DocketNumber: Case No. 16-cv-03617-HSG
Citation Numbers: 328 F. Supp. 3d 1007
Judges: Gilliam
Filed Date: 7/24/2018
Status: Precedential
Modified Date: 7/25/2022
Plaintiffs Gianni Versace, S.p.A. and Versace USA, Inc. (collectively, "Versace") bring this trademark infringement action against Versace 19.69 Abbigliamento Sportivo SRL, Theofanis Papadas, Valero Enterprises, Inc., Susan Valero, V1969 BH LLC, Brilliance New York LLC, V1969 Versace SMO LLC, V1969 Versace HG LLC, and V1969 USA LLC. See Dkt. No. 1.
Versace moves for summary judgment on all claims stated in the FAC, as well as on all counterclaims and affirmative defenses asserted by Defendants Versace 19.69 Abbigliamento Sportivo S.R.L. and Theofanis Papadas (collectively, "VAS"). Dkt. No. 221 ("Pls. Mot."). VAS moves for partial summary judgment on Versace's federal and state law trademark infringement claims, trademark dilution claims, and all claims asserted by Versace USA, Inc. Dkt. No. 218 ("Defs. Mot.") at 1-2. Briefing on the motions is complete, and the Court held a hearing on March 29, 2018. See Dkt. Nos. 238 ("Defs. Opp."), 248 ("Pls. Reply"), 240 ("Pls. Opp."), 246 ("Defs. Reply"). After carefully considering the parties' arguments, the Court GRANTS Versace's motion, and GRANTS IN PART and DENIES IN PART VAS's motion.
I. LEGAL STANDARD
Summary judgment is proper when a "movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a). A fact is "material" if it "might affect the outcome of the suit under the governing law."
*1013Anderson v. Liberty Lobby, Inc. ,
The moving party bears both the ultimate burden of persuasion and the initial burden of producing those portions of the pleadings, discovery, and affidavits that show the absence of a genuine issue of material fact. Celotex Corp. v. Catrett ,
"If, however, a moving party carries its burden of production, the nonmoving party must produce evidence to support its claim or defense."
II. VERSACE'S MOTION FOR SUMMARY JUDGMENT
Versace moves for summary judgment on all of the claims asserted in the FAC. See Pls. Mot. at 10. The Court turns first to Versace's claims for federal and state law trademark infringement, false designation of origin, and unfair competition. The Court examines these claims concurrently because they are "substantially congruent." See
A. Trademark Infringement
"To prevail on a claim of trademark infringement under the Lanham Act,
VAS does not dispute the first element of Versace's trademark infringement claim: that Gianni Versace, S.p.A. has a protectable ownership interest in the marks. See Pls. Mot. at 10. Under 15 U.S.C. Section 1065, Gianni Versace, S.p.A.'s registered marks are incontestable. See
Turning to the second inquiry, whether VAS's use of the marks is likely *1015to confuse consumers, the Court is guided by the following eight Sleekcraft factors:
(1) [T]he similarity of the marks; (2) the strength of the plaintiff's mark; (3) the proximity or relatedness of the goods or services; (4) the defendant's intent in selecting the mark; (5) evidence of actual confusion; (6) the marketing channels used; (7) the likelihood of expansion into other markets; and (8) the degree of care likely to be exercised by purchasers of the defendant's product.
Fortune Dynamic, Inc. ,
i. Sleekcraft Factors
a. The Similarity of the Marks
In comparing the VAS and Versace marks, "[t]he key elements ... are their sight, sound, and meaning, and similarities in these characteristics 'weigh more heavily than differences.' " E. & J. Gallo Winery v. Gallo Cattle Co. ,
VAS's argument fails. First, there is no dispute that VAS's mark incorporates the "Versace" name. See Briers Decl. ¶¶ 9-10, Ex. 28 at 14. Second, VAS's expert, Michele L. McShane, admits that the "Versace" name is the dominant element of the VAS mark "by virtue of the word positioning of the previously registered company name." Dkt. No. 238-07 ("McShane Decl."), Ex. D at 14. In virtually identical circumstances, including those involving the "Versace" marks, district courts have found that the marks at issue were similar. See Versace v. Versace , No. 01CIV.9645(PKL)(THK),
b. The Proximity or Relatedness of the Goods or Services
With regard to this factor, "the focus is on whether the consuming public is likely somehow to associate" VAS's products with Versace's. Brookfield Commc'ns, Inc. v. West Coast Entm't Corp. ,
c. The Strength of Versace's Marks
The strength of a trademark is assessed on a continuum of distinctiveness: "(1) generic; (2) descriptive; (3) suggestive; (4) arbitrary; or (5) fanciful." Two Pesos, Inc. v. Taco Cabana, Inc. ,
Apart from its marks' incontestability, Versace presents additional evidence that its marks have acquired secondary meaning. See Brookfield Commc'ns, Inc. ,
In response, VAS presents just one argument to show that Versace "is at the low end of strength for well-known marks." Defs. Opp. at 19. According to VAS, Versace paid a consulting company to conduct a survey assessing the strength of its marks, and Versace failed to produce that survey in this litigation. See
d. The Marketing Channels Used
"Convergent marketing channels increase the likelihood of confusion." Sleekcraft ,
In response, VAS highlights that its products have been sold at "off-price stores, such as Ross Stores, Dillards, Century 21, and T.J. Maxx." Defs. Opp. at 21. But VAS fails to acknowledge that Versace's products are also sold at many of these stores. VAS then stresses that Versace fails to present figures comparing the number of Versace and VAS products sold by these retailers. See
e. The Degree of Consumer Care
"[W]hen the goods are expensive, the buyer can be expected to exercise greater care in his purchases; again, though, confusion may still be likely." Sleekcraft ,
VAS's argument fails. That some VAS consumers may sometimes be "sophisticated" is neither material nor disputed. VAS does not present evidence to show that a "sophisticated" consumer is unlikely to be confused; put differently, a consumer can have sophisticated taste, but still be confused by products that are similar in look or function. In addition, Versace presents evidence of actual confusion, as discussed below, supporting that VAS consumers "are in fact not exercising a high degree of care." De Anda Enterprises, Inc. v. JL Deanda Enterprises LLC , No. SACV162049DOCJCGX,
f. Evidence of Actual Confusion
"Evidence of actual confusion by consumers is strong evidence of likelihood of confusion." Surfvivor Media, Inc. v. Survivor Prods. ,
*1019Versace sets forth extensive evidence of consumer confusion and disappointment stemming from the conflation of VAS and Versace products. Negative remarks and product reviews by VAS purchasers show that many understand VAS products to be manufactured and/or sold by Versace. See Briers Decl. ¶ 159a-f, Ex. 91 at 4, 6-7 (customer reviews conflating VAS and Versace products), ¶¶ 228-259, Exs. 70, 106, 138 (customers confusing VAS and Versace products), ¶¶ 160-163, Exs. 120, 121 (customers criticizing Versace's product quality after buying VAS products).
In addition to evidence of confusion on the part of actual purchasers, there is evidence of confusion on the part of potential customers. For instance, Versace presents evidence of online inquiries asking how Versace and VAS products are related. See Briers Decl. ¶¶ 265-266, Exs. 27 ("Wallace Depo.") (explaining that the Versace website logs questions regarding VAS products), 130 (providing the search report). Versace also offers an empirical study on confusion from its expert, Dr. Kent Van Liere, in which he examined whether consumers are confused as to: (1) the source of VAS and Versace products; (2) the association between the VAS and Versace brands, and (3) whether VAS requires Versace's permission to make VAS products. See Briers Decl. ¶¶ 276-277, Ex. 29 ("Van Liere Report") ¶ 11. Dr. Van Liere accordingly found that "84 percent of respondents in the test conditions were confused as to source, association, or permission." Van Liere Report ¶ 12. Dr. Van Liere opined that this was "strong evidence of confusion and strongly supports the conclusion" that VAS's use of the Versace name "on products and product labeling is likely to confuse consumers in the relevant population."
As to non-consumer confusion, Versace sets forth unrebutted evidence that retailers mistake the nature of VAS and Versace's relationship. Briers Decl. ¶¶ 268-274. With respect to media confusion, several news outlets reported that a Versace store was opening in the Mall of America; in fact, it was VAS that opened a store in that location. See Briers Decl. ¶ 275, Ex. 119; Rearden, LLC ,
Notably, VAS does not take specific issue with this evidence. Instead, VAS asserts broadly that a genuine dispute of fact exists as to whether consumers are actually confused because "VAS's licensees sold over $16,000,000 of VAS licensed products." See Defs. Opp. at 9; Dkt. No. 218-11 (providing an expert damages report that sales by U.S. licensees of VAS products "totaled $16,171,353"). VAS suggests that "the retail sales volume of those products would represent about twice that amount."
*1020Defs. Opp. at 14. Even if VAS is correct, VAS does not set forth evidence or apposite authority to meaningfully link these sales figures with an absence of consumer confusion. See
VAS next asserts that confusion is unlikely because there is no evidence of "point-of-sale confusion." See Defs. Opp. at 9, 15 ("There is no dispute that plaintiffs have no witness to testify that he or she was confused at the time of a purchase as to the source or sponsorship of the products VAS licensed."). But VAS fails to cite a case indicating that Versace must present evidence of "point-of-sale" confusion, particularly in view of the above-discussed evidence of actual confusion. See
g. VAS's Intent in Selecting the Mark
Even though an intent to confuse consumers is not required for a finding of trademark infringement, intent to deceive is strong evidence of a likelihood of confusion. Entrepreneur Media, Inc. v. Smith ,
Versace argues that intent can be inferred from (1) VAS's knowledge of the Versace marks; (2) VAS's agreement to indemnify licensees against any infringement lawsuit brought by Versace; and (3) VAS's branding and marketing materials, which Versace argues create a "false association" with its brand. See Pls. Mot. at 22-23; Briers Decl. ¶¶ 64, 206-216, Exs. 100-105. To the extent that VAS responds to this argument, it does so by raising the somewhat different proposition that VAS cannot be liable under a contributory theory of trademark liability. See Defs. Opp. 25-26. But that question is distinct from whether VAS adopted its mark knowing that it was similar to the Versace marks. See Sleekcraft ,
h. The Likelihood of Expansion Into Other Markets
Versace argues that the likelihood of expansion factor also supports summary *1021judgment. According to Versace, VAS is planning to open additional luxury boutiques to mimic Versace's sales and branding strategies. See Pls. Mot. at 25-26. Versace offers a VAS corporate statement from May 27, 2016, indicating that the company seeks to invest "significant funds on opening flagship stores." See id. at 25; Briers Decl., Ex. 82 at 1. According to that announcement, VAS planned to open one store in San Francisco, two in Los Angeles, one store in Houston, and another in Minnesota. VAS does not disagree that it intended to expand. See Defs. Reply at 12. Given VAS's concrete plans for expansion, and that it is in the same line of commerce of Versace, to the extent this factor is significant, it favors Versace. See Sleekcraft ,
ii. Direct, Vicarious, and Contributory Infringement Liability
Apart from the confusion inquiry, VAS argues that it entirely escapes infringement liability under direct, vicarious, and contributory infringement theories. With respect to direct infringement, VAS argues that it cannot be liable because VAS operated entirely through licensees, and thus did not directly sell any infringing products or operate any stores. See Defs. Opp. at 24 ("VAS merely entered into license agreements that permitted the licensees to use its trademarks and company name."). The premise of VAS's vicarious liability theory is similar. VAS argues that Susan Valero and Valero Enterprises (collectively, "Valero"), with whom VAS worked to distribute VAS products to licensees, did not itself infringe. Id. at 24-25. Instead, VAS characterizes Valero's role as "identif[ying] potential licensees for VAS and work[ing] with those licensees in dealing with VAS and with retailers." Id. To the extent that Valero did infringe, VAS claims that Valero acted beyond the scope of its agency authority, and that VAS was unaware of any unlawful representations by Valero. Id. Finally, VAS claims that it cannot be liable for inducing infringement under a contributory infringement theory because (1) there is no evidence of direct infringement; and (2) VAS lacked the necessary intent to infringe. See id. at 25-26.
VAS cannot escape liability based on its status as a licensor. VAS does not present any analogous authority, binding or otherwise, to support that proposition. See id. at 24. And while Versace presents limited case law on this question, Ninth Circuit authority favors its position. See Fifty-Six Hope Rd. Music, Ltd. v. A.V.E.L.A., Inc. ,
In addition, the facts underlying a finding of direct infringement are uncontroverted. Namely, that VAS licensed the VAS mark, which includes the Versace name; Valero acted as VAS's contractual agent in working with licensees to promote VAS products; the VAS licensing agreements included a right to use the VAS name on the licensees' products; and VAS licensees were instructed by Valero, with VAS's knowledge, to conform to specific packaging and branding guidelines. See *1022Briers Decl. ¶¶ 59-65, Exs. 35-48 (presenting a list of 31 licensing agreements, rights, and product scope), ¶¶ 66-71, Exs. 52-53 (describing a "style guide" distributed to licensees that set forth brand logo and packaging guidelines). As discussed, there is also undisputed evidence that VAS licensees agreed to VAS's terms in large part based on an ability to use the "Versace" name. See also Briers Decl. ¶¶ 72-80, Exs. 10-15, 17.
But even if VAS were not liable for direct infringement, VAS is liable under a theory of vicarious infringement liability. See Pls. Reply at 15 n.6. The above referenced evidence establishes that Valero's infringing acts were within the scope of its authority as VAS's agent, and were conducted with VAS's knowledge. VAS points to one contractual excerpt that VAS represents as limiting "Valero's ability to prepare documentation on behalf of VAS." See Defs. Opp. at 25; Papadas Decl. ¶ 22. But this excerpt does not support VAS's assertion; rather, it states simply that VAS, as licensor, will provide Valero, its agent, with any documentation necessary to carry out the scope of their agreement.
B. Trademark Dilution and Unfair Competition
Under both federal and California state dilution law, Versace must show that (1) its mark is "famous and distinctive"; (2) VAS is "making use of the mark in commerce"; (3) VAS's use "began after the mark became famous"; and (4) VAS's use of the Versace marks is "likely to cause dilution by blurring or dilution by tarnishment." Jada Toys, Inc. v. Mattel, Inc. ,
i. Versace's Marks are Famous, and VAS Began Using those Marks in Commerce After They Became Famous
"A mark is famous if it is widely recognized by the general consuming public of the United States as a designation of source of the goods or services of the mark's owner."
(i) The duration, extent, and geographic reach of advertising and publicity of the mark, whether advertised or publicized by the owner or third parties.
(ii) The amount, volume, and geographic extent of sales of goods or services offered under the mark.
(iii) The extent of actual recognition of the mark.
(iv) Whether the mark was registered under the Act of March 3, 1881, or the Act of February 20, 1905, or on the principal register.
*1023That evidence is undisputed, and establishes that Versace has used its marks for decades, engages in extensive advertising and promotional efforts in furtherance of the Versace brand, is widely recognized by consumers for the Versace name, and enjoys a high volume of domestic sales. See Conti Decl. ¶¶ 16-20, 39-42; Briers Decl. ¶¶ 72-80. Even Papadas has testified, as VAS's corporate representative, that "the Versace name was made famous in the fashion industry by Gianni Versace SpA." Papadas Depo. at 534:21-535:21.
VAS does not expressly rebut Versace's evidence that it began using Versace's marks after those marks became famous. See Defs. Opp. at 31-34; Pls. Reply at 16. Versace's evidence shows that: (1) Versace has used its marks since 1978; (2) those marks have gained national recognition; and (3) the Versace marks' fame persists to the present day. See Pls. Mot. at 27-28; Conti Decl. ¶¶ 4, 16-20, 39-42. VAS addresses only the fourth and final element of the dilution analysis: whether its use of the Versace name is likely to cause dilution by blurring or tarnishment. See
ii. VAS's Use of Versace's Marks Causes Blurring and Tarnishment
"Blurring occurs when a defendant uses a plaintiff's trademark to identify the defendant's goods or services, creating the possibility that the mark will lose its ability to serve as a unique identifier of the plaintiff's product." Panavision Int'l, L.P. v. Toeppen ,
As to the first, second, and fourth factors, the undisputed evidence favors Versace. That evidence, discussed with respect to infringement, shows that the VAS and Versace marks are similar, and VAS has attempted to evoke the Versace design and baroque aesthetic. See Nike, Inc. v. Nikepal Int'l, Inc. , No. 2:05-CV-1468-GEB-JFM,
The remaining blurring factors favor Versace. With respect to the third factor, Versace has acted defensively to protect its marks, and tightly controls its diffusion lines. See Defs. Opp. at 32-33; Pls. Reply at 17; Briers Decl. ¶¶ 7-8 (discussing Versace's precautionary infringement lawsuits). VAS does not dispute that there is *1024only one other "Versace" mark owned by a third party: a gelato and frozen dessert company. See Briers Decl., Ex. 20 ("McShane Depo.") at 177:12-178:20.
Dilution by tarnishment, in contrast, "aris[es] from the similarity between a mark or trade name and a famous mark that harms the reputation of the famous mark."
Versace contends that, as a factual matter, VAS's products are inferior to Versace's. To support that assertion, Versace relies on expert testimony and consumer complaints detailing the poor quality of VAS products and workmanship. See Briers Decl. ¶¶ 158-164, 226-264, Ex. 30 ("Serdari Rep.") at 21 n.61, 28; Briers Decl., Ex. 12 ("Bergman Depo.") at 190:11-19, 196:13-197:3. VAS specifically denies just one of these consumer complaints (pertaining to a moldy product); otherwise, VAS does not address Versace's evidence. VAS does broadly assert that Versace fails to "offer any comprehensive evidence as to the quality of the products VAS licensed." Defs. Opp. at 34. VAS is simply incorrect, and given the substantial evidence Versace sets forth, it is VAS that bears the burden to come forward with evidence that its products are not inferior. VAS has not done so.
Separately, VAS suggests that it may have licensed higher quality products because Versace has a "1 percent return rate from consumers." See
C. VAS's Counterclaims and Defenses
In addition to moving for summary judgment on its own claims, Versace also seeks summary judgment on: (1) VAS's counterclaims for breach of contract and declaratory judgment; and (2) VAS's *1025affirmative defenses of waiver, collateral estoppel, laches, and fair use. See Pls. Mot. at 30 n.14, Dkt. No. 139 ("Answer") at 11 ¶¶ 6-29.
The parties' dispute turns on the meaning and interpretation of the Conciliation Agreement. Versace argues that the Agreement prohibits VAS from using the Versace name for any purpose except where the law requires VAS to use its full name. See, e.g. , Pls. Mot. at 4. Versace presents a certified translation in support of its interpretation. See Dkt. No. 223 ("Pennekamp Decl."), Ex. H. at 2 ("Mr. Papadas ... agrees to forego registration of the distinctive sign [VAS] ... although he retains the right/duty to indicate the full name of the manufacturer and/or importer of the products in cases required by law including for purposes of the labeling, but the current font being used must be modified...."). Versace acknowledges that, under the Agreement, it has waived "all rights and/or claims" against VAS in the event that VAS complies with the Agreement's terms. And yet, VAS admitted in this litigation that no U.S. law requires VAS to place its full name on products involved in the present lawsuit. See Briers Decl., Ex. 37 ("VAS states that it does not at this time contend, and does not need to contend, in this action that the applicable law requires the full company name to be placed on the subject labels that are involved in the present lawsuit."). Versace highlights that multiple Italian courts have agreed with its interpretation of the Agreement (which is written in Italian). Versace argues that principles of comity merit deference to those decisions, regardless of either party's English translation of the Agreement.
In response, VAS contends that the Agreement allows VAS to use the "Versace" marks for purposes of labeling irrespective of whether the law requires it. See Answer ¶¶ 8, 28(a); Defs. Mot. at 10. VAS sets forth its own corresponding translation of the Agreement. See Dkt. No. 139-1 at 1 ("It is therefore understood that [Papadas] has the right and the duty to indicate the complete company name of the producer and/or importer of the products in those cases stated by the law, also for the products labeling by modifying the eventual font used.").
The Court defers to the decisions of numerous Italian courts holding, respectively, that Versace's interpretation of the Agreement is correct and that VAS's reading is incorrect. See Pennekamp Decl., Ex. L at 3 ("Such use of the petitioner's name, whose identifying heart is clearly represented by the surname VERSACE, clearly exceeds the requirements to comply with European Union law and consumer protection law, the purpose of which is to allow the manufacturer to be identified, and represents a form of use strictly as a distinctive sign, in violation of the settlement agreements invoked."), Ex. M at 2 ("[T]he [settlement] agreement allows [Papadas] only to use the name Versace if it is a part/component of the company name of the manufacturer or importer and, therefore, always in the context of the entire company name, in cases where the indication *1026of the company name is obligatory, including on labels, but with the requirement of possible modification of the font used."), Ex. N at 6 ("As to 'in cases where required by law', a correct interpretation of the clause in the context of the settlement agreement ... was intended by the parties to be strictly limited to cases where the use of the manufacturer, importer or exporter company's name is required by law...."). Notably-in the most recent of these decisions-the Court of Appeal of Milan affirmed the lower court's rejection of VAS's interpretation of the Agreement. See Pennekamp Decl., Ex. R; Papadas v. Gianni Versace, S.p.A. , No. 1680/2016 at 11-12 (Ct. of App. of Milan Dec. 18, 2017). In reaching that holding, the appellate court reasoned,
From the literal tenor of the [settlement] agreement, it is clear that its primary goal is to affirm that Papadas and its companies do not have the right to use the national and international fame of the 'Versace' brand in order to promote their own products. Gianni Versace Spa granting the use of its company name including the word 'Versace' only when the law requires it to identify the producer/importer is, as noted, an exception, which involves a strict and restrictive interpretation.
Principles of comity warrant deference to these judgments. See Hilton v. Guyot ,
With respect to its collateral estoppel defense, VAS contends that comity principles are inapplicable because: (1) VAS is appealing the Milan appellate court's December 2017 decision; (2) the Italian courts' interpretations are erroneous because they nullify the words "also for the purpose of labeling" in the Agreement; and (3) specific principles of Italian trademark law influenced those courts' interpretations of the agreement. See Defs. Opp. at 28. Beginning with VAS's second point, comity principles apply despite an error "in law or in fact" in the absence of a procedural infirmity. See Hilton ,
Apart from its interpretation of the Conciliation Agreement, VAS asserts that its fair use defense survives summary judgment. To invoke a "fair use" defense, VAS must show that (1) it is not using the Versace name "as a trademark"; (2) VAS's use is "descriptive of" VAS's goods; and (3) VAS is using the Versace marks in good faith. See Marketquest Grp., Inc. v. BIC Corp. ,
VAS argues that it did not use the Versace name as a trademark because VAS acted as a licensor in distributing the infringing products. See Defs. Opp. at 29. VAS asserts that it "did not sell any products or advertise to consumers" or induce others to use the Versace name as a mark. See id. at 29-30. VAS also contends that it can establish fair use because, in addition to not using or inducing use of the mark, VAS is in privity with Alessandro Versace, who sold his ownership interest to Papadas. See id. (citing Dolby v. Robertson ,
Once more, VAS's attempt to rely on its licensor status fails. VAS does not present any authority that licensing the use of an infringing mark is not itself "use" of a trademark for purposes of this defense. The undisputed evidence establishes that VAS, through and in coordination with its agent Valero, encouraged licensees to display the Versace name prominently on their products. See Briers Decl. ¶¶ 46-47 (describing how Alessandro Versace, in creating VAS, "utiliz[ed] the legendary brand awareness of the name Versace"), ¶¶ 49-53, ¶¶ 55-56 (detailing efforts by Valero to encourage licensees to use and display "Versace" and evoke Versace's aesthetic); Briers Decl., Exs. 10 ("Azrak Dep."), 11 ("Babayan Dep."), 17, 25 ("Valero Dep."). VAS also independently used the Versace marks as part of its branding and promotional efforts. See Briers Decl., Exs. 116, 117 (screenshots of the VAS website). That evidence is sufficient to show that VAS attempted to use the Versace term "as a symbol to attract public attention." Marketquest Grp. ,
As to intent, that inquiry "involves the same issue as the intent factor in the likelihood of confusion analysis: whether defendant in adopting its mark intended to capitalize on plaintiff's good will." Fortune Dynamic, Inc. ,
Turning to good faith, VAS contends that it "reasonably believed that Versace waived any confusion that resulted from VAS's compliance with the portion of the Conciliation Agreement that allowed VAS to use its company name for the purpose of labeling." Defs. Opp. at 31. VAS's representation of good faith reliance on the Agreement fails in view of the numerous Italian court decisions rejecting its interpretation. Furthermore, these decisions were sufficient to put VAS on notice of its infringing use. See E. & J. Gallo Winery v. Gallo Cattle Co. , No. CV-F-86-183 REC,
III. VAS'S MOTION FOR PARTIAL SUMMARY JUDGMENT
VAS moves for partial summary judgment on five grounds. First, VAS argues summary judgment is proper on Versace's "infringement claims to the extent they seek a monetary recovery." Defs. Mot. at 10-14.
*1029Id. at 14-16. Third, VAS requests summary judgment on Versace's state law claims, contending that VAS did not sell infringing products in California. Fourth, VAS argues that the Court should grant summary judgment on Versace's dilution claims because VAS is not liable under direct, vicarious, or contributory dilution theories. Id. at 19-22. Fifth, VAS argues that the Court should dismiss all of Versace USA, Inc.'s claim because Versace USA, Inc. does not own any trademark rights. Id. at 23.
i. Versace's Infringer's Profits Claim
Whether Versace lost sales and revenue as a result of VAS's infringing activity presents a question of fact. A trademark plaintiff seeking to recover an infringer's profits must show that the defendant gained "gross revenue from the infringement." Fifty-Six Hope Rd. Music, Ltd. ,
Summary judgment is inappropriate as to Versace's ability to obtain infringer's profits. There are disputed material facts regarding whether VAS's profits increased as a result of its thirty-one licensing agreements for the domestic use, manufacture, distribution, and sale of products bearing the VAS name. See, e.g. , Briers Decl. ¶¶ 59-65; Dkt. No. 218-1 ("Papadas Decl.") ¶¶ 4, 7-9 (admitting that VAS received approximately $416,000 in sales of its licensed products). Under the terms of these agreements, licensees were required to pay royalties for the right to use the VAS mark on their products. Briers Decl. ¶ 64, Ex. 40 at § 4(u). Licensees paid VAS more than three million dollars in advances and upfront royalty payments as well as ongoing royalty payments. See Briers Decl., Ex. 164; Dkt. No. 218-2, Ex. I at 3.
Contrary to VAS's claim, VAS's status as a licensor does not allow it to avoid potential payment of infringer's profits. See Fifty-Six Hope Road Music ,
ii. Versace's Ability to Recover Infringer's Profits Prior to Filing of this Action
VAS's second ground for summary judgment is similarly inappropriate. VAS contends that Versace cannot recover money for VAS's pre-litigation conduct because Versace did not correctly mark its *1030products as registered under 15 U.S.C. Section 1111. Defs. Mot. at 14-17. According to VAS, it therefore lacked notice of the Versace marks prior to the filing of this lawsuit on June 27, 2016. See
Notwithstanding the provisions of section 1072 of this title, a registrant of a mark registered in the Patent and Trademark Office, may give notice that his mark is registered by displaying with the mark the words 'Registered in U.S. Patent and Trademark Office' or 'Reg. U.S. Pat. & Tm. Off.' or the letter R enclosed within a circle, thus ®; and in any suit for infringement under this chapter by such a registrant failing to give such notice of registration, no profits and no damages shall be recovered under the provisions of this chapter unless the defendant had actual notice of the registration.
(emphasis added).
Even if VAS lacked statutory notice, VAS had actual notice of the Versace marks prior to this lawsuit. See Mophie, Inc. v. Shah , No. SACV1301321DMGJEMX,
A reasonable factfinder could likewise find that VAS had actual notice of its infringing activity based on the multiple adverse judgments of Italian courts. See Pls. Mot. at 5. As discussed, those courts unanimously rejected VAS's reading of the Conciliation Agreement. It is undisputed that a trial court in Milan issued the first such decision in July 2013. See
iii. Versace's State Law Claims
Summary judgment is not warranted on VAS's state law claims. VAS argues that there is no dispute that: (1) Versace did not sustain any damage as a result of confusion from sales of VAS products in California, and (2) neither VAS nor its licensees generated any revenue from product sales in California. See Defs. Mot. at 17. VAS is incorrect. To recover under its state law theories, Versace need only show that it was harmed "by wrongful conduct occurring in California." Diamond Multimedia Sys., Inc. v. Superior Court ,
iv. Versace's Dilution Claims
Here too, VAS's attempt to rely on its status as a licensor fails. VAS argues, *1031without authority, that it cannot be liable for dilution because it simply licensed others to use its mark. In relevant part, 15 U.S.C. Section 1125(c) provides that liability attaches where one "commences use of a mark or trade name in commerce," with exceptions that are not applicable here. "Commercial use" within the meaning of the statute need not involve physical attachment of the disputed marks to a product. See Panavision Int'l ,
v. Versace's USA, Inc.'s Claims
Finally, VAS requests that the Court dismiss Versace USA, Inc.'s claims against it. VAS contends that Versace USA, Inc. "does not own any trademark asserted in this case," and therefore lacks standing. Defs. Mot. at 32. VAS is correct that only a mark's owner has standing under federal and state law to bring claims for trademark dilution and infringement. Brown v. Green , No. C 12-2113 DMR,
In its opposition, Versace does not rebut that Versace USA, Inc. lacks an ownership interest in the Versace marks at issue. As VAS points out, the marks' owner, Gianni Versace, S.p.A., is a named party that is "present to pursue its rights." Defs. Reply at 15. In its briefing, Versace addresses only Versace USA, Inc.'s standing to bring a Section 1125(a) unfair competition claim; Versace does not reference Versace USA, Inc.'s ability to raise the other asserted claims. See Brown ,
*1032IV. INJUNCTIVE RELIEF
Versace requests that the Court permanently enjoin VAS from using the Versace marks if it concludes that VAS is liable for the claims asserted in the FAC. See Pls. Mot. at 38. For a permanent injunction to issue, Versace must show that (1) it has suffered an irreparable injury; (2) monetary damages are inadequate; (3) the balance of hardships merits an equitable remedy; and (4) the public interest will not be disserved by a permanent injunction. eBay Inc. v. MercExchange, L.L.C. ,
The Court finds in its discretion that a permanent injunction is warranted. Though a strong case of trademark infringement is not alone sufficient to establish irreparable harm, Versace shows that it will suffer irreparable "loss of business, reputation, and goodwill" if VAS continues its infringing activity. See Herb Reed Enterprises, LLC v. Fla. Entm't, Mgmt., Inc. ,
The consequent loss of goodwill incurred by Versace renders money damages inadequate. This is especially so considering that VAS has continued its infringing activity despite receiving multiple adverse judgments from foreign courts. See Neurovision Med. Prod., Inc. v. NuVasive, Inc. , No. CV096988DSFJEMX,
Contrary to VAS's suggestion, there is no factual dispute that underlies "whether the equities favor Plaintiff." Defs. Opp. at 38. VAS again relies for that proposition on its "good faith" interpretation of the Conciliation Agreement. See
The Court accordingly finds that a permanent injunction of some sort is warranted based on the above discussed factors, Yet, the Court is required to consider all circumstances in determining whether the injunction issued constitutes "fair and equitable relief." See La Quinta Worldwide LLC ,
V. CONCLUSION
For these reasons, the Court GRANTS Versace's motion, and GRANTS IN PART and DENIES IN PART VAS's motion. The Court SETS a case management conference for August 7, 2018 at 2:00 p.m. to discuss: (1) the particular provisions to be included in a permanent injunction; and (2) a schedule for a bench trial regarding the amount of money appropriately awarded in the form of infringer's profits. A joint case management statement, including a proposed schedule, is due on July 31, 2018.
IT IS SO ORDERED.
The two trademarks at issue are "Versace" and "Gianni Versace."
Though they are not binding authority, the Court considers the Ninth Circuit's unpublished decisions, including E. & J. Gallo Winery , as persuasive authority.
While Defendants object to this evidence as hearsay, it is properly admissible as a present sense impression. See Lahoti v. Vericheck, Inc. ,
VAS argues that it lacked the requisite intent because it believed its use of the Versace marks conformed to a settlement agreement reached with Versace in Italy ("the Conciliation Agreement" or "the Agreement"). That argument is unavailing for the reasons set forth below.
That excerpt states "c) The LICENSOR shall furnish the AGENT with any available artwork material and necessary documentation with regard to the Property free of charge. Should the material not suffice for the implementation of License Agreement under negotiation or existing License Agreements, the LICENSOR agrees to use its best efforts to provide such material as soon as possible, it being understood that the AGENT is not prepared to develop such material or have it developed on behalf of the LICENSOR." Defs. Opp. at 25.
Because VAS is either directly or vicariously liable, the Court does not need to decide whether VAS may be liable under a contributory theory of infringement.
VAS's affirmative defense based on the Conciliation Agreement is discussed in further detail below. See Defs. Opp. at 33.
Here too, VAS asserts that it cannot be liable under direct, vicarious, or contributory dilution theories. See Defs. Opp. at 35-36. With the exception of contributory dilution, VAS does not present case law that supports that assertion. The Court addresses these arguments in its discussion of VAS's motion for partial summary judgment.
VAS does not respond to Versace's motion for summary judgment on VAS's laches defense. See Pls. Mot. at 37-38; Pls. Reply at 21 n.11. The Court agrees with the arguments set forth in Versace's motion, Pls. Mot. at 36-37, and concludes that there is no genuine dispute of fact underlying that defense.
Because the Court defers to the Italian courts' interpretation of the Conciliation Agreement, it does not need to independently interpret the agreement. See Pls. Reply at 20.
Versace contends that an injunction should issue if the Court finds that VAS has infringed or diluted its marks. Part IV of this order addresses the propriety of injunctive relief.
At oral argument, Versace clarified that it does not seek actual damages in this case, but rather seeks to recover infringer's profits as an equitable remedy, and attorneys' fees. See Hearing Transcript at 25:11-18; Pls. Mot. at 40 n.21;
Though VAS cites this case and others for the proposition that a showing of actual confusion is required to recover infringer's profits, see Defs. Mot. at 11, these cases do not support that assertion. Likewise, the district court cases VAS cites do not support that Versace must prove, at this stage, post-sale, point-of-sale, and initial interest confusion; these cases just define those concepts. See Defs. Mot. at 12-14. But even if VAS is correct as a matter of law, there is sufficient factual evidence to establish a triable issue as to whether confusion between the VAS and Versace brands allowed VAS to generate revenue it otherwise would not have.
Versace does not argue that it provided statutory notice. See Pls. Opp. at 10 n.6.
VAS contends that Versace USA, Inc. cannot pursue its unfair competition claim because it cannot show that it sustained damages. VAS fails to set forth facts or authority to support that proposition. See Defs. Reply at 15. Because it is VAS's burden to do so, the Court declines to grant summary judgment as to Versace USA, Inc.'s unfair competition claim.