Karoun Dairies, Inc. v. Karoun Dairies, Inc. et al

Filing 67

ORDER Denying 39 Plaintiff's Motion for Preliminary Injunction; and Denying 38 Plaintiff's Motion to Dismiss the Counterclaim. Signed by Judge M. James Lorenz on 9/13/2010. (mjj)

-WVG Karoun Dairies, Inc. v. Karoun Dairies, Inc. et al

Doc. 67

1 2 3 4 5 6 7 8 9 10 11 KAROUN DAIRIES, INC., 12 13 v. 14 KAROUN DAIRIES, INC., et al. 15 16 17 18 Defendants; _________________________________ AND RELATED COUNTERCLAIM. Plaintiff, ) ) ) ) ) ) ) ) ) ) ) ) ) UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF CALIFORNIA Civil No. 08cv1521-L(WVG) ORDER (1) DENYING PLAINTIFF'S MOTION FOR A PRELIMINARY INJUNCTION, AND (2) DENYING PLAINTIFF'S MOTION TO DISMISS THE COUNTERCLAIM

This trademark infringement action arises from a family dispute over the right to use in

19 the United States a trademark previously established in the family business in Lebanon. Plaintiff 20 was first to use and register the mark in the United States and filed this infringement action 21 against Defendants. Defendants filed a counterclaim alleging that Plaintiff is the infringer and 22 requested cancellation of Plaintiff's registered mark. Plaintiff moved for a preliminary 23 injunction pursuant to Federal Rule of Civil Procedure 65(a) and to dismiss the counterclaim 24 pursuant to Rule 12(b)(6) for lack of trademark standing. For the reasons which follow, 25 Plaintiff's motions are DENIED. 26 27 28 For ease of reference, the court will refer to these parties throughout as Anto and Ara, respectively. No disrespect is intended by the use of first names.
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Plaintiff's founder, Anto Baghdassarian and Defendant Ara Baghdassarian are brothers.1

Dockets.Justia.com

1 Anto and Ara both worked for many years in the family dairy business in Lebanon ("Karoun 2 Lebanon").2 Karoun Dairies is a trade name which has been used in the family business since 3 1931 and is registered in Lebanon. Karoun Lebanon was well known in the Middle East and 4 exported its products as far as Paris and London. (Answer and Countercl. at 10-11.)3 5 Ara was Karoun Lebanon's financial controller and manager. (Answer and Countercl. at

6 10.) Anto was a shareholder, director and officer of Karoun Lebanon. In these capacities, he 7 was privy to the company's plans to further expand its business outside Lebanon. (Id. at 11.) In 8 approximately 1990, after the death of his father and due to civil unrest in Lebanon, Anto sold 9 his interest in Karoun Lebanon to Ara, and moved to the United States. (Id.; Decl. of Andrea M. 10 Kimball in Supp. of Karoun Dairies, Inc.'s Mot. for Prelim. Inj. ("Kimball Decl.") Ex. L at 30; 11 Decl. of John M. Nading in Supp. of Defs/Countercls' Opp'n to Pl./Counterdef.'s Mot. to 12 Dismiss ("Nading Decl.") Ex. B at 5).) While Ara asserts that they entered into an agreement 13 that Anto would not enter the dairy business, Anto disputes this. (Cf. Anto PI Decl. at 2 with 14 Third Decl. of Ara Baghdassarian in Supp. of Defs/Countercls' Opp'n to Pl./Counterdef's Mot. 15 to Dismiss ("Ara Mot. to Dismiss Decl.") at 1.) 16 Subsequently, Ara continued to manage Karoun Lebanon, which proceeded to expand its

17 business. Karoun Lebanon participated in local and intentional exhibitions, and advertised in 18 international directories and journals. (Answer and Countercl. at 11.) In 1998 Karoun Lebanon 19 registered the karoun.com and karoundairies.com domain names. (Suppl. Decl. of Andrea M. 20 Kimball in Supp. of Karoun Dairies, Inc.'s Reply in Supp. of Its Mot. for Prelim. Inj. (Suppl. 21 Kimball Decl.") Ex. 3.) It focused its expansion efforts on the United States, Canada, Australia 22 and Europe because these regions were politically stable and had large Lebanese and Armenian 23 communities. Karoun Lebanon registered its mark in Australia and Canada, it attempted 24 registration in the United States, and has a pending Community Trademark application in 25 Europe. (Answer and Countercl. at 11-12.) In 2004 or 2005 Karoun Lebanon had to 26 27 28 The family business was established in 1931 as a sole proprietorship known as Laiterie Karoun. In 1972 it was incorporated in Lebanon under the name Karoun Dairies, S.A.L.
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The factual allegations from pleadings referenced herein were not disputed.
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1 temporarily suspend production in Lebanon during a military conflict, however, it continued to 2 use the Karoun mark through its exclusive licensees, Defendants Karoun Dairies, Inc., a 3 Canadian corporation ("Karoun Canada") and Karlacti, Inc., a Delaware corporation 4 ("Karlacti"). (See Ara Mot. to Dismiss Decl. at 2.) 5 Anto started a dairy business in California in 1992, incorporated Plaintiff and started

6 selling cheese products. (Decl. of Anto Baghdassarian in Supp. of Karoun Dairies, Inc.'s Mot. 7 for Prelim. Inj. ("Anto PI Decl.") at 1-2.) Anto named his business after the family business in 8 Lebanon and marketed his products to Middle Eastern emigres in California and elsewhere in the 9 United States. (Nading Decl. Ex. B at 5; see also id. at Ex. A.) In 1993 Plaintiff registered 10 trademark "Karoun Dairies" and in 2003 it registered the mark "Karoun's California Cheese, a 11 Whole Milk Cheese." (Kimball Decl. Ex. A & B.) Plaintiff has invested in advertising and 12 promoting its marks in the United States by attending national trade shows and placing 13 newspaper and television advertising. (Anto PI Decl. at 4-5; Kimball Decl. Ex. B at 32-33.) 14 Plaintiff registered its first domain name, karouncheese.com, in 1999 and its second, 15 karoundairiesinc.com, in 2006. (Ara Mot. to Dismiss Decl. at 1.) Starting in February 2007, 16 Plaintiff registered a number of additional marks, including a circular logo with a drawing of a 17 cow's head and the word "karoun." (Kimball Decl. Ex. C-H.) 18 In January 2006 Ara retained intellectual property counsel in California. (Decl. of Ara

19 Baghdassarian in Supp. of Mot. to Dismiss for Lack of Personal Jurisdiction ("Ara Personal 20 Jurisdiction Decl.") at 1.) In June 2006 Ara's counsel filed a trademark application to register 21 the Karoun mark in the United States on behalf of Karoun Lebanon. Plaintiff objected and 22 demanded Ara to withdraw the application. Ara, on the other hand, asserted that Karoun 23 Lebanon intended to expand its business into the United States under the Karoun name and 24 demanded that Plaintiff cease and desist using the name. He argued that Anto had sold his right 25 to use the mark to Ara when he sold him his interest in the family business. In May 2007 Ara's 26 trademark application was abandoned. (See Order Denying Defendants' Motion to Dismiss for 27 Lack of Personal Jurisdiction, dated July 13, 2009 ("Personal Jurisdiction Order"), at 4.) In 28 / / / / /
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1 November 2007, Karoun Lebanon was able to register in the United States a circular logo with 2 two cows. (Ara PI Decl. Ex. B at 14.) 3 In July 2006 following the outbreak of military conflict in Lebanon, Ara and his family

4 immigrated into the United States. (Ara Personal Jurisdiction Decl. at 1.) In October 2006, Ara 5 and his family visited Anto and his family in California. While the precise nature of this visit is 6 disputed, Anto contends that Ara demanded a share in Plaintiff corporation or compensation, 7 both of which Anto denied. (See Personal Jurisdiction Order at 4-5.) 8 From October 2006 to August 2008, Ara contacted "a couple of times" Raffi Kradjian of

9 Kradjian Importing Co. in California. Mr. Kradjian is in the business of importing and 10 distributing Middle Eastern specialty foods in the United States. The precise nature of Ara's 11 contacts with Mr. Kradjian are disputed. According to Ara, he contacted Mr. Kradjian on behalf 12 of Karoun Lebanon to "get a general feel of the U.S. market." According to Anto, Ara 13 represented that his business was the "real" Karoun Dairies and asked him to deal only with Ara 14 to the exclusion of Plaintiff. (See Personal Jurisdiction Order at 5.) 15 In February 2007, Ara incorporated Karlacti in Delaware and in July 2008, he registered a

16 domain name karlacti.com. Although Karlacti has not and is not using the Karoun mark in 17 commerce in connection with any goods or services in the United States, its plans for expansion 18 in the United States were put on hold due to this litigation. (Third Decl. of Ara Baghdassarian in 19 His Capacity as President of Karlacti, Inc., a Delaware Corp., in Supp. of Defs/Countercls' 20 Opp'n to Pl./Counterdef's Mot. for Prelim. Inj. ("Ara Karlacti PI Decl.") at 2; Second Decl. of 21 Ara Baghdassarian in His Capacity as President of Karlacti, Inc., a Delaware Corp., in Supp. of 22 Defs/Countercls' Opp'n to Pl./Counterdef.'s Mot. to Dismiss ("Ara Karlacti Mot. to Dismiss 23 Decl.").) 24 In September 2007, Ara incorporated Karoun Canada, and in July and August 2008

25 registered domain names karoundairies.ca, karouncheese.ca, karounfoods.com, 26 karoundairiesgroup.com, karouncheese.net and karoundairy.com. The company had sales in 27 Canada starting in November 2007. All of its customers have been in Canada, and it has never 28 sold or offered for sale any products in the United States. The products are labeled "Not for sale
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1 in the USA." Its operations have been suspended due to this litigation. (Second Decl. of Ara 2 Baghdassarian in His Capacity as President of Karoun Dairies, Inc., a Canadian Corp., in Supp. 3 of Defs/Countercls' Opp'n to Pl./Counterdef's Mot. to Dismiss (Ara Karoun Canada Mot. to 4 Dismiss Decl."); Third Decl. of Ara Baghdassarian in His Capacity as President of Karoun 5 Canada, Inc., a Canadian Corp., in Supp. of Defs/Countercls' Opp'n to Pl./Counterdef.'s Mot. 6 for Prelim. Inj.) 7 Plaintiff admits that Karoun Canada registered the Karoun mark in Canada and has a right

8 to market and sell its goods under the Karoun name there. (Pl.'s Mot. for Prelim. Inj. at 19.) In 9 addition, in response to Plaintiff's demand letters (Ara PI Decl. at 1-2), Defendants' websites 10 include notices stating, "Licensees of the original KAROUN DAIRIES S.A.L. Beirut - Lebanon. 11 Not affiliated with KAROUN DAIRIES, Inc. California - USA incorporated without our 12 consent" and "KAROUN DAIRIES S.A.L. does not sponsor ARZ, GOPI LASSI and YANNI 13 branded dairy products."4 (Anto PI Decl. Ex. G.) Defendants are not "currently using the 14 KAROUN mark in commerce in connection with any goods or services in the United States, nor 15 targeting the United States under the KAROUN brand." (Defs' Opp'n to Pl.'s Mot. for Prelim. 16 Inj. at 3; see also id. at 17.) 17 In August 2008 Plaintiff filed a complaint against Ara, Karlacti and Karoun Canada. The

18 operative complaint claims trademark infringement under the Lanham Act and federal common 19 law, false designation of origin and federal unfair competition, dilution, and unfair competition 20 under California law. Defendants filed a counterclaim for false designation of origin and federal 21 unfair competition under the Lanham Act, cancellation of trademark registrations, and 22 accounting. 23 Contending that it likely will prevail on the merits of its infringement and unfair

24 competition claims, Plaintiff filed a motion for a preliminary injunction, requesting an order 25 prohibiting Defendants from using any trademarks owned by Plaintiff, or any references thereto 26 and from using Plaintiff's marks on any websites or products, including the use of Plaintiff's 27 28
4

ARZ, GOPI LASSI and YANNI are some of the products sold by Plaintiff.
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1 marks in the URL. In the alternative, Plaintiff requests that Defendants' websites be modified to 2 preclude visitors from the United States. 3 To the extent Plaintiff requests relief against Karoun Lebanon and its two web sites,

4 karoun.com and karoundairies.com, the court notes that Karoun Lebanon is not a party to this 5 action. "A federal court may issue an injunction if it has personal jurisdiction over the 6 parties . . .; it may not attempt to determine the rights of persons not before the court." Zepeda v. 7 INS, 753 F.2d 719, 727 (9th Cir. 1983); Fed. R. Civ. Proc. 65(d). Accordingly, Plaintiff's 8 motion for a preliminary injunction is denied as to Karoun Lebanon and its websites. 9 With respect to Karoun Canada, Karlacti and Ara, "[a] preliminary injunction is an

10 extraordinary remedy never awarded as of right." Winter v. Natural Res. Def. Council, Inc., __ 11 U.S. __; 129 S. Ct. 365, 376 (2008) "A plaintiff seeking a preliminary injunction must establish 12 that he is likely to succeed on the merits, that he is likely to suffer irreparable harm in the 13 absence of preliminary relief, that the balance of equities tips in his favor, and that an injunction 14 is in the public interest." Id. at 374. 15 The burden of proving the foregoing elements is on the moving party. Marlyn

16 Neutraceuticals, Inc. v. Mucos Pharma GmbH & Co., 571 F.3d 873, 877 n.2 (9th Cir. 2009). 17 "Once the moving party has carried its burden of showing a likelihood of success on the merits, 18 the burden shifts to the non-moving party to show a likelihood of that its affirmative defense will 19 succeed." Perfect 10, Inc. v. Amazon.com, Inc., 508 F.3d 1146, 1158 (9th Cir. 2007). 20 To prevail on a trademark infringement claim, Plaintiff must show that Defendants "(1)

21 use in commerce (2) any word, false designation of origin, false or misleading description, or 22 representation of fact, which (3) is likely to cause confusion or misrepresents the characteristics 23 of his or another person's goods or services." Marlyn Neutraceuticals, 571 F.3d at 877. 24 Plaintiff assumes that Defendants' use of the Karoun mark constitutes "use in commerce." It 25 contends that Defendants have caused initial interest confusion, which "occurs when the 26 defendant uses the plaintiff's trademark in a manner calculated to capture initial consumer 27 attention, even though no actual sale is finally completed as a result of the confusion." 28 Interstellar Starship Serv., Ltd. v. Epix, Inc., 304 F.3d 936, 941 (9th Cir. 2002). It argues that
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1 Defendants' use of domain names which include the word "Karoun" confuses customers who 2 wish to purchase products from Plaintiff.5 "To evaluate the likelihood of confusion, including 3 interest confusion, the so-called Sleekcraft factors provide non-exhaustive guidance," Id. at 942. 4 However, in the internet context, the three most important Sleekcraft factors "are (1) the 5 similarity of the marks, (2) the relatedness of the goods or services, and (3) the parties' 6 simultaneous use of the Web as a marketing channel." Id. When these factors suggest 7 confusion, the other factors must weigh strongly against a likelihood of confusion to avoid the 8 finding. Id. 9 It is undisputed that there is a likelihood of confusion in this case. The mark "Karoun

10 Dairy" is the same, the products are very similar, i.e., Mediterranean-style dairy products, and 11 the parties use the internet as their marketing channel. The remaining Sleekcraft factors do not 12 negate the likelihood of confusion. 13 Defendants argue the confusion was created when Plaintiff adopted the Karoun mark.

14 Plaintiff relies on a 2004 e-mail from a Costco employee to [e-mail] to show 15 an instance of actual confusion. (Anto PI Decl. Ex. I.) Because the domain name was registered 16 to Karoun Lebanon, the e-mail went there.6 However, this was two years before Ara attempted 17 to register a trademark in the United States, and three years before Karoun Canada and Karlacti 18 were incorporated. It therefore appears that Defendants did not cause the confusion, but that it 19 originated with Plaintiff's use of the Karoun mark. 20 Defendants do not dispute the strong likelihood of confusion, but instead argue that they

21 are senior users and have a right to use the Karoun mark in the United States. Plaintiff counters 22 that Plaintiff was the first to register the mark in the United States and has exclusive use under 23 Plaintiff's reliance on internet search engine results to support its argument is irrelevant. Interstellar Starship, 304 F.3d at 945 n.10 ("[W]e find largely irrelevant what results 25 when a given term is input into a search engine. Our initial interest confusion analysis does not depend on a given business's payment or lack thereof to the various search engines."). 26 6 In an attempt to show bad faith on Ara's part, Anto speculates that Karoun Lebanon set up e-mail boxes with the names of Plaintiff's employees attached to Karoun 27 Lebanon's domain names. (Anto PI Decl. at 6.) This argument is rejected because the evidence 28 offered in its support is speculative and because Defendants provided evidence to the contrary. (See Ara PI Decl. at 1.) Moreover, the e-mail was forwarded the same day to Plaintiff. 24
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1 the territoriality principle of trademark law. 2 "A fundamental principle of trademark law is first in time equals first in right. . . . [¶]

3 Under the principle of first in time equals first in right, priority ordinarily comes with earlier use 4 of a mark in commerce." Grupo Gigante SA de CV v. Dallo & Co., Inc., 391 F.3d 1088, 1093 5 (9th Cir. 2004). It is undisputed that Karoun Lebanon used the mark in commerce first, but not 6 in the United States, and that Plaintiff was first to use the mark in the United States. Under the 7 territoriality principle, the "priority of trademark rights in the United States depends solely upon 8 priority of use in the United States, not on priority of use anywhere else in the world. Earlier use 9 in another country usually just does not count." Id. (brackets, footnote and internal quotation 10 marks omitted). 11 However, "even those who use marks in other countries can sometimes - when their

12 marks are famous enough - gain exclusive rights to the marks in this country." Id. at 1095. This 13 is the case even when the foreign user has not used the mark in the United States. Id. at 1094; 14 see also id. at 1095. 15 16 17 18 19 While the territoriality principle is a long-standing and important doctrine within trademark law, it cannot be absolute. An absolute territoriality rule without a famous-mark exception would promote consumer confusion and fraud. Commerce crosses borders. In this nation of immigrants, so do people. Trademark is, at its core, about protecting against consumer confusion and palming off. There can be no justification for using trademark law to fool immigrants into thinking that they are buying from the store they liked back home. Grupo Gigante, 391 F.3d at 1094 (footnote omitted). To come within the exception, the foreign

20 user must show that its mark acquired a secondary meaning and a substantial percentage of 21 consumers in the relevant American market is familiar with the foreign mark. Id. at 1098. 22 "Secondary meaning refers to a mark's actual ability to trigger in consumers' minds a link

23 between a product or service and the source of that product or service. That is, a mark has 24 secondary meaning when, in the minds of the public, the primary significance of a mark is to 25 identify the source of the product rather than the product itself." Id. at 1095 (internal quotation 26 marks and footnote omitted). 27 Although Anto asserts that the "trademark and brand name KAROUN was not known by

28 consumers in the United States until I started Karoun in 1992" (Anto PI Decl. at 1), this bald
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1 assertion is contradicted by prior representations on Plaintiff's website: 2 3 4 Karoun, which is Armenian for "springtime," was the name of the family factory in Beirut, where Ohannese Baghdassarian specialized in yogurt before developing cheese-making skills. Almost anyone from that part of the world will recognize the name.

5 (Nading Decl. Ex. A. (emphasis added).) According to Plaintiff's own advertising, the Karoun 6 name was already known among the Middle Eastern immigrants in the United States. 7 To determine whether a substantial percentage of American consumers in the relevant

8 market is familiar with the foreign mark, the court considers the following: 9 10 11 12 13 The relevant American market is the geographic area where the defendant uses the alleged infringing mark. In making this determination, the court should consider such factors as the intentional copying of the mark by the defendant, and whether customers of the American firm are likely to think they are patronizing the same firm that uses the mark in another country. While these factors are not necessarily determinative, they are particularly relevant because they bear heavily on the risks of consumer confusion and fraud, which are the reasons for having a famous-mark exception.

14 Grupo Gigante, 391 F.3d at 1098. It is beyond dispute that Plaintiff intentionally copied the 15 Karoun mark. In addition to showcasing the history of Karoun Lebanon on Plaintiff's website, 16 Anto discussed it in interviews for industry publications. For example, Cheese Market News 17 published interviews with Anto and later his son Rostom Baghdassarian on September 15, 2000 18 and July 18, 2008, respectively. (Nading Decl. Ex. B & C.) Anto admitted that he named his 19 business after his family's plant in Beirut. (Id. Ex. B at 5.) In each instance, Plaintiff drew on 20 the long history of the family business. (Id. Ex. B & C.) However, when Ara asked Cheese 21 Market News for a clarification of the 2008 article to state that Karoun Lebanon is still in 22 existence and that it is separate from Plaintiff, Plaintiff protested. (See Kimball Decl. Ex. L; se 23 also Nading Decl. Ex. C at 12-13.) Plaintiff used the Karoun mark because it was already well24 known in the United States among the immigrants from the Middle East. Accordingly, 25 Defendants, as Karoun Lebanon's licensees, have shown a likelihood of prevailing on their 26 senior user defense. 27 It therefore does not appear likely that Plaintiff can prevail on its infringement claims

28 against Defendants. Because Plaintiff's unfair competition claim is based entirely on the
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1 infringement claims, it is also not likely that Plaintiff can prevail on the unfair competition 2 claim. 3 In the absence of likelihood of success on the merits, irreparable harm to Plaintiff cannot

4 be presumed. See Marlyn Pharmaceuticals, Inc., 571 F.3d at 877. Furthermore, any harm likely 5 to result from the denial of Plaintiff's motion is slight. Even if Plaintiff had met its burden for a 6 preliminary injunction, the court could not grant the requested relief against Karoun Lebanon or 7 its websites, karoun.com and karoundairies.com, because Karoun Lebanon is not a party. 8 Plaintiff admits that Karoun Canada registered the mark in Canada and is entitled use it there. 9 (Pl.'s Mot. for Prelim. Inj. at 19.) Karlacti does not incorporate the Karoun name. (See Kimball 10 Decl. Ex. I at 23.) Any relief would therefore be limited to the accessibility of Karoun Canada's 11 websites from the United States and disabling links, if any, on karlacti.com. However, because 12 Karoun Canada's and Karlacti's websites already contain disclaimers stating that they are not 13 associated with Plaintiff and because neither is selling any products, the benefit to Plaintiff from 14 granting injunctive relief likely would be meager. The likelihood of irreparable harm therefore 15 does not weigh in favor of granting Plaintiff's motion. 16 Last, based on the facts of this case, the court cannot find that the "balance of equities tips

17 in [Plaintiff's] favor" or that "an injunction is in the public interest." See Winter, 129 S. Ct. at 18 376. Accordingly, Plaintiff's motion for a preliminary injunction is DENIED. 19 Plaintiff also filed a motion to dismiss Defendants' counterclaims for lack of trademark

20 standing. A Rule 12(b)(6) motion tests the sufficiency of the complaint. Navarro v. Block, 250 21 F.3d 729, 732 (9th Cir. 2001). "While a complaint attacked by a Rule 12(b)(6) motion to 22 dismiss does not need detailed factual allegations, a plaintiff's obligation to provide the grounds 23 of his entitlement to relief requires more than labels and conclusions, and a formulaic recitation 24 of the elements of a cause of action will not do. Factual allegations must be enough to raise a 25 right to relief above the speculative level." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 26 (2007) (internal quotation marks, brackets and citations omitted). In reviewing a motion to 27 dismiss under Rule 12(b)(6), the court must assume the truth of all factual allegations and must 28 construe them in the light most favorable to the nonmoving party. Cahill v. Liberty Mut. Ins.
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1 Co., 80 F.3d 336, 337-38 (9th Cir. 1996). Legal conclusions need not be taken as true merely 2 because they are cast in the form of factual allegations. Roberts v. Corrothers, 812 F.2d 1173, 3 1177 (9th Cir. 1987); W. Mining Council v. Watt, 643 F.2d 618, 624 (9th Cir. 1981). Similarly, 4 "conclusory allegations of law and unwarranted inferences are not sufficient to defeat a motion 5 to dismiss." Pareto v. Fed. Deposit Ins. Corp., 139 F.3d 696, 699 (9th Cir. 1998). 6 "[W]hen ruling on a motion to dismiss, [the court] must disregard facts that are not

7 alleged on the face of the complaint or contained in documents attached to the complaint," with 8 the exception of the "incorporation by reference doctrine, which permits [the court] to take into 9 account documents whose contents are alleged in a complaint and whose authenticity no party 10 questions, but which are not physically attached to the [complaint]." Knievel v. ESPN, 393 F.3d 11 1068, 1076 (9th Cir. 2005) (internal quotation marks and citations omitted). Neither party 12 requested to convert Plaintiff's motion to dismiss to a motion for summary judgment. See Fed. 13 R. Civ. P. 12(d). Accordingly, Plaintiff's objections to Ara's affidavits filed with his opposition 14 are sustained. Ara's affidavits were not considered in ruling on this motion. For the same 15 reasons, Plaintiff's assertions of fact in its briefs (see, e.g., Pl.'s Mot. to Dismiss at 3 & 9 n.3; 16 Reply at 8), were also not considered. 17 Plaintiff argues that Defendants lack standing to pursue a counterclaim for false

18 designation of origin and federal unfair competition under 15 U.S.C. Section 1125(a) because 19 they did not use the Karoun mark in commerce in the United States. (See, e.g., Pl.'s Mot. to 20 Dismiss at 5-6.)7 Defendants point out, however, that in its motion for a preliminary injunction, 21 Plaintiff took the opposite position on Defendants "use in commerce" of the Karoun mark. See 22 Marlyn Neutraceuticals, 571 F.3d at 877 ("use in commerce" is an element). Moreover, in 23 opposition to Plaintiff's motion to dismiss for lack of personal jurisdiction, Anto declared that 24 Karoun Canada's web sites "actively solicit[] business from people in . . . the United States and 25 California." (Decl. of Anto Baghdassarian in Supp. of Karoun Dairies, Inc.'s Opp'n to Defs' 26 For purposes of this claim, the correct standard is that the claimant "need only allege commercial injury based upon deceptive use of a trademark or its equivalent to satisfy the 28 standing requirements." Jack Russell Terrier Network of N. Cal. v. Am. Kennel Club, Inc., 407 F.3d 1027, 1037 (9th Cir. 2005); see also Waits v. Frito-Lay, Inc., 978 F.2d 1093, 1109-10 (9th Cir. 1992). 27
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1 Mot. to Dismiss at 3.) Similarly, Plaintiff alleges in the operative complaint that Karoun Canada 2 "makes, distributes and sells the very same products as [Plaintiff] in the United States." (Second 3 Am. Compl. at 6.) 4 5 6 7 Where a party assumes a certain position in a legal proceeding, and succeeds in maintaining that position, he may not thereafter, simply because his interests have changed, assume a contrary position, especially if it be to the prejudice of the party who has acquiesced in the position formerly taken by him. This rule, known as judicial estoppel, generally prevents a party from prevailing in one phase of a case on an argument and then relying on a contradictory argument to prevail in another phase.

8 New Hampshire v. Maine, 532 U.S. 742, 749 (2001) (brackets, internal quotation marks and 9 citation omitted). "Its purpose is to protect the integrity of the judicial process by prohibiting 10 parties from deliberately changing positions according to the exigencies of the moment." Id. 11 (internal quotation marks and citations omitted). In considering whether to apply this equitable 12 doctrine in a particular case, three factors may inform the decision: 13 14 15 16 17 18 First, a party's later position must be "clearly inconsistent" with its earlier position. Second, courts regularly inquire whether the party has succeeded in persuading a court to accept that party's earlier position, so that judicial acceptance of an inconsistent position in a later proceeding would create the perception that either the first or the second court was misled. Absent success in a prior proceeding, a party's later inconsistent position introduces no risk of inconsistent court determinations, and thus poses little threat to judicial integrity. A third consideration is whether the party seeking to assert an inconsistent position would derive an unfair advantage or impose an unfair detriment on the opposing party if not estopped.

19 Id. at 750-51 (internal quotation marks and citations omitted). 20 In this case, the position that Defendants did not use the marks in commerce in the United

21 States, asserted in the motion to dismiss, is "clearly inconsistent" with the position that they did, 22 asserted in support of the motion for a preliminary injunction. It is also inconsistent with the 23 allegations in the operative complaint and declaration supporting personal jurisdiction over 24 Defendants. The court relied on Anto's declaration regarding Karoun Canada's activities in the 25 United States, among other things, in denying Defendants' motion to dismiss for lack of personal 26 jurisdiction. The declaration prejudiced Defendants because it was one of the bases for holding 27 that they were subject to personal jurisdiction in California. Furthermore, Plaintiff's attempt to 28 advance the inconsistent positions in the pending motions seeks an inherently inequitable result
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1 ­ that Defendants be enjoined based on allegedly infringing activity on one hand, while they 2 should be precluded from asserting claims against Plaintiff which arise from the right to use the 3 same mark. This tactic is particularly inequitable because Defendants have delayed their 4 planned expansion in the United States due to this pending action. (Ara Karlacti Mot. to Dismiss 5 Decl.; Ara Karoun Canada Mot. to Dismiss Decl.) 6 Because the fundamental premise of Plaintiff's lawsuit and its motion for a preliminary

7 injunction is that Defendants are using the Karoun mark in commerce in the United States so as 8 to damage Plaintiff's interest in the same mark in the United States, and in order to prevent 9 unfair detriment to Defendants, Plaintiff is hereby estopped from arguing that Defendants lack 10 standing on their counterclaim because they are not using the Karoun mark in commerce in the 11 United States. 12 Moreover, Defendants allege that Karoun Canada and Karlacti are exclusive licensees of

13 Karoun Lebanon. (Answer and Countercl. at 9.) To the extent Plaintiff's argument is based on 14 the contention that a third party not before the court is the mark's owner, the contention is 15 without merit. See Ninth Cir. Model Jury Instr. 15.14. 16 Plaintiff next contends that Defendants lack standing and fail to allege sufficient grounds

17 to state a claim for cancellation of a trademark registration under 15 U.S.C. Section 1064(3). 18 Defendants seek to cancel Plaintiff's registered marks "Karoun Dairies;" "Karoun's California 19 Cheese, a While Milk Cheese;" "Karounette" and "Karoun" & Design. 20 "The Lanham Act allows for cancellation of a Principal Register registration by anyone

21 `who believes that he is or will be damaged . . . by the registration.'" Cunningham v. Laser Golf 22 Corp., 222 F.3d 943, 945 (Fed. Cir. 2000), quoting 15 U.S.C. § 1064 (ellipsis in Cunningham). 23 "The party seeking cancellation must prove two elements: (1) that it has standing; and (2) that 24 there are valid grounds for cancelling the registration." Id. 25 Plaintiff argues that Defendants lack standing for the cancellation claim because they are 26 not using the marks in commerce in the United States.8 For the reasons discussed with respect to 27 28 In the cancellation context, standing "requires only that the party seeking cancellation believe that it is likely to be damaged by the registration. A belief in likely damage can be shown by establishing a direct commercial interest." Id. (internal citations omitted); see
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1 the first cause of action for false designation of origin and federal unfair competition, this 2 argument is rejected. 3 With respect to the second element of cancellation, Defendants rely on section 1064(3),

4 which provides that a registration can be cancelled at any time if "the registered mark is being 5 used by . . . the registrant so as to misrepresent the source of goods or services on or in 6 connection with which the mark is used." "A cancellation claim for misrepresentation under 7 § 14(3) requires a pleading that registrant deliberately sought to pass off its goods as those of 8 petitioner. Willful use of a confusingly similar mark is not sufficient." J. Thomas McCarthy, 9 McCarthy on Trademarks and Unfair Competition, § 20:60 (4th ed. 2010). 10 Defendants allege that Plaintiff intentionally used the Karoun name because it is well

11 known in the Middle East, and therefore well known to the Middle Eastern emigres in 12 California. (Answer and Countercl. at 12, 13.) Plaintiff intended its potential customers to 13 associate Plaintiff's products with the products of Karoun Lebanon, although Plaintiff was not 14 associated with Karoun Lebanon. (Id at 12, 15.) Specifically, on its website Plaintiff stated that 15 "Karoun . . . was the name of the family factory in Beirut, where Ohannese Baghdassarian 16 specialized in yogurt before developing cheese-making skills. Almost anyone from that part of 17 the world will recognize the name." (Id. at 12.) 18 These allegations go beyond willful use of a confusingly similar mark. Defendants allege

19 specific facts indicating a deliberate effort to pass off Plaintiff's goods as Karoun Lebanon's and 20 trade on its reputation. Accordingly, Plaintiff's motion to dismiss the cancellation claim is 21 denied. 22 Last, Plaintiff seeks to dismiss the third cause of action for accounting, arguing that it is a

23 remedy rather than an independent claim and that it depends entirely on the success of the 24 remaining claims. Because Plaintiff's motion is denied with respect to the remaining claims, its 25 / / / / / 26 27 also Star-Kist Foods, Inc. v. P.J. Rhodes & Co., 735 F.2d 346, 349 (9th Cir. 1984) (the petitioner 28 "must show a real and rational basis for his belief that he would be damaged by the registration sought to be cancelled, stemming from an actual commercial or pecuniary interest in his own mark").
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1 motion to dismiss accounting is also denied. Based on the foregoing, Plaintiff's motion to 2 dismiss the counterclaims is DENIED. 3 4 5 DATED: September 13, 2010 6 7 8 9 10 COPY TO: M. James Lorenz United States District Court Judge IT IS SO ORDERED.

HON. WILLIAM V. GALLO 11 UNITED STATES MAGISTRATE JUDGE 12 ALL PARTIES/COUNSEL 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28
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