Opinion
Case No.: 2:22-cv-03909-AB-MAR
2023-02-23
EVO BRANDS, LLC, a Delaware limited liability company; and PVG2, LLC, a Delaware limited liability company, Plaintiffs, v. AL KHALIFA GROUP LLC, California Limited Liability Company; Overseek Investments, LLC, a California Limited Liability Corporation; Xtra Ecig LLC, a California Limited Liability Corporation; Mohammad Khalifa, an individual; Abbas Khalifa, an individual; and Omar Fdawi, an individual, Defendants.
John Allan Conkle, Zachary T. Page, Conkle Kremer and Engel PLC, Santa Monica, CA, Carrie A. Shufflebarger, Pro Hac Vice, Thompson Hine LLP, Cincinnati, OH, Eric N. Heyer, Pro Hac Vice, Thompson Hine LLP, Washington, DC, for Plaintiffs. Gary P. Simonian, Milord A. Keshishian, Milord and Associates PC, Los Angeles, CA, Stephanie V. Trice, Los Angeles, CA, for Defendants Al Khalifa Group LLC, Overseek Investments, LLC, Xtra Ecig LLC, Mohammad Khalifa.
John Allan Conkle, Zachary T. Page, Conkle Kremer and Engel PLC, Santa Monica, CA, Carrie A. Shufflebarger, Pro Hac Vice, Thompson Hine LLP, Cincinnati, OH, Eric N. Heyer, Pro Hac Vice, Thompson Hine LLP, Washington, DC, for Plaintiffs. Gary P. Simonian, Milord A. Keshishian, Milord and Associates PC, Los Angeles, CA, Stephanie V. Trice, Los Angeles, CA, for Defendants Al Khalifa Group LLC, Overseek Investments, LLC, Xtra Ecig LLC, Mohammad Khalifa. ORDER GRANTING DEFENDANTS' MOTION TO DISMISS FOR FAILURE TO STATE A CLAIM ANDRÉ BIROTTE JR., UNITED STATES DISTRICT COURT JUDGE
Pending before the Court is Defendants Al Khalifa Group LLC, Overseek Investments, LLC, Xtra Ecig LLG, and Mohammad Khalifa's ("Defendants") Motion to Dismiss Plaintiffs EVO Brands, LLC and PVG2, LLC's ("Plaintiffs") First Amended Complaint for failure to state a claim, filed October 21, 2022. ("Mot." or "Motion," Dkt. No. 27.) Plaintiffs filed an opposition ("Oppn." or "Opposition", Dkt. No. 29) and Defendants filed a reply ("Reply," Dkt. No. 30). Defendants filed two Requests for Judicial Notice. The first was filed with the Motion. ("First RFJN," Dkt. No. 27-1.) The second was filed with the Reply. ("Second RFJN," Dkt. No. 30-2.) Plaintiffs objected to the Second RFJN. (Dkt. No. 34.)
Having considered the materials and arguments submitted, and for the reasons discussed below, the Court GRANTS Defendants' Motion to Dismiss under Rule 12(b)(6) and DISMISSES this action with leave to amend.
I. BACKGROUND
Plaintiffs filed this action on June 8, 2022. ("Complaint," Dkt. No. 1.) Defendants filed a motion to dismiss on August 26, 2022. (Dkt. No. 21.) Before the motion to dismiss was ruled on, Plaintiffs filed an amended complaint on September 9, 2022. ("First Amended Complaint" or "FAC," Dkt. No. 25.) Defendants now move to dismiss the First Amended Complaint under rule 12(b)(6). (Mot., Dkt. No. 27.)
Plaintiffs and Defendants are in the business of selling electronic cigarette products containing nicotine, as well as other accessories to be used alongside electronic cigarettes (collectively, "Vape Products"). (FAC ¶¶ 13, 24-26.) Plaintiffs' current products use synthetic nicotine, which is created without the use of tobacco ("Synthetic Nicotine"), as opposed to Tobacco-Based Nicotine ("Tobacco-Based Nicotine").
Plaintiffs allege ownership of a family of marks incorporating the term "PUFF," as well as a distinctive cloud design ("The Marks"), under which Plaintiffs sell Vape Products. (FAC ¶¶ 13-23.) These marks include "PUFF BAR," "PUFF PLUS," "PUFF NANO," "PUFF FLOW," and "PUFF MAX." Id. The marks are usually stylized with the word "PUFF" appearing in the middle of the cloud design, with a line under it, below which the secondary word appears. Id.
Plaintiffs allege that Defendants began using confusingly similar marks around mid-to-late 2021. (FAC ¶ 28-34.) Defendants have historically sold Vape Products under the stylized trademark "XTRA." (FAC ¶ 27.) Around mid-to-late 2021, Defendants switched branding on their products to say "Puff Xtra" in a manner where the word "Puff" was significantly larger and more dominant than the word "Xtra." (FAC ¶ 28.) Plaintiffs provide a number of examples of the allegedly infringing products. (FAC ¶¶ 28-30.) Plaintiffs allege that Defendants' use of the allegedly infringing marks is causing actual consumer confusion, with harm to the value of Plaintiffs' trademarks as a result. (FAC ¶¶ 31, 39, 50, 54.)
Plaintiffs' federal claims consist of trademark infringement, unfair competition, and false designation of origin in violation of 15 U.S.C. § 1125(a)(1)(A). (FAC ¶¶ 47-51.) Plaintiffs' state law claims consist of unfair of the California Unfair Practices Act, Cal. Bus. & Prof. Code §§ 17200, et seq. (FAC ¶¶ 52-56.)
Defendants argue that Plaintiffs were assigned ownership of the Marks by DS Technology Licensing, LLC. (First RFJN, Ex. 7.) Defendants also argue that Plaintiffs' predecessor in interest to their business is Umais Abubaker, d/b/a Puff Bar ("Plaintiffs' Predecessor"). (Motion at 4; First RFJN at 1.)
Defendants argue that Plaintiffs' Predecessor did not have a lawful right to the Marks because Plaintiffs and Plaintiffs' Predecessor only ever used the Marks were only ever used on adulterated or misbranded nicotine products, and therefore cannot demonstrate legal use in trade. (Motion at 4-7.) Defendants rely on two warning letters from the FDA to Plaintiffs' Predecessor in making this argument. (Motion at 4-5; Reply at 2-3.) The first warning letter, sent on July 20, 2020, states that Plaintiffs' Predecessor's Tobacco-Based Nicotine products were adulterated and misbranded. (First RFJN at 1, Ex. 1.) The second warning letter, sent on October 6, 2022, informs Plaintiffs' Predecessor that, under new law as of March 15, 2022, Plaintiffs' Predecessors Synthetic Nicotine products were adulterated and misbranded. (Second RFJN at 1, Ex. A.)
II. LEGAL STANDARD
Rule 8 requires a plaintiff to present a "short and plain statement of the claim showing that the pleader is entitled to relief." Fed. R. Civ. P. 8(a)(2). Under Rule 12(b)(6), a defendant may move to dismiss a pleading for "failure to state a claim upon which relief can be granted." Fed. R. Civ. P. 12(b)(6).
To defeat a Rule 12(b)(6) motion to dismiss, the complaint must provide enough factual detail to "give the defendant fair notice of what the . . . claim is and the grounds upon which it rests." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). The complaint must also be "plausible on its face." Id. That is, it "must contain sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.' " Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (quoting Twombly, 550 U.S. at 570, 127 S.Ct. 1955). A plaintiff's "factual allegations must be enough to raise a right to relief above the speculative level." Twombly, 550 U.S. at 555, 127 S.Ct. 1955. "The plausibility standard is not akin to a 'probability requirement,' but it asks for more than a sheer possibility that a defendant has acted unlawfully." Id. Labels, conclusions, and "a formulaic recitation of the elements of a cause of action will not do." Id.
A complaint may be dismissed under Rule 12(b)(6) for the lack of a cognizable legal theory or the absence of sufficient facts alleged under a cognizable legal theory. Balistreri v. Pacifica Police Dep't., 901 F.2d 696, 699 (9th Cir. 1988). When ruling on a Rule 12(b)(6) motion, "a judge must accept as true all of the factual allegations contained in the complaint." Erickson v. Pardus, 551 U.S. 89, 94, 127 S.Ct. 2197, 167 L.Ed.2d 1081 (2007). But a court is "not bound to accept as true a legal conclusion couched as a factual allegation." Iqbal, 556 U.S. at 678, 129 S.Ct. 1937 (quotation marks omitted).
If a court determines that a complaint should be dismissed, it must then decide whether to grant leave to amend. Under Rule 15(a), leave to amend "shall be freely given when justice so requires," bearing in mind "the underlying purpose of Rule 15 to facilitate decisions on the merits, rather than on the pleadings or technicalities." Lopez v. Smith, 203 F.3d 1122, 1127 (9th Cir. 2000) (alterations and quotation marks omitted). When dismissing a complaint for failure to state a claim, "a district court should grant leave to amend even if no request to amend the pleading was made, unless it determines that the pleading could not possibly be cured by the allegation of other facts." Id. at 1130 (quotation marks omitted). Leave to amend generally shall be denied only if allowing amendment would unduly prejudice the opposing party, cause undue delay, or be futile, or if the moving party has acted in bad faith. Leadsinger, Inc. v. BMG Music Publ'g, 512 F.3d 522, 532 (9th Cir. 2008).
III. DISCUSSION
A. Judicial Notice
Judicial notice under Rule 201 permits a court to notice an adjudicative fact if it is "not subject to reasonable dispute." Fed. R. Evid. 201(b). A fact is "not subject to reasonable dispute" if it is "generally known," or "can be accurately and readily determined from sources whose accuracy cannot reasonably be questioned." Fed. R. Evid. 201(b)(1)-(2).
Just because the document itself is susceptible to judicial notice does not mean that every assertion of fact within that document is judicially noticeable for its truth. Khoja v. Orexigen Therapeutics, Inc., 899 F.3d 988, 999 (9th Cir. 2018). A court may not take judicial notice of the truth of disputed factual matters at the pleading stage. Lee v. City of Los Angeles, 250 F.3d 668, 688 (9th Cir. 2001).
A court may take judicial notice of matters of public record without converting a motion to dismiss into a motion for summary judgment. Fed. R. Evid. 201. However, a court cannot take judicial notice of disputed facts contained in such public records. Khoja v. Orexigen Therapeutics, Inc., 899 F.3d 988, 999 (9th Cir. 2018).
i. USPTO Records
Defendants seek judicial notice of five different items from USPTO records: (1) USPTO Trademark Status & Document Retrieval (TSDR) Documents Screenshot of U.S. Intent to Use Trademark Application No. 88550952, for PUFF BAR, plus design; (2) USPTO TSDR Documents Screenshot of U.S. Intent to Use Trademark Application No. 88729156 for PUFF PLUS, plus design; (3) USPTO TSDR Status Screenshot of U.S. Intent to Use Trademark Application No. 97358268, for PUFF MAX, plus design; (4) USPTO TSDR Status Screenshot of U.S. Intent to Use Trademark Application No. 97358265, for PUFF MAX; and (5) January 21, 2021 Trademark Assignment from DS Technology Licensing to Evo Brands, LLC retrieved from USPTO at the following URL: https://assignments.uspto.gov/assignments/assignment-tm-7213-0146.pdf. Each of the foregoing trademark applications were allegedly filed by Plaintiffs or their predecessors, pertaining to the Marks at issue. (FAC ¶ 15.)
The records of administrative bodies are appropriate subjects for judicial notice because they constitute matters of public record. Reyn's Pasta Bella, LLC v. Visa USA, Inc., 442 F.3d 741, 746 n.6 (9th Cir. 2006); Barron v. Reich, 13 F.3d 1370, 1377 (9th Cir. 1994). Similarly, a court can take judicial notice of a government's website. Daniels-Hall v. National Education Association, 629 F.3d 992, 999 (9th Cir. 2010) (taking judicial notice of information on the websites of two school districts because they were government entities); U.S. ex rel. Modglin v. DJO Glob. Inc., 48 F. Supp. 3d 1362, 1381-82 (C.D. Cal. 2014) (taking judicial notice of documents from the FDA's website). Court have taken judicial notice of trademark registrations and applications publicly available on the USPTO website in the past. Autodesk, Inc. v. Dassault Sys. SolidWorks Corp., No. 08-04397, 2008 WL 6742224, at *2 n.1 (N.D. Cal. Dec. 18, 2008) (taking judicial notice of trademark registrations and applications publicly available on USPTO website).
Here, Plaintiffs have also incorporated the foregoing applications by reference in the First Amended Complaint. (FAC ¶ 15.) Because the trademark applications are referenced in the complaint, they are appropriate for consideration regardless of judicial notice. Prime Healthcare Servs., Inc. v. Humana Ins. Co., 230 F. Supp. 3d 1194, 1203 (C.D. Cal. 2017); accord Lee v. City of L.A., 250 F.3d 668, 688-89 (9th Cir. 2001). It is therefore not necessary to reach the question of judicial notice as to the trademark applications.
The Court takes judicial notice of the assignment documents, as they are public records properly subject to judicial notice.
ii. FDA July 20, 2020 Warning Letter
Defendants seek judicial notice of a printout of a webpage on the Food & Drug Administration's website which publishes a July 20, 2020 "WARNING LETTER" to Plaintiffs' Predecessor. (First RFJN at 1, Ex. 1.) Defendants provide the following link to the website: https://www.fda.gov/inspections-compliance-enforcement-and-criminal-investigations/warning-letters/cool-clouds-distribution-inc-dba-puff-bar-608526-07202020. Id. at 1.
Defendants argue that the letter shows that Plaintiffs' Predecessor's sales of tobacco-based nicotine were illegal, and therefore cannot constitute use in trade. (Motion at 4-7.)
A court can take judicial notice of a government's website. Daniels-Hall v. National Education Association, 629 F.3d 992, 999 (9th Cir. 2010) (taking judicial notice of information on the websites of two school districts because they were government entities); U.S. ex rel. Modglin v. DJO Glob. Inc., 48 F. Supp. 3d 1362, 1381-82 (C.D. Cal. 2014) (taking judicial notice of documents from the FDA's website). However, a court that takes notice of a website need not take notice that the contents of the website are true. Farrell v. Boeing Emps. Credit Union, No. 16-CV-02711 NC, 2017 WL 1508993, at *3 (N.D. Cal. Apr. 26, 2017), aff'd in part on other grounds, vacated in part on other grounds, remanded, 761 F. App'x 682 (9th Cir. 2019) (taking judicial notice the Defense Finance and Accounting Service's website, but declining to notice that the contents of the website were true). In particular, a court cannot take judicial notice of disputed facts contained in such public records. Khoja, 899 F.3d 988.
The Court therefore takes judicial notice of the contents of the contents foregoing website, but does not take notice that the contents of the website are true.
iii. Archive.org Captures of Puffbar.com Website
Defendants seek judicial notice for three printouts taken from Archive.org, each purporting to represent a page from Puffbar.com as it existed on various dates. (First RFJN at 1-2.) Puffbar.com is Plaintiff PVG2's website, through which it advertises and sells its Vape Products. (FAC ¶ 13.) The captures were taken using Archive.org's "Wayback Machine," which captures and preserves snapshots of a website's state at specific time intervals. (First RFJN at 1-2.) The first purports to represent Puffbar.com on August 2, 2020; the second purports to represent the website on January 21, 2021; and the third purports to represent the website on February 19, 2021. Id.
Defendant argues that the August 2, 2020 capture demonstrates that Plaintiffs ceased marketing all nicotine products following the FDA July 20, 2020 warning letter. (Motion at 4.)
Defendants argue that the January 21, 2021 and February 19, 2021 captures show that Plaintiffs did not begin selling synthetic nicotine until February 19, 2021 at the earliest because the Puffbar.com home page displayed nicotine products on the latter date, but not the former. (Motion at 8-9.)
Courts have taken judicial notice of internet archives in the past, including Archive.org's "Wayback Machine," finding that Archive.org possesses sufficient indicia of accuracy that it can be used to readily determine the various historical versions of a website. UL LLC v. The Space Chariot Inc. et al., 250 F. Supp. 3d 596, 604 n.2 (C.D. Cal. 2017); Erickson v. Nebraska Mach. Co., No. 15-cv-01147-JD, 2015 WL 4089849, at *1 (N.D. Cal. July 6, 2015); see also Pond Guy, Inc. v. Aquascape Designs, Inc., No. 13-13229, 2014 WL 2863871, at *4 (E.D. Mich. June 24, 2014) ("As a resource the accuracy of which cannot reasonably be questioned, the Internet Archive has been found to be an acceptable source for the taking of judicial notice."); Martins v. 3PD, Inc., No. 11-cv-11313, 2013 WL 1320454, at *16 n.8 (D. Mass. Mar. 28, 2013) (taking judicial notice of "the various historical versions of a website available on the Internet Archive at Archive.org as facts readily determinable by resort to a source whose accuracy cannot reasonably be questioned"); Foreword Magazine, Inc. v. OverDrive, Inc., No. 1:10-cv-1144, 2011 WL 5169384, at *3 (W.D. Mich. Oct. 31, 2011) ("[T]he federal courts have recognized that Internet archive services, although representing a relatively new source of information, have sufficient indicia of reliability to support introduction of their contents into evidence, subject to challenge at trial for authenticity.").
However, the inquiry does not end there. Just because the document itself is susceptible to judicial notice does not mean that every assertion of fact within that document is judicially noticeable for its truth. Khoja, 899 F.3d at 999. In other words, it is an extra deductive step to take notice of the alleged facts that Plaintiff used the Marks in trade on the dates when content appeared on the website, and did not use the Marks in trade on dates when content did not appear on the website. There is good reason not to take this step. The accuracy of Archive.org as an internet archive service does not speak to the accuracy of the underlying archived websites. Archive.org may accurately archive a commercial website which itself inaccurately states which products are being sold. Furthermore, because Plaintiffs' priority date is a disputed fact, it is therefore an inappropriate subject for judicial notice. Lee, 250 F.3d at 688.
The Court therefore takes judicial notice of the Archive.org screen captures, subject to challenge at trial for authenticity, but does not take notice of the truth of their contents.
iv. Wall Street Journal Article
Defendants seek judicial notice of the contents of a Wall Street Journal Article dated March 2, 2021, and available at https://www.wsj.com/articles/puff-bar-defies-fda-crackdown-on-fruity-e-cigarettes-by-ditching-the-tobacco-11614681003. (First RFJN at 1.)
To the extent the court can take judicial notice of press releases and news articles, it can do so only to indicate what was in the public realm at the time, not whether the contents of those articles were in fact true. Von Saher v. Norton Simon Museum of Art at Pasadena, 592 F.3d 954, 960 (9th Cir. 2010); In re Disciplinary Proceedings of Yana, No. 2012-SCC-0017-ADA, 2014 WL 309314 (N.M.I. Jan. 28, 2014).
Here, Defendants argue that the article's contents prove that Plaintiff does not have priority. (Motion at 8-9.) As stated before, Plaintiffs' priority date is a disputed fact, and is therefore an inappropriate subject for judicial notice. Lee, 250 F.3d at 688.
For the foregoing reasons, the Court takes judicial notice of the requested Wall Street Journal article, but declines to notice that the article's contents are true.
v. FDA October 6, 2022 Warning Letter
Defendants seek judicial notice of a printout of a webpage on the Food & Drug Administration's website which publishes an October 6, 2022 "WARNING LETTER" to Plaintiffs. The website is available at the following link: https://www.fda.gov/inspections-compliance-enforcement-and-criminal-investigations/warning-letters/evo-brands-llc-and-pvg2-llc-dba-puff-bar-643091-10062022.
Defendants argue that the October 6, 2022 warning letter shows that all of Plaintiffs' synthetic nicotine sales have been illegal, and thus cannot support an argument for use in trade. (Reply at 2-3.)
Plaintiffs object to this request on the basis that it is untimely, since it was first filed with Defendants' Reply and therefore gave Plaintiffs inadequate time to respond. (Dkt. 34 at 1.) Plaintiffs further respond that the October 6, 2022 warning letter only speaks to three of Plaintiffs' products, and not all of them, and thus does not support Defendants' argument that Plaintiffs' products are illegal.
As discussed above, a court may take judicial notice of the contents of a government website, but need not take notice that the contents of the website are true. Daniels-Hall, 629 F.3d at 999; U.S. ex rel. Modglin, 48 F. Supp. 3d at 1381-82; Farrell, No. 16-CV-02711 NC, 2017 WL 1508993, at *3 (N.D. Cal. Apr. 26, 2017). When the contents comprise disputed facts, a court cannot take notice of their truth. Khoja, 899 F.3d 988.
The Court takes judicial notice of the contents of the website because it is properly subject to judicial notice, but declines to take notice of the truth of the website's contents.
vi. YouTube Screenshot
Defendants seek judicial notice of a screenshot taken from YouTube on October 4, 2022. (Second RFJN at 1, Ex. B.) The screenshot purports to display a YouTube video published on June 16, 2020 by "The smoke don," titled "PUFF XTRA 1,500 PUFF DISPOSABLES." Id.
Defendants argue that this screenshot shows that Defendants are the senior user of the Marks. (Reply at 2.) However, it is inappropriate to determine the factual issue of a defendant's prior use at the pleading stage. Planet Coffee Roasters, Inc. v. Dam, No. SACV 09-00571-MLG, 2009 WL 2486457, at *2 (C.D. Cal. Aug. 12, 2009) (denying 12(b)(6) motion which argued that dismissal was appropriate because the defendant was a prior user of the plaintiff's mark). Further, priority date is a disputed fact, and is therefore an inappropriate subject for judicial notice. Lee, 250 F.3d at 688.
As discussed above, it is inappropriate to judicially notice disputed facts at the pleading stage. Lee, 250 F.3d at 688. As such, the Court declines to take judicial notice of the YouTube screenshot.
vii. Archive.org Capture of Vapemasterz.com Website
Finally, Defendants seek judicial notice of a printout of Archive.org's capture of the website Vapemasterz.com. (Second RFJN at 1.) The screen capture, also taken using the "Wayback Machine," purports to represent a page from the website as it existed on August 7, 2020 and purports to display a disposable e-cigarette sold by Defendants containing the term "puff." Id. Defendants argue that this screenshot proves that Defendants are the senior user of the Marks. (Reply at 3.)
As discussed above, it is inappropriate to determine the factual issue of a defendant's prior use at the pleading stage. Planet Coffee Roasters, Inc. v. Dam, No. SACV 09-00571-MLG , 2009 WL 2486457, at *2 (C.D. Cal. Aug. 12, 2009). Furthermore, it is inappropriate to judicially notice disputed facts at the pleading stage. Lee, 250 F.3d at 688. As such, the Court declines to take judicial notice of the foregoing Archive.org capture.
B. Failure to State a Claim
The same standard applies to infringement of both registered and unregistered trademarks. GoTo.com, Inc. v. Walt Disney Co., 202 F.3d 1199, 1205 n.3 (9th Cir. 2000). To establish a trademark infringement claim or an unfair competition claim under the Lanham Act, a plaintiff must show that (1) the plaintiff has a protectable ownership interest in the mark, and (2) that the defendant's use of the mark is likely to cause consumer confusion. 15 U.S.C.A. §§ 1114(1), 1125(a); Brookfield Commc'ns, Inc. v. W. Coast Ent. Corp., 174 F.3d 1036, 1046 (9th Cir. 1999). The standard test of ownership is priority of use - that is to say, the party claiming ownership must have been the first to actually use the mark in the sale of goods or services. Sengoku Works Ltd. v. RMC Int'l, Ltd., 96 F.3d 1217, 1219 (9th Cir.), as modified, 97 F.3d 1460 (9th Cir. 1996).
Plaintiffs do not attempt to rely on any federal trademark registrations or applications to support their claims, instead arguing that their claims arise purely from common law trademark claims. (Oppn. at 1.)
Plaintiffs were assigned four different intent-to-use trademark applications by Plaintiffs' Predecessor. (FAC ¶ 15; First RFJN, Ex. 7.) Defendants argue that these assignments violate the Lanham Act's anti-trafficking rule, which prohibits the assignment of an ITU application under certain circumstances. (Motion at 7-8.) Because Plaintiffs admittedly do not base their trademark ownership claims on the ITU applications, it is unnecessary to evaluate this argument.
i. Protectable Ownership Interest
California Business and Professions Code § 17200 claims are "substantially congruent" with federal trademark claims, and the analysis under each regime is therefore the same. Cleary v. News Corp., 30 F.3d 1255, 1262-63 (9th Cir. 1994); Grupo Gigante S.A. de C.V. v. Dallo & Co., 391 F.3d 1088, 1100 (9th Cir. 2004). As such, the Court will analyze Plaintiffs' federal and state claims together.
It is not necessary that a trademark be registered in order for it to qualify for protection under the Lanham Act. New W. Corp. v. NYM Co. of California, 595 F.2d 1194, 1198 (9th Cir. 1979). However, without registration, a mark does not receive the prima facie presumption of validity that registered marks benefit from. Brookfield Commc'ns, Inc. v. W. Coast Ent. Corp., 174 F.3d 1036, 1047 (9th Cir. 1999). A plaintiff claiming an unregistered trademark must therefore alleges sufficient facts to support it's assertion that it has a valid ownership interest in the mark. Sebastian Brown Prods., LLC v. Muzooka, Inc., 143 F. Supp. 3d 1026, 1041 (N.D. Cal. 2015). When a plaintiff claims priority by alleging that the plaintiff used the mark in commerce before a defendant, that plaintiff must allege the plaintiff's date of first use. Id. at 1040-41. It is insufficient, for example, to merely allege that a plaintiff has used the mark "for several years." Id. at 1041.
A court may generally consider facts subject to judicial notice at the pleading stage without converting the movant's motion into one for summary judgment. Mullis v. U.S. Bankr. Court, 828 F.2d 1385, 1388 (9th Cir. 1987).
However, it is inappropriate to determine the factual issue of prior use at the pleading stage. Planet Coffee Roasters, Inc. v. Dam, No. SACV 09-00571-MLG, 2009 WL 2486457, at *2 (C.D. Cal. Aug. 12, 2009) (denying 12(b)(6) motion which argued that dismissal was appropriate defendant was a prior user of plaintiff's mark); Roseville Fullerton Burton Holdings, LLC v. SoCal Wheels, Inc., No. SACV141954JLSJCGX, 2016 WL 6159014, at *5 (C.D. Cal. May 20, 2016). "If defendants are permitted to present their own version of the facts at the pleading stage—and district courts accept those facts as uncontroverted and true—it becomes near impossible for even the most aggrieved plaintiff to demonstrate a sufficiently "plausible" claim for relief." Khoja v. Orexigen Therapeutics, Inc., 899 F.3d 988, 999 (9th Cir. 2018) "Trademark cases are not resolved with only a stopwatch that pinpoints the time of first use. Put differently, the prior use concept is not only about who used a [m]ark first. Trademark rights are also based, in large part, on the way that a holder uses a [m]ark." Advanced Baseball Acad., LLC v. Google, Inc., No. 14-2461-CM, 2015 WL 1440656, at *7 (D. Kan. Mar. 30, 2015) (citing 1 Anne Gilson Lalonde, Gilson on Trademarks § 3.02 (Matthew Bender 2014)). As such, it is only necessary to determine whether Plaintiffs can allege prior use. It is not necessary to parse Defendants' evidence to determine which party actually has priority. The Court therefore declines to do so at this stage.
Plaintiffs argue that two of the documents for which Defendants seek judicial notice, the February 19, 2021 printout from Puffbar.com and the March 2, 2021 Wall Street Journal article, establish use dates by Plaintiff as least as early as February 19, 2021, and March 2, 2021, respectively. (Oppn. at 14; Dkt. No. 27-1, Ex. 10; Dkt. No. 27-1; Ex. 8.) As explained above, these documents are not judicially noticeable for the truth of the facts asserted therein at the pleading stage. Lee, 250 F.3d at 688. Furthermore, even if judicial notice were appropriate, it is insufficient for Plaintiffs to merely state dates on which Plaintiffs used the Marks, because they fail to state the first date of use. Brown Prods., LLC, 143 F. Supp. 3d at 1040-1041. Defendants are therefore left guessing as to whether February 19, 2021 is the earliest date that Plaintiffs used the Marks, or whether there is an earlier date.
However, where a complaint could be cured by the allegation of other facts, as it could here, a court should grant leave to amend. Lopez v. Smith, 203 F.3d 1122, 1127 (9th Cir. 2000). Here, it is clearly possible that Plaintiff could allege a priority date such that it could state a claim. The Court therefore grants leave to amend in this instance.
ii. Legal Use
Defendants argue that neither Plaintiff nor Plaintiffs' Predecessor have made lawful use of the Marks in commerce because all of the products sold were adulterated under § 902(6)(A) of the FD&C Act and were misbranded under § 903(a)(6) of the FD&C Act. (Mot. at 1.) Defendants' argument for illegality is two-pronged.
First, Defendants argue that Plaintiffs' sales of Tobacco-Based Nicotine products were adulterated for the entire time that they were sold, on the basis of a July 20, 2020 warning letter from the FDA to Plaintiffs' predecessor in interest stating as such. (Mot. at 4-5; Dkt. No. 27-1 at 7-10.) Because Plaintiffs' FAC does not assert use in trade as to tobacco-based nicotine products, it is unnecessary to address this argument.
Second, Defendants argue that Plaintiffs' sale of Synthetic Nicotine products was also illegal, basing this contention on an October 6, 2022 letter from the FDA to Plaintiffs. (Reply at 2-3; Dkt. No. 30-1 at 2, 7-10.) This letter allegedly informed Plaintiffs that amendments to the FD&C Act enacted on March 15, 2022 extended the FDA's jurisdiction to products containing nicotine from any source, not just nicotine from tobacco, and that the FDA using this new jurisdiction, had determined that Plaintiff's sales of synthetic nicotine were unlawful. (Dkt. 30-1 at 8-9.) See also Consolidated Appropriations Act, 2022, Public Law 117-103, Division P, Title I, Subtitle B; 21 U.S.C. § 321(rr).
Defendants' arguments hinge on documents that, while judicially noticeable for their existence, ultimately do not need to be noticed for the truth of their contents at the pleading stage, as discussed extensively above. Defendants are free to make their argument for illegality based on this evidence on a motion for summary judgment, but consideration of this issue is simply not appropriate on a 12(b)(6) motion.
iii. Likelihood of Confusion
Plaintiffs have adequately pled likelihood of confusion. (FAC ¶¶ 35, 40.) Further, Defendants do not contest that Plaintiff has adequately pled likelihood of confusion.
IV. CONCLUSION
For the reasons set forth above, the Court GRANTS Defendants' Motion to Dismiss under Rule 12(b)(2) for failure to state a claim and DISMISSES this action with leave to amend. Plaintiff has 21 days to file a Second Amended Complaint. If Plaintiff does not do so, the case will be deemed dismissed with prejudice and will be closed.
IT IS SO ORDERED.