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Cobra Systems Inc. v. Accuform Manufacturing Inc.

United States District Court, Ninth Circuit

January 9, 2014

COBRA SYSTEMS, INC., a California corporation Plaintiff/Counter-Defendant,
v.
ACCUFORM MANUFACTURING, INC., a Florida corporation, and DOES 1-10, inclusive, Defendants/Counterclaimants.

ORDER GRANTING IN PART AND DENYING IN PART COBRA'S MOTION FOR PRELIMINARY INJUNCTION [20]

OTIS D. WARIGHT, II, District Judge.

I. INTRODUCTION

This action arises out of a business relationship that went sour between Plaintiff Cobra Systems, Inc. ("Cobra") and Defendant Accuform Manufacturing, Inc. ("Accuform"). Cobra sells industrial label printers under the trademark VnM®. The two parties had an oral business arrangement where Accuform sold Cobra's VnM® printers through its catalog. After the business arrangement fell apart, Accuform went into direct competition with Cobra, selling an almost identical printer under the name Spitfire. Cobra filed suit for copyright and trademark infringement as well as unfair competition and breach of oral agreement. (ECF No. 1.) Now before the Court is Cobra's Motion for Preliminary Injunction. (ECF No. 20.) The Motion relates only to Cobra's trademark and unfair competition claims. For the reasons discussed below, the Court GRANTS IN PART and DENIES IN PART the Motion for Preliminary Injunction.[1]

II. FACTUAL BACKGROUND

Cobra offers industrial printing products and services. (Erickson Decl. ¶ 2.) In 2008, Cobra started expanding its line of industrial printers and began to develop the VnM® line of thermal label printers. ( Id. ¶ 4.) The first VnM® product, the VnM® 2 Signmaker was released in early 2009. ( Id. ¶¶ 3-5.) The printer includes a keyboard and does not require a personal computer connection. ( Id. ¶ 5.) On February 10, 2009, Cobra filed its VnM® mark with the United States Trademark Office. (Murphy Decl. Ex. 1.) It was published for opposition on June 9, 2009, and registered on November 10, 2009. ( Id.; Trademark Reg. No. 3710479.) Since the introduction of the VnM® 2 Signmaker, Cobra has also introduced several other printing products bearing the VnM® mark. (Erickson Decl. ¶ 6.) Cobra's products are carried in third-party catalogs, but all bear Cobra software and labels. ( Id. ¶ 7, Exs 1-3.)

Accuform approached Cobra in 2010 about carrying the VnM® line of printers in its catalog. (Erickson Decl. ¶ 8; Zee Decl. ¶ 20.) At the time, Accuform offered pre-printed signs but no industrial printers. (Erickson Decl. ¶ 8.) The parties agreed to work together, but did not memorialize the terms of their business relationship in writing. (Zee Decl. ¶ 20.) On February 23, 2011, Accuform announced the addition of Cobra's VnM® printers on its website. ( Id. ¶ 22.) Accuform also assigned the VnM® printers internal SKU numbers, referred to as "part numbers" by Cobra, in order to add the printers to Accuform's product list. ( Id. ¶ 21.)

In 2012, the business relationship began to fracture. (Erickson Decl. ¶¶ 10-13; Zee Decl. ¶ 27.) Cobra and Accuform disagree as to who is to blame. Cobra contends that Accuform's sales force was not meeting sales goals and was not technically savvy enough to properly sell the VnM® printers. (Erickson Decl. ¶¶ 10-13.) Accuform contends that Cobra was trying to poach its biggest customer, Grainger Industrial Supply, and essentially cut out the middle man by selling VnM® products directly to Grainger. (Zee Decl. ¶¶ 29-30.) By the fall of 2012, Accuform decided to gradually phase out the VnM® product line. ( Id. ¶ 30.) Accuform stopped ordering VnM® printers from Cobra in May 2013. (Erickson Decl. ¶ 14.)

As the business relationship between Cobra and Accuform fractured, Accuform began developing its own line of printers under the name Spitfire. (Zee Decl. ¶¶ 12, 30.) The Spitfire printers and VnM® printers look exactly alike, since they use the same hardware from the same Taiwanese manufacturer. ( Id. ¶¶ 9-12, Exs. 1-2.) According to Accuform, the same printer components are sold to at least four other printer suppliers in the United States. ( Id. ¶ 14, Ex. 3.) Accuform claims that the Spitfire software is different, utilizing Accuform's media instead of Cobra's media; however the software was developed by a former Cobra employee. ( Id. ¶ 13.) Accuform began selling the Spitfire printers in 2013, using the same SKU numbers previously assigned to the VnM® printers. (Erickson Decl. ¶ 13; Murphy Decl. ¶¶ 5-7, Exs. 4-6.)

Once Accuform rolled out the Spitfire printers, it began to contact customers who purchased VnM® printers. (Zee Decl. ¶¶ 31-32; Erickson Decl. ¶¶ 15-16, Exs. 8-9.) Accuform visited these customers and replaced the Cobra software on the printers with Accuform's Spitfire software.[2] ( Id. ) Accuform also placed labels over the VnM® mark and any references to Cobra on the printers. ( Id. ) Cobra claims that in addition to these actions, Accuform continues to use the VnM® mark on its website, where references to VnM® printers link customers to Spitfire products. (Murphy Decl. ¶¶ 8-13, Ex. 7-12.) Accuform rejects this contention stating that it has gone to great lengths to purge all VnM® references from its website and catalog. (Zee Decl. ¶¶ 2-8.)

On August 14, 2013, Cobra filed the Complaint against Accuform asserting seven claims including copyright infringement, trademark infringement, unfair competition, and breach of an oral agreement. (ECF No. 1.) Accuform's Amended Answer, filed on October 25, 2013, raises a number of affirmative defenses as well as two counterclaims for invalidity of copyright applications and intentional interference with contract.[3] (ECF No. 18.) Cobra filed this Motion for Preliminary Injunction on November 4, 2013. (ECF No. 20.) Cobra's Motion seeks to enjoin Accuform as follows:

• Cease using and/or displaying the VnM® mark, or variations of the mark
• Cease selling products under the same part numbers as were used for VnM® products when they were sold by Accuform
• Cease selling confusingly similar printers (the ...

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