Kiva Health Brands LLC v. Kiva Brands Inc.

439 F.Supp.3d 1185

KIVA HEALTH BRANDS LLC, Plaintiff,

v.KIVA BRANDS INC., et al., Defendants.

Case No. 19-cv-03459-CRB

United States District Court, N.D. California.

Signed February 14, 2020

Jon Bernard Miller, Miller Johnson Law, San Diego, CA, Kathryn J. Fritz, Armen Nercess Nercessian, Matthew Berman Becker, Sarah Vasquez Lightstone, Fenwick & West LLP, San Francisco, CA, Seth M. Reiss, Pro Hac Vice, Seth M. Reiss, AAL, ALLLC, Honolulu, HI, for Plaintiff.

Brett Michael Schuman, Jeremy Noah Lateiner, Nicholas M. Costanza, Goodwin Procter LLP, San Francisco, CA, for Defendants.

ORDER ON CROSS-MOTIONS

CHARLES R. BREYER, United States District Judge

In this trademark case, Plaintiff Kiva Health Brands LLC ("KHB"), a maker of natural foods, and Defendant Kiva Brands Inc. ("KBI"), a maker of cannabis-infused chocolates, both claim the right to the KIVA mark. The Court instructed the parties to file "any motions for summary judgment or partial summary judgment, as to the federal claims in this case only." Order Vacating CMC (dkt. 61). In response, KHB filed a motion for partial summary judgment on KBI's affirmative defenses of laches, prior use, acquiescence, waiver, and estoppel. KHB MSJ (dkt. 63). The same day, KBI filed a motion for partial summary judgment on the single affirmative defense of laches. KBI MSJ (dkt. 64). Because there is a dispute of fact as to when KHB knew or should have known about the threat from KBI, the Court DENIES both motions as to laches. Because KHB prevails on the prior use affirmative defense, the Court GRANTS its motion on that ground. Because there has not yet been discovery on the issues of acquiescence, waiver and estoppel, the Court DENIES KHB's motion on those grounds.

I. BACKGROUND

A. Plaintiff Kiva Health Brands ("KHB")

Plaintiff KHB is a Nevada corporation, with a principal place of business in Hawaii. Henderson Decl. (dkt. 63-1) ¶ 3. It sells health and wellness products throughout the United States and internationally. Id. ¶ 2. Tchad Henderson, a managing member of KHB, along his wife, Janet Chong-Henderson, chose the name KIVA in May or June of 2009 after a trip to Arizona: it refers to a Pueblo word for underground rooms that the Hopi and other Puebloan people used for religious ceremonies. Id. ¶ 4. When starting the business in 2009, Mr. Henderson conducted internet searches to see if other companies used the name KIVA. Id. In 2009, he registered the domain name kivahealthbrands.com. Id. KHB developed its KIVA logo in March 2010 for use on its KIVA Maqui Berry Powder. Id. ¶ 5. In 2010, in connection with the incorporation process, Mr. Henderson conducted another round of searches for other companies using KIVA, and found none that sold health or food products. Id. ¶ 6. KHB began selling its KIVA Maqui Berry Powder to the public in February 2013. Id. ¶ 7. KHB's first online sales were via Amazon.com in June 2013; in September 2013, KHB also sold products through its website, www.kivahealthfood.com. Id. ¶ 9.

In September 2013, KHB filed an application with the USPTO to register the KIVA mark in connection with food products. Id. ¶ 10. Before that, Mr. Henderson "again conducted searches for companies that used ‘KIVA’ in connection with their provision of goods and services," and he "did not turn up any companies that used ‘KIVA’ to market health products or food products such as those that [KHB] sells." Id. ¶ 12. USPTO issued KHB a registration on April 15, 2014. Id. ¶ 10. In 2015 and 2016, KHB obtained additional trademark registrations for marks with the word KIVA on additional food and cosmetic products. Id. ¶ 11.

B. Defendant Kiva Brands Inc. ("KBI")

Defendant KBI is an Oakland-based company incorporated in Delaware. First Amended Counterclaim ("FACC") (dkt. 10) ¶ 1. It is a leading provider of cannabis-infused edible chocolates and confections. Palmer MPI Decl. (dkt. 24-1) ¶ 4. Scott Palmer, the CEO and co-founder of KBI, asserts that KBI started in November 2010 as a California not-for-profit mutual benefit corporation (CNMBC) named Indica. Id. ¶¶ 6, 8.¹ Mr. Palmer and his wife, Kristi Knoblich, brainstormed potential trade names for the company, and decided to do business as "Kiva Confections." Id., Ex. A.

Mr. Palmer declares that Indica manufactured, sold and distributed products bearing the names KIVA and/or KIVA CONFECTIONS with permission from Mr. Palmer and Ms. Knoblich. Id. ¶ 9. The contract that purports to govern that arrangement is the TM License Agreement, between Mr. Palmer and Ms. Knoblich, Licensors, on the one hand, and Indica, Licensee, on the other. See Palmer MPI Decl. Ex. B. The "TM License Agreement was signed on or around October 2018, but [purportedly] memorialized the agreement that had existed since November 2010." Palmer MPI Decl. ¶ 9, Ex. B.² The Court has previously stated that irregularities with the TM License Agreement made the Court disinclined to accept it "as proof of a 2010 assignment of the KIVA mark from Palmer and Knoblich to Indica." Order re MPIs (dkt. 52) at 8–11.

There was a Kiva Confections website as early as March 2011. See Palmer MSJ Decl. (dkt. 67-2) ¶ 6, Ex. A (single page with "KIVA Cannabis Confections," describing Kiva chocolates as "a chocolate bar that redefines what a cannabis confection ought to be," and listing under "where to find us" locations in Berkeley and San Jose, with Oakland and San Francisco "coming soon"); see also id. Ex. B (essentially the same page from March 2012); id. Ex. C (essentially the same page from March 2013, with "please contact us for a list of supporting collectives in your area" instead of a locations list). Kiva Confections had a publicly-available Facebook page since December 2010. See id. ¶ 12; id. Ex. G (Facebook page from December 2010, showing photo of KIVA "Medical Cannabis Chocolate Bar[s]"); id. Ex. H (Facebook page from February 2011, showing three people in KIVA t-shirts at a KIVA booth, advertising KIVA bars); id. Ex. I (Facebook page from May 8, 2012, showing KIVA "medical cannabis" bars, introducing "Blackberry Dark Chocolate" flavor, along with the message, "When you plan a trip to Cali, we'll be here waiting for you!").

Mr. Palmer and Ms. Knoblich formed KBI in 2014. Palmer MPI Decl. ¶ 10. Mr. Palmer asserts that "[b]etween approximately 2014 through 2017, Indica and related entities were reorganized into KBI and its wholly-owned subsidiaries." Id. ³ Mr. Palmer and Ms. Knoblich agreed to transfer all of the intellectual property to KBI in October of 2014. Palmer MPI Decl. ¶ 11, Ex. C ("IP Sale Agreement"). That agreement, between KBI, Buyer, and Mr. Palmer and Ms. Knoblich, Sellers, listed the California trademark for KIVA and the trademark application for KIVA among the intellectual property being sold. Id. Schedule A. Mr. Palmer and Ms. Knoblich co-founded KBI, Indica, and all of their affiliates. Palmer MPI Decl. ¶ 12. They have been the majority and controlling owners and members since the entities' inception. Id. "The main activity of all of these businesses has always been to manufacture, distribute, and sell and promote ‘Kiva Confections’ and its products." Id.

Indica made its first sales of cannabis-infused chocolate in December 2010. Id. ¶ 13. In 2015, KBI expanded its business to Arizona, Nevada, Illinois, Hawaii and Michigan. Id. ¶ 14. Mr. Palmer declares that since 2010, KBI has used both "KIVA" and "KIVA CONFECTIONS" on its products, and that there has never been a strategic change in how often KBI uses one or the other. Id. ¶ 15. KBI has sold millions of units, including 1,705,000 units in California in 2018. Id. ¶ 18. It has a marketing budget of $6.5 million for the 2019 year. Id. "Over the past several years," KBI registered the KIVA mark on the state level in California and other states. Id. ¶ 20, Ex. H.⁴ A California trademark issued on January 20, 2018, for the KIVA mark for "Chocolate and confections, all of the foregoing containing cannabis," and states a first use date of December 1, 2010. Palmer MPI Decl. Ex. H.

C. The Conflict Between the Parties

Mr. Henderson declares that he learned about KBI while at a food industry trade show in California around June 2015. Henderson Decl. ¶ 15. A vendor approached him and asked whether KHB was the same as a company doing business as "Kiva Confections," "a marijuana company in California." Id. After the show, Mr. Henderson researched Kiva Confections on the internet. Id. ¶ 16. Upon reviewing KBI's website and social media, and searching on Google, he "understood that ‘Kiva Confections’ seemed to be a small company that sold edible products that contained marijuana (for medical use only at that time), exclusively or primarily in the San Francisco Bay Area." Id.

In late 2016 or early 2017, KHB's customers began expressing confusion about KHB and "Kiva Confections." Id. ¶ 17. The number and severity of customers' concerns increased through 2017 and into 2018. Id. In January of 2017, KHB staff began keeping a customer confusion log. Id. ¶ 18; Ex. 9. On May 5, 2018, KHB's counsel sent a cease and desist letter to KBI about the rise in customer confusion, and demanded that KBI cease infringing the KIVA mark. Henderson Decl. ¶ 22; Ex. 13. Counsel for KBI responded on May 22, 2018, seeking to schedule an amicable resolution. Henderson Decl. ¶ 23; id. Ex. 14. KHB responded on June 5, 2018, proposing a mediation. Henderson Decl. ¶ 24; id. Ex. 15. KBI responded on July 24, stating that mediation would be premature. Henderson Decl. ¶ 25; id. Ex. 16.

KHB brought suit in September 2018 for trademark infringement, unfair competition in violation of the Lanham Act, declaratory relief, and unfair and deceptive trade practices under state law. See generally Compl. (dkt. 1). It served the Complaint in December 2018, see Waiver of Service Executed (dkt. 4), after the parties held a structured mediation in November and December 2018, see KHB Reply re MPI (dkt. 27) at 4. KBI filed counterclaims. See Counterclaims (dkt. 8); Amended...