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Learn more about what you receive with purchase of this case. Inc. v. Lennar Corporation

United States District Court, W.D. Washington, Seattle

March 17, 2017

ISHOW.COM, INC., Plaintiff,
LENNAR CORPORATION, et al., Defendants.


          Robert S. Lasnik United States District Judge

         This matter comes before the Court on “Defendants Lennar Corporation and Lennar Pacific Properties Management, Inc.'s Motion for Summary Judgment.” Dkt. # 41. The parties both claim the right to use the mark NEXTGEN (or NEXT GEN) in connection with residential construction and real estate development services. Defendants (hereinafter, “Lennar”) seek a summary determination that, Inc.'s trademark claims are barred by the doctrine of laches.

         Summary judgment is appropriate when, viewing the facts in the light most favorable to the nonmoving party, there is no genuine dispute as to any material fact that would preclude the entry of judgment as a matter of law. The party seeking summary dismissal of the case “bears the initial responsibility of informing the district court of the basis for its motion” (Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986)) and “citing to particular parts of materials in the record” that show the absence of a genuine dispute of material fact (Fed. R. Civ. P. 56(c)). Once the moving party has satisfied its burden, it is entitled to summary judgment if the non-moving party fails to designate “specific facts showing that there is a genuine issue for trial.” Celotex Corp., 477 U.S. at 324. The Court will “view the evidence in the light most favorable to the nonmoving party . . . and draw all reasonable inferences in that party's favor.” Krechman v. County of Riverside, 723 F.3d 1104, 1109 (9th Cir. 2013). Although the Court must reserve for the jury genuine issues regarding credibility, the weight of the evidence, and legitimate inferences, the “mere existence of a scintilla of evidence in support of the non-moving party's position will be insufficient” to avoid judgment. City of Pomona v. SQM N. Am. Corp., 750 F.3d 1036, 1049 (9th Cir. 2014); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 252 (1986). Summary judgment should be granted where the nonmoving party fails to offer evidence from which a reasonable jury could return a verdict in its favor. FreecycleSunnyvale v. Freecycle Network, 626 F.3d 509, 514 (9th Cir. 2010).

         Having reviewed the memoranda, declarations, and exhibits in the light most favorable to plaintiff and having heard the arguments of counsel, the Court finds as follows:

         Since the early 2000's, iShow has been using the NEXTGEN mark in connection with the construction of show homes in which to display innovative, green, or forward-looking construction techniques and consumer electronics. Toward the end of that decade, iShow made efforts to use its mark in connection with the design and sale of residential homes, but the venture ended before a single home was sold. In the summer of 2011, Lennar filed an application to register a NEXTGEN mark for use in real estate development, management, and financing. Shortly thereafter, iShow sent Lennar an email expressing concern that Lennar's proposed use of the NEXTGEN mark would cause consumer confusion. Nevertheless, Lennar began selling homes under the disputed mark in October 2011. iShow filed a formal objection to Lennar's trademark application with the United States Patent and Trademark Office (“PTO”) in March 2012, but withdrew the objection five months later. By that point, Lennar had sold 175 homes under the NEXTGEN mark. Lennar's mark was registered on February 5, 2013. Lennar has spent millions of dollars advertising its NEXTGEN mark in connection with building homes conducive to multi-generational living. It has sold more than 4, 200 homes with gross sales exceeding $1.77 billion.

         The Lanham Act does not contain an explicit statute of limitations (Jarrow Formulas, Inc. V. Nutrition Now, Inc., 304 F.3d 829, 836 (9th Cir. 2002)), but laches is a recognized equitable defense to a Lanham Act claim (see, e.g., Internet Specialties West, Inc. v. Milon-DiGiorgio Enters., Inc., 559 F.3d 985, 989 (9th Cir. 2009)). The underlying justification for the defense in the intellectual property context was stated long ago by Judge Learned Hand:

It must be obvious to every one familiar with equitable principles that it is inequitable for the owners of a copyright, with full notice of an intended infringement, to stand inactive while the proposed infringer spends large sums of money in its exploitation, and to intervene only when his speculation has proved a success. Delay under such circumstances allows the owner to speculate without risk with the other's money; he cannot possibly lose, and he may win.

Haas v. Leo Feist, Inc., 234 F. 105, 108 (S.D.N.Y. 1916). Laches is a complete defense to a trademark claim if plaintiff has unreasonably delayed in filing suit and defendant has suffered prejudice. Danjaq LLC v. Sony Corp., 263 F.3d 942, 951 (9th Cir. 2001). In evaluating the delay element, courts consider the limitations period for the analogous action at law: if plaintiff filed suit after that period expired, a presumption of unreasonable delay arises. Jarrow Formulas, 304 F.3d at 835-36.

         It is undisputed that iShow knew of Lennar's proposed use of the NEXTGEN mark and believed that the use was infringing no later than September 16, 2011, when iShow contacted Lennar via email. This suit was not filed until September 29, 2015, more than four years later.[1] Thus, there is a presumption that plaintiff unreasonably delayed in filing suit. iShow argues, however, (a) that laches does not apply because defendant has unclean hands, (b) that its opposition to Lennar's registration application before the PTO precludes a finding of laches, and (c) that time spent communicating with Lennar about its use and possible settlement should not be included in the calculation. Each argument is considered below.

         (a) Willful Infringement

         “Over the past eighty-five years, various courts have held that laches does not bar a suit against a deliberate infringer. This principle appears to be based on the equitable maxim that ‘he who comes into equity must come with clean hands.'” Danjaq, 263 F.3d at 956. Thus, if Lennar were a “deliberate pirate” or a”naked infringer, ” its wrong would not be excused simply because iShow delayed in filing suit. Universal Pictures Co. v. Harold Lloyd Corp., 162 F.2d 354, 372 (9th Cir. 1947) (quoting Haas, 234 F. at 108, and Window Glass Mach. Co. v. Pittsburgh Plate Glass Co., 284 F. 645, 650 (3d Cir. 1922)). In order to establish the willfulness exception to laches, iShow must demonstrate that Lennar acted “with knowledge that [its] conduct constitutes [trademark] infringement.” Danjaq, 263 F.3d at 957-58 (quoting Columbia Pictures Television v. Krypton Broad., 106 F.3d 284, 293 (9th Cir. 1997)).

         Taking the evidence in the light most favorable to iShow, there is a genuine issue of fact regarding whether Lennar adopted the NEXTGEN mark with knowledge that its use in the residential construction and real estate development markets would infringe iShow's intellectual property and/or that Lennar pirated the mark in order to exploit the goodwill iShow had achieved in the relevant market. iShow points out that Lennar was aware of iShow's use of the NEXTGEN mark on innovative and forward-looking demonstration homes and that it told Lennar that the proposed use of the NEXTGEN mark in the residential housing market would constitute infringement. Lennar may have reasonably doubted iShow's declaration of infringement, however. iShow's mark is registered for use solely in the demonstration home market, and iShow has never claimed sole possession of the mark for all purposes. NEXTGEN (or the substantially similar mark NEXT GEN) has been registered hundreds of times for use in a wide variety of industries and markets.[2] Thus, when iShow first made its claim of infringement, it was asserting a right to extend the reach of its mark into a new, albeit related, field. A claim of infringement in this context would be successful only if Lennar's use of the mark in the residential real estate development context “creates a likelihood that the consuming public will be confused as to who makes what product.” Brother Records, Inc. v. Jardine, 318 F.3d 1036, 1053-54 (9th Cir. 1999).[3] If there is no such likelihood, “classic trademark law mandates that it is possible that the exact same marks can peacefully co-exist on different goods and services.” 4 McCarthy on Trademarks and Unfair Competition § 24:11.

         Lennar did not necessarily have to credit iShow's effort to extend its mark into a separate but related market. It may have performed an infringement analysis and reasonably concluded that iShow was overreaching. Or it may have relied on the fact that iShow withdrew its opposition to Lennar's trademark application as a concession that Lennar's use of the mark did not infringe. Or it may have presumed that the PTO's willingness to register the NEXTGEN mark for use in the real estate development market established the mark's validity alongside iShow's pre-existing mark. All of these inferences are possible based on the existing record, but they are not compelled as a matter of law. For whatever reason, Lennar has not provided any evidence regarding its beliefs or intent at the time it adopted the mark in 2011. It makes plausible assertions for why a company building multi-generational housing might chose a mark with GEN in it and scoffs at the suggestion that iShow's mark had acquired good will and/or secondary meaning in the residential housing market. But there is no declaration from company decision-makers or explanation of the process that led Lennar to adopt a mark which, according to another home builder, had already established in iShow a “brand for quality, and the brand's association with the latest in home-design, building materials, and in-home technologies.” Dkt. # 33 at ¶ 5. This absence of facts and evidence, all of which is within Lennar's possession, distinguishes it from many of the laches cases in which the determination regarding willfulness was made as a matter of law. See, e.g., Danjaq, 263 F.3d at 958 (alleged infringer described the steps it took to avoid the possibility of infringement); Fitbug Ltd. v. Fitbit, Inc., 78 F.Supp.3d 1180, 1195-96 (N.D. Cal. 2015) (alleged infringer explained the timing and circumstances regarding the selection of the mark and submitted evidence regarding it contemporaneous intent and beliefs). In the absence of an affirmative statement regarding Lennar's intent at the time it adopted the NEXTGEN mark or other evidence that overcomes the plausible inference of willfulness raised by the existing record, Lennar has not established its laches defense as a matter of law.

         (b) Opposition ...

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