, protectable trademarks. (See ECF No. 1 at ¶ 11.) Because the complaint 22 sufficiently alleges that three trademarks are federally registered to plaintiff, the first prong of 23 trademark infringement is adequately plead. 24 B. Defendants’ Use of the Mark. 25 Plaintiff’s complaint lacks sufficient clarity regarding defendants’ use of the trademark. 26 The complaint alleges that defendants sold a glass infuser affixed with “a Stündenglass Mark”. 27 (Id. at ¶ 30.) However, plaintiff’s motion for default judgment alleges that the glass diffuser 28 contained “three (3) fake Stündenglass Marks.” (ECF No. 14 at 8.) Based on these two 1 statements, it is not clear to the court whether each of the Stüdenglass Marks were affixed, or if 2 one trademark was affixed multiple times. This discrepancy causes the court to doubt the 3 strength of the merits of plaintiff’s substantive claims. See Eitel, 782 F.2d at 1471. 4 C. Likelihood of Confusion 5 Plaintiff has not adequately shown the third element, likelihood of confusion. Courts 6 determine likelihood of confusion using the following Sleekcraft factors: (1) strength of the 7 mark; (2) proximity of the goods; (3) similarity of the marks; (4) evidence of actual confusion; (5) 8 marketing channels used; (6) type of goods and degree of care consumers are likely to exercise in 9 purchasing them; (7) intent of the defendant in selecting the mark; and (8) likelihood that the 10 parties will expand their product lines. See AMF Incorporated v. Sleekcraft Boats, 599 F.2d 341, 11 348–54 (9th Cir. 1979). Courts need not engage in the Sleekcraft analysis if the plaintiff alleges 12 the use of a counterfeit mark. See Louis Vuitton Malletier, S.A. v. Akanoc Sols., Inc., 658 F.3d 13 936, 945 (9th Cir. 2011) (“The late comer who deliberately copies the dress of his competitors 14 already in the field ... raises a presumption that customers will be deceived.” (citation omitted)). 15 Here, the complaint does not allege sufficient facts from which the court can infer a 16 likelihood of confusion under the Sleekcraft factors. While plaintiff’s motion makes passing 17 reference to the Sleekcraft factors, plaintiff makes little to no effort to apply the applicable legal 18 standard to the sparse facts of this case. (ECF No. 14 at 8, “[d]efendants used images and names 19 identical to or confusingly similar to the Stündenglass Marks, to confuse customers and aid in the 20 promotion and sales of Counterfeit Goods under the Infringing Marks[;] [d]efendants’ use of the 21 Stündenglass Marks includes importing, advertising, displaying, distributing, selling, and/or 22 offering for sale unauthorized copies of Stündenglass branded products” and “[d]efendants’ 23 offering to sell, selling, importing and encouraging others to import Counterfeit Goods bearing 24 the Infringing Marks in this manner was and is likely to cause confusion or to cause mistake 25 and/or deceive consumers who purchase the Counterfeit Goods.”) 26 The complaint also fails to adequately allege that defendants sold a counterfeit product. 27 To plead a counterfeiting claim, a plaintiff must establish (1) a non-genuine mark identical to or 28 substantially indistinguishable from the plaintiff's registered, genuine mark, where (2) the 1 plaintiff's genuine mark was registered for use on the same goods to which the infringer applied 2 the non-genuine mark. Louis Vuitton, 658 F.3d at 946. The complaint states the “unauthorized 3 use of counterfeit marks of the registered Stündenglass Trademarks ... is likely to cause confusion 4 or mistake in the minds of the public.” (ECF No. 1 at ¶ 56.) But this is a conclusory statement 5 and not a factual allegation, and the court need not accept it is true. Ashcroft v. Iqbal, 129 S. Ct. 6 1937, 1949-50 (2009) (“Threadbare recitals of the elements of a cause of action, supported by 7 mere conclusory statements, do not suffice.”) Plaintiff’s complaint fails to identify the specific 8 genuine mark used by defendants, the similarities of the marks, nor provides any pictures or other 9 evidence of the two marks, and thus lacks sufficient facts from which the court can infer 10 counterfeiting. Therefore, plaintiff has not adequately plead the third element, likelihood of 11 confusion, and has not adequately alleged trademark infringement or false designation of origin 12 claims. See Applied Info. Scis. Corp., 511 F.3d at 969. 13 Accordingly, the court finds that plaintiff’s allegations are insufficient for the purposes of 14 default judgment. Bailey v. HVSN Enters. Inc., No. 20-01744, 2021 WL 794501, at *2 (C.D. 15 Cal. Mar. 2, 2021) (“[N]ecessary facts not contained in the pleadings, and claims which are 16 legally insufficient, are not established by default”) (cleaned up). See also GS Holistic, LLC v. 17 Alien Smoke Shop, 2023 WL 3402589, at *1 (C.D. Cal. Mar. 17, 2023) (“[T]he court has 18 discretion to require some proof of the facts that must be established in order to determine 19 liability.”) 20 ORDER 21 Accordingly, it is HEREBY ORDERED that: 22 1. The motion for default judgment, ECF No. 14, is DENIED without prejudice. 23 2. The default previously entered against defendants is hereby VACATED. (ECF 24 No. 13). 25 3. If plaintiff chooses to amend the complaint to address the deficiencies 26 identified herein, any amended complaint must be filed and served according 27 to Rule 4 and within twenty-eight (28) days. 28 //// ] 4. If plaintiff timely files an amended complaint, defendants’ response is due no 2 later than twenty-one (21) days from the date of the filing. 3 | Dated: December 22, 2023 ' Foci) Aharon 5 KENDALL J. NE ascho.2086 UNITED STATES MAGISTRATE JUDGE 6 7 8 9 10 1] 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28