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Professional'S Choice Sports Medicine Products, Inc. v. Eurow & O'reilly Corporation

United States District Court, S.D. California

February 10, 2014

PROFESSIONAL'S CHOICE SPORTS MEDICINE PRODUCTS, INC. Plaintiff, [Doc.
v.
EUROW & O'REILLY CORPORATION d/b/a EQUINE COMFORT PRODUCTS, Defendant.

ORDER DENYING DEFENDANT'S MOTION TO DISMISS [Doc. No. 14]

ANTHONY J. BATTAGLIA, District Judge.

This matter comes before the Court on Defendant Eurow & O'Reilly Corporation d/b/a Equine Comfort Products' ("Defendant") Motion to Dismiss the First Amended Complaint ("FAC"). Plaintiff brought this action for declaratory judgment, trademark cancellation, trademark infringement under 15 U.S.C. § 1125(a)(2), and for unfair competition under California Business and Professions Code § 17200 et seq. (Doc. No. 13.) Defendant filed the Motion to Dismiss on December 30, 2013. (Doc. No. 14.) Plaintiff responded on January 23, 2014. (Doc. No. 16.) The Court finds the matter appropriate for determination on the briefs without oral arguments pursuant to Civil Local Rule 7.1.d.1. The hearing on the Motion, currently scheduled for February 20, 2014 is hereby VA-CATED. For the follow reasons, the Motion to Dismiss is DENIED.

I. BACKGROUND[1]

This trademark action arises under the Lanham Act, 15 U.S.C. § 1051, seq. Plaintiff is, and has been for over 25 years, a purveyor of specialty equine products. (Doc. No. 13 at 3.) Plaintiff states that it has used the AIR RIDE mark in conjunction with the sale of equine saddle pads continuously since at least 1999. ( Id. ) Plaintiff has attempted, on numerous occasions, to protect its marks by filing trademark applications with the United States Patent and Trademark Office ("USPTO"): (1) in 1999 the 620 Application for AIR RIDE SUSPENSION SYSTEM; (2) in 2003 the 777 Application for AIR RIDE; and (3) also in 2003 the 639 Application for SMX AIR RIDE (collectively the "Air Ride trademarks/marks"). ( Id. at 4-5.) The 620 Application did not proceed to registration and was abandoned in 2000. The USPTO refused registration for the 777 and 639 Application due to a likelihood of confusion with a prior registration for AIRRIDE with Registration Number 2, 412, 023 (the "023 Registration") (registered to EQ, Inc. for hoof packing for horses). ( Id. at 5.) Plaintiff attempted to overcome the office action rejecting the 777 and 639 Application, but was unsuccessful and thereafter also abandoned those Applications. On September 15, 2007, the 023 Registration was cancelled by the USPTO due to the owner's failure to file a continued statement of use under Section 8 of the Act. ( Id. )

Defendant is "one of the nation's leading wholesalers of top quality products in its field." ( Id. at 5.) Defendant manufactures products ranging from jewelry to automotive detailing products. ( Id. ) Equine Comfort Products ("ECP"), a manufacturer of equine products, was initially established around 2003 by Donna O'Reilly, one of Defendant's executives, and third party cofounder Martine Fennelly. In 2005, Fennelly parted ways with O'Reilly and since that time, ECP has been operated as a division within Defendant's overall textile business. ( Id. at 6-7.) According to Plaintiff, Fennelly was ECP's product designer and O'Reilly handled the manufacturing aspects of ECP. On May 13, 2011 Defendant caused to be filed with the USPTO a trademark applications for the Air Ride marks: (1) Air Ride (registration no. 4, 074, 157), (2) ECP Air Ride (registration no. 4, 083, 086), and (3) Air Ride by ECP (registration no. 4, 207, 097). Each matured to registration. ( Id. at 8.)

Plaintiff alleges that Defendant procured these trademark registrations despite knowledge of Plaintiff's superior rights to the AIR RIDE mark "in efforts to build a facade of legitimacy around its bad-faith adoption of" the same mark. ( Id. at 7.) Plaintiff alleges that Fennelly and Plaintiff's own executives were "longstanding professional acquain-tances, " and that Fennelly had actual knowledge of Plaintiff, its products and its rights in various trademarks by virtue of Plaintiff's presence and reputation in the equine industry. ( Id. at 6.) Plaintiff alleges that Defendant has continuously copied competitors' products and manufactures lower-quality copies overseas. ( Id. at 6-7) Plaintiff further alleges that Defendant "employed the foregoing strategy in copying Plaintiff's products by intentionally adopting a series of products bearing similar names."[2] ( Id. at 7.) Moreover, Plaintiff alleges that both Plaintiff's AIR RIDE saddle pads and Defendant's Air Ride saddle pads have appeared in Dover Saddlery, a catalog of a mutual distributor, but that Plaintiff's appeared first. ( Id. ) Defendant's review of Dover Saddlery revealed the existence of Plaintiff's AIR RIDE saddle prior to their submission of the Air Ride trademark applications.

Plaintiff received a cease and desist letter from Defendant's counsel on March 25, 2013, demanding Plaintiff discontinue the use of AIR RIDE in connection with equine products. ( Id. at 9) The parties engaged in communications and discussion for a potential settlement. However, discussions were unfruitful and Plaintiff, fearing a potential lawsuit for trademark infringement, brought this action for declaratory relief. Plaintiff asserts itself as the senior user and seeks to cancel Defendant's Air Ride trademarks.

Plaintiff's FAC asserts five causes of action: (1) declaratory judgment; (2) cancellation of the "Air Ride" trademarks based on fraud on the USPTO under 15 U.S.C. § 1064; (3) civil liability for false or fraudulent registration under 15 U.S.C. § 1120;(4) trademark infringement under 15 U.S.C. § 1125(a)(1); and (5) unfair competition under California Business and Professional Code 17200, et seq. ("UCL"). Defendant seeks dismissal of the Second, Third, and Fifth causes of action on the basis that the FAC "did not aver clearly established trademark' rights sufficient to transform defendant's non-disclosure into a fraudulent trademark application." (Doc. No. 14 at 1.)

II. LEGAL STANDARD GOVERNING MOTIONS TO DISMISS

Federal Rule of Civil Procedure 8(a)(2) requires only "a short and plain statement of the claim showing that the plaintiff is entitled to relief... [to] give the defendant fair notice of what the... claim is and the grounds upon which it rests." See Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007). A court may dismiss a complaint under Federal Rule of Civil Procedure 12(b)(6) when it does not contain enough facts to state a claim to relief that is plausible on its face. See id. at 570. "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Ashcroft v. Iqbal, 556 U.S. 662, (2009). "The plausibility standard is not akin to a probability requirement, ' but it asks for more than a sheer possibility that a defendant has acted unlawfully." Id. (quoting Twombly, 550 U.S. at 556.)

"While a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, a plaintiff's obligation to provide the grounds' of his entitle[ment] to relief' requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do. Factual allegations must be enough to raise a right to relief above the speculative level." Twombly, 550 U.S. at 555 (citations and parentheticals omitted). In considering a motion to dismiss, a court must accept all of the plaintiff's allegations as true and construe them in the light most favorable to the plaintiff. Erickson v. Pardus, 551 U.S. 89, 93-94 (2007); Vasquez v. Los Angeles County, 487 F.3d 1246, 1249 (9th Cir.2007).

Rule 9(b) requires that "[i]n all averments of fraud or mistake, the circumstances constituting fraud or mistake shall be stated with particularity." Fed.R.Civ.P. 9(b); see Leatherman v. Tarrant Cty. Narcotics Intelligence Unit, 507 U.S. 163, 168, (1993). "Rule 9(b) serves three purposes: (1) to provide defendants with adequate notice to allow them to defend the charge and deter plaintiffs from the filing of complaints as a pretext for the discovery of unknown wrongs'; (2) to protect those whose reputation would be harmed as a result of being subject to fraud charges; and (3) to prohibit [ ] plaintiff[s] from unilaterally imposing upon the court, the parties and society enormous social and economic costs absent some factual basis.' [Citations omitted.]" Kearns v. Ford Motor Co., 567 F.3d 1120, 1125 (9th Cir. 2009). "Averments of fraud must be accompanied by the who, what, when, where, and how' of the misconduct charged." Vess v. Ciba-Geigy Corp. USA, 317 F.3d 1097, 1106 (9th Cir. 2003).

III. DISCUSSION

Defendant's Motion seeks dismissal of the FAC's second, third, and fifth causes of action on the basis that Plaintiff (1) has not established trademark rights sufficient to transform Defendant's non-disclosure into a fraudulent trademark application and (2) has not alleged plausible grounds for scienter, an essential element in the three causes of action.[3] (Doc. No. 14 at 1.) Plaintiff filed a Response in opposition on January 23, 2014. (Doc. No. 16.) Defendant filed a Reply in support on February 6, 2014. (Doc. No. 17.)

A. Second Cause of Action: Cancellation Based on Fraudulent Representation

A trademark can be cancelled under 15 U.S.C. § 1064(3) if, among other things, its "registration was obtained fraudulently." To seek cancellation, a plaintiff must prove (1) a false representation; (2) regarding a material fact; (3) the registrant's knowledge or belief that the representation is false, (4) the intent to induce reliance upon the misrepresentation; (4) reasonable reliance thereon; and (6) damages proximately resulting from the reliance. Robi v. ...


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