Sunday, September 21, 2008

Sawmakers battle it out in court

Better than on the field of battle, I'd think.

Trilink Saw Chain, LLC v. Blount, Inc., 2008 WL 4261040 (N.D. Ga.)

Trilink and Blount (here, “Oregon”) make chain saw components and accessories. Trilink is a new entrant and Oregon has been around for decades; Oregon is one of the two major US competitors, with a 57% market share as of 2005 when Trilink entered. Oregon perceived a threat and prepared a memo summarizing the results of Oregon’s tests on Oregon and Trilink products. Oregon discussed the results with several customers. Oregon then had third-party testing labs conduct additional tests, resulting in a memo it distributed to customers. It also disseminated a brochure listing “Eight Important Considerations In Choosing Your Partner for Saw Chain.”

Trilink alleged that these materials contained false advertising. Oregon counterclaimed for trademark infringement and unfair competition based on Trilink’s use of PROLINE for chain saw accessories in competition with Oregon’s PRO-LITE for chain saw guide bars.

Evidence of False Advertising

Trilink offered the testimony of a mechanical engineer, Hal Dunham, with 19 years of product testing experience, to show that Oregon’s ads made claims unsupported by its testing data. Oregon moved to exclude his testimony. FRE 702 requires that expert testimony be (1) based on sufficient facts or data and (2) the product of reliable principles and methods which are (3) applied reliably to the facts of the case. Thus, a district court must consider the expert’s qualifications, the reliability of his methodology, and the extent to which the testimony assists the trier of fact to understand the evidence or resolve disputed issues.

FRE 702 takes a liberal view of qualifications; training and experience need not be narrowly tailored to the exact point of dispute in a case, as long as the expert has the education or background to permit him to analyze a given set of circumstances, as long as he doesn’t try to become an expert in an entirely different discipline. Here, Dunham’s background qualified him to testify about general product testing procedures; how Oregon’s tests diverged from those procedures; and how Oregon’s ads didn’t correspond to the tests.

Unfortunately for Oregon, Dunham’s actual testimony went beyond those topics: in particular, he testified about how average consumers would interpret Oregon’s language in the ads and about the meaning of consumer research data, but he’s not a consumer survey or market research expert. Likewise, Dunham drew many conclusions about saw chains, typical saw chain practices and uses, and saw chain industry standards, but he’s not an expert about those things and has no education, training or experience specific to chain saws. So, for example, he wasn’t qualified to testify that Oregon was wrong to claim that chain breakage is the most important attribute for durability. Dunham was qualified to testify about whether Oregon’s tests tested for and found “durability issues” and injuries therefrom, but not qualified to testify about whether substantiated durability issues cause potential safety threats. Further, and closer to the core of his expertise, he wasn’t familiar with industry standards for chain saw testing, so he couldn’t testify about whether Oregon’s test methods met industry standards. Likewise, because he wasn’t familiar with chain saw use in practice, he couldn’t opine on whether Oregon’s fatigue testing reliably simulated actual chain saw use.

Oregon also argued that Durham’s testimony wouldn’t be helpful to the trier of fact. Expert testimony is unhelpful if all the primary facts can be accurately and intelligibly described by the jury and the jury is capable of understanding their implications without special training. Many of the facts on which Dunham relied were evident to anyone (e.g., Oregon treated the Trilink saw chain as identical to another chain produced in the same factory), but he used them to draw conclusions (e.g., Oregon deviated from an “important rule of product testing: proper sample identification”). Rule 702 doesn’t require exclusion of testimony about basic facts that support an ultimate expert conclusion; the court declined to “comb through” Dunham’s testimony for helpfulness.

Damages from False Advertising

Oregon also argued that Trilink couldn’t show any damages. Trilink sought actual damages, including lost sales and the cost of testing to counter Oregon’s ad materials, as well as a recovery of Oregon’s profits from customers who received the ads.

To get money damages, a Lanham Act plaintiff must show actual harm, which means actual and not just likely deception. In some circuits, literally false ads are presumed to cause actual deception, and willfully deceptive comparative ads are presumed to cause financial injury; the court was persuaded by these authorities and by the Eleventh Circuit’s presumption of irreparable harm from false comparative statements. Thus, at this stage, Trilink’s allegations of deliberate literally false comparative advertising was enough to presume damages; Oregon did not rebut the presumption with any evidence. At trial, Trilink would need to show its entitlement to damages as well as their amount. But that wouldn’t necessarily require further evidence of causation, only of the financial extent of the harm.

Further, Trilink’s claim for “damage control costs” was allowed to proceed, even though Oregon argued that testing was a standard expense; the court found an issue of fact over whether Trilink would have conducted the tests in any event.

An award of Oregon’s profits would be appropriate where (1) the conduct was willful; (2) Oregon was unjustly enriched; or (3) the award would serve deterrence purposes. There should be some connection between harm and recovery; some courts require plaintiffs to show that defendants actually benefited from false ads. However, in the Eleventh Circuit, trademark cases consistently conclude that once the plaintiff shows the defendant’s gross sales, the burden is on the defendant to show that its profits aren’t due to Lanham Act violations. At least when a defendant “specifically disparages a market newcomer through deliberately false advertisements,” the court agreed that the plaintiff’s burden was to show gross sales, and then it would be eligible for an award of profits. The court noted that, as a practical matter, a veteran seeks to maintain its market share against a newcomer, so it would be very hard to “prove” benefit. Oregon was therefore not entitled to summary judgment on Trilink’s claim for profits.

Trilink’s tortious interference claim, however, failed because Trilink didn’t show that Oregon induced any particular third party not to enter into or continue a business relationship with Trilink.

Trademark Infringement

On the trademark claims, here are some more facts: Trilink filed to register PROLINE for chain saw parts and accessories. The PTO published the mark for opposition in early 2006, and Oregon duly opposed in August 2006. Trilink was actually unaware of Oregon’s incontestable registered PRO-LITE mark for chain saw guide bars until that time. When Oregon opposed, Trilink decided to abandon PROLINE and ceased soliciting new business under that name, though it continued shipping PROLINE products to its only US PROLINE customer, a small West Virginia chain, until April 2007.

The parties agreed that PRO-LITE, because it’s incontestable, is presumed to be at least descriptive with secondary meaning. The Eleventh Circuit has stated that such marks are “relatively strong.” (Compared to what? That’s the minimum necessary to have a mark in a descriptive term at all.) But a mark’s strength can still be attacked; incontestability is simply one piece of the overall puzzle.

PRO has been registered 40 times, including four in relation to chain saws and saw chain, and 13 for other handheld saws and saw blades. The court wasn’t convinced that this diminished the strength of the PRO-LITE mark. None of the other marks used the entire PRO-LITE name, nor was there evidence that the other uses were in a format or in conjunction with symbols confusingly similar to PRO-LITE.

Oregon has used PRO-LITE since 1981, expending “significant resources” in advertising and selling millions of dollars worth of PRO-LITE products, which also supported a finding of strength. Trilink argued that Oregon only promotes its product in catalogues, at trade shows, and on Oregon’s web sites, and that recognition of the trade name Oregon is low, so that therefore PRO-LITE recognition must also be low. The court disagreed; people might recognize PRO-LITE without recognizing the parent brand. However, the limited advertising undermines the strength of the mark, but not enough to take it out of the category of “relatively strong.”

Given the similarity of the goods, lower similarity of the marks was required to prove likely confusion; the marks differ only by one letter and thus sound and look similar. However, the trade dress differs: PRO-LITE generally follows OREGON as part of a pine tree/mountain design. The PROLINE mark appeared in large block letters with no design, in a different font. Differing presentation may suffice to distinguish marks that would be confusingly similar in the abstract, and the court found that this was the case here. (Oddly, the court noted here in support of its conclusion the fact that the PTO didn’t mention PRO-LITE when Trilink attempted to register PROLINE, though the PTO ignores context.)

Nonetheless, the similarity of the goods weighed heavily in Oregon’s favor, as did the similarity of retail outlets and customers and the advertising media used. (Oregon alleged that Trilink operated; the court saw that as evidence of use of the mark in internet advertising, though only has an “under construction” page archived.)

There was no evidence of actual confusion.

On bad faith, Oregon was required to show that Trilink adopted its mark with the intention of benefiting from Oregon’s goodwill, or that it was intentionally blind to a likelihood of confusion. Trilink argued that it chose PROLINE because it was a versatile mark for multiple products; that it engaged in online trademark searches; that it used counsel to seek registration for the mark; that the PTO didn’t see Oregon’s mark as an issue; and that it abandoned the mark after it learned of Oregon’s opposition. Oregon argued that Trilink may have been intentionally blind to confusion and may have conducted a deficient trademark search; moreover, this dispute, combined with two other similar disputes the parties have had indicated Trilink’s “general disregard” for Oregon’s IP rights.

The court sided with Trilink. Other disputes just mean the parties are litigious; Trilink voluntarily discontinued two other practices after Oregon objected, but that’s not an admission of guilt and would be excluded by FRE 407 if it were. Speculation about Trilink’s trademark clearance is insufficient to create a jury issue.

On balance, the court found no likely confusion.

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