Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-4_06-cv-06079/USCOURTS-cand-4_06-cv-06079-7/pdf.json

Nature of Suit Code: 840
Nature of Suit: Trademark
Cause of Action: 15:1125 Trademark Infringement (Lanham Act)

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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

WORLDPAC, INC.,

Plaintiff,

v.

INTERCO PRODUCTS CORP.,

Defendant.

 /

INTERCO PRODUCTS CORP.,

Counterclaimant,

v.

WORLDPAC, INC.,

Counterdefendant.

 /

No. C 06-6079 CW

ORDER DENYING

WORLDPAC'S MOTION

FOR PARTIAL SUMMARY

JUDGMENT AND DENYING

INTERCO’S CROSSMOTION FOR PARTIAL

SUMMARY JUDGMENT

Plaintiff and Counterdefendant Worldpac, Inc. moves for

partial summary judgment. Defendant and Counterclaimant Interco

Products Corp. opposes the motion and cross-moves for partial

summary judgment. Worldpac opposes that motion. The matter was

heard on August 2, 2007. Having considered all of the papers filed

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by the parties, the evidence cited therein and oral argument, the

Court denies both motions. 

BACKGROUND

Worldpac and Interco are competitors; both distribute Weber

brand carburetors in the United States.

In addition to distributing Weber carburetors, Worldpac

imports and distributes other automotive parts for the import

specialty repair shop market. It claims that it (and its

predecessors) have imported and distributed Weber carburetors in

the United States for more than twenty years. The president of

Interco, Michael Pace, states that he has had a relationship with

the prior owner of the Weber trademark and its successors for over

forty years, since as early as 1960. 

Beginning in the 1980's and continuing until 2002, Magneti

Marelli Powertrain USA, LLC (MM USA) and its parent company,

Magneti Marelli Italy (MM Italy), manufactured Weber brand

carburetors. MM USA manufactured the carburetors at its plant in

Sanford, North Carolina. MM Italy manufactured the carburetors at

its plant in Guadalajara, Spain; it owned the Weber trademark. 

During that time, there were two primary distributors of Weber

carburetors in the United States: the Redline division of Impac and

Interco Parts Corporation (IPC), which was owned by Mr. Pace. In

1995, Worldpac acquired Impac. Four years later, it acquired IPC. 

As part of that acquisition, Mr. Pace entered into a two-year noncompete agreement. After the non-compete agreement expired, Mr.

Pace formed Defendant Interco. 

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In 2002, MM Italy sold its plant in Spain to Proscesos

Mecanicos Espanoles, S.L., (Promek), which then began manufacturing

Weber carburetors. Promek entered into an exclusive distribution

arrangement with Interco. Although the agreement was to expire on

December 31, 2005, it could be terminated for cause or if a party

became bankrupt or insolvent. The agreement provided that Promek

would sell Weber carburetors in North America exclusively to

Interco and that Interco would have the exclusive right to use,

display, license and exploit the Weber logo and trademarks in North

America. 

In 2004, Promek experienced severe financial difficulties. It

became insolvent and filed for bankruptcy protection in the Spanish

courts. The bankruptcy administrators sent a letter to Interco,

informing it that the contract was terminated and that Interco

still owed Promek € 577,984.41. Interco brought an action against

Promek in the Eastern District of New York and, in a default

judgment, was awarded $1,804,740,000 in damages.

During Promek's bankruptcy proceedings, MM Italy entered into

negotiations with LCN Mecanica, S.L. (LCN). According to Worldpac,

these negotiations concerned LCN acquiring the manufacturing assets

of Promek and obtaining a license to manufacture Weber carburetors

in Promek's plant. On September 21, 2004, Mr. Pace and one of

Interco's attorneys attended a meeting in Guadalajara, Spain at

LCN's office. In a letter concerning the meeting, Interco's

attorney stated that LCN indicated at the meeting its "intention to

respect and comply with the terms" of the Exclusive North America

Distribution Agreement between Interco and Promek. Pace Dec.,

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Ex. 20.

On November 4, 2004, Mr. Pace, on behalf of Interco, met with

individuals from MM Italy. According to Mr. Pace, they agreed that

Interco would (1) manufacture certain models of Weber carburetors

in MM USA's North Carolina plant and (2) continue as the exclusive

importer and distributor of all Weber Products in North America. 

Mr. Pace states that, because of his long-standing relationship

with MM Italy, this agreement was confirmed with a handshake. 

 Approximately two months later, on January 1, 2005, MM USA and

Interco entered into a written manufacturing agreement, providing

that MM USA would assemble certain Weber carburetors and sell them

exclusively to Interco. Mr. Pace states that this agreement

formalized the manufacturing portion of his and MM Italy's

November, 2004 agreement; however, there was no mention of that

oral agreement in the January, 2005 written agreement. 

In March, 2005, Mr. Pace sent an email to MM Italy, attaching

a memo from Interco's counsel advising that there be a direct,

written agreement between MM Italy and Interco concerning Interco's

exclusive right to enforce and to protect the Weber mark in the

United States. The email stated, 

It is important that if LCN or another company were to acquire

the assets of Promek--that they NOT be granted a license to

sell Weber carbs etc. into North America--and to require any

of the possible customers/distributors outside of North

America to also not sell into or to sell to any third party

that may/could do so. 

Worldpac Ex. F.

Shortly after, however, LCN purchased Promek's plant and

inventory and, on April 18, 2005, MM Italy entered into a nonCase 4:06-cv-06079-CW Document 63 Filed 08/24/07 Page 4 of 16
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exclusive trademark license agreement with LCN. The agreement gave

LCN the right to manufacture Weber carburetors at the plant in

Guadalajara; it did not contain express restrictions or limitations

on the customers to whom LCN could distribute Weber carburetors in

the United States. 

In May, 2005, Interco and MM USA entered into an Exclusive

North American Licensing Agreement. Mr. Pace states that this

agreement memorialized his November, 2004 oral agreement with MM

Italy concerning Interco's exclusive importation and distribution;

again, however, the agreement does not mention the November, 2004

agreement. The agreement grants Interco the exclusive right to use

the Weber trademark in North America and the right to enforce and

to protect the Weber trademark from authorized use or exploitation

in North America. 

In July, 2005, LCN and Worldpac entered into a supply and

distribution contract, which provided that "LCN gives WORLDPAC the

faculties to distribute 'Weber' carburettors [sic] or kits, without

exclusivity, and only from LCN's production, in all countries in

the world where Weber trademark is registered." Worldpac Ex. B. 

Interco contends that LCN entered into this agreement with Worldpac

in violation of Interco's exclusive rights. To support its

contention, it relies, in part, on a February, 2007 letter written

by MM Italy's general counsel to the general counsel of General

Parts International, the parent company of Worldpac: 

[W]hile LCN Mecanica, S.L. ("LCN") has a non-exclusive license

to use the WEBER trademark on carburetors in certain

territories, including North America, Interco Products

Corporation ("Interco") has the exclusive license to use the

WEBER trademark in North America and has been nominated by MM

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as the exclusive distributor of WEBER branded carburetors in

this territory. The rights granted by MM to LCN and Interco

effectively mean that, while LCN can make and sell WEBER

branded carburetors in certain territories, to the extent that

LCN sells such products within North America, LCN must do so

via Interco.

Pace Dec., Ex. 35 (emphasis in original).

Throughout the late summer and fall of 2005, Interco

encouraged MM Italy to assign the U.S. registration of the Weber

mark to its subsidiary MM USA. In October, 2005, MM Italy did so. 

During this time, Interco also sent Worldpac a letter demanding

that Worldpac cease distributing Weber carburetors in North America

in recognition of Interco's exclusive license agreement. Worldpac

did not comply. 

On November 1, 2005, Interco and MM USA entered into a letter

agreement concerning Interco's intention to import the 34DGEC

carburetor model from Argelite, a Argentinian manufacturer. The

letter noted that carburetors with the same technical features as

the 34DGEC model had been manufactured in the past by WEBER S.p.A.

and licensed for production to Argelite on the basis of a license

agreement that had expired. Although it did not know the "current

quality situation of Argelite production, process and plants," MM

USA conditionally approved Interco's intention to import the 34DGEC

model and affix it with the Weber trademark. Pace Dec., Ex. 32.

Worldpac contends that Interco's actions disrupted the market

for Weber carburetors in North America and that, because of this

disruption, LCN entered into negotiations with Interco. The

negotiations resulted in a November 15, 2005 letter agreement,

reflecting LCN's and Interco's mutual understanding. Under this

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agreement, Interco waived any claims it may have had against

Worldpac or LCN relating to the July 20, 2005 supply and

distribution agreement between the latter two companies and agreed

not to bring claims against other LCN customers without prior

discussion with LCN; LCN granted Interco "most favored worldwide

treatment," agreeing to sell Weber carburetors to Interco at its

lowest price; and Interco agreed to stop "all advertisement and/or

sales of alterative WEBER trademark products." Worldpac Ex. J. 

According to Worldpac, pursuant to that agreement, LCN sold

Interco the same Weber carburetors it currently sells to Worldpac. 

But, according to Interco, it learned later that the company from

which it, and Worldpac, were purchasing Weber carburetors was not

LCN Mecanica, the company with which MM Italy had entered into the

non-exclusive agreement, but rather LCN Automotive Equipment, S.A. 

LCN had sent a letter to Weber North American LCC and other

customers informing them that, on September 1, 2005, it would

change "its name for the activity as WEBER and SOLEX carburettor

[sic] manufacturer" to LCN Automotive Equipment. Pace Dec.,

Ex. 26. Interco contends that LCN did more than merely change its

name: Dun & Bradstreet reports that show that LCN Mecanica and LCN

Automotive Equipment are two separate companies.

In the spring of 2006, Interco contacted eBay Inc. concerning

listings of three of Worldpac's customers, who were selling Weber

brand carburetors that they had purchased from Worldpac. Interco

asserted to eBay that these sales of Weber brand carburetors

violated Interco's intellectual property rights. Pursuant to eBay

policies, those listings were removed. 

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In September, 2006, after MM Italy's assignment of the United

States registration of the Weber trademark to MM USA was formally

recorded with the United States Patent and Trademark Office,

Interco and MM USA entered into a renewed exclusive license

agreement, reflecting that MM USA is now the registered owner of

the Weber trademark in the United States and confirming that

Interco is the exclusive North American distributor. This

agreement contains essentially the same terms as the prior

exclusive license agreement between Interco and MM USA.

That same month, Worldpac filed this action against Interco.

The amended complaint contains eleven causes of action, alleging

false and misleading advertising under the Lanham Act, intentional

and negligent interference with contractual relations, intentional

and negligent interference with prospective business relations,

violations of California's Unfair Business Practices Act, trade

libel and common law unfair competition, and seeking a declaration

of its rights. These causes of action are based on Interco's

alleged mislabeling of SOLEX brand carburetors, including the

34DGEC carburetor, as Weber carburetors, its alleged false and

misleading statements concerning its status as the exclusive

distributor of Weber carburetors and its complaints which resulted

in eBay removing the listings of Worldpac's customers who sell

Weber carburetors. 

In October, 2006, Interco filed a single counterclaim,

accusing Worldpac of improperly using the Weber trademark in

violation of section 43(a) of the Lanham Act. Worldpac notes that

the issue of whether it and its customers have the right to

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distribute Weber brand carburetors in North America is not raised

by Interco's counterclaim.

The next month, LCN terminated its agreement with Interco,

less than a year after the parties signed it, claiming that Interco

breached the agreement by selling SOLEX brand carburetors as Weber

carburetors and by continuing to threaten Worldpac and Worldpac's

customers. 

LEGAL STANDARD

Summary judgment is properly granted when no genuine and

disputed issues of material fact remain, and when, viewing the

evidence most favorably to the non-moving party, the movant is

clearly entitled to prevail as a matter of law. Fed. R. Civ.

P. 56; Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986);

Eisenberg v. Ins. Co. of N. Am., 815 F.2d 1285, 1288-89 (9th Cir.

1987).

The moving party bears the burden of showing that there is no

material factual dispute. Therefore, the court must regard as true

the opposing party's evidence, if supported by affidavits or other

evidentiary material. Celotex, 477 U.S. at 324; Eisenberg, 815

F.2d at 1289. The court must draw all reasonable inferences in

favor of the party against whom summary judgment is sought. 

Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574,

587 (1986); Intel Corp. v. Hartford Accident & Indem. Co., 952 F.2d

1551, 1558 (9th Cir. 1991). 

Material facts which would preclude entry of summary judgment

are those which, under applicable substantive law, may affect the

outcome of the case. The substantive law will identify which facts

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are material. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248

(1986).

Where the moving party does not bear the burden of proof on an

issue at trial, the moving party may discharge its burden of

production by either of two methods. Nissan Fire & Marine Ins.

Co., Ltd., v. Fritz Cos., Inc., 210 F.3d 1099, 1106 (9th Cir.

2000). 

The moving party may produce evidence negating an

essential element of the nonmoving party’s case, or,

after suitable discovery, the moving party may show that

the nonmoving party does not have enough evidence of an

essential element of its claim or defense to carry its 

ultimate burden of persuasion at trial. 

Id. 

If the moving party discharges its burden by showing an

absence of evidence to support an essential element of a claim or

defense, it is not required to produce evidence showing the absence

of a material fact on such issues, or to support its motion with

evidence negating the non-moving party's claim. Id.; see also

Lujan v. Nat’l Wildlife Fed’n, 497 U.S. 871, 885 (1990); Bhan v.

NME Hosps., Inc., 929 F.2d 1404, 1409 (9th Cir. 1991). If the

moving party shows an absence of evidence to support the non-moving

party's case, the burden then shifts to the non-moving party to

produce "specific evidence, through affidavits or admissible

discovery material, to show that the dispute exists." Bhan, 929

F.2d at 1409. 

If the moving party discharges its burden by negating an

essential element of the non-moving party’s claim or defense, it

must produce affirmative evidence of such negation. Nissan, 210

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F.3d at 1105. If the moving party produces such evidence, the

burden then shifts to the non-moving party to produce specific

evidence to show that a dispute of material fact exists. Id.

If the moving party does not meet its initial burden of

production by either method, the non-moving party is under no

obligation to offer any evidence in support of its opposition. Id.

This is true even though the non-moving party bears the ultimate

burden of persuasion at trial. Id. at 1107.

Where the moving party bears the burden of proof on an issue

at trial, it must, in order to discharge its burden of showing that

no genuine issue of material fact remains, make a prima facie

showing in support of its position on that issue. UA Local 343 v.

Nor-Cal Plumbing, Inc., 48 F.3d 1465, 1471 (9th Cir. 1994). That

is, the moving party must present evidence that, if uncontroverted

at trial, would entitle it to prevail on that issue. Id.; see also

Int’l Shortstop, Inc. v. Rally's, Inc., 939 F.2d 1257, 1264-65 (5th

Cir. 1991). Once it has done so, the non-moving party must set

forth specific facts controverting the moving party's prima facie

case. UA Local 343, 48 F.3d at 1471. The non-moving party's

"burden of contradicting [the moving party's] evidence is not

negligible." Id. This standard does not change merely because

resolution of the relevant issue is "highly fact specific." Id.

DISCUSSION

Worldpac seeks judgment in its favor that it and its customers

have, as a matter of law, the right to distribute in the United

States the Weber brand carburetors that Worldpac purchases from

LCN. Interco seeks judgment in its favor that Worldpac's claims

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concerning the 34DGEC carburetors are without merit and must be

summarily dismissed. 

I. Worldpac's Motion for Partial Summary Judgment

Worldpac states that its motion is solely directed to whether

it can distribute the Weber carburetors that it purchases from LCN.

It contends that whether Interco has the exclusive right to

distribute Weber carburetors is irrelevant to its motion. 

According to Worldpac, even if Interco's exclusive license and

distribution agreements are valid, which Worldpac disputes,

Worldpac still has the right to sell the Weber carburetors it

purchases from LCN. 

The Ninth Circuit explains, “Trademark law generally does not

reach the sale of genuine goods bearing a true mark even though

such sale is without the mark owner's consent.” Am. Circuit

Breaker Corp. v. Oregon Breakers Inc., 406 F.3d 577, 585 (9th Cir.

2005) (quoting NEC Elecs. v. CAL Circuit Abco, 810 F.2d 1506, 1510

(9th Cir. 1987)). It is designed to protect the consuming public

from confusion about a product's source, "which confusion

ordinarily does not exist when a genuine article bearing a true

mark is sold.” Id. Thus, there is no trademark violation "where

the goods being sold are genuine goods bearing a true mark.” 

Summit Tech., Inc. v. High-Line Med. Instruments Co., Inc., 922 F.

Supp. 299, 307 (C.D. Cal. 1996) (quoting Polymer Tech. Corp. v.

Mimran, 37 F.3d 74, 78 (2d Cir. 1994)). 

Worldpac claims that the Weber carburetors it imports and

sells in the United States are "genuine goods" produced by LCN, a

company licensed and authorized to make Weber carburetors. 

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According to Worldpac, there is no customer confusion; its

customers get exactly what they expect: Weber carburetors. 

However, in the cases Worldpac cites, such as American Circuit

Breaker Corp. and Summit Technologies, Inc., there was no material

dispute of fact concerning whether the products at issue were

genuine goods bearing a true mark. For example, in American

Circuit Breaker Corp., the parties stipulated that there were no

material differences between the black and gray breakers and that

the gray breakers were "genuine" products. 406 F.3d at 585. Here,

there is evidence suggesting that Worldpac's products are genuine:

Interco purchased the same carburetors as Worldpac did. But there

is also evidence suggesting that the products are not genuine.

LCN Automotive Equipment may not be an authorized manufacturer

and, thus, the carburetors Worldpac receives may not be authentic. 

MM Italy entered into a manufacturing and licensing agreement with

LCN Mecanica, not LCN Automotive Equipment, and the agreement

provides that the license, "as well as the rights and obligations

inherent therein, cannot be assigned nor can a sublicense be

granted to a third party under any circumstances, not even in the

form of a franchise, without the previous consent in writing of the

Licensor." Worldpac Ex. A. Although Worldpac contends that LCN

Automotive is nothing more than "an administrative convenience" to

LCN Mecanica, there is evidence that LCN Mecanica and LCN

Automotive may be two separate companies. 

Further, there is evidence that carburetors sold by Worldpac

do not bear the true Weber trademark; the carburetors are packaged

bearing a "Redline Weber" designation. 

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Thus, there are disputes of fact concerning both whether the

Weber carburetors Worldpac purchases from LCN are authentic genuine

goods and whether Worldpac distributes carburetors bearing a true

mark.

Because triable issues of fact remain, Worldpac's motion for

partial summary judgment is denied.

II. Interco's Motion for Summary Judgment

Interco contends that the Court should summarily adjudicate

that it has the right to sell the 34DGEC carburetors as Weber

carburetors in North America. According to Worldpac's second and

third causes of action, Interco is deceiving actual and potential

purchasers of Weber carburetors by falsely advertising and

promoting lower quality carburetors made by Argelite, including the

34DGEC carburetor, as Weber carburetors. 

Interco argues that the 34DGEC carburetors are of equal, if

not better, quality than the models LCN manufactures and sells

under the Weber mark. In support of this contention, Interco cites

the November 1, 2005 conditional agreement between it and MM USA

concerning the 34DGEC carburetors and a letter from a pleased

customer stating that the Weber 34DGEC carburetor is a great

complement to the Weber product line and that "at Allstate

Carburetor we actually prefer this carburetor over the 32/36 DGEV

carburetor." Pace Dec., Ex. 33. With Interco's reply, it includes

a declaration from Mr. Pace stating that Interco has a

substantially lower return rate for its 34DGEC model carburetors

than for any other model carburetor that it obtains and that

Argelite, the company that manufactures the 34DGEC model

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1Mr. Pace does not explain the significance of ISO 9002

certification. 

2Worldpac also states that the parties have not had an

opportunity to take discovery concerning the quality of the 34DGEC

carburetors manufactured by Argelite. It requests, pursuant to

Rule 56(f), that the Court defer ruling on Interco's cross-motion

until additional discovery may be had on the subject. Worldpac

fails to provide an affidavit supporting its Rule 56(f) request,

nor does it show (1) that it has set forth in affidavit form the

specific facts that it hopes to elicit from further discovery,

(2) that the facts sought exist, and (3) that these sought-after

facts are essential to resist the summary judgment motion. State

of California v. Campbell, 138 F.3d 772, 779 (9th Cir. 1998).

15

carburetors, has ISO 9002 certification.1

Worldpac responds that the November 1, 2005 letter agreement

permitting Interco to sell the 34DGEC model carburetors in North

America is a "naked license" and thus is invalid because it is

fatally defective with respect to the necessary quality control.2

As Interco points out, in certain situations, a licensor can rely

upon the licensee's own quality control. See, e.g., Transgo, Inc.

v. Ajac Transmission Parts Corp., 768 F.2d 1001, 1018 (9th Cir.

1985). Nonetheless, even if the license is valid, which cannot be

determined on the record before the Court, a dispute of fact

remains as to whether the 34DGEC model carburetors are of equal

quality to other Weber carburetors. Although Mr. Pace assures the

Court that they are equal, if not better, Worldpac's executive vice

president states that Worldpac has received numerous complaints

about the performance of the 34DGEC model from customers who

purchased it believing it was a genuine Weber carburetor.

Because triable issues of fact remain, the Court denies

Interco's cross-motion for summary judgment.

Case 4:06-cv-06079-CW Document 63 Filed 08/24/07 Page 15 of 16
United States District Court

For the Northern District of California

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CONCLUSION

For the foregoing reasons, Worldpac's Motion for Partial

Summary Judgment is DENIED (Docket No. 41). Interco's cross-motion

for partial summary judgment is also DENIED (Docket No. 46). 

IT IS SO ORDERED.

8/24/07

Dated: ________________________ 

CLAUDIA WILKEN

United States District Judge

Case 4:06-cv-06079-CW Document 63 Filed 08/24/07 Page 16 of 16