IP Law Daily, TRADEMARK—N.D. Cal.: Perplexity Solutions’ failure to retain counsel dooms infringement suit against Perplexity AI, (Oct 29, 2025)

By Carolin Dennis, B.Sc., LL.B., LL.M.

Perplexity Solutions’ failure to retain counsel resulted in default on Perplexity AI’s counterclaims and dismissal of its claims against Perplexity AI.

The U.S. District Court for the Northern District of California granted Perplexity AI’s motions to dismiss Perplexity Solved Solutions’ answer to its counterclaims, for entry of default, and to dismiss plaintiff Perplexity Solutions’ trademark claims with prejudice for failure to prosecute because four Malone factors weighed in favor of dismissing Perplexity Solutions’ claims and declaring default on Perplexity AI’s counterclaims (Perplexity Solved Solutions, Inc. v. Perplexity AI, Inc., No. 3:25-cv-00989-JSC (N.D. Cal. Oct. 27, 2025)).

Background. Perplexity Solved Solutions Inc. (Perplexity Solutions), a Texas-based software company, filed a lawsuit against Perplexity AI, Inc. (Perplexity AI), a San Francisco based AI startup, in the U.S. District Court for the Northern District of California, alleging trademark infringement, unfair competition/false designation of origin, cybersquatting, unfair business practices, trademark infringement and unfair competition in violation of California common law. Perplexity Solutions also requested a declaratory judgment in connection with Perplexity AI’s marks in the pending applications. Perplexity AI counterclaimed for cancellation of Perplexity Solutions’ trademark registration.

On July 18, 2025, Mitchell Silberberg & Knupp LLP and its individual attorneys, Eleanor M. Lackman and Marissa B. Lewis, moved to withdraw as Perplexity Solutions’ counsel. Ms. Lewis attested because there had been an irreparable breakdown in the attorney-client relationship and that her firm could not continue to effectively represent Perplexity Solutions. She stated that professional considerations required termination of the representation and the situation was one in which withdrawal is appropriate. She also attested that on June 20, 2025, she advised Perplexity Solutions that it would have to obtain substitute counsel because a corporation cannot be represent itself in federal court. On August 5, 2025, the district court granted the motion to withdraw ‘subject to the condition that papers may continue to be served on counsel for forwarding purposes’ until Perplexity Solutions retained new counsel.

However, as no attorney had made an appearance for Perplexity Solutions by September 11, 2025, the district court continued its September 17, 2025, case management conference. In its continuance order, the district court again explained that Perplexity Solutions is a corporation and cannot appear without licensed counsel and noted “Defendant and Counterclaimant-Plaintiff may take whatever steps it deems appropriate.” In addition, on October 9, 2025, the district court denied Dawn Gallman Mobley’s request for a continuance of court proceedings because she had not yet obtained counsel for Perplexity Solutions. The district court reiterated “if no new counsel appeared in this action, Perplexity Solutions’ claims would have to be dismissed, and Perplexity Solutions’ default could be entered on Perplexity AI’s counterclaims.”

Perplexity AI then moved to strike Perplexity Solutions’ answer to its counterclaims and direct entry of default, and dismiss Perplexity Solutions’ claims with prejudice based on Perplexity Solutions’ failure to comply with court orders.

Failure to prosecute. Failure to prosecute diligently is sufficient by itself to justify a dismissal, the district court noted. The district court thoroughly considered the Malone factors outlined in Malone v. United States Postal Service, 833 F.2d 128, 130 (9th Cir. 1987). The district court noted that in determining whether dismissal is warranted it must weigh five factors: (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 the disposition of cases on their merits; and (5) the availability of less drastic sanctions. Further, dismissal or default is appropriate where at least four factors support dismissal, or where at least three factors strongly support dismissal.

The district court noted that the first two factors relate to the efficient administration of judicial business for the benefit of all litigants with cases pending. More than four months ago, Perplexity Solutions’ previous counsel advised it that it was moving to withdraw and, because a corporation cannot represent itself, it needed to find substitute counsel. However, Perplexity Solutions’ failure to do so for the past four months has delayed case management conferences and therefore adjudication of this action. Therefore, the first two factors weighed in favor of default and dismissal.

As to the third factor, to determine whether a defendant has been prejudiced, the district court examined whether the Perplexity Solutions’ actions impair Perplexity AI’s ability to go to trial or threaten to interfere with the rightful decision of the case. The district court found that in the nearly three months since the district court ordered Perplexity Solutions to obtain counsel, and over four months since Perplexity Solutions’ prior counsel advised it to obtain new counsel, Perplexity Solutions has not provided any excuses that would justify delaying this action further. Additionally, Perplexity Solutions’ inability to retain counsel and therefore to participate in litigation it initiated has “made it impossible for Perplexity AI to adequately prepare itself for trial” and litigate this case to its conclusion. Thus, prejudice to defendant supports default or dismissal.

The fifth Malone factor considers the adequacy of less drastic sanctions. A district court’s warning to a party that his failure to obey the court’s order will result in dismissal can satisfy the ‘consideration of alternatives’ requirement. Here, in its orders requiring Perplexity Solutions to retain counsel, the district court repeatedly warned Perplexity Solutions’ that Perplexity AI may seek default and dismissal as a result of Perplexity Solutions’ not obtaining counsel. Accordingly, this factor weighed in favor of default and dismissal.

Accordingly, after careful consideration of the Malone factors, Perplexity AI’s motion to strike Perplexity Solutions’ answer to its counterclaims and direct entry of default, and motion to dismiss Perplexity Solutions’ claims with prejudice were granted.

The Case is No. 3:25-cv-00989-JSC.

Judge: Corley, J.

Attorneys: Perplexity Solved Solutions, Inc., pro se. Jennifer L. Barry (Latham & Watkins LLP) for Perplexity AI, Inc.

Companies: Perplexity Solved Solutions, Inc.; Perplexity AI, Inc.

Cases: AINews TechnologyInternet Trademark CaliforniaNews