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Karoun Dairies, Inc. v. Karoun Dairies

September 13, 2010

KAROUN DAIRIES, INC., PLAINTIFF,
v.
KAROUN DAIRIES, INC., ET AL. DEFENDANTS;



The opinion of the court was delivered by: M. James Lorenz United States District Court Judge

ORDER (1) DENYING PLAINTIFF'S MOTION FOR A PRELIMINARY INJUNCTION, AND (2) DENYING PLAINTIFF'S MOTION TO DISMISS THE COUNTERCLAIM AND RELATED COUNTERCLAIM.

This trademark infringement action arises from a family dispute over the right to use in the United States a trademark previously established in the family business in Lebanon. Plaintiff was first to use and register the mark in the United States and filed this infringement action against Defendants. Defendants filed a counterclaim alleging that Plaintiff is the infringer and requested cancellation of Plaintiff's registered mark. Plaintiff moved for a preliminary injunction pursuant to Federal Rule of Civil Procedure 65(a) and to dismiss the counterclaim pursuant to Rule 12(b)(6) for lack of trademark standing. For the reasons which follow, Plaintiff's motions are DENIED.

Plaintiff's founder, Anto Baghdassarian and Defendant Ara Baghdassarian are brothers.*fn1

Anto and Ara both worked for many years in the family dairy business in Lebanon ("Karoun Lebanon").*fn2 Karoun Dairies is a trade name which has been used in the family business since 1931 and is registered in Lebanon. Karoun Lebanon was well known in the Middle East and exported its products as far as Paris and London. (Answer and Countercl. at 10-11.)*fn3

Ara was Karoun Lebanon's financial controller and manager. (Answer and Countercl. at 10.) Anto was a shareholder, director and officer of Karoun Lebanon. In these capacities, he was privy to the company's plans to further expand its business outside Lebanon. (Id. at 11.) In approximately 1990, after the death of his father and due to civil unrest in Lebanon, Anto sold his interest in Karoun Lebanon to Ara, and moved to the United States. (Id.; Decl. of Andrea M. Kimball in Supp. of Karoun Dairies, Inc.'s Mot. for Prelim. Inj. ("Kimball Decl.") Ex. L at 30; Decl. of John M. Nading in Supp. of Defs/Countercls' Opp'n to Pl./Counterdef.'s Mot. to Dismiss ("Nading Decl.") Ex. B at 5).) While Ara asserts that they entered into an agreement that Anto would not enter the dairy business, Anto disputes this. (Cf. Anto PI Decl. at 2 with Third Decl. of Ara Baghdassarian in Supp. of Defs/Countercls' Opp'n to Pl./Counterdef's Mot. to Dismiss ("Ara Mot. to Dismiss Decl.") at 1.)

Subsequently, Ara continued to manage Karoun Lebanon, which proceeded to expand its business. Karoun Lebanon participated in local and intentional exhibitions, and advertised in international directories and journals. (Answer and Countercl. at 11.) In 1998 Karoun Lebanon registered the karoun.com and karoundairies.com domain names. (Suppl. Decl. of Andrea M. Kimball in Supp. of Karoun Dairies, Inc.'s Reply in Supp. of Its Mot. for Prelim. Inj. (Suppl. Kimball Decl.") Ex. 3.) It focused its expansion efforts on the United States, Canada, Australia and Europe because these regions were politically stable and had large Lebanese and Armenian communities. Karoun Lebanon registered its mark in Australia and Canada, it attempted registration in the United States, and has a pending Community Trademark application in Europe. (Answer and Countercl. at 11-12.) In 2004 or 2005 Karoun Lebanon had to temporarily suspend production in Lebanon during a military conflict, however, it continued to use the Karoun mark through its exclusive licensees, Defendants Karoun Dairies, Inc., a Canadian corporation ("Karoun Canada") and Karlacti, Inc., a Delaware corporation ("Karlacti"). (See Ara Mot. to Dismiss Decl. at 2.)

Anto started a dairy business in California in 1992, incorporated Plaintiff and started selling cheese products. (Decl. of Anto Baghdassarian in Supp. of Karoun Dairies, Inc.'s Mot. for Prelim. Inj. ("Anto PI Decl.") at 1-2.) Anto named his business after the family business in Lebanon and marketed his products to Middle Eastern emigres in California and elsewhere in the United States. (Nading Decl. Ex. B at 5; see also id. at Ex. A.) In 1993 Plaintiff registered trademark "Karoun Dairies" and in 2003 it registered the mark "Karoun's California Cheese, a Whole Milk Cheese." (Kimball Decl. Ex. A & B.) Plaintiff has invested in advertising and promoting its marks in the United States by attending national trade shows and placing newspaper and television advertising. (Anto PI Decl. at 4-5; Kimball Decl. Ex. B at 32-33.) Plaintiff registered its first domain name, karouncheese.com, in 1999 and its second, karoundairiesinc.com, in 2006. (Ara Mot. to Dismiss Decl. at 1.) Starting in February 2007, Plaintiff registered a number of additional marks, including a circular logo with a drawing of a cow's head and the word "karoun." (Kimball Decl. Ex. C-H.)

In January 2006 Ara retained intellectual property counsel in California. (Decl. of Ara Baghdassarian in Supp. of Mot. to Dismiss for Lack of Personal Jurisdiction ("Ara Personal Jurisdiction Decl.") at 1.) In June 2006 Ara's counsel filed a trademark application to register the Karoun mark in the United States on behalf of Karoun Lebanon. Plaintiff objected and demanded Ara to withdraw the application. Ara, on the other hand, asserted that Karoun Lebanon intended to expand its business into the United States under the Karoun name and demanded that Plaintiff cease and desist using the name. He argued that Anto had sold his right to use the mark to Ara when he sold him his interest in the family business. In May 2007 Ara's trademark application was abandoned. (See Order Denying Defendants' Motion to Dismiss for Lack of Personal Jurisdiction, dated July 13, 2009 ("Personal Jurisdiction Order"), at 4.) In November 2007, Karoun Lebanon was able to register in the United States a circular logo with two cows. (Ara PI Decl. Ex. B at 14.)

In July 2006 following the outbreak of military conflict in Lebanon, Ara and his family immigrated into the United States. (Ara Personal Jurisdiction Decl. at 1.) In October 2006, Ara and his family visited Anto and his family in California. While the precise nature of this visit is disputed, Anto contends that Ara demanded a share in Plaintiff corporation or compensation, both of which Anto denied. (See Personal Jurisdiction Order at 4-5.)

From October 2006 to August 2008, Ara contacted "a couple of times" Raffi Kradjian of Kradjian Importing Co. in California. Mr. Kradjian is in the business of importing and distributing Middle Eastern specialty foods in the United States. The precise nature of Ara's contacts with Mr. Kradjian are disputed. According to Ara, he contacted Mr. Kradjian on behalf of Karoun Lebanon to "get a general feel of the U.S. market." According to Anto, Ara represented that his business was the "real" Karoun Dairies and asked him to deal only with Ara to the exclusion of Plaintiff. (See Personal Jurisdiction Order at 5.)

In February 2007, Ara incorporated Karlacti in Delaware and in July 2008, he registered a domain name karlacti.com. Although Karlacti has not and is not using the Karoun mark in commerce in connection with any goods or services in the United States, its plans for expansion in the United States were put on hold due to this litigation. (Third Decl. of Ara Baghdassarian in His Capacity as President of Karlacti, Inc., a Delaware Corp., in Supp. of Defs/Countercls' Opp'n to Pl./Counterdef's Mot. for Prelim. Inj. ("Ara Karlacti PI Decl.") at 2; Second Decl. of Ara Baghdassarian in His Capacity as President of Karlacti, Inc., a Delaware Corp., in Supp. of Defs/Countercls' Opp'n to Pl./Counterdef.'s Mot. to Dismiss ("Ara Karlacti Mot. to Dismiss Decl.").)

In September 2007, Ara incorporated Karoun Canada, and in July and August 2008 registered domain names karoundairies.ca, karouncheese.ca, karounfoods.com, karoundairiesgroup.com, karouncheese.net and karoundairy.com. The company had sales in Canada starting in November 2007. All of its customers have been in Canada, and it has never sold or offered for sale any products in the United States. The products are labeled "Not for sale in the USA." Its operations have been suspended due to this litigation. (Second Decl. of Ara Baghdassarian in His Capacity as President of Karoun Dairies, Inc., a Canadian Corp., in Supp. of Defs/Countercls' Opp'n to Pl./Counterdef's Mot. to Dismiss (Ara Karoun Canada Mot. to Dismiss Decl."); Third Decl. of Ara Baghdassarian in His Capacity as President of Karoun Canada, Inc., a Canadian Corp., in Supp. of Defs/Countercls' Opp'n to Pl./Counterdef.'s Mot. for Prelim. Inj.)

Plaintiff admits that Karoun Canada registered the Karoun mark in Canada and has a right to market and sell its goods under the Karoun name there. (Pl.'s Mot. for Prelim. Inj. at 19.) In addition, in response to Plaintiff's demand letters (Ara PI Decl. at 1-2), Defendants' websites include notices stating, "Licensees of the original KAROUN DAIRIES S.A.L. Beirut - Lebanon. Not affiliated with KAROUN DAIRIES, Inc. California - USA incorporated without our consent" and "KAROUN DAIRIES S.A.L. does not sponsor ARZ, GOPI LASSI and YANNI branded dairy products."*fn4 (Anto PI Decl. Ex. G.) Defendants are not "currently using the KAROUN mark in commerce in connection with any goods or services in the United States, nor targeting the United States under the KAROUN brand." (Defs' Opp'n to Pl.'s Mot. for Prelim. Inj. at 3; see also id. at 17.)

In August 2008 Plaintiff filed a complaint against Ara, Karlacti and Karoun Canada. The operative complaint claims trademark infringement under the Lanham Act and federal common law, false designation of origin and federal unfair competition, dilution, and unfair competition under California law. Defendants filed a counterclaim for false designation of origin and federal unfair competition under the Lanham Act, cancellation of trademark registrations, and accounting.

Contending that it likely will prevail on the merits of its infringement and unfair competition claims, Plaintiff filed a motion for a preliminary injunction, requesting an order prohibiting Defendants from using any trademarks owned by Plaintiff, or any references thereto and from using Plaintiff's marks on any websites or products, including the use of Plaintiff's marks in the URL. In the alternative, Plaintiff requests that Defendants' websites be modified to preclude visitors from the United States.

To the extent Plaintiff requests relief against Karoun Lebanon and its two web sites, karoun.com and karoundairies.com, the court notes that Karoun Lebanon is not a party to this action. "A federal court may issue an injunction if it has personal jurisdiction over the parties . . .; it may not attempt to determine the rights of persons not before the court." Zepeda v. , 753 F.2d 719, 727 (9th Cir. 1983); Fed. R. Civ. Proc. 65(d). ...


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