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Calista Enterprises Lrd. v. Tenza Trading Ltd.

United States District Court, D. Oregon

August 8, 2014

CALISTA ENTERPRISES LTD., a Republic of Seychelles Company, Plaintiff,
v.
TENZA TRADING LTD., a Cyprus Company, Defendant,
v.
ALEXANDER ZHUKOV, a Czechoslovakian citizen, Counterclaim-Defendant

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For Plaintiff: Valentin David Gurvits and Matthew Shayefar, BOSTON LAW GROUP, PC, Newton Centre, MA; Sean Ploen, PLOEN LAW FIRM, PC, Minneapolis, MN; Evan Fray-Witzer, CIAMPA FRAY-WITZER, LLP, Boston, MA; Thomas Freedman Jr., PEARL LAW LLC, Portland, OR.

For Tenza Trading Ltd., Defendant: Paul N. Tauger and Anna M. Vradenburgh, THE ECLIPSE GROUP LLP, Irvine, CA; Devon Zastrow Newman, SCHWABE, WILLIAMSON & WYATT, P.C., Portland, OR.

OPINION

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Michael H. Simon, United States District Judge.

This is a trademark dispute between two providers of Internet pornography. Plaintiff Calista Enterprises Ltd. (" Calista" ) and Defendant Tenza Trading Ltd. (" Tenza" ) are businesses that operate websites in the adult-entertainment industry and stream sexually explicit videos. The parties' claims and counterclaims concern U.S. trademark law under the Lanham Act, 15 U.S.C. § § 1114-1125, as well as related claims under Oregon law. Calista moves for partial summary judgment on its claim for cancellation of Tenza's registered trademark, Calista's claim for declaration of noninfringement, Tenza's claim for counterfeiting, and for a finding that Tenza's claims are barred by laches. Tenza moves for partial summary judgment on its claims for trademark infringement, counterfeiting, cybersquatting, and for a finding that Calista may not recover money damages. For the reasons below, the Court denies Calista's motion for partial summary judgment and grants in part and denies in part Tenza's motion for partial summary judgment.

STANDARDS

A party is entitled to summary judgment 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). The moving party has the burden of establishing the absence of a genuine dispute of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323,

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106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). The court must view the evidence in the light most favorable to the non-movant and draw all reasonable inferences in the non-movant's favor. Clicks Billiards Inc. v. Sixshooters Inc., 251 F.3d 1252, 1257 (9th Cir. 2001). Although " [c]redibility determinations, the weighing of the evidence, and the drawing of legitimate inferences from the facts are jury functions, not those of a judge . . . ruling on a motion for summary judgment," the " mere existence of a scintilla of evidence in support of the plaintiff's position [is] insufficient . . . ." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 252, 255, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). " Where the record taken as a whole could not lead a rational trier of fact to find for the non-moving party, there is no genuine issue for trial." Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986) (citation and quotation marks omitted).

Where parties file cross-motions for summary judgment, the court " evaluate[s] each motion separately, giving the non-moving party in each instance the benefit of all reasonable inferences." A.C.L.U. of Nev. v. City of Las Vegas, 466 F.3d 784, 790-91 (9th Cir. 2006); see also Pintos v. P. Creditors Ass'n, 605 F.3d 665, 674 (9th Cir. 2010) (" Cross-motions for summary judgment are evaluated separately under [the] same standard." ). In evaluating the motions, " the court must consider each party's evidence, regardless under which motion the evidence is offered." Las Vegas Sands, LLC v. Nehme, 632 F.3d 526, 532 (9th Cir. 2011). " Where the non-moving party bears the burden of proof at trial, the moving party need only prove that there is an absence of evidence to support the non-moving party's case." In re Oracle Corp. Sec. Litig., 627 F.3d 376, 387 (9th Cir. 2010). Thereafter, the non-moving party bears the burden of designating " specific facts demonstrating the existence of genuine issues for trial." Id. " This burden is not a light one." Id. The Supreme Court has directed that in such a situation, the non-moving party must do more than raise a " metaphysical doubt" as to the material facts at issue. Matsushita, 475 U.S. at 586.

BACKGROUND[1]

A. Tenza

Tenza is the owner of an adult-entertainment website at www.porntube.com. The www.porntube.com website was originally owned by EMC Ideas, Inc. In late 2010, EMC sold the domain name to FUX Ltd., of which Steve Matthyssen is a shareholder. FUX contributed the domain name bought from EMC to the newly formed Tenza, of which FUX is a shareholder. Tenza's domain porntube.com is operated by non-party DreamStar Cash Ltd. (" DreamStar" ). DreamStar is managed by Steven Matthyssen who, along with Michael Cardone, is a beneficial co-owner of Tenza.

In May of 2005, the www.porntube.com website began streaming pornographic videos. Content on Tenza's website is uploaded by content producers. Tenza's business model is to route traffic to its website and generate revenue through two methods: (1) third-party advertising displayed on the website; and (2) payments from the content producers when visitors

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click on a hyperlink to the content producer's website and make a purchase from that content producer. In order to promote visitors to its website, Tenza markets itself by using " search engine placement services" to maximize the times when Tenza's website appears among the top results on a search engine in response to user searches. Tenza also sponsors events, such as race cars in major races, to promote its website. Tenza's primary marketing tool, however, is its affiliate program, whereby operators of other adult-entertainment websites (" Affiliates" ) include links on their websites so that visitors to those websites may " click through" to reach Tenza's website. Tenza then tracks each " click through" and compensates Affiliates on a per-click-through basis. Tenza's website has a Global Alexa ranking, which estimates the popularity of a website based on the number of visitors and the number of page views on a site, of 1,110 globally and a ranking of 1,182 in the United States.[2]

Tenza also has a trademark registration for the word mark " PORNTUBE," registration number 3,936,197 (" the '197 Registration" ). Tenza's predecessor in interest, EMC, filed an application for the '197 Registration on October 29, 2008. Tenza bought the rights to the pending application in late 2010 for $30,000. The application recited a date of first use of the " PORNTUBE" word mark of May 2005. After publication in the Official Gazette of the U.S. Patent & Trademark Office (" PTO" ), WMM Holdings, LLC (" WMM" ) filed an objection to the application for the '197 Registration. The objection was dismissed after Tenza entered into a consent and coexistence agreement with WMM. The PTO issued the '197 Registration on March 29, 2011 without further objection.

B. Calista

Calista owns and operates several websites that that " categorize" and link to third-party websites that stream pornographic videos. Calista's sole owner and employee is Alexander Zhukov, a named counterclaim defendant in this action.[3] Several other corporations work with Calista on its websites, including Oklax Inc. (which manages the domain name register accounts for the domain names in dispute in this litigation), Wiblax Ltd. (which serves as a payment agent for Calista), and AlexZ-Traffic s.r.o. (which develops software and templates used on Calista's websites).

Calista's relationship with DreamStar began in September of 2009. DreamStar and Mr. Matthyssen invited Calista to participate in the " webmaster affiliate program" for an adult-entertainment video website called 4tube.com. As an affiliate of the 4tube.com webmaster program, DreamStar paid Calista a commission to send traffic to 4tube.com. In February of 2010, Mr. Matthyssen also asked Calista to

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join the webmaster affiliate program for a new website called fux.com. On January 3, 2011, Mr. Matthyssen asked Calista to join the webmaster affiliate program for www.porntube.com (" Tenza Webmaster Program" ). Calista participated in the Tenza Webmaster Program from January 3, 2011 through March 28, 2013. Calista was one of the most productive affiliates in the Tenza Webmaster Program.

Calista registered a number of domains containing the words " porn," " tube," or " porn" and " tube" in various combinations. Some of these domain names were used as a part of Calista's participation in the 4tube.com webmaster affiliate program, the fux.com webmaster affiliate program, and the Tenza Webmaster Program.

Calista registered its first domain name that included the word " porntube," www.freshporntube.com, in June of 2009. Between that time and before January 2011, Calista owned and operated 15 websites with domain names containing both " porn" and " tube" in various combinations. Between January of 2011 and August of 2013, Calista developed and operated at least an additional 17 domain names containing some permutation of the '197 Registration. In total, Calista has at least 14 domain names that include the '197 Registration verbatim, including: freshporntube.com, goldporntube.com, lustporntube.com, bonusporntube.com, boxporntube.com, directporntube.com, largeporntube.com, pipeporntube.com, bookporntube.com, 69porntube.com, kissporntube.com, royalporntube.com, cubeporntube.com, and goldporntube.xxx. Shayefar Decl. Ex. 15 at 4, Dkt. 98-7 at 27.[4]

C. Dispute Between the Parties

On March 25, 2013, Tenza initiated a proceeding under the Uniform Domain Name Dispute Resolution Policy (" UDRP" ) of the Internet Corporation for Assigned Names and Numbers (" ICANN" ). In that UDRP action, Tenza sought the transfer to Tenza of 13 domain names, which Calista contends it owns, based on their substantial similarity to and alleged infringement of to the '197 Registration. A UDRP arbitration panel ruled in favor of Tenza, and Calista then filed this lawsuit. The filing of this lawsuit prevented the immediate transfer to Tenza of the disputed domain names pursuant to the UDRP panel's decision.

DISCUSSION

A. Evidentiary Disputes

Tenza relies on a survey completed by Donald J. Morgan in support of Tenza's motion for summary judgment. Tenza argues that this survey evidence demonstrates that it has a valid trademark and that there is a likelihood of consumer confusion related to its counterclaim for trademark infringement. Calista argues that consumer surveys are irrelevant in this matter because of the nature of the '197 Registration. Calista also argues that Mr. Morgan's survey results are " irretrievably flawed as to render" them irrelevant and inadmissible under Federal Rules of Evidence 401 or 402. Calista also argues that Mr. Morgan's survey methodologies are inadmissible under Federal Rule of Evidence 702 and Daubert v. Merrell Dow Pharms., Inc., 509 U.S. 579, 113 S.Ct. 2786, 125 L.Ed.2d 469 (1993). In order for the Morgan survey to be admissible, Tenza must show that the survey is both relevant and reliable. Keith v. Volpe, 858 F.2d 467, 480 (9th Cir. 1988).

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1. Relevance

Evidence is relevant if it has any tendency to make a fact of consequence more or less probable than it would be without the evidence. Fed.R.Evid. 401. Calista argues that consumer surveys are only relevant where the trademark at issue is a newly-coined or " fanciful term," or in the context of a descriptive term, to determine if the word has acquired " secondary meaning." See Schwan's IP, LLC v. Kraft Pizza Co., 460 F.3d 971, 975-76 (8th Cir. 2006). The Court, however, looks not only to the component parts of a composite trademark, i.e., by focusing on the words " porn" and " tube" in isolation but, instead, looks at the trademark as a whole. See Official Airline Guides, Inc. v. Goss, 6 F.3d 1385, 1392 (9th Cir. 1993); Abercrombie & Fitch Co. v. Moose Creek, Inc., 486 F.3d 629, 636 (9th Cir. 2007). This is the correct approach because " [c]ombinations of old words to create new phrases can be just as specific product descriptive/nongeneric as new coined words." Berner Int'l Corp. v. Mars Sales Co., 987 F.2d 975, 982 (3d Cir. 1993); see also McCarthy on Trademarks and Unfair Competition § 12:17.50 (4th ed. 2014) (explaining that " [t]o state that consumer perception is irrelevant for a non-coined 'generic' word (like SHELL, or IVORY or HARP) is to assume the result before making an analysis of that which is to be decided" ). Because the combination of the words " porn" and " tube" could have nongeneric meaning to the consuming public, the Court finds that the Morgan survey is relevant because it relates to factual issues of consumer perception.[5] See McCarthy on Trademarks and Unfair Competition § 32:158.

2. Reliability

Survey evidence is only admissible if it was obtained " in accordance with generally accepted survey principles" and " the results were used in a statistically correct manner." Keith, 858 F.2d at 480. Asserted technical inadequacies with a survey, " including the format of the questions or the manner in which it was taken, bear on the weight of the evidence, not its admissibility." Id. If, however, there are substantial design defects in the survey or its execution is defective, then the survey could be excluded. See Harolds Stores, Inc. v. Dillard Dep't Stores, 82 F.3d 1533, 1544 (10th Cir. 1996); Pittsburgh Press Club v. United States, 579 F.2d 751, 759-60 (3d Cir. 1978); accord Keith, 858 F.2d at 480. The Ninth Circuit does not have a standard test to determine when a survey is conducted reliably, but the Handbook of Recommended Procedures for the Trial of Protracted Cases provides a list of important factors, including:

(1) The proper universe was selected and examined;
(2) A representative sample was drawn from that universe;
(3) The mode of questioning the interviewees was correct;
(4) The persons conducting the survey were recognized experts;
(5) The data gathered were accurately reported;
(6) The sample design, the questionnaire and the interviewing were in accordance with generally accepted standards of objective procedure and statistics in the field of such surveys;

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(7) The sample design and the interviews were conducted independently of the attorneys; and,
(8) The interviewers trained in this field had no knowledge of the litigation or the purposes for which the survey was used.

Judicial Conference of the United States, Handbook of Recommended Procedures for the Trial of Protracted Cases, 25 F.R.D. 365, 429 (1960) (" Handbook " ). The more modern Reference Manual on Scientific Evidence (" Reference Manual " ) enumerates similar considerations. See Federal Judicial Center, Reference Manual, Reference Guide on Survey Research 373-76 (3rd ed. 2011).

Calista argues that the Morgan survey is unreliable for three reasons: (1) Mr. Morgan is unfamiliar with the subject matter involved in this case and improperly defined a crucial term; (2) Mr. Morgan made several methodological errors; and (3) the order of the questions in the Morgan survey were leading and rendered portions of the survey meaningless.

a. Morgan's Familiarity

Calista argues that the Morgan survey is unreliable because it was Mr. Morgan's first consumer survey related to the adult-entertainment industry. Because Mr. Morgan had no exposure to the adult-entertainment industry before this litigation, he visited www.porntube.com and a few other adult-entertainment websites. Calista contends that this lack of familiarity led Mr. Morgan improperly to define an " adult streaming video" as a " video that can be viewed in real time." Mr. Morgan explained in his deposition testimony that when he used the phrase " real time" he meant that " what you see on those sites includes video that appears to be live streaming video where someone wants to talk to you." Shayefar Decl. Ex. 59, Morgan Depo. at 123:21-25, Dkt. 114-12 at 47. Mr. Morgan continued: " And so I was trying to define that category of websites that allows the consumer to see this streaming video that they can--I mean, it's real, it's live, in realtime." Id. at 124:1-6. When Calista brought to Mr. Morgan's attention that the definition of " adult streaming video" in this case does not include videos that can be viewed in real time, Mr. Morgan explained " I think that I've defined things accurately, and I think the results are very scientific." Id. at 134:13-17. Calista argues that because neither the disputed domains nor Tenza's website actually display live video or provide an opportunity to interact with performers, Mr. Morgan's definition of " adult streaming video" was erroneous.

Tenza asserts that Mr. Morgan is sufficiently qualified to execute the consumer survey. Tenza, however, did not respond to the issue of Mr. Morgan defining an " adult streaming video" as something that occurs in " real time." This flaw may be sufficient to justify the exclusion of the Morgan survey under Rule 702, however, the Court need not resolve this issue at this time, because even if the Morgan survey were excluded, summary judgment would still be inappropriate.

b. Morgan's Methodology

Calista also challenges the design of the Morgan survey on the basis that Mr. Morgan improperly defined the " 'universe' to be studied" --that is, " that segment of the population whose perceptions and state of mind are relevant to the issues in the case." McCarthy on Trademarks and Unfair Competition § 32:159. In a case claiming " forward" confusion, " the proper universe to survey is the potential buyers of the junior user's goods or services." [6]

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Id. (emphasis in original); see also AMF Inc. v. Sleekcraft Boats, 599 F.2d 341, 353 (9th Cir. 1979) (" In assessing the likelihood of confusion to the public, the standard used by the courts is the typical buyer exercising ordinary caution." ), abrogated in part on other grounds by Mattel Inc. v. Walking Mountain Prods., 353 F.3d 792 (9th Cir. 2003) ; see also Suzanne Bonamici, The Use and Reliability of Survey Evidence in Deceptive Advertising Cases, 62 Or. L. Rev. 561, 596 (1983) (" If the wrong universe has been selected, the survey will provide information about a wholly irrelevant universe." ).

Calista states that the Morgan survey used three qualifications to define the relevant " universe" of participants: a person needed to be 18 years or older, not be employed in the legal profession, and visit an adult-entertainment website four or more times per month. Morgan Depo. at 56:13-61:17. Calista argues that individuals who participate in the adult-entertainment industry should have been excluded. Calista further argues that Mr. Morgan erroneously failed to exclude the 176 respondents who stated they had not visited " adult entertainment streaming websites" in the past three months even after answering the relevant screening question. Id. at 137:16-138:11.

Regarding the proper " universe," Tenza argues that the relevant audience is individuals who visit adult-entertainment websites four or more times per month. Mr. Morgan explained in his deposition testimony that in his judgment, these individuals " were part of the total, the totality of the consumer base, and that their opinions with regards to that would be important." Id. at 57:24-58:7. Although Tenza did not respond to whether individuals in the adult-entertainment industry should have been excluded, the Court concludes that this challenge goes " to the weight of the survey rather than its admissibility." See Fortune Dynamic, Inc. v. Victoria's Secret Stores Brand Mgmt., Inc., 618 F.3d 1025, 1038 (9th Cir. 2010) (quoting Clicks Billiards, 251 F.3d at 1263); see also City of Pomona v. SQM N. Am. Corp., 750 F.3d 1036, 1044 (9th Cir. 2014) (" Shaky but admissible evidence is to be attacked by cross examination, contrary evidence, and attention to the burden of proof, not exclusion." (quoting Daubert, 509 U.S. at 596)). Calista's argument that 176 respondents were erroneously included in the survey results because those individuals had not visited an adult-entertainment website in the last three months is an insufficient basis to exclude the Morgan survey. As Mr. Morgan explains, the fact that someone has not visited such a website in the past three months does not necessarily mean that individual does not generally visit such websites on a regular basis. Morgan Depo. at 139:1-5. Calista's objection goes to the weight that the factfinder should give the evidence, not to its admissibility. See Pomona, 750 F.3d at 1044.

The Court concludes that these potential weaknesses in the defined universe are not sufficient to exclude the survey. Wendt v. Host Int'l, Inc., 125 F.3d 806, 814 (9th Cir. 1997) (" Challenges to survey methodology go to the weight given the survey, not its admissibility" ).

c. Order of Survey Questions

Calista's final challenge to the reliability of the Morgan survey is that immediately

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after asking, " Would you say PORNTUBE is a brand name or a common name," the survey asked " Which of the following are names of adult entertainment streaming video websites of which you have heard?" Shayefar Decl. Ex. 56, Dkt. 114-10 at 73-75. Calista argues that this juxtaposition of questions is guaranteed to inflate the number of respondents who claim to have heard of " PORNTUBE." See McCarthy on Trademarks and Unfair Competition § 32:172 (" A question 'What brand do you think of when you hear this slogan?' was held slanted where previous questions had already mentioned the critical brand name." ) (citing Ralston Purina Co. v. Quaker Oats Co., 169 U.S.P.Q. 508, 1971 WL 16472 (T.T.A.B. 1971)). Tenza ...


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