United States District Court, D. Nevada
FOLEY, JR. United States Magistrate Judge.
matter is before the Court on Plaintiff's Motion for
Leave to File First Amended Complaint (ECF No. 26), filed on
January 20, 2017. Defendant filed its Opposition (ECF No. 28)
on February 2, 2017 and Plaintiff filed its Reply (ECF No.
29) on February 9, 2017. Having reviewed the parties'
briefs, the Court concludes that oral argument on this motion
filed its complaint against Defendant Two M, Inc., d/b/a
Babe's Cabaret (“TMI”) on August 10, 2016,
alleging claims for trademark infringement under 15 U.S.C.
§ 1114, federal trademark counterfeiting under 15 U.S.C.
§ 1114, federal trademark dilution under 15 U.S.C.
§ 1125(c), unfair competition and false designation of
origin under 15 U.S.C. §1125(a), cybersquatting under 15
U.S.C. § 1125(d), common law trademark infringement, and
violation of the Nevada Unfair and Deceptive Trade Practices
Act. Complaint (ECF No. 1). The complaint alleges
that Plaintiff obtained its federally registered trademarks
in the name “Babe's Cabaret” in 2015.
Id. at ¶¶ 7-11. Defendant has allegedly
violated Plaintiff's registered trademarks by using the
name “Babe's Cabaret” for its adult
entertainment business in Nevada.
filed its answer on September 23, 2016. Answer (ECF
No. 9). The scheduling order provided that December 22, 2016
was the last day to file motions to amend the pleadings.
Order (ECF No. 16). The Court, however, granted
Plaintiff's unopposed motion to extend the amended
pleadings deadline to January 23, 2017. Order (ECF
No. 23). Plaintiff filed its instant motion on January 20,
proposed amended complaint seeks to add Omar Aldabbagh as a
defendant. It alleges that Mr. Aldabbagh is a founder of
Defendant TMI and has continuously operated, controlled and
had an ownership interest in TMI since its founding.
Motion (ECF No. 26), Exhibit B, Proposed First
Amended Complaint, ¶ 5. It alleges that Mr. Aldabbagh
has been continuously responsible for overseeing the
operations and marketing of TMI's goods and services,
including the company's promotion of infringing services.
Mr. Aldabbagh allegedly is the principal, driving force
behind TMI's past and continued infringement of
Plaintiff's trademarks. Id. at ¶ 18.
Plaintiff's motion for leave to amend was filed prior to
the amendment deadline, the Court applies the liberal
standard for amendment under Rule 15(a) of the Federal Rules
of Civil Procedure. Foman v. Davis, 371 U.S. 178,
182, 83 S.Ct. 227, 230 (1962), states that leave to amend
should be granted unless the court finds that there has been
undue delay, bad faith or dilatory motive by the moving
party, that the opposing party would suffer undue prejudice
by the amendment, or the amendment would be futile. See
also Eminence Capital, LLC v. Aspeon, Inc., 316 F.3d
1048, 1051-52 (9th Cir. 2003).
opposes the proposed amendment apparently on the grounds that
it would be futile. Defendant has attached to its opposition
a draft motion for summary judgment that it intends to file.
Opposit ion (ECF No. 28), Exhibit 1. The draft
motion states that Plaintiff's adult entertainment
businesses, known as Babe's Cabaret, are located in
Louisiana and New Jersey. Defendant has operated its adult
entertainment business, also known as Babe's Cabaret, in
Henderson, Nevada since 2006. Defendant argues that
Plaintiff's claims are barred under the “Tea-Rose
Rule” which provides that “if the party who was
first in time to use the trademark (the ‘senior
user') later enters the territory of the other party who
adopted the trademark at a later date (the ‘junior
user') the senior users ability to enforce the trademark
rights is restricted, in that the junior user retains the
exclusive right to continue using the trademark in the
geographic area in which it operates. See McCarthy
on trademarks, Section 26:2 et seq., Hanover
Star Milling Company v. Metcalf, 240 U.S. 403 1916,
known as the ‘Tea-Rose Doctrine'; United Drug
Company v. Theodore Rectanus Company, 248 U.S. 90
(1918); Groupo Gigante SA v. Dallo and Company,
Inc., 391 F.3d 1088, 1096 (9th Cir. 2004).”
Exhibit 1, pgs 3-4.
also argues that Plaintiff's claims are barred by the
“Dawn Donut Rule” which provides that
“[e]ven if a senior user, armed with a federal
trademark registration, establishes the right to enforce its
nationwide trademark right in a junior user's territory,
the right to enjoin the junior user's ongoing use of an
infringing trademark can be enforced only if there
is an actual likelihood of confusion. Dawn Donut
Company v. Heart's Food Stores, Inc., 267 F.2d 358
(2d Cir. 1959).” Id. at pgs 4-5. Defendant
argues that because it operates its business in Henderson,
Nevada and caters to a local clientele, there is no
likelihood of confusion even if Plaintiff hereafter opens a
similar business in Southern Nevada that uses the subject
of fact may exist regarding application of the
“Tea-Rose Rule” or the “Dawn Donut
Rule.” Groupo Gigante SA De CV v. Dallo and
Company, Inc. states that the point of the Tea
Rose-Rectanus doctrine is that “in a remote area,
where no one is likely to know of an earlier user, it is
unlikely that consumers would be confused by the second
user's use of the mark.” 391 F.3d at 1096-97.
Whether consumers in Nevada would relate the name
“Babe's Cabaret” to the businesses operated
by Plaintiffs in New Orleans or New Jersey may be open to
reasonable debate. The Court is unable to conclude on the
basis of the draft motion that Plaintiff's claims are
without merit and that the joinder of Mr. Aldabbagh as a
defendant would be futile. It also makes more practical sense
to allow . . . . . .
Aldabbagh to be joined as a defendant, and avoid the delay
that is likely to occur if Plaintiff is required to wait
until the motion for summary judgment is decided before
moving to join him as a defendant. Accordingly
IS HEREBY ORDERED that Plaintiffs Motion for Leave
to File First Amended Complaint (ECF No. 26) is granted and
the hearing set for ...