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Grumpy Cat Ltd. v. Grenade Beverage LLC

United States District Court, C.D. California, Southern Division

May 31, 2018

GRUMPY CAT LIMITED, Plaintiff,
v.
GRENADE BEVERAGE LLC, et al., Defendants. PAUL SANDFORD, et al., Counterclaimants,
v.
GRUMPY CAT LIMITED, et al, . Counterdefendants.

          FINDINGS OF FACT AND CONCLUSIONS OF LAW RE: CYBERSQUATTING AND DECLARATORY RELIEF FOR NON-INFRINGEMENT OF TRADEMARK AND COPYRIGHT

          DAVID O. CARTER UNITED STATES DISTRICT JUDGE

         I. INTRODUCTION

         This case concerns Grumpy Cat, a viral Internet meme that transformed a house cat named Tardar Sauce into one of the most famous cats in the world. Complaint (Dkt. 1) ¶ 13. Plaintiff Grumpy Cat Limited (“Plaintiff”), owns intellectual property rights associated with Grumpy Cat, including a registered trademark and four registered copyrights. See Id. ¶¶ 14, 15, 16. Plaintiff alleged that Defendant Grenade Beverage LLC (“Grenade”) and its members, Defendants Nick and Paul Sandford-in creating and selling a ground coffee product-used the Grumpy Cat name and image beyond what was authorized in a licensing agreement (which Plaintiff alleged only authorized iced coffee products). Id. ¶ 2; see generally MSJ Order (Dkt. 92). Grenade defaulted, and Grumpy Beverage intervened and joined with the Sandfords (collectively, “Defendants”) in filing a counterclaim. Counterclaim (Dkt. 39).

         A jury trial in this matter was held on January 16-19 and 22, 2018. See Minutes (Dkts. 121, 122, 124-26). On January 22, 2018, a jury returned a verdict for Plaintiff, and against Grumpy Beverage and Paul Sandford. See Redacted Jury Verdict Form (Dkt. 131) at 1-7.

         Under the December 18, 2017 Final Pretrial Conference Order (Dkt. 102), the parties agreed that the Court is to decide the following outstanding claims: Plaintiff's cybersquatting and accounting claims; and Defendants Paul Sandford, Nick Sandford, and Grumpy Beverage LLC's (collectively, “Defendants”) counterclaims seeking declaratory relief for ownership of trademark, copyright, and domain name; and declaratory relief for non-infringement of trademark and copyright. Final Pretrial Conference Order at 2.[1]

         On January 10, 2018, Defendants filed proposed findings of fact and conclusions of law on their counterclaims for declaratory judgment of copyright and trademark non-infringement. Defendants' Proposed Findings of Fact and Conclusions of Law (“Def. FFCL”) (Dkt 119). On January 10, 2018, Plaintiff filed proposed findings of fact and conclusions of law requesting that the Court deny Defendants' counterclaims for declaratory judgment of copyright and trademark non-infringement, and grant Plaintiff's claim for cybersquatting and accounting. Plaintiff's Proposed Findings of Fact and Conclusions of Law (“Pl. FFCL”) (Dkt 118-1).

         On January 24, 2018, the Court set a post-trial briefing schedule for amended proposed findings of facts and conclusions of law, based on the evidence admitted at jury trial. See Order Setting Briefing Schedule (Dkt. 133).

         On January 31, 2018, Defendants filed Amended Proposed Findings of Fact and Conclusions of Law regarding their counterclaim for declaratory relief for non-infringement of trademark and copyright (“Declaratory Br.”) (Dkt. 138).[2] On February 7, 2018, Plaintiff filed Amended Proposed Findings of Fact and Conclusions of Law in opposition to the counterclaim for declaratory relief for non-infringement of trademark and copyright (“Declaratory Opp'n”) (Dkt. 139).

         On January 31, 2018, Plaintiff filed Amended Proposed Findings of Fact and Conclusions of Law regarding its cybersquatting claim (“Cybersquatting Br.”) (Dkt. 137).[3] On February 7, 2018, Defendants filed Amended Proposed Findings of Fact and Conclusions of Law in opposition to the cybersquatting claim (“Cybersquatting Opp'n”) (Dkt 137).

         The Court issues the following findings of fact and conclusions of law, pursuant to Federal Rule of Civil Procedure 52. To the extent that any findings of fact are included in the Conclusions of Law section, they shall be deemed findings of fact, and to the extent that any conclusions of law are included in the Findings of Fact section, they shall be deemed conclusions of law.

         II. FINDINGS OF FACT

         A. Declaratory Relief For Non-Infringement

         1. Grumpy Cat is a viral Internet meme that transformed a house cat named Tardar Sauce into one of the most famous cats in the world. See Trial Testimony of Tabatha Bundesen; see also Declaratory Br. ¶ I.1 (citing Compl. ¶ 13).

         2. Plaintiff is the owner of the intellectual property rights associated with Grumpy Cat, including a registered trademark and four registered copyrights. See Trial Testimony of Kia Kamran; see also Declaratory Br. ¶ I.2 (citing Compl. ¶¶ 14, 15, 16).

         3. On or around May 31, 2013, Plaintiff, the owner of Grumpy Cat's intellectual property, entered into a license agreement with Defendant Grenade Beverage that granted Grenade certain exclusive rights to use Grumpy Cat's copyrighted and trademarked name and image. See Trial Testimony of Kia Kamran and Paul Sandford; Def. FFCL No. I.3; Declaratory Br. No. I.8; Declaration of Brian Kindler (“Kindler Decl.”) (Dkt. 88-2), Ex. 1 (“License Agreement”) (admitted at trial, see Exhibits Admitted (Dkt. 129) at 1)).[4]

         4. The License Agreement granted Grenade a “license and privilege” for the use of the Licensed Properties “in connection with the manufacture, advertisement, merchandising, promotion, distribution, and sale of solely Products . . . .” License Agreement ¶ 2(a).

         5. The License Agreement defines “Products” as “a line of Grumpy Cat-branded coffee products, or other additional products within the Product Category that may, upon the Parties' mutual approval, be marketed hereunder.” Id. ¶ 1(b).

         6. The License Agreement defines “Product Category” as “non-alcoholic beverages.” Id. ¶ 1(a).

         7. The Grant of Rights of the License Agreement states:

Licensor hereby grants to Licensee, and Licensee hereby accepts from Licensor, the exclusive, non-assignable, non-sublicensable (except as set forth in Paragraphs 6[c] and 13 below), non-transferable right, license and privilege, solely during the Term, solely in the Product Category of utilizing Licensor's Licensed Properties in connection with the manufacture, advertisement, merchandising, promotion, distribution, and sale of solely Products, in any and all media and forms of communication and through all channels of trade and distribution throughout the Contract Territory [the Universe] during the Term defined in Paragraph 3 below [five year terms that automatically renew.

Id. ¶¶ 1(b), 2(a), 3.

         8. The Ownership section states:

All right, title and interest in and to all copyrights and trademarks in and to the Licensed Properties shall at all times be owned by, and remain the property of, exclusively Licensor, and Licensee covenants and agrees that this Agreement shall be deemed a license, not a transfer, of Licensor's rights in the Licensed Properties. All Works created hereunder by Licensee or any of its agents and/or employees embodying the Licensed Properties, including any adaptations thereof or derivations therefrom (which shall at all times be made solely with the prior written consent of Licensor) and the right to copyright and/or trademark therein, shall from the inception of its creation, be the sole and exclusive property of Licensor throughout the Territory in perpetuity within the meaning of the Copyright and Trademark Laws throughout the world, free of any claim whatsoever by Licensee or by any persons deriving any rights or interests therefrom . . . .

Id. ¶ 4(b).

         9. Defendants used the Grumpy Cat name and image to market iced coffee and non-iced coffee products, including ground coffee. See Declaratory Br. ¶ 37; see, e.g., Trial Testimony of Kia Kamran, Paul Sandford.

         B. Cybersquatting

         10. A third party owned the domain www.grumpycat.com prior to Grumpy Cat being born, and before Grumpy Cat went viral on the internet. See Trial Testimony of Kia Kamran.

         11. Plaintiff's intellectual property counsel, Kia Kamran, understood the third party to have a seniority interest in the domain, compared to Plaintiff's trademark interest in the domain. See id.

         12. Plaintiff was unable to obtain the domain from the third party. See id.

         13. At some point, Paul Sandford and/or Grumpy Beverage obtained the domain name from the third party prior owner, after Mr. Kamran could not obtain the domain name from the third party prior owner. See id.

         14. In October 2014, Paul Sandford and Grumpy Beverage, through their counsel, Brian Kinder, proposed that-in exchange for Paul Sandford and Grumpy Beverage transferring www.grumpycat.com to Plaintiff-the license agreement be changed: (1) to apply to “Grumpy-Cat branded coffee products, ” rather than “a line of Grumpy-Cat branded coffee products”; and (2) to add language requiring that approval of products “shall not be unreasonably withheld.” See Trial Testimony of Kia Kamran and Paul Sandford; see also Cybersquatting Br. at 2.

         15. Plaintiff declined the proposal regarding the transfer of www.grumpycat.com and a proposed modification to the License Agreement. See Trial Testimony of Kia Kamran.

         16. At some point, Grumpy Beverage used www.grumpycat.com to redirect traffic to Grumpy ...


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