Adobe Sys. Inc. v. A & S Elecs., Inc.

• Decision Date: 29 December 2015
• Docket Number: Case No: C 15-2288 SBA
• Citation: 153 F.Supp.3d 1136
• Court: U.S. District Court — Northern District of California
• Parties: Adobe Systems Incorporated, a Delaware Corporation, Plaintiff, v. A & S Electronics, Inc., a California Corporation d/b/a Trustprice; Alan Z. Lin, an Individual; and DOES 1-10, Inclusive, Defendants.

153 F.Supp.3d 1136

Adobe Systems Incorporated, a Delaware Corporation, Plaintiff,

v.A & S Electronics, Inc., a California Corporation d/b/a Trustprice; Alan Z. Lin, an Individual; and DOES 1-10, Inclusive, Defendants.

Case No: C 15-2288 SBA

United States District Court, N.D. California, Oakland Division.

Signed December 29, 2015

Marcus Freeman Chaney, Christopher Quang Pham, Jason Robert Vener, Johnson and Pham LLP, Woodland Hills, CA, for Plaintiff.

Craig Alan Hansen, Law Offices of Craig Hansen, Sarah Wager, Hansen Law Firm, Palo Alto, CA, for Defendants.

ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS' MOTION TO DISMISS ALL CLAIMS; DENYING ALTERNATIVE MOTION FOR A MORE DEFINITE STATEMENT

SAUNDRA BROWN ARMSTRONG

, United States District Judge

Plaintiff Adobe Systems Inc. (“Plaintiff” or “Adobe”) brings the instant action against A & S Electronics, Inc. (“A&S”), and its owner, Alan Z. Lin (“Lin”). The First Amended Complaint (“FAC”) alleges claims for trademark infringement, false designation of origin and trademark dilution under the Lanham Act; copyright infringement; and breach of contract. The parties are presently before the Court on Defendants' Motion to Dismiss All Claims, and in the Alternative, for A More Definite Statement. Dkt. 53. Having read and considered the papers filed in connection with these matters and being fully informed, the Court hereby GRANTS IN PART and DENIES IN PART the motion to dismiss, and DENIES the alternative motion for a more definite statement. The Court GRANTS Adobe leave to amend to file a Second Amended Complaint. The Court, in its discretion, finds this matter suitable for resolution without oral argument. See Fed. R. Civ. P. 78(b)

; N.D. Cal. Civ. L.R. 7-1(b).

I. BACKGROUND

A. Factual Summary

Adobe is a software company that produces and distributes Adobe Acrobat-branded software. FAC ¶¶ 21-23, Dkt. 41. The ADOBE® and ACROBAT® marks are registered with the Patent and Trademark Office (“PTO”). Id. ¶¶ 21-22, 38. Defendant A&S is a corporation doing business as TRUSTprice, which sells various software products, including Adobe-branded products, through its website, www.TRUSTprice.com. Id. ¶ 30. Defendant Lin owns A&S and is alleged to be its alter ego. Id. ¶¶ 4-5.

On or about April 17, 2014, A&S and Adobe entered into an Adobe Partner Connection Program Reseller Agreement (“Reseller Agreement”), pursuant to which A&S became an authorized distributor of Adobe software products. Id. ¶ 32 & Ex. C. Under the agreement, A&S is permitted to sell Original Equipment Manufacturer (“OEM”) versions of Adobe software, provided that it is distributed as a bundle with approved hardware components. Id. ¶ 33. OEM software may not be unbundled and distributed separately from the specific hardware components for which they were intended. Id. OEM software is not the same as full retail versions of the same type of Adobe branded software, as it “usually” has “less functionality and no technical support.” Id. According to Adobe, A&S secured the Reseller Agreement for the purpose of leading consumers to believe that it is a “legitimate” reseller, despite the fact that its conduct violated such agreement. Id. ¶ 41. On information and belief, Adobe claims that A&S purchased copies of Adobe-branded software from “unauthorized sources” to resell the same in the United States. Id. ¶ 42.

Adobe regularly conducts investigations to identify sales of unauthorized, pirated and counterfeit versions of its software. Id. ¶ 30. On May 28, 2014, Adobe's investigator purchased a copy of Adobe Acrobat X Standard v.10 for Windows—1 User / 2 PCs (License Key Card only—No media) (“Adobe Acrobat X Standard”) from the TRUSTprice website. Id. ¶ 37. The shipment from TRUSTprice included a card displaying a serial number license key (“serial license key”), which is necessary to unlock and operate the software. Id. ¶ 38. The card bore the ADOBE® mark. Id. However, the card “did not originate with [Adobe]” and appears to be “counterfeit.” Id. Adobe claims that the serial license key corresponded to an OEM product which was not authorized for resale separate from physical media. Id.

B. Procedural History

On April 21, 2015, Adobe filed the instant action against A&S and Lin. The original Complaint alleged seven claims, styled as follows: (1) Federal Trademark Infringement, 15 U.S.C. § 1114

; (2) False Designation of Origin/False or Misleading Advertising /Unfair Competition, 15 U.S.C. § 1125(a) ; (3) Trademark Dilution, 15 U.S.C. § 1125(c) ; (4) Federal Copyright Infringement, 17 U.S.C. § 501(a) ; (5) Unlawful/Unfair /Fraudulent Business Practices, Cal. Bus. & Prof. Code § 17200 ; (6) Breach of Contract; and (7) Digital Millennium Copyright Act (“DMCA”) Violation, 17 U.S.C. § 1201. In response to the Complaint, Defendants filed a motion to dismiss all claims, along with a motion to strike Exhibits A and B to the Complaint. Those exhibits purported to list hundreds of trademark and copyright registrations issued to ADOBE by the Patent and Trademark Office which were potentially violated by Defendants.

On August 19, 2015, the Court partially granted Defendants' motion, dismissing: (1) the claims for trademark infringement, false designation of origin, trademark dilution, and violation of the UCL, with leave to amend; and (2) the DMCA claim without leave to amend. The Court denied the motion to dismiss as to Plaintiff's claims for copyright infringement and breach of contract. The Court denied Defendants' motion to strike, but ordered Adobe to file an amended complaint listing the trademarks and copyrights it has a good faith basis for claiming that Defendants infringed.

On September 2, 2015, Adobe filed its First Amended Complaint (“FAC”), which alleges the following five claims: (1) Federal Trademark Infringement, 15 U.S.C. § 1114

; (2) False Designation of Origin/False or Misleading Advertising /Unfair Competition, 15 U.S.C. § 1125(a) ; (3) Trademark Dilution, 15 U.S.C. § 1125(c) ; (4) Federal Copyright Infringement, 17 U.S.C. § 501(a) ; and (5) Breach of Contract. Dkt. 41. In response to the FAC, Defendants have filed a motion to dismiss all claims for failure to state a claim under Federal Rule of Civil Procedure 12(b)(6), or alternatively, for a more definite statement under Rule 12(e). Dkt. 53. The matter has been fully briefed and is ripe for adjudication.

II. LEGAL STANDARD

Rule 12(b)(6)

“tests the legal sufficiency of a claim.” Navarro v. Block , 250 F.3d 729, 732 (9th Cir.2001). “Dismissal under Rule 12(b)(6) is proper when the complaint either (1) lacks a cognizable legal theory or (2) fails to allege sufficient facts to support a cognizable legal theory.” Somers v. Apple, Inc. , 729 F.3d 953, 959 (9th Cir.2013). “Rule 12(b)(6) is read in conjunction with Rule 8(a), which requires not only ‘fair notice of the nature of the claim, but also grounds on which the claim rests.”’ Zixiang Li v. Kerry , 710 F.3d 995, 998–99 (9th Cir.2013) (quoting in part Bell Atl. Corp. v. Twombly , 550 U.S. 544, 556 n. 3, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) ). “To survive a motion to dismiss, a complaint 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 ).

In assessing the sufficiency of the pleadings, “courts must consider the complaint in its entirety, as well as other sources courts ordinarily examine when ruling on Rule 12(b)(6)

motions to dismiss, in particular, documents incorporated into the complaint by reference, and matters of which a court may take judicial notice.” Tellabs, Inc. v. Makor Issues & Rights, Ltd. , 551 U.S. 308, 322, 127 S.Ct. 2499, 168 L.Ed.2d 179 (2007). The court is to “accept all factual allegations in the complaint as true and construe the pleadings in the light most favorable to the nonmoving party.” Outdoor Media Group, Inc. v. City of Beaumont , 506 F.3d 895, 899–900 (9th Cir.2007). Where a complaint or claim is dismissed, leave to amend generally is granted, unless further amendment would be futile. Cervantes v. Countrywide Home Loans, Inc., 656 F.3d 1034, 1041 (9th Cir.2011).

III. DISCUSSION

A. Lanham Act Claims

Defendants contend that Adobe's Lanham Act claims should be dismissed for the following reasons: (1) Adobe has not sufficiently alleged consumer confusion; (2) their use of Adobe's marks is permissible as nominative fair use; and (3) the claims conflict with the claim for copyright infringement. The Court discusses each contention, in turn.

1. Likelihood of Consumer Confusion

“To prevail on its Lanham Act trademark claim, a plaintiff must prove: (1) that it has a protectible ownership interest in the mark; and (2) that the defendant's use of the mark is likely to cause consumer confusion.” Rearden LLC v. Rearden Commerce, Inc. , 683 F.3d 1190, 1202–203 (9th Cir.2012)

(internal quotation marks and citations omitted). A false designation of origin claim likewise requires a showing of a likelihood of consumer confusion. New W. Corp. v. NYM Co. of Cal., Inc. , 595 F.2d 1194, 1201 (9th Cir.1979) (“Whether we call the violation infringement, unfair competition or false designation of origin, the test is identical[:] is there a 'likelihood of confusion?”').

Defendants argue that Adobe's allegations of customer confusion are deficient because they do not expressly recite that their distribution of the serial license key “actually prevented the purchaser from receiving the expected level of service or support for use [sic] Adobe Acrobat X Standard software.” Dkt. 53 at 12. Although Adobe's opposition does not address this contention specifically, the Court finds the argument unpersuasive. The likelihood of confusion analysis focuses on “whether a ‘reasonably prudent consumer’ in the marketplace is likely to be confused as to the origin of the good or service bearing one of the marks.” Rearden , 683 F.3d at 1244

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