Teetex LLC v. Zeetex, LLC

Background

Teetex filed a trademark-infringement action against Jiajie Zhu, Zeetex, LLC, and Shanghai Tianan Textile Co., Ltd. The second amended complaint asserted a trademark-infringement claim against the Zhu Defendants, a breach-of-contract claim against Shanghai Tianan Textile Co., Ltd., and California Unfair Competition Law claims against all defendants. The Zhu Defendants moved for summary judgment on the trademark and unfair-competition claims.

Teetex alleged that Zeetex’s name and logo were confusingly similar to Teetex’s and that the similarity had confused Teetex’s customers. Teetex identified Pegasus and Newport as allegedly confused customers. The record showed that Newport’s purchasing manager knew the companies were different, and Zeetex never made sales to Pegasus. Teetex admitted it had no evidence of actual consumer confusion.

Trademark Claim

The court applied the eight factors used to evaluate whether consumers are likely to confuse two marks: the strength of the mark, relatedness of the goods, similarity of the marks, actual confusion, marketing channels, consumer care, the defendants’ intent, and the likelihood that the plaintiff will expand its products.

The court held that the lack of evidence of actual confusion strongly favored the Zhu Defendants. It also found that Teetex’s mark was, at best, suggestive and had not been shown to have widespread industry recognition. Although the companies sold textiles to wholesalers and used some overlapping marketing channels, the marks were visually dissimilar, wholesale buyers were sophisticated and likely to exercise care, and the record indicated that Zhu did not intend to deceive customers. Teetex offered no evidence concerning likely expansion.

Balancing the factors, the court concluded that there was no genuine dispute of material fact about the likelihood of confusion and granted summary judgment to the Zhu Defendants on the trademark claim. Because the court resolved liability in their favor, it did not reach the parties’ arguments about damages.

Unfair-Competition Claims and Late-Raised Theory

The parties agreed that Teetex’s California unfair-competition claims against the Zhu Defendants rose or fell with the trademark claim. Because the trademark claim failed, the court granted the Zhu Defendants summary judgment on those state-law claims as well.

Teetex appeared to raise a tortious-interference claim for the first time in its opposition to summary judgment. The court did not consider that theory because it was not pleaded in the complaint, discovery had closed, and allowing it at that stage would prejudice the Zhu Defendants.

Other Rulings

Teetex asked the court to defer ruling until it resolved issues in a joint discovery letter. The court concluded that the disputes did not affect the summary-judgment motion, particularly because the financial-records issue concerned damages, which the court did not need to reach. The court took no further action on the discovery letter at that time and stated that discovery issues concerning Shanghai Tianan Textile Co., Ltd. could be renewed if that defendant appeared.

The Zhu Defendants requested sanctions for allegedly pursuing a baseless lawsuit. The court could not entertain the request because it was included in the reply to the summary-judgment motion rather than made in a separate motion. The court also declined to grant sanctions under its inherent powers at that time.

Remaining Claims and Service

After the ruling, the only claims remaining in the action were Teetex’s breach-of-contract and unfair-competition claims against Shanghai Tianan Textile Co., Ltd. That defendant had not been served. The court declined to dismiss it for failure to serve at that time, but directed Teetex to complete service and file proof of service by June 20, 2022. If Teetex could not do so, it was directed to file a status report describing its service efforts, after which the court could reconsider whether dismissal was appropriate.

The court also ordered Teetex to show cause in writing by May 6, 2022, why final judgment should not be entered for the Zhu Defendants under Federal Rule of Civil Procedure 54(b).