coast spas complaint

7/25/2019 Coast Spas Complaint

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COMPLAINT Page 1

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF OREGON

PORTLAND DIVISION

COAST SPAS MANUFACTURING INC.,a Canadian Corporation,

Plaintiff,

v.

MARLETTO MANUFACTURING, INC.

an Oregon Corporation, d/b/a WEST

COAST SPAS,

Defendant.

Civil No. 3:16-cv-1162

COMPLAINT FOR FEDERAL UNFAIR

COMPETITION, COMMON LAW

UNFAIR COMPETITION AND

TRADEMARK INFRINGEMENT,

AND OREGON UNFAIR AND

DECEPTIVE TRADE PRACTICES

DEMAND FOR JURY TRIAL

J. Christopher Carraway, OSB #961723

Email: [email protected] KLARQUIST SPARKMAN, LLP

121 S.W. Salmon Street, Suite 1600

Portland, Oregon 97204

Telephone: 503-595-5300Facsimile: 503-595-5301

Attorney for Plaintiff

Coast Spas Manufacturing Inc.

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COMPLAINT Page 2

Plaintiff Coast Spas Manufacturing Inc. (Coast), owner of trademark rights for the

mark COAST SPAS, complains of Defendant Marletto Manufacturing, Inc. d/b/a West Coast

Spas (Defendant) infringing use of the confusingly similar name WEST COAST SPAS.

Coast alleges as follows, upon knowledge with respect to itself and its own acts and upon

information and belief as to all other matters:

I. THE COAST SPAS MARK AND THE NATURE OF THE ACTION

1. Coast owns the trademark for COAST SPAS (the COAST SPAS Mark) and has

been using the mark for at least 19 years in association with the hot tub and spa products it

manufactures and sells to dealers, who then sell the products to retail customers. Coasts hot

tubs and spas are sold to dealers throughout the United States, Canada and numerous other

countries around the world.

2. Coasts hot tubs and spas sold under its trademark have developed a reputation

and distinction among spa dealers and end users in the United States for innovation, high quality

and craftsmanship. Its hot tubs and spas have won numerous industry awards and recognitions,

and it also owns a portfolio of intellectual property in the form of both registered trademarks and

patents.

3. Through long, continuous, substantially exclusive use in the United States,

including in Oregon, the COAST SPAS Mark has become a valuable trademark for Coast.

4. Just recently, Coast learned that Defendant is manufacturing and selling hot tubs

and spas to dealers using the confusingly similar name WEST COAST SPAS.

5.

Coast learned about the WEST COAST SPAS name because of actual confusion

in the market. A potential new dealer declined interest in becoming a dealer for Coasts products

because of its disappointment with the quality of a supposed COAST SPAS product it had

purchased and then returned. But Coast had never sold its products to that dealer, and the dealer

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COMPLAINT Page 3

had instead confused a product sold by Defendant under the WEST COAST SPAS name for a

Coast product sold under the COAST SPAS Mark.

6. Upon learning of the confusingly similar WEST COAST SPAS products being

sold by Defendant and harming Coasts reputation, Coast began investigating Defendant, its

products and its history. Coast uncovered that Defendant did not even exist until 2011, at least a

decade after Coast had established its COAST SPAS Mark in the market and built a reputation

tied to that mark.

7. Coast brings this suit to stop Defendant from continuing its infringement of the

COAST SPAS Mark and from further damaging the quality reputation associated with Coasts

products sold in connection with that trademark.

II. THE PARTIES

8. Plaintiff Coast Spas Manufacturing Inc. is a Canadian corporation with its

principal place of business at 6315 202 St., Langley, British Columbia, Canada, V2Y 1N1.

Coast sells its hot tubs and spas to dealers across the United States. Among other locations,

Coast sells its hot tubs and spas to dealers in the states of Oregon, Washington, California, Idaho,

Montana and Utah.

9. Defendant Marletto Manufacturing, Inc. is an Oregon corporation operating in the

state of Oregon with its manufacturing facility and principal place of business at 13201 Wilco

Hwy, Woodburn, Oregon 97071. Defendant is located and does business within this judicial

district. Defendant does business under the assumed business name West Coast Spas.

10.

Defendant was incorporated in Oregon in May 2011. Its 2016 Annual Report

filed with the State of Oregon identifies its business as spa manufacturing and its President as

Scott Marletto.

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COMPLAINT Page 4

11. In addition to its manufacturing location in Woodburn, Defendant maintains a

retail store under the name West Coast Spas at 14221 SE McLoughlin Blvd., Milwaukie,

Oregon. Defendant also sells its hot tubs and spas to dealers in Oregon, Washington, California,

Idaho, Montana and Utah, including to dealers in the Oregon cities of Bend, Philomath,

Roseburg and Gleneden.

III. JURISDICTION AND VENUE

12. This Court has jurisdiction over the subject matter of this action because this action

arises under the Lanham Act, 15 U.S.C. 1051-1127, jurisdiction being conferred in accordance

with 15 U.S.C. 1121 and 28 U.S.C. 1331 and 1338. Supplemental jurisdiction over the causes

of action under Oregon state law is proper because those causes of action are substantially related

to the cause of action over which the Court has original jurisdiction, pursuant to 28 U.S.C.

1338(b) and 1367. Venue is proper under 28 U.S.C. 1391(b) in that Defendants are transacting

business within this judicial district and have committed acts complained of herein in this judicial

district (or those acts have been aimed at and felt within this judicial district).

IV. THE FACTS

A. Plaintiff Coast and its COAST SPAS Trademarks

13. Coast has used the COAST SPAS Mark in connection with sales of hot tubs and

spas to dealers in United States commerce since at least 1997, specifically in Utah, California

and Washington since 1997, in Oregon since 2001, and in Idaho since 2005.

14. Coast continues to use the COAST SPAS Mark in connection with sales of hot

tubs and spas to dealers in over 28 states, including Oregon, Washington, California, Idaho,

Montana and Utah.

15. Coasts use the COAST SPAS Mark in connection with sales of hot tubs and spas

to dealers has been substantially exclusive since at least 1997.

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COMPLAINT Page 5

16. In addition to using the COAST SPAS Mark in a printed text format, Coast also

uses the COAST SPAS Mark in a cursive script format. For example, Coast has used a cursive

script format of the COAST SPAS Mark in the following logo since 1997:

Coast has also used the scripted form of the COAST SPAS for years in the logo below:

17.

Using its COAST SPAS Mark, Coast markets a wide variety of hot tubs and spas,

including traditional hot tubs, infinity edge hot tubs, micro-bubble therapeutic hot tubs and swim

spas.

18.

Coast advertises its hot tubs and spas bearing the COAST SPAS Mark in trade

magazines directed to spa dealers, including Spa Retailer, Spa Search, Pool and Spa News and

AQUA. Attached as Exhibit Aare several exemplary advertisements showing the use of the

COAST SPAS Mark.

19. Coast also markets its hot tubs and spas bearing the COAST SPAS Mark through

a website located at the address www.coastspas.com. This website uses the COAST SPAS Mark

as the domain name. Coast has operated the www.coastspas.comwebsite and used the COAST

SPAS Mark on that website since 1998.

20.

Coast also markets its hot tubs and spas bearing the COAST SPAS Mark using

many different types of social media that use the COAST SPAS Mark as part of the address. For

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COMPLAINT Page 6

example, Coast has marketed its products using a Facebook page located at the address

www.facebook.com/CoastSpas/continuously since 2009. Coast uploaded its first video to

YouTube in 2011 and maintains a YouTube channel located at

https://www.youtube.com/user/CoastSpas/videos . Coast also operates a Twitter feed with the

username @coastspas.

21. Coasts hot tubs and spas sold under the COAST SPAS Mark are innovative and

of very high quality and craftsmanship. For example, Coasts hot tubs and spas have been

manufactured since 2000 under ISO 9001:2008 quality management systems certification, which

is the highest internationally recognized quality standard for manufacturing. Coast is believed to

be one of only two spa manufacturers in North America to maintain this ISO quality

certification.

22.

Coast is also known as an innovator in the spa industry. It holds numerous

patents and pending patents on spa features and technology. Coast also was the first to

manufacture and sell an infinity edge portable spa as well as the first to sell hot tubs and spas

using Owens Corning Fiberglass reinforced shells, Hydro Cyclonic Pressurized Filtration,

underwater LED lights, stereo and TV, a tri-lever jet face, 7HP pumps, 5HP pumps, a waterproof

floating remote control, Bluetooth hands-free calling, a 5-inch tapered spa cover, a 24-inch

waterfall, levitator jets in a swim spa, slate cabinets and carbon fiber corners.

23. In recognition of their high quality and innovation, hot tubs and spas sold under

the COAST SPAS Mark have received numerous awards and recognitions in the spa industry.

For example, hot tubs and spas sold under the COAST SPAS Mark have received the 5-Star Best

of Class award from Poolandspa.com every year since 2008. Coasts hot tubs and spas have also

won a Best Buy Award from WhatSpa? Magazine every year since 2010.

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COMPLAINT Page 7

24. Coast has expended considerable time, effort and money to promote the COAST

SPAS Mark in connection with its hot tubs and spas. As a result of these efforts, and the

substantial and continuous use of the mark, dealers and end users of such products in this District

and elsewhere associate the COAST SPAS Mark with Coast.

25.

By virtue of the long period of use and extensive promotion, the COAST SPAS

Mark has acquired distinctiveness in the minds of dealers and retail customers associated with

Coast and its products.

26. The COAST SPAS Mark is a strong source identifier for Coast by virtue of its

long use, extensive promotion and distinctiveness.

27.

Coast has established valuable goodwill in connection with its hot tub and spa

products. This goodwill is associated with the COAST SPAS Mark.

28.

Coast possesses the exclusive right to use the COAST SPAS Mark in connection

with the sale of manufactured hot tub and spa products to dealers in those states in which it has

been selling, including but not limited to Oregon, Washington, California, Idaho, Montana and

Utah.

29. In addition to its common law rights in the COAST SPAS Mark, Coast is the sole

owner of the following U.S. trademark registrations (among others):

Trademark Registration Number Claimed First

Use Date

2,405,059 Jan. 13, 1997

3,748,075 June 16, 2003

COAST SPAS THE WINNING EDGE 4,107,579 Nov. 3, 2010

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COMPLAINT Page 8

B. Defendant and Its Infringing WEST COAST SPAS Name

30. Defendant was not incorporated until 2011. Thus, Defendant did not manufacture

hot tubs or swim spas before 2011. Defendant also did not use the name WEST COAST SPAS

in association with hot tubs or spas before 2011.

31.

Using the WEST COAST SPAS name, Defendant currently manufactures and

sells both traditional hot tubs as well as swim spas.

32. Defendant sells its hot tubs and spas under the WEST COAST SPAS name to spa

dealers in the states of Oregon, Washington, California, Idaho, Montana and Utah.

33.

Defendant also directly sells its hot tubs and spas branded with the WEST

COAST SPAS name to retail customers through Defendants retail store located in Milwaukie,

Oregon.

34. Defendant markets its WEST COAST SPAS products through a website with the

domain name www.wcoastspas.com. Defendant registered this domain in 2011.

35. Defendant also markets its WEST COAST SPAS products on a Facebook page at

the address www.facebook.com/westcoastspas/.

36.

Defendant uses the WEST COAST SPAS name both in plain text as well as in a

script, as shown below:

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COMPLAINT Page 9

37. Defendants hot tubs and spas also are physically marked with several instances

of the WEST COAST SPAS name. As shown below, Defendant includes both the name WEST

COAST SPAS as well as WCOASTSPAS.COM on the control panel for its hot tubs and spas:

Screen capture from video uploaded to YouTube by West Coast Spas at address

https://www.youtube.com/watch?v=3f5hpXx9JKA (last visited June 17, 2016).

C. The Likely and Actual Confusion in the Market

38. Coast adopted its COAST SPAS Mark in the United States more than a decade

before Defendant adopted its WEST COAST SPAS name. The COAST SPAS Mark is

inherently distinctive. In addition, during that long period of time prior to Defendants entry into

the market, dealers and retail customers came to associate the COAST SPAS Mark with Coast

and its quality hot tub and spa products, thereby acquiring distinctiveness as well.

39.

Defendants WEST COAST SPAS name includes the entirety of Coasts COAST

SPAS Mark. The additional geographic word WEST added to the COAST SPAS Mark by

Defendant does not distinguish the name WEST COAST SPAS from the COAST SPAS Mark.

40. Defendants WEST COAST SPAS name is similar in sight, sound and meaning to

Coasts COAST SPAS Mark

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COMPLAINT Page 10

41. Defendants WEST COAST SPAS name is confusingly similar to Coasts

COAST SPAS Mark.

42. In addition to the confusing similarity in the plain text uses, Defendants use of

the WEST COAST SPAS name in its logo format is confusingly similar to Coasts use of the

COAST SPAS Mark in a logo. Both logos use a cursive script. Both logos consist of the colors

white and light blue.

43.

Defendants website address (www.wcoastspas.com) is also confusingly similar

to the COAST SPAS Mark, adding only the single letter w to the COAST SPAS Mark and to

Coasts www.coastspas.comwebsite address.

44.

Defendant manufactures and sells the identical types of goods (including

traditional hot tubs and swim spas) under the WEST COAST SPAS name as Coast does under

the COAST SPAS Mark.

45. Both Coast and Defendant use the same channels of trade to market their

products. For example, both Coast and Defendant sell their hot tubs and spas to dealers, who

then sell the hot tubs and spas to retail customers.

46. Defendant also maintains a retail store of its own in Milwaukie, Oregon using the

name WEST COAST SPAS. The photo below illustrates Defendants use of the WEST COAST

SPAS name on the retail location:

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COMPLAINT Page 11

47. Defendant sells its spa and hot tub products using the WEST COAST SPAS name

to dealers in the same states as Coasts dealers, including Oregon, Washington, California,

Montana, Idaho and Utah. For each of these states, Coast was in the market using the COAST

SPAS Mark long prior to Defendant being in that market with the WEST COAST SPAS name.

48.

Defendants use of its WEST COAST SPAS name will likely confuse or mislead

consumers to believe Defendants hot tubs and spas originate from Coast or to assume that

Defendant is affiliated with or endorsed by Coast.

49. The likely confusion in the marketplace is also evidenced by World Wide Web

search results shown to computer users requesting a search using the COAST SPAS Mark as a

keyword. For example, when Coasts COAST SPAS Mark is entered into a Bing search request,

an advertisement for Defendant and its hot tubs is the first search result on the page. Further,

Defendants location and other information about Defendant and its products appear on the

majority of the right half of the coast spas search result page. A copy of a Bing search result

page for the search term coast spas made by a user in Portland, Oregon on June 17, 2016, is

attached as Exhibit B. The top part of that search result page is shown below:

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COMPLAINT Page 12

50. Similarly, Googles AdWords service indicates that when Coasts COAST SPAS

Mark is entered into a Google search request in a browser located in Portland, results for

Defendants website are the third, fourth and fifth search results. A copy of that AdWords report

conducted on June 21, 2016 is attached as Exhibit C. The top part of that search result page is

shown below:

51.

A significant percentage of visitors to Defendants website

(www.wcoastspas.com) reach that website by searching for Coasts trademark coast spas,

receiving search results that include Defendants website, and by following the link in that search

result. For example, a recent report from search analytics service Alexa indicates that coast

spas is the fourth highest keyword leading visitors to Defendants website, with over 12% of

search traffic to Defendants website arriving there after searching for coast spas. A copy of

that Alexa search report is attached as Exhibit D.

52.

Members of the relevant public have been actually confused regarding the source

or sponsorship of Defendants hot tubs and spas sold using the WEST COAST SPAS name.

Specifically, dealers have mistakenly believed that poor-quality hot tubs and spas sold by

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COMPLAINT Page 13

Defendant using the WEST COAST SPAS name were in fact manufactured by Coast, thereby

harming Coasts reputation for quality products.

53. On April 27, 2016, a Coast Spas representative, Larry Richards, was making sales

calls to hot tub and spa dealers in Southern Oregon. Mr. Richards visited a spa dealer named

Orleys Stoves & Spas in Medford, Oregon. When Mr. Richards introduced himself as a

representative for Coast Spas, the employee of Orleys stated that he had already tried spas from

Coast Spas and returned them due to poor quality. When Mr. Richards pursued the issue further

with the Orleys representative, Mr. Richards learned that the supposed Coast Spas products

that were rejected for poor quality were not in fact products manufactured by Coast using the

COAST SPAS Mark but instead were products manufactured and sold by Defendant under the

WEST COAST SPAS name.

54.

Defendants actions are without Coasts authorization. Defendant is liable for the

resulting acts of unfair competition, trademark infringement and unfair and deceptive trade

practices.

COUNT I

Federal Unfair Competition

55.

Coast repeats and re-alleges each and every allegation contained in paragraphs 1-54

of this Complaint as though fully set forth herein.

56. This cause of action for unfair competition arises under Section 43(a)(1) of the

Lanham Act, 15 U.S.C. 1125 (a)(1).

57. Coast has been using its COAST SPAS Mark on and in connection with hot tubs

and spas in interstate commerce since at least 1997 and has developed substantial goodwill in this

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COMPLAINT Page 14

mark in its common law territory (the entire United States) prior to Defendants adoption and use

of the WEST COAST SPAS name in commerce.

58. Defendants use of the name WEST COAST SPAS in commerce in connection

with sales of hot tubs and spas to dealers as alleged above is likely to cause confusion, mistake, or

deception as to the affiliation, connection or association of Defendant with Coast or as to the

origin, sponsorship or approval of the products of Defendant and those of Coast and misrepresents

the nature, characteristics and qualities of those products.

59. The acts of Defendant constitute unfair competition in violation of Section 43(a)(1)

of the Lanham Act, 15 U.S.C. 1125(a)(1).

60.

As a direct and proximate result of Defendants conduct, Coast has suffered

damages to its valuable COAST SPAS Mark and other damages in an amount to be proven at

trial.

61. Coast is without an adequate remedy at law because Defendants unfair competition

is causing irreparable injury to Coast and to its goodwill and reputation, and unless said acts are

enjoined by this Court, Coast will continue to suffer such irreparable injury.

COUNT II

Common Law Trademark Infringement and Unfair Competition

62. Coast repeats and re-alleges each and every allegation contained in paragraphs 1-

54 of this Complaint as though fully set forth herein.

63.

This cause of action for trademark infringement and unfair competition arises under

the common law of the State of Oregon.

64.

Defendants use of the name WEST COAST SPAS in connection with sales of

hot tubs and spas to dealers, as alleged above, is likely to cause confusion, mistake, or deception

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COMPLAINT Page 15

as to the source, sponsorship or approval of Defendants products in that others are likely to

believe that Defendants products are in some way legitimately connected with, sponsored or

licensed by, or otherwise related to Coast.

65.

Defendants use of the name WEST COAST SPAS is without Coasts consent or

permission.

66. The acts of Defendant constitute common law trademark infringement and unfair

competition.

67. As a direct and proximate result of Defendants conduct, Coast has suffered

damages to its valuable COAST SPAS Mark and other damages in an amount to be proven at

trial.

68. Coast is without an adequate remedy at law because Defendants common law

trademark infringement and unfair competition is causing irreparable injury to Coast and to its

goodwill and reputation, and unless said acts are enjoined by this Court, Coast will continue to

suffer such irreparable injury.

COUNT III

Unfair and Deceptive Trade Practices ORS 646.605 to 646.656

69.

Coast repeats and re-alleges each and every allegation contained in paragraphs 1-

54 of this Complaint as though fully set forth herein.

70. This cause of action for unfair and deceptive trade practices arises under Oregons

Unlawful Trade Practices Act, ORS 646.605 to 646.656 (2003).

71. Defendant has been and is passing off its goods as those of Coast, causing a

likelihood of confusion or misunderstanding as to the source, sponsorship or approval of

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Defendants goods, causing a likelihood of confusion as to Defendants affiliation, connection or

association with Coast, and/or otherwise damaging the public.

72. Defendants conduct constitutes unfair and deceptive acts or practices in the

course of business, trade or commerce in violation of Oregons Unlawful Trade Practices Act,

ORS 646.605 to 646.656 (2003).

73. Defendants unauthorized use of confusingly similar imitations of the COAST

SPAS Mark has caused and is likely to continue causing substantial injury to the public and to

Coast, and Coast is entitled to injunctive relief and to recover damages, costs and reasonable

attorneys fees.

PRAYER FOR RELIEF

WHEREFORE, Plaintiff, Coast Spas Manufacturing Inc., prays for, pursuant to 15

U.S.C. 1125(a) and Oregon state law:

A. A judgment for Coast against Defendant on all claims of this Complaint;

B. A grant of a preliminary and permanent injunction against Defendant and all

persons in active concert or participation with it, enjoining it from:

1. Using WEST COAST SPAS or any other name confusingly similar to the

COAST SPAS Mark, in connection with the sale of hot tubs and spas or

other similar goods and services;

2. Using any trademark, service mark, name, logo, design or source identifier

of any kind in connection with Defendants goods or services that is a

copy, reproduction, colorable imitation or simulation of, or confusingly

similar to, or in any way similar to the trademarks, service marks, names

or logos of Coast;

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COMPLAINT Page 17

3. Using any trademark, service mark, name, logo, design or source

designation of any kind on or in connection with Defendants goods or

services that is likely to cause confusion, mistake, deception or public

misunderstanding that such goods or services are produced or provided by

Coast, or are sponsored or authorized by Coast or are in any way

connected or related to Coast; and

4. Passing off, palming off or assisting in passing off or palming off,

Defendants goods or services as those of Coast, or otherwise continuing

any and all acts of unfair competition and deceptive trade practices alleged

in this Complaint;

C. An order as part of the injunction requiring Defendant to recall all products

bearing the infringing WEST COAST SPAS name, or any other mark confusingly similar to the

COAST SPAS Mark, which have been shipped by Defendant or under its authority, to any

customer, including, but not limited to, any wholesaler, distributor, retailer, consignor or

marketer, and also to deliver to each customer a copy of this Courts order as it relates to said

injunctive relief against Defendant;

D.

An order as part of the injunction and pursuant to 15 U.S.C. 1116(a) that

Defendant file with the Court and serve on Coast within thirty days after the service on the

Defendants of the injunction, a report in writing under oath setting forth in detail the manner and

form in which the Defendants have complied with the injunction;

E. An order requiring Defendant to assign its domain (www.wcoastspas.com) to

Coast;

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F. A judgment awarding Coast damages as a result of Defendants actions, together

with interest and costs;

G. A judgment requiring Defendant to account for and pay to Coast all profits

wrongfully derived by Defendant through its unlawful acts set forth herein, together with interest

and costs;

H. An award to Coast of its costs (including expert fees), disbursements and

reasonable attorneys fees incurred in this action, together with interest, including prejudgment

interest, pursuant to 15 U.S.C. 1117 and the equity powers of this Court; and

I.

Such other and further relief as may be deemed just and appropriate.

DEMAND FOR JURY TRIAL

Pursuant to Fed. R. Civ. P. 38(b), Plaintiff requests a trial by jury on all issues properly

triable by a jury.

Respectfully submitted,

Dated: June 22, 2016 By: /s/ J. Christopher Carraway

J. Christopher Carraway, OSB #961723

Email: [email protected]

KLARQUIST SPARKMAN, LLP121 S.W. Salmon Street, Suite 1600

Portland, Oregon 97204

Telephone: 503-595-5300

Facsimile: 503-595-5301

Attorneys for Plaintiff

Coast Spas Manufacturing Inc.

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coast spas complaint

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