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Agdia Inc. v. Xia

United States District Court, N.D. Indiana, South Bend Division

August 10, 2017

AGDIA INC., Plaintiff,
v.
JUN QIANG XIA and AC DIAGNOSTICS, INC., Defendants.

          MEMORANDUM OPINION AND ORDER

          JON E. DEGUILIO JUDGE UNITED STATES DISTRICT COURT

         This is a trademark infringement action over two marks owned by Agdia Inc. (“Agdia” or “Plaintiff”). Dr. Jun Qiang Xia owns and operates a company that directly competes with Agdia in the field of plant diagnostic products and services: AC Diagnostics, Inc. (“ACD”). Plaintiff alleges that Defendants placed one of its marks - the Agdia mark - in white-on-white text on over 200 URL pages within ACD's website in order to divert search engine traffic.[1] Plaintiff also alleges Defendants infringed upon the Agdia mark by selecting a domain name for ACD's website that is confusingly similar to the Agdia mark itself. Lastly, Plaintiff alleges that Defendants made unauthorized use of its ImmunoStrip mark to describe their products on ACD's website.

         Discovery has now closed and Defendants moved for summary judgment on Plaintiff's Counts I-V on July 1, 2016. [DE 37] The matter has been fully briefed and is ripe for review. For the reasons discussed herein, Defendants' motion is denied.

         STANDARD OF REVIEW

         On summary judgment, the moving party bears the burden of demonstrating 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). A “material” fact is one identified by the substantive law as affecting the outcome of the suit. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A “genuine issue” exists with respect to any material fact when “the evidence is such that a reasonable jury could return a verdict for the nonmoving party.” Id. Where a factual record taken as a whole could not lead a rational trier of fact to find for the non-moving party, there is no genuine issue for trial, and summary judgment should be granted. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986) (citing Bank of Ariz. v. Cities Servs. Co., 391 U.S. 253, 289 (1968)). In determining whether a genuine issue of material fact exists, this Court must construe all facts in the light most favorable to the non-moving party and draw all reasonable and justifiable inferences in that party's favor. Jackson v. Kotter, 541 F.3d 688, 697 (7th Cir. 2008); King v. Preferred Tech. Grp., 166 F.3d 887, 890 (7th Cir. 1999).

         FACTUAL BACKGROUND

         Agdia Inc., based in Elkhart, Indiana, provides plant diagnostic products and services to customers around the world. [DE 39-1, Affidavit of Baziel Vrient ¶ 3] It owns the two trademarks at issue here, the “Agdia” mark and the “ImmunoStrip” mark. Id. ¶¶ 7, 23. Defendant Dr. Jun Q. Xia worked as an employee for Agdia in the late 1990s and early 2000s, along with his wife. Id. ¶ 4. He and his wife were forced to resign from Agdia in 2001 after it was discovered that they had engaged in prohibited competitive activities during their employ. Id. Around that same time, Dr. Xia attempted to compete with his former employer in violation of his non-compete obligations, and formed a company known as Advanced Diagnostics International LLC (“ADI”). Id. ¶ 5; see also Case No. 3:01-cv-0781. Agdia sued Dr. Xia to enforce those obligations and to prevent Dr. Xia from misappropriating Agdia's trade secrets; the lawsuit resulted in a permanent injunction being entered against Dr. Xia and ADI. Id.

         In 2004, Xia formed ACD, also named as a defendant herein. [DE 38-9 at 47:20-23] Like Agdia, ACD develops and sells agricultural diagnostic products and related testing services, and thus it competes with Agdia in the marketplace. [DE 39-1, Affidavit of Keith Schuetz, ¶¶ 4, 15] Defendants maintain a website for ACD and Dr. Xia claims that he used the volunteer services of some of his friends' children to assist him with setting up that site. [DE 38-9 at 48:25-49:5] Dr. Xia also maintains that Plaintiff's former president, Chester Sutula, approved of ACD's domain name - “www.acdiainc.com” - during a verbal conversation held between them. [DE 38-9 at 88:15-24] Mr. Sutula denies this. [DE 39-1, Affidavit of Chester Sutula ¶¶ 8-9]

         Sometime between June 24 and August 3, 2007, Plaintiff's Agdia mark was added to ACD's website, without permission, in the form of white-on-white text. [DE 38-5 at 5; DE 38-9 at 98:13-17] Based on Plaintiff's own investigation, the Agdia mark appeared on over 200 URL pages within the website, many of which displayed certain ACD products that competed directly with Plaintiff's own. [DE 39-1, Schuetz Aff. ¶¶ 7, 9-14] According to Plaintiff's expert, Mr. Mohl, the use of white-on-white text was a common practice associated with search engine optimization (“SEO”) in 2007, when the Agdia mark began showing up on ACD's website.[2] [DE 38-5 at 5]. Indeed, this practice proved effective for Defendants as recently as January 2015.[3][DE 39-1, Affidavit of Marcos Amato ¶¶ 6-11]

         The ACD website also displayed and used the ImmunoStrip mark to describe ACD's products that had a function similar to Agdia's own ImmunoStrip products - this time making open use of the mark in plain view rather than burying it in white-on-white text. [DE 39-1, Vrient Aff. ¶¶ 24-25] Dr. Xia stated in his deposition that the ImmunoStrip label was placed on ACD's website because the term was “very popular.” [DE 38-9 at 112:4-10] As with the Agdia mark, this was done without permission. Id. at 115:24-116:7.

         It is against the backdrop of these facts that the Court analyzes the issues at hand.

         DISCUSSION

         Plaintiff alleges five Counts in total, for trademark infringement (I), unfair competition (II), and cyberpiracy (III) under the Lanham Act, 15 U.S.C. §§ 1114(1), 1125(a), 1125(d), and for Indiana state common law claims of unfair competition (IV) and infringement (V). [DE 21] The only substantive issue raised by the parties in their papers revolves around whether Defendants' use of Plaintiff's marks and the selection of the ACD domain name created a likelihood of confusion. Thus, the Court will confine its analysis to whether the evidence is so one-sided in favor of Defendants, that no reasonable jury could conclude that their alleged conduct created a likelihood of confusion with Plaintiff's marks.

         To succeed, Agdia's claims rely on the presence of a likelihood of confusion between its own marks and Defendants' use of the marks. CAE, Inc. v. Clean Air Eng'g, Inc., 267 F.3d 660, 673-74 (7th Cir. 2001); see also AHP Subsidiary Holding Co. v. Stuart Hale Co., 1 F.3d 611, 615 (7th Cir. 1993). A weighing of the following seven factors determines whether consumers are likely to be confused:

(1) the similarity between the marks in appearance and suggestion;
(2) the similarity of the products;
(3) the area and manner of concurrent use;
(4) the degree and care likely to be exercised by consumers;
(5) the strength of the plaintiff's mark;
(6) any actual confusion; and
(7) the intent of the defendant to “palm off” his product as ...

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