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Boston Dental Group, LLC v. Affordable Care, LLC

United States District Court, D. Nevada

March 29, 2018

BOSTON DENTAL GROUP, LLC, Plaintiff,
v.
AFFORDABLE CARE, LLC, Defendant.

          ORDER PLAINTIFF'S MOTIONS FOR PARTIAL SUMMARY JUDGMENT (ECF NOS. 34, 35, 37) DEFENDANT'S MOTION FOR SUMMARY JUDGMENT (ECF NO. 38)

          RICHARD F. BOULWARE, II UNITED STATES DISTRICT JUDGE

         I. INTRODUCTION

         Before the Court are Plaintiff / Counterdefendant Boston Dental Group, LLC (“BDG”)'s Motion for Partial Summary Judgment (Unlawful use), (ECF No. 34); Plaintiff's Motion for Summary Judgment (Naked Licensing), (ECF No. 35); Plaintiff's Motion for Summary Judgment (Laches), (ECF No. 37); and Defendant / Counterclaimant Affordable Care, LLC (“AC”)'s Motion for Partial Summary Judgment, (ECF No. 38).

         II. PROCEDURAL BACKGROUND

         On July 12, 2016, BDG filed its Complaint against AC. (ECF No. 1). AC filed an Answer and Counterclaim on September 12, 2016. (ECF No. 5). BDG filed an Answer to the Counterclaim on September 27, 2016. (ECF No. 10).

         On June 30, 2017, BDG filed the instant Motion for Partial Summary Judgment on the issue of unlawful use, a Motion for Summary Judgment on the issue of naked licensing, and a Motion for Summary Judgment on the issue of laches. (ECF Nos. 34, 35 & 37). AC filed a Motion for Partial Summary Judgment on the same day. (ECF No. 38). BDG filed its Response to AC's Motion on August 4, 2017. (ECF No. 46). AC also filed its Responses to BDG's Motions on August 4, 2017. (ECF Nos. 53, 54, 55). AC filed its Reply to its Motion for Summary Judgment on August 25, 2017. (ECF No. 62). The same day, BDG filed Replies to its Motions. (ECF Nos. 64, 65, 66).

         III. LEGAL STANDARD

         A. Motion for Summary Judgment

         Summary judgment is appropriate when the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show “that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a); accord Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986).

         When considering the propriety of summary judgment, the court views all facts and draws all inferences in the light most favorable to the nonmoving party. Gonzalez v. City of Anaheim, 747 F.3d 789, 793 (9th Cir. 2014).

         If the movant has carried its burden, the non-moving party “must do more than simply show that there is some metaphysical doubt as to the material facts . . . . Where the record taken as a whole could not lead a rational trier of fact to find for the nonmoving party, there is no genuine issue for trial.” Scott v. Harris, 550 U.S. 372, 380 (2007) (alteration in original) (quotation marks omitted).

         IV. UNDISPUTED FACTS

         The Court finds the following facts to be undisputed. BDG is a limited liability company owned by Dr. David Ting (“Dr. Ting”). (Ting Decl., ECF No. 34-1 at 2). In 2007, Dr. Ting and BDG began to promote the opening of a dental office called Affordable Dental in Las Vegas, Nevada. (Id.) The office opened for business in January 2008. (Id.). AC is a dental support organization (“DSO”) that provides a variety of non-clinical services, including billing, purchasing, financing, marketing, assistance with securing legal services, and advertising services to its affiliated dental practices (“Affiliates”). (Steelman Decl., ECF No. 86-3 at 3). AC has one Affiliate dental practice in Nevada, located in Las Vegas (“Vegas Affiliate”). (Id. at 4). The Vegas Affiliate opened its doors for customers in 2007, and has remained open through the present. (Id.).

         Both parties have trademarks that they license to dental practices or dental offices. In November 2000, Affordable Care applied to register the AFFORDABLE DENTURES mark on the Patent & Trademark Office (“PTO”)'s Principal Register. (Affordable Dentures PTO Page, ECF No. 86-9 at 2). In March 2002, AC's AFFORDABLE DENTURES mark was granted registration on the Principal Register for “dental services” under Reg. No. 2, 546, 707. (List of AC Trademark Registrations, ECF No. 86-2 at 4). AC's federal registration for the AFFORDABLE DENTURES mark is based on a first use in commerce of 1977. (Id.). AC owns federal trademark registrations on the Principal Register for a family of additional AFFORDABLE-formative marks used in connection with dental services (collectively, and inclusive of the AFFORDABLE DENTURES mark, the “AC Marks”) (Id. at 3-12). AC licenses the AC Marks to more than 230 Affiliates to be used in connection with the provision of dental services, including dentures. (ECF No. 86-3 at 4).

         On August 21, 2012, BDG filed U.S. Trademark Application No. 85, 709, 476 to register the mark AFFORDABLE DENTAL for “dentist services; oral surgery and dental implant services; orthodontic services; providing cancer screening services; [and] teeth whitening services.” (Affordable Dental PTO Page, ECF No. 86-10 at 2). On December 19, 2012, the PTO denied registration based upon likelihood of confusion with AC's AFFORDABLE DENTURES mark. On March 7, 2013, the PTO suspended action on BDG's application, in part because it found BDG's arguments unpersuasive with regard to the prior “likelihood of confusion” refusal to registration on the Principal Register. (PTO Suspension Letter, ECF. 86-19 at 2). BDG's AFFORDABLE DENTAL application was subsequently amended and allowed to register on the Supplemental Register on January 6, 2015, Reg. No. 4, 668, 829. (ECF No. 86-10 at 2).

         A. Facts Regarding Unlawful Use

         AC has over 230 Affiliates nationwide. (ECF No. 86-3 at 3). In addition to other fees, AC charges its Affiliates a general management fee (“Management Fee”). (Id.). Nevada is a state that prohibit DSOs from charging a fee based on the net profit or net operating margin of the dental practices (“Percentage-Based Fee”); AC charges its Affiliates in states like Nevada a fixed fee (“Fixed Fee”). (Id. at 4). Regardless of whether an Affiliate is located in a state that allows or forbids fees based on the net profit or net operating margin of the dental practices, AC does not ask its Affiliates to pay a Management Fee until after the Affiliate begins to earn a profit. (Id.).

         Since 2007, AC has provided services to the Vegas Affiliate. (Id.). On October 25, 2007, AC and the Vegas Affiliate entered into a service contract (the “2007 Service Contract”). (ECF No. 86-4). The 2007 Service Contract includes a summary of management fees, which summary lists a “Central Office Service Fee” as a Fixed Fee and lists a Management Fee as a Percentage-Based Fee. (ECF No. 86-4 at 20). Section VI(H) of the 2007 Service Contract, titled “Waiver of Performance, ” provides that if any act or service of AC under the Agreement “should be construed or deemed by any government authority, agency or court to constitute the practice of dentistry, the performance of said act or service by [AC] shall be deemed waived and forever unenforceable. . . .” (Id. at 10). Financial documents from between 2013 and 2016 show that AC charged the Vegas Affiliate a fixed Management Fee. (Fee Statements, ECF No. 86-6).

         B. Facts Regarding Naked Licensing

         i. AC's Role As A DSO

         DSOs provide affiliate dentists and dental practices with a variety of non-clinical services, including billing, purchasing, financing, marketing, assistance with securing legal services, and advertising services. (Bileca Decl., ECF No. 38-4 at 3). AC is a member of the Association of Dental Support Organizations (“ADSO”). (Id. at 5). DSOs are recognized by and permitted to operate under the laws of all 50 states. (Id. at 3). Members of the ADSO operate in 44 states and support more than 13, 000 dentists worldwide. (Id.). DSOs typically license their marks to provide affiliates with a common brand identity, and most DSO-affiliates practice under marks owned by their DSO. (Id. at 5). As a DSO, AC recruits dentists to become practice owners of dental practices that affiliate with AC. (Siegal Depo., ECF No. 38-15 at 3).

         ii. License Provisions Governing The Vegas Affiliate

         AC provides similar services to all of its Affiliates using the AFFORDABLE DENTURES mark and related AC Marks, with small variability due to the individual practice owners (“Pos”). (Siegal Depo., ECF No. 38-15 at 10). AC enters into oral trademark licenses with each of its Affiliates, which allow the Affiliates to use the AC Marks. (ECF No. 87-3 at 3). The right to use the AC Marks is concurrent with and dependent upon affiliation with AC. (Id.). Additionally, as a condition of the oral license, each Affiliate enters into a service contract and facility lease with AC. (Id. at 4). The Vegas Affiliate entered into a Service Contract (“Vegas Contract”) and building lease (“Vegas Lease”) with AC. (ECF No. 38-3 at A-1 and A-2). The current Vegas Contract and Vegas Lease were entered between AC and the Vegas Affiliate on January 1, 2016. (Id.).

         The Vegas Affiliate is wholly owned by PO Dr. Cher Chang (“Dr. Chang”). (ECF No. 38-3 at A-1). Dr. Chang is licensed to practice dentistry in the state of Nevada. (Id.). Dr. Chang opened the Vegas Affiliate under the AFFORDABLE DENTURES name at the end of 2007. ECF No. 66-22 at 3). Dr. Chang controls the clinical practice of her office; under the terms of the Service Contract, AC cannot direct, control, or interfere with Dr. Chang's independent professional judgment over clinical matters. (ECF No. 38-3 at A-1). AC provides the Vegas Affiliate with “business and administrative services . . . to support the management of the business aspects of the [Affiliate]” and supplies an on-site dentures laboratory. (Id.).

         Further, the Vegas Contract requires “that each dentist and dental staff who works at the Dental Office comply . . . with the professional and ethical standards, requirements, laws and regulations applicable to their professions under federal law and the law of the State (including, without limitation, OSHA, HIPAA, and workplace safety laws).” (Id.). When disciplinary complaints, professional malpractice, or other actions are initiated against any dentist or dental staff the Affiliate is required under the terms of the contract to immediately “inform AC of the action, and the underlying facts and circumstances.” (Id.). The Vegas Contract also requires the Affiliate to “maintain comprehensive professional liability insurance” with minimum limits per claim and policy and provide AC with proof of coverage. (Id.). ...


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