United Tactical Sys., LLC v. Real Action Paintball, Inc.
| Decision Date | 23 February 2017 |
| Docket Number | Case No. 14-cv-04050-MEJ |
| Parties | UNITED TACTICAL SYSTEMS, LLC, Plaintiff, v. REAL ACTION PAINTBALL, INC., et al., Defendants. AND RELATED ACTION AND CROSS ACTION |
| Court | U.S. District Court — Northern District of California |
Pending before the Court is the Motion for Summary Judgment filed by Plaintiff and Counter-Defendant United Tactical Systems, LLC ("UTS") and related Counter-Defendants1 (together with UTS, "Counter-Defendants"). UTS Mot., Dkt. No. 307. Defendants and Counter-Claimants Real Action Paintball, Inc. and K.T. Tran (collectively, "Real Action") filed an Opposition and Cross-Motion for Summary Judgment. RAP Mot., Dkt. No. 316. UTS and Real Action each filed Replies. UTS Reply, Dkt. No. 320; RAP Reply, Dkt. No. 322. Having considered the parties' positions, the relevant legal authority, and the record in this case, the Court GRANTS IN PART and DENIES IN PART Counter-Defendants' Motion and DENIES Real Action's Motion for the following reasons.
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PepperBall projectiles are small plastic spheres that contain a proprietary irritant powder that functions similarly to pepper spray. RAP Resp. to Counter-Defs.' Statement of Undisputed Fact ("RAP SUF Reply") ¶ 2, Dkt. No. 316-17.2 UTS and its predecessors have sold PepperBall projectiles to police and governmental agencies, militaries, and private security firms as a non-lethal force compliance tool. Id. ¶ 3; Decl. of Gary Gibson ("Gibson Decl.") ¶ 5, Dkt. No. 308.
On September 14, 1999, Jaycor, Inc. ("Jaycor") filed an application with the United States Patent and Trademark Office ("USPTO") to trademark the name "PepperBall." RAP SUF Resp. ¶ 5; see Gibson Decl., Ex. 1. On October 27, 2000, Jaycor assigned the PepperBall trademark application to Jaycor Tactical Systems, Inc. ("Jaycor Tactical"). RAP SUF Resp. ¶ 6; Gibson Decl., Ex. 2. On December 31, 2001, Jaycor filed a confirmation of assignment of six trademark applications, including the PepperBall trademark, to Jaycor Tactical. RAP SUF Resp. ¶ 7; see Gibson Decl., Ex. 3.
On May 13, 2003, the PepperBall trademark was registered under the number 2,716,025 (the "PepperBall mark") to Jaycor Tactical for use generally in connection with )."3 RAP SUF Resp. ¶ 8; Gibson Decl., Ex. 4; Decl. of Padraic Glaspy ("Glaspy Decl."), Ex. 63, Dkt. No. 309.
Jaycor Tactical twice filed a change of name to PepperBall Technologies, Inc. ("PepperBall Technologies" or "PTI"), once on December 26, 2002 and again on July 23, 2003. RAP SUF Resp. ¶¶ 10-11; see Gibson Decl., Exs. 6-7. PepperBall Technologies was registered as a Delaware corporation. Gibson Decl., Ex. 7. The July 23, 2003 filing included an assignment of the PepperBall mark to PepperBall Technologies. Id.; RAP SUF Resp. ¶ 11.
On January 15, 2010, PepperBall Technologies took out a loan from the James Simpson Foundation (the "Simpson Foundation Loan"), which provided a security interest in PepperBall Technologies' intellectual property, including its trademarks and associated goodwill. RAP SUF Resp. ¶ 15; Gibson Decl., Ex. 9. Under the terms of the Simpson Foundation Loan, "Borrower grants Lender a security interest in all of Borrower's personal property . . . , including without limitation all of the following: all accounts, cash, patents, copyrights, trademarks, goodwill, general intangibles . . . ." Gibson Decl., Ex. 9 § 2. PepperBall Technologies also took out a loan from the J.A. & G.L. Simpson Trust (the "Simpson Trust Loan") (together with the Simpson Foundation Loan, the "Simpson Loans"), a related Simpson entity. RAP SUF Resp. ¶ 16. The Simpson Trust Loan "contained substantially the same terms" as the Simpson Foundation Loan. RAP SUF Resp. ¶ 16.
On October 25, 2011, the J.A. & G.L. Simpson Trust and the James Simpson Foundation (together, the "Lenders") and PepperBall Technologies amended the Simpson Loans to include PepperBall Technologies-CA, Inc. ("PepperBall Technologies-CA" or "PTI-CA") as a co-borrower. Counter-Defs.' Statement of Uncontroverted Facts ( ) ¶ 17, Dkt. No. 307-1; Gibson Decl., Ex. 10 (Second Amendment to the Simpson Foundation Loan); id., Ex. 12 (Second Amendment to the Simpson Trust Loan); Declaration of Jim Simpson ("SimpsonDecl."), Ex. 2 (Second Amendment to the Simpson Foundation Loan), Dkt. No. 320-4; id., Ex. 3 (Second Amendment to the Simpson Trust Loan). PepperBall Technologies-CA is a wholly owned subsidiary of PepperBall Technologies and is incorporated in Delaware. Gibson Decl., Ex. 13. Both amendments provided that "the grant of security interest set forth in Section 2 of the Original Agreement shall be deemed for all purposes to include a grant of security interest by PepperBall Technologies-CA in its personal property[.]" Gibson Decl., Exs. 10 ¶ 2 & 12 ¶ 2; Simpson Decl., Exs. 2 ¶ 2 & 3 ¶ 2. PepperBall Technologies' and PepperBall Technologies-CA's chairman, as well the James Simpson Foundation's president, signed the amendments. See Gibson Decl., Exs. 10, 12; Simpson Decl., Exs. 2-3. The James Simpson Foundation filed two Uniform Commercial Code ("UCC") Financing Statements with the Delaware Secretary of State indicating it and the J.A. & G.L. Simpson Trust had a secured interest in "[a]ll of Borrower [PepperBall Technologies-CA]'s personal property . . . including without limitation all of the following: . . . patents, copyrights, trademarks, [and] goodwill[.]" RAP SUF Resp. ¶ 18; Gibson Decl. Exs. 16-17.
Phoenix International LLC ("Phoenix") acquired the Simpson Loans through an Assignment Agreement. RAP SUF Resp. ¶ 21; Gibson Decl., Exs. 20-22. In addition to the Simpson Loans, PepperBall Technologies and PepperBall Technologies-CA took out "second-tier debt" in the form of small loans from individuals and entities. RAP SUF Resp. ¶ 22; Gibson Decl., Exs. 18, 40. PepperBall Technologies also gave a security interest to Agility Capital, LLC ("Agility Capital"). RAP SUF Resp. ¶ 19; Gibson Decl., Ex. 18.
PepperBall Technologies and PepperBall Technologies-CA materially defaulted on the Simpson Loans. Counter-Defs.' SUF ¶ 24; see Gibson Decl., Exs. 20-22. On January 9, 2012, Phoenix held a UCC foreclosure sale pursuant to the security interests in PepperBall Technologies and PepperBall Technologies-CA's secured assets, including the PepperBall trademark and goodwill. Counter-Defs.' SUF ¶ 25. Notices of the UCC foreclosure sale were placed in the San Diego Daily Transcript on December 30, 2011 and January 6, 2012. RAP SUF Resp. ¶ 26; Gibson Decl., Exs. 23-24. Notice of the sale was made by multiple means and sent to each of PepperBallTechnologies' secured creditors. Counter-Defs.' SUF ¶ 27; see, e.g., Gibson Decl., Ex. 26. PepperBall Technologies-CA received notice of the foreclosure sale indicating its assets were being foreclosed upon; it did not object to or challenge the sale. Counter-Defs.' SUF ¶ 29. PepperBall Technologies and PepperBall Technologies-CA worked with Phoenix to ensure foreclosure proceedings included the proper entities. Id. ¶ 28.
On May 25, 2012, Phoenix changed its name to Advanced Tactical Ordinance Systems LLC; it filed a second Certificate of Amendment that same day to correct the name to Advanced Tactical Ordnance Systems LLC ("ATO"). RAP SUF Resp. ¶¶ 31-32; Gibson Decl., Exs. 28-29. On December 5, 2012, ATO filed with the USPTO a nunc pro tunc Bill of Sale memorializing the completed foreclosure sale. RAP SUF Resp. ¶ 34; see id. ¶ 33 (); Gibson Decl., Ex. 30. The Bill of Sale's identified property included the PepperBall mark as the property. Gibson Decl., Ex. 30.
On May 13, 2009, the USPTO received pursuant to Section 8 of the Lanham Act a Declaration of Use regarding the PepperBall mark. See Glaspy Decl., Ex. 67; Counter-Defs.' Reply to RAP SUF ¶¶ 1-2, Dkt. No. 320-7.4 The Section 8 Declaration lists "Jaycor Tactical Systems, Inc." as the current owner and "Pepperball Technologies, Inc." as the proposed owner. Glaspy Decl., Ex. 67. The Declaration is signed by Conrad Sun. Id. The USPTO accepted the Declaration on June 29, 2009. Id., Ex. 66.
On October 30, 2013, ATO filed a Section 8 Declaration of Use and a Section 9 Application for Renewal for the PepperBall mark. Counter-Defs.' SUF ¶ 49; Gibson Decl., Ex. 35. On November 4, 2013, the USPTO granted the Section 9 Renewal portion, but it rejected the Section 8 portion because "[o]ffice records do not show clear chain of title in the party [ATO] who filed the Section 8 Affidavit." Counter-Defs.' SUF ¶ 50; Gibson Decl., Ex. 36. That same day, ATO filed with the USPTO a statement confirming ATO had acquired the PepperBall mark in a foreclosure sale. Counter-Defs.' SUF ¶ 51; Gibson Decl., Ex. 37. On November 13, 2013, theUSPTO issued a Notice of Acceptance under Section 8 and Registration Renewal under Section 9. Counter-Defs.' SUF ¶ 52; Gibson Decl., Ex. 38.
ATO's assets were transferred to UTS by written assignment. RAP SUF Resp. ¶ 56; Gibson Decl. ¶ 63. The PepperBall mark was included in the transfer of these assets. RAP SUF Resp. ¶¶ 56-57; see Gibson Decl., Ex. 33.
Litigation over the PepperBall trademark has been extensive and fought in multiple courts.
In September 2012, ATO filed suit in the United States District Court for the Northern District of Indiana in a case styled Advanced Tactical...
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