Tuesday, September 04, 2018

Using part of an "anticipated order" from a competitor's supplier constitutes reverse passing off, despite Dastar

OTR Wheel Eng'g, Inc. v. West Worldwide Servs., Nos. 16-35897 16-35936, 2018 U.S. App. LEXIS 20520 (9th Cir. Jul. 24, 2018)

OTR Wheel and West compete to sell industrial tires. “West asked one of OTR’s suppliers to provide him with sample tires from OTR’s molds, and he asked the supplier to remove OTR’s identifying information from the tires.” This constituted reverse passing off.

Specifically, West asked the supplier, Superhawk, for 16 of the relevant tires for testing by a potential customer. Superhawk said it would take 50 days to make a mold for the tires. West responded, “I really need it much sooner. . . .  Could you buff off the [OTR] name on the sidewall or just remove the plate and let me get the tire tested? … If we take out the nameplate and all the sidewall information, nobody will know.”  It appears that spring plates used with the molds were used to prevent imprinting of OTR’s mark onto the tires, as the molds otherwise would have done.

A jury found West liable for reverse passing off and for tortiously interfering with a contract between OTR and Superhawk, as well as with related business relationships. West was not found liable for trade dress infringement, trade dress counterfeiting, trade secret misappropriation, or tortious interference with a contract between OTR and one customer, Genie.  The jury also found that OTR’s claim for protected trade dress on its tire tread was invalid (either because the design had functional, self-cleaning properties or because it lacked distinctiveness from other tread designs) and that the trade dress registration had been obtained through fraud on the PTO, though the last finding was set aside by the trial court because of failure to meet the stringent standards for proving fraud by clear and convincing evidence.  The jury awarded OTR actual damages of $967,015.

West argued that Dastar precluded the finding of reverse passing off, but the court held that, instead of simply copying OTR’s design, West used tires from an “anticipated OTR order” and passed those tires off as his own, meaning that the claim survived Dastar. 

This does strike me as troubling.  We have an underlying design that, per the jury’s findings, is not itself protectable as trade dress.  Assume something more standard, like a paper clip.  If reseller X ordered a bunch of paper clips from a supplier who had previously only done business with reseller Y, and thus “anticipated” more orders from Y, then it would be ridiculous to think that X engaged in reverse passing off.  I don’t think it would change things if the paper clip design had Y’s trademark automatically stamped on in the ordinary course of production, such that the supplier had to change its production methods to produce paper clips for X.  Here, OTR claimed rights in the design, and West knew that and had to cajole Superhawk into using the molds to make tires for it.  Nonetheless, OTR didn’t actually have rights. In such circumstances, I would have found Dastar to apply.

The court of appeals reasoned that it didn’t have to decide whether simple use of the OTR mold would create a mere copy or a “genuine” OTR tire. Instead, West passed off “actual OTR tires” because West asked Superhawk to make tires “to fill an anticipated order” for OTR’s partner and to hold most of the tires until the order was actually placed; West then wanted to take ten of the tires to provide to West’s potential customer.  “The jury could therefore conclude that the development tires were taken from part of an anticipated OTR … order and were genuine OTR products, not just copies.”  I think this doesn’t really distinguish the case from my paper clip hypothetical because all of that could have happened with standard paper clips too, even if it was only economical to do a full production run and hope/expect that Y would buy the rest of the paper clips.  Still, the panel purports not to create a conflict with Kehoe Component Sales Inc. v. Best Lighting Products, Inc., 796 F.3d 576 (6th Cir. 2015), in which the manufacturer continued to use the same molds that it used for one customer to make additional units that it sold in competition with the customer. Dastar precluded a reverse passing off claim in that case, but there “the manufacturer did not pass off products that had been produced as part of the customer's order. West did. ‘The right question, Dastar holds, is whether the consumer knows who has produced the finished product.’ Here, the product was produced for OTR, and West attributed it to himself.”  This seems to be playing linguistic games with “produced for”—based on the timing, the product was produced when it was produced for West, not for OTR, even if OTR was a but-for cause of the production. 

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