Case 3:15-cv-01741-EMC Document 135 Filed 11/15/16 Page 1 of 10 1 2 3 4 UNITED STATES DISTRICT COURT 5 NORTHERN DISTRICT OF CALIFORNIA 6 7 Plaintiff, 8 9 10 ORDER GRANTING PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT v. Docket No. 97 THRU INC., Defendant. 12 For the Northern District of California United States District Court 11 Case No. 15-cv-01741-EMC DROPBOX, INC., I. 13 14 INTRODUCTION Plaintiff Dropbox, Inc. (“Dropbox”) brought this action for declaratory relief seeking to 15 establish its right to use the term “dropbox” as a trademark. Docket No. 1. Defendant Thru Inc. 16 (“Thru”) brought counterclaims for trademark infringement under the Lanham Act, 15 U.S.C. § 17 1125(a)(1)(A), and California common law, and for unfair competition under Cal. Bus. & Prof. 18 Code § 17200 et seq. and cancellation of Dropbox‟s trademark registration under 15 U.S.C. § 19 1119. Docket No. 33. Now pending before the Court is Dropbox‟s motion for summary judgment 20 on Thru‟s counterclaims. Docket No. 97 (“Motion”). The Court GRANTS the motion. 21 II. FACTUAL AND PROCEDURAL BACKGROUND 22 Dropbox is a large software company that produces an application allowing people to 23 store, access, and modify electronic files online. Today, Dropbox has over 500 million users. 24 Docket No. 98 (Vashee Decl.) ¶ 5. As of 2014, the company was valued at $10 billion. The 25 company was founded in 2006. Co-founder and CEO Drew Houston states that he planned to use 26 the name “Dropbox” from the start, having previously used folders called “dropboxes” to share 27 files with other computer users. Docket No. 99 (Houston Decl.) ¶¶ 3-4. Dropbox launched its 28 product in 2008, and it quickly attracted numerous users and significant press coverage. Id. ¶¶ 16- Case 3:15-cv-01741-EMC Document 135 Filed 11/15/16 Page 2 of 10 1 23. In late 2009, Dropbox applied to the United States Patent and Trademark Office (“PTO”) to 2 register the DROPBOX trademark. Id. ¶ 24. Its application was published in March 2011. 3 Docket No. 100 (Slafsky Decl.) ¶ 3. After this publication, other companies claimed rights in the “dropbox.” In June 2011, a For the Northern District of California United States District Court 4 5 company called Officeware sued Dropbox claiming common law trademark rights in the term, 6 having used it beginning in 2004 to describe functionality similar to that offered by Dropbox. Ex. 7 5.1 The parties reached a settlement according to which Officeware assigned its rights to 8 Dropbox. Ex. 7. Also in 2011, Dropbox received demands from two other companies, YouSendIt 9 and DropBoks, each of which claimed similar rights. Slafsky Decl. ¶ 13. Dropbox contended that 10 the term was merely descriptive as used by these companies – indeed, the PTO had already denied 11 a trademark application from DropBoks on this ground – and the companies ultimately did not 12 press their claims. The PTO issued Dropbox a trademark registration for DROPBOX in February 13 2014. Id. ¶ 4. 14 Defendant Thru is a company based in Texas that has, since 2002, offered a file 15 management software program called File Transaction Hub (FTH). Docket No. 109 (Harrison 16 Decl.) ¶ 2. In 2004, Thru added a feature that allowed its customers to receive digital files from 17 third parties; it called this feature “DropBox.” Id. ¶ 12. In May 2004, Thru asked all of its 18 employees to include the term in their email signature blocks. See Harrison Decl. Ex. 29. It also 19 appears that Thru at times – though not always – appended a TM symbol when it used the 20 “DropBox” designator on documents intended for customers and the general public, indicating its 21 intent to use the term as a trademark. Compare id. Ex. 2 (using the symbol in an FTH user guide) 22 with Ex. 3 (using the term DropBox without the symbol on the company web page). Thru took no action to enforce any trademark rights in the term “dropbox” until December 23 24 8, 2011, when Thru‟s counsel contacted Dropbox for the first time, asserting that Thru had “used 25 its mark DROPBOX continuously since 2004.” Ex. 28. Counsel stated that Thru was “aware of 26 the current trademark dispute regarding the mark” between Dropbox, Officeware, “and several 27 1 28 Except where otherwise noted, “Ex.” refers to exhibits attached to the Slafsky declaration, Docket No. 100. 2 Case 3:15-cv-01741-EMC Document 135 Filed 11/15/16 Page 3 of 10 1 other claimants,” but asserted that Thru‟s rights that would take priority to any of those parties. 2 Id. Thru asserts that after that point it offered to meet with Dropbox on multiple occasions “to 3 resolve the ownership question.” Docket No. 107 (“Opp.”) at 19. On February 4, 2014, when the 4 PTO issued Dropbox‟s trademark registration, Thru filed a Petition for Cancellation, but it did not 5 otherwise take any action until Dropbox initiated the present suit on April 17, 2015. Thru then 6 filed counterclaims for trademark infringement under the Lanham Act and California common 7 law, and for unfair competition under Cal. Bus. & Prof. Code § 17200 et seq. and cancellation of 8 Dropbox‟s trademark registration under 15 U.S.C. § 1119. Docket No. 33. Following discovery, 9 Dropbox filed the instant motion for summary judgment on Thru‟s counterclaims. III. 10 12 For the Northern District of California United States District Court 11 A. DISCUSSION Legal Standard “Summary judgment is appropriate only if, taking the evidence and all reasonable 13 inferences drawn therefrom in the light most favorable to the non-moving party, there are no 14 genuine issues of material fact and the moving party is entitled to judgment as a matter of law.” 15 Torres v. City of Madera, 648 F.3d 1119, 1123 (9th Cir. 2011) (citing Corales v. Bennett, 567 F.3d 16 554, 562 (9th Cir. 2009)). “[T]here is no issue for trial unless there is sufficient evidence favoring 17 the nonmoving party for a jury to return a verdict for that party. If the evidence is merely 18 colorable, or is not significantly probative, summary judgment may be granted.” McIndoe v. 19 Huntington Ingalls Inc., 817 F.3d 1170, 1173 (9th Cir. 2016) (quoting R.W. Beck & Assocs. v. City 20 & Borough of Sitka, 27 F.3d 1475, 1480 n.4 (9th Cir. 1994)). 21 “A moving party without the ultimate burden of persuasion at trial” – such as Dropbox in 22 this case – nonetheless “has both the initial burden of production and the ultimate burden of 23 persuasion on a motion for summary judgment.” Nissan Fire & Marine Ins. Co. v. Fritz 24 Companies, Inc., 210 F.3d 1099, 1102 (9th Cir. 2000). The moving party may discharge its initial 25 burden by “show[ing] that the nonmoving party does not have enough evidence of an essential 26 element to carry its ultimate burden of persuasion at trial.” Friedman v. Live Nation Merch., Inc., 27 833 F.3d 1180, 1188 (9th Cir. 2016) (quoting Nissan Fire, 210 F.3d at 1102). Where “a moving 28 party carries its burden of production, the nonmoving party must produce evidence to support its 3 For the Northern District of California United States District Court Case 3:15-cv-01741-EMC Document 135 Filed 11/15/16 Page 4 of 10 1 claim or defense.” Id. (quoting Nissan Fire, 210 F.3d at 1102). The ultimate question at summary 2 judgment is whether “the record taken as a whole could . . . lead a rational trier of fact to find for 3 the non-moving party”; if not, then “there is no „genuine issue for trial.‟” Matsushita Elec. Indus. 4 Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986) (quoting First Nat. Bank of Ariz. v. Cities 5 Serv. Co., 391 U.S. 253, 287 (1968)); see also Dominguez-Curry v. Nevada Transp. Dep’t, 424 6 F.3d 1027, 1039 (9th Cir. 2005). 7 Dropbox argues that it is entitled to summary judgment for three reasons: (1) Thru has no 8 trademark rights in “dropbox” because it failed to use it as a trademark and because “dropbox” is 9 descriptive and Thru has not established secondary meaning; (2) even if Thru could demonstrate a 10 protectable interest in “dropbox,” Dropbox would have seniority by virtue of its acquisition of 11 Officeware‟s rights; and (3) Thru‟s claims are barred by laches. 12 B. 13 Laches The Court first addresses Dropbox‟s argument that Thru‟s claims are barred by laches. 14 “Laches is an equitable time limitation on a party's right to bring suit,” . . . resting on the maxim 15 that “one who seeks the help of a court of equity must not sleep on his rights.” Jarrow Formulas, 16 Inc. v. Nutrition Now, Inc., 304 F.3d 829, 835 (9th Cir. 2002) (quoting Boone v. Mech. Specialties 17 Co., 609 F.2d 956, 958 (9th Cir.1979)). “As the party asserting laches, [Dropbox] must show that 18 (1) [Thru]‟s delay in filing suit was unreasonable, and (2) [Dropbox] would suffer prejudice 19 caused by the delay if the suit were to continue.” Id. at 838. “While laches and the statute of 20 limitations are distinct defenses, a laches determination is made with reference to the limitations 21 period for the analogous action at law. If the plaintiff filed suit within the analogous limitations 22 period, the strong presumption is that laches is inapplicable. . . . However, if suit is filed outside of 23 the analogous limitations period, courts often have presumed that laches is applicable.” Id. at 836. 24 “When a federal statute lacks a specific statute of limitations, we generally presume that Congress 25 intended to „borrow‟ the limitations period from the most closely analogous action under state 26 law.” Id. “[I]n determining the presumption for laches, the limitations period runs from the time 27 the plaintiff knew or should have known about his [Lanham Act] cause of action.” Id. at 838. 28 The first question, then, is whether Thru has brought its claims within the applicable 4 Case 3:15-cv-01741-EMC Document 135 Filed 11/15/16 Page 5 of 10 1 limitations period. Thru asserts that the applicable limitations period is four years under 2 California‟s “catch-all” limitations period, as set out in Cal. Prof. Bus. & Prof. Code § 17208. 3 Dropbox suggests that the more appropriate limitations period might be the two-year limitations 4 period for tort claims under Cal. Code Civ. P. § 339, but argues that Thru‟s claim is untimely 5 whether the four year period or the two year period applies. The Court agrees. In an interrogatory response verified by Thru CEO Lee Harrison, Thru stated that “Thru‟s For the Northern District of California United States District Court 6 7 directors and management first became aware of Dropbox, Inc., and its use of DROPBOX in mid- 8 2011” and that “Thru‟s directors and management is not aware of any employee that was aware of 9 Dropbox, Inc. and its use of DROPBOX at any earlier date.” Ex. 40. Record evidence shows that 10 this is not the case. On June 9, 2009, Thru‟s Chief Technology Officer sent an email to the 11 Harrison, as well as other officers, informing them about Dropbox, which offered another service 12 “to sync the files across computers.” Ex. 42. On June 15, 2009, the CTO wrote again, asking 13 “[a]re we ok with web-only write only dropbox or we will need [sic] something like 14 getdropbox.com2? They are very prominent in Mac community.” Ex. 43. In a sworn deposition, 15 Harrison nonetheless insisted again that he had never heard of Dropbox before the summer of 16 2011, at which point Dropbox had 40 million users. Ex. 34 at 138:20. When confronted with the 17 CTO‟s 2009 emails, however, Harrison conceded that his interrogatory response had been “false.” 18 Id. at 162:3-4. In light of this evidence, Harrison‟s continued assertion that “[Dropbox] did not get 19 [his] attention until 2011” is simply not credible. “When opposing parties tell two different 20 stories, one of which is blatantly contradicted by the record, so that no reasonable jury could 21 believe it, a court should not adopt that version of the facts for purposes of ruling on a motion for 22 summary judgment.” Scott v. Harris, 550 U.S. 372 (2007). This is especially so where the only 23 evidence supporting them on this point is concededly false. As the above evidence demonstrates, Thru‟s statement in its briefing on the present motion 24 25 that “there is no evidence (or at least a factual dispute as to the evidence), that Thru knew or 26 should have known of its claim against [Dropbox] prior to July 2011” is plainly false. Opp. at 18. 27 28 2 At the time of this email, getdropbox.com was Dropbox‟s web address. 5 Case 3:15-cv-01741-EMC Document 135 Filed 11/15/16 Page 6 of 10 1 Thru‟s officers, including its CEO, corresponded over email about Dropbox as early as June 2009, 2 and Harrison conceded in his deposition that his earlier statement, that the company had not 3 learned of Dropbox until 2011, was “false.” Ex. 34. Moreover, Harrison stated in Thru‟s Rule 4 30(b)(6) deposition that in 2009, Thru believed that Dropbox‟s use of its name was 5 “overwhelmingly an obvious violation of what we believe is our trademark.” Ex. 39 at 139-141. 6 The evidence is simply uncontestable that Thru actually knew of Dropbox‟s use of what Thru 7 believed was its trademark beginning in 2009. 8 For the Northern District of California United States District Court 9 Thru asserts that it nonetheless was not required to act at that point because it “believed [Dropbox]‟s use to be non-competitive or minimal in light of the customers Thru was targeting.” 10 Opp. at 22 (citing Harrison Decl.. Specifically, Thru claims it believed Dropbox was a purely 11 consumer-oriented technology, while it targeted businesses. See Harrison Decl. ¶ 28; Docket No. 12 108 Ex. 24 (Deposition of Thru‟s Former VP of Marketing and Product Strategy Thomas 13 Skybakmoen). That, too, is not plausible. First of all, an email in the record shows that as early as 14 January 2010, Thru was aware that it had lost at least one customer to Dropbox, which, the 15 customer stated, “serve[d] [his] needs, both professionally and personally.” Ex. 44. But in any 16 case, “the law is well settled that, where the question of laches is in issue the plaintiff is chargeable 17 with such knowledge as he might have obtained upon inquiry, provided the facts already known 18 by him were such as to put upon a man of ordinary intelligence the duty of inquiry.” 6 McCarthy 19 on Trademarks § 31:38 (4th ed.) (quoting Johnston v. Standard Mining Co., 148 U.S. 360 (1893)) 20 (emphasis added). It is not disputed that by June 2009, Dropbox had over one million customers, 21 and had been widely covered in the mainstream media, including coverage detailing business use 22 of the product. See Ex. 91 (January 2009 NY Times article discussing business applications of 23 Dropbox); Houston Decl. ¶ 20-22 (citing 2009 articles about Dropbox appearing in Forbes, PC 24 Magazine, CNN, The Washington Post, and others and describing the growth in Dropbox‟s user 25 base during 2009). Even if you were to credit this implausible testimony that it was not aware of 26 Dropbox‟s commercial business in 2009, it clearly had inquiry notice sufficient to trigger laches. 27 A company such as Thru in the business of providing online file storage and transfer software 28 should have been aware of what was, by then, the preeminent company offering similar products 6 Case 3:15-cv-01741-EMC Document 135 Filed 11/15/16 Page 7 of 10 1 in the field, and that this company posed a competitive threat. No reasonable fact finder could 2 conclude otherwise. The Court therefore concludes that the limitations period began running in 3 June 2009; because Thru had still taken no action in June 2013, when the four-year period expired, 4 laches presumptively applies. 5 Thru nonetheless argues that its delay was reasonable, first because it took some action 6 during the intervening period, including sending its December 2011 demand letter to Dropbox. 7 Opp. at 18-19. But “the delay, which the defense (of laches) contemplates, is not delay in bringing 8 claims to the attention of the defendant. It is . . . delay on the part of the plaintiff in instituting 9 litigation on his claims.” Danjaq LLC v. Sony Corp., 263 F.3d 942, 953 (9th Cir. 2001) (quoting 10 For the Northern District of California United States District Court 11 Nealey v. Transportacion Maritima Mexicana, S.A., 662 F.2d 1275, 1280 n. 6 (9th Cir.1980)). Thru also argues that it was not required to act because, during 2011, after Dropbox‟s 12 registration was published, a number of other parties, including Officeware, YouSendIt, and 13 Box.net, opposed Dropbox‟s trademark application to the PTO and claimed rights in the term 14 “dropbox.” Thru argues that it “could not tell which of these parties had superior rights in the 15 DROPBOX mark and decided to let them fight it out and then pursue the party that the PTO 16 affirmed.” Opp. at 20. Thru provides no excuse why it did not join the other companies in 17 asserting its own trademark rights before the PTO in a timely way. Indeed, a delay of this sort is 18 precisely what laches is designed to guard against; Thru cannot simply “sleep on [its] rights,” 19 allowing multiple other parties to expend significant resources litigating over rights that Thru 20 believes it owns, only to belatedly pursue the victorious party. See Jarrow Formulas, 304 F.3d at 21 835. Such an approach would unfairly prejudice all of the companies who did timely join the fray 22 by asserting their claims. Thru cites a case that it claims allowed a similar approach, but in fact 23 the case is inapplicable. See Novell, Inc. v. Unicom Sales, Inc., No. C-03-2785 MMC, 2004 WL 24 1839117, at *1 (N.D. Cal. Aug. 17, 2004) In Novell, this court excused a party‟s delay in bringing 25 suit when that party was, itself, already engaged in litigation over its right to use a trademark, and 26 thus its right to bring suit was unsettled. Furthermore, the defendant in that case had promised to 27 stop the allegedly infringing use, and the plaintiff promptly brought suit when the defendant broke 28 the promise. 7 Case 3:15-cv-01741-EMC Document 135 Filed 11/15/16 Page 8 of 10 1 2 February 4, 2014, salvage its claim. First, that petition was itself filed outside the limitations 3 period. As noted above, it did not timely oppose Dropbox‟s application to the PTO in 2011. 4 Second, while the 2014 proceeding challenged Dropbox‟s registration, Thru has conceded that it 5 did not challenge Dropbox‟s right to continue using the mark. See Docket No. 19 (Thru‟s Motion 6 to Dismiss) (“Thru has not and does not contest Plaintiff‟s use of the DROPBOX mark.”). 7 Nothing about the cancellation petition put Dropbox on notice that its name was at risk; instead, 8 Thru continued to delay litigation while allowing Dropbox to expend additional resources 9 developing the value of its brand. For the Northern District of California 10 United States District Court Nor can Thru‟s petition for cancellation of Dropbox‟s trademark, filed with the PTO on Finally, and perhaps most significantly, the record belies Thru‟s explanation for the reason 11 behind its delay. Dropbox points to numerous documents that indicate that, in fact, Thru‟s delay 12 was a deliberate attempt to maximize the value of its claims by leveraging an anticipated initial 13 public offering from Dropbox. Thru had been explicitly contemplating a lawsuit concerning its 14 trademark rights at least since February 2012, when Harrison wrote in an email to an investor: 15 “New development turns out we own the term Dropbox . . . Our IP attorney is talking to 16 Dropbox‟s attorney about buying the name from us . . . They raised 250M in October 2011 at 1B 17 value. . . . An action could be had soon.” Ex. 47. Harrison repeatedly in emails described Thru‟s 18 claim as a “lottery ticket.” Ex. 54 (discussing whether “a portion of the staff [had] no skin in DB 19 lottery ticket game”); Ex. 62 (“Dropbox will be a lottery ticket.”). In October 2013 Harrison 20 wrote that “My call is [Dropbox] want[s] us to file a lawsuit and treat us like [Officeware] so they 21 can quietly dispose of this matter anytime they want to . . . The best leverage we have is to sit tight 22 and wait to the IPO announcement and be prepared to file suit that day and make as much noise as 23 we can about it.” Ex. 51; see also Ex. 57 (“If we wanted to be the first to file we should have done 24 that last year. Time is on our side not theirs. Slow walking this to [Dropbox‟s pre-IPO] S1 filing 25 is all that is important.”). In his deposition, Harrison confirmed that he had felt that a pending IPO 26 “was a leverage point,” that “it would be tough for them to file without clear title” to their 27 trademark, and that accordingly Dropbox “would come to us eventually and settle with us.” Ex. 28 34 at 187. 8 Case 3:15-cv-01741-EMC Document 135 Filed 11/15/16 Page 9 of 10 1 These documents demonstrate that Thru purposefully delayed bringing suit in an attempt to 2 increase its leverage over Dropbox and thus the value of its claims. In its opposition to Dropbox‟s 3 Motion, Thru did not respond to, or even mention, this evidence. At hearing, counsel for Thru 4 merely stated that he did not think the evidence could bear the interpretation Dropbox would give 5 it. The Court disagrees; it is difficult to see what other interpretation would be plausible with 6 respect to the references to “slow walking” the case and the admonition to “sit tight and wait to the 7 IPO announcement and be prepared to file suit that day.” In light of this evidence, no reasonable 8 fact finder could conclude that Thru‟s delay was reasonable. If there is a paradigmatic set of facts 9 that warrants laches, this is it. For the Northern District of California United States District Court 10 The only remaining question, then, is whether Thru‟s delay prejudiced Dropbox. Thru 11 claims it did not because there is “no evidence that [Dropbox] would have done anything 12 differently if Thru had been one of the myriad of companies involved in disputing the DROPBOX 13 mark earlier.” Opp. at 24. But as the Ninth Circuit has explained, a party “can make the required 14 showing of prejudice by proving that it has continued to build a valuable business around its 15 trademark during the time that the plaintiff delayed the exercise of its legal rights.” Grupo 16 Gigante SA De CV v. Dallo & Co., 391 F.3d 1088, 1105 (9th Cir. 2004). That is precisely what 17 happened here. If a trial resulted in a determination that Thru owned superior rights to the 18 “dropbox” trademark, the costs to Dropbox would be massively greater today than they would 19 have been years ago, because of Dropbox‟s continued investment in its brand. Thru concedes that 20 during the relevant time period, Dropbox continued to “spend millions of dollars in attempting to 21 build brand recognition” and continued to “build its business.” Opp. at 23. 22 23 IV. CONCLUSION The Ninth Circuit has stated that laches is “seldom susceptible of resolution by summary 24 judgment.” Couveau v. Am. Airlines, Inc., 218 F.3d 1078, 1083 (9th Cir. 2000). But there are 25 numerous cases in which the Ninth Circuit has affirmed summary judgment determinations of 26 laches. See, e.g., Grupo Gigante, 391 F.3d at 1105; Jarrow Formulas, 304 F.3d at 833 (citing 27 additional cases). The evidence is overwhelming that Thru‟s delay in filing suit was unreasonable 28 and prejudiced Dropbox, and summary judgment is therefore appropriate here. The Court 9 Case 3:15-cv-01741-EMC Document 135 Filed 11/15/16 Page 10 of 10 1 accordingly holds that Thru‟s claims are barred by laches, and GRANTS Dropbox‟s motion for 2 summary judgment on that ground. Because this determination is sufficient to decide the motion, 3 the Court does not reach Dropbox‟s alternative arguments for summary judgment. 4 This order disposes of Docket No. 97. 5 6 IT IS SO ORDERED. 7 8 9 10 Dated: November 15, 2016 ______________________________________ EDWARD M. CHEN United States District Judge 12 For the Northern District of California United States District Court 11 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 10