Amarte USA Holdings, Inc. v. Kendo Holdings Inc. ( 2023 )

1 2 3 4 5 IN THE UNITED STATES DISTRICT COURT 6 FOR THE NORTHERN DISTRICT OF CALIFORNIA 7 8 AMARTE USA HOLDINGS, INC., Case No. 22-cv-08958-CRB 9 Plaintiff, ORDER RE: SEALING AND 10 v. MOTIONS TO AMEND 11 KENDO HOLDINGS INC., et al., 12 Defendants. 13 Plaintiff Amarte USA Holdings, Inc. (“Amarte”) brings this action for trademark 14 infringement against Kendo Holdings, Inc. (“Kendo”), Mark Jacobs International LLC, 15 Sephora USA, Inc., and The Neiman Marcus Group LLC (together, “Defendants”), for 16 selling the Marc Jacobs “EYE-CONIC” eyeshadow palette, allegedly infringing on 17 Amarte’s “EYECONIC” trademark for its eye-cream. See Compl. (dkt. 1). Before the 18 Court are three motions: Kendo’s Motion to Consider Whether Amarte’s Material Should 19 Be Sealed (dkt. 80), Amarte’s Third Motion for Leave to File a First Amended Complaint 20 (“Amarte’s Motion to Amend”) (dkt. 73), and Kendo’s Motion for Leave to Amend 21 Answer to Add Counterclaim (“Kendo’s Motion to Amend”) (dkt. 81). 22 The Court finds that these motions are suitable for resolution without oral argument 23 or further briefing, pursuant to Local Rule 7-1(b). The Court ORDERS that Kendo unseal 24 the sealed material at issue, DENIES Amarte’s Motion, and GRANTS Kendo’s Motion. 25 I. BACKGROUND 26 Amarte manufactures, advertises, markets, promotes, distributes, and sells high-end 27 cosmetic and skin care products bearing the mark EYECONIC. Compl. ¶¶ 15, 16, 17. 1 Amarte asserts that it has common law trademark rights and holds a registered trademark 2 in the EYECONIC mark. Id. ¶¶ 15, 18, 19. The trademark registration for EYECONIC is 3 as follows: “Class 03: eye cosmetics; eye creams,” Id. ¶ 19. 4 Defendants allegedly use or have used an almost identical mark, EYE-CONIC, to 5 advertise, market, promote, distribute, and sell their eye makeup palettes. Id. ¶¶ 18, 19. 6 According to Amarte, Defendants’ use of the EYE-CONIC mark is likely to cause 7 customer confusion about the source, association, affiliation, and sponsorship of 8 Defendants’ makeup palettes, or to deceive customers into believing that Defendants’ 9 makeup palettes originate from the same source as, or are otherwise affiliated with, 10 Amarte’s products. Id. ¶¶ 33, 34. Amarte contends that this use constitutes federal and 11 California common law trademark infringement of Amarte’s rights in its EYECONIC 12 mark. Id. ¶¶ 20–36; 71–74. In addition, Amarte alleges that Defendants’ willful selection 13 of the EYE-CONIC mark constitutes federal and California statutory and common law 14 unfair competition. Id. ¶¶ 55–69, 75–80. 15 Defendants claim that their use of the EYE-CONIC mark in connection with eye 16 makeup palettes is not likely to cause consumer confusion with Amarte’s EYECONIC 17 mark. Kendo Answer to Compl. (dkt. 34) ¶¶ 23–24. Specifically, Defendants argue that 18 its eyeshadow product, in conjunction with the well-known MARC JACOBS house mark, 19 is distinct from Amarte’s EYECONIC eye cream. Id. Defendants also contend that 20 Plaintiff’s claims are barred by laches, acquiescence, estoppel, mootness, and the statute of 21 limitations because the accused product was first offered for sale in 2017 and was 22 discontinued in 2021. Id. at 10–15. 23 II. PROCEDURAL POSTURE 24 There are three motions at issue here. (1) the administrative motion to seal; (2) 25 Amarte’s Motion to Amend, in which Amarte seeks to add co-defendants and amend the 26 scheduling order; and (3) Kendo’s Motion to Amend, in which Kendo seeks to amend its 27 answer to add a counterclaim. 1 Kendo’s Motion to Amend and an attached exhibit. See Sealing Mot.; Stipulated 2 Protective Order (dkt. 51). Kendo seeks to unseal all the redacted portions, and Amarte 3 seeks to seal portions of the documents that it claims contain trade secrets. See Kendo’s 4 Resp. to Sealing Mot. (dkt. 85); Amarte’s Resp. to Sealing Mot. (dkt. 84) 5 On the motions to amend: the deadline to amend the complaint and answer expired 6 on July 15, 2023, pursuant to the scheduling order. See Scheduling Order at 6. Before 7 July 15, Amarte twice moved to amend its complaint to add co-defendants. See Amarte’s 8 First Mot. to Amend Complaint (dkt. 52); Amarte’s Second Mot. to Amend Complaint 9 (dkt. 66). The Court denied both of Amarte’s motions without prejudice on futility 10 grounds on August 21, 2023, after the deadline passed. See Order Denying Amarte’s Mot. 11 to Amend (dkt. 72). Amarte’s motion is therefore its third attempt to amend its complaint 12 to add co-defendants. See Amarte’s Mot. Kendo’s motion is its first to amend its answer. 13 See Kendo’s Mot. 14 III. ADMINSTRATIVE MOTION TO SEAL 15 Kendo moves to consider whether portions of Amarte’s material in Kendo’s Motion 16 to Amend and portions of Exhibit 2 attached to the Declaration of Connor T. Gants (dkt. 17 81-1) should be sealed.1 See Sealing Mot.; Kendo’s Mot. The specified materials were 18 provisionally redacted pursuant to the parties’ Stipulated Order. See Amarte’s Resp. to 19 Sealing Mot. (citing Stipulated Protective Order). 20 Amarte seeks to seal portions of Kendo’s Motion to Amend and portions of Exhibit 21 2 attached to the Declaration of Connor T. Gants on the grounds that the information 22 contains trade secrets, marketing strategies, and discussion of business strategy. Amarte’s 23 Resp. to Sealing Mot. at 3. Kendo argues that Amarte failed to carry its burden to establish 24 that any of the portions should be sealed. See Kendo’s Resp. to Sealing Mot. Because 25 Kendo is correct that Amarte does not meet its burden, the Court ORDERS Kendo to 26 27 1 Exhibit 2 is composed of excerpts from Amarte’s deposition. The excerpts are of 1 unseal Kendo’s Motion to Amend and Exhibit 2 in their entirety within 14 days of this 2 Order. 3 A. Legal Standard 4 Courts recognize that the public has a right to access judicial records and 5 documents. Nixon v. Warner Commc’ns, Inc., 435 U.S. 589, 597 (1978) (footnote 6 omitted). “The presumption of access is ‘based on the need for federal courts, although 7 independent—indeed, particularly because they are independent—to have a measure of 8 accountability and for the public to have confidence in the administration of justice.’” Ctr. 9 for Auto Safety v. Chrysler Grp., LLC, 809 F.3d 1092, 1096 (9th Cir. 2016) (quoting 10 United States v. Amodeo, 71 F.3d 1044, 1048 (2d Cir. 1995)). 11 Generally, a court may seal records when it finds “a compelling reason and 12 articulates a factual basis for its ruling, without relying on hypothesis or conjecture.” Id. at 13 1096–97. The “compelling reasons” standard applies when a motion is “dispositive,” or 14 “more than tangentially related to the merits of a case.” Id. at 1098–1102. Although there 15 is strong preference for public access to judicial records, the Ninth Circuit created an 16 exception for sealed materials attached to a discovery motion unrelated to the merits of the 17 case. Id. at 1097. Under this exception, the party seeking sealing of such materials need 18 only meet the “good cause” standard, which can protect the party or person from 19 “annoyance, embarrassment, oppression, or undue burden or expense.” Id. Here, the 20 parties agree that the compelling reasons standard, not the good cause standard, applies to 21 the provisionally sealed portions. See Amarte’s Resp. to Sealing Mot. at 2; Kendo’s Resp. 22 to Sealing Mot. at 2. 23 The compelling reasons standard requires the moving party to identify “compelling 24 reasons supported by specific factual findings . . . that outweigh the general history of 25 access and the public policies favoring disclosure.” Kamakana v. City & Cty. of Honolulu, 26 447 F.3d 1172, 1178–79 (9th Cir. 2006) (internal quotation marks and citation omitted). 27 The court must then weigh “‘relevant factors,’ base its decision ‘on a compelling reason,’ 1 conjecture.’” Pintos v. Pac. Creditors Ass’n, 605 F.3d 665, 679 (9th Cir. 2010) (quoting 2 Hagestad v. Tragesser, 49 F.3d 1430, 1434 (9th Cir. 1995)). For instance, compelling 3 reasons may exist when a court document may “become a vehicle for improper purposes, 4 such as the use of records to gratify private spite, promote public scandal, circulate libelous 5 statements, or release trade secrets.” Kamakana, 447 F.3d at 1179 (internal quotation 6 marks omitted). “A trade secret is a process or device for continuous use in the operation 7 of business.” Clark v. Bunker, 453 F.2d 1006, 1009 (9th Cir. 1972) (quoting Restatement 8 of Torts, § 757, Comment b, p. 5). This may “consist of any formula, pattern, device or 9 compilation of information which is used in one’s business, and gives him an opportunity 10 to obtain an advantage over competitors who do not know or use it.” Id. at 1009–10. 11 If publicly disclosing that information would harm a designating party’s 12 competitive standing and divulge terms of confidential contracts or contract negotiations, 13 compelling reasons may exist to seal that information. See FTC v. Qualcomm Inc., No. 14 17-cv-00220-LHK, 2019 WL 95922, at *3 (N.D. Cal. Jan. 3, 2019). However, the fact that 15 documents are subject to a protective order, or labeled as confidential under a protective 16 order, is not a compelling reason justifying continued sealing of the document if attached 17 to a dispositive motion. Foltz v. State Farm Mut. Auto. Ins. Co., 331 F.3d 1122, 1136 (9th 18 Cir. 2003); see also Est. of Nunez by & through Nunez v. Cnty. of San Diego, 386 F. 19 Supp. 3d 1334 (S.D. Cal. 2019) (“[A] party does not satisfy the compelling reasons 20 standard to justify sealing documents merely by labeling them as ‘CONFIDENTIAL.’”). 21 Additionally, Local Civil Rule 79-5 governs motions to file documents under seal in 22 this District. The rule permits sealing only where the party “establishes that the document, 23 or portions thereof, are privileged, protectable as a trade secret or otherwise entitled to 24 protection under the law.” Civil L.R. 79-5(b). “The request must be narrowly tailored to 25 seek sealing only of sealable material.” Id. If the moving party “seek[s] to file under seal 26 a document designated as confidential by the opposing party or a non-party pursuant to a 27 protective order, or a document containing information so designated by an opposing party 1 79-5(d)(1)(A) establishing that all of the designated material is sealable.” Civil L.R. 79- 2 5(e). 3 B. Discussion 4 Amarte does not seek to seal all the materials provisionally redacted pursuant to the 5 parties’ Stipulated Order. See Amarte’s Resp. to Sealing Mot. at 3–4. Rather, Amarte 6 seeks only to seal the five excerpts indicated in Section B.2, which it contends contain 7 trade secrets. 8 1. Portions Not In Dispute 9 Amarte does not designate as confidential the portions listed in the chart below. 10 Amarte’s Resp. to Sealing Mot. at 3–4. As such, the Court ORDERS Kendo to unseal 11 the following portions of the Motion and Exhibit 2. Document Portions filed under seal 12 Motion Page 2, portions of line 16 13 Motion Page 7, portions of line 17–18 Motion Page 9, portions of line 2 14 Motion Page 9, portions of lines 17–24 15 Motion Page 10, portions of lines 1–6 Motion Page 10, portions of lines 10–11 16 Motion Page 11, portions of lines 20–22 17 Motion Page 12, portions of lines 12–13 Motion Page 15, portions of lines 1–4 18 Motion Page 16, portions of line 25 19 Motion Page 17, portions of lines 6–7 Motion Page 18, portions of lines 24–27 20 Motion Page 19, portions of lines 1–3 Declaration, Page 1 in its entirety; Page 2 in its entirety; Page 27 in its entirety; 21 Ex. 2 Page 28 lines 1–23; Page 50 in its entirety; Page 51 lines 1–6 and lines 22 12–25; Page 56 lines 1 and lines 10-13; Page 57 lines 3–25; Page 173 in its entirety 23 2. Portions in Dispute 24 Amarte requests that the Court seal the portions indicated in the chart below. 25 Amarte’s Resp. to Sealing Mot. at 4. Amarte argues that every portion contains trade 26 secrets in the form of “highly sensitive, confidential, non-public information related to 27 Amarte’s product formulation marketing strategies, internal strategic business decisions, 1 and discussions with counsel.” Id. at 5. Kendo argues that no portions should be 2 sealed because Amarte fails to fulfill its burden under the compelling reasons standard. 3 See Kendo’s Resp. to Sealing Mot. Document Portions to Text Ruling 4 be filed 5 under Seal 1 Motion Page 10, “When asked about the USPTO Manual’s Deny 6 portions of rule that ‘semi colons should be generally 7 lines 7–9 used to separate distinct categories of goods,’ Dr. Kraffert responded that he was 8 ‘not aware of the formalities of trademark law’ and ‘that’s why I have counsel.’” 9 2 Declaration, Page 28, “Q. Is it the same formulation? Deny 10 Ex. 2 lines 24–25 A. Yes. The formulation has changed” 3 Declaration, Page 51, “Q. Are you aware of a trademark office Deny 11 Ex. 2 lines 7–11 rule that says that semi colons should 12 generally be used to separate distinct categories of goods? 13 A. I am not aware of the formalities of trademark law. That’s why I have counsel.” 14 4 Declaration, Page 56, “A. It’s intended for use anywhere a person Deny 15 Ex. 2 lines 2–9 wants to use it. Some people want to use it all over because it’s a great product. It’s just 16 that it’s very expensive. And the most 17 important area for a very expensive precious cream like this is this the eye area, 18 eye contour area, which is why that’s where we market and that’s how we have 19 continued to market it.” 20 5 Declaration, Page 56, “Q. Does Amarte still continue to market it Deny Ex. 2 lines 14–25, for use in the lip area? 21 and Page 57, A. I have – 22 lines 1–2 Mr. Kim: Objection; form. The Witness: The thrust of this product is as 23 an eye cream. That’s how we market it and position it. The suggestion of using it 24 around the lips is an add-on because some 25 people think about that and we are just giving them license to do that. But as in 26 terms of the marketing and branding, this is 27 an eye cream. Eye cosmetic. That is the thrust of the marketing and the branding. As there in bold on top.” 1 a. Testimony Concerning Discussions with Counsel 2 Amarte argues that Numbers 1 and 3 should be sealed because they contain 3 testimony about “substantive discussions with counsel.” Amarte’s Resp. to Sealing Mot. 4 at 4. Kendo argues that these portions should not be sealed because they reflect an 5 unsubstantive, lack of conversation with counsel and Amarte did not identify facts 6 pertinent to harm it would suffer should this information be disclosed. Kendo’s Resp. to 7 Sealing Mot. at 2–3. 8 The Court agrees with Kendo and ORDERS that Kendo unseal these portions. 9 Amarte did not provide “specific factual findings” as to why it would be harmed by these 10 unsubstantive conversations. Kamakana v, 447 F.3d at 1178–79. 11 b. Testimony Concerning Plaintiff’s Formula 12 Amarte argues that Number 2 should be sealed because the testimony is related to 13 the formula that bears its EYECONIC trademark. Amarte’s Resp. to Sealing Mot. at 4. 14 Kendo argues that this should not be sealed because the testimony does not divulge 15 information about the product formula and Amarte did not allege facts about why it would 16 be harmed by the public disclosure of this information. Kendo’s Resp. to Sealing Mot. at 17 3. 18 The Court ORDERS Kendo to unseal this portion because Amarte did not articulate 19 with particularity why the statement regarding its formula is a trade secret. Instead, it 20 stated only that “[e]ach portion . . . contains highly sensitive, non-public information 21 related to Amarte’s product formulation, marketing strategies, internal strategic business 22 decisions, and discussions with counsel.” Amarte’s Resp. to Sealing Mot. at 5. This is not 23 an explanation with particularity about why publication of this portion, which gives no 24 specific detail about Amarte’s product formulation, could result in infringing upon a trade 25 secret, so this portion should be unsealed. See Kivett v. Flagstaff Bank, FSB, 2019 WL 26 13203923 *1 (N.D. Cal. Nov. 4, 2019) (denying an administrative motion to seal because 27 c. Testimony Concerning Marketing 1 Amarte argues that Numbers 4 and 5 should be sealed because they reference 2 marketing and business strategies for Amarte’s product bearing its EYECONIC mark. 3 See Amarte’s Resp. to Sealing Mot. at 4. Kendo argues that this testimony should not be 4 sealed because it speaks to public-facing aspects of product marketing. See Kendo’s 5 Resp. to Sealing Mot. at 3. 6 The Court ORDERS Kendo to unseal these portions because Numbers 4 and 5 7 consist of publicly available material regarding the way Amarte markets the EYECONIC 8 Eye Cream. See Amarte’s Resp. to Sealing Mot. at 4. For example, Amarte seeks to seal 9 statements that it markets the cream primarily as an eye cream, but it is “intended for use 10 anywhere a person wants to use it. Some people want to use it all over because it’s a 11 great product.” Id. at 5. However, the FAQ section of Amarte’s public website includes 12 that same information: 13 Q: “Can Eyeconic be used in places other than the eye contour and lip areas?” 14 A: “Eyeconic can certainly be used anywhere on the face. This precious formula is 15 probably best reserved, however, for area requiring extra care and attention.” 16 Gant Declaration, Exhibit A. 17 Because the material that Amarte seeks to seal is publicly available on its website 18 and in other public-facing marketing, the Court denies Amarte’s request to seal Numbers 4 19 and 5. See Ruckelshaus v. Monsanto Co., 467 U.S. 986, 1002 (1984) (“Information that is 20 public knowledge or that is generally known in an industry cannot be a trade secret.”). 21 In sum, the Court ORDERS Kendo to unseal Kendo’s Motion to Amend and 22 Exhibit 2 in their entirety. 23 IV. AMARTE’S MOTION 24 Amarte filed a third motion to amend its complaint to join co-defendants, identified 25 as third-party retailers in Defendants’ first set of produced documents. Amarte’s Mot. at 2. 26 Those defendants are: Boxycharm, PBD, JCP, YNAP, ROSS, and TJX (“Proposed 27 Defendants”). Proposed FAC (dkt. 73-2) ¶¶ 39–44. Amarte previously filed two motions 1 to amend to add “interested corporate parent parties” and “retailers of goods bearing the 2 infringing EYE-CONIC trademark.” Amarte’s Second Mot. to Amend at 3; see Amarte’s 3 First Mot. to Amend Complaint. The Court denied those motions without prejudice on 4 futility grounds because the amendment failed to sufficiently plead direct infringement and 5 personal jurisdiction for the proposed parties. See Order Denying Amarte’s Mot. to 6 Amend. 7 Defendant opposes Amarte’s latest motion contending that (1) Amarte did not show 8 good cause pursuant to Rule 16 and (2) leave to amend would be futile under Rule 15. See 9 Opp’n to Amarte’s Mot. (dkt. 74). 10 A. Legal Standard 11 Once a district court files a pretrial scheduling order, FRCP 16 governs the 12 timetable for amending pleadings. Johnson v. Mammoth Recreations, Inc., 975 F.2d 604, 13 607–08 (9th Cir. 1992). A “party seeking to amend pleading after [the] date specified in 14 scheduling order must first show ‘good cause’ for amendment under Rule 16(b)” before 15 demonstrating that amendment was proper under Rule 15. Id. at 608. Good cause is a 16 heightened standard that “primarily considers the diligence of the party seeking the 17 amendment.” Id. at 609. “If the party seeking the modification ‘was not diligent, the 18 inquiry should end’ and the motion to modify should not be granted.” Zivkovic v. S. 19 California Edison Co., 302 F.3d 1080, 1087 (9th Cir. 2002) (quoting Johnson, 975 F.2d at 20 609). 21 Under Rule 15, the Court should freely give leave to amend “when justice so 22 requires.” Fed. R. Civ. P. 15(a)(2). The Ninth Circuit has instructed that the policy 23 favoring amendment “should be applied with ‘extreme liberality.’” United States v. Webb, 24 655 F.2d 977, 979 (9th Cir. 1981) (quoting Rosenberg Brothers & Co. v. Arnold, 283 F.2d 25 406, 406 (9th Cir. 1960) (per curiam)). However, leave to amend “is not to be granted 26 automatically.” In re W. States Wholesale Nat. Gas Antitrust Litig., 715 F.3d 716, 738 27 (9th Cir. 2013) (quoting Jackson v. Bank of Haw., 902 F.2d 1385, 1387 (9th Cir. 1990)). 1 [2] bad faith or dilatory motive on the part of the movant, [3] repeated failure to cure 2 deficiencies by amendment previously allowed, [4] undue prejudice to the opposing party 3 by virtue of allowance of the amendment, [and] [5] futility of amendment.” Leadsinger, 4 Inc. v. BMG Music Publ’g, 512 F.3d 522, 532 (9th Cir. 2008) (quoting Foman v. Davis, 5 371 U.S. 178, 182 (1962)). “Futility alone can justify the denial of a motion for leave to 6 amend.” Nunes v. Ashcroft, 375 F.3d 805, 808 (9th Cir. 2004). 7 B. Discussion 8 Pursuant to the Court’s scheduling order, the parties’ deadline to amend the 9 pleadings and/or add parties was July 15, 2023. See Scheduling Order (dkt. 49) at 6. 10 Therefore, the Court addresses whether Amarte presented good cause under Rule 16 before 11 addressing the factors under Rule 15. See, e.g., Johnson, 975 F.2d at 608 (holding that 12 Rule 16(b) is a threshold issue when a party seeks to amend a pleading after the deadline in 13 a scheduling order). 14 1. Rule 16 15 The Court finds Amarte has satisfied the good cause standard. To show good cause 16 to satisfy Rule 16(b), Amarte is required to demonstrate that, despite its diligence, it could 17 not reasonably comply with the pretrial schedule. See id. at 609. The two inquiries for the 18 Court to address are (a) whether Amarte knew of the Proposed Defendants before the filing 19 deadline; and (b) if Amarte knew, whether it was unable to reasonably comply with the 20 pretrial schedule despite its diligence. 21 Amarte argues that Defendants intentionally withheld production of the Proposed 22 Defendants’ identities until four days before the deadline to amend pleadings. Reply to 23 Amarte’s Mot. at 6–7. Defendants argue that Amarte knew of the Proposed Defendants 24 through documents produced in discovery before the filing deadline, and was careless in 25 failing to meet the filing deadline. Opp’n to Amarte’s Mot. at 8–9. 26 a. Knowledge of the Proposed Defendants 27 The record indicates that Amarte learned of the Proposed Defendants four days 1 Amarte’s Mot. at 7; Scheduling Order at 6. A timeline of the proceedings prior to this 2 instant Third Motion to Amend is as follows: 3 • On April 7, 2023, Amarte served Defendants Interrogatories and other 4 discovery requests. See Reply to Amarte’s Mot. at 7. 5 • On July 11, 2023, Defendants responded to the Interrogatories and other 6 discovery requests and produced documents. See Reply to Amarte’s Mot. at 7 7. 8 • On July 14, 2023, Amarte filed a Second Motion to Amend. See Amarte’s 9 Second Mot. to Amend. 10 • On July 15, 2023, the deadline to amend/add parties expired. See 11 Scheduling Order at 6. 12 • On August 21, 2023, the Court denied Amarte’s Second Motion to Amend. 13 See Order Denying Amarte’s Second Mot. to Amend. 14 • On August 29, 2023, Amarte filed the instant Third Motion to Amend. See 15 Amarte’s Mot. 16 Since Amarte learned the identities of the Proposed Defendants from documents 17 produced on July 11, 2023, the primary question for the Court is whether Amarte was 18 unable to reasonably comply with the July 15 deadline to add new parties in the pretrial 19 schedule, despite its diligence. 20 b. Diligence 21 Amarte was diligent in complying with the July 15 deadline because it sought 22 production of the Proposed Defendants’ identities in April of 2023, months before the July 23 15 deadline, yet it did not receive the information from Defendants until July 11, 2023. 24 See Reply to Amarte’s Mot. at 7. Three days after receiving Defendants’ response, 25 Amarte filed its Second Motion to Amend on July 14, 2023. Id. The Court did not issue 26 its order denying this motion until August 21, 2023, more than a month after the July 15 27 deadline. See Order Denying Amarte’s Second Mot. to Amend. Thus, despite its 1 to Amend. 2 Even so, Amarte filed the Third Motion for Leave to Amend Complaint and to 3 Amend Scheduling Order eight days after the Court denied the Second Motion to Amend. 4 Reply to Amarte’s Mot. at 7. This short timeframe shows that Amarte was reasonably 5 diligent in seeking leave to amend from the Court once it was apparent it could not comply 6 with the Scheduling Order. Cf. AmerisourceBergen Corp. v. Dialysist W., Inc., 465 F.3d 7 946, 953 (9th Cir. 2006) (“An eight month delay between the time of obtaining a relevant 8 fact and seeking a leave to amend is unreasonable.”). 9 2. Rule 15 10 The Rule 15 factors are as follows: “[1] undue delay, [2] bad faith or dilatory 11 motive on the part of the movant, [3] repeated failure to cure deficiencies by amendment 12 previously allowed, [4] undue prejudice to the opposing party by virtue of allowance of 13 the amendment, [and] [5] futility of amendment.” Leadsinger, Inc., 512 F.3d at 532. A 14 proposed amendment is futile only if “no set of facts can be proved under the amendment 15 to the pleadings that would constitute a valid and sufficient claim.” See Miller v. Rykoff- 16 Sexton, Inc., 845 F.2d 209, 214 (9th Cir. 1988). 17 Defendants argue that Amarte’s proposed First Amended Complaint is futile 18 because it fails to plead direct infringement. See Opp’n to Amarte’s Mot. at 10. 19 Defendants also argue that they would be prejudiced by the amendment and that the 20 motion was brought in bad faith. Id. at 15–17. Amarte argues that the amendment is not 21 futile and that it filed the motion in good faith. See Reply to Amarte’s Mot. (dkt. 79). 22 a. Futility 23 Amarte alleges that each of the Proposed Defendants, “on information and belief,” 24 “advertised, promoted, sold and/or has offered for sale the Infringing Goods bearing 25 Defendants’ EYE-CONIC Mark on [the Proposed Defendant’s] website” and are “direct 26 seller[s] to residents of California through the regular course of business, all of which have 27 resulted in significant sales.” Proposed FAC ¶¶ 39–44. Amarte contends that these claims 1 Defendants argue that Amarte’s key facts occur in the open commercial 2 marketplace and are publicly available information, so Amarte cannot plead publicly 3 available information “on information and belief.” Opp’n to Amarte’s Mot. at 11. 4 The Court finds that Amarte’s proposed allegations are insufficient to plausibly 5 allege infringement by the Proposed Defendants, and thus its proposed amendment would 6 be futile. The Court previously denied Amarte’s motion to leave to amend to add these 7 same co-defendants because Amarte did not allege how each individual party infringed on 8 its trademark. See Order Denying Amarte’s Second Mot. to Amend. at 3. In the latest 9 Proposed Amended Complaint, Amarte again does not specifically allege how PBD, Ross, 10 JCP, or TJX infringed on its Mark. Proposed FAC ¶¶ 39–44. Amarte does not allege new 11 facts, nor does it provide additional clarity as to each Proposed Defendant’s allegedly 12 infringing conduct. Rather, Amarte used the same insufficient pleading from its Second 13 Proposed Amended Complaint and simply disaggregated each individual defendant. 14 Proposed FAC ¶¶ 39–44. Separating out each individual defendant, rather than using a 15 defined group, is insufficient to satisfy the pleading standard under Rule 8. Id.; see 16 Destfino v. Reiswig, 630 F.3d 952, 958 (9th Cir. 2011) (“[P]laintiffs must . . . ‘state[] 17 clearly how each and every defendant is alleged to have violated plaintiffs’ legal rights.’”). 18 The Court DENIES Amarte’s motion for leave to amend on futility grounds, so the 19 Court need not determine whether there would be undue prejudice. See Nunes v. Ashcroft, 20 375 F.3d at 808 (“Futility alone can justify the denial of a motion for leave to amend.”). 21 Since this is Amarte’s third motion for leave to amend, the Court DENIES the motion with 22 prejudice for “repeated failure to cure deficiencies by amendment previously allowed.” 23 Leadsinger, Inc., 512 F.3d at 532. 24 V. KENDO’S MOTION 25 Kendo moves for leave to amend its answer to add a counterclaim. Kendo seeks to 26 add a counterclaim for cancellation of Amarte’s Mark on the basis that Amarte’s 27 trademark registration covers a good that does not exist. See Kendo’s Mot. Specifically, 1 sold only eye creams. Id. at 7. 2 Amarte opposes this motion because (A) Kendo did not show good cause 3 pursuant to Rule 16 and (B) leave to amend would be futile under Rule 15. See Opp’n to 4 Kendo’s Mot. (dkt. 86). 5 As referenced above, the parties’ deadline to amend the pleadings and lapsed on 6 July 15, 2023, pursuant to the Court’s scheduling order. See Scheduling Order at 6. The 7 Court addresses whether Kendo has presented good cause under Rule 16 before 8 addressing the factors under Rule 15. See Johnson, 975 F.2d at 608. 9 A. Rule 16 10 To show good cause to satisfy Rule 16(b), Kendo is required to demonstrate 11 that, despite their diligence, they could not reasonably comply with a pretrial schedule. 12 See Johnson, 975 F.2d at 609. As with Amarte’s Motion, the inquiry for the Court to 13 address is whether, despite their diligence, Kendo was unable to reasonably comply with 14 the pretrial schedule once it found out that Amarte used the EYECONIC mark for only an 15 eye cream. 16 The parties disagree about when Kendo had knowledge that Amarte used the 17 EYECONIC mark for only an eye cream. Kendo argues that it diligently investigated 18 Amarte’s use of the Mark through written discovery. See Kendo’s Mot. at 12. According 19 to Kendo, Amarte represented in its first set of interrogatory responses, dated May 25, 20 2023, that its Mark was used in six different types of goods: cosmetics, skin care products, 21 cosmetic creams, skin care creams, eye cosmetics, and eye creams. Id. at 9. Kendo argues 22 that it did not know that Amarte’s use of the EYECONIC Mark was limited to one product 23 until the deposition of Amarte’s corporate representative, Dr. Craig Kraffert, on September 24 19, 2023, nearly two months after the deadline to amend its answer had passed. Id. at 11. 25 Subsequently, Kendo filed the Motion to amend its answer to add counterclaim on October 26 5, 2023. Id. at 19. 27 Amarte argues that its corporate representative deposition did not provide new 1 before the scheduling deadline. Opp’n to Kendo’s Mot. at 6. Amarte points to the 2 trademark registration for the Mark, which states, “Class 03: eye cosmetics; eye creams,” 3 Compl. ¶ 19, USPTO public record history associated with the EYECONIC Registration, 4 an internet search, and documents produced to Defendants on July 7, 2023, to demonstrate 5 that Kendo had access to this information. See Opp’n to Kendo’s Mot. at 12–13. Amarte 6 argues that this production shows that Kendo knew the full extent to which Amarte used 7 the EYECONIC Mark. Id. at 8–9. Amarte argues that Kendo acknowledged it was “an 8 open question whether the EYECONIC Trademark was in use for ‘eye cosmetics’ at the 9 time it reviewed the Complaint,” so Kendo should have investigated this prior to the 10 scheduling deadline. Opp’n to Kendo’s Mot. at 3. 11 The Court finds that Kendo did not have knowledge sufficient to state a 12 counterclaim that Amarte used the EYECONIC mark for only an eye cream until Amarte’s 13 corporate representative deposition on September 19, 2023. Even taking Amarte’s 14 argument as true, that Kendo had suspicions that Amarte’s use of the EYECONIC Mark 15 was limited to one product, “having a suspicion and having sufficient information to 16 certify in a pleading (subject to Rule 11 sanctions) that one asserts a claim or defense ‘after 17 an inquiry reasonable under the circumstances’ are two very different matters.” Reald 18 Spark, LLC v. Microsoft Corp., No. 2:22-CV-00942-TL, 2023 WL 7110505 *3 (W.D. 19 Wash. Oct. 27, 2023). Amarte’s deposition on September 19, 2023, confirmed for Kendo 20 for the first time that Amarte used the EYECONIC Mark solely for an eye cream and 21 provided a factual basis to plausibly allege the counterclaim. See Kendo’s Mot. at 11. 22 “[D]iscovery of new evidence is often sufficient to satisfy the good cause standard.” 23 Macias v. Cleaver, No. 1:13-CV-01819-BAM, 2016 WL 8730687 *4 (E.D. Cal. Apr. 8, 24 2016). 25 The Court finds that, despite their diligence, Kendo could not reasonably 26 comply with the deadline to add a counterclaim in the scheduling order. Defendants 27 served its first set of interrogatories to Amarte on April 25, 2023, months before the 1 scheduling deadline on July 15, 2023. Kendo’s Mot. at 11. Kendo learned of Amarte’s 2 use of the Mark from Amarte’s deposition on September 19, 2023. Id. at 19. Two weeks 3 after learning this information, Kendo moved to amend its answer to add counterclaim on 4 October 5, 2023. Id. Kendo demonstrated that it was diligent in seeking discovery well 5 ahead of the scheduling deadline, and in moving to amend soon after it learned the new 6 information at Amarte’s deposition. However, despite this diligence, Kendo was unable 7 to reasonably comply with the scheduling order, given that the relevant deadline has 8 passed by the time it learned the new information. See Johnson, 975 F.2d at 609. The 9 Court finds that Kendo satisfies the Rule 16 standard, and thus that the Court reaches the 10 Rule 15 inquiry. 11 B. Rule 15 12 Again, the Rule 15 factors are as follows: (1) futility; (2) bad faith; (3) undue delay; 13 (4) repeated failure to cure; and (5) undue prejudice. Leadsinger, Inc., 512 F.3d at 532. A 14 proposed amendment is futile only if “no set of facts can be proved under the amendment 15 to the pleadings that would constitute a valid and sufficient claim.” See Miller, 845 F.2d at 16 214. “Absent prejudice, or strong showing of any of the remaining . . . factors, there exists 17 a presumption under Rule 15(a) in favor of granting leave to amend.” Eminence Cap., 18 LLC v. Aspeon, Inc., 316 F.3d 1048, 1052 (9th Cir. 2003). 19 1. Futility 20 Kendo seeks to amend to its answer to add a counterclaim for cancellation of 21 Amarte’s EYECONIC Mark because Amarte only used the Mark for eye creams, and not 22 eye cosmetics. Kendo’s Mot. at 2. Amarte argues that amendment would be futile 23 because Kendo cannot plausibly allege that the Mark must be used for two separate 24 products (an eye cream and an eye cosmetic) to remain registered. Opp’n to Kendo’s 25 Mot. at 12. 26 “Cancellation of registration is proper when (1) there is a valid ground for why the 27 trademark should not continue to be registered and (2) the party petitioning for 1 (9th Cir. 1984) (quotation marks omitted). Amarte does not dispute that Kendo has 2 standing to petition for cancellation, so the relevant question is whether there is a valid 3 ground for cancellation. Opp’n to Kendo’s Mot. at 11. 4 Kendo bases its counterclaim under § 1064(6) of the Trademark Modernization Act 5 of 2020, which allows any person to petition to cancel a registration of a Mark “[a]t any 6 time after the 3-year period following the date of registration, if the registered mark has 7 never been used in commerce on or in connection with some or all of the goods or services 8 cited in the registration.” 15 U.S.C. § 1064(6); Kendo’s Mot. at 14. Kendo also cites to 9 the USPTO Manual, which provides that “semicolons should generally be used to separate 10 distinct categories of goods or services within a single class.” USPTO Manual § 11 1402.01(a); Kendo’s Mot. at 14–15. 12 Kendo’s amendment to add its cancellation counterclaim is not futile. Kendo 13 sufficiently alleges that more than three years have lapsed since Amarte registered the 14 EYECONIC trademark in 2013. Proposed Amended Answer (dkt. 81-1) at 66, 68. 15 Kendo’s allegation that “Plaintiff has only used the Mark in commerce in connection with 16 a single product, which it offers for sale as ‘Eyeconic Eye Cream,” is sufficient to state a 17 claim for cancellation of registration. Id. at 68; 15 U.S.C. § 1064(6). 18 Amarte argues that its use of the EYECONIC Trademark for an “eye cream 19 cosmetic product” is sufficient to support the “eye cosmetics” and “eye creams” described 20 in the Trademark registration, and that the use of a semicolon to separate the two phrases 21 does not require Amarte to have two different products.2 Opp’n to Kendo’s Mot. at 14–15. 22 While these arguments may ultimately have merit, the motion before the Court is a motion 23 to amend to add a newly discovered counterclaim. And the Court concludes that 24 25 2 The only legal authority that Amarte cites for this proposition is GDM Enterprises, LLC v. Astral Health & Beauty, Inc. Opp’n to Defendants’ Mot. at 14–15 (citing GDM 26 Enterprises, LLC v. Astral Health & Beauty, Inc., No. 17-10690CV-W-SRB, 2019 WL 4790917 (W.D. Mo. Sep. 30, 2019)). However, that case does not hold that cancellation 27 claims are barred when based on the assertion that a product is not properly descripted in a 1 Kendo has plausibly stated “factual content that allows the court to draw the reasonable 2 inference that the [infringing party] is liable for the misconduct alleged.” Iqbal, 556 U.S. 3 at 678. 4 2. Bad Faith 5 The non-moving party has the burden of showing bad faith under Rule 15, which 6 can be demonstrated by offering facts that a motion was filed for a frivolous or improper 7 purpose. Eminence Cap., LLC, 316 F.3d at 1052; see Westlake N. Prop. Owners Ass’n v. 8 City of Thousand Oaks, 915 F.2d 1301, 1305 (9th Cir. 1990). Amarte argues that Kendo 9 brought the Motion in bad faith to harass and inflict monetary harm, and that no reasonable 10 person could believe that eye cosmetics do not encompass eye creams. Opp’n to Kendo’s 11 Mot. at 20–21. However, Amarte does not offer facts supporting that Kendo filed the 12 motion in bad faith, such as for a frivolous or improper purpose. As described in the 13 previous section, Kendo’s proposed counterclaim is not frivolous because it plausibly 14 stated a claim for cancellation of registration of Amarte’s Mark. See infra at 19–20. 15 Amarte has not demonstrated that no reasonable person could believe Kendo’s position 16 that the EYECONIC Mark was only used for a single product. See Opp’n to Kendo’s 17 Mot. at 20–21; Proposed Amended Answer at 66, 68. And Amarte has not offered facts 18 that Kendo otherwise brought the motion for an improper purpose, such as to inflict 19 monetary harm, other than the fact that Defendants have “considerable financial might.” 20 Id. at 21. Therefore, Amarte has not shown that Kendo filed the motion in bad faith. 21 3. Undue Delay 22 When evaluating the undue delay factor, the Court considers “whether the moving 23 party knew or should have known the facts and theories raised by the amendment in the 24 original pleading.” Jackson v. Bank of Hawaii, 902 F.2d 1385, 1388 (9th Cir. 1990). 25 Amarte argues that granting Kendo’s motion will “make it impossible” for it to 26 conduct additional discovery in compliance with the scheduling order. Opp’n to Kendo’s 27 Mot. at 21–22. However, Kendo did not know the full extent of Amarte’s use of its Mark 1 until Amarte’s September 19th corporate representative deposition, so it was unable to 2 conduct discovery pursuant to this claim under the original scheduling order. See infra at 3 18–19. Because Kendo only learned of Amarte’s full use of the EYECONIC mark 4 through Dr. Kraffert’s deposition on September 19, 2023, and filed this motion two weeks 5 later, the Court finds that there was no undue delay. See Kendo’s Mot. at 11. 6 The Court ORDERS the parties to submit a new Proposed Scheduling Order, with 7 updated deadlines, to allow the parties to conduct additional discovery regarding the 8 Proposed Counterclaim. 9 4. Repeated Failure to Cure 10 This is Kendo’s first motion to amend to add its counterclaim, so there has not been 11 a “repeated failure to cure deficiencies previously allowed.” Kendo’s Mot. at 17. 12 Amarte’s Opposition does not address this factor at all. This factor weighs in favor of 13 Kendo. 14 5. Undue Prejudice 15 The non-moving party has the burden of showing prejudice under Rule 15. 16 Eminence Cap., LLC, 316 F.3d at 1052. Amarte argues that it would be prejudiced in 17 having to “sit through a [costly] second deposition.” Opp’n to Kendo’s Mot. at 22. 18 Kendo argues that the Proposed Counterclaim is limited in scope, so it will not impose a 19 large burden or cost to Amarte. Kendo’s Mot. at 18. 20 The Court finds that Amarte will not be unduly prejudiced by Kendo’s assertion of 21 the Proposed Counterclaim. Amarte has not proffered facts to show it would be unduly 22 prejudiced based solely on the potential of an additional, limited scope deposition. See 23 Opp’n to Kendo’s Mot. at 22. In addition, courts have found on similar facts that there 24 would not be undue prejudice to allow an amendment. See, e.g., DCD Programs, Ltd. v. 25 Leighton, 833 F.2d 183, 187–88 (9th Cir. 1987) (“Given that this case is still at the 26 discovery stage with no trial date pending, nor has a pretrial conference been scheduled, 27 there is no evidence that [the nonmoving party] would be prejudiced by the timing of the 1 The Court GRANTS Kendo’s motion for leave to amend their answer to add the 2 || proposed counterclaim because Kendo has established good cause under Rule 16, and all 3 || of the Rule 15 factors weigh in favor of amendment. 4 || vI. CONCLUSION 5 For the foregoing reasons, the Court ORDERS Kendo to unseal Kendo’s Motion to 6 || Amend and Exhibit 2 in their entirety, DENIES Amarte’s Motion to Amend its Complaint 7 || to add the Proposed Defendants, and GRANTS Kendo’s Motion to Amend its Answer to 8 || add its counterclaim. The Court also ORDERS the parties to submit a new Proposed 9 Scheduling Order within 14 days, with updated deadlines to allow the parties to conduct 10 |) additional discovery regarding Kendo’s Proposed Counterclaim. 11 12 13 IT IS SO ORDERED. 14 Dated: December 4, 2023 e~—_—*” CHARLES R. BREYER 15 United States District Judge 16 18 Z 19 20 21 22 23 24 25 26 27 28