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UL LLC v. The Space Chariot Inc.

United States District Court, C.D. California

April 20, 2017

UL LLC
v.
THE SPACE CHARIOT INC. ET AL.

          Present: Honorable CHRISTINA A. SNYDER JUDGE

          CIVIL MINUTES - GENERAL

         Proceedings: (IN CHAMBERS) - DEFENDANT THE SPACE CHARIOT'S MOTION FOR LEAVE TO FILE THIRD-PARTY COMPLAINT (Dkt. 50, filed February 22, 2017)

         PLAINTIFF UL'S MOTION FOR PARTIAL SUMMARY JUDGMENT (Dkt. 50, filed February 22, 2017)

         The Court finds this motion appropriate for decision without oral argument. See Fed. R. Civ. P. 78; C.D. Cal. L.R. 7-15. Accordingly, the hearing date of April 24, 2017 is vacated, and the matter is hereby taken under submission.

         I. INTRODUCTION

         On November 3, 2016, plaintiff UL LLC filed this action against defendants The Space Chariot, Inc., Kevin Walker, Donabelle Escarez Mortel (aka Donabella Mortel), and John Does 1-10. Dkt. 1. UL asserts five claims: (1) trademark infringement, 15 U.S.C. § 1114; (2) counterfeit of registered marks, 15 U.S.C. § 1114; (3) unfair competition and false designation of original and false and misleading representations, 15 U.S.C. § 1125(a); (4) unfair competition in violation of California Business and Professions Code §§ 17200 et seq.; and (5) false advertising under California Business and Professions Code §§ 17500 et seq. The gravamen of UL's complaint is that Space Chariot, Walker, and Mortel (“defendants”) are using UL marks on various websites to falsely represent that Space Chariot's goods-namely, hoverboards-have been certified by UL.

         Also on November 3, 2016, UL filed an ex parte application for a temporary restraining order, seizure order, expedited discovery, and order to show cause re: preliminary injunction. Dkts. 4, 7. On the same day, the Court denied UL's application for a seizure order. Dkt. 12.

         On November 17, 2016, the Court granted UL's motion for a temporary restraining order and ordered defendants to show cause why a preliminary injunction should not be issued. Dkt. 25 (“TRO”). On December 9, 2016, the parties stipulated to a preliminary injunction. Dkt. 31. Pursuant to this stipulation, the Court: (1) enjoined defendants from, inter alia, using UL marks and dispersing personal and corporate assets; and (2) ordered defendants to, inter alia, (a) produce all bank statements in their possession or control, (b) identify all persons affiliated with the domain names truehoverboard.com, perfecthoverboards.com, and spacechariotca.com, and identify the nature of the relationship between defendants and those domain names, and (c) provide an accounting of any assets having a value greater than $5, 000 and the location and identify thereof. Dkt. 33 (“Preliminary Injunction”). On April 10, the Court granted UL's motion for civil contempt and sanctions on the grounds that defendants violated portions of the TRO and the Preliminary Injunction. Dkt. 74.

         On January 9, 2017, the Court denied Walker and Mortel's motion to dismiss UL's claims against them. Dkt. 36.

         On February 22, 2017, Space Chariot filed a motion for leave to file a third-party complaint against Deep Vapes, Inc. Dkt. 49 (“MTPC”). UL filed an opposition to Space Chariot's motion on April 3, 2017, dkt. 69 (“Opp'n to MTPC”), and Space Chariot filed a reply on April 10, 2017, dkt. 73 (“MTPC Reply”).

         Also on February 22, 2017, UL filed a motion for partial summary judgment as to its first and second claims (trademark infringement and counterfeit of registered marks). Dkt. 50 (“MSJ”). Defendants filed their opposition to UL's motion on April 3, 2017, dkt. 63 (“Opp'n to MSJ”), and UL filed its reply on April 10, 2017, dkt. 71 (“MSJ Reply”).

         On April 19, 2017, Walker and Mortel filed a notice that they have filed Chapter 13 Bankruptcy Petitions. Dkt. 79. Accordingly, this action is stayed as to Walker and Mortel and this order applies only to Space Chariot.

         Having carefully considered the parties' arguments, the Court concludes as follows.

         II. BACKGROUND

         The following facts are not in dispute unless otherwise noted. [1]

         UL owns the well-known UL-in-a-circle certification mark (“Certification Mark”) and variations thereof, along with the UL Service Mark (collectively, “UL Marks”). Dkt. 50-2, UL's Statement of Controverted Facts (“SUF”) at no. 1. The Certification Mark appears as: UL. Dkt. 6, Declaration of Robert J. Pollock (“Pollock Decl.”), Ex. B. The Service Mark appears as: UL. Id. Ex. C. UL has registered the Certification Mark (U.S. Reg. No. 782, 589; U.S. Reg. No. 2, 391, 140) and the Service Mark (U.S. Reg. No. 4, 201, 014) with the U.S. Patent and Trademark Office. SUF at no. 3. UL's federal registrations for the Certification Mark have reached incontestable status pursuant to 15 U.S.C. § 1115(b). SUF at no. 4. UL has the exclusive right to use the UL marks and authorize customers to use the UL marks. SUF at no. 6; dkt. 6, Pollock Decl. Exs. A-C.

         To obtain UL certification and listing in the UL certification directory, manufacturers submit representative product samples to UL for evaluation and testing. SUF at no. 7; Pollock Decl.¶ 19. If representative samples comply with the applicable safety, performance, or other standard, UL may authorize the manufacturer to affix the UL Certification Mark to that product. SUF at nos. 7-8; Pollock Decl. ¶ 20.

         Space Chariot is a California corporation that sold hoverboards and was founded by Walker, who holds himself out as Space Chariot's president and chief executive officer. SUF at no. 11. The parties dispute whether Mortel was an officer of Space Chariot. See Defs. SMF at 12. Nevertheless, it not disputed that Mortel stated on her LinkedIn Account that she was a Vice President of Space Chariot. See dkt. 5, Ex. D (Mortel's LinkedIn profile); dkt. 65, Declaration of Donabelle Mortel (“Mortel Decl.”) ¶ 3. Furthermore, both Walker and Mortel promoted Space Chariot hoverboards via their personal social media accounts. SUF at no. 15.

         The parties dispute when defendants began advertising Space Chariot's hoverboards as UL certified. See Defs. SMF at nos. 16-17. Defendants contend they only advertised their hoverboards as UL certified when Deep Vapes received its UL 2722 certification in June 2016. Defs. SMF ¶ 16. However, defendants do not contest or challenge the authenticity of evidence demonstrating that Space Chariot's Facebook page advertised their hoverboards as “safety certified” along with images of the UL Certification Mark as early as December 2015. Dkt. 50-6, Ex. 17. In addition, on or about January 21, 2016, Kevin Olive-Investigation Manager for UL-visited the Space Chariot website, which included the statement “ALL Space Chariots are UL CE FCC RoHS Safety Certified, ” using what appears to be the UL Certification Mark. Dkt. 5, Declaration of Kevin Olive (“Olive Decl.) ¶ 8 & Ex. A. On January 27, 2016, in an email exchange between Olive and info@spacechariot.com, “Steven, ” a “Space Chariot Specialist” stated that “All our our products are safety certified (ROCH, UL, etc.)[.]” Olive Decl. Ex. E. On April 8, 2017, the Space Chariot website stated that “All Space Chariots are UL, CE, FCC and RoHS safety certified!” Olive Decl. ¶ 19 & Ex. F. Space Chariot continued to use on its website what appears to be the UL Certification Mark along with a statement that all of their products were UL certified on February 6, March 22, and April 19, 2016, and on October 9, 2017. SUF at no. 25; dkt. 50-6, Ex. 19.[2]

         UL first announced its safety standard for hoverboards, UL 2722, in February 2016 and did not certify any hoverboard product until May 2016. SUF at nos. 21, 22; dkt. 50-6, Ex. 18; Pollock Decl. ¶¶ 25. Walker has testified that he “did know about the certification when it was announced in February.” See dkt. 50-6, Ex. 15 (“Walker Depo.”) at 53:8-15.

         On April 26, 2016, UL sent a cease and desist letter to info@spacechariot.com, stating that Space Chariot's use of the UL Marks was unauthorized and demanding that Space Chariot stop using any UL Marks. SUF at no. 26; Olive Decl. ¶ 21. On the same day, Walker asked Sally Beauty-a sales employee for Space Chariot's supplier, JOMO Technology Ltd. (“JOMO”) and/or Deep Vapes-whether the supplier was UL certified.[3]SUF at no. 27; dkt. 50-7, Ex. 22. Beauty responded: “We are applying.” SUF at no. 28; dkt. 50-7, Ex. 22.

         On May 17, 2016, the U.S. Consumer Protection Safety Commission (“CPSC”) sent by email a letter informing defendants that CPSC staff was “evaluating whether the self-balancing scooters comply with currently applicable voluntary standards, including all referenced standards are requirements contained in UL 2272[.]” Dkt. 50-7, Ex. 23. On the same day, Walker asked Beauty whether JOMO's hoverboards had been tested and certified by UL yet; Beauty responded that they had been sent out for testing. SUF at 30; dkt. 50-7, Ex. 24.

         On May 18, 2016, Olive called Space Chariot's customer service line and spoke with a Space Chariot employee named Ariel. Olive explained that Space Chariot is not a customer of UL, UL never conducted any tests on Space Chariot's hoverboards, and the hoverboards are therefore not “safety certified” by UL. Olive Decl. ¶ 21. Olive further explained that defendants were not authorized to use UL's Certification Mark or to suggest that Space Chariot hoverboards were certified by UL. Id. Ariel stated that she was taking notes and would speak to her manager regarding the phone call. Id.

         On June 2, 2016, by text message to Walker, Beauty of JOMO/Deep Vapes stated: “Good news, we are almost to pass UL 2272.” SUF at ¶ 32; dkt. 50-7, Ex. 25.

         On June 6, 2016, Space Chariot added a statement to the news section of its website asserting that its hoverboards were UL certified. SUF at no. 33; dkt. 50-7, Ex. 20.

         On July 10, 2016, Beauty sent an email to Walker with proof of the UL 2272 certification. Walker Decl. ¶ 13 & Ex. 2. The certificate of compliance was issued on June 30, 2016. Walker Decl. Ex. 2 On August 4, 2015, a UL investigator working with Olive contacted Space Chariot to set up a time to purchase a hoverboard at Space Chariot's offices. SUF at no. 37; Olive Decl. ¶ 25. Upon retrieving and reviewing the hoverboard, it did not include any UL Marks, but it did include a sticker indicating that the board was made by “KooWheels, ” which is not a UL customer and is not authorized by UL to use any UL Marks. Olive Decl. ¶ 26 & Ex. K.

         On August 25, 2016, Walker communicated by text message with Beauty. SUF at no. 38; dkt. 50-7, Ex. 28. Walker asked Beauty for the price of non-UL hoverboards and stated: “You can't keep charging me so much for non UL 2722. I've been paying you $200 each for all as a friendly gesture even though it was $190[.] I need better than $190 for non UL 2722[.]” Dkt. 50-7, Ex. 28.

         Defendants bought two non-UL certified hoverboards from JOMO/Deep Vapes on October 18, 2016. SUF at no. 40; dkt. 50-7, Ex. 29.

         III. LEAVE TO FILE THIRD-PARTY COMPLAINT

         A. ...


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