Designer Skin, LLC v. S & L Vitamins, Inc.

• Decision Date: 20 May 2008
• Docket Number: No. CV 05-3699-PHX-JAT.,CV 05-3699-PHX-JAT.
• Citation: 560 F.Supp.2d 811
• Court: U.S. District Court — District of Arizona
• Parties: DESIGNER SKIN, LLC, et al., Plaintiffs, v. S & L VITAMINS, INC., et al., Defendants.

560 F.Supp.2d 811

DESIGNER SKIN, LLC, et al., Plaintiffs, v. S & L VITAMINS, INC., et al., Defendants.

No. CV 05-3699-PHX-JAT.

United States District Court, D. Arizona.

May 20, 2008.

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Elan Shai Mizrahi, Jennings Haug & Cunningham LLP, Phoenix, AZ, for Plaintiffs.

Ronald D. Coleman, Hoffman Polland & Furman PLLC, New York, NY, for Defendants.

ORDER

JAMES A. TEILBORG, District Judge.

Pending before the Court are Defendants' Motion for Summary Judgment (Doc. # 51) and Plaintiffs' Motion for Partial Summary Judgment (Doc. # 52). The Court now rules on these motions.

I. Background

Designer Skin, LLC is a manufacturer of certain indoor tanning products. It owns a number of registered trademarks in these products and its company name, and also owns the copyright in certain artwork related to its products.

Designer Skin distributes its products through independent distributors. The relationship between Designer Skin and its distributors is governed by the terms of a distributorship agreement, which limits the distributors' ability to resell Designer Skin's products. Specifically, the agreement prohibits the distributors from selling Designer Skin's products to anyone other than certain qualifying tanning salons. More specifically, the agreement prohibits the distributors from selling Designer Skin's products to internet resellers.

S & L Vitamins, Inc. is an internet reseller: it buys various products in bulk and then resells those products on its websites at discount prices. Since some time near the beginning of 2004, S & L Vitamins has sold Designer Skin products on its websites. S & L Vitamins has obtained all of its Designer Skin products through tanning salons. It has not purchased any of these products directly from a Designer Skin distributor.

On its websites, S & L Vitamins displays thumbnail images of the Designer Skin products for sale and identifies those products by using Designer Skin's trademarks. In addition, S & L Vitamins uses Designer Skin's trademarks in the metatags of its sites and as search-engine keywords. On the current websites at issue, S & L Vitamins has posted a disclaimer stating that it is not affiliated with or authorized by any tanning lotion manufacturers to sell their products. It is unclear, however, when S & L Vitamins first posted this disclaimer on its sites.

Designer Skin filed this action on November 14, 2005, claiming trademark infringement,¹ trademark dilution, copyright infringement, intentional interference with contractual relations, and unfair competition. S & L Vitamins filed counterclaims for unfair competition and for declaratory judgments of noninfringement of trademark and noninterference with contract. Designer Skin now moves for partial summary judgment on its claims of trademark infringement, copyright infringement, and intentional interference with contractual relations, and on all counterclaims. S & L Vitamins cross-moves for summary judgment on all claims and counterclaims in this case except its counterclaim for unfair competition.

II. Legal Standard

Summary judgment is appropriate when "the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c). Thus, summary judgment is mandated "against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial." Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986).

Initially, the movant bears the burden of pointing out to the Court the basis for the motion and the elements of the causes of action upon which the nonmovant will be unable to establish a genuine issue of material fact. Id. at 323, 106 S.Ct. 2548. The burden then shifts to the nonmovant to establish the existence of a material fact. Id. The nonmovant "must do more than simply show that there is some metaphysical doubt as to the material facts" by "com[ing] forward with `specific facts showing that there is a genuine issue for trial.'" Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586-87, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986) (quoting Fed.R.Civ.P. 56(e)). A dispute about a fact is "genuine" if the evidence is such that a reasonable jury could return a verdict for the nonmoving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). The nonmovant's bare assertions, standing alone, are insufficient to create a material issue of fact and defeat a motion for summary judgment. Id. at 247-48, 106 S.Ct. 2505. However, in the summary judgment context, the Court construes all disputed facts in the light most favorable to the nonmoving party. Ellison v. Robertson, 357 F.3d 1072, 1075 (9th Cir.2004).

III. Discussion

A. First-to-File Rule

As a preliminary matter, the Court briefly addresses the first-to-file rule. The first-to-file rule "is a generally recognized doctrine of federal comity which permits a district court to decline jurisdiction over an action when a complaint involving the same parties and issues has already been filed in another district." Pacesetter Systems, Inc. v. Medtronic, Inc., 678 F.2d 93, 94-95 (9th Cir.1982). S & L Vitamins has made reference to this doctrine, and the parallel litigation proceeding in the Eastern District of New York, at various points throughout this litigation. But S & L Vitamins has not moved to dismiss this case pursuant to the first-to-file rule. For this reason, not to mention the fact that this case is now at the summary-judgment stage of litigation and has already been set for trial, this Court will not consider the merits of dismissing or transferring this case under the first-to-file rule.

B. Trademark Infringement

Both parties move for summary judgment on the trademark-infringement claim (and the corresponding counterclaim for a declaratory judgment of noninfringement). The facts pertaining to this claim are undisputed: (1) S & L Vitamins uses Designer Skin's trademarks in the metatags and source codes² of its websites, and as search-engine keywords,³ to inform internet consumers who are searching for Designer Skin's products that those products are for sale on S & L Vitamins' websites;⁴ (2) On its websites, S & L Vitamins sells genuine Designer Skin products, as well as products of Designer Skin's competitors; and (3) S & L Vitamins uses Designer Skin's trademarks without permission. The parties disagree as to the legal significance of these facts.

The parties' disagreement centers around "[t]he core element of trademark infringement": the likelihood of consumer confusion. Interstellar Starship Servs., Ltd. v. Epix, Inc., 304 F.3d 936, 941 (9th Cir.2002). S & L Vitamins argues that there is no likelihood of confusion under the facts of this case. S & L Vitamins emphasizes that it uses the marks to truthfully identify the mark holder's product, i.e., the. source of the goods, and maintains that it has done nothing to suggest that it is affiliated with or sponsored by Designer Skin in any way. In response, Designer Skin argues that S & L Vitamins causes what the Ninth Circuit calls "initial interest" confusion. See, e.g., Brookfield Commc'ns, Inc. v. West Coast Entm't Corp., 174 F.3d 1036, 1062 (9th Cir.1999). This argument appears to take three forms. First, Designer Skin seems to suggest that initial interest confusion results from the mere fact that S & L Vitamins uses the marks in the metatags of its sites and as search-engine keywords. Second, Designer Skin argues that initial interest confusion results from the fact that these invisible uses sometimes give S & L Vitamins' websites higher priority on search-results pages than Designer Skin's website. And third, Designer Skin argues that the visible uses of its marks on the websites in close association with S & L Vitamins' own logo somehow bolsters the alleged initial interest confusion. Each of Designer Skin's arguments fails as a matter of law.

Designer Skin's first argument misstates the law. Initial interest confusion has been equated to a "bait and switch" scheme. Dorr-Oliver, Inc. v. Fluid-Quip, Inc., 94 F.3d 376, 382 (7th Cir.1996). It occurs when potential customers are lured away from a trademark holder's product to a competitor's product through the deceptive use of the holder's mark. See Playboy Enters., Inc. v. Netscape Commc'ns Corp., 354 F.3d 1020, 1025 (9th Cir.2004); Brookfield 174 F.3d at 1062; Deborah F. Buckman, Annotation, Initial Interest Confusion Doctrine Under Lanham Trademark Act, 183 A.L.R. Fed. 553, 572-73 (2003). Deception, it bears emphasizing, is essential to a finding of initial interest confusion. The Ninth Circuit's oft-quoted example of initial interest confusion clearly illustrates this point:

Suppose West Coast's competitor (let's call it "Blockbuster") puts up a billboard on a highway reading—"West Coast Video: 2 miles ahead at Exit 7"—where West Coast is really located at Exit 8 but Blockbuster is located at Exit 7. Customers looking for West Coast's store will pull off at Exit 7 and drive around looking for it. Unable to locate West Coast, but seeing the Blockbuster store right by the highway entrance, they may simply rent there. Even consumers who prefer West Coast may find it not worth the trouble to continue searching for West Coast since there is a Blockbuster right there. Customers are not confused in the narrow sense: they are fully aware that they are purchasing from Blockbuster and they have no reason to believe that Blockbuster is related to, or in any way sponsored by, West Coast. Nevertheless, the fact that there is only initial customer confusion does not alter the fact that Blockbuster would be misappropriating West Coast's acquired...