Applied Underwriters, Inc. v. Larry Lichtenegger

FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

APPLIED UNDERWRITERS, INC., a No. 17-16815

Nebraska corporation,

Plaintiff-Appellant, D.C. No.

2:15-cv-02445-

v. TLN-CKD

LARRY J. LICHTENEGGER; J. DALE

DEBBER; PROVIDENCE OPINION

PUBLICATIONS, LLC, a California

limited liability company,

Defendants-Appellees.

Appeal from the United States District Court

for the Eastern District of California

Troy L. Nunley, District Judge, Presiding

Argued and Submitted December 18, 2018

San Francisco, California

Filed January 15, 2019

Before: MILAN D. SMITH, JR. and JACQUELINE H.

NGUYEN, Circuit Judges, and JANE A. RESTANI, *

Judge.

Opinion by Judge Milan D. Smith, Jr.

*

The Honorable Jane A. Restani, Judge for the United States Court

of International Trade, sitting by designation.

2 APPLIED UNDERWRITERS V. LICHTENEGGER

SUMMARY **

Lanham Act / Civil Procedure

The panel affirmed the district court’s dismissal of an

action brought by a financial services company under the

Lanham Act.

The panel held that the district court abused its discretion

when it sanctioned the plaintiff and dismissed the case

pursuant to Federal Rule of Civil Procedure 41(b) absent an

order requiring the plaintiff to file an amended complaint.

The panel nonetheless affirmed the district court’s earlier

dismissal for failure to state a claim under Rule 12(b)(6).

The panel concluded that defendants’ use of plaintiff’s

trademarks in the title of a webcast seminar and in

promotional materials was a nominative fair use because

plaintiff’s service was not readily identifiable without use of

the trademarks, defendants used only so much of the

trademarks as was reasonably necessary, and use of the

trademarks did not suggest sponsorship or endorsement.

**

This summary constitutes no part of the opinion of the court. It

has been prepared by court staff for the convenience of the reader.

APPLIED UNDERWRITERS V. LICHTENEGGER 3

COUNSEL

Kimberly A. Jansen (argued), Hinshaw & Culbertson LLP,

Chicago, Illinois; Mark Suri, Peter Felsenfeld, Travis Wall,

and Spencer Y. Kook, Hinshaw & Culbertson LLP, Los

Angeles, California; for Plaintiff-Appellant.

Duffy Carolan (argued), Jassy Vick Carolan LLP, San

Francisco, California; Kevin L. Vick and Jean-Paul Jassy,

Jassy Vick Carolan LLP, Los Angeles, California; for

Defendants-Appellees.

OPINION

M. SMITH, Circuit Judge:

We are confronted with an appeal of a procedurally

curious nature. Plaintiff-Appellant Applied Underwriters,

Inc. (Plaintiff) appealed the district court’s dismissal of its

claims for trademark infringement and unfair competition,

on the apparent belief that the court dismissed the complaint

pursuant to Federal Rule of Civil Procedure 12(b)(6). When

we asked the district court to clarify its grounds for

dismissal, however, it explained that it actually dismissed

Plaintiff’s complaint as a sanction pursuant to Federal Rule

of Civil Procedure 41(b).

4 APPLIED UNDERWRITERS V. LICHTENEGGER

Although we conclude that the district court abused its

discretion when it sanctioned Plaintiff and dismissed the

case pursuant to Rule 41(b) absent an order requiring

Plaintiff to file an amended complaint, we nevertheless

affirm the district court’s earlier Rule 12(b)(6) dismissal

because the use of Plaintiff’s trademarks by Defendants-

Appellees Larry J. Lichtenegger, J. Dale Debber, and

Providence Publications, LLC (Defendants) constituted

nominative fair use.

FACTUAL AND PROCEDURAL BACKGROUND

I. Factual Background

Plaintiff is “a financial services company that provides

payroll processing services and, through affiliated insurance

companies, offers programs through which workers’

compensation insurance is offered and provided to

employers throughout the United States.” It began to use the

“Applied Underwriters” mark in October 2001, and has

continuously used the mark since. Beginning in October

2002, it also began to use the “EquityComp” mark in

connection with its workers’ compensation insurance

services. The U.S. Patent and Trademark Office has issued

Plaintiff five relevant trademark registrations: for the

“Applied Underwriters” mark, the “EquityComp” mark, and

three stylized versions of these marks, two of which appear

to depict a St. Bernard:

APPLIED UNDERWRITERS V. LICHTENEGGER 5

6 APPLIED UNDERWRITERS V. LICHTENEGGER

In its complaint, Plaintiff asserted that these registrations are

currently in force and uncontestable, and that it

“aggressively advertises and promotes its marks and its

services,” having “spent millions of dollars advertising”

them.

Defendant Providence Publications, LLC publishes

various online news sources, including “Workers’ Comp

Executive” (WCE). WCE features news reports and offers

online seminars, some of which feature Defendants

Lichtenegger and Debber.

Plaintiff alleged that, beginning in November 2015,

Defendants began offering a seminar (both online and on

DVD) that “uses the Applied Underwriters and EquityComp

marks in the title of the webcast.” The marks were also

featured in various promotional materials, including a

widely distributed email advertisement. Defendants used

these marks “without Applied Underwriters’ authority or

permission and in reckless disregard of [its] federal

trademark registrations and its rights.” Plaintiff also claimed

that Defendants “specifically and intentionally target[ed]

their marketing and advertising . . . to independent brokers

and the business organizations that they serve who use

Plaintiff’s services.” In its complaint, Plaintiff averred that

“[a]s a result of the likelihood of confusion caused by

Defendants’ unauthorized use of” the marks, “Defendants

are able to attract customers who mistakenly believe that

they will attend a program sponsored or affiliated with

Applied Underwriters,” leading to dilution of the marks.

II. Procedural Background

Plaintiff filed a complaint asserting causes of action for

federal trademark infringement and dilution, false

designation of origin under the Lanham Act, and federal and

APPLIED UNDERWRITERS V. LICHTENEGGER 7

state unfair competition. The next day, Plaintiff filed a

motion for a temporary restraining order, which the district

court denied.

Defendants moved to dismiss under Rule 12(b)(6),

arguing that their use of Plaintiff’s marks was protected

under the First Amendment, constituted nominal fair use,

and satisfied the statutory defenses to trademark dilution.

Defendants also filed a request for judicial notice that the

district court granted in part and denied in part, taking

judicial notice only of the DVD of the seminar. Plaintiff in

turn filed an opposition to Defendants’ motion to dismiss,

accompanied by a declaration and additional evidence not

included in its complaint. 1

On July 6, 2017, the district court granted Defendants’

motion to dismiss, concluding that “Defendants’ use of the

Trademarks is nominative fair use.” At Plaintiff’s request,

the court granted leave to amend the complaint within

30 days. The district court docket confirms that Plaintiff

neither filed an amended complaint (timely or otherwise) nor

announced an intent not to do so. Consequently, on August

10, 2017, the district court issued a minute order that read:

“In light of Plaintiff’s failure to file an Amended Complaint

pursuant to the Court’s Order (ECF No. [31]), this case is

hereby DISMISSED. CASE CLOSED.” The clerk of court

subsequently entered judgment “in accordance with the

Court’s Order filed on 8/10/2017.”

1

Plaintiff did not seek judicial notice of this additional evidence and,

as Defendants note, “the District Court did not cite or rely on this

evidence in its ruling.” Because this evidence was not part of the

complaint or submitted for judicial notice, we will disregard it at this

stage. See Branch v. Tunnell, 14 F.3d 449, 453–54 (9th Cir. 1994),

overruled on other grounds by Galbraith v. County of Santa Clara,

307 F.3d 1119 (9th Cir. 2002).

8 APPLIED UNDERWRITERS V. LICHTENEGGER

This appeal followed. In their briefs, Plaintiff and

Defendants disputed whether the district court dismissed

Plaintiff’s complaint pursuant to Rule 12(b)(6), in which

case we would review the sufficiency of the complaint de

novo, Starr v. Baca, 652 F.3d 1202, 1205 (9th Cir. 2011), or

as a sanction under Rule 41(b), which we would review for

abuse of discretion, Yourish v. Cal. Amplifier, 191 F.3d 983,

986 (9th Cir. 1999). To remedy this confusion, we remanded

this case for the limited purpose of allowing

the district court to clarify whether the

complaint was dismissed as a sanction under

Federal Rule of Civil Procedure 41 or for

failure to state a claim under Rule 12(b)(6),

and, if the final dismissal was intended as a

sanction under Rule 41(b), to state the

reasoning behind the selection of that

sanction.

Before oral argument in this appeal, the district court

responded with a clarification order, in which it explained

that it dismissed Plaintiff’s complaint as a sanction pursuant

to Rule 41(b), and analyzed the five pertinent factors as

enumerated in Yourish. It concluded that “[t]hree of the five

factors strongly favored dismissal, and this Court dismissed

the case under Rule 41(b) as a sanction for failure to comply

with the Court’s order.”

STANDARD OF REVIEW AND JURISDICTION

“We review de novo a district court’s dismissal of a

complaint under [Rule] 12(b)(6) for failure to state a claim,”

Starr, 652 F.3d at 1205, and “[w]e review the district court’s

dismissal of a complaint pursuant to Rule 41(b) for abuse of

discretion,” Yourish, 191 F.3d at 986. We have jurisdiction

pursuant to 28 U.S.C. § 1291—regardless of the basis for the

APPLIED UNDERWRITERS V. LICHTENEGGER 9

district court’s dismissal of Plaintiff’s complaint, its entry of

judgment constituted a final decision of the court. Cf. De Tie

v. Orange County, 152 F.3d 1109, 1111 (9th Cir. 1998)

(“The dismissal of an action, even when it is without

prejudice, is a final order.”).

ANALYSIS

I. Rule 41(b)

Under Rule 41(b), “[i]f the plaintiff fails to prosecute or

to comply with . . . a court order”—such as by failing to file

an amended complaint after being ordered to do so—“a

defendant may move to dismiss the action or any claim

against it. Unless the dismissal order states otherwise, [such]

a dismissal . . . operates as an adjudication on the merits.”

Fed. R. Civ. P. 41(b). We have noted that “[w]hen a district

court dismisses an action because the plaintiff has not filed

an amended complaint after being given leave to do so and

has not notified the court of his intention not to file an

amended complaint, we may deem the dismissal to be for

failure to comply with a court order based on Federal Rule

of Civil Procedure 41(b).” Harris v. Mangum, 863 F.3d

1133, 1142 (9th Cir. 2017).

In the order clarifying its dismissal of Plaintiff’s

complaint, the district court analyzed the five factors that

must be considered before dismissing a case pursuant to

Rule 41(b): “(1) the public’s interest in expeditious

resolution of litigation; (2) the court’s need to manage its

docket; (3) the risk of prejudice to the defendants; (4) the

public policy favoring disposition of cases on their merits;

and (5) the availability of less drastic alternatives.” Yourish,

191 F.3d at 990 (quoting Hernandez v. City of El Monte,

10 APPLIED UNDERWRITERS V. LICHTENEGGER

138 F.3d 393, 399 (9th Cir. 1998)). 2 However, the district

court did not consider whether Rule 41(b) was even

applicable in this case, given that Plaintiff was granted

leave—not ordered—to amend its complaint. We hold that

the district court abused its discretion when it invoked Rule

41(b) under these circumstances.

We are not the first panel to address this question. See,

e.g., Yourish, 191 F.3d at 986 n.4 (“This approach is

somewhat problematic because a plaintiff’s failure to amend

a complaint is not easily described as disobeying a court

order because the plaintiff has the right simply to allow the

complaint to be dismissed.”). Decades ago, the Fifth Circuit

considered a similar factual scenario and concluded that

[h]ad the District Judge intended what he

wrote literally—that the action was being

dismissed because the March order had been

“disobeyed”—he would have been guilty of

an abuse of his Rule 41(b) discretion to

dismiss. Dismissal of a case for disobedience

of a court order is an exceedingly harsh

sanction which should be imposed only in

extreme cases, and then only after

exploration of lesser sanctions. Failure to

amend a complaint after it has been dismissed

with leave to amend is not such an extreme

2

“Although it is preferred, it is not required that the district court

make explicit findings in order to show that it has considered these

factors and we may review the record independently to determine if the

district court has abused its discretion.” Yourish, 191 F.3d at 990

(quoting Ferdik v. Bonzelet, 963 F.2d 1258, 1261 (9th Cir. 1992)).

Accordingly, the fact that the district court initially dismissed the

complaint without any explicit analysis of these five factors did not

constitute an abuse of discretion.

APPLIED UNDERWRITERS V. LICHTENEGGER 11

case of disobedience, if it is disobedience at

all.

Mann v. Merrill Lynch, Pierce, Fenner & Smith, Inc.,

488 F.2d 75, 76 (5th Cir. 1973) (per curiam) (citations

omitted). More recently, dissenting in Brown v. Rawson-

Neal Psychiatric Hospital, Judge Graber concluded that a

district court’s dismissal with prejudice under Rule 41(b)

“was an abuse of discretion for the simple reason that, under

our precedents, Plaintiff did not fail to comply with a court

order.” 840 F.3d 1146, 1150 (9th Cir. 2016) (Graber, J.,

dissenting). Judge Graber noted that our precedent makes

clear that “[w]hen a district court requires a plaintiff to file

an amended complaint, the court may dismiss the case under

Rule 41(b) if the plaintiff fails to follow the requirement.”

Id.; see also Edwards v. Marin Park, Inc., 356 F.3d 1058,

1065 (9th Cir. 2004) (“The failure of the plaintiff eventually

to respond to the court’s ultimatum—either by amending the

complaint or by indicating to the court that it will not do so—

is properly met with the sanction of a Rule 41(b) dismissal.”

(emphasis added)); Yourish, 191 F.3d at 986 n.2 (noting that

the district court order stated that an “[a]mended complaint

shall be filed within 60 days” (emphasis added)); Ferdik v.

Bonzelet, 963 F.2d 1258, 1260 (9th Cir. 1992) (stating that

the court “ordered” and “required” the filing of a second

amended complaint). However, in Brown, as in this case,

the district court did not require Plaintiff to

file an amended complaint, nor did the court

require in the alternative that Plaintiff file an

amended complaint or some other specified

document. The court’s order denying

Plaintiff’s motion for reconsideration merely

granted leave to amend, with permissive text

allowing Plaintiff to amend or not . . . .

12 APPLIED UNDERWRITERS V. LICHTENEGGER

Given the court’s failure to cite Rule 41(b),

the permissive wording of its orders, and

Plaintiff’s desire to obtain appellate review of

the Rule 12(b)(6) dismissal as discussed in

the motion for reconsideration, he

understandably hoped for a dismissal, which

he reasonably thought would be under Rule

12(b)(6). After all, the district court never

ordered Plaintiff to file an amended

complaint, as the courts had in Yourish or

Ferdik. Leave to amend was granted; failure

to amend did not constitute noncompliance

with a court order. Simply put, there was no

“ultimatum” within the meaning of our

precedents, and so the district court abused its

discretion in dismissing Plaintiff’s federal

claims under Rule 41(b).

840 F.3d at 1151 (Graber, J., dissenting). 3

We agree with Judge Graber’s reasoning. By its plain

text, a Rule 41(b) dismissal under these circumstances

requires “a court order” with which an offending plaintiff

failed to comply. Fed. R. Civ. P. 41(b). 4 Here, there was no

3

Notably, the Brown majority did not address this issue and instead

based its holding on the plaintiff’s failure to raise Rule 41(b) in his

opening brief. See 840 F.3d at 1148–49. Thus, we are not bound by that

case to treat a permissive invitation to amend as a court order requiring

amendment.

4

Rule 41(b) also permits dismissal when a plaintiff fails to prosecute

its case or comply with the Federal Rules of Civil Procedure. See Fed.

R. Civ. P. 41(b) (“If the plaintiff fails to prosecute or to comply with

these rules or a court order, a defendant may move to dismiss the action

or any claim against it.”). However, these alternative bases for dismissal

are not at issue in this appeal because the district court specifically stated

that its dismissal was based on Plaintiff’s failure to follow its court order.

APPLIED UNDERWRITERS V. LICHTENEGGER 13

such order—the district court did not require that Plaintiff

file an amended complaint following the initial Rule

12(b)(6) dismissal. Instead, the court’s order concluded as

follows: “Plaintiff is GRANTED leave to amend within

thirty (30) days of this Order.” The district court did not

mandate the filing of an amended complaint, and it did not

indicate that failure to do so would result in dismissal of the

complaint pursuant to Rule 41(b). See Oliva v. Sullivan,

958 F.2d 272, 274 (9th Cir. 1992) (“The district judge has an

obligation to warn the plaintiff that dismissal is imminent.”).

The district court’s dismissal under Rule 41(b) required

noncompliance with a court order. A grant of leave to amend

is not an order to amend. Therefore, Rule 41(b) did not apply

here, and the district court’s dismissal on this ground

constituted an abuse of discretion.

II. How to Proceed?

Having concluded that the district court abused its

discretion when it dismissed Plaintiff’s complaint as a

sanction pursuant to Rule 41(b), we must now determine the

proper course of action moving forward.

One option is to remand. Upon remand, the district court

would presumably either again dismiss Plaintiff’s complaint

under Rule 12(b)(6), based on reasoning articulated in its

prior order, or again grant Plaintiff leave to amend—an

opportunity of which Plaintiff would not avail itself, given

its stated desire to appeal the district court’s original Rule

12(b)(6) dismissal. Remand would therefore require the

parties to engage in additional and redundant briefing, and

would add years to their litigation. Nothing substantive

would be gained, and “remand . . . would be an unnecessary

waste of judicial and litigant resources.” O’Reilly v. Bd. of

Appeals, 942 F.2d 281, 284 (4th Cir. 1991).

14 APPLIED UNDERWRITERS V. LICHTENEGGER

We conclude that remand would not serve the interest of

judicial economy, and fortunately, it is not required. As the

Supreme Court explained,

[I]n reviewing the decision of a lower court,

it must be affirmed if the result is correct

‘although the lower court relied upon a wrong

ground or gave a wrong reason.’ The reason

for this rule is obvious. It would be wasteful

to send a case back to a lower court to

reinstate a decision which it had already

made but which the appellate court

concluded should properly be based on

another ground within the power of the

appellate court to formulate.

SEC v. Chenery Corp., 318 U.S. 80, 88 (1943) (citation

omitted) (quoting Helvering v. Gowran, 302 U.S. 238, 245

(1937)); see also Alcaraz v. Block, 746 F.2d 593, 602 (9th

Cir. 1984) (“We will affirm the district court’s correct legal

results, even if reached for the wrong reasons.”). Here, we

have before us the correct result; as discussed below,

Defendants’ use of Plaintiff’s marks constituted nominative

fair use, and thus dismissal was required. We also have the

district court’s analysis in its Rule 12(b)(6) order, which still

stands and has not been altered or retracted. Therefore, we

conclude that dismissal of Plaintiff’s complaint was the

correct legal result, even if the district court reached it for

the wrong reason—as a sanction under Rule 41(b)—instead

of the correct reason—as a dismissal under Rule 12(b)(6).

Accordingly, we do not need to remand the action, and will

APPLIED UNDERWRITERS V. LICHTENEGGER 15

instead proceed with analysis of the district court’s dismissal

pursuant to Rule 12(b)(6). 5

III. Rule 12(b)(6)

Defendants maintain, as the district court concluded, that

their use of Plaintiff’s marks constituted nominative fair use.

We agree.

Pursuant to this defense, the “nominative use of a mark—

where the only word reasonably available to describe a

particular thing is pressed into service—lies outside the

strictures of trademark law: Because it does not implicate the

source-identification function that is the purpose of

trademark, it does not constitute unfair competition.” New

Kids on the Block v. News Am. Publ’g, Inc., 971 F.2d 302,

308 (9th Cir. 1992). 6 New Kids held that

5

We note that this approach is consistent with the basic principles

of finality that undergird our appellate jurisdiction. The district court’s

Rule 12(b)(6) order dispensed with all of Plaintiff’s claims, and hence

was “a full adjudication of the issues.” Nat’l Distrib. Agency v.

Nationwide Mut. Ins. Co., 117 F.3d 432, 433 (9th Cir. 1997). If not for

the court’s grant of leave to amend—which, again, Plaintiff has made

clear it had no intention of undertaking—the dismissal would have

“clearly evidence[d] the judge’s intention that it be the court’s final act

in the matter.” Id. (quoting In re Slimick, 928 F.2d 304, 307 (9th Cir.

1990)). Accordingly, we are satisfied that the Rule 12(b)(6) order is

sufficiently final for our review, since Plaintiff’s refusal to amend

ensures that the decision was not “tentative, informal or incomplete,” and

is thus reviewable. Citicorp Real Estate, Inc. v. Smith, 155 F.3d 1097,

1101 (9th Cir. 1998) (quoting Cohen v. Beneficial Indus. Loan Corp.,

337 U.S. 541, 546 (1949)).

6

Accordingly, although Plaintiff’s complaint included various

causes of action—including trademark infringement and dilution and

federal and state unfair competition—the nominative fair use defense

applied to all of its claims. See Playboy Enters., Inc. v. Welles, 279 F.3d

16 APPLIED UNDERWRITERS V. LICHTENEGGER

a commercial user is entitled to a nominative

fair use defense provided he meets the

following three requirements: First, the

product or service in question must be one not

readily identifiable without use of the

trademark; second, only so much of the mark

or marks may be used as is reasonably

necessary to identify the product or service;

and third, the user must do nothing that

would, in conjunction with the mark, suggest

sponsorship or endorsement by the trademark

holder.

Id. (footnote omitted). If the nominative use of a mark

satisfies these three factors, then there is no infringement;

“[i]f the nominative use does not satisfy all the New Kids

factors, the district court may order defendants to modify

their use of the mark so that all three factors are satisfied.”

Toyota Motor Sales, U.S.A., Inc. v. Tabari, 610 F.3d 1171,

1176 (9th Cir. 2010).

Although Plaintiff’s primary contention is that

Defendants’ use of its marks failed to satisfy the third New

Kids factor, it challenges the district court’s conclusions as

to all three. We will thus consider each factor in turn.

796, 806 (9th Cir. 2002) (“Uses that do not create an improper

association between a mark and a new product but merely identify the

trademark holder’s products should be excepted from the reach of the

anti-dilution statute.”); Cleary v. News Corp., 30 F.3d 1255, 1262–63

(9th Cir. 1994) (“This Circuit has consistently held that state common

law claims of unfair competition and actions pursuant to California

Business and Professions Code § 17200 are ‘substantially congruent’ to

claims made under the Lanham Act.” (quoting Acad. of Motion Picture

Arts & Scis. v. Creative House Promotions, Inc., 944 F.2d 1446, 1457

(9th Cir. 1991))).

APPLIED UNDERWRITERS V. LICHTENEGGER 17

A. Whether Plaintiff’s Service Was Readily

Identifiable Without Use of the Trademarks

Plaintiff contends that “Defendants did not need to use

Plaintiff’s trademarks to identify their Program.” It

concedes that “the Program apparently addresses Plaintiff’s

workers’ compensation product in particular,” but

nonetheless argues that “Defendants could have come up

with another readily understood generic or descriptive

name.”

The email attached to the complaint demonstrates that

Defendants’ seminar exclusively critiqued Plaintiff’s

EquityComp service. The title of the seminar was “Applied

Underwriters’ EquityComp® Program Like it, Leave it, or

Let it be?” and its subtitle read, “Learn the best strategies for

selling, competing with, or helping a prospect out of

EquityComp® mid-term.” We have previously determined

that a descriptive alternative—such as Plaintiff’s proposed

“Risk Sharing Workers’ Comp Program” or “Captive

Workers’ Comp Arrangement Program”—need not be

employed where use of a mark is necessary to refer to a

specific brand or product. As we explained in Toyota Motor

Sales,

Toyota claims . . . the Tabaris could have

used a domain name that did not contain the

Lexus mark. It’s true they could have used

some other domain name like

autobroker.com or fastimports.com, or have

used the text of their website to explain their

business. But it’s enough to satisfy our test

for necessity that the Tabaris needed to

communicate that they specialize in Lexus

vehicles, and using the Lexus mark in their

domain names accomplished this goal.

18 APPLIED UNDERWRITERS V. LICHTENEGGER

610 F.3d at 1180; see also Playboy Enters., Inc. v. Welles,

279 F.3d 796, 802 (9th Cir. 2002) (“[T]here is no other way

that Ms. Welles can identify or describe herself and her

services without venturing into absurd descriptive phrases.

To describe herself as the ‘nude model selected by Mr.

Hefner’s magazine as its number-one prototypical woman

for the year 1981’ would be impractical as well as ineffectual

in identifying Terri Welles to the public.”). 7

Such is the case here. The seminar did not discuss

workers’ compensation programs generally, but rather

Plaintiff’s specific offering. Therefore, Defendants “needed

to communicate” that they critiqued the EquityComp

program, and so using the mark in the title and description

of the program “accomplished this goal.” Toyota Motor

Sales, 610 F.3d at 1180.

In its reply brief, Plaintiff makes the argument that, even

if the use of the “EquityComp” mark satisfied the first New

Kids factor, the use of the “Applied Underwriters” mark did

not. Plaintiff suggests that “[t]he addition of the ‘Applied

Underwriters’ mark does nothing to identify the content of

the seminar but instead serves solely to create the impression

7

Plaintiff suggests that “Defendants’ attempt to apply Welles to their

seminar is circular” because “[o]n one hand, defendants insist that they

could not possibly have described their seminar without using plaintiff’s

mark,” but on the other hand, “if a more generic descriptor could not be

used to describe the seminar because the subject of the seminar [was]

limited to EquityComp®, then the suggestion of sponsorship is

reinforced. After all, a reasonably prudent consumer could assume that

a seminar focused on a single product is sponsored or endorsed by the

entity selling that product.” However, this reasoning would essentially

vitiate the nominative fair use defense, because it suggests that any time

the first New Kids factor is satisfied—in other words, when use of a mark

is needed for identification purposes—then the third factor could never

be satisfied, because endorsement would always be presupposed in such

cases.

APPLIED UNDERWRITERS V. LICHTENEGGER 19

that Applied Underwriters is sponsoring or endorsing a

seminar about its own EquityComp® product.” It relies on

Playboy Enterprises, in which we determined that while use

of the trademarked phrase “Playboy Playmate of the Year

1981” was permissible because it was needed for

identification purposes, use of another potentially protected

phrase—“PMOY ‘81”—was not. 279 F.3d at 804. We

reasoned that “[t]he repeated depiction of ‘PMOY ‘81’ is not

necessary to describe Welles. ‘Playboy Playmate of the

Year 1981’ is quite adequate.” Id. Here, similarly, Plaintiff

suggests that the “EquityComp” mark identified the service

that Defendants analyzed in their seminar, and thus the

“Applied Underwriters” mark did not serve that function.

But this argument falls short. Defendants’ use of the

“Applied Underwriters” mark was not necessarily redundant

because it was used to identify the company that offered

EquityComp—a company that was itself critiqued in the

seminar. We therefore find this case distinguishable from

Playboy Enterprises, where use of the “PMOY ‘81” mark

served no additional identification purpose.

Accordingly, because both marks were needed to

identify the service (and company) that Defendants analyzed

in their seminar, the district court correctly determined that

the first New Kids factor was satisfied.

B. Whether Defendants Used Only So Much of the

Trademarks As Was Reasonably Necessary

Plaintiff argues that Defendants’ use of its marks failed

the second factor because the email attached to the complaint

featured several uses of both marks. That argument relies on

a misunderstanding of this factor. The second New Kids

factor does not implicate the number of uses of a mark, but

rather the nature of the uses. In clarifying it, we explained

that “a soft drink competitor would be entitled to compare

20 APPLIED UNDERWRITERS V. LICHTENEGGER

its product to Coca-Cola or Coke, but would not be entitled

to use Coca-Cola’s distinctive lettering.” New Kids,

971 F.2d at 308 n.7; see also Playboy Enters., 279 F.3d at

802 (“Welles’ banner advertisements and headlines satisfy

this element because they use only the trademarked words,

not the font or symbols associated with the trademarks.”);

Volkswagenwerk Aktiengesellschaft v. Church, 411 F.2d

350, 352 (9th Cir. 1969) (noting that defendant “did not use

Volkswagen’s distinctive lettering style or color scheme, nor

did he display the encircled ‘VW’ emblem”); cf. Toyota

Motor Sales, 610 F.3d at 1181 (“Toyota suggests that use of

the stylized Lexus mark and ‘Lexus L’ logo was more use of

the mark than necessary and suggested sponsorship or

endorsement by Toyota. This is true: The Tabaris could

adequately communicate their message without using the

visual trappings of the Lexus brand.”). Our case law

demonstrates that analysis of this factor should focus not on

the number of uses of Plaintiffs’ marks, but on whether

Defendants used more of each individual mark than was

necessary in terms of font and stylization.

Here, Defendants correctly note that the email “did not

use any part of Plaintiff’s service marks, the distinctive

lettering or design; rather they used only the term ‘Applied

Underwriters’ and ‘EquityComp’ in describing its webcast.”

The email did not contain, for example, the illustration of a

St. Bernard or the stylized lettering of Plaintiff’s registered

marks. It did not even employ the distinctive small-caps

rendering of the “Applied Underwriters” and “EquityComp”

marks. Defendants used only the words themselves, which

were, as discussed above, necessary to identify Plaintiff’s

product. Therefore, the second New Kids factor was

satisfied.

APPLIED UNDERWRITERS V. LICHTENEGGER 21

C. Whether Use of the Trademarks Suggested

Sponsorship or Endorsement

Plaintiff asserts that, “[s]imply put, Defendants’

advertising creates confusion.”

At the outset, it claims that “[t]he district court erred by

ignoring Plaintiff’s evidence of actual confusion in its Order,

which nowhere mentions the actual confusion.” However,

in its complaint, Plaintiff pleaded no such facts of actual

confusion. Instead, the complaint stated only that

“Defendants’ improper use of the APPLIED

UNDERWRITERS IP has caused, and will continue to

cause, damaging and actual confusion among the public.”

That conclusory statement constituted the only evidence of

confusion contained in the complaint, and at no other point

did Plaintiff plead facts suggesting that use of its marks led

consumers to assume that it sponsored or endorsed

Defendants’ seminar. 8

Plaintiff also notes that Defendants employed the ®

registration symbol in conjunction with their uses of the

“Applied Underwriters” and “EquityComp” marks, which it

claims “makes the use of the trademark look more official or

authorized, because one would expect that the trademark

owner or its authorized users would use the registration

symbol ®, not unauthorized users.” This is not a particularly

compelling argument. Although Defendants did use the ®

symbol, the email attached to the complaint clarified that

8

In its opposition to Defendants’ motion to dismiss, Plaintiff

referenced a “confused potential customer” who reached out to it.

However, that allegation was not included in the complaint, and so it

cannot be considered. See Arpin v. Santa Clara Valley Transp. Agency,

261 F.3d 912, 925 (9th Cir. 2001) (“[E]xtraneous evidence should not be

considered in ruling on a motion to dismiss.”).

22 APPLIED UNDERWRITERS V. LICHTENEGGER

“EquityComp is the registered trademark of Applied

Underwriters, Inc.” 9 Moreover, in the body of the email (and

on the DVD cover), the title of the seminar—which did

feature both the “Applied Underwriters” and “EquityComp”

marks—was in regular font beneath a stylized logo for

WCE:

This further suggested that it was WCE—not Plaintiff—that

sponsored the seminar, which discounts the possibility of

any confusion.

Furthermore, Defendants correctly argue that any

likelihood of confusion is implausible due to the content of

9

At least one district court has dismissed a trademark infringement

claim under similar circumstances. See Architectural Mailboxes, LLC v.

Epoch Design, LLC, No. 10cv974 DMS (CAB), 2011 WL 1630809, at

*3 (S.D. Cal. Apr. 28, 2011) (“[T]he exhibits attached to the Complaint

lead to the same conclusion, namely that Plaintiff has failed to allege

sufficient facts to demonstrate a likelihood of confusion. The excerpts

from Defendant’s website clearly identify Plaintiff as the manufacturer

of the Oasis Jr. mailbox. The website even goes so far as to state,

‘Oasis® is a registered trademark of Architectural Mailboxes.’” (citation

omitted)).

APPLIED UNDERWRITERS V. LICHTENEGGER 23

the email and the seminar itself. The text of the email

referred to EquityComp as a “sophisticated yet controversial

program,” and Lichtenegger was billed as a lawyer who “for

15 years has specialized in Investment and Commercial

Fraud recovery” and “represents a panoply of employers vs

Applied and is well versed in their math and how their

program works.” Debber, for his part, was credited as the

person “who broke the recent spate of stories about Applied

Underwriters’ EquityComp Program. Only that other mild

mannered reporter, Clark Kent, exceeds Dale’s commitment

to ‘Truth, Justice and the American Way.’” The seminar’s

subtitle advertised that users can “[l]earn the best strategies

for . . . helping a prospect out of EquityComp® mid-term,”

and a reasonable consumer in this context would surely

understand that Plaintiff would not be in the business of

helping customers out of its programs. 10

We have held that criticism of a product tends to negate

the possibility of confusion as to sponsorship and

endorsement. See New Kids, 971 F.2d at 308–09

(“[N]othing in the announcements suggests joint

sponsorship or endorsement by the New Kids. The USA

Today announcement implies quite the contrary by asking

whether the New Kids might be ‘a turn off.’”). 11 Here, it

10

Additionally, the list of questions that the seminar purportedly

answered included several that Plaintiff would be unlikely to field, such

as “If you have a client in the program who is unhappy, should you get

them out and if so, how to know when?” and “How to compete against

the program—at the start and mid-term.”

11

District courts have reached similar conclusions. See, e.g., 1800

GET THIN, LLC v. Hiltzik, No. CV11-00505 ODW (PJWx), 2011 WL

3206486, at *3 (C.D. Cal. July 25, 2011) (determining on motion to

dismiss that “Defendants have not done anything that would suggest

Plaintiff has sponsored or endorsed Defendants’ use of Plaintiff’s

claimed trademark because the articles and comments . . . do not portray

24 APPLIED UNDERWRITERS V. LICHTENEGGER

was clear from the text of the email that the seminar was a

critique of Plaintiff’s program, and it is simply not plausible

that it could have been construed as anything else.

It is true, as Plaintiff notes, that “[t]he existence of

consumer confusion is a fact-intensive analysis that does not

lend itself to a motion to dismiss.” See, e.g., Williams v.

Gerber Prods. Co., 552 F.3d 934, 938–39 (9th Cir. 2008).

Even so, based on the critical nature of the presentation, the

disclaimer included in the text, and the fact that Defendants

advertised the seminar under the WCE banner, we cannot

conclude that a “reasonably prudent consumer” in the

relevant marketplace, Toyota Motor Sales, 610 F.3d at 1176,

could have interpreted Defendants’ seminar has being

endorsed or sponsored by Plaintiff. The complaint contained

only scant, conclusory allegations of consumer confusion,

which, even when considered in the light most favorable to

Plaintiff, were belied by the allegedly infringing email

attached to the complaint, which demonstrated nominative

fair use. Although Plaintiff introduced additional evidence

that might change this conclusion in its opposition to

Defendants’ motion to dismiss, those additional facts cannot

be considered because they were not included in the

operative pleading. The third New Kids factor was therefore

satisfied.

Plaintiff in a positive light”); Patmont Motor Werks, Inc. v. Gateway

Marine, Inc., No. C 96-2703 TEH, 1997 WL 811770, at *4 (N.D. Cal.

Dec. 18, 1997) (“The third and final requirement is met because nothing

in Anthony DeBartolo’s website could possibly be construed to indicate

Patmont’s sponsorship or endorsement. Indeed, the Court would find

incredible any argument to the contrary given the website’s

disparagement of Go-Peds as unsafe and of Patmont management as

criminally anti-competitive.”).

APPLIED UNDERWRITERS V. LICHTENEGGER 25

D. Summation

Although it is a “rare situation in which granting a

motion to dismiss is appropriate” when a case involves

questions of consumer confusion, Williams, 552 F.3d at 939,

the district court properly concluded that Plaintiff failed to

state claims for which relief could be granted because, on the

face of the complaint, it was clear that Defendants’ alleged

infringement constituted nominative fair use.

CONCLUSION

We conclude that the district court abused its discretion

when it dismissed Plaintiff’s complaint as a sanction

pursuant to Rule 41(b) without actually ordering Plaintiff to

amend its complaint. However, we also conclude that

dismissal was nevertheless appropriate, because

Defendants’ use of Plaintiff’s marks constituted nominative

fair use. Accordingly, we AFFIRM the district court’s

dismissal of Plaintiff’s complaint.