Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-casd-3_04-cv-02562/USCOURTS-casd-3_04-cv-02562-4/pdf.json

Nature of Suit Code: 840
Nature of Suit: Trademark
Cause of Action: 15:1114 Trademark Infringement

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UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF CALIFORNIA

ELDORADO STONE, LLC; ELDORADO

STONE OPERATIONS, LLC,

Plaintiffs,

CASE NO. 04cv2562 JM(CAB)

ORDER DENYING DEFENDANTS’

MOTION FOR PARTIAL

SUMMARY JUDGMENT; 

DENYING PLAINTIFFS’ MOTION

FOR PRELIMINARY INJUNCTION 

vs.

RENAISSANCE STONE, INC; ALFONSO

ALVAREZ; JOSE GALVEZ MARTINEZ;

JOSEPH SMITH; ROB HABER; ORCO

CONSTRUCTION SUPPLY

Defendants. ____________________________________

AND RELATED COUNTERCLAIMS

 

Defendants and Counterclaimants Renaissance Stone, Inc., Alfonso Alvarez, Joseph Smith,

and Rob Hager move for partial summary judgment on Plaintiffs’ Fourth and Sixth through Eleventh

causes of action. Plaintiffs Eldorado Stone, LLC. and Eldorado Stone Operations, LLC. (collectively

“Eldorado”) separately move for preliminary injunction to enjoin Defendant Renaissance Stone from

selling certain products. All motions are opposed. Pursuant to Local Rule 7.1(d)(1), these matters are

appropriate for decision without oral argument. For the reasons set forth below, all motions are

denied. 

BACKGROUND

Eldorado is a specialty building materials siding company and a leading manufacturer of

architectural stone veneer, also known as manufactured stone, for residential and commercial use.

Case 3:04-cv-02562-JM-CAB Document 237 Filed 01/23/07 Page 1 of 5
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Eldorado uses proprietary technologies in manufacturing “customized stone profiles designed to look

like natural stone.” (Third Amended Complaint “TAC” ¶14). Plaintiff Eldorado Stone Operations,

LLC is a wholly owned subsidiary of Eldorado Stone, LLC and holds all rights to the trademarks,

trade dress rights and copyrights of Eldorado. (TAC ¶15). 

Defendant Alfonso Alvarez (“Alvarez”) was hired by StoneCraft Industries, Eldorado’s

predecessor in interest, as a process engineer on January 14, 2002. Alvarez was responsible for

documenting the precise formulas and methodologies used to manufacture Eldorado’s stone veneer

products. Alvarez was also responsible for establishing procedures and mechanisms to keep

Eldorado’s trade secret information secure. (TAC ¶21). Alvarez left Eldorado’s employ in or around

July 2004.

Eldorado generally alleges that Alvarez, while still an employee of Eldorado, established a

business entity to compete with Eldorado and misappropriated its trade secrets and intellectual

property. In broad brush, Eldorado alleges that all Defendants knowingly conspired to misappropriate

and did misappropriate Eldorado’s trade secrets consisting of its proprietary formulas and

manufacturing technologies for their own use. Eldorado also alleges that Defendants disclosed those

trade secrets to third parties and violated its trademarks and copyrights. Based upon this generally

described conduct, Eldorado alleges 13 claims for (1) federal trademark infringement; (2) federal

common law trademark infringement; (3) false designation of origin/federal unfair competition; (4)

federal trademark dilution; (5) federal trade dress infringement; (6) misappropriation of trade secrets;

(7) copyright infringement; (8) intentional interference with economic relationships; (9) negligent

interference with economic relationships; (10) unfair competition; (11) conversion; (12) constructive

trust; and (13) civil conspiracy.

On December 2, 2005, Counterclaimants filed a counterclaim against Eldorado alleging six

claims for (1) declaration of trademark invalidity as to Eldorado’s FIELDLEGE, CLIFFSTONE,

RUSTIC LEDGE, CREEK COBBLE, and HILLSTONE marks; (2) declaration of non-infringement

and invalidity of Eldorado’s trade dress claim; (3) intentional interference with prospective economic

advantage; (4) negligent interference with prospective economic advantage; and (5) libel. The libel

and interference with prospective economic advantage claims arise from allegations that certain

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representatives and employees of Eldorado allegedly made false statements about Counterclaimants

to actual and potential customers as well as to prospective employees. (SACC ¶21). Eldorado

employee Silvia Acuna allegedly told a prospective employee that “Alvarez was a thief who was being

investigated by the police and that the police would soon show up at Renaissance and ‘pick everyone

up.” (SACC ¶35). One prospective Renaissance employee, Luis Miguel Robles, declined

employment with Renaissance because “he was ‘afraid to go to jail’ and does not want to be ‘part of

a company like that (meaning a company that misappropriates trade secret information from another

company).” (SACC ¶36). Counterclaimants also allege that additional Eldorado employees, including

Don Tracewell, falsely stated to several individuals, including Jose Martinez, that Alvarez was a

“thief.” (SACC ¶52).

The parties have jointly moved the court to voluntarily dismiss without prejudice Plaintiffs’

trade dress cause of action and Defendants’ counterclaims for intentional and negligent interference

with prospective economic advantage. 

Motion for Partial Summary Judgment

The Misappropriation Claim (Sixth Claim)

In essence, Defendants come forward with evidence indicating that Plaintiffs did not take

adequate and reasonable steps to ensure the confidentiality of its trade secrets. Plaintiffs have come

forward with evidence giving rise to inferences that they took reasonable steps to ensure the

confidentiality of its trade secrets.

Consequently, the court concludes that genuine issues of material fact preclude entry of

summary judgment on this claim.

The Dilution and Copyright Claims (Fourth and Seventh Claims

On the dilution and Trademark claims, the court concludes that genuine issues of material fact

exist as to whether Eldorado’s trademarks are famous and have acquired distinctiveness in its niche

market and also as to whether there has been actual dilution of the mark. These disputed facts

preclude entry of summary judgment on this claim. 

On the copyright claim there is no dispute that Renaissance copied verbatim certain of

Plaintiffs’ copyrighted works. Defendants argue that the copied portions of the work were in an

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intermediate form and only available to the public for a few hours. Eldorado comes forward with

evidence to show that verbatim copying of its product brochures and installation guides have also

infringed its copyrights. The Court concludes that genuine issues of material fact preclude summary

judgement on the copyright claim.

The Negligent and Intentional Interference, Unfair Competition and Conversion State Law

Claims (Eight, Ninth, Tenth, and Eleventh Claims)

Defendants argue that the negligent and intentional interference with prospective economic

relationships, unfair competition, and conversion state law claims are preempted in whole or in part

by the California Uniform Trade Secrets Act (“CUTSA”) or the federal Copyright Act. In general,

Defendants argue that these claims are preempted because the claims are based “on the very same

nucleus of facts as their claim of trade secret misappropriation.” (Motion at p.23:5-6). Plaintiffs come

forward with evidence to show that Defendants’ entire course of conduct demonstrates that the state

law rights asserted are qualitatively different from those protected by the CUTSA or Copyright Act.

Accordingly, the court concludes that genuine issues of material fact preclude entry of summary

judgment in favor of Defendants.

In sum, whether the evidence qualitatively supports the state law claims must await the

presentation of the complete evidentiary record at the time of trial.

The Motion for Preliminary Injunction

Eldorado moves for an injunction (1) enjoining Renaissance from selling ten of its products;

(2) enjoining Renaissance from using 50 of its initial face color formulas; and (3) requiring audit rights

to ensure Renaissance’s compliance with the injunction. The court notes that, on May 31, 2005, the

court preliminarily found that Alvarez misappropriated Eldorado’s trade secrets and enjoined

Renaissance from using any of Eldorado’s trade secrets. Eldorado comes forward with evidence to

show that Alvarez misappropriated its trade secrets and that Renaissance is using that trade secret

information to produce its manufactured stones. Eldorado further supports its motion with expert

testimony indicating the similarity, or identical quality, of the mix designs.

Renaissance comes forward with evidence to create genuine issues of material fact.

Renaissance presents evidence that the color pigments were developed by an independent supplier,

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AMW, based upon the work product of Alvarez while he was employed by AMW. Renaissance also

presents evidence that its base mix is different than Eldorado’s base mix. Further, Renaissance

presents some evidence to challenge whether Eldorado took reasonable steps under the circumstances

to maintain the confidentiality of its mix designs. The court notes that the credibility and weight of

the evidence, seen in light of the totality of the circumstances, is better left to the trier of fact,

especially in light of the extended period of time this action has been pending and the proximity of

the trial date in this matter. 

In sum, the court denies Defendants’ motion for summary judgment and denies Plaintiffs’

motion for preliminary injunction. 

IT IS SO ORDERED.

DATED: January 23, 2007

 Hon. Jeffrey T. Miller

 United States District Judge

cc: All Parties 

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