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Halcyon Horizons, Inc. v. Delphi Behavioral Health Group, LLC

United States District Court, N.D. California

May 11, 2017

HALCYON HORIZONS, INCORPORATED, Plaintiff,
v.
DELPHI BEHAVIORAL HEALTH GROUP, LLC, et al., Defendants.

          ORDER DENYING MOTION FOR PRELIMINARY INJUNCTION AND DISMISSING CASE RE: ECF NO. 5

          JON S. TIGAR United States District Judge.

         Before the Court is Plaintiff Halcyon Horizon, Inc., d/b/a Elevate Addiction Services' (“Elevate”) motion for preliminary injunction. The Court will deny the motion and dismiss the case for lack of standing.[1]

         I. BACKGROUND

         Elevate is a California company that operates addiction recovery centers. Specifically, Elevate is a “licensed, certified and accredited detoxification, residential and outpatient facility.” ECF No. 5 at 7; Nos. 5-5, 5-6. In September and November 2015, respectively, Elevate CEO and Chairman of the Board Daniel Manson filed applications for the “ELEVATE ADDICTION SERVICES” word mark and a related figurative mark. ECF Nos. 5-2 (word mark), 5-3 (figurative mark) (collectively, the “ELEVATE Marks”). Manson filed the applications as an individual, but now states that “[he] made that filing in [his] capacity as the President and Chairman of the Board for Halcyon Horizons, Incorporated, for use by the company.” ECF No 23 ¶ 5. Elevate claims to have used the ELEVATE Marks “in connection with addition recovery services since that date.” The Elevate Marks were registered in early 2016. Id.

         On October 12, 2016, Manson and Halcyon entered into an Exclusive Trademark License Agreement. ECF No. 5-4. Under the licensing agreement, Manson “retains the right . . . to monitor the quality of the Services” provided using the ELEVATE Marks. Id. (Section 2(b)). Moreover, “[a]ll use of any Trademarks licensed by this Agreement and used in connection with any Services shall inure to the benefit of [Manson].” Id. (Section 2(d)). With respect to enforcement and protection of the marks, the licensing agreement provides that “Licensee shall have the right, at its own expense to prosecute actions against infringers and defend against infringement actions, subject to the prior written approval of the Licensor.” Id. (Section 3(b)). Manson also retains the option to “prosecute such actions independently” if he believes the marks are being infringed and Elevate declines to file suit. Id.

         Elevate asserts that it has “established itself as a trusted and respected addiction recovery center, and has spent substantial resources establishing its brand under the ELEVATE Marks.” ECF No. 5 at 8. For example, Elevate obtained a license from the State of California's Department of Health Care Services to provide “individual sessions; recovery or treatment planning; group sessions; educational sessions and detoxification.” ECF No. 5-6. Elevate is also accredited by the Joint Commission as a Behavioral Health Care Program. ECF Nos. 5-7, 5-8, 5-10.[2] The California Consortium of Addiction Program and Professionals recognized Elevate as a “Program of Distinction.” ECF No. 5-10. Each of these licenses, accreditations, and awards occurred under the Elevate Addiction Services name.

         Elevate claims to have received positive reviews on various websites where customers can post comments. One person wrote, for example, “[t]his facility is your best chance if you have an addiction problem.” ECF No. 5-11 (screen shots of comments). Another stated, “Elevate saved my family, I would recommend it to anyone and everyone who is in need of treatment.” Id. Also to promote its brand, Elevate “participates in a number of community events, ” including co-hosting a sober grad night and sponsoring local women's shelters, all using the Elevate Marks. ECF No. 23 at 3. Finally, Elevate has spent money “advertising, branding and marketing the Elevate Addiction Services name.” ECF No. 5 at 10. For example, Elevate spent several hundred thousand dollars on direct marketing, and several hundred thousand more for website branding and marketing, website maintenance and promotion, and television commercial advertising. ECF No. 23 at 3; see also ECF Nos. 23-1-23-5 (exhibits to Manson declaration).

         Defendant Delphi Behavioral Health Group, LLC, also operates addiction recovery centers, one of which it calls “Elevate Recovery Center.” ECF No. 5 at 10.[3] Like Elevate's facilities, the Elevate Recovery Center is located in California. Elevate Recovery Center registered to do business in California with the Secretary of State on November 24, 2014. ECF No. 27-1 ¶ 4, signed a lease with a May 15, 2015 effective date, id. ¶¶ 6, 8, employed over a dozen staff since June 2015, id. ¶¶ 5, 14, and claims to have served over 50 patients between June 2015 and September 23, 2015, id. ¶ 16. According to both parties' websites, the facilities offer similar categories of service. ECF No. 5 at 11.

         Despite these similarities, Elevate claims that compared with its own clinics, the Elevate Recovery Center has poor treatment services and bad business practices. Elevate Recovery Center is not licensed by the State of California to provide “detoxification or residential addiction treatment services, ” despite advertising them on its website. ECF No. 5-13. Elevate also claims to have identified unfavorable reviews of Defendants' center on Facebook. ECF No. 5 at 11.

         Elevate claims that Defendants' use of the “Elevate” name has created confusion among its customers because both companies advertise similar services and operate facilities in California. Id. at 11. For example, consumers have called Elevate to complain about the poor business practices at Elevate Recovery Center, not realizing that Elevate Recovery Center is operated by Defendants, not Plaintiff. ECF No. 5-1 at 3.

         Seeking to prevent further confusion, Elevate contacted Defendants to inform them of their “infringement of the registered service mark-ELEVATE Addiction Services” and to demand that Defendants “cease and desist from using Elevate Recovery in public branding or promotion.” ECF No. 5-15. In spite of this warning, Defendants have continued to operate the Elevate Recovery Center under that name. ECF No. 5-1 at 4. Instead, Defendant Elevate Recovery LLC filed an application for trademark registration of the mark “ELEVATE” for “[a]ddiction treatment services, rehabilitation of drug, alcohol and narcotic addicted patients.” ECF No. 5-14 at 3. On December 28, 2016, the United States Patent and Trademark Office (“USPTO”) refused registration of Defendants' applied-for mark based on a likelihood of confusion with Plaintiff's ELEVATE Marks. Id.

         On February 17, 2017, Elevate filed suit against Defendants alleging trademark infringement of the ELEVATE Marks under the Lanham Act, 15 U.S.C. § 1114, unfair competition in violation of California Business Code § 17200, and cybersquatting in violation of 15 U.S.C. § 1125. Then, on February 21, 2017, Elevate filed the present motion for preliminary injunction to stop Defendants “from further use of the ‘Elevate Recovery Center' name, and all similarly confusing names, in connection with its addiction recovery centers.” ECF No. 5 at 6.

         II. LEGAL STANDARD

         “A plaintiff seeking a preliminary injunction 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.” Winter v. Natural Resources Defense Council, Inc., 555 U.S. 7, 20 (2008). Courts use different formulations to describe the first factor, including “reasonable probability, ” “fair prospect, ” “substantial case on the merits, ” and “serious legal questions . . . raised.” Lair v. Bullock, 697 F.3d 1200, 1204 (9th Cir.2012). These formulations “are largely interchangeable, ” and “indicate that, ‘at a minimum, ' a petitioner must show that there is a ‘substantial case for relief on the merits.'” Id. (quoting Leiva-Perez v. Holder, 640 F.3d 962, 968 (9th Cir. 2011). “The standard does not require the petitioners to show that ‘it is more likely than not that they will win on the merits.'” Id. (quoting Leiva-Perez, 640 F.3d at 966). “[S]erious questions going to the merits and a balance of hardships that tips sharply towards the plaintiff can support issuance of a preliminary injunction, so long as the ...


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