Vinh-Sanh Trading Corporation v. SFTC, Inc.

Background

Vinh-Sanh imports and distributes rice and rice-based products, including Thai jasmine rice. In the mid-1980s, it established the THREE LADIES brand and developed a trademark featuring three women wearing clothing representing Cambodia, Vietnam, and Laos. Vinh-Sanh has four trademarks connected to that brand.

Vinh-Sanh briefly had a wholesale relationship with SFTC, Inc., which does business as Sun Fat Trading Corporation, for the sale of a small quantity of THREE LADIES rice. Vinh-Sanh ended that relationship after concluding that Sun Fat was infringing its THREE LADIES mark. Sun Fat was marketing and selling Thai jasmine rice with photographs of three women wearing what Vinh-Sanh claimed represented Cambodian, Vietnamese, and Laotian clothing.

Vinh-Sanh asserted claims for federal trademark infringement under 15 U.S.C. § 1114, federal unfair competition under 15 U.S.C. § 1125(a), common-law trademark infringement, and unfair competition under California Business and Professions Code § 17200. After the court denied Vinh-Sanh’s request for a temporary restraining order, the court allowed further discovery about irreparable harm before Vinh-Sanh filed its preliminary-injunction motion.

Legal standard

To obtain a preliminary injunction, a plaintiff must show that it is likely to succeed on the merits, likely to suffer irreparable harm without immediate relief, that the balance of hardships favors an injunction, and that an injunction would serve the public interest. The Ninth Circuit also permits a sliding-scale approach when there are serious questions about the merits, the hardships sharply favor the plaintiff, irreparable injury is likely, and the injunction is in the public interest.

Likelihood of success

The court continued to find that Vinh-Sanh was likely to succeed on a trademark-infringement claim. That claim required Vinh-Sanh to show ownership of a valid trademark and Sun Fat’s commercial use of a mark likely to cause consumer confusion.

The court found that Vinh-Sanh owned valid marks. Vinh-Sanh had registered the THREE LADIES Composite Mark in 2005, claiming first use in commerce in 1986, and had registered its Vietnamese-language Word Mark in 2013, claiming first use in commerce in 2004. The registrations provided initial evidence of validity and Vinh-Sanh’s exclusive right to use the marks in commerce. The court also noted Vinh-Sanh’s continuous commercial use of the marks since 1986.

The court applied the eight factors used in the Ninth Circuit to assess likely consumer confusion: the strength of the mark, similarity of the marks, proximity of the goods, similarity of marketing channels, the type of goods and buyer care, actual confusion, the defendant’s intent, and the likelihood of expansion into other markets.

The court considered the THREE LADIES marks strong. It concluded that “THREE LADIES” did not describe rice or its features and was instead distinctive. The court reached the same conclusion about Vinh-Sanh’s Vietnamese-language mark because its translation was “Three Ladies” or “Three Girls.” Although Sun Fat cited other rice brands featuring drawings of three Asian figures, it provided no examples, so the court found that the mark appeared strong at this stage.

The court found the marks highly similar in their overall commercial impression. Both products were bags of jasmine rice displaying three women in traditional, formal Asian clothing. The court recognized differences: Vinh-Sanh used a drawing while Sun Fat used a photograph; the women’s poses and clothing differed; Vinh-Sanh used the words “Three Ladies”; and other wording on the bags was different. But the court concluded that consumers might view Sun Fat’s photograph as an updated version of the drawing on Vinh-Sanh’s product.

The parties used the marks on the same product, jasmine or Thai Hom Mali rice. The court also found that the products appeared to use similar marketing channels, although it was unclear how widely Sun Fat sold its product. The court considered the buyer-care factor mixed because rice was presumably inexpensive, but the evidence suggested that some customers carefully selected the rice they purchased.

The evidence of actual consumer confusion was limited and the court considered that factor mixed. Sun Fat submitted declarations stating that its customers had not been confused about whether Sun Fat’s products came from the same company as THREE LADIES. Vinh-Sanh submitted evidence that one market owner had mistaken Sun Fat’s rice for THREE LADIES rice, but the court found that incident not highly significant.

The court found that Sun Fat’s knowledge of Vinh-Sanh’s mark favored Vinh-Sanh. Sun Fat’s chief executive offered an explanation that the company changed its packaging after learning that a model in an earlier package had died and wanted to use new models, including Hmong and Vietnamese models. The court found that explanation innocent but not entirely persuasive given Vinh-Sanh’s brand dominance and Sun Fat’s prior wholesale relationship with Vinh-Sanh. The possibility that Sun Fat would expand into other markets was present but speculative.

Considering all the factors, particularly the strength of Vinh-Sanh’s mark, the similarity of the marks, the parties’ sale of the same goods, and Sun Fat’s intent, the court held that Sun Fat’s use of the challenged mark was likely to cause confusion. The court therefore concluded that Vinh-Sanh was likely to succeed on its trademark claim for purposes of the preliminary-injunction motion.

Irreparable harm

The court nevertheless found that Vinh-Sanh had not made a strong enough showing of irreparable harm. Irreparable harm is injury that cannot adequately be repaired through later monetary damages. The court explained that trademark infringement does not automatically establish this type of harm; evidence is required.

Vinh-Sanh argued that Sun Fat’s rice was lower quality, sold at a lower price, and supported by inferior sales practices. The court found this evidence insufficient. Testing showed differences in moisture and whiteness, but Vinh-Sanh did not explain the significance of those measurements, show that consumers would notice the differences, or provide taste testing, visual observations, or expert testimony addressing consumer perceptions. Evidence about refrigerated and non-refrigerated rice did not establish a direct comparison between Vinh-Sanh’s and Sun Fat’s products or show that consumers would perceive the alleged quality differences.

The court also found that lower pricing alone did not demonstrate lower quality or irreparable harm. It considered Vinh-Sanh’s argument about Sun Fat’s sales practices tenuous because the connection between those practices and damage to Vinh-Sanh’s reputation was not sufficiently shown. The court agreed with Sun Fat that Vinh-Sanh had not adequately supported its goodwill and reputation claims or shown that monetary damages would be inadequate.

Balance of hardships and public interest

The court found that the balance of hardships favored Sun Fat. An injunction could prevent Sun Fat from selling inventory and filling orders, and Sun Fat stated that it had about 4,000 bags ready to ship and estimated losses of about $1 million if it could not sell its inventory, fill orders, or pay factory bills. Vinh-Sanh argued that Sun Fat had used the challenged marks only since late 2018 or in 2019 and could repackage its rice with little disruption. The court nevertheless concluded that it would not impose an injunction lightly in view of the likely hardship to Sun Fat.

The public-interest factor favored Vinh-Sanh because preventing consumer confusion serves the public interest. The court rejected Sun Fat’s argument that the relevant public interest was consumers’ ability to buy cheaper rice.

Disposition

The court concluded that Vinh-Sanh was likely to prevail on the merits of its trademark claims and that the public interest favored Vinh-Sanh, but Vinh-Sanh had not sufficiently shown likely irreparable harm and the balance of hardships favored Sun Fat. The court therefore denied Vinh-Sanh’s motion for a preliminary injunction.