La Canada Ventures, Inc. v. MDalgorithms, Inc.

Background

This is a trademark infringement action. La Canada Ventures, Inc. is described as a health and beauty retailer offering cosmetic products. MDalgorithms, Inc. offers computer software and app technology providing education and advice about acne treatment.

La Canada alleged that MDalgorithms infringed La Canada’s “MD” mark and other marks containing “MD” by using those marks in selling health and beauty products. MDalgorithms filed counterclaims seeking cancellation of seven La Canada trademark registrations. It alleged that three registrations were void from the beginning because Susan Lin, rather than La Canada, applied as the owner even though La Canada was the true owner. It also alleged that four registrations obtained incontestable status through fraud on the United States Patent and Trademark Office. In addition, MDalgorithms asserted common-law and California statutory unfair-competition counterclaims, alleging that La Canada used “MDacne” and “MDhair” to deceive or divert MDalgorithms’s customers.

La Canada moved to dismiss the counterclaims under Federal Rule of Civil Procedure 12(b)(6), which tests whether a pleading states a legally sufficient and plausible claim. La Canada argued that its registrations were valid, that MDalgorithms had not adequately pleaded fraud, and that La Canada had priority to use the relevant marks. La Canada also moved for partial summary judgment under Rule 56 on its claim that MDalgorithms’s “MDhair” mark was confusingly similar to La Canada’s marks and infringed them. Summary judgment is a decision without a trial when the evidence shows no genuine dispute over a fact that could affect the result and the moving party is entitled to judgment as a matter of law.

Motion to Dismiss the Counterclaims

The court denied dismissal of the first three counterclaims, which challenged the ownership of the registrations for “MD FACTOR,” “MD BY SUSAN F. LIN M.D.,” and “MD WELLNESS BY SUSAN F. LIN M.D.” The court found that MDalgorithms’s factual basis was “tenuous” but more than a mere possibility of wrongdoing. The specimens submitted with Lin’s applications referred to La Canada’s uses, providing enough factual support at the pleading stage for the allegation that La Canada, not Lin, owned the marks when the applications were filed.

The court also held that counterclaims four through seven, concerning “MD,” “MD INTIMATE RESTORE,” “MD 101,” and “MD LASH FACTOR,” adequately pleaded fraud relating to the declarations of incontestability. MDalgorithms alleged that the declarations falsely represented continuous use by Lin when La Canada was the true owner and user. The court concluded that the counterclaims adequately alleged the required elements of fraud, including a material false statement, knowledge or belief that it was false, intent to induce reliance, actual and reasonable reliance, and resulting damages. The court therefore allowed counterclaims four through seven to survive the motion to dismiss.

For counterclaims eight and nine, MDalgorithms alleged that La Canada used “MDacne” and “MDhair” to divert customers. La Canada relied on its claimed priority of use. The court held that MDalgorithms nevertheless pleaded sufficient facts that La Canada began using those identical terms to harm or divert MDalgorithms’s customers after MDalgorithms entered the market and began selling similar goods. The court denied the motion to dismiss these unfair-competition counterclaims as well.

Partial Summary Judgment

The court denied La Canada’s motion for partial summary judgment on the alleged infringement of “MDhair.” The court examined the likelihood-of-confusion factors used in the Ninth Circuit, including the marks’ similarity, the relatedness of the goods, marketing channels, actual confusion, the marks’ strength, consumer care, intent, and possible expansion.

Several factors favored possible confusion. The parties’ “mdhair.com” and “mdhair.co” domain names were virtually identical apart from their top-level domains. “MDhair” was similar in appearance and sound to La Canada’s “MD Nutri Hair” and “MD Hair” marks. Both parties sold haircare products online, and La Canada presented customer inquiries indicating confusion about the products’ relationship.

Other factors weighed against a finding of confusion or raised factual disputes. The court found a genuine dispute about the conceptual and commercial strength of the “MD” mark, noting the mark’s common use in cosmetic products and the crowded field of marks using the “MD” root. The court also found that the sophistication of online shoppers could weigh against confusion and that La Canada had not shown MDalgorithms knew about La Canada’s competing goods when it selected “MDhair.” Because multiple factors presented issues that could be decided at trial, the court did not reach the ownership question and denied partial summary judgment.

Other Rulings and Disposition

The court’s conclusion states that the motion to dismiss and motion for partial summary judgment were denied. The court granted the parties’ requests for judicial notice concerning materials submitted with their briefing. It also granted motions to seal portions of records containing personal identification information, private email communications, and monetary values.

The opinion discusses MDalgorithms’s administrative request to modify the case schedule and notes that a further case-management conference was scheduled for February 1, 2024. It directed the parties to continue working diligently toward the existing deadlines while MDalgorithms prepared to identify the discovery it sought and the additional time it expected to need. The opinion does not state a separate final disposition of that schedule-modification request.