Steeped, Inc. v. Nuzee, Inc.

• Court: District Court, N.D. California
• Decided: November 22, 2019
• Docket: 4:19-cv-03763
• Status: Unknown

Opinion

1 2 3 4 UNITED STATES DISTRICT COURT 5 NORTHERN DISTRICT OF CALIFORNIA 6 7 STEEPED, INC., Case No. 19-cv-03763-HSG

8 Plaintiff, ORDER DENYING DEFENDANT'S MOTION TO DISMISS 9 v. Re: Dkt. No. 18 10 NUZEE, INC., 11 Defendant.

12 Plaintiff Steeped, Inc. (“Steeped Coffee” or “Plaintiff”) filed trademark infringement 13 claims against Defendant Nuzee, Inc. (“Nuzee” or “Defendant”) for its use of the STEEPED 14 COFFEE trademark. See Dkt. No. 1 (“Compl.”). Before the Court is Defendant’s motion to 15 dismiss for failure to state a claim, for which briefing is complete. See Dkt. No. 18 (“Mot.”), 26 16 (“Opp.”), and 30 (“Reply”). The Court DENIES Defendant’s motion. 17 I. BACKGROUND 18 Plaintiff is a Delaware Corporation headquartered in Scotts Valley, California, which 19 began with a crowdfunded Kickstarter campaign in 2015. Compl. ¶ 7. Steeped Coffee 20 “developed a unique and innovative single-serve coffee product that is small, light, pre-ground and 21 pre-portioned, yet can be stored for months with minimal loss of freshness.” Id. ¶ 1. Specifically, 22 its products store “ground coffee in small, specially engineered, biodegradable filter bags, which 23 are in turn kept in zero waste outer pouches flushed with nitrogen gas to eliminate oxygen and 24 thus prevent oxidation.” Id. ¶ 2. Plaintiff alleges that “NuZee’s use of ‘Steep Coffee,’ ‘Steep Bag 25 Coffee,’ ‘Steep Pouch,’ ‘Steeped to Perfection,’ and similar terms [in connection with its Pine 26 Ranch Coffee Co. brand product] is confusingly similar to Steeped’s STEEPED COFFEE mark 27 (and identical to other marks Steeped uses and has filed for registrations on) in sound, appearance, 1 the Supplemental Register, the secondary register maintained by the United States Patent and 2 Trademark Office (“PTO”). Id. ¶ 2, Ex. A. 3 II. LEGAL STANDARD 4 Federal Rule of Civil Procedure 8(a) requires that a complaint contain “a short and plain 5 statement of the claim showing that the pleader is entitled to relief.” Fed. R. Civ. P. 8(a)(2). A 6 defendant may move to dismiss a complaint for failing to state a claim upon which relief can be 7 granted under Federal Rule of Civil Procedure 12(b)(6). “Dismissal under Rule 12(b)(6) is 8 appropriate only where the complaint lacks a cognizable legal theory or sufficient facts to support 9 a cognizable legal theory.” Mendiondo v. Centinela Hosp. Med. Ctr., 521 F.3d 1097, 1104 (9th 10 Cir. 2008). To survive a Rule 12(b)(6) motion, a plaintiff must plead “enough facts to state a 11 claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). 12 A claim is facially plausible when a plaintiff pleads “factual content that allows the court to draw 13 the reasonable inference that the defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 14 556 U.S. 662, 678 (2009). 15 In reviewing the plausibility of a complaint, courts “accept factual allegations in the 16 complaint as true and construe the pleadings in the light most favorable to the nonmoving party.” 17 Manzarek v. St. Paul Fire & Marine Ins. Co., 519 F.3d 1025, 1031 (9th Cir. 2008). Nonetheless, 18 Courts do not “accept as true allegations that are merely conclusory, unwarranted deductions of 19 fact, or unreasonable inferences.” In re Gilead Scis. Sec. Litig., 536 F.3d 1049, 1055 (9th Cir. 20 2008) (quoting Sprewell v. Golden State Warriors, 266 F.3d 979, 988 (9th Cir. 2001)). Even if the 21 court concludes that a 12(b)(6) motion should be granted, the “court should grant leave to amend 22 even if no request to amend the pleading was made, unless it determines that the pleading could 23 not possibly be cured by the allegation of other facts.” Lopez v. Smith, 203 F.3d 1122, 1127 (9th 24 Cir. 2000) (en banc) (quotation omitted). 25 III. ANALYSIS 26 Defendant moves to dismiss on two grounds: first, Plaintiff failed to sufficiently allege 27 Defendant’s “use” of the infringing mark “in commerce” as required under the Lanham Act, and A. Use in Commerce 1 As an initial matter, Defendant characterizes its argument that Plaintiff fails to sufficiently 2 allege Defendant used an infringing mark in commerce as a jurisdictional challenge under Federal 3 Rules of Civil Procedure 12(b)(1). This is incorrect. Whether Plaintiff has met its burden to plead 4 the elements of 15 U.S.C. § 1114 does not affect whether the Court has the power to resolve this 5 case. Instead, the Court has subject matter jurisdiction over this case via federal question 6 jurisdiction because Plaintiff alleges a Lanham Act violation. See 28 U.S.C. § 1331. Plaintiff also 7 has standing under Article III of the Constitution because it alleges damage to its brand traceable 8 to NuZee’s use of the STEEPED COFFEE mark, which is redressable through an injunction by 9 this Court. Compl. ¶ 4, Prayer for Relief; see also, Monsanto Co. v. Geertson Seed Farms, 561 10 U.S. 139, 149 (2010) (“Standing under Article III of the Constitution requires that an injury be 11 concrete, particularized, and actual or imminent; fairly traceable to the challenged action; and 12 redressable by a favorable ruling.”).1 Accordingly, the Court construes Defendant’s claim that 13 Plaintiff failed to sufficiently allege an element of the statute as seeking dismissal under Rule 14 12(b)(6). See Iqbal, 556 U.S. at 678 (analyzing whether plaintiff sufficiently “recit[ed] the 15 elements of a cause of action” as a Rule 12(b)(6) motion.). 16 The Lanham Act “grants trademark protection . . . to marks that are used to identify and to 17 distinguish goods or services in commerce—which typically occurs when a mark is used in 18 conjunction with the actual sale of goods or services.” Brookfield Commc’ns, Inc. v. W. Coast 19 Entm’t Corp., 174 F.3d 1036, 1051 (9th Cir. 1999). It provides a remedy against: 20 (1) Any person who shall, without the consent of the registrant-- 21 (a) use in commerce any reproduction, counterfeit, copy, or colorable imitation of a registered mark in connection with the 22 sale, offering for sale, distribution, or advertising of any goods or services on or in connection with which such use is likely 23 to cause confusion, or to cause mistake, or to deceive 24 1 To the extent that Defendant is arguing the case is moot since it has removed the infringing mark 25 from its products, the Court must construe facts in Plaintiff’s favor when assessing a Rule 12(b)(6) motion. Plaintiff specifically alleges that NuZee “continue[d] using ‘steep’ and similar terms in 26 marketing for its copycat products” and “prepare[d] additional marketing materials for its ‘Steep Coffee’ product.” Compl. ¶ 17, 18. Additionally, Plaintiff seeks actual damages and treble 27 damages for “damages to Steeped’s reputation and goodwill among its customers and partners.” 15 U.S.C. § 1114 (emphasis added). The Act further defines “use in commerce” as: 1 [T]he bona fide use of a mark in the ordinary course of trade, and not 2 made merely to reserve a right in a mark. For purposes of this chapter, a mark shall be deemed to be in use in commerce— 3 (1) on goods when— (A) it is placed in any manner on the goods or their 4 containers or the displays associated therewith or on the tags or labels affixed thereto . . . and 5 (B) the goods are sold or transported in commerce. . . . 6 15 U.S.C. § 1127 (emphasis added). 7 In its Complaint, Plaintiff primarily relies on NuZee’s use of the allegedly infringing 8 marks on products displayed at a trade show to establish use in commerce. See Compl. ¶¶ 4, 18. 9 Plaintiff also alleges “that NuZee had began [sic] marketing and pre-selling coffee products and 10 services . . ., using the name ‘Steep Coffee’ and claiming to use the ‘Steep Coffee’ method and 11 verbally referring to their product [as] ‘Steeped Bag Coffees.’” Id. ¶ 4, Ex. B, C. 12 Defendant argues that Plaintiff’s allegations are insufficient because NuZee has yet to sell 13 any of its Pine Ranch Coffee Co. products (which will not go to market until “later this year”), and 14 exhibiting products at the trade show does not sufficiently allege “use.” Mot. at 6. A similar 15 argument was rejected by another district court just last year. See Marketquest Grp., Inc. v. BIC 16 Corp., 316 F. Supp. 3d 1234, 1285–86 (S.D. Cal. 2018). As the Marketquest court noted, “[a] 17 point-of-sale display associated with the goods is ‘more than mere advertising’ if it is ‘calculated 18 to consummate a sale.’” 316 F. Supp. 3d at 1286 (quoting In re Quantum Foods, Inc., 94 U.S.P.Q. 19 2d (BNA) at 1379). While Plaintiff does not specifically allege that NuZee was soliciting or 20 accepting sales at the trade show itself, it does allege that NuZee had “beg[u]n secretly soliciting 21 Steeped’s customers, both before and after the show,” Compl. ¶ 15, and “had beg[u]n marketing 22 and pre-selling coffee products and services,” Id. ¶ 4. The Court finds these allegations sufficient 23 at this stage to show that Defendant used the allegedly infringing marks in commerce. 24 B. Secondary Meaning 25 “To claim trademark infringement, a plaintiff must have a ‘valid, protectable trademark.’” 26 Zobmondo Entm’t, LLC v. Falls Media, LLC, 602 F.3d 1108, 1113 (9th Cir. 2010) (quoting 27 Brookfield, 174 F.3d at 1046). Unlike registration on the Principal Register, registration on the 1 the registrant’s ownership of the mark, [or] of the registrant’s exclusive right to use the registered 2 mark in commerce.” 15 U.S.C. § 1057(b); see Plus Mgmt., Inc. v. Cantrell, No. CV 09-2511- 3 GHK (PLAx), 2009 WL 10675362, at *2 (C.D. Cal. Oct. 8, 2009). Instead, to show the mark is 4 protectable, Plaintiff must demonstrate that the mark is non-functional and has acquired secondary 5 meaning by “showing that there is a mental recognition in buyers’ and potential buyers’ minds that 6 products connected with the mark are associated with the same source.” Japan Telecom, Inc. v. 7 Japan Telecom Am. Inc., 287 F.3d 866, 873 (9th Cir. 2002) (quoting Self–Realization Fellowship 8 Church v. Ananda Church of Self–Realization, 59 F.3d 902, 911 (9th Cir. 1995)). 9 Defendant argues that Plaintiff failed to allege that the STEEPED COFFEE trademark has 10 acquired a secondary meaning such that it is a “valid, protectable trademark.” Mot. at 8. The 11 Court disagrees. Although the facts pled are far from overwhelming, Plaintiff has done enough to 12 allege secondary meaning. Plaintiff has alleged that its trademark has “acquired extensive 13 goodwill, is well recognized in the coffee industry as identifying high quality, convenience and 14 sustainable single serve coffee products, which have their origin with or have been authorized by 15 Steeped.” Compl. ¶ 11. Plaintiff alleges that in response to NuZee’s solicitations, “[s]everal 16 Steeped customers reported receiving phone calls or other contacts from NuZee representatives, 17 who they initially believed were Steeped sales representatives because they claimed to be offered 18 ‘Steep Coffee’ or the ‘Steeped Bag Coffees.’” Id. If proven, these allegations could demonstrate 19 secondary meaning. See Humboldt Wholesale, Inc. v. Humboldt Nation Distribution, LLC, No. C- 20 11-4144 EMC, 2011 WL 6119149, at *4 (N.D. Cal. Dec. 8, 2011); Spirit Clothing Co. v. N.S. 21 Enterprises, Inc., No. CV132203RGKPJWX, 2013 WL 12144107, at *3 (C.D. Cal. July 23, 22 2013). 23 // 24 // 25 // 26 // 27 // IV. CONCLUSION For the reasons stated above, the Court finds that Plaintiff’s complaint sufficiently pleads a 2 claim under 15 U.S.C. § 1141, and DENIES Defendant’s motion to dismiss. 3 IT IS SO ORDERED. 4 Dated: 11/22/2019 . 6 Mako S. GILLIAM, JR. i 7 United States District Judge 8 9 10 11 12

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