BBK Tobacco & Foods LLP v. Skunk Inc.

Full title: BBK Tobacco & Foods LLP, BBK, v. Skunk Incorporated, et al., Defendants.

Court: UNITED STATES DISTRICT COURT FOR THE DISTRICT OF ARIZONA

Date published: Dec 15, 2020

No. CV-18-02332-PHX-JAT (D. Ariz. Dec. 15, 2020)

Opinion

No. CV-18-02332-PHX-JAT

12-15-2020

BBK Tobacco & Foods LLP, BBK, v. Skunk Incorporated, et al., Defendants.

James A. Teilborg Senior United States District Judge

ORDER (UNDER SEAL)

Pending before the Court are BBK Tobacco & Foods LLP's Motion for Partial Summary Judgment (Doc. 280), Defendants Skunk, Inc. and Vatra, Inc.'s Motion for Partial Summary Judgment for Laches and Non-Infringement (Doc. 337), and accompanying motions to supplement the record (Doc. 336) and strike (Doc. 358). Because the motions contain overlapping issues, the Court addresses them together. The motions are fully briefed,¹ and the Court now rules.²

1 Doc. 280, Doc. 332, Doc. 335; Doc. 337, Doc. 341, Doc. 356, Doc. 367; Doc. 336, Doc. 355, Doc. 360; Doc. 358, Doc. 364, Doc. 365.

2 The Court addresses only the evidentiary objections necessary to resolve the motions in footnotes throughout this Order. All objections not specifically addressed below are overruled without prejudice.

I. BACKGROUND

Of all the animals to fight over, the skunk seems like an unlikely choice. But the uniquely foul little creature finds itself at the center of this contentious trademark dispute. BBK Tobacco & Foods, LLP sells a variety of smoking-related products under different brand names. At issue here is BBK's "SKUNK" brand. BBK's SKUNK products include items such as rolling papers, herbs for smoking, and glass cigarette tips. In November 2014, BBK began selling its "Skunk Sack" odor-free storage bags, which are plastic zip-top bags, that it has sold ever since. (See Doc. 378).

BBK holds several registered trademarks for both SKUNK and SKUNK BRAND that apply to smoking-related product categories. Specifically, BBK's SKUNK marks apply to cigarette lighters, cigarette rolling papers, cigarette tubes, and herbs for smoking (the "'677 Registration")³ and to electronic cigarettes and cigars (the "'712 Registration").⁴ (Doc. 280-7 at 2; Doc. 280-8 at 2). BBK's SKUNK BRAND marks apply to cigarette rolling papers and cigarette lighters (the "'666 Registration"); to cigarette tips made of glass (the "'902 Registration"); and to hemp-based rolling papers and tubes for cigarettes and cigars (the "'903 Registration").⁵ (Doc. 280-6 at 2; Doc. 280-9 at 2; Doc. 280-10 at 2).

3 US Registration Number 4,436,677 covers the following goods: "Cigarette lighters not of precious metal; Cigarette papers; [Cigarette rolling machines;] Cigarette rolling papers; Cigarette tubes; [Cigarettes containing tobacco substitutes not for medical purposes]; Herbs for smoking[; Machines allowing smokers to make cigarettes by themselves; Pocket apparatus for self-rolling cigarettes]." (Doc. 280-7 at 2). The bracketed terms indicate goods that have since been deleted from the registration. (Id.).

4 US Registration Number 4,569,712 covers the following goods: "Electric cigarettes; Electronic cigarettes; Electronic cigarettes for use as an alternative to traditional cigarettes; Electronic cigars." (Doc. 280-8 at 2).

5 The '666, '902, and '903 Registrations refer to US Registration Numbers 2,435,666, 5,344,902, and 5,344,903, respectively. (Doc. 280-6 at 2; Doc. 280-9 at 2; Doc. 280-10 at 2). The Court previously ordered cigarettes, tobacco, snuff, pipes for smoking, and matches removed from the '666 Registration pursuant to an agreement of the parties. (Doc. 146).

Defendants Skunk, Inc. and Vatra, Inc. share the same sole owner, Alise Jusic. (Doc. 280-16 at 8). Vatra, Inc. sells a variety of bags and accessories ranging from small fabric zipper bags to large pieces of luggage that bear Skunk, Inc.'s brand name and logo.⁶ (See Doc. 337-3 at 142-63). Skunk, Inc.'s bags are advertised as odor-eliminating and have been featured in catalogs along with smoking accessories such as bongs and grinders. (See Doc. 341-4).

6 For simplicity, the Court refers to Skunk, Inc. and Vatra, Inc. collectively as "Skunk, Inc." throughout.

Skunk, Inc. holds a registered trademark for SKUNK that applies to wallets, belt bags, drawstring bags, kit bags, and traveling bags (the "'795 Registration").⁷ Skunk, Inc. has applied to register a trademark for the word SKUNK together with its contemporary skunk-tail logo that applies to more styles of bags than its '795 Registration (the "Pending Application"). (Doc. 280-28 at 2; Doc. 280-37 at 2).

7 The Court previously ordered additional varieties of bags removed from US Registration Number 5,072,795 pursuant to an agreement of the parties. (Doc. 148; Doc. 280-28 at 2).

In July 2015, representatives of both BBK and Skunk, Inc. featured their products at the CHAMPS trade show in Las Vegas, Nevada—a show for those in the smoking industry. (Doc. 280-24 at 3-4; Doc. 332-2 at 44, 92-93). At the trade show, Skunk, Inc. featured its SKUNK-branded bags at a large booth that had the single word skunk and its logo printed largely on its backdrop. (Doc. 332-3 at 56). A BBK employee at the trade show noticed Skunk, Inc.'s booth and informed BBK's corporate counsel. (Doc. 280-24 at 3-5).

In February 2017, BBK sent Skunk, Inc. a cease and desist letter which stated that Skunk, Inc.'s use of the SKUNK mark violated the Lanham Act. (Doc. 280-31). Skunk, Inc. responded two weeks later with a letter denying any trademark violations. (Doc. 280-34). That same day, Skunk, Inc. filed the Pending Application with the Patent and Trademark Office (PTO). (Doc. 280-37 at 2). BBK did not respond to Skunk, Inc.'s letter, requested an extension of time to oppose the Pending Application with the PTO in February 2018, and formally objected to the Pending Application with the PTO in late May 2018. (Doc. 280-37 at 3).

BBK then filed the instant action in July 2018 alleging federal trademark infringement under 15 U.S.C. § 1114 (Count 1) and federal false designation of origin and representation under 15 U.S.C. § 1125(a) (Count 2), seeking cancellation of Skunk, Inc.'s '795 Registration under 15 U.S.C. § 1064 (Count 3) and refusal of the Pending Application under 15 U.S.C. §§ 1052(d) and 1051(a) (Count 4), and alleging Arizona common law claims of trademark infringement (Count 5) and unfair competition (Count 6). (Doc. 1, amended at Doc. 49). Skunk, Inc. generally denied BBK's allegations and raised affirmative defenses of unclean hands, fraud, misuse of the federal registration symbol, laches, estoppel, acquiescence, prior registration under Morehouse,⁸ abandonment, genericness, descriptiveness, and lack of priority. (Doc. 55; Doc. 128). Skunk, Inc. also counterclaimed for cancellation of the '666 Registration on fraud, abandonment, and genericness grounds; of the '677 Registration on fraud and genericness grounds; of the '712 and '902 Registrations on fraud and descriptiveness grounds; and of the '903 Registration on descriptiveness grounds. (Doc. 128). The Court previously dismissed Skunk, Inc.'s genericness-based counterclaims for failing to state a claim upon which relief can be granted. See Fed. R. Civ. P. 12(b)(6). (Doc. 120).

8 See Morehouse Mfg. Corp. v. J. Strickland & Co., 407 F.2d 881 (C.C.P.A. 1969).

BBK now moves for partial summary judgment on Skunk, Inc.'s affirmative defenses and remaining counterclaims (Doc. 280), and Skunk, Inc. moves for partial summary judgment on its laches affirmative defense and on all BBK's claims that require proof of a likelihood of confusion. (Doc. 337).

II. LEGAL STANDARD

Summary judgment is appropriate "if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a); see also Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986). The party asserting "that a fact cannot be or is genuinely disputed must support th[at] assertion by" either "citing to particular parts of materials in the record" or "showing that materials cited do not establish the absence or presence of a genuine dispute, or that an adverse party cannot produce admissible evidence to support the fact." Fed. R. Civ. P. 56(c)(1)(A)-(B).

The movant bears the initial responsibility of presenting the basis for its motion and identifying those portions of the record, together with affidavits, if any, that it believes demonstrate the absence of a genuine issue of material fact. Celotex, 477 U.S. at 323. If the movant fails to carry its initial burden of production, the nonmovant need not produce anything. Nissan Fire & Marine Ins. Co., Ltd. v. Fritz Co., Inc., 210 F.3d 1099, 1102-03 (9th Cir. 2000). But if the movant meets its initial responsibility, the burden shifts to the nonmovant to demonstrate the existence of a factual dispute and that the fact in contention is material. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 250 (1986); see Triton Energy Corp. v. Square D. Co., 68 F.3d 1216, 1221 (9th Cir. 1995).

The nonmovant need not establish a material issue of fact conclusively in its favor. First Nat'l Bank of Ariz. v. Cities Serv. Co., 391 U.S. 253, 288-89 (1968). However, it must "come forward with specific facts showing that there is a genuine issue for trial." Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986) (internal citation omitted); see Fed. R. Civ. P. 56(c)(1). "Only disputes over facts that might affect the outcome of the suit," and thus are material, "properly preclude the entry of summary judgment." Anderson, 477 U.S. at 248. Such disputes are "genuine" when they can "reasonably be resolved in favor of either party." Ellison v. Robertson, 357 F.3d 1072, 1075 (9th Cir. 2004).

At summary judgment, the Court's function is not to weigh the evidence and determine the truth but to determine whether there is a genuine issue for trial. Anderson, 477 U.S. at 249. In its analysis, the Court must believe the nonmovant's evidence and draw all inferences in the nonmovant's favor. Id. at 255. The Court need consider only the cited materials, but it may consider any other materials in the record. Fed. R. Civ. P. 56(c)(3). "When simultaneous cross-motions for summary judgment on the same claim are before the [C]ourt, the [C]ourt must consider the appropriate evidentiary material identified and submitted in support of both motions, and in opposition to both motions, before ruling on each of them." Tulalip Tribes of Wash. v. Washington, 783 F.3d 1151, 1156 (9th Cir. 2015) (quoting Fair Hous. Council of Riverside Cnty., Inc. v. Riverside Two, 249 F.3d 1132, 1134 (9th Cir. 2001)) (alteration omitted).

III. DISCUSSION

A. Likelihood of Confusion

With the exception of a few alternative grounds for relief,⁹ all BBK's claims require BBK to prove that a likelihood of confusion exists between its marks and Skunk, Inc.'s. See 15 U.S.C. §§ 1114(1), 1125(a), 1064(3), 1052(d); Taylor v. Quebedeaux, 617 P.2d 23, 24 (Ariz. 1980); see also Angel's Gate Inc. v. All-Star Grand Canyon Tours Inc., No. CV- 12-08181-NVW, 2013 WL 12114580, at *3 (D. Ariz. Sept. 30, 2013). Skunk, Inc. claims that it is entitled to partial summary judgment because no likelihood of confusion exists between BBK's marks and its own. (Doc. 337 at 20).

9 Specifically, Count 3 of BBK's complaint alleges that Skunk, Inc.'s '795 Registration should be cancelled on non-use, abandonment, and fraud grounds, and Count 4 alleges that Skunk, Inc.'s Pending Application should be denied on non-use and fraud grounds. (Doc. 49 at 13-23). These grounds do not require a showing that a likelihood of confusion exists.

"The test for likelihood of confusion is whether a 'reasonably prudent consumer' in the marketplace is likely to be confused as to the origin of the good or service bearing one of the marks." Servpro Indus. Inc. v. Zerorez of Phx. LLC, 339 F. Supp. 3d 898, 904 (D. Ariz. 2018) (quoting Dreamwerks Prod. Grp., Inc. v. SKG Studio, 142 F.3d 1127, 1129 (9th Cir. 1998)). "This requires the confusion 'be probable, not simply a possibility.'" Id. (quoting Murray v. Cable NBC, 86 F.3d 858, 861 (9th Cir. 1996)). Whether a likelihood of confusion exists is determined by the eight-part test set forth in AMF Inc. v. Sleekcraft Boats, 599 F.2d 341, 348-49 (9th Cir. 1979). "The Sleekcraft factors are not a scorecard, a bean-counter, or a checklist." Fortune Dynamic, Inc. v. Victoria's Secret Stores Brand Mgmt., Inc., 618 F.3d 1025, 1031 (9th Cir. 2010). "Some factors are much more important than others, and the[ir] relative importance . . . will be case-specific." Id. (quoting Brookfield Commc'ns, Inc. v. W. Coast Entm't Corp., 174 F.3d 1036, 1054 (9th Cir. 1999)).

The Court discusses each factor below.

1. Strength of the Mark

The first factor is the strength of the mark at issue. "The strength of the mark is a key factor with two components: the mark's recognition in the market (i.e., its commercial strength) and the mark's inherent distinctiveness (i.e., its conceptual strength)." Stone Creek, Inc. v. Omnia Italian Design, Inc., 875 F.3d 426, 432 (9th Cir. 2017).

a. Commercial Strength

A party may prove marketplace recognition with "evidence of actual consumer recognition," as well as "evidence of 'extensive advertising, length of exclusive use,' and a large amount of sales." Servpro, 339 F. Supp. 3d at 906 (quoting Accuride Int'l, Inc. v. Accuride Corp., 871 F.2d 1531, 1536 (9th Cir. 1989)).

Skunk, Inc. argues that the commercial strength of BBK's SKUNK mark is weak because BBK's sales of SKUNK-branded products have been insubstantial, and BBK devotes limited advertising resources to SKUNK-branded products. (Doc. 337 at 23-24). The Court, however, agrees with BBK that its marketplace recognition turns on disputed issues of fact.

Skunk, Inc.'s argument that BBK's sales of its SKUNK and SKUNK BRAND products are not significant enough to demonstrate a strong commercial presence is based on a selective view of BBK's sales revenue. (Doc. 375-2). For example, Skunk, Inc.'s statement of undisputed material facts notes that BBK has not sold SKUNK-branded lighters since 2014 and that BBK's sales of its herbal smoking blends, electronic cigarettes, vaporizers, and accessories have been insubstantial since 2016. (Id.). Other SKUNK-branded products, however, such as Skunk Sacks and rolling papers have consistently generated steady and meaningful revenue. (Id.). BBK offers exhibits showing that SKUNK-branded products have collectively brought in several million dollars since 2004 (Doc. 371-3) and that in the 12-month period ending in November 2019, BBK sold 48,000 wholesale packages of SKUNK goods representing over 840,000 units of consumer-level goods (371-2).¹⁰ Contrary to Skunk, Inc.'s suggestion, the Court cannot determine commercial strength as a matter of law based on the performance of BBK's least successful products. Viewing the total sales and revenues generated by all BBK's SKUNK-branded products in the light most favorable to BBK, a factfinder could conclude that its marks have strong marketplace brand recognition.

10 Relying on Orr v. Bank of America, NT & SA, 285 F.3d 764 (9th Cir. 2002), Skunk, Inc. objects to the Court's consideration of Doc. 371-3 and Doc. 371-2 because the exhibits are not authenticated. (Doc. 356 at 20). Skunk, Inc. raises this same objection as to many of BBK's exhibits. (See Doc. 356 at 14, 15, 16, 20). Skunk, Inc., however, "misreads [Orr] to hold that the Court may not consider unauthenticated documents to support an argument to overcome summary judgment." See Ericson v. City of Phoenix, No. CV-14-01942-PHX-JAT, 2016 WL 6522805, at *8 (D. Ariz. Nov. 3, 2016). "Although Orr held that a non-movant's exhibits were inadmissible for purposes of opposing a motion for summary judgment, the Ninth Circuit later clarified that it is the admissibility of the contents of evidence—not its form—that determines whether evidence is admissible for purposes of avoiding summary judgment." Id. (citing Fraser v. Goodale, 342 F.3d 1032, 1036-37 (9th Cir. 2003)); see also Fed. R. Civ. P. 56(c)(2) ("A party may object that the material cited to support or dispute a fact cannot be presented in a form that would be admissible in evidence."). Skunk, Inc.'s authentication objections are not based on arguments that the evidence could not be presented in an admissible form at trial. They instead challenges the manner in which the evidence is presented, see, e.g., Doc. 356 at 14 (stating that "[i]t is not clear when [Doc. 371] was created or by whom" without contesting the accuracy of the cited documents from which BBK derived the summarized data), or state the objection without reasoning. (Doc. 356 at 14, 15, 16, 20). Accordingly, the objection is overruled, as are Skunk, Inc.'s other objections based on lack of authentication.

Skunk, Inc. further argues that BBK's marketplace recognition is weak because the budget BBK specifically allocates to its SKUNK brands is minimal, constituting less than one percent of BBK's total marketing budget (Doc. 375-1 at 4), and because the SKUNK brands are not prominently featured in BBK's product catalog or trade show signage. (Doc. 337-2 at 31, 152; Doc. 337-3 at 12-14, 45-46, 74-76). (Doc. 337 at 24). Although the fact that BBK features its other brands more prominently may indicate that the other brands have a stronger commercial presence than the SKUNK brands, it does not itself establish that the SKUNK brands' recognition is weak. Moreover, these facts are in dispute.

Regarding its promotional efforts and expenditures, BBK put forth evidence that it does not break down marketing expenses by brand, so BBK argues that looking only to the expenditures directly attributable to the SKUNK brands does not accurately reflect BBK's total SKUNK-related promotional expenditures. (Doc. 341-55 at 6). Further, BBK offers the testimony of its founder, Joshua Kesselman, who stated that among its most important methods of promotion are trade shows and catalogs. (Doc. 341-7 at 23). Mr. Kesselman estimates that BBK has spent millions of dollars in its trade show presentations over the years (Doc. 341-7 at 24), and BBK further notes that its catalog features its SKUNK-branded products on several of its pages (Doc. 337-2 at 17).

Viewing the evidence in the light most favorable to BBK, the Court finds that a genuine issue of material fact exists regarding SKUNK's commercial strength, and given the evidence in the record before it, the Court is unable to determine as a matter of law whether the SKUNK brands carry significant weight in the market.

b. Conceptual Strength

"Distinctiveness is often expressed on an increasing scale: Word marks 'may be (1) generic; (2) descriptive; (3) suggestive; (4) arbitrary; or (5) fanciful.'" U.S. Patent & Trademark Office v. Booking.com B.V., 140 S. Ct. 2298, 2302 (2020) (quoting Two Pesos, Inc. v. Taco Cabana, Inc., 505 U.S. 763, 768 (1992)). As explained in Surfvivor Media, Inc. v. Survivor Productions, 406 F.3d 625, 631-32 (9th Cir. 2005):

"Arbitrary" marks are common words that have no connection with the actual product—for example, "Dutch Boy" paint. "Fanciful" marks consist of "coined phrases" that also have no commonly known connection with the product at hand. Examples of fanciful marks include "Kodak" cameras or "Aveda" skin care products.

"Suggestive" marks do not describe the product's features but suggest them. The exercise of some imagination is required to associate a suggestive mark with the product. Examples include "Slickcraft" boats or "Air Care," for a service that maintains medical equipment for administering oxygen.

The fourth category of marks is referred to as "descriptive." These marks define a particular characteristic of the product in a way that does not require any exercise of the imagination. An example of a descriptive mark is "Honey Roasted" for nuts roasted with honey. Because these marks merely describe a characteristic of the product, they do not receive any trademark protection unless they acquire sufficient "secondary meaning" to create an association between the mark and the product.

The final category of marks consists of "generic" marks, which describe the product in its entirety, and which are not entitled to trademark protection. Examples include "Liquid controls" for equipment that dispenses liquid, or "Multistate Bar Examination" for a bar examination that may be taken across multiple states.

(Internal citations, quotations, and modifications omitted.)

Skunk, Inc. argues that BBK's SKUNK marks bear little conceptual strength because they are either descriptive or suggestive, and both are inherently weak (Doc. 337 at 22). See Nutri/Sys., Inc. v. Con-Stan Indus., Inc., 809 F.2d 601, 605 (9th Cir. 1987).

In support of this argument, Skunk, Inc. cites the opinions of both BBK's and its own linguistic experts who agree that, at the very least, skunk is a term that some use to refer to a strain of marijuana. (Doc. 337-4 at 46, 57). However, the parties' experts disagree about the extent to which skunk is associated with marijuana, and "summary judgment is generally inappropriate where conflicting expert reports are presented." See Miller v. Corr. Corp. of Am., 239 Fed. App'x 396, 396 (9th Cir. 2007). Skunk, Inc.'s expert opines that skunk "is well-recognized as another word for marijuana or at least a subset of marijuana considered 'good' or 'strong'" (Id. at 57), whereas BBK's expert contends that skunk "is not a term in common or general use to mean 'exceptionally potent marijuana,' let alone a common synonym of marijuana." (Id. at 46). BBK further notes that the PTO's registration of the SKUNK marks is strong evidence of distinctiveness and demonstrates that the marks are not descriptive as a matter of law. See Lahoti v. VeriCheck, Inc., 586 F.3d 1190, 1199 (9th Cir. 2009) ("There can be no serious dispute with the principle that a federal trademark registration of a particular mark supports the distinctiveness of that mark, because the PTO should not otherwise give it protection.").

Next, Skunk, Inc. argues that BBK's mark is weak because the word skunk and images of skunks are widely used in the smoking industry, including on other bags, boxes, rolling trays, rolling papers, magazines, body sprays, room fresheners, and retailers. (Doc. 337 at 23; Doc. 337-3 at 185, 187-91; Doc. 337-4 at 2-4). See One Indus., LLC v. Jim O'Neal Distrib., Inc., 578 F.3d 1154, 1164 (9th Cir. 2009) ("When similar marks permeate the marketplace, the strength of the mark decreases."). Even assuming the truth of Skunk, Inc.'s evidence on this point, the Court finds that an issue of material fact exists regarding the conceptual strength of the SKUNK mark given the difference in opinions as to the word's meaning.

At best, the experts' opinions agree that in some circles, some people refer to some strain of marijuana as skunk. Although this evidence demonstrates that the mark is not arbitrary or fanciful, as the mark is not entirely unrelated to smoking products or a "coined term," see Surfvivor Media, 406 F.3d at 631-32, the extent to which that reference is in common use affects whether SKUNK is suggestive or descriptive. Although Skunk, Inc. argues that the distinction is immaterial because both suggestive and descriptive marks are inherently weak, "[t]he distinction is important here because if the mark is suggestive, there is a stronger likelihood that [the factfinder] could reasonably conclude that the 'strength of the mark' factor favors" one party over the other. See Fortune Dynamic, 618 F.3d at 1034.

2. Proximity of the Goods

The second Sleekcraft factor is the proximity of the goods. "The proximity of goods is measured by whether the products are: (1) complementary; (2) sold to the same class of purchasers; and (3) similar in use and function." Network Automation, Inc. v. Advanced Sys. Concepts, Inc., 638 F.3d 1137, 1150 (9th Cir. 2011). "Related goods are generally more likely than unrelated goods to confuse the public as to the producers of the goods." Id. (quoting Brookfield Commc'ns, 174 F.3d at 1055).

Skunk, Inc. argues that this factor weighs in its favor because its products and BBK's are unrelated. (Doc. 337 at 24). Its bags, Skunk, Inc. argues, are high-end investment items sold at a premium price point and, accordingly, dissimilar to BBK's Skunk Sack zip-top plastic bags. (Id. at 24-25). BBK counters that the products are complementary because both BBK and Skunk, Inc.'s SKUNK products are, or have been, directly marketed to smokers and serve the same function of providing storage while preventing the odor of the bags' contents from escaping the bag. (Doc. 341 at 9-10).

The Court finds a genuine issue of fact as to this factor. Skunk, Inc. correctly notes that the products differ in price point. BBK sells SKUNK products wholesale to retailers and distributors for around $4.00 per multi-bag box. (Doc. 375-5 at 3). According to Skunk, Inc.'s online product catalog, its products range in price to consumers from $15.00 for small zipper pouches to $225.00 for large pieces of luggage. (Doc. 337-3 at 142-63). Even considering this imperfect comparison of BBK's wholesale and Skunk, Inc.'s retail prices, the price points are not so far apart at Skunk, Inc.'s low end that no reasonable factfinder could find a close proximity of the goods. Cf. Louis Vuitton Malletier, S.A. v. My Other Bag, Inc., 156 F. Supp. 3d 425, 442 (S.D.N.Y. 2016), aff'd, 674 F. App'x 16 (2d Cir. 2016) (finding that a claim of close proximity of goods "does not withstand even light scrutiny" where a company selling handbags for "hundreds, if not thousands of dollars" sued another whose items "retail[ed] for only between thirty and fifty-five dollars.").

Further, the evidence in the record could support a finding that BBK and Skunk, Inc.'s goods are sold to the same class of consumers. Both sides acknowledge that they have marketed their SKUNK-branded products to smokers, and BBK presents evidence showing that both BBK and Skunk, Inc.'s products are sold at almost 200 of the same smoke shops. (Doc. 371). Although the products differ in character in that BBK's bags are disposable plastic bags and Skunk, Inc.'s bags are reusable fabric bags, Skunk, Inc.'s product line includes items such as the "Zip Pouch" bag, which is a similarly-sized small bag that serves the same purpose as BBK's Skunk Sack. (Doc. 337-3 at 149).

Skunk, Inc.'s argument that it also sells many products that "could not plausibly be used merely to hold smoking-related items," such as duffel bags and suitcases, does not move the needle. (Doc. 356 at 13). Setting aside the question of why the bags could not simply be used to hold large amounts of smoking products, the fact that Skunk, Inc. sells items that may not resemble BBK's products does negate the fact that the two companies have similar products sold at similar price points that a consumer could find at the same stores.

3. Similarity of the Marks

The third factor is the similarity of the marks, which "is tested on three levels: sight, sound, and meaning. Each must be considered as they are encountered in the marketplace." Network Automation, 638 F.3d at 1150 (quoting Sleekcraft, 599 F.2d at 351).

Here, because BBK's and Skunk, Inc.'s SKUNK marks are the same, they have the same sound and meaning. Both BBK and Skunk, Inc. use SKUNK as their brand, or house mark, and refer at least in primary part to the animal. Nonetheless, Skunk, Inc. argues the marks are dissimilar because they are presented differently. (Doc. 337 at 26). Specifically, Skunk, Inc. notes that BBK's SKUNK marks appear in a different font and color scheme and are often accompanied by a small cartoon skunk (named Sneaky) peeking out of a circle between the words skunk and brand. Skunk, Inc.'s mark, on the other hand, is presented in black and white and accompanied by its abstract skunk tail logo.

Image materials not available for display.

Having reviewed the companies' marketing materials and product catalogs, the Court agrees with Skunk, Inc. that despite the same sound and meaning, the marks are visually presented differently in the market. Although this generally weighs against a finding of a likelihood of confusion, see Glow Indus., Inc. v. Lopez, 252 F. Supp. 2d 962, 996-98 (C.D. Cal. 2002), this on its own is not enough to establish that there is no likelihood of confusion as a matter of law.

Unlike the cases Skunk, Inc. cites for support, this is not a case where potential confusion resulting from the use of the same trademark is mitigated by the presence of different house marks or other prominent accompanying words and images. Cf. Lindy Pen Co., Inc. v. Bic Pen Corp., 725 F.2d 1240, 1245 (9th Cir. 1984) ("The pens' dissimilar appearance, the dominance of the company marks and logos on the pens themselves and on all packaging and promotional material, and the dissimilar and distinctive packaging and advertisement designs overcome the similarity of the marks considered in isolation."); Suja, Life, LLC v. Pines Int'l, Inc., No. 16CV985-GPC(WVG), 2016 WL 6157950, at *8-9 (S.D. Cal. Oct. 24, 2016) ("Above the words MIGHTY GREENS, the word PINES appears in white capital letters in a dark green box with a font size that is smaller than the font size of MIGHTY but larger than the font size of GREENS. . . . In contrast, Suja's Mighty Greens drink is sold in a narrower and taller clear plastic bottles with the name 'suja' in small case letters in a large font prominently displayed with a rain drop symbol above 'suja.'"); Servpro, 339 F. Supp. 3d at 908 ("'Like it never even happened' and 'Like it never happened' were always accompanied by other obvious indications of the entity behind the usage. That is, consumers encountered the mark or phrase only in conjunction with the 'dominant commercial identity' of the underlying entity." (citation omitted)).

Here, both BBK and Skunk, Inc. use the same mark as their primary identifier. Viewing the evidence in the light most favorable to BBK, considering the same sound and meaning, a consumer who enters one of the many stores that sells both BBK's and Skunk, Inc.'s products and asks for a "Skunk bag" would just as likely be shown BBK's products as Skunk, Inc.'s. Although the difference in font and color and the presence of different logos could lessen the level of confusion, considering the factual issues surrounding the remaining factors, the Court cannot conclude as a matter of law that these differences would eliminate consumer confusion.

4. Evidence of Actual Confusion

The fourth factor is evidence of actual confusion. Absent unusual circumstances, "[t]he failure to prove instances of actual confusion is not dispositive against a trademark plaintiff, because actual confusion is hard to prove; difficulties in gathering evidence of actual confusion make its absence generally unnoteworthy." Au-Tomotive Gold, Inc. v. Volkswagen of Am., Inc., 457 F.3d 1062, 1077 (9th Cir. 2006) (quoting Brookfield Commc'ns, 174 F.3d at 1050). Skunk, Inc. argues this factor weighs heavily in its favor because the record contains little to no evidence of actual confusion despite years of BBK and Skunk, Inc.'s coexistence. (Doc. 337 at 27). The Court agrees that the record does not contain meaningful examples of actual consumer confusion but disagrees that this case presents the unusual circumstances that make this absence particularly noteworthy.

In Cohn v. Petsmart, Inc., "the parties used the same trademark in the same city for six years to market closely-related goods and services"—veterinary services to which the court noted consumers would be "particularly attentive." 281 F.3d 837, 842 (9th Cir. 2002). "Under these unusual circumstances," the court stated, "some evidence of actual confusion should have become available . . . ." Id. at 842-43. Here, however, the parties market their products nationally, and a persistent theme of Skunk, Inc.'s summary judgment arguments is that BBK and Skunk, Inc.'s products are not closely related. Accordingly, the Court disagrees that this factor weighs strongly in Skunk, Inc.'s favor as a matter of law. See Au-Tomotive Gold, 457 F.3d at 1077 ("In this case, which involves a national market and a low degree of consumer care, nothing suggests that the lack of evidence of confusion should be particularly noteworthy.").

For its part, BBK argues that evidence of actual confusion does exist and provides strong evidence of a likelihood of confusion.¹¹ (Doc. 341 at 17). See Stone Creek, 875 F.3d at 433 ("Such evidence is not necessary for a finding of likelihood of confusion, but . . . is particularly potent.").

11 In addition to the evidence discussed below, BBK cites Mr. Kesselman's testimony stating that he commonly speaks to customers who believe BBK is associated with Skunk, Inc. and its products. (Doc. 341-7 at 28-29). Skunk, Inc. objects to this testimony as hearsay. (Doc. 356 at 19). The objection is sustained. The out of court statements of these unidentified customers are being offered for the truth of the matter asserted, i.e., that the customers were actually confused, and therefore constitute inadmissible hearsay. See Fed. R. Evid. 801(c). Because Mr. Kesselman cannot identify the specific customers with whom he spoke, on the record currently before the Court, this testimony could not be presented in an admissible form at trial, and the Court therefore declines to consider it in opposition to summary judgment.

BBK offers the deposition of one of its wholesale customers, Jamie Escobar, who purchased BBK products to resell them online. (Doc. 341-31 at 3). Escobar testified that he was unsure whether Skunk, Inc.'s SKUNK products were sold by BBK when he first discovered them while doing search engine optimization research. (Id. at 4-6). Skunk, Inc. disputes Escobar's testimony as evidence of consumer confusion because he did not encounter BBK's products in the marketplace as a regular consumer would, but rather in the unrelated context of search engine optimization research. (Doc. 356 at 19). The Court disagrees with Skunk, Inc.'s argument that this evidence is categorically irrelevant, but does agree that this evidence does not weigh strongly in BBK's favor because Escobar did not encounter the products in the marketplace.

BBK also cites an email it received asking whether BBK would replace a broken "skunk box." (Doc. 337-4 at 191). A BBK representative replied that BBK does not sell such an item and referred the person to Skunk, Inc.'s website. (Id.). The parties disagree (and largely speculate) as to what product the emailer may have been referring since Skunk, Inc. asserts it was not selling a "skunk box" at the time. But this factual dispute is not for the Court to resolve on summary judgment.

Given the record before the Court, complete with factual disputes, the Court cannot conclude as a matter of law that this factor weighs strongly in favor of either party.

5. Marketing Channels Used

The fifth factor is the marketing channels the parties use. "In general, two entities using the same marketing channels increases the likelihood of confusion." Servpro, 339 F. Supp. 3d at 908. "This factor is most helpful when the two entities belong to a niche market and advertise in specialized outlets, such as trade magazines." Id. "The Ninth Circuit has noted that 'the Web, as a marketing channel, is particularly susceptible to a likelihood of confusion, since . . . it allows for competing marks to be encountered at the same time, on the same screen.'" HTS, Inc. v. Boley, 954 F. Supp. 2d 927, 943 (D. Ariz. 2013) (quoting GoTo.com, Inc. v. Walt Disney Co., 202 F.3d 1199, 1207 (9th Cir. 2000)).

Here, the parties agree that their marketing channels have at least some overlap. Skunk, Inc. acknowledges that BBK's and its products appear at some of the same smoke shops and trade shows, but argues that its "bags appeal to a far broader audience and range of uses than [BBK's], are marketed directly to consumers, and do not share a variety of other marketing channels with [BBK]." (Doc. 337 at 28). BBK notes, however, that most trade shows at which Skunk, Inc. displayed its products were smoking industry shows (Doc. 341-16), and it did not branch out to non-smoking shows until after BBK's 2017 cease and desist letter (Doc. 341-17). Further, as discussed above, BBK offers an exhibit listing almost 200 retail stores around the country that carry both BBK and Skunk, Inc.'s SKUNK branded products. (Doc. 371). The parties also acknowledge that they sell their products online.

The parties' agreement demonstrates that this factor weighs in BBK's favor. Both BBK and Skunk, Inc. clearly market their products to smokers, feature their products at many of the same trade shows, and sell their products at the same stores. Further, both parties acknowledge that they sell their products direct to consumer through the internet. Exactly how much weight to afford this factor in light of the other factors, however, is left to the determination of the factfinder at trial.

6. Degree of Care Likely Exercised by the Purchaser

The sixth factor is the degree of care likely exercised by the purchaser and "requires assessing the nature of the goods or services and the type of consumer who would be interested in those goods or services." Servpro, 339 F. Supp.3d at 908. The degree of care a consumer is expected to exercise is based on the nature of the goods and services and their cost. Id. at 908-09. "Generally, consumers are expected to proceed with more care if the goods or services are specialized or of uncommon importance," and "there is less likelihood of confusion as the goods or services increase in cost." Id. Likelihood of confusion is determined by considering a "reasonably prudent consumer." Brookfield Commc'ns, 174 F.3d at 1060 (citation omitted).

Skunk, Inc. notably does not argue that its products are specialized or of uncommon importance. It instead argues that consumers are more likely to exercise care when purchasing its products because its SKUNK bags are premium investment items that can cost in the hundreds of dollars. (Doc. 337 at 29).

Skunk, Inc.'s consumers, however, are not conducive to classification as a matter of law. Although Skunk, Inc.'s higher-end products retail in the hundreds of dollars, the SKUNK line covers a wide price range and product types. As discussed above, according to Skunk, Inc.'s online product catalog, its products range in price to consumers from $15.00 for small zipper pouches to $225.00 for large pieces of luggage. (Doc. 337-7 at 142-63).

Skunk, Inc. does not offer any suggestion as to whether someone purchasing a $15.00 zipper pouch would exercise the same level of heightened care as someone buying a much more expensive piece of luggage. Nor does Skunk, Inc. explain why the buyer of one of its zipper pouches would exercise any more care than someone purchasing a box of BBK's Skunk Sacks.¹² Therefore, Skunk, Inc.'s purchasers are not easily categorized as a collective like "perfume buyers," see Charles of the Ritz Grp. Ltd. v. Quality King Distribs., Inc., 832 F.2d 1317, 1323 (2d Cir. 1987), or buyers selecting among watches that all "sell for several hundred dollars," see Multi Time Mach., Inc. v. Amazon.com, Inc., 804 F.3d 930, 937 (9th Cir. 2015).

12 Further, as discussed above, Skunk, Inc. cites BBK's wholesale prices when comparing its prices with BBK's. However, the test for this factor looks to the consumer, so the wholesale price is an inapt metric.

Accordingly, Skunk, Inc. fails to show that this factor weights in its favor as a matter of law, and the Court finds a genuine issue of material fact as to this issue.

7. Intent in Selecting the Mark

The seventh factor is the intent in selecting the mark. "When one party knowingly adopts a mark similar to another's, reviewing courts presume that the defendant will accomplish its purpose, and that the public will be deceived." Acad. of Motion Picture Arts & Scis. v. Creative House Promotions, Inc., 944 F.2d 1446, 1456 (9th Cir. 1991).

Here, Skunk, Inc. argues that the undisputed evidence establishes that it selected the name SKUNK in good faith and without intent to confuse the consumer. (Doc. 337 at 29-30). According to Jusic's declaration, he began developing a smell-proof line of bags in early 2014, and a management consultant suggested the name SKUNK to him. (Doc. 337-3 at 103; Doc. 337-4 at 221). He further asserts that he conducted an internet search at the time for "Skunk bag" and "Skunk backpack" to determine whether any existing company used the term in conjunction with bags and, after not finding any, decided to use the term. (Doc. 337-3 at 103). He further states that he was unaware of any of BBK's SKUNK or SKUNK BRAND products at the time he selected the SKUNK mark and was not aware of BBK's Skunk Sacks specifically until 2016, after Skunk, Inc.'s products were already being sold. (Id. at 108).

BBK counters with the testimony of Mr. Kesselman, who testified that BBK sold its SKUNK-branded products in the late 1990s to another company Jusic owned, indicating Jusic's—and, consequently, Skunk, Inc.'s—awareness of BBK's use of SKUNK in connection with smoking accessories. (Doc. 341-7 at 3-4). BBK also offers the testimony of graphic designer Maritza Torres, who testified that Jusic showed her SKUNK-branded products from other companies as inspiration in 2014, including BBK's SKUNK brands and logo. (Doc. 341-6 at 3, 7). BBK also offers an email from Jusic to Torres, in which Jusic stated that Skunk, Inc. was using its SKUNKGUARD mark rather than SKUNK "for legal reasons" but that eventually SKUNK "should be the real logo." (Doc. 341-28). BBK also notes that Skunk's Inc.'s promotional materials featured photos of Skunk, Inc.'s products used with BBK's products.¹³ (Doc. 280-39; Doc. 341-7 at 14-15). Further, BBK argues that Skunk, Inc.'s use of the hashtag "#skunkbrand" with social media posts demonstrates its intent to trade on the goodwill of BBK's SKUNK BRAND mark. (Doc. 341-29 at 3; Doc. 341-30 at 3).

13 Skunk, Inc. objects to Mr. Kesselman's testimony describing these photos on best evidence and relevance grounds. (Doc. 356 at 16). Like Skunk, Inc.'s authentication objections, its objections based on the best evidence rule challenge the form of the evidence rather than its substance. See Fraser, 342 F.3d at 1037 (citing Hughes v. United States, 953 F.2d 531, 543 (9th Cir. 1992) (holding that affidavit could be considered on summary judgment despite hearsay and best evidence rule objections because the facts underlying the affidavit were of the type that would be admissible evidence, even though the affidavit itself might not be admissible)). Further, the Court finds that Mr. Kesselman's testimony is relevant because it permits an inference that Skunk, Inc. intended to associate its product with BBK's. Accordingly, the objections are overruled.

Viewing this evidence in the light most favorable to BBK, the Court cannot determine that Skunk, Inc. acted in good faith as a matter of law, as the conflicting testimony permits different inferences. Although Skunk, Inc. asserts that Jusic and the consultant who suggested the name SKUNK will both testify that they had no knowledge of BBK's SKUNK marks (Doc. 356 at 14), this underscores, rather than eliminates, the factual issues. And Skunk, Inc.'s conclusory assertion that a factfinder could not infer ill-intent from its use of BBK products in its advertising material or the use of hashtags in social media posts is insufficient to overcome the disputes of fact.

8. Likelihood of Expansion

The eighth and final factor considers the likelihood that the parties will expand their businesses to compete more directly with one another. See Servpro, 339 F. Supp. 3d at 910. Skunk, Inc. argues no evidence supports that BBK has legitimate plans to expand its product lines to include fabric bags akin to its own products. (Doc. 337 at 30). BBK's owner, however, testified that BBK has SKUNK BRAND fabric bags in development and that BBK plans to expand its SKUNK brand to include different kinds of bags, as it has with its "RAW" brand and as is common with other brands in the smoking industry. (Doc. 341-7 at 18-20).

Although Skunk, Inc. correctly notes that the Ninth Circuit has "refused to find a 'genuine issue' where the only evidence presented is 'uncorroborated and self-serving' testimony," see Villiarimo v. Aloha Island Air, Inc., 281 F.3d 1054, 1061 (9th Cir. 2002) (emphasis added), BBK corroborates these statements with photos of a protype SKUNK BRAND backpack and a screenshot of a similar backpack bearing its RAW brand for sale on Amazon.com.¹⁴ (Doc. 341-56; Doc. 341-38 at 2).

14 Skunk, Inc. objects to these exhibits as unauthenticated and hearsay. (Doc. 356 at 20). As discussed above, the authentication objections address the form and not the substance of the exhibits. See supra, note 10; Ericson, 2016 WL 6522805, at *8. As to the hearsay objections, hearsay refers to an out-of-court statement that a party offers to prove the truth of the matter asserted in the statement. Fed. R. Evid. 801(c). The photo of the SKUNK BRAND backpack prototype is not a statement and therefore cannot constitute hearsay. The screenshot of the Amazon.com web page is not being offered for the truth of any matter asserted within the screenshot but rather to demonstrate that the bag exists. Accordingly, the objections are overruled.

Accordingly, on this record, a genuine issue of fact exists regarding BBK's intent to expand its product lines.

9. Summary

In sum, the genuine issues of material fact prevent summary judgment in favor of Skunk, Inc. based on the lack of a likelihood of confusion. These factual disputes permeate almost every one of the Sleekcraft factors. And evidence that Skunk, Inc. presents its products differently in the marketplace is not enough to demonstrate no likelihood of confusion exists as a matter of law. Accordingly, Skunk, Inc.'s motion on this issue is denied.

B. Laches

Next, on cross-motions, both BBK and Skunk, Inc. argue that they are entitled to partial summary judgment on Skunk, Inc.'s laches affirmative defense. (Doc. 280 at 11; Doc. 337 at 18).

"[T]he Lanham Act, which governs trademarks, contains no statute of limitations, and expressly provides for defensive use of 'equitable principles, including laches.'" Petrella v. Metro-Goldwyn-Mayer, Inc., 572 U.S. 663, 678 n.15 (2014) (quoting 15 U.S.C. § 1115(b)(9)). "The affirmative defense of laches 'is an equitable time limitation on a party's right to bring suit, which is derived from the maxim that those who sleep on their rights, lose them.'" Eat Right Foods Ltd. v. Whole Foods Mkt., Inc., 880 F.3d 1109, 1115 (9th Cir. 2018) (quoting Miller v. Glenn Miller Prod., Inc., 454 F.3d 975, 997 (9th Cir. 2006)). The Court analyzes the laches defense using a two-prong analysis, considering (1) the plaintiff's delay and (2) the prejudice to the defendant. Id.; see also Pinkette Clothing, Inc. v. Cosmetic Warriors Ltd., 894 F.3d 1015, 1025 (9th Cir. 2018).

In determining the plaintiff's delay, the Court looks to whether the most analogous state statute of limitations has expired. Pinkette, 894 F.3d at 1025. If so, "there is a strong presumption in favor of laches." Id. To determine the equity of applying laches, the Court considers six factors: "(1) strength and value of trademark rights asserted; (2) plaintiff's diligence in enforcing mark; (3) harm to senior user if relief denied; (4) good faith ignorance by junior user; (5) competition between senior and junior users; and (6) extent of harm suffered by junior user because of senior user's delay." Id. (citing E-Sys., Inc. v. Monitek, Inc., 720 F.2d 604, 607 (9th Cir. 1983)) (internal quotation marks omitted).

1. Presumption of Laches

Here, the undisputed facts establish that a presumption of laches applies. The parties agree that Arizona's three-year statute of limitations for fraud is the most analogous state statute of limitations. See Au-Tomotive Gold, 603 F.3d at 1140; Skydive Ariz., Inc. v. Hogue, 360 P.3d 153, 161, ¶ 29 (Ariz. Ct. App. 2015). (Doc. 280 at 12; Doc. 337 at 18). The evidence in the record indicates that BBK first became aware of Skunk, Inc.'s use of SKUNK at the 2015 CHAMPS trade show in Las Vegas, Nevada, that took place between July 21-23. (Doc. 280-24 at 3-4; Doc. 332-2 at 92-93). BBK did not file the instant case until July 25, 2018 (See Doc. 1), just outside Arizona's three-year statute of limitations.

BBK's arguments as to why the presumption should not apply are unpersuasive. First, quoting 6 McCarthy on Trademarks and Unfair Competition § 31:19 (5th ed.), BBK argues that "'[l]aches is measured from the date when there was an infringing use sufficient to require legal protest and possible lawsuit' and a senior user is not obligated to sue until 'the likelihood of confusion looms large.'" (Doc. 280 at 11). At the time it first became generally aware of Skunk, Inc.'s use of SKUNK in 2015, BBK argues there was not yet a significant possibility of confusion. (Doc. 335 at 7).

"To measure the length of a delay, [the Court] start[s] the clock 'when the plaintiff knew (or should have known) of the allegedly infringing conduct,' and . . . stop[s] it when 'the lawsuit in which the defendant seeks to invoke the laches defense' is initiated." Eat Right Foods, 880 F.3d at 1116 (quoting Evergreen Safety Council v. RSA Network Inc., 697 F.3d 1221, 1226 (9th Cir. 2012)).¹⁵ Here, the record reflects that after seeing Skunk, Inc.'s booth on the first day of the trade show, a BBK employee informed others, including BBK's internal legal counsel, that he became aware of this use. (Doc. 280-24 at 5). Although the employee testified that he did not inspect Skunk, Inc.'s products (id.), he and other BBK employees had two days to do so before the end of the trade show, and BBK cannot avoid beginning the laches period simply by failing to investigate potentially infringing conduct of which it was aware. The CHAMPS trade show is a forum for those in the smoking industry to demonstrate their wares (Doc. 332-2 at 44), and BBK's employee was moved enough by the presence of another company using the same mark that he felt motivated to inform corporate counsel. Further, as Skunk, Inc. noted at oral argument, the products Skunk, Inc. displayed at the 2015 CHAMPS trade show were substantially similar to—if not exactly the same as—the products BBK now challenges as similar enough to its own to support its claims.

15 The Court acknowledges that different Ninth Circuit cases have articulated this standard in somewhat different terms, with some considering when the plaintiff became aware of "infringing conduct," see, e.g., Eat Right Foods, 880 F.3d at 1116 (quoting Evergreen Safety Council, 697 F.3d at 1226), and others considering when the plaintiff became aware of "its potential cause of action," see, e.g., Internet Specialties W., Inc. v. Milon-DiGiorgio Enterprises, Inc., 559 F.3d 985, 990 (9th Cir. 2009) (quoting Tillamook Country Smoker, Inc. v. Tillamook Cnty. Creamery Ass'n, 465 F.3d 1102, 1108 (9th Cir. 2006)). The Court finds, however, that its ruling on the the instant motions is consistent with both articulations.

Based on these circumstances, the Court finds that BBK, at the very least, should have known about any potentially infringing conduct between July 21-23 of 2015. Even though "trademark holders are not required to 'constantly monitor every nook and cranny of the entire nation and to fire both barrels of [their] shotgun instantly upon spotting a possible infringer,'" BBK had enough information that it should have known whether potential trademark infringement existed. See Luna Distrib. LLC v. Stoli Grp. (USA), LLC, No. SACV171552DOCJDEX, 2018 WL 5099277, at *6 (C.D. Cal. July 10, 2018) (quoting Fitbug Ltd. v. Fitbit, Inc., 78 F. Supp. 3d 1180, 1186 (N.D. Cal. 2015)).

Second, BBK argues that even though BBK was aware of Skunk, Inc.'s use of the mark in 2015, the clock should start at the time in 2016 when Skunk, Inc. began using SKUNK exclusively on its products, rather than SKUNK and SKUNKGUARD interchangeably. (Doc. 280 at 12 (citing Doc. 280-16 at 19-20)). The only case BBK cites in support of this theory is New Enchantment, LLC v. Journey Spa & Wellness Center, Inc., No. SACV121382JGBRNBX, 2014 WL 12558845, at *7 (C.D. Cal. Jan. 2, 2014).¹⁶ New Enchantment, however, did not hold that the use of multiple names prevents the recognition of a single mark. It instead held that under the circumstances presented in that case, the mark at issue was not used in such a manner that current and prospective clients would have associated the company at issue with the mark, which is not the case here. See id. Accordingly, the presumption of laches applies.

16 The parties also quibble over the holding in Stone Brewing Co., LLC v. MillerCoors LLC, 445 F. Supp. 3d 1113 (S.D. Cal. 2020). That case involved a dispute over the plaintiff's trademark, STONE, which the plaintiff used on beer. The defendant moved for summary judgment, claiming that it had priority over the STONE mark because the packaging on its Keystone Light beer included either the word STONE or STONES on it. Id. at 1140. The court there held that the defendant was not entitled to summary judgment for several reasons, including "because Defendant's use of 'STONE' and 'STONES' varied, it was not clear and/or recognizable without extended analysis that it was intended to identify the item as a Keystone Light beer product," and "evidence shows that MillerCoors never used 'STONE' or 'STONES' on the Keystone packaging or as a source identifier" in the time period relevant to the priority issue. Id. at 1143. The Stone Brewing Court did not consider the relevance of the use of multiple source identifiers, and accordingly, the Court does not find Stone Brewing helpful to either side.

2. Overcoming the Presumption

Even though the presumption of laches applies, the Court finds that a material issue of fact exists regarding whether BBK can overcome that presumption.

Of the six E-Systems factors set forth above, the Court addressed three in the likelihood of confusion analysis above: the strength of the mark, whether Skunk, Inc. acted in good faith in selecting the mark, and the extent to which Skunk, Inc. and BBK compete with each other in the same market. The Court addresses the remaining three factors below.

a. Diligence in Enforcing the Mark

Regarding BBK's diligence in enforcing the mark, many of the facts are not in dispute. After first discovering Skunk, Inc.'s use of SKUNK at the 2015 CHAMPS trade show, BBK sent Skunk, Inc. a cease and desist letter in February 2017. (Doc. 280-24 at 3-4; Doc. 280-31; Doc. 332-2 at 92-93). The letter informed Skunk, Inc. that BBK believed Skunk, Inc.'s use of SKUNK on its products violated the Lanham Act. (Doc. 280-31 at 3). Skunk, Inc. responded two weeks later with a letter denying any trademark violations. (Doc. 280-34). The letter concluded that Skunk, Inc. "would be happy to explore ways in which the two companies could work together or could further emphasize the respective products' differentiation." (Id. at 4). Skunk, Inc. filed the Pending Application with the PTO to register its SKUNK text and logo mark the same day. (Doc. 280-37 at 1). BBK did not respond to Skunk, Inc.'s letter, requested an extension of time to oppose registration with the PTO in February 2018, and objected to Skunk, Inc.'s application in late May 2018. (Doc. 280-37 at 3). BBK ultimately filed the instant action in July 2018. (See Doc. 1).

Although the laches period began when BBK first knew or should have known of Skunk, Inc.'s potentially infringing use, see Eat Right Foods, 880 F.3d at 1116, "[r]easonable justifications for a delay include exhausting remedies through administrative processes, evaluating and preparing complicated claims, and determining 'whether the scope of proposed infringement will justify the cost of litigation.'" Id. at 1117 (citation omitted). "[A] plaintiff may be 'justified in delaying a protest or the commencement of litigation until the viability of the defendant's infringing business is evident.'" Grupo Gigante SA De CV v. Dallo & Co., 391 F.3d 1088, 1102-03 (9th Cir. 2004) (quoting Restatement (Third) of Unfair Competition, § 31, cmt. c (1995)).

Here, the parties disagree as to whether BBK's actions were reasonably diligent under the circumstances. In support of its argument that any delay was reasonable, BBK cites the testimony of one of its representatives, stating that in the course of BBK's business, it has determined legal action is often unnecessary because companies in the smoking business simply fail on their own. (Doc. 341-55 at 7-8). Because the 2015 CHAMPS trade show was the first trade show at which Skunk, Inc. displayed its SKUNK bags, BBK argues that Skunk, Inc. did not have enough of a presence in the market to justify legal action. (Doc. 341 at 25). Further, BBK argues that its 2017 cease and desist letter was an attempt at resolving the issue without filing suit that further justified any delay, as did its later opposition with the PTO. (Id.). For its part, Skunk, Inc. argues that it "reasonably assumed that the matter was resolved" once it replied to BBK's cease and desist letter and did not hear back from BBK. (Doc. 337 at 19).

The Court finds that BBK was reasonably diligent in enforcing its trademark rights. Notably, unlike the cases Skunk, Inc. cites for support, BBK filed its claim only a few days after the expiration of Arizona's comparable statute of limitations. Cf. Polaroid Corp. v. Polarad Elecs. Corp., 287 F.2d 492 (2d Cir. 1961) (considering equity of applying laches after 11-year delay in bringing suit). Skunk, Inc. does not dispute that BBK takes time to monitor competitors in the industry before taking legal action. Further, during the time before BBK sued, it took steps to make Skunk, Inc. aware of its objections, namely its cease and desist letter and opposition with the PTO. However, given the issues of facts involved in the remaining E-Systems factors, the Court does not find that this showing of reasonable diligence itself entitles BBK to summary judgment on this issue.

b. Harm to Senior User if Relief is Denied

"The question of whether a senior user will be harmed if relief is denied turns largely on the court's analysis of the likelihood of confusion." RSI Corp. v. Int'l Bus. Machines Corp., No. 5:08-CV-3414 RMW, 2012 WL 3277136, at *18 (N.D. Cal. Aug. 9, 2012) (citing Grupo Gigante, 391 F.3d at 1103). The greater the likelihood of consumer confusion, the more likely the senior user will be harmed by the denial of relief. See id. For the reasons discussed in Section III(A) of this Order, supra, the Court finds a genuine issue of fact exists as to the senior user's harm if relief is denied. Absent factual findings as to whether consumers are likely to be confused by the presence of both BBK and Skunk, Inc.'s products in the marketplace, a sufficient factual basis does not exist from which the Court can evaluate potential harm.

c. Extent of Harm to Junior User Due to Delay

"[P]rejudice to the defendant is an essential element of any laches defense." Grupo Gigante, 391 F.3d at 1105. "[A] defendant can make the required showing of prejudice by proving that it has continued to build a valuable business around its trademark during the time that the plaintiff delayed the exercise of its legal rights." Id. "Two types of prejudice can give rise to laches: expectations-based prejudice and evidentiary prejudice." Eat Right Foods, 880 F.3d at 1119.

"Expectations-based prejudice occurs when a defendant 'took actions or suffered consequences that it would not have, had the plaintiff brought suit promptly.'" Evergreen Safety Council, 697 F.3d at 1227 (quoting Danjaq LLC v. Sony Corp., 263 F.3d 942, 955 (9th Cir. 2001)). However, expectations-based prejudice does not include all expenditures a defendant makes related to the mark at issue; if that were the case, "then relief would have to be denied in practically every case of delay." Internet Specialties W., 559 F.3d at 991. "Thus, only expenditures made after a plaintiff 'knew or should have known about the potential claim' will support a finding of expectations-based prejudice." Eat Right Foods, 880 F.3d at 1120 (quoting Kling v. Hallmark Cards Inc., 225 F.3d 1030, 1036 (9th Cir. 2000)).

"Evidentiary prejudice includes such things as lost, stale, or degraded evidence, or witnesses whose memories have faded, or who have died." Evergreen Safety Council, 697 F.3d at 1227 (quoting Danjaq, 263 F.3d at 955).

Here, Skunk, Inc. does not make any claims of evidentiary prejudice. It instead argues that it invested significantly in its SKUNK bags during BBK's delay and would be prejudiced if it could no longer use the SKUNK mark. (Doc. 337 at 19-20). BBK argues that Skunk, Inc. is not able to show meaningful prejudice because it used both SKUNK and SKUNKGUARD interchangeably until November 2016 and received BBK's cease and desist letter three months later. (Doc. 280 at 13). Only after receiving notice of BBK's objection, BBK argues, did Skunk, Inc. ramp up its efforts to build its SKUNK brand. (Doc. 280 at 13). Skunk, Inc., however, argues that it thought the matter was resolved after BBK did not respond to its letter, and that its brand "trajectory" was already in place by the time it received BBK's cease and desist letter. (Doc. 332 at 9).

The Court finds that a genuine issue of fact exists regarding this factor. Although Skunk, Inc. asserts that it thought the matter was resolved, it sent only one letter to BBK which concluded with somewhat open-ended terms. (Doc. 280-34 at 4). On this record, a factfinder could conclude that Skunk, Inc. instead doubled down on its marketing efforts only after it knew BBK's objected to its use of the mark. Under such circumstances, any damages Skunk, Inc. incurred as a result of having to change its name would be the consequence of its own actions and not as the result of BBK's delay.

d. Summary

In sum, the Court finds that genuine issues of material fact preclude summary judgment on Skunk, Inc.'s laches affirmative defense and, accordingly, denies both parties' motions for partial summary judgment on this issue.

C. Estoppel

Next, in its motion for partial summary judgment, BBK argues it is entitled to judgment as a matter of law on Skunk, Inc.'s affirmative defense of estoppel. (Doc. 280 at 14-15). On this issue, the Court grants BBK's motion.

To prevail on an affirmative defense of estoppel, Skunk, Inc. must prove that (1) BBK knew Skunk, Inc. was selling potentially infringing products, (2) BBK's action or inaction led Skunk, Inc. to reasonably believe that BBK did not intend to enforce its trademark rights, (3) Skunk, Inc. did not know BBK actually objected to the sale of Skunk, Inc.'s products, and (4) Skunk, Inc. will be materially prejudiced if BBK is allowed to proceed with its claim. See adidas-Am., Inc. v. Payless Shoesource, Inc., 546 F. Supp. 2d 1029, 1075 (D. Or. 2008). "Where any one of the elements of equitable estoppel is absent, the claim must fail." Am. Cas. Co. v. Baker, 22 F.3d 880, 892 (9th Cir. 1994) (citation omitted).

Here, the only evidence Skunk, Inc. points to on the third element is that its owner "will testify that due to [BBK's] silence, he did not know that [BBK] actually continued to object to [Skunk, Inc.'s] sales of the accused products." (Doc. 332 at 10 (emphasis added)). Although this may impact the second element, it is immaterial to the third. As discussed above, it is undisputed that BBK sent Skunk, Inc. a cease and desist letter stating its objections to Skunk, Inc.'s use of the SKUNK mark. (Doc. 280-31). This letter provided actual notice of BBK's objection.

Skunk, Inc. does not cite any authority providing that one can erase actual knowledge of an objection simply by responding to a cease and desist letter and not following up. Accordingly, the Court grants BBK's motion for partial summary judgment on this affirmative defense.

D. Lack of Priority

BBK next moves for summary judgment on Skunk, Inc.'s affirmative defense of lack of priority. (Doc. 280 at 15). On this issue, the Court grants BBK's motion.

"For a party to establish it has priority in a particular mark over a rival user, the party must show it was the first to use the mark in commerce." Monster Energy Co. v. BeastUp LLC, 395 F. Supp. 3d 1334, 1368 (E.D. Cal. 2019). "[T]he 'use in commerce' requirement includes (1) an element of actual use, and (2) an element of display." Chance v. Pac-Tel Teletrac Inc., 242 F.3d 1151, 1159 (9th Cir. 2001) (citing 15 U.S.C. § 1127).

As a preliminary matter, BBK argues that lack of priority is not a valid affirmative defense. (Doc. 280 at 15). The Court previously noted that this defense "essentially amounts to a contention that BBK has failed to set forth sufficient facts to constitute a cause of action." (Doc. 122 at 8). "A defense which demonstrates that [a] plaintiff has not met its burden of proof is not an affirmative defense." Zivkovic v. S. Cali. Edison Co., 302 F.3d 1080, 1088 (9th Cir. 2002). Consistent with the Court's prior Order, the Court continues to hold that lack of priority is not a valid affirmative defense. It is instead "merely rebuttal against the evidence presented by the plaintiff."¹⁷ Barnes v. AT&T Pension Ben. Plan-Nonbargained Program, 718 F. Supp. 2d 1167, 1173 (N.D. Cal. 2010).

17 The Court recognizes, however, that at least one other court has treated lack of priority as an affirmative defense. See Monster Energy Co., 395 F. Supp. 3d at 1368-69.

BBK also urges, however, that it is entitled to summary judgment on this issue because the evidence establishes that it, rather than Skunk, Inc., has priority. (Doc. 280 at 15). The Court agrees.

The parties do not dispute that BBK began selling its Skunk Sacks in November 2014 (See Doc. 378), and BBK argues that the record contains no evidence from which a factfinder could conclude that Skunk, Inc. used its SKUNK mark in commerce before that date. Skunk, Inc. responds that factual issues preclude summary judgment (Doc. 332 at 10), but binding precedent forecloses Skunk, Inc.'s argument.

In Chance, the Ninth Circuit affirmed summary judgment in favor of the defendant, finding that the plaintiff did not have priority over the service mark at issue. 242 F.3d at 1159-61. There, the plaintiff produced evidence that it mailed out 35,000 postcards announcing its hotline before the defendant's priority date, which generated 128 responses but no sales. Id. at 1155. The plaintiff also identified two customer sales that predated the defendant's priority date, but "[t]here was no evidence presented that either [customer] . . . paid for the . . . service," and neither could recall if or what they paid. Id. at 1160. The plaintiff also could not say how or how much either customer paid and "could produce no record reflecting payment." Id.

Here, Skunk, Inc produces even less evidence of use in commerce than the plaintiff in Chance. Skunk, Inc. offers the declaration of its owner who states that "[b]y at least as early as October 25, 2014, my companies were using the SKUNK mark . . . in connection with sales of a new line of bags" and that such bags "were available for sale through our showroom in downtown Los Angeles." (Doc. 332-2 at 88). He further states that "retailers had the opportunity to purchase and provide feedback on the bags and select retailers did make purchases of SKUNK bags from Skunk, Inc.'s showroom in 2014." (Id.). Skunk, Inc., however, offers no documentation reflecting any transaction, and, unlike in Chance, Skunk, Inc. cannot identify any specific customers.¹⁸

18 Skunk, Inc. asserts that it had paper records of these transactions but lost them when it was moving from Los Angeles to Carson. (Doc. 332 at 13). Though this may well be true, it does not negate the fact that no record evidence exists reflecting the existence of these transactions.

Coupled with the statements of its owner, however, Skunk, Inc. argues that non-sales related evidence permits an inference that it used its mark in commerce before November 2014. (Doc. 332 at 11-12). These non-sales activities, however, do not establish that the mark was "used in public in a manner that creates an association among consumers between the mark and the mark's owner." Brookfield Commc'ns, 174 F.3d at 1051. For example, Skunk, Inc. offers emails that include photos of its bags bearing the SKUNK mark or its skunk tail logo before November 2014. (Doc. 332-2 at 104-05). However, "mere use in limited e-mail correspondence with . . . a few customers is not" sufficient to create an association among the public between Skunk, Inc. and its goods. See id. at 1052.

Skunk, Inc. also points to evidence that its owner worked with someone to come up with the name SKUNK and registered its skunkbags.com and skunkguard.com domain names in May 2014 and that he worked with the designer who created Skunk, Inc.'s logo in June 2014. (Doc. 332-2 at 84, 98, 101; Doc. 337-4 at 221; Doc. 341-6 at 7). But absent some evidence of website functionality or availability to the public, "mere registration of a domain name [is] not sufficient to constitute commercial use for purposes of the Lanham Act," and although direct evidence of the creation of the brand or contact between an owner and a designer may demonstrate an intent to create a mark for commercial use, "trademark rights are not conveyed through mere intent to use a mark commercially." Id. at 1052.

Accordingly, the only relevant evidence Skunk, Inc. puts forth in opposition to summary judgment on this issue is the uncorroborated avowal of its owner that sales did, in fact, occur before November 2014. This uncorroborated statement is not itself sufficient to survive summary judgment.¹⁹ See Villiarimo, 281 F.3d at 1061. Considering the totality of the evidence in the record, the Court finds that a sufficient evidentiary basis does not exist from which a reasonable factfinder could find that Skunk, Inc. has priority over the mark, and the Court grants BBK's motion on this issue.

19 Skunk, Inc. also argues that the allegation in BBK's complaint that "[u]pon information and belief, [Skunk, Inc.] began selling the Skunk 'smell proof' bag products in 2014" (Doc. 49 at 6) is a binding judicial admission. (Doc. 332 at 11). Absent some evidence of when in 2014 this took place, Skunk, Inc. argues, summary judgment is inappropriate. (Id.). But "[c]ourts appear to be reluctant to construe allegations expressly made on 'information and belief' as binding judicial admissions," Deerpoint Grp., Inc. v. Agrigenix, LLC, 345 F. Supp. 3d 1207, 1232 (E.D. Cal. 2018) (citing cases), and in the absence of any record evidence demonstrating a genuine issue of material fact exists, the Court declines to allow this single allegation to preclude summary judgment.

E. Unclean Hands

BBK next moves for summary judgment on Skunk, Inc.'s unclean hands affirmative defenses and related counterclaims. (Doc. 280 at 22). "Unclean hands is a defense to a Lanham Act infringement suit." Fuddruckers, Inc. v. Doc's B.R. Others, Inc., 826 F.2d 837, 847 (9th Cir. 1987). "To prevail, the defendant must demonstrate that the plaintiff's conduct is inequitable and that the conduct relates to the subject matter of its claims." Id.

1. Misuse of the Federal Trademark Symbol

a. Motions to Supplement and Strike

As discussed below, BBK argues that Skunk, Inc.'s unclean hands argument fails because BBK took corrective actions after learning that it had misused the federal registration symbol (®). BBK argues that Skunk, Inc. did not disclose any factual or legal basis to challenge its corrective actions but Skunk, Inc. now argues that those corrective actions were ineffective. (Doc. 335 at 14). Skunk, Inc. supports its argument in part by citing excerpts of BBK's 2018-20 product catalogs showing BBK's improper uses of the federal registration symbol. (Doc. 332-7 at 2-20).

Consequently, BBK moves to strike that portion of Skunk, Inc.'s argument as untimely disclosed. (Doc. 335 at 14). Presumably in the alternative, BBK also renews its prior motion to supplement the record with additional pages of its 2018-20 product catalogs showing that the registration symbol was used correctly. (Doc. 336). Skunk, Inc. opposes BBK's motion (Doc. 360) and moves to strike any reference in BBK's reply to the catalog pages BBK cites (Doc. 358).

The Court finds that Skunk, Inc. gave BBK adequate notice of its argument and therefore denies BBK's motion to strike. Skunk, Inc.'s Sixth Amended Responses to [BBK's] First Set of Interrogatories provides:

INTERROGATORY NO. 18:

Describe in detail all facts supporting Your assertion in Paragraph 194 of the Answer that: "[BBK's] action is barred by the doctrine of unclean hands because [BBK] bears fault for the damages or injury it has or will suffer."

RESPONSE TO INTERROGATORY NO. 18:

. . .

Further, the documents produced in this litigation show

that [BBK] has a pattern of misusing the federal registration symbol and that this pattern continued even after [BBK] brought this suit. . . . It has also misused the federal registration symbol on its SKUNK SACK product, the packaging for that product, and in promoting that product, despite the fact it does not own a federal registration covering that product or the SKUNK SACK mark. Similarly, it has misused the federal registration symbol in promoting its SKUNK and SKUNK BRAND rolling trays, another product for which it does not own a federal registration. It has likewise misused the federal registration symbol on packaging for and in the promotion of its SKUNKER product and its SKUNK ceramic screens. The above are just some examples of the misuse of the federal registration symbol by [BBK] and are not an exhaustive list.

(Doc. 280-20 at 17, 19-20).

This response provided BBK with notice that Skunk, Inc. would argue that BBK has continued to misuse the federal registration symbol. See Pesci v. McDonald, No. 5:15-CV-00607-SVW-E, 2015 WL 12672094, at *11 (C.D. Cal. Oct. 22, 2015) (considering at summary judgment factual predicates not raised in the complaint, but disclosed during discovery). Because the interrogatory response indicated that BBK's misuse continued even after it sued, Skunk, Inc.'s response necessarily meant that Skunk, Inc. would argue that any remedial efforts were ineffective.

The Court, however, will grant BBK's request to supplement the record with additional pages of its 2018-20 catalogs and deny Skunk, Inc.'s corresponding motion to strike. As a preliminary matter, the page from BBK's 2020 catalog that BBK seeks to add is already in the summary judgment record. (See Doc. 280-14 at 26). As to the pages from the 2018-19 catalogs, although the Court's scheduling Order provides that "a reply may cite only evidence attached to the motion or response" (Doc. 63 at 4-5 n.4), both parties have had access to BBK's product catalogs and cite to different pages of the catalogs in their partial summary judgment motions. Accordingly, the Court does not find that either party will be prejudiced by the Court's consideration of the pages BBK cites. Skunk, Inc. acknowledged as much in its response to BBK's original motion to supplement. (Doc. 329 at 6 ("Regardless, three examples of proper use in the same catalogs that still contain several other instances of misuse of the ® symbol is of little significance and certainly does not resolve the factual disputes that exist as to [BBK's] misuse and intent." (citations omitted))). And in any event, as discussed below, BBK is not entitled to summary judgment even in light of this evidence.

b. Merits

Moving to the merits, BBK moves for summary judgment arguing that Skunk, Inc. demonstrates neither that BBK's conduct was inequitable nor that the conduct was related to the subject matter of the claim. (Doc. 280 at 22). On this issue, the Court will deny the motion.

Skunk, Inc. bases its affirmative defense and counterclaims on BBK's alleged misuse of the federal registration symbol on its products. Specifically, Skunk, Inc. argues that BBK used the federal registration symbol with products for which its registered marks do not apply, including its Skunk Sack products. (Doc. 332 at 17).

BBK does not dispute that "the ® symbol appeared in the wrong place, or several months before the PTO registration issued or while the application for PTO registration was pending," but argues that Skunk, Inc. does not provide "any evidence that BBK misplaced or misused the symbol intending to deceive or mislead consumers or anyone else." (Doc. 335 at 13). BBK instead asserts that any such misuse was unintentional or the fault of errant overseas suppliers and that it has developed internal auditing procedures to prevent any further misuse of the registration symbol. (Doc. 280-24 at 7; Doc. 280-59 at 3-4).

Skunk, Inc. responds that issues of material fact preclude summary judgment because evidence exists from which a factfinder could conclude that BBK intentionally misused the federal registration symbol.²⁰ The Court agrees.

20 Skunk, Inc., citing Sterling Acceptance Corp. v. Tommark, Inc., 227 F. Supp. 2d 454 (D. Md. 2002), aff'd, 91 F. App'x 880 (4th Cir. 2004), and Fox-Stanley Photo Prod., Inc. v. Otaguro, 339 F. Supp. 1293 (D. Mass. 1972), also argues that intent is not a required element of unclean hands based on misuse of the federal registration symbol. (Doc. 332 at 21-22). Because the Court agrees that issues of fact regarding BBK's intent preclude summary judgment, the Court does not address this argument.

Skunk, Inc. notes that BBK is a large and sophisticated company, whose trademarks have been managed by in-house counsel since 2013. (Doc. 332 at 19; Doc. 332-2 at 10, 29). Skunk, Inc. argues that BBK cannot solely blame outside suppliers for its misuse of the registration symbol because its own marketing materials, such as its annual catalogs, have misused the symbol over a period of years. (Doc. 332 at 19; see, e.g., Doc. 332-4 at 3, 7, 12,). Further, even though BBK acknowledges that it became aware of Skunk, Inc.'s misuse allegations when Skunk, Inc. filed its answer in May 2019, BBK's 2020 product catalog prepared "in the later months of 2019" still misused the registration symbol. (Doc. 335 at 14 n.15).

BBK's evidence that it replaced the federal registration symbol with the common law/state trademark symbol (™) on its Skunk Suck products in its 2018-20 catalogs and developed an internal auditing procedure does not negate evidence that permits an inference of intentional misuse. Although "it has been the practice of the [PTO] to accept explanations that demonstrate that such use was inadvertent or without any intent to deceive or mislead and that there has been an effort to discontinue the offending use," see Knorr-Nahrmittel Aktiengesellschaft v. Havland Int'l, Inc., 206 U.S.P.Q. 827, 834 (T.T.A.B. 1980), it is not the role of the Court to accept BBK's assertions as true on summary judgment, see Copelands' Enters., Inc. v. CNV, Inc., 945 F.2d 1563, 1567 (Fed. Cir. 1991) ("[T]he factual question of intent is particularly unsuited to disposition on summary judgment."). And Skunk, Inc. puts forth sufficient facts which could potentially demonstrate that BBK's misuse of the federal registration symbol was intentional.

BBK next argues that even if fact issues exist regarding its intent, any misuse of the federal registration symbol is not directly related to its acquisition of its trademark rights. (Doc. 280 at 24). "'Direct relation,' however, is not the standard applied in the Ninth Circuit. Instead, Ninth Circuit precedent merely requires that a defendant in a Lanham Act case demonstrate 'that the conduct relates to the subject matter of its claims,' for 'equity requires that those seeking its protection shall have acted fairly and without fraud or deceit as to the controversy at issue.'" POM Wonderful LLC v. Coca Cola Co., 166 F. Supp. 3d 1085, 1095 (C.D. Cal. 2016) (quoting Fuddruckers, 826 F.2d at 847) (emphasis omitted); see also Republic Molding Corp. v. B. W. Photo Utilities, 319 F.2d 347, 349 (9th Cir. 1963) ("What is material is not that the plaintiff's hands are dirty, but that he dirtied them in acquiring the right he now asserts, or that the manner of dirtying renders inequitable the assertion of such rights against the defendant." (emphasis added)).

Here, BBK is arguing that Skunk, Inc. is violating its rights to several registered trademarks and is seeking to enforce its trademark rights. The Court finds that BBK's potential misuse of the federal registration symbol is sufficiently related to the claim. If the factfinder finds that BBK itself intentionally misused the registration symbol, it would be inequitable to allow BBK to enforce the registration against Skunk, Inc.

2. Fraudulent Procurement

BBK next moves for summary judgment on Skunk, Inc.'s affirmative defense and counterclaim seeking to cancel the '666 Registration as fraudulently obtained. (Doc. 280 at 25). On this issue, the Court grants the motion.²¹

21 BBK's motion to supplement the record includes a request for the Court to consider Doc. 321-5, which is cited in its reply and relevant to this issue (Doc. 336), and Skunk, Inc. in turn moves to strike the reference from BBK's reply. (Doc. 358). Because the Court concludes that BBK is entitled to summary judgment even in the absence Doc. 321-5, the Court denies BBK's motion to supplement and Skunk, Inc.'s motion to strike on this issue as moot.

"In order to prove fraud on the PTO, the party seeking cancellation must show: 'a false representation regarding a material fact, the registrant's knowledge or belief that the representation is false, the intent to induce reliance upon the misrepresentation and reasonable reliance thereon, and damages proximately resulting from the reliance.'" Spin Master, Ltd. v. Zobmondo Entm't, LLC, 778 F. Supp. 2d 1052, 1061 (C.D. Cal. 2011) (quoting Robi v. Five Platters, Inc., 918 F.2d 1439, 1444 (9th Cir. 1990)). Recognizing that direct evidence of the necessary subjective intent to deceive is often unavailable, courts allow "such intent [to] be inferred from indirect and circumstantial evidence," so long as the evidence is clear and convincing; "inferences drawn from lesser evidence cannot satisfy the deceptive intent requirement." In re Bose Corp., 580 F.3d 1240, 1245 (Fed. Cir. 2009) (quoting Star Sci., Inc. v. R.J. Reynolds Tobacco Co., 537 F.3d 1357, 1366 (Fed. Cir. 2008)). "There is no room for speculation, inference or surmise and, obviously, any doubt must be resolved against the charging party." Id. at 1243 (quoting Smith Int'l, Inc. v. Olin Corp., 209 U.S.P.Q. 1033, 1044 (T.T.A.B. 1981)).

Here, viewing the record in the light most favorable to Skunk, Inc., a reasonable factfinder could not determine by clear and convincing evidence that the PTO registrants knowingly provided false information to the PTO in order to acquire the registration.

Before BBK acquired the rights to the '666 Registration in 2013, the mark's prior owners filed with the PTO a "Statement of Use Under 37 CFR § 2.88, with Declaration" in 2000 (Doc. 280-50), a "Combined Declaration of Use and Incontestability Under Sections 8 & 15" in 2006 (Doc. 280-51), and two subsequent "Combined Declaration[s] of Use and/or Excusable Nonuse/Application for Renewal of Registration of a Mark under Sections 8 & 9" in 2010 (Doc. 280-52, Doc. 280-53). Skunk, Inc. argues that these filings falsely stated that the SKUNK BRAND mark was being used in commerce in relation with products that were never actually used in commerce. (Doc. 332 at 23-24).

BBK argues that no evidence supports that it had any involvement in making any false statements in connection with this registration. (Doc. 280 at 26). However, the Court previously ruled that fraudulent procurement does not require that the current owner of the mark engaged in fraud. (Doc. 120 at 4-5). The Court now reiterates that the proper inquiry is whether the mark was "obtained fraudulently," and this inquiry can look to the conduct of non-parties to a case. See 15 U.S.C. § 1064(3).

Nonetheless, regarding the 2000 and 2006 filings, the Court agrees with BBK that the record does not support a finding, by clear and convincing evidence, that the registrants provided the information to the PTO with the intent to deceive. The only evidence Skunk, Inc. offers in support of its affirmative defense and counterclaim is the testimony of a BBK representative that, to the best of his knowledge, he did not believe the '666 Registration had been used in connection with certain goods in the United States. (Doc. 332-2 at 6-9). For Skunk, Inc. to prevail on its argument on this record, the factfinder would need to assume the truth of the representative's statement and, from there, infer both the registrant's knowledge and intent to deceive. The Court finds that this limited evidence is insufficient to support such a finding by clear and convincing evidence. See In re Bose Corp., 580 F.3d at 1245. And Skunk, Inc.'s statement that "[t]here is no evidence that the SKUNK BRAND mark was in use at any time for the majority of the listed items" (Doc. 332 at 24) is insufficient to carry its burden to produce some evidence of an intentional misrepresentation.

Skunk, Inc.'s argument regarding the 2010 filings fares no better. Skunk, Inc. notes that at the time of 2010 filings, the '666 Registration was owned by GKB Worldwide, Inc., and GKB's president was Basilia Kesselman, who was married to BBK's owner, Joshua Kesselman. (Doc. 332 at 25). Again relying on the stated belief of a BBK representative, Skunk, Inc. asserts that BBK "was the exclusive provider of SKUNK BRAND products in the United States," and Ms. Kesselman would therefore have known the kinds of products on which BBK used its marks. (Doc. 332 at 20; Doc. 332-2 at 6-8). Skunk, Inc. also notes that GKB and BBK entered an agreement regarding the '666 Registration in 2018 (see Doc. 332-8 at 27-54) and that GKB designated BBK as its "domestic representative." (Doc. 332 at 25-26). This evidence certainly establishes that the companies were associated. But this limited circumstantial evidence cannot support inferences that the '666 Registration was never used in connection with certain product categories, that Ms. Kesselman personally knew that the mark was never used in connection with those products, and that she intended to deceive the PTO when filing the 2010 filings by clear and convincing evidence. See In re Bose Corp., 580 F.3d at 1245.

Accordingly, the Court grants BBK's motion on this issue.

3. Cannabis Use

Finally, BBK moves for summary judgment on Skunk, Inc.'s affirmative defense that BBK failed to inform the PTO that its products are used with marijuana and complied with the Controlled Substances Act (CSA). (Doc. 280 at 25). The Court grants BBK's motion for summary judgment on this issue in part.

"[O]nly lawful use in commerce can give rise to trademark priority," S. Cali. Darts Ass'n v. Zaffina, 762 F.3d 921, 931 (9th Cir. 2014) (quoting CreAgri, Inc. v. USANA Health Scis., Inc., 474 F.3d 626, 630 (9th Cir. 2007)), and therefore, controlled substances and drug paraphernalia are not entitled to trademark protection. Under the CSA, drug paraphernalia includes any "equipment, product, or material of any kind which is primarily intended or designed for use" in conjunction with a controlled substance. 21 U.S.C. § 863(d). However, the CSA explicitly provides that drug paraphernalia does not include "any item that, in the normal lawful course of business, is . . . traditionally intended for use with tobacco products, including any pipe, paper, or accessory." Id. § 863(f)(2). "An item's 'traditional' use is not based on the subjective intent of a particular defendant." Posters 'N' Things, Ltd. v. United States, 511 U.S. 513, 520-21 (1994).

Here, most categories of products for which BBK holds a registered trademark fall within the traditional-tobacco-use exemption because they consist squarely of pipes, papers, and accessories such as glass tips for rolled cigarettes. This distinguishes the instant case from those Skunk, Inc. cites in support of its argument.

In Sream, Inc. v. Superior Discount, LLC, the court denied a motion to dismiss a counterclaim seeking cancellation of the registration of a mark that applied to "glass pipes, bongs, water pipes, water pipes of glass," and other categories of glassware that were alleged to comprise the component parts of bongs. No. CV 17-8177, 2019 WL 2124887, at *1-4 (E.D. La. May 15, 2019) (alteration omitted). There, the counterclaimant noted that the Controlled Substances Act specifically lists water pipes and bongs as examples of drug paraphernalia. Id. at *4; see also 21 U.S.C. § 863(d)(2), (12). Although the counterclaimant also sought cancellation of a mark that applied to tobacco-related categories such as cigarettes, cigars, and matches, the primary basis for cancellation as to those categories was that the marks had never been used in commerce in connection with those products, and the court did not address whether those categories fell under the traditional-tobacco-use exemption. Superior Disc., 2019 WL 2124887, at *4.

The counterclaimant in Sream, Inc. v. Hookah Me Up, Inc. sought to invalidate the same bong-related marks as the counterclaimant in Superior Discount. No. 9:18-CV-80937, 2019 WL 2269740, at *3 (S.D. Fla. Feb. 5, 2019). And the court there similarly found that the facts supported a plausible counterclaim for one of the marks. Id. at *5. The court also did not consider the traditional-tobacco-use exemption.

Finally, in Republic Technologies (NA), LLC v. BBK Tobacco & Foods, LLC, BBK moved to dismiss a trademark-cancellation claim based on the allegation that its RAW trademarks were "used with goods that are marketed, promoted and sold for use with marijuana." 262 F. Supp. 3d 605, 607 (N.D. Ill. 2017). The court there noted that "[s]ome of the products—such as [BBK's] rolling papers—almost certainly fall within § 863(f)(2)'s exemption for products traditionally intended for use with tobacco products," but concluded that at least one product, a vaporizer, did "not incontrovertibly fall under the exemption." Id. at 608. Because the court could not "say as a matter of law that none of [BBK's] registered products violates the Controlled Substances Act, [it] den[ied] [BBK's] motion to dismiss [the] cancelation claim . . . ." Id.

Here, Skunk, Inc. does not attempt to specify which of the SKUNK and SKUNK BRAND products it believes are within or excluded from the traditional-tobacco-use exemption. It instead notes that BBK "acknowledges not only that its goods are suitable for use with marijuana, but it markets them at shows that are specifically directed to marijuana users" and asserts that "there are issues of fact as to whether items listed in the asserted SKUNK and SKUNK BRAND registrations constitute drug paraphernalia under the Controlled Substance Act." (Doc. 332 at 22).

The Court finds that the products covered by BBK's '666, '677, '902, and '903 Registrations fall as a matter of law within § 863(f)(2)'s traditional-tobacco-use exemption and are, therefore, not drug paraphernalia under the CSA. These products either fall squarely within § 863(f)(2)'s specific pipe and rolling paper examples or are accessories made for use with pipes and rolling papers (e.g., cigarette tips and mouth pieces for cigarettes).²² Given this compliance, the Court does not find that BBK's representations to the PTO to be improper. BBK's '712 Registration, however, covers electronic cigarettes and cigars, and the Court finds these product categories more analogous to the vaporizer at issue in Republic Technologies, as they do not fall within the specific examples of products set forth in the traditional-tobacco-use exemption.

22 The Court acknowledges that the '677 Registration also includes "herbs for smoking," which does not fall under the examples set forth in the traditional-tobacco-use exemption. (See Doc. 280-7 at 2). However, Skunk, Inc. does not make any argument explaining why BBK's products within this category would constitute drug paraphernalia or present any evidence demonstrating that those particular products are used in conjunction with controlled substances. Accordingly, the Court finds that BBK is entitled to summary judgment on the '677 Registration in its entirety on this issue. --------

Accordingly, the Court grants BBK's motion for summary judgment on this issue as it pertains to the '666, '677, '902, and '903 Registrations and denies the motion as it pertains to the '712 Registration.

F. Abandonment

BBK next moves for summary judgment on Skunk, Inc.'s affirmative defense and counterclaim for partial cancellation based on abandonment. (Doc. 280 at 26-27). Skunk, Inc.'s answer asserted that BBK had not used its SKUNK BRAND mark on several categories of products covered by the '666 Registration, and earlier in this litigation, the parties agreed to remove those product categories from the registration. (Doc. 144). The Court issued an Order consistent with the parties' agreement. (Doc. 146). The parties agree that as to the removed product categories, Skunk, Inc.'s counterclaims should be dismissed; the parties disagree, however, as to whether BBK also abandoned its mark as to an additional category, lighters not of precious metals. (Doc. 280 at 27; Doc. 332 at 23; Doc. 335 at 17).

1. Motions to Supplement and Strike

As a preliminary matter, BBK moves to strike Skunk, Inc.'s argument regarding lighters as untimely disclosed in violation of the Court's MIDP Order (Doc. 4). (Doc. 335 at 17). It also moves to supplement the record with additional evidence that it cites in its reply in support of partial summary judgment demonstrating that it has not abandoned the mark with respect to lighters. (Doc. 336). Skunk, Inc. responds by moving to strike the reference to this evidence in BBK's reply. (Doc. 358).

Rather than diving again into the parties continued disclosure conflicts, the Court considered BBK's newly offered evidence and permitted Skunk, Inc. to file a sur-reply specifically addressing this evidence (Doc. 366), see JG v. Douglas Cnty. Sch. Dist., 552 F.3d 786, 803 n.14 (9th Cir. 2008), and Skunk, Inc. did so (Doc. 367). Because BBK had the opportunity to present its desired evidence in support of its motion and Skunk, Inc. had the opportunity to respond, the Court finds that neither party will be prejudiced. Accordingly, the Court grants BBK's Renewed Motion to Supplement the Record with Doc. 281-2 at 25 and Doc. 321-1 and denies Skunk, Inc.'s related Motion to Strike.

2. Merits

Having considered the parties' materials, the Court now denies BBK's motion on this issue. To prevail on an abandonment affirmative defense, Skunk, Inc. "must show (1) nonuse of the mark and (2) intent not to resume its use." See Marketquest Grp., Inc. v. BIC Corp., 316 F. Supp. 3d 1234, 1281 (S.D. Cal. 2018). "[N]on-use for three consecutive years constitutes prima facie evidence of abandonment under the Lanham Act." Id. at 1282; see also 15 U.S.C. § 1127. "When a prima facie case of non-use is shown, there is a rebuttable presumption that the trademark owner has abandoned the mark without intent to resume use." Marketquest Grp., 316 F. Supp. at 1282.

BBK argues that Skunk, Inc. is unable to show nonuse because undisputed testimony offered by BBK's representative provides that BBK began offering SKUNK lighters for sale in 2011 and continues to offer SKUNK lighters in a set of other lighters. (Doc. 281-2 at 25; Doc. 321-1 at 3-4). In response, Skunk, Inc. points out that this testimony relates only to the use of the SKUNK, rather than the SKUNK BRAND, mark and therefore summary judgment is inappropriate as to the '666 Registration. (Doc. 367 at 2). Further, Skunk, Inc. cites BBK sales data showing that BBK has not sold sets of lighters since 2014 and notes that BBK's product catalogs since at least 2017 have not featured a SKUNK-branded lighter. (Doc. 367 at 2-3). Although BBK's representative offers an explanation for why the SKUNK lighter did not appear in the 2017 catalog, the Court finds that these disputes of fact preclude summary judgment. A reasonable factfinder could conclude that the absence of lighter sales and the absence of lighters in BBK's catalog demonstrate that BBK has not sold SKUNK lighters for at least three years—or it could believe BBK's representation. The Court, however, cannot do so on summary judgment.

Further, because Skunk, Inc. may be entitled to a rebuttable presumption that BBK did not intend to resume use of it SKUNK and SKUNK BRAND marks on lighters due to three years of non-use, BBK's argument that it is entitled to summary judgment because Skunk, Inc. does not provide specific evidence of intent to abandon also fails. See id. Accordingly, the Court denies summary judgment on this issue.

G. Genericness

BBK next argues it is entitled to summary judgment on Skunk, Inc.'s affirmative defense that both SKUNK and SKUNK BRAND are generic. (Doc. 280 at 27). The Court previously dismissed Skunk, Inc.'s genericness-based counterclaims for failing to state a claim upon which relief can be granted. See Fed. R. Civ. P. 12(b)(6). (Doc. 172). For largely the same reasons, the Court grants BBK's motion for summary judgment on this issue.

As discussed above, "generic" marks "describe the product in its entirety" and "are not entitled to trademark protection." Surfvivor Media, 406 F.3d at 632; see also Marketquest Grp., 316 F. Supp. 3d at 1257 (describing generic marks as "common descriptive names for what a product is" (citation omitted)). A generic term "must always relate to a particular type of good or service." Elliott v. Google, Inc., 860 F.3d 1151, 1156 (9th Cir. 2017). "In cases involving properly registered marks, a presumption of validity places the burden of proving genericness upon the defendant." Filipino Yellow Pages, Inc. v. Asian Journal Publications, Inc., 198 F.3d 1143, 1146 (9th Cir. 1999).

Here, Skunk, Inc. argues summary judgment is inappropriate because "there is significant evidence that 'skunk' refers to marijuana or types of marijuana and, hence, to the subcategory of cigarette papers, rolling papers, and tubes used for smoking skunk." (Doc. 332 at 29). To support this argument, Skunk, Inc. relies on the reports of its linguistics expert, Dr. Frank Nuessel. (Doc. 332-9 at 32-73). Those reports, however, do not form a sufficient evidentiary basis from which a reasonable factfinder could find in Skunk, Inc.'s favor. See Ellison, 357 F.3d at 1075.

In his expert report, Dr. Nuessel opines that "[m]arijuana, cannabis, or skunk are all synonymous terms that identify herbs, which can be smoked or otherwise ingested, or describe paraphernalia that can be used with those herbs." (Doc. 332-9 at 34). "Much like a juice glass identifies a type of glass used to hold juice," the report explains, "the use of the term 'skunk' for rolling papers immediately identifies to consumers that the product is a subset of rolling papers—namely rolling papers for joints." (Id. at 35). In his reply to BBK's expert, Dr. Nuessel describes his opinion as follows:

It is my opinion that when the term "skunk" is used for rolling papers, hemp wraps, cones, and other smoking accessories, such as glass tips, screens, e-cigarettes, trays or lighters, it immediately conveys information to potential consumers about the product's uses—namely, that the product may be used for or is particularly well suited to smoking "skunk."

(Doc. 332-9 at 73).

Viewing this evidence in the light most favorable to Skunk, Inc., Dr. Nuessel's report establishes that skunk is completely synonymous with marijuana. However, to prevail on a genericness affirmative defense, Skunk, Inc. must prove that skunk describes the paraphernalia itself (i.e., that cigarette papers, rolling papers, and tubes are skunks). See Elliott, 860 F.3d at 1156. As clarified by Dr. Nuessel's reply, however, his opinion does not go that far (and Skunk, Inc.'s opposition does not argue that it does). Dr. Nuessel's opinion instead establishes that skunk indicates or describes the use of paraphernalia (i.e., that skunk rolling papers are used to smoke marijuana).

Here, none of BBK's marks apply to the product category of marijuana, nor could they, see Trademark Manual of Examining Procedure § 907 (Oct. 2018) ("Use of a mark in commerce must be lawful use to be the basis for federal registration of the mark."); see also Doc. 172 at 6 ("Given the United States Patent and Trademark Office's ('USPTO') strong policy against authorizing registrations of unlawful goods, it would not have registered BBK's mark for cannabis-based goods."). And although Dr. Neussel's opinion that skunk indicates or describes a potential use of BBK's products may lead to the conclusion that BBK's marks are descriptive, it is insufficient to support a finding that BBK's marks are generic. See Surfvivor Media, 406 F.3d at 632.

Accordingly, the Court grants BBK's motion for summary judgment on this issue.

H. Descriptiveness

BBK next moves for summary judgment on Skunk, Inc.'s descriptiveness affirmative defense. For the reasons discussed in Section 3(A)(1)(b) of this Order, supra, the Court determines a genuine issue of material fact exists as to whether BBK's marks are descriptive. Accordingly, the Court denies BBK's motion for summary judgment on this issue.

I. Uncontested Issues

Finally, BBK moves for summary judgment on Skunk, Inc.'s remaining three affirmative defenses: waiver, acquiescence, and prior registration under Morehouse. (Doc. 280 at 14, 15, 21). Skunk, Inc. does not oppose BBK's motion on these issues. (Doc. 332 at 6). Given the parties' stipulation, the Court dismisses these three affirmative defenses.

IV. CONCLUSION

For the foregoing reasons,

IT IS ORDERED that the Clerk of the Court shall file this Order under seal.

IT IS FURTHER ORDERED that BBK's Motion for Partial Summary Judgment (Doc. 280) is GRANTED IN PART AND DENIED IN PART as specified above.

IT IS FURTHER ORDERED that Skunk, Inc.'s Motion for Partial Summary Judgment (Doc. 337) is DENIED.

IT IS FURTHER ORDERED that BBK's Renewed Motion to Supplement (Doc. 336) is GRANTED IN PART AND DENIED AS MOOT IN PART as specified above.

IT IS FURTHER ORDERED that Skunk, Inc.'s Motion to Strike Portions of BBK's Partial Summary Judgment Reply Brief (Doc. 358) is DENIED IN PART AND DENIED AS MOOT IN PART as specified above.

IT IS FURTHER ORDERED that this Order will remain under seal for 14 days from today's date. This Order will be automatically unsealed after 14 days, unless prior thereto the parties jointly file a copy of this Order, unsealed, redacting only the information that must remain sealed consistent with the prior Orders of the Court allowing certain information to be filed under seal. Each party will be responsible for identifying and redacting its own information. If the parties file the unsealed, redacted order within the deadline, the Clerk of the Court shall leave this order under seal.

IT IS FINALLY ORDERED that the Clerk of Court shall send copies of this Order to only:

Frank G. Long

J. Alex Grimsley

Cindy A. Villanueva

Dickinson Wright PLLC

1850 N. Central Ave., Suite 1400

Phoenix, AZ 85004

Majed Dakak

Kesselman Brantly Stockinger LLP

1230 Rosecrans Ave., Suite 400

Manhattan Beach, CA 90266

Mary Ann Novak

Hilgers Graben PLLC

575 Fallbrook Blvd., Suite 202

Lincoln, NE 68521

Dated this 15th day of December, 2020.

/s/_________

James A. Teilborg

Senior United States District Judge