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Imagenetix, Inc v. Gnc Parent

July 18, 2012

IMAGENETIX, INC.,
PLAINTIFF,
v.
GNC PARENT, LLC; GNC CORP.; GENERAL NUTRITION CENTERS, INC.; GENERAL NUTRITION CORP.; GNC HOLDINGS, INC.;
AND DOES 1-4,000, INCLUSIVE, DEFENDANTS.



The opinion of the court was delivered by: Marilyn L. Huff, District Judge United States District Court

ORDER DENYING DEFENDANTS' MOTION TO STAY LITIGATION

On May 29, 2012, Defendants GNC Parent, LLC, GNC Corp., General Nutrition Centers, Inc., General Nutrition Corp., and GNC Holdings, Inc. ("GNC" or "Defendants") filed a motion to stay this action pending the outcome of arbitration proceedings between Plaintiff Imagenetix, Inc. and a third party, TriPharma, LLC. (Doc. No. 15.) On July 9, 2012, Imagenetix filed a response in opposition of GNC's motion for a stay. (Doc. No. 18.) On July 16, 2012, GNC filed a reply. (Doc. No. 20.)

The Court finds this matter appropriate for resolution without oral argument, submits it on the parties' papers pursuant to the Local Rule 7.1(d)(1), and vacates the hearing scheduled for July 23, 2012. For the following reasons, the Court denies GNC's motion to stay. ///

Background

Imagenetix is a manufacturer and distributor of nutritional supplements. Imagenetix applied for a federal trademark for the name "Trisynex" on December 8, 2006, and the mark was registered to Imagenetix on July 29, 2008. (Doc. No. 1 at ¶15.)

GNC is a global retailer of nutritional products. On January 11, 2012, Imagenetix filed this suit against GNC asserting claims of trademark infringement, trademark dilution, false advertising, unfair competition, and unjust enrichment concerning the Trisynex® mark. (Doc. No. 1.) GNC admits that it uses the Trisynex® mark in connection with its Physio-BurnTM products. (Doc. No. 15-3 at 69.) GNC claims that it is entitled to use the Trisynex® mark based on a sub-license from a third party, TriPharma. (Id. at 70.)

GNC seeks to stay this litigation based on a recently filed arbitration proceeding between Imagenetix and TriPharma concerning ownership rights in the Trisynex® mark. (Doc. No. 15.) TriPharma is a distributor and marketer of nutritional supplements. TriPharma is not a party to this case.

In June of 2006, Imagenetix and TriPharma entered into several distribution agreements to allow TriPharma to distribute and market Imagenetix weight-loss products. (Doc. No. 18-3 at 5-29.) Imagenetix and TriPharma dispute whether the terms of the distribution agreements give TriPharma the right to use and license the Trisynex® mark. (Doc. No. 15-3 at 10-13.)

In June of 2010, Imagenetix initiated an arbitration proceeding before the Judicial Arbitration and Mediation Service (JAMS). (Doc. No. 18-5 at 3.) TriPharma argued that it had the right to use the Trisynex® mark. TriPharma also asserted a number of counterclaims against Imagenetix, including a counterclaim for violation of the Lanham Act. (Doc. No. 18-4 at 21-22.) On September 12, 2011, the arbitrator issued an Interim Award in favor of TriPharma's counterclaims against Imagenetix for breach of contract, breach of the implied covenant of good faith and fair dealing, and fraud. (Doc. No. 18-5 at 32-33.) The arbitrator awarded TriPharma $2.1 million in compensatory damages and $250,000 in punitive damages. (Id. at 33.) The arbitrator explicitly found that Imagenetix did not violate the Lanham Act, but the arbitrator did not determine if TriPharma had rights to use or license the Trisynex® mark. (Id. at 32.)

On October 6, 2011, TriPharma sent a letter to the arbitrator requesting clarification on whether TriPharma had the right to use the Trisynex® mark. (Doc. No. 18-6 at 2-7.) Specifically, TriPharma requested that the arbitrator "clarify in the Final Award . . . that TriPharma has the exclusive right to use the trademark name Trisynex." (Id. at 3.) In the Final Award, the arbitrator denied TriPharma's request because it "seeks more than a mere clarification of the Interim Award . . . [and] raises a substantive issue . . . The Arbitrator declines to consider making a substantive modification of the Interim Award absent re-opening the Hearing." (Doc. No. 15-2 at 79.) On March 5, 2012, the San Diego Superior Court confirmed the arbitration award. (Doc. No. 15-3 at 8.)

On April 25, 2012, TriPharma initiated a second JAMS arbitration proceeding against Imagenetix to determine whether TriPharma has rights to use the Trisynex® mark. (Doc. No. 15-3 at 10-13.) In the second arbitration TriPharma asserts that it has the exclusive right to use the Trisynex® mark based on the terms of the distribution agreements between TriPharma and Imagenetix. (Id. at 11.) The second arbitration proceeding is currently pending. Imagenetix and TriPharma have yet to schedule evidentiary hearings in the second arbitration. (Doc. No. 18-1 at 3.)

GNC's present motion seeks to stay this litigation pending the outcome of the second JAMS arbitration between Imagenetix and TriPharma. (Doc. No. 15.) GNC asserts that the second arbitration will dispositively determine whether TriPharma possessed the right to sub-license the Trisynex® mark to GNC. Imagenetix opposes GNC's motion. (Doc. No. 18.)

I. Legal Standard for a Motion to Stay

The District Court has broad discretion to stay proceedings as an incident to its power to control its own docket. Clinton v. Jones, 520 U.S. 681, 706 (1997) (citing Landis v. N. Am. Co., 299 U.S. 248, 254 (1936)). In determining whether to grant a motion to stay, "the competing interests which will be affected by the granting or refusal to grant a stay must be weighed." Lockyer v. Mirant Corp., 398 F.3d 1098, 1110 (9th Cir. 2005) (citing CMAX Inc. v. Hall, 300 F.2d 265, 268 (9th Cir. 1962)). These interests include: (1) the possible damage which may result from the granting of a stay, (2) the hardship or inequity which a party may suffer in being required to go forward, and (3) the orderly course of justice measured in terms of the simplifying or complicating of issues, proof, and questions of law which could be expected to result from a stay. Id. "Only in rare ...


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