United States District Court, N.D. California
August 9, 2004.
HALO MANAGEMENT, LLC, Plaintiff,
INTERLAND, INC., Defendant.
The opinion of the court was delivered by: MARILYN PATEL, Chief Judge, District
MEMORANDUM AND ORDER Motion for Summary Judgment
In March 2003, plaintiff Halo Management, LLC ("HM") brought
this civil action against defendant Interland, Inc., seeking
monetary and injunctive relief for alleged violations of federal
trademark law, see 15 U.S.C. § 1114, 1125, and of California's
Business and Professional Code. See Cal. Bus. & Prof. Code §
17203. On October 17, 2004, the court denied HM's motion for a
preliminary injunction. Now before the court is Interland's
motion for summary adjudication. The court has considered fully
the parties' arguments, and for the reasons set forth below, the
court rules as follows.
I. Background Facts and the Parties' Relationship
Founded as a sole proprietorship, HM is a small, privately-held
limited liability corporation based in Los Altos, California.
Focusing on internet-related services, HM offers email,
web-search functions, and web-hosting to its list of subscribers
and customers.*fn2 In late 1999, HM filed a United States
trademark application for the word mark "HALO."*fn3 By June
25, 2002, HM had registered the "HALO" mark,*fn4 see Ashby
Dec., Exh. 3, identifying two classes of relevant goods and
services: CLASS 038 Electronic communication and commerce
services, namely, electronic transmission of voice,
video, and data via computer terminals, electronic
mail services, providing on-line chat rooms for
transmission of messages among computer users in the
field of business, legal, and intellectual asset
management, and providing multi-user access to a
global computer network.
CLASS 042 Providing a search engine for online
searching and retrieving of information on a global
computer network; hosting the web sites of others on
a computer server for a global computer network;
on-line, non-downloadable electronic newsletters in
the field of business, legal, and intellectual asset
management; and intellectual property consultation.
Interland, Inc. is a publicly-traded corporation, attracting
customers through, inter alia, its listing on the NASDAQ stock
exchange. Like HM, Interland offers an array of internet-based
services to its subscribers and customers. As a part of its
business practices, Interland employs the web address
"bluehalo.com," often redirecting visitors to the "bluehalo.com"
site to Interland's corporate homepage ("interlandcom").
Interland also displays the symbol "blueHALO" prominently
throughout its corporate, sales, and marketing materials, often
if not uniformly casting the mark in the color blue.
After HM filed its 1999 trademark application for
"HALO,"*fn5 Interland filed an intent-to-use*fn6
trademark application for the mark "blueHALO Architecture." See
Ashby Dec., Exh. 5 (dated June 13, 2002).*fn7 Interland's
trademark application identified web-hosting as the service
targeted by the mark. The Patent & Trademark Office ("PTO")
rejected Interland's "blueHALO Architecture" application on March
7, 2003. See Ashby Dec., Exh. 6 (citing 15 U.S.C. § 1052
(d) of the Lanham Act in finding Interland's proposed mark
too likely to cause confusion, too likely to cause mistake, or
too likely to deceive). Interland filed a second trademark
application a short time later. In this second application,
Interland substituted the phrase "and Design" for "Architecture,"
seeking to register the mark "blueHALO and Design." See Ashby
Dec., Exh. 7 (noting that the mark was "lined" for the color
blue). The PTO refused Interland's second application, once again
noting the likelihood of confusion and the close affinity between
the goods and services offered by the parties. See Ashby Dec.,
Exh. 8. Interland continued to employ the "blueHALO" moniker in its
business ventures. HM learned of Interland's ongoing use in
January 2003, and it promptly asked Interland to alter the mark
used in Interland's web-hosting services. Interland confirmed
receipt of HM's initial query, but Interland did not otherwise
respond. Not until HM reiterated its request, in fact, did
Interland formally refuse HM's demand See Ashby Dec., Exh. 11.
During this time, Interland continued to use the "blueHALO"
moniker in its press releases, denoting the term with a
superscript "SM." See, e.g., Ashby Dec., Exh. 12. Interland
also used the mark in combination with "shared" or
"Architecture," rerouting all visitors to the "bluehalo.com"
website directly to Interland's corporate homepage. See Ashby
Dec. ¶ 9.
II. The Relevant Licence
On July 1, 2002, HM entered a "License, Consent to Use and
Registration Agreement" with Planet Halo, Inc., a California
corporation. See Wargo Decl., Exh. B.*fn8 Through this
agreement, HM granted Planet Halo a license to use HM's mark
and "any eventual registrations based thereon" and invested
Planet Halo with the right to "worldwide use and registration."
Id. When it entered this license agreement, Planet Halo agreed
only "to employ reasonable commercial efforts to maintain the
positive business value of the HALO mark." Id. No explication
of this provision is provided in the agreement, and no express
right to inspect or to supervise Planet Halo's "efforts" is
provided. Id. (permitting either party to "assign th[e license]
Agreement so long as any such assignee agrees to the terms and
conditions [t]herein"). In fact, the licensing agreement invests
HM with no express contractual right to inspect or to monitor
Planet Halo's use of the "HALO" mark. See, e.g., Wargo Decl.,
Exh. A & B.
III. The Instant Litigation
HM filed this action on March 14, 2003. See Compl. at 1. On
October 17, 2004, the court denied HM's motion for a preliminary
injunctive relief, finding that HM had failed to satisfy either
portion of the relevant "sliding scale." See Southwest Voter
Registration Education Project v. Shelley, 344 F.3d 914, 917
(9th Cir. 2003) (en banc; per curiam) (discussing the court's responsibility to consider the moving party's "likelihood of
success on the merits," "the possibility of irreparable injury,"
and the seriousness of "the questions" raised, and "the balance
of hardships"). Interland has now moved for summary judgment,
arguing that HM abandoned its rights in the relevant mark and, in
so doing, forfeited all of the claims federal and state it
attempts to bring here.
Under Federal Rule of Civil Procedure 56, summary judgment
shall be granted "against a party who fails to make a showing
sufficient to establish the existence of an element essential to
that party's case, and on which that party will bear the burden
of proof at trial . . . since a complete failure of proof
concerning an essential element of the nonmoving party's case
necessarily renders all other facts immaterial." Celotex Corp.
v. Catrett, 477 U.S. 317, 322-23 (1986); Fed.R.Civ.P. 56(c).
When making a summary judgment motion, the moving party bears the
initial burden of identifying those portions of the record that
demonstrate the absence of a genuine issue of material fact. To
discharge this burden, the moving party must show that the
nonmoving party has failed to disclose the existence of any
"significant probative evidence tending to support the
complaint." First Nat'l Bank v. Cities Serv. Co., 391 U.S. 253,
290 (1968). If the moving party satisfies this initial hurdle,
the burden then shifts to the nonmoving party to "go beyond the
pleadings, and by her own affidavits, or by the `depositions,
answers to interrogatories, and admissions on file,' designate
`specific facts showing that there is a genuine issue for
trial.'" Celotex Corp., 477 U.S. at 324 (citations omitted).
Not all disputes that arise in the course of litigation
constitute genuine issues of material fact. A dispute about a
material fact is genuine and thus adequate to survive a motion
for summary judgment "if the evidence is such that a reasonable
jury could return a verdict for the nonmoving party." Anderson
v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). Mere
allegations or unsubstantiated denials do not, without more,
generate a genuine issue of material fact. See Gasaway v.
Northwestern Mut. Life Ins. Co., 26 F.3d 957, 960 (9th Cir.
1994). When considering motions for summary judgment, the court
views the facts and the inferences drawn therefrom in the light most favorable to the party opposing the motion. See
T.W. Elec. Serv., Inc. v. Pacific Elec. Contractor's Ass'n,
809 F.2d 626, 631 (9th Cir. 1987). In this process, the court does
not make credibility determinations. See Anderson, 477 U.S.
The core issue before the court is whether HM abandoned its
"HALO" trademark by entering into a "naked license." The Ninth
Circuit has defined "naked licenses" as those licenses that
"fail to exercise adequate quality control over the licensee."
Barcamerica Int'l USA Trust v. Tyfield Importers, Inc.,
289 F.3d 589, 595-96 (9th Cir. 2002) (citing Moore Bus. Forms, Inc.
v. Ryu, 960 F.2d 486, 489 (5th Cir. 1992)); see also
McCarthy on Trademarks and Unfair Competition § 17:6, at 17-9
(4th ed. 2003) ("Licensing a mark without adequate control over
the quality of the goods or services sold under the mark by the
licensee may cause the mark to lose its significance as a symbol
of equal quality hence, abandonment."). Where a "trademark
holder engages in naked licensing, without any quality control
over the quality of goods produced by the licensee, such a
practice is inherently deceptive." See First Interstate
Bancorp v. Stenquist, 1990 WL 300321, at *3 (N.D. Ca. 1990)
(Patel, J.).*fn9 Failure to exercise "adequate quality
control" constitutes "abandonment" of a mark i.e., a "purely 
involuntary forfeiture of trademark rights" that does not demand
evidence of "any subjective intent to abandon the mark." Id.
(quoting McCarthy § 18:48 at 18-76-18-78). Once a trademark
holder enters a "naked license" that is, once a holder
"abandons the trademark" the holder is "estopped from asserting
rights [related] to [that] mark." Id. (quoting Moore, 960
F.2d at 489).
As the court noted in its preliminary injunction order, a party
must satisfy a "stringent standard" of proof when asserting that
a trademark holder entered into a "naked license." Id. (quoting
Moore, 960 F.2d at 489); see also Creative Gifts, Inc. v.
UFO, 235 F.3d 540, 548-548 (10th Cir. 2000) ("Because naked
licensing if established is treated as an abandonment of the
trademark, which triggers the loss of trademark rights against
the world, anyone attempting to show such abandonment via naked
licensing faces a stringent burden of proof.") (citing Moore,
960 F.2d at 489, and Taco Cabana Int'l, Inc. v. Two Pesos,
Inc., 932 F.2d 1113, 1121 (5th Cir. 1991), aff'd, 505 U.S. 763
(1992)). The court found that Interland met that "stringent"
standard for the purposes of HM's request for a preliminary
injunction. And while the motion for summary adjudication asks a different question than did the request for preliminary
injunctive relief viz., whether there is a genuine issue of
material fact, not whether HM demonstrated a probability of
success on the merits Interland nevertheless meets its
"stringent" standard of proof here.
On July 31, 2002, HM granted Planet Halo a license*fn10
for "worldwide use and registration" of HM's mark and "any
eventual registrations based thereon." See Wargo Decl., Exh. B.
No explicit or definite quality control terms appear anywhere in
the two-page licensing agreement; no objective, enforceable terms
guide (or limit) Planet Halo's use of the mark. Id. Instead,
the agreement requires Planet Halo only to do (at most) three
things: one, "to employ reasonable commercial efforts to maintain
the positive business value of the HALO mark"; two, to limit mark
use to that "substantially as shown in the pending applications
and with services substantially as recited"; and, three, to
cooperate with HM to "mitigate the confusion or likelihood of
confusion between the parties' respective marks." See Ashby
Decl., Exh. B. None of these requirements nor the three taken
together place any distinct or cognizable restriction on the
quality of goods Planet Halo may produce or distribute under the
mark. In fact, all of these putative "quality control" terms
prove inherently amorphous, both in obligation and in effect
and all remain wholly undefined in the agreement. Id. Under the
terms of the licensing agreement, in fact, HM retains no express
contractual right to inspect or to supervise Planet Halo's
conduct. HM lacks even the ability to terminate the license
should Planet Halo derogate its supposed "quality" or "value"
obligations. See Barcamerica, 289 F.3d at 595-96.*fn11 By
its own terms, then, the licensing agreement between HM and
Planet Halo was a "naked" one.
As the Ninth Circuit has noted, of course, "[t]he lack of an
express contract right to inspect and [to] supervise a licensee's
operation is not conclusive evidence of lack of control." Id.
at 596 (noting that where circumstances informing or surrounding
the "licensing arrangement [indicate] that the public will not be
deceived," the lack of a formal quality control provision does
not automatically divest a trademark holder of protection)
(citation omitted). But HM's conduct also confirms that HM
relinquished and otherwise failed to maintain adequate
quality control. Id. From the beginning, HM's interaction with
Planet Halo was acrimonious,*fn12 marked by HM's intent to
divest itself of control of the germane mark, not to maintain
it. HM's initial contact (via email) with Planet Halo was
adversarial in nature, as HM immediately accused Planet Halo of
infringing HM's mark. See Wargo Decl., Exh. B. Planet Halo
disagreed with HM's charge, but HM persisted, sending Planet Halo
a number of additional emails discussing a supposedly
"self-evident" conflict. See id. Planet Halo continued to dispute HM's claims, but it entered the
licensing agreement nonetheless, hoping to end the supposed
relationship with HM, not to solidify it. See Wargo Decl., Exh.
A (Angell Depo.) (noting that, through this "deal with the
devil," Planet Halo hoped to "move on" at less cost than "hiring
a lawyer"). No ongoing "working relationship" existed or
developed between HM and Planet Halo, and little additional
interaction occurred. Id. (noting, inter alia, that Planet
Halo "didn't have a relationship" with HM, that the two entities
were not "in any way related or affiliated," and that the two
"never had a working relationship").*fn13 In fact, all
Planet Halo ever sent to HM was a single set of marketing
materials; no updates on these materials followed, and no
"product" was ever reviewed. See Angell Depo., at 42:21-43:8
(noting that the transmission of one "marketing package" was
"all" that the agreement and, specifically, the "reasonable
commercial efforts" term contemplated).*fn14
At oral argument plaintiff made much of the fact that, of
course, there had been no visits to Planet Halo's plant or other
facility, because the model, a picture of which was displayed at
the hearing and contained in an exhibit, was a only a prototype.
However, despite demonstrations to potential manufacturers and
purchasers, plaintiff had never been consulted about
demonstrations or about particular manufacturers nor even
inquired about them. Also, Planet Halo never sought plaintiff's
permission or guidance on such activities.
Indeed, nothing in the record suggests that HM was remotely
interested in any of these activities and there is nothing in the
record to show that Planet Halo was familiar with HM's internal
quality control efforts. Id. Nor does anything in the record
indicate that HM had (or sought) any information about Planet
Halo's own quality control methods, either. Id. A studied
myopia or blindness appears to have guided these parties in their
dealings. The deposition testimony of Marc Angell, Planet Halo's
CEO, puts it succinctly: Planet Halo entered a "bogus deal . . .
with the devil" so that it could "move on"; Planet Halo permitted
HM no access to any of its facilities; Planet Halo had no
discussion of nor understood the thrust of any of the
supposed "quality control" terms in the licensing agreement;
Planet Halo angrily rebuffed HM's few attempts to inspect Planet
Halo's "facilities and books and records"; Planet Halo had "no
plans, then, now or in the future, to give" HM the right to
inspect or to confirm Planet Halo's operations; and Planet Halo
emphatically denied any suggestion of HM "control," however
minute, calling such claims "absurd." See id. At most, the
record suggests that Planet Halo entered the licensing agreement
so that it might forfend additional contact with HM. Id.
(assuring that Planet Halo "absolutely [would] not" have entered into the license agreement had it believed HM had any supervisory
or monitoring rights); see Stanfield v. Osborne Industries,
Inc., 52 F.3d 867, 872 (10th Cir. 1995) ("[T]he parties have had
no contact with each other except as adversaries."). No
legitimate efforts to control quality occurred.
To be sure, as a part of its opposition to Interland's motion
for summary adjudication, HM adduces three new declarations one
from a supposed "expert," one from Planet Halo's CEO, and one
from Ashby himself. See Pl.'s Opp., Decls. of Franklyn, Angell,
and Ashby. Each of these declarations conclude in nearly
identical language that Planet Halo and HM were somehow
"working together," that the licensing agreement was
"sufficiently definite" to be enforceable, and that HM was
involved in "periodic" review of Planet Halo's efforts. See
id. But each of these declarations confuse untenable,
self-serving, and impressionistic conclusions of law for
legitimate assertions of material fact. See United States v.
Shumway, 199 F.3d 1093, 1104 (9th Cir. 1999). In fact, none of
the three declarations contains relevant, material facts;
instead, the declarations recite legal conclusions and attempt to
recast facts already found by this court. See Decls. of Ashby,
Angell, and Franklyn. This does not satisfy Rule 56's standard
especially where a declarant's conclusions contradict his own
deposition testimony, and especially where an "expert" merely
signs a declaration rife with unvarnished legal conclusions that
echo (identically) what the benefitting party himself has said.
See Scamihorn v. General Truck Drivers, 282 F.3d 1078, 1086
(9th Cir. 2002) ("As a general rule, an affidavit submitted in
response to a motion for summary judgment which contradicts
earlier sworn testimony without explanation of the difference
does not automatically create a genuine issue of material fact.")
(citing Kennedy v. Allied Mut. Ins. Co., 952 F.2d 262, 266 (9th
Cir. 1991)); Aguilar v. Int'l Longshoremen's Union,
966 F.2d 443, 447 (9th Cir. 1992) (discussing improper "expert"
testimony); see also Fed.R.Evid. 702 & 704.
The court is mindful of the fact "that a statement is
self-serving [may] bear on its credibility, not on its
cognizability for purposes of establishing a genuine issue of
material fact." Lucas Auto. Eng'g, Inc. v.
Bridgestone/Firestone, Inc., 275 F.3d 762, 768 (9th Cir. 2001);
Fed.R.Civ.P. 56(e). But the court is likewise mindful that
interested parties cannot concoct genuine issues of material fact
simply by submitting strategically-worded and unsupported
conclusions of law in the form of declarations. See Shumway,
199 F.3d at 1104 ("If the affidavit stated only conclusions,
. . . then it would be too conclusory to be cognizable. . . .").
All three declarations Franklyn's "expert" opinions, Angell's
contradictory (i.e., "sham")*fn15 declaration, and Ashby's
legal assertions provide little more than a list of
self-serving legal conclusions, not facts. And all three hope to cure a naked license by reciting terms no less indefinite
than those in the license itself. See, e.g., Decls. of
Franklyn & Ashby (suggesting that "reasonable commercial efforts"
is sufficiently clear because it demands Planet Halo to "uphold
the stature of the mark" and to "maintain a respectable
integrity"). Such declarations do not, without more, overcome a
motion for summary judgment.*fn16 See, e.g., A&M
Records, Inc. v. Napster, Inc., 2000 WL 1170106, at *8 (N.D. Ca.
2000) (finding that a law professor's report was inadmissible
vis-a-vis legal questions before the court) (Patel, C.J.).
In the end, all that HM properly adduces to prove "quality
control" is a pair of email messages from HM to Planet Halo. Both
messages seek "reassurance" from Planet Halo regarding its
license obligations, and both ask to review "samples" of Planet
Halo's relevant products. See Ashby Supp. Decl., Exh. 8 (dated
January 21, 2003, and February 19, 2003) (thanking Planet Halo
for "promoting a positive image" though this "positive image"
term is left unexplored and noting that, for fear of "a loss of
rights," it is "kind of important to check up" on Planet Halo's
use of the mark). Viewed generously, these emails may imply a
"minimal effort to monitor quality." Barcamerica, 289 F.3d at
597 (citation omitted). But the timing and the effect of the
messages actually weaken rather than buttress HM's claims of
legitimate quality control. All of HM's attempts to monitor
Planet Halo's use of the mark occurred more than six months after
the license agreement was entered. In fact, all of HM's putative
monitoring coincided with (and helped prepare for) HM's filing of
this litigation as if HM wished to cure the abandonment of its
mark through a series of tardy, dilatory, and facile quality
control gestures. See Ashby Supp. Decl., Exh. 8. Such "minimal
effort[s]" do not qualify as sufficient quality control efforts.
See Barcamerica, 289 F.3d at 597 (citation omitted).
They were inconsistent and unsuccessful as well. Cf.
Emergency One, Inc. v. American FireEagle, Ltd., 228 F.3d 531,
537 (4th Cir. 2000) ("[T]he owner of a trademark cannot defeat an
abandonment claim, as well as the purposes of the Lanham Act, by
simply asserting a vague, subjective intent to resume use of a
mark at some unspecified future date."). HM's quality control
efforts consist of little more*fn17 than a short series of
curt, pro forma requests to review unspecified Planet Halo
products and materials. Id. Such transparent post hoc
gestures are not sufficient to revive an abandoned mark, nor do
they function as adequate "quality controls."*fn18 See
Barcamerica, 289 F.3d at 597-98. Since HM and Planet Halo
entered the license agreement, HM has "failed to demonstrate any
knowledge of or reliance on actual quality controls used . . .,
nor has it demonstrated any ongoing effort to monitor quality." Id. No
formal agreement guides Planet Halo's use of the mark; nothing in
the record establishes "when, how often, and under what
circumstances" HM can or did exercise any kind of quality
control. Planet Halo and HM never maintained "the type of close
working relationship required to establish adequate quality
control in the absence of a formal agreement." Id. (citations
omitted).*fn19 If anything, the record confirms that HM
"played [no] meaningful role in holding [any product] to a
standard of quality good, bad, or otherwise." Id. at 598;
see also McCarthy, § 18:48, at 18-82 ("A mark can become
abandoned by any act or omission of the registrant which causes
the mark to lose its significance as an indication of origin.");
see McCarthy § 18:55, at 18-94; TMT North America, Inc. v.
Magic Touch GmbH, 124 F.3d 876, 885 (7th Cir. 1997). All that HM
has done is attempt to revive an abandoned mark through uniformly
tardy, unsystematic, and unavailing means. Cf. Stanfield, 52
F.3d at 872 ("In cases in which courts have found that a licensor
justifiably relied on a licensee for quality control, some
special relationship existed between the parties."); Wargo Decl.,
Exh. A ("This is absurd. There has been no control."). Such
efforts do not change the character of the "naked" license
between HM and Planet Halo and they do not restore HM's
forfeited state or federal rights.*fn20 See, e.g.,
Cleary v. News Corp., 30 F.3d 1255, 1262-63 (9th Cir. 1994)
(affirming the dismissal of related Lanham Act and state law
claims). For this reason, all of HM's claims against Interland
are untenable as a matter of law. Interland's motion for summary
judgment must be granted accordingly.
Interland's motion for summary judgment is GRANTED. HM's claims
are DISMISSED WITH PREJUDICE.*fn21
IT IS SO ORDERED.