Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-4_06-cv-00964/USCOURTS-cand-4_06-cv-00964-1/pdf.json

Nature of Suit Code: 840
Nature of Suit: Trademark
Cause of Action: 15:1051 Trademark Infringement

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United States District Court

For the Northern District of California

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IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA

NEILMED PRODUCTS, INC.,

Plaintiff,

v.

MED-SYSTEMS, INC.,

Defendant.

 /

No. C 06-00964 CW

ORDER DENYING

DEFENDANT'S

MOTION TO DISMISS

Defendant Med-Systems, Inc., moves pursuant to Federal Rule of

Civil Procedure 12(b)(1) to dismiss this case for lack of subject

matter jurisdiction under the Declaratory Judgment Act, 28 U.S.C. 

§ 2201 or, alternatively, pursuant to the Court's discretion. 

Plaintiff NeilMed Products, Inc., opposes the motion. The matter

was heard on January 5, 2007. Having considered all of the papers

filed by the parties and oral argument, the Court DENIES

Defendant's motion. 

BACKGROUND

On July 12, 2004, Plaintiff filed a trademark application,

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Serial No. 78/449,153, with the United States Patent and Trademark

Office (PTO) for the mark "NEILMED'S SINUS RINSE A COMPLETE SALINE

NASAL RINSE KIT (stylized)" (Sinus Rinse) for use on

"pharmaceutical preparations for the treatment of nasal and sinus

ailments." Pl.'s Opp. Ex. A. On December 27, 2005, Defendant

filed a notice of opposition, Opp. No. 91168470, to Plaintiff's

trademark application, alleging that the proposed mark is similar

or identical to Defendant's earlier, competing mark "SINUCLEANSE

(stylized)" (SinuCleanse), Registration No. 2,205,705. Pl.'s Opp.

Ex. B ¶ 1-3. Plaintiff brought this case on February 13, 2006, to

obtain declaratory judgment from this Court that the Sinus Rinse

mark does not infringe on Defendant's SinuCleanse mark. 

LEGAL STANDARD

The Declaratory Judgment Act (DJA), 28 U.S.C. § 2201, permits

a federal court to “declare the rights and other legal relations”

of parties to “a case of actual controversy." 28 U.S.C. § 2201;

see Wickland Oil Terminals v. Asarco, Inc., 792 F.2d 887, 893 (9th

Cir. 1986). The “actual controversy” requirement of the DJA is the

same as the “case or controversy” requirement of Article III of the

United States Constitution. American States Ins. Co. v. Kearns, 15

F.3d 142, 143 (9th Cir. 1993).

Under the DJA, a two-part test is used to determine whether a

declaratory judgment is appropriate. Principal Life Ins. Co. v.

Robinson, 394 F.3d 665, 669 (9th Cir. 2005). First, the court must

determine if there exists an actual case or controversy within the

court's jurisdiction. Id. Second, if so, the court must decide

whether to exercise its jurisdiction. Id.

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The Ninth Circuit has stated that trademark disputes have

sufficiently ripened into an actual controversy under the DJA when

"'the plaintiff has a real and reasonable apprehension that he will

be subject to liability.'” Chesebrough-Pond's v. Faberge, 666 F.2d

393, 396 (9th Cir. 1982) (quoting Societe de Conditionnement en

Aluminium v. Hunter Engineering Co., 655 F.2d 938, 944 (9th Cir.

1981)). In determining "if the threat perceived by the plaintiff

is real and reasonable," the court focuses "upon the position and

perceptions of the plaintiff" and "[t]he acts of the defendant

[are] . . . examined in view of their likely impact on competition

and the risks imposed upon the plaintiff." Id. If the plaintiff

is engaged in the ongoing use of the allegedly infringing

trademark, the showing of apprehension "need not be substantial." 

Societe de Conditionnement en Aluminium, 655 F.2d at 944. The

Ninth Circuit established this approach with the caveat that the

district court's exercise of its discretion under the DJA "will

allow rejection of cases that are properly before the Patent and

Trademark Office." Chesebrough-Pond's, 666 F.2d at 396.

In Brillhart v. Excess Ins. Co. of America, 316 U.S. 491

(1942), the Supreme Court identified several factors for the

district court to consider when determining whether to exercise

jurisdiction over a declaratory judgment action, and the Ninth

Circuit has affirmed that “the Brillhart factors remain the

philosophical touchstone for the district court.” Government

Employees Ins. Co. v. Dizol, 133 F.3d 1202, 1225 (9th Cir. 1998). 

"The district court should avoid needless determination of State

law issues; it should discourage litigants from filing declaratory

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actions as a means of forum shopping; and it should avoid

duplicative litigation." Id. (internal citations omitted). The

Ninth Circuit has also “suggested other considerations” in addition

to the Brillhart factors that may assist in deciding whether to

exercise jurisdiction, including:

[W]hether the declaratory action will settle all aspects

of the controversy; whether the declaratory action will

serve a useful purpose in clarifying the legal relations

at issue; whether the declaratory action is being sought

merely for the purposes of procedural fencing or to obtain

a "res judicata" advantage; or whether the use of a

declaratory action will result in entanglement between the

federal and State court systems. 

Id.

DISCUSSION

Defendant argues that this case should be dismissed because

the mere filing of a notice of opposition to a trademark

registration application with the PTO is insufficient grounds to

give Plaintiff a reasonable apprehension of litigation to create

federal jurisdiction. Plaintiff responds that Defendant's detailed

notice of opposition, especially its use of factors relevant to

trademark infringement and dilution, has given Plaintiff a

reasonable apprehension of being sued if Plaintiff continues to use

its Sinus Rinse mark. The Court agrees.

Defendant relies heavily on the language in Chesebrough-Pond's

that "a simple opposition proceeding in the Patent and Trademark

Office generally will not raise a real and reasonable apprehension

of suit." 666 F.2d at 396. In that case, the defendant sent the

plaintiff a letter requesting that it withdraw its application to

trademark a line of men's toiletries and cosmetics that the

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1 "A valid, registered trademark entitles the holder to

prevent others from using the mark where (1) 'such use is likely to

cause confusion, or to cause mistake or deceive,' 15 U.S.C. §

1114(1)(a) (so-called 'trademark infringement'), or (2) 'such use 

. . . causes dilution of the distinctive quality of the mark,' 15

U.S.C. § 1125(c)(1) (so-called 'trademark dilution')." Au-Tomotive

Gold, Inc. v. Volkswagen of America, Inc., 457 F.3d 1062, 1067 (9th

Cir. 2006). 

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defendant argued was "confusingly similar" to its own or it would

file an opposition with the PTO. Id. at 395. The Ninth Circuit,

applying the test outlined in Societe de Conditionnement en

Aluminium, held that because the defendant's letter threatening to

bring an opposition with the PTO "stated a prima facie case for

trademark infringement . . . [i]t was reasonable to infer from [the

defendant's] letter a threat of an infringement action." Id. at

395-396.1 Defendant here points to the fact that the defendant's

threat in Chesebrough-Pond's had the actual effect of stopping the

plaintiff from using its mark and the reasonableness of the

plaintiff's apprehension was confirmed when the defendant brought

counter-claims for trademark infringement in the plaintiff's

declaratory judgment action. Id. at 396.

In the instant case, Defendant's notice of opposition alleged

that Plaintiff's Sinus Rinse mark was "strikingly similar" to

Defendant's SinuCleanse mark, that Plaintiff's mark was causing

"widespread actual confusion" in consumers, that "the extent of

potential confusion is substantial," that Plaintiff's advertising

campaign intends to "intentionally and willfully deceive the public

and free ride on [Defendant's] valuable good will," and that

Plaintiff's "proposed mark is likely to cause confusion, to cause

mistake, or to deceive consumers as to the sponsorship or origin of

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[Plaintiff's] and/or [Defendant's] goods and services." Pl.'s Opp.

Ex. B. Like the defendant in Chesebrough-Pond's, Defendant in this

case invoked the language of trademark infringement and dilution,

which could give Plaintiff a reasonable apprehension that Defendant

would sue Plaintiff if Plaintiff continues to use its Sinus Rinse

mark. From the Plaintiff's perspective, the risk of continuing to

use its mark under these circumstances, for the years it may take

to the PTO to address Plaintiff's application, is substantial. In

the event that it is eventually determined that the Sinus Rinse

mark infringes upon the SinuCleanse mark, Plaintiff could face

years of relinquished profits. 

The differences between this case and Chesebrough-Pond's upon

which Defendant relies, namely that Plaintiff has "not ceased using

the mark at issue" and Defendant has not filed any counter-claims,

do not save this case from the result in Chesebrough-Pond's. 

Defendant is correct that in Chesebrough-Pond's the defendant's

actions subsequent to its letter creating the threat of litigation

"bolstered" the reasonableness of the plaintiff's perception. 

However, the court's decision as to jurisdiction under the DJA did

not depend upon this point. See Chesebrough-Pond's, 666 F.2d at

397. Also, the fact that Plaintiff's use of the allegedly

infringing mark is ongoing actually makes the burden of showing

apprehension lower. See Societe de Conditionnement en Aluminium,

655 F.2d at 944. 

Further, although Defendant has not yet filed any counterclaims, it has not agreed not to sue Plaintiff over the Sinus Rinse

mark. As the Ninth Circuit in Societe de Conditionnement en

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Aluminium stated:

It is not relevant that [the defendant] attempted to

withdraw its 'threat' after the filing of this lawsuit. 

We do think it relevant, in the light of the

circumstances, that [the defendant] has not indicated that

it will not sue [the plaintiff] for infringement or in any

other manner agree to a non-adversary position with

respect to the patent. Thus, dismissal of this suit would

leave [the plaintiff] with the "Damoclean threat" of

litigation hanging over its head.

655 F.2d at 945. Defendant's notice of opposition makes clear that

it believes that Plaintiff's Sinus Rinse mark infringes and dilutes

Defendant's registered SinuCleanse mark and Defendant has done

nothing to "dispel such an inference." Chesebrough-Pond's, 666

F.2d at 397. The fact that Defendant has not yet acted upon its

veiled threat does not erase the threat's effect. 

Defendant cites a multitude of cases from other circuits in

support of its argument that merely filing a notice of opposition

with the PTO generally does not create a reasonable apprehension of

litigation. These cases stand for the proposition that an

opposition to the registration of a trademark is directed at the

registration, not to infringement of the opposer's mark, and thus

does not in itself give rise to a "reasonable apprehension" of

being sued for trademark infringement in federal court. These

cases do not address the situation where an opposition also pleads

a case for trademark infringement or dilution, as Defendant's does. 

Defendant contends that this Court's recent decision in

Freecyclesunnyvale v. Freecycle Network, Inc., 2006 WL 870688 (N.D.

Cal. April 04, 2006), demands a finding that Plaintiff could not

have a reasonable apprehension of litigation based on the instant

facts. In Freecyclesunnyvale, this Court concluded that the

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defendant's emails instructing the plaintiff to cease using its

allegedly infringing mark, or the defendant would report the

plaintiff to Yahoo! for "trademark and copyright infringement,"

gave the plaintiff a reasonable apprehension of litigation. Id. at

*4. There, the defendant actually followed through with its threat

and had the plaintiff's website shut down, denying the plaintiff

the opportunity to continue to use its mark. Id. Defendant's

argument that the operative facts in Freecyclesunnyvale are

stronger than those in the instant case does not avail it. As in

Chesebrough-Pond's and Freecyclesunnyvale, Defendant expressed in

the clear terms of trademark infringement its opposition to

Plaintiff's use of its Sinus Rinse mark. In fact, here, the threat

is more substantial. Instead of reporting Plaintiff to a private

entity or merely threatening to bring an opposition proceeding

before the PTO, Defendant actually filed an opposition with the PTO

alleging intentional trademark infringement and dilution by

Plaintiff. 

Finally, in addition to finding that an actual controversy

exists, the Court must decide whether to exercise its jurisdiction

over this case, considering the factors in Brillhart and Drizol. 

In the instant case, there are no state law issues, only federal

trademark issues. There is no evidence of duplicative litigation,

only this declaratory action and the pending opposition proceeding

with the PTO. Despite Defendant's argument to the contrary, the

mere commencement of federal litigation does not constitute forumshopping or procedural fencing, however expensive litigation might

be. Moreover, this declaratory action would "settle all aspects of

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the controversy" and "serve a useful purpose in clarifying the

legal relations at issue." There is no need to wait perhaps years

for the PTO to decide on the registration of Plaintiff's Sinus

Rinse mark in order to resolve the issue of whether Plaintiff's

mark infringes on Defendant's SinuCleanse mark. Defendant can

bring an action for infringement regardless of the PTO's

determination. See Goya Foods, Inc. v. Tropicana Products, Inc.,

846 F.2d 848, 853-54 (2nd Cir. 1988)(outcome of PTO proceeding does

not affect legal determination of infringement claim; district

court must still independently decide validity and priority of

marks and likelihood of consumer confusion). Therefore, the Court

will exercise its discretion to take jurisdiction over this

declaratory judgment action in order to resolve the trademark

infringement and dilution claims raised by Defendant in its notice

of opposition before the PTO.

CONCLUSION

For the forgoing reasons, the Court DENIES Defendant's motion

to dismiss (Docket No. 22).

IT IS SO ORDERED.

Dated: 1/10/07 

CLAUDIA WILKEN

United States District Judge

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