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Ak Metals, LLC v. Norman Industrial Materials

January 31, 2013

AK METALS, LLC,
PLAINTIFF,
v.
NORMAN INDUSTRIAL MATERIALS, DOES 1 TO 100, INCLUSIVE, DEFENDANTS.



The opinion of the court was delivered by: Irma E. GONZALEZUnited States District Judge

ORDER: (1) DENYING PLAINTIFF'S MOTION FOR PRELIMINARY INJUNCTION AND (2) DENYING PLAINTIFF'S INC.; MOTION TO EXPEDITE DISCOVERY [Doc. No. 10]

Presently before the Court are the motions of Plaintiff AK Metals, LLC ("Plaintiff") for a preliminary injunction and to expedite discovery. [Doc. No. 10, Pl.'s Mot.] For the reasons below, the Court DENIES both motions.

BACKGROUND

Plaintiff is a distributor of metal supplies, services, and materials. [Doc No. 1-1, Compl. ¶¶ 7-8.] Plaintiff alleges that its registered fictitious business name is "Escondido Metal Supply" and that it has continuously used the trade names and trademarks "AK Metals" and "Escondido Metal Supply" at least since 1998. [Id. ¶¶ 1, 7-8.]

Plaintiff alleges that Defendant Norman Industrial Materials, Inc. ("Defendant"), a direct competitor, "has engaged in a number of activities that infringe upon the trade names and trademarks of [Escondido Metal Supply] which constitute false advertising and unfair competition." [Id. at ¶¶ 11, 13.] Plaintiff alleges that Defendant is using the trade name, "Escondido Metal Supply" and variations thereof, without its authorization. [Id. ¶ 4.] More specifically, Plaintiff states that Defendant is using "Escondido Metal Supply" as a keyword for Internet advertising, including in Google's AdWords program. [Id. ¶¶ 4, 13.] Plaintiff alleges that when a potential consumer searches for "Escondido Metal Supply" or similar variations, Defendant's advertisement appears as a sponsored link (separate from the search results themselves). [Id. ¶¶ 13-14; Doc. No. 10-7, Exhibit.] Plaintiff alleges that Defendant uses "Escondido Metal Supply" in the header and text of its advertisement. [Doc. No. 1-1, Compl. ¶ 14.] Plaintiff also believes that "Defendant's unauthorized use of [Escondido Metal Supply] . . . is likely to confuse, mislead, and deceive consumers as to the source of products available through [Defendant's website]." [Id. ¶ 15.]

On October 3, 2012, Plaintiff filed a Complaint in the California Superior Court for the County of San Diego. [Doc. No. 1-1, Compl.] On October 24, 2012, Defendant removed the action to this Court. [Doc. No. 1, Notice of Removal.] The following causes of action are alleged in the Complaint: (1) common law trademark infringement; (2) federal unfair competition and false advertising in violation of 15 U.S.C. §§ 1114 and 1125(a); and (3) statutory unfair competition and false advertising under California Business and Professions Code §§ 17200 and 17500, et seq. [Doc. No. 1-1, Compl.]

After the filing of the Complaint, Defendant informed Plaintiff in a letter that it had "paused the link on 'escondido metal supply,' without admission of wrongdoing, as a sign of good faith and in the hope of working out a resolution to these issues." [Doc. No. 10-8, Oct. 31 Letter from Def. at 5.] Defendant stated that all of its sponsored ads had been stopped for Google searches of "Escondido Metal Supply." [Doc. No. 20, Def.'s Opp. at 7.] Defendant also stated that although searches for misspellings of "Escondido Metal Supply" still display Defendant's advertisement, the text of the ad header does not read "Escondido," and the text clearly identifies Defendant. [Doc. No. 10-8, Oct. 31 Letter from Def. at 4.]

On December 19, 2012, Plaintiff filed an ex parte motion for a temporary restraining order ("TRO"), for a preliminary injunction, and to expedite discovery. [Doc. No. 10, Pl.'s Mot.] In its ex parte application for a TRO, Plaintiff requested that the Court order Defendant to "immediately cease any all and all [sic] use of [P]laintiff's trademark and business and trade name Escondido Metal Supply, or confusingly similar variations therefor, in any and all of its advertising, including but not limited to: (A) As a 'keyword' in Internet keyword advertising programs, including but not limited to, Google's AdWords program; (B) In the header and text of the resulting sponsored links that appear when someone types in "ESCONDIDO METAL SUPPLY" or a variation thereof as a search term in an Internet search engine." [Doc. No. 10, Pl.'s Mot. at 1-2.]

This Court denied the application for a TRO on December 21, 2012 [Doc. No. 12, Order Denying TRO], but ordered Defendant to show cause why Plaintiff's motions for a preliminary injunction and to expedite discovery should not be granted. [Id.] Defendant filed a response in opposition on January 7, 2013. [Doc. No. 20, Def.'s Opp.] Plaintiff filed its reply on January 14, 2013. [Doc. No. 21, Pl.'s Reply.] Defendant filed a sur-reply on January 21, 2013. [Doc. No. 22, Def.'s Sur-Reply.]*fn1

DISCUSSION

I. Motion for Preliminary Injunction

A plaintiff seeking a preliminary injunction must establish that: (1) he is likely to succeed on the merits; (2) he is likely to suffer irreparable harm in the absence of preliminary relief; (3) the balance of equities tips in his favor; and (4) an injunction is in the public interest. Winter v. Natural Res. Def. Council, Inc., 555 U.S. 7 (2008). Alliance for the Wild Rockies v. Cottrell explicitly found that Winter did not abrogate the Ninth Circuit's "serious questions" test for preliminary injunctions "when applied as part of the four-element Winter test." 632 F.3d 1127, 1131-32 (9th Cir. 2011). Therefore, "serious questions going to the merits and a hardship balance that tips sharply toward the plaintiff can support issuance of an injunction, assuming the other two elements of the Winter test are also met." Id. at 1132 (internal quotation marks omitted). The burden is on the plaintiff seeking the preliminary injunction to establish the four elements. Winter, 555 U.S. at 20.

A. Likelihood of Success on the Merits

In the application for a TRO and motion for a preliminary injunction, Plaintiff argues that it will prevail on the merits of its federal trademark infringement claim under 15 U.S.C. § 1114, and on its unfair competition and false advertising claims under 15 U.S.C. § 1125(a) and California Business and Professions Code §§ 17200 and 17500. The Court addresses each claim in turn.

1. Trademark Infringement Under Lanham Act, 15 U.S.C. § 1114

To prevail on a claim of trademark infringement under the Lanham Act, 15 U.S.C. § 1114, a party must demonstrate that (1) it has a protectable ownership interest in the mark; and (2) the defendant's use of the mark is likely to cause consumer confusion. Network Automation, Inc. v. Advanced Sys. Concepts, Inc., 638 F.3d 1137, 1144 (9th Cir. 2011).*fn2 The Court first addresses the likelihood of consumer confusion.

The Ninth Circuit has identified eight relevant factors to determine whether consumers would likely be confused by related goods: (1) strength of the mark; (2) proximity of the goods; (3) similarity of the marks; (4) evidence of actual confusion; (5) marketing channels used; (6) type of goods and the degree of care likely to be exercised by the purchaser; (7) the defendant's intent in selecting the mark; and (8) likelihood of expansion of the product lines. Network Automation, Inc., 638 F.3d at 1145 (citing AMF Inc. v. Sleekcraft Boats, 599 F.2d 341, 348-49 (9th Cir. 1979)).This list of factors is not exhaustive; "[o]ther variables may come into play depending on the particular facts presented." Id. at 348 n.11. Further, "[t]he Sleekcraft factors are intended as an adaptable proxy for consumer confusion, not a rote checklist." Network Automation, Inc., 638 F.3d at 1145.The Ninth Circuit has also cautioned against rigidity when applying the law in the context of the Internet, which instead requires a flexible approach. Id. at 1145-46, 49;*fn3 see also Brookfield Commc'ns, Inc. v. West Coast Entm't Corp., 174 F.3d 1036, 1054 (9th Cir. 1999).

For alleged trademark infringement in the context of Internet advertising, the Ninth Circuit has stated that the following Sleekcraft factors are most relevant to the analysis of the likelihood of confusion: "(1) the strength of the mark; (2) the evidence of actual confusion; (3) the type of goods and degree of care likely to be exercised by the purchaser; and (4) the labeling and appearance of the advertisements and the surrounding context on the screen displaying the results page." Network Automation, Inc., 638 F.3d at 1154. The Court addresses these four factors below.

a. Strength of the Mark

"The stronger a mark-meaning the more likely it is to be remembered and associated in the public mind with the mark's owner-the greater the protection it is accorded by the trademark laws." Brookfield, 174 F.3d at 1058. "This factor is probative of confusion here because a consumer searching for a generic term is more likely ...


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