Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-casd-3_16-cv-00751/USCOURTS-casd-3_16-cv-00751-0/pdf.json

Nature of Suit Code: 840
Nature of Suit: Trademark
Cause of Action: 15:1114 Trademark Infringement (Lanham Act)

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UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF CALIFORNIA

HUF WORLDWIDE, LLC

Plaintiff,

CASE NO. 16cv751-LAB (WVG)

ORDER OF DISMISSAL

vs.

WAL-MART STORES, INC., et al.,

Defendants.

I. Summary

To survive a motion to dismiss for failure to state a claim, a plaintiff must “nudge[] their

claims across the line from conceivable to plausible.” Bell Atl. Corp. v. Twombly, 550 U.S.

544, 570 (2007). Huf Worldwide sued various Walmart entities and Ebuys, Inc. (“Walmart”)

for trademark infringement because Walmart resells Huf shoes and apparel that are likely

to cause confusion because they are “materially altered.” Huf doesn’t dispute that Walmart 1

is reselling actual Huf shoes, but says Walmart has materially altered the shoes in two ways:

(1) Walmart may obscure barcode labels on the outside of Huf boxes; and (2) Walmart's

resales void Huf's warranty. Huf’s allegations fail to state a plausible claim “that allows the

court to draw the reasonable inference that the defendant is liable for the misconduct

alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009).

Huf also alleges state law claims for unfair competition and interference with 1

prospective economic relations.

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II. Analysis

The Lanham Act allows trademark owners to sue competitors using an unauthorized

copy of their mark that's “likely to cause confusion.” 15 U.S.C. § 1114 and 1125(a). But 2

resale “of the original article under the producer's trademark is neither trademark

infringement nor unfair competition.” Sebastian Int'l, Inc. v. Longs Drug Stores Corp., 53 F.3d

1073, 1076 (9th Cir. 1995). Courts call this principle the first sale rule, but it's another way

of saying that reselling authentic goods isn't trademark infringement because “confusion

ordinarily does not exist when a genuine article bearing a true mark is sold.” NEC Elecs. v.

CAL Circuit Abco, 810 F.2d 1506, 1509 (9th Cir. 1987). Under the first sale rule, it's not

enough to allege that “consumers erroneously believe the reseller is affiliated with or

authorized by the producer.” Sebastian, 53 F.3d at 1076. Instead, the plaintiff must allege

that the resold products are materially different. Hokto Kinoko Co. v. Concord Farms, Inc.,

738 F.3d 1085, 1093 (9th Cir. 2013). “The key question is whether a consumer is likely to

consider a difference relevant when purchasing a product.” Id.

Huf says products sold by Walmart aren’t “authentic Huf products, as they are

products of changed character that [ ] are no longer genuine.” Huf admits that Walmart is 3

reselling actual Huf shoes, but says the shoes aren’t genuine because they are different in

two ways: (1) Walmart may obscure Huf’s barcode labels; and (2) Walmart’s resales void

Huf’s warranty.

1. Obscured Barcodes

First, Huf didn’t adequately allege how Walmart changed the character of Huf’s shoes

by obscuring barcodes. Huf believes Walmart has “changed, obscured, removed or defaced”

or “altered, obliterated, and/or replaced” Huf's barcodes “with fraudulent ones.” Six verb 4

variations of “to change”—with the infamous “and/or” conjunctive-disjunctive—is as close as

The court analyzes both provisions together. Brookfield Commc'ns, Inc. v. W. Coast 2

Entm't Corp., 174 F.3d 1036, 1047 n.8 (9th Cir. 1999).

 Complaint ¶ 36. 3

 Complaint ¶ 26, 76–77. 4

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it gets to a tell in legal writing: Huf doesn't know what, if anything, Walmart has done to alter

the barcodes.

Walmart speculates that Huf may have in mind something innocuous and far more

quotidian than allegations of “obliterating” barcodes: it’s possible that some of Walmart’s new

“price tags may cover some portion of the bar codes or other tags initially placed on the

boxes.” Why a consumer would consider this difference relevant, Huf hasn’t explained.

Putting a new price tag on a resold item is par for the course. If these barcodes are a crucial 

“quality control mechanism” that permits detection of counterfeits or gives Huf the ability to

recall defective products, Huf hasn’t sufficiently outlined those allegations. See Zino Davidoff

v. CVS, 571 F.3d 238, 240 (2d Cir. 2009).

2. Voided Warranties

Second, Huf says it offers warranties on its products, but only for those “that are sold

through authorized dealers.” Walmart isn’t an authorized dealer. Ergo, Walmart sales void

the Huf warranty. Maybe so. But that’s a conclusion for the Court to draw based on sufficient

alleged facts. And here, Huf hasn’t even offered the Court the specific language of its

warranty. Nor has Huf offered the Court a sufficient statement of how the void warranty is

likely to cause confusion or why consumers consider the warranty a relevant difference. The

Court’s not asking for evidence. But Huf hasn’t put the Court in a position to draw reasonable

inferences that the company is entitled to relief. 

Even if Huf can fix these problems, the Ninth Circuit precludes an infringement claim

based on voided warranties alone. In NEC Elecs. v. CAL Circuit, the court granted summary

judgment to competitors who resold a trademark owner’s products, despite evidence that

some customers “mistakenly thought” products were protected by a trademark holder’s

“servicing and warranties.” NEC Elecs. v. CAL Circuit Abco, 810 F.2d 1506, 1508 (9th Cir.

1987). The Ninth Circuit explained that even if the competitors that resold the products had 5

The Ninth Circuit didn’t offer much analysis in NEC, but other cases have confirmed 5

this holding. Sebastian v. Longs Drug Stores, 53 F.3d 1073, 1076 (9th Cir. 1995)(“this court's

holding in NEC, which applied the ‘first sale’ doctrine despite the district court's finding that

some purchasers” “mistakenly thought their chips were protected by” “servicing and

warranties."); Upper Deck v. CPG Direct, 971 F. Supp. 1337, 1342 (S.D. Cal. 1997) (same).

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misled the customers about the servicing and warranties, the plaintiff’s remedy was “in

contract or tort, but not in trademark.” Id. at 1510. Huf didn’t address this case.

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III. Conclusion

“It is the essence of the 'first sale' doctrine that a purchaser who does no more than

stock, display, and resell a producer's product under the producer's trademark violates no

right conferred upon the producer by the Lanham Act.” Sebastian, 53 F.3d at 1076 (9th Cir.

1995). Huf hasn't pled facts from which the Court can draw a reasonable inference that Huf's

entitled to relief because Walmart resells products that are materially different.

The Court declines to exercise supplemental jurisdiction over the remaining state

claims. Huf’s real concern seems to turn on its authorized retailers breaking their contracts

with Huf and Walmart's possible role inducing those retailers to breach their existing

contracts. State court may be the more appropriate venue for this dispute, as the claims

sound more “in contract or tort” rather than federal trademark law. NEC, 810 F.2d at 1508.7

Because significant time has passed since the motions were filed, and Rule 15

provides for “extreme liberality” in amendment, the Court allows Huf an opportunity to

replead. DCD Programs v. Leighton, 833 F.2d 183, 186 (9th Cir. 1987). If Huf files an

amended complaint, it must do so on or before March 21, 2017. Walmart’s motion to

dismiss is GRANTED.

IT IS SO ORDERED.

DATED: February 28, 2017

HONORABLE LARRY ALAN Burns

United States District Judge

 Huf cited Toshiba v. Advantage Telecom, 19 F. App'x 646 (9th Cir. 2001). But the 6

Court can’t rely on that case. See Ninth Circuit Rule 36-3. Huf also cited Beltronics v.

Midwest, 562 F.3d 1067 (10th Cir. 2009), which says void warranties may create confusion

and result in possible infringement. But that case isn’t binding precedent either. The Court

notes that the sensible fix discussed in Beltronics suggests Walmart could remedy the

problem by simply disclosing the voided warranty to its customers. 

Huf repeatedly referenced the Central District—the Court notes that venue is 7

currently in the Southern District.

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