Applied Underwriters, Inc. v. Larry Lichtenegger

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
APPLIED UNDERWRITERS, INC., a No. 17-16815
Nebraska corporation,
Plaintiff-Appellant, D.C. No.
2:15-cv-02445-
v. TLN-CKD
LARRY J. LICHTENEGGER; J. DALE
DEBBER; PROVIDENCE OPINION
PUBLICATIONS, LLC, a California
limited liability company,
Defendants-Appellees.
Appeal from the United States District Court
for the Eastern District of California
Troy L. Nunley, District Judge, Presiding
Argued and Submitted December 18, 2018
San Francisco, California
Filed January 15, 2019
Before: MILAN D. SMITH, JR. and JACQUELINE H.
NGUYEN, Circuit Judges, and JANE A. RESTANI, *
Judge.
Opinion by Judge Milan D. Smith, Jr.
*
The Honorable Jane A. Restani, Judge for the United States Court
of International Trade, sitting by designation.
2 APPLIED UNDERWRITERS V. LICHTENEGGER
SUMMARY **
Lanham Act / Civil Procedure
The panel affirmed the district court’s dismissal of an
action brought by a financial services company under the
Lanham Act.
The panel held that the district court abused its discretion
when it sanctioned the plaintiff and dismissed the case
pursuant to Federal Rule of Civil Procedure 41(b) absent an
order requiring the plaintiff to file an amended complaint.
The panel nonetheless affirmed the district court’s earlier
dismissal for failure to state a claim under Rule 12(b)(6).
The panel concluded that defendants’ use of plaintiff’s
trademarks in the title of a webcast seminar and in
promotional materials was a nominative fair use because
plaintiff’s service was not readily identifiable without use of
the trademarks, defendants used only so much of the
trademarks as was reasonably necessary, and use of the
trademarks did not suggest sponsorship or endorsement.
**
This summary constitutes no part of the opinion of the court. It
has been prepared by court staff for the convenience of the reader.
APPLIED UNDERWRITERS V. LICHTENEGGER 3
COUNSEL
Kimberly A. Jansen (argued), Hinshaw & Culbertson LLP,
Chicago, Illinois; Mark Suri, Peter Felsenfeld, Travis Wall,
and Spencer Y. Kook, Hinshaw & Culbertson LLP, Los
Angeles, California; for Plaintiff-Appellant.
Duffy Carolan (argued), Jassy Vick Carolan LLP, San
Francisco, California; Kevin L. Vick and Jean-Paul Jassy,
Jassy Vick Carolan LLP, Los Angeles, California; for
Defendants-Appellees.
OPINION
M. SMITH, Circuit Judge:
We are confronted with an appeal of a procedurally
curious nature. Plaintiff-Appellant Applied Underwriters,
Inc. (Plaintiff) appealed the district court’s dismissal of its
claims for trademark infringement and unfair competition,
on the apparent belief that the court dismissed the complaint
pursuant to Federal Rule of Civil Procedure 12(b)(6). When
we asked the district court to clarify its grounds for
dismissal, however, it explained that it actually dismissed
Plaintiff’s complaint as a sanction pursuant to Federal Rule
of Civil Procedure 41(b).
4 APPLIED UNDERWRITERS V. LICHTENEGGER
Although we conclude that the district court abused its
discretion when it sanctioned Plaintiff and dismissed the
case pursuant to Rule 41(b) absent an order requiring
Plaintiff to file an amended complaint, we nevertheless
affirm the district court’s earlier Rule 12(b)(6) dismissal
because the use of Plaintiff’s trademarks by Defendants-
Appellees Larry J. Lichtenegger, J. Dale Debber, and
Providence Publications, LLC (Defendants) constituted
nominative fair use.
FACTUAL AND PROCEDURAL BACKGROUND
I. Factual Background
Plaintiff is “a financial services company that provides
payroll processing services and, through affiliated insurance
companies, offers programs through which workers’
compensation insurance is offered and provided to
employers throughout the United States.” It began to use the
“Applied Underwriters” mark in October 2001, and has
continuously used the mark since. Beginning in October
2002, it also began to use the “EquityComp” mark in
connection with its workers’ compensation insurance
services. The U.S. Patent and Trademark Office has issued
Plaintiff five relevant trademark registrations: for the
“Applied Underwriters” mark, the “EquityComp” mark, and
three stylized versions of these marks, two of which appear
to depict a St. Bernard:
APPLIED UNDERWRITERS V. LICHTENEGGER 5
6 APPLIED UNDERWRITERS V. LICHTENEGGER
In its complaint, Plaintiff asserted that these registrations are
currently in force and uncontestable, and that it
“aggressively advertises and promotes its marks and its
services,” having “spent millions of dollars advertising”
them.
Defendant Providence Publications, LLC publishes
various online news sources, including “Workers’ Comp
Executive” (WCE). WCE features news reports and offers
online seminars, some of which feature Defendants
Lichtenegger and Debber.
Plaintiff alleged that, beginning in November 2015,
Defendants began offering a seminar (both online and on
DVD) that “uses the APPLIED UNDERWRITERS and
EQUITYCOMP marks in the title of the webcast.” The marks
were also featured in various promotional materials,
including a widely distributed email advertisement.
Defendants used these marks “without Applied
Underwriters’ authority or permission and in reckless
disregard of [its] federal trademark registrations and its
rights.” Plaintiff also claimed that Defendants “specifically
and intentionally target[ed] their marketing and advertising
. . . to independent brokers and the business organizations
that they serve who use Plaintiff’s services.” In its
complaint, Plaintiff averred that “[a]s a result of the
likelihood of confusion caused by Defendants’ unauthorized
use of” the marks, “Defendants are able to attract customers
who mistakenly believe that they will attend a program
sponsored or affiliated with Applied Underwriters,” leading
to dilution of the marks.
II. Procedural Background
Plaintiff filed a complaint asserting causes of action for
federal trademark infringement and dilution, false
APPLIED UNDERWRITERS V. LICHTENEGGER 7
designation of origin under the Lanham Act, and federal and
state unfair competition. The next day, Plaintiff filed a
motion for a temporary restraining order, which the district
court denied.
Defendants moved to dismiss under Rule 12(b)(6),
arguing that their use of Plaintiff’s marks was protected
under the First Amendment, constituted nominal fair use,
and satisfied the statutory defenses to trademark dilution.
Defendants also filed a request for judicial notice that the
district court granted in part and denied in part, taking
judicial notice only of the DVD of the seminar. Plaintiff in
turn filed an opposition to Defendants’ motion to dismiss,
accompanied by a declaration and additional evidence not
included in its complaint. 1
On July 6, 2017, the district court granted Defendants’
motion to dismiss, concluding that “Defendants’ use of the
Trademarks is nominative fair use.” At Plaintiff’s request,
the court granted leave to amend the complaint within
30 days. The district court docket confirms that Plaintiff
neither filed an amended complaint (timely or otherwise) nor
announced an intent not to do so. Consequently, on August
10, 2017, the district court issued a minute order that read:
“In light of Plaintiff’s failure to file an Amended Complaint
pursuant to the Court’s Order (ECF No. [31]), this case is
hereby DISMISSED. CASE CLOSED.” The clerk of court
1
Plaintiff did not seek judicial notice of this additional evidence and,
as Defendants note, “the District Court did not cite or rely on this
evidence in its ruling.” Because this evidence was not part of the
complaint or submitted for judicial notice, we will disregard it at this
stage. See Branch v. Tunnell, 14 F.3d 449, 453–54 (9th Cir. 1994),
overruled on other grounds by Galbraith v. County of Santa Clara,
307 F.3d 1119 (9th Cir. 2002).
8 APPLIED UNDERWRITERS V. LICHTENEGGER
subsequently entered judgment “in accordance with the
Court’s Order filed on 8/10/2017.”
This appeal followed. In their briefs, Plaintiff and
Defendants disputed whether the district court dismissed
Plaintiff’s complaint pursuant to Rule 12(b)(6), in which
case we would review the sufficiency of the complaint de
novo, Starr v. Baca, 652 F.3d 1202, 1205 (9th Cir. 2011), or
as a sanction under Rule 41(b), which we would review for
abuse of discretion, Yourish v. Cal. Amplifier, 191 F.3d 983,
986 (9th Cir. 1999). To remedy this confusion, we remanded
this case for the limited purpose of allowing
the district court to clarify whether the
complaint was dismissed as a sanction under
Federal Rule of Civil Procedure 41 or for
failure to state a claim under Rule 12(b)(6),
and, if the final dismissal was intended as a
sanction under Rule 41(b), to state the
reasoning behind the selection of that
sanction.
Before oral argument in this appeal, the district court
responded with a clarification order, in which it explained
that it dismissed Plaintiff’s complaint as a sanction pursuant
to Rule 41(b), and analyzed the five pertinent factors as
enumerated in Yourish. It concluded that “[t]hree of the five
factors strongly favored dismissal, and this Court dismissed
the case under Rule 41(b) as a sanction for failure to comply
with the Court’s order.”
STANDARD OF REVIEW AND JURISDICTION
“We review de novo a district court’s dismissal of a
complaint under [Rule] 12(b)(6) for failure to state a claim,”
Starr, 652 F.3d at 1205, and “[w]e review the district court’s
APPLIED UNDERWRITERS V. LICHTENEGGER 9
dismissal of a complaint pursuant to Rule 41(b) for abuse of
discretion,” Yourish, 191 F.3d at 986. We have jurisdiction
pursuant to 28 U.S.C. § 1291—regardless of the basis for the
district court’s dismissal of Plaintiff’s complaint, its entry of
judgment constituted a final decision of the court. Cf. De Tie
v. Orange County, 152 F.3d 1109, 1111 (9th Cir. 1998)
(“The dismissal of an action, even when it is without
prejudice, is a final order.”).
ANALYSIS
I. Rule 41(b)
Under Rule 41(b), “[i]f the plaintiff fails to prosecute or
to comply with . . . a court order”—such as by failing to file
an amended complaint after being ordered to do so—“a
defendant may move to dismiss the action or any claim
against it. Unless the dismissal order states otherwise, [such]
a dismissal . . . operates as an adjudication on the merits.”
Fed. R. Civ. P. 41(b). We have noted that “[w]hen a district
court dismisses an action because the plaintiff has not filed
an amended complaint after being given leave to do so and
has not notified the court of his intention not to file an
amended complaint, we may deem the dismissal to be for
failure to comply with a court order based on Federal Rule
of Civil Procedure 41(b).” Harris v. Mangum, 863 F.3d
1133, 1142 (9th Cir. 2017).
In the order clarifying its dismissal of Plaintiff’s
complaint, the district court analyzed the five factors that
must be considered before dismissing a case pursuant to
Rule 41(b): “(1) the public’s interest in expeditious
resolution of litigation; (2) the court’s need to manage its
docket; (3) the risk of prejudice to the defendants; (4) the
public policy favoring disposition of cases on their merits;
and (5) the availability of less drastic alternatives.” Yourish,
10 APPLIED UNDERWRITERS V. LICHTENEGGER
191 F.3d at 990 (quoting Hernandez v. City of El Monte,
138 F.3d 393, 399 (9th Cir. 1998)). 2 However, the district
court did not consider whether Rule 41(b) was even
applicable in this case, given that Plaintiff was granted
leave—not ordered—to amend its complaint. We hold that
the district court abused its discretion when it invoked Rule
41(b) under these circumstances.
We are not the first panel to address this question. See,
e.g., Yourish, 191 F.3d at 986 n.4 (“This approach is
somewhat problematic because a plaintiff’s failure to amend
a complaint is not easily described as disobeying a court
order because the plaintiff has the right simply to allow the
complaint to be dismissed.”). Decades ago, the Fifth Circuit
considered a similar factual scenario and concluded that
[h]ad the District Judge intended what he
wrote literally—that the action was being
dismissed because the March order had been
“disobeyed”—he would have been guilty of
an abuse of his Rule 41(b) discretion to
dismiss. Dismissal of a case for disobedience
of a court order is an exceedingly harsh
sanction which should be imposed only in
extreme cases, and then only after
exploration of lesser sanctions. Failure to
amend a complaint after it has been dismissed
with leave to amend is not such an extreme
2
“Although it is preferred, it is not required that the district court
make explicit findings in order to show that it has considered these
factors and we may review the record independently to determine if the
district court has abused its discretion.” Yourish, 191 F.3d at 990(quoting Ferdik v. Bonzelet, 963 F.2d 1258, 1261 (9th Cir. 1992)).
Accordingly, the fact that the district court initially dismissed the
complaint without any explicit analysis of these five factors did not
constitute an abuse of discretion.
APPLIED UNDERWRITERS V. LICHTENEGGER 11
case of disobedience, if it is disobedience at
all.
Mann v. Merrill Lynch, Pierce, Fenner & Smith, Inc.,
488 F.2d 75, 76 (5th Cir. 1973) (per curiam) (citations
omitted). More recently, dissenting in Brown v. Rawson-
Neal Psychiatric Hospital, Judge Graber concluded that a
district court’s dismissal with prejudice under Rule 41(b)
“was an abuse of discretion for the simple reason that, under
our precedents, Plaintiff did not fail to comply with a court
order.” 840 F.3d 1146, 1150 (9th Cir. 2016) (Graber, J.,
dissenting). Judge Graber noted that our precedent makes
clear that “[w]hen a district court requires a plaintiff to file
an amended complaint, the court may dismiss the case under
Rule 41(b) if the plaintiff fails to follow the requirement.”
Id.; see also Edwards v. Marin Park, Inc., 356 F.3d 1058,
1065 (9th Cir. 2004) (“The failure of the plaintiff eventually
to respond to the court’s ultimatum—either by amending the
complaint or by indicating to the court that it will not do so—
is properly met with the sanction of a Rule 41(b) dismissal.”
(emphasis added)); Yourish, 191 F.3d at 986 n.2 (noting that
the district court order stated that an “[a]mended complaint
shall be filed within 60 days” (emphasis added)); Ferdik v.
Bonzelet, 963 F.2d 1258, 1260 (9th Cir. 1992) (stating that
the court “ordered” and “required” the filing of a second
amended complaint). However, in Brown, as in this case,
the district court did not require Plaintiff to
file an amended complaint, nor did the court
require in the alternative that Plaintiff file an
amended complaint or some other specified
document. The court’s order denying
Plaintiff’s motion for reconsideration merely
granted leave to amend, with permissive text
allowing Plaintiff to amend or not . . . .
12 APPLIED UNDERWRITERS V. LICHTENEGGER
Given the court’s failure to cite Rule 41(b),
the permissive wording of its orders, and
Plaintiff’s desire to obtain appellate review of
the Rule 12(b)(6) dismissal as discussed in
the motion for reconsideration, he
understandably hoped for a dismissal, which
he reasonably thought would be under Rule
12(b)(6). After all, the district court never
ordered Plaintiff to file an amended
complaint, as the courts had in Yourish or
Ferdik. Leave to amend was granted; failure
to amend did not constitute noncompliance
with a court order. Simply put, there was no
“ultimatum” within the meaning of our
precedents, and so the district court abused its
discretion in dismissing Plaintiff’s federal
claims under Rule 41(b).
840 F.3d at 1151 (Graber, J., dissenting). 3
We agree with Judge Graber’s reasoning. By its plain
text, a Rule 41(b) dismissal under these circumstances
requires “a court order” with which an offending plaintiff
failed to comply. Fed. R. Civ. P. 41(b). 4 Here, there was no
3
Notably, the Brown majority did not address this issue and instead
based its holding on the plaintiff’s failure to raise Rule 41(b) in his
opening brief. See 840 F.3d at 1148–49. Thus, we are not bound by that
case to treat a permissive invitation to amend as a court order requiring
amendment.
4
Rule 41(b) also permits dismissal when a plaintiff fails to prosecute
its case or comply with the Federal Rules of Civil Procedure. See Fed.
R. Civ. P. 41(b) (“If the plaintiff fails to prosecute or to comply with
these rules or a court order, a defendant may move to dismiss the action
or any claim against it.”). However, these alternative bases for dismissal
are not at issue in this appeal because the district court specifically stated
that its dismissal was based on Plaintiff’s failure to follow its court order.
APPLIED UNDERWRITERS V. LICHTENEGGER 13
such order—the district court did not require that Plaintiff
file an amended complaint following the initial Rule
12(b)(6) dismissal. Instead, the court’s order concluded as
follows: “Plaintiff is GRANTED leave to amend within
thirty (30) days of this Order.” The district court did not
mandate the filing of an amended complaint, and it did not
indicate that failure to do so would result in dismissal of the
complaint pursuant to Rule 41(b). See Oliva v. Sullivan,
958 F.2d 272, 274 (9th Cir. 1992) (“The district judge has an
obligation to warn the plaintiff that dismissal is imminent.”).
The district court’s dismissal under Rule 41(b) required
noncompliance with a court order. A grant of leave to amend
is not an order to amend. Therefore, Rule 41(b) did not apply
here, and the district court’s dismissal on this ground
constituted an abuse of discretion.
II. How to Proceed?
Having concluded that the district court abused its
discretion when it dismissed Plaintiff’s complaint as a
sanction pursuant to Rule 41(b), we must now determine the
proper course of action moving forward.
One option is to remand. Upon remand, the district court
would presumably either again dismiss Plaintiff’s complaint
under Rule 12(b)(6), based on reasoning articulated in its
prior order, or again grant Plaintiff leave to amend—an
opportunity of which Plaintiff would not avail itself, given
its stated desire to appeal the district court’s original Rule
12(b)(6) dismissal. Remand would therefore require the
parties to engage in additional and redundant briefing, and
would add years to their litigation. Nothing substantive
would be gained, and “remand . . . would be an unnecessary
waste of judicial and litigant resources.” O’Reilly v. Bd. of
Appeals, 942 F.2d 281, 284 (4th Cir. 1991).
14 APPLIED UNDERWRITERS V. LICHTENEGGER
We conclude that remand would not serve the interest of
judicial economy, and fortunately, it is not required. As the
Supreme Court explained,
[I]n reviewing the decision of a lower court,
it must be affirmed if the result is correct
‘although the lower court relied upon a wrong
ground or gave a wrong reason.’ The reason
for this rule is obvious. It would be wasteful
to send a case back to a lower court to
reinstate a decision which it had already
made but which the appellate court
concluded should properly be based on
another ground within the power of the
appellate court to formulate.
SEC v. Chenery Corp., 318 U.S. 80, 88 (1943) (citation
omitted) (quoting Helvering v. Gowran, 302 U.S. 238, 245
(1937)); see also Alcaraz v. Block, 746 F.2d 593, 602 (9th
Cir. 1984) (“We will affirm the district court’s correct legal
results, even if reached for the wrong reasons.”). Here, we
have before us the correct result; as discussed below,
Defendants’ use of Plaintiff’s marks constituted nominative
fair use, and thus dismissal was required. We also have the
district court’s analysis in its Rule 12(b)(6) order, which still
stands and has not been altered or retracted. Therefore, we
conclude that dismissal of Plaintiff’s complaint was the
correct legal result, even if the district court reached it for
the wrong reason—as a sanction under Rule 41(b)—instead
of the correct reason—as a dismissal under Rule 12(b)(6).
Accordingly, we do not need to remand the action, and will
APPLIED UNDERWRITERS V. LICHTENEGGER 15
instead proceed with analysis of the district court’s dismissal
pursuant to Rule 12(b)(6). 5
III. Rule 12(b)(6)
Defendants maintain, as the district court concluded, that
their use of Plaintiff’s marks constituted nominative fair use.
We agree.
Pursuant to this defense, the “nominative use of a mark—
where the only word reasonably available to describe a
particular thing is pressed into service—lies outside the
strictures of trademark law: Because it does not implicate the
source-identification function that is the purpose of
trademark, it does not constitute unfair competition.” New
Kids on the Block v. News Am. Publ’g, Inc., 971 F.2d 302,
308 (9th Cir. 1992). 6 New Kids held that
5
We note that this approach is consistent with the basic principles
of finality that undergird our appellate jurisdiction. The district court’s
Rule 12(b)(6) order dispensed with all of Plaintiff’s claims, and hence
was “a full adjudication of the issues.” Nat’l Distrib. Agency v.
Nationwide Mut. Ins. Co., 117 F.3d 432, 433 (9th Cir. 1997). If not for
the court’s grant of leave to amend—which, again, Plaintiff has made
clear it had no intention of undertaking—the dismissal would have
“clearly evidence[d] the judge’s intention that it be the court’s final act
in the matter.” Id. (quoting In re Slimick, 928 F.2d 304, 307 (9th Cir.
1990)). Accordingly, we are satisfied that the Rule 12(b)(6) order is
sufficiently final for our review, since Plaintiff’s refusal to amend
ensures that the decision was not “tentative, informal or incomplete,” and
is thus reviewable. Citicorp Real Estate, Inc. v. Smith, 155 F.3d 1097,
1101 (9th Cir. 1998) (quoting Cohen v. Beneficial Indus. Loan Corp.,
337 U.S. 541, 546 (1949)).
6
Accordingly, although Plaintiff’s complaint included various
causes of action—including trademark infringement and dilution and
federal and state unfair competition—the nominative fair use defense
applied to all of its claims. See Playboy Enters., Inc. v. Welles, 279 F.3d
16 APPLIED UNDERWRITERS V. LICHTENEGGER
a commercial user is entitled to a nominative
fair use defense provided he meets the
following three requirements: First, the
product or service in question must be one not
readily identifiable without use of the
trademark; second, only so much of the mark
or marks may be used as is reasonably
necessary to identify the product or service;
and third, the user must do nothing that
would, in conjunction with the mark, suggest
sponsorship or endorsement by the trademark
holder.
Id. (footnote omitted). If the nominative use of a mark
satisfies these three factors, then there is no infringement;
“[i]f the nominative use does not satisfy all the New Kids
factors, the district court may order defendants to modify
their use of the mark so that all three factors are satisfied.”
Toyota Motor Sales, U.S.A., Inc. v. Tabari, 610 F.3d 1171,
1176 (9th Cir. 2010).
Although Plaintiff’s primary contention is that
Defendants’ use of its marks failed to satisfy the third New
Kids factor, it challenges the district court’s conclusions as
to all three. We will thus consider each factor in turn.
796, 806 (9th Cir. 2002) (“Uses that do not create an improper
association between a mark and a new product but merely identify the
trademark holder’s products should be excepted from the reach of the
anti-dilution statute.”); Cleary v. News Corp., 30 F.3d 1255, 1262–63
(9th Cir. 1994) (“This Circuit has consistently held that state common
law claims of unfair competition and actions pursuant to California
Business and Professions Code § 17200 are ‘substantially congruent’ to
claims made under the Lanham Act.” (quoting Acad. of Motion Picture
Arts & Scis. v. Creative House Promotions, Inc., 944 F.2d 1446, 1457
(9th Cir. 1991))).
APPLIED UNDERWRITERS V. LICHTENEGGER 17
A. Whether Plaintiff’s Service Was Readily
Identifiable Without Use of the Trademarks
Plaintiff contends that “Defendants did not need to use
Plaintiff’s trademarks to identify their Program.” It
concedes that “the Program apparently addresses Plaintiff’s
workers’ compensation product in particular,” but
nonetheless argues that “Defendants could have come up
with another readily understood generic or descriptive
name.”
The email attached to the complaint demonstrates that
Defendants’ seminar exclusively critiqued Plaintiff’s
EquityComp service. The title of the seminar was “Applied
Underwriters’ EquityComp® Program Like it, Leave it, or
Let it be?” and its subtitle read, “Learn the best strategies for
selling, competing with, or helping a prospect out of
EquityComp® mid-term.” We have previously determined
that a descriptive alternative—such as Plaintiff’s proposed
“Risk Sharing Workers’ Comp Program” or “Captive
Workers’ Comp Arrangement Program”—need not be
employed where use of a mark is necessary to refer to a
specific brand or product. As we explained in Toyota Motor
Sales,
Toyota claims . . . the Tabaris could have
used a domain name that did not contain the
Lexus mark. It’s true they could have used
some other domain name like
autobroker.com or fastimports.com, or have
used the text of their website to explain their
business. But it’s enough to satisfy our test
for necessity that the Tabaris needed to
communicate that they specialize in Lexus
vehicles, and using the Lexus mark in their
domain names accomplished this goal.
18 APPLIED UNDERWRITERS V. LICHTENEGGER
610 F.3d at 1180; see also Playboy Enters., Inc. v. Welles,
279 F.3d 796, 802 (9th Cir. 2002) (“[T]here is no other way
that Ms. Welles can identify or describe herself and her
services without venturing into absurd descriptive phrases.
To describe herself as the ‘nude model selected by Mr.
Hefner’s magazine as its number-one prototypical woman
for the year 1981’ would be impractical as well as ineffectual
in identifying Terri Welles to the public.”). 7
Such is the case here. The seminar did not discuss
workers’ compensation programs generally, but rather
Plaintiff’s specific offering. Therefore, Defendants “needed
to communicate” that they critiqued the EquityComp
program, and so using the mark in the title and description
of the program “accomplished this goal.” Toyota Motor
Sales, 610 F.3d at 1180.
In its reply brief, Plaintiff makes the argument that, even
if the use of the “EquityComp” mark satisfied the first New
Kids factor, the use of the “Applied Underwriters” mark did
not. Plaintiff suggests that “[t]he addition of the ‘Applied
Underwriters’ mark does nothing to identify the content of
the seminar but instead serves solely to create the impression
7
Plaintiff suggests that “Defendants’ attempt to apply Welles to their
seminar is circular” because “[o]n one hand, defendants insist that they
could not possibly have described their seminar without using plaintiff’s
mark,” but on the other hand, “if a more generic descriptor could not be
used to describe the seminar because the subject of the seminar [was]
limited to EquityComp®, then the suggestion of sponsorship is
reinforced. After all, a reasonably prudent consumer could assume that
a seminar focused on a single product is sponsored or endorsed by the
entity selling that product.” However, this reasoning would essentially
vitiate the nominative fair use defense, because it suggests that any time
the first New Kids factor is satisfied—in other words, when use of a mark
is needed for identification purposes—then the third factor could never
be satisfied, because endorsement would always be presupposed in such
cases.
APPLIED UNDERWRITERS V. LICHTENEGGER 19
that Applied Underwriters is sponsoring or endorsing a
seminar about its own EquityComp® product.” It relies on
Playboy Enterprises, in which we determined that while use
of the trademarked phrase “Playboy Playmate of the Year
1981” was permissible because it was needed for
identification purposes, use of another potentially protected
phrase—“PMOY ‘81”—was not. 279 F.3d at 804. We
reasoned that “[t]he repeated depiction of ‘PMOY ‘81’ is not
necessary to describe Welles. ‘Playboy Playmate of the
Year 1981’ is quite adequate.” Id. Here, similarly, Plaintiff
suggests that the “EquityComp” mark identified the service
that Defendants analyzed in their seminar, and thus the
“Applied Underwriters” mark did not serve that function.
But this argument falls short. Defendants’ use of the
“Applied Underwriters” mark was not necessarily redundant
because it was used to identify the company that offered
EquityComp—a company that was itself critiqued in the
seminar. We therefore find this case distinguishable from
Playboy Enterprises, where use of the “PMOY ‘81” mark
served no additional identification purpose.
Accordingly, because both marks were needed to
identify the service (and company) that Defendants analyzed
in their seminar, the district court correctly determined that
the first New Kids factor was satisfied.
B. Whether Defendants Used Only So Much of the
Trademarks As Was Reasonably Necessary
Plaintiff argues that Defendants’ use of its marks failed
the second factor because the email attached to the complaint
featured several uses of both marks. That argument relies on
a misunderstanding of this factor. The second New Kids
factor does not implicate the number of uses of a mark, but
rather the nature of the uses. In clarifying it, we explained
that “a soft drink competitor would be entitled to compare
20 APPLIED UNDERWRITERS V. LICHTENEGGER
its product to Coca-Cola or Coke, but would not be entitled
to use Coca-Cola’s distinctive lettering.” New Kids,
971 F.2d at 308 n.7; see also Playboy Enters., 279 F.3d at
802 (“Welles’ banner advertisements and headlines satisfy
this element because they use only the trademarked words,
not the font or symbols associated with the trademarks.”);
Volkswagenwerk Aktiengesellschaft v. Church, 411 F.2d
350, 352 (9th Cir. 1969) (noting that defendant “did not use
Volkswagen’s distinctive lettering style or color scheme, nor
did he display the encircled ‘VW’ emblem”); cf. Toyota
Motor Sales, 610 F.3d at 1181 (“Toyota suggests that use of
the stylized Lexus mark and ‘Lexus L’ logo was more use of
the mark than necessary and suggested sponsorship or
endorsement by Toyota. This is true: The Tabaris could
adequately communicate their message without using the
visual trappings of the Lexus brand.”). Our case law
demonstrates that analysis of this factor should focus not on
the number of uses of Plaintiffs’ marks, but on whether
Defendants used more of each individual mark than was
necessary in terms of font and stylization.
Here, Defendants correctly note that the email “did not
use any part of Plaintiff’s service marks, the distinctive
lettering or design; rather they used only the term ‘Applied
Underwriters’ and ‘EquityComp’ in describing its webcast.”
The email did not contain, for example, the illustration of a
St. Bernard or the stylized lettering of Plaintiff’s registered
marks. It did not even employ the distinctive small-caps
rendering of the “APPLIED UNDERWRITERS” and
“EQUITYCOMP” marks. Defendants used only the words
themselves, which were, as discussed above, necessary to
identify Plaintiff’s product. Therefore, the second New Kids
factor was satisfied.
APPLIED UNDERWRITERS V. LICHTENEGGER 21
C. Whether Use of the Trademarks Suggested
Sponsorship or Endorsement
Plaintiff asserts that, “[s]imply put, Defendants’
advertising creates confusion.”
At the outset, it claims that “[t]he district court erred by
ignoring Plaintiff’s evidence of actual confusion in its Order,
which nowhere mentions the actual confusion.” However,
in its complaint, Plaintiff pleaded no such facts of actual
confusion. Instead, the complaint stated only that
“Defendants’ improper use of the APPLIED
UNDERWRITERS IP has caused, and will continue to
cause, damaging and actual confusion among the public.”
That conclusory statement constituted the only evidence of
confusion contained in the complaint, and at no other point
did Plaintiff plead facts suggesting that use of its marks led
consumers to assume that it sponsored or endorsed
Defendants’ seminar. 8
Plaintiff also notes that Defendants employed the ®
registration symbol in conjunction with their uses of the
“Applied Underwriters” and “EquityComp” marks, which it
claims “makes the use of the trademark look more official or
authorized, because one would expect that the trademark
owner or its authorized users would use the registration
symbol ®, not unauthorized users.” This is not a particularly
compelling argument. Although Defendants did use the ®
symbol, the email attached to the complaint clarified that
8
In its opposition to Defendants’ motion to dismiss, Plaintiff
referenced a “confused potential customer” who reached out to it.
However, that allegation was not included in the complaint, and so it
cannot be considered. See Arpin v. Santa Clara Valley Transp. Agency,
261 F.3d 912, 925 (9th Cir. 2001) (“[E]xtraneous evidence should not be
considered in ruling on a motion to dismiss.”).
22 APPLIED UNDERWRITERS V. LICHTENEGGER
“EquityComp is the registered trademark of Applied
Underwriters, Inc.” 9 Moreover, in the body of the email (and
on the DVD cover), the title of the seminar—which did
feature both the “Applied Underwriters” and “EquityComp”
marks—was in regular font beneath a stylized logo for
WCE:
This further suggested that it was WCE—not Plaintiff—that
sponsored the seminar, which discounts the possibility of
any confusion.
Furthermore, Defendants correctly argue that any
likelihood of confusion is implausible due to the content of
9
At least one district court has dismissed a trademark infringement
claim under similar circumstances. See Architectural Mailboxes, LLC v.
Epoch Design, LLC, No. 10cv974 DMS (CAB), 2011 WL 1630809, at
*3 (S.D. Cal. Apr. 28, 2011) (“[T]he exhibits attached to the Complaint
lead to the same conclusion, namely that Plaintiff has failed to allege
sufficient facts to demonstrate a likelihood of confusion. The excerpts
from Defendant’s website clearly identify Plaintiff as the manufacturer
of the Oasis Jr. mailbox. The website even goes so far as to state,
‘Oasis® is a registered trademark of Architectural Mailboxes.’” (citation
omitted)).
APPLIED UNDERWRITERS V. LICHTENEGGER 23
the email and the seminar itself. The text of the email
referred to EquityComp as a “sophisticated yet controversial
program,” and Lichtenegger was billed as a lawyer who “for
15 years has specialized in Investment and Commercial
Fraud recovery” and “represents a panoply of employers vs
Applied and is well versed in their math and how their
program works.” Debber, for his part, was credited as the
person “who broke the recent spate of stories about Applied
Underwriters’ EquityComp Program. Only that other mild
mannered reporter, Clark Kent, exceeds Dale’s commitment
to ‘Truth, Justice and the American Way.’” The seminar’s
subtitle advertised that users can “[l]earn the best strategies
for . . . helping a prospect out of EquityComp® mid-term,”
and a reasonable consumer in this context would surely
understand that Plaintiff would not be in the business of
helping customers out of its programs. 10
We have held that criticism of a product tends to negate
the possibility of confusion as to sponsorship and
endorsement. See New Kids, 971 F.2d at 308–09
(“[N]othing in the announcements suggests joint
sponsorship or endorsement by the New Kids. The USA
Today announcement implies quite the contrary by asking
whether the New Kids might be ‘a turn off.’”). 11 Here, it
10
Additionally, the list of questions that the seminar purportedly
answered included several that Plaintiff would be unlikely to field, such
as “If you have a client in the program who is unhappy, should you get
them out and if so, how to know when?” and “How to compete against
the program—at the start and mid-term.”
11
District courts have reached similar conclusions. See, e.g., 1800
GET THIN, LLC v. Hiltzik, No. CV11-00505 ODW (PJWx), 2011 WL
3206486, at *3 (C.D. Cal. July 25, 2011) (determining on motion to
dismiss that “Defendants have not done anything that would suggest
Plaintiff has sponsored or endorsed Defendants’ use of Plaintiff’s
claimed trademark because the articles and comments . . . do not portray
24 APPLIED UNDERWRITERS V. LICHTENEGGER
was clear from the text of the email that the seminar was a
critique of Plaintiff’s program, and it is simply not plausible
that it could have been construed as anything else.
It is true, as Plaintiff notes, that “[t]he existence of
consumer confusion is a fact-intensive analysis that does not
lend itself to a motion to dismiss.” See, e.g., Williams v.
Gerber Prods. Co., 552 F.3d 934, 938–39 (9th Cir. 2008).
Even so, based on the critical nature of the presentation, the
disclaimer included in the text, and the fact that Defendants
advertised the seminar under the WCE banner, we cannot
conclude that a “reasonably prudent consumer” in the
relevant marketplace, Toyota Motor Sales, 610 F.3d at 1176,
could have interpreted Defendants’ seminar as being
endorsed or sponsored by Plaintiff. The complaint contained
only scant, conclusory allegations of consumer confusion,
which, even when considered in the light most favorable to
Plaintiff, were belied by the allegedly infringing email
attached to the complaint, which demonstrated nominative
fair use. Although Plaintiff introduced additional evidence
that might change this conclusion in its opposition to
Defendants’ motion to dismiss, those additional facts cannot
be considered because they were not included in the
operative pleading. The third New Kids factor was therefore
satisfied.
Plaintiff in a positive light”); Patmont Motor Werks, Inc. v. Gateway
Marine, Inc., No. C 96-2703 TEH, 1997 WL 811770, at *4 (N.D. Cal.
Dec. 18, 1997) (“The third and final requirement is met because nothing
in Anthony DeBartolo’s website could possibly be construed to indicate
Patmont’s sponsorship or endorsement. Indeed, the Court would find
incredible any argument to the contrary given the website’s
disparagement of Go-Peds as unsafe and of Patmont management as
criminally anti-competitive.”).
APPLIED UNDERWRITERS V. LICHTENEGGER 25
D. Summation
Although it is a “rare situation in which granting a
motion to dismiss is appropriate” when a case involves
questions of consumer confusion, Williams, 552 F.3d at 939,
the district court properly concluded that Plaintiff failed to
state claims for which relief could be granted because, on the
face of the complaint, it was clear that Defendants’ alleged
infringement constituted nominative fair use.
CONCLUSION
We conclude that the district court abused its discretion
when it dismissed Plaintiff’s complaint as a sanction
pursuant to Rule 41(b) without actually ordering Plaintiff to
amend its complaint. However, we also conclude that
dismissal was nevertheless appropriate, because
Defendants’ use of Plaintiff’s marks constituted nominative
fair use. Accordingly, we AFFIRM the district court’s
dismissal of Plaintiff’s complaint.