Gathering Tree, LLC v. Symmetric Labs, Inc.

[3] 4 UNITED STATES DISTRICT COURT 5 NORTHERN DISTRICT OF CALIFORNIA [6] 7 GATHERING TREE, LLC, Case No. 19-cv-07074-WHO 8 Plaintiff, ORDER RE MOTION FOR DEFAULT 9 v. JUDGMENT 10 SYMMETRY LABS, INC., et al., Re: Dkt. No. 22 Defendants. [11] 12 Plaintiff Gathering Tree, LLC (“Gathering Tree”) brings a motion for default judgment 13 against defendant Symmetric Labs, Inc., d/b/a Symmetry Labs (“Symmetry”). Its motion with 14 respect to its conversion claim is GRANTED. But the motion with respect to its Lanham Act 15 claims and its California claims for intentional interference with prospective economic advantage 16 and unfair competition is DENIED WITHOUT PREJUDICE because the complaint and the record 17 are insufficient to show that Gathering Tree owns a valid and protectable trademark. 18 BACKGROUND 19 Gathering Tree was formed to oversee the financing, design, construction, and installation 20 of the “Tree of Ténéré,” a large piece of sculptural art that originally debuted at a well-known art 21 festival in Nevada in 2017. Dkt. No. 11 (“Compl.”) ¶¶ 2, 13. It currently plans to manufacture 22 and sell authorized reproductions of the Tree of Ténéré, which will allow it to repay the debts and 23 art grant that it obtained in creating the original tree. Id. ¶ 2. It asserts that it owns the trademark 24 for Tree of Ténéré as a brand name for illuminated trees containing imbedded light-emitting 25 diodes (“LEDs”). Id. ¶ 4. 26 Gathering Tree states that in creating the Tree of Ténéré, it hired subcontractors, including 27 Symmetry, who all agreed that rights associated with the Tree of Ténéré remained with Gathering 1 The Services Agreement also provided that Alex Green (Symmetry’s founder and CEO) would be 2 credited as a co-creator of the Tree of Ténéré along with Patrick Deegan and Zachary Smith. Id. 3 ¶¶ 17, 19. 4 Symmetry failed to deliver the milestones set forth in the Services Agreement, and 5 Gathering Tree paid other contractors and recruited volunteers to perform this work. Id. ¶ 20. 6 Nonetheless, [b]etween April and August 2017, the parties to the SA [Services 7 Agreement] subsequently entered into oral agreements amending Paragraph 5, concerning creative credit. They agreed that Mark Slee, 8 who joined the project around April 2017, would share the “Co-lead Artist” credit with Alex Green. In August 2017, they agreed that 9 Smith would have the “Co-lead Artist” and “Creator” title. 10 Id. ¶ 22. Gathering Tree asserts that Symmetry made no investment in the Tree of Ténéré. Id. ¶ 11 16. 12 At the arts festival, the Tree of Ténéré was very successful. Id. ¶ 24. After the event, the 13 tree was dismantled for transportation and storage, and Gathering Tree paid a monthly fee to store 14 the tree in Stagecoach, Nevada. Id. ¶ 25. In around the summer of 2018, Symmetry took a tree 15 limb from the storage site without Gathering Tree’s knowledge or consent and installed it in its 16 office in San Francisco. Id. ¶¶ 26-27. Gathering Tree has repeatedly requested return of the tree 17 limb, but Symmetry has refused. Id. ¶ 29. 18 Symmetry also began an extensive campaign to claim exclusive creative credit for the Tree 19 of Ténéré and made unauthorized reproductions of the tree for sale. Id. ¶¶ 30-45. In January of 20 2019, after Gathering Tree renewed its demands that Symmetry stop its infringing activities 21 related to the Tree of Ténéré, Symmetry filed a trademark application with the United States 22 Patent and Trademark Office (“PTO”). Id. ¶¶ 46-47. Symmetry Labs later admitted that this 23 application was filed to obtain a “bargaining chip” to use in negotiations with Gathering Tree. Id. 24 ¶ 47. Gathering Tree continued to request that Symmetry cease and desist its operations with 25 respect to the Tree of Ténéré, including by sending an “open letter” to Symmetry’s counsel. Id. ¶ 26 52. 27 Gathering Tree filed this action on October 28, 2019. Dkt. No. 1. It brings causes of 1 cancellation of trademark registration pursuant to the Lanham Act; and for unfair competition, 2 intentional interference with prospective economic advantage, and conversion under California 3 law. Dkt. No. 11. Symmetry did not appear in this action or file an answer to the operative 4 complaint, and Gathering Tree moved for default judgement on April 28, 2020. Dkt. No. 22. 5 Symmetry has not filed any opposition. 6 LEGAL STANDARD 7 Pursuant to Federal Rule of Civil Procedure 55(b)(2), a district court may enter a final 8 judgment in a case following a defendant’s default. Whether to enter a judgment lies within the 9 court’s discretion. Bd. of Trustees of Laborers Health & Welfare Tr. Fund for N. California v. 10 Cazadores Constr., Inc., No. 17-cv-05242-WHO, 2018 WL 986020 , at *2 (N.D. Cal. Feb. 20, 11 2018). In order to exercise this discretion, the court must first confirm that it has subject matter 12 jurisdiction over the case and personal jurisdiction over the parties, as well as ensure the adequacy 13 of service on the defendant. Id. Once these elements are satisfied, the court turns to the following 14 factors (the “Eitel factors”) to determine whether it should grant a default judgment: (1) the possibility of prejudice to the plaintiff, (2) the merits of 15 plaintiff’s substantive claim, (3) the sufficiency of the complaint, (4) the sum of money at stake in the action[,] (5) the possibility of a 16 dispute concerning material facts [,] (6) whether the default was due to excusable neglect, and (7) the strong policy underlying the Federal 17 Rules of Civil Procedure favoring decision on the merits. 18 Eitel v. McCool, 782 F.2d 1470 , 1471–72 (9th Cir. 1986). 19 DISCUSSION 20 I. JURISDICTION AND SERVICE 21 Gathering Tree’s Lanham Act claims arise under federal law, and therefore I have subject 22 matter jurisdiction over them pursuant to 28 U.S.C. § 1331 . Gathering Tree’s state-law claims 23 arise from the same set of facts, and I have supplemental jurisdiction pursuant to 28 U.S.C. §. 24 1367(a). With respect to personal jurisdiction, the Complaint alleges that Symmetry has its 25 principal place of business in San Francisco, California. Compl. ¶ 11. Therefore, Gathering Tree 26 has established that this Court has personal jurisdiction over Symmetry. Daimler AG v. Bauman, [27] 571 U.S. 117, 118 (2014). 1 Complaint in this case and a summons on December 27, 2019. See Dkt. No. 12. Therefore, 2 Gathering Tree has satisfied the threshold factors for default judgment. 3 II. EITEL FACTORS 4 A. Possibility of prejudice to Gathering Tree 5 Gathering Tree has articulated substantial prejudice if the requested remedy is not 6 provided. With respect to its claims for trademark infringement, it will be harmed without 7 recourse to court action by Symmetry’s ongoing infringement. See Yelp Inc. v. Catron, 70 F. 8 Supp. 3d 1082, 1094 (N.D. Cal. 2014). With respect to conversion, it has provided detailed 9 information about the cost of the stolen tree branch, which will need to be replaced in order for the 10 art installation to become whole again. Accordingly, the possibility of prejudice to Gathering Tree 11 weighs in favor of granting default judgment. 12 B. The sum of money at stake in this action 13 Gathering Tree seeks $31,249.66 in this matter, which relates to the cost of the stolen 14 branch. Dkt. No. 22 at 16. It does not seek any monetary damages related to the alleged 15 infringement. The amount sought is narrowly-tailored and weighs in favor of granting default 16 judgment. Catron, 70 F. Supp. 3d at 1100 (when “the sum of money at stake is tailored to the 17 specific misconduct of the defendant, default judgment may be appropriate.”) (citation omitted). 18 C. The merits of plaintiff’s substantive claims, the sufficiency of the complaint, and the possibility of a dispute of material facts [19] 1. Infringement-related claims [20] To establish a cause of action for trademark infringement and false designation of origin, [21] Gathering Tree must show (i) that its trademark is valid and protectable, and (ii) that Symmetry’s [22] mark is “confusingly similar.” Herb Reed Enterprises, LLC v. Fla. Entm't Mgmt., Inc., 736 F.3d 23 1239, 1247 (9th Cir. 2013); see also Juno Therapeutics, Inc. v. Juno Biomedical, Inc., No. 17-CV24 04196-JSC, 2018 WL 2021483 , at *4-6 (N.D. Cal. Mar. 26, 2018), report and recommendation [25] adopted, No. 17-CV-04196-HSG, 2018 WL 1993407 (N.D. Cal. Apr. 27, 2018). Gathering Tree [26] has established the second prong of this inquiry, as Symmetry markets the same tree that was [27] installed at the arts and culture festival, and was directly involved in the project. Thus, there can 1 be no real dispute of material fact that the competing trademarks are nearly identical. 2 However, Gathering Tree has not adequately shown that it owns the trademark. For 3 unregistered trademarks, “the standard test of ownership is priority of use,” and “the party 4 claiming ownership must have been the first to actually use the mark in the sale of goods or 5 services.” Halicki Films, LLC v. Sanderson Sales & Mktg., 547 F.3d 1213, 1226 (9th Cir. 2008) 6 (citations omitted). “While a ‘registrant is granted a presumption of ownership, dating to the filing 7 date of the application for federal registration . . . the non-registrant can rebut this presumption . . . 8 if the non-registrant can show that he used the mark in commerce first. . .” Cutting Edge Sols., 9 LLC v. Sustainable Low Maint. Grass, LLC, No. 14-CV-02770-WHO, 2014 WL 5361548 , at *5 10 (N.D. Cal. Oct. 20, 2014) (citation omitted). Although Gathering Tree asserts that it owns the 11 trademark to the Tree of Ténéré, it does not dispute that Symmetry that has a registered trademark 12 to the tree. Gathering Tree did not itself register the trademark, and does not assert that it opposed 13 Symmetry’s trademark application. 14 Gathering Tree’s primary argument as to ownership is that it is the senior user of the mark 15 because the “installation was initially conceived by a founding member of Gathering Tree on or 16 about August 31, 2016.” Dkt. No. 22 at 7; Compl. ¶ 14. This vague allegation does not provide a 17 persuasive case for ownership. Critically, Gathering Tree has not provided any allegations that it 18 used the mark in commerce, or in the sale of goods or services. Although Gathering Tree states 19 that it has current plans to sell products related to the Tree of Ténéré, it has not asserted or 20 provided any evidence that in the three years since the Tree of Ténéré debuted at the festival, it has 21 done so or even sought to do so. Rearden LLC v. Rearden Commerce, Inc., 683 F.3d 1190 , 1203 22 (9th Cir. 2012) (“a party pursuing a trademark claim must meet a threshold ‘use in commerce’ 23 requirement”). “To acquire ownership of a trademark it is not enough to have invented the mark 24 first or even to have registered it first; the party claiming ownership must have been the first to 25 actually use the mark in the sale of goods or services.” Id. (emphasis added). To satisfy the “use 26 in commerce” requirement, a mark must be “used or displayed in the sale or advertising of 27 services and the services are rendered in commerce.” Id. (citation omitted). Gathering Tree’s 1 requirement. See Dkt. No. 22 at 8. The current allegations suggest that Symmetry may be the 2 party that first used the mark in commerce and would thus be the senior user. 3 In addition, Gathering Tree’s allegation with respect to the conception of the Tree of 4 Ténéré provides no further information that supports a conclusion of ownership. It does not 5 specify what exactly was conceived of at that time, whether the mark was intended by the 6 unnamed “founding member” or Gathering Tree (which was not yet in existence) to be Gathering 7 Tree’s property, or whether it was intended to be used in commerce. At most, it appears to pertain 8 to copyright ownership of the tree, which is not at issue in this case. 9 The remaining allegations in the complaint concerning ownership are also thin. Gathering 10 Tree alleges that Symmetry, as with all other subcontractors, executed a Services Agreement that 11 stated that “Gathering Tree is retaining the services of Symmetry Labs to assist in the production 12 of a large-scale art installation called Ténéré.” Compl. ¶ 18. This agreement provided for 13 payments to Symmetry upon certain milestones, provided that Green and two others would be 14 credited as co-creators of the Tree of Ténéré, and stated that “Gathering Tree remained ‘the sole 15 owner of the Tree in its entirety.’” Id. ¶ 19. For an art grant application, Green would be credited 16 as the lead artist. Id. 17 These allegations do not clarify ownership of the intellectual property (“IP”) rights to the 18 Tree of Ténéré. Gathering Tree was stated to “own[] . . . the Tree in its entirety,” id., but whether 19 this refers to the physical tree itself or the IP rights in the tree is unclear. Moreover, the Services 20 Agreement provisions with respect to creative credit give rise to questions as to Symmetry’s (and 21 Green’s) contributions to the Tree of Ténéré. The Services Agreement is not in the record, so it is 22 impossible to independently evaluate the terms of this contract. Further, the Complaint states that 23 the parties entered into an unspecified number of oral amendments to this agreement “concerning 24 creative credit,” but provides no further information about these agreements, including whether 25 they altered the IP rights between the parties. Id. ¶ 22. Gathering Tree also describes an “open 26 letter’ to Symmetry’s counsel, which is not in the record. Compl. ¶ 52; Dkt. No. 22 at 6. 27 Thus, reading the complaint as a whole there are substantial questions as to ownership of 1 protectable by Gathering Tree. 2 Aside from allegations in the complaint, Gathering Tree has not provided evidence that it 3 owns the IP rights to the Tree of Ténéré. Gathering Tree’s co-founder and manager filed a 4 declaration in support of its motion providing support for its claim of damages and itemizing 5 invoices paid to vendors for portions of the tree. See Dkt. No. 22-4. The declaration does not 6 provide any assertion as to ownership of the IP rights to the Tree of Ténéré. As discussed, the 7 Services Agreement is not in the record, and Gathering Tree’s website (cited in the complaint) is 8 not operative. See Compl. ¶ 15. The record does not provide a strong substantive showing of 9 ownership. 10 Finally, there is likely to be a dispute of material facts with respect to ownership. As the 11 complaint states, Gathering Tree agreed to give the founder of Symmetry certain creative credits 12 to the Tree of Ténéré. This suggests that Symmetry may have copyright rights in the Tree of 13 Ténéré, and possibly other IP rights as well. And, as evidenced by Symmetry’s trademark 14 application, it is likely to take the position that it had exclusive rights to the Tree of Ténéré. See 15 Compl. ¶¶ 49-50. 16 For these reasons, Gathering Tree’s substantive claims, the sufficiency of the complaint, 17 and the possibility of a dispute of material facts weigh in favor of denying Gathering Tree’s 18 motion with respect to its Lanham Act claims. Because its California unfair competition claim, 19 claim for intentional interference with prospective economic advantage, and trademark registration 20 cancellation claim are based upon the same set of facts, these factors also weigh in favor of denial 21 for these causes of action.1 22 2. Conversion 23 “The elements of a conversion claim are: (1) the plaintiff’s ownership or right to 24 possession of the property; (2) the defendant’s conversion by a wrongful act or disposition of 25 property rights; and (3) damages.” Hanover Ins. Co. v. Fremont Bank, 68 F. Supp. 3d 1085 , 1100 [26] 1 Gathering Tree’s cause of action for intentional interference with prospective economic [27] advantage and for trademark cancellation require that it establish factors that differ from those for 1 (N.D. Cal. 2014) (citations omitted). “The ‘wrongful act’ underpinning the conversion may be a 2 simple refusal to surrender possession or an ‘unjustified refusal to deliver possession.’” Id. 3 (citations omitted). 4 Gathering Tree has adequately alleged that it owned the physical tree branch that 5 Symmetry took. Although it has not provided the Court with the Services Agreement, the 6 complaint states that this agreement stated that the tree was owned by Gathering Tree. Moreover, 7 Gathering Tree has provided multiple invoices, billed to Gathering Tree, for parts of the tree parts 8 from subcontractors. See Dkt. No. 22-4. The complaint further alleges that Gathering Tree paid 9 the rent of the storage facility where the tree parts were stored, and that Symmetry took a branch 10 and installed it in its San Francisco office and refused to return it. Compl. ¶¶ 86-89. These 11 allegations, taken as true, establish that Gathering Tree owned at least the physical tree, and a clear 12 claim for conversion. Because the ownership of the tree is established by the Services Agreement, 13 it is unlikely that there will be a dispute of material fact for this claim. Accordingly, Gathering 14 Tree has demonstrated that the substantive claims, sufficiency of the complaint, and likelihood of 15 dispute as to material facts with respect to its conversion claim weigh in favor of granting its 16 motion. 17 D. Whether the default was due to excusable neglect 18 The Eitel factor of excusable neglect “contemplates the possibility that Defendants’ default 19 was the result of excusable neglect.” Bay Area Painters & Tapers Pension Tr. Fund v. Delta City 20 Drywall, No. C 10-1043 JSW (JL), 2011 WL 13243837 , at *4 (N.D. Cal. Mar. 15, 2011). “Under 21 this analysis, the Court considers whether Defendant was put on adequate notice to apprise [it] of 22 the pendency of the action brought against it.” Id. As discussed above, Symmetry was served 23 with the Amended Complaint in this case. Although it appears that Green was incarcerated at the 24 time this lawsuit was filed, Gathering Tree has alleged that it has been in contact with an interim 25 CEO for the company. Compl. ¶ 47. Accordingly, this factor weighs in favor of granting 26 Gathering Tree’s motion. [27] E. Policy underlying the Federal Rules of Civil Procedure favoring decision on 1 the merits 2 A “defendant’s failure to answer the plaintiff[’]s complaint makes a decision on the merits 3 of a case impractical, if not impossible.” Delta City Drywall, 2011 WL 13243837 , at *4 (citation 4 omitted). Symmetry did not respond to the complaint or to the motion for default judgment. 5 At the same time, Gathering Tree requests an order directing the PTO to invalidate 6 Symmetry’s trademark, a finding that it has a valid trademark in the Tree of Ténéré, and an 7 injunction prohibiting Symmetry from future use of the trademark. As discussed above, its 8 allegations and factual showing with regard to trademark ownership, and thus infringement, are 9 thin. Furthermore, there is a presumption of validity of Symmetry’s registered trademark. In 10 these circumstances, the strong policy favoring a decision on the merits weighs in favor of 11 denying Gathering Tree’s motion with respect to its Lanham Act claims. This factor is neutral as 12 to Gathering Tree’s conversion claims. 13 F. Conclusion 14 All factors weigh in favor of or are neutral as to granting Symmetry’s motion for default 15 judgment on its conversion claim. However, given the substantial questions as to Gathering 16 Tree’s ownership of a valid and protectable trademark, I find that the Eitel factors weigh in favor 17 of denying its motion with respect to its remaining claims. 18 III. DAMAGES 19 As discussed above, Gathering Tree seeks $31,249.66 to replace the cost of the stolen 20 branch. Dkt. No. 22 at 16. In support of its motion, it provided a declaration of Patrick Deegan, 21 Gathering Tree’s co-founder and manager, that provides a detailed estimate of the cost of the lost 22 tree branch based on multiple invoices from vendors and the relative cost of each part of the tree. 23 Dkt. No. 22-4. I find this estimate to be reasonable. Therefore, Gathering Tree is entitled to 24 $31,249.66 in damages for its conversion cause of action. 25 CONCLUSION 26 For the above reasons, Gathering Tree’s motion for default judgment is DENIED IN 27 PART and GRANTED IN PART. If it chooses to do so, Gathering Tree should refile a motion for 1 default with sufficient evidence for the remaining causes of actions within thirty days of this Order 2 IT IS SO ORDERED. 3 Dated: June 13, 2020 5 ® William H. Orrick 6 United States District Judge [11] a 12 [16] il Z 18