M2 Software, Inc. v. Viacom, Inc.

• Decision Date: 27 July 2000
• Docket Number: No. CV 98-8734 RAP MCX.,CV 98-8734 RAP MCX.
• Citation: 119 F.Supp.2d 1061
• Parties: M2 SOFTWARE, INC., a Delaware corporation, Plaintiff, v. VIACOM, INC., a Delaware corporation; Viacom International, Inc., a Delaware corporation; and MTV Networks Company, a Delaware corporation, Defendants.
• Court: U.S. District Court — Central District of California

Page 1061

119 F.Supp.2d 1061

M2 SOFTWARE, INC., a Delaware corporation, Plaintiff, v. VIACOM, INC., a Delaware corporation; Viacom International, Inc., a Delaware corporation; and MTV Networks Company, a Delaware corporation, Defendants.

No. CV 98-8734 RAP MCX.

United States District Court, C.D. California.

July 27, 2000.

Robert B Owens, Owens & Gach Ray, Los Angeles, CA, Mark L Johnson, Steven L Baron, D'Ancona & Pflaum, Chicago, IL, Don A Hernandez, Don A Hernandez Law Offices, Pasadena, CA, E Randol Schoenberg, E Randol Schoenberg Law Offices, Los Angeles, CA, for plaintiff.

Anthony M Keats, Dennis L Wilson, Larry W McFarland, Keats McFarland & Wilson, Beverly Hills, CA, for defendants.

ORDER GRANTING SUMMARY JUDGMENT

PAEZ, District Judge.

I. Introduction

Plaintiff M2 Software, Inc. brings this action for damages against defendants Viacom, Inc., Viacom International, Inc. and MTV Networks Company for trademark infringement and unfair competition. Plaintiff owns the federally registered trademark for the M2 mark. Plaintiff asserts that defendants unlawfully infringed the M2 mark when they used it to describe their second cable network, M2: Music Television. As a result, plaintiff filed its complaint against defendants on October 28, 1998, alleging seven federal and state causes of action, including trademark infringement, unfair competition, trademark dilution and unfair business practice.

Plaintiff previously moved for a preliminary injunction barring defendants' use of the M2 mark in conjunction with the M2: Music Television channel or any other product. The Court denied the motion, finding that, although plaintiff had shown a likelihood of success on the merits, it had not shown a possibility of irreparable harm because the plaintiff had delayed in bringing the motion and the evidence did not show the imminent expansion of defendant's business. See M2 Software, Inc. v. Viacom Inc. et al., No. CV 98-8743 RAP (MCX) (C.D. Cal. filed January 27, 1999) ("Preliminary Injunction Order").

Following the denial of the preliminary injunction, defendants changed the logo of their new programming service from "M2: Music Television" to "MTV 2."

Pending before the Court is defendants' motion for summary judgment. Defendants argue that plaintiff's 1st, 2nd, 4th, 6th, and 7th causes of action¹, which encompass defendants' alleged infringement of plaintiff's trademark, should be dismissed because four of plaintiff's five products were never "used in commerce" so as to invoke trademark protection and defendants did not infringe the trademark of the one protected product. Defendants argue that plaintiff's 3rd and 5th causes of action for federal and state dilution, under 15 U.S.C. § 1125(c) and Cal. Bus. Prof.Code § 14330, should be dismissed because plaintiff's mark is not famous. Defendants also argue that plaintiff sustained no damage from defendants' conduct.

II. Factual Background

M2 Software, a Delaware corporation based in Los Angeles, owns the federally registered trademark "M2." The corporation is a one-man operation, run entirely by Dave Escamilla, a musician and a graduate of Stanford College and Wharton School of Business. Escamilla began doing business as M2 Software in Fall 1991.

His original product was the M2 Multimedia Sampler, later called M2 BPC interactive. This was a program that allowed a viewer to hear clips of music and watch animation and video footage. The product was available on floppy disc and cassette tape, and it was downloadable as "shareware," whereby a consumer could download the program via an on-line service and later pay for the program if he chose to keep it. M2 Software offers no proof of any sales of this product. Plaintiff admits that this product was not commercially available after 1995.

In 1991, M2 Software began marketing its Record Label Management System ("RLMS"), a software system for use by record companies in managing royalties and other information related to their music and video products. Between 1992 and 1997, plaintiff licensed RLMS systems to thirteen recording companies. It modified the system in 1993 or 1994 by adding a feature that let users link to clips of music and videos. Defendants claim that this feature is not mentioned in any brochures for the product, and that none of the thirteen licensees' systems have music or video content. Plaintiff claims this feature provides music and video functionality— not content—and that this capability is installed at client sites. Plaintiff does not advertise the RLMS system.

Plaintiff's trademark registration issued on October 31, 1995, based upon plaintiff's first use in October of 1991. The trademark issued for use on "computer software featuring business management applications for the film and music industries; and interactive multimedia applications for entertainment, education and information, in the nature of artists' performances and biographical information from the film and music industries; and instructions and information for playing musical instruments."

In 1997, plaintiff created an interactive video CD-ROM under the M2 label featuring the group Marden Hill for Stepping Stone Recordings. Stepping Stone sent promotional copies of the product to retail record stores. The CD was listed in an ad in Spin Magazine for a Marden Hill album.

In late 1998, plaintiff produced a CD-ROM under the M2 label featuring a performer called Buckethead. The CD was given away or sold as a promotion by Buckethead at concerts, through mail order, and on the Buckethead website. In March 1998, plaintiff placed an ad in Guitar Magazine promoting an instructional video by Buckethead and the CD. In 1999, plaintiff began distributing the CD through Amazon.com.²

Defendants are all Delaware corporations involved in the entertainment industry encompassing the music, television, recording and multimedia fields. In particular, MTV Networks operates two music channels broadcasting primarily through cable and satellite providers. In August 1996, MTV Networks launched its second cable network, called M2: Music Television. The M2: Music Television network was initially available only to subscribers with C-band satellite dishes, large satellite dishes typically utilized in rural areas. Only three million viewers originally had access to the channel, and Los Angeles and Manhattan were "blacked out" from viewing the channel. Today, the M2: Music Television channel maintains a subscriber base of eleven million consumers. Defendants have never sold advertising on M2: Music Television and they have provided the programming to cable and satellite operators for no charge.

Around the time defendants launched M2: Music Television, defendants entered into an agreement with Intel which enabled defendants to provide additional programming elements that could be accessed through Intel's Intercast technology. These elements were part of the analog feed that supplied the programming—not part of the internet. Thus, to access this technology, a consumer had to receive an analog feed of M2: Music Television. Further, the consumer needed to purchase Intel's Intercast TV tuner card. Intel's Intercast technology was a commercial failure and has been phased out. Only three or four people ever viewed the Intercast additional programming elements for M2: Music Television.

III. Discussion

A. Summary Judgment Standard

Summary judgment is appropriate when "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c); see Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986).

The moving party bears the initial burden of demonstrating the absence of a genuine issue of material fact. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 256, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). Whether a fact is material is determined by looking to the governing substantive law; if the fact may affect the outcome, it is material. Id. at 248, 106 S.Ct. 2505. If the moving party seeks summary adjudication with respect to a claim or defense upon which it bears the burden of proof at trial, its burden must be satisfied by affirmative, admissible evidence. By contrast, when the non-moving party bears the burden of proving the claim or defense, the moving party can meet its burden by pointing out the absence of evidence submitted by the non-moving party. The moving party need not disprove the other party's case. See Celotex Corp. v. Catrett, 477 U.S. 317, 325, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986).

If the moving party meets its initial burden, the "adverse party may not rest upon the mere allegations or denials of the adverse party's pleadings, but the adverse party's response, by affidavits or as otherwise provided in this rule, must set forth specific facts showing that there is a genuine issue for trial." Fed.R.Civ.P. 56(e).

In assessing whether the non-moving party has raised a genuine issue, its evidence is to be believed, and all justifiable inferences are to be drawn in its favor. Anderson, 477 U.S. at 255, 106 S.Ct. 2505, citing Adickes v. S.H. Kress and Co., 398 U.S. 144, 90 S.Ct. 1598, 26 L.Ed.2d 142 (1970). Nonetheless, "the mere existence of a scintilla of evidence" is insufficient to create a genuine issue of material fact. Id. at 252, 106 S.Ct. 2505. As the Supreme Court explained in Matsushita,

[w]hen the moving party has carried its burden under Rule 56(c), its opponent must do more than simply show that there is some metaphysical doubt as to the material facts.... Where the record taken as a whole could not lead a rational trier of fact to find for the nonmoving party, there is no "genuine issue for trial."

Matsushita Elec. Indus. Co., 475 U.S. at 586-87, 106 S.Ct. 1348.

To be admissible for purposes of...