Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_06-cv-01296/USCOURTS-cand-3_06-cv-01296-17/pdf.json

Parties Involved:
Lappert's Ice Cream, Inc
Counter-defendant
Lappert's, Inc
Counter-claimant

Document Text:

United States District Court

For the Northern District of California

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UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

LAPPERT'S ICE CREAM, INC., a

California Corporation

Plaintiff,

 v.

LAPPERT'S, INC., a Hawaii

Corporation,

Defendant. 

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No. C-06-1296 SC

ORDER DENYING

PLAINTIFF'S MOTION

FOR SUMMARY JUDGMENT

I. INTRODUCTION

Presently before the Court is a motion by Plaintiff and

Counterdefendant Lappert's Ice Cream, Inc. ("Plaintiff" or

"Lappert's California") for summary judgment on the counterclaims

and eighth and ninth Affirmative Defenses asserted by Defendant

and Counterclaimant Lappert's Inc. ("Defendant" or "Lappert's

Hawaii"). Docket No. 61. Defendant opposed the motion, Docket

No. 97; Plaintiff replied, Docket No. 111; Defendant filed a

supplemental opposition, Docket No. 112; and Plaintiff filed a

supplemental reply, Docket No. 113.

Having considered the submissions of both parties, the Court

hereby DENIES Plaintiff's Motion for Summary Judgment. 

II. BACKGROUND

This case arises from a dispute between two closely related

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companies over the control of the intellectual property rights of

an ice cream and coffee business. See Am. Compl., Docket No. 47. 

Lappert's Hawaii was co-founded in 1983 by Walter Lappert and Mary

Pratt, Walter's wife, who opened a store together in Hanapepe,

Hawaii. In 1984, Walter Lappert, Mary Pratt, and Michael Lappert,

Walter's son from a prior marriage, opened a store in Sausalito,

California. Lappert's Hawaii was incorporated on August 21, 1986. 

See Pratt Decl., Docket No. 98, ¶ 5 and Ex. C. In 1989, Michael

bought out Walter and Mary's interest in the California business.

Michael Lappert presently owns 100% of Lappert's California. 

When Walter and Mary divorced in 1991, each was awarded a 50%

share of Lappert's Hawaii. Walter Lappert died in 2003 and his

50% share of Lappert's Hawaii and all other intellectual property

he purportedly held as an individual passed to his son Michael,

who currently owns 50% of Lappert's Hawaii. Mary Pratt owns the

other 50% of Lappert's Hawaii. See Pl.'s Mot. and Def.'s Opp'n

(providing detailed summaries of the facts).

In this case, Lappert's California claims ownership of four

U.S. federal trademark registrations and other Hawaii state

registrations for Lappert's-related intellectual property ("IP"). 

See Am. Compl. Lappert's Hawaii has asserted counterclaims for

ownership of the same IP, claiming that it was developed by

Lappert's Hawaii and Walter Lappert's registration of the rights

in his own name, without the knowledge or consent of Mary Pratt,

was fraud on the United States Patent and Trademark Office. See

Answer to Am. Compl., Docket No. 49.

For purposes of this motion, Lappert's California asks the

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Court to find as a matter of law that all of Lappert's Hawaii's

counterclaims and its eighth and ninth affirmative defenses (for

inequitable and fraudulent conduct in obtaining the trademark

registrations) are barred by the equitable doctrine of laches.

The parties began fighting over the use and ownership of the

IP in 2005. See Pratt Decl., ¶ 12. Until that time, these

closely related companies used the Lappert's trademarks for their

mutual benefit, enabling the success of an ice cream and coffee

business in Hawaii and the continental United States. Their

relationship has deteriorated to the point where they no longer

feel they can share the trademarks they jointly developed and used

for over twenty years.

III. LEGAL STANDARD

"Laches is an equitable time limitation on a party's right to

bring suit." Boone v. Mech. Specialties Co., 609 F.2d 956, 958

(9th Cir. 1979). Laches rests on the maxim that "one who seeks

the help of a court of equity must not sleep on his rights." 

Piper Aircraft Corp. v. Wag-Aero, Inc., 741 F.2d 925, 938 (7th

Cir. 1984) (Posner, J., concurring). It is well established that

laches is a valid defense in trademark suits. See e.g., Miller v.

Glen Miller Prod., Inc., 454 F.3d 975, 980 (9th Cir. 2006); Jarrow

Formulas, Inc. v. Nurtition Now, Inc., 304 F.3d 829, 839 (9th Cir.

2002). To demonstrate laches, the "defendant must prove both an

unreasonable delay by the plaintiff and prejudice to itself." 

Couveau v. Am. Airlines, Inc., 218 F.3d 1078, 1083 (9th Cir.

2000).

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When considering unreasonable delay, Courts perform a twostep analysis:

First, we assess the length of delay, which is measured from

the time the plaintiff knew or should have known about its

potential cause of action. Second, we decide whether the

plaintiff's delay was reasonable. The reasonableness of the

plaintiff's delay is considered in light of the time allotted

by the analogous limitations period. We also consider

whether the plaintiff has proffered a legitimate excuse for

its delay. 

Jarrow, 304 F.3d at 838 (citations omitted).

When considering prejudice, Courts have recognized both

evidentiary and expectations-based prejudice. "Evidentiary

prejudice includes such things as lost, stale, or degraded

evidence, or witnesses whose memories have faded or who have

died." Danjaq LLC v. Sony Corp., 263 F.3d 942, 955 (9th Cir.

2001). Expectations prejudice includes a showing by a defendant

"that it took actions or suffered consequences that it would not

have, had the plaintiff brought suit promptly." Id.

To prevail on its motion, the moving party, Lappert's

California, must show that there is no genuine issue as to any

material fact, and that it is entitled to judgment as a matter of

law. See Fed R. Civ. P. 56(c); Celotex Corp. v. Catrett, 477 U.S.

317, 322 (1986). In considering Plaintiff's motion, the Court

does not make credibility determinations or weigh conflicting

evidence; the Court must draw all inferences in the light most

favorable to Defendant. See T.W. Elec. Serv. Inc. v. Pac. Elec.

Contractors Ass'n, 809 F.2d 626, 630-31 (9th Cir. 1987). 

//

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IV. DISCUSSION

A. Fraudulent Procurement Claims

To defeat the fraudulent procurement claims asserted by

Defendant Lappert's Hawaii, Plaintiff Lappert's California must

show unreasonable delay and prejudice. Defendant argues that the

laches defense (1) is unavailable as a matter of law and, in the

alternative, (2) fails because Defendant was unaware of the basis

for the claim until approximately 2005. See Opp'n, 1. The Court

finds Defendant's first argument unavailing. Laches may be

asserted as an affirmative defense even though claims for

fraudulent procurement may be brought "at any time." See 15

U.S.C. § 1064(3); Beaty v. Selinger, 306 F.3d 914 (9th Cir. 2002);

Pro-Football, Inc. v. Harjo, 415 F.3d 44 (D.C. Cir. 2005). In

Beaty and Pro-Football, courts dismissed the notion that the "at

any time" language invalidated the laches defense. See Beaty, 306

F.3d at 924 ("Rather, [laches] is primarily concerned with

prejudice. There is thus nothing inherently contradictory about

saying that an action that may be brought 'at any time' is

nonetheless subject to an equitable limitation based on

prejudicial delay."); Pro-Football, 415 F.3d at 48 ("The words 'at

any time' demonstrate only that the act imposes no statute of

limitations for bringing petitions. Those words have nothing to

do with what equitable defenses may be available during

cancellation proceedings."). Because the law does not preclude

Plaintiff's legal arguments, the Court will consider whether

laches defeats Defendant's counterclaims as a matter of law.

Lappert's California argues that its laches defense succeeds

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because Lappert's Hawaii, and Mary Pratt specifically, knew or

should have known of the allegedly fraudulent conduct as early as

1987. In response, Lappert's Hawaii points to the statement of

Mary Pratt, "Prior to 2005, I did not know that the Post-Divorce

Registrations existed." Pratt Decl., ¶ 8. As such, Mary Pratt

had no knowledge of the alleged fraud when it occurred and the

laches defense will only succeed if the Court finds that Defendant

should have known about basis for its counterclaims. Lappert's

Hawaii asserts that it is wrong to say that Mary Pratt or

Lappert's Hawaii should have known that the IP was improperly

registered in Walter Lappert's name because the purpose of the

alleged fraud was to conceal this information from Mary Pratt and

the company. Having reviewed the evidence, the Court finds

disputed issues of material fact involving Defendant's fraudulent

procurement counterclaims. Thus, the Court denies Defendant's

motion as to these counterclaims.

B. Infringement and Unfair Competition Claims

Plaintiff also seeks to bar Defendant's infringement and

unfair competition claims. "Today, there is little doubt that

because of the overriding interest of the public in being free

from confusion and mistake as to source or affiliation, the

defense of estoppel by laches is only rarely applied to bar a

permanent injunction after a strong case of likely confusion has

been proven." McCarthy on Trademarks, § 31:6. In this case,

Plaintiff's Amended Complaint states that consumers are likely to

be confused as to the difference between the products sold by

Lappert's Hawaii and Lappert's California. See Am. Compl., ¶ 32. 

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In addition, Defendant has presented evidence that its claims did

not arise until 2005, when the interests of the two companies

became adverse. Drawing all inferences in the light most

favorable to Defendant, Plaintiff's laches defense fails as to the

remaining counterclaims because there are disputed issues of

material fact regarding the reasonableness of Defendant's delay

and the prejudice suffered by Plaintiff. Thus, the Court denies

Plaintiff's motion for summary judgment in its entirety.

V. CONCLUSION

For the reasons described herein, the Court DENIES

Plaintiff's Motion for Summary Judgment. 

IT IS SO ORDERED.

Dated: August 1, 2007 

UNITED STATES DISTRICT JUDGE

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