Instant Infosystems, Inc. v. Open Text, Inc.

INSTANT INFOSYSTEMS, INC., Plaintiff and Respondent, v. OPEN TEXT, INC., Defendant and Appellant.

B276691

COURT OF APPEAL OF THE STATE OF CALIFORNIA SECOND APPELLATE DISTRICT DIVISION FIVE

August 24, 2017

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

(Los Angeles County Super. Ct. No. BC619405)

APPEAL from an order of the Superior Court of Los Angeles County, Robert H. O'Brien, Judge. Affirmed.

Vedder Price, James V. Garvey, Deborah A. Hedley and Christopher Ramos for Defendant and Appellant.

Ervin Cohen & Jessup, Allen Cooper, Barry MacNaughton and Amy S. Russell for Plaintiff and Respondent.

____________________

I. INTRODUCTION

Defendant and cross-complainant Open Text, Inc. (Open Text or defendant) appeals from the denial of a preliminary injunction. Plaintiff and cross-defendant Instant InfoSystems, Inc. (Instant InfoSystems or plaintiff) and Open Text had a prior contractual relationship. Instant InfoSystems serviced a product, RightFax, belonging to defendant. After the business relationship ended, defendant allegedly made it known to customers that plaintiff was not permitted to service RightFax, which plaintiff disputed. Instant InfoSystems sued Open Text for intentional interference with a contractual relation and violation of the Unfair Competition Law (Bus. & Prof. Code, § 17200 et seq.).

Open Text cross-complained for, inter alia, trademark infringement, unfair competition, false advertising, and breach of contract. Open Text asserted Instant InfoSystems breached their license agreement which required plaintiff to stop using Open Text's trademark after the agreement ended. Open Text also argued Instant InfoSystems's use of the RightFax trademark amounted to trademark infringement and dilution. Defendant also complained of plaintiff's alleged misleading statements related to RightFax. Defendant subsequently moved for a preliminary injunction on the above grounds. The trial court denied the motion.

Open Text contends the trial court erred by denying the preliminary injunction request. We affirm.

II. BACKGROUND

A. Pleadings

Instant InfoSystems is a California corporation with its principal place of business located in Los Angeles, California. Open Text is a Delaware corporation with its principal place of business located in San Mateo, California. Instant InfoSystems is in the sale and service business for computer enabled fax software and services. A user of the software would be able to fax documents via a computer without the need for a fax machine. The computer enabled fax software and service was sold under the trade name RightFax. RightFax is popular with businesses requiring large scale faxing, such as hospitals and insurance companies. RightFax was originally owned by Captaris, Inc. Open Text purchased Captaris in 2008. It is undisputed Open Text holds the RightFax federal trademark.

Instant InfoSystems previously had a contractual relationship with Captaris to service RightFax products installed by plaintiff in its customers' businesses. Following Open Text's purchase of Captaris, the parties entered into the "Open Text Partner Master Agreement" (master agreement) on or about April 21, 2014. Section 3.4 of the master agreement provides in pertinent part: "Immediately upon termination, Partner [Instant Infosystems] shall stop representing itself as an OT partner and cease use of all OT Products and OT Materials except as explicitly authorized by [Open Text] in writing." Open Text terminated the master agreement on October 31, 2015.

On May 4, 2016, Instant InfoSystems filed its complaint against Open Text. It alleged that following termination of the master agreement, it notified plaintiff's customers that plaintiffwould no longer be able to provide services relating to RightFax. Open Text also allegedly denied Instant InfoSystems access to defendant's Knowledge Center, which would severely limit plaintiff's ability to provide its customers adequate technical support. Open Text allegedly contacted Instant InfoSystems's customers and offered to take plaintiff's place as support services. Plaintiff alleged intentional interference with prospective economic advantage, intentional interference with contractual relations, and unfair competition pursuant to Business and Professions Code section 17200.¹

Open Text filed its cross-complaint on June 15, 2016. It alleged plaintiff's Web site used RightFax trademarks even after its license for such use ended when defendant terminated the master agreement. Instant InfoSystems allegedly sent out e-mails in May 2016 advertising a webinar promoting XMediusFax, a competitor to RightFax, stating, "[i]f you are using RightFax, you will want to join us to learn how you can overcome the shortcomings of the RightFax collective architecture for disaster recovery." On June 2, 2016, Instant InfoSystems allegedly e-mailed multiple Open Text customers stating that certain RightFax products would be reaching its "support end of life" or "end of life." Open Text asserted the "end of life" statements were misleading and false. Open Text alleged 10 causes of action, including: breach of contract; trademark infringement under the Lanham Act (15 U.S.C. § 1114), Business and Professions Codesection 14245 et seq., and common law; trademark dilution under the Lanham Act (15 U.S.C. § 1125(c)) and Business and Professions Code section 14247; unfair competition under the Lanham Act (15 U.S.C. § 1125(a)) and Business and Professions Code section 17200 et seq.; and false advertising under Business and Professions Code section 17500.

B. Motion for Preliminary Injunction

Open Text moved for a preliminary injunction on June 20, 2016.² It argued it had a likelihood of prevailing on the merits for its claims of: breach of contract; trademark infringement and trademark dilution under the federal Lanham Act; and false advertising and unfair competition under California's False Advertising Law and Unfair Competition Law. It also contended irreparable harm would occur if the injunction was not granted and sought to enjoin Instant InfoSystems from: using defendant's intellectual property, including the RightFax marks, for any purpose, including plaintiff's Web site; representing itself or holding itself out to the public as being associated with RightFax or Open Text in any way; and misrepresenting the nature, characteristics, or qualities of RightFax to the public.

Instant InfoSystems asserted no breach occurred and argued its use of RightFax marks is nominative fair use. Plaintiff contended its use of the phrase "end of life" was factually accurate under an industry standard and thus was not false or misleading. Plaintiff also asserted Open Text failed todemonstrate irreparable harm. Instant InfoSystems contended the balance of hardships tips in favor of itself, not Open Text.

On July 13, 2016, the trial court issued its ruling by minute order. The minute order stated: "The court is unable to conclude that the moving party is likely to prevail in this lawsuit (either party). [¶] Request for preliminary injunction denied." This appeal followed.

III. DISCUSSION

A. Standard of Review

Code of Civil Procedure section 527, subdivision (a) provides in pertinent part: "A preliminary injunction may be granted at any time before judgment upon a verified complaint, or upon affidavits if the complaint in the one case, or the affidavits in the other, show satisfactorily that sufficient grounds exist therefor." Code of Civil Procedure section 526 describes when an injunction may be granted, including: "(1) When it appears by the complaint that the plaintiff is entitled to the relief demanded, and the relief, or any part thereof, consists in restraining the commission or continuance of the act complained of, either for a limited period or perpetually. [¶] (2) When it appears by the complaint or affidavits that the commission or continuance of some act during the litigation would produce waste, or great or irreparable injury, to a party to the action. [¶] . . . [¶] (4) Where pecuniary compensation would not afford adequate relief. [¶] (5) Where it would be extremely difficult to ascertain the amount of compensation which would afford adequate relief."

Generally, a trial court's grant or denial of a preliminary injunction is reviewed for abuse of discretion. (Oiye v. Fox (2012) 211 Cal.App.4th 1036, 1047.) For preliminary injunction requests, a trial court evaluates 1) the likelihood a plaintiff will prevail on the merits at trial, and 2) the interim harm a plaintiff is likely to sustain absent an injunction against the harm a defendant is likely to sustain if the injunction is granted. (White v. Davis (2003) 30 Cal.4th 528, 554.) For the denial of a preliminary injunction, the standard of review on appeal is whether the trial court abused its discretion in ruling on both the balancing factors. (Cohen v. Board of Supervisors (1985) 40 Cal.3d 277, 286-287.) "'Discretion is abused when a court exceeds the bounds of reason or contravenes uncontradicted evidence. [Citation.]' [Citation.]" (14859 Moorpark Homeowner's Assn. v. VRT Corp. (1998) 63 Cal.App.4th 1396, 1402.) The more likely it is that the plaintiff will ultimately prevail, the less severe must be the harm that the plaintiff alleges will occur if the injunction does not issue. (King v. Meese (1987) 43 Cal.3d 1217, 1226.)

If the likelihood of prevailing on the merits depends on a question of pure law rather than on evidence to be introduced at trial, the standard of review is whether the law was correctly interpreted and applied by the trial court. (SB Liberty, LLC v. Isla Verde Assn., Inc. (2013) 217 Cal.App.4th 272, 281; Garamendi v. Executive Life Ins. Co. (1993) 17...