Friday, September 17, 2010

Posting photos of product you don't make is false advertising

B & B Hardware, Inc. v. Hargis Industries, Inc., 2010 WL 3515710 (E.D. Ark.)

Here’s a lawsuit that backfired. B&B sued Hargis for trademark infringement, unfair competition, and false designation of origin. Hargis counterclaimed, alleging B&B obtained its trademark registration fraudulently and asserting claims for copyright infringement, false advertising, false designation of origin, and unfair competition; Hargis’s copyright infringement and unfair competition claims didn’t go to the jury, but the rest did. The jury returned a verdict in favor of Hargis on all claims.

The court denied B&B’s renewed motion for judgment as a matter of law or a new trial. The JMOL standard is tough: the evidence must point all one way. It didn’t. The false advertising claim was that B&B published phots of Hargis’s construction fasteners on B&B’s website for about six weeks. B&B argued that the claim should be dismissed as a matter of law because the fasteners are visually identical (so the representation was not materially false). Hargis cited some pre-Dastar cases that, while finding defendants liable in this situation, are probably no longer good law. But Hargis had a better argument: B&B hadn’t established that it had ever sent any fastener designs to any manufacturer for production of specimens, so the allegedly identical products didn’t exist. The court held that the verdict was supported by the evidence presented at trial.

B&B argued that this was really a trade dress claim, except that Hargis didn’t show that its fasteners were nonfunctional or had secondary meaning. But copying the fasteners’ design wasn’t the wrongful act; it was copying the pictures as if B&B had those exact fasteners to sell. This was not a trade dress claim.

Likewise, citing Porous Media Corp. v. Pall Corp., 110 F.3d 1329, 1335 (8th Cir.1997), the court held that showing a violation of the Lanham Act was alone sufficient to establish entitlement to injunctive relief even without evidence of likely future harm from the 6-week posting of the photos.

B&B argued for a new trial because the court erred in refusing to defer to relevant TTAB opinions involving the same parties and the same marks, and/or in refusing to admit those opinions, as well as by making errors in the jury instructions. The court disagreed. The TTAB denied Hargis registration of its mark on the basis of a likely confusion finding. Flavor Corp. of America v. Kemin Indus., Inc., 493 F.2d 275 (8th Cir. 1974), applied collateral estoppel to an infringement action based on an earlier CCPA ruling in a trademark cancellation proceeding. But there, the determination of an Article III court was at issue, not the TTAB.

Nor did the court need to defer to TTAB factual findings, given that this was not an appeal of a TTAB decision. Even if the court did apply deference, the trial evidence was sufficient to convince the court that the TTAB was wrong. And it would have been highly confusing and misleading to the jury, and prejudicial to both parties, to admit the TTAB opinions into evidence. The TTAB uses a different multifactor test than the Eighth Circuit to assess likely confusion, and of course the TTAB applies the factors and analyzes the evidence in an opposition proceeding very differently than a jury does in a confusion case. (Among other things, the TTAB assesses the description of the goods/services and the mark as applied for, rather than the actual marketplace context and presentation of the mark.) The TTAB resolved all doubts in favor of B&B; that’s not the standard here.

The court rejected other challenges to the instructions, including the court’s refusal to instruct the jury on what it should consider when determining the strength of the mark. B&B’s proferred instruction would have emphasized mark strength over other factors. Likewise, the court refused to give a proffered instruction on the incontestability of B&B’s mark. Incontestability was not relevant to any jury issues. B&B argued that the jury heard evidence on descriptiveness even though the issue was not sent to the jury; Hargis argued that this was admissible for purpose of proving the mark’s weakness. The court’s instructions didn’t tell the jury that the degree of descriptiveness of the mark should be considered in resolving the claims; the court upheld its prior refusal to instruct the jury on incontestability.

Likewise, B&B’s contention that the verdict was against the weight of the evidence failed. In a previous trial, the jury found B&B’s mark to be merely descriptive without secondary meaning, and the evidence in this trial showed that the mark hadn’t gained appreciable strength since then. B&B’s sales revenues had stayed flat or even decreased since 2000. It had de minimis ad expenditures, and the principals called no witnesses other than themselves to testify about public association. Incontestability alone doesn’t make a weak mark strong; it just blocks Hargis from asserting mere descriptiveness as a defense. B&B’s own reverse confusion argument seemed to concede weakness.

The only factor that supported confusion was that the marks (Sealtite) were phonetically identical, though Hargis always used the term in the context of “Sealtite Building Fasteners.” But, other than the fact that both products are fasteners, “they are distinctly and vastly different in their features and characteristics, functions and applications, and pricing structure.” Hargis witnesses testified that there was no possible product crossover between B&B’s high-precision, NASA/aerospace-focused product and its own screws for attaching sheet metal to wood and steel frames. There was extensive testimony about lack of competitive proximity.

On intent, Hargis admitted that it didn’t conduct any searches on the name Sealtite before picking it, but Hargis argued that the evidence supported a finding that Hargis lacked actual knowledge of B&B.

On actual confusion, a Hargis employee testified that she received approximately two calls per year from Fastenal looking for a B&B part, but that she received hundreds of calls per week and that the Fastenal inquiries were rare (which makes sense, since B&B had an exclusive written distributorship agreement with Fastenal). There was no evidence that Fastenal was confused as to source. Other evidence of confusion was minimal—a couple of queries. The jury was apparently unpersuaded.

Finally, on the degree of care exercised by consumers, B&B argued that neither fastener was expensive. But Hargis presented extensive evidence of care exercised by customers and the relevance of the types of applications for the fasteners and the differences between the markets. (Also, even if the fasteners are cheap, I have one word for a company with NASA as a client: O-rings. If NASA or Boeing isn’t paying attention to its fasteners, I am extremely concerned.)

The jury’s verdict was not against the weight of the evidence.

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