Hokto Kinoko Co. v. Concord Farms, Inc.

• Decision Date: 16 August 2011
• Docket Number: No. CV 10–1384 RSWL (PLAx).,CV 10–1384 RSWL (PLAx).
• Citation: 810 F.Supp.2d 1013
• Court: U.S. District Court — Central District of California
• Parties: HOKTO KINOKO COMPANY, Plaintiff and Counterdefendant, v. CONCORD FARMS, INC., Defendant, Counterclaimant, and Third–Party Plaintiff, v. Hokuto Corporation, Ltd., Third–Party Defendant.

810 F.Supp.2d 1013

HOKTO KINOKO COMPANY, Plaintiff and Counterdefendant,

v.CONCORD FARMS, INC., Defendant, Counterclaimant, and Third–Party Plaintiff,

v.Hokuto Corporation, Ltd., Third–Party Defendant.

No. CV 10–1384 RSWL (PLAx).

United States District Court, C.D. California.

Aug. 16, 2011.

David A. Dillard, Patrick J. Orme, Pasadena, CA, for Plaintiff, Counterdefendant, and Third–Party Defendant.

Alan M. Kindred, Ivan M. Posey, Kindred Posey, Hacienda Heights, CA, for Defendant, Counterclaimant, and Third–Party Plaintiff.

ORDER re: Plaintiff Hokto Kinoko's Motion for Summary Judgment and for Permanent Injunction [65], Third–Party Defendant Hokuto Corporation's Motion for Summary Judgment [66], and Defendant, Counterclaimant, and Third–Party Plaintiff Concord Farms, Inc.'s Motion for Summary Judgment [100]

RONALD S.W. LEW, Senior District Judge.

On August 9, 2011, Plaintiff Hokto Kinoko Company's (“Hokto Kinoko”) Motion for Summary Judgment and for Permanent Injunction [65], Third–Party Defendant Hokuto Corporation's (“Hokuto Japan”) Motion for Summary Judgment [66], and Defendant, Counterclaimant, and Third–Party Plaintiff Concord Farms, Inc.'s (“Concord”) Motion for Summary Judgment [100] came on for regular calendar before this Court. The Court having reviewed all papers submitted pertaining to these Motions and having considered all arguments presented to the Court, NOW FINDS AND RULES AS FOLLOWS:

The Court GRANTS Plaintiff Hokto Kinoko's Motion for Summary Judgment as well as Plaintiff's Request for a Permanent Injunction. Furthermore, the Court GRANTS Third–Party Defendant Hokuto Japan's Motion for Summary Judgment in its entirety. Lastly, the Court DENIES, in its entirety, Defendant, Counterclaimant, and Third–Party Plaintiff Concord's Motion for Summary Judgment.

I. BACKGROUND

Plaintiff and Counterdefendant Hokto Kinoko is a corporation organized under the laws of the State of California on July 3, 2006. Hokto Kinoko is a wholly-owned subsidiary of Third–Party Defendant Hokuto Japan. Hokto Kinoko undertook the construction of a growing facility in San Marcos, California, which was completed in 2009. Shortly thereafter, Hokto Kinoko began growing and selling its mushrooms in the United States.

Hokto Kinoko sells its mushroom products under a family of trademarks (collectively referred to as the “Hokto Marks”) ¹. Plaintiff Hokto Kinoko grows, distributes, and markets “100% Certified Organic” speciality mushrooms throughout the United States. Hokto Kinoko's mushrooms include maitake, brown beech, and white beech mushrooms.

From June 28, 2010, Hokto Kinoko has been the owner of the U.S. rights in the Hokto Marks by virtue of an assignment from its parent company, Hokuto Japan. However, from August 2008 to June 28, 2010, Hokto Kinoko was the exclusive U.S. licensee of Hokuto Japan under the Hokto Marks.

From August 2008 to the first quarter of 2009, Hokto Kinoko imported into the United States and sold organically grown maitake, brown beech, and white beech mushrooms bearing the Hokto Marks that were produced in Japan by Hokuto Japan. Hokto Kinoko was the exclusive licensed distributor of Hokuto Japan products in the United States during this period. The mushrooms imported by Hokto Kinoko for the U.S. market were grown under special conditions not normally used by Hokuto Japan. Specifically, the growing media was changed to meet the United States Certified Organic standards. Moreover, Hokuto Japan and Hokto Kinoko developed special packaging for Hokto Kinoko's use in the U.S. market that used the English language, as compared to Hokuto Japan's normal Japanese language packaging. The English language packaging identified the product as “Certified Organic by QAI” and provided nutritional facts.

Shortly after Hokto Kinoko began producing mushrooms in its San Marcos facility in California, Hokuto Japan ceased exporting mushrooms bearing the Hokto Marks to the United States. An exception occurred in 2010, when Hokto Kinoko could not meet demand due to capacity issues in the production of white beech mushrooms. Hokto Japan white beech mushrooms were imported to augment Hokto Kinoko's inventory of these mushrooms. These imported white beech mushrooms from Japan contained English language stickers indicating the country of origin and nutritional facts.

Third–Party Defendant Hokuto Japan is an organization organized under the laws of Japan with its principal place of business in Nagano, Japan. Hokuto Japan grows, sells, and distributes in Japan mushrooms contained in distinctive packaging with Hokuto Japan trademarks. These Japanese trademarks are identical to Hokto Kinoko's U.S. Marks. However, because “Organic Certification” is not as important to the average Japanese consumer as compared to the American consumer, Hokuto Japan does not go to the added expense to grow its mushrooms under Organic Certified conditions.

Defendant and Third–Party Plaintiff Concord is a corporation organized under the laws of the State of California, with a principal place of business in Union City, California. Concord grows and imports a variety of agricultural products that are distributed across the United States in bulk and retail packs. Since 1987, Concord has distributed exotic Asian mushrooms and produce across the United States.

Since 2003, Concord Farms has been purchasing mushrooms distributed by Hokuto Japan through and from Hokuto Japan's authorized suppliers. However, Concord has never purchased mushrooms directly from Hokuto Japan. Rather, Concord purchases Hokuto Japan mushrooms from a company called MRT, who in turn, purchases the mushrooms from a separate company called Maruichi Seika Co., Ltd. (hereinafter, “Maruichi”). Maruichi purchases mushroom products from Hokuto Japan for resale in Japan.

In July 2009, a Hokto Kinoko representative purchased packages of mushrooms bearing one or more of the Hokto Kinoko U.S. Marks and written mostly in Japanese from two different retail outlets in Irvine, California. The Hokto Kinoko representative was informed that the retail establishments had purchased the packaged mushrooms from Defendant and Third–Party Plaintiff Concord. In October 2009, Hokto Kinoko representatives attended a produce exposition in Anaheim, California where they spoke with a Concord representative requesting that Concord not import, sell, or distribute Hokuto Japan packaged mushrooms. Concord refused to comply with Hokto Kinoko's request and, as a result, this dispute between the parties ensued.

During the period from 2003 to February 2009, Concord imported and sold non-organic white beech and brown beech mushrooms grown by Hokuto Japan packaged in all Japanese language packages. However, since February 2009, Concord has not imported or sold brown or white beech Hokto branded mushrooms, but only now imports maitake mushrooms from Japan bearing the Hokto Marks. Therefore, during the pendency of this Action, the only infringing mushroom products that have been imported and sold by Concord are the maitake mushrooms.

II. LEGAL STANDARDS

A. Summary Judgment

Summary judgment is appropriate when there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(a). A genuine issue is one in which the evidence is such that a reasonable fact-finder could return a verdict for the non- moving party. Anderson v. Liberty Lobby, 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986).

A party seeking summary judgment always bears the initial burden of establishing the absence of a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). The moving party can satisfy this burden by: (1) presenting evidence that negates an essential element of the non-moving party's case or (2) demonstrating that the non-moving party failed to establish an essential element of the non-moving party's case on which the non-moving party bears the burden of proving at trial. Id. at 322–23, 106 S.Ct. 2548.

Once the moving party establishes the absence of genuine issues of material fact, the burden shifts to the non-moving party to set forth facts showing that a genuine issue of disputed fact remains. Celotex, 477 U.S. at 322, 106 S.Ct. 2548. However, the non-moving party is required by Federal Rules of Civil Procedure, Rule 56(e) ² to go beyond the pleadings and designate specific facts showing that there is a genuine issue for trial. Id. at 324, 106 S.Ct. 2548. Conclusory allegations unsupported by factual allegations are insufficient to create a triable issue of fact so as to preclude summary judgment. Hansen v. United States, 7 F.3d 137, 138 (9th Cir.1993) (citing Marks v. Dep't of Justice, 578 F.2d 261, 263 (9th Cir.1978)). A non-moving party who has the burden of proof at trial must present enough evidence that a “fair-minded jury could return a verdict for the [opposing party] on the evidence presented.” Anderson, 477 U.S. at 255, 106 S.Ct. 2505.

B. Permanent Injunction

Courts apply “traditional equitable principles” in deciding whether to grant a permanent injunction:

[A] plaintiff seeking a permanent injunction must demonstrate: (1) that it has suffered an irreparable injury; (2) that remedies available at law, such as monetary damages, are inadequate to compensate for that injury; (3) that, considering the balance of hardships between the plaintiff and defendant, a remedy in equity is warranted; and (4) that the public interest would not be disserved by a permanent injunction.

Reno Air Racing Ass'n v. McCord, 452 F.3d 1126, 1137 n. 11 (9th Cir.2006) (quoting eBay Inc. v. MercExchange LLC, 547 U.S. 388, 126 S.Ct. 1837, 1840, 164 L.Ed.2d 641 (2006)).

III. DISCUSSION

A. Plaintiff Hokto Kinoko's Motion for Summary Judgment

Plaintiff Hokto Kinoko moves for summary judgment on its claims against Defendant Concord for 1) trademark infringement and 2) common law unfair competition, and on all of Defendant...