Kip's Nut-Free Kitchen, LLC v. Kip's Dehydrated Foods LLC et al, No. 3:2019cv00290 - Document 13 (S.D. Cal. 2019)
Court Description: ORDER Denying Defendants' Motion to Dismiss (Dkt. 8 ). Signed by Chief Judge Larry Alan Burns on 8/8/2019. (jdt)
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Kip&#039;s Nut-Free Kitchen, LLC v. Kip&#039;s Dehydrated Foods LLC et al Doc. 13 1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 SOUTHERN DISTRICT OF CALIFORNIA 10 11 KIP’S NUT-FREE KITCHEN, LLC, CASE NO. 3:19-cv-00290-LAB-LL Plaintiff, 12 vs. ORDER DENYING DEFENDANTS’ MOTION TO DISMISS [Dkt. 8] 13 14 15 KIPS DEHYDRATED FOODS, LLC, and NADEEM ROBERT SROUJI, an individual, Defendants. 16 17 This is a trademark dispute between Plaintiff Kip’s Nut-Free Kitchen (“Kip’s Nut- 18 Free”) and its similarly named health-food competitor, Defendant Kips Dehydrated Foods, 19 LLC (“Kips Dehydrated”).1 Presently before the Court is Kips Dehydrated’s motion to 20 dismiss. Dkt. 8. For the reasons below, that motion is DENIED. Background 21 22 According to its complaint, since 2013, Kip’s Nut-Free Kitchen (“Kip’s Nut-Free”) 23 has manufactured and sold health-conscious snacks that are free of common allergens 24 such as nuts, peanuts, dairy, and soy. Dkt. 1 at ¶ 11. Its products are available for 25 purchase online through its website, <lovekips.com>, and in Southern California grocery 26 27 28 1 Plaintiff also sued Nadeem Robert Srouji, the CEO of Kips Dehydrated Foods. For simplicity, both defendants are referred to as “Kips Dehydrated” or “Defendants” here. -1Dockets.Justia.com 1 stores. Id. at ¶ 12. Although the company claims to have operated continuously since 2 2013, Kip’s Nut-Free didn’t seek official trademark protection over its name until February 3 2018, when it filed United States Application Serial No. 87/801,097 for the “KIP’s” mark 4 in connection with “granola, granola snacks.” Id. at ¶ 13. A depiction of the mark can be 5 found in Figure 1 below: 6 7 8 9 10 Figure 1 United States Application Serial No. 87/801,097 (Kip's Nut-Free Kitchen; Application Date: February 16, 2018) 11 Defendant Kips Dehydrated Food (“Kips Dehydrated”) is a separate manufacturer 12 of health foods, primarily specializing in kale-chip products that are free of nuts, gluten, 13 and other allergens. Id. at ¶ 17. Like Kip’s Nut-Free, Kips Dehydrated sells its products 14 through its website, <www.kipskalechips.com>, and at retail grocery stores and farmer’s 15 markets in Southern California. Id. at ¶ 16. 16 On August 22, 2017—several years after Kip’s Nut-Free alleges it began using the 17 “Kip’s” name but before the company first sought official trademark registration—Kips 18 Dehydrated filed U.S. Application Serial No. 87/578,673 to register a mark for “KIPS the 19 tasty kale chips”. Id. at ¶ 19. A depiction of this mark can be found in Figure 2 below. 20 21 22 23 24 25 Figure 2 United States Application Serial No. 87/578,673 (Kips Dehydrated Food; Application Date: August 22, 2017) 26 27 In November 2018, Kip’s Nut-Free filed a Notice of Opposition with the USPTO Trademark Trial and Appeal Board seeking to prevent registration of Kips Dehydrated’s 28 -2- 1 mark. Id. at ¶ 23. Then, while the administrative appeal was ongoing, Kip’s Nut-Free 2 brought this suit asserting four causes of action against Kips Dehydrated: (1) federal 3 trademark infringement; (2) federal unfair competition and false designation of origin; (3) 4 violation of California Business and Professions Code § 17200, et seq., and (4) common 5 law trademark infringement. Kips Dehydrated now moves to dismiss the complaint. 6 Legal Standards 7 A Rule 12(b)(6) motion tests the sufficiency of a complaint. Navarro v. Block, 250 8 F.3d 729, 732 (9th Cir. 2001). While a plaintiff need not give “detailed factual allegations,” 9 a plaintiff must plead sufficient facts that, if true, “raise a right to relief above the 10 speculative level.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 545 (2007). “To survive 11 a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, 12 to ‘state a claim to relief that is plausible on its face.’” Ashcroft v. Iqbal, 556 U.S. 662, 13 678 (2009) (quoting Twombly, 550 U.S. at 547). A claim is facially plausible when the 14 factual allegations permit “the court to draw the reasonable inference that the defendant 15 is liable for the misconduct alleged.” Id. The Court need not accept legal conclusions 16 couched as factual allegations. See Twombly, 550 U.S. at 555. 17 Analysis 18 Kips Dehydrated moves to dismiss the complaint, arguing that Kip’s Nut-Free has 19 not met its burden of plausibly showing it has a valid trademark infringement claim. As a 20 result, Defendants argue, both the trademark infringement claim and Plaintiff’s remaining 21 claims—each of which is largely derivative of the trademark claim—must be dismissed. 22 But, as discussed below, Defendants’ argument is premised almost entirely on materials 23 that the Court is prohibited from considering at this stage of the litigation. Looking only to 24 the complaint, the Court finds that Kip’s Nut-Free’s claims are plausible and that 25 Defendants’ motion must therefore be denied. Plaintiff’s Website Is Not Incorporated by Reference 26 1. 27 As the parties know, in ruling on a 12(b)(6) motion, “a court may generally consider 28 only allegations contained in the pleadings, exhibits attached to the complaint, and -3- 1 matters properly subject to judicial notice.” Swartz v. KPMG LLP, 476 F.3d 756, 763 (9th 2 Cir. 2007). This doctrine has one important—but limited—exception: incorporation by 3 reference. In order to “prevent[] plaintiffs from selecting only portions of documents that 4 support their claims, while omitting portions of those very documents that weaken—or 5 doom—their claims,” a court may consider a writing referenced in a complaint but not 6 explicitly incorporated therein if the complaint relies on the document and its authenticity 7 is unquestioned. Khoja v. Orexigen Therapeutics, Inc., 899 F.3d 988, 1002 (9th Cir. 8 2018). This exception also extends “to situations in which the plaintiff's claim depends 9 on the contents of a document, the defendant attaches the document to its motion to 10 dismiss, and the parties do not dispute the authenticity of the document, even though the 11 plaintiff does not explicitly allege the contents of that document in the complaint.” Knievel 12 v. ESPN, 393 F.3d 1068, 1076 (9th Cir. 2005). 13 Plaintiff’s primary contention in this suit is that it has a senior trademark interest in 14 the “Kips” or ”Kip’s” name because it has been using the name in the health-food market 15 since 2013, at least four years before Kips Dehydrated began using it. Kips Dehydrated 16 argues in its motion to dismiss that the complaint is insufficient as a matter of law because 17 of contradictory information found on Plaintiff’s website. See Opp. at 6. Defendants 18 argue, for example, that Plaintiff’s mark has not been in “continuous use”—a requirement 19 to have a valid, protectable trademark—because a blog post from Plaintiff’s website 20 suggests that the company pulled its products off shelves in 2016 and didn’t reintroduce 21 the products until May 2017. Mork Decl., Dkt. 8-1, Ex. C at 19-22. As a result of these 22 contradictory statements and others found in the blog post, Kips Dehydrated argues that 23 Plaintiff cannot plausibly plead trademark infringement. 24 But this is not a motion for summary judgment. Defendants may have uncovered 25 evidence that supports their defense, but that doesn’t mean they can shoehorn that 26 evidence into a motion to dismiss. Incorporation by reference applies only where the 27 plaintiff has strategically omitted critical portions of a document or where the plaintiff’s 28 claims “depend on” the contents of a document that is omitted altogether. Neither -4- 1 circumstance applies here. Although the complaint makes passing reference to Plaintiff’s 2 website, <lovekips.com>, it makes no reference to the specific blog post the Defendants 3 have proffered. A passing reference to a website does not transform every document 4 associated with that website into a proper subject for judicial notice. See Greg Young 5 Publ'g, Inc. v. CafePress, Inc., 2016 WL 6106752, at *2 (C.D. Cal. 2016) (“[A]lthough 6 Plaintiff does quote portions of the ‘FAQs’ section of the website, such allegations are not 7 a blanket permission to incorporate unrelated information found elsewhere on [the] 8 domain.”) (citations omitted). Nor does any portion of Plaintiff’s trademark infringement 9 claim “depend on” the contents of this blog post. The statements in the blog post may 10 support a defense at some later stage of the litigation, but they are irrelevant to Plaintiff’s 11 claims at this time. See Zero Motorcycles, Inc. v. Nikola Motor Co., 2018 WL 3009126, 12 at *5 (N.D. Cal. 2018) (rejecting a trademark defendant’s argument that plaintiff’s website 13 press releases are proper subjects for incorporation by reference because plaintiff’s “FAC 14 does not depend on the assertion Defendants are currently marketing the vehicle.”). 15 From a practical standpoint, the evidentiary issues alone should have alerted the 16 Defendants that this material was improper in support of a motion to dismiss. The blog 17 post is hearsay and the Defendants are offering it for the truth of the matter asserted— 18 that Kip’s Nut-Free has not continually used the mark since 2013. The Court has no 19 information about when the blog post was written, what the author’s motivations were, or 20 any other critical facts that would be necessary to determine whether the contents of the 21 blog post have evidentiary significance to this case. As courts in this circuit routinely 22 recognize, judicial notice and incorporation by reference are limited doctrines—“to the 23 extent the court can take judicial notice of press releases and news articles, it can do so 24 only to ‘indicate what was in the public realm at the time, not whether the contents of 25 those articles were in fact true.’” Gerritsen v. Warner Bros. Entm't Inc., 112 F.Supp.3d 26 1011, 1029 (C.D. Cal. 2015) (quoting Von Saher v. Norton Simon Museum of Art at 27 Pasadena, 592 F.3d 954, 960 (9th Cir. 2010)). 28 -5- 1 In short, the blog post from Plaintiff’s website is not properly incorporated by 2 reference into the complaint and cannot be considered by the Court on a motion to 3 dismiss. To the extent they are relevant, the Court will take judicial notice of the parties’ 4 trademark applications, but Defendants’ request for judicial notice is DENIED as to the 5 blog post. 6 2. 7 Without the blog post to support their argument, Defendants’ motion to dismiss 8 largely falls apart. To succeed on a trademark infringement claim, a plaintiff must show 9 that (1) they have a valid, protectable trademark, and (2) the defendant is using a mark 10 that is confusingly similar. Herb Reed Enters., LLC v. Fla. Entm't Mgmt., Inc., 736 F.3d 11 1239, 1247 (9th Cir. 2013). Kip’s Nut-Free has plausibly pled both elements here. 12 Plaintiff Has Stated a Plausible Trademark Claim a. Valid, Protectable Trademark 13 To have a valid, protectable trademark, a plaintiff must show that it is the senior 14 user of the mark, that the mark has been in continuous use, and that the mark has 15 sufficient market penetration in a particular geographic market. See Hanginout, Inc. v. 16 Google, Inc., 54 F.Supp.3d 1109, 1118 (S.D. Cal. 2014); Spin Master, Ltd. v. Zobmondo 17 Entm’t, LLC, 944 F.Supp.2d 830, 851 (C.D. Cal. 2012). 18 Kip’s Nut-Free has plausibly pled both a senior interest and continuing use of the 19 mark. The complaint alleges that Plaintiff “has used the KIP’S trademark as a brand 20 identifier for health food products . . . since 2013,” and that it was the exclusive user of 21 that mark in the health-food market until Defendants began using a similar name in 2017 22 or 2018. Plaintiff further alleges that its products are still available today under the “Kip’s” 23 name online and in retail stores. 24 Plaintiff’s use of the mark is continuous and senior. Accepted as true, these allegations suggest that 25 Plaintiff has also plausibly pled market penetration. Although Defendants argue 26 that Kip’s Nut-Free “pleads no specific facts regarding its volume of sales and growth 27 trends, the number of persons buying the trademarked product in relation to the number 28 of potential purchasers, or any relevant facts whereby Plaintiff’s market penetration can -6- 1 be measured,” this overstates the pleading burden at this stage. Kip’s Nut-Free alleges 2 that its products are available throughout the United States and that it focuses specifically 3 on the Southern California market. Construed in the light most favorable to the Plaintiff, 4 this is sufficient to plead market penetration. See Hanginout, 54 F.Supp.3d at 1136 5 (“[B]ecause Hanginout has alleged that it ‘achieved market penetration through the United 6 States and, at a minimum, in California,’ the Court must take these facts as true and leave 7 for a later date the determination of whether Hanginout will be able to support such facts 8 with necessary evidence.”). It’s true that Kip’s Nut-Free doesn’t specifically use the 9 phrase “market penetration” in its complaint, but mercifully the law doesn’t always turn on 10 11 such formalities. b. Likelihood of Confusion 12 In the Ninth Circuit, likelihood of confusion is determined by an eight-part test that 13 is “predominantly factual in nature.” Entrepreneur Media, Inc. v. Smith, 279 F.3d 1135, 14 1140 (9th Cir. 2002). Among other things, courts consider a variety of non-exclusive 15 factors, including (1) the strength of the mark; (2) the relatedness or proximity of the goods 16 or services; (3) the similarity of the marks; (4) the evidence of actual confusion; (5) the 17 marketing channels used; (6) the type of goods and degree of care likely to be exercised 18 by the purchaser; (7) the defendant’s intent in selecting the mark; and (8) the likelihood 19 of expansion in product lines. See AMF Inc. v. Sleekcraft Boats, 599 F.2d 341, 348-49 20 (9th Cir. 1979). 21 Plaintiff has met its pleading burden on this issue. The complaint alleges that the 22 two companies use similar marks (“KIP’S” vs. “KIPS”) on highly related goods (healthy, 23 allergen-free snacks) in the same geographic locations (online sales nationwide, with 24 physical sales in Southern California). At this stage of the litigation, these facts are more 25 than sufficient to suggest that there is a likelihood of confusion among at least some 26 consumers. See also Dita, Inc. v. Mendez, 2010 WL 5140855, at *5 (C.D. Cal. 2010) 27 (“Although dismissal of pleadings on grounds that likelihood of confusion is impossible 28 from the face of a complaint is not entirely unprecedented, . . . dismissal at this stage in -7- 1 the proceedings would nonetheless be ‘highly unusual.’”) (quoting 6 McCarthy on 2 Trademarks and Unfair Competition § 32:121.25). 3 Because Plaintiff has plausibly pled both elements of a trademark infringement 4 claim—that it has a valid, protectable trademark and there is likelihood of confusion— 5 Defendants’ motion to dismiss is DENIED as to this claim. 6 7 3. Defendants’ Remaining Arguments in Favor of Dismissal Are Unpersuasive. 8 In addition to trademark infringement, Plaintiff’s complaint contains three other 9 causes of action—federal unfair competition, state unfair competition, and common law 10 trademark infringement. Although Defendants put forward cursory arguments as to why 11 these claims should also be dismissed, the claims largely rise or fall with the trademark 12 infringement claim. 13 trademark infringement is an example or form of unfair competition, stating a claim for 14 trademark infringement is sufficient to state a claim for unfair competition.” Microsoft 15 Corp. v. My Choice Software, LLC, 2017 WL 5643210, at *6 (C.D. Cal. 2017). And 16 Plaintiff’s common law trademark claim also survives because a “state law trademark 17 infringement claim . . . is subject to the same legal standards as [a federal] trademark 18 claim.” Rearden LLC v. Rearden Commerce, Inc., 683 F.3d 1190, 1221 (9th Cir. 2012). 19 In short, because the Court has determined that Plaintiff has stated a valid claim for 20 trademark infringement, the remainder of the claims survive as well. 21 22 23 24 25 26 27 As to Plaintiff’s unfair competition claims, for example, “[s]ince 4. Conclusion Defendants’ motion to dismiss is DENIED. Dkt. 8. Defendants’ Request for Judicial Notice is GRANTED IN PART and DENIED IN PART. IT IS SO ORDERED. Dated: August 8, 2019 HONORABLE LARRY ALAN BURNS Chief United States District Judge 28 -8-
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