Paleteria La Michoacana, Inc. v. Productos Lacteos Tocumbo S.A. De C.V.

Decision Date27 May 2016
Docket NumberCivil Action No.: 11-01623 (RC)
Citation188 F.Supp.3d 22
CourtU.S. District Court — District of Columbia
Parties Paleteria La Michoacana, Inc. et al., Plaintiffs & Counter-Defendants, v. Productos Lacteos Tocumbo S.A. DE C.V., Defendant & Counter-Claimant.

Laura L. Chapman, Toni Qiu, Sheppard, Mullin, Richter & Hampton, LLP, Wendy M. Garbers, Morrison & Foerster LLP, San Francisco, CA, Karin H. Johnson, Sheppard Mullin Richter & Hampton LLP, Washington, DC, Paul Bost, Sheppard Mullin Richter & Hampton, LLP, Los Angeles, CA, for Plaintiffs & Counter-Defendants.

Stephanie D. Scruggs, Smith, Gambrell & Russell, LLP, Washington, DC, Steven War, Mcneely, Hare & War LLP, Washington, DC, Stephen L. Anderson, Anderson & Associates, Temecula, CA, for Defendant & Counter-Claimant.

FINDINGS OF FACT AND CONCLUSIONS OF LAW

RUDOLPH CONTRERAS, United States District Judge

This long-running dispute between Plaintiffs/Counter-Defendants Paleteria La Michoacana, Inc. and Paleteria La Michoacana (Sub), Inc. (collectively, and together with their predecessors in interest, "PLM")1 and Defendant/Counter-Claimant Productos Lacteos Tocumbo S.A. De C.V. ("PROLACTO") involves the right to use various registered and unregistered trademarks when selling ice cream and various other frozen treats in the United States. PLM brought this action against PROLACTO under the Lanham Act, 15 U.S.C. §§ 1051 et seq. , challenging a decision by the Trademark Trial and Appeal Board (the "TTAB") to cancel the federal registration of one of PLM's asserted trademarks and seeking other relief on various infringement-related theories. See Second Am. Compl., ECF No. 40. PROLACTO, in turn, filed a variety of counterclaims against PLM alleging, among other things, trademark infringement and false advertising. See Ans. 2d Am. Compl. & Countercls., ECF No. 41. At the summary judgment stage, the Court resolved a number of the parties' claims and narrowed some of the issues for trial.

The Court conducted a bench trial over the course of thirteen days between September 14, 2015 and October 1, 2015. Following the trial, the parties submitted proposed findings of fact and conclusions of law, as well as subsequent briefs in opposition. The Court now makes its Findings of Fact and Conclusions of Law, as required by Rule 52(a)(1) of the Federal Rules of Civil Procedure. For the reasons discussed below, the Court will enter judgment in favor of PROLACTO as to Count I of PLM's Second Amended Complaint, enter judgment in favor of PLM as to Counts II and III of the Second Amended Complaint and as to PROLACTO's Counterclaim Count II. The Court will also dismiss Count IV of the Second Amended Complaint as moot.

I. BACKGROUND

For clarity in following the Court's specific findings of fact and conclusions of law, the Court first provides a brief overview of the facts underlying this case and a summary of the case's procedural history and current posture.

A. Factual Overview

PLM and PROLACTO are in the business of manufacturing and selling "paletas," a style of ice cream bars and popsicles that originated in Mexico and are traditionally made from fruit, spices and nuts and sold to the public in trucks and retail stores, as well as other frozen treats.

PROLACTO is a Mexican company founded in 1992. The Andrade Malfavon family, which founded and owns the company, traces its history in the paleta business to the purported origin of the paleta and the ice cream stores that make and sell them, called "paleterias," in Tocumbo, a city in the Mexican state of Michoacán, in the 1940s. PROLACTO primarily does business in the United States through licensing agreements with various members of the Andrade Malfavon family who own and operate individual paleterias in certain markets, namely, Florida, Texas, Northern California, and North Carolina. Until relatively recently, PROLACTO did not directly own any paleterias in the United States or otherwise directly sell its products to any consumers in the United States.

PLM traces its history to at least as early as 1991, when two brothers, Mexican immigrants Ignacio Gutierrez and Ruben Gutierrez, began selling paletas out of pushcarts in Northern California using the name "La Michoacana," which literally means, in Spanish, "the woman from the state of Michoacán." The partnership dissolved in 1999, and Ignacio Gutierrez operated the business as a sole proprietorship for several years before incorporating in California. PLM's business has grown significantly since its beginnings as a pushcart operation in Northern California. PLM currently manufactures its products in a factory in Modesto, California and distributes its products throughout various parts of the United States where they are sold at large-scale retailers such as Costco, Wal-Mart, and Walgreens, as well as Hispanic grocery stores such as El Super and Vallarta and a variety of other retail outlets.

Both PLM and PROLACTO use a variety of trademarks when selling their products in the United States. A graphic displaying some of the marks the parties have used appears below:

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The battle between the PLM and PROLACTO over the right to use these marks has been fierce and protracted. The parties sharply dispute, among many other things, which of them first used these marks in the United States, and each party accuses the other of engaging in bad faith in a variety of different ways.

B. Procedural History

The procedural history of this case stretches back nearly a decade. An understanding of this history is necessary to resolve the issues before the Court.

1. TTAB Proceedings

After unsuccessfully attempting to register certain marks with the United States Patent and Trademark Office (the "USPTO"), on April 27, 2007, pursuant to the Lanham Act, PROLACTO filed a petition with the TTAB, a body of the USPTO, to cancel PLM's Registration No. 3,210,304 for the mark titled "LA INDITA MICHOACANA," shown above, for use on ice cream and fruit products. See Pet. Cancellation, TTAB Dkt. 1.2 The cancellation proceeding remained pending for several years, and, as part of the discovery process, the parties took oral and written deposition testimony from a number of witnesses between 2009 and 2010.

On May 20, 2011 the TTAB granted PROLACTO's petition for cancellation of PLM's LA INDITA MICHOACANA mark. See generally Productos Lacteos Tocumbo S.A. De C.V. v. Paleteria La Michoacana, Inc. , 98 U.S.P.Q.2d 1921, 2011 WL 2161071 (T.T.A.B. May 20, 2011) (" TTAB Decision"). The TTAB concluded that the mark should be cancelled because PROLACTO had established priority of use and likelihood of confusion with respect to several of its asserted, unregistered marks, including its own Indian Girl design, as well as its LA MICHOACANA (words only), LA MICHOACANA NATURAL (words only), and LA MICHOACANA NATURAL marks. See id. at **9–16.

Following the TTAB's decision, PLM moved for reconsideration, arguing that PROLACTO failed to establish priority of use and that the TTAB erred in concluding that PROLACTO established common law rights in its "Michoacana" marks. See Mot. Recons., TTAB Dkt. 109. The TTAB issued a decision denying reconsideration on July 13, 2011. See TTAB Dkt. 115.

2. The Present Action

PLM commenced this action pursuant to 15 U.S.C. § 1071(b) on September 8, 2011. See Compl., ECF No. 1.

a. PLM's Second Amended Complaint and PROLACTO's Counterclaims

PLM's Second Amended Complaint alleges four causes of action: Count I seeks reversal of the TTAB's decision to cancel the registration of PLM's LA INDITA MICHOACANA mark and denial of PROLACTO's cancellation petition; Count II seeks a declaration that there is no likelihood of confusion between PLM's LA INDITA MICHOACANA mark and various marks asserted by PROLACTO on the basis of their common usage of the word "MICHOACANA"; Count III alleges that PROLACTO's use of its Indian Girl mark infringes three of PLM's registered marks under 15 U.S.C. § 1114, including its LA INDITA MICHOACANA mark; and Count IV seeks to cancel PROLACTO's registration of certain marks containing the name LA FLOR DE MICHOACAN if a likelihood of confusion is found between those marks and PLM's marks. See Second Am. Compl. at 13–16.

PROLACTO, in turn, filed seven counterclaims: Counterclaim Count I alleges that PLM infringed its registered LA FLOR DE MICHOACAN and design mark under 15 U.S.C. § 1114(1) ; Counterclaim Count II alleges trademark infringement, unfair competition, passing off, false advertising, false association, and false designation in violation of 15 U.S.C. § 1125(a) ; Counterclaim Count III alleges trademark infringement of the District of Columbia's common law; Counterclaim Count IV alleges trademark dilution under 15 U.S.C. § 1125(c) ; and Counterclaim Counts V, VI, and VII seek cancellation of two of PLM's registered marks due to fraud and abandonment. See Ans. 2d Am. Compl. & Countercls. at 29–43.

b. Summary Judgment

After the close of discovery in this case, the parties filed cross-motions for partial summary judgment, each of which the Court granted in part and denied in part. See generally Paleteria La Michoacana, Inc. v. Productos Lacteos Tocumbo S.A. De C.V. , 69 F.Supp.3d 175 (D.D.C.2014) (" PLM I "). The Court subsequently granted in part and denied in part a motion by PLM to revise the Court's Memorandum Opinion and Order at summary judgment and denied a motion for consideration by PROLACTO, issuing a First Revised Order on February 3, 2015. See First Revised Order, ECF No. 175; Paleteria La Michoacana, Inc. v. Productos Lacteos Tocumbo S.A. De C.V. , 79 F.Supp.3d 60 (D.D.C.2015) (" PLM II ") (denying PROLACTO's motion for reconsideration); Mem. & Order, ECF No. 174 ("PLM III ") (granting in part and denying in part PLM's motion to revise the Court's summary judgment Memorandum Opinion and Order).

A brief summary of the disposition of each count of PLM's Second Amended Complaint and PROLACTO's Counterclaims is necessary to understanding the issues presented at trial for the Court's...

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