LLC v. Caliber Corp.

          ORDER GRANTING CALIBER'S MOTION FOR LEAVE TO FILE AMENDED COUNTERCLAIMS AND THIRD-PARTY CLAIMS [DKT. NO. 64.]

          Hon. Gonzalo P. Curiel United States District Judge

         Before the Court is Defendant/Counterclaim Plaintiff/Third-Party Plaintiff/Third Party Counterclaim-Defendant Caliber Corporation's motion for leave to file an Amended Counterclaim and Third-Party Claim. (Dkt. No. 64.) Third Party Defendant/Third Party Counterclaim Plaintiff 2 Monkey Trading LLC and Plaintiff/Counterclaim-Defendant Bullets2Bandages, LLC filed an opposition. (Dkt. No. 77.) Caliber filed a reply. (Dkt. No. 84.) Based on the reasoning below, the Court GRANTS Caliber's motion for leave to file an Amended Counterclaim and Third Party Complaint.

         Background

         Plaintiff Bullets2Bandages, LLC (“B2B”) and Defendant Caliber Corporation (“Caliber”) are both in the business of selling bullet-shaped bottle openers. (Dkt. No. 41, Counterclaim ¶ 14; Case No. 13cv3134-CAB(BLM), Dkt. No. 1, Compl. ¶ 11.) On December 20, 2013, in Case No. 13cv3134-CAB(BLM), B2B filed a complaint against Caliber for trademark infringement of B2B's U.S. Trademark Registration No. 4, 364, 453 for the CALIBER mark as well as a federal unfair competition, and California statutory and common law unfair competition claims. (Case No. 13cv3134-CAB(BLM), Dkt. No. 1, Compl.) In turn, Caliber filed a counterclaim against B2B for unfair competition based on B2B's wrongful use of the CALIBER mark and wrongful use of Caliber's Bullet Trade Dress^[1], cancellation of the CALIBER mark^[2], false or fraudulent registration, and trademark infringement and unfair competition under California law. (Id., Dkt. No. 15, Caliber's Ans./Counterclaim.)

         On June 9, 2014, B2B and Caliber entered into a Settlement Agreement in Case No. 13cv3134-CAB(BLM), effective April 7, 2014, where B2B assigned to Caliber all rights to the CALIBER Mark, U.S. Trademark Registration No. 4, 364, 453, agreed to withdraw its opposition to Caliber's registration of the Bullet Trade Dress^[3] and agreed not to use the phrase “the original”^[4] in connection with the sale of bullet-shaped bottle openers. (Dkt. No. 41, Counterclaim ¶ 23; id., Ex. 2.) In exchange, Caliber agreed to grant B2B a worldwide, nonexclusive license to the Bullet Trade Dress and to “B2B's then-current use of the word ‘Caliber'”. (Id. ¶ 23; Dkt. No. 1, Compl. ¶ 9.)

         The Complaint alleges that B2B, relying on its rights under the Settlement Agreement, manufactures products that it then sells to wholesalers, such as 2 Monkey Trading, LLC (“2 Monkey”) (a/k/a Lucky Shot) who sells the products directly to consumers. (Dkt. No. 1, Compl. ¶ 11.) 2 Monkey sells B2B's products through Amazon and Etsy. (Id.) B2B learned that someone complained that 2 Monkey's products were infringing. (Id. ¶ 12.) Due to the complaints, Amazon and Etsy removed 2 Monkey's listings from their websites, barring it from engaging in any sales of B2B's products. (Id.)

         B2B suspected Caliber complained to Amazon and Etsy and when it contacted Caliber, it was slow to respond despite the substantial financial damage to B2B for 2 Monkey's inability to sell its products. (Id. ¶¶ 14-16.) Caliber then told B2B that it was disappointed that B2B had signed an agreement with 2 Monkey. (Id. ¶ 17.) Instead of raising an issue concerning the Settlement Agreement, it asked B2B to repudiate its agreement with 2 Monkey so that B2B and Caliber could work together to make 2 Monkey pay a higher rate. (Id.) Caliber also threatened that it would begin licensing the CALIBER Mark and Bullet Trade Dress to anyone so that the market would be flooded ultimately taking sales away from B2B and 2 Monkey. (Id. ¶ 18.)

         Consequently, on April 3, 2018, B2B filed the underlying Complaint against Caliber for breach of contract, interference with existing contractual relations, interference with prospective economic advantage and unfair competition under California Business & Professions Code section 17200 et seq. (Dkt. No. 1, Compl.)

         Meanwhile, Caliber's Counterclaim and Third-Party Complaint alleges that following the execution of the Settlement Agreement, Caliber manufactured large caliber bullet-shaped bottle openers for third parties including, 2 Monkey. (Dkt. No. 41, Counterclaim ¶ 36.) On or after April 7, 2017, Caliber told 2 Monkey that it could offer a nonexclusive license to its Bullet Trade Dress. (Id. at ¶ 37.) 2 Monkey then ceased purchasing product from Caliber and expressed an interest in obtaining a license for sale of products bearing the Bullet Trade Dress. (Id. ¶ 38.) During the remainder of 2017, 2 Monkey continued to independently purchase and/or manufacture bullet-shaped bottle openers. (Id. ¶ 39.) Around April 2017, 2 Monkey contracted with Triton Welding & Machine Shop located in Cocoa, Florida to cut openings in .50 caliber shell casings and contracted with Orlando Contract Packaging located in Altamonte Springs, Florida to assemble .50 caliber bottle openers. (Id. ¶ 40.) 2 Monkey then de-burred and polished the bottle openers, itself, and sold them to others through Lucky Shot. (Id.) 2 Monkey knew it needed a license to the Bullet Trade Dress and engaged in negotiations with Caliber throughout 2017 and early 2018 regarding a license for the sale of large caliber bottle openers. (Id. ¶ 42.) On January 25, 2018, after making a requested change by 2 Monkey to the agreement, Caliber believed they had an agreement. (Id. ¶ 43.) But 2 Monkey delayed execution of the agreement. (Id. ¶ 44.) On February 23, 2018, 2 Monkey told Caliber that it would purchase products from B2B instead of Caliber. (Id. 45.) Because they did not enter into a license agreement, 2 Monkey's prior sales of bullet-shaped bottle openers since April 2017 were unlicensed, unauthorized and counterfeit. (Id. ¶ 46.)

         Around February 23, 2018, 2 Monkey entered into a Manufacturing Agreement with B2B without Caliber's knowledge, and on that day, 2 Monkey placed its first order of 5, 000 .50 caliber bullet-shaped bottle openers and other bullet-shaped bottle openers. (Id. ¶ 47.) As a result, Caliber notified Amazon and Etsy on February 23, 2018 that Lucky Shot's then-existing product was infringing its Bullet Trade Dress. (Id. ¶ 48.) B2B did not obtain Caliber's consent to transfer rights to the Bullet Trade Dress or CALIBER mark to 2 Monkey or Lucky Shot. (Id. ¶ 49.) Lucky Shot continues to list bullet-shaped bottle openers on its own website, Amazon.com and Etsy.com without a license from Caliber. (Id. ¶ 50.) Lucky Shot also uses the phrase “the original” without a license from Caliber. (Id. ¶ 51.) B2B continues to use the phrase “the original” in connection with the sale of bullet-shaped bottle openers without a license from Caliber. (Id. ¶ 52.) Amazon and Etsy removed specific listings of Lucky Shot to comply with their policies on sale of infringing and/or counterfeit products. (Id. ¶ 53.) On March 1, 2018, B2B contacted Caliber demanding that the take-down notices be withdrawn explaining that all 2 Monkey/Lucky Shot products were being manufactured by B2B as of Monday, February 26, 2018. (Id. ¶ 56.) In response, Caliber sought a copy of the Manufacturing Agreement that was heavily redacted but confirmed that B2B and 2 Monkey/Lucky Shot entered into a sublicense agreement. (Id. ¶ 60.) Moreover, invoices related to the production of bottle openers for 2 Monkey were produced indicating that B2B subcontracted with Triton Welding & Machine Shop, Inc. and Orlando Contract Packaging, the same companies 2 Monkey hired directly to manufacture bottle openers from April 2017 to February 2018. (Id. ¶¶ 61-62.) Caliber also requested the pricing information in the Manufacturing Agreement and purchase documents that verify that B2B is the manufacturer but B2B and 2 Monkey refused. (Id. ¶¶ 65, 66.) Therefore, Caliber is unable to determine whether the Lucky Shot bullet-shaped bottle openers on Amazon and Etsy are counterfeit, non-infringing or produced under the settlement agreement with B2B. (Id. ¶ 67.)

         Based on these facts, on April 27, 2018, Defendant Caliber filed its Answer and a Counterclaim against B2B for breach of contract, interference with prospective economic advantage and negligent misrepresentation, unfair competition, two counts of federal unfair competition pursuant to 15 U.S.C. § 1125(a) for the CALIBER and ORIGINAL marks, and two counts of trademark infringement of U.S. Registration No. 4, 930, 487 (THE ORIGINAL .50 CALIBER BOTTLE OPENER) and the U.S. Registration No. 4, 364, 453 (CALIBER) pursuant to 15 U.S.C. § 1114. (Dkt. No. 5.) Caliber also filed a Third-Party Complaint (“TPC”) against Third Party Defendants Lucky Shot and 2 Monkey. (Id.) In the TPC, Caliber alleges eight causes of action of common law unfair competition, three counts of trademark infringement of U.S. Registration No. 4, 630, 557 (Bullet Design mark), U.S. Registration No. 4, 364, 453 (CALIBER) and U.S. Registration No. 4, 930, 487 (ORIGINAL .50 CALIBER BOTTLE OPENER) pursuant to 15 U.S.C. § 1114; three counts of federal unfair competition pursuant to 14 U.S.C. § 1125(a), and counterfeiting. (Dkt. No. 5 at 22-29.)

         On June 8, 2018, B2B filed its Answer to Caliber's Counterclaims. (Dkt. No. 22.) On August 7, 2018, Third Party Defendants filed their Answer to the TPC and filed a Third-Party Counterclaim. On August 28, 2018, Caliber filed its answer to the Third-Party Defendants' Counterclaim. (Dkt. No. 30.)

         On January 9, 2019, the Court granted Caliber's unopposed motion for leave to file an Amended Answer, Counterclaims and Third-Party Complaint due to a typographical error. (Dkt. Nos. 37, 39, 40.) On January 10, 2019, Caliber filed the operative Amended Answer, Counterclaims and Third-Party Claims. (Dkt. No. 41.) On January 24, 2019, Third Party Defendants filed an Answer to the Third-Party Complaint and Counterclaim as well as their Third Party Counterclaims against Caliber seeking a declaration that trademark registration no. 4, 630, 557 (Bullet Trade Dress) is invalid, cancellation of federal trademark registration No. 4, 630, 557 (Bullet Trade Dress), cancellation of federal trademark registration No. 4, 364, 453 (CALIBER mark), and cancellation of federal trademark registration No. 4, 930, 487 (ORIGINAL mark). (Dkt. No. 42 at 15-22.)

         The deadline for the completion of fact discovery in this case was May 10, 2019 and expert discovery deadline was September 13, 2019. (Dkt. No. 35 at 2-3.) Summary judgment motions were filed by all parties on October 28, ...