Baskim Holdings, Inc. v. Two M, Inc.
Filing
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ORDER. IT IS HEREBY ORDERED that 26 Plaintiff's Motion for Leave to File First Amended Complaint is granted and the hearing set for 2/16/17 at 10:30 A.M. is vacated. Signed by Magistrate Judge George Foley, Jr on 2/13/17. (Copies have been distributed pursuant to the NEF - ADR)
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UNITED STATES DISTRICT COURT
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DISTRICT OF NEVADA
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Plaintiff,
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vs.
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TWO , INC., d/b/a BABE’S CABARET,
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__________________________________________)
BASKIM HOLDINGS, INC,
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Case No.: 2:16-cv-01898-APG-GWF
ORDER
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This matter is before the Court on Plaintiff’s Motion for Leave to File First Amended Complaint
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(ECF No. 26), filed on January 20, 2017. Defendant filed its Opposition (ECF No. 28) on February 2,
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2017 and Plaintiff filed its Reply (ECF No. 29) on February 9, 2017. Having reviewed the parties’
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briefs, the Court concludes that oral argument on this motion is unnecessary.
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BACKGROUND AND DISCUSSION
Plaintiff filed its complaint against Defendant Two M, Inc., d/b/a Babe’s Cabaret (“TMI”) on
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August 10, 2016, alleging claims for trademark infringement under 15 U.S.C. § 1114, federal trademark
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counterfeiting under 15 U.S.C. § 1114, federal trademark dilution under 15 U.S.C. § 1125(c), unfair
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competition and false designation of origin under 15 U.S.C. §1125(a), cybersquatting under 15 U.S.C. §
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1125(d), common law trademark infringement, and violation of the Nevada Unfair and Deceptive Trade
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Practices Act. Complaint (ECF No. 1). The complaint alleges that Plaintiff obtained its federally
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registered trademarks in the name “Babe’s Cabaret” in 2015. Id. at ¶¶ 7-11. Defendant has allegedly
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violated Plaintiff’s registered trademarks by using the name “Babe’s Cabaret” for its adult
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entertainment business in Nevada.
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Defendant filed its answer on September 23, 2016. Answer (ECF No. 9). The scheduling order
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provided that December 22, 2016 was the last day to file motions to amend the pleadings. Order (ECF
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No. 16). The Court, however, granted Plaintiff’s unopposed motion to extend the amended pleadings
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deadline to January 23, 2017. Order (ECF No. 23). Plaintiff filed its instant motion on January 20,
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2017.
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The proposed amended complaint seeks to add Omar Aldabbagh as a defendant. It alleges that
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Mr. Aldabbagh is a founder of Defendant TMI and has continuously operated, controlled and had an
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ownership interest in TMI since its founding. Motion (ECF No. 26), Exhibit B, Proposed First
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Amended Complaint, ¶ 5. It alleges that Mr. Aldabbagh has been continuously responsible for
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overseeing the operations and marketing of TMI’s goods and services, including the company’s
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promotion of infringing services. Mr. Aldabbagh allegedly is the principal, driving force behind TMI’s
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past and continued infringement of Plaintiff’s trademarks. Id. at ¶ 18.
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Because Plaintiff’s motion for leave to amend was filed prior to the amendment deadline, the
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Court applies the liberal standard for amendment under Rule 15(a) of the Federal Rules of Civil
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Procedure. Foman v. Davis, 371 U.S. 178, 182, 83 S.Ct. 227, 230 (1962), states that leave to amend
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should be granted unless the court finds that there has been undue delay, bad faith or dilatory motive by
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the moving party, that the opposing party would suffer undue prejudice by the amendment, or the
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amendment would be futile. See also Eminence Capital, LLC v. Aspeon, Inc., 316 F.3d 1048, 1051-52
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(9th Cir. 2003).
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Defendant opposes the proposed amendment apparently on the grounds that it would be futile.
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Defendant has attached to its opposition a draft motion for summary judgment that it intends to file.
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Opposition (ECF No. 28), Exhibit 1. The draft motion states that Plaintiff’s adult entertainment
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businesses, known as Babe’s Cabaret, are located in Louisiana and New Jersey. Defendant has
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operated its adult entertainment business, also known as Babe’s Cabaret, in Henderson, Nevada since
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2006. Defendant argues that Plaintiff’s claims are barred under the “Tea-Rose Rule” which provides
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that “if the party who was first in time to use the trademark (the ‘senior user’) later enters the territory
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of the other party who adopted the trademark at a later date (the ‘junior user’) the senior users ability to
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enforce the trademark rights is restricted, in that the junior user retains the exclusive right to continue
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using the trademark in the geographic area in which it operates. See McCarthy on trademarks, Section
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26:2 et seq., Hanover Star Milling Company v. Metcalf, 240 U.S. 403 1916, known as the ‘Tea-Rose
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Doctrine’; United Drug Company v. Theodore Rectanus Company, 248 U.S. 90 (1918); Groupo
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Gigante SA v. Dallo and Company, Inc., 391 F.3d 1088, 1096 (9th Cir. 2004).” Exhibit 1, pgs 3-4.
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Defendant also argues that Plaintiff’s claims are barred by the “Dawn Donut Rule” which provides that
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“[e]ven if a senior user, armed with a federal trademark registration, establishes the right to enforce its
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nationwide trademark right in a junior user’s territory, the right to enjoin the junior user’s ongoing use
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of an infringing trademark can be enforced only if there is an actual likelihood of confusion. Dawn
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Donut Company v. Heart’s Food Stores, Inc., 267 F.2d 358 (2d Cir. 1959).” Id. at pgs 4-5. Defendant
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argues that because it operates its business in Henderson, Nevada and caters to a local clientele, there
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is no likelihood of confusion even if Plaintiff hereafter opens a similar business in Southern Nevada
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that uses the subject trademark.
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Issues of fact may exist regarding application of the “Tea-Rose Rule” or the “Dawn Donut
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Rule.” Groupo Gigante SA De CV v. Dallo and Company, Inc. states that the point of the Tea Rose-
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Rectanus doctrine is that “in a remote area, where no one is likely to know of an earlier user, it is
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unlikely that consumers would be confused by the second user’s use of the mark.” 391 F.3d at 1096-
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97. Whether consumers in Nevada would relate the name “Babe’s Cabaret” to the businesses operated
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by Plaintiffs in New Orleans or New Jersey may be open to reasonable debate. The Court is unable to
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conclude on the basis of the draft motion that Plaintiff’s claims are without merit and that the joinder
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of Mr. Aldabbagh as a defendant would be futile. It also makes more practical sense to allow
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Mr. Aldabbagh to be joined as a defendant, and avoid the delay that is likely to occur if Plaintiff is
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required to wait until the motion for summary judgment is decided before moving to join him as a
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defendant. Accordingly,
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IT IS HEREBY ORDERED that Plaintiff’s Motion for Leave to File First Amended
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Complaint (ECF No. 26) is granted and the hearing set for February 16, 2017 at 10:30 A.M. is
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vacated.
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DATED this 13th day of February, 2017.
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______________________________________
GEORGE FOLEY, JR.
United States Magistrate Judge
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