Zamfir v. Casperlabs, LLC

• Citation: 528 F.Supp.3d 1136
• Decision Date: 26 March 2021
• Docket Number: Case No.: 21cv474-GPC(AHG)
• Parties: Vlad ZAMFIR, Plaintiff, v. CASPERLABS, LLC, Defendant.
• Court: U.S. District Court — Southern District of California

528 F.Supp.3d 1136

Vlad ZAMFIR, Plaintiff,

v.CASPERLABS, LLC, Defendant.

Case No.: 21cv474-GPC(AHG)

United States District Court, S.D. California.

Signed March 26, 2021

Christopher A. Ott, Leo M. Loughlin, Pro Hac Vice, Daniel Richard McCallum, Pro Hac Vice, Jennifer B. Maisel, Pro Hac Vice, Rothwell, Figg, Ernst & Manbeck, P.C., Washington, DC, Jason A. Forge, Robbins Geller Rudman & Dowd LLP, San Diegp, CA, for Plaintiff.

David Lee Kirman, David Marroso, O'Melveny & Myers LLP, Los Angeles, CA, Gina L. Durham, Michael Fluhr, DLA Piper LLP, San Francisco, CA, for Defendant.

ORDER DENYING PLAINTIFF'S MOTION FOR TEMPORARY RESTRAINING ORDER

[ECF No. 2]

Gonzalo P. Curiel, United States District Judge Before the Court is Plaintiff Vlad Zamfir's Motion for Preliminary Injunction and Temporary Restraining Order. ECF No. 2. Defendant CasperLabs, LLC opposes. ECF No. 15. On March 22, 2021, the Court held a hearing on this matter. ECF No. 26. For the reasons that follow, the Court DENIES Plaintiff's Motion for a Temporary Restraining Order.

I. Procedural History

On March 17, 2021, Plaintiff Vlad Zamfir ("Plaintiff") filed the complaint and instant Motion. ECF Nos. 1, 2. In his complaint, Plaintiff brings a claim for false designation of origin under Section 43(a) of the Lanham Act, 15 U.S.C. § 1125(a), and for unfair competition under California common law, arising from Defendant CasperLabs, LLC ("Defendant")’s use of the name "Casper." ECF No. 1 ¶ 2. Plaintiff seeks monetary and injunctive relief as well as cancellation of Defendant's trademark registration for the name Casper and abandonment of a pending trademark application for the same name. Id. ¶ 4. In the instant Motion, Plaintiff seeks a TRO or preliminary injunction preventing Defendant from further use of the name "Casper" in connection with their goods and services. ECF No. 2-1 at 5.

On March 19, 2021, Defendant filed a response in opposition to the Motion. ECF No. 15. On March 22, 2021, Plaintiff filed a supplemental declaration. ECF No. 23. On March 22, 2021, the Court held a hearing on the Motion. ECF No. 26.

II. Factual Background

This Motion revolves around the use of the name "Casper" in connection with blockchain technologies. A blockchain is a distributed protocol that stores transactional records as a chain of "blocks," and each block cannot be retroactively altered without leaving evidence of the alteration. ECF No. 2-3 ("Zamfir Decl.") ¶ 2. Blockchain technology is therefore used for cryptocurrency exchanges, like Bitcoin, to enable peer-to-peer networks without relying on any single legal entity to own or administer the network. Id. ¶ 3. Blockchain-based cryptocurrencies have historically relied on a "proof of work" ("PoW") consensus mechanism to secure the network, but PoW protocols have been criticized due to their significant consumption of computational and electrical energy. Id. at 4. In recent years, researchers have begun developing an alternative to PoW protocols known as "proof-of-stake" ("PoS") protocols, which use digital resources to protect the blockchain network and thus would "eliminate the computational waste inherent to PoW" protocols. Id. ¶ 5.

Plaintiff is a researcher in the field of cryptoeconomics and distributed systems. Id. ¶ 6. Plaintiff and Vitalik Buterin are the two lead researchers of the PoS blockchain protocols known as Casper. Id. Around 2014, Plaintiff and Buterin began developing their PoS blockchain protocol design, and around 2015 Plaintiff adopted the name "Casper." Id. ¶¶ 7–8. Plaintiff and Buterin thereafter began research in two different directions, with Plaintiff's branch of this research becoming known as "CBC Casper." Id. ¶ 10. According to Plaintiff, CBC Casper is currently known and referred throughout the industry as "Casper." Id. Plaintiff has been conducting research and development under the name Casper in the United States since at least as early as March 2015. Id. ¶ 11, Exs. A, B, C.

Defendant is a company founded in October 2018 organized under the laws of the State of Wyoming, and has used the name "CasperLabs" since its inception. ECF No. 15-1 ("Manohar Decl.") ¶¶ 5, 9; ECF No. 15-3 ("Sarkin Decl.") ¶ 4. In December 2018, Plaintiff and Defendant discussed collaborating on the research and development of a new blockchain adopting a version of Plaintiff's CBC Casper PoS protocol. Zamfir Decl. ¶ 17. On February 14, 2019, Plaintiff, on behalf of himself and his company Coordination Technology, Ltd. ("CoorTech"), and Defendant's overseas affiliate CasperLabs, Ltd. entered into a Research Agreement. Id. ¶ 19; Manohar Decl. ¶ 10. On the same day, Plaintiff, again on behalf of himself and CoorTech, and Defendant entered into a License Agreement with CasperLabs, Ltd. granting Defendant limited rights to use Plaintiff's name and image. Id. ; Zamfir Decl. ¶ 20. Plaintiff asserts that soon after he began working with Defendant, he became concerned that Defendant was misappropriating his name and leveraging his reputation to mislead investors. Id. ¶¶ 23–24. Defendant asserts that Plaintiff's work fell short of Defendant's expectations. Manohar Decl. ¶ 11. On September 11, 2019, Plaintiff notified Defendant that CoorTech was terminating both the Research Agreement and License Agreement. Id. ¶ 13; Zamfir Decl. ¶ 26. The License Agreement was terminated in October 2019. Id. After an extension, the Research Agreement was ultimately terminated on November 2, 2019. Id. Aside from maintaining some beneficial ownership in CasperLabs, Plaintiff states he has not had any relationship with Defendant since terminating the agreements. Id. ¶¶ 27–28.

On October 31, 2019, Defendant released a protocol specification. Id. ¶ 32. According to Plaintiff, the product had been known as "Highway Protocol," but later Defendant started calling the product "CasperLabs Highway Protocol" and later "Casper Highway Protocol." Id. By August 2020, Defendant had begun referring to its blockchain protocol and token as "Casper." Id. ¶ 33. Defendant asserts that it had been using the name "Casper" before August 2020. Manohar Decl. at 5. On August 31, 2020, Defendant announced its network launch and token sale planned for the first quarter of 2021 as "[t]he Casper public network and token sale" and referred to its blockchain network as "Casper." Zamfir Decl. ¶ 34. Defendant has thereafter continued to market its products¹ using the name "Casper." Id. ¶¶ 35–36, 38 Plaintiff states that he never consented to Defendant's use of the name "Casper" for Defendant's PoS protocol, token, or other products, and in fact was adamant that Defendant not use the Casper name. Id. ¶¶ 30–31, 37. Defendant asserts that Plaintiff was well-aware of Defendant's intent to use the Casper name, and that its Chief Technology Officer informed Plaintiff as early as June 2019 that Defendant was "leaning towards Casper" for the name of its "token and chain." Manohar Decl. at 5; ECF No. 15-2 ("Parlikar Decl.") ¶¶ 3–4, Ex. 1.

On September 4, 2019, Defendant filed an application with the U.S. Patent and Trademark Office ("PTO") in its own name for the mark CASPER in connection with blockchain technology. Zamfir Decl. ¶ 43, 44.² On November 17, 2020, the mark was registered. Id. , Ex. M. According to Plaintiff, Defendant had agreed to register the marks on Plaintiff's behalf and to transfer the marks to Plaintiff, but Defendant has not assigned the registration to Plaintiff. Id. ¶¶ 42, 45. Defendant denies that it ever made an agreement with Plaintiff to transfer the rights or registration of the CASPER mark. ECF No. 15-4 ("Walker Decl.") ¶ 3; Manohar Decl. at 5–6. Defendant's CEO states that he "understand[s] that Mr. Zamfir did ask others if CasperLabs, LLC would be willing to transfer to him any registrations we secured, and was told no." Id. at 5. According to Defendant, Plaintiff never objected to applications for trademark registration. Id. Plaintiff vigorously disputes this account. See generally ECF No. 23 ("Suppl. Zamfir Decl.").³

Plaintiff alleges that as a result of Defendant's use of the Casper name, customers mistakenly associate Plaintiff and CoorTech with Defendant. Zamfir Decl. ¶¶ 46–47. Plaintiff asserts that this confusion harms his reputation, makes it more difficult to market the genuine products of his research, and gives the false impression that his research is being financed by a relationship with Defendant, which makes it harder for Plaintiff to secure sponsorship. Id.

Defendant alleges that the names "CASPER" and "CASPERLABS" have become widely recognized on social media to refer to Defendant's network. Sarkin Decl. ¶ 11. Defendant states that there has been $21 million in "contractual private token presales" and that according to CoinList, the platform where the public sale of its tokens will take place, over 180,000 individuals and entities have preregistered for the CSPR token sale. Id. ¶¶ 8–9. Defendant states that it stands to suffer substantial financial harm if it is restrained from using the Casper name for its network. Id. ¶ 12.

III. Legal Standard

Federal Rule of Civil Procedure 65 authorizes a court to enter a temporary restraining order ("TRO") or preliminary injunction. Fed. R. Civ. P. 65. The purpose of a TRO is to preserve the status quo before a preliminary injunction hearing may be held; its provisional remedial nature is designed merely to prevent irreparable loss of rights prior to judgment. Granny Goose Foods, Inc. v. Brotherhood of Teamsters & Auto Truck Drivers , 415 U.S. 423, 439, 94 S.Ct. 1113, 39 L.Ed.2d 435 (1974).

The legal standard that applies to a motion for a TRO is the same as a motion for a preliminary injunction. See Stuhlbarg Int'l Sales Co. v. John D. Brush & Co. , 240 F.3d 832, 839 n.7 (9th Cir. 2001). To obtain a TRO or preliminary injunction, the moving party must show: (1) a likelihood of success on the merits; (2) a likelihood of irreparable harm to the moving party in the absence of preliminary relief; (3) that the...