Dropbox, Inc. v. Thru Inc.
Filing
135
ORDER by Judge Edward M. Chen Granting 97 Plaintiff's Motion for Summary Judgment. (emcsec, COURT STAFF) (Filed on 11/15/2016)
Case 3:15-cv-01741-EMC Document 135 Filed 11/15/16 Page 1 of 10
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UNITED STATES DISTRICT COURT
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NORTHERN DISTRICT OF CALIFORNIA
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Plaintiff,
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ORDER GRANTING PLAINTIFF’S
MOTION FOR SUMMARY JUDGMENT
v.
Docket No. 97
THRU INC.,
Defendant.
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For the Northern District of California
United States District Court
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Case No. 15-cv-01741-EMC
DROPBOX, INC.,
I.
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INTRODUCTION
Plaintiff Dropbox, Inc. (“Dropbox”) brought this action for declaratory relief seeking to
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establish its right to use the term “dropbox” as a trademark. Docket No. 1. Defendant Thru Inc.
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(“Thru”) brought counterclaims for trademark infringement under the Lanham Act, 15 U.S.C. §
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1125(a)(1)(A), and California common law, and for unfair competition under Cal. Bus. & Prof.
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Code § 17200 et seq. and cancellation of Dropbox‟s trademark registration under 15 U.S.C. §
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1119. Docket No. 33. Now pending before the Court is Dropbox‟s motion for summary judgment
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on Thru‟s counterclaims. Docket No. 97 (“Motion”). The Court GRANTS the motion.
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II.
FACTUAL AND PROCEDURAL BACKGROUND
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Dropbox is a large software company that produces an application allowing people to
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store, access, and modify electronic files online. Today, Dropbox has over 500 million users.
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Docket No. 98 (Vashee Decl.) ¶ 5. As of 2014, the company was valued at $10 billion. The
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company was founded in 2006. Co-founder and CEO Drew Houston states that he planned to use
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the name “Dropbox” from the start, having previously used folders called “dropboxes” to share
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files with other computer users. Docket No. 99 (Houston Decl.) ¶¶ 3-4. Dropbox launched its
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product in 2008, and it quickly attracted numerous users and significant press coverage. Id. ¶¶ 16-
Case 3:15-cv-01741-EMC Document 135 Filed 11/15/16 Page 2 of 10
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23. In late 2009, Dropbox applied to the United States Patent and Trademark Office (“PTO”) to
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register the DROPBOX trademark. Id. ¶ 24. Its application was published in March 2011.
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Docket No. 100 (Slafsky Decl.) ¶ 3.
After this publication, other companies claimed rights in the “dropbox.” In June 2011, a
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having used it beginning in 2004 to describe functionality similar to that offered by Dropbox. Ex.
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5.1 The parties reached a settlement according to which Officeware assigned its rights to
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Dropbox. Ex. 7. Also in 2011, Dropbox received demands from two other companies, YouSendIt
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and DropBoks, each of which claimed similar rights. Slafsky Decl. ¶ 13. Dropbox contended that
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the term was merely descriptive as used by these companies – indeed, the PTO had already denied
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a trademark application from DropBoks on this ground – and the companies ultimately did not
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For the Northern District of California
company called Officeware sued Dropbox claiming common law trademark rights in the term,
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United States District Court
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press their claims. The PTO issued Dropbox a trademark registration for DROPBOX in February
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2014. Id. ¶ 4.
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Defendant Thru is a company based in Texas that has, since 2002, offered a file
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management software program called File Transaction Hub (FTH). Docket No. 109 (Harrison
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Decl.) ¶ 2. In 2004, Thru added a feature that allowed its customers to receive digital files from
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third parties; it called this feature “DropBox.” Id. ¶ 12. In May 2004, Thru asked all of its
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employees to include the term in their email signature blocks. See Harrison Decl. Ex. 29. It also
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appears that Thru at times – though not always – appended a TM symbol when it used the
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“DropBox” designator on documents intended for customers and the general public, indicating its
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intent to use the term as a trademark. Compare id. Ex. 2 (using the symbol in an FTH user guide)
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with Ex. 3 (using the term DropBox without the symbol on the company web page).
Thru took no action to enforce any trademark rights in the term “dropbox” until December
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8, 2011, when Thru‟s counsel contacted Dropbox for the first time, asserting that Thru had “used
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its mark DROPBOX continuously since 2004.” Ex. 28. Counsel stated that Thru was “aware of
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the current trademark dispute regarding the mark” between Dropbox, Officeware, “and several
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Except where otherwise noted, “Ex.” refers to exhibits attached to the Slafsky declaration,
Docket No. 100.
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other claimants,” but asserted that Thru‟s rights that would take priority to any of those parties.
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Id. Thru asserts that after that point it offered to meet with Dropbox on multiple occasions “to
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resolve the ownership question.” Docket No. 107 (“Opp.”) at 19. On February 4, 2014, when the
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PTO issued Dropbox‟s trademark registration, Thru filed a Petition for Cancellation, but it did not
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otherwise take any action until Dropbox initiated the present suit on April 17, 2015. Thru then
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filed counterclaims for trademark infringement under the Lanham Act and California common
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law, and for unfair competition under Cal. Bus. & Prof. Code § 17200 et seq. and cancellation of
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Dropbox‟s trademark registration under 15 U.S.C. § 1119. Docket No. 33. Following discovery,
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Dropbox filed the instant motion for summary judgment on Thru‟s counterclaims.
III.
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For the Northern District of California
United States District Court
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A.
DISCUSSION
Legal Standard
“Summary judgment is appropriate only if, taking the evidence and all reasonable
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inferences drawn therefrom in the light most favorable to the non-moving party, there are no
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genuine issues of material fact and the moving party is entitled to judgment as a matter of law.”
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Torres v. City of Madera, 648 F.3d 1119, 1123 (9th Cir. 2011) (citing Corales v. Bennett, 567 F.3d
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554, 562 (9th Cir. 2009)). “[T]here is no issue for trial unless there is sufficient evidence favoring
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the nonmoving party for a jury to return a verdict for that party. If the evidence is merely
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colorable, or is not significantly probative, summary judgment may be granted.” McIndoe v.
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Huntington Ingalls Inc., 817 F.3d 1170, 1173 (9th Cir. 2016) (quoting R.W. Beck & Assocs. v. City
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& Borough of Sitka, 27 F.3d 1475, 1480 n.4 (9th Cir. 1994)).
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“A moving party without the ultimate burden of persuasion at trial” – such as Dropbox in
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this case – nonetheless “has both the initial burden of production and the ultimate burden of
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persuasion on a motion for summary judgment.” Nissan Fire & Marine Ins. Co. v. Fritz
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Companies, Inc., 210 F.3d 1099, 1102 (9th Cir. 2000). The moving party may discharge its initial
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burden by “show[ing] that the nonmoving party does not have enough evidence of an essential
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element to carry its ultimate burden of persuasion at trial.” Friedman v. Live Nation Merch., Inc.,
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833 F.3d 1180, 1188 (9th Cir. 2016) (quoting Nissan Fire, 210 F.3d at 1102). Where “a moving
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party carries its burden of production, the nonmoving party must produce evidence to support its
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claim or defense.” Id. (quoting Nissan Fire, 210 F.3d at 1102). The ultimate question at summary
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judgment is whether “the record taken as a whole could . . . lead a rational trier of fact to find for
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the non-moving party”; if not, then “there is no „genuine issue for trial.‟” Matsushita Elec. Indus.
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Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986) (quoting First Nat. Bank of Ariz. v. Cities
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Serv. Co., 391 U.S. 253, 287 (1968)); see also Dominguez-Curry v. Nevada Transp. Dep’t, 424
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F.3d 1027, 1039 (9th Cir. 2005).
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Dropbox argues that it is entitled to summary judgment for three reasons: (1) Thru has no
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trademark rights in “dropbox” because it failed to use it as a trademark and because “dropbox” is
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descriptive and Thru has not established secondary meaning; (2) even if Thru could demonstrate a
Officeware‟s rights; and (3) Thru‟s claims are barred by laches.
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For the Northern District of California
protectable interest in “dropbox,” Dropbox would have seniority by virtue of its acquisition of
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United States District Court
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B.
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Laches
The Court first addresses Dropbox‟s argument that Thru‟s claims are barred by laches.
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“Laches is an equitable time limitation on a party's right to bring suit,” . . . resting on the maxim
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that “one who seeks the help of a court of equity must not sleep on his rights.” Jarrow Formulas,
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Inc. v. Nutrition Now, Inc., 304 F.3d 829, 835 (9th Cir. 2002) (quoting Boone v. Mech. Specialties
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Co., 609 F.2d 956, 958 (9th Cir.1979)). “As the party asserting laches, [Dropbox] must show that
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(1) [Thru]‟s delay in filing suit was unreasonable, and (2) [Dropbox] would suffer prejudice
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caused by the delay if the suit were to continue.” Id. at 838. “While laches and the statute of
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limitations are distinct defenses, a laches determination is made with reference to the limitations
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period for the analogous action at law. If the plaintiff filed suit within the analogous limitations
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period, the strong presumption is that laches is inapplicable. . . . However, if suit is filed outside of
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the analogous limitations period, courts often have presumed that laches is applicable.” Id. at 836.
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“When a federal statute lacks a specific statute of limitations, we generally presume that Congress
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intended to „borrow‟ the limitations period from the most closely analogous action under state
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law.” Id. “[I]n determining the presumption for laches, the limitations period runs from the time
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the plaintiff knew or should have known about his [Lanham Act] cause of action.” Id. at 838.
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The first question, then, is whether Thru has brought its claims within the applicable
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limitations period. Thru asserts that the applicable limitations period is four years under
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California‟s “catch-all” limitations period, as set out in Cal. Prof. Bus. & Prof. Code § 17208.
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Dropbox suggests that the more appropriate limitations period might be the two-year limitations
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period for tort claims under Cal. Code Civ. P. § 339, but argues that Thru‟s claim is untimely
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whether the four year period or the two year period applies. The Court agrees.
In an interrogatory response verified by Thru CEO Lee Harrison, Thru stated that “Thru‟s
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directors and management first became aware of Dropbox, Inc., and its use of DROPBOX in mid-
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2011” and that “Thru‟s directors and management is not aware of any employee that was aware of
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Dropbox, Inc. and its use of DROPBOX at any earlier date.” Ex. 40. Record evidence shows that
Harrison, as well as other officers, informing them about Dropbox, which offered another service
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For the Northern District of California
this is not the case. On June 9, 2009, Thru‟s Chief Technology Officer sent an email to the
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United States District Court
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“to sync the files across computers.” Ex. 42. On June 15, 2009, the CTO wrote again, asking
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“[a]re we ok with web-only write only dropbox or we will need [sic] something like
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getdropbox.com2? They are very prominent in Mac community.” Ex. 43. In a sworn deposition,
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Harrison nonetheless insisted again that he had never heard of Dropbox before the summer of
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2011, at which point Dropbox had 40 million users. Ex. 34 at 138:20. When confronted with the
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CTO‟s 2009 emails, however, Harrison conceded that his interrogatory response had been “false.”
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Id. at 162:3-4. In light of this evidence, Harrison‟s continued assertion that “[Dropbox] did not get
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[his] attention until 2011” is simply not credible. “When opposing parties tell two different
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stories, one of which is blatantly contradicted by the record, so that no reasonable jury could
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believe it, a court should not adopt that version of the facts for purposes of ruling on a motion for
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summary judgment.” Scott v. Harris, 550 U.S. 372 (2007). This is especially so where the only
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evidence supporting them on this point is concededly false.
As the above evidence demonstrates, Thru‟s statement in its briefing on the present motion
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that “there is no evidence (or at least a factual dispute as to the evidence), that Thru knew or
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should have known of its claim against [Dropbox] prior to July 2011” is plainly false. Opp. at 18.
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At the time of this email, getdropbox.com was Dropbox‟s web address.
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Thru‟s officers, including its CEO, corresponded over email about Dropbox as early as June 2009,
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and Harrison conceded in his deposition that his earlier statement, that the company had not
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learned of Dropbox until 2011, was “false.” Ex. 34. Moreover, Harrison stated in Thru‟s Rule
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30(b)(6) deposition that in 2009, Thru believed that Dropbox‟s use of its name was
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“overwhelmingly an obvious violation of what we believe is our trademark.” Ex. 39 at 139-141.
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The evidence is simply uncontestable that Thru actually knew of Dropbox‟s use of what Thru
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believed was its trademark beginning in 2009.
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Thru asserts that it nonetheless was not required to act at that point because it “believed
[Dropbox]‟s use to be non-competitive or minimal in light of the customers Thru was targeting.”
consumer-oriented technology, while it targeted businesses. See Harrison Decl. ¶ 28; Docket No.
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For the Northern District of California
Opp. at 22 (citing Harrison Decl.. Specifically, Thru claims it believed Dropbox was a purely
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United States District Court
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108 Ex. 24 (Deposition of Thru‟s Former VP of Marketing and Product Strategy Thomas
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Skybakmoen). That, too, is not plausible. First of all, an email in the record shows that as early as
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January 2010, Thru was aware that it had lost at least one customer to Dropbox, which, the
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customer stated, “serve[d] [his] needs, both professionally and personally.” Ex. 44. But in any
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case, “the law is well settled that, where the question of laches is in issue the plaintiff is chargeable
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with such knowledge as he might have obtained upon inquiry, provided the facts already known
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by him were such as to put upon a man of ordinary intelligence the duty of inquiry.” 6 McCarthy
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on Trademarks § 31:38 (4th ed.) (quoting Johnston v. Standard Mining Co., 148 U.S. 360 (1893))
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(emphasis added). It is not disputed that by June 2009, Dropbox had over one million customers,
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and had been widely covered in the mainstream media, including coverage detailing business use
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of the product. See Ex. 91 (January 2009 NY Times article discussing business applications of
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Dropbox); Houston Decl. ¶ 20-22 (citing 2009 articles about Dropbox appearing in Forbes, PC
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Magazine, CNN, The Washington Post, and others and describing the growth in Dropbox‟s user
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base during 2009). Even if you were to credit this implausible testimony that it was not aware of
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Dropbox‟s commercial business in 2009, it clearly had inquiry notice sufficient to trigger laches.
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A company such as Thru in the business of providing online file storage and transfer software
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should have been aware of what was, by then, the preeminent company offering similar products
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in the field, and that this company posed a competitive threat. No reasonable fact finder could
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conclude otherwise. The Court therefore concludes that the limitations period began running in
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June 2009; because Thru had still taken no action in June 2013, when the four-year period expired,
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laches presumptively applies.
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Thru nonetheless argues that its delay was reasonable, first because it took some action
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during the intervening period, including sending its December 2011 demand letter to Dropbox.
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Opp. at 18-19. But “the delay, which the defense (of laches) contemplates, is not delay in bringing
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claims to the attention of the defendant. It is . . . delay on the part of the plaintiff in instituting
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litigation on his claims.” Danjaq LLC v. Sony Corp., 263 F.3d 942, 953 (9th Cir. 2001) (quoting
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Thru also argues that it was not required to act because, during 2011, after Dropbox‟s
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For the Northern District of California
United States District Court
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Nealey v. Transportacion Maritima Mexicana, S.A., 662 F.2d 1275, 1280 n. 6 (9th Cir.1980)).
registration was published, a number of other parties, including Officeware, YouSendIt, and
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Box.net, opposed Dropbox‟s trademark application to the PTO and claimed rights in the term
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“dropbox.” Thru argues that it “could not tell which of these parties had superior rights in the
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DROPBOX mark and decided to let them fight it out and then pursue the party that the PTO
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affirmed.” Opp. at 20. Thru provides no excuse why it did not join the other companies in
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asserting its own trademark rights before the PTO in a timely way. Indeed, a delay of this sort is
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precisely what laches is designed to guard against; Thru cannot simply “sleep on [its] rights,”
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allowing multiple other parties to expend significant resources litigating over rights that Thru
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believes it owns, only to belatedly pursue the victorious party. See Jarrow Formulas, 304 F.3d at
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835. Such an approach would unfairly prejudice all of the companies who did timely join the fray
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by asserting their claims. Thru cites a case that it claims allowed a similar approach, but in fact
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the case is inapplicable. See Novell, Inc. v. Unicom Sales, Inc., No. C-03-2785 MMC, 2004 WL
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1839117, at *1 (N.D. Cal. Aug. 17, 2004) In Novell, this court excused a party‟s delay in bringing
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suit when that party was, itself, already engaged in litigation over its right to use a trademark, and
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thus its right to bring suit was unsettled. Furthermore, the defendant in that case had promised to
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stop the allegedly infringing use, and the plaintiff promptly brought suit when the defendant broke
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the promise.
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Nor can Thru‟s petition for cancellation of Dropbox‟s trademark, filed with the PTO on
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February 4, 2014, salvage its claim. First, that petition was itself filed outside the limitations
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period. As noted above, it did not timely oppose Dropbox‟s application to the PTO in 2011.
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Second, while the 2014 proceeding challenged Dropbox‟s registration, Thru has conceded that it
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did not challenge Dropbox‟s right to continue using the mark. See Docket No. 19 (Thru‟s Motion
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to Dismiss) (“Thru has not and does not contest Plaintiff‟s use of the DROPBOX mark.”).
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Nothing about the cancellation petition put Dropbox on notice that its name was at risk; instead,
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Thru continued to delay litigation while allowing Dropbox to expend additional resources
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developing the value of its brand.
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Finally, and perhaps most significantly, the record belies Thru‟s explanation for the reason
behind its delay. Dropbox points to numerous documents that indicate that, in fact, Thru‟s delay
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For the Northern District of California
United States District Court
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was a deliberate attempt to maximize the value of its claims by leveraging an anticipated initial
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public offering from Dropbox. Thru had been explicitly contemplating a lawsuit concerning its
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trademark rights at least since February 2012, when Harrison wrote in an email to an investor:
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“New development turns out we own the term Dropbox . . . Our IP attorney is talking to
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Dropbox‟s attorney about buying the name from us . . . They raised 250M in October 2011 at 1B
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value. . . . An action could be had soon.” Ex. 47. Harrison repeatedly in emails described Thru‟s
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claim as a “lottery ticket.” Ex. 54 (discussing whether “a portion of the staff [had] no skin in DB
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lottery ticket game”); Ex. 62 (“Dropbox will be a lottery ticket.”). In October 2013 Harrison
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wrote that “My call is [Dropbox] want[s] us to file a lawsuit and treat us like [Officeware] so they
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can quietly dispose of this matter anytime they want to . . . The best leverage we have is to sit tight
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and wait to the IPO announcement and be prepared to file suit that day and make as much noise as
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we can about it.” Ex. 51; see also Ex. 57 (“If we wanted to be the first to file we should have done
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that last year. Time is on our side not theirs. Slow walking this to [Dropbox‟s pre-IPO] S1 filing
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is all that is important.”). In his deposition, Harrison confirmed that he had felt that a pending IPO
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“was a leverage point,” that “it would be tough for them to file without clear title” to their
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trademark, and that accordingly Dropbox “would come to us eventually and settle with us.” Ex.
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34 at 187.
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These documents demonstrate that Thru purposefully delayed bringing suit in an attempt to
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increase its leverage over Dropbox and thus the value of its claims. In its opposition to Dropbox‟s
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Motion, Thru did not respond to, or even mention, this evidence. At hearing, counsel for Thru
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merely stated that he did not think the evidence could bear the interpretation Dropbox would give
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it. The Court disagrees; it is difficult to see what other interpretation would be plausible with
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respect to the references to “slow walking” the case and the admonition to “sit tight and wait to the
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IPO announcement and be prepared to file suit that day.” In light of this evidence, no reasonable
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fact finder could conclude that Thru‟s delay was reasonable. If there is a paradigmatic set of facts
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that warrants laches, this is it.
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The only remaining question, then, is whether Thru‟s delay prejudiced Dropbox. Thru
claims it did not because there is “no evidence that [Dropbox] would have done anything
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For the Northern District of California
United States District Court
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differently if Thru had been one of the myriad of companies involved in disputing the DROPBOX
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mark earlier.” Opp. at 24. But as the Ninth Circuit has explained, a party “can make the required
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showing of prejudice by proving that it has continued to build a valuable business around its
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trademark during the time that the plaintiff delayed the exercise of its legal rights.” Grupo
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Gigante SA De CV v. Dallo & Co., 391 F.3d 1088, 1105 (9th Cir. 2004). That is precisely what
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happened here. If a trial resulted in a determination that Thru owned superior rights to the
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“dropbox” trademark, the costs to Dropbox would be massively greater today than they would
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have been years ago, because of Dropbox‟s continued investment in its brand. Thru concedes that
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during the relevant time period, Dropbox continued to “spend millions of dollars in attempting to
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build brand recognition” and continued to “build its business.” Opp. at 23.
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IV.
CONCLUSION
The Ninth Circuit has stated that laches is “seldom susceptible of resolution by summary
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judgment.” Couveau v. Am. Airlines, Inc., 218 F.3d 1078, 1083 (9th Cir. 2000). But there are
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numerous cases in which the Ninth Circuit has affirmed summary judgment determinations of
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laches. See, e.g., Grupo Gigante, 391 F.3d at 1105; Jarrow Formulas, 304 F.3d at 833 (citing
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additional cases). The evidence is overwhelming that Thru‟s delay in filing suit was unreasonable
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and prejudiced Dropbox, and summary judgment is therefore appropriate here. The Court
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accordingly holds that Thru‟s claims are barred by laches, and GRANTS Dropbox‟s motion for
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summary judgment on that ground. Because this determination is sufficient to decide the motion,
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the Court does not reach Dropbox‟s alternative arguments for summary judgment.
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This order disposes of Docket No. 97.
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IT IS SO ORDERED.
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Dated: November 15, 2016
______________________________________
EDWARD M. CHEN
United States District Judge
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For the Northern District of California
United States District Court
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