ORDER RE PLAINTIFFS’ MOTION FOR PRELIMINARY INJUNCTION [17]
I.
PROCEDURAL BACKGROUND
On September 16, 2016, Plaintiffs Mor-occanoil, Inc. and Moroccanoil Israel Ltd. (collectively, “Moroccanoil”) filed their Complaint against Defendant Zotos International, Inc. (“Zotos”) alleging (1) trademark infringement under 15 U.S.C. § 1114; (2) trademark infringement and unfair competition under 15 U.S.C. § 1125(a); (3) common law trademark infringement and unfair competition; (4) breach of contract; (5) false advertising under 15 U.S.C. § 1125(a); (6) unfair business practices under Cal. Bus. and Prof. Code §§ 17200 and 17500; (7) trade secret misappropriation under 18 U.S.C. § 1836(b); and (8) trade secret misappropriation under Cal. Civil Code § 3426. [Doc. # 1.]
On November 10, 2016, Moroccanoil filed a motion for a preliminary injunction
On December 9, 2016, the Court held a hearing and requested the parties file simultaneous supplemental briefing on the amount of bond necessary to safeguard Zotos in the event the preliminary injunction is determined to be improvidently granted. [Doc. #46.] On December 16, 2016, the parties filed supplemental briefs (“First Suppl.”). [Doc. ## 56, 57.] On December 23, 2016, the parties filed responses to the supplemental briefs (“Second Suppl.”). [Doc. ## 64, 70.]
Having duly considered the parties’ written submissions and oral argument, the Court GRANTS Moroceanoil’s motion for preliminary injunction for the reasons set forth below.
II.
FACTUAL BACKGROUND
Launched in 2007, Moroсcanoil distributes hair and body care products in the United States featuring “argan oil to revitalize and replenish hair.” Compl. ¶¶ 12, 15. Each of its products bear one or more trademarks, including: (a) the word “Mor-occanoil”—United States Patent and Trademark Office (“USPTO”) Registration No. 3,478,807; (b) “M Moroccanoil Design”—with the word Moroccanoil in white vertical lettering next to the letter M in copper orange on a turquoise blue background, USPTO Registration No. 3,684,910 (“Vertical Design Mark”); and “M Moroc-canoil Design”—with the word Morocca-noil in white horizontal lettering through the letter M in copper orange on a turquoise blue background, USPTO Registration No. 3,684,909 (“Horizontal Design Mark”) (the ‘^Vertical Design Mark” and “Horizontal Design Mark” collectively, the “Moroccanoil Trademarks”). Id- ¶ 18; see also Declaration of Nicole Sands in support of Pis.’ Mot. (“Sands Deck”) ¶¶ 4-5, Exs. 3-4 [Doc. # 17-1 at p. 22]. The Mor-occanoil Trademarks were registered on September 22, 2009, and a declaration of incontestability for each of the trademarks was accepted by the USPTO on January 9, 2015. Id. The Moroccanoil Trademarks are displayed in the images below.
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Mot. at 5.
Moroccanoil has sold its products in
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Sands Decl. ¶ 3, Ex. 2.
Moroccanoil is known as a “high-quality, premium hair care brand” and takes “significant steps to ensure that it controls and maintains its high-end, high-quality status in the marketplace.” Declaration of Jay Elarar in support of Pis.’ Mot. (“Elarar Decl.”) ¶ 3 [Doc. 17-1 at p. 6]. Since 2007, it has spent a substantial amount of money in advertising directed to the United States. Declaration of Allan Weizmann in support of Pis.’ Mot. (“Weizmann Decl.”) ¶ 4 [Doс. # 17-1 at p. 30]. Its products are sold on its own website as well as “premium” salons and spas, “high-end” retailers such as Saks, Neiman Marcus, Barneys, Nordstrom and Sephora, and “upscale” beauty supply stores such as Planet Beauty and Design Collection. Elarar Decl. ¶¶ 3-5, 7-8.
Zotos is a “professional beauty industry leader that manufactures and markets a range of hair care products.” Compl. 14; see also Declaration of Elizabeth Kenny in support of Def.’s Mot. (“Kenny Decl.”) ¶ 3 [Doc. # 23-2], In 2014, Zotos and Morocca-noil explored a possible business relationship whereby Zotos would manufacture certain hair care products for Moroccanoil. Compl. ¶¶49, 51; see also Declaration of Gloria Hoo (“Hoo Deсl.”) in support of Pis.’ Mot. ¶ 2 [Doc. # 17-1 at p. 13]; Declaration of Laura Salley in support of Def.’s Mot. (“Salley Decl.”) ¶ 4 [Doc. # 23-3]. On October 1, 2014, the parties signed a Non-Disclosure Agreement regarding the potential business arrangement. Id. Mor-occanoil and Zotos had no substantive communications from late 2014 through early 2016. Salley Decl. ¶ 5. In September of 2016, Moroccanoil advised Zotos that it was not moving forward with any potential business opportunity. Id. ¶ 9.
In or around July, 2016, Zotos began to market and sell a line of hair care products featuring argan oil known as “Luxe Majestic Oil” (“Majestic Oil). Compl. ¶ 14; see also Declaration of Bruce Selan in support of Def.’s Mot. (“Selan Deck”) ¶4 [Doc. # 23-4], Zotos sells its products in paсkaging that includes the term “MAJESTIC OIL” in vertical white lettering with an orange fleur-de-lis symbol in front of a blue background, as displayed in the images below.
Kenny Decl. ¶ 7.
The largest seller of its hair care products is Sally Beauty Supply, a retailer chain that sells beauty supplies at value prices. Id. ¶ 4. Zotos’ products appeal to consumers in the market for “a lower-priced alternative to hair care brands that are typically sold at higher price points at high-end department stores and salons.” Id. ¶ 5. Zotos promotes its “Luxe Majestic Oil” line of products with flyers, in-store displays and emails that state: “Compare to Moroccanoil® and Save” and “If you like Moroccanoil® products, you’ll LOVE our new Luxe Majestic Oil line.” Id. ¶¶ 11-13, Exs. 1-3.
Moroccanoil alleges that Zotos’ line of products appear to be designed “specifically to mimic and poach the Moroccanoil Trademarks and the Moroccanoil Trade Dress.” Compl. ¶ 21. It seeks a preliminary injunction “to preserve the status quo that preceded Zotos’ infringement of Morocca-noil’s longstanding trademarks and trade dress.” Mot. at 1; see also Compl. ¶¶ 31, 39.
III.
LEGAL STANDARD
Federal Rule of Civil Procedure 65 governs the issuance of preliminary injunctions. Fed. R. Civ. P. 65(a). Plaintiffs seeking injunctive relief must show that (1) they are likely to succeed on the merits; (2) they are likely to suffer irreparable harm in the absence of preliminary relief; (3) the balance of equities tips in their favor; and (4) that an injunction is in the public interest. Toyo Tire Holdings of Ams. Inc. v. Cont’l Tire N. Am., Inc.,
Under the Ninth Circuit’s “sliding scale” approach to preliminary injunctions, the four “elements of the preliminary injunction test are balanced, so that a stronger showing of one element may offset a weaker showing of another.” Alliance For The Wild Rockies v. Cottrell,
DISCUSSION
A. Likelihood of Success on the Merits
1. Whether The Marks Are Valid and Enforceable
To succeed on a claim for trademark infringement, the plaintiff must demonstrate: (1) the presence of a valid and protectable trademark; and (2) that defendant’s use of the mark “is likely to cause consumer confusion.” Aurora World, Inc. v. Ty Inc.,
“In contrast to a trademark, ‘trade dress’ refers to the ‘total image of a product’ and may include features such as size, shape, color, color combinations, texture or graphics.” Int'l Jensen, Inc. v. Metrosound U.S.A., Inc.,
i. Functionality
A plaintiffs trade dress must be nonfunctional to be protected. TrafFix Devices v. Mktg. Displays, Inc.,
Zotos argues the Moroccanoil Trade Dress is functional because elements such as (1) “white lettering on colored packaging;” (2) “placing letters vertically on products;” (3) use of an amber bottle for liquid products; and (4) use of the turquoise color are “common in hair care products.” Opp. at 12. As noted above, however, the focus of a trade dress claim is not on the individual elements, but on the “overall visual impression that the combination and arrangement of those elements сreate.” Clicks Billiards, Inc. v. Sixshooters, Inc.,
Distinctiveness requires the trade dress be “capable of distinguishing the applicant’s goods from the goods of others.” Kendall-Jackson Winery, Ltd. v. E. & J. Gallo Winery,
Here, Moroccanoil contends that its Trade Dress is suggestive and therefore inherently distinctive because “it requires imagination, thought and perception to reach a conclusion as to the nature of goods.” Mot. at 11 (quoting Surgicenters of Am., Inc. v. Med. Dental Surgeries, Co.,
In sum, the Court finds Moroccanoil establishes evidence that its Trademarks and Trade Dress are valid and enforceable marks.
2. Likelihood of Confusion
Likelihood of confusion exists whenever “consumers are likely to assume that a product or service is associated with a source other than its actual source because of similarities between the two sources’ marks or marketing techniques.” Nutri/System, Inc. v. Con-Stan Indus., Inc.,
Here, as discussed more fully below, after balancing the eight Sleekcraft factors,
i.Strength of Marks
“The stronger a mark—meaning the more likely it is to be remembered and associated in the public mind with the mark’s owner—the greater the protection it is accorded by the trademark laws.” Network Automation,
Here, Moroecanoil’s marks appear to be suggestive because a consumer must make a “mental leap” to understand the term “Moroecanoil” refers to hair and body products that contain argan oil. Brookfield Commc’ns,
ii.Proximity of Goods
Goods are proximate if consumers are “likely to associate” the two product lines. Surfvivor Media, Inc. v. Survivors Prods.,
iii.Similarity of the Marks
“[T]he similarity of the marks—has always been considered a critical question in the likelihood-of-confusion analysis.” GoTo.com v. Walt Disney Co.,
Morоccanoil argues that its Trademarks and Trade Dress are substantially similar to the Zotos’ Majestic Oil line of products. Mot. at 13-14. On the shampoo, conditioner, oil treatment and styling cream, Moroc-canoil contends the term “Majestic Oil” arranged vertically in white letters with an orange symbol in front of a blue background is similar to Moroccanoil’s Vertical Design Mark as well as its Trade Dress. Id. at 14. On the mask product, Morocca-noil contends the term “Majestic Oil” arranged horizontally in white lettering over an orange symbol in front of a blue background is similar to Moroccanoil’s Horizontal Design Mark and its Trade Dress. Id. at 14-15.
Zotos disagrees. It argues the name “Majestic Oil” is distinct from the “Mor-occanoil” name, with the only common elements being the first letter and the generic word “oil.” Opp. at 15. Moreover, “Majestic” and “Morocco” do not invoke the same meaning because majestic is an adjective used to describe impressive beauty or dignity, while Morocco is a noun that describes a specific place in the world. Id. at 16. Zotos also points out that its products do not contain an “orange M” and make no particular emphasis on the letter “M” of Majestic Oil. Id. • at 15. Although its products have vertical lettering and a blue background, Zotos claims that vertical lettering is functional and common in hair care products, and that the shades of blue are clearly distinct. Id. at 15-16. Zotos also contends that an amber bottle is functional for liquid products. Id. at 17.
Here, the Court agrees with Zotos that the product names “Moroccanoil” and “Majestic Oil” are sufficiently distinct, and thus an injunction will not issue as to the name “Majestic Oil.” The appearance of the Zotos products, however, is strikingly similar to the Moroccanoil products. Zotos’ marks consist of similar white vertical lettering, similar placement of an orange symbol, and a similar blue background. While an amber bottle by itself may be functional, the Majestic Oil product is similarly packaged as the Moroccanoil product with the vertical white lettering and orange symbol against a blue box background.
Thus, after reviewing the parties’ arguments and the products themselves, the Court finds there are more similarities in the marks than differences when considered in their entirety and as they appear in the marketplace. This factor therefore favors Moroccanoil.
iv. Evidence of Actual Confusion
Evidence of “actual confusion among significant numbers of consumers provides strong support for the likelihood of confusion.” Network Automation,
Moroccanoil provides a survey conducted by Dr. Michael A. Kamins, currently the Director of Research, Full Professor and Area Head of Marketing with tenure at the Harriman School of Business at Stony Brook University-SUNY. Expert Report of Dr. Michael A. Kamins (“Ka-mins Report”) in support of Pis.’ Mot. ¶ 7 [Doc. 17-1 at p. 45.] Dr. Kamins was asked to “conduct an empirical study designed to examine whether or not consumers, or potential consumers of hair care products who purchase, such items either on the internet or at a beauty supply store would be confused” between Moroccanoil products and Majestic Oil products. Id. ¶ 1. Dr. Kamins’ survey found that 41% of respondents believed that Majestic Oil products were manufactured by or associated with Moroccanoil. Id. ¶¶ 43^45.
Zotos contends that Kamins’ survey is flawed. Opp. at 20. Zotos provides the expert report of Eugene P. Ericksen (“Er-icksen Report”), an Emeritus Professor of Sociology and Statistics at Temple University and Special Consultant with NERA Economic Consulting, who opines that Dr. Kamins used the “wrong survey design, and, as a result, produced an artificially high estimate of the confusion rate.” Declaration of Diana Hughes Leiden in support of Def.’s Mot. ¶ 8, Ex. 7 at ¶¶ 1, 8 [Doc. # 23-1.] Dr. Ericksen points out the following “critical errors” in Dr. Kamins’ use of the Squirt design: (1) the products at issue are not sold in the same stores nor at the same price point; (2) the “survey design did not appropriately reflect market conditions”; (3) the failure to consider the “impact of price” meant that Dr. Ka-mins studied “the wrong universe”; and (4) the survey failed to “use appropriate control stimuli.” Opp. at 20; Ericksen Report ¶¶ 8-10.
The Squirt design is “most appropriate where a product with a weak mark is sold in close proximity to the alleged infringer in the marketplace.” Isle of Capri Casinos, Inc. v. Flynt,
v. Marketing Channels Used
“Convergent marketing channels increаse the likelihood of confusion.” Sleekcraft,
Here, Zotos argues that the products serve entirely distinct markets. Opp. at 18. Moroccanoil sells its products- in high-end stores such as Saks, Neiman Marcus, Barney’s and Nordstrom. Elarar Decl. ¶ 8. On the other hand, Zotos sells its products at the Sally Beauty Supply chain, which serves consumers seeking lower prices. Kenny Decl. ¶ 5. Moroccanoil disagrees, contending the parties’ marketing channels overlap because the parties target the same general class of purchasers—female consumers of hair care products. Reply at 8. This is evidenced by Zotos’ “efforts to target and capture Moroccanoil customers” through its comparative advertising, such as “If you like Moroccanoil, you’ll LOVE Luxe Majestic Oil!” Id. at 7. Moroc-carioil is also concerned about the sale of both products on non-authorized Internet websites, such as Amazon, eBay, Sears, Wal-Mart and Sleekhair Beauty. Mot. at 16.
The fact that both parties sell products online adds little weight in the overall likelihood of confusion analysis. Network Automation,
Notwithstanding that the parties sell their products in different marketing channels, the “similarities between the products suggest an overlapping general class of consumers.” See Pom Wonderful,
Thus, this factor favors Moroccanoil.
vi. Type of Goods and Degree of Care Likely to be Exercised by Purchaser
When purchasing inexpensive products, courts generally assume that consumers will exercise less care. Brookfield Commc’ns,
Moroccanoil argues that this factor favors likelihood of confusion because Zotos’ products are inexpensive and therefore consumers are not likely to exercise a heightened degree of care. Mot. at 18. In response, Zotos contends consumers will notice a distinction between the products because Zotos “expressly distinguished the products in its marketing.” Opp. at 22. As Moroccanoil points out, however, Zotos products are sold on the Internet without the “comparative advertising.” Reply at 6; Sands Decl. ¶ 21, Ex. 25; Declaration of Eric S. Engel in support of Pis.’ Mot. ¶ 2, Ex. 26 [Doc. 17-1 at p. 11]. Moreover, the term “our” in Zotos’ advertisement—“If you like Moroccanoil® products, you’ll LOVE our new Luxe Majestic Oil line”— may appear ambiguous to consumers as to whether the companies are associated with eách other. Kenny Decl. ¶ 11, Ex. 1. Thus, this factor favors Moroccanoil.
The Ninth Circuit has previously “emphasized the minimal importance of the intent factor.” GoTo.com,
Here, it is undisputed that Zotos was aware of the Moroccanoil Trademarks and Trade Dress when it began selling its Majestic Oñ products. In 2014, Zotos and Moroccanoil explored a possible business relationship whereby Zotos would manufacture certain hair care products for Mor-occanoil. See Hoo Decl. ¶ 2; Sallеy Decl. ¶ 4. The fact that Zotos was “aware” of Moroccanoil, without more, “provides no direct evidence of [Zotos’] judgment concerning likely confusion.” Entrepreneur Media, Inc. v. Smith,
viii. Likelihood of Expansion of the Product Lines
“The likelihood of expansion in product lines is relatively unimportant where two companies already compete to a significant extent.” GoTo.com,
B. Irreparable Harm
A plaintiff must “demonstrate a likelihood of irreparable injury—not just a possibility—in order to obtain preliminary relief.” Winter,
Moroccanoil argues it is likely to be irreparably harmed by “Zotos’ interference with Moroccanoil’s ability to maintain its image as a premium brand by selecting its price points and sales and marketing channels.” Mot. at 22. In support, Moroc-canoil points to the fact that Zotos is clearly targeting Moroccanoil customers with its advertisements: “Compare to Moroccanoil® and Save” and “If you like Moroccanoil® products, you’ll LOVE our new Luxe Majestic Oil line.” Reply at 13; Kenny Deck ¶¶ 11-13, Exs. 1-3. Morocca-noil also submits the expert report of William Decker, an independent consultant in the professional beauty industry, who opines that once the public perceives a brand is no longer “premium,” it is “difficult, if not impossible, to rеinstate the
Accordingly, Moroccanoil will likely suffer irreparable reputational injury without the issuance of an injunction enjoining Zo-tos from distributing its Majestic Oil products in their current packaging.
C.Balance of Equities
Before issuing a preliminary injunction, courts must weigh “the competing claims of injury and [] consider the effect on each party of the granting or withholding of the requested relief.” Amoco Prod. Co. v. Village of Cambell, AK,
D. Public Interest
“The public interest analysis for the issuance of a preliminary injunction requires [district courts] to consider whether there exists some critical public interest that would be injured by the grant of preliminary relief.” Alliance for the Wild Rockies,
E. Bond
Under Federal Rule of Civil Procedure 65(c), “[t]he court may issue a preliminary injunction ... only if the mov-ant gives security in an amount that the court considers proper to pay the costs and damages sustained by any party found to have been wrongfully enjoined or restrained.” Fed. R. Civ. P. 65(c). The Ninth Circuit has recognized that Rule 65 “invests the court with discretion as to the amount of security required, if any.” Jorgensen v. Cassiday,
Zotos contends it will suffer “very significant financial and reputational harm” if it is required to recall all existing Majestic Oil products and redesign and repackage its product line. Defs First Suppl. at 2 [Doc. # 56.] It claims it will need to recall a substantial number of cases of products from more than 3,000 retail stores and warehouses nationwide. Id.; see also Suppl. Declaration of Elizabeth Kenny in support of Def.’s Mot. (“Suppl. Kenny Decl”) ¶¶4-5 [Doc. #56-1.] Thus, Zotos requests a bond in the amount of $2.5 million, consisting of costs associated with recalling the products, redesigning the packing, destroying unsellable units, storing the remaining units, and other costs if Zotos is unable to sell warehoused inventory. Defs First Suppl. at 4-5; Suppl. Kenny Decl. ¶¶ 6-16. Zotos also requests lost profits over the next six months. Defs Second Suppl. at 3 [Doc. # 70.]; Second Suppl. Declaration of Elizabeth Kenny in support of Defi’s Mot. ¶ 6 [Doc. # 70-1.] In response, Moroecanoil argues that Zotos fails to base its requested amount on “actual harm demonstrated by admissible evidence” and that “no bond or at most a bond in the amount of $25,000 is appropriate.” Pis.’ First Suppl. at 1 [Doc. # 64.]
Based on the record before it, the Court finds that a bond in the amount of $250,000 is reasonable, which takes into account tangible costs Zotos would incur as a result of the preliminary injunction, including costs to (a) ship its product currently in Sally Beauty’s brick-and-motor stores and distribution centers, and (b) store current Majestic Oil products that could potentially be re-sold. Although Zotos claims that it is not “commercially viable” to resell Majestic Oil products currently on the shelves at Sally Beauty, it does not appear that all of the product must be destroyed. Suppl. Kenny Decl. ¶ 10. Moroccanoil’s expert, Mr. Decker, opines that “it is common for beauty product manufactures to resell products that have been returned to the manufacturer by a retailer and reworked for resale.” Supplemental Report of William Decker in support of Pis.’ Mot. ¶ 6 [Doc. # 64 at p. 8]. Thus, the Court declines to order “buy back” costs since it appears Zotos may recoup such amounts if it resumes selling its product with a non-infringing trade dress. Fiji Water Co., LLC v. Fiji Mineral Water USA LLC,
Y.
CONCLUSION
In light of the foregoing, the Court GRANTS Moroccanoil’s motion for preliminary injunction.
IT IS SO ORDERED.
Notes
. The Court does not address Moroccanoil’s objections to Exhibit 4 to the Declaration of Diana Hughes Leiden because it did not consider the document in resolving the Motion. [Doc. #31.]
. Zotos requests that the Court take judicial notice оf the Notice of Opposition filed' on March 7, 2016 by Tiffany (NJ) LLC with the
. In connection with the parties’ supplemental briefing on the issue of the bond amount, Moroccanoil has filed objections to the Declarations of Elizabeth Kenny and Ronald M. Krassin. [Doc. ##65, 85.] The Court OVERRULES the evidentiary objections to the declarations upon which the Court relied.