confusion of some people at trade shows does not necessarily demonstrate that purchasers are confused. In sum, Ultrapure has offered some evidence of actual confusion but the evidence is weak.
5. Type of Goods and Degree of Care of Consumers
Gas circulation fittings are specialized goods and it is undisputed that purchasers of the product are sophisticated. Additionally, the fittings are expensive and scrutinized by microelectronics companies to insure purity in their gas distribution systems. Further, the number of suppliers is small and well known by the market. Thus, it is evident that buyers in the market exercise a high degree of care.
6. Intent of Defendants
Ultrapure asserts that HTC could have chosen any mark but adopted a mark similar to GAZEL. According to Ultrapure, since HAM-LET formerly sold GAZEL fittings, use of the GAZLINE mark indicates an intent to confuse buyers.
In response, HTC contends that it adopted the name because "gaz" means "gas" in French and Hebrew and because HAM-LET sells other products with "line in the brand names (pipeline and weldline). Additionally, HTC alleges that its products are superior to Ultrapure's and therefore, it does not want the two product lines to be confused. Although it is difficult to determine HTC's intent on selecting the mark of "GAZLINE," HTC's explanations effectively rebut Ultrapure's allegation that HTC intended to confuse purchasers.
In weighing all the factors, Ultrapure has not demonstrated a likelihood of confusion in the consuming public. Although the GAZEL mark warrants moderate protection and the GAZLINE and GAZEL fittings are related products, the marks are not confusingly similar. Further, buyers in the industry are knowledgeable and exercise a high degree of care in purchasing fittings. Thus, Ultrapure has not adequately established a likelihood of success on the merits.
Additionally, Ultrapure has not made a showing of irreparable harm if the injunction is not issued. Ultrapure alleges that it will lose sales and miss the window of opportunity that currently exists in a rapidly expanding gas fittings industry. However, Ultrapure also admits that it is a small player in the market and that it has not established itself as a manufacturer of high quality fittings. Further, Ultrapure does not contend that Defendants' actions are injuring Ultrapure's reputation or causing a loss of goodwill. In fact, it is possible that GAZLINE fittings are superior to GAZEL fittings and thus, any confusion between the products will not impair Ultrapure's standing in the industry.
In sum, Ultrapure has failed to establish either a likelihood of success on the merits on its trademark infringement claim or the possibility of irreparable harm if the preliminary injunction is not issued. Accordingly, Ultrapure's application for a preliminary injunction on the basis of trademark infringement is DENIED.
B. Unfair Competition: The Licensing Agreements
California Bus. and Prof. Code § 17203 prohibits unfair business practices and permits courts to enjoin any unlawful business acts and award restitutionary damages. Unlawful acts include any business practice that is determined to be unlawful, unfair, or fraudulent. Cal. Bus. & Prof. Code § 17200.
Ultrapure alleges that Defendants are committing an unlawful business practice by selling fittings in violation of CGMI licensing agreements. Under its licensing agreement with CGMI, Ultrapure is the exclusive manufacturer of GAZEL fittings in the United States. According to Ultrapure, HAM-LET obtained technology and other trade secrets from CGMI and used this information to set up HTC and manufacture the GAZLINE fittings currently sold in the U.S.
In response, HTC asserts that the GAZLINE fittings are not GAZEL fittings, but were developed by HTC through its own research. According HTC, HAM-LET stopped producing GAZEL fittings in 1992 and none of the information obtained from CGMI by HAM-LET was used by HTC to develop and manufacture the GAZLINE fittings. Thus, HTC contends that selling GAZLINE fittings in the U.S. is neither a violation of the licensing agreements nor an unfair business practice.
Both sides submitted numerous declarations on the similarity or dissimilarity of the GAZLINE and GAZEL fittings. However, these declarations do not provide an adequate basis for determining whether Defendants are violating the CGMI licensing agreements by selling the GAZLINE fittings. Thus, the Court ORDERS an evidentiary hearing on the issue of whether the GAZLINE fittings are actually GAZEL fittings with a different name. The hearing will be held in San Jose on February 7, 1996, at 10:00 a.m.
II. Defendants' Motion to Dismiss Counts One and Seven of the Complaint
Defendants move to dismiss Ultrapure's claims for trademark infringement (count one of Ultrapure's complaint) and breach of contract (count seven). Defendants allege that Ultrapure, as a licensee, does not have standing to assert a claim for trademark infringement. Further, HAM-LET asserts that it cannot be held liable for breach of contract when the alleged unlawful conduct was committed by another entity, HTC.
Under the liberal federal pleading policies, a plaintiff need only give defendant fair notice of the claims against it. Conley v. Gibson, 355 U.S. 41, 47, 78 S. Ct. 99, 102, 2 L. Ed. 2d 80 (1957). A complaint should only be dismissed where, assuming all allegations as true in the light most favorable to plaintiff, it appears beyond doubt that no set of facts could support plaintiff's claim for relief. Id.; Durning v. First Boston Corp., 815 F.2d 1265, 1267 (9th Cir. 1987), cert. denied, 484 U.S. 944, 108 S. Ct. 330, 98 L. Ed. 2d 358 (1987).
A. Trademark Infringement Standing
Title 15 U.S.C. § 1114 permits civil actions for trademark infringement to be brought by the "registrant" of the mark. The term registrant includes the legal representatives, predecessors, successors, and assigns of the registrant. 15 U.S.C. § 1127.
Here, CGMI, is the registrant of the GAZEL mark. Thus, any rights that Ultrapure has in the mark derive from the rights of CGMI.
Originally, CGMI licensed the exclusive use of the GAZEL mark in the U.S. to Aluminum Company of America (ACOA). Thereafter, Ultrapure allegedly acquired the exclusive license to the GAZEL brand in the U.S.
The determination of whether a licensee has standing to sue under § 1114 largely depends on the rights granted to the licensee in the licensing agreement. Where the license is non-exclusive the licensee does not have standing to bring an infringement action. Quabaug Rubber Co. v. Fabiano Shoe Co., 567 F.2d 154, 159-160 (1st Cir. 1977). Also, the licensee lacks standing when provisions in the contract indicate that the licensor retains exclusive ownership of the mark. DEP Corp. v. Interstate Cigar Co., 622 F.2d 621, 623 (2nd Cir. 1980). Further, since the rights of the licensee are based upon the rights of the owner or licensor, infringement actions against the owner are generally prohibited. Silverstar Enterprises, Inc. v. Aday, 537 F. Supp. 236, 241 (S.D.N.Y. 1982); Shoney's, Inc. v. Schoenbaum, 686 F. Supp. 554, 563-64 (E.D.Va. 1988), aff'd, 894 F.2d 92 (4th Cir. 1990).
Here, the contract between CGMI and ACOA contains the following provision:
ACOA [Licensee] will have the right to register in the TERRITORY the CGMI brands in CGMI's name but at ACOAs expense. ACOA [Licensee] will have exclusive rights to their use in the TERRITORY for the duration of the contract.
Thus, the contract gives exclusive use of the trademarks in the U.S. to the licensee. Further, the contract does not set forth any restrictions on the licensee's ability to enforce the trademarks. Under these circumstances, Ultrapure, as an exclusive licensee, does have a property interest in the trademark and qualifies as an assignee or successor of the registrant. See Shoney's, Inc., 686 F. Supp. at 563; G.H. Mumm Champagne v. Eastern Wine Corp., 142 F.2d 499 (2nd Cir. 1944), cert. denied, 323 U.S. 715, 89 L. Ed. 575, 65 S. Ct. 41 (1944); see also Jerome Gilson, Trademark Protection and Practice § 8.16[b]. Therefore, Ultrapure does have standing to enforce the GAZEL mark against Defendants. Accordingly, Defendants' motion to dismiss Ultrapure's infringement claim is DENIED.
B. Breach of Contract
HAM-LET contends that it cannot be held liable for breach of contract because the complaint does not allege a sufficient relationship between HAM-LET and HTC to support a breach of contract theory against HAM-LET. HAM-LET's argument is unpersuasive.
In its complaint, Ultrapure alleges that HTC and HAM-LET are related entities. Although the exact relationship between HTC and HAM-LET is unclear, it is undisputed that the companies have common ownership. Since any confusion about corporate entities can be clarified by HAM-LET, HAM-LET should not be allowed to exploit the fact that Ultrapure does not know the precise nature of the relationship between HAM-LET and HTC. Thus, the Court finds that Ultrapure has sufficiently stated allegations to support its breach of contract claim. Accordingly, HAM-LET's motion to dismiss the breach of contract claim is DENIED.
IT IS SO ORDERED.
United States District Judge