Aguila Management LLC v. International Fruit Genetics LLC

• Court: District Court, D. Arizona
• Decided: February 13, 2020
• Docket: 2:19-cv-00173
• Status: Unknown

Opinion

1 WO 2 3 4 5 6 7 IN THE UNITED STATES DISTRICT COURT 8 FOR THE DISTRICT OF ARIZONA

10 Aguila Management LLC, No. CV-19-00173-PHX-DJH

11 Plaintiff, ORDER

12 v.

13 International Fruit Genetics LLC,

14 Defendant. 15 16 Pending before the Court is a Motion to Dismiss (“the Motion”) filed by Defendant 17 International Fruit Genetics, LLC (“IFG”) (Doc. 20). The Motion seeks to dismiss the 18 Complaint filed by Plaintiff Aguila Management LLC (“Aguila”). (Doc. 20 at 1). Plaintiff 19 filed a Response (Doc. 28), and Defendant filed a Reply (Doc. 31).1 20 I. Background 21 Plaintiff initiated this action on January 10, 2019 (Doc. 1). The Complaint alleges 22 Federal Trademark Infringement in violation of 15 U.S.C. § 1114(1), Federal Unfair 23 Competition and False Designation of Origin in violation of 15 U.S.C. § 1125(a), and 24 Dilution in violation of 15 U.S.C. § 1125(c), as well as Common Law Unfair Competition 25 and Common Law Trademark Infringement. (Doc. 1 at 8-12). 26 Plaintiff Aguila is the managing entity of a fruit and vegetables business which

27 1 Both parties requested oral argument on this matter. The Court denies the request because 28 the issues have been fully briefed and oral argument will not aid the Court’s decision. See Fed.R.Civ.P. 78(b) (court may decide motions without oral hearings); LRCiv 7.2(f) (same). 1 conducts transactions in the retail and wholesale marketplaces. (Doc. 1 at 3). Defendant 2 IFG is a fruit-breeding business focused on creating new fruit varietals. (Doc. 20 at 4). 3 Plaintiff’s fruit and vegetables business utilizes trademarks “CANDY” for “Fresh Fruit- 4 Namely, Apples, Peaches, Pears, Fresh Prunes and Plums;” “CANDY” for “Fresh Fruit;” 5 and “KANDY” for “Fresh Fruit and Fresh Vegetables.” (Doc. 1 at 4-5). Subsequent to 6 Plaintiff, Defendant registered “COTTON CANDY” for “Fruits, Namely, Fresh Grapes,” 7 among other phrases. (Doc. 20 at Ex. 6). In the Complaint, Plaintiff alleges that Defendant 8 knowingly and willingly infringed upon its trademarks by adopting and using “Cotton 9 Candy” as well as other “Candy” related terms. (Doc. 1 at 5-6). Pursuant to Fed. R. Civ. P. 10 12(b)(6), Defendant moves to dismiss on all counts for failure to state a claim upon which 11 relief can be granted, arguing that the affirmative defense of laches bars Plaintiff’s claims. 12 (Doc. 20 at 1-2). 13 II. Discussion 14 A. Legal Standard for Rule 12(b)(6) Motion 15 A motion to dismiss pursuant to Rule 12(b)(6) challenges the legal sufficiency of a 16 complaint. Cook v. Brewer, 637 F.3d 1002, 1004 (9th Cir. 2011). Complaints must contain 17 a “short and plain statement showing that the pleader is entitled to relief.” Fed. R. Civ. P. 18 8(a). This requires “more than an unadorned, the-defendant-unlawfully-harmed-me 19 accusation.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing Bell Atlantic Corp. v. 20 Twombly, 550 U.S. 544, 555 (2007)). A complaint need not contain detailed factual 21 allegations to avoid a Rule 12(b)(6) dismissal; it must simply plead “enough facts to state 22 a claim to relief that is plausible on its face.” Twombly, 550 U.S. 544, 570 (2007). “The 23 plausibility standard is not akin to a ‘probability requirement,’ but it asks for more than a 24 sheer possibility that defendant has acted unlawfully.” Iqbal, 556 U.S. at 678 (citing 25 Twombly, 550 U.S. at 556). “Where a complaint pleads facts that are ‘merely consistent 26 with’ a defendant’s liability, it ‘stops short of the line between possibility and plausibility 27 of entitlement to relief.’” Id. at 678 (citation omitted). 28 The Court must interpret facts alleged in the complaint in the light most favorable 1 to the plaintiff, while also accepting all well-pleaded factual allegations as true. Shwarz v. 2 United States, 234 F.3d 428, 435 (9th Cir. 2000). That rule does not apply, however, to 3 legal conclusions. Iqbal, 556 U.S. at 678. A complaint that provides “labels and 4 conclusions” or “a formulaic recitation of the elements of a cause of action will not do.” 5 Twombly, 550 U.S. at 555. Nor will a complaint suffice if it presents nothing more than 6 “naked assertions” without “further factual enhancement.” Id. at 557. 7 B. Laches 8 Laches is an affirmative defense distinct from a statute of limitations defense. 9 Jarrow Formulas, Inc. v. Nutrition Now, Inc., 304 F.3d 829, 835 (9th Cir. 2002) (citation 10 omitted). It is “an equitable time limitation on a party’s right to bring suit.” Id. (quoting 11 Boone v. Mech Specialties Co., 609 F.2d 956, 958 (9th Cir. 1979)). In a trademark 12 infringement claim under the Lanham Act, it is well established that laches may be 13 presented as an equitable defense. GoTo.com, Inc. v. Walt Disney Co., 202 F.3d 1199, 1209 14 (9th Cir. 2000). If a suit is filed beyond the “analogous state limitations period” for a claim 15 arising from the Lanham Act, the Court presumes laches applies. Jarrow, 304 F.3d at 836 16 (citations omitted). Arizona’s analogous statute of limitations for trademark infringement 17 and unfair competition bars claims after three years. See Ranch Realty v. DC Ranch Realty, 18 LLC, 614 F. Supp. 2d 983, 989-90 (D. Ariz. 2007). 19 To evaluate the application of laches, the Court first applies a two-prong test. 20 Danjaq LLC v. Sony corp., 263 F.3d 942, 951 (9th Cir. 2001). The first prong asks whether 21 plaintiff unreasonably delayed filing suit, and the second prong asks whether defendant 22 suffered prejudice as a result of the delay. Id. 23 The first prong begins with the length of delay, which is measured from the time the 24 plaintiff knew or should have known about its potential cause of action. Jarrow, 304 F.3d 25 at 838 (citing Kling v. Hallmark Cards Inc., 225 F.3d 1030, 1036 (9th Cir. 2000); Portland 26 Audubon Soc’y v. Lujan, 884 F.2d 1233, 1241 (9th Cir. 1989)). Next, the Court decides 27 whether the plaintiff’s delay was reasonable. Id. (citing Danjaq, 263 F.3d at 954-55; 28 Couveau v. American Airlines, 218 F.3d 1078, 1083 (9th Cir. 2000)). The reasonableness 1 of the plaintiff’s delay is considered in light of the time allotted by the analogous limitations 2 period. Id. (citing Sandvik v. Alaska Packers Ass’n, 609 F.2d 969, 971 (9th Cir. 1979)). 3 The Court also considers whether the plaintiff has proffered a legitimate excuse for its 4 delay. Id. (citing Danjaq, 263 F.3d at 954-55). 5 In the second prong, a defendant must prove either evidentiary prejudice or 6 expectations-based prejudice. Danjaq, 263 F.3d at 955. Evidentiary prejudice includes 7 such things as lost, stale, or degraded evidence, or witnesses whose memories have faded 8 or who have died. Id. (citations omitted). A defendant may demonstrate expectations-based 9 prejudice by showing that it took actions or suffered consequences that it would not have, 10 had the plaintiff brought suit promptly. Id. (citation omitted). However, when laches is 11 presented as a defense to a trademark infringement claim, a finding of expectations-based 12 prejudice requires more. Internet Specialties West, Inc. v. Milon-Digiorgio Enters., Inc., 13 559 F.3d 985, 991 (9th Cir. 2009). The court must determine whether the claim of prejudice 14 is based on mere expenditures in promoting the infringed name or whether it is based on 15 an investment in the mark as the identity of the business in the minds of the public. Id. at 16 991-93 (citations omitted) (quotation omitted). 17 Finally, in addition to the Jarrow two-prong test, courts analyze six factors to 18 determine whether laches precludes a trademark infringement claim: “1) the strength and 19 value of trademark rights asserted; 2) plaintiff’s diligence in enforcing mark; 3) harm to 20 senior user if relief denied; 4) good faith ignorance by junior users; 5) competition between 21 senior and junior users; and 6) extent of harm suffered by junior user because of senior 22 user’s delay.” E-Systems, Inc. v. Monitek, Inc., 720 F.2d 604, 607 (9th Cir. 1983). 23 C. Analysis 24 In the Motion, Defendant argues Plaintiff’s claims are barred by the equitable 25 doctrine of laches. (Doc. 20 at 7). Courts in this district have previously applied laches in 26 a motion to dismiss, noting that “where the elements of laches are apparent on the face of 27 a complaint, it may be asserted on a motion to dismiss.” Arizona Minority Coalition for 28 Fair Redistricting v. Arizona Independent Redistricting Com’n, 366 F. Supp. 2d 887, 912 1 n.19 (D. Ariz. 2005) (citation omitted). Defendant first argues the facts require the 2 presumption that laches applies. (Doc. 20 at 8). Second, Defendant argues Plaintiff 3 unreasonably delayed suit. Id. at 9. Third, Defendant argues it is prejudiced by Plaintiff’s 4 alleged unreasonable delay in bringing suit. Id. at 10. Finally, Defendant argues the six- 5 factor E-Systems test weighs in favor of dismissing Plaintiff’s claims. Id. at 11-14. For the 6 following reasons, the Court will deny the Motion. 7 1. The Presumption of Laches 8 Plaintiff does not dispute that in 2011 it had knowledge of Defendant’s “COTTON 9 CANDY” Intent-To-Use Trademark Application at the U.S. Patent Trademark Office 10 (“USPTO”). (Doc. 28 at 9-10). Plaintiff argues an intent-to-use application does not trigger 11 laches because the Lanham Act requires infringement by “use in commerce” for laches to 12 be triggered. Id. at 9 (citing United Am. Indus., Inc. v. Cumberland Packing Corp., No. 13 CV-06-1833PHX-FJM, 2007 WL 38279 at *3 (D. Ariz. Jan 5, 2007)). In this instance, 14 however, the Court need not reach whether an intent-to-use application triggers laches 15 under the Lanham Act because Defendant’s “COTTON CANDY” mark was later 16 registered with the USPTO on March 6, 2012. (Doc. 20 at Ex. 6). The registration also 17 indicated use in commerce as early as August 26, 2011. Id. 18 As a matter of public record not subject to reasonable dispute, the Court takes 19 judicial notice of Defendant’s 2012 “COTTON CANDY” mark registration. See Intri-Plex 20 Technologies, Inc. v. Crest Group, Inc., 499 f.3d 1048, 1052 (9th Cir. 2007); Fed. R. Evid. 21 201(b); Tallyho Enterprises, LLC. V. PremierGarage Sys., LLC, No. CV-07-01791-PHX- 22 SRB, 2008 WL 11338891, at *7 n.1 (D. Ariz. Apr. 29, 2008). Plaintiff thus had constructive 23 notice of the March 6, 2012 registration of “COTTON CANDY” mark by Defendant. See 24 Kling, 225 F.3d at 1036 (when laches is raised, the law charges Plaintiff with “such 25 knowledge as he might have obtained upon inquiry, provided the facts already known by 26 him were such as to put upon a man of ordinary intelligence the duty of inquiry”). Given 27 that Plaintiff was aware of the relevant intent-to-use application prior to Defendant’s March 28 6, 2012 “COTTON CANDY” mark registration, the Court finds Plaintiff reasonably had a 1 duty of inquiry and is assumed to have had knowledge of the registration as of March 6, 2 2012. 3 The current action was filed January 10, 2019, far later than the would-be March 6, 4 2015 deadline for suit under Arizona’s analogous statute. The Court thus initially proceeds 5 under the assumption laches applies. See Jarrow, 304 F.3d at 836. 6 2. Plaintiff’s Unreasonable Delay 7 Plaintiff filed suit nearly seven years following Defendant’s March 6, 2012 8 “COTTON CANDY” mark registration. Plaintiff’s delay is greater than double the 9 maximum time to file suit under Arizona’s analogous statute of limitations. Plaintiff does 10 not establish any justifiable reason for the delay. The Court finds the length of Plaintiff’s 11 delay to be unreasonable. 12 3. Defendant Must Show it is Prejudiced by Plaintiff’s Unreasonable Delay 13 Plaintiff’s delay in bringing suit is unreasonable, but Defendant does not claim 14 evidentiary prejudice and has not proven expectations-based prejudice. The Complaint 15 does allege that “IFG has both licensed the Infringing Marks . . . and sold products bearing 16 the Infringing Marks.” (Doc. 1 at 7). The claim that Defendant licensed and sold products 17 bearing infringing marks, however, does not establish prejudice in the laches context. See 18 Internet Specialties, 559 F.3d at 991-93. Laches is meant to protect an infringer whose 19 efforts have been aimed at “build[ing] a valuable business around its trademark” and “an 20 important reliance on the publicity of [its] mark.” Id. at 991-92 (quoting 6 McCarthy on 21 Trademarks and Unfair Competition § 31:12) (citations omitted) (emphases added). Proof 22 of efforts to build a valuable business around the marks in question is necessary because 23 “if this prejudice could consist merely of expenditures in promoting the infringed name, 24 then relief would have to be denied in practically every case of delay.” Id. at 991 (quoting 25 Tisch Hotels, Inc. v. Americana Inn, Inc., 350 F.2d 609, 615 (7th Cir. 1965)). 26 Defendant has not shown at this stage that its alleged infringement rests on “an 27 investment in the mark [ ] as the identity of the business in the minds of the public.” Id. at 28 992; see also Jarrow, 304 F.3d at 839 (if plaintiff had filed the action sooner, defendant || “could have invested its resources in shaping an alternative identity . . . in the minds of the 2|| public”). Defendant’s statement that “the history of IFG’s uncontested growth as || documented in the Complaint and in the USPTO register are precisely what evidence Courts rely upon” when analyzing prejudice understates the burden of proof required when || asserting laches against a Lanham Act trademark infringement claim. (Doc. 31 at 2). 6|| Defendant’s statement that its efforts regarding brand recognition are sufficiently 7\| demonstrated “by its development, registration, use, and licensing of its numerous 8 || CANDY-formative marks” also misapprehends the burden of proof required to show || expectations-based prejudice. Jd. at 8. The Court is unable to conclude, at this early stage □□ of the litigation, that Defendant has invested in the relevant marks as the identity of its 11 |} business. Even finding a presumption in favor of laches, the application of laches at this 12|) stage is inappropriate because prejudice is not apparent on the face of the Complaint.’ 13 || Therefore, the Court will deny the Motion to Dismiss. 14} Il. Conclusion 15 The Court finds the application of laches inappropriate because the Defendant failed 16 || to establish prejudice at this stage. 17 Accordingly, 18 IT IS ORDERED that Defendant’s Motion to Dismiss (Doc. 20) is DENIED. 19 Dated this 13th day of February, 2020. 20 21 5 fe □□ 22 norable' Diang4. Huretewa 3 United States District Fudge 24 25 26 * The Court need not reach the E-Systems factors because the Motion fails to establish 27 prejudice under Sean test. See Internet Specialties, 529 Fd at eed (citing Jarrow, || defendant must still satisfy the second | prong of the laches test), ° Pnees □□□

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