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Inc. v. Ultimate Offprice, Inc.

United States District Court, Ninth Circuit

September 3, 2013

FOREVER 21, INC., Plaintiff,
v.
ULTIMATE OFFPRICE, INC., Defendant.

ORDER DENYING MOTION FOR CONTEMPT [40]

OTIS D. WRIGHT, II, District Judge.

I. INTRODUCTION

This contempt action arises from the Court's October 11, 2011 Final Judgment and Permanent Injunction. (ECF No. 35.) Forever 21 now moves to hold Ultimate Offprice in contempt of the Permanent Injunction for its sale of garments bearing ablated Forever 21 marks.[1]

II. FACTUAL BACKGROUND

Plaintiff Forever 21 is a retailer of fashion apparel and accessories. (Mot. 4.) Forever 21's clothing is identified by an extensive portfolio of trademarks. (Kwon Decl. Ex. A-H.) Defendant Ultimate is in the business of buying and selling closeout garments-items that are left over, returned, or cancelled-in the secondary market. (Opp'n 2.)

On July 23, 2010, Forever 21 sued Ultimate for infringement of its intellectual-property rights.[2] The infringement action arose from Ultimate's unauthorized distribution and sale of garments bearing the following Forever 21 trademarks:

(ECF No. 35.) Ultimate orders large quantities of garments sight-unseen and can only determine the existence of attached trademarks upon delivery. (Opp'n 2.) After Forever 21 brought suit, Ultimate instituted procedures to eliminate any remaining trademark indicia from the clothing it sells. (Sfadia Decl. ¶ 8.) Ultimate obtained a copy of a Forever 21 instruction sheet explaining procedures to eliminate trademarks from apparel that would be sold in the secondary market. ( Id. Ex. 3.) Ultimate's employees were instructed to take out hang tags and labels or, if not feasible, to punch holes in the labels of the clothing bearing retailer trademarks. (Opp'n 3; Sfadia Decl. ¶ 5.)

On October 7, 2011, the parties stipulated to entry of the Final Judgment, which included a permanent injunction, as a part of a confidential settlement of the suit. (ECF No. 35.) The Final Judgment and Permanent Injunction were entered by the Court on October 11, 2011, enjoining Ultimate from the following:

(a) copying, manufacturing, exporting, marketing, displaying, selling offering for sale, reproducing, brokering, consigning, shipping, licensing, developing, delivering or distributing any product or services that uses, or otherwise makes use of, Plaintiff's Forever 21 Trademarks, and/or any intellectual property that is confusingly or substantially similar to, or that constitutes a colorable imitation of Plaintiff's Forever 21 Trademarks in connection with internet use, website, domain name, metatags, advertising, promotions, solicitations, commercial exploitation, television, web-based or any other program, or any product or service otherwise;
(b) performing or allowing others employed by or representing it, or under its control, to perform any act which is likely to injure Plaintiff's rights in the Forever 21 Trademarks; and
(c) engaging in any acts of federal and/or state trademark infringement, false designation, unfair competition, and dilution, which would damage or injure Plaintiff's rights in its Forever 21 Trademarks.

(ECF No. 35 (emphasis added).)

Approximately one year later, Forever 21 began investigating a third party to this litigation, National Stores, Inc., for trademark infringement. (Mot. 3-4.) On October 19, 2012, Forever 21's investigator purchased what appeared to be Forever 21 garments from two of National's retail outlets. (Heaney Decl. ¶ 2, ¶ 5, ¶ 6, Ex. A, D, E; Vener Decl. ¶ 6.) Forever 21 then sued National for infringement. (Mot. 7.)

During discovery, National provided Forever 21 with the invoices for the garments purchased by Forever 21's investigator. (Mot. 7.) Some of these invoices had been issued to National by Ultimate. (Vener Decl. ¶ 8, Ex. F.) Examination of the invoice dated September 7, 2012, reveals that five of the allegedly infringing garments originated with Ultimate.[3] ( ...


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