Wunderwerks, Inc. v. Dual Beverage Co.

ORDER DENYING PLAINTIFF'S MOTION FOR A PRELIMINARY INJUNCTION

Dkt. No. 16

SUSAN ILLSTON United States District Judge

On November 5, 2021, the Court heard oral argument on plaintiff's motion for a preliminary injunction. Dkt. No. 17. Plaintiff Wunderwerks, Inc. (“plaintiff” or “Wunderwerks”) alleges defendants Dual Beverage Company LLC (“DBC”), WNDER, LTD (“Wnder”), and DOES 1-10, collectively “defendants, ” infringe plaintiff's trademark and should be preliminarily enjoined from doing so. Dkt. Nos. 1 and 17. Having considered the papers and arguments made, the Court hereby DENIES plaintiff's motion.

BACKGROUND Plaintiff's complaint (Dkt. No. 1 at 1) alleges five causes of action against defendants:

(1) Federal Trademark Infringement under 15 U.S.C. § 1114

(2) Federal False Designation of Origin under 15 U.S.C § 1125(a)(1)(A)

(3) Common Law Trademark Infringement

(4) California Statutory Unfair Competition under Cal. Bus. & Prof. Code § 17200 et seq.; and

2

(5) Declaratory judgment that Trademark Reg. No. 6, 198, 393 is valid and enforceable.

Plaintiff Wunderwerks was founded in September, 2019, as a wholly owned subsidiary of parent company Radix Labs, Inc. (“Radix”), incorporated in California. Dkt. No. 20 at ¶ 9 (Chialtas Decl.). Radix is based in Napa, California, and was founded in 2018. Id. at ¶ 3. Radix began to sell “all-natural, uninfused^[1]sparkling fruit beverages under the word mark WUNDER” in April, 2019, to customers in California and Florida. Id. at ¶ 4, referencing Dkt. No. 20-1 (Invoices) (emphasis added).

On September 14, 2019, Radix assigned its rights and interests in the “WUNDER” mark to plaintiff. Dkt. No. 20 at ¶ 10; see Dkt. No. 19-1 Exhibit A (Assignment and Transfer Agreement). Plaintiff maintains it has “continued to develop and refine the line of uninfused . . . beverages” and has registered several domain names in connection with uninfused beverages. Dkt. No. 19 at ¶ 9. On October 24, 2019, plaintiff filed a trademark application, U.S. Serial No. 88667500, with the USPTO to register the mark “WUNDER” (the ‘500 application). Dkt. No. 19-1 Exhibit E. The ‘500 application matured to Registration No. 6, 198, 393 (the ‘393 Registration) on November 17, 2020, and has a first use date of April 1, 2019. Dkt. No. 19-1 Exhibit F (Registration certificate). The ‘393 Registration indicates “CLASS 32: Fruit Juices Non-alcoholic sparkling fruit juice beverages; Non-alcoholic carbonated beverages; Concentrates and powders used in the preparation of energy drinks and fruit-flavored beverages.” See WUNDER, Registration No. 6, 198, 393.

Around July 2020, plaintiff launched its infused beverage product, with sales alleged to have begun thereafter around July 2020. Dkt. No. 26 at 8^[2] (Opposition); Dkt. No. 29 at 5 (Reply); Dkt. No. 27-4 Exhibit D (plaintiff's Instagram post of June 27, 2020); Dkt. No. 27-5 Exhibit E (plaintiff's Instagram post of July 10, 2020). This “separate line of infused . . . beverages also sold under the WUNDER mark” is available in eight-ounce cans in three flavors. Dkt. No. 29-3 at ¶ 10. Plaintiff

3

asserts the infused beverages and uninfused beverages differ only by the CBD and THC additives and “[n]one of the ingredients in the uninfused beverage have been substituted.” Id. at ¶¶ 8-9. For example, plaintiff asserts plaintiff's infused Lemon Ginger flavored beverage and Radix's uninfused Lemon Ginger flavored beverages differ only by added CBD and THC. Id. Plaintiff admits the WUNDER mark has not been used since the “end of 2019” in connection with uninfused beverages. Dkt. No. 29 at 9. However, plaintiff maintains that while Radix developed only a single flavor of uninfused beverage (Lemon Ginger), plaintiff is currently developing further flavors of uninfused beverages. Dkt. No. 29-3 at ¶¶ 5-7 (Chialtas Reply Decl.); See Dkt. No. 29-12 Exhibit L (taste-test survey indicating Q3 2021). Plaintiff maintains it is “in the process of securing a manufacturer so that it can release [uninfused beverages] in early 2022.” Dkt. No. 29 at 10; Dkt. No. 29-3 at ¶ 7.

In 2021, plaintiff introduced a product having “larger amounts of extracts from the Cannabis plant, ” in three flavors, under the sub-brand “HIGHER VIBES 20.” Id. at ¶ 11. Both the WUNDER brand beverages and HIGHER VIBES 20 beverages are available at plaintiff's website (www.findwunder.com) via online orders or from retail locations. Id. at ¶ 12. To date, plaintiff has spent about $165, 000 on advertising and has “actively marketed and promoted its . . . [infused] beverages throughout the United States.” Id. at ¶ 15. Defendant DBC was founded in April 2019, and defendant Wnder was formed months later “as the holding company for DBC.” Dkt. No. 26 at 7 (Defendants' Opposition). Defendants selected the brand name “W*NDER” for a line of beverages, wherein the “*” character stands for an “abstract representation of a leaf.” Id. (referencing Dkt. No. 27 at ¶ 3).

On July 17, 2019, defendant DBC filed an intent-to-use trademark application, U.S. Serial No. 88519040, with the USPTO to register the mark “W*NDER” (the ‘040 application) in connection with uninfused beverages. Dkt. No. 28-1 Exhibit 2-A. With respect to beverages, the ‘040 application pertains to “[n]on-alcoholic beverages, namely, carbonated beverages, carbonated beverages enhanced with plant extracts, carbonated beverages enhanced with vitamins, carbonated beverages with fruit flavor with none of the foregoing comprised of any oils, extracts, derivatives or ingredients from Cannabis sativa L with a delta-9 tetrahydrocannabinol (THC) content of more than 0.3 percent on a dry weight basis and none of which contain cannabidiol (CBD).” U.S.

4

Trademark Application Serial No. 88/519040 (filed July 17, 2019) (emphasis added).

In January, 2020, defendants launched the “W*NDER” branded beverages, via online and “brick-and-mortar” distribution. Dkt. No. 27 at ¶¶ 5-6. Defendants' products for sale include CBD-infused beverages. See, e.g., Dkt. No. 18-1 Exhibits 1-6; See, e.g., www.wnder.com (defendants' website). Defendants assert they are also developing a “non-CBD infused line of beverages.”^[3] Id.

In late February 2021, defendants learned of plaintiff Wunderwerks and the WUNDER brand upon receipt of plaintiff's February 23, 2021 cease-and-desist letter. Dkt. No. 27 at ¶ 7 (Robinson Decl.); Dkt. No. 18 at ¶ 8 (Kowsari Decl.); Dkt. No. 18-1 Ex. 10 (Plaintiff's cease and desist letter). Images of plaintiff's and defendants' product marks are shown below:

(Image Omitted)

Defendants filed a Petition to Cancel No. 92076715 with the USPTO on March 18, 2021, in connection with plaintiff's ‘393 Registration. Dkt. No. 1 at ¶ 31; Dkt. No. 18 at ¶ 9; see Cancellation No. 92076715, USPTO (filed March 18, 2021).^[4]

On June 28, 2021, plaintiff filed the instant action and this Motion for Preliminary Injunction on August 23, 2021. Dkt. Nos. 1 and 17. Plaintiff contends defendants' use of the mark “W*NDER” will cause consumer confusion in the reverse direction relative to Wunderwerks' “WUNDER” mark,

5

as plaintiff is a relatively smaller company.^[5]

LEGAL STANDARD

To obtain a preliminary injunction, a plaintiff must establish (1) a likelihood of success on the merits, (2) it is likely to suffer irreparable harm in the absence of preliminary relief, (3) the balance of equities tips in plaintiff's favor, and (4) an injunction is in the public interest. Winter v. Natural Res. Def. Council, 555 U.S. 7, 20, 129 S.Ct. 365, 172 L.Ed.2d 249 (2008). Courts have also applied an alternative “sliding scale” or “serious questions” test, requiring the plaintiff raise “serious questions going to the merits” and showing “the balance of hardships tip[s] sharply in plaintiff's favor.” See Alliance for the Wild Rockies v. Cottrell, 632 F.3d 1127, 1131-32 (9th Cir. 2011); id. at 1135 (stating plaintiff must also show a “likelihood of irreparable injury and that the injunction is in the public interest.”). The sliding scale approach allows courts to balance the factors, offering flexibility where, for example, the plaintiff makes a weaker showing of likelihood of success, but a strong showing of irreparable harm. Id. at 1131. Regardless of the approach, a preliminary injunction is an “extraordinary remedy that may only be awarded upon a clear showing that the plaintiff is entitled to such relief.” Winter, 555 U.S. at 22; see also Earth Island Inst. v. Carlton, 626 F.3d 462, 469 (9th Cir. 2010) (Plaintiffs “face a difficult task in proving that they are entitled to this ‘extraordinary remedy[.]'”).

A preliminary injunction “should not be granted unless the movant, by a clear showing, carries the burden of persuasion.” Mazurek v. Armstrong, 520 U.S. 968, 972 (1997) (citation omitted) (emphasis in original). However, “[d]ue to the urgency of obtaining a preliminary injunction at a point when there has been limited factual development, the rules of evidence do not apply strictly to preliminary injunction proceedings.” Herb Reed Enters., LLC v. Fla. Entm't Mgmt., Inc., 736 F.3d 1239, 1250 n.5 (9th Cir. 2013) (internal citation omitted).

6

DISCUSSION

Plaintiff requests a preliminary injunction restraining “defendants . . ., their agents, and [others] from using the “W*NDER” mark or any mark confusingly similar to Wunderwerk's WUNDER mark in connection with wellness and lifestyle beverages.” Dkt. No. 16 at 1 (Plaintiff's Notice of Motion). Defendants argue plaintiff is not likely to succeed on the merits, the balance of equities tips in defendants' favor, defendants will suffer irreparable harm, and an injunction is not in the public interest. See generally Dkt. No. 26 (Defendants' Opposition).

I. Likelihood of Success on the...