Fitbit, Inc. v. Laguna 2, LLC et al
Filing
121
ORDER by Judge Edward M. Chen Denying 99 101 Defendants' Motions to Dismiss. (emcsec, COURT STAFF) (Filed on 9/29/2017)
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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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LAGUNA 2, LLC, et al.,
Docket Nos. 99, 101
Defendants.
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For the Northern District of California
United States District Court
ORDER DENYING DEFENDANTS’
MOTIONS TO DISMISS
v.
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Case No. 17-cv-00079-EMC
FITBIT, INC.,
Currently pending before the Court are two motions to dismiss, one filed by the Cali
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Defendants and Great Value and the other filed by the L2 Defendants. The Court held a hearing
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on the motions on September 28, 2017. This order memorializes the Court‟s rulings made at the
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hearing and provides additional analysis, as necessary.
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Both motions to dismiss are DENIED.
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As to the Cali Defendants and Great Value‟s motion to dismiss, the Court finds that there
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are sufficient allegations to support a fraud claim against the Cali Defendants – in particular,
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allegations as to why the Cali Defendants knew or should have known that BCS was defrauding
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Fitbit.
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As for the trademark infringement and related claims, the Cali Defendants and Great Value
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assert a first sale defense. More specifically, they take the position that an authorized first sale
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took place when Fitbit or an authorized reseller sold the Fitbit product to a consumer, even though
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the consumer ultimately returned the product to Fitbit. While the Court does not, at this juncture,
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foreclose this first sale argument, it has some doubts about the theory; the Cali Defendants and
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Great Value have not cited any case law finding the first sale doctrine applies in this particular
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context. Compare RFA Brands, LLC v. Beauvais, No. 13-14615, 2014 U.S. Dist. LEXIS 181781,
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at *22-23 (E.D. Mich. Dec. 23, 2014) (report and recommendation) (in a trademark case, holding
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that defendant failed to establish that first sales of products at issue were authorized for purposes
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of the first sale defense; noting that, at best, defendant was speculating as to the origin of the
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products and further “offer[ed] no rebuttal to plaintiff‟s proof that the products were returned
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product not to be resold”), adopted by 2015 U.S. Dist. LEXIS 14914 (E.D. Mich. Feb. 9, 2015).
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Therefore, the Court will not grant the motion to dismiss. Furthermore, even if a first sale had
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taken place, Fitbit has made sufficient allegations that there are material differences which would
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provide an exception to the first sale doctrine. This precludes dismissal at the 12(b)(6) phase of
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proceedings.
sale defense but they claim that the first sale took place when Fitbit gave Fitbit product to the BCS
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For the Northern District of California
As for the L2 Defendants‟ motion to dismiss, the L2 Defendants have also asserted the first
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United States District Court
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Defendants for destruction and/or recycling. However, there are at the very least questions of fact
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as to whether Fitbit actually sold Fitbit product to BCS (i.e., transferred title) or whether the
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relationship between Fitbit and BCS was more like a bailment relationship or a vendor services
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relationship. See, e.g., Vernor v. Autodesk, Inc., 621 F.3d 1102, 1107-08 (9th Cir. 2010) (in the
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context of copyright infringement, stating that “[t]he first sale doctrine does not apply to a person
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who possesses a copy of the copyrighted work without owning it, such as a licensee”; citing a
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Supreme Court case for the proposition that “„[t]he first sale doctrine would not provide a defense
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to . . . any non-owner such as a bailee, a licensee, a consignee, or one whose possession of the
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copy was unlawful‟”); Little, Brown & Co. v. American Paper Recycling Corp., 824 F. Supp. 11,
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13-16 (D. Mass. 1993) (in a copyright infringement case, finding a bailment for mutual benefit
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and not an outright sale, thus making the first sale doctrine inapplicable; the plaintiff was a
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publishing company, and it had an arrangement with the defendant-company under which the
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latter would pick up books from the plaintiff for purposes of recycling such books). And even if
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there were a sale, it is unclear whether the first sale doctrine applies to unauthorized sales.
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Compare FURminator, Inc. v. Kirk Weaver Enterprises, Inc., 545 F. Supp. 2d 685, 690 (N.D.
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Ohio 2008) (in a trademark infringement case, noting that “[g]oods are not genuine goods until
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their sale is authorized by the trademark owner” and then stating that “there is no dispute that [the
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plaintiff] did not authorize or approve the sale of the tools at issue” because the plaintiff
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determined that certain goods provided by the manufacturer did not meet its quality control
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standards and therefore it would not authorize the tools for sale but rather took steps to implement
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their destruction), with McCarthy v. Fuller, No. 1:08-cv-994-WTL-DML, 2013 U.S. Dist. LEXIS
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162826, at *4-6 (S.D. Ind. Nov. 15, 2013) (rejecting plaintiff‟s contention that the first sale
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“doctrine does not apply in situations in which the trademarked goods in question were not sold by
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the trademark holder at all, but rather were stolen or otherwise obtained illegally”; because the
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goal of trademark law is to protect against consumer confusion, “„a consumer purchasing genuine
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goods receives exactly what the customer expects to receive: genuine goods,‟” and so, “with
counterclaim plaintiff] – regardless of how they were obtained – those who purchased the
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For the Northern District of California
regard to the sale of the Medallions that the Counterclaim Defendants obtained from [the
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United States District Court
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Medallions received a genuine Medallion, not a substitute”). In addition, similar to above, there
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are questions of fact that cannot be resolved at the 12(b)(6) juncture because there are sufficient
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allegations in the complaint of material differences with respect to the Fitbit refurbished product
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being sold by the L2 Defendants.
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Finally, as to both sets of defendants, the Court notes that the first sale defense would not
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dispose of all trademark infringement and related claims against them because Fitbit has also made
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allegations that both sets of defendants improperly suggested that Fitbit authorized the sale of the
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goods at issue through, e.g., packaging, advertising, and misleading warranties.
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Accordingly, both the Cali Defendants/Great Value and the L2 Defendants‟ motions to
dismiss are denied.
This order disposes of Docket Nos. 99 and 101.
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IT IS SO ORDERED.
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Dated: September 29, 2017
______________________________________
EDWARD M. CHEN
United States District Judge
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