DocketNumber： CV 10-1384 RSWL (PLAx)
Judges： Ronald S.W. Lew
Filed Date： 8/16/2011
Status： Precedential
Modified Date： 11/7/2024
United States District Court, C.D. California.
*1018 David A. Dillard, Patrick J. Orme, Pasadena, CA, for Plaintiff, Counterdefendant, and Third-Party Defendant.
Alan M. Kindred, Ivan M. Posey, Kindred Posey, Hacienda Heights, CA, for Defendant, Counterclaimant, and Third-Party Plaintiff.
RONALD S.W. LEW, Senior District Judge.
On August 9, 2011, Plaintiff Hokto Kinoko Company's ("Hokto Kinoko") Motion for Summary Judgment and for Permanent *1019 Injunction [65], Third-Party Defendant Hokuto Corporation's ("Hokuto Japan") Motion for Summary Judgment [66], and Defendant, Counterclaimant, and Third-Party Plaintiff Concord Farms, Inc.'s ("Concord") Motion for Summary Judgment [100] came on for regular calendar before this Court. The Court having reviewed all papers submitted pertaining to these Motions and having considered all arguments presented to the Court, NOW FINDS AND RULES AS FOLLOWS:
The Court GRANTS Plaintiff Hokto Kinoko's Motion for Summary Judgment as well as Plaintiff's Request for a Permanent Injunction. Furthermore, the Court GRANTS Third-Party Defendant Hokuto Japan's Motion for Summary Judgment in its entirety. Lastly, the Court DENIES, in its entirety, Defendant, Counterclaimant, and Third-Party Plaintiff Concord's Motion for Summary Judgment.
Plaintiff and Counterdefendant Hokto Kinoko is a corporation organized under the laws of the State of California on July 3, 2006. Hokto Kinoko is a wholly-owned subsidiary of Third-Party Defendant Hokuto Japan. Hokto Kinoko undertook the construction of a growing facility in San Marcos, California, which was completed in 2009. Shortly thereafter, Hokto Kinoko began growing and selling its mushrooms in the United States.
Hokto Kinoko sells its mushroom products under a family of trademarks (collectively referred to as the "Hokto Marks")[1]. Plaintiff Hokto Kinoko grows, distributes, and markets "100% Certified Organic" speciality mushrooms throughout the United States. Hokto Kinoko's mushrooms include maitake, brown beech, and white beech mushrooms.
From June 28, 2010, Hokto Kinoko has been the owner of the U.S. rights in the Hokto Marks by virtue of an assignment from its parent company, Hokuto Japan. However, from August 2008 to June 28, 2010, Hokto Kinoko was the exclusive U.S. licensee of Hokuto Japan under the Hokto Marks.
From August 2008 to the first quarter of 2009, Hokto Kinoko imported into the United States and sold organically grown maitake, brown beech, and white beech mushrooms bearing the Hokto Marks that were produced in Japan by Hokuto Japan. Hokto Kinoko was the exclusive licensed distributor of Hokuto Japan products in the United States during this period. The mushrooms imported by Hokto Kinoko for the U.S. market were grown under special conditions not normally used by Hokuto Japan. Specifically, the growing media was changed to meet the United States Certified Organic standards. Moreover, Hokuto Japan and Hokto Kinoko developed special packaging for Hokto Kinoko's use in the U.S. market that used the English language, as compared to Hokuto Japan's normal Japanese language packaging. The English language packaging identified the product as "Certified Organic by QAI" and provided nutritional facts.
Shortly after Hokto Kinoko began producing mushrooms in its San Marcos facility in California, Hokuto Japan ceased exporting mushrooms bearing the Hokto Marks to the United States. An exception occurred in 2010, when Hokto Kinoko *1020 could not meet demand due to capacity issues in the production of white beech mushrooms. Hokto Japan white beech mushrooms were imported to augment Hokto Kinoko's inventory of these mushrooms. These imported white beech mushrooms from Japan contained English language stickers indicating the country of origin and nutritional facts.
Third-Party Defendant Hokuto Japan is an organization organized under the laws of Japan with its principal place of business in Nagano, Japan. Hokuto Japan grows, sells, and distributes in Japan mushrooms contained in distinctive packaging with Hokuto Japan trademarks. These Japanese trademarks are identical to Hokto Kinoko's U.S. Marks. However, because "Organic Certification" is not as important to the average Japanese consumer as compared to the American consumer, Hokuto Japan does not go to the added expense to grow its mushrooms under Organic Certified conditions.
Defendant and Third-Party Plaintiff Concord is a corporation organized under the laws of the State of California, with a principal place of business in Union City, California. Concord grows and imports a variety of agricultural products that are distributed across the United States in bulk and retail packs. Since 1987, Concord has distributed exotic Asian mushrooms and produce across the United States.
Since 2003, Concord Farms has been purchasing mushrooms distributed by Hokuto Japan through and from Hokuto Japan's authorized suppliers. However, Concord has never purchased mushrooms directly from Hokuto Japan. Rather, Concord purchases Hokuto Japan mushrooms from a company called MRT, who in turn, purchases the mushrooms from a separate company called Maruichi Seika Co., Ltd. (hereinafter, "Maruichi"). Maruichi purchases mushroom products from Hokuto Japan for resale in Japan.
In July 2009, a Hokto Kinoko representative purchased packages of mushrooms bearing one or more of the Hokto Kinoko U.S. Marks and written mostly in Japanese from two different retail outlets in Irvine, California. The Hokto Kinoko representative was informed that the retail establishments had purchased the packaged mushrooms from Defendant and Third-Party Plaintiff Concord. In October 2009, Hokto Kinoko representatives attended a produce exposition in Anaheim, California where they spoke with a Concord representative requesting that Concord not import, sell, or distribute Hokuto Japan packaged mushrooms. Concord refused to comply with Hokto Kinoko's request and, as a result, this dispute between the parties ensued.
During the period from 2003 to February 2009, Concord imported and sold non-organic white beech and brown beech mushrooms grown by Hokuto Japan packaged in all Japanese language packages. However, since February 2009, Concord has not imported or sold brown or white beech Hokto branded mushrooms, but only now imports maitake mushrooms from Japan bearing the Hokto Marks. Therefore, during the pendency of this Action, the only infringing mushroom products that have been imported and sold by Concord are the maitake mushrooms.
Summary judgment is appropriate when there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(a). A genuine issue is one in which the evidence is such that a reasonable fact-finder could return a verdict for the non-moving *1021 party. Anderson v. Liberty Lobby, 477 U.S. 242, 248, 106 S. Ct. 2505, 91 L. Ed. 2d 202 (1986).
A party seeking summary judgment always bears the initial burden of establishing the absence of a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S. Ct. 2548, 91 L. Ed. 2d 265 (1986). The moving party can satisfy this burden by: (1) presenting evidence that negates an essential element of the non-moving party's case or (2) demonstrating that the non-moving party failed to establish an essential element of the non-moving party's case on which the non-moving party bears the burden of proving at trial. Id. at 322-23, 106 S. Ct. 2548.
Once the moving party establishes the absence of genuine issues of material fact, the burden shifts to the non-moving party to set forth facts showing that a genuine issue of disputed fact remains. Celotex, 477 U.S. at 322, 106 S. Ct. 2548. However, the non-moving party is required by Federal Rules of Civil Procedure, Rule 56(e)[2] to go beyond the pleadings and designate specific facts showing that there is a genuine issue for trial. Id. at 324, 106 S. Ct. 2548. Conclusory allegations unsupported by factual allegations are insufficient to create a triable issue of fact so as to preclude summary judgment. Hansen v. United States, 7 F.3d 137, 138 (9th Cir. 1993) (citing Marks v. Dep't of Justice, 578 F.2d 261, 263 (9th Cir.1978)). A non-moving party who has the burden of proof at trial must present enough evidence that a "fair-minded jury could return a verdict for the [opposing party] on the evidence presented." Anderson, 477 U.S. at 255, 106 S. Ct. 2505.
Courts apply "traditional equitable principles" in deciding whether to grant a permanent injunction:
[A] plaintiff seeking a permanent injunction must demonstrate: (1) that it has suffered an irreparable injury; (2) that remedies available at law, such as monetary damages, are inadequate to compensate for that injury; (3) that, considering the balance of hardships between the plaintiff and defendant, a remedy in equity is warranted; and (4) that the public interest would not be disserved by a permanent injunction.
Reno Air Racing Ass'n v. McCord, 452 F.3d 1126, 1137 n. 11 (9th Cir.2006) (quoting eBay Inc. v. MercExchange LLC, 547 U.S. 388, 126 S. Ct. 1837, 1840, 164 L. Ed. 2d 641 (2006)).
Plaintiff Hokto Kinoko moves for summary judgment on its claims against Defendant Concord for 1) trademark infringement and 2) common law unfair competition, and on all of Defendant Concord's counterclaims and affirmative defenses.
However, Plaintiff Hokto Kinoko's Motion for Summary Judgment currently before this Court relates only to four out of the original ten federal registrations pled in Plaintiff's First Amended Complaint. Accordingly, Plaintiff has informed the Court that it seeks summary judgment on its trademark infringement claim only with respect to the following four federally registered trademarks:
Registration No. 3210268
*1022
Moreover, while Plaintiff also initially pled a cause of action for false designation of origin in its FAC, Plaintiff has not submitted briefing to the Court on this claim in its summary judgment motion. As such, the Court will not determine whether Plaintiff is entitled to summary judgment on its claim for false designation of origin.
To sustain a claim for trademark infringement, Hokto Kinoko must show (1) that it has valid trademark rights; and (2) that Concord's sale of foreign packaged mushrooms is likely to confuse United States consumers. See Comedy III Prods., Inc. v. New Line Cinema, 200 F.3d 593, 594 (9th Cir.2000).
The initial inquiry relates to whether Plaintiff Hokto Kinoko has valid trademark rights in the following trademarks at issue in this Motion, namely those shown in U.S. Trademark Registration Nos. 3210268, 3182866, 3179700, and 3182867. Under the Lanham Act, registration of a trademark creates a rebuttable presumption that the mark is valid, but the presumption evaporates as soon as evidence of invalidity is presented. 15 U.S.C. § 1051 et seq.
Here, Plaintiff maintains that in June 2010, for good and valuable consideration, Hokuto Japan assigned all rights and interests in the Hokto Marks to Plaintiff Hokto Kinoko. [See Shigeta Decl., ¶ 5, Ex. E.] In support of this assertion, Plaintiff has attached, to the Shigeta Declaration, Exhibit E, which is a copy of the Assignment recorded with the United States Patent and Trademark Office.[3]
*1023 Defendant Concord disputes this fact and alleges that Plaintiff Hokto Kinoko has not provided any proof of the consideration paid for the alleged assignment, and therefore maintains that the alleged assignment may be invalid. [UF No. 18 Def.'s Mot. for Summ. J.] However, Plaintiff maintains that in consideration, Hokuto Japan received the benefit of no longer "having the burden and expense of policing the Marks . . . in the United States." Moreover, Plaintiff asserts that consideration received by Plaintiff Hokto Kinoko included having control of the Marks, . . . protecting and policing the Marks in the United States, and ensuring the quality of goods sold under the Marks in the United States." [Pl.'s UF No. 18.]
Defendant Concord maintains that such purported consideration is not legal consideration. However, the Ninth Circuit instructs this Court to find otherwise. See Kremen v. Cohen, 337 F.3d 1024, 1028 (9th Cir.2003) (stating that consideration can be found when the other party received some benefit they were not already entitled to receive and finding that the adequacy of consideration doesn't matter, and that consideration must be "something of real value"). Additionally, the Court finds that Defendant has not designated specific facts to show that there is a genuine issue here with regard to its claim of lack of consideration.
Accordingly, the Court finds that Defendant Concord has not met its burden in establishing that a triable issue of fact remains with regard to whether Plaintiff Hokto Kinoko has valid trademark rights in the trademarks at issue in this Case. Defendant Concord has not presented the Court with affirmative evidence to establish that a genuine issue exists with regard to the existence of consideration in relation to the assignment of trademark rights from Third-Party Defendant Hokuto Japan to Plaintiff Hokto Kinoko. Therefore, the Court finds that Defendant has not presented sufficient evidence regarding invalidity and has therefore not successfully rebutted the presumption that registration of a trademark supports the finding of a valid mark. See 555-1212.com, Inc. v. Commc'n House Intern., Inc., 157 F. Supp. 2d 1084 (N.D.Cal.2001).
The Court must now determine if there are triable issues of fact regarding whether Concord's sale of foreign packaged mushrooms is likely to confuse United States consumers. This issue is critical in determining whether the Court should grant summary judgment on both Plaintiff's claims for trademark infringement and common law unfair competition. The element of likelihood of confusion applies to both claims. Plaintiff Hokto Kinoko argues that there is a high likelihood of confusion between Concord's sale of Hokuto Japan's foreign packaged mushrooms and Hokto Kinoko's U.S. locally grown mushrooms.
The core element of trademark infringement is the likelihood of confusion, i.e., whether the similarity of the marks is likely to confuse customers about the source of the products. E. & J. Gallo Winery v. Gallo Cattle Co., 967 F.2d 1280, 1290 (9th Cir.1992). The Ninth Circuit looks to the following factors for guidance in determining the likelihood of confusion: similarity of the conflicting designations; relatedness or proximity of the two companies' products or services; strength of the mark; marketing channels used; degree of care likely to be exercised by purchasers *1024 in selecting goods; defendant's intent in selecting its mark; evidence of actual confusion; and likelihood of expansion in product lines. See Dr. Seuss Enters. v. Penguin Books USA, Inc., 109 F.3d 1394, 1404 (9th Cir.1997).
Specifically, in the context of gray market goods, the likelihood of confusion relates to the existence of material differences between the allegedly infringing good and the registrant's product. See Grupo Gamesa S.A. De C.V. v. Dulceria El Molino, Inc., 39 U.S.P.Q.2d 1531, 1533 (C.D.Cal.1996). In general terms, a gray market good, often referred to as a parallel import, is "[a] foreign-manufactured good, bearing a valid United States trademark, that is imported without the consent of the United States trademark holder." K Mart Corp. v. Cartier, Inc., 486 U.S. 281, 285, 108 S. Ct. 1811, 100 L. Ed. 2d 313 (1988). "[T]he ultimate issue in a trademark infringement suit against the importer of gray market imports is the factual question of likelihood of confusion of U.S. customers." Am. Circuit Breaker Corp. v. Or. Breakers Inc., 406 F.3d 577, 584 (9th Cir.2005). Liability for the importation of goods bearing an identical mark "turns on whether the allegedly infringing goods are genuine or ``differ materially' from the plaintiff's goods." Summit Tech. v. High-Line Med. Instruments Co., 922 F. Supp. 299, 308 (C.D.Cal.1996). See PepsiCo, Inc. v. Reyes, 70 F. Supp. 2d 1057, 1059 (C.D.Cal.1999) (finding that the sale of gray market products under the same trademarks as the authorized products is likely to confuse customers if these gray market products differ materially from the authorized products).
The inquiry of whether a product qualifies as a genuine product turns on the question of whether material differences exist between the allegedly infringing good and the registrant's product. Under the Lanham Act, imported goods are not "genuine" if they differed materially from the authorized version. See Monte Carlo Shirt, Inc. v. Daewoo Intern. (America) Corp., 707 F.2d 1054, 1057 (9th Cir.1983).
Therefore, the threshold inquiry in resolving whether summary judgment should be granted on Plaintiff's trademark infringement claim is whether the Defendant has met its burden to prove that there are no genuine issues of fact regarding the existence of material differences between Plaintiff Hokto Kinoko's U.S. produced and Japanese imported mushrooms and the Japanese mushrooms imported by Defendant Concord.
As an initial matter, it is undisputed that both the Plaintiff Hokto Kinoko's U.S. produced mushrooms and the Hokuto Japan Japanese mushrooms imported by Concord are both sold under the same Hokto Marks. Defendant Concord argues that it cannot be held to infringe the Hokto Marks for importing the same genuine goods imported by Plaintiff Hokto Kinoko. However, Plaintiff Hokto Kinoko maintains that the goods imported by Defendant Concord are not considered genuine because there are material differences between those mushrooms and Hokto Kinoko's U.S. produced and Japanese imported mushrooms.
Defendant Concord relies on NEC Electronics v. CAL Circuit Abco, where the Ninth Circuit held that trademark law does not reach the sale of genuine goods bearing a true mark even though such sale is without the mark owner's consent. 810 F.2d 1506, 1510 (9th Cir.1987). However, the Court finds that Defendant's reliance on NEC Electronics is misplaced because in that case, the parties stipulated that defendant's imported products were genuine products. See id. Such is not the case here. In fact, Defendant Concord has not met its burden to survive summary judgment on the issue of whether Defendant *1025 Concord's imported mushrooms qualify as genuine goods for purposes of trademark protection.
While Defendant Concord avers that it is undisputed that its imported mushrooms are considered genuine products, Plaintiff Hokto Kinoko contends otherwise. Specifically, Plaintiff points to affirmative evidence, through the Declaration of Katsumi Shigeta, that the mushrooms imported from Hokuto Japan by Defendant Concord are not genuine goods because they materially differ from both Hokto Kinoko's U.S. produced mushrooms and the mushrooms it imports from Hokuto Japan. [Shigeta Decl., ¶ 3.] The mushrooms Plaintiff Hokto Kinoko imported from Japan for the U.S. market were grown under special conditions not normally used by Hokuto Japan. [Id.] Specifically, the growing media was changed to meet the United States Certified Organic standards. [Id.] Furthermore, Hokuto Japan and Plaintiff Hokto Kinoko developed special packaging for Plaintiff Hokto Kinoko's use in the U.S. market that used the English language, as compared to Hokuto Japan's normal Japanese language. [Id.]
The Court finds that while Plaintiff Hokto Kinoko points to affirmative evidence with regard to the issue of genuine products, Defendant has not negated its burden to prove that there are triable issues of fact regarding whether the Defendant's imported mushrooms are considered genuine goods. As such, the issue of whether Defendant's imported mushrooms materially differ from both Plaintiff's domestically grown and Japanese imported mushrooms is also important for the Court to consider.
Material differences can relate to a product's quality control standards, packaging, and price. See Societe Des Produits Nestle, S.A. v. Casa Helvetia, Inc., 982 F.2d 633, 641 (1st Cir.1992) (enjoining gray market chocolates that were not manufactured to the same quality control standards and contained numerous differences in composition, configuration, packaging, and price). Moreover, material differences can pertain to including nutritional information on labeling and packaging. See Ferrero U.S.A., Inc. v. Ozak Trading, Inc., 753 F. Supp. 1240, 1244 (D.N.J.1991) (finding that unauthorized product differed materially because, among other things, label did not contain information concerning serving size, servings per container, and nutrient and mineral composition). See also PepsiCo, 70 F.Supp.2d at 1059 (finding use of Spanish versus English a material difference); Nestle, 982 F.2d at 641 (finding use of Spanish and English on gray goods versus Italian, French, and English on authorized goods a material difference).
Different quality control standards also qualify as material differences. Grupo Gamesa S.A., 39 U.S.P.Q.2d at 1553. See also PepsiCo, 70 F.Supp.2d at 1059 (finding material difference because gray goods did not comply with FDA requirements). Lastly, different marketing strategies and techniques have been evaluated in determining whether material differences exist between a registrant's product and the allegedly infringing gray good. PepsiCo, 70 F.Supp.2d at 1060.
Defendant Concord argues that its imported Hokuto Japan mushrooms are considered "genuine" or identical products to the Plaintiff Hokto Kinoko's imported mushrooms. As such, Defendant maintains that courts have held that the unauthorized sale of genuine goods does not constitute trademark infringement because it does not cause consumer confusion. See, e.g., NEC Elec., 810 F.2d at 1509.
By contrast, Plaintiff asserts that Hokuto Japan's Japanese produced mushrooms are only "genuine goods" in Japan, and Hokto Kinoko's products are "genuine *1026 goods" in the United States. Plaintiff maintains that Hokuto Japan's Japanese mushrooms are not "genuine goods" in the United States because there are material differences between the Hokuto Japan Japanese products and Hokto Kinoko's U.S. products. Plaintiff argues that the proper comparison is between Hokto Kinoko's genuine goods, whether domestically produced or imported and Concord's unauthorized imported goods.
The Court finds Plaintiff's arguments here persuasive. Plaintiff relies primarily on Nestle in furthering its argument about the existence of material differences between the imported mushrooms by Defendant Concord and Plaintiff's mushrooms manufactured in the United States.
In Nestle, the First Circuit found infringement because the Venezuelan manufactured chocolates differed materially from the "Perugina" chocolates manufactured in Italy and authorized for the U.S. market. 982 F.2d at 641. As the First Circuit held in Nestle, "when dealing with the importation of gray goods, a reviewing court must necessarily be concerned with subtle differences, for it is by subtle differences that consumers are most easily confused." Id. Thus, in gray goods cases, "the threshold of materiality is always quite low." Id.
The Court finds the reasoning in Nestle particularly instructive in determining that Plaintiff has sufficiently presented to the Court that there are no genuine issues of fact regarding whether there are material differences between Hokto Kinoko's U.S. produced and Japanese imported mushrooms and those imported by Defendant Concord. On the other hand, the Court finds that Defendant Concord has not met its burden to show that triable issues of fact remain.
The Court finds that material differences in growing conditions, labeling and packaging information, warranty and customer support, and quality control between packaged mushrooms sold by Defendant Concord and the Hokto Kinoko U.S. produced and Japanese imported mushrooms demonstrate that there is a high likelihood of confusion regarding the nature and origin of mushrooms bearing the Hokto Kinoko Marks.
With regard to material differences in growing conditions, there is no genuine issue of fact that Concord's imported mushrooms are grown under non-organic conditions. By contrast, Hokto Kinoko's U.S. produced and imported mushrooms are grown under conditions that are approved as meeting the Organic Certifier's standards.
Furthermore, the labeling and packaging information between the Hokto Kinoko and Hokuto Japan products have language and design differences. The authorized domestic packaging, states that mushrooms are "100% Organic," "USDA Organic" and "Certified Organic by GOCA," while the imported product has no claim to being Organic or Certified Organic. [Shigeta Decl., ¶ 13, Ex. G.] Moreover, the domestic product contains the familiar nutrition information such as serving size, servings per container, calorie content in English along with vitamin and mineral content. [Shigeta Decl.,¶ 15, Ex. H.] Concord's imported Hokuto Japan products do not contain such information. [Shigeta Decl., ¶ 13, Ex. G.]
Additionally, the packaging of Defendant Concord's imported mushrooms specifies weights based on the metric system (which is used in Japan): provides hours of customer support based on the Japanese time zone using a 24-hour notation ("13:00-17:00"); includes information uniquely designed for the Japanese market (including the website address for the Japanese parent company (http: //www.hokto-Kinoko.co.jp), and provides a Japanese *1027 telephone number "TEL. XXX-XXX-XXXX." [Shigeta Decl., ¶ 13, Ex. G.] The Hokto Kinoko goods, on the other hand, indicate they are "produced and packed by Hokto Kinoko Company, San Marcos, California," and that it is a "Product of the U.S.A." Weights are in English metric units, e.g., 3.5 ounces (100 grams). [Shigeta Decl., ¶ 15, Ex. H.]
With regard to the issue of mushrooms imported by Hokto Kinoko from Hokuto Japan, the mushrooms imported by Hokto Kinoko for the U.S. market were grown under special conditions not normally used by Hokuto Japan. [Shigeta Decl., ¶ 3.] Plaintiff avers that the growing media was changed to meet the United States Organic standards. [Id.] Defendant disputes this by arguing that Hokto Kinoko is referring to its American-grown product here and not the product it imports from its parent company, Hokuto Japan. However, the Court finds that Defendant offers no credible evidence in support of this contention. Rather, Defendant cites to the deposition transcript of Kazumi Ikeda, Vice President of Production at Hokto Kinoko, which does not affirm that Hokto Kinoko imports the same mushrooms as Defendant Concord. Instead, the testimony indicates that the mushrooms imported by Hokto Kinoko from Hokuto Japan were organic products specifically grown for the U.S. market and not the same products imported by Defendant Concord. [Posey Decl., ¶ 3, Ex. B, Ikeda Dep. 72: 4-9.]
Furthermore, Plaintiff asserts that Hokuto Japan and Hokto Kinoko developed special packaging for Hokto Kinoko's use in the U.S. market that used the English language, as compared to Hokuto Japan's normal Japanese language. [Shigeta Decl., ¶ 3.] The English language packaging identified the product as "Certified Organic by QAI" and provided Nutrition Facts. [Id.]
Additionally, Hokuto Japan provides customer support information on its packaging uniquely designed for the Japanese market while Hokto Kinoko lists a California-based website as its contact information. Hokto Kinoko packages list a California-based website from which contact information, e.g. address, telephone and facsimile numbers and email address for comments and questions and suggestions, are readily available. [Shigeta Decl., ¶ 15, Ex. H.]
Moreover, there are substantial differences in the quality control exercised over Hokto Kinoko and Concord's mushrooms. For example, Hokto Kinoko maintains strict temperature settings and controls temperature both within their San Marcos facility and during transportation and storage of the mushrooms. However, Plaintiff maintains that Concord testified that shipping companies can use their own temperature settings without any specific setting provided by Concord when transporting goods.
Accordingly, the Court finds that Plaintiff has put forth affirmative evidence to show that there are material differences between Hokto Kinoko's U.S. produced mushrooms and Defendant Concord's mushrooms. Furthermore, Plaintiff has put forth evidence to show that there are material differences between the mushrooms it imports from Hokuto Japan and Defendant's imported mushrooms from Japan.
With respect to the differences between Hokto Kinoko's Japanese imported mushrooms and Defendant Concord's Japanese imported mushrooms, Plaintiff has also met its burden to show that there are no genuine issues of material fact on the existence of material differences between these products. Specifically, Plaintiff Hokto Kinoko offers affirmative evidence to prove material differences with respect *1028 to growing conditions, labeling and packaging info, and quality control.
Accordingly, the Court finds that the Defendant has not met its burden of showing that genuine issues of material fact remain as to whether Hokto Kinoko mushrooms imported from Hokuto Japan materially differ from those imported by Defendant with respect to quality control. The Court finds that the evidence put forth by Defendant Concord is not sufficient to sustain its burden under summary judgment.
Moreover, while there is no mechanical way to determine the point at which a difference becomes "material," the threshold of materiality is always quite low in gray goods cases. See Lever Bros. v. United States, 877 F.2d 101, 103, 108 (D.C.Cir.1989) (finding minor differences in ingredients and packaging between versions of deodorant soap to be material); Ferrero, 753 F.Supp. at 1241-49, 1247 (finding a one-half calorie difference in chemical composition of breath mints, coupled with slight differences in packaging and labeling, to be material); PepsiCo Inc. v. Nostalgia, 18 U.S.P.Q.2d 1404, 1405 (N.D.Ill.1991) (finding "differences in labeling, packaging and marketing methods" to be material); PepsiCo v. Giraud, 7 U.S.P.Q.2d 1371, 1373 (D.P.R.1988) (finding differences not readily apparent to the consumercontainer volume, packaging, quality control, and advertising participationto be material); Dial Corp. v. Encina Corp., 643 F. Supp. 951, 952 (S.D.Fla. 1986) (finding differences in formulation and packaging of soap products to be material).
Here, Plaintiff Hokto Kinoko has pointed to material differences in growing conditions, labeling and packaging info, warranty and customer support, and quality control. The Court finds that such differences in conjunction with identical Hokto Marks appearing on Hokto Kinoko's U.S. produced mushrooms, their Japanese imported mushrooms, and Defendant's Japanese imported mushrooms from Hokuto Japan, creates a distinct potential for consumer confusion. See Ferrero, 753 F.Supp. at 1247. See also Nestle, 982 F.2d at 641 (finding that the existence of any difference between the registrant's product and the allegedly infringing gray good that consumers would likely consider to be relevant when purchasing a product creates a presumption of consumer confusion sufficient to support a Lanham Trademark Act claim).
Accordingly, the Court finds that there are no genuine issues of fact on whether there are material differences between Defendant Concord's imported Japanese mushrooms, Plaintiff Hokto Kinoko's U.S. produced mushrooms, as well as the Hokuto Japan mushrooms imported by Plaintiff Hokto Kinoko. Defendant has failed to point to specific facts and has instead made a series of conclusory allegations, which are insufficient in defeating summary judgment. See Hansen, 7 F.3d at 138 (finding that conclusory allegations unsupported by factual allegations are insufficient to create a triable issue of fact so as to preclude summary judgment).
Defendant's argument that it is importing a genuine good lacks merit. A product of Hokuto Japan may be a "genuine product" in Japan, but it is not necessarily a genuine product in the U.S. To be a genuine product in the U.S., it must be identical to authorized products sold in the U.S. and not contain material differences with the authorized product. See Monte Carlo Shirt, Inc., 707 F.2d at 1057.
Moreover, as previously discussed, it is a finding of material differences between the gray market imports and the authorized imports that can create a likelihood of confusion. See Nestle, 982 F.2d at 641. See also PepsiCo, Inc. v. Torres, 27 U.S.P.Q.2d 1948, 1950 (C.D.Cal.1993) *1029 (holding that United States courts have repeatedly found that the unauthorized importation into the United States of goods legitimately manufactured abroad under a mark used in the United States is likely to result in confusion where there are material differences between the domestic and foreign goods).
Furthermore, although disfavored in trademark infringement cases, summary judgment may be entered when no genuine issue of material fact exists. See Surfvivor Media, Inc. v. Survivor Productions, 406 F.3d 625 (9th Cir.2005). The Ninth Circuit has held that likelihood of confusion in a trademark infringement suit against the importer of gray market imports is a question of fact that is routinely submitted for jury determination. Levi Strauss & Co. v. Blue Bell, Inc., 778 F.2d 1352, 1356 n. 5 (9th Cir.1985); Interstellar Starship Servs., Ltd. v. Epix, Inc., 184 F.3d 1107, 1109 (9th Cir.1999). However, whether likelihood of confusion is more a question of law or one of fact can depend on the circumstances of each particular case. Alpha Industries, Inc. v. Alpha Steel Tube & Shapes, Inc., 616 F.2d 440, 443 (9th Cir.1980). And, a question of fact may be resolved as a matter of law if reasonable minds cannot differ and the evidence permits only one conclusion. See Sanders v. Parker Drilling Co., 911 F.2d 191, 194 (9th Cir.1990).
The Ninth Circuit has identified eight factors to determine whether there is a likelihood of confusion: (1) the similarity of the mark(s), (2) the strength of the mark(s), (3) evidence of actual confusion, (4) the proximity or relatedness of the goods, (5) the degree to which the marketing channels used for the goods converge, (6) the type of goods and the degree of care likely to be exercised by the purchasers, (7) the defendant's intent in selecting the mark, and (8) the likelihood of expansion of the product lines. AMF, Inc. v. Sleekcraft Boats, 599 F.2d 341 (9th Cir. 1979). The test is a pliant onesome factors are more important than others, and the factors need not be mechanically added up in order to find a likelihood of confusion. Dreamwerks Production Group, Inc. v. SKG Studio, 142 F.3d 1127, 1129 (9th Cir.1998).
The legal conclusion that confusion is likely must rest on the particular facts of the case, but when all of the material facts have been determined, the ultimate determination of likelihood of confusion lies within the exclusive jurisdiction of the court. See Alpha Industries, Inc. v. Alpha Steel Tube & Shapes, Inc., 616 F.2d 440, 443-44 (9th Cir.1980). Plaintiff Hokto Kinoko successfully advances a series of arguments with regard to likelihood of confusion. First, with respect to the similarity of the mark, there is no dispute that the Hokto Marks used on the packaging for Hokto Kinoko's U.S. produced and Japanese imported mushrooms and the Hokuto Japan mushrooms imported to the U.S. by Defendant Concord are the same. There is no genuine issue of fact regarding the similarity of the marks.
Second, the strength of the Hokto Marks also weigh in favor of a finding of likelihood of confusion. The purpose of examining the strength of the plaintiff's mark is to determine the scope of trademark protection to which the mark is entitled. See Entrepreneur Media, Inc. v. Smith, 279 F.3d 1135, 1141 (9th Cir. 2002). The more unique the mark, the greater the degree of protection. See id.
The Marks at issue here include a series of mushroom character marks as well as the name "Hokto." "Fanciful" marks consist of "coined phrases" that also have no commonly known connection with the product at hand. See Dreamwerks, 142 F.3d at 1130 n. 7. A *1030 mark is "strong" if it is memorable and if the public would likely associate it with the mark's owner. Brookfield Comm., Inc. v. West Coast Entm't Corp., 174 F.3d 1036, 1058 (9th Cir.1999). Analysis of this prong serves to determine the scope of trademark protection to which the mark is entitled; more unique marks are entitled to greater protection. Surfvivor, 406 F.3d at 631. Marks that have no commonly known connection with the product, whether the marks consist of common words or coined phrases, are considered the strongest marks. See id. at 631-32.
In this case, the Court finds that Hokto is a unique term that is entitled to more protection than if the term was merely generic or descriptive. Moreover, the mushroom like characters are significantly distinct. Accordingly, the Court finds the strength of the marks at issue here also favors a finding of likelihood of confusion.
Third, with regard to the issue of actual confusion, the Ninth Circuit has recognized that evidence of actual confusion is not required to establish likelihood of confusion. See American Intern. Group, Inc. v. American Intern. Bank, 926 F.2d 829 (9th Cir.1991). While there is no evidence of actual confusion in the record here, the Court finds that the lack of evidence of actual confusion is not a material fact. See Network Automation, Inc. v. Advanced Systems Concepts, Inc., 638 F.3d 1137, 1145 (9th Cir.2011) (recognizing that the [likelihood of confusion] factors are intended as an adaptable proxy for consumer confusion, not a rote checklist).
Fourth, the proximity or relatedness of the goods also favors a finding of likelihood of confusion. Goods are proximate if they are "similar in use and function" and "would be reasonably thought by the buying public to come from the same source if sold under the same mark." Sleekcraft, 599 F.2d at 348, 350. Both Plaintiff Hokto Kinoko and Defendant Concord sell mushrooms. It is undeniable that the products have the same uses and functions.
Fifth, the Court must next consider "whether the predominant purchasers of the parties' goods are similar or different, and whether the parties' marketing approaches resemble one another." Aurora World, Inc. v. Ty, Inc., 719 F. Supp. 2d 1115, 1162 (C.D.Cal.2009) (citing Gray v. Meijer, Inc., 295 F.3d 641 (6th Cir.2002)). The greater the degree of overlap, the more likely there is to be confusion. Sleekcraft, 599 F.2d at 353.
Here, Hokto Kinoko and Defendant Concord are in direct competition. Both parties have submitted evidence that they directly market their mushrooms to grocery stores. [Shigeta Decl., ¶ 16; Posey Decl., ¶ 16, Ex. P]. As such, the Court finds that this factor also favors a finding of likelihood of confusion.
Sixth, the Court need consider the type of goods and the degree of care likely to be exercised by the purchasers. Likelihood of confusion is determined on the basis of a "reasonably prudent consumer," so courts have expected consumers "to be more discerningand less easily confusedwhen [they are] purchasing expensive items." Brookfield, 174 F.3d at 1060. "On the other hand, when dealing with inexpensive products, customers are likely to exercise less care, thus making confusion more likely." Id.
Mushrooms are considered a low-cost consumer good, purchased at a grocery store. A reasonably prudent consumer may not carefully inspect the back label of a package of mushrooms to ascertain who produced it. Therefore, with respect to the purchase of mushrooms, the consumer is likely to exercise very little care. As such, the Court finds that the "degree of consumer care" factor favors Plaintiff *1031 Hokto Kinoko here and a finding of likelihood of confusion.
Seventh, the defendant's intent in selecting the mark must also be evaluated in determining the likelihood of confusion. Knowing adoption of a mark that is closely similar to one that is used by another is a basis for inferring intent to deceive the public, which is "strong evidence of a likelihood of confusion." See Official Airline Guides, Inc. v. Goss, 6 F.3d 1385, 1394 (9th Cir.1993). Here, the fact that the mushroom packages carry the same Hokto Marks permits an inference of intent. See K-Swiss, Inc. v. USA Aisiqi Shoes Inc., 291 F. Supp. 2d 1116, 1124 (C.D.Cal.2003).
With regard to evidence of Defendant's intent, Plaintiff Hokto Kinoko points to the deposition testimony of David Tung, Concord's President. Plaintiff specifically references Mr. Tung's testimony that "compared to other suppliers of maitake mushrooms, the quality of the Hokto brand is better." [Orme Decl., Ex. TT, D. Tung. Dep. 51:4-7.] Overall, Defendant has not submitted any evidence to the Court to negate the inference that its intent in selecting the Hokuto Japan mushroom products to import and sell was to trade off the reputation of the Hokto brand. Therefore, while the Court finds that it is not one of the strongest factors in support of a likelihood of confusion finding, it nonetheless weighs in favor of finding likelihood of confusion.
Lastly, the Court considers the likelihood of expansion of the product lines. A strong possibility that either party will expand its business to compete with the other weighs in favor of finding infringement. Sleekcraft, 599 F.2d at 354. However, where, as here, the parties already compete to a significant degree because they sell related products and use similar marketing channels, the Court finds that this factor is relatively unimportant to the likelihood of confusion analysis. See Brookfield Comm., Inc., 174 F.3d at 1055. Neither party has submitted evidence of planned expansion, and Plaintiff Hokto Kinoko does not allege that Concord's presence is hindering its expansion plans.
Based on the foregoing, Defendant Concord has not put forth affirmative evidence to prove the existence of genuine issues with regard to both whether Hokuto Japan's Japanese mushrooms imported by Defendant Concord are "genuine goods" in the United States and whether there are material differences between Plaintiff Hokto Kinoko's U.S. produced and Japanese imported mushrooms and the Japanese mushrooms imported by Defendant Concord.
Furthermore, a thorough review of the likelihood of confusion factors confirms that Defendant has not met it burden to set forth facts showing that genuine issues of disputed fact remain with regard to a finding of likelihood of confusion. See PepsiCo, Inc., 27 U.S.P.Q.2d at 1950. In fact, the Court finds that the relevant factors support a finding of likelihood of confusion as a matter of law. Accordingly, the Court GRANTS Plaintiff's Motion for Summary Judgment on its claim for trademark infringement.
Whether Concord's sale of foreign packaged mushrooms is likely to confuse United States consumers is also critical in determining whether the Court should grant summary judgment on Plaintiff's claim for common law unfair competition. The element of likelihood of confusion also applies to this claim.
Moreover, the courts have uniformly held that common law and statutory trademark infringement are merely specific aspects of unfair competition. New West Corp. v. NYM Co. of California, Inc., 595 F.2d 1194, 1201 (9th Cir.1979). Under the *1032 Lanham Act, the ultimate test is whether the public is likely to be deceived or confused by the similarity of the marks. Smith v. Chanel, Inc., 402 F.2d 562, 563 (9th Cir. 1968). "Whether we call the violation infringement, unfair competition or false designation of origin, the test is identicalis there a ``likelihood of confusion?'" New West Corp., 595 F.2d at 1201.
The decisive test of common law unfair competition is whether the public is likely to be deceived about the source of goods or services by the defendant's conduct. Academy of Motion Picture Arts and Sciences v. Benson, 15 Cal. 2d 685, 690, 104 P.2d 650 (1940); South Bay Chevrolet v. General Motors Acceptance Corp., 72 Cal. App. 4th 861, 865, 85 Cal. Rptr. 2d 301 (4th Dist.1999). The likelihood of public confusion, although innocently created, will warrant injunctive relief against unfair competition. Tomlin v. Walt Disney Prods., 18 Cal. App. 3d 226, 231, 96 Cal. Rptr. 118 (2d Dist.1971).
The Court finds that Defendant has not put forth affirmative evidence to establish that there are triable issues of fact regarding whether Defendant Concord's sale of Japanese imported mushrooms that bear the registered Hokto Marks is likely to confuse United States consumers, who expect mushroom products bearing these marks to be the same as the products normally sold in the United States by Hokto Kinoko.
As courts have uniformly held that common law and statutory trademark infringement are merely specific aspects of unfair competition, a finding of likelihood of confusion under Plaintiff's trademark infringement claim also supports a finding of likelihood of confusion under Plaintiff's common law unfair competition claim. Accordingly, the Court GRANTS Plaintiff Hokto Kinoko's Motion for Summary Judgment on its claim for common law unfair competition.
Plaintiff requests that the Court enter a permanent injunction to preclude further infringing activity, in the event that the Court grant summary judgment in Plaintiff's favor on its claims for trademark infringement and unfair competition.
The Supreme Court noted in eBay Inc. v. MercExchange LLC, 547 U.S. 388, 126 S. Ct. 1837, 1840, 164 L. Ed. 2d 641 (2006), that to be entitled to a permanent injunction, a plaintiff must show:
(1) that it has suffered an irreparable injury;
(2) that remedies available at law, such as monetary damages, are inadequate to compensate for that injury;
(3) that, considering the balance of hardships between the plaintiff and defendant, a remedy in equity is warranted; and
(4) that the public interest would not be disserved by a permanent injunction.
Reno Air Racing Ass'n v. McCord, 452 F.3d 1126, 1137 n. 11 (9th Cir.2006) (quoting eBay Inc. v. MercExchange LLC, 547 U.S. 388, 126 S. Ct. 1837, 1840, 164 L. Ed. 2d 641 (2006)).
In trademark infringement or unfair competition actions, once the plaintiff establishes a likelihood of confusion, it is ordinarily presumed that the plaintiff will suffer irreparable harm if injunctive relief is not granted. Vision Sports, Inc. v. Melville Corp., 888 F.2d 609, 612 n. 3 (9th Cir.1989).
Hokto Kinoko argues that a permanent injunction is warranted because Concord's alleged infringing activity is currently ongoing which cannot be adequately compensated by monetary damages. Moreover, Concord argues that the balance of hardships weigh in favor of Hokto Kinoko, as Concord is free to purchase Hokto Kinoko's mushrooms from one of Hokto Kinoko's *1033 distributors. The only hardship to Concord is that it will likely cost more to buy the authorized Hokto Kinoko products versus the unauthorized and unlawful imported mushrooms from Japan. Additionally, Plaintiff avers that there is a great public interest in avoiding confusion by protecting trademark owners against the sale of infringing goods.
In Opposition, Defendant Concord argues that Plaintiff's request for a permanent injunction is overbroad. Defendant Concord argues that any injunction preventing Concord from selling genuine goods in the United States would violate first sale and exhaustion doctrines and is likely to be unconstitutional as a restraint on fair trade.
However, contrary to Concord's assertions, the Court finds that the proposed permanent injunction is limited to gray market goods imported by Defendant Concord and is therefore not overbroad. There are no restrictions placed on Defendant Concord, should Concord intend to import genuine goods.
Moreover, the Court finds that Plaintiff Hokto Kinoko has suffered an irreparable injury. As such, the Court GRANTS summary judgment in Plaintiff's favor on its claims for trademark infringement and unfair competition. Once infringement is shown, irreparable injury is generally presumed in a trademark case. See Abercrombie & Fitch Co. v. Moose Creek, Inc., 486 F.3d 629, 633 (9th Cir.2007).
Furthermore, the Court finds that the remedy at law here is inadequate. Although damages will remedy Concord's past acts, it will not remedy Concord's future acts. Additionally, the Court finds that the balance of hardships favors Plaintiff Hokto Kinoko. If the injunction does not issue, Defendant Concord would be more likely to continue violating Hokto Kinoko's rights, imposing a hardship on Plaintiff Hokto Kinoko. On the other hand, an injunction would impose little hardship on Concord because Concord is free to purchase Hokto Kinoko's mushrooms from one of Hokto Kinoko's distributors. The only hardship to Concord is that it will likely cost more to buy the authorized Hokto Kinoko products versus the unauthorized and unlawful imported mushrooms from Japan. The Court finds that this is simply not enough to tip the balance of hardship in Defendant Concord's favor.
Finally, the Court finds that the public interest would not be disserved by the issuance of the permanent injunction. Rather, preventing Concord from importing Japanese produced mushrooms with the Hokto Marks meant for sale only in Japan can benefit the public by preventing likelihood of confusion to consumers. In conclusion, the Court finds that the four factor test is sufficiently satisfied, and the Court GRANTS the permanent injunction. Specifically, the Court adopts the injunction language proposed by Plaintiff Hokto and will issue a separate order with regard to the permanent injunction.
Third-Party Defendant Hokuto Japan seeks summary judgment as to Third-Party Plaintiff Concord's claims for 1) Declaration of Cancellation of the Asserted Trademarks, 2) Declaration of License, 3) Declaration of Laches, 4) Declaration of Non-Infringement, and 5) Unfair Competition.
As a preliminary matter, Hokuto Japan argues that there is no present case or controversy with respect to the cancellation of the Hokto Marks between Concord and Hokuto Japan because Hokuto Japan *1034 is not the owner of the federal registrations at issue. Hokto Kinoko is the owner of the Hokto Marks[4] by assignment from Hokuto Japan on June 28, 2010. [See Shigeta Decl., ¶ 5, Ex. E.] In June 2010, for good and valuable consideration, Hokuto Japan assigned all rights and interests in the Hokto Marks to Plaintiff Hokto Kinoko. [See id.] This assignment also included the right to sue for past damages. See H & J Foods, Inc. v. Reeder, 477 F.2d 1053, 1056 (9th Cir.1973) (finding that a trademark owner may specifically assign all interests in the mark, including the right to sue for past infringement).
Defendant Concord disputes this fact and alleges that Plaintiff Hokto Kinoko has not provided any proof of the consideration paid for the alleged assignment, and therefore maintains that the alleged assignment may be invalid. However, as previously discussed, prevailing Ninth Circuit case law instructs this Court to find that there was proper legal consideration to make the assignment valid as Hokuto Japan did receive some benefit. See Kremen, 337 F.3d at 1028.
In order to bring a claim for trademark cancellation, the cancellation petitioner must plead and prove facts showing a "real interest" in the proceedings in order to establish standing. Rosso and Mastracco, Inc. v. Giant Food, Inc., 720 F.2d 1263, 1265 (Fed.Cir.1983). A cancellation petitioner must show that he is "more than an intermeddler" but rather has a personal interest, and that "there is a real controversy between the parties." Star-Kist Foods, Inc. v. P.J. Rhodes & Co., 735 F.2d 346, 349 (9th Cir.1984).
Additionally, a complaint for trademark cancellation in federal court must proceed against the party who currently owns the trademark, rather than an exclusive licensee authorized to use the trademark. See Informix Software, Inc. v. Oracle Corp., 927 F. Supp. 1283, 1286 (N.D.Cal.1996).
The Court finds that there is no present case or controversy with respect to the cancellation of the Hokto Marks between Concord and Hokuto Japan. The assignment made by Hokuto Japan to Hokto Kinoko contained legal consideration sufficient to make the assignment valid. With a valid assignment, there is no genuine issue of fact with regard to Hokuto Japan not being the current owner of the federal registrations at issue here. Finding the District Court for the Northern District of California's decision in Informix Software particularly instructive, the Court finds that Defendant Concord's declaratory relief claim for trademark cancellation should proceed against Hokto Kinoko, the party who currently owns the trademarks at issue. Therefore, the Court GRANTS summary judgment in favor of Hokuto Japan as to Defendant's third-party claim for Declaration of Cancellation of Asserted Trademarks against Hokuto Japan.
In order to grant a trademark license, the licensor must maintain sufficient control over the licensee. That control is necessary to meet the public expectations of quality and source of the goods. See Miller v. Glenn Miller Prods., Inc., 318 F. Supp. 2d 923, 937 (C.D.Cal.2004) ("a trademark owner has an affirmative duty to supervise and control the licensee's use of its mark, in order to protect the public's expectation that all products sold under a particular mark derive from a common *1035 source and are of like quality"). Moreover, a "licensee of a trademark . . . may not sublicense those rights to third parties without express permission from the original licensor." Miller v. Glenn Miller Prods., Inc., 454 F.3d 975, 978 (9th Cir. 2006).
Hokuto Japan maintains that Concord was never granted an express or implied license to use the Hokto Marks. However, Concord relies upon an agreement between Hokuto Japan and Maruichi regarding sales of Hokuto Japan's products to Maruichi in Japan ("Japanese Agreement") as a way to justify its claim that a license exists.
The Court finds that Defendant Concord has not met its burden to establish a genuine issue of material fact as to whether or not it acquired an implied or express license to use the Hokto Marks. Concord bases its claim to possess an implied or express license on the following allegations: 1) MRT is a company of Maruichi Produce, Inc., 2) the Japanese agreement requires reporting of all sales to Hokuto Japan, 3) MRT is an authorized supplier of Hokuto Japan, 4) Hokuto Japan . . . specifically controls the sales of Maruichi Produce, Inc., and 5) MRT had express permission to export Hokuto Japan's Hokto branded mushrooms.
However, the Court finds that Defendant Concord has offered no evidence that MRT is affiliated with Maruichi and that MRT is an authorized supplier of Hokuto Japan. Rather, Defendant's purported support for this assertion is nothing more than invoices and packing lists that make no mention about MRT being an authorized distributor for Hokuto Japan or that MRT is a subsidiary of Maruichi Produce, Inc. [Posey Decl., ¶ 11, Ex. K at 56-61.] Furthermore, while Concord alleges that Hokuto Japan . . . specifically controls the sales of Maruichi Produce, Inc., it does not cite to affirmative evidence in support of this conclusion. The only evidence of the relationship between Maruichi and MRT is that Maruichi may have some unknown ownership interest in MRT. [Orme Decl., ¶ 30, Ex. DD.] The Court finds that this ownership interest does not equate to an agreement between Hokuto Japan and MRT as Defendant Concord claims. Instead, the Japanese agreement is only between Hokuto Japan and Maruichi.
Under Concord's express license theory, Hokuto Japan granted an express license to Maruichi who granted an express license to MRT who granted an express license to Concord. Concord, however, has not produced any evidence of an express license. Rather, what Concord has produced is the Japanese agreement between Hokuto Japan and Maruichi that is not an express license for the export of Hokuto Japan products bearing the Marks. [Orme Decl., ¶ 31, Ex. EE (CF00001-4).]
Moreover, the Court finds that even if the Japanese agreement did grant an express license to Maruichi to sublicense the Marks to either Concord or MRT, which it did not, Concord could not possess an implied license to import the gray market goods. See Miller, 454 F.3d at 978 (finding that "a licensee of trademark . . . rights may not sublicense those rights to third parties without express permission from the original licensor").
The Court finds that there is no evidence of any express permission given by Hokuto Japan to Maruichi to sublicense the Hokto Marks to either Concord or MRT. As such, the Court finds that Defendant Concord has not met its burden to defeat summary judgment on its claim that it had an express or implied license under the Hokto Marks. Accordingly, the Court GRANTS summary judgment in favor of Third-Party Defendant Hokuto Japan on *1036 the Declaration of License third-party claim.
Laches requires a showing that "(1) [the] delay in filing suit was unreasonable, and (2) [that party] would suffer prejudice caused by the delay if the suit were to continue." Jarrow Formulas, Inc. v. Nutrition Now, Inc., 304 F.3d 829, 838 (9th Cir.2002). A party asserting laches must show that it suffered prejudice as a result of the plaintiff's unreasonable delay in filing suit. Id. The limitations period for laches starts "from the time the plaintiff knew or should have known about its potential cause of action." Tillamook Cntry. Smoker, Inc. v. Tillamook Cnty. Creamery Assoc., 465 F.3d 1102 (9th Cir. 2006).
The Court finds that Defendant Concord has not met its burden to establish a genuine issue of material fact as to whether Hokto Kinoko and Hokuto Japan acted diligently in asserting their rights under the Lanham Act and California unfair competition law. Defendant does not cite facts to support its claim for laches. Rather, Defendant relies on attorney argument to assert that Hokto Kinoko's trademark infringement and unfair competition claims are barred by laches. Defendant merely avers that Hokto Kinoko delayed in filing suit and both Hokto Kinoko and Hokuto Japan unreasonably waited to assert any claims against Defendant Concord. However, the Court finds that such conclusory statements do not create any genuine issues of material fact. See Hansen, 7 F.3d at 138.
Defendant has not pointed to any facts to suggest that Hokuto Japan or Hokto Kinoko knew or could have learned of Concord's importation of the gray market goods before November 2008. Hokuto Japan and Hokto Kinoko maintain that they first discovered the gray market goods in November 2008. This lawsuit was filed in February 2010. The Court finds that this fifteen month time frame does not constitute an unreasonable delay for purposes of establishing a laches defense.
Equally fatal is that Defendant Concord has failed to point to specific facts to show that it has suffered prejudice as a result of the alleged unreasonable delay. Proof of prejudice is an element of a claim for laches. See Jarrow Formulas, Inc., 304 F.3d at 838. Plaintiff has failed to provide the Court with any factual support on this element. Accordingly, the Court GRANTS summary judgment in favor of Hokuto Japan on Concord's claim for declaration of laches.
The Lanham Act specifically allows for assignment of rights in registered trademarks.
(a)(1) A registered mark or a mark for which an application to register has been filed shall be assignable with the goodwill of the business in which the mark is used, or with that part of the goodwill of the business connected with the use of and symbolized by the mark.
(3) Assignments shall be by instruments in writing duly executed. Acknowledgment shall be prima facie evidence of the execution of an assignment, and when the prescribed information reporting the assignment is recorded in the United States Patent and Trademark Office, the record shall be prima facie evidence of execution.
15 U.S.C. § 1060.
Hokuto Japan assigned its entire interest and goodwill for use of the Hokto Marks in the U.S. to Hokto Kinoko. [Shigeta Decl., ¶ 5, Ex. E.] Included in that assignment is "the right to file suit for past and future damages resulting from infringement of said marks." (Id.) The USPTO received notice of the assignment *1037 on July 12, 2010. (Orme Decl., ¶ 36, Ex. JJ.) The validity of the assignment has been previously addressed in this Order and will not be discussed here.
The Court finds that as Hokuto Japan assigned its rights to file claims for infringement, it is not the proper party under Concord's non-infringement counterclaim. See Mercado-Salinas v. Bart Enters. Intern., Ltd., 747 F. Supp. 2d 265 (D.P.R.2010) (finding that after assignment of a trademark, the assignee gains exclusive rights to the mark and has the right to sue infringers). Rather, Hokto Kinoko now has the exclusive right to sue infringers and oppose any claims made by alleged infringers for non-infringement. Therefore, the Court GRANTS summary judgment in favor of Hokuto Japan on Concord's claim for declaration of non-infringement.
Concord filed a third-party claim for unfair competition, under California Business and Professions Code § 17200 et seq. and under common law. Concord's statutory unfair competition claims are based on a purported group boycott of Concord by Hokuto Japan and Hokto Kinoko and their distributors of mushroom products.
Unfair competition, under California Business and Professions Code § 17200 et seq., "shall mean and include any unlawful, unfair, or fraudulent business act or practice. . ." Bus. & Prof. Code, § 17200. With respect to the unlawful prong, "[v]irtually any state, federal, or local law can serve as the predicate for an action under section 17200." Id. Concord contends that Hokuto Japan and Hokto Kinoko launched a group boycott against Concord. Group boycotts are unlawful under Section 1 of the Sherman Act and when such conduct is engaged in as a "business practice" it comes within the meaning of section 17200. See 15 U.S.C.A. § 1. See also Cal. Bus. & Prof. Code § 17200 et. seq.
Concord's basis for alleging a group boycott appears to stem from a November 13, 2008, letter sent by a Hokto Kinoko executive to one of its distributors shortly after learning of Concord's importation of gray market goods. As indicated in the letter, Hokto Kinoko had legitimate concerns regarding Concord's actions which "gives [goods with the Hokto Marks] an adverse brand image and also affects [Hokto Kinoko's] overall marketing strategy." [Orme Decl., ¶ 37, Ex. KK.]
Hokuto Japan maintains that no group boycott could exist for several reasons. First, no group boycott can be found when a defendant "sends letters to the wholesalers of approved service market products directing those companies not to sell to defendant" and also sends letters to franchises "notifying them that [plaintiff] was the sole approved distributor" because defendant had legitimate business reasons related to the exclusion. Tominaga v. Shepherd, 682 F. Supp. 1489, 1496 (C.D.Cal.1988).
Moreover, a company may freely choose who may purchase its products. See Estey & Assocs., Inc. v. McCulloch Corp., 663 F. Supp. 167, 172 (D.Or.1986) (noting that "this substitution of distributors is merely an exercise of the right to deal, or refuse to deal, with whomever [the supplier] defendants choose") (citing Monsanto Co. v. Spray-Rite Serv. Corp., 465 U.S. 752, 104 S. Ct. 1464, 79 L. Ed. 2d 775 (1984)). Therefore, Hokuto Japan avers that Hokto Kinoko's letter to a single distributor could not be considered a group boycott by Hokuto Japan where Hokto Kinoko sought to protect its brand image and distribution network.
The Court finds that Concord has failed to establish a genuine issue of fact in support of its claim that Hokuto Japan and *1038 Hokto Kinoko engaged in unfair competition. Concord only proffers the November 13, 2008 letter in support of its "group boycott" theory. The Court finds that Concord bases this assertion on a misreading in the letter that Hokuto Japan and Hokto Kinoko threatened to no longer sell to Hokto Kinoko's distributers if those distributors continued to sell mushrooms bearing the Hokto Marks to Concord. However, the Court finds that a review of the letter indicates no such threat. [Orme Decl., ¶ 37, Ex. KK.]
Equally important is that Concord continued to purchase mushrooms bearing the Marks from third party Hokto Kinoko distributor, Global Best and Yes Produce, after the alleged "group boycott," in November 2008. [Orme Decl., Exs. FF, NN, SS.] Both Hokto Kinoko's and Hokuto Japan's choice of distributors "is merely an exercise of the right to deal, or refuse to deal, with whomever [the suppliers] choose." Monsanto Co., 465 U.S. at 752, 104 S. Ct. 1464. The Court finds that an exercise of the right to deal does not amount to unfair competition. See id. Nor do Concord's allegations of purported witness tampering committed by Eva Cheung serve as evidence of unfair competition.
Therefore, the Court finds that Concord has not met its burden to prove that genuine issues of fact remain with regard to its claim for both statutory and common law unfair competition. Concord has not pointed to affirmative evidence to establish the existence of an alleged "group boycott." In fact, the Court finds that Concord's reliance on the November 13, 2008 letter is insufficient to meet its burden under summary judgment. See Hansen, 7 F.3d at 138. Accordingly, the Court GRANTS summary judgment in favor of Hokuto Japan on Concord's claim for statutory and common law unfair competition.
In sum, the Court GRANTS Third-Party Defendant Hokuto Japan's Motion for Summary Judgment in its entirety.
Defendant Concord moves for summary judgment on its third-party claims against Hokuto Japan and on all of its counterclaims and affirmative defenses against Plaintiff Hokto Kinoko. The Court has already ruled in favor of Hokuto Japan in its Motion for Summary Judgment with regard to all of the third-party claims asserted by Defendant Concord. Accordingly, discussion of the Court's position with respect to the third-party claims will not be repeated here. Rather, the Court will now address the Defendant's Motion for Summary Judgment and Plaintiff Hokto Kinoko's Motion for Summary Judgment on all of Defendant's counterclaims and affirmative defenses.
Defendant Concord's counterclaims against Plaintiff Hokto Kinoko include 1) Non-infringement on the asserted marks, 2) Non-liability for false designation of origin, 3) Non-liability for Hokto Kinoko's claim for common law unfair competition, 4) Invalidity of trademarks asserted by Plaintiff Hokto Kinoko, 5) Cancellation of trademarks asserted by Plaintiff Hokto Kinoko, 6) Declaration of License or Implied License, 7) Declaration of Laches, and 8) Unfair Competition.
The affirmative defenses include 1) Failure to state a claim, 2) Non Infringement of the Asserted Trademarks, 3) Laches, 4) Estoppel, 5) License, 6) Implied License, 7) Acquiescence, 8) Invalidity and Unenforceability of Trademarks Due to Inequitable Conduct, 9) Failure of Hokto Kinoko to join an indispensable party (Hokuto Japan), *1039 10) Waiver, 11) Unclean Hands, 12) and Statute of Limitations.[5]
The Court has previously addressed Plaintiff Hokto Kinoko's claim for trademark infringement against Defendant in this Order. Therefore, the Court will not repeat its discussion of infringement here. However, as a brief review, the marks at issue here are the same and used on the same type of products, mushrooms. Moreover, there are material differences between Concord's imported mushrooms, and the Hokto Kinoko domestically grown and Japanese imported mushrooms. As such, Concord's unauthorized imported mushrooms are not considered "genuine goods." Rather, the Court finds that they are considered infringements, as a matter of law, because they materially differ from Plaintiff's mushrooms and are therefore likely to confuse consumers.
As a finding of material differences between the allegedly infringing gray market good and the registrant's product supports a finding of likelihood of confusion as a matter of law, the Court GRANTS Plaintiff's Motion for Summary Judgment on its claim for trademark infringement. As the Court GRANTS Plaintiff's Motion for Summary Judgment on its claim for trademark infringement, the Court DENIES Defendant's Motion for Summary Judgment on both its counterclaim and affirmative defense for non-infringement of the asserted marks. Therefore, the Court GRANTS summary judgment in favor of Plaintiff and DENIES Defendant's Motion for Summary Judgment on both its counterclaim and affirmative defense for non-infringement of the asserted marks.
Plaintiff Hokto Kinoko has not moved for summary judgment on its claim for false designation of origin. Although Plaintiff has indicated in its Notice Motion that it seeks summary judgment on this claim, it did not make such argument in its briefing. Moreover, Defendant Concord also moved for summary judgment on its claim for non-liability for false designation of origin, yet also failed to proffer argument with regard to this claim.
To establish a false designation of origin claim, Plaintiff Hokto Kinoko must show: (1) the defendants used a false designation of origin; (2) the use occurred in interstate commerce; (3) that such false designation is likely to cause confusion, mistake or deception as to the origin, sponsorship, or approval of defendants' goods or services by another person; and (4) that plaintiff has been or is likely to be damaged. See 15 U.S.C. § 1125(a).
As both Plaintiff and Defendant have failed to provide the Court with proper argument and evidence with respect to Plaintiff's claim for false designation of origin and Defendant's counterclaim for non-liability for false designation of origin, the Court DENIES both Parties' request for summary judgment on this claim.
The Ninth Circuit has uniformly held that common law and statutory trademark *1040 infringement are merely specific aspects of unfair competition. New West Corp. v. NYM Co. of California, Inc., 595 F.2d 1194, 1201 (9th Cir.1979). Under the Lanham Act, the ultimate test is whether the public is likely to be deceived or confused by the similarity of the marks. Smith v. Chanel, Inc., 402 F.2d 562, 563 (9th Cir. 1968).
As previously discussed, Defendant has not put forth affirmative evidence to establish that there are triable issues of fact regarding whether Defendant Concord's sale of Japanese imported mushrooms that bear the registered Hokto Marks is likely to confuse United States consumers, who expect mushroom products bearing these marks to be the same as the products normally sold in the United States by Hokto Kinoko. Furthermore, a thorough review of the likelihood of confusion factors confirms that Defendant has not met its burden to set forth facts showing that genuine issues of disputed fact remain with regard to a finding of likelihood of confusion. See PepsiCo, Inc., 27 U.S.P.Q.2d at 1950. In fact, the Court finds that the relevant factors support a finding of likelihood of confusion as a matter of law.
As courts have uniformly held that common law and statutory trademark infringements are merely specific aspects of unfair competition, a finding of likelihood of confusion under Plaintiff's trademark infringement claim also supports a finding of likelihood of confusion under Plaintiff's common law unfair competition claim. Accordingly, the Court GRANTS summary judgment in favor of Plaintiff and DENIES Defendant's Motion for Summary Judgment on its counterclaim for non-liability for Hokto Kinoko's claim for common law unfair competition.
Defendant Concord asserts two grounds for invalidity of the Hokto Marks: 1) invalidity due to naked license, and 2) invalidity due to fraud.
It is well-established that "[a] trademark owner may grant a license and remain protected provided quality control of the goods and services sold under the trademark by the licensee is maintained." Moore Bus. Forms, Inc. v. Ryu, 960 F.2d 486, 489 (5th Cir.1992). But "[u]ncontrolled or ``naked' licensing may result in the trademark ceasing to function as a symbol of quality and controlled source." McCarthy on Trademarks and Unfair Competition § 18:48, at 18-79 (4th ed. 2001).
Consequently, where the licensor fails to exercise adequate quality control over the licensee, "a court may find that the trademark owner has abandoned the trademark, in which case the owner would be estopped from asserting rights to the trademark." Moore, 960 F.2d at 489. Such abandonment "is purely an ``involuntary' forfeiture of trademark rights," for it need not be shown that the trademark owner had any subjective intent to abandon the mark. McCarthy § 18:48, at 18-79. Accordingly, the proponent of a naked license theory "faces a stringent standard" of proof. Moore, 960 F.2d at 489.
Defendant Concord argues that the Hokto Marks are invalid on the basis of a purported "naked license." Hokuto Japan granted an exclusive license to Hokto Kinoko to sell mushroom products bearing the Hokto Marks in the United States from August 2008 to the first quarter of 2009. In September 2009, Hokuto Japan and Hokto Kinoko formalized their relationship with respect to the Hokto Marks by entering into a written Exclusive License Agreement. [Shigeta Decl., ¶ 3, Ex. A.] Defendant maintains that the 2009 Exclusive License Agreement entered between *1041 Hokto Kinoko and Hokuto Japan lacks provisions regarding quality control, policing quality control, and consideration. Defendant avers that this absence automatically forfeits the Hokto Marks.
In Opposition, Plaintiff Hokto Kinoko asserts that Concord bases its allegation of a purported naked license on the sole fact that the license agreement between Hokuto Japan and Hokto Kinoko did not specifically mention the quality of the goods sold.
The Court finds that while Concord is correct that the license agreement does not specifically mention the quality of goods, the absence of such a provision does not support a finding of a naked license. See Miller, 454 F.3d at 978, 992. "A naked license agreement need not contain an express quality control provision because trademark law, rather than the contract itself, confers the licensor the right and obligation to exercise quality control." Id. Concord has presented the Court with no evidence to establish that Hokuto Japan did not exercise quality control over goods sold under the Hokto Marks by its wholly-owned U.S. subsidiary Hokto Kinoko. In fact, the Court finds that Defendant Concord has not met the stringent standard of proof to maintain its naked license theory beyond summary judgment. See Moore, 960 F.2d at 489. Accordingly, the Court GRANTS summary judgment in favor of Plaintiff and DENIES Defendant's Motion for Summary Judgment on its counterclaim for invalidity of trademarks asserted by Plaintiff Hokto Kinoko due to naked license.
Defendant's arguments with regard to invalidity on the basis of fraud are similar to the arguments made under its claim for cancellation of trademarks. Accordingly, the Court will address such arguments under the discussion of Defendant's counterclaim for cancellation of trademarks. However, in short, the Court GRANTS summary judgment in favor of Plaintiff and DENIES Defendant's Motion for Summary Judgment on its counterclaim for invalidity of trademarks asserted by Plaintiff Hokto Kinoko due to fraud.
In order to prove fraud on the USPTO, the party seeking cancellation must show "a false representation regarding a material fact, the registrant's knowledge or belief that the representation is false, the intent to induce reliance upon the misrepresentation, and reasonable reliance thereon, and damages." Spin Master, Ltd. v. Zobmondo Entm't, LLC, 778 F. Supp. 2d 1052, 1061 (C.D.Cal.2011) (quoting Robi v. Five Platters, Inc., 918 F.2d 1439, 1444 (9th Cir.1990)).
"The falsity and intent prongs are separate, ``so absent the requisite intent to mislead the USPTO, even a material misrepresentation would not qualify as fraud under the Lanham Act warranting cancellation.'" Id. at 1061. Thus, ["m]ere negligence is not sufficient to infer fraud or dishonesty." Id. The burden to prove fraud is ``heavy,' and must be shown by clear and convincing evidence. Id. That heavy burden requires a "charge of fraud. . . be proven to the hilt . . . no room for speculation, inference or surmise and, . . . any doubt must be resolved against the charging party." Id. at 1061.
"Intent to deceive cannot be inferred solely from the fact that information was not disclosed; there must be a factual basis for a finding of deceptive intent." Levi Strauss & Co. v. Esprit U.S. Distrib., 588 F. Supp. 2d 1076, 1084 (N.D.Cal.2008) (granting summary judgment denying cancellation of mark on allegation of fraud).
In order to survive summary judgment, the party alleging fraud must *1042 show that there is a genuine issue as to whether the failure to make a disclosure to the USPTO was made "in bad faith or with knowledge" that disclosure was required. Far Out Productions, Inc. v. Oskar, 247 F.3d 986, 996-97 (9th Cir.2001). "[F]raud will not lie if it can be proven that the statement, though false, was made with a reasonable and honest belief that it was true." Id.
Defendant Concord moves for cancellation of Hokto Kinoko's trademark registrations based on allegations of fraud on the USPTO. In support of its claim of fraud, Concord argues that 1) Hokuto Japan's U.S. trademark attorney had no reason to believe Hokuto Japan had a bona fide intent to use the Hokto Marks on all of the goods listed in the registration applications, 2) that the U.S. attorney was willfully blind, 3) that the U.S. attorney acted recklessly, and 4) that the U.S. attorney intended to deceive the USPTO by failing to conduct a specific inquiry into Hokuto Japan's bona fide intent to use the Hokto Marks on all the goods in the application. Furthermore, Concord argues that because Hokto Kinoko and Hokuto Japan have not relied upon an expert report, there has been a concession of fraud and that therefore Concord's expert report conclusively proves fraud.
Lastly, Defendant contends that a failure to be truthful when dealing with the USPTO results in fraud liability and possible trademark cancellation. Hokuto Japan argues that Concord's claim for cancelling Plaintiff Hokto Kinoko's U.S. Marks is entirely based on Hokuto Japan's allegedly false and fraudulent statement that Hokuto Japan had a bona fide intent to use the applied-for marks for all the goals listed in the application when applying for the U.S. trademark registrations based on the registrations it owned in Japan.
However, Hokuto Japan avers that Concord lacks sufficient evidence to show that Hokuto Japan acted fraudulently. Hokuto Japan admits that it mistakenly included goods on the U.S. trademark registration applications for which Hokuto Japan did not use the Marks or have a bona fide intention to use the Marks in the future. However, Hokuto Japan argues that its inclusion of the goods to the U.S. trademark registration is based upon "a misunderstanding of the differences between Japanese and U.S. trademark registration requirements" rather than an intent to deceive. Moreover, Hokuto Japan recently filed Requests for Amendment with the USPTO on June 15, 2011, to restrict the goods listed on the registrations to those goods on which the Hokto Marks have been and continue to be used. On July 27, 2011, Plaintiff Hokto Kinoko lodged with the Court amended trademark registrations as granted by the USPTO on July 26, 2011 for the Hokto Marks at issue in this Action.
Hokuto Japan argues that it lacked the awareness that the U.S. and Japanese trademark registration requirements were different, which meant that Hokuto Japan never considered whether it had a bona fide intent to use the Mark. Hokuto Japan concedes that its U.S. attorney failed to make further inquiries because "his majority of clients were presumed to know about that requirement." However, Hokuto Japan argues that its lack of awareness regarding bona fide intent to use the Marks for all goods necessarily implies that Hokuto Japan could not have intended to misrepresent its bona fide intent to use the Marks on the goods listed in its application.
Furthermore, Hokuto Japan alleges that Concord did not suffer any damages because it did not rely on Hokuto Japan's statements to the USPTO. Hokuto Japan argues that Concord does not claim or have any ownership rights in the Marks or *1043 any other claim of damages resulting from reliance on Hokuto Japan's statements of its bona fide intent to use its marks. Therefore, Hokuto Japan argues that Concord lacks evidence to prove this element of fraud.
The Court finds that Defendant Concord's claim for cancellation of Hokto Kinoko's trademark registrations based on alleged fraud on the USPTO is factually deficient. The Court finds that Concord fails to provide evidence supporting each element of a fraud claim and relies purely on attorney argument to support its position. No evidence supports Concord's heavy burden required to succeed on its cancellation claim. The Court finds that with uncontroverted evidence that Hokuto Japan and its U.S. trademark attorney did not know or believe the bona fide intent to use statements to be false, no intent to deceive the USPTO, and no harm to Concord, judgment as a matter of law that the trademark registrations are valid and enforceable is warranted.
Moreover, the Court finds that Defendant Concord mistakenly asserts that fraud only requires a showing of false statement in the trademark registration application and a specific intent to defraud the USPTO. Prevailing Ninth Circuit case law guides the Court to find that a claim for fraud requires more. In fact, the Ninth Circuit in Robi, specifically required a party alleging fraud show the four elements discussed above and that the party make a showing of "damages proximately resulting from the reliance." Robi, 918 F.2d at 1444.
Additionally, Concord incorrectly claims that it need not make any showing of damages based upon any misrepresentation by Hokuto Japan to the USPTO. Ninth Circuit precedent demonstrates that Defendant's assertions are without merit. In Robi, the court specifically required a party alleging fraud show "damages proximately resulting from the reliance." 918 F.2d at 1444.
In the context of summary judgment, where the moving party bears the burden of proof on an issue at trial, it must, in order to discharge its burden of showing that no genuine issue of material fact remains, make a prima facie showing in support of its position on that issue. UA Local 343 v. Nor-Cal Plumbing, Inc., 48 F.3d 1465, 1471 (9th Cir.1994).
The Court finds that Defendant Concord has failed to meet this burden and has not pointed to specific evidence to support a prima facie case for cancellation of trademark on the basis of fraud. There is a complete lack of factual evidence supporting Concord's claim that Hokuto Japan, either itself or through U.S. counsel, intended to deceive the USPTO. Concord has failed to proffer affirmative evidence of any intent to deceive. Moreover, the Court finds that Concord has presented no facts here showing that it suffered damages as a result of any misrepresentation to the USPTO.
Additionally, the Court finds that Concord unsuccessfully advances its claim for trademark cancellation on the basis that Hokuto Japan's U.S. counsel was willfully blind or reckless. As the Supreme Court recently stated in Global-Tech Appliances, Inc. v. SEB S.A., ___ U.S. ___, 131 S. Ct. 2060, 2070-71, 179 L. Ed. 2d 1167, 1179 (2011), "a willfully blind defendant is one who takes deliberate actions to avoid confirming a high probability of wrongdoing and who can almost be said to have actually known the critical facts." Id. Such is not the case here. Hokuto Japan admits that it mistakenly included goods on the U.S. trademark registration applications for which Hokuto Japan did not use the Marks or have a bona fide intention to use the Marks in the future. Furthermore, Hokuto Japan recently filed Requests for *1044 Amendment, that were granted by the USPTO, to restrict the goods listed on the registrations to those goods on which the Hokto Marks have been and continue to be used.
Lastly, the Court finds that Concord's reliance on an export report does not qualify as sufficient evidence to sustain its claim for cancellation of trademarks beyond summary judgment. Concord relies on the Export Report of Amy J. Benjamin ("Benjamin Report") that concludes the Hokto Mark registrations were obtained by fraud on the USPTO. However, a review of the report demonstrates that the expert's reliance on the applicable fraud standard was misplaced. Concord's Benjamin Report applies the standard for fraud from Medinol v. Neuro Vasx, Inc., 67 U.S.P.Q.2d 1205, 1209 (T.T.A.B.2003), which the Federal Circuit rejected in In re Bose Corp., 580 F.3d 1240, 1244 (Fed.Cir. 2009).
The Court finds that Defendant Concord's reliance on an expert report that applies the incorrect standard for fraud is insufficient to show a basis for granting summary judgment in favor of Defendant. Moreover, Defendant Concord has not pointed to specific evidence to support a prima facie case for cancellation of trademark on the basis of fraud. There is a complete lack of factual evidence supporting Concord's claim that Hokuto Japan, either itself or through U.S. counsel, intended to deceive the USPTO. Accordingly, the Court GRANTS summary judgment in favor of Plaintiff and DENIES Defendant's Motion for Summary Judgment on its counterclaim for cancellation of trademarks asserted by Plaintiff Hokto Kinoko.
The Court finds that Defendant Concord has not met its burden to establish a genuine issue of material fact as to whether or not it acquired an implied or express license to use the Hokto Marks. As previously discussed, Concord offers no evidence that MRT is affiliated with Maruichi and that MRT is an authorized supplier of Hokuto Japan. Rather, Defendant's purported support for this assertion is nothing more than invoices and packing lists that make no mention about MRT being an authorized distributor for Hokuto Japan or that MRT is a subsidiary of Maruichi Produce, Inc. [Posey Decl., ¶ 11, Ex. K at 56-61.]
There is no evidence submitted of any express permission given by Hokuto Japan to Maruichi to sublicense the Marks to either Concord or MRT. Therefore, the Court finds that Defendant Concord has not met its burden to defeat summary judgment on its claim that it had an express or implied license under the Hokto Marks. Accordingly, the Court GRANTS summary judgment in favor of Plaintiff and DENIES Defendant's Motion for Summary Judgment on both its counterclaim for declaration of license or implied license and the affirmative defenses of license and implied license.
Laches bars trademark infringement cases only where the trademark holder knowingly allowed the infringing mark to be used without objection for a lengthy period of time. GoTo.com, Inc. v. Walt Disney Co., 202 F.3d 1199, 1209 (9th Cir. 2000). As previously discussed, the Court finds that Defendant Concord has not met its burden to establish a genuine issue of material fact as to whether Hokto Kinoko and Hokuto Japan acted diligently in asserting their rights under the Lanham Act and California unfair competition law. Defendant does not cite facts to support its claim for laches. Rather, Defendant relies on attorney argument to assert that Hokuto Japan's trademark infringement and unfair competition claims are barred by laches. *1045 Defendant merely avers that Hokuto Japan delayed in filing suit and both Hokto Kinoko and Hokuto Japan unreasonably waited to assert any claims against Defendant Concord. However, such conclusory statements do not create any genuine issues of material fact. See Hansen, 7 F.3d at 138.
Equally fatal is that Defendant Concord has failed to point to specific facts to show that it has suffered prejudice as a result of the alleged unreasonable delay. Proof of prejudice is an element of a claim for laches. See Jarrow Formulas, Inc., 304 F.3d at 838. Plaintiff has failed to provide the Court with any factual support on this element. Accordingly, the Court GRANTS summary judgment in favor of Plaintiff and DENIES Defendant's Motion for Summary Judgment on both its counterclaim and affirmative defense of laches.
Concord's unfair competition counterclaim against Hokto Kinoko is the same as the claim asserted against Third-Patty Defendant Hokuto Japan. As previously discussed, Concord fails to establish a genuine issue of fact in support of its claim that Hokuto Japan and Hokto Kinoko engaged in unfair competition. Concord has not pointed to affirmative evidence to establish the existence of an alleged "group boycott." In fact, Concord's reliance on the November 13, 2008 letter is insufficient to meet its burden under summary judgment. Accordingly, the Court GRANTS summary judgment in favor of Plaintiff and DENIES Defendant's Motion for Summary Judgment on its counterclaim against Plaintiff Hokto Kinoko for unfair competition.
The affirmative defenses, already not discussed in this Order, in which Defendant moves for summary judgment include 1) Failure to state a claim, 2) Estoppel, 3) Acquiescence, 4) Invalidity and unenforceability of trademarks due to inequitable conduct, 5) Failure of Hokto Kinoko to join an indispensable party (Hokuto Japan), 6) Waiver, 7) Unclean Hands, 8) and Statute of Limitations.
However, Defendant Concord also asserts the affirmative defenses of 1) Failure to mark and/or notify, 2) Innocent infringement, and 3)Failure to mitigate damages. These are pertinent only to the issue of damages and are not defenses to Plaintiff's claims for trademark infringement and unfair competition. However, as Plaintiff has not sought summary judgment on damages, the Court will not make a ruling on these affirmative defenses at this juncture.
Concord claims that it has presented evidence that Plaintiff's allegations of trademark infringement and related claims fail to state a claim because the trademarks are invalid. The Court GRANTS summary judgment in favor of Plaintiff and DENIES Defendant's Motion for Summary Judgment on the affirmative defense of failure to state a claim because it is without merit. Defendant Concord has failed to present any evidence to sustain this affirmative defense beyond summary judgment. The Court finds that there are no issues of material fact that warrant going to trial on this affirmative defense.
Additionally, Defendant Concord has raised a number of other affirmative defenses, including estoppel, acquiescence, waiver, and unclean hands. Again, the Court finds that Defendant Concord has failed to present any evidence to sustain these affirmative defenses beyond summary judgment. Rather, Defendant has merely informed the Court that it is entitled to summary judgment on these affirmative defenses. However, conclusory allegations unsupported by factual allegations are insufficient to create a triable issue of fact so as to preclude summary judgment. Hansen, 7 F.3d at 138. Accordingly, the Court GRANTS summary *1046 judgment in favor of Plaintiff and DENIES Defendant's Motion for Summary Judgment on the affirmative defenses of estoppel, acquiescence, waiver, and unclean hands.
With regard to Concord's affirmative defense of failure of Hokto Kinoko to join an indispensable party, the Court finds that Hokuto Japan is involved in this Action and all rights amongst the Parties can therefore be adjudicated. Accordingly, the Court GRANTS summary judgment in favor of Plaintiff and DENIES Defendant's Motion for Summary Judgment on the affirmative defense of failure to join an indispensable party.
Lastly, with regard to Defendant's affirmative defense of statute of limitations, Defendant provides no evidence to sustain this defense beyond summary judgment. Defendant argues that Hokto Kinoko and Hokuto Japan waited beyond the Ninth Circuit's presumptive laches period of four years without filing a lawsuit against Concord for trademark infringement and unfair competition. The Court finds that Defendant's argument here is entirely without merit. Defendant has not pointed to any facts to suggest that Hokuto Japan or Hokto Kinoko knew or could have learned of Concord's importation of the gray market goods before November 2008. This lawsuit was filed in February 2010. The Court finds that this fifteen month time frame does not constitute an unreasonable delay. Accordingly, the Court GRANTS summary judgment in favor of Plaintiff and DENIES Defendant's Motion for Summary Judgment on the affirmative defense of statute of limitations.
In sum, the Court DENIES, in its entirety, Defendant Concord's Motion for Summary Judgment.
For the reasons stated above, the Court GRANTS Plaintiff Hokto Kinoko's Motion for Summary Judgment on its claims for trademark infringement and unfair competition. As Plaintiff has not presented argument with regard to its claim for false designation of origin, the Court DENIES summary judgment on this claim. The Court also GRANTS Plaintiff's request for a permanent injunction.
With respect to Third-Party Defendant Hokuto Japan's Motion for Summary Judgment, the Court GRANTS Hokuto Japan's Motion for Summary Judgment in its entirety.
Lastly, the Court DENIES, in its entirety, Defendant, Counterclaimant, and Third-Party Plaintiff Concord's Motion for Summary Judgment. The Court finds that Concord has failed to provide sufficient factual support for its undisputed facts and genuine issues. By contrast, Plaintiff Hokto Kinoko and Third-Party Defendant Hokuto Japan have presented undisputed facts to the Court with sufficient evidentiary support that includes more than conclusory allegations or attorney argument.
IT IS SO ORDERED.
[1] The Hokto Marks at issue in these Motions for Summary Judgment refer to the following trademark registrations: (3, 210, 268), (3, 179, 700), (3, 182, 866), and (3, 182, 867). However, in Plaintiff's First Amended Complaint ("FAC"), Plaintiff originally listed ten registered trademarks: (3,185,838), (3, 185, 839), (3, 185, 840), (3, 210, 268), (3, 179, 700), (3, 182, 865), (3, 182, 866) (3, 200, 594), (3, 182, 867), (3, 723, 744). Hokto Kinoko is the owner of all 10 federal registered trademarks.
[2] The Federal Rules of Civil Procedure were amended on December 01, 2010. Federal Rules of Civil Procedure, Rule 56(e) has now been codified as Federal Rules of Civil Procedure, Rule 56(c).
[3] On July 27, 2011, Plaintiff Hokto Kinoko lodged amended trademark registrations, as granted by the USPTO on July 26, 2011, with regard to the following Hokto Marks: (3, 210, 268), (3, 200, 594), (3, 185, 840), (3, 185, 839), (3, 185, 838), (3, 182, 865), (3, 182, 866), (3, 182, 867), and (3, 179, 700) [135]. These amended trademark registrations list Plaintiff Hokto Kinoko as the owner of the registered marks.
[4] The Hokto Marks at issue in Hokuto Japan's Motion for Summary Judgment refer to the following trademark registrations: (3, 210, 268), (3, 179, 700), (3, 182, 866), and (3, 182, 867).
[5] Defendant Concord has also asserted the affirmative defenses of 1) Failure to mark and/or notify, 2) Innocent Infringement, and 3)Failure to mitigate damages. However, these are pertinent only to the issue of damages and are not defenses to Plaintiff's claims for trademark infringement and unfair competition. As Plaintiff has not sought summary judgment on damages, the Court will not address the affirmative defenses related to Plaintiff's claim for damages.
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