1 UNITED STATES DISTRICT COURT 2 SOUTHERN DISTRICT OF CALIFORNIA 3 RESIDENTIAL ENERGY SERVICES Case No.: 22-cv-1641-AGS-MSB NETWORK, INC., 4 ORDER GRANTING IN PART Plaintiff, 5 PLAINTIFF’S MOTION TO DISMISS v. OR STRIKE COUNTERCLAIMS 6 (ECF 58) BUILDING SCIENCE INSTITUTE, 7 LTD. CO., et al.,
8 Defendants. 9 In this trademark-infringement action, plaintiff Residential Energy Services 10 Network, Inc., alleged that defendant Building Science Institute, Ltd. Co., unlawfully used 11 RESNET’s trademarked acronym “HERS.” BSI responded with five counterclaims, and 12 RESNET now moves to dismiss or strike them all. 13 DISCUSSION 14 A. Motion to Dismiss 15 “To survive a motion to dismiss, a complaint must contain sufficient factual matter, 16 accepted as true, to state a claim to relief that is plausible on its face.” Ashcroft v. Iqbal, 17 556 U.S. 662, 678 (2009) (quotations omitted). Facial plausibility requires more than mere 18 “conclusions” or a “formulaic recitation” of elements; it must be based on “factual 19 allegations” that “raise a right to relief above the speculative level.” Bell Atlantic Corp. v. 20 Twombly, 550 U.S. 544, 555 (2007) (cleaned up). The same standard applies to 21 counterclaims. See Starr v. Baca, 652 F.3d 1202, 1216 (9th Cir. 2011) (“[A]llegations in a 22 complaint or counterclaim may not simply recite the elements of a cause of action, but 23 must contain sufficient allegations of underlying facts,” “taken as true,” that “plausibly 24 suggest an entitlement to relief.”). 25 1. Counterclaim 1: Declaration of Noninfringement 26 27 In its first counterclaim, BSI “requests a declaration by the Court that BSI has not 28 infringed and does not infringe” upon “the purported HERS trademark.” (ECF 53, at 5.) 1 RESNET moves to dismiss this counterclaim because it is “redundant” of RESNET’s own 2 “claims for trademark infringement.” (ECF 58-1, at 11.) But “courts should decline to 3 dismiss counterclaims that seek a declaration that” a “trademark is invalid” on 4 “redundan[cy]” grounds. Stickrath v. Globalstar, Inc., No. C07-1941 TEH, 2008 WL 5 2050990, at *4 (N.D. Cal. May 13, 2008). After all, “a court may find a defendant has no 6 liability for infringement without adjudicating the validity of the underlying intellectual 7 property.” Id. (quotations omitted). And the counterclaiming defendant “has something to 8 gain from a counterclaim declaration of” noninfringement—“it can go on to develop its 9 products without fear of infringing.” Id. (quotations omitted). So RESNET’s motion to 10 dismiss BSI’s first counterclaim is denied. 11 2. Counterclaims 2 and 3: Declaration of Trademark Invalidity and Declaration of Fraud upon the Trademark Office 12 BSI’s second and third counterclaims appear to be grounded in the same allegation: 13 RESNET committed “[f]raud on the [t]rademark [o]ffice.” (See ECF 53, at 5–6.) 14 Specifically, BSI asks the Court to “declar[e]” that RESNET’s HERS trademark “is invalid 15 and unenforceable as issued by the” United States Patent and Trademark Office 16 (counterclaim 2) because RESNET committed “[f]raud on the [t]rademark [o]ffice” 17 (counterclaim 3). (Id.) Both counterclaims fail because BSI has not sufficiently alleged that 18 RESNET engaged in fraud. 19 The first element in proving a petition to cancel a trademark based on fraud is that 20 the applicant made “a false representation regarding a material fact.” OTR Wheel Eng’g, 21 Inc. v. West Worldwide Servs., Inc., 897 F.3d 1008, 1019 (9th Cir. 2018). “[I]t is well 22 established that an applicant for a registration of a trademark has a duty of candor in his 23 communications with the PTO, and fraud arises not only where the applicant makes false 24 statements but also where the applicant fails to make full disclosure of all material facts.” 25 His & Her Corp v. Shake-N-Go Fashion Inc., No. CV 11-05323 GAF (VBKx), 2012 WL 26 13009119, at *4 (C.D. Cal. Mar. 22, 2012) (cleaned up). 27 BSI’s main theory is that a RESNET representative intentionally withheld 28 1 information about the government’s HERS use when he falsely “declar[ed]” in the HERS 2 trademark application that—to the best of his “knowledge and belief”—“no other person, 3 firm, corporation, or association has the right to use the mark in commerce.” (ECF 53, at 7.) 4 According to BSI, the government began using HERS “[a]s early as 1981,” and RESNET’s 5 predecessor didn’t file the trademark application until “2007.” (Id. at 3–4.) But a trademark 6 “applicant” is “not require[d]” “to disclose those persons whom he may have heard are 7 using the mark if he feels that the rights of such others are not superior to his.” Quiksilver, 8 Inc. v. Kymsta Corp., 466 F.3d 749, 755 (9th Cir. 2006) (cleaned up). Put another way, 9 “[t]here is no requirement that an applicant for a trademark registration disclose all prior 10 use of a mark. . . . Instead, an applicant must disclose only those prior users that the 11 applicant believes have acquired superior rights to the mark in the classification for which 12 registration is sought.” Neurovision Med. Prods. Inc. v. NuVasive, Inc., 494 F. App’x 749, 13 751 (9th Cir. 2012). The counterclaims allege no facts that suggest RESNET believed “that 14 the [HERS-use] rights of” those governmental agencies were “superior to” RESNET’s. See 15 Quiksilver, 466 F.3d at 755. So, BSI’s argument is unavailing. 16 Next, BSI asserts that “[a]t no time during the prosecution of the HERS trademark 17 application did ResNet inform the USPTO that HERS is an acronym for the then widely 18 used descriptive term Home Energy Rating System.” (ECF 53, at 5.) In BSI’s telling, 19 RESNET “intentionally withheld this material information to mislead the USPTO into 20 issuing a trademark.” (Id.) This is fraud, BSI argues, because the Trademark Manual of 21 Examining Procedure states that an acronym is non-trademarkable if it is “merely 22 descriptive of” “goods or services” and “readily understood by relevant purchasers to be 23 substantially synonymous with the merely descriptive wording it represents.” Trademark 24 Manual of Examining Procedure § 1209.03(h); (see ECF 61, at 12). 25 But BSI offers no authority—and this Court’s own research uncovered none— 26 suggesting that a failure to disclose a trademark’s descriptive nature can constitute fraud. 27 In fact, the Trademark Trial and Appeal Board found the opposite: “Because considerations 28 of a mark’s descriptiveness are not included among [an] applicant’s statutory duties,” “no 1 fraud can occur based upon [an] applicant’s failure to disclose to the Office the descriptive 2 nature of the mark at issue.” John Abate Int’l, Inc. & Carina Prods., Ltd., Cancellation 3 No. 28,890, 2001 WL 817791, at *5 (T.TA.B. July 18, 2001). In other words, although the 4 term’s allegedly descriptive nature might have been a problem in the years before the 5 trademark here reached incontestability, it does not support a fraud claim now. See Bart 6 Schwartz Int’l Textiles, Ltd. v. F.T.C., 289 F.2d 665, 668 (C.C.P.A. 1961) (finding that 7 although the word in question was “descriptive” and therefore “cannot be registered” “as a 8 trademark for the described product,” “[t]his fact is of no assistance to” the petitioner’s 9 argument that the “registration was obtained fraudulently”); see also KP Permanent 10 Make-Up, Inc. v.
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1 UNITED STATES DISTRICT COURT 2 SOUTHERN DISTRICT OF CALIFORNIA 3 RESIDENTIAL ENERGY SERVICES Case No.: 22-cv-1641-AGS-MSB NETWORK, INC., 4 ORDER GRANTING IN PART Plaintiff, 5 PLAINTIFF’S MOTION TO DISMISS v. OR STRIKE COUNTERCLAIMS 6 (ECF 58) BUILDING SCIENCE INSTITUTE, 7 LTD. CO., et al.,
8 Defendants. 9 In this trademark-infringement action, plaintiff Residential Energy Services 10 Network, Inc., alleged that defendant Building Science Institute, Ltd. Co., unlawfully used 11 RESNET’s trademarked acronym “HERS.” BSI responded with five counterclaims, and 12 RESNET now moves to dismiss or strike them all. 13 DISCUSSION 14 A. Motion to Dismiss 15 “To survive a motion to dismiss, a complaint must contain sufficient factual matter, 16 accepted as true, to state a claim to relief that is plausible on its face.” Ashcroft v. Iqbal, 17 556 U.S. 662, 678 (2009) (quotations omitted). Facial plausibility requires more than mere 18 “conclusions” or a “formulaic recitation” of elements; it must be based on “factual 19 allegations” that “raise a right to relief above the speculative level.” Bell Atlantic Corp. v. 20 Twombly, 550 U.S. 544, 555 (2007) (cleaned up). The same standard applies to 21 counterclaims. See Starr v. Baca, 652 F.3d 1202, 1216 (9th Cir. 2011) (“[A]llegations in a 22 complaint or counterclaim may not simply recite the elements of a cause of action, but 23 must contain sufficient allegations of underlying facts,” “taken as true,” that “plausibly 24 suggest an entitlement to relief.”). 25 1. Counterclaim 1: Declaration of Noninfringement 26 27 In its first counterclaim, BSI “requests a declaration by the Court that BSI has not 28 infringed and does not infringe” upon “the purported HERS trademark.” (ECF 53, at 5.) 1 RESNET moves to dismiss this counterclaim because it is “redundant” of RESNET’s own 2 “claims for trademark infringement.” (ECF 58-1, at 11.) But “courts should decline to 3 dismiss counterclaims that seek a declaration that” a “trademark is invalid” on 4 “redundan[cy]” grounds. Stickrath v. Globalstar, Inc., No. C07-1941 TEH, 2008 WL 5 2050990, at *4 (N.D. Cal. May 13, 2008). After all, “a court may find a defendant has no 6 liability for infringement without adjudicating the validity of the underlying intellectual 7 property.” Id. (quotations omitted). And the counterclaiming defendant “has something to 8 gain from a counterclaim declaration of” noninfringement—“it can go on to develop its 9 products without fear of infringing.” Id. (quotations omitted). So RESNET’s motion to 10 dismiss BSI’s first counterclaim is denied. 11 2. Counterclaims 2 and 3: Declaration of Trademark Invalidity and Declaration of Fraud upon the Trademark Office 12 BSI’s second and third counterclaims appear to be grounded in the same allegation: 13 RESNET committed “[f]raud on the [t]rademark [o]ffice.” (See ECF 53, at 5–6.) 14 Specifically, BSI asks the Court to “declar[e]” that RESNET’s HERS trademark “is invalid 15 and unenforceable as issued by the” United States Patent and Trademark Office 16 (counterclaim 2) because RESNET committed “[f]raud on the [t]rademark [o]ffice” 17 (counterclaim 3). (Id.) Both counterclaims fail because BSI has not sufficiently alleged that 18 RESNET engaged in fraud. 19 The first element in proving a petition to cancel a trademark based on fraud is that 20 the applicant made “a false representation regarding a material fact.” OTR Wheel Eng’g, 21 Inc. v. West Worldwide Servs., Inc., 897 F.3d 1008, 1019 (9th Cir. 2018). “[I]t is well 22 established that an applicant for a registration of a trademark has a duty of candor in his 23 communications with the PTO, and fraud arises not only where the applicant makes false 24 statements but also where the applicant fails to make full disclosure of all material facts.” 25 His & Her Corp v. Shake-N-Go Fashion Inc., No. CV 11-05323 GAF (VBKx), 2012 WL 26 13009119, at *4 (C.D. Cal. Mar. 22, 2012) (cleaned up). 27 BSI’s main theory is that a RESNET representative intentionally withheld 28 1 information about the government’s HERS use when he falsely “declar[ed]” in the HERS 2 trademark application that—to the best of his “knowledge and belief”—“no other person, 3 firm, corporation, or association has the right to use the mark in commerce.” (ECF 53, at 7.) 4 According to BSI, the government began using HERS “[a]s early as 1981,” and RESNET’s 5 predecessor didn’t file the trademark application until “2007.” (Id. at 3–4.) But a trademark 6 “applicant” is “not require[d]” “to disclose those persons whom he may have heard are 7 using the mark if he feels that the rights of such others are not superior to his.” Quiksilver, 8 Inc. v. Kymsta Corp., 466 F.3d 749, 755 (9th Cir. 2006) (cleaned up). Put another way, 9 “[t]here is no requirement that an applicant for a trademark registration disclose all prior 10 use of a mark. . . . Instead, an applicant must disclose only those prior users that the 11 applicant believes have acquired superior rights to the mark in the classification for which 12 registration is sought.” Neurovision Med. Prods. Inc. v. NuVasive, Inc., 494 F. App’x 749, 13 751 (9th Cir. 2012). The counterclaims allege no facts that suggest RESNET believed “that 14 the [HERS-use] rights of” those governmental agencies were “superior to” RESNET’s. See 15 Quiksilver, 466 F.3d at 755. So, BSI’s argument is unavailing. 16 Next, BSI asserts that “[a]t no time during the prosecution of the HERS trademark 17 application did ResNet inform the USPTO that HERS is an acronym for the then widely 18 used descriptive term Home Energy Rating System.” (ECF 53, at 5.) In BSI’s telling, 19 RESNET “intentionally withheld this material information to mislead the USPTO into 20 issuing a trademark.” (Id.) This is fraud, BSI argues, because the Trademark Manual of 21 Examining Procedure states that an acronym is non-trademarkable if it is “merely 22 descriptive of” “goods or services” and “readily understood by relevant purchasers to be 23 substantially synonymous with the merely descriptive wording it represents.” Trademark 24 Manual of Examining Procedure § 1209.03(h); (see ECF 61, at 12). 25 But BSI offers no authority—and this Court’s own research uncovered none— 26 suggesting that a failure to disclose a trademark’s descriptive nature can constitute fraud. 27 In fact, the Trademark Trial and Appeal Board found the opposite: “Because considerations 28 of a mark’s descriptiveness are not included among [an] applicant’s statutory duties,” “no 1 fraud can occur based upon [an] applicant’s failure to disclose to the Office the descriptive 2 nature of the mark at issue.” John Abate Int’l, Inc. & Carina Prods., Ltd., Cancellation 3 No. 28,890, 2001 WL 817791, at *5 (T.TA.B. July 18, 2001). In other words, although the 4 term’s allegedly descriptive nature might have been a problem in the years before the 5 trademark here reached incontestability, it does not support a fraud claim now. See Bart 6 Schwartz Int’l Textiles, Ltd. v. F.T.C., 289 F.2d 665, 668 (C.C.P.A. 1961) (finding that 7 although the word in question was “descriptive” and therefore “cannot be registered” “as a 8 trademark for the described product,” “[t]his fact is of no assistance to” the petitioner’s 9 argument that the “registration was obtained fraudulently”); see also KP Permanent 10 Make-Up, Inc. v. Lasting Impression I, Inc., 408 F.3d 596, 606 (9th Cir. 2005) (“[A] 11 defendant in a trademark infringement action cannot assert that an incontestable mark is 12 invalid because it is descriptive and lacks secondary meaning.”). 13 Thus, BSI has not sufficiently alleged that RESNET committed fraud. So RESNET’s 14 motion to dismiss BSI’s third counterclaim is granted, and BSI’s second counterclaim— 15 requesting a declaration of invalidity—falls with it, as it is based on the insufficiently 16 pleaded fraud allegations. But when a pleading “can possibly be cured by additional factual 17 allegations,” as here, courts should grant leave to amend. Salameh v. Tarsadia Hotel, 18 726 F.3d 1124, 1133 (9th Cir. 2013). So the Court grants leave to amend BSI’s second and 19 third counterclaims. 20 3. Counterclaims 4 and 5: UCL Violation and Specific Performance 21 BSI’s fourth and fifth counterclaims are premised upon RESNET’s contract with the 22 California Energy Commission. (See ECF 53, at 8–12.) BSI alleges that RESNET breached 23 that contract and thus violated California’s Unfair Competition Law (counterclaim 4), and 24 BSI seeks specific performance of the contract (counterclaim 5). (Id.) RESNET challenges 25 both counterclaims on the same ground, arguing that “BSI does not have standing as an 26 incidental beneficiary” to enforce a contract between RESNET and the Energy 27 Commission. (ECF 58-1, at 18.) Based on the contract’s plain language, however, BSI 28 sufficiently alleges that it can enforce the contract as a third-party beneficiary. 1 The contract’s “construction and performance” is “governed, construed, and 2 enforced in accordance with the laws of” “the State of California.” (ECF 53-1, at 4.) In 3 California, “third party beneficiary principles do not require that the person to be benefited 4 be named in the contract, but rather allow the third party to qualify as a contract beneficiary 5 if the contracting parties must have intended to benefit that individual and such intent 6 appears on the terms of the agreement.” San Diego Hous. Comm’n v. Industrial Indemnity 7 Co., 95 Cal. App. 4th 669, 685 (2002). 8 According to the contract, RESNET cannot enforce its HERS trademark against 9 “any individual, company or governmental entity that deals with the State of California,” 10 which “includes . . . service providers who have a professional need to use the terms” and 11 others with a “reason to refer to the possible applications of the related services covered by 12 federal or California codes or regulations at any time.” (ECF 53-1, at 3.) BSI alleges that 13 it “deals with the State of California,” is a “service provider[]” that has “a professional 14 need to use” the HERS mark, and has a “reason to refer to the possible applications of the 15 related services covered by federal or California codes or regulations.” (ECF 53, at 9; see 16 also ECF 53-1, at 3.) These allegations plausibly place BSI among the third parties who 17 the “contracting parties must have intended to benefit” because the “intent appears on the 18 terms of the agreement.” See San Diego Housing, 95 Cal. App. 4th at 685. So, RESNET’s 19 motion to dismiss on standing grounds is denied. 20 Finally, RESNET argues that the UCL counterclaim fails because BSI “alleges no” 21 “damages.” (ECF 58-1, at 22.) A UCL claim may only be brought by a “person who has 22 suffered injury in fact and has lost money or property as a result of the unfair competition.” 23 Cal. Bus. & Prof. Code § 17204. Although BSI alleges it “lost money or property” due to 24 RESNET’s alleged UCL violation (ECF 53, at 11), “unexplained allegations of ‘monetary 25 damages’ are indeed too conclusory to demonstrate UCL standing,” LiveRamp, Inc. v. 26 Kochava, Inc., No. 19-cv-02158-CRB, 2020 WL 2065696, at *4 (N.D. Cal. Apr. 29, 2020). 27 So, the fourth counterclaim is dismissed, but BSI may amend. See Salameh, 726 F.3d 28 at 1133. 1 ||B. Motion to Strike 2 RESNET also appended to the end of its dismissal arguments motions to strike BSI’s 3 || first and second counterclaims. (ECF 58-1, at 12, 18.) Both are denied. The first request 4 || fails for the same reasons as RESNET’s motion to dismiss BSI’s first counterclaim. See 5 ||Colaprico vy. Sun Microsystems, Inc., 758 F.Supp. 1335, 1339 (N.D. Cal. 1991) 6 || (“‘[MJotions to strike should not be granted unless it is clear that the matter to be stricken 7 ||could have no possible bearing on the subject matter of the litigation.”). And the second 8 || request is denied as moot because the Court dismissed BSI’s second counterclaim. 9 CONCLUSION 10 RESNET’s motion to dismiss or strike is GRANTED IN PART. BSI’s 11 counterclaims 2, 3, and 4 are DISMISSED with leave to amend. The motion is otherwise 12 ||denied. By August 26, 2025, BSI must file any amended countercomplaint. 13 ||Dated: July 29, 2025
15 Hon. Andrew G. Schopler 16 United States District Judge 17 18 19 20 21 22 23 24 25 26 27 28