Hand & Nail Harmony, Inc. v. ABC Nail and Spa Products

          AMENDED ORDER GRANTING PLAINITFFS’ APPLICATION FOR (A) TEMPORARY RESTRAINING ORDER; (B) ORDER TO SHOW CAUSE RE: PRELIMINARY INJUNCTION; AND (C) EXPEDITED DISCOVERY [15]

          DAVID O. CARTER, UNITED STATES DISTRICT JUDGE

         Before the Court is Plaintiffs Hand & Nail Harmony, Inc. (“Harmony”) and Nail Alliance, LLC’s (“Nail Alliance”) (collectively, “Plaintiffs”) renewed Application for: (a) Entry of Temporary Restraining Order; (b) An Order to Show Cause Re: Preliminary Injunction; and (c) Expedited Discovery (“Renewed Application”) (Dkts. 15, 16).^[1] Plaintiffs seek a temporary restraining order (“TRO”) against Defendants ABC Nail and Spa Products (“ABC Nail”), Gel Nail Supply (“Gel Nail”), Val USA Manufacturer, Inc. (a.k.a., Val Gel Polish Manufacture) (“Val USA”), VIP Nail Products, Inc. (“VIP Nail”), V & V Beauty Supplies (“V & V Beauty”), Xuan Thi Lam, Chau Thi Ngoc Le, Anh Q. Le, Iris Zhen, Felix Tseng, Cindy Trinh, Lindside Pham, Bryan Tran, Hai T. Nguyen, and Bao Toan Le (collectively, “Defendants”).^[2]

         Having considered the Complaint (“Compl.”) (Dkt. 1), Renewed Application, as well as the accompanying Memorandum of Points and Authorities, declarations, and exhibits, ^[3] and all other pleadings and proceedings of record before the Court, the Court GRANTS the Renewed Application as set forth below.

         I. Factual Background

         Plaintiff Harmony manufactures, distributes, and sells high-quality, soak-off gel polishes and other nail products, accessories, and preparations under the brand name GELISH. Compl. ¶ 6. Through its qualified distributors, Harmony sells GELISH brand goods to boutiques and salons in Southern California and throughout the world. Id. GELISH brand foundation, gel polish, and top coat are sold in elegantly adorned and distinctive bottles. Declaration of Garidawn Tingler (“Tingler Decl.”) (Dkt. 8) ¶ 9.

         Plaintiff Nail Alliance owns and holds certain intellectual property rights used in connection with GELISH goods, including federal trademarks for the GELISH brand. Compl. ¶¶ 7, 34–35. In particular, Nail Alliance owns the rights to United States Trademark Registration Numbers 4, 096, 115 (GELISH standard character mark), 3, 857, 946 (GELISH design plus words), as well as the unique three-dimensional configuration and scrollwork pattern, which is protected by United States Trademark Registration Numbers 4, 473, 557 and 4, 473, 558 (collectively, “GELISH marks”). Tingler Decl. ¶ 5; see Compl. Exs. 1–2. Harmony is the exclusive, worldwide licensee of Nail Alliance as it relates to the GELISH goods, marks, and bottle. Tingler Decl. ¶ 5.

         This case centers upon allegations that Defendants are “actively engaged in manufacturing, distributing, selling, promoting, and/or attempting to pass off counterfeit products and spurious imitations of Plaintiffs’ GELISH® brand nail products.” Compl. ¶ 5; see also Id. ¶¶ 48, 50–53. Plaintiffs contend Defendants’ counterfeit products are cheap, low-quality masquerades that disparage Plaintiffs’ registered trademarks and inherently distinctive trade dress. Id. ¶¶ 5, 55, 57. Plaintiffs allege Defendants’ counterfeiting activities originate from Garden Grove, Westminster, and the City of Industry and that such activities have “manifested [themselves] in cities and states across the nation, ” including in Orlando, Florida; Las Vegas, Nevada; Taylor, South Carolina; and Omaha, Nebraska. Id. ¶ 5.

         Harmony has invested millions of dollars in promoting its GELISH goods, marks, and bottles in the United States and throughout the world. Tingler Decl. ¶ 15. In particular, Harmony has spent millions of dollars promoting GELISH brand goods at trade shows and over the internet. Id. Harmony has developed and maintains a highly visited website (www.nailharmony.com), and corporate pages on social media sites such as Facebook. Id. ¶ 16. Harmony has also produced online advertisements, including a video that has been viewed by more than 2.5 million visitors. Id.

         The GELISH goods incorporate the ® symbol to notify others the mark “GELISH” is subject to federal trademark registrations. Id. ¶ 14. The GELISH marks, trade dress, and bottle are symbols of Harmony’s quality, reputation, and goodwill and have never been abandoned. Id. Moreover, the GELISH marks are instantly recognizable and associated exclusively with Plaintiffs in the United States and throughout the world by consumers. Id. Indeed, consumers routinely ask for the products by name. Id. ¶ 4. Plaintiffs state GELISH is a famous mark in the nail industry. Id. ¶ 17.

         Harmony carefully monitors and polices the use of its intellectual property, including the GELISH marks, both in the United States and around the world. Id. ¶¶ 18–20; see also Supplemental Declaration of Garidawn Tingler (“Supp. Tingler Decl.”) (Dkt. 17) ¶ 6. The “continuing and growing success of the GELISH brand has attracted numerous counterfeit, knock-off, and other spurious products attempting to tradeoff the goodwill and reputation of Harmony’s Products.” Tingler Decl. ¶ 19; Supp. Tingler Decl. ¶ 7. In this case, Harmony states Defendants sell cheap, low-quality foundation and top coat that are mislabeled and sold as GELISH brand foundation and top coat (the “counterfeit product”). See Tingler Decl. ¶ 24; Declaration of Jim Phan (“Phan Decl.”) (Dkt. 9) ¶¶ 6–8, Id. Exs. 1–2. Defendants’ counterfeit product is sold or offered for sale in bottles with nearly identical labels. See Tingler Decl. ¶ 11, Fig. 2; Phan Decl. Exs. 3–6; Renewed App. at 5. Given the similarity between the genuine GELISH goods and the counterfeit product, the unavoidable conclusion is that consumers presented with the counterfeit product will be confused about its source.

         The counterfeit product is of inferior quality. See Tingler Decl. ¶¶ 37–38; Supp. Tingler Decl. ¶ 4. The counterfeit product originates from sources in China. See Supp. Tingler Decl. ¶¶ 4, 7–10. The Chinese government does not follow or enforce the standards imposed on companies in the United States. See Declaration of Sunil Sirdesai (“Sirdesai Decl.”) (Dkt. 18) ¶¶ 4, 7. Defendants generally sell the products at steeply discounted prices. See Tingler Decl. ¶ 29, Phan Decl. Exs. 1–2.

         None of the Defendants are direct distributors of Harmony’s GELISH brand products, and none of them have a license to use the mark GELISH to promote any product not manufactured by Harmony. See Tingler Decl. ¶¶ 5–6.

         In their Complaint, Plaintiffs allege the following claims: (1) trademark infringement and counterfeiting in violation of 15 U.S.C. §§ 1114, 1116(d), id. ¶¶ 61–72; (2) false designation of origin, false descriptions, unfair competition and dilution under 15 U.S.C. § 1125, id. ¶¶ 73–88; and (3) unfair competition in violation of California Business & Professions Code § 17200, id. ¶¶ 89–95.

         II. Procedural History

         Plaintiffs commenced this action on May 27, 2016. See generally Compl. Also on May 27, 2016, Plaintiffs filed their original Ex Parte Application for: (a) Entry of Temporary Restraining Order and Seizure Order; (b) Order to Show Cause Re: Preliminary Injunction; (c) A Substitute Custodian Order; and (d) An Order for Expedited Discovery (“Original Application”) (Dkt. 7). On May 31, 2016, the Court denied without prejudice Plaintiffs’ Original Application (“Order Denying Original Application”) (Dkt. 14).

         Plaintiffs filed their Renewed Application on June 8, 2016, requesting the Court issue a TRO, an order to show cause, and grant Plaintiffs’ request for expedited discovery. Although Plaintiffs previously sought a TRO without notice, Plaintiffs have provided Defendants ABC Nail, Gel Nail, Val USA, VIP Nail, V & V Beauty, Xuan Thi Lam, Chau Thi Ngoc Le, An Q. Le, Iris Zhen, Felix Tseng, Cindy Trinh, Lindside Pham, Bryan Tran, Hai T. Nguyen, and Bao Toan Le, against whom they seek a TRO, with notice of the Renewed Application. See Proof of Service (Dkt. 21) at 1–3; Proof of Service (Dkt. 22) at 1–2; Proof of Service (Dkt. 24) at 1–2. Despite receiving notice, as of the date of this Order, none of the Defendants have filed a response or Opposition to the Renewed Application.

         III. Legal Standards

         A. Temporary Restraining Order

         The standards for issuing a temporary restraining order (“TRO”) and a preliminary injunction are “substantially identical.” Stuhlbarg Int’l Sales Co. v. John D. Brushy & Co., 240 F.3d 832, 839 n.7 (9th Cir. 2001). A preliminary injunction is an “extraordinary remedy.” Winter v. Natural Res. Def. Council, Inc., 555 U.S. 7, 24 (2008). As explained by the Ninth Circuit in Winter, a plaintiff seeking preliminary injunctive relief “must establish that he is likely to succeed on the merits, that he is likely to suffer irreparable harm in the absence of preliminary relief, that the balance of equities tips in his favor, and that an injunction is in the public interest.” Am. Trucking Ass’n, Inc. v. City of Los Angeles, 559 F.3d 1046, 1052 (9th Cir. 2009). Alternatively, “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.” Alliance for the Wild Rockies v. Cottrell, 632 F.3d 1127, 1132 (9th Cir. 2011) (internal quotations marks omitted). A “serious question” is one on which the movant “has a fair chance of success on the merits.” Sierra On-Line, Inc. v. Phoenix Software, Inc., 739 F.2d 1415, 1421 (9th Cir. 1984).

         B. Bond Amount

         A TRO must be accompanied by payment of a bond “in such a sum as the court deems proper, for the payment of such costs and damages as may be incurred or suffered by any party who is found to have been wrongfully enjoined or restrained.” Fed.R.Civ.P. 65(c). “Although there is ‘no steadfast rule as to the amount of a bond as a result of the issuance of a preliminary injunction, ’ the Ninth Circuit ‘gives wide discretion to the issuance of preliminary injunction bonds, holding that’ ‘[s]o long as a district court does not set such a high bond that it serves to thwart citizen actions, it does not abuse its discretion.’” SATA GmbH & Co. Kg v. Wenzhou New Century Int’l, Ltd., No. CV 15-08157-BRO (EX), 2015 WL 6680807, at *11 (C.D. Cal. Oct. 19, 2015) (quoting Garrett v. City of Escondido, 465 F.Supp.2d. 1043, 1059 (S.D. Cal. 2006)).

         C. Expedited Discovery

         “Because the Parties could not have already conferred as required by Federal Rule of Civil Procedure 26(f), Plaintiff[s] ‘may not seek discovery . . . except . . . when authorized by . . . a court order.’” SATA, 2015 WL 6680807, at *11 (quoting Fed.R.Civ.P. 26(d)(1)). Courts employ the “good cause” standard to determine whether expedited discovery is warranted. Id. (citation omitted). Courts may consider the following factors when determining whether good cause exists: “(1) whether a preliminary injunction is pending; (2) the breadth of the discovery requests; (3) the purpose for requesting the expedited discovery; (4) the burden on the defendants to comply with the requests; and (5) how far in advance of the typical discovery process the request was made.” Id. (citation and internal quotation marks omitted).

         IV. Discussion

         A. Temporary Restraining Order

         After reviewing the Renewed Application and supporting documents, the ...