Deckers Outdoor Corporation v. J.C. Penney Company Inc.

Filing 30

ORDER GRANTING IN PART MOTION TO DISMISS WITH PARTIAL LEAVE TO AMEND 25 by Judge Otis D. Wright, II. For the reasons discussed above, the Court GRANTS IN PART JC Penney's Motion to Dismiss with respect to Deckers's claims for false d esignation of origin, willful patent infringement, and the UCL 25 . The Court DENIES the Motion on all other grounds. If Deckers may do so consistent with Rule 11, it may amend its Complaint with respect to presuit knowledge, if any, within 14 days. If Deckers does not amend within that timeframe, JC Penney shall file its answer to the remainder of Deckers's First Amended Complaint within 35 days from the date of this Order. IT IS SO ORDERED. (lom)

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O 1 2 3 4 5 6 United States District Court Central District of California 7 8 9 10 DECKERS OUTDOOR CORPORATION, Case № 2:14-cv-02565-ODW(MANx) Plaintiff, 11 v. 12 ORDER GRANTING IN PART 13 J.C. PENNEY COMPANY INC.; DOES MOTION TO DISMISS WITH 14 1–10, inclusive, PARTIAL LEAVE TO AMEND [25] Defendants. 15 16 I. INTRODUCTION 17 Plaintiff Deckers Outdoor Corporation makes the famous UGG® Bailey Button 18 Boots. It owns two United States Design Patents, which cover the Bailey Button 19 designs. After discovering that Defendant J.C. Penney Company Inc. was selling 20 boots with similar designs, Deckers brought this action, alleging trade-dress 21 infringement, false designation of origin, federal unfair competition, patent 22 infringement, and state-law unfair competition. 23 JC Penney moved to dismiss the First Amended Complaint, arguing that 24 Deckers failed to state a valid claim for relief. The Court agrees with most of JC 25 Penney’s arguments and accordingly GRANTS IN PART JC Penney’s Motion to 26 Dismiss with PARTIAL LEAVE TO AMEND.1 (ECF No. 25.) 27 28 1 After carefully considering the papers filed in support of and in opposition to the Motion, the Court deems the matter appropriate for decision without oral argument. Fed. R. Civ. P. 78; L.R. 7-15. 1 II. FACTUAL BACKGROUND 2 Deckers is a Delaware corporation with its principal place of business in Goleta, 3 California. (FAC ¶ 4.) Deckers produces footwear under the well-known UGG® 4 trademark and other federal trademarks. (Id.; ¶ 8.) Deckers distributes its UGG 5 footwear through authorized retailers and online. (Id. ¶¶ 8–9.) 6 In 2009, Deckers introduced one of its most widely recognizable product lines: 7 the “Bailey Button” style of sheepskin boots. (Id. ¶¶ 9, 13.) The Bailey Button boots 8 are made of suede and feature overlapping front and rear panels, curved top edges on 9 the overlapping panels, exposed fleece-type lining, and one or more buttons 10 depending on the height of the boot placed on the lateral side of the boot shaft. (Id. 11 ¶ 9.) 12 Deckers owns several United States Design Patents for its Bailey Button boot 13 styles, including Nos. D599,999 for the Bailey Button Single boot and D616,189 for 14 the Bailey Button Triplet boot (“Bailey Button Design Patents”). (Id. ¶ 16.) 15 Deckers alleges that JC Penney has offered for sale “knock-off” UGG boots, 16 which infringe upon the Bailey Button trade dress and design patents. (Id. ¶ 19.) 17 Deckers has pointed to at least two boot styles offered by JC Penney called Arizona 18 Carmen Girls Boots and Arizona Crescent Casual Suede Boots. (Id. ¶ 19–20; Ex. 2.) 19 Deckers has not licensed or otherwise authorized JC Penney to use the Bailey Button 20 trade dress or design patents. (Id. ¶ 22.) 21 On April 4, 2014, Deckers filed this action against JC Penney. (ECF No. 1.) 22 Deckers later filed a First Amended Complaint, alleging claims for trade-dress 23 infringement, false designations of origin and false descriptions, federal unfair 24 competition, patent infringement, and unfair competition under California law. (ECF 25 No. 18.) On August 6, 2014, JC Penney moved to dismiss Deckers’s First Amended 26 Complaint under Federal Rule of Civil Procedure 12(b)(6). Deckers timely opposed. 27 That Motion is now before the Court for decision. 28 /// 2 1 III. LEGAL STANDARD 2 A court may dismiss a complaint under Rule 12(b)(6) for lack of a cognizable 3 legal theory or insufficient facts pleaded to support an otherwise cognizable legal 4 theory. Balistreri v. Pacifica Police Dep’t, 901 F.2d 696, 699 (9th Cir. 1990). To 5 survive a dismissal motion, a complaint need only satisfy the minimal notice pleading 6 requirements of Rule 8(a)(2)—a short and plain statement of the claim. Porter v. 7 Jones, 319 F.3d 483, 494 (9th Cir. 2003). The factual “allegations must be enough to 8 raise a right to relief above the speculative level.” Bell Atl. Corp. v. Twombly, 550 9 U.S. 544, 555 (2007). That is, the complaint must “contain sufficient factual matter, 10 accepted as true, to state a claim to relief that is plausible on its face.” Ashcroft v. 11 Iqbal, 556 U.S. 662, 678 (2009). 12 The determination whether a complaint satisfies the plausibility standard is a 13 “context-specific task that requires the reviewing court to draw on its judicial 14 experience and common sense.” Id. at 679. A court is generally limited to the 15 pleadings and must construe all “factual allegations set forth in the complaint . . . as 16 true and . . . in the light most favorable” to the plaintiff. Lee v. City of L.A., 250 F.3d 17 668, 688 (9th Cir. 2001). But a court need not blindly accept conclusory allegations, 18 unwarranted deductions of fact, and unreasonable inferences. Sprewell v. Golden 19 State Warriors, 266 F.3d 979, 988 (9th Cir. 2001). 20 As a general rule, a court should freely give leave to amend a complaint that has 21 been dismissed. Fed. R. Civ. P. 15(a). But a court may deny leave to amend when 22 “the court determines that the allegation of other facts consistent with the challenged 23 pleading could not possibly cure the deficiency.” Schreiber Distrib. Co. v. Serv-Well 24 Furniture Co., 806 F.2d 1393, 1401 (9th Cir.1986); see Lopez v. Smith, 203 F.3d 25 1122, 1127 (9th Cir. 2000). 26 IV. DISCUSSION 27 JC Penney moves to dismiss Deckers’s claims for false designation of origin, 28 infringement of the ’189 Patent, willful infringement, and state-law unfair 3 1 competition.2 The Court agrees with JC Penney’s arguments with respect to Decker’s 2 false-designation, willful-infringement, and state unfair-competition claims and thus 3 grants in part its Motion. 4 A. False designations of origin 5 The Lanham Act prohibits any person from using any “false designation of 6 origin” in connection with any goods or services in commerce that “is likely to cause 7 confusion, or to cause mistake, or to deceive as to the affiliation, connection, or 8 association of such person with another person, or as to the origin, sponsorship, or 9 approval of his or her goods, services, or commercial activities by another person.” 10 15 U.S.C. § 1125(a). 11 JC Penney argues that under the United States Supreme Court’s decision in 12 Dastar Corp. v. Twentieth Century Fox Film Corp., 539 U.S. 23 (2003), Deckers’s 13 false-designation-of-origin claim fails as a matter of law. JC Penney contends that 14 where, as here, a defendant actually produced the goods at issue—even if those goods 15 embody the plaintiff’s ideas or concepts—those goods cannot be the subject of a false- 16 designation claim. 17 But Deckers attempts to distinguish Dastar, asserting that unlike the plaintiff in 18 Dastar, Deckers is bringing a passing-off claim—not reverse passing off. Deckers 19 argues that JC Penney violated the Lanham Act by using Deckers’s Bailey Button 20 trade dress on its own products to falsely represent that they came from Deckers. 21 In Dastar, Fox Film had acquired the rights to General Dwight D. Eisenhower’s 22 book Crusade in Europe, which detailed the allied campaign in Europe during World 23 War II. 539 U.S. at 25–26. Fox then arranged for Time, Inc. to produce a television 24 series based on the book—Crusade. Id. at 26. 25 26 27 28 2 JC Penney only argues for dismissal of Deckers’s false-designation-of-origin, infringement of the ’189 Patent, state unfair-competition claims in its Motion. But JC Penney then concludes by requesting that the Court dismiss Deckers’s entire First Amended Complaint. Since JC Penney fails to address Deckers’s trade-dress infringement or federal unfair-competition claims, the Court expresses no view with respect to them. They accordingly survive this Motion to Dismiss. 4 1 Dastar later produced its own video series called Campaigns, which borrowed 2 footage extensively from Crusade. Id. at 26–27. Dastar also edited the film and 3 added new features and packaging. Id. Fox then brought a false-designation-of-origin 4 claim against Dastar. The district court found for Fox, and the Court of Appeals 5 affirmed. Id. at 27–28. 6 But the United States Supreme Court reversed. Interpreting the phrase “origin 7 of goods” in the Lanham Act, the Court concluded “that the phrase refers to the 8 producer of the tangible goods that are offered for sale, and not to the author of any 9 idea, concept, or communication embodied in those goods.” Id. at 37. The Court 10 reasoned that the Lanham Act was “not designed to protect originality or creativity”— 11 unlike patent and copyright law—and therefore could not be used to “create[]a species 12 of perpetual patent and copyright, which Congress may not do.” Id. Since Dastar was 13 clearly the producer of the Campaigns series, it—not Fox—was the “origin” of those 14 goods for Lanham Act purposes. Id. at 38. 15 Deckers’s proposed point of distinguishment—i.e., that Dastar involved a 16 reverse passing-off claim whereas Deckers has brought a passing-off claim3—does not 17 remove this case from Dastar’s grasp. Both claims still involve false designation of 18 origin under the Lanham Act—and therefore both focus on the definition of “origin” 19 of the goods or services. In a reverse passing-off scenario as in Dastar, a producer 20 allegedly misrepresents itself as the origin of the goods of services made by someone 21 else. And in a passing-off situation like this case, a person allegedly misrepresents 22 another entity as the origin of goods or services it produces itself. But the operative 23 issue remains the same: the false designation of origin—whatever origin that may be. 24 While Deckers repeatedly argues that it has brought a passing-off claim against 25 JC Penney, Deckers does not allege that JC Penney has sold Deckers’s Bailey Button 26 Boots as JC Penney’s own products. Rather, Deckers confusingly contends that JC 27 3 28 As the Supreme Court pointed out, passing off involves a producer misrepresenting its goods or services as someone else’s, while reverse passing off occurs when the producer sells someone else’s goods or services as his own. Id. at 27 n.1. 5 1 Penney has appropriated Deckers’s Bailey Button Boot trade dress on to JC Penney’s 2 own boots and then caused consumer confusion as to the origin of JC Penney’s boots. 3 Regardless of whether Deckers accurately characterizes this scenario as passing off, it 4 is crucial that the origin of the boots JC Penney has sold is JC Penney—not Deckers. 5 It is immaterial for the purposes of Deckers’s false-designation claim that JC 6 Penney may have misappropriated the Bailey Button Boot trade dress, as the Supreme 7 Court made clear that “the phrase ‘origin of goods’ is . . . incapable of connoting the 8 person or entity that originated the ideas or communications that ‘goods’ embody or 9 contain.” 539 U.S. at 32. Unless JC Penney sold Deckers boots as its own—thus 10 changing the “origin” for Lanham Act purposes—the fact remains that JC Penney is 11 the origin of its own goods. Deckers may not use § 1125(a) as “a species of perpetual 12 patent and copyright” to attach Lanham Act liability to what is more properly the 13 province of patent and copyright law. Under Dastar, Deckers’s false-designation-of- 14 origin claim fails as a matter of law. The Court accordingly GRANTS JC Penney’s 15 Motion on this ground WITHOUT LEAVE TO AMEND. 16 B. Design-patent infringement 17 The Federal Circuit has held that “[w]hether a design patent is infringed is 18 determined by first construing the claim to the design, when appropriate, and then 19 comparing it to the design of the accused device.”   OddzOn Prods., Inc. v. Just Toys, 20 Inc., 122 F.3d 1396, 1404 (Fed. Cir. 1997). The comparison occurs through the eyes 21 of an ordinary observer familiar with the prior-art designs.   Crocs, Inc. v. Int’l Trade 22 Comm’n, 598 F.3d 1294, 1303 (Fed. Cir. 2010). If the “patented design as a whole is 23 substantially similar in appearance to the accused design,” then the defendant has 24 infringed the patent. OddzOn, 122 F.3d at 1405. 25 JC Penney contends that Deckers fails to explain how either the Carmen or 26 Crescent Girls Boots plausibly infringes the ’189 Patent.4 JC Penney faults Deckers 27 28 4 JC Penney does not attack Deckers’s pleading with respect to the ’999 Patent, so that portion of the patent-infringement claim is not subject to the Motion to Dismiss. 6 1 for lumping the ’189 Patent in with its ’999 Patent allegations. JC Penney then 2 proceeds to analyze the design differences between the Carmen Girls Boot and the 3 Bailey Button Triplet design embodied in the ’189 Patent. 4 In contrast, Deckers argues that it has properly pleaded infringement of the ’189 5 Patent, as it has identified the specific Bailey Button Design patents it alleges JC 6 Penney infringed along with design-patent illustrations and photos of the UGG 7 products embodying the design patents. 8 The Court finds that Deckers properly pleaded JC Penney’s alleged 9 infringement of the ’189 Patent. The Federal Circuit has held that “[i]nfringement of 10 a design patent is a question of fact.”   Catalina Lighting, Inc. v. Lamps Plus, Inc., 295 11 F.3d 1277, 1287 (Fed. Cir. 2002). It is therefore improper in a situation like this one 12 to contend that a plaintiff has failed to allege design-patent infringement based on a 13 comparison of the subject designs, since the Court must accept all factual allegations 14 as true in deciding a Rule 12(b)(6) motion. Moreover, as depicted in Figure 1, a 15 comparison of the protected designs with the accused products demonstrates a 16 sufficient visual similarity to at least render infringement of the ’189 Patent plausible. 17 Deckers had to do no more. 18 /// 19 /// 20 /// 21 /// 22 /// 23 /// 24 /// 25 /// 26 /// 27 /// 28 /// 7 1 Figure 1 2 Deckers’s Design Patents Accused Products D616,189 Arizona Carmen Girls Boot 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 D599,999 20 21 C. Arizona Crescent Casual Suede Boot Willful patent infringement 22 To establish willful infringement, “a patentee must show by clear and 23 convincing evidence that the infringer acted despite an objectively high likelihood that 24 its actions constituted infringement of a valid patent.” In re Seagate Tech., LLC, 497 25 F.3d 1360, 1371 (Fed. Cir. 2007). If the plaintiff establishes that risk, it must then 26 show that the objectively defined risk “was either known or so obvious that it should 27 have been known to the accused infringer.” Id. 28 /// 8 1 California federal courts have taken the view that a plaintiff must plead presuit 2 knowledge in order to adequately plead willful infringement. 3 MyMedicalRecords, Inc. v. Jardogs, LLC, No. 2:13-CV-03560-ODW, --- F. Supp. 2d 4 ---, 2014 WL 585450, at *5–6 (C.D. Cal. Feb. 14, 2014); Seoul Laser Dieboard Sys. 5 Co., Ltd. v. Serviform, S.r.l., 957 F. Supp. 2d 1189, 1196–97 (S.D. Cal. July 16, 2013); 6 Avocet Sports Tech., Inc. v. Garmin Int’l, Inc., No. C 11-04049 JW, 2012 WL 7 1030031, at *4 (N.D. Cal. Mar. 22, 2012). E.g., 8 JC Penney argues that Deckers conclusorily alleges “on information and belief” 9 that JC Penney’s alleged patent infringement was “willful” but fails to state any 10 supporting facts or that JC Penney had advance knowledge of Deckers’s patents. JC 11 Penney points out that Deckers only alleges widespread popularity and recognition of 12 Deckers’s Bailey Button boot style and the patent notice provided on the boots 13 themselves. 14 15 But Deckers contends that the Bailey Button Boots’ popularity and patent notice on the products themselves suffices to establish presuit knowledge. 16 The Court disagrees. Deckers has not alleged that JC Penney was actually 17 aware of either of the patents-in-suit prior to producing and selling the accused 18 products. Even if the Bailey Button Boots have garnered widespread popularity and 19 are stamped with patent notice, those allegations, standing alone, do not establish that 20 JC Penney actually knew about the ’189 and ’999 Patents. Actual knowledge—not 21 constructive knowledge—is the criterion. i4i Ltd. P’ship v. Microsoft Corp., 598 F.3d 22 831, 860 (Fed. Cir. 2010) (“Infringement is willful when the infringer was aware of 23 the asserted patent . . . .”); Seoul Laser Dieboard Sys., 957 F. Supp. 2d at 1196–97 24 (same). 25 In its Opposition, Deckers states that “[c]ourts have routinely denied motions to 26 dismiss where the patentee has made similar allegations of willful infringement,” and 27 then lists several case citations. (Opp’n 10.) Yet, all but one of these cases actually 28 establish the opposite of what Deckers asserts. In those cases, the plaintiff alleged that 9 1 the defendant had actual knowledge of the patents-in-suit—not some form of 2 bootstrapped constructive knowledge. See Sony Corp. v. LG Electronics U.S.A., Inc., 3 768 F. Supp. 2d 1058, 1064 (C.D. Cal. 2011) (“Here, plaintiff identifies the specific 4 accused products . . . and alleges that defendants had actual notice of the patents in 5 suits . . . .” (emphasis added)); Oakley, Inc. v. 5.11, Inc., No. 11CV2173 WQH CAB, 6 2012 WL 5363245, at *2 (S.D. Cal. Oct. 29, 2012) (“The second amended complaint 7 identifies the specific products alleged to infringe and alleges that the Defendants’ 8 [sic] had written notice of the issued patents before the action was filed.” (emphasis 9 added)); Milwaukee Elec. Tool Corp. v. Hitachi Koki, Ltd., No. 09-C-948, 2011 WL 10 665439, at *5 (E.D. Wis. Feb. 14, 2011) (“[T]he plaintiffs allege that ‘[the defendants 11 were] aware of [the plaintiffs’ patents] prior to filing [the] Amended Complaint’ and 12 yet continued to infringe the patents.”).5 13 Circuit’s opinion in Sentry Protection Products, Inc. v. Eagle Manufacturing Co., 400 14 F.3d 910 (Fed. Cir. 2005), is completely inapposite, as that case dealt with the 15 pleading standard for general patent infringement—not enhanced damages for willful 16 infringement. See id. at 918 (citing 35 U.S.C. § 287(a)). And Deckers’s citation to the Federal Since Deckers has not alleged that JC Penney had actual knowledge of either 17 18 the ’189 or ’999 Patents, Deckers’s willfulness allegation fails. The Court 19 consequently GRANTS JC Penney’s Motion on this ground WITH LEAVE TO 20 AMEND. 21 D. California’s Unfair Competition Law 22 Lastly, JC Penney argues that federal law preempts Deckers’s California Unfair 23 Competition Law (“UCL”) claim. To determine whether federal law preempts a state 24 25 26 27 28 5 Deckers cites to one case in which the district court held that actual or constructive knowledge satisfied the willful-infringement pleading standard. Jardin v. Datallegro, Inc., No. 08CV1462-IEGRBB, 2009 WL 186194, at *7 (S.D. Cal. Jan. 20, 2009). But interestingly, Deckers included a quotation that allegedly came from the case stating that the plaintiff had alleged the defendants’ actual knowledge of the patents-in-suit. (Opp’n 10.) Not only does this quotation not support Deckers’s position, but that quotation does not appear in Jardin. Rather, it comes from a citation to Jardin in Oakley where the court apparently misquoted Jardin. See 2012 WL 5363245, at *2. 10 1 claim, the Ninth Circuit has held that one must determine “whether the state law claim 2 contains an element not shared by the federal law; an element which changes the 3 nature of the action so that it is qualitatively different from a [federal] infringement 4 claim.” Summit Mach. Tool Mfg. Corp. v. Victor CNC Sys., Inc., 7 F.3d 1434, 1439– 5 40 (9th Cir. 1993) (internal quotation marks omitted). JC Penney contends that there 6 is no “extra element” that distinguishes Deckers’s UCL claim from its federal ones. 7 JC Penney points out that Deckers simply incorporates its previous allegations into its 8 UCL claim. 9 But Deckers argues that it has alleged JC Penney’s bad-faith conduct and that 10 courts have held that alleging bad faith may avoid preemption. Deckers also contends 11 that unfair-competition claims based on California law provide additional remedies 12 such as punitive damages that are not available under the Lanham or Patent Acts. 13 Deckers confuses the analysis in its opposing arguments. The Ninth Circuit has 14 not held that simply alleging more elements or factual information than necessary 15 saves a claim from federal preemption; rather, the court emphasized that the state 16 claim must require “an element not shared by the federal law.” Id. Just because 17 Deckers decided to plead bad faith does not mean that this allegation is even an 18 element of a UCL claim. The UCL does not necessarily require bad-faith conduct to 19 establish a violation. For example, under the “unlawful” prong, conduct that violates 20 another law—such as a law not involving any sort of bad faith—could serve as a 21 predicate for UCL liability. Cel-Tech Commc’ns, Inc. v. L.A. Cellular Tel. Co., 20 22 Cal. 4th 163, 180 (1999); Durell v. Sharp Healthcare, 183 Cal. App. 4th 1350, 1360– 23 61 (Ct. App. 2010). Since not every law requires bad-faith conduct, it follows that not 24 every UCL claim mandates it either. 25 Neither does the fact that the UCL authorizes additional remedies save the 26 claim from federal preemption. The Ninth Circuit requires that the state-law claim 27 have an element not shared by federal law; the remedies provided are irrelevant. See 28 Summit, 7 F.3d at 1439–40. 11 1 Since Deckers has failed to point out any element of its UCL claim not shared 2 by its federal ones, federal law preempts it. The Court thus GRANTS JC Penney’s 3 Motion on this ground WITHOUT LEAVE TO AMEND. 4 V. CONCLUSION 5 For the reasons discussed above, the Court GRANTS IN PART JC Penney’s 6 Motion to Dismiss with respect to Deckers’s claims for false designation of origin, 7 willful patent infringement, and the UCL. (ECF No. 25.) The Court DENIES the 8 Motion on all other grounds. If Deckers may do so consistent with Rule 11, it may 9 amend its Complaint with respect to presuit knowledge, if any, within 14 days. If 10 Deckers does not amend within that timeframe, JC Penney shall file its answer to the 11 remainder of Deckers’s First Amended Complaint within 35 days from the date of this 12 Order. 13 IT IS SO ORDERED. 14 15 September 8, 2014 16 17 18 19 ____________________________________ OTIS D. WRIGHT, II UNITED STATES DISTRICT JUDGE 20 21 22 23 24 25 26 27 28 12

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