Monday, July 28, 2014

court says Lexmark doesn't change trademark harm standard

Reynolds Consumer Prods. Inc. v. Handi-Foil Corp., No. 1:13–CV–214, 2014 WL 3615853 (E.D. Va. July 18, 2014)

A jury found Handi-Foil liable for willful infringement of Reynolds’ unregistered trade dress, but in favor of Handi-Foil on all other accounts (including infringement of registered trade dress). The court declined to set aside the verdict and denied Reynolds’ request for attorneys’ fees.

Handi-Foil argued that Lexmark merited judgment as a matter of law because Reynolds didn’t produce “substantial evidence” of harm during trial. The court found Lexmark “totally inapplicable.” That case held that “[t]o invoke the Lanham Act’s cause of action for false advertising, a plaintiff must plead (and ultimately prove) an injury to a commercial interest in sales or business reputation proximately caused by the defendant’s misrepresentations.” But nobody ever questioned Reynolds’ standing, and anyway Lexmark was specifically a false advertising case. (The court did not explain why this is, or what language in the Lanham Act justifies a distinction in what a plaintiff must prove in terms of harm.)

The finding of likely confusion was not unreasonable. Confusion is particularly amenable to jury resolution, and the jury was instructed that it could weigh the factors as it saw fit. Handi-Foil’s emphasis on dissimilarity and lack of actual confusion evidence was unpersuasive. Reynolds provided evidence of mark strength; similarity of the parties’ packages; similarity of goods, marketing channels, and advertising; and Handi-Foil’s specific intent to make the packages look similar. (For marketing, the court said, “While Handi-Foil does not advertise to individual aluminum roll foil consumers, almost the entirety of the marketing pitch for the Handi–Foil roll foil centered on the product being ‘comparable to Reynolds Wrap.’” I don’t think that can be relevant evidence—it’s not to consumers, and it’s about comparability of the product, not the packaging; moreover, it indicates an intent to distinguish the product from Reynolds Wrap as a comparison.)

The court also declined to grant a new trial. Handi-Foil argued that the verdict was inconsistent. To invalidate a verdict on such grounds requires that there be no reasonable view of the jury’s verdict that makes it consistent. The core of Handi-Foil’s argument was that Reynolds’ registered marks provided broader rights than its common law trade dress. Thus, it should have been impossible for the jury to find trade dress infringement but not trademark infringement (where, as here, it’s the trade dress that’s registered).

Reynolds registrations
Trade dress means “the total image and overall appearance of a product, product packaging, product label, product design, or a combination of these things.” The registrations here both designated the colors blue (horizontal), silver (diagonal), and pink (vertical) for Reynolds’ mark (plus words for one). As for its common law trade dress, Reynolds claimed
(a) the color scheme; (b) the use of the color scheme; (c) the use of prominent lettering within the blue section; (d) the use of silver bands to separate the blue and pink sections; (e) the placement of the quantity information; (f) the inclusion of the “made in the U.S.A.” lettering; (g) the repetition of the color scheme and type on the ends of the boxes; (h) the “press here to lock” feature at the ends of the boxes; (i) the use of graphics with how-to information; (j) the “Lift” graphic; (k) the positioning of the brand name on the top flap of the box; and (1) the color yellow, placement, and text used to caution the consumer.

Though McCarthy says that distinctions between trademarks and trade dress “have largely disappeared,” that just means that many types of protectable trade dress are registrable. Thus, “although Reynolds could have likely obtained a registered trademark that is identical in all respects to its trade dress, it chose not to.” Plus, the marks Reynolds chose to register differ from the unregistered trade dress.  

Two Pesos says that the Lanham Act’s protection for unregistered trade dress “prohibits a broader range of practices” than trademark infringement (§32). But that doesn’t resolve the question before this court, and the Supreme Court also said that registrability principles mostly apply for protectability of unregistered marks. McCarthy says that “the irony of both patent claims and definitions of trade dress is that the more elements that are listed, the narrower and weaker the claim.” Handi-Foil argued that this meant that Reynolds’ unregistered trade dress had to be narrower than its registered mark. Even if McCarthy’s statement means that a trade dress with more elements is generally weaker than a trademark with fewer elements, that didn’t matter on the facts of this case. The jury was instructed on the elements of Reynolds’ registrations, as well as on the definition of (unregistered) trade dress. The jury thus was told to determine whether Handi-Foil’s packages were likely to cause confusion with (1) the elements that made up the registered marks or (2) the “total image and overall appearance ” of the Reynolds Wrap boxes. While answering (1) no and (2) yes might not have been the most reasonable verdict, it wasn’t unreasonable.

“A picture is worth a thousand words”: The jury “easily” could have looked at the boxes and decided that the absence of “Reynolds Wrap” precluded infringement of the second mark. As for the first, the jury could have noticed that the registration includes three curved silver lines, separating the blue from other colored areas, while the Handi-Foil boxes lacked that feature. But “the similarity between the overall impressions of the two boxes in each set is striking. This is the case even if the boxes’ color schemes are put aside.” Here the court referred to a bunch of descriptive elements and their arrangement: the two boxes both say “non-stick” and “heavy duty;” Reynolds says “foods lift right off!” and Handi-Foil says “Food Easily Lifts Off!”; both boxes have identical square footage on the right end of the box, with the metric conversions “typed neatly below.” Also, the side and end panels have “striking” similarity. That, combined with “Made in the USA” on the right in the first example, plus the other likely confusion factors, made the jury’s unregistered trade dress verdict reasonable. “In fact, any other finding may well have been unreasonable.”

Non stick boxes

75 foot boxes
It was “perhaps” more difficult to square the jury’s finding of likelihood of unregistered trade dress confusion with its finding that Handi-Foil wasn’t guilty of common law unfair competition. The jury might’ve misunderstood the instructions, though, and that doesn’t require a new trial. The only relevant instruction was that “Virginia common law unfair competition claim requires the same proof, including likelihood of confusion, as the Lanham Act offenses.” “Reasonable jurors could look at this instruction and determine that a finding of non-infringement on any of the Lanham Act claims required a finding in Handi-Foil’s favor on the unfair competition count.” That didn’t render the verdict irrational.

Okay, but what about the court’s previous nonabandonment finding that the current boxes create the same continuing commercial impression as the registered designs? How then could the jury rationally have seen a substantive difference between the unregistered trade dress and the registered marks? The answer is that the court used a different standard and different boxes than the jury did. The court compared the PTO specimen with the current box for “tacking,” a question of law. (For now; one of the trademark cases before the Supreme Court may change matters.) But the jury made a factual determination by comparing a variety of Handi-Foil and Reynolds boxes. (In other words, shut up, infringer.)

Estoppel by laches didn’t bar injunctive relief, especially given the jury’s finding of willful infringement. Plus, Reynolds sued within ten months, comfortably within the analogous Virginia statute of limitations of two years. Applying eBay and Winter, a permanent injunction was appropriate. Though the circuit precedent instructing that likely confusion ordinarily means irreparable injury is pre-eBay, the Eastern District of Virginia has continued to find that irreparable harm generally stems from likely confusion.

What about Reynolds’ failure to show actual confusion or money damages? The jury still found likely confusion, and likely confusion “primarily represents an injury to reputation.” Thus, infringement “gives rise to irreparable injury, in that plaintiff has lost control of its business reputation ... and there is an inherent injury to the good will and reputation of the plaintiff.” As a result, the jury found that Reynolds suffered irreparable harm. (Making eBay irrelevant in trademark cases.) Importantly, Reynolds’ remedies at law were inadequate.

Though Reynolds failed to prove that Handi-Foil earned profits, likely confusion “demonstrates a palpable risk of continuing and future harm.” The jury found in Handi-Foil’s favor on Reynolds’ false advertising claim (relating to Handi-Foil’s claims to be comparable). Even assuming that means that the jury believed that Handi-Foil was comparable, that doesn’t negate any reputational harm suffered by Reynolds due to the infringement. (Why not? What about Handi-Foil could harm Reynolds’ reputation if the products were of the same quality? There may be an answer—I’m sure a plaintiff’s expert could give one—but these mantras of “reputation” are so entrenched that courts don’t pause to think about them at all.) Anyway, the quality of goods is irrelevant to infringement. (And, apparently, harm.)

The public interest also favored an injunction because of Handi-Foil’s specific intent to mimic the Reynolds trade dress and corresponding willful infringement. Reynolds was the prevailing party and was entitled to costs, but not attorneys’ fees. Under Octane Fitness, LLC v. ICON Health & Fitness, Inc., 134 S.Ct. 1749 (2014), a case is exceptional when it “stands out from others with respect to the substantive strength of the party’s litigating position ... or the unreasonable manner in which the case was litigated.” The court found that this case couldn’t be deemed exceptional under this standard.

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