Gibson Guitar Corp v. Viacom International Inc et al

Filing 95

ORDER DENYING PLAINTIFFS MOTION FOR SANCTIONS 88 by Judge Dean D. Pregerson. (SEE DOCUMENT FOR FURTHER DETAILS) (vv)

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UNITED STATES DISTRICT COURT

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CENTRAL DISTRICT OF CALIFORNIA

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GIBSON BRANDS INC., a
Delaware corporation,

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Plaintiff,
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v.
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VIACOM INTERNATIONAL INC.,
Delaware corporation; JOHN
HORNBY SKEWES & CO., LTD.,
United Kingdom corporation,
Defendants.
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Case No. CV 12-10870 DDP (AJWx)
ORDER DENYING PLAINTIFF’S MOTION
FOR SANCTIONS
[Dkt. No. 88]

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Presently before the court is Plaintiff Gibson Brands, Inc.’s

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("Gibson") Motion for Sanctions Under the Court’s Inherent Powers.

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(Dkt. No. 88.) Having considered the parties’ submissions, the

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court denies Plaintiff’s Motion.

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The litigation history of this case is familiar to the parties

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and set forth in this Court’s prior Order granting Defendants’

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Motion to Dismiss (Dkt. No. 70.) In brief, Plaintiff Gibson brought

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suit against Defendant John Hornby Skewes & Co. Ltd.’s (“JHS”)

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alleging that JHS sold products in violation of Gibson’s Flying V

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trademarks. (First Amended Complaint ¶24.) In particular, Gibson’s

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complaint concerns the SpongeBob SquarePants Flying V Ukulele. (FAC

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Ex. D, E.) Gibson also named as defendant Viacom International Inc.

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(Viacom), a corporation that owns trademarks for SpongeBob

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Squarepants. This Court dismissed Gibson’s claims against Viacom

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for failure to state a claim upon which relief could be granted.

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(Dkt. No. 36.) It later dismissed claims against JHS for lack of

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subject matter jurisdiction under Rule 12(b)(1). Of particular

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importance to the prior order was this Court’s conclusion that,

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because all allegedly infringing activity occurred outside of the

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United States, the weight of the evidence counseled against

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exercising extraterritorial jurisdiction under the Lanham Act.

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On appeal, the Ninth Circuit reversed in part and remanded the

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case to the district court to determine whether Gibson’s complaint

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survives under Rule 12(b)(6). Gibson Brands, Inc. v. Viacom Int'l,

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Inc., No. 13-57050, 2016 WL 685026 (9th Cir. Feb. 19, 2016). JHS

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then filed a new Motion to Dismiss at the direction of this court.

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(Dkt. Nos. 82 & 83.) In its Opposition to the Motion to Dismiss,

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Gibson drew the court’s attention to newly uncovered evidence that

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it believes would have altered the course of earlier proceedings

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and proves JHS made material misrepresentations to the court.(Dkt.

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No. 84.) JHS then withdrew its Motion to Dismiss. (Dkt. No. 85.)

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Gibson now files this Motion for Sanctions.

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At the heart of Gibson’s motion is a newly discovered

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licensing agreement between JHS and MTV, a division of Viacom (the

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“Canada License”). (Gibson’s Motion for Sanctions 2.) In prior

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proceedings, the parties and this Court focused primarily on a

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separate licensing agreement between JHS and Viacom that authorized

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JHS to use the SpongeBob trademark on musical instruments in a
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number of jurisdictions across Europe, Asia, Africa, and South

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America. (Declaration of Dennis Drumm ¶5.) As part of its earlier

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decision, the court found: “JHS’s license from Viacom to use the

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SpongeBob trademark on ukuleles specifically excludes sales in the

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United States, indicating an intent to avoid U.S. commerce.” (Dkt.

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No. 70 at 11-12.) However, this newly produced licensing agreement

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between JHS and MTV states that JHS was also authorized to

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distribute the ukulele in Canada. (Declaration of Brent Davis, Ex.

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B, C.)

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According to Gibson, JHS intentionally withheld this agreement

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to obscure the fact that JHS had sold the allegedly infringing

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product in North America. (Mot. 7-13.) Gibson also argues that

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representatives of JHS made material misrepresentations to the

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court in an effort to evade disclosure of the Canada License.

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Specifically, it notes a statement by JHS’s Managing Director that

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“JHS marketed and offered the Ukulele for sale solely in the

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Licensed Territory–principally in the United Kingdom and Europe,

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and never in the United States.” (Drumm Decl. ¶7.) After finding

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the Canada License, Gibson has also identified a previously

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undisclosed distributor, M.I.D.C., that JHS worked with to

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distribute the ukuleles in North America. (Dkt. 84.) Gibson now

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submits additional evidence related to M.I.D.C.’s marketing efforts

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that it believes controverts JHS’s previous assertion that it never

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marketed the ukuleles in the United States. (Declaration of Kurt

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Schuettinger, Exs. 5-12.) In particular, Gibson points to an

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advertisement for the SpongeBob Ukulele placed in a trade

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publication in 2008 contrary to Mr. Drumm’s statement that the

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SpongeBob Ukulele was not distributed until 2012. (Schuettinger

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Decl., Ex. 9; Drum Decl. ¶8.)

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In its opposition, JHS denies that it engaged in a conspiracy

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to withhold evidence or make material misrepresentations to the

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court. (JHS’s Opposition to Plaintiff’s Motion for Sanctions 1.) It

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notes that counsel for JHS first learned of the existence of

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M.I.D.C. when Gibson filed its opposition papers to the renewed

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Motion to Dismiss. (Davis Decl. ¶15.) JHS also explained that it

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believed the licensing agreement with Viacom, the other named

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defendant, was the relevant licensing agreement and that there was

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no bad faith effort to hide the Canada License from the court.

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(Opp. 11.) Finally, JHS argues that existence of the Canada License

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is immaterial because it does not affect JHS’s central claim that

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it never marketed or sold the SpongeBob Ukulele in the United

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States. (Id.)

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This Court has inherent authority to “fashion an appropriate

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sanction for conduct which abuses the judicial process.” Chambers

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v. NASCO, Inc., 501 U.S. 32 at 44-45 (1991). “Before awarding

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sanctions under its inherent powers, however, the court must make

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an explicit finding that [the] conduct ‘constituted or was

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tantamount to bad faith.’” Primus Auto. Fin. Servs., Inc. V.

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Batarse, 115 F.3d 644, 648 (9th Cir. 1997) (quoting Roadway Exp.,

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Inc. v. Piper, 447 U.S. 752, 767 (1980)).

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Based on the facts before it, this Court cannot conclude that

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JHS’s actions rise to the level of bad faith. The court

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acknowledges, and indeed shares, some of Gibson’s concerns

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regarding the newly discovered evidence. In particular, the failure

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to disclose a related licensing agreement–whether or not it altered
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JHS’s defense that it did not sell the allegedly infringing

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products in the United States–or to ensure the accuracy of dates in

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a sworn declaration is of concern. The court also acknowledges,

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however, counsel for JHS’s explanation that they were not aware of

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these facts prior to Gibson’s most recent filings. While sanctions

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are not merited at this time, the court expects full compliance

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with discovery obligations. The court also notes that, without

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prejudging admissibility in this case, parties may be able to refer

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to and argue about alleged discovery abuses as such abuses may be

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relevant to credibility or other issues in the trial.

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IT IS SO ORDERED.

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Dated: June 21, 2016
DEAN D. PREGERSON
United States District Judge

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