Friday, July 08, 2016

Update: that's not actually the latest in B&B!

My mistake. The latest is that after the ruling I just wrote about, there was a jury trial, which produced findings that (1) Hargis infringed the federally registered mark, (2) there were no damages/profits awardable from the infringement and the infringement was not willful, (3) the registration/incontestability was procured by fraud, and (4) Hargis prevailed on its false advertising/false designation of origin counterclaims.  Because of (3), the judge granted judgment as a matter of law to Hargis on (1), since fraud on the PTO invalidates the entire registration.

B&B Hardware Inc. v. Hargis Indus. Inc., 06-cv-01654 (E.D. Ark. Jun. 26, 2016)

The court explained that, absent the benefits of incontestability, Hargis could’ve shown that the Sealtight mark was descriptive without secondary meaning.  Indeed, it did so in a 2000 trial, but then B&B renewed and filed for incontestability.  Then B&B sued again in 2006, and the court of appeals found that preclusion didn’t apply because of the change in the registration’s circumstances from contestable to incontestable.  (Should that affidavit even have been filed?  How could it possibly be correct to say there were no final determinations adverse to B&B’s ownership of a valid mark?  The 2000 trial sounds an awful lot like a final judgment that the mark wasn’t valid.  Something has gone very wrong with incontestability.)   Hargis thus couldn’t repeat its mere descriptiveness argument, but it did prove fraud on the PTO, which removed the conclusiveness provided by incontestability.  “Without incontestability, B&B does not have a change in circumstances that allows it to escape claim preclusion because the jury in 2000 found that ‘Sealtight’ lacks secondary meaning.” 

Anyway, B&B wasn’t entitled to a remedy.  No injunction, because protecting B&B’s registration in the future was no longer possible; Sealtight wasn’t registered any more.  (This seems to skip over some issues surrounding likely confusion, but I find it hard to blame the court.)  Disgorgement was unavailable because it was subject to the principles of equity, which did not favor B&B.  There was no intentional infringement; there were no diverted sales because the parties don’t compete; and there was no palming off.  True, B&B was without another remedy, but that was its own fault for failing to renew; B&B didn’t delay in asserting rights and filed 43 days after its mark became incontestable; and the public interest was served by enforcing valid trademarks. But it would be “unfair to disgorge Hargis of its profits under unjust enrichment or deterrence rationales when B&B did not lose a single sale as a result of Hargis’s actions and Hargis’s infringement was unintentional.”  Even if the fraud on the PTO claim didn’t survive the (inevitable) appeal, there’d be no justification for disgorgement.

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