Sinco Technologies Pte Ltd. v. Sinco Electronics (Dongguan) Co. Ltd. ( 2020 )

1 2 3 4 UNITED STATES DISTRICT COURT 5 NORTHERN DISTRICT OF CALIFORNIA 6 7 SINCO TECHNOLOGIES PTE LTD., Case No. 17-cv-05517-EMC 8 Plaintiff, ORDER DENYING PLAINTIFF AND 9 v. DEFENDANTS’ MOTIONS FOR PARTIAL SUMMARY JUDGMENT 10 SINCO ELECTRONICS (DONGGUAN) CO. LTD., et al., Docket Nos. 248, 299, 319 11 Defendants. 12 13 14 Plaintiff SinCo Technologies Pte, Ltd. (“SinCo”) filed suit against Defendants SinCo 15 Electronics (Dongguan) Co., Ltd. (“SinCo Elec”); XingKe Electronics (Dongguan) Co., Ltd. 16 (“XingKe”); Mui Liang Tjoa (“Mr. Tjoa”); Ng Cher Yong (“Mr. Ng”); and Liew Yew Soon (“Mr. 17 Liew”) (collectively, “Defendants”)1 for trademark infringement, false designation of origin, false 18 advertising, trademark dilution, common law trademark infringement and unfair competition, and 19 state statutory unfair competition. See Docket No. 23 (“SAC”). 20 All parties, with the exception of Mr. Tjoa, have moved this Court for partial summary 21 judgment in their favor. See Docket Nos. 248, 299, 319. As explained in further detail below, 22 because there are disputed issues of material fact regarding all three pending motions, this Court 23 DENIES issuing a summary-judgment order. 24 25 26 27 1 XingKe is the same company as SinCo Elec; “XingKe” is simply the phonetic equivalent of 1 I. LEGAL STANDARD 2 Federal Rule of Civil Procedure 56 provides that a “court shall grant summary judgment 3 [to a moving party] if the movant shows that there is no genuine dispute as to any material fact and 4 the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a). An issue of fact is 5 genuine only if there is sufficient evidence for a reasonable jury to find for the nonmoving party. 6 See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248–49 (1986). “The mere existence of a 7 scintilla of evidence . . . will be insufficient; there must be evidence on which the jury could 8 reasonably find for the [nonmoving party].” Id. at 252. At the summary judgment stage, evidence 9 must be viewed in the light most favorable to the nonmoving party and all justifiable inferences 10 are to be drawn in the nonmovant’s favor. See id. at 255.2 11 II. SINCO’S MOTION FOR PARTIAL SUMMARY JUDGMENT 12 SinCo moves for summary judgment on the following claims: (1) trademark infringement; 13 (2) common law trademark infringement and unfair competition; and (3) false designation of 14 origin. Docket No. 248 (“SinCo Mot.”) at 10–11. SinCo argues that “Defendants’ lawful use of 15 the ‘SinCo’ marks ended when they used the marks for their own ends in competition with SinCo, 16 which is acknowledged by Defendants’ conduct in concealing their use of SinCo’s employees in 17 using the marks in the U.S. against SinCo’s interest and by filing multiple trademark applications 18 on matter[s] previously rejected by the PTO.” Id. at 12. SinCo argues: (1) it meets the Sleekcraft 19 factors of trademark infringement articulated in AMF Inc. v. Sleekcraft Boats, 599 F.2d 341, 348– 20 49 (9th Cir. 1979), abrogated by Mattel, Inc. v. Walking Mountain Prods., 353 F.3d 792 (9th Cir. 21 2003); and (2) because infringement exists, the safe-distance rule applies with regard to XingKe’s 22 use of the trademark “XINGKE.” SinCo Mot. at 23. 23 However, SinCo concedes that it provided XingKe with an oral agreement amounting to a 24 25 2 Evidence may be presented in a form that is not admissible at trial so long as it could ultimately be capable of being put in admissible form. See Fed. R. Civ. P. 56(c)(2) (providing that “[a] party 26 may object that the material cited to support or dispute a fact cannot be presented in a form that would be admissible in evidence”). See, e.g., Fonseca v. Sysco Food Servs. of Ariz., Inc., 374 F.3d 27 840, 846 (9th Cir. 2004) (stating that “[e]ven the declarations that do contain hearsay are 1 geographically-limited license to use the trademark. Id. at 3. This oral license was never reduced 2 to a written contract. There are genuine issues of disputed material fact including: (1) the nature 3 and restrictions of the oral agreement; and (2) representations of any restrictions or agreements in 4 2016 when SinCo Elec was sold to Mr. Tjoa, the CEO of XingKe. Moreover, XingKe opposes 5 summary judgment on the grounds that disputed material facts exist as to whether a naked license 6 issued based on SinCo’s history of permitting use of its marks without restriction, which includes 7 the dispute of whether Mr. Ng and Mr. Liew were hired by SinCo and embedded at XingKe 8 factories in China by SinCo to police the trademarks. As discussed below, there are disputed 9 issues of fact as to that assertion. 10 The Court DENIES SinCo’s motion for partial summary judgment. 11 III. XINGKE’S MOTION FOR PARTIAL SUMMARY JUDGMENT 12 XingKe’s cross-motion is predicated on affirmative defenses. First, it argues that SinCo 13 gave it a naked license to use the trademarks. Second, XingKe argues that SinCo is equitably 14 estopped from enforcing the marks based on its conduct throughout the past decade. 15 A. Naked License 16 While it is undisputed that XingKe had a license to use the trademark, XingKe argues that 17 SinCo had a duty to control the quality of its trademark lest it be deemed to have abandoned the 18 mark. “It is well-established that ‘[a] trademark owner may grant a license and remain protected 19 provided quality control of the goods and services sold under the trademark by the licensee is 20 maintained.’” Barcamerica, 289 F.3d at 595–96 (quoting Moore Bus. Forms, Inc. v. Ryu, 960 21 F.2d 486, 489 (5th Cir.1992)). However, “where the licensor fails to exercise adequate quality 22 control over the licensee, ‘a court may find that the trademark owner has abandoned the 23 trademark, in which case the owner would be estopped from asserting rights to the trademark.’” 24 FreecycleSunnyvale v. Freecycle Network, 626 F.3d 509, 516 (9th Cir. 2010) (quoting Moore, 690 25 F.2d at 489). To determine whether a naked license exists, the Ninth Circuit looks to whether (1) 26 the license contained express contractual control over the licensee’s operations, (2) the licensor 27 had actual control over the licensee’s quality control measures, and (3) the licensor was 1 626 F.3d at 512. 2 XingKe cites to two Ninth Circuit cases that analyze the naked-license affirmative defense 3 to trademark infringement: (1) FreecycleSunnyvale v. Freecycle Network, 626 F.3d 509 (9th Cir. 4 2010); and (2) Barcamerica Int'l USA Tr. v. Tyfield Importers, Inc., 289 F.3d 589 (9th Cir. 2002). 5 In response, SinCo relies on a Hokto Kinoko Co. v. Concord Farms, Inc., 738 F.3d 1085 (9th Cir. 6 2013) for its argument that a naked license did not issue. All these cases are distinguishable 7 because of the unique, long-standing relationship SinCo and XingKe had throughout the past 8 decade. 9 Both FreecycleSunnyvale and Barcamerica are distinguishable to the case at bar because 10 of XingKe’s allegation that it and SinCo participated in a joint venture, which resulted in a long 11 and close working relationship in which they shared profits and ownership interest in the joint 12 venture. SinCo presumably received the goods manufactured by XingKe and could see and 13 monitor the quality.3 It is undisputed that a significant majority of XingKe’s business consisted of 14 manufacturing products for SinCo’s customers. This relationship is different than the relationship 15 between the licensor and licensee in Barcamerica, where the only connection was the fact that the 16 parties had a license. See Barcamerica, 289 F.3d at 592. In FreecycleSunnyvale, there was no 17 relationship at all between the licensor and licensee—not even a commercial contract. See 18 FreecycleSunnyvale, 626 F.3d at 519. 19 On the other hand, SinCo’s reliance on Hokto Kinoko Co. v. Concord Farms, Inc., 738 20 F.3d 1085 (9th Cir. 2013) is likewise misplaced. Hokto is distinguishable because the Ninth 21 Circuit relied on a close working relationship, and there was sufficient evidence of actual quality 22 control. Id. at 1098. Hokto involved two Japanese companies that were directly related—i.e., one 23 was the parent company of the other. Id. at 1090. Because of this close working relationship and 24 evidence of the parent company’s involvement with developing its subsidiary’s factory for 25 quality-control purposes, the Ninth Circuit concluded that the parent company reasonably relied 26 on its subsidiary’s efforts to control the quality of the products. Id. 1098. 27 1 Genuine issues of disputed material fact preclude this Court from issuing summary 2 judgment regarding XingKe’s naked-license affirmative defense. For instance, it is disputed 3 whether Section 5 of the “SINCO TECHNOLOGIES PTE LTD PURCHASE AGREEMENT & 4 PURCHASE ORDER TERMS AND CONDITIONS” provides SinCo with a contractual right to 5 inspect and enforce quality. Whether SinCo actually controlled the quality of XingKe’s products 6 is contested. Likewise, it is up to the jury to decide if SinCo’s reliance on XingKe’s quality 7 control was reasonable. See Taco Cabana Int'l, Inc. v. Two Pesos, Inc., 932 F.2d 1113, 1121 (5th 8 Cir. 1991), aff'd sub nom. Two Pesos, Inc. v. Taco Cabana, Inc., 505 U.S. 763 (1992) (“While the 9 parties dispute the actual level of quality control, the jury's finding—that [the licensor] exercises 10 adequate supervision and control over [the licensee] to ensure that the quality of [the licensee’s] 11 goods and services are not inferior to [licensor’s]—enjoys adequate record support.”). As 12 discussed below, the role of (and who employed) SinCo’s alleged embedded employees (Mr. Ng 13 and Mr. Liew) is also disputed. 14 The Court DENIES XingKe’s motion for summary judgement on its naked-license 15 defense. 16 B. Equitable Estoppel 17 XingKe’s second affirmative defense for equitable estoppel also involves factual disputes. 18 In order to demonstrate the affirmative defense of equitable estoppel, the proponent must 19 demonstrate three elements: 20 [1] The actor, who usually must have knowledge of the true facts, communicates something in a misleading way, either by words, 21 conduct or silence. [2] The other relies upon that communication. [3] And the other would be harmed materially if the actor is later 22 permitted to assert any claim inconsistent with his earlier conduct. 23 A.C. Aukerman Co. v. R.L. Chaides Const. Co., 960 F.2d 1020, 1041 (Fed. Cir. 1992), abrogated 24 by SCA Hygiene Prod. Aktiebolag v. First Quality Baby Prod., LLC, 137 S. Ct. 954 (2017). A 25 jury must determine whether SinCo had knowledge (whether through Mr. Ng and Mr. Liew as 26 embedded employees or via-a-vis Mr. Lim as the then-shareholder of SinCo Elec) of XingKe’s 27 independent usage of the mark in the United States market. It is also for the jury to decide 1 group” to use certain new logos, fonts, colors, etc.—was a separate and new contract that 2 superseded the oral license, which, according to XingKe led it to believe it could use the mark 3 without restrictions. 4 The Court DENIES XingKe’s motion for summary judgment regarding its equitable 5 estoppel affirmative defense. 6 IV. MR. NG AND MR. LIEW’S MOTION FOR PARTIAL SUMMARY JUDGMENT 7 Defendants Mr. Ng and Mr. Liew (the “Individual Defendants”) separately move for 8 summary judgment on the grounds that they cannot be individually liable for trademark 9 infringement in their roles as engineers. Docket No. 319 (“Ng’s Mot.”) at 5. SinCo appears to 10 argues two theories for liability: (1) if Individual Defendants were employees of SinCo, they are 11 liable for trademark infringement for traveling to the United States and convincing SinCo’s 12 customers to buy from XingKe (Docket No. 328 [“SinCo’s Opp. to Ng’s Mot.”] at 17); or (2) if 13 Individual Defendants were employees of XingKe, then they are liable as officers or directors. Id. 14 at 18. Individual Defendants respond that (1) if the claim is regarding poaching customers, then 15 that is the trade-secret claim being litigated in a parallel state court action; (2) they are not 16 directors or officers within the meaning of a company’s Board of Directors for the purposes of 17 personal liability; and (3) they were at all times acting under the orders of their supervisors 18 (whether XingKe supervisors or SinCo supervisors, depending on the theory pursued by SinCo). 19 Docket No. 329 (“Reply ISO Ng’s Mot.”) at 5–6. 20 As discussed above, whether Mr. Ng and Mr. Liew were employees of SinCo or XingKe— 21 or jointly employed—is a contested question of fact. Moreover, the parties have not squarely 22 briefed or addressed what law applies regarding the Individual Defendants’ employment status. 23 See Docket No. 332 (“February 6, 2020 Joint Case Management Conference”) at 13 (Defendants 24 represent that legal issues exist as to “whether the law of Singapore, China or the US governs” 25 employee status.). SinCo’s opposition relies on the California Workers’ Compensation Code and 26 the Labor Code’s definition of an employee. However, it has not demonstrated why California 27 law applies to define the relationship between these Asia-based companies and their agents. 1 This Court will not hear a motion for summary judgment from Mr. Tjoa. This matter is set 2 || to proceed to trial on June 22, 2020. The parties are strongly urged to settle this case.* 3 This order disposes of Docket Nos. 248, 299, and 319. 4 5 IT IS SO ORDERED. 6 7 Dated: February 25, 2020 8 Lx 9 hho ED M. CHEN 10 United States District Judge 11 12 13 15 16 = 17 Z 18 19 20 21 22 23 24 25 26 || 4 Defense counsel raised the issue of their clients’ present inability to travel from Mainland China 07 to the United States because of the temporary, emergency travel ban related to the novel coronavirus. However, there is no renewed motion to continue trial on this ground at this time. 28 Any future request to continue the trial date must be based on cause with adequate evidentiary support.