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Idylwilde, Inc. v. Umpqua Feather Merchants, LLC

United States District Court, Ninth Circuit

January 16, 2014

IDYLWILDE, INC., and ZACH MERTENS, Plaintiffs,
v.
UMPQUA FEATHER MERCHANTS, LLC, MIRABEL, INC., BIEN TAN, and DOES 1 THROUGH 10 Defendants.

Katherine R. Heekin, THE HEEKIN LAW FIRM, Portland, OR, Attorney for Plaintiffs Idylwilde, Inc. and Zach Mertens.

Samuel T. Smith, Anne Devlan Foster, DUNN CARNEY ALLEN HIGGINS & TONGUE, LLP, Portland, OR, Philip M. Quatrochi, Kevin S. Tuttle, Kyle L. Elliott, SPENCER FANE BRITT & BROWNE, LLP, Kansas City, MO, Attorneys for Umpqua Feather Merchants, LLC

Steve D. Larson, Mark A. Friel, STOLL STOLL BERNE LOKTING & SHLACHTER, Portland, OR, Attorneys for Mirabel, Inc. and Bien Tan.

OPINION & ORDER

MARCO A. HERNANDEZ, District Judge.

Plaintiffs Zachary Mertens and Idylwilde, Inc. ("Idylwilde") bring this action against Umpqua Feather Merchants, LLC ("Umpqua"), Mirabel, Inc. ("Mirabel"), and Bien Tan. Plaintiffs bring claims for unregistered trademark and trade dress infringement[1] under § 43(a) of the Lanham Act, 15 U.S.C. § 1125, trade dress dilution under 15 U.S.C. § 1125(c), unfair competition, misappropriation of trade secrets, common law trademark infringement, intentional interference with contracts, breach of fiduciary duty, conversion, and unjust enrichment. Plaintiffs filed a motion for a temporary restraining order ("TRO") and preliminary injunction [11], which seeks to estop Defendants from advertising and disposing of Idylwilde's alleged products, infringing and diluting Plaintiffs' purported trademarks and trade dress, and disclosing Plaintiffs' alleged trade secrets. On November 19, 2013, I granted Plaintiffs' motion for a TRO. Umpqua subsequently filed a motion to dissolve Plaintiffs' temporary restraining order or, alternatively, to increase the bond amount [45]. I held oral argument on December 3, 2013, to address Plaintiffs' and Umpqua's motions. At the time of oral argument, the TRO had expired, and I declined to continue the TRO. For the reasons that follow, Plaintiffs' motion for a preliminary injunction is DENIED and Umpqua's motion is DENIED as moot.

BACKGROUND

In the fall of 1997, Mertens and Tan entered a Working Agreement to "produce top quality [fishing] flies in the Philippines." Mertens Decl., Ex A, p. 1. On January 21, 1998, Mertens incorporated Idylwilde, Inc.[2] Id., ¶¶ 9-10. On April 24, 1998, Mertens and Tan entered into a joint venture agreement entitled, "Confidential Joint Venture Agreement between Idylwilde Inc. and Mirabel, Inc." (hereinafter, the "Joint Venture Agreement"). Id., Ex. C, p. 1. Under the Joint Venture Agreement, "Mertens... and... Tan... [agreed to] form[] a joint venture [(the "Joint Venture")]... to produce top quality fishing flies in the Philippines and market them worldwide." Id., Ex. C, p. 1. Pursuant to the Joint Venture Agreement, Mertens "retain[ed a] 60% majority" interest in the Joint Venture and Tan owned 40%. Id., p. 2. Also pursuant to the Joint Venture Agreement, Mertens agreed that "Idylwilde [would] be Mirabel's exclusive marketing agent for Mirabel's entire production and Mirabel [would] be Idylwilde's exclusive supplier for its products." Id., p. 3. Mertens also agreed to "transfer[] his product inventory, work in process, raw materials, equipment, and other personal property used in the business[, ]... his knowledge and goodwill of his ongoing business, and... the names Far and Away Flies' and Idylwilde Flies' to the [Joint Venture]."[3] Id., p. 1.

Plaintiffs claim that where most fly companies "push" their products into retail channels through sales representatives and then rely upon retailers to sell the products to consumers, "Idylwilde... changed the industry by creating a pull market' for Idylwilde's flies." Pls.' Mem., p. 4. Plaintiffs represent that "Idylwilde... contracted with a limited number of talented fly designers, called signature tyers' - a total of 33 in 2013-to submit unique patterns to Idylwilde for mass production." Id., p. 3. Plaintiffs maintain that "[t]he patterns are designed exclusively for Idylwilde... and the signature tyers are paid a royalty." Id . Plaintiffs further maintain that "Idylwilde develops a recipe and process for mass-producing the fly that replicates the high quality of construction found in the fly tied personally by the signature tyer." Id.

According to Plaintiffs, "Idylwilde promotes the signature tyers as sub-brands within Idylwilde by affixing the designer's name to the patterns they designed for Idylwilde in Idylwilde's sales catalog (print version and on-line) and on the packaging for the flies, and through posts on Idylwilde's Facebook page and Idylwilde's blog...." Id . Plaintiffs also assert that "[c]licking on a fly on Idylwilde's website links to information about when to fish, where to fish, why to fish, and how to fish with that particular fly." Id . Plaintiffs posit that "Idylwilde uses YouTube and Vimeo video channels to provide instruction, entertainment, and showcase flies in action" and "manufactur[es] custom flies for some of its long term or well-established dealers." Id., pp. 3, 5. According to Plaintiffs, "[c]ustom flies are created exclusively for a particular fly shop... [and] are not offered in Idylwilde's catalog or anywhere else." Id., p. 5.

Plaintiffs also state that the "majority of Idylwilde's sales (80-85%) come from pre-season orders placed in the fall[, ]" and that "[d]elivery occurs the following spring and summer, generally between April and July." Id . Plaintiffs represent that although they "paid for raw materials and labor to manufacture the pre-season orders for the 2013 season[, ]" Tan and Mirabel "refused to ship the flies on the expected ship date, April 17, 2013." Id . Based on this and other problems arising between Plaintiffs, Tan, and Mirabel, on June 25, 2013, Mertens decided to manufacture flies in Sri Lanka instead of the Philippines, and dissolved Idylwilde, Inc. on July 16, 2013. Id., p. 6; Umpqua's Mot. to Dissolve TRO, Ex. 1, p. 1.

On September 10, 2013, Umpqua announced that it had entered into a "long-term agreement to partner with a well-established factory in the Philippines" and "released the Thrilla from Manila'" campaign, which Plaintiffs assert sells flies "that Idylwilde... paid [Tan] to produce for the 2013 season." Id., pp. 7-8. In November 2013, the parties filed their respective motions.

STANDARD

"A preliminary injunction is an extraordinary remedy never awarded as of right." Winter v. Natural Res. Def. Council, Inc. , 555 U.S. 7, 24 (2008). The standards for a temporary restraining order and a preliminary injunction are the same. See, e.g., Stuhlbarg Int'l Sales Co., Inc. v. John D. Brush & Co., Inc. , 240 F.3d 832, 839 n.7 (9th Cir. 2001). A preliminary injunction "should not be granted unless the movant, by a clear showing, carries the burden of persuasion." Mazurek v. Armstrong , 520 U.S. 968, 972 (1997) (emphasis in original and citation omitted). "A plaintiff seeking a preliminary injunction must establish that he is likely to succeed on the merits, that he is likely to suffer irreparable harm in the absence of preliminary relief, that the balance of equities tips in his favor, and that an injunction is in the public interest." Winter , 555 U.S. at 20; see also Herb Reed Enters., LLC v. Fla. Enterm't Mgmt., Inc., No. 12-16868, 2013 WL 6224288, at *8 (9th Cir. 2013).

DISCUSSION

Plaintiffs contend they are entitled to a preliminary injunction because Defendants are unlawfully using Plaintiffs' unregistered trademarks in the name "Idylwilde" and the name of and item codes for each signature, custom, and "Idyl"[4] fly. Plaintiffs also assert that they are entitled to a preliminary injunction because Defendants have infringed on Plaintiffs' fly designs and fly packaging trade dress, unlawfully diluted their purported trademarks and trade dress, and misappropriated their trade secrets.

I. Likelihood of Success on Trademark Infringement and Unfair Competition Claim

The unregistered trademarks alleged by Plaintiffs fall within the ambit of the Lanham Act. See New W. Corp. v. Nym Co. , 595 F.2d 1194, 1198 (9th Cir. 1979) ("To recover for a violation of... [15 U.S.C. § 1125(a)] it is not necessary that a mark or trade-mark be registered.") (Citation omitted); Calista Enters. Ltd. v. Tenza Trading Ltd., No. 3:13-cv-01045-SI, 2013 WL 6080184, at *5 (D. Or. 2013) ("Although a federal registration will give the owner of a mark important legal rights and benefits, the registration does not create the trademark.... [T]he absence or cancellation of a registration does not invalidate the trademark. It is the use of the mark to identify a single source which creates exclusive trademark rights."); see also Two Pesos, Inc. v. Taco Cabana, Inc. , 505 U.S. 763, 768 (1992) (stating that § 43(a) of the Lanham Act "protects qualifying unregistered trademarks") (citations omitted). Plaintiffs assert that to prevail on their claim of unregistered trademark infringement under the Lanham Act, they must prove: (1) that they have a protectable ownership interest in the mark; and (2) that Defendants' use of the mark is likely to cause consumer confusion. Pls.' Mem., p. 10; Dep't of Parks & Recreation v. Bazaar Del Mundo Inc. , 448 F.3d 1118, 1124 (9th Cir. 2006).

A. Mirabel and Tan

1. Whether the Joint Venture Has Been Dissolved

As a threshold issue, the parties disagree as to whether the Joint Venture has been dissolved. Plaintiffs argued at oral argument on December 3, 2013, that the Joint Venture still exists because Mertens, as the majority owner of the Joint Venture, has not yet consented to dissolve the Joint Venture and thus, the Joint Venture can only be dissolved by a judicial determination under ORS 67.290.[5] Plaintiffs' assertion is not well taken.

Plaintiffs' position that Mertens did not give his express written consent to dissolve the Joint Venture belies the record. The evidence shows that Mertens dissolved the Joint Venture when he, as the majority shareholder of the partnership, gave his express written consent to do so. Tan Decl., Ex. 1, p. 2. In a letter to Tan dated June 7, 2013, Mertens expressly stated that if Tan did not provide "shipping documents" showing that Tan had shipped the "2013 flies" by "Tuesday, June 11, 2013, then Idylwilde [would] conclude that it [was] no longer bound by the [Joint Venture]." It is undisputed that Tan did not ship the "2013 flies" by June 11, 2013, or any other date, and did not provide Mertens with the requested shipping documents. It is also undisputed that Mertens stopped using Mirabel for the production of flies after June 11, 2013, and had secured "manufacturing in Sri Lanka" with another manufacturer. Fryhover Decl., Ex. L, p. 1.

The undisputed evidence shows that Mertens dissolved the Joint Venture on June 11, 2013, when he expressly stated that he would no longer be bound by the terms of the Joint Venture.

2. Ownership

Tan and Mirabel argue that Plaintiffs do not own the purported trademarks or trade dress because Mertens transferred the name Idylwilde to the Joint Venture pursuant to the Joint Venture Agreement. Tan and Mirabel also assert that Plaintiffs do not own the purported trademarks or trade dress because the names of and item codes for each signature, custom, and Idyl fly belong to the Joint Venture. Plaintiffs contend that the purported trademarks and trade dress belong to them because any transfers Mertens made to the Joint Venture were limited to the point in time that the Joint Venture Agreement was consummated on April 24, 1998, and because the Joint Venture Agreement does not specifically address trademarks and trade dress.

Plaintiffs' arguments fail. The evidence before me does not establish that Plaintiffs alone own the name Idylwilde. The undisputed evidence shows that Mertens "transferred" the name "Idylwilde Flies" and all "personal property used in the business" to the Joint Venture. Mertens Decl., Ex. C, p.1. Plaintiffs point to no language in the Joint Venture Agreement showing that the name Idylwilde or any of Mertens' other "personal property used in the business" were to be transferred back to Mertens or that the transfers were only temporary. The Joint Venture Agreement also lacks any language addressing who would own any of the trademarks or trade dress arising out of the partnership between Mertens and Tan. Although the Joint Venture Agreement specifically states that the Joint Venture's "positive cash flows" would be distributed to Mertens and Tan, it lacks any similar language addressing how the parties would handle any trademarks and trade dress arising out of the joint venture partnership, let alone any language stating the Mertens alone would own all the trademarks and trade dress.

Notably, Plaintiffs cite no authority, Oregon partnership law or otherwise, establishing that they solely own the purported marks or trade dress. Although Plaintiffs cite a number of Oregon cases for the proposition that all partnership property used in a joint venture remain with the individual partners, none of those cases involved language similar to that used in the Joint Venture Agreement.

Because Plaintiffs fail to establish that they alone own the purported trademarks and trade dress, they are not likely to succeed on their trademark claim against Tan and Mirabel.

3. First to Use in Commerce

Plaintiffs assert they own the purported trademarks because they were the first to use them in commerce. Plaintiffs assert that Idylwilde was the first fly company to sell flies using the signature fly names of tyers "as evidenced by longstanding contracts with the signature tyers who exclusively designed the flies for Idylwilde[, ]" that "Idylwilde was the first fly company to sell flies that use the names of Idylwilde's custom flies as evidenced by pro shops exclusively engaging Idylwilde to manufacture them[, ]" and that ...


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