FN Cellars, LLC v. Union Wine Company

Filing 30

ORDER RE 20 MOTION TO DISMISS. Signed by Judge James Donato on 9/1/2015. (jdlc1S, COURT STAFF) (Filed on 9/1/2015)

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UNITED STATES DISTRICT COURT

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NORTHERN DISTRICT OF CALIFORNIA

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FN CELLARS, LLC,

Case No. 15-cv-02301-JD

Plaintiff,
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v.

ORDER RE MOTION TO DISMISS FOR
LACK OF SUBJECT MATTER
JURISDICTION

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UNION WINE COMPANY,

Re: Dkt. No. 20

Defendant.

United States District Court
Northern District of California

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Plaintiff FN Cellars, LLC (“FN Cellars”) has sued for declaratory relief and trademark

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cancellation under the Lanham Act. Dkt. No. 17. FN Cellars seeks a declaratory judgment of

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validity for its own trademark, and a declaration that its mark does not infringe on trademark

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rights held by defendant Union Wine Company (“Union Wine”). It also seeks cancellation of

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Union Wine’s mark. Defendant Union Wine has moved to dismiss for lack of subject matter

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jurisdiction pursuant to Federal Rule of Civil Procedure 12(b)(1) on the grounds that the dealings

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between the parties have not given rise to a justiciable case or controversy under the Declaratory

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Judgment Act. Dkt. No. 20. The Court denies the motion.

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BACKGROUND

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Two trademarks for wine are at issue in this case. FN Cellars owns a “BELLA UNION”

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trademark (U.S. Trademark Reg. No. 4,618,420) registered by the U.S. Patent and Trademark

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Office (“USPTO”) on October 7, 2014. Dkt. No. 17 at ¶¶ 9-15. Defendant Union Wine owns a

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“UNION WINE CO.” trademark (U.S. Trademark Reg. No. 4,486,053) that was registered on

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February 18, 2014. Dkt. No. 17 at ¶¶ 18-21.

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On June 15, 2014, after a Notice of Allowance for the BELLA UNION mark had issued,

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Union Wine’s attorney sent a letter to FN Cellars’ predecessor asserting its rights in the UNION

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WINE CO. mark. Dkt. No. 17 at ¶¶ 12, 22-23; Dkt. No. 20-1 (Reidl Decl.) at Ex. 1. Union Wine

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highlighted “an obvious likelihood of confusion” between the parties’ marks because “the marks

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both contain the same dominant term ‘UNION,’ the goods are identical, they will move in the

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same channels of trade and they will be purchased by the same type of consumers,” and stated that

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it “intend[ed] to petition to cancel [BELLA UNION] if the registration ever issues.” Dkt. No. 20-

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1 (Reidl Decl.) at Ex. 1; Dkt. No. 17 at ¶ 22. Union Wine’s lawyer also requested “that your client

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abandon the application and provide my client with an unequivocal undertaking not to use this

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mark on wine.” Dkt. No. 20-1 (Reidl Decl.) at Ex. 1; Dkt. No. 17 at ¶ 23. If such an undertaking

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were not provided by July 1, 2014, Union Wine would “proceed with a cancellation action at the

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earliest possible juncture.” Dkt. No. 20-1 (Reidl Decl.) at Ex. 1; Dkt. No. 17 at ¶ 23. A second
letter from Union Wine’s lawyer, sent on July 23, 2014, rejected “settlement terms offered” by FN

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United States District Court
Northern District of California

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Cellars’ predecessor and “your claim that the marks can co-exist without causing confusion.” Dkt.

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No. 21-1 (Kachigian Decl.) at Ex. 1; Dkt. No. 17 at ¶ 25. After that, the parties stopped

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communicating with each other. Dkt. No. 17 at ¶ 25.

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Union Wine filed a petition for cancellation of the BELLA UNION mark before the

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USPTO Trademark Trial and Appeal Board (“TTAB”) in February 2015, alleging that the parties’

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marks were “highly similar,” and that the BELLA UNION mark was “likely to cause confusion, or

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to cause mistake, or to deceive as to affiliation, connection, or association” between FN Cellars

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and Union Wine. Dkt. No. 17 at ¶ 26; Dkt. No. 20-1 (Reidl Decl.) at Ex. 2. The cancellation

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action was stayed by the TTAB after this case was filed. Dkt. No. 20 at 3.
DISCUSSION

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I.

STANDARDS
Well-established standards govern this motion. The Declaratory Judgment Act permits the

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Court to “declare the rights and other legal relations of any interested party” to a “case of actual

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controversy within its jurisdiction.” 28 U.S.C. § 2201(a). A case of actual controversy exists

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when the dispute is “‘definite and concrete,’” and can be addressed by “‘specific relief through a

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decree of a conclusive character.’” MedImmune, Inc. v. Genentech, Inc., 549 U.S. 118, 127 (2007)

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(quoting Aetna Life Ins. Co. v. Haworth, 300 U.S. 227, 240-41 (1937)). All that is necessary for

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jurisdiction is that “‘the facts alleged, under all the circumstances, show that there is a substantial
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controversy, between parties having adverse legal interests, of sufficient immediacy and reality to

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warrant the issuance of a declaratory judgment.’” Id. (quoting Maryland Cas. Co. v. Pac. Coal &

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Oil Co., 312 U.S. 270, 273 (1941)).

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Ninth Circuit decisions before and after MedImmune hold that trademark disputes are

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justiciable under the Declaratory Judgment Act when “‘the plaintiff has a real and reasonable

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apprehension that he will be subject to liability.’” Chesebrough-Pond’s, Inc. v. Faberge, Inc., 666

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F.2d 393, 396 (9th Cir. 1982) (quoting Societe de Conditionnement v. Hunter Eng’g Co., 655 F.2d

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938, 944 (9th Cir. 1981)). The showing of apprehension “need not be substantial” when an

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allegedly infringing mark is in use. See Societe de Conditionnement, 655 F.2d at 944. The Court
examines the acts of the defendant “in view of their likely impact on competition and the risks

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United States District Court
Northern District of California

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imposed upon the plaintiff, to determine if the threat perceived by the plaintiff were real and

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reasonable.” Chesebrough-Pond’s, 666 F.2d at 396. The Ninth Circuit has reaffirmed this

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approach post-MedImmune. See E. & J. Gallo Winery v. Proximo Spirits, Inc., 583 F. App’x 632,

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634 (9th Cir. 2014).

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The Court is not required to hear every declaratory judgment case. It may decline to

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exercise jurisdiction over a declaratory judgment action even when the facts show a live

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controversy. Neilmed Prods., Inc. v. Med-Sys., Inc., 472 F. Supp. 2d 1178, 1182 (N.D. Cal. 2007).

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The Supreme Court and Ninth Circuit have identified a number of prudential factors for the Court

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to consider in deciding whether to exercise jurisdiction. Id. at 1180 (citing Brillhart v. Excess Ins.

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Co. of Am., 316 U.S. 491 (1942); Gov’t Employees Ins. Co. v. Dizol, 133 F.3d 1220, 1225 (9th Cir.

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1998). Rather than repeat all those factors here, the Court will address later the pertinent ones as

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warranted.

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Although most of the salient terms in the parties’ communications were alleged in the

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Amended Complaint, Union Wine provided copies of its June 15, 2014 letter and its February

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2015 Cancellation Petition in support of its Motion to Dismiss. Dkt. No. 20-1. With its

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Opposition, FN Cellars provided a copy of the July 23, 2014 sent by Union Wine. Dkt. No. 21-1.

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These documents are properly before the Court and may be considered in deciding the motion.

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See St. Clair v. City of Chico, 880 F.2d 199, 201 (9th Cir. 1989) (“[A] Rule 12(b)(1) motion can
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attack the substance of a complaint’s jurisdictional allegations despite their formal sufficiency, and

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in so doing rely on affidavits or any other evidence properly before the court”); Safe Air for

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Everyone v. Meyer, 373 F.3d 1035, 1039 (9th Cir. 2004) (“In resolving a factual attack on

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jurisdiction the district court may review evidence beyond the complaint without converting the

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motion to dismiss into a motion for summary judgment”).

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SUBJECT MATTER JURISDICTION FOR THE VALIDITY AND
CANCELLATION CLAIMS

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The parties agree that there is no independent basis for subject matter jurisdiction over

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II.

plaintiff’s first claim, for declaratory judgment of validity for the “BELLA UNION” trademark
(U.S. Trademark Reg. No. 4,618,420), and third claim, for cancellation of Union Wine’s “UNION

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United States District Court
Northern District of California

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WINE CO.” trademark (U.S. Trademark Reg. No. 4,486,053). See Dkt. No. 20 at 4-5; Dkt. No. 21

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at 9-10. The Court’s jurisdiction over these claims is contingent upon a finding of subject matter

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jurisdiction over plaintiff’s second claim for declaratory judgment of non-infringement for the

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BELLA UNION mark. See Airs Aromatics, LLC v. Opinion Victoria’s Secret Stores Brand

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Mgmt., Inc., 744 F.3d 595, 599 (9th Cir. 2014).

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III.

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SUBJECT MATTER JURISDICTION FOR THE NON-INFRINGEMENT CLAIM
Significantly, Union Wine does not dispute that a definite and concrete controversy exists

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with FN Cellars -- it expressly concedes that there is “undeniably a controversy between the

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parties over the right to register their respective marks.” Dkt. No. 20 at 9. But Union Wine argues

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against jurisdiction in this Court because “Union has never threatened Plaintiff with litigation and

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damages; its only arguable ‘threat’ (made in June 2014) was to file a cancellation petition at the

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TTAB.” Dkt. No. 20 at 6. In Union Wine’s view, its lawyer’s letters to FN Cellars’ predecessor

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in June and July 2014 are best read as a “professional courtesy” made “in anticipation of” the

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subsequent TTAB cancellation proceeding, and “in an attempt to avoid a TTAB action,” and not

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as any kind of independent or implicit threat of litigation. Dkt. No. 23 at 3, 3 n.1. Brushing away

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the letters in this manner, Union Wine argues that there is no justiciable controversy here because

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“the filing of a TTAB action … without more is insufficient to support a declaratory judgment

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action for non-infringement.” Dkt. No. 20 at 8.
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Union Wine gives itself far too much benefit of the doubt. The undisputed record of
communications between the parties in pre-lawsuit correspondence and the TTAB cancellation

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action paint a clear picture of a “substantial controversy” that is “definite and concrete” enough to

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be addressed by the Court. See MedImmune, 549 U.S. at 127. Union Wine’s June 2014 letter laid

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out the elements of a potential infringement action by asserting its UNION WINE CO. mark and

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expressing certainty about “an obvious likelihood of confusion” between the parties’ marks. Dkt.

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No. 17 at ¶¶ 22-23; Dkt. No. 20-1 at Ex. 1. The letter went on to threaten that Union Wine would

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“proceed with a cancellation action at the earliest possible juncture” unless the BELLA UNION

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mark were abandoned and its owner provided Union Wine “with an unequivocal undertaking not

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to use [the BELLA UNION] mark on wine.” Dkt. No. 17 at ¶ 23; Dkt. No. 20-1 at Ex. 1. These

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United States District Court
Northern District of California

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facts amply establish the existence of an actual and justiciable controversy. See Chesebrough-

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Pond’s, 666 F.2d at 396-97 (“reasonable to infer … a threat of an infringement action” from a

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letter that stated “a prima facie case for trademark infringement” and was sent “declaring [an]

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intent to file opposition proceedings”); E. & J. Gallo, 583 F. App’x at 635 (finding subject matter

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jurisdiction where Gallo’s supplier, on the eve of distribution, received a “demand that all

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distribution of the Camarena bottle cease on the grounds that the Camarena and 1800 bottles were

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confusingly similar”). That Union Wine ultimately did file a cancellation action, again

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“invok[ing] the language of trademark infringement and dilution,” further supports a finding of

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jurisdiction. See Neilmed, 472 F. Supp. 2d at 1181 (finding subject matter jurisdiction in a case

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based on the substance of a notice of opposition alone).

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None of Union Wine’s arguments compel a different conclusion. Union Wine’s

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explanation that the June 2014 letter used the “language of infringement” only to identify the

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grounds for a threatened cancellation action is an after-the-fact spin to duck this lawsuit. Dkt. 23

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at 3. It does nothing to dispel FN Cellars’ reasonable apprehension that the legal language used in

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the letter -- and sent by a lawyer -- was an infringement threat. See Chesebrough-Pond’s, 666

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F.2d at 396 (applying a “flexible approach that is oriented to the reasonable perceptions of the

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plaintiff”). The letter did not need to contain an express threat that defendant would sue, or any

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other formulaic words, to create an actual controversy. See id. at 397; Societe de
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Conditionnement, 655 F.2d at 945. And Union Wine’s claim that it “never demanded that

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Plaintiff cease using the mark” is rebutted by its own letter and borders on a misrepresentation to

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the Court. Dkt. No. 20 at 7; Dkt. No. 20-1 at Ex. 1 (“We therefore request that your client …

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provide my client with an unequivocal undertaking not to use this mark on wine.”) Although

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Union Wine claims now that it “has never had any intention of seeking a damages award,” Dkt.

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No. 23 at 5, it has not given FN Cellars a covenant not to sue or any other formal assurance

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backing up its purportedly peaceful intentions. To the contrary, at the hearing on this motion it

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highlighted the possibility of filing counterclaims against FN Cellars. The plaintiff’s apprehension

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of suit here was eminently reasonable. See Chesebrough-Pond’s, 666 F.2d at 397; Neilmed, 472

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United States District Court
Northern District of California

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F. Supp. 2d at 1181-82.
Union Wine’s effort to shift attention to the plaintiff is equally misdirected. Union Wine

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argues that FN Cellars could not have had “any apprehension of immediate injury” because it

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“began using [its] mark in August 2014” and has not alleged that its “use of its trademark was in

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any way threated [sic] or impacted by the TTAB action.” Dkt. No. 20 at 6. Pulling a random

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factual thread out of Chesebrough-Pond’s, Union Wine argues that FN Cellars’ choice to continue

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using its mark -- despite Union Wine’s threats -- shows that it had no “reasonable apprehension of

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an infringement lawsuit.” Dkt. No. 23 at 4. Union Wine misapprehends the legal standard. The

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fact that a plaintiff does not fold after a demand letter and abandon use of a mark does not negate

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reasonable apprehension. To the contrary, that plaintiff’s “use of the allegedly infringing mark is

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ongoing actually makes the burden of showing apprehension lower.” Neilmed, 472 F. Supp. 2d at

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1181 (citing Societe de Conditionnement, 655 F.2d at 944).

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Taken as a whole, the facts and circumstances alleged in the Complaint and accompanying

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documents show a substantial controversy “of sufficient immediacy and reality to warrant the

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issuance of a declaratory judgment.” MedImmune, 549 U.S. at 127. A declaratory action is

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appropriate here so that plaintiff is not forced into the dilemma of choosing between foregoing

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competition in the market or “risking substantial future damages and harm to relationships with its

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customers and retailers.” Chesebrough-Pond’s, 666 F.2d at 397.

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IV.

EXERCISE OF JURISDICTION
The Court finds that no prudential factors weigh against the Court’s exercise of discretion.

See Dizol, 133 F.3d at 1225. This is a trademark action based on federal law, and so there are no

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state law issues in this case. There is no evidence of duplicative litigation -- the TTAB

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cancellation action, even if it were counted, has been stayed in favor of this action. Dkt. No. 20 at

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3; see Chesebrough-Pond’s, 666 F.2d at 397 (finding a PTO action no barrier to an action for

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infringement). Although defendant alleges that “[w]hat Plaintiff is really trying to do here is to get

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the cancellation case of the TTAB” so that the issues may be “decided by a jury applying Ninth

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Circuit law,” Dkt. No. 20 at 8, filing a declaratory action in this district does not amount to forum-

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shopping, especially when it is the acts of defendant that created federal court jurisdiction for this

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United States District Court
Northern District of California

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case in the first place. See Neilmed, 472 F. Supp. 2d at 1182 (“the mere commencement of federal

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litigation does not constitute forum-shopping or procedural fencing, however expensive litigation

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might be.”) A declaratory action is preferable to a TTAB action for addressing “all aspects of the

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controversy” between the parties, because the TTAB cannot address a trademark non-infringement

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claim. See Dizol, 133 F.3d at 1225 n.5; Dkt. No. 20 at 7. Consequently, the Court will exercise its

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discretion to take jurisdiction over this declaratory judgment action so the various trademark

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infringement and cancellation claims between the parties may be resolved in an expeditious

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manner.
CONCLUSION

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The Court denies Union Wine’s motion to dismiss. The Court finds and exercises subject

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matter jurisdiction over FN Cellars’ request for declaratory judgment of non-infringement, and

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consequently, over its trademark validity and cancellation claims. As directed at the hearing,

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Union Wine will have 10 days from the filing of this order to respond to the amended complaint.

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IT IS SO ORDERED.
Dated: September 1, 2015

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________________________
JAMES DONATO
United States District Judge

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