Material Handling Systems, Inc. v. Rack Men Equipment Co, Inc.

• Court: District Court, E.D. California
• Decided: January 23, 2024
• Docket: 2:23-cv-01089
• Status: Unknown

Opinion

1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 EASTERN DISTRICT OF CALIFORNIA 10 ----oo0oo---- 11 12 Material Handling Systems, Inc., No. 2:23-cv-01089 WBS AC a California Corporation, 13 Plaintiff, 14 ORDER v. 15 Rack Men Equipment Company, 16 Inc., a Georgia Corporation, 17 Defendant. 18 Rack Men Equipment Company, 19 Inc., a Georgia Corporation,

20 Counterclaimant,

21 v.

22 Material Handling Systems, Inc., a California Corporation, 23 and MOES 1-25,

24 Counter-Defendants.

25 26 ----oo0oo---- 27 This is a trademark dispute. Plaintiff Material 28 Handling Systems, Inc. (“Material Handling”) filed a complaint nee nnn en I NIE OIE ED

1 for declaratory judgment of non-infringement. (Compl. (Docket 2 No. 1).) Defendant Rack Men Equipment Company, Inc. (“Rack Men”) 3 filed obverse counterclaims which encompass six allegations of 4 trademark infringement, dilution, and unfair competition under 5 state and federal law. (Counterel. (Docket No. 20).) The court 6 now considers Material Handing’s motion to dismiss Rack Men’s 7 counterclaims. (Mot. (Docket No. 22).) 8 I. Factual and Procedural History 9 The court takes the following allegations from Rack 10 Men’s counterclaims as true and draws every reasonable inference 11 in favor of Rack Men. 12 Rack Men is a Georgia-based equipment company that 13 sells warehouse equipment throughout the world. (Countercl. 14 2, 7.) It has been in business since 1989, always under the 15 | moniker “Rack Men.” (Id. 9-10.) It also maintains an online 16 retail presence on the internet via the domain “rackmen.com,” 17 | which it registered back in 1998. (Id. G@ 11.) In September 18 2009, Rack Men sought to register its service mark, below, with 19 | the United States Patent and Trademark Office (“USPTO”). 20 21 22 23 24 (Id. G7 13.) The USPTO issued a certificate of registration on 25 July 27, 2010. (Id. 9 14.) Rack Men further filed a Declaration 26 | of Use and Incontestability for its mark, which the USPTO 27 | accepted on September 4, 2015. (Id. J 16.) 28

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1 Material Handling is a Sacramento-based rack and 2 shelving business that does business under the moniker “Rack 3 | Man!” (Id. @ 3.) Material Handling utilizes the following mark 4 in its course of business: 5 Reese 7 FF f = es i

9 = ct “5 = 10 Gg” 11 12 (Id. 9 20.) 13 Rack Men alleges that it did not discover Material 14 Handling’s use of the “Rack Man!” mark until 2021 or 2022. (Id. 15 G 23.) Rack Men could not immediately act to address the alleged 16 trademark infringement because its late president, John Spang, 17 | was fighting cancer at the time. (Id. G9 24-25.) Rack Men 18 contacted Material Handling on March 2, 2023 to request that they 19 | cease use of the “Rack Man!” mark. (Id. 9 27.) Material 20 Handling did not cease, and instead applied for its own trademark 21 in April 2023. (Id. {I 29.) 22 If. Legal Standard 23 Federal Rule of Civil Procedure 12(b) (6) allows for 24 dismissal when the plaintiff’s complaint fails to state a claim 25 upon which relief can be granted. See Fed. R. Civ. P. 12(b) (6). 26 | The inquiry before the court is whether, accepting the 27 allegations in the complaint as true and drawing all reasonable 28

1 inferences in the plaintiff’s favor, the complaint has alleged 2 “sufficient facts . . . to support a cognizable legal theory,” 3 Navarro v. Block, 250 F.3d 729, 732 (9th Cir. 2001), and thereby 4 stated “a claim to relief that is plausible on its face,” Bell 5 Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). In deciding 6 such a motion, all material allegations of the complaint are 7 accepted as true, as well as all reasonable inferences to be 8 drawn from them. Id. 9 A motion to dismiss a counterclaim brought pursuant to 10 Federal Rule of Civil Procedure 12(b)(6) is evaluated under the 11 same standard as a motion to dismiss a plaintiff’s complaint. 12 See, e.g., AirWair Int’l Ltd. v. Schultz, 84 F. Supp. 3d 943, 949 13 (N.D. Cal. 2015). 14 III. Discussion 15 Rack Men brings infringement and dilution counterclaims 16 under state and federal law. Material Handling argues that all 17 of Rack Men’s counterclaims are time-barred. 18 Under California law, trademark infringement claims 19 have a four-year statute of limitations. See Cal. Civ. Proc. 20 Code §§ 337, 343; Pinkette Clothing, Inc. v. Cosmetic Warriors 21 Ltd., 894 F.3d 1015, 1025 (9th Cir. 2018). Lanham Act claims in 22 the Ninth Circuit are also presumptively subject to a four-year 23 limitations period pursuant to the doctrine of laches. Id. 24 (drawing from “the most analogous state statute of limitations”). 25 Under both federal and state law, the clock begins to run from 26 the time a plaintiff knew or should have known about the alleged 27 infringement. Id. (Laches runs “from the time the plaintiff knew 28 or should have known about its potential cause of action.” 1 (citing Tillamook Country Smoker, Inc. v. Tillamook Cty. Creamery 2 Ass’n, 465 F.3d 1102, 1108 (9th Cir. 2006))); Jarrow Formulas, 3 Inc. v. Nutrition Now, Inc., 304 F.3d 829, 838 (9th Cir. 2002) 4 (“[T]he state limitations period runs from the time the plaintiff 5 knew or should have known” about Lanham Act claim.). 6 Material Handling points to two different reasons why 7 the court should find Rack Men’s counterclaims are time-barred: 8 (1) Rack Men’s assertion of its own statute of limitations and 9 laches affirmative defenses; and (2) records from the Internet 10 Archive’s “Wayback Machine,” which allegedly show that Rack Men 11 should have known of Material Handling’s alleged infringement 12 over a decade ago. 13 Separately, Material Handling argues that Rack Men’s 14 federal dilution counterclaim (Counterclaim 5) should be 15 dismissed because Rack Men fails to allege that its marks are 16 famous and distinctive. (Mot. at 20.) 17 A. Rack Men’s Affirmative Defenses 18 In its answer to Material Handling’s complaint, Rack 19 Men asserted thirteen affirmative defenses. One is statute of 20 limitations; another is laches. (Answer at 9.) Material 21 Handling argues that Rack Men’s assertion of these defenses 22 against Material Handling’s complaint amounts to Rack Men 23 admitting that Rack Men should have known of Material Handling’s 24 alleged infringement at least four years ago -- and, as a result, 25 admitting that its own counterclaims for infringement are time- 26 barred as well. 27 However, no authority of which the court is aware holds 28 that affirmative defenses are themselves factual admissions. Cf. 1 Oki Am., Inc. v. Microtech Int’l, Inc., 872 F.2d 312, 313 (9th 2 Cir. 1989) (affirmative defense denying existence of contract “is 3 not an admission” that precludes other defenses to contract 4 claim). See also Fed. R. Civ. P. 8(d)(3) (“A party may state as 5 many separate claims or defenses as it has, regardless of 6 consistency.”); Russ v. Apollo Grp., Inc., No. CV 09-904- 7 VBF(FMOX), 2009 WL 10673931, at *3 (C.D. Cal. June 2, 2009) 8 (“[T]he Federal Rules permit a defendant to assert ‘inconsistent’ 9 affirmative defenses in a responsive pleading.”). 10 Rack Men also plausibly denies in its answer that it 11 knew or should have known of any infringement before the 12 applicable limitations period. (See Compl. ¶ 39 (“Defendants 13 have known of, or should have known of, Plaintiff’s use of the 14 Rack Man! Marks since at least as early as 2011.”); Answer 15 (Docket No. 8) ¶ 39 (“Rack Men denies the allegations within 16 paragraph thirty-nine (39) of the Complaint.”).) 17 “Rule 8 does not require plaintiffs to plead around 18 affirmative defenses. And ordinarily, affirmative defenses . . . 19 may not be raised on a motion to dismiss.” U.S. Commodity 20 Futures Trading Comm’n v. Monex Credit Co., 931 F.3d 966, 972 21 (9th Cir. 2019) (cleaned up).1 The court therefore concludes 22 that Rack Men’s pleadings do not inadvertently establish any 23 affirmative defenses that vitiate its own counterclaims.2

24 1 Cf. id. at 973 (“We can consider an affirmative defense on a motion to dismiss when there is some obvious bar to securing 25 relief on the face of the complaint. In other words, dismissal 26 based on an affirmative defense is permitted when the complaint establishes the defense.”) (cleaned up) (emphasis added). 27 2 Even if the court were to strike Rack Men’s conclusory 28 allegation that “Upon information and belief, Rack Men had no 1 Accordingly, the court will not dismiss Rack Men’s 2 counterclaims on this ground. 3 B. Wayback Machine 4 Material Handling also argues that the court should 5 take judicial notice of certain records from the Internet 6 Archive’s “Wayback Machine,” which purport to show Material 7 Handling’s allegedly infringing marks being used on Material 8 Handling’s website at least as far back as 2011. However, 9 Material Handling provides no binding authority compelling the 10 court to do so.3 Separately, the court cannot conclude at this 11 time that the contents of these records are “facts that can be 12 accurately and readily determined from sources whose accuracy 13 cannot reasonably be questioned.” See Fed. R. Evid. 201(b). 14 Accordingly, the court will not dismiss Rack Men’s 15 counterclaims based on Wayback Machine records. 16 C. Federal Dilution Counterclaim (Counterclaim 5) 17 To establish a claim of federal trademark dilution, a 18 plaintiff must allege that: (1) plaintiff’s marks are famous and 19 distinctive; (2) defendant is using the mark in commerce; (3) 20 defendant’s use began after plaintiff’s marks became famous; and 21 (4) defendant’s “use of the mark[s] is likely to cause dilution 22 knowledge of Counter-Defendants’ usage of the mark ‘Rack Man’ 23 until sometime in 2022, maybe 2021” (Countercl. ¶ 23), nothing on the face of Rack Men’s pleadings establish that its own 24 counterclaims are time-barred. 25 3 To the extent that Material Handling’s cited persuasive 26 authorities hold contrary to the court’s decision, the court disagrees with them. See Lindsay v. Shree Enter., LLC, No. 2:21- 27 CV-00299 WBS CKD, 2021 WL 2711225, at *3 n.2 (E.D. Cal. July 1, 2021). 28 nnn nen ene non nn IE OE EE ED OE

1 by blurring or dilution by tarnishment.” Jada Toys, Inc. v. 2] Mattel, Inc., 518 F.3d 628, 634 (9th Cir. 2008). 3 Material Handling argues that Rack Men has failed to 4 allege that its marks are famous and are being tarnished. (Mot. 5 at 21-22; Reply (Docket No. 26) at 1-2.) However, Rack Men 6 | alleges in its counterclaims that it “has established an 7 outstanding reputation throughout the United States of America 8 and beyond as to the excellence of the quality of its goods and 9 services offered under this brand” (Countercl. 7 12), and “The 10 unauthorized and infringing use by [Rack Men] of the disputed 11 marks will, unless enjoined, continue cause [sic] irreparable 12 harm, damage, and injury to Rack Men’s good will in its marks” 13 (id. @ 30). This is sufficient to allege a dilution claim under 14 15 U.S.C. § 1125(c) at the pleading stage. 15 Accordingly, the court will not dismiss Counterclaim 5 16 | on this basis. 17 IT IS THEREFORE ORDERED that Material Handling’s motion 18 to dismiss Rack Men’s counterclaims (Docket No. 21) be, and the 19 same hereby is, DENIED.‘4 □ . a bean, (hi. 20 | Dated: January 23, 2024 Pi he Vi (eh

21 UNITED STATES DISTRICT JUDGE 22 23 24 25 26 27 4 Material Handling’s motion for judicial notice (Docket No. 22-1) is also denied. 28