United States District Court, N.D. California
ORDER DENYING MOTION FOR PRELIMINARY INJUNCTION AND
CROSS-MOTION FOR PRELIMINARY INJUNCTION, AND GRANTING MOTION
CHARLES R. BREYER UNITED STATES DISTRICT JUDGE
trademark case, Plaintiff Kiva Health Brands LLC
(“KHB”), a maker of natural foods and health
supplements, brings suit against Defendant Kiva Brands Inc.
(“KBI”), a maker of cannabis-infused chocolate
and other “edibles.” Both companies claim the
right to the KIVA mark. KHB has held a federally-registered
trademark in the KIVA mark since 2014. However, KBI claims to
have inherited the KIVA mark from predecessors who have been
using it to make cannabis-infused edibles in California since
2010. Now pending are (1) KHB's Motion for a Preliminary
Injunction, see KHB MPI (dkt. 21-1); (2) KHB's
Motion to Dismiss two of KBI's counterclaims,
see KHB MTD (also dkt. 21-1); and (3) KBI's
Cross-Motion for a Preliminary Injunction, see KBI
MPI (dkt. 25-1).
the Court concludes that neither party has met its burden for
a preliminary injunction, the Court DENIES both such motions.
The Court GRANTS KHB's motion to dismiss the two
counterclaims in light of KBI's manufacture of a product
that is illegal under federal law.
Plaintiff Kiva Health Brands LLC
KHB is a Nevada corporation, created in 2010, with a
principal place of business in Hawaii. Henderson Decl. (dkt.
21-2) ¶ 2. KHB distributes and sells “health and
wellness foods and food supplements, sourced from farmers
that practice sustainable and eco-friendly farming
methods.” Id. ¶ 3. KHB registered the
kivahealthbrands.com domain name in 2009, and developed a
KIVA logo and its first KIVA product (berry powder) in early
2010. Id. ¶ 5. KHB sold KIVA-branded reusable
grocery bags as of mid-2010, and sold KIVA-branded food
products and food supplements as of February 2013.
Id. ¶¶ 7, 8. KHB's first online sales
were on Amazon.com in June 2013; as of September 2013, KHB
also made sales through its website,
www.kivahealthfood.com. Id. ¶ 8. KHB
has been selling continuously using the KIVA mark since 2013,
in California, interstate, and internationally. Id.
September 2013, KHB filed an application with the USPTO to
register the KIVA mark in connection with food products.
Id. ¶ 9. The USPTO issued that registration in
April 2014. Id., Ex. A. In 2015 and 2016, KHB
obtained two other trademark registrations for the mark KIVA
to be used on additional food and cosmetic products.
Id. ¶ 9, Exs. B and C.
to KHB's Managing Member, Tchad Henderson, KHB is
“associated with quality products, and is well known as
a source of safe, healthy, and environmentally friendly food
products and food supplements.” Id. ¶ 10.
KHB spent $245, 000 in 2016, $720, 000 in 2017, and $1, 360,
000 in 2018 to promote its KIVA-branded products.
Defendant Kiva Brands Inc.
KBI is a leading provider of cannabis-infused chocolates and
confections. Palmer Decl. (dkt. 24-1) ¶ 4. KBI started
in November 2010 as a California not-for-profit mutual
benefit corporation named Indica. Id. ¶¶
6, 8. Founders Scott Palmer and Kristi Knoblich brainstormed
potential trade names for the company, and decided on
“Kiva Confections.” Id. ¶ 7, Ex. A.
Indica manufactured, sold, and distributed products bearing
the names KIVA and/or KIVA CONFECTIONS with permission from
Palmer and Knoblich. Id. ¶ 9.
contract that purports to govern that arrangement is the TM
License Agreement, between Palmer and Knoblich, Licensors, on
the one hand, and Indica, Licensee, on the other. See
id. Ex. B. It states that Licensors own the trademark
Kiva and are granting to Licensee “an exclusive,
royalty-bearing right and license to use the Licensed Rights
in the Territory for the processing, production, and sale of
the Products.” Id. at 1, 3. The TM License
Agreement states that it is “entered into as of
November 23, 2010, ” and also that the Execution Date
of the contract is November 23, 2010. See Id. Palmer
acknowledged in the course of this litigation that the
“TM License Agreement was signed in or around October
2018, ” though he asserts that it “memorialized
the agreement that had existed since November 2010.”
Palmer Decl. ¶ 9B. The TM License Agreement is signed by
Palmer and Knoblich, and there is a typewritten signature for
“Matt Desano, Director” on behalf of
“Indica, Inc. (DBA Kiva Confections).” See
id. Ex. B at 20.
and Knoblich formed KBI in 2014. Palmer Decl. ¶ 10.
Palmer asserts that “[b]etween approximately 2014
through 2017, Indica and related entities were reorganized
into KBI and its wholly-owned subsidiaries.”
Id. As part of that reorganization, Palmer and
Knoblich transferred “all rights, title, and interest
(including but not limited to, all registration rights, all
rights to prepare derivative works, all goodwill and all
other rights, in and to the intellectual property” to
KBI pursuant to an Intellectual Property and Sale Agreement
(“IP Sale Agreement”) dated October 30, 2014.
Id. ¶ 11, Ex. C. That agreement listed the
California trademark for KIVA and the trademark application
for KIVA among the intellectual property being sold.
Id. Schedule A.
and Knoblich co-founded KBI, Indica, and all of their
affiliates. Palmer Decl. ¶ 12. They have been the
majority and controlling owners/members since the
entities' inception. Id. “The main
activity of all of these businesses has always been to
manufacture, distribute, and sell and promote ‘Kiva
Confections' and its products.” Id.
made its first sales in Northern California in December 2010,
and expanded to Southern and Central California in 2011.
Id. ¶ 13. By 2015, KBI was also selling in
Arizona, Nevada, Illinois, Hawaii and Michigan. Id.
¶ 14. Palmer declares that since 2010, KBI has used both
“KIVA” and “KIVA CONFECTIONS” on its
products, and that there has never been a strategic change in
how often KBI uses one or the other. Id. ¶ 15.
KBI has continuously sold products with the KIVA mark since
December 2010. Id. ¶ 18. In that time, KBI has
sold millions of units, including 1, 705, 000 units in
California in 2018. Id. It has a marketing budget of
$6.5 million for the 2019 year. Id. “Over the
past several years, ” KBI registered the KIVA mark on
the state level in California and other states. Id.
¶ 20, Ex. H. A California trademark issued on January
20, 2018 for the mark KIVA for “Chocolate and
confections, all of the foregoing containing cannabis,
” with a date of first use of December 1, 2010. Palmer
Decl. Ex. H.
The Conflict Between the Parties
and KBI first became aware of KHB's use of the KIVA mark
in August 2017. Palmer Decl. ¶ 21. Henderson and KHB
first became aware of KBI in 2015. Henderson Decl. ¶ 12.
Henderson understood at the time, apparently wrongly,
“that [KBI] was selling marijuana-containing products,
exclusively or primarily in the San Francisco Bay Area, and
that its products were labeled ‘Kiva
Confections.'” Id. Henderson learned
“more recently” that KBI was selling some of its
products without the “Confections” identifier,
and that KBI was selling throughout the state of California
and in other states. Id. In late 2016 or early 2017,
KHB became aware that some of its consumers were confusing
KHB's brand with KBI's. Id. ¶ 13. In
January 2017, KHB staff began making a consumer confusion
log. Id., Ex. E. KHB contends that the consumer
confusion is causing KHB “economic damage and injury to
its reputation and good will.” Henderson Decl. ¶
15. Henderson asserts that “[KHB's] products are
environmentally friendly, unadulterated and healthy, but
consumers will be confused by the similar marks, and will
likely  become worried, or erroneously assume, that
[KHB's] KIVA-brand food products are infused with
2018, KHB's counsel sent a cease and desist letter to
KBI. Henderson Decl. Ex. F. KBI responded in May 2018 that it
had been making continuous use of the KIVA mark for seven
years. Johnson Decl. Ex. 1 (dkt. 27-1). It stated that it was
not aware of any consumer confusion, but that it nonetheless
wished to “take appropriate steps to minimize, if not
eliminate misdirected contact to KHB.” Id.
KBI asserted that it had common law rights to the mark in
California that predated KHB's USPTO registration,
suggested that the KHB trademarks were vulnerable, and
concluded by seeking “to discuss an amicable
resolution.” Id. KBI wrote to KHB's
counsel again in late July 2018. See Johnson Decl.
Ex. 2. That letter continued to assert KBI's common law
rights to the KIVA mark, and stated that a KHB proposal to
mediate or arbitrate the dispute “may be
brought suit in September 2018 for trademark infringement,
unfair competition in violation of the Lanham Act,
declaratory relief, and unfair and deceptive trade practices
under state law. See generally Compl. (dkt. 1). It
served the Complaint in December 2018, see Waiver of
Service Executed (dkt. 4), after the parties participated in
a structured mediation in November and December 2018,
see KHB Reply re MPI (dkt. 27) at 4. KBI filed
counterclaims. See Counterclaims (dkt. 8); Amended
Counterclaims (dkt. 10). KHB then filed for a motion for
preliminary injunction in March 2019, seeking to enjoin KBI
from any further use of the KIVA mark. See KHB MPI
at 18. That same filing includes a motion to dismiss two of
KBI's counterclaims. See KHB MTD. In May 2019,
KBI filed a cross-motion for preliminary injunction, seeking
to enjoin KHB from using the KIVA mark within California.
See KBI MPI at 1.
Court received this case in June when it was transferred in
from the Southern District of California. See Case
Transferred In (dkt. 31).
preliminary injunction should issue where the plaintiff
establishes 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.” See Rodriguez v. Robbins, 715 F.3d
1127, 1133 (9th Cir. 2013) (citing Winter v. Natural Res.
Def. Council, Inc., 555 U.S. 7, 20 (2008)). The Ninth
Circuit has adopted a “sliding scale approach, ”
such that “'serious 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 plaintiff also shows that there is
a likelihood of irreparable injury and that the injunction is
in the public interest.” Alliance for the Wild
Rockies v. Cottrell, 632 F.3d 1127, 1134-35 (9th Cir.
2011). The “[l]ikelihood of success on the merits
‘is the most important' Winter
factor[.]” Disney Enters., Inc. v. VidAngel,
Inc., 869 F.3d 848, 856 (9th Cir. 2017).
to dismiss are governed by Federal Rule of Civil Procedure
12(b)(6). Courts adjudicating such motions must ask whether
the complaint “contain[s] sufficient factual matter,
accepted as true, to ‘state a claim to relief that is
plausible on its face.'” Ashcroft v.
Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl.
Corp. v. Twombly, 550 U.S. 544, 570 (2007)). All
material factual allegations must be construed in favor of
the non- moving party. W. Reserve Oil & Gas Co. v.
New, 765 F.2d 1428, 1430 (9th Cir. 1985). However,
courts “are not bound to accept as true a legal
conclusion couched as a factual allegation.”
Iqbal, 556 U.S. at 678 (quoting Twombly,
550 U.S. at 555).
Order discusses the three motions now pending: (A) KHB's
Motion for a Preliminary Injunction, (B) KHB's Motion to
Dismiss two of KBI's counterclaims, and (C) KBI's
Cross-Motion for a Preliminary Injunction.
KHB's Motion for Preliminary Injunction
first and most substantial motion is KHB's Motion for
Preliminary Injunction. As discussed below, KHB has not
demonstrated that it is likely to succeed on the merits, it
has failed to demonstrate irreparable harm, and the balance
of the hardships weighs against KHB, although the public
interest weighs in its favor. Accordingly, the motion falls
Likelihood of Success
first requirement for injunctive relief is a likelihood of
success on the merits. See Rodriguez, 715 F.3d at
1133. To prevail on a claim of trademark infringement, a
plaintiff must show (a) ownership of a valid mark and (b) use
by defendant in commerce of a mark likely to cause consumer
confusion. Network Automation, Inc. v. Advanced Sys.
Concepts, Inc., 638 F.3d 1137, 1144 (9th Cir. 2011).
Both prongs are in dispute here.
Ownership of the Mark
has three USPTO trademarks for KIVA. See Henderson
Decl. Exs. A, B, C (trademarks from 2014, 2015, 2016). A
federal trademark registration is prima facie evidence of:
(1) the validity of the registered mark; (2) the registration
of the mark; (3) the registrant's ownership of the mark;
and (4) the registrant's exclusive right to use the
registered mark in commerce on or in connection with the
goods or services specified. 15 U.S.C. § 1057(b); 3
McCarthy on Trademarks and Unfair Competition,
§ 19:9 (5th ed. 2018); Rolley, Inc. v.
Younghusband, 204 F.2d 209, 211 (9th Cir. 1953). KHB
thus argues that it has shown a protectable ownership
interest in the KIVA mark. KHB MPI at 7.
does not dispute the validity of KHB's trademarks per se;
instead, KBI argues that it “has a protectable
ownership interest in the KIVA mark under California [common]
law dating back to December 2010 that covers
all of California.” KBI Opp'n to KHB MPI
at 18. KBI contends that its common law right to the KIVA
mark in California “precludes an injunction in favor of
KHB covering all of California.” See id. In
sum, then: KHB seeks an injunction to prevent KBI from using
the KIVA mark anywhere, and KBI challenges KHB's
ownership of the KIVA mark in California only.
disputes that KBI has a common law right to the KIVA mark.
See KHB MPI Reply (dkt. 27) at 4. It does so on two
grounds. First, KHB argues that KBI does not have a valid
chain of title in the KIVA mark. Id. at 4-5. Second,
KHB argues that KBI cannot demonstrate “first
use” in commerce because its product is illegal.
Id. at 4-6 (citing Sengoku Works Ltd. v. RMC,
Int'l, Ltd., 96 F.3d 1217, 1219 (9th Cir. 1996)
(“To acquire ownership of a trademark it is not enough
to have invented the mark first or even to have registered it
first; the party claiming ownership must have been the
first to actually use the mark in the sale of goods
or services.”) (emphasis added)). The second ground is
Chain of Title
KHB's argument as to chain of title is that KBI has only
existed since 2014 and so can only claim to have been the
first user of the KIVA mark if it has a valid chain of title
in the mark before then. KHB MPI Reply at 4. KHB notes that
the only evidence of chain of title dating back to 2010 is
the TM License Agreement. Id. at 5. KHB then argues
that the TM License Agreement is fatally flawed because,
after stating in his deposition that the agreement was signed
on November 23, 2010, Palmer later admitted that it
“was signed in or around October 2018, effective
November 23, 2010.'” Id.; see
also Miller Decl. Ex L (May 2, 2019 letter from KBI
counsel submitting errata to deposition transcript); Palmer
Decl. ¶ 9B (“The TM License Agreement was signed
in or around October 2018, but memorialized the agreement
that had existed since November 2010.”). KHB contends
that KBI's admission that the license agreement was
signed in 2018, after litigation had begun, “strips it
of any significance.” See KHB MPI Reply at 5.
correctly responds that a backdated agreement can be valid.
See KBI MPI at 4 (citing Du Frene v. Kaiser
Steel Corp., 231 Cal.App. 2d 452');">231 Cal.App. 2d 452, 458 (1964) (“a
party of a contract may retroactively adopt prior acts or fix
retroactive dates of execution for a contract.”) and
Hotel Corp. of Am. v. Inn Am., Inc., 153 U.S.P.Q.
574, at *5 (T.T.A.B. 1967) (backdated trademark agreements
executed during litigation were no less “sufficient on
their face to meet the essential requirements of a nunc pro
tunc assignment” given “stockholders and
officials of the original [applicant] and those of
[subsequent corporate form of applicant] were for the most
part the same”)). Du Frene is not altogether
relevant, but like the more recent Raceway Ford
Cases, 2 Cal. 5th 161');">2 Cal. 5th 161, 175-76 (2016), it suggests that
California courts do not reject backdated contracts out of
hand. The court in the more factually analogous Hotel
Corp. of America observed that nunc pro tunc assignments
are intended “to make the record show something which
actually occurred, but has been omitted from the record
through inadvertence or mistake.” 153 U.S.P.Q. at *5.
so, this Court would have more confidence that the TM License
Agreement was created as a legitimate, backdated agreement
had it explicitly stated that it was a nunc pro tunc
agreement written in 2018 to reflect what was meant in 2010.
That seems to be more akin to what happened in Du
Frene, 231 Cal.App. 2d at 458, where the document at
issue was a “Change Order” signed by all parties,
and stating, “The foregoing [o]rder . . . is hereby
approved and accepted as of November 4, 1957, ” and the
Raceway Ford Cases, 2 Cal. 5th at 164, where Raceway
Ford would enter into a “subsequent finance
contract” with a buyer and backdate the second contract
to the date of the first contract. Even the assignments in
Hotel Corp. of Am., 153 U.S.P.Q. at *5, appear to
have been explicitly nunc pro tunc.
further facts undermine the TM License Agreement. First, the
TM License Agreement states that “Licensee shall pay
Licensors a nonrefundable licensing fee of Twenty-Five
Thousand Dollars ($25, 000) on the following basis: (a) on
the Execution Date, Licensee shall pay to Licensors Fifteen
Thousand Dollars ($15, 000). . . .” Palmer Decl. Ex. B
¶ 4.1 (“License Fee”). When asked at his
deposition whether he actually received $15, 000 on the day
the agreement was made [in 2010], Palmer answered,
“Based on our financial situation at the time it's
doubt[ful]. I don't think so.” Miller Decl. Ex. L.
He subsequently changed that answer to “I don't
think so.” Id. Second, the TM License
Agreement bears the handwritten signatures of Knoblich and
Palmer, as Licensors, but the signature for the
representative of the Licensee, Indica, was typewritten: it
says simply “ Matt Desano, Matt Desano,
Director.” Palmer Decl. Ex. B at 20. KHB asserts that
“Palmer testified under oath that Matt Desano was a
director of Indica who had joined when it was formed, in
2010, and who had left Indica by 2014 or 2015.” KHB
Opp'n to KBI MPI (dkt. 28) at 12 (citing Palmer Depo. at
46-20 to 50-7). If Desano was no longer at Indica when the TM
License Agreement was signed in 2018, then the Court cannot
know that Desano actually agreed to the agreement's terms
on behalf of Indica in 2010.“If [an] alleged
‘senior user' traces rights through an assignment,
the assignment is subject to judicial scrutiny to be sure it
was in fact a valid assignment.” See McCarthy
§ 26:5; see also Sarieddine v. Alien Visions
E-Juice, Inc., No. CV 18-3658 PA (MAAx), 2019 WL
1966661, at *6 (C.D. Cal. April 12, 2019) (slip op.)
(“courts must be cautious in scenarios that do not
involve clear written documents of assignment. Requiring
strong evidence to establish an assignment is appropriate
both to prevent parties from using self-serving testimony to
gain ownership of trademarks and to give parties incentive to
identify expressly the ownership of the marks they
employ.”) (quoting Doeblers' Pa. Hybrids, Inc.
v. Doebler, 442 F.3d 812, 822 (3d Cir. 2006)); TMT
N. Am., Inc. v. Magic Touch GmbH, 124 F.3d 876, 884 (7th
Cir. 1997) (same). Given the irregularities with the TM
License Agreement, the Court is inclined to reject it as
proof of a 2010 assignment of the KIVA mark from Palmer and
Knoblich to Indica.
KBI argues that “even if the TM License
Agreement is invalid . . . a license to use a trademark may
be implied by the conduct of the parties.” KBI MPI at
5. This is true. “‘If there is no documentary
evidence of an assignment, it may be proven by the clear and
uncontradicted oral testimony of a person in a position to
have actual knowledge.'” Sarieddine, 2019
WL 1966661, at *6 (quoting Doeblers' Pa.
Hybrids, 442 F.3d at 822); see also Kane on
Trademark Law (6th ed. 2018) § 21:2 (“Trademarks,
like other forms of property, can be transferred orally or in
writing. An oral assignment may be proven by the clear and
uncontradicted testimony of a person with knowledge. For ease
of proof, of course, you are much better off with a written
argues that it has demonstrated an “implied
license” between Palmer and Knoblich, and Indica. KBI
MPI at 5. To show an implied license, there must be
“evidence of an agreement or course of conduct by the
parties to contract for a trademark license.”
Bazaar Del Mundo, Inc. 448 F.3d at 1130. Moreover,
“it is imperative for a licensor to have
‘maintain[ed] control over the quality of the finished
product or service to guarantee to the public that the goods
or services are of the same, pre-license quality.'”
Henderson v. Lindland, No. CV 11-01350 DDP DTBX,
2013 WL 1181957, at *5 (C.D. Cal. Mar. 21, 2013) (quoting
Transgo, Inc. v. Ajac Transmission Parts Corp., 768
F.2d 1001, 1017 (9th Cir. 1985)). Here there was no
“pre-license quality, ” as Palmer and Knoblich
never used the KIVA mark in commerce until Indica did so in
December 2010, see Palmer Decl. ¶ 13, but no
matter, see TAP Mfg., LLC v. Signs, No.
2:15-cv-00797-SVW-PJW, 2015 WL 12752874, at *6 (C.D. Cal.
July 23, 2015) (trademark use by licensee “inures to
the benefit of the licensor.”). Given Palmer's
uncontested testimony that the main business of Indica and
KBI has always been to sell KIVA confections, that he and
Knoblich maintained full control over Indica, KBI, and their
affiliates, and that they were the “majority and
controlling owners/members since the entities' inception,
” see Palmer Decl. ¶ 12, there is
probably a sufficient basis to conclude that there was an
while the TM License Agreement does not necessarily
demonstrate a valid assignment of the KIVA mark from Palmer
and Knoblich to Indica in 2010, the doctrine of implied
license likely establishes a chain of title, in California
second argument in opposing KBI's assertion of a common
law right to the KIVA mark is that one cannot claim first use
based on an illegal product. KHB MPI at 12. There is a
paucity of trademark authority addressing what happens when a