Monday, October 04, 2021

Laches bars TM claims but what counts as "Made in the USA" merits trial

Illinois Tool Works Inc. v. J-B Weld Co., 2021 WL 4310576, No. 3:19-cv-1434 (JAM) (D. Conn. Sept. 22, 2021)

The parties compete in the market for “chemical bonding products—like epoxies, adhesives, threadlockers, gasket makers, and silicone sealants—that someone might buy at a hardware store to fix their car or for other mechanical projects.” Illinois Tool is well-established in the market for bonding products known as threadlockers and gasket makers; J-B Weld is a relative newcomer. Most of Illinois Tool’s trademark-related claims were time-barred by the statute of limitations and laches. But genuine fact issues remained on whether J-B Weld’s advertising of “Made in USA” was false and whether Illinois Tool had standing.

Illinois Tool has long sold threadlockers under the trademark “Permatex.” J-B Weld began in 2010 to sell theadlockers under the “Perma-Lock” name. Similarly, Illinois Tool has long sold gasket makers under names such as “Ultra Black,” “Ultra Grey,” and “Ultra Copper.” J-B Weld began in 2014 to sell gasket makers as “Ultimate Black” and “Ultimate Grey.”

Illinois Tool sued in 2019. Connecticut state law claims for common law trademark infringement, for common law unfair competition, and for CUTPA were all subject to a three-year statute of limitations. Thus, the statute of limitations barred the state law claims. Nor did Illinois Tool argue that it could attack the continuation of the allegedly infringing conduct.

As for the Lanham Act claims, laches supplied the rule, with a presumption triggered by the expiration of the analogous state law limitations period. (Here, the court says it’s the analogous period for “fraud,” but more generally it is “the closest state law cause of action.”) That was also three years, so the burden shifted to Illinois Tool to show why it would be inequitable to dismiss its Lanham Act claims.

It was undisputed that Illinois Tool actually knew about these products more than three years before filing this lawsuit, including a slide presentation about J-B Weld, mentioning Ultimate and Perma-Lock by name and describing each as a “Competitive Threat.” In 2016, it even commissioned a survey asking customers whether they preferred “J-B Weld Ultimate Black” or Illinois Tool’s “Permatex Ultra Black.”

JB Weld product

Illinois Tool product

Nor was Illinois Tool justified in waiting to sue until J-B Weld grew its market share:

The very point of laches is not for the wait-and-see convenience of a plaintiff but to avoid unfair prejudice to a defendant. Laches requires a plaintiff to file suit for a known trademark infringement before the defendant foreseeably commits continuing resources year after year to promoting a product and entrenching itself in the market. … While Illinois Tool sat on its hands, not only did J-B Weld’s sales grow, but it expanded its brands into more stores and launched new variants (like “Perma-Lock Green”). So the fact that J-B Weld had low sales in 2015 is not an excuse for delaying, but rather a reason why Illinois Tool should have acted then.

This was not a case of progressive encroachment, which only starts the laches clock when “the likelihood of confusion looms large.” “[T]hat rule is just a reminder that not every use of a rival’s trademark violates the Lanham Act. The use must also cause confusion.” If a defendant slowly comes more directly into competition with the plaintiff, that can be progressive encroachment, but here direct competition existed since at least early 2016. “Any confusion loomed as large from the start as it did later on.” In other words, “[a] junior user’s growth of its existing business and the concomitant increase in its use of the mark do not constitute progressive encroachment.” Change over time in likelihood of confusion, not change over time in market share, is the key.

What about bad faith as precluding laches? There was no evidence of intentional trademark infringement. The packaging featured a large “J-B Weld” logo (in contrast to the large “Permatex” logo appearing on Illinois Tool’s product), “and the packaging self-evidently differs from Illinois Tool’s in other ways as apparent from the images below”:

These similarities in packaging “fall well short of establishing bad faith.” The limited name similarity was based on their meaning—durability of function, “the core value of any bonding product,” and didn’t meaningfully suggest bad faith. It reflected only “[t]he intent to compete by imitating the successful features of another’s product” rather than intent to deceive. Illinois Tool asked for more discovery to show bad faith, but “[t]he mere fact that discovery is incomplete is not enough to prevent summary judgment.” Illinois Tool didn’t identify the evidence it hoped to find or how that evidence would help.

False advertising claims as to “Made in USA”: First, J-B Weld argued that Illinois Tool lacked standing because it didn’t advertise its own products as being “Made in USA.” The court has a great answer:

This argument makes little sense. What if J-B Weld falsely advertised that its bonding products cure cancer or stopped global warming? If J-B Weld’s sales skyrocketed at the expense of its competitors as a result of these false claims, would only those competitors who also claim that their products cure cancer or stop global warming be allowed to complain? What if none of J-B Weld’s competitors made the same outlandish claim—does no one then have standing to complain?

Competitors who can satisfy the proximate cause requirement have standing; “[t]here is no sub-rule that only a plaintiff competitor who truthfully makes the same type of advertising claim as a defendant who falsely makes such a claim has standing to complain.”

Here, “it is far from speculative to conclude that Illinois Tool has not suffered lost sales due to J-B Weld’s ‘Made in USA’ claim. J-B Weld features this claim very prominently on its packaging, presumably because it understands the importance of this type of claim to consumers’ purchasing decisions.”

Nor was there no factual issue on falsity. J-B Weld didn’t dispute for summary judgment purposes that items such as the tubes, the caps, and the syringe applicators weren’t made in the United States. J-B Weld argued that the Lanham Act does not apply to acts that cause confusion about the source of “container” items like tubes, caps, and syringes, as distinct from the underlying “good” such as the chemical bonding product within the container. Even assuming that the distinction was correct, there were genuine fact issues about whether these parts were “goods” or “containers.” An item can be both, depending on the circumstances.

J-B Weld also argued that customers realize that the “Made in USA” claim does not refer to those items. “The evidence conflicts.” For example, the syringes are standalone items that must be actively handled, and so a customer “might think that they are a core part of the product and covered by the ‘Made in USA’ label.” The caps were also vital to the function of the product, since they “keep[ ] the two components of the epoxy product separated until they are dispensed.” And J-B Weld singles out their special anti-waste design on the packaging, right next to its “Made in USA” label. “A customer who sees the two claims next to each other might well think that they are related.”

package closeup

standalone parts?

J-B Weld argued that staff lawyers at the FTC investigated its use of the label but decided not to sue. “But the letter explaining the FTC staff’s decision is thinly reasoned, and the discretionary enforcement decisions of FTC staff members do not bind federal courts.” And it argued that there was no survey evidence. But Illinois Tool might; the discovery period wasn’t over, and anyway survey evidence isn’t always required to survive summary judgment.

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