Mercado Latino Inc v. Indio Products Inc et al
Filing
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ORDER GRANTING DEFENDANTS MOTION TO DISMISS SECOND AMENDED COMPLAINT 33 by Judge Dean D. Pregerson: Plaintiffs trade dress claim is dismissed with prejudice. In all other respects, Defendants Motion to Dismiss is GRANTED, with limited leave to amend. Should Plaintiff desire to amend the SAC to include allegations relevant to the quality control exception to the First Sale Doctrine, it must do so within ten days of the date of this order. (lc). Modified on 9/24/2013 .(lc).
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UNITED STATES DISTRICT COURT
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CENTRAL DISTRICT OF CALIFORNIA
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MERCADO LATINO, INC. dba
CONTINENTAL CANDLE COMPANY,
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Plaintiff,
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v.
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INDIO PRODUCTS, INC., a
California corporation,
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Defendant.
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Case No. CV 13-01027 DDP (RNBx)
ORDER GRANTING DEFENDANT’S MOTION
TO DISMISS SECOND AMENDED
COMPLAINT
[Dkt. No.33]
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Presently before the court is Defendant Indio Products, Inc.
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(“Indio”)’s Motion to Dismiss the Second Amended Complaint.
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Having considered the submissions of the parties and heard oral
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argument, the court grants the motion and adopts the following
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order.
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I.
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Background
Indio and Plaintiff Mercado Latino, Inc. (“Mercado”) both sell
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devotional prayer candles bearing images of saints and other
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religious figures.
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23.)
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bearing a label depicting a religious icon within a “bullet” shape
(Second Amended Complaint (“SAC”) ¶¶ 7, 12,
Mercado’s “Sanctuary Series” candles are clear containers
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in the style of a stained glass window, surrounded by a patterned
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border of colorful, geometric shapes.
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copyrights on “the original and distinctive artwork shown on
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Sanctuary Series candles.”
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trademarked the name “Sanctuary Series” and a design consisting of
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three circles within a window.
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owns trade dress featuring a combination of a clear container of
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certain dimensions filled with a single color wax, a two-sided
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“opaque die-cut label” with a bullet-shaped, black bordered
(SAC ¶).
(FAC ¶¶ 12-14.)
Mercado obtained
Mercado also
(SAC ¶¶ 20-21.)
Mercado allegedly
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silhouette featuring various shapes, atop of which is placed an
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image of a religious figure and a depiction of a scroll with the
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figure’s name.
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B.
(SAC ¶ 12.)
Procedural History
In its First Amended Complaint, Mercado alleged that Defendant
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Indio copied Mercado’s copyrights and passed off inferior Indio
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candles as Mercado products.
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alleged that Indio infringed upon Mercado’s Sanctuary Series trade
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dress and trademarks.
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federal unfair competition under 15 U.S.C. § 1125(a) and
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intentional interference with prospective economic advantage.
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(FAC ¶¶ 29-31.)
The FAC further
Mercado also alleged causes of action for
Indio moved to dismiss all claims.
The court dismissed
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Mercado’s copyright claim, with prejudice.
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to Dismiss at 6.)
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under Section 43(a) of the Lanham Act, 15 U.S.C. § 1125(a), should
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also be dismissed because it was premised upon the same facts as
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its copyright claim.
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claims that overlap with copyright claims are preempted when the
(Order Granting Motion
Indio argued that Mercado’s trade dress claim
As this court explained, Lanham Act trademark
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Copyright Act provides an adequate remedy.
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Dastar Corp. v. Twentieth Cent. Fox Corp., 539 U.S. 23, 34 (2003);
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Shaw v. Lindheim, 919 F.2d 1353, 1364-65 (9th Cir. 1990)).)
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(Order at 8 (citing
Mercado did not oppose Indio’s preemption argument.
Instead,
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Mercado asserted that Indio had engaged in wrongful conduct
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independent of its alleged copyright violations.
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noted, however, Mercado made no such allegations in the First
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Amended Complaint.
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contended that Indio was selling Mercado’s Sanctuary Series candles
As the court
Rather, by way of declaration, Mercado
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in boxes labeled with Indio’s name.
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confirmed that this purported repackaging was the purportedly
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independent basis for its trade dress claim.
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that Mercado would be able to amend its complaint to include
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factual allegations regarding this repackaging, the court dismissed
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Mercado’s trade dress claim with leave to do so.
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dress claim is therefore dismissed, with leave to amend (Order at 8
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(emphasis added).)
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Mercado’s unfair competition, trademark, and interference with
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economic advantage claims were also predicated upon the new
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repackaging assertions, those claims were also dismissed with leave
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to amend.
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At oral argument, Mercado
Because it appeared
(Mercado’s trade
The court further explained that because
(Order at 9.)
Mercado then filed its Second Amended Complaint.
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moves to dismiss the SAC in its entirety.
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II.
Indio now
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Legal Standard
A complaint will survive a motion to dismiss when it contains
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“sufficient factual matter, accepted as true, to state a claim to
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relief that is plausible on its face.” Ashcroft v. Iqbal, 556 U.S.
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662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544,
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570 (2007)).
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“accept as true all allegations of material fact and must construe
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those facts in the light most favorable to the plaintiff.” Resnick
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v. Hayes, 213 F.3d 443, 447 (9th Cir. 2000).
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need not include “detailed factual allegations,” it must offer
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“more than an unadorned, the-defendant-unlawfully-harmed-me
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accusation.”
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allegations that are no more than a statement of a legal conclusion
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“are not entitled to the assumption of truth.” Id. at 679.
When considering a Rule 12(b)(6) motion, a court must
Iqbal, 556 U.S. at 678.
Although a complaint
Conclusory allegations or
In
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other words, a pleading that merely offers “labels and
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conclusions,” a “formulaic recitation of the elements,” or “naked
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assertions” will not be sufficient to state a claim upon which
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relief can be granted.
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quotation marks omitted).
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Id. at 678 (citations and internal
“When there are well-pleaded factual allegations, a court should
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assume their veracity and then determine whether they plausibly
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give rise to an entitlement of relief.” Id. at 679.
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must allege “plausible grounds to infer” that their claims rise
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“above the speculative level.” Twombly, 550 U.S. at 555.
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“Determining whether a complaint states a plausible claim for
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relief” is a “context-specific task that requires the reviewing
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court to draw on its judicial experience and common sense.”
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556 U.S. at 679.
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III. Discussion
Plaintiffs
Iqbal,
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A.
Scope of Trade Dress Amendments
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Mercado’s trade dress claim, as previously pled, was premised
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on the same facts as its copyright claim, and was therefore
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preempted.
As explained above, Mercado did not oppose dismissal on
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preemption grounds.
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however, because it claimed that it could allege facts regarding
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Indio’s purported repackaging of Sanctuary Series candles in Indio
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boxes.
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The court granted Mercado leave to amend,
Unlike the First Amended Complaint, the Second Amended
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Complaint does include facts relating to repackaging.
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32-41.)
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same trade dress claims that this court previously dismissed as
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preempted.
(SAC ¶¶ 29,
The Second Amended Complaint, however, also includes the
The only significant difference between these claims,
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as pled in the First and Second Amended Complaints, is that the SAC
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includes additional elements of Mercado’s alleged trade dress,
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including a clear, cylindrical container and a “solid color wax.”
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(SAC ¶ 12.)
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the leave to amend.
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Indio argues that these amendments exceed the scope of
The court agrees.
At this stage, Mercado may only amend its complaint with
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Indio’s leave or by leave of the court.
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This court granted Mercado leave to amend its non-copyright claims
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solely because Mercado identified an independent basis for its
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claims: repackaging.
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unrelated to the repackaging allegations.
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specific authorization to cure certain deficiencies, courts will
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dismiss or strike the new, improper allegations.
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v. Baker Hughes, No. CV 12-07735 MMM (MRWx), 2013 WL 3353636 at *3
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(C.D. Cal. Jun. 30, 2013) (collecting cases).
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allegations unrelated to Indio’s repackaging of authentic Mercado
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candles are stricken from the SAC.
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court, nor does Mercado argue, that the newly alleged repackaging
Fed. R. Civ. P. 15(a)(2).
The SAC, however, pleads new facts wholly
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When a plaintiff exceeds
See, e.g. Benton
Accordingly, all
It is not apparent to the
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facts provide any basis for a trade dress claim.
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therefore, dismissed with prejudice.
Count 1 is,
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B.
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Indio argues that all four of Mercado’s claims, insofar as
First Sale Doctrine
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they relate to Indio’s alleged repackaging, are barred by the First
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Sale Doctrine.1
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from confusing or deceiving consumers about the origin or make of a
“[T]rademark law is designed to prevent sellers
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product, which confusion ordinarily does not exist when a genuine
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article bearing a true mark is sold.”
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Circuit Abco, 810 F.2d 1506, 1509 (9th Cir. 1987).
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sale of a real product under a true mark would not deceive
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consumers, under the First Sale Doctrine, “resale by the first
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purchaser of the original article under the producer’s trademark is
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generally neither trademark infringement nor unfair competition.”
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Enesco Corp. v. Price/Costco, Inc., 146 F.3d 1083, 1085 (9th Cir.
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1998); Sebastian Int’l v. Longs Drug Stores Corp., 53 F.3d 1073,
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1076 (9th Cir. 1995) (“It is the essence of the ‘first sale’
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doctrine that a purchaser who does no more than stock, display, and
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resell a producer’s product under the producer’s trademark violates
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no right conferred upon the producer by the Lanham Act.”).
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NEC Electronics v. CAL
Because the
Here, the SAC alleges that Indio placed Mercado Sanctuary
Series candles into boxes bearing Indio’s name and sold the boxes.
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Mercado’s unfair competition claim is also based on Section
43(a) of the Lanham Act. Mercado’s intentional interference with
economic advantage claim is based upon the alleged Lanham Act
violations.
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(SAC ¶¶ 29, 32).2
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Mercado sell candles by the boxful, and that Indio is attempting to
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“pass off” its own products as Mercado candles.
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36.)
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boxes “purchased 3/22/013 at Vernon Sales.”
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contains twelve candles appearing to be Sanctuary Series candles.
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The boxes appear to be brown cardboard shipping boxes, bearing
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packing tape and large “Made in China” lettering.
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nineteen of the twenty boxes are white labels with black lettering
The SAC further alleges that both Indio and
(SAC ¶¶ 33-34,
Exhibit G to the SAC consists of several images of twenty
(SAC Ex. G.)
Id.
Each box
Affixed to
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reading “INDIO PRODUCTS INC,” as well as “ITEM DESCRIP” and various
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written combinations of colors and religious figures (e.g. “ST
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MARTHA WHITE”).
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Id.
Mercado argues that the “material difference” exception to the
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First Sale Doctrine applies.3
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“quality control” exception, this theory posits that when products
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are sold under a producer’s trademark but are distributed in a
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manner that does not meet the trademark holder’s quality control
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standards, there may be some hidden defect that tarnishes the mark.
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Enesco, 146 F.3d at 1087; SoftMan Prods. Co., LLC v. Adobe Sys.,
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Inc., 171 F. Supp. 2d 1075, 1092 (C.D. Cal. 2001).
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the non-conforming product should not be considered genuine, and
(Opp. at 17-19.)
Also known as the
In such cases,
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The SAC somewhat imprecisely alleges that Indio placed
“candles bearing Mercado’s Sanctuary Series Trade Dress” in Indio
boxes. (SAC ¶ 29.) The SAC appears, however, to refer to genuine
Mercado products, rather than Indio products alleged to be similar
in appearance. (SAC ¶¶ 29 (“Pictures of Mercado candles in Indio
boxes . . . .”), 32 (“Defendants have sold Mercado candles . . .
.”).)
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At argument, the court specifically asked Mercado which, if
any, of the exceptions to the First Sale Doctrine apply. Mercado
identified and argued only the “material difference” exception.
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the first sale doctrine will not apply.
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at 1092.
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SoftMan, 171 F. Supp. 2d
The only related allegation in the SAC is that “Defendants’
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conduct is likely to cause confusion, mistake and deception among
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the general purchasing public, and interfere with MERCADO’S ability
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to use its mark to indicate a single quality controlled source of
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goods and services.”
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seeks to support its argument with facts not pled in the complaint.
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Plaintiff submits the declaration of Mercado Vice President Richard
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Rodriguez, who states that Mercado uses a patented device to ensure
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that its candles’ wicks remain centered during shipping.
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(Rodriguez Decl. ¶¶ 3-11.)
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may shatter or explode.
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from Vernon Sales in Indio boxes did not contain the wick-centering
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device.
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(SAC ¶ 52.)
Beyond that, Mercado once again
If the device is not used, lit candles
(Id. ¶ 8.)
The Mercado candles purchased
(Id. 17.)
Indio seems to suggest that absent an allegation of actual
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product malfunction, the “quality control” exception cannot apply.
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(Reply at 4.)
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have recognized the quality control argument in trademark
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infringement cases where there is some defect (or potential defect)
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in the product itself that the customer would not be readily able
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to detect.”
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emphasis, internal quotation, and citation omitted).
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As the Enesco court explained, however, “[c]ourts
Enesco, 146 F.3d at 1087 (emphasis added) (original
Thus, the facts alleged in the Rodriguez declaration might be
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sufficient to warrant invocation of the material difference, had
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they been alleged in the complaint.
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however, Mercado’s allegation that Indio’s actions “interfere with
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MERCADO’S ability to use its mark to indicate a single quality
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Without such factual support,
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controlled source of goods and services” is nothing more than a
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conclusory assertion.4
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pled, thus does not fall within the “material alteration” or
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“quality control” exception to the First Sale Doctrine.
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IV.
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Mercado’s trademark claim, as currently
Conclusion
For the reasons stated above, Defendant’s Motion to Dismiss is
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GRANTED.
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prejudice.
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GRANTED, with limited leave to amend.
Plaintiff’s trade dress claim is dismissed with
In all other respects, Defendant’s Motion to Dismiss is
Should Plaintiff desire to
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amend the SAC to include allegations relevant to the “quality
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control” exception to the First Sale Doctrine, it must do so within
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ten days of the date of this order.
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IT IS SO ORDERED.
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Dated: September 24, 2013
DEAN D. PREGERSON
United States District Judge
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Contrary to Indio’s argument, the Rodriguez Declaration does
not state that Mercado purchased all of Vernon Sales’ inventory,
and this action is not, therefore, moot. (Rodriguez Decl. ¶ 15
(“[O]ur representative observed a large quantity of other Sanctuary
Series candles offered for sale in Indio’s 12 pack boxes.”).)
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