Case 2:16-cv-01235-DB Document 38 Filed 06/15/17 Page 1 of 7
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`\\IN l r.:. I~ 3: 08
`IN THE UNITED STATES COURT FOR THE DIS~RfCT OP UTAH
`OISTHICT OF UT.1\H
`CENTRAL DIVISION
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`'11)\1
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`CRAFT SMITH, LLC, a California limited
`liability company,
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`Plaintiff,
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`v.
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`MEMORANDUM DECISION AND
`ORDER
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`EC DESIGN, LLC, a California limited
`liability company,
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`Case No. 2:16-cv-1235-DB
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`Defendant.
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`· Judge Dee Benson
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`Before the Court is Defendant EC Design's Motion to Dismiss or, in the Alternative, to
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`Transfer Action [Dkt. 16]. The motion has been fully briefed and a hearing was held before the
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`Court on May 22, 2017. Plaintiff, Craft Smith, was represented by R. Parrish Freeman. EC
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`Design was represented by Michael Erickson and Seth Gold. Based on the parties' oral and
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`written arguments as well as the relevant facts and the law, the Court enters the following Order.
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`BACKGROUND
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`Craft Smith is a company that designs and produces hobby and craft supplies such as
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`patterned paper, cards and envelopes, planners, calendars, party decor, ribbons, and stickers.
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`Case 2:16-cv-01235-DB Document 38 Filed 06/15/17 Page 2 of 7
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`Craft Smith is a California limited liability company with its principle place of business in
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`California, although its product design and development teams are based in Utah. Craft Smith
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`has 28 full-time employees and 3 part-time or contract employees. Ten are located in Utah, 16 in
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`California, three in Texas and one in Alabama.
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`EC Design also designs and produces crafts, stationery and hobby goods that are sold
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`online and in retail stores throughout the nation. It is a California limited liability company with
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`its principle place of business in California.
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`The dispute between these two companies began when EC Design learned that Craft
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`Smith was selling and promoting products that EC Design believes infringe its intellectual
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`property rights.
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`According to EC Design, in 2007 it designed and created its product known as the
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`LifePlanner personal organizer. The LifePlanner is a spiraled book that contains a yearly
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`calendar with a unique combination of designs, layouts, quotes, colors and other elements.
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`In 2015, executives at Craft Smith and EC Design discussed the possibility of engaging in
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`a business relationship to manufacture LifePlanners and other products. Following meetings and
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`negotiations, a partnership failed to materialize. In October, 2016, Craft Smith began marketing
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`its own collection of personal organizers.
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`On November 29, 2016, counsel for EC Design sent a cease and desist letter to Craft
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`Smith accusing it of infringing the LifePlanner' s trade dress and copyrights. Craft Smith did not
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`respond to the letter. Rather, on December 8, 2016, Craft Smith filed the complaint in this action
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`seeking declaratory judgment of non-infringement.
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`Case 2:16-cv-01235-DB Document 38 Filed 06/15/17 Page 3 of 7
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`On January 6, 2017, before the complaint was served on EC Design, EC Design filed a
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`complaint in the Central District of California alleging Lanham Act violations, copyright
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`infringement and California unfair competition claims against Craft Smith and its retail partner,
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`Michaels, Inc. EC Design served Craft Smith with the complaint on January 8, 2017. Two
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`weeks later, on January 25, 2017, Craft Smith served EC Design with its complaint in this action.
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`EC Design moves the Court to dismiss this action under Federal Rules of Civil Procedure
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`12(b)(l) and (3) and 28 U.S.C. § 220l(a), as an improper anticipatory action. Alternatively, EC
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`Design requests that the Court transfer this action to the Central District of California for the
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`convenience of the parties and witnesses and in the interests of justice pursuant to 28 U.S.C. §
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`1404(a).
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`ANALYSIS
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`I. Dismissal
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`EC Design seeks dismissal of this action under the Wilton/Brillhar abstention doctrine
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`which provides that district courts have discretion to decline jurisdiction over claims brought
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`under the Federal Declaratory Judgment Act. 28 U.S.C.§ § 2201, 2202; Wilton v. Seven Falls
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`Co., 515 U.S. 277, 287 (1995); Harpin v . .Oakley Custom Homes, Inc., 232 F.3d 901 (10111 Cir.
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`2000). District courts consider a number of factors in determining whether to hear declaratory
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`judgment suits. Surefoot LC v. Sure Foot Corp., 531 F.3d 1236, 1248 (10111 Cir. 2008). Those
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`factors include:
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`[1] whether a declaratory action would settle the controversy; [2] whether it
`would serve a useful purpose in clarifying the legal relations at issue;
`[3] whether the declaratory remedy is being used merely for the purpose
`of 'procedural fencing' or to ' provide an arena for a race to res judicata';
`[ 4] whether use of a declaratory action would increase friction between our federal
`and state courts and improperly encroach upon state jurisdiction; and [ 5] whether
`there is an alternative remedy with is better or more effective.
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`Surefoot, 531 F.3d at 1248 (quoting State Farm Fire & Cas. Co. v. Mhoon, 31F.3d979, 983
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`(10111 Cir. 1994)). EC Design argues that these factorf) weigh in favor of dismissal. It contends
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`that analysis of the third Mhoon factor alone mandates dismissal. EC Design alleges that Craft
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`Smith filed this action as procedural fencing, to gain an improper procedural advantage. The
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`Court finds that Craft Smith's commencement of this action was not an improper anticipatory
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`action. Rather, it was in response to the bombastic demand letter it received from EC Design's
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`attorney. While EC Design attempts to characterize its cease and desist letter as a "good-faith
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`effort to discuss settlement," the Court disagrees. The letter did not, as EC Design asserts,
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`express "a willingness to discuss a settlement without legal action" or reference "various options
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`for legal recourse." Rather, the letter outlines that the only way for Craft Smith to avoid a federal
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`court lawsuit is to immediately: (1) stop selling and advertising the allegedly infringing planners;
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`(2) notify distributors to return any allegedly infringing planners in stock; and (3) provide a
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`"detailed accounting" and "sign a declaration attesting to the accounting." It states, "[w ]e require
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`your agreement to comply with the above provisions by December 6, 2016," which was seven
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`days from the date of the letter. In response, Craft Smith filed this action seeking judgment of
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`non-infringement. It contends it selected Utah because the company's founders lived in Utah
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`until recently and because the company has as much of a presence in Utah as it does in
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`California.
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`With regard to the first two Mhoon factors, the Court agrees with Craft Smith that this
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`declaratory action would settle the controversy between the parties and therefore clarify the legal
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`relations at issue. While the lawsuit by EC Design includes California state law claims for
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`common law and statutory unfair competition, both rest on the federal copyright and trade dress
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`claims. They are either preempted or detennined by the outcome of the federal claims. See
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`Kodadekv. MTV Networks, Inc., 152 F.3d 1209, 1212-1213 (9th Cir. 1998) (federal copyright law
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`preempts California state unfair competition claims where based on rights granted by the
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`Copyright Act); Cleary v. News Corp., 30 F.3d 1255, 1262-63 (9th Cir. 1994) (where Lanham Act
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`claim fails, so do California common law and statutory unfair competition claims; there is no
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`separate analysis). Additionally, the presence of Michaels, Inc., as a defendant in the California
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`action does not change this conclusion because Michaels, Inc. has agreed that if the case remains
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`in this Court, it will not contest venue or personal jurisdiction should EC Design attempt to add it
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`as a defendant. [Dkt. 19-5].
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`Finally, with regard to the last two Mhoon factors, the Court finds that this action does
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`not encroach on state jurisdiction and there is not a better or more effective alternative remedy.
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`Having considered the factors in Mhoon, the Court denies EC Design's motion to dismiss
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`this action.
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`II. Transfer
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`In the alternative, EC Design asks the Court to transfer this action pursuant to 28 U.S.C. §
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`1404(a) for the convenience of the parties and witnesses and in the interests of justice.
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`A district court may transfer a civil action "to any other district or division where it might
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`have been brought" "[f]or the convenience of parties and witnesses" or "in the interest of
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`justice." District courts in the Tenth Circuit consider several different factors in considering a
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`motion to transfer venue, including:
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`[T]he plaintiffs choice of forum; the accessibility of witnesses and other
`sources of proof, including the availability of compulsory process to insure
`attendance of witnesses; the cost of making the necessary proof; questions
`as to the enforceability of a judgment if one is obtained; relative advantages
`and obstacles to a fair trial; difficulties that may arise from congested dockets;
`the possibility of the existence of questions arising in the area of conflict
`of laws; the advantage of having a local court determine questions of local law;
`and all other considerations of a practical nature that make a trial easy,
`expeditious and economical.
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`Employers Mut. Cas. Co. v. Bartile Roofs, Inc., 618 F.3d 1153, 1167 (10th Cir. 2010)(quoting
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`Chrysler Credit Corp. v. Country Chrysler, Inc., 928 F.2d 1509, 1516 (10th Cir. 1991)).
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`The party moving to transfer a case pursuant to§ 1404(a) bears the burden of establishing
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`that the existing forum is inconvenient. Employers Mut., 618 F.3d at 1167. Here, EC Design has
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`not met its burden. A significant number of Craft Smith's employees live in Utah. Its design
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`team, including those who are anticipated to be called as witnesses in this action, is based in
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`Utah. "Merely shifting the inconvenience from one side to the other .. obviously is not a
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`permissible justification for a change of venue." Id. The Court finds that the balance of these
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`factors favors keeping the action in Utah and declines to transfer venue.
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`CONCLUSION
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`EC Design's Motion to Dismiss or, in the Alternative, to Transfer Action is hereby
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`Case 2:16-cv-01235-DB Document 38 Filed 06/15/17 Page 7 of 7
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`DENIED.
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`IT IS SO ORDERED.
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`DATED this J2- day of June, 2017.
`1)~ ")~$,J1-.--
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`,,/
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`Dee Benson
`United States District Judge
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