Opinion
No. C 01-2478 MJJ
December 19, 2001
ORDER GRANTING PRELIMINARY INJUNCTION AND SETTING SECURITY BOND AMOUNT
I. INTRODUCTION
Plaintiffs Erich Russell and Rabbit Ridge Wine Sales, Inc. (collectively "Rabbit Ridge") have brought suit against pro se Defendant Joseph Caesar dba Rabbit Hill Winery and Jennifer Caesar (collectively "Rabbit Hill") for trademark infringement, dilution, and unfair competition. Rabbit Ridge is seeking a preliminary injunction to prevent Rabbit Hill's alleged infringing use of the trademark "RABBIT HILL."
This motion requires the Court to determine whether (1) Rabbit Hill's use of RABBIT HILL on wine infringes Rabbit Ridge's rights in its their federally registered trademark RABBIT RIDGE; (2) a finding of infringement creates a presumption of irreparable harm in favor of Rabbit Ridge; and (3) the balance of hardships tip in favor of Rabbit Hill.
II. FACTUAL BACKGROUND
Plaintiff Rabbit Ridge produces, distributes and sells California wines throughout the United States under the federally registered trademarks RABBIT RIDGE and Rabbit Design. Since 1980, Rabbit Ridge has distributed over 1.2 million 12-bottle cases ($75 million in sales) of Rabbit Ridge wine among national grocery chains such as Albertson's, Safeway, Vons, and Winn Dixie and among national retail outlets such as Costco, Cost Plus, and Longs. Rabbit Ridge has been featured in magazines, newspapers, and television and was recently named Winery of the Year by Connoisseur's Guide to California Wines and Red Wine Value of the Year by Food Wine magazine. (Russell Decl., ¶ 7; Gerien Decl., ¶ 3, Exh. 1.)
Defendant Rabbit Hill produces and sells wines under the name RABBIT HILL. Rabbit Hill sells approximately 300 cases of wine yearly throughout California. Rabbit Hill wine is promoted by the Amador Vintners Association and is sold at the Rabbit Hill winery in Amador County and in small retail outlets and restaurants.
Rabbit Ridge began using the RABBIT RIDGE and Rabbit Design trademarks in 1982. Plaintiff Erich Russell registered the trademarks in 1999 and granted an exclusive license to Rabbit Ridge to use both marks. Defendant Rabbit Hill began using their RABBIT HILL mark for wine sometime around 1998.
RABBIT RIDGE (No. 2,249,789) was registered in June 1, 1999 and the Rabbit Design (No. 2,247,866) was registered in May 25, 1999.
Rabbit Ridge alleges that it became aware of Rabbit Hill's use of their mark sometime around May 2001. Rabbit Ridge received a flyer in the mail advertising an Amador County wine festival in which Rabbit Hill was a participant. On May 24, 2001, Rabbit Ridge issued a cease and desist letter to Rabbit Hill requesting that Rabbit Hill cease use of RABBIT HILL as a mark for wine. (Plain. Compl. Exh. B.) Sometime around June 18, 2001, Rabbit Hill responded in writing. Rabbit Hill claimed that their mark did not infringe on Rabbit Ridge's rights in their mark. Both parties attempted to settle the matter, but their negotiation attempts broke down. (See Def. Opp, ¶ 1.) After negotiation attempts failed, Rabbit Ridge filed this action on August 2, 2001.
III. LEGAL STANDARD
The moving party is entitled to a preliminary injunction if it establishes either: "(1) a combination of probable success on the merits and the possibility of irreparable harm, or (2) that there exist serious questions regarding the merits and the balance of hardships tips sharply in its favor." Rodeo Collection. Ltd. v. West Seventh, 812 F.2d 1215, 1217 (9th Cir. 1987); California Cooler v. Loretto Winery, 774 F.2d 1451, 1455 (9th Cir. 1985); See also Wm. Inglis Sons Baking Co. v. ITT Continental Baking Co., 526 F.2d 86, 88 (9th Cir. 1975); County of Alameda v. Weinberger, 520 F.2d 344, 349 (9th Cir. 1975). The test is a "continuum in which the required showing of harm varies inversely with the required showing of meritoriousness." Rodeo Collection, 812 F.2d at 1217 (quoting San Diego Comm. Against Registration and the Draft v. Governing Board of Grossmont Union High School Dist., 790 F.2d 1471, 1473 n. 3 (9th Cir. 1986)).
To overcome a weak showing of merit, a plaintiff seeking a preliminary injunction must make a very strong showing that the balance of hardships is in its favor. Rodeo Collection, 812 F.2d at 1217. In appropriate cases, the court should also consider whether injunctive relief would serve the public interest. International Jensen. Inc. v. Metrosound U.S.A., Inc., 4 F.3d 819, 822 (9th Cir. 1993). On appeal, the Ninth Circuit will vacate the district court's entry of a preliminary injunction "only if the district court abused its discretion, or based its decision on an erroneous legal standard or clearly erroneous findings of fact." Id. It reviews de novo "the correctness of the legal standards employed by the district court in evaluating the plaintiffs likelihood of success on the merits." Associated Gen. Contractors of CA v. Coalition for Economic Equity, 950 F.2d 1401, 1405 (9th Cir. 1991), cert. denied, 503 U.S. 985 (1992).
IV. ANALYSIS
A. Likelihood of Success on the Merits
1. Federally Registered Marks
In order to prevail on a trademark infringement action, Rabbit Ridge must demonstrate that they have a valid, protectable mark and that Rabbit Hill's use of the RABBIT HILL mark is likely to cause confusion, mistake, or deception. 15 U.S.C. § 1114 (1) (Lanham Act § 32(1)); 15 U.S.C. § 1125 (a) (Lanham Act § 43(a)); Brookfield Communications, Inc. v. West Coast Entertainment Corp., 174 F.3d 1036, 1046 (9th Cir. 1999).
"A certificate of registration of a mark . . . shall be prima facie evidence of the validity of the registered mark and of the registrant's ownership of the mark, and of the registrant's exclusive right to use the registered mark in commerce." 15 U.S.C. § 1057(b). Registered trademarks are presumed to to use the registered mark in commerce." 15 U.S.C. § 1057(b). Registered trademarks are presumed to be distinctive and should be afforded the utmost protection. Americana Trading Inc. v. Russ Berrie Co., 966 F.2d 1284, 1287 (9th Cir. 1992) (citations omitted). Because Rabbit Ridge's marks are federally registered and inherently distinctive, they are entitled to the utmost protection under the trademark laws. Americana Trading, 966 F.2d at 1287. However, as mentioned above, to prevail at the preliminary injunction phase, Rabbit Ridge must also demonstrate that consumer confusion is likely. Brookfield, 174 F.3d at 1046.
2. Likelihood of Confusion
In order to prevail at the preliminary injunction phase, Rabbit Ridge must demonstrate that they are "likely to show . . . a likelihood of confusion" between the trademarks RABBIT RIDGE and RABBIT HILL.GoTo.Com, Inc. v. The Walt Disney Co., et al., 202 F.3d 1199, 1205. The Ninth Circuit has identified eight factors that are relevant in determining likelihood of confusion: (1) strength of the mark; (2) relatedness of the two companies' services; (3) the similarity of the mark; (4) evidence of actual confusion; (5) the marketing channels used; (6) degree of care likely to be exercised by purchaser; (7) defendants' intent in selecting the mark; and (8) the like. AMF Inc., v. Sleekcraft Boats, 599 F.2d 431 (9th Cir. 1979). The list is a "pliant" one "in which `some factors are much more important than others.'" Brookfield Communications. Inc. v. West Coast Entertainment Corp., 174 F.3d at 1054.
a. Strength of the Mark
"The strength of a given mark rests on its distinctiveness. The scope of protection afforded a strong mark is greater than that afforded a weak one. In determining the distinctiveness of a mark one looks to the degree to which the public associates the mark with the particular source . . . [A] `mark's strength can be measured in terms of its location along a continuum stretching from arbitrary, inherently strong marks to suggestive marks, to descriptive marks, to generic, inherently weak marks.'" Postx Corporation v. The docSpace Company, Inc., 80 F. Supp.2d 1056, 1060 (N.D. Cal. 1999) (quoting Miss World (UK) v. Mrs. America Pagaents, Inc., 856 F.2d 1445, 1448 (9th Cir. 1988). Arbitrary marks are entitled to maximum protection while generic marks are afforded no protection. Id. To determine the strength of the mark the Ninth Circuit applies an "imagination test" and "need test."
The imagination test asks how much imagination a consumer must use to associate a given mark with the goods or services it identifies. The product signified by an arbitrary mark requires great imagination. The more imagination required, the stronger the mark is. The "need test" approaches the problem from the opposite end. It asks to what extent a mark is actually needed by competitors to identify their goods or services. If "the message conveyed by the mark about the goods or services is so direct and clear that competing sellers would be likely to [need to] use the term in describing or advertising their goods [or services], then this indicates the mark is descriptive." As the amount of imagination needed increases, the need of the mark to describe the product decreases. [citation].Miss World, 856 F.2d at 1448.
The Court finds that Rabbit Hill's mark is arbitrary and entitled to maximum protection. The RABBIT RIDGE label depicts a gold seated rabbit atop the "Rabbit Ridge" name in blue ink against a stark white background. The label's border is alternately blue with gold striping. The label does not immediately bring wine to one's mind. One must use an extensive amount of imagination to associate the RABBIT RIDGE mark and the Rabbit design with wine. Moreover, neither Rabbit Ridge's mark nor design is needed to convey its goods and services.
Rabbit Ridge has also submitted evidence of the widespread media attention and vast critical acclaim their wine has received. Rabbit Ridge has specificlly noted that Rabbit Ridge wine was named Winery of the Year by Connoisseur's Guide to California Wines and Red Wine Value of the Year by Food Wine magazine. (Russell Decl., ¶ 7; Gerien Decl., ¶ 3, Exh. 1.) Taken together, Rabbit Ridge's arbitrary mark and its acclaim in the marketplace establishes the strength of the RABBIT RIDGE mark and Rabbit design. Accordingly, the Court finds that Rabbit Hill's mark is strong.
b. Proximity of the Goods
The greater the similarity between the goods offered by the plaintiff and the defendant, the more likelihood there is of consumer confusion.Miss World, 856 F.2d at 1450. This factor weighs in favor of Rabbit Ridge. Both parties are involved in the sale of wine. Both parties make the same variety of wine (Zinfandel) using grapes from the same region (Amador County), selling them at similar prices (see Russell Dec., ¶ 8, Exh. 8; Gerien Decl., ¶ 4, Exh. 2.) Moreover, both parties package their wine in 750 milliliter bottles. In addition, the Patent and Trademark Office has repeatedly found that wines of any type constitute a single class of goods. Krug Vins Fins de Champagne v. Rutman Wine Co., 197 U.S.P.Q. 572 (T.T.A.B. 1977); L.N. Renault Sons, Inc. v. Etablissements Leon Rigault, 31 U.S.P.Q. 101 (Op. of Comm'r 1936). "In fact if [Rabbit Hill] sought to register its name as a trademark, it would fall into the same class of goods as [Rabbit Ridge's] trademarks."E. J. Gallo Winery v. Consorzio del Gallo Nero, 782 F. Supp. 457, 464 (N.D.Cal. 1991); See also 27 C.F.R. § 4.23. Therefore, the Court finds that the goods produced by Rabbit Ridge and Rabbit Hill are substantially similar for purposes of establishing a likelihood of confusion.
c. Similarity of the Marks
The similarity of the marks is determined by their sight, sound and meaning (overall appearance). AMF, Inc., 599 F.2d at 351. When assessing likelihood of confusion, similarities are weighed more heavily than differences. Brookfield, 174 F.3d at 1054. Rabbit Ridge argues that the parties' marks are identical because both parties use the word "Rabbit" as the first term of their respective two-word composite marks, and because both employ the use of a rabbit on their wine labels. Here, Rabbit Ridge points the several cases in support of these propositions: Century 21 Real Estate Corp. v. Sandlin, 846 F.2d 1175, 1179 (identity in first term of composite marks fosters confusion); Sun Microsystems, Inc. v. Sunriver Corp., 1995 WL 390696, *4 (N.D.Cal 1995) (marks are largely identical because consumers will focus on "SUN" portion of respective composites).
While the Court agrees that the first term of a composite mark fosters confusion, this characteristic alone does not resolve the similarity analysis. Under Postx Corporation, 80 F. Supp.2d at 1060, the similarity of the marks must also be considered in light of the way the marks are encountered in the marketplace. As discussed more fully below, the manner in which the marks are encountered suggests a finding of dissimilarity. Rabbit Ridge's label depicts a gold seated rabbit cameo affixed atop the "Rabbit Ridge" name in blue ink. The blue lettering is contrasted against a stark white background. The label's sharp border is alternately blue with gold striping. The Anal-type font and distinctive striping gives the label a modern, sleek appearance.
In contrast, Rabbit Hill's label is anything but modern and sleek. The Rabbit Hill label depicts two animated poses of white rabbits atop a small hill covered with flowers. The rabbits are configured under a heavily-leafed tree atop of the hill. Leaning against the tree is a violin. This small portrait is affixed atop of the Rabbit Hill name in Gothic-type font. The label's border is accented by grape leaves. The playful appearance of the rabbits, the picturesque small portrait, and the leaved-border gives the Rabbit Hill label a quaint, cozy appearance and feeling. Moreover, Rabbit Hill's second, alternative label depicts a white rabbit, standing on its hind legs, playing a violin. This label too, evokes a playful, quaint feeling. Thus the Court finds, that, as encountered in the marketplace, the parties' labels are facially distinctive.
See Freixenet, S.A. v. Admiral wine Liquor Co., 731 F.2d 148, 151 (3d Cir. 1984). There, "Freixenet moved for a preliminary injunction alleging trade dress infringement because Admiral's frosted black wine bottle was identical in shape and color to its own. The district court's denial of the preliminary injunction was upheld because the "labels of the two bottles were so dissimilar as to rule out any possibility of confusion' in the minds of the consuming public." Id. at 151.
However, Rabbit Hill's facially distinctive label cannot overcome a finding of similarity between the two marks. Rabbit Ridges's continued use of the term "Rabbit" "as a manifestation of a federally registered mark or in conjunction with other terms establishes not only that the mark itself is strong, but that the consuming public will find the single term ["Rabbit"] to be wholly and uniquely distinctive" whenever it is used in connection with wine. E. J. Gallo, 782 F. Supp. at 464. Because "Rabbit" is the single dominant or substantive term used by Rabbit Ridge on all of its products — including the 14.4 million bottles of wine already sold — Rabbit Hill's use of the term "Rabbit" even on a facially distinctive label or in conjunction with other terms cannot dissuade this Court from concluding that marks are significantly similar for purposes of a finding of a likelihood of confusion. Id.
d. Actual Confusion
The Ninth Circuit has held that since "[t]he absence of actual confusion will not defeat an otherwise successful claim of infringement" (E. J. Gallo Winery, 782 F. Supp. at 465), evidence of actual confusion is not necessary. See Rodeo Collection, 812 F.2d at 1219. In their preliminary injunction motion, Rabbit Ridge concedes that "[a]t present, [we] are not aware of any actual consumer confusion. (Plain. MPA, 13:19.) However, in its reply memorandum, Rabbit Ridge offers three instances of consumer confusion. (Reply, 4:8-24.) The Court finds that such isolated anecdotes are insufficient under case law to establish actual confusion. In light of Rabbit Ridge's high volume of business, these few instances of "actual confusion" are thin at best, and trivial at worst. See Nutri/System, Inc. v. Con-Stan Industries, Inc., 809 F.2d 601 (9th Cir. 1987).
Moreover, Rabbit Ridge acknowledges that it knew nothing of Rabbit Hill until May 2001, approximately two years after Rabbit Hill began making wine. Rabbit Ridge's two year-ignorance of Rabbit Hill, combined with its meager offering of supporting evidence, buttresses this Court's finding that there is no actual confusion.
e. Marketing Channels
"Convergent marketing channels increase the likelihood of confusion. Therefore, the courts examine the proximity of the marketing channels to one another and whether direct competition exists." Id. This factor favors Rabbit Ridge. While it is unclear whether Rabbit Hill markets in stores and retail outlets similar to that of Rabbit Ridge (Cost Plus, Vons, Winn Dixie, etc.), it is clear that both parties market their wine on the Internet. The Ninth Circuit has held that the simultaneous use of the Internet to market both products increases the likelihood of consumer confusion. See Interstellar Starship Svcs., Ltd. v. Epix. Inc., 184 F.3d 1107, 1110 (9th Cir. 1999); Brookfield Communications, 174 E.3d at 1057. Accordingly, this factor favors Rabbit Ridge.
f. Degree of Care Likely to be Exercised
"Confusion between marks is generally more likely where the goods at issue involve relatively inexpensive, `impulse' products to which the average "unsophisticated' consumer does not devote a great deal of care and consideration in purchasing." E. J. Gallo Winery, 782 F. Supp. at 465 (citations omitted). The Ninth Circuit has deemed wine as an "impulse" product. Id. This factor favors Rabbit Ridge.
At $14.99, purchasers of both parties' wines would almost certainly fall into the "unsophisticated" category. Moreover, the Court finds that Rabbit Hill "has failed to contest either through evidence or legal support the characterization of the wine-buying public as generally unsophisticated `impulse' buyers who are an "easy mark for a [trademark] infringer. Id. Accordingly, the Court finds that the lack of consumer sophistication enhances the likelihood of confusion between Rabbit Hill and Rabbit Ridge wine. Id.
g. Defendant's Intent in Selecting a Mark
"This factor considers `whether the [alleged infringer] adopted its mark with the intention of capitalizing on [the opposing party's] reputation and goodwill and any confusion between his and the senior user's product.'" Banfi Products Corp., v. Kendall-Jackson Winery, Ltd., 74 F. Supp.2d 188, 198 (2d Cir. 1999). Rabbit Ridge concedes that they have no evidence of Rabbit Hill's intent in adopting their mark. (Plain. MPA, at 17:7-9.) Despite this, Rabbit Ridge argues that the evidence of intent can be inferred when a defendant continues to use a mark after it has been put on notice. See Wynn Oil Co. v. Thomas, 839 F.2d 1183, 1189 (6th Cir. 1988). The Court disagrees.
The record reflects that Rabbit Hill adopted its mark in 1998, a year before Rabbit Ridge registered their RABBIT HILL mark and Rabbit design. Moreover, Rabbit Hill claims that it chose the name after Scott Harvey, a family friend and president and winemaker at Folie a Deux, suggested it to them. (See Def. Opp. at p. 2) While Rabbit Hill has continued to sell its wine after Rabbit Ridge issued a cease and desist letter on May 24, 2001, the Court does not find that this act infers bad faith. This Court is satisfied that Rabbit Hill's lack of sophistication in trademark disputes, their lack of advice from counsel, and their selection of their mark based on the advise of a family friend prior to Rabbit Ridge's registration indicates that Rabbit Hill acted in good faith when selecting their mark.
h. Expansion of Sales
Because "Plaintiff[s] and Defendants are currently in the same business in the same geographical area [Sacramento], this factor takes on little importance." Guess?, Inc. v. Tres Hermanos, 993 F. Supp. 1277, 1284 (C.D.Cal. 1997). However, Rabbit Ridge argues that this factor should favor Rabbit Ridge because Defendant Joseph Caesar alleged in his Answer that Rabbit Hill has recently enlisted the assistance of a distributor. See Official Airline Guides. Inc., v. Goss, 6 F.3d 1385, 1395 (9th Cir. 1993) (see also Def. Answer, ¶ 4.) The Court disagrees with Rabbit Ridge. The question here is whether there is astrong likelihood that Rabbit Hill may expand their business to compete with the Rabbit Ridge. Id. As noted above, Rabbit Hill only produces 300 cases of wine per year, in contrast to Rabbit Ridge's 1.2 million cases each year. Even in hiring a new distributor, it is unlikely that Rabbit Hill will be "competing" with the likes of Rabbit Ridge anytime soon. Moreover, Rabbit Ridge has not produced any evidence establishing a strong likelihood that such an occurrence will take place. Id. Therefore, the Court finds in favor of Rabbit Hill.
Summary
While the "actual confusion," "expansion of sales" and "intent" factors weigh in favor of Rabbit Hill, the overwhelming majority favor Rabbit Ridge. Thus, the Court finds that, as a matter of law, Rabbit Ridge has shown the likelihood of success on the merits.
3. Irreparable Harm
Where a trademark owner has shown a likelihood of success on the merits, the resultant loss of control over the tradermark and the risk to the goodwill and reputation associated therewith constitutes irrepable injury warranting a preliminary injunction. Dep Corp. v. Opti-Ray. Inc., 768 F. Supp. 710 (C.D. Cal. 1991) (citing Apple Computer v. Formula Int'l. Inc., 725 F.2d 521, 526 (9th Cir. 1984)). As mentioned above, Rabbit Ridge has shown the likelihood that they will be successful on the merits of the case at bar. Thus, the Court finds that Rabbit Ridge will be irreparably harmed by Rabbit Hill's use of the similar RABBIT HILL mark.
4. Balance of Hardships
Rabbit Ridge's strong showing of success on the merits obviates the need for an analysis under this section. Rodeo Collection, 812 F.2d at 1217 (to overcome a weak showing of merit, a plaintiff seeking a preliminary injunction must make a very strong showing that the balance of hardships is in its favor). However, the Court finds that Rabbit Ridge has made the requisite showing that the balance of hardships favors granting Rabbit Ridge's request for injunctive relief
B. Security Bond Amount
"No party other than the United States may be granted a preliminary injunction without first posting security for the payment of such costs and damages as may be incurred by anyone later found to have been wrongfully enjoined." Clark Pacific v. Krump Construction, Inc., 942 F. Supp. 1324, 1352 (D. Nev. 1996); Fed.R.Civ.P. 65(c). "The requirement of security serves to protect a defendant who is enjoined pendent lite but who later prevails on the merits of the case." Clark Pacific, 942 F. Supp. at 1352. In setting the appropriate security amount, the Court looks to approximate Rabbit Hill's potential economic loss by considering both the length of the Court's prohibition and the winery's yearly revenue. Id. at 1353; see also Rathmann Group dba Rathmann-Foster Company v. Joel Tanenbaum, 889 F.2d 787 (8th Cir. 1989) ("the bond should be of an amount adequate to protect [Defendants'] business until such time as the district court enters its final decision").
According to Defendant Joseph Caesar's declaration, the Rabbit Hill Winery produces approximately 300 (12 bottle) cases per year. At approximately $15.00 per bottle, the winery's annual revenue is approximately $54,000, exclusive of overhead and costs. If Defendants Joseph and Jennifer Caesar sold no more Rabbit Hill wine as a result of the injunction and did not attempt to sell wine under a new mark, electing instead to await trial, their approximate damages would total $50,000, exclusive of overhead and costs, as trial in this matter begins on November 4, 2002, roughly a year from now. See Clark Pacific andRathmann Group above. However, the Court is aware that Defendants may elect to sell wine under a new mark. If so, the revenue Defendants could reasonably expect to realize as a result of sales under a new mark arguably would fall somewhere short of $54,000, due to the expected loss of goodwill associated with the prohibited mark. The precise amount of the shortfall, however, is difficult to quantify. With this difficulty in mind, the Court, in looking to strike an appropriate balance between the extremes of the two possible revenue pictures, sets the security to be posted by Rabbit Ridge at $25,000.
The Court has reviewed the proposed security amount suggested by Rabbit Ridge. The Court finds that Rabbit Ridge's suggested amount of $5,000 is insufficient to cover "such costs and damages as may be incurred or suffered by [Defendants should they be] found to have been wrongfully enjoined or restrained." (Fed.R.Civ.P 65(c)); see also Rathmann Group, 889 F.2d 787 ("Evidence in the record indicates that [defendant] may lose gross income of $13,000 per month as a result of the injunction. The $10,000 that [plaintiff] posted pursuant to the TRO thus is inadequate to protect [defendant] in the event that a trial on the merits results in a decision in his favor.")
V. CONCLUSION
Because Rabbit Ridge has made a strong showing of likelihood of success on the merits, and because Rabbit Ridge will be irreparably harmed by Rabbit Ridge's continued use of the RABBIT HILL mark, the Court hereby GRANTS Rabbit Ridge's preliminary injunction motion, and ORDERS Defendants Joseph Caesar dba Rabbit Hill Winery and Jennifer Caesar to cease and desist the use of the above mentioned mark until further notice from this Court. In connection with this Order, Rabbit Ridge shall post security in the sum of $25,000, and shall have seven days from the date of entry of this Order within which time to post such security.
IT IS SO ORDERED.