United States District Court, D. Minnesota
Zerorez Franchising System, Inc. and HSK, LLC d/b/a ZEROREZ, Plaintiffs,
Distinctive Cleaning, Inc. and Jennifer Carr, Defendants
Michael H. Frasier, Esq., Rubric Legal LLC, Minneapolis, MN, on behalf of Plaintiffs.
Malcolm P. Terry, Esq., Bernick Lifson, P.A., Minneapolis, MN, on behalf of Defendants.
MEMORANDUM OPINION AND ORDER
ANN D. MONTGOMERY, UNITED STATES DISTRICT JUDGE.
On February 24, 2015, the undersigned United States District Judge heard oral argument on Plaintiffs Zerorez Franchising System, Inc. (the " Franchisor" ) and HSK LLC d/b/a ZEROREZ's (" ZEROREZ" ) (collectively, the " Plaintiffs" ) Motion for Summary Judgment [Docket No. 53]. Defendants Distinctive Cleaning, Inc. (" Distinctive" ) and Jennifer Carr (" Carr" ) (collectively, the " Defendants" ) oppose the motion. For the reasons set forth below, Plaintiffs' motion is granted in part and denied in part.
The Franchisor offers carpet and surface cleaning services with franchisees located throughout the United States. Compl. [Docket No. 1] ¶ 1. The Franchisor owns trademark and common law rights in the Zerorez name, and has registered " Zerorez" as a trademark with the U.S. Patent and Trademark Office. Id. ZEROREZ is a franchisee with its principal place of business in Richfield, Minnesota. Id. ¶ 2. ZEROREZ has been operating in the Twin Cities metro area since 2005 and has been continuously using the Zerorez trademark. Kaplan Aff. [Docket No. 64] ¶ 2.
Distinctive is a corporation with its headquarters in Bloomington, Minnesota. Compl. ¶ 3. Distinctive offers window cleaning, moving cleaning, post construction cleaning, carpet cleaning, and more. Terry Aff. [Docket No. 68] Ex. 1. Carr is Distinctive's owner and day-today manager. Compl. ¶ 4. The carpet cleaning services of ZEROREZ and Distinctive compete in the Minneapolis and St. Paul metropolitan areas. Id. ¶ ¶ 27-28.
A. Distinctive's alleged deception
In April 2012, ZEROREZ discovered online advertisements that stated: " Zero Rez Carpet Cleaning." Id. ¶ 33. These advertisements were displayed in response to Google searches for " Zerorez," " twin cities carpet cleaning," and related phrases. Id. The advertisements provided a hyperlink to Distinctive's website. Id. The Franchisor sent Distinctive a cease and desist letter on April 20, 2012. Id. Attach. 1. The cease and desist letter states that " Zerorez" is a protected mark and Distinctive's unauthorized use of " zero rez" in its advertising is deceptive, confusing, and constitutes trademark infringement. Id. The letter additionally states that Distinctive employees or representatives have communicated that Distinctive is " Zerorez" to potential customers. Id. The letter concludes by demanding Distinctive cease misrepresenting its affiliation with ZEROREZ and immediately discontinue using the Zerorez mark in its advertising. Id.
Distinctive argues it responded to the cease and desist letter through counsel on May 14, 2012. Terry Aff. Ex. 14. Distinctive's response denies advertising with the Zerorez trademark and further denies making any representation or affiliation with ZEROREZ to prospective customers. Distinctive's response concludes by stating " [w]e trust that the foregoing closes this matter." Id.
Plaintiffs clearly did not regard the matter as closed; Plaintiffs continued receiving reports from confused customers claiming they hired Distinctive when they intended to hire ZEROREZ. Compl. ¶ 35. In January 2013, ZEROREZ discovered that Distinctive was advertising online with the phrase " ZERO REZ Carpet Cleaning." Id. ¶ 39. Shortly thereafter, ZEROREZ again demanded Distinctive cease and desist using the Zerorez mark in its advertising. Id. Distinctive again responded through counsel, stating that it was not using the marks " in a trademark sense." Id. ¶ 40.
Sometime in March 2013, ZEROREZ discovered Distinctive purchased " Zero Rez" and " Zerorez" as Google keyword search terms. Id. ¶ 41. In April 2013, Distinctive advertised with the phrases " Zero Res" and " Rez Free Carpet Cleaning" in response to Google searches for " Zero Rez," " carpet cleaning Twin Cities," and similar phrases. Id. ¶ ¶ 42-43. In August 2013, ZEROREZ hired a private investigator and learned that Distinctive employees represented that it provided services identical to those offered by ZEROREZ. Id. ¶ 45.
B. Google AdWords and Distinctive's contempt of court
Plaintiffs allege that Distinctive used Google's AdWords advertising service to create and display the allegedly infringing advertisements. AdWords is a customizable advertising service that allows businesses to create advertising campaigns that display specific advertisements in response to keywords--particular search phrases or terms a user enters into their Google search. Rand Aff. [Docket No. 17] ¶ ¶ 8-9. When a user makes a Google search, advertisements typically appear in the top three search results as well as along the right side of the screen. Id. ¶ 11. The AdWords platform allows businesses to edit, pause, delete, or resume any advertising campaign at any time. Id. ¶ 9.
C. The present action
Plaintiffs filed suit on August 26, 2013, alleging violations of the Lanham Act and Minnesota consumer protection statutes. Just over a month after the lawsuit was filed, the parties stipulated that Distinctive and Carr shall not use the protected mark " zerorez" and similar phrases like " zero rez," " zero rezidue," and " zero res," " in connection with any online, print, radio, television, metatag, Google ad-word, flyer, pamphlet, or any other advertisement." Stipulation [Docket No. 6]. The Stipulation expressly permitted Distinctive to use the phrases " zero residue," " no residue," " 0 residue," and " residue free" in any of its advertisements. Id. The Stipulation was approved by the Court on October 3, 2013. Order [Docket No. 7] (" Stipulation Order" ).
On January 3, 2014, counsel for Plaintiffs, while running periodic Google searches to verify Distinctive's compliance, discovered a violation of the Stipulation Order. Frasier Decl. [Docket No. 18] ¶ ¶ 1, 2, 6. Counsel observed that Distinctive had resumed using the prohibited keywords. Id. ¶ 5. After attempting to resolve the issue without judicial intervention, Plaintiffs moved for contempt sanctions on February 28, 2014. In support of its motion, Plaintiffs presented a series of screenshots taken between January 3, 2014, and February 27, 2014 showing that Distinctive was running campaigns using prohibited Google keywords. Pls.' Mem. Supp. Mot. Contempt [Docket No. 16] 2-4. On this evidence, Defendants were found in contempt on March 14, 2014. Order [Docket No. 25]. Plaintiffs have not alleged any further violations of the Stipulation Order or further instances of trademark infringement subsequent to the March 14, 2014 Order. After a period of discovery, Plaintiffs moved for summary judgment on December 9, 2014.
A. Standard for Summary Judgment
Rule 56(c) of the Federal Rules of Civil Procedure provides that summary judgment shall be rendered if there exists no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law.
The United States Supreme Court, in construing Federal Rule 56(c), stated in Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986):
In our view, the plain language of Rule 56(c) mandates the entry of summary judgment, after adequate time for discovery and upon motion, against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial.
On a motion for summary judgment, the court views the evidence in the light most favorable to the nonmoving party. Ludwig v. Anderson, 54 F.3d 465, 470 (8th Cir. 1995). However, the nonmoving party may not " rest on mere allegations or denials, but must demonstrate on the record the existence of specific facts which create a genuine issue for trial." Krenik v. Cnty. of Le Sueur, 47 F.3d 953, 957 (8th Cir. 1995).
If the nonmoving party presents evidence sufficient to permit a reasonable jury to return a verdict in its favor, summary judgment is inappropriate. Id. However, " the mere existence of some alleged factual dispute between the parties is not sufficient by itself to deny summary judgment. . . . Instead, 'the dispute must be outcome determinative under prevailing law.'" Get Away Club, Inc. v. Coleman, 969 F.2d 664, 666 (8th Cir. 1992) (citation omitted).
B. Trademark Infringement and False Designation of Origin
The essence of Plaintiffs' Complaint alleges claims of trademark infringement and false designation of origin. These claims require proof of trademark ownership and the alleged infringer's use of the mark " in connection with goods or services in a manner likely to cause customer confusion as to the source or sponsorship of the goods or services." Cmty. of Christ Copyright Corp. v. Devon Park Restoration Branch of Jesus Christ's Church, 634 F.3d 1005, 1009 (8th Cir. 2011).
Defendants do not challenge Plaintiffs' ownership of the " Zerorez" mark. Thus, Plaintiffs' claims of infringement and false designation of origin turn on whether Distinctive used the mark in a manner likely to cause customer confusion. The following six factors guide that determination:
1) the strength of the trademark owner's mark; 2) the similarity between the trademark owner's mark and the alleged infringing mark; 3) the degree to which the allegedly infringing services competes with the trademark owner's services; 4) the alleged infringer's intent to confuse the public; 5) the degree of care reasonably expected of potential customers; and 6) evidence of actual confusion.
Id. at 1009 (citing SquirtCo. v. Seven-Up Co.,628 F.2d 1086, 1091 (8th Cir. 1980)). " These factors do not operate in a mathematically precise formula; rather, we use them at the summary judgment stage as a guide to determine whether a reasonable jury could find a likelihood of confusion." Duluth News-Tribune v. Mesabi Publ'g Co.,84 F.3d 1093, 1096 (8th Cir. 1996). " Factual disputes regarding a single factor are insufficient to support the ...