Amarte USA Holdings, Inc. v. Kendo Holdings Inc.

Background

Amarte alleges that Kendo Holdings, Inc., Mark Jacobs International LLC, Sephora USA, Inc., and The Neiman Marcus Group LLC infringed Amarte’s EYECONIC trademark by selling a Marc Jacobs EYE-CONIC eyeshadow palette. Amarte asserts federal and California trademark-infringement and unfair-competition claims. The defendants contend that the products are distinct because the eyeshadow palette is sold with the MARC JACOBS house mark and that consumers are unlikely to be confused. They also assert defenses including laches, acquiescence, estoppel, mootness, and the statute of limitations.

The order addressed three motions: Kendo’s motion concerning whether Amarte’s material should remain sealed; Amarte’s third motion for leave to amend its complaint to add Boxycharm, PBD, JCP, YNAP, ROSS, and TJX as defendants and amend the scheduling order; and Kendo’s motion for leave to amend its answer to add a counterclaim seeking cancellation of Amarte’s EYECONIC trademark registration.

Sealing motion

Amarte sought to seal five excerpts from Kendo’s motion to amend and an attached deposition exhibit, claiming that they contained trade secrets, marketing strategies, internal business decisions, and discussions with counsel. The court applied the “compelling reasons” standard, which requires specific factual support showing that the need for secrecy outweighs the public’s general right to access court records.

The court concluded that Amarte did not meet that burden. It found that excerpts concerning discussions with counsel lacked specific evidence of likely harm, that the excerpt concerning Amarte’s product formula did not reveal specific formula information or explain why it was a trade secret, and that the excerpts concerning marketing described information already available through Amarte’s public website and other public-facing marketing. The court therefore ordered Kendo to unseal its motion to amend and Exhibit 2 in their entirety within 14 days.

Amarte’s motion to amend

Because Amarte sought amendment after the scheduling-order deadline, the court first applied Federal Rule of Civil Procedure 16. That rule requires a party to show “good cause,” principally by showing diligence. The court found that Amarte satisfied this requirement because it sought the proposed defendants’ identities in April 2023, received the relevant information on July 11, 2023, filed its second motion to amend on July 14, and filed the third motion eight days after the court denied the second motion.

The court then applied Rule 15, which generally favors allowing amendments but permits denial for reasons including futility, bad faith, undue delay, repeated failure to cure deficiencies, or undue prejudice. The court found the proposed amendment futile because Amarte again failed to allege specifically how each proposed defendant—particularly PBD, ROSS, JCP, and TJX—infringed its trademark. The court held that merely separating the defendants into individual allegations did not satisfy the requirement to clearly state how each defendant allegedly violated Amarte’s rights.

The court denied Amarte’s motion for leave to amend on futility grounds and stated that, because it was Amarte’s third motion for leave to amend, the denial was with prejudice based on repeated failure to cure deficiencies by amendment previously allowed.

Kendo’s motion to amend

Kendo sought to add a counterclaim under 15 U.S.C. § 1064(6), which permits a person to seek cancellation of a trademark registration if, after the required period, the mark was never used in commerce for some or all of the goods or services listed in the registration. Kendo alleged that Amarte had used EYECONIC only for “Eyeconic Eye Cream,” although the registration listed “eye cosmetics; eye creams.”

The court found that Kendo showed good cause under Rule 16. It accepted that Kendo did not have enough information to plead the counterclaim until the September 19, 2023 deposition of Amarte’s corporate representative, Dr. Craig Kraffert. Kendo moved to amend on October 5, 2023, two weeks after that deposition, which the court found sufficiently diligent.

Under Rule 15, the court found that the proposed counterclaim was not futile because Kendo plausibly alleged that Amarte had used the mark for only one product and that more than three years had passed since the 2013 registration. The court also found no evidence of bad faith, undue delay, repeated failure to cure, or undue prejudice to Amarte. The court noted that Amarte’s arguments about whether eye cream qualifies as “eye cosmetics” might ultimately have merit, but that issue was not decided on this motion to amend.

Disposition

The court ordered Kendo to unseal Kendo’s motion to amend and Exhibit 2 in their entirety; denied Amarte’s motion to amend its complaint to add the proposed defendants with prejudice; granted Kendo’s motion for leave to amend its answer to add the counterclaim; and ordered the parties to submit a new proposed scheduling order within 14 days with updated deadlines for additional discovery concerning the counterclaim. Judge Charles R. Breyer signed the order. The order did not decide the ultimate trademark-infringement claims or the merits of Kendo’s proposed cancellation counterclaim.