Case 2:11-cv-01086-DGC Document 34 Filed 09/20/11 Page 1 of 17
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`IN THE UNITED STATES DISTRICT COURT
`FOR THE DISTRICT OF ARIZONA
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`WO
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`No. CV-11-1081-PHX-DGC
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`ORDER
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`AFL Telecommunications LLC,
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`Plaintiff,
`
`vs.
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`Fiberoptic Hardware, LLC; and George
`Kyrias,
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`Defendants.
`AFL Telecommunications LLC is a wholly-owned subsidiary of Fujikura Ltd.,
`a leading manufacturer of fiber optic products. AFL is the exclusive licensee for
`distribution of Fujikura-brand fusion splicers in North America. Fiberoptic Hardware,
`LLC (“FOH”) is a New Hampshire-based reseller of fiber optic equipment. FOH,
`according to AFL, purchases Fujikura splicers intended for use overseas, modifies the
`products, and resells the “gray market” units in the United States.
`
`AFL filed suit against FOH and its principal, George Kyrias, in May 2011. The
`complaint asserts claims for unfair competition and false advertising in violation of the
`Lanham Act, 15 U.S.C. § 1125(a), common law unfair competition, and copyright
`infringement. Doc. 1. Plaintiff seeks injunctive relief and an award of actual, treble, and
`punitive damages. Id.
`
`Plaintiff, pursuant to Rule 65 of the Federal Rules of Civil Procedure, has filed a
`motion for a preliminary injunction. Doc. 6. Defendants have filed a motion to dismiss
`for lack of personal jurisdiction under Rule 12(b)(2) and a motion to dismiss the
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`Case 2:11-cv-01086-DGC Document 34 Filed 09/20/11 Page 2 of 17
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`copyright infringement claim under Rule 12(b)(6). Docs. 19, 20. The motions are fully
`briefed. For reasons stated below, the Court will dismiss the claims asserted against
`Kyrias, dismiss the copyright infringement claim, and enter a preliminary injunction
`against FOH on the Lanham Act claims.1
`I.
`Personal Jurisdiction.
`
`In opposing a Rule 12(b)(2) motion, the plaintiff bears the burden of establishing
`that the exercise of personal jurisdiction is proper. Brayton Purcell LLP v. Recordon
`& Recordon, 606 F.3d 1124, 1127 (9th Cir. 2010). Where, as here, the motion will be
`resolved before discovery has been conducted and without an evidentiary hearing, the
`plaintiff need only make a prima facie showing of jurisdictional facts to withstand the
`motion, that is, the plaintiff “need only demonstrate facts that if true would support
`jurisdiction over the defendant.” Bauman v. DaimlerChrysler Corp., 644 F.3d 909,
`919 (9th Cir. 2011) (quoting Ballard v. Savage, 65 F.3d 1495, 1498 (9th Cir. 1995);
`emphasis in original). In deciding whether this burden has been met, “the uncontroverted
`allegations of [the] complaint must be taken as true, and conflicts between the facts
`contained in the parties’ affidavits must be resolved in [the plaintiff’s] favor.” Rio
`Properties, Inc. v. Rio Int’l Interlink, 284 F.3d 1007, 1019 (9th Cir. 2002).
`
`The complaint contains no factual allegations, Defendants contend, showing that
`they have the requisite minimum contacts with Arizona to support the exercise of
`jurisdiction over them. Docs. 19, 29. Plaintiff argues that Defendants’ contacts with
`Arizona are sufficient to subject each of them to general jurisdiction and specific
`jurisdiction in Arizona. Doc. 27.
`A.
`FOH.
`
`
`A court may, consistent with principles of constitutional due process, exercise
`general jurisdiction over a non-forum defendant as to any cause of action where the
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`1 The requests for oral argument are denied because the issues have been fully
`briefed and oral argument will not aid the Court’s decision. See Fed. R. Civ. P. 78(b);
`Partridge v. Reich, 141 F.3d 920, 926 (9th Cir. 1998).
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`Case 2:11-cv-01086-DGC Document 34 Filed 09/20/11 Page 3 of 17
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`defendant has certain minimum contacts with the forum state, that is, where the
`defendant’s activities in the forum state are substantial or continuous and systematic
`“such that the maintenance of the suit does not offend ‘traditional notions of fair play and
`substantial justice.’” Int’l Shoe Co. v. Washington, 326 U.S. 310, 316 (1945) (citation
`omitted); see also Perkins v. Benguet Consol. Mining Co., 342 U.S. 437, 444-47 (1952);
`Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 415-16 (1984). This
`standard is met where “the defendant’s contacts [are] of the sort that approximate
`physical presence.” Bancroft & Masters, Inc. v. Augusta Nat’l Inc., 223 F.3d 1082, 1086
`(9th Cir. 2000).
`
`Plaintiff has made a prima facie showing of general jurisdiction over FOH.
`Arizona is home to one of the two sales and service centers FOH operates. Doc. 6-2
`at 14. The company has contracted with two sales representatives in Arizona – one in
`May 2010 and the other in July 2010 (Doc. 21 at 34, 40) – and has leased office space in
`Arizona for at least eight months (id. at 4). Resolving factual disputes in favor of
`Plaintiff, as the Court must on the instant motion, see Pebble Beach Co. v. Caddy, 453
`F.3d 1151, 1154 (9th Cir. 2006), the Court finds that FOH not only has contacts that
`approximate physical presence in Arizona, it has a physical presence here. Stated
`differently, FOH has substantially more than a mere “casual presence” in Arizona and has
`engaged in more than “single or isolated items of activities in [the] state[.]” Int’l Shoe,
`326 U.S. at 317.
`
`It is worth noting that the claims asserted against FOH do not arise from “dealings
`entirely distinct” from its contacts with Arizona. Tuazon v. R.J. Reynolds Tobacco Co.,
`433 F.3d 1163, 1169 (9th Cir. 2006). Rather, selling fiber optic equipment – including
`the fusion splicers at issue here – is FOH’s “core business.” Id.
`FOH cites In re Rationis Enterprises, Inc., 261 F.3d 264 (2d Cir. 2001), for the
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`proposition that the existence of a sales office in the forum state does not automatically
`confer general jurisdiction. Doc. 19 at 5. FOH claims that it has sold no Fujikura splicer
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`Case 2:11-cv-01086-DGC Document 34 Filed 09/20/11 Page 4 of 17
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`in Arizona, but the company offers for sale many fiber optic products other than Fujikura
`splicers at its Arizona facility, and the company’s website makes clear that there are
`certified technicians at that facility who provide fiber optic repair, cleaning, and
`calibration services. Doc. 6-2 at 6-7; http://fiberoptichardware. com (last visited Sept. 9,
`2011). FOH does not assert that it has sold or serviced no product in Arizona. Plaintiff
`alleges that FOH has sold and otherwise directed the sale of fusion splicers and other
`fiber optic equipment from Arizona. Doc. 1 ¶¶ 3, 7. Accepting those uncontroverted
`factual allegations as true, it is clear that the Court may exercise general jurisdiction over
`FOH consistent with principles of constitutional due process and Arizona’s long-arm
`statute, Ariz. R. Civ. P. 4.2(a). See Batton v. Tenn. Farmers Mut. Ins. Co., 736 P.2d 2, 4
`(Ariz. 1987) (Arizona’s long-arm statute is coextensive with the permissible limits of
`federal due process); Doe v. Am. Nat’l Red Cross, 112 F.3d 1048, 1050 (9th Cir. 1997)
`(same).
`FOH’s reliance on Coastal Video Communications Corp. v. Staywell Corp., 59 F.
`
`Supp. 2d 562 (E.D. Va. 1999), is misplaced. Docs. 19 at 5, 29 at 3. Noting that
`information relevant to the amount of sales generated in the forum state was uniquely
`within the defendant’s control, the district court in Coastal Video declined to dismiss for
`lack of general jurisdiction pending further discovery by the plaintiff. 59 F. Supp. 2d
`at 572. Coastal Video does not support dismissal of the claims asserted against FOH.
`
`Because Plaintiff has demonstrated minimum contacts with Arizona sufficient
`to confer general jurisdiction over FOH, the burden shifts to FOH to present a
`“compelling case” that the exercise of jurisdiction would, in fact, be unreasonable.
`Burger King Corp. v. Rudzewicz, 471 U.S. 462, 477 (1985). The reasonableness
`determination considers five factors: (1) the burden on the defendant, (2) the forum
`state’s interest in the dispute, (3) the importance of the chosen forum to the plaintiff,
`(4) the most efficient forum for resolution of the dispute, and (5) the shared interest of the
`states in furthering fundamental social policy. Doc. 19 at 6-7; Asahi Metal Indus. Co. v.
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`Case 2:11-cv-01086-DGC Document 34 Filed 09/20/11 Page 5 of 17
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`Super. Ct. of Cal., 480 U.S. 102, 113 (1987). Balancing these factors, the Court
`concludes that FOH “has failed to meet its burden of demonstrating a compelling case of
`unreasonable jurisdiction.” Tuazon, 433 F.3d at 1175.
`
`FOH operates a facility in Arizona and has engaged Arizona counsel. Given
`modern advances in technology and communications, and the availability of electronic
`case filing, the burden on FOH from litigating this action in Arizona is not a heavy one.
`See Centrifugal Force, Inc. v. Softnet Communication, Inc., No. 08 Civ. 5463 (CM)
`(GWG), 2009 WL 1059647, at *8 (S.D.N.Y Apr. 17, 2009); Roaring Fork Capital SBIC,
`L.P. v. ATC Healthcare, Inc., No. 10-cv-00338-MSK-CBS, 2011 WL 1258504, at *7-8
`(D. Colo. Mar. 29, 2011). While Arizona may not have a strong interest in the dispute, it
`serves as an efficient forum for resolving the dispute given the presence of evidence and
`witnesses in the State. Plaintiff’s choice of forum cannot be said to be arbitrary or
`otherwise unimportant given that Arizona is one of only two states in which FOH
`conducts operations and FOH is alleged to have sold infringing goods to an Arizona
`company. The fifth factor, that is, the shared interest of the states in furthering
`fundamental social policy, does not appear to be relevant.
`
`When compared with the burden on Plaintiff, FOH asserts, the burden on FOH to
`defend this lawsuit in Arizona is “significant.” Doc. 19 at 7. This bald assertion does not
`satisfy FOH’s “heavy burden of rebutting the strong presumption in favor of
`jurisdiction.” Ballard, 65 F.3d at 1500. Stated differently, FOH has failed to show that
`the relevant factors “are so lopsided in [its] favor as to render the exercise of jurisdiction
`contrary to ‘fair play and substantial justice.’” Unicru, Inc. v. Brenner, No. Civ. 04-248-
`MO, 2004 WL 785276, at *11 (D. Or. Apr. 13, 2004).
`
`In summary, Plaintiff has made the requisite prima facie showing of general
`jurisdiction over FOH, and FOH has not established that the exercise of personal
`jurisdiction will violate principles of due process. The Court will deny the motion to
`dismiss in this regard. Given this ruling, the Court need not decide whether it has
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`Case 2:11-cv-01086-DGC Document 34 Filed 09/20/11 Page 6 of 17
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`specific jurisdiction over FOH.
`B.
`Kyrias.
`
`
`Personal jurisdiction over individual corporate officers may not be based on
`jurisdiction over the corporation itself, see Davis v. Metro Prods., Inc., 885 F.2d 515, 522
`(9th Cir. 1989), but their status as corporate officers “does not somehow insulate them
`from jurisdiction.” Calder v. Jones, 465 U.S. 783, 790 (1984). “Each defendant’s
`contacts with the forum state must be assessed individually.” Id. The relevant inquiry is
`whether, given the corporate officer’s own contacts with the forum state, he should
`“reasonably anticipate being haled into court there.” World-Wide Volkswagen Corp. v.
`Woodson, 444 U.S. 286, 297 (1980).
`
`Plaintiff has identified only two contacts with Arizona on the part of Kyrias: one
`phone call and one email to an Arizona company. These isolated contacts are insufficient
`to approximate “physical presence” in Arizona. Bancroft, 223 F.3d at 1086. Plaintiff has
`made no showing, prima facie or otherwise, of general jurisdiction over Kyrias. See
`Gates v. Learjet Corp. v. Jensen, 743 F.2d 1325, 1330-31 (9th Cir. 1984) (no general
`jurisdiction over corporate officer despite his communications with, visits to, and
`solicitation of a contract in the forum).
`Under this Circuit’s three-part test, specific jurisdiction exists only where (1) the
`
`defendant performed some act by which he purposefully availed himself of the privileges
`of conducting activities in the forum, thereby invoking the benefits and protections of its
`laws, or purposefully directed tortious conduct at the forum that had effects in the forum,
`(2) the plaintiff would not have filed suit “but for” the defendant’s forum-related
`activities, and (3) the exercise of jurisdiction would be reasonable. Bancroft, 223 F.3d at
`1086-88; see also Calder, 465 U.S. at 789-90; J. McIntyre Mach., Ltd. v. Nicastro, ---
`U.S. ----, 131 S. Ct. 2780, 2787-88 (2011).
`
`With respect to the first part of the specific jurisdiction test, Plaintiff has presented
`insufficient facts to establish purposeful availment or purposeful direction on the part of
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`Case 2:11-cv-01086-DGC Document 34 Filed 09/20/11 Page 7 of 17
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`Kyrias. “A defendant has purposely availed himself of the benefits of a forum if he has
`deliberately ‘engaged in significant activities within a State or has created continuing
`obligations between himself and the residents of the forum.’” Gray & Co. v. Firstenberg
`Mach. Co., 913 F.2d 758, 760 (9th Cir. 1990) (quoting Burger King, 471 U.S. at 475-76).
`Purposeful direction cannot be found where the defendant has engaged in “mere
`untargeted negligence”; instead, the defendant must be found to have committed an
`intentional tortious act “expressly aimed” at the forum. Calder, 465 U.S. at 789; see
`Yahoo! Inc. v. La Ligue Contre Le Racisme Et L’Antisemitisme, 433 F.3d 1199, 1206-07
`(9th Cir. 2006).
`
`FOH sold several Fujikura splicers to an Arizona company, Sana Trading and
`Services (“Sana”), but Kyrias did not reach out to Sana to make the sale. Instead, Sana’s
`chief operating officer, Taiby Sabuwala, contacted FOH and received a written quotation
`from sales person Anna Bakker. Doc. 6-10 at 2, 22-23. Mr. Sabuwala’s initial contact
`with FOH is irrelevant to the question whether Kyrias purposefully availed himself of the
`benefits of the forum. In order “‘to ensure that the defendant is not haled into court as the
`result of random, fortuitous, or attenuated contacts,’” the purposeful availment inquiry
`focuses not on the conduct of third-parties, but on the defendant’s own affirmative
`conduct. Gray, 913 F.2d at 760 (citation omitted).
`
`While Kyrias had a telephone conversation with Mr. Sabuwala about the fusion
`splicers (Doc. 21-1 at 7) and sent him an email offering to accept their return and resell
`them on a consignment basis (Doc. 6-10 at 3), these limited contacts are not sufficient to
`show purposeful availment on the part of Kyrias. It cannot fairly be said that he engaged
`in “significant activities” within Arizona or otherwise created “continuing obligations”
`with forum residents such that he invoked the benefits and protections of the State’s laws.
`Gray, 913 F.2d at 760. This Circuit has made clear that use of the telephone and email
`“‘simply do[es] not qualify as purposeful activity invoking the benefits and protection of
`the forum state.’” Peterson v. Kennedy, 771 F.2d 1244, 1262 (9th Cir. 1985) (citations
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`Case 2:11-cv-01086-DGC Document 34 Filed 09/20/11 Page 8 of 17
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`omitted). In short, Kyrias’ “attenuated contacts” with Arizona are legally insufficient to
`establish purposeful availment. Gray, 913 F.2d at 761; see Peterson v. Kennedy, 771
`F.2d at 1262; Lake v. Lake, 817 F.2d 1416, 1421 (9th Cir. 1987) (noting that the first
`prong of the specific jurisdiction test involves a “qualitative evaluation” of the
`defendant’s contacts with the forum).
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`Nor are the contacts sufficient to establish purposeful direction. No evidence
`suggests that Kyrias targeted Sana or Mr. Sabuwala for tortious activity or otherwise
`engaged in wrongful conduct “expressly aimed” at Arizona. Bancroft, 223 F.3d at 1087.
`Sana and Mr. Sabuwala have asserted no intentional tort claim against Kyrias, and no
`such claim is apparent from a review of Mr. Sabuwala’s declaration. Doc. 6-10 at 2-5.
`
`In summary, Plaintiff has failed to make a prima facie showing of purposeful
`availment or purposeful direction on the part of Kyrias. Nor has Plaintiff shown, or even
`argued, that but for Kyrias’ contacts with Arizona, Plaintiff would not have filed suit.
`Because Plaintiff has failed to satisfy the first two prongs of the specific jurisdiction test,
`Kyrias need not show that the exercise of jurisdiction over him would be unreasonable.
`See Peterson, 771 F.2d at 1261 (each of the three prongs of the specific jurisdiction test
`must be met to exercise personal jurisdiction over a non-resident defendant). The claims
`asserted against Kyrias will be dismissed for lack of personal jurisdiction.
`II.
`The Copyright Infringement Claim.
`
`Plaintiff purports to assert a copyright infringement claim in count four of the
`complaint. Doc. 1 ¶¶ 67-71. FOH, pursuant to Rule 12(b)(6), has filed a motion to
`dismiss count four for failure to state a claim to relief. Doc. 20. Plaintiff opposes the
`motion. Doc. 23.
`
`When analyzing a complaint for failure to state a claim to relief, the well-pled
`factual allegations “‘are taken as true and construed in the light most favorable to the
`nonmoving party.’” Cousins v. Lockyer, 568 F.3d 1063, 1067 (9th Cir. 2009) (citation
`omitted). Legal conclusions couched as factual allegations “are not entitled to the
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`Case 2:11-cv-01086-DGC Document 34 Filed 09/20/11 Page 9 of 17
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`assumption of truth,” Ashcroft v. Iqbal, 129 S. Ct. 1937, 1950 (2009), and therefore are
`“‘insufficient to defeat a motion to dismiss for failure to state a claim,’” In re Cutera Sec.
`Litig., 610 F.3d 1103, 1108 (9th Cir. 2010) (citation omitted). To avoid a Rule 12(b)(6)
`dismissal, and satisfy the pleading requirements of Rule 8(a), the pleading must contain
`“enough facts to state a claim to relief that is plausible on its face.” Bell Atl. Corp. v.
`Twombly, 550 U.S. 544, 570 (2007).
`
`To establish a claim for copyright infringement, the plaintiff must demonstrate
`valid ownership in a copyright and violation of an exclusive right granted to copyright
`holders. 17 U.S.C. §§ 106, 501; A&M Records, Inc. v. Napster, Inc., 239 F.3d 1004,
`1013 (9th Cir. 2001). With respect to the first element, the plaintiff must establish
`ownership of something original and copyrightable. A work is original where it has been
`independently created by the author (as opposed to copied from other works) and
`possesses at least some degree of creativity. Feist Publ’ns, Inc. v. Rural Tele. Serv. Co.,
`499 U.S. 340, 346 (1991).
`
`FOH argues, among other things, that the complaint fails to plead sufficient facts
`about copyright ownership to state a plausible claim to relief. Doc. 20 at 3, 21 at 7. The
`Court agrees.
`
`The complaint alleges generally that certain fusion splicers sold by FOH are
`“operated in part by copyrighted software owned by Fujikura” (Doc. 1 ¶ 28), but the
`alleged copyrighted software is not otherwise described. The complaint further alleges,
`“[u]pon information and belief,” that Fujikura is the owner of the purported copyright in
`the software “as a work made for hire or otherwise.” Id. ¶ 68.
`
`Those bare allegations of copyright ownership do “no more than ask the Court to
`infer the possibility of misconduct by Defendants.” Curington v. UMG Recordings, Inc.,
`No. 1:10-cv-890, 2011 WL 3568278, at *3 (M.D.N.C. Aug. 12, 2011). Because the
`complaint’s factual allegations do not possess enough “heft” to raise a right to relief
`above the speculative level, Twombly, 550 U.S. at 557, the complaint “has alleged – but it
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`Case 2:11-cv-01086-DGC Document 34 Filed 09/20/11 Page 10 of 17
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`has not ‘shown’ – ‘that [Plaintiff] is entitled to relief’” for copyright infringement, Iqbal,
`129 S. Ct. at 1950. FOH notes, correctly, that this is not a case where the facts necessary
`to state a valid claim to relief are in the defendant’s sole possession. Doc. 20 at 3; see
`Strand v. John C. Lincoln Health Network, Inc., No. CV-10-02112-PHX-NVW, 2011
`WL 1253408, at *3 (D. Ariz. Mar. 31, 2011). The motion to dismiss the copyright
`infringement claim (count four) will be granted. See Curington, 2011 WL 3568278,
`at *4; Universal Surface Tech., Inc. v. Sae-A Trading Am. Corp., No. CV 10-6972 (CAS)
`(PJWx), 2011 WL 281020, at *6 (C.D. Cal. Jan. 26, 2011) (dismissing copyright claim
`where the complaint contained “‘nothing more than labels and conclusions, and
`a formulaic recitation of the elements of a cause of action’”) (quoting Twombly, 550 U.S.
`at 555).
`III. Preliminary Injunctive Relief.
`
`Plaintiff seeks a preliminary injunction with respect to the Lanham Act claims
`asserted in counts one and two and the copyright infringement claim asserted in count
`four. Doc. 6. To obtain preliminary injunctive relief under Rule 65, Plaintiff must show
`that it is likely to succeed on the merits, that it is likely to suffer irreparable harm in the
`absence of preliminary relief, that the balance of equities tips in its favor, and that an
`injunction is in the public interest. Winter v. Natural Res. Def. Council, 555 U.S. 7, 20
`(2008). The test includes a sliding scale. If Plaintiff shows that the balance of hardships
`will tip sharply in its favor, it need not make as strong a showing of the likelihood of
`success on the merits – the existence of serious questions will suffice. Alliance for Wild
`Rockies v. Cottrell, 632 F.3d 1127, 1134-35 (9th Cir. 2011).
`
`Because the complaint fails to state a claim to relief for copyright infringement,
`Plaintiff has not demonstrated a likelihood of success or serious questions with respect to
`that claim. The motion for a preliminary injunction will be denied in this regard. See
`Davila v. BAC Home Loans Servicing, LP, No. 2:10-cv-02252-ECR-GWF, 2011 WL
`3159146, at *2 (D. Nev. July 26, 2011) (denying request for a preliminary injunction
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`Case 2:11-cv-01086-DGC Document 34 Filed 09/20/11 Page 11 of 17
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`where the complaint failed to state a claim to relief).
`A.
`The Balance of Hardships and the Public Interest.
`
`
`With respect to the Lanham Act claims, the third and fourth elements of the test
`for preliminary injunctive relief have been satisfied. Plaintiff argues (Doc. 6 at 16), and
`FOH does not dispute, that “the public interest is usually the right of the public not to be
`deceived or confused.” Century 21 Real Estate LLC v. All Prof’l Realty, Inc., No. CIV.
`2:10-2751, 2011 WL 221651, at *13 (E.D. Cal. Jan. 24, 2011). Nor does FOH dispute
`that the balance of equities tips strongly in Plaintiff’s favor. See Doc. 6 at 15-16. To
`obtain a preliminary injunction, therefore, Plaintiff need only show that the Lanham Act
`claims raise serious questions and that it is likely to suffer irreparable harm in the absence
`of preliminary relief. Alliance for Wild Rockies, 632 F.3d at 1134-35.2
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`B.
`Serious Questions.
`
`Plaintiff brings two claims against FOH under Section 43 of the Lanham Act. The
`first alleges unfair competition in violation of 15 U.S.C. § 1125(a)(1)(A), and the second
`alleges false advertising in violation 15 U.S.C. § 1125(a)(1)(B). Doc. 1 ¶¶ 46-63.
`To prevail on the claim for unfair competition, Plaintiff must show that use of
`the “Fujikura” mark by FOH is likely to cause consumer confusion. In the context of
`“gray market” goods – that is, foreign-manufactured goods bearing a valid United States
`trademark that are imported without the consent of the mark holder – “the likelihood of
`confusion relates to the existence of material differences between the allegedly infringing
`good and the [mark holder’s] product.” Hokto Kinoko Co. v. Concord Farms, Inc., No.
`
`2 Contrary to FOH’s assertion (Doc. 21 at 5-6 & n.2), Plaintiff need not
`demonstrate a “strong” or “high” likelihood of success on the merits. Under pre-Winter
`Ninth Circuit precedent, a preliminary injunction could issue “based only on the
`‘possibility’ of irreparable harm” where the plaintiff also demonstrated a “strong”
`likelihood of prevailing on the merits. Winter, 555 U.S. at 21. Because, after Winter, a
`plaintiff seeking preliminary relief must demonstrate that irreparable harm is “likely,” not
`merely possible, the plaintiff need not also demonstrate a strong likelihood of success.
`555 U.S. at 21; see Hagos v. MTC Fin., Inc., No. 11-cv-01272-GMN-RJJ, 2011 WL
`3471153, at *2 (D. Nev. Aug. 8, 2011) (Alliance makes clear that “the ‘serious questions’
`version of the sliding scale test for preliminary injunctions remains viable after the
`Supreme Court’s decision in Winter”).
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`Case 2:11-cv-01086-DGC Document 34 Filed 09/20/11 Page 12 of 17
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`CV 10-1384 RSWL (PLAx), 2011 WL 3625382, at *5 (C.D. Cal. 2011); see K Mart
`Corp. v. Cartier, Inc., 486 U.S. 281, 285 (1988). Although gray market goods “are
`authentic in the sense that they originated with the mark owner, they are not considered
`‘genuine’ with the meaning of the Lanham Act if they are not authorized for sale in the
`United States and they differ materially from those that are.” Zip Int’l Group, LLC v.
`Trilini Imports, Inc., No. 99-CV-2437 (JG)(VVP), 2010 WL 648696, at *3 (E.D.N.Y.
`Feb. 22, 2010). “The sale of such goods is actionable by the exclusive United States
`licensee not because consumers may be confused about the manufacturer of the goods,
`but because consumers may unwittingly purchase the goods on the basis of the domestic
`markholder’s reputation only to be disappointed when the product does not meet their
`expectations.” Id.
`Plaintiff has identified a confused and disappointed consumer of the alleged gray
`market goods: the Minnesota Air National Guard (the “ANG”). The four Fujikura-brand
`fusion splicers FOH sold to Sana were to be used by the ANG. Doc. 6-10 at 2-5, 31.
`Each splicer initially was shipped by Fujikura to China and licensed for use only in that
`country. Doc. 6-8 at 13-27. FOH purchased the splicers, resold them to Sana, and
`shipped them to the ANG at Sana’s direction. Doc. 6-10 at 3, 31. Less than a month
`after receiving one of the Fujikura splicers from FOH, the ANG had concerns about an
`error message on the unit’s startup screen stating that the unit is “licensed for use only in
`Europe.” Docs. 6-9 at 2, 6-10 at 36. Although pressing an “agree” button would make
`the message disappear, the ANG worried that the unit “may not be configured properly
`for U.S. use.” Doc. 6-10 at 35. The ANG also had concerns about a label FOH had
`placed on the unit warning the operator not to update the unit’s software using Fujikura’s
`website, but instead to return the unit to FOH. Because National Guard personnel would
`need to be able to update the software in the field, the ANG rightly wondered, “Why
`would connecting the unit to Fujikura’s website damage it?” Id. ANG was not satisfied
`with the fusion splicers and ultimately shipped them to Plaintiff. Docs. 6-9 at 2, 6-10
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`Case 2:11-cv-01086-DGC Document 34 Filed 09/20/11 Page 13 of 17
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`at 4.
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`The sale of gray market products under the same trademark as the authorized
`products is likely to cause consumer confusion, and thereby run afoul of Section 43 of the
`Lanham Act, where the gray market products differ materially from the authorized
`products. See PepsiCo, Inc. v. Reyes, 70 F. Supp. 2d 1057, 1059 (C.D. Cal. 1999). “The
`threshold of materiality ‘is always quite low.’” Id. (quoting Societe Des Produits Nestle,
`S.A. v. Casa Helvetia, Inc., 982 F.2d 633, 641 (1st Cir. 1992)). “‘The existence of any
`difference between [the trademark owner’s] product and the allegedly infringing gray
`good that consumers would likely consider to be relevant when purchasing a product
`creates a presumption of consumer confusion sufficient to support a Lanham Trade Mark
`Act claim.’” Id.; see Beltronics USA, Inc. v. Midwest Inventory Distribution, LLC, 562
`F.3d 1067, 1073 (10th Cir. 2009) (because many factors influence a consumer’s decision
`to purchase a product, the materiality standard “‘must be kept low to include even subtle
`differences between products’”) (citation omitted).
`Given the alterations FOH made to the Fujikura-brand fusions splicers resold to
`Sana, see Doc. 6-8 at 13-17, and the ANG’s confusion about those alterations and
`dissatisfaction with the products, see Doc. 6-10 at 35-36, serious questions exist as to
`whether there are material differences between the domestic fusion splicers distributed by
`Plaintiff (Fujikura’s exclusive licensee) and the gray market goods resold by FOH. See
`PepsiCo, 70 F. Supp. 2d at 1059 (labeling and language differences were “material and
`demonstrate that there is a likelihood of confusion and deception concerning the nature
`and origin of the goods”); Hokto Kinoko, 2011 WL 3625382, at *7 (material differences
`can relate to a product’s labeling and quality control standards); Idaho Potato Comm’n v.
`G & T Terminal Packaging, Inc., 425 F.3d 708, 721 (9th Cir. 2005) (“many cases have
`found a likelihood of confusion when a trademark owner was prevented from exercising
`quality control over the merchandise bearing its mark”). Stated differently, Plaintiff has
`presented evidence suggesting that the Fujikura-brand fusion splicers FOH resells “are
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`not ‘genuine’ within the meaning of the Lanham Act and that consumers are therefore
`likely to be confused or deceived about the ‘sponsorship’ and ‘characteristics’ of the
`[splicers].” Zip, 2010 WL 648696, at *4; see Beltronics, 562 F.3d at 1072 (a material
`different product “is not genuine and may generate consumer confusion about the source
`and the quality of the trademarked product”). In short, Plaintiff has demonstrated the
`existence of serious questions – that is, “a fair chance of success on the merits” – with
`respect to its Lanham Act claim for unfair competition, 43 U.S.C. § 1125(a)(1)(A).
`Republic of the Philippines v. Marcos, 862 F.2d 1355, 1362 (9th Cir. 1988).
`Plaintiff also has raised serious questions concerning its false advertising claim.
`Section 43 of the Lanham Act, 43 U.S.C. § 1125(a)(1)(B), “explicitly furnishes a private
`right of action ‘against persons who make false and deceptive statements in a commercial
`advertisement[.]’” PhotoMedex, Inc. v. Irwin, 601 F.3d 919, 923 (9th Cir. 2010) (citation
`omitted). Plaintiff has presented evidence showing that FOH offers for sale on eBay
`“new” Fujikura-brand fusion splicers. Docs. 6-4 at 5, 6-5 at 4. The condition “new” – as
`opposed to “used” and “refurbished” items – is defined on eBay as a “brand-new, unused,
`unopened, undamaged item in its original packaging[.]” Doc. 6-6 at 2. As explained
`more fully above, Plaintiff has presented evidence suggesting that FOH makes material
`alterations to the Fujikura splicers before reselling them. FOH itself admits that the