AFL Telecommunications LLC v. SurplusEQ.com Incorporated et al

Filing 34

ORDER (originally filed in CV-11-1081-PHX-DGC this date) - Plaintiff's motion to transfer related case (Doc. 24) is granted. The Clerk, pursuant to Local Rule 42.1(a), is directed to transfer to the undersigned Case No. CV-11-01086-FJM. (See document for details). Signed by Judge David G Campbell on 9/20/11. (ALS)

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IN THE UNITED STATES DISTRICT COURT

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FOR THE DISTRICT OF ARIZONA

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AFL Telecommunications LLC,

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Plaintiff,

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ORDER

vs.

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No. CV-11-1081-PHX-DGC

Fiberoptic Hardware, LLC; and George
Kyrias,

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Defendants.
AFL Telecommunications LLC is a wholly-owned subsidiary of Fujikura Ltd.,

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a leading manufacturer of fiber optic products.

AFL is the exclusive licensee for

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distribution of Fujikura-brand fusion splicers in North America. Fiberoptic Hardware,

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LLC (“FOH”) is a New Hampshire-based reseller of fiber optic equipment.

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according to AFL, purchases Fujikura splicers intended for use overseas, modifies the

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products, and resells the “gray market” units in the United States.

FOH,

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AFL filed suit against FOH and its principal, George Kyrias, in May 2011. The

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complaint asserts claims for unfair competition and false advertising in violation of the

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Lanham Act, 15 U.S.C. § 1125(a), common law unfair competition, and copyright

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infringement. Doc. 1. Plaintiff seeks injunctive relief and an award of actual, treble, and

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punitive damages. Id.

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Plaintiff, pursuant to Rule 65 of the Federal Rules of Civil Procedure, has filed a

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motion for a preliminary injunction. Doc. 6. Defendants have filed a motion to dismiss

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for lack of personal jurisdiction under Rule 12(b)(2) and a motion to dismiss the

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copyright infringement claim under Rule 12(b)(6). Docs. 19, 20. The motions are fully
briefed. For reasons stated below, the Court will dismiss the claims asserted against
Kyrias, dismiss the copyright infringement claim, and enter a preliminary injunction
against FOH on the Lanham Act claims.1
I.

Personal Jurisdiction.
In opposing a Rule 12(b)(2) motion, the plaintiff bears the burden of establishing

that the exercise of personal jurisdiction is proper. Brayton Purcell LLP v. Recordon
& Recordon, 606 F.3d 1124, 1127 (9th Cir. 2010). Where, as here, the motion will be
resolved before discovery has been conducted and without an evidentiary hearing, the
plaintiff need only make a prima facie showing of jurisdictional facts to withstand the
motion, that is, the plaintiff “need only demonstrate facts that if true would support
jurisdiction over the defendant.” Bauman v. DaimlerChrysler Corp., 644 F.3d 909,
919 (9th Cir. 2011) (quoting Ballard v. Savage, 65 F.3d 1495, 1498 (9th Cir. 1995);
emphasis in original). In deciding whether this burden has been met, “the uncontroverted
allegations of [the] complaint must be taken as true, and conflicts between the facts
contained in the parties’ affidavits must be resolved in [the plaintiff’s] favor.” Rio
Properties, Inc. v. Rio Int’l Interlink, 284 F.3d 1007, 1019 (9th Cir. 2002).
The complaint contains no factual allegations, Defendants contend, showing that
they have the requisite minimum contacts with Arizona to support the exercise of
jurisdiction over them. Docs. 19, 29. Plaintiff argues that Defendants’ contacts with
Arizona are sufficient to subject each of them to general jurisdiction and specific
jurisdiction in Arizona. Doc. 27.
A.

FOH.

A court may, consistent with principles of constitutional due process, exercise
general jurisdiction over a non-forum defendant as to any cause of action where the

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The requests for oral argument are denied because the issues have been fully
briefed and oral argument will not aid the Court’s decision. See Fed. R. Civ. P. 78(b);
Partridge v. Reich, 141 F.3d 920, 926 (9th Cir. 1998).
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defendant has certain minimum contacts with the forum state, that is, where the
defendant’s activities in the forum state are substantial or continuous and systematic
“such that the maintenance of the suit does not offend ‘traditional notions of fair play and
substantial justice.’” Int’l Shoe Co. v. Washington, 326 U.S. 310, 316 (1945) (citation
omitted); see also Perkins v. Benguet Consol. Mining Co., 342 U.S. 437, 444-47 (1952);
Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 415-16 (1984). This
standard is met where “the defendant’s contacts [are] of the sort that approximate
physical presence.” Bancroft & Masters, Inc. v. Augusta Nat’l Inc., 223 F.3d 1082, 1086
(9th Cir. 2000).
Plaintiff has made a prima facie showing of general jurisdiction over FOH.
Arizona is home to one of the two sales and service centers FOH operates. Doc. 6-2
at 14. The company has contracted with two sales representatives in Arizona – one in
May 2010 and the other in July 2010 (Doc. 21 at 34, 40) – and has leased office space in
Arizona for at least eight months (id. at 4). Resolving factual disputes in favor of
Plaintiff, as the Court must on the instant motion, see Pebble Beach Co. v. Caddy, 453
F.3d 1151, 1154 (9th Cir. 2006), the Court finds that FOH not only has contacts that
approximate physical presence in Arizona, it has a physical presence here.

Stated

differently, FOH has substantially more than a mere “casual presence” in Arizona and has
engaged in more than “single or isolated items of activities in [the] state[.]” Int’l Shoe,
326 U.S. at 317.
It is worth noting that the claims asserted against FOH do not arise from “dealings
entirely distinct” from its contacts with Arizona. Tuazon v. R.J. Reynolds Tobacco Co.,
433 F.3d 1163, 1169 (9th Cir. 2006). Rather, selling fiber optic equipment – including
the fusion splicers at issue here – is FOH’s “core business.” Id.
FOH cites In re Rationis Enterprises, Inc., 261 F.3d 264 (2d Cir. 2001), for the
proposition that the existence of a sales office in the forum state does not automatically
confer general jurisdiction. Doc. 19 at 5. FOH claims that it has sold no Fujikura splicer

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in Arizona, but the company offers for sale many fiber optic products other than Fujikura
splicers at its Arizona facility, and the company’s website makes clear that there are
certified technicians at that facility who provide fiber optic repair, cleaning, and
calibration services. Doc. 6-2 at 6-7; http://fiberoptichardware. com (last visited Sept. 9,
2011). FOH does not assert that it has sold or serviced no product in Arizona. Plaintiff
alleges that FOH has sold and otherwise directed the sale of fusion splicers and other
fiber optic equipment from Arizona. Doc. 1 ¶¶ 3, 7. Accepting those uncontroverted
factual allegations as true, it is clear that the Court may exercise general jurisdiction over
FOH consistent with principles of constitutional due process and Arizona’s long-arm
statute, Ariz. R. Civ. P. 4.2(a). See Batton v. Tenn. Farmers Mut. Ins. Co., 736 P.2d 2, 4
(Ariz. 1987) (Arizona’s long-arm statute is coextensive with the permissible limits of
federal due process); Doe v. Am. Nat’l Red Cross, 112 F.3d 1048, 1050 (9th Cir. 1997)
(same).
FOH’s reliance on Coastal Video Communications Corp. v. Staywell Corp., 59 F.
Supp. 2d 562 (E.D. Va. 1999), is misplaced. Docs. 19 at 5, 29 at 3. Noting that
information relevant to the amount of sales generated in the forum state was uniquely
within the defendant’s control, the district court in Coastal Video declined to dismiss for
lack of general jurisdiction pending further discovery by the plaintiff. 59 F. Supp. 2d
at 572. Coastal Video does not support dismissal of the claims asserted against FOH.
Because Plaintiff has demonstrated minimum contacts with Arizona sufficient
to confer general jurisdiction over FOH, the burden shifts to FOH to present a
“compelling case” that the exercise of jurisdiction would, in fact, be unreasonable.
Burger King Corp. v. Rudzewicz, 471 U.S. 462, 477 (1985).

The reasonableness

determination considers five factors: (1) the burden on the defendant, (2) the forum
state’s interest in the dispute, (3) the importance of the chosen forum to the plaintiff,
(4) the most efficient forum for resolution of the dispute, and (5) the shared interest of the
states in furthering fundamental social policy. Doc. 19 at 6-7; Asahi Metal Indus. Co. v.

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Super. Ct. of Cal., 480 U.S. 102, 113 (1987).

Balancing these factors, the Court

concludes that FOH “has failed to meet its burden of demonstrating a compelling case of
unreasonable jurisdiction.” Tuazon, 433 F.3d at 1175.
FOH operates a facility in Arizona and has engaged Arizona counsel. Given
modern advances in technology and communications, and the availability of electronic
case filing, the burden on FOH from litigating this action in Arizona is not a heavy one.
See Centrifugal Force, Inc. v. Softnet Communication, Inc., No. 08 Civ. 5463 (CM)
(GWG), 2009 WL 1059647, at *8 (S.D.N.Y Apr. 17, 2009); Roaring Fork Capital SBIC,
L.P. v. ATC Healthcare, Inc., No. 10-cv-00338-MSK-CBS, 2011 WL 1258504, at *7-8
(D. Colo. Mar. 29, 2011). While Arizona may not have a strong interest in the dispute, it
serves as an efficient forum for resolving the dispute given the presence of evidence and
witnesses in the State. Plaintiff’s choice of forum cannot be said to be arbitrary or
otherwise unimportant given that Arizona is one of only two states in which FOH
conducts operations and FOH is alleged to have sold infringing goods to an Arizona
company.

The fifth factor, that is, the shared interest of the states in furthering

fundamental social policy, does not appear to be relevant.
When compared with the burden on Plaintiff, FOH asserts, the burden on FOH to
defend this lawsuit in Arizona is “significant.” Doc. 19 at 7. This bald assertion does not
satisfy FOH’s “heavy burden of rebutting the strong presumption in favor of
jurisdiction.” Ballard, 65 F.3d at 1500. Stated differently, FOH has failed to show that
the relevant factors “are so lopsided in [its] favor as to render the exercise of jurisdiction
contrary to ‘fair play and substantial justice.’” Unicru, Inc. v. Brenner, No. Civ. 04-248MO, 2004 WL 785276, at *11 (D. Or. Apr. 13, 2004).
In summary, Plaintiff has made the requisite prima facie showing of general
jurisdiction over FOH, and FOH has not established that the exercise of personal
jurisdiction will violate principles of due process. The Court will deny the motion to
dismiss in this regard. Given this ruling, the Court need not decide whether it has

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specific jurisdiction over FOH.
B.

Kyrias.

Personal jurisdiction over individual corporate officers may not be based on
jurisdiction over the corporation itself, see Davis v. Metro Prods., Inc., 885 F.2d 515, 522
(9th Cir. 1989), but their status as corporate officers “does not somehow insulate them
from jurisdiction.” Calder v. Jones, 465 U.S. 783, 790 (1984). “Each defendant’s
contacts with the forum state must be assessed individually.” Id. The relevant inquiry is
whether, given the corporate officer’s own contacts with the forum state, he should
“reasonably anticipate being haled into court there.” World-Wide Volkswagen Corp. v.
Woodson, 444 U.S. 286, 297 (1980).
Plaintiff has identified only two contacts with Arizona on the part of Kyrias: one
phone call and one email to an Arizona company. These isolated contacts are insufficient
to approximate “physical presence” in Arizona. Bancroft, 223 F.3d at 1086. Plaintiff has
made no showing, prima facie or otherwise, of general jurisdiction over Kyrias. See
Gates v. Learjet Corp. v. Jensen, 743 F.2d 1325, 1330-31 (9th Cir. 1984) (no general
jurisdiction over corporate officer despite his communications with, visits to, and
solicitation of a contract in the forum).
Under this Circuit’s three-part test, specific jurisdiction exists only where (1) the
defendant performed some act by which he purposefully availed himself of the privileges
of conducting activities in the forum, thereby invoking the benefits and protections of its
laws, or purposefully directed tortious conduct at the forum that had effects in the forum,
(2) the plaintiff would not have filed suit “but for” the defendant’s forum-related
activities, and (3) the exercise of jurisdiction would be reasonable. Bancroft, 223 F.3d at
1086-88; see also Calder, 465 U.S. at 789-90; J. McIntyre Mach., Ltd. v. Nicastro, --U.S. ----, 131 S. Ct. 2780, 2787-88 (2011).
With respect to the first part of the specific jurisdiction test, Plaintiff has presented
insufficient facts to establish purposeful availment or purposeful direction on the part of

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Kyrias. “A defendant has purposely availed himself of the benefits of a forum if he has
deliberately ‘engaged in significant activities within a State or has created continuing
obligations between himself and the residents of the forum.’” Gray & Co. v. Firstenberg
Mach. Co., 913 F.2d 758, 760 (9th Cir. 1990) (quoting Burger King, 471 U.S. at 475-76).
Purposeful direction cannot be found where the defendant has engaged in “mere
untargeted negligence”; instead, the defendant must be found to have committed an
intentional tortious act “expressly aimed” at the forum. Calder, 465 U.S. at 789; see
Yahoo! Inc. v. La Ligue Contre Le Racisme Et L’Antisemitisme, 433 F.3d 1199, 1206-07
(9th Cir. 2006).
FOH sold several Fujikura splicers to an Arizona company, Sana Trading and
Services (“Sana”), but Kyrias did not reach out to Sana to make the sale. Instead, Sana’s
chief operating officer, Taiby Sabuwala, contacted FOH and received a written quotation
from sales person Anna Bakker. Doc. 6-10 at 2, 22-23. Mr. Sabuwala’s initial contact
with FOH is irrelevant to the question whether Kyrias purposefully availed himself of the
benefits of the forum. In order “‘to ensure that the defendant is not haled into court as the
result of random, fortuitous, or attenuated contacts,’” the purposeful availment inquiry
focuses not on the conduct of third-parties, but on the defendant’s own affirmative
conduct. Gray, 913 F.2d at 760 (citation omitted).
While Kyrias had a telephone conversation with Mr. Sabuwala about the fusion
splicers (Doc. 21-1 at 7) and sent him an email offering to accept their return and resell
them on a consignment basis (Doc. 6-10 at 3), these limited contacts are not sufficient to
show purposeful availment on the part of Kyrias. It cannot fairly be said that he engaged
in “significant activities” within Arizona or otherwise created “continuing obligations”
with forum residents such that he invoked the benefits and protections of the State’s laws.
Gray, 913 F.2d at 760. This Circuit has made clear that use of the telephone and email
“‘simply do[es] not qualify as purposeful activity invoking the benefits and protection of
the forum state.’” Peterson v. Kennedy, 771 F.2d 1244, 1262 (9th Cir. 1985) (citations

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omitted). In short, Kyrias’ “attenuated contacts” with Arizona are legally insufficient to
establish purposeful availment. Gray, 913 F.2d at 761; see Peterson v. Kennedy, 771
F.2d at 1262; Lake v. Lake, 817 F.2d 1416, 1421 (9th Cir. 1987) (noting that the first
prong of the specific jurisdiction test involves a “qualitative evaluation” of the
defendant’s contacts with the forum).

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Nor are the contacts sufficient to establish purposeful direction. No evidence
suggests that Kyrias targeted Sana or Mr. Sabuwala for tortious activity or otherwise
engaged in wrongful conduct “expressly aimed” at Arizona. Bancroft, 223 F.3d at 1087.
Sana and Mr. Sabuwala have asserted no intentional tort claim against Kyrias, and no
such claim is apparent from a review of Mr. Sabuwala’s declaration. Doc. 6-10 at 2-5.

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In summary, Plaintiff has failed to make a prima facie showing of purposeful
availment or purposeful direction on the part of Kyrias. Nor has Plaintiff shown, or even
argued, that but for Kyrias’ contacts with Arizona, Plaintiff would not have filed suit.
Because Plaintiff has failed to satisfy the first two prongs of the specific jurisdiction test,
Kyrias need not show that the exercise of jurisdiction over him would be unreasonable.
See Peterson, 771 F.2d at 1261 (each of the three prongs of the specific jurisdiction test
must be met to exercise personal jurisdiction over a non-resident defendant). The claims
asserted against Kyrias will be dismissed for lack of personal jurisdiction.
II.

The Copyright Infringement Claim.
Plaintiff purports to assert a copyright infringement claim in count four of the

complaint. Doc. 1 ¶¶ 67-71. FOH, pursuant to Rule 12(b)(6), has filed a motion to
dismiss count four for failure to state a claim to relief. Doc. 20. Plaintiff opposes the
motion. Doc. 23.
When analyzing a complaint for failure to state a claim to relief, the well-pled
factual allegations “‘are taken as true and construed in the light most favorable to the
nonmoving party.’” Cousins v. Lockyer, 568 F.3d 1063, 1067 (9th Cir. 2009) (citation
omitted).

Legal conclusions couched as factual allegations “are not entitled to the

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assumption of truth,” Ashcroft v. Iqbal, 129 S. Ct. 1937, 1950 (2009), and therefore are
“‘insufficient to defeat a motion to dismiss for failure to state a claim,’” In re Cutera Sec.
Litig., 610 F.3d 1103, 1108 (9th Cir. 2010) (citation omitted). To avoid a Rule 12(b)(6)
dismissal, and satisfy the pleading requirements of Rule 8(a), the pleading must contain
“enough facts to state a claim to relief that is plausible on its face.” Bell Atl. Corp. v.
Twombly, 550 U.S. 544, 570 (2007).
To establish a claim for copyright infringement, the plaintiff must demonstrate
valid ownership in a copyright and violation of an exclusive right granted to copyright
holders. 17 U.S.C. §§ 106, 501; A&M Records, Inc. v. Napster, Inc., 239 F.3d 1004,
1013 (9th Cir. 2001). With respect to the first element, the plaintiff must establish
ownership of something original and copyrightable. A work is original where it has been
independently created by the author (as opposed to copied from other works) and
possesses at least some degree of creativity. Feist Publ’ns, Inc. v. Rural Tele. Serv. Co.,
499 U.S. 340, 346 (1991).
FOH argues, among other things, that the complaint fails to plead sufficient facts
about copyright ownership to state a plausible claim to relief. Doc. 20 at 3, 21 at 7. The
Court agrees.
The complaint alleges generally that certain fusion splicers sold by FOH are
“operated in part by copyrighted software owned by Fujikura” (Doc. 1 ¶ 28), but the
alleged copyrighted software is not otherwise described. The complaint further alleges,
“[u]pon information and belief,” that Fujikura is the owner of the purported copyright in
the software “as a work made for hire or otherwise.” Id. ¶ 68.
Those bare allegations of copyright ownership do “no more than ask the Court to
infer the possibility of misconduct by Defendants.” Curington v. UMG Recordings, Inc.,
No. 1:10-cv-890, 2011 WL 3568278, at *3 (M.D.N.C. Aug. 12, 2011). Because the
complaint’s factual allegations do not possess enough “heft” to raise a right to relief
above the speculative level, Twombly, 550 U.S. at 557, the complaint “has alleged – but it

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has not ‘shown’ – ‘that [Plaintiff] is entitled to relief’” for copyright infringement, Iqbal,
129 S. Ct. at 1950. FOH notes, correctly, that this is not a case where the facts necessary
to state a valid claim to relief are in the defendant’s sole possession. Doc. 20 at 3; see
Strand v. John C. Lincoln Health Network, Inc., No. CV-10-02112-PHX-NVW, 2011
WL 1253408, at *3 (D. Ariz. Mar. 31, 2011). The motion to dismiss the copyright
infringement claim (count four) will be granted. See Curington, 2011 WL 3568278,
at *4; Universal Surface Tech., Inc. v. Sae-A Trading Am. Corp., No. CV 10-6972 (CAS)
(PJWx), 2011 WL 281020, at *6 (C.D. Cal. Jan. 26, 2011) (dismissing copyright claim
where the complaint contained “‘nothing more than labels and conclusions, and
a formulaic recitation of the elements of a cause of action’”) (quoting Twombly, 550 U.S.
at 555).
III.

Preliminary Injunctive Relief.
Plaintiff seeks a preliminary injunction with respect to the Lanham Act claims

asserted in counts one and two and the copyright infringement claim asserted in count
four. Doc. 6. To obtain preliminary injunctive relief under Rule 65, Plaintiff must show
that it is likely to succeed on the merits, that it is likely to suffer irreparable harm in the
absence of preliminary relief, that the balance of equities tips in its favor, and that an
injunction is in the public interest. Winter v. Natural Res. Def. Council, 555 U.S. 7, 20
(2008). The test includes a sliding scale. If Plaintiff shows that the balance of hardships
will tip sharply in its favor, it need not make as strong a showing of the likelihood of
success on the merits – the existence of serious questions will suffice. Alliance for Wild
Rockies v. Cottrell, 632 F.3d 1127, 1134-35 (9th Cir. 2011).
Because the complaint fails to state a claim to relief for copyright infringement,
Plaintiff has not demonstrated a likelihood of success or serious questions with respect to
that claim. The motion for a preliminary injunction will be denied in this regard. See
Davila v. BAC Home Loans Servicing, LP, No. 2:10-cv-02252-ECR-GWF, 2011 WL
3159146, at *2 (D. Nev. July 26, 2011) (denying request for a preliminary injunction

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where the complaint failed to state a claim to relief).
A.

The Balance of Hardships and the Public Interest.

With respect to the Lanham Act claims, the third and fourth elements of the test
for preliminary injunctive relief have been satisfied. Plaintiff argues (Doc. 6 at 16), and
FOH does not dispute, that “the public interest is usually the right of the public not to be
deceived or confused.” Century 21 Real Estate LLC v. All Prof’l Realty, Inc., No. CIV.
2:10-2751, 2011 WL 221651, at *13 (E.D. Cal. Jan. 24, 2011). Nor does FOH dispute
that the balance of equities tips strongly in Plaintiff’s favor. See Doc. 6 at 15-16. To
obtain a preliminary injunction, therefore, Plaintiff need only show that the Lanham Act
claims raise serious questions and that it is likely to suffer irreparable harm in the absence
of preliminary relief. Alliance for Wild Rockies, 632 F.3d at 1134-35.2
B.

Serious Questions.

Plaintiff brings two claims against FOH under Section 43 of the Lanham Act. The
first alleges unfair competition in violation of 15 U.S.C. § 1125(a)(1)(A), and the second
alleges false advertising in violation 15 U.S.C. § 1125(a)(1)(B). Doc. 1 ¶¶ 46-63.
To prevail on the claim for unfair competition, Plaintiff must show that use of
the “Fujikura” mark by FOH is likely to cause consumer confusion. In the context of
“gray market” goods – that is, foreign-manufactured goods bearing a valid United States
trademark that are imported without the consent of the mark holder – “the likelihood of
confusion relates to the existence of material differences between the allegedly infringing
good and the [mark holder’s] product.” Hokto Kinoko Co. v. Concord Farms, Inc., No.

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Contrary to FOH’s assertion (Doc. 21 at 5-6 & n.2), Plaintiff need not
demonstrate a “strong” or “high” likelihood of success on the merits. Under pre-Winter
Ninth Circuit precedent, a preliminary injunction could issue “based only on the
‘possibility’ of irreparable harm” where the plaintiff also demonstrated a “strong”
likelihood of prevailing on the merits. Winter, 555 U.S. at 21. Because, after Winter, a
plaintiff seeking preliminary relief must demonstrate that irreparable harm is “likely,” not
merely possible, the plaintiff need not also demonstrate a strong likelihood of success.
555 U.S. at 21; see Hagos v. MTC Fin., Inc., No. 11-cv-01272-GMN-RJJ, 2011 WL
3471153, at *2 (D. Nev. Aug. 8, 2011) (Alliance makes clear that “the ‘serious questions’
version of the sliding scale test for preliminary injunctions remains viable after the
Supreme Court’s decision in Winter”).
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CV 10-1384 RSWL (PLAx), 2011 WL 3625382, at *5 (C.D. Cal. 2011); see K Mart
Corp. v. Cartier, Inc., 486 U.S. 281, 285 (1988). Although gray market goods “are
authentic in the sense that they originated with the mark owner, they are not considered
‘genuine’ with the meaning of the Lanham Act if they are not authorized for sale in the
United States and they differ materially from those that are.” Zip Int’l Group, LLC v.
Trilini Imports, Inc., No. 99-CV-2437 (JG)(VVP), 2010 WL 648696, at *3 (E.D.N.Y.
Feb. 22, 2010). “The sale of such goods is actionable by the exclusive United States
licensee not because consumers may be confused about the manufacturer of the goods,
but because consumers may unwittingly purchase the goods on the basis of the domestic
markholder’s reputation only to be disappointed when the product does not meet their
expectations.” Id.
Plaintiff has identified a confused and disappointed consumer of the alleged gray
market goods: the Minnesota Air National Guard (the “ANG”). The four Fujikura-brand
fusion splicers FOH sold to Sana were to be used by the ANG. Doc. 6-10 at 2-5, 31.
Each splicer initially was shipped by Fujikura to China and licensed for use only in that
country. Doc. 6-8 at 13-27. FOH purchased the splicers, resold them to Sana, and
shipped them to the ANG at Sana’s direction. Doc. 6-10 at 3, 31. Less than a month
after receiving one of the Fujikura splicers from FOH, the ANG had concerns about an
error message on the unit’s startup screen stating that the unit is “licensed for use only in
Europe.” Docs. 6-9 at 2, 6-10 at 36. Although pressing an “agree” button would make
the message disappear, the ANG worried that the unit “may not be configured properly
for U.S. use.” Doc. 6-10 at 35. The ANG also had concerns about a label FOH had
placed on the unit warning the operator not to update the unit’s software using Fujikura’s
website, but instead to return the unit to FOH. Because National Guard personnel would
need to be able to update the software in the field, the ANG rightly wondered, “Why
would connecting the unit to Fujikura’s website damage it?” Id. ANG was not satisfied
with the fusion splicers and ultimately shipped them to Plaintiff. Docs. 6-9 at 2, 6-10

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at 4.
The sale of gray market products under the same trademark as the authorized
products is likely to cause consumer confusion, and thereby run afoul of Section 43 of the
Lanham Act, where the gray market products differ materially from the authorized
products. See PepsiCo, Inc. v. Reyes, 70 F. Supp. 2d 1057, 1059 (C.D. Cal. 1999). “The
threshold of materiality ‘is always quite low.’” Id. (quoting Societe Des Produits Nestle,
S.A. v. Casa Helvetia, Inc., 982 F.2d 633, 641 (1st Cir. 1992)). “‘The existence of any
difference between [the trademark owner’s] product and the allegedly infringing gray
good that consumers would likely consider to be relevant when purchasing a product
creates a presumption of consumer confusion sufficient to support a Lanham Trade Mark
Act claim.’” Id.; see Beltronics USA, Inc. v. Midwest Inventory Distribution, LLC, 562
F.3d 1067, 1073 (10th Cir. 2009) (because many factors influence a consumer’s decision
to purchase a product, the materiality standard “‘must be kept low to include even subtle
differences between products’”) (citation omitted).
Given the alterations FOH made to the Fujikura-brand fusions splicers resold to
Sana, see Doc. 6-8 at 13-17, and the ANG’s confusion about those alterations and
dissatisfaction with the products, see Doc. 6-10 at 35-36, serious questions exist as to
whether there are material differences between the domestic fusion splicers distributed by
Plaintiff (Fujikura’s exclusive licensee) and the gray market goods resold by FOH. See
PepsiCo, 70 F. Supp. 2d at 1059 (labeling and language differences were “material and
demonstrate that there is a likelihood of confusion and deception concerning the nature
and origin of the goods”); Hokto Kinoko, 2011 WL 3625382, at *7 (material differences
can relate to a product’s labeling and quality control standards); Idaho Potato Comm’n v.
G & T Terminal Packaging, Inc., 425 F.3d 708, 721 (9th Cir. 2005) (“many cases have
found a likelihood of confusion when a trademark owner was prevented from exercising
quality control over the merchandise bearing its mark”). Stated differently, Plaintiff has
presented evidence suggesting that the Fujikura-brand fusion splicers FOH resells “are

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not ‘genuine’ within the meaning of the Lanham Act and that consumers are therefore
likely to be confused or deceived about the ‘sponsorship’ and ‘characteristics’ of the
[splicers].” Zip, 2010 WL 648696, at *4; see Beltronics, 562 F.3d at 1072 (a material
different product “is not genuine and may generate consumer confusion about the source
and the quality of the trademarked product”). In short, Plaintiff has demonstrated the
existence of serious questions – that is, “a fair chance of success on the merits” – with
respect to its Lanham Act claim for unfair competition, 43 U.S.C. § 1125(a)(1)(A).
Republic of the Philippines v. Marcos, 862 F.2d 1355, 1362 (9th Cir. 1988).
Plaintiff also has raised serious questions concerning its false advertising claim.
Section 43 of the Lanham Act, 43 U.S.C. § 1125(a)(1)(B), “explicitly furnishes a private
right of action ‘against persons who make false and deceptive statements in a commercial
advertisement[.]’” PhotoMedex, Inc. v. Irwin, 601 F.3d 919, 923 (9th Cir. 2010) (citation
omitted). Plaintiff has presented evidence showing that FOH offers for sale on eBay
“new” Fujikura-brand fusion splicers. Docs. 6-4 at 5, 6-5 at 4. The condition “new” – as
opposed to “used” and “refurbished” items – is defined on eBay as a “brand-new, unused,
unopened, undamaged item in its original packaging[.]” Doc. 6-6 at 2. As explained
more fully above, Plaintiff has presented evidence suggesting that FOH makes material
alterations to the Fujikura splicers before reselling them. FOH itself admits that the
Fujikura splicers it advertises as being “new” are in fact used first by FOH for “quality
control” purposes. Doc. 21 at 5, 15. Plaintiff has demonstrated the existence of serious
questions with respect to its Lanham Act claim for false advertising.
Because Plaintiff has not identified the specific contracts under which Fujikura
sells its products overseas, FOH asserts, Plaintiff has not established whether Fujikura
restricts the ability of purchasers to resell products in the United States. Doc. 21 at 3, 9.
Plaintiff has presented testimony from a Fujikura manager providing that the fusion
splicers at issue were shipped “to a distributor in China for resale in China” and “are not
licensed for use outside China.” Doc. 6-8 at 16-17. This evidence is sufficient to raise

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“serious questions,” that is, questions which are “‘substantial, difficult and doubtful, as to
make them a fair ground for litigation and thus for more deliberative investigation.’”
Republic of the Philippines, 862 F.2d at 1362 (citation omitted).
FOH further asserts that it “carefully and explicitly” informs consumers that FOH,
and not Plaintiff or Fujikura, services and warranties the splicers sold by FOH. Doc. 21
at 5. Given FOH’s claim that it sells “genuine Fujikura products materially the same as
those sold by AFL” (Doc. 21 at 10), serious questions exist as to whether FOH
sufficiently discloses that the Fujikura splicers it resells are different from the original
goods so as to alleviate the possibility of consumer confusion. See Beltronics, 562 F.3d
at 1074-75.
FOH’s reliance on NEC Electronics v. CAL Circuit Abco, 810 F.2d 1506 (9th Cir.
1987), is misplaced. In NEC, unlike this case, the parties stipulated that the defendant’s
imported products were genuine goods. 810 F.2d at 1510; see Hokto Kinoko, 2011 WL
3625382, at *6.
C.

Irreparable Harm.

FOH asserts that because it provides information about the warranty, service, and
software on the Fujikura splicers it resells, neither Plaintiff nor Fujikura is likely to suffer
irreparable harm from the sale of the gray market goods. Doc. 21 at 17. The Court does
not agree.
Trademarks serve as “‘the identity of their owners and in them resides the
reputation and goodwill of their owners.’” Century 21 Real Estate LLC v. All Prof’l
Realty, Inc., No. CIV. 2:10-2751, 2011 WL 221651, at *12 (E.D. Cal. Jan. 24, 2011)
(citation omitted). This Circuit “has recognized that damage to goodwill is an irreparable
harm.” Id. (citing Rent-A-Center, Inc. v. Canyon Television & Appliance Rental, Inc.,
944 F.2d 597, 603 (9th Cir. 1991)). Given the ANG’s dissatisfaction with the Fujikurabrand splicers resold by FOH, the Court finds that Plaintiff is likely to suffer irreparable
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the United States.

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The Court concludes that the Lanham Act claims raise serious questions, that
Plaintiff is likely to suffer irreparable harm absent preliminary relief, that the balance of
equities tips sharply in Plaintiff’s favor, and that issuance of an injunction is in the public
interest. Consistent with traditional principles of equity, see eBay Inc. v. MercExchange,
L.L.C., 547 U.S. 388, 394 (2006), the Court will exercise its discretion and enter a
preliminary injunction against FOH on the Lanham Act claims.

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Preliminary Injunction Summary.

The Court finds the proposed preliminary injunction (Doc. 6-11) to be
impermissibly broad in that it would, among other things, enjoin FOH from importing
and reselling any product – including truly genuine goods – bearing the “Fujikura” mark.
Plaintiff and FOH are directed to confer in good faith and provide the Court with a
stipulated preliminary injunction consistent with this order by September 30, 2011. The
proposed injunction shall include the amount of the bond to be posted by Plaintiff. See
Fed. R. Civ. P. 65(c). If the parties are unable to agree, they shall submit simultaneous
proposed injunctions by September 30, 2011.
IV.

Plaintiff’s Motion to Transfer.
Plaintiff has filed a motion to transfer a related case, AFL Telecommunications

LLC v. SurplusEQ.com, Inc., No. CV-11-01086-FJM (D. Ariz. May 31, 2011), to the
undersigned Judge pursuant to Rule 42.1(a) of the Local Rules of Civil Procedure.
Doc. 24. No party in either case opposes the motion. The Court finds that the interests of
judicial economy are best served by transferring the SurplusEQ.com case to the
undersigned. Plaintiff’s unopposed motion to transfer will be granted. Plaintiff has not
requested consolidation under Local Rule 42.1(b) or Rule 42(a). See Doc. 28 at 2.
IT IS ORDERED:
1.

Defendants’ motion to dismiss for lack of personal jurisdiction (Doc. 19) is

granted in part and denied in part. The motion is granted with respect to the claims

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asserted against George Kyrias and denied with respect to Fiberoptic Hardware LLC
(“FOH”).
2.

The motion to dismiss the copyright infringement claim (Doc. 20) is

granted.
3.

Plaintiff’s motion for a preliminary injunction (Doc. 6) is granted in part

and denied in part. The motion is granted with respect to the Lanham Act claims
asserted against FOH in counts one and two of the complaint. The motion otherwise is
denied.
4.

Plaintiff and FOH shall confer in good faith and provide the Court with a

stipulated preliminary injunction by September 30, 2011. If the parties are unable to
agree, they shall submit simultaneous proposed injunctions by September 30, 2011.
5.

Plaintiff’s motion to transfer related case (Doc. 24) is granted. The Clerk,

pursuant to Local Rule 42.1(a), is directed to transfer to the undersigned Case No. CV11-01086-FJM.
6.

Defendants’ motion to stay decision on consolidation (Doc. 26) is denied

as moot.
Dated this 20th day of September, 2011.

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