Spy Optic, Inc. v. Alibaba.Com, Inc., Case No. CV 15–00659–BRO (JCx)

• Decision Date: 28 September 2015
• Docket Number: Case No. CV 15–00659–BRO (JCx)
• Parties: Spy Optic, Inc. v. Alibaba.Com, Inc., et al.
• Court: U.S. District Court — Central District of California

163 F.Supp.3d 755

Spy Optic, Inc.

v.Alibaba.Com, Inc., et al.

Case No. CV 15–00659–BRO (JCx)

United States District Court, C.D. California.

Signed September 28, 2015

Brent H. Blakely, Courtney L. Stuart-Alban, Michael Marchand, Blakely Law Group, Manhattan Beach, CA, for Spy Optic, Inc.

Carey R. Ramos, Rachel E. Epstein, Quinn Emanuel Urquhart and Sullivan LLP, New York, NY, David Kramer, Michael Fang Peng, Quinn Emanuel Urquhart and Sullivan LLP, Los Angeles, CA, Nicholas P. Connon, Connon Wood LLP, Pasadena, CA, for Alibaba.Com, Inc., et al.

ORDER DENYING DEFENDANT'S MOTION FOR JUDGMENT ON THE PLEADINGS [31]

BEVERLY REID O'CONNELL

, United States District Judge

I. INTRODUCTION

Pending before the Court is Defendant Alibaba.com Hong Kong Ltd.'s (“Defendant”) Motion for Judgment on the Pleadings against Plaintiff Spy Optic, Inc. (“Plaintiff”). (Dkt. No. 31.) Defendant seeks to dismiss all claims in Plaintiff's First Amended Complaint (“FAC”). In the FAC, Plaintiff alleges five causes of action: (1) direct and contributory trademark infringement and counterfeiting, under 15 U.S.C. §§ 1114(1)

, 1116(d), and 1117(b) and (c) ; (2) false advertising, pursuant to 15 U.S.C. § 1125(a)(1)(A) and (B) ; (3) unfair competition and false designation of origin, according to 15 U.S.C. § 1125(a) ; (4) direct and contributory common law trademark infringement, and (5) unfair competition, under California Business and Professions Code §§ 17200, 17500, et seq. and California common law. (Dkt. No. 20.) After considering the papers filed in support of and in opposition to the instant motion, the Court deems this matter appropriate for resolution without oral argument of counsel. See Fed.R.Civ.P. 78

; C.D. Cal. L.R. 7–15. For the following reasons, the Court DENIES Defendant's motion.

II. FACTUAL AND PROCEDURAL BACKGROUND

A. Factual Background

Plaintiff is a California corporation in the business of developing, advertising, and marketing various products, including glasses, sunglasses, sunglass products, wearing apparel, and sporting goods, such as backpacks and sports bags. (First Am. Compl. (“FAC”) ¶¶ 1, 23–25.) To create brand awareness, Plaintiff uses the logos “SPY,” “SPY OPTIC,” and a cross logo—

—in connection with its goods and services. (FAC ¶ 23.)

Defendant is a Hong Kong corporation that operates “a well-known network” of websites, including www.alibaba.com—a “business-to-business marketplace designed to connect buyers and sellers of a wide variety of products throughout the world”—and www.aliexpress.com—a website connecting “wholesale and other buyers to sellers in a wide variety of consumer products.” (FAC ¶¶ 2–5.)

The facts giving rise to Plaintiff's FAC stem from Defendant's alleged infringing uses of Plaintiff's trademarks on Defendant's websites. (FAC ¶ 36.) Specifically, Plaintiff claims that Defendant uses its trademarks and “product depictions on its websites in a manner which falsely indicates that the suppliers on the Alibaba and other websites are authorized sellers of genuine Spy products or that Plaintiff has in some manner endorsed the sale of these products.” (FAC ¶ 36.) Plaintiff further avers that upon entering “Spy Optic” into the websites' search engines, “a series of listings appear [ ] which, in many instances, includes unauthorized uses of the Spy Trademarks [,] suggesting that the products are authorized by Spy.” (FAC ¶ 37.) According to Plaintiff, many of the listings regard counterfeit Spy merchandise. (FAC ¶ 37.) Further, the bottom of search-results pages provide links to other allegedly counterfeit Spy products, with link-titles such as “spy optic sunglasses,” “sunglasses 2013 spy,” “spy sunglasses mirror,” and “spy sunglasses.” (FAC ¶¶ 38–39.)

Plaintiff goes on to allege that Defendant's websites include a verification process for certain sellers, called “Gold Suppliers.” (FAC ¶¶ 40–45.) According to Plaintiff, the verification process purports to “vet [ ] suppliers to ensure they provide authentic and genuine products, when in fact, upon information and belief, many of the identified ‘Gold Suppliers' are providing counterfeit merchandise in connection with the infringing use of Plaintiff's Spy Trademarks.” (FAC ¶ 42.) Plaintiff avers that Defendant's verification “places Defendant in the position of a principal with agency liability for the Gold Suppliers,” (FAC ¶ 43), and that Defendant “promotes counterfeit Spy Sunglasses offered by ‘Gold Suppliers' which claim to have been vetted by Alibaba, whose endorsement suggests to prospective consumers that the sunglasses offered by these suppliers are genuine and authentic Spy products,” (FAC ¶ 48). Plaintiff also contends that the significantly lower retail price at which the retailers sell Spy products to customers provides circumstantial evidence that such products are counterfeit. (FAC ¶ 51.)

With respect to the Gold Suppliers, Defendant claims that it does not verify the authenticity of the goods listed for sale by Gold Suppliers. (Mot. at 6.) In fact, Defendant maintains that it specifically explains on its websites that it “does not and cannot guarantee the authenticity or genuineness of any goods listed for sale by sellers.” (Mot. at 6.) Rather, the Gold Supplier status, according to Defendant, provides buyers with assurances that the sellers are “legally registered companies.” (Mot. at 6.)

Plaintiff also alleges that Defendant uses its trademarks in Defendant's websites' metadata to create an association with various landing pages on the sites to promote counterfeit Spy products offered by Gold Suppliers. (FAC ¶ 55.) Plaintiff further contends that this conduct constitutes false advertising, namely because it indicates that the Gold Suppliers provide authentic Spy products. (FAC ¶ 49.) By grouping Plaintiff's products in the “spy sunglasses” category, and by using Plaintiff's trademark on its websites and in its metadata to attract browsers to the products, Plaintiff maintains Defendant “actively encourages users searching for Plaintiff's products to purchase counterfeit items or goods sold by unauthorized distributors.” (FAC ¶ 55.)

Even though Plaintiff alleges trademark infringement, Plaintiff concedes that Defendant has a system in place for intellectual property holders to submit complaints reporting infringing listings appearing on websites controlled by Defendant. (FAC ¶ 59.) The system is called “AliProtect.” (FAC 59.) Plaintiff also acknowledges that it has used the AliProtect over 12,000 times to report violations, and Defendant has responded by removing “thousands” of infringing listing from its websites. (FAC ¶ 60.) Despite the fact that Defendant has removed many infringing listings upon Plaintiff's request, Plaintiff maintains that more infringing products are added daily and that Defendant has failed to eliminate repeat infringers from its websites. (FAC ¶¶ 60–61.) For example, Plaintiff alleges that Shenzhen Yashiwei Optical Co. Ltd., a third-year Gold Supplier, had infringing products removed from one of the websites. (FAC ¶ 61.) Notwithstanding this fact, Plaintiff claims that Defendant allowed Shenzhen Yashiwei Optical to subsequently list additional unauthorized Spy products on Defendant's websites. (FAC ¶ 61.)

B. Procedural Background

Plaintiff filed the original Complaint initiating this case on January 28, 2015. (Dkt. No. 1.) On May 6, 2015, the Court issued an order granting Plaintiff leave to file the FAC, (Dkt. No. 19), which Plaintiff filed on May 15, 2015, (Dkt. No. 20). The Court also allowed Defendant sixty days to respond to the FAC. (Dkt. No. 19.) Defendant timely filed its Answer to Plaintiff's FAC, (Dkt. No. 26), and filed the instant motion on August 19, 2015, (Dkt. No. 31). Plaintiff filed its Opposition on August 26, 2015, (Dkt. No. 34), as well as evidentiary objections, (Dkt. No. 35), and a request for judicial notice, (Dkt. No. 36). Defendant timely replied. (Dkt. No. 38.)

III. REQUEST FOR JUDICIAL NOTICE

When considering a motion to dismiss, a court typically does not look beyond the complaint in order to avoid converting a motion to dismiss into a motion for summary judgment. See Mack v. S. Bay Beer Distribs., Inc. , 798 F.2d 1279, 1282 (9th Cir.1986)

, overruled on other grounds by

Astoria Fed. Sav. & Loan Ass'n v. Solimino , 501 U.S. 104, 111 S.Ct. 2166, 115 L.Ed.2d 96 (1991). Notwithstanding this precept, a court may properly take judicial notice of (1) material which is included as part of the complaint or relied upon by the complaint, and (2) matters in the public record. See

Marder v. Lopez , 450 F.3d 445, 448 (9th Cir.2006) ; Lee v. City of L

os

A

ngeles , 250 F.3d 668, 688–89 (9th Cir.2001).

A court may also take judicial notice pursuant to Federal Rule of Evidence 201(b)

. Under the rule, a judicially noticed fact must be one that is “not subject to reasonable dispute because it: (1) is generally known within the trial court's territorial jurisdiction; or (2) can be accurately and readily determined from sources whose accuracy cannot reasonably be questioned.” Fed. R. Evid. 201(b). A court “must take judicial notice if a party requests it and the court is supplied with the necessary information.” See Fed. R. Evid. 201(c)(2) ; In re Icenhower , 755 F.3d 1130, 1142 (9th Cir.2014).

Here, Plaintiff requests that the Court take judicial notice of five documents, including an internet news article about Defendant that is available at Bloomberg.com, three screen shots of web pages on one of Defendant's websites, and Defendant's corporate filing with the Securities Exchange Commission (“SEC”).¹ (Req. for Judicial Notice (“RJN”), Exs. 1–5.)

A. Internet Article

First, Plaintiff requests that the Court take judicial notice of an internet article on Bloomberg.com, titled “China Accuses Alibaba of Lax Oversight of Merchants,” which allegedly “detail[s] public accusations made by the Chinese government against Alibaba.” (RJN, Ex. 1.) Courts may take judicial notice of the fact that an internet article is available to...