The opinion of the court was delivered by: Morrison C. England, Jr. United States District Judge
MEMORANDUM AND ORDER
AND RELATED COUNTERLAIM
Before the Court are: (1) The Wine Group, LLC's ("TWG") Motion for Summary Judgment (ECF No. 56); (2) L. and R. Wine Company, Inc.'s ("L&R") Motion for Partial Summary Judgment on TWG's Amended Second Affirmative Defense (ECF No. 58); (3) L&R's Motion for Summary Judgment on its Counterclaim for Cancellation of TWG's Trademark Registration (ECF No. 60); (4) TWG's Contingent Motion for Summary Judgment on L&R's Cancellation and Inequitable Conduct Claims (ECF No. 69); (5) L&R's Motion to Strike the Declarations of L. Jones and J. Sutton and Cross-Motion for Summary Judgment on TWG's Claims Based on TWG's Unclean Hands (ECF No. 72); and (6) TWG's Contingent Cross Motion for Summary Judgment on L&R's Claims of Unclean Hands (ECF No. 86). The motions are fully briefed.*fn1 For the reasons that follow TWG's Motion for Summary Judgment (ECF No. 56) is granted and the remainder of the motions are denied either on the merits or as moot.
A. TWG's Complaint and L&R's Counterclaim
This action arises from a federal trademark infringement dispute between two wineries, each of which contends that it has the trademark rights to an octagonal wine box design, and each of which seek to prevent the other from any further infringement.
TWG is a winery and a Delaware limited liability company with its principal place of business in Tracy, California. (See TWG's Complaint ("Compl."), ECF No. 1 ¶¶ 3, 7.) L&R is also a winery and is a Pennsylvania corporation having its principal place of business in Lancaster, Pennsylvania.*fn2 (Id. ¶ 4.)
TWG alleges that it was the first company to introduce "bag in box" wines, and that to differentiate itself from competitors, it started to develop an octagonal wine box in 1999, which, in 2009, it developed for premium wines. (Id. ¶¶ 8-11.) Specifically, TWG states that, in 1999, it obtained U.S. trademark registrations for the octagonal box design (registration no. 3,009,688). (Id. ¶ 9.) Thereafter, in 2010, TWG states that it developed the concept for selling premium wines in the octagonal-sided box and it obtained trademark registrations both for the design (for which it had the prior registration) and the "Octavin" name it had given the box design (registration nos. 3,800,596 (box design) and 3,775,740 ("Octavin" name)). (Id. ¶¶ 11-12.)
In 2010, TWG states it began selling wine in the "Octavin" box. (Id. ¶¶ 13-14). TWG alleges that L&R received approval to sell its flavored wine named "Like No Other" or "LNO" in an octagonal box from the Department of the Treasury's Alcohol and Tobacco Tax and Trade Bureau in December 2009, that several months later it launched a web site selling the LNO wine, and that L&R has since been marketing the LNO wine aggressively by various different means. (Id. ¶¶ 15-18.)
TWG's First Claim, for federal trademark infringement alleges that: (1) its octagonal box design is not functional and is more expensive than the standard box design; (2) its octagonal wine box design and L&R's are virtually identical, and both wines would be sold to the same consumers of wine in the same channels of trade, which creates a likelihood of confusion for consumers; and (3) was the first to use the octagonal box design and the first to file trademark applications. (Id. ¶¶ 15-22.) TWG contends that it has been injured by L&R's use of the octagonal box and that L&R's use was willful, intentional and in bad faith. (Id. ¶¶ 23-25.) TWG's second claim seeks restitution based on L&R's alleged unjust enrichment. (Id. ¶¶ 26-27.) TWG seeks an injunction enjoining L&R from any further infringement, as well as restitution, costs and any further relief. (Id. at pp. 7-8.)
In its Answer and Counterclaim, L&R generally denies TWG's claims, and, as a Counterclaim, asserts that it was a prior user of the Octagonal box design, therefore TWG is actually infringing on L&R's rights to the make. (L&R's Answer and Counterclaim, ECF No. 8.) Specifically, L&R asserts that, in 2007, it developed a concept for selling wine in an octagonal box, began selling wine in an octagonal box in 2008, and thereafter sold wine in octagonal boxes on a continuous basis. (Id. ¶¶ 46-48.) Like TWG, L&R asserts that its octagonal box design is distinctive and also virtually identical to TWG's, is not functional, is more expensive than a rectangular box, and that its wine and TWG's may be sold to the same consumers in the same channels of trade. (Id. ¶¶ 11, 21-22, 49.)
As affirmative defenses, L&R argues, inter alia, that it is a prior user and has trademark/trade dress rights to the octagonal box design, and that TWG's action violated L&R's First Amendment rights. (Id. at pp. 5-6.)*fn3 In addition, L&R asserted that after discovery, "there is likely to be evidence that TWG's claims are barred in whole or in part by the doctrines of unclean hands, waiver, acquiescence, absence of provable damages, res judicata, and/or collateral estoppel."*fn4 (Id. ¶ 35.) Notably, L&R did not thereafter move to amend to add any of these claims.
For its Counterclaims, L&R argues that (1) TWG's trademark registrations must be cancelled because L&R was a prior user of the octagonal box design and TWG's use of the design caused L&R damage; (2) L&R is not infringing on the octagonal box design and it is entitled to declaratory relief on that point; (3) TWG's acts constitute trademark/trade dress infringement in that they are wilful, likely to cause confusion in the public, and have caused L&R irreparable harm; (4) TWG's acts constitute unfair competition and trademark infringement under common law entitling L&R to damages and injunctive relief; and (5) TWG has been unjustly enriched as a result of its conduct. (Id. at 6-12.) L&R seeks declaratory relief, damages, punitive damages, attorneys' fees, costs, and the cancellation of TWG's trademark registration. (Id. at 12-13.)
In its First Amended Answer to L&R's Counterclaim (ECF No. 26), TWG raises several affirmative defenses, including, as its Second Affirmative Defense, that L&R's use of the octagonal box was unlawful because it had not complied with state and local laws. (ECF No. 26 ¶ 40.) In addition, TWG's affirmative defenses generally contend that any use by L&R prior to TWG's filing of its trademark application was insufficient to give rise to L&R's trademark claims and was limited to the geographic scope of those sales as of the time that TWG filed its application. (Id. at pp. 5-7.)
B. TWG and L&R's Motions for Summary Judgment
Following discovery, TWG filed its Motion for Summary Judgment. (ECF No. 56.) TWG generally alleges that there is no material issue of fact on its infringement or prior use claims, as well as no genuine issue of material fact on L&R's affirmative defenses, and that, as a matter of law, TWG is entitled to summary judgment on each of its claims. ( Id. at 2-16.) In addition, TWG contends that L&R is not entitled to a damages award. (Id. at 16-19.)
Despite the Court's Pretrial Order limiting the parties to a single motion for summary judgment (ECF No. 27), L&R then filed two such motions (and both parties thereafter filed the additional summary judgment motions). First, L&R Moved for Partial Summary Judgment on TWG's Amended Second Affirmative Defense (ECF No. 58).
TWG thereafter filed its Statement of Non-Opposition to L&R's Motion and Notice of Withdrawal of its Second Affirmative Defense. (ECF No. 67.)
Second, L&R filed its Motion for Summary Judgment on its Counterclaim for Cancellation of TWG's trademark registration. (ECF No. 60.) In this Motion, L&R argues that it is entitled to the trademark rights for the octagonal box design and that cancellation of L&R's trademark registration is warranted because: (1) it was a prior user of the equal-sided octagon-shaped box; and (2) TWG engaged in unlawful and inequitable conduct before the U.S. Patent and Trade Office ("USPTO") because it had knowledge of and failed to disclose to the USPTO of "the prior creation, use and sale of a virtually identical design by L&R" while TWG's patent application was allegedly pending. (Id. at 20, see also id., at 10-22.) In its Opposition to L&R's motion (TWG Opposition, ECF No. 68), TWG first asserts that L&R's prior use arguments are unsupported by admissible evidence, there are no genuine material fact issues, and L&R's legal theory is unsupported. (Id. at 6-13.) Regarding L&R's inequitable conduct claims, TWG first notes that this claim is unpleaded and L&R never sought to amend to raise this claim. (Id. at 13-16.) Furthermore, because this claim sounds in fraud, TWG contends that L&R was required to, but has not, satisfied Federal Rule of Civil Procedure 9(b)'s particularity requirements.*fn5 (Id. at 16-17.)
TWG thereafter filed its Contingent Motion for Summary Judgment on L&R's Cancellation Counterclaim. (See ECF Nos. 68, 69.) This Motion is contingent on the Court first finding that L&R properly pleaded this ground for cancellation, and that L&R's cancellation legal theory is viable. (Id.)
L&R then filed its Motion to Strike Declarations of Laurie Jones and John Sutton and Cross-motion for Summary Judgment on TWG's Claims Based on TWG's Unclean Hands. (ECF No. 72.) In this Motion, L&R argues that "The Wine Group, LLC" is not the owner of the trademark registrations at issue, rather some third party company, "The Wine Group, Inc." actually owns the trademark registration. Therefore, L&R contends that the declarations of L. Jones and J. Sutton (attached to TWG's MSJ, ECF No. 56, Exs. 3 and 4), who are the Chief Marketing Officer (L. Jones) and Executive Vice President and General Counsel (J. Sutton) contain false statements about TWG's ownership of the trademark registrations and should therefore be stricken. (ECF No. 72, at 7-12.) In addition, L&R contends that summary judgment on the cancellation claim is warranted on the basis that TWG has unclean hands because it made false statements regarding its ownership of the 1999 trademark both to the USPTO as well as to this Court.
In its Opposition (ECF No. 84) to L&R's Motion to Strike Declarations of L. Jones and J. Sutton and Cross-motion for Summary Judgment (ECF No. 72), TWG asserts that L&R's Motion is frivolous and sanctionable.
Specifically, TWG: (1) notes that this is another unpleaded claim by L&R; (2) asserts that L&R conducted no discovery on this claim; and (3) contends that this is, in essence, a fraud claim and that L&R had failed to state the alleged fraud with particularity pursuant to Rule 9(b), or support its position with any law.*fn6 (Id. at 4-5.)
Substantively, TWG asserts that TWG, Inc. and TWG, LLC are effectively the same company, as "the 'LLC' is the parent company and the 'Inc.' is a wholly owned subsidiary whose primary purpose is to hold various state licenses." (Id. at 10-11.) In addition, TWG asserts there is a complete unity of control between the two companies: "[t]hey have the same officers, same offices, same day to day decision-makers and the same ultimate owners." (Id. at 11.) In essence, TWG contends that it is immaterial, as a matter of fact or law, whether the "LLC" or "Inc." is listed on the trademark registrations related to the octagonal box design.
Finally, TWG filed its Motion for Summary Judgment on L&R's unclean hands defense, which is contingent on the Court first finding that L&R (a) has properly pleaded this ground for cancellation, and (b) its legal theory is viable. (ECF No. 86.) L&R opposes TWG's Motion. (ECF No. 92.)
The Federal Rules of Civil Procedure provide for summary judgment when "the pleadings, depositions, answers to interrogatories, and admissions on file, together with affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed. R. Civ. P. 56(c). One of the principal purposes of Rule 56 is to dispose of factually unsupported claims or defenses. Celotex Corp. v. Catrett, 477 U.S. 317, 325 (1986).
Under summary judgment practice, the moving party always bears the initial responsibility of informing the district court of the basis for its motion, and identifying those portions of 'the pleadings, depositions, answers to interrogatories, and admissions on file together with the affidavits, if any,' which it believes demonstrate the absence of a genuine issue of material fact.
Celotex Corp. v. Catrett, 477 U.S. at 323 (quoting Rule 56(c)).
If the moving party meets its initial responsibility, the burden then shifts to the opposing party to establish that a genuine issue as to any material fact actually does exist. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 585-87 (1986); First Nat'l Bank v. Cities Serv. Co., 391 U.S. 253, 288-89 (1968).
In attempting to establish the existence of this factual dispute, the opposing party must tender evidence of specific facts in the form of affidavits, and/or admissible discovery material, in support of its contention that the dispute exists. Fed. R. Civ. P. 56(e).
The opposing party must demonstrate that the fact in contention is material, i.e., a fact that might affect the outcome of the suit under the governing law, and that the dispute is genuine,
i.e., 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, 251-52 (1986); Owens v. Local No. 169, Assoc. of Western Pulp and Paper Workers, 971 F.2d 347, 355 (9th Cir. 1987). Stated another way, "before the evidence is left to the jury, there is a preliminary question for the judge, not whether there is literally no evidence, but whether there is any upon which a jury could properly proceed to find a verdict for the party producing it, upon whom the onus of proof is imposed." Anderson, 477 U.S. at 251 (quoting Improvement Co. v. Munson, 14 Wall. 442, 448, 20 L. Ed. 867 (1872)). As the Supreme Court explained, "[w]hen the moving party has carried its burden under Rule 56(c), its opponent must do more that simply show that there is some metaphysical doubt as to the material facts.... Where the record taken as a whole could not lead a rational trier of fact to find for the nonmoving party, there is no 'genuine issue for trial.'" Matsushita, 475 U.S. at 586-87.
In resolving a summary judgment motion, the evidence of the opposing party is to be believed, and all reasonable inferences that may be drawn from the facts placed before the court must be drawn in favor of the opposing party. Anderson, 477 U.S. at 255. Nevertheless, inferences are not drawn out of the air, and it is the opposing party's obligation to produce a factual predicate from which the inference may be drawn.
Richards v. Nielsen Freight Lines, 602 F. Supp. 1224, 1244-45 (E.D. Cal. 1985), aff'd, 810 F.2d 898 (9th Cir. 1987).
Given the plethora of motions, the Court will first dispose of several that are, in the Court's view, peripheral to the fundamental dispute between the parties.
A. L&R's Motion for Partial Summary Judgment on TWG's Amended Second Affirmative Defense (ECF No. 58)
L&R Moves for Partial Summary Judgment on TWG's Amended Second Affirmative Defense (ECF No. 58), in which TWG argued that L&R's use of the octagonal sided wine box was unlawful because it had not complied with various state and local laws. TWG thereafter filed its Statement of Non-Opposition to L&R's Motion and Notice of Withdrawal of its Second Affirmative Defense. (ECF No. 67.) Because TWG withdrew its Second Amended Defense, L&R's Motion for Summary Judgment on TWG's Amended Second Affirmative Defense (ECF No. 58) is denied as moot.
Unpleaded Claims for Inequitable Conduct and Unclean
In its Answer and Counterclaim, L&R asserted that after discovery, "there is likely to be evidence that TWG's claims are barred in whole or in part by the doctrines of unclean hands, waiver, acquiescence, absence of provable damages, res judicata, and/or collateral estoppel." (ECF No. 8 ¶ 35.)
However, L&R indicated in the Joint Status Report that it did not contemplate amending the pleadings (ECF No. 15 at page 4) and L&R did not thereafter seek to amend its Complaint to add any of these claims. Despite this, L&R has repeatedly raised unpleaded claims in its subsequent motions.*fn7
On a motion for summary judgment, Plaintiffs' allegations and theories of liability are confined to those found in the operative complaint. Coleman v. Quaker Oats Co., 232 F.3d 1271, 1292 (9th Cir. 2000) ("A complaint guides the parties' discovery, putting the defendant on notice of the evidence it needs to adduce in order to defend against the plaintiff's allegations."); Insurance Company of North America v. Moore, 783 F.2d 1326, 1327--28 (9th Cir. 1986) (holding, where plaintiff argued it was entitled to relief on claim for breach of implied covenant of good faith and fair dealing, but had failed to plead such claim, "district court did not err in refusing to award relief on [the] unpleaded cause of action"). Generally, "[f]ailure to plead an affirmative defense  results in a waiver of that defense."
Enlow v. Salem-Keizer Yellow Cab Co., Inc., 389 F.3d 802, 819 (9th Cir. 2004) (citation omitted). However, the failure to plead a defense is not necessarily a waiver, as the court can permit a party to raise affirmative defenses through a subsequent motion. Simmons v. Navajo Cnty., Ariz., 609 F.3d 1011, 1023 (9th Cir. 2010). The defense may be raised later if the delay in raising the defense does not prejudice the plaintiff. Owens v. Kaiser Found. Health Plan, Inc., 244 F.3d 708, 713 (9th Cir. 2001).
1. Inequitable Conduct Claims in L&R's Motion for Summary Judgment on its Cancellation Counterclaim Summary Judgment (ECF No. 69) (ECF No. 60) and TWG's Contingent Motion for First, L&R contends in its Motion for Summary Judgment on its Counterclaim for Cancellation of TWG's Trademark Registration (ECF No. 60) that TWG engaged in inequitable and unlawful conduct in prosecuting its design patent application.*fn8 (Id. at 18-22.) Specifically, L&R argues that during the pendency of TWG's design patent application for its octagon-shaped box design, TWG became aware that L&R was also engaged in creating and manufacturing an octagon-shaped box, but failed to disclose this information to the USPTO. (Id. at 20.)
L&R contends that this was material information and that TWG's failure to disclose the information makes its use of the octagon-shaped design an unlawful use, therefore, cancellation of its trademark registration is warranted. (Id. at 20-23.)
Notably, in its Answer and Counterclaim L&R did not plead inequitable conduct regarding TWG's patent application and L&R did not thereafter amend, or seek leave to amend, to add this claim. (See ECF No. 8.) L&R also does not explain why it did not raise this claim until after discovery had closed and dispositive motions were filed, or why it could not have discovered this issue earlier.
In addition, there is no patent claim at issue: all of L&R's pleaded claims are based on trademark rights. On that basis alone, the Court could deny L&R's motion for summary judgment as to this argument. See Coleman, 232 F.3d at 1292-93 (permitting an unpleaded new theory of liability at the summary judgment stage would prejudice the party against whom the new theory is being brought: the new claim should have been brought by means of a motion to amend at an earlier stage of the litigation).
However, even were the Court to reach L&R's claim that TWG engaged in inequitable conduct in its patent application, this claim sounds in fraud, see, e.g., Kaiser Foundation Health Plan, Inc. v. Abbott Laboratories, Inc., 552 F.3d 1033, 1048 (9th Cir. 2009); Hydranautics v. FilmTec Corp., 204 F.3d 880, 883 n.1 (9th Cir. 2000), and a fraud claim must be pleaded with particularity pursuant to Rule 9(b). "A pleading is sufficient under Rule 9(b) if it identifies the circumstances constituting fraud so that the defendant can prepare an adequate answer from the allegations."
Neubronner v. Milken, 6 F.3d 666, 671-72 (9th Cir. 1993) (internal quotations and citations omitted). "The complaint must specify such facts as the times, dates, places, benefits received, and other ...