Gibson Guitar Corp v. Viacom International Inc et al

Filing 36

ORDER granting 30 Viacoms Motion to Dismiss with prejudice by Judge Dean D. Pregerson. (lc). Modified on 5/17/2013 (lc).

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UNITED STATES DISTRICT COURT

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CENTRAL DISTRICT OF CALIFORNIA

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GIBSON GUITAR CORP., a
Delaware corporation,

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Plaintiff,
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v.
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VIACOM INTERNATIONAL INC., a
Delaware corporation; JOHN
HORNBY SKEWES & CO., LTD., a
United Kingdom corporation,

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Defendants.
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Case No. CV 12-10870 DDP (AJWx)
ORDER GRANTING MOTION TO DISMISS
[Dkt. No. 30]

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Presently before the court is Defendant Viacom International

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Inc. (“Viacom”)’s Motion to Dismiss Plaintiff’s Amended Complaint

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for Failure to State a Claim on Which Relief May Be Granted.

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Having considered the parties’ submissions and heard oral argument,

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the court adopts the following order.

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I. Background

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Plaintiff Gibson Guitar Corporation (“Gibson”) owns trademarks

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to the Flying V Body Shape Design Trademark, the Flying V Peg-Head

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Design Trademark, and the word mark FLYING V.

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Defendant Viacom is a Delaware corporation that owns trademarks for

(FAC ¶ 14.)

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SpongeBob Squarepants and Nickelodeon.

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Hornby Skewes & Co. Ltd. (“JHS”) is a United Kingdom corporation

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that promotes and sells various products using the SPONGEBOB

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trademarks.

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Plaintiff’s Flying V trademarks without authorization.

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32.)

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Viacom:

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(Id. ¶ 7.)

(Id. ¶ 6.)

Defendant John

Plaintiff alleges that JHS has used
(Id. ¶¶ 21-

Plaintiff makes the following factual allegations regarding

35. Upon information and belief, the Viacom License
requires Defendant Viacom to monitor and control the
quality and distribution of the JHS’ Unauthorized
Products containing the SPONGEBOB SQAREPANTS and
NICKELODEON trademarks.
36. Upon information and belief, the Viacom License
requires Defendant Viacom to monitor and control the
quality and distribution of the JHS’s Unauthorized
Products containing the SPONGEBOB SQUAREPANTS and
NICKELODEON trademarks. JHS is the distributor of the
JHS’s Unauthorized Products, and specifically pursuant to
the License Agreement, Viacom controls, among other
things, which products JHS can use Viacom’s trademarks
on, i.e. Ukuleles. Viacom controls product approval, and
JHS must report and notify Viacom of all sales outside
the Licensed Territory. A copy of this License Agreement
is attached as Exhibit G.
37. Upon information and belief, Viacom had
constructive knowledge that JHS’ Unauthorized Products
were infringing the Gibson Trademarks. The Gibson
Trademarks are all registered in the United States, one
for over 30 years. The Lanham Act requires the trademark
owner to monitor the use of its own trademarks, including
the use by third parties, or trademark rights could be
lost.
38. Viacom has actual knowledge of the infringement
of the Gibson Trademarks by JHS’ Unauthorized Products.
Gibson contacted Viacom on December 7, 2012, with a cease
and desist letter describing the infringement of JHS’
Unauthorized Products. A copy of this cease and desist
letter is attached hereto as Exhibit H.
39. Despite its constructive and actual knowledge of
the infringement of the Gibson Trademarks by JHS’
Unauthorized Products, Viacom has continued to provide
its intellectual property to JHS for use with JHS’
Unauthorized Products.
40. Upon information and belief, Viacom
intentionally induced JHS to infringe on Gibson
Trademarks by controlling and approving products that
infringe on Gibson Trademarks and obtaining license fees
for such infringement.
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41. Upon information and belief, the aforementioned
misuse of the Gibson Trademarks by Viacom was done with
the intent of deceiving or misleading customers into
mistakenly believing that said JHS’ Unauthorized Products
were authorized Gibson products originating from Gibson
or its related companies and otherwise misappropriating
the goodwill built up by Gibson in the Gibson Trademarks
and otherwise attracting and misdirecting consumers
looking for genuine or authorized Gibson goods to the JHS
websites.

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Based on these allegations, Plaintiff alleges that Viacom is

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contributorily and vicariously liable for JHS’s infringement.

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II. Legal Standard

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A complaint will survive a motion to dismiss under Rule

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12(b)(6) when it contains "sufficient factual matter, accepted as

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true, to state a claim to relief that is plausible on its face."

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Ashcroft v. Iqbal, 556 U.S. 662, 663 (2009) (quoting Bell Atl.

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Corp. v. Twombly, 550 U.S. 544, 570 (2007)).

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Rule 12(b)(6) motion, a court must "accept as true all allegations

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of material fact and must construe those facts in the light most

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favorable to the plaintiff."

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(9th Cir. 2000).

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factual allegations," it must offer "more than an unadorned,

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the-defendant-unlawfully-harmed-me accusation."

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678.

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statement of a legal conclusion "are not entitled to the assumption

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of truth."

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offers "labels and conclusions," a "formulaic recitation of the

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elements," or "naked assertions" will not be sufficient to state a

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claim upon which relief can be granted.

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internal quotation marks omitted).

When considering a

Resnick v. Hayes, 213 F.3d 443, 447

Although a complaint need not include "detailed

Iqbal, 556 U.S. at

Conclusory allegations or allegations that are no more than a

Id. at 679.

In other words, a pleading that merely

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Id. at 678 (citations and

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"When there are well-pleaded factual allegations, a court

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should assume their veracity and then determine whether they

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plausibly give rise to an entitlement of relief." Id. at 664.

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Plaintiffs must allege "plausible grounds to infer" that their

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claims rise "above the speculative level."

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555-56. "Determining whether a complaint states a plausible claim

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for relief" is a "context-specific" task, "requiring the reviewing

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court to draw on its judicial experience and common sense."

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556 U.S. at 663-64.

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Twombly, 550 U.S. at

Iqbal,

III. Discussion

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A. Contributory Infringement

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“To be liable for contributory trademark infringement, a

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defendant must have (1) ‘intentionally induced’ the primary

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infringer to infringe, or (2) continued to supply an infringing

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product to an infringer with knowledge that the infringer is

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mislabeling the particular product supplied.”

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Inwood Labs., Inc v. Ives Labs., Inc., 456 U.S. 844, 855 (1982).

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“When the alleged direct infringer supplies a service rather than a

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product, under the second prong of this test, the court must

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‘consider the extent of control exercised by the defendant over the

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third party's means of infringement.’

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there must be ‘direct control and monitoring of the instrumentality

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used by a third party to infringe the plaintiff's mark.’” Id.,

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quoting Lockheed Martin Corp. v. Network Solutions, Inc., 194 F.3d

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980, 984 (9th Cir.1999)(alterations omitted).

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Id. at 807, citing

For liability to attach,

“The tests for secondary trademark infringement are even more

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difficult to satisfy than those required to find secondary

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copyright infringement.”

Perfect 10, Inc. v. Visa Int'l Serv.
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Ass'n, 494 F.3d 788, 806 (9th Cir. 2007).

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America v. Universal City Studios, Inc., 464 U.S. 417, 439 n.19

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(1984)(noting that “Inwood’s narrow standard for contributory

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infringement” governs only trademark cases, not copyright cases,

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which has a broader contributory infringement standard).

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See also Sony Corp. of

1. Intentional Inducement
The standard for “intentional inducement” is fairly high.

It

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requires that the contributory infringer do more than be able to

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“reasonably anticipate” the direct infringement.

Inwood, 456 U.S.

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at 852 n.13.

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that produced “generic” capsules designed to duplicate the

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appearance of a trademarked drug, there was no intentional

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inducement where “incidents [of mislabeling] occurred too

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infrequently to justify the inference that the petitioners’

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catalogs and use of imitative colors had ‘impliedly invited’

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druggists to mislabel” the generic drugs under a brand name.

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at 853.

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Service Association, payment processing for infringing Internet

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websites by credit card companies did not constitute intentional

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inducement of infringement even though it did provide “critical

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support” to infringing websites; Perfect 10 alleged no “affirmative

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acts by Defendants suggesting that third parties infringe Perfect

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10's mark, much less induce them to do so.”

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at 807.

Thus, in Inwood, which concerned a drug manufacturer

Id.

Likewise, in Perfect 10, Inc. v. Visa International

Perfect 10, 494 F.3d

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Here, under the intentional inducement prong, Plaintiff

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alleges that “[u]pon information and belief, Viacom intentionally

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induced JHS to infringe on Gibson Trademarks by controlling and

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approving products that infringe on Gibson Trademarks and obtaining
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license fees for such infringement.”

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thus whether Viacom’s “controlling and approving” infringing

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products and receipt of license fees for infringing products

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constitute intentional inducement.

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(FAC ¶ 40.)

The issue is

In the first place, the control and approval exercised by

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Viacom do not appear to be “affirmative acts.”

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right to stop a product from being marketed and sold, but Plaintiff

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does not allege any facts suggesting that Viacom acted

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affirmatively in its relationship with JHS once the license

Viacom retains the

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agreement was signed.

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names and logos” to the infringers “despite actual knowledge of the

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infringement,” but these facts as pled do not “constitute a clear

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expression of a specific intent to foster infringement.”

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at 802 (internal quotation marks omitted).

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Plaintiff here “has not alleged any ‘specific acts’ intended to

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encourage or induce infringement.”

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As in Perfect 10, “Defendants lend their

494 F.3d

Like Perfect 10,

Id.

Additionally, a certain amount of control is required for a

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valid trademark license agreement. “[W]hen the owner of a trademark

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licenses the mark to others, he retains a duty to exercise control

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and supervision over the licensee's use of the mark.”

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Glenn Miller Prods., Inc., 454 F.3d 975, 992 (9th Cir.

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2006)(internal citation and quotation marks omitted).

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supervise and control derives from trademark law rather than a

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given contract.

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such control is to protect consumers from deceptive use of a

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trademark.

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reasonable steps to prevent misuses of his trademark in the hands

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of others the public will be deprived of its most effective

Id.

Miller v.

The duty to

The purpose of requiring a licensor to retain

“If the licensor is not compelled to take some

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protection against misleading uses of a trademark.”

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v. Hart’s Food Stores, Inc., 267 F.2d 358, 367 (2d Cir. 1959).

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Hence, “naked licensing, without any control over the quality of

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goods produced by the licensee, . . . is inherently deceptive and

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constitutes abandonment of any rights to the trademark by the

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licensor.”

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Inc., 289 F.3d 589, 598 (9th Cir. 2002)(internal citations and

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quotation marks omitted).

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Dawn Donut Co.

Barcamerica Intern. USA Trust v. Tyfield Importers,

To hold that the amount of control required by a license

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agreement is sufficient to state a claim for contributory

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infringement by a licensor would expose every licensor to claims of

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contributory infringement for every license.

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requiring control by licensors is not to expose them to secondary

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liability but to protect consumers.1

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contributory infringement liability to all licensors would dilute

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the standard for contributory trademark infringement by lowering

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the bar for intentional inducement.

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the control exerted by a licensor, without more, is not sufficient

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to state a claim for contributory trademark infringement.

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The purpose of

Furthermore, expanding

The court therefore finds that

For these reasons, the claim for contributory infringement
fails under the first prong.

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Since the requirement of quality control is intended to
protect consumers from fraudulent or misleading use of a trademark,
it makes little sense to extend that control beyond the use of that
trademark to all aspects of a product. Viacom is required to
control its SPONGEBOB trademarks to ensure that a consumer does not
purchase a product believing that it comes from the SpongeBob
source and that it will be of the typical SpongeBob quality, only
to find that it is an inferior product. Viacom in its quality
control is required to ensure that the product meets its own
standards of quality, not to ensure that the product breaks no
other law, including trademark infringement.
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2. Continued Supply to Known Infringer

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Under the second prong of the Inwood contributory infringement

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test, Plaintiff alleges that “Viacom had constructive knowledge

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that JHS’s Unauthorized Products were infringing the Gibson

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Trademarks” by virtue of the U.S. registration of the Gibson

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Trademarks, and that “Viacom has actual knowledge of the

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infringement of the Gibson Trademarks by JHS’ Unauthorized

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Products” by virtue of the cease and desist letter.

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38.)

(Id. ¶¶ 37-

“Despite its constructive and actual knowledge of the

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infringement of the Gibson Trademarks by JHS’ Unauthorized

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Products, Viacom has continued to provide its intellectual property

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to JHS for use with JHS’ Unauthorized Products.”

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Plaintiff describes Viacom’s licensing of its SPONGEBOB trademark

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to JHS as a “service” provided to JHS.2

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(Id. ¶ 39.)

(Opp. at 14.)

Whether Viacom had actual or constructive knowledge of JHS’s

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infringement, it must also have had the requisite control over the

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infringement in order to be held liable for contributory

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infringement.

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providers of credit card services were liable for infringement by

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websites for whom they processed payments, and held that despite

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their knowledge of the websites’ infringement, the credit card

In Perfect 10, the Ninth Circuit considered whether

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A license to use a trademark is not clearly either a service
or a product. However, the Ninth Circuit advises that “when
measuring and weighing a fact pattern in the contributory
infringement context without the convenient ‘product’ mold dealt
with in Inwood Lab, we consider the extent of control exercised by
the defendant over the third party’s means of infringement.”
Lockheed Martin Corp., 194 F.3d at 984. As this is the same as the
test used to evaluate contributory infringement with respect to
services, the court need not consider whether a trademark license
is more like a product or a service.
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payment networks were not liable because they lacked the requisite

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control.

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Perfect 10 has failed to allege facts sufficient to show
direct control and monitoring of the instrumentality used
by a third party to infringe the plaintiff's mark.
Perfect 10 claims that the “product” or “instrumentality”
at issue here is the credit card payment network through
which Defendants process payments for infringing
material. . . . [T]his network is not the instrument used
to infringe Perfect 10's trademarks; that infringement
occurs without any involvement of Defendants and their
payment systems. Perfect 10 has not alleged that
Defendants have the power to remove infringing material
from these websites or directly stop their distribution
over the Internet. At most, Perfect 10 alleges that
Defendants can choose to stop processing payments to
these websites, and that this refusal might have the
practical effect of stopping or reducing the infringing
activity. This, without more, does not constitute direct
control.

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Perfect 10, 494 F.3d at 807 (internal citations and quotation marks
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omitted).
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Perfect 10 is distinguishable from the instant case insofar as
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there the alleged contributory infringers were providing an
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ancillary service to the direct infringers, whereas here, Viacom’s
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“service” - the SPONGEBOB trademarks - appears on the infringing
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product itself.

Here, instead of providing the means for consumers

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to purchase the infringing product, the infringing product bears
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Viacom’s SPONGEBOB marks, which presumably create at least a part
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of the product’s appeal.
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Despite these differences, this case resembles Perfect 10 in
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important ways.

As in Perfect 10, the “service” provided by Viacom

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- the SPONGEBOB trademark - is not the instrument of infringement;
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the infringing trademark is the FLYING V word mark and Flying V
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trademark body shape.

Although Viacom’s mark appears on an

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allegedly infringing product, Viacom’s licensing of the SPONGEBOB
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mark to JHS is not the instrument of infringement.

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makes non-infringing instruments using the SPONGEBOB mark, such as

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a drum set and a guitar, and could make a non-infringing SpongeBob

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ukulele.

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the SpongeBob SquarePants Flying V Ukulele, which would “have the

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practical effect of stopping or reducing the infringing activity,”

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id., but would not prevent JHS from designing and selling a Flying

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V Ukulele without the SPONGEBOB mark, since the two marks are

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independent.

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JHS apparently

Also as in Perfect 10, Viacom could bar JHS from selling

Thus, when this court “consider[s] the extent of control

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exercised by the defendant over the third party’s means of

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infringement,” Lockheed Martin Corp., 194 F.3d at 984, it finds

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that such control is lacking.

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could take to prevent allegedly infringing products from being

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manufactured, marketed, and sold, these steps do not have a direct

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connection to the infringement itself; JHS can infringe

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independently of anything Viacom might do.

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court’s finding, above, that Plaintiff has not alleged that Viacom

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has taken any affirmative steps to induce JHS to infringe, the

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court finds that Plaintiff has not alleged facts sufficient to

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state a claim for Viacom’s contributory infringement.

Although there are steps Viacom

Combined with the

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B. Vicarious Liability

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“Vicarious liability for trademark infringement requires a

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finding that the defendant and the infringer have an apparent or

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actual partnership, have authority to bind one another in

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transactions with third parties or exercise joint ownership or

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control over the infringing product.”

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In support of this claim, Plaintiff has alleged that Viacom and JHS
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Perfect 10, 494 F.3d at 807.

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exercise joint control based on the license agreement, which at

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minimum gives Viacom control over the licensed property, the

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licensed territory, and the licensed channels of distribution.

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(Opp. at 8; see redacted 2012 License Agreement, Bates Decl., Exh.

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A.). Plaintiff asserts that the full license agreements and

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additional discovery will reveal more factual bases for JHS and

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Viacom’s joint control.

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The court finds that the alleged control given to Viacom by
the license agreement does not rise to the level of control

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necessary to give Viacom joint control or ownership sufficient to

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make Viacom vicariously liable for JHS’s alleged infringement.

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discussed above, Viacom can influence the allegedly infringing

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product by blocking its sale or by removing its mark from the

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product, but this does not give Viacom “the right or ability to

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control the actual infringing activity at issue in this case,”

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namely, the production and sale of instruments that infringe.

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Viacom’s type of control is only indirect.3

As

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Viacom’s control is arguably more direct than in Perfect 10.
There, the Ninth Circuit held that “Defendants cannot take away the
software the offending websites use to copy, alter, and distribute
the infringing images, cannot remove those websites from the
Internet, and cannot themselves block the distribution of those
images over the Internet. Defendants can refuse to process credit
card payments for those images, but while this refusal would reduce
the number of those sales, that reduction is the result of indirect
economic pressure rather than an affirmative exercise of
contractual rights.” 494 F.3d at 805. Here, Plaintiff’s ability
to stop the sale of licensed products is arguably “an affirmative
exercise of contractual rights,” since it such ability is an
exercise of rights described in a contract. However, as discussed
above, those rights are required by trademark law for a valid
license agreement, so they are distinguishable from affirmative
rights granted by contract. Additionally, here there is no
indication that such rights have any function in this contract
beyond the purposes of establishing a valid license agreement.
Thus, Viacom’s ability to control JHS’s products remains indirect,
(continued...)
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Plaintiff asserts that “the extent to which Defendant Viacom

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exercises control over JHS pursuant to the Redacted July 2012

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Viacom License Agreement is not fully known, as Defendant Viacom

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redacted a lion’s share of the language from the Redacted July 2012

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Viacom License Agreement.

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notices on Defendants’ own infringing product, it appears that the

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Defendants began their relationship circa 2007 (five years prior to

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the July 2012 Viacom License Agreement).”

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thus argues that the complete license agreements from 2007 to 20124

Furthermore, from the various copyright

(Opp. at 6.)

Plaintiff

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and other discovery will reveal “MORE evidence of Defendant

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Viacom’s misconduct in this case.”

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Plaintiff has not alleged any facts that, taken as true, would

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constitute control sufficient to make Viacom vicariously liable;

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the control required by a license agreement is not sufficient.

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Because the license agreement and licensing relationship are the

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sole basis for Plaintiff’s allegations against Viacom, the court

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finds that Plaintiff has failed to state a claim for vicarious

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infringement.

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///

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///

(Opp. at 6-7.)

However,

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(...continued)
despite the contract.
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Plaintiff’s FAC includes seven pages of the redacted license
agreement between Viacom and JHS for the year 2012. In its reply
brief, Viacom attached a more complete version of the 2012 and 2007
license agreements. Plaintiff’s objection to the new evidence is
SUSTAINED. The court declines to consider documents provided in a
reply brief to which Plaintiff did not have previous access.
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B. Use in Commerce

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Because the court has found that Plaintiff has failed to state

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a claim for Viacom’s secondary liability, it need not reach the

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issue of whether Plaintiff has stated a claim for use of the mark

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in U.S. commerce.

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IV. Conclusion

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For the reasons stated above, Viacom’s Motion to Dismiss is

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GRANTED with prejudice.

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IT IS SO ORDERED.

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Dated: May 17, 2013
DEAN D. PREGERSON
United States District Judge

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