Opinion
Civil Action No. 1:98-CV-130-M
January 20, 1999.
MEMORANDUM OPINION AND ORDER
This matter is before the Court upon a motion by Plaintiff, Holley Performance Products, Inc. (hereinafter "Holley") for a preliminary injunction [DN 16]. This action arises out of an alleged infringement of the trade dress of Plaintiff's high performance carburetors by Defendant, BG 300, Inc. (hereinafter "BG"). Holley's complaint asserts five causes of action. Each cause of action asserted is based on Holley's allegation that it has a protectable trade dress in the product configuration of certain high performance and racing carburetors. Four of the counts of the Complaint are based on the federal Lanham Act: Count 1, for trade dress infringement under 15 U.S.C. § 1125(a); Count II for unfair competition and false designation of origin under 15 U.S.C. § 1125; Count III, for dilution of a famous mark under 15 U.S.C. § 1125(c); and Count IV for an injunction under 15 U.S.C. § 1116. The fifth cause of action alleged is for common law unfair competition. The parties have fully briefed the pending motions. On December 21, 1998, a hearing on the preliminary injunction was held. There appeared Mr. Mark Alcott and Mr. Dalbert Shefte, counsel for Plaintiff, and Ms. Laura Hagan, Mr. George Thomas, Mr. Stephen Risley and Mr. Dan Gresham, counsel for Defendant. This matter is now ripe for decision. For the reasons set forth below, the Court denies Plaintiff's motion for preliminary injunction.
I. Facts
Holley is the leading manufacturer in the United States of high performance automotive equipment. Holley specializes in the design, manufacture, marketing, and sales of high performance carburetors, sold under the Holley brand name. Since 1957, Holley Carburetors have been approved and specified by NASCAR as the required carburetor for all sanctioned races.
Because of a demand for enhanced performance carburetors in the industry and because Holley did not offer such a carburetor, other companies ("modifiers") bought Holley carburetors, modified the stock Holley carburetor and sold those carburetors as "modified Holley" carburetors under their own name. In 1984, BG began selling modified Holley carburetors. BG would purchase the stock Holley carburetors, take them apart, modify the parts to enhance their performance, reassemble the carburetor and sell the performance enhanced carburetor under the name BG. When BG sold such modified Holley carburetors it placed "BG" on the carburetor to identify BG as the modifier of the Holley. At least 40 companies have sold performance enhanced carburetors under their own name.
Prior to 1989, BG and its performance enhanced carburetor competitors bought entire carburetors from Holley and rebuilt them. Holley encouraged this and in 1989 Holley introduced its "Bulk Program." Under the Bulk Program, Holley began selling individual component parts of its carburetors in bulk to the "modifiers." Participation in the Bulk Program was not governed by a written document. Holley had no control over BG's product or service.
In 1997, BG started manufacturing and selling their own carburetors using the names "BG Silver Claw" and "BG Gold Claw" and bearing the letters BG on the carburetors. According to the President of BG, Barry Grant, he decided to start manufacturing and marketing the Claw series of carburetors due to problems BG encountered in participating in the Bulk Program. Under the Bulk Program, Holley had the power to raise its prices or even terminate sales of the Holley parts to BG at will. Additionally, Grant testified that he had problems with Holley's poor delivery and lead time and, therefore, BG was required to maintain a large inventory of Holley parts. BG's Claw carburetors took over two years to develop and represented an investment of $1.5 million in research and development. The new machine centers were financed at an additional cost of $2 million. BG advertised its Claw carburetors as a new and innovative product — the first all new racing carburetor in over 40 years.
Two weeks prior to the introduction of the Claw series to the market (April of 1997), BG invited two senior Holley representatives, including Marty Brown, who was then Holley's Vice President of Marketing and Sales, to view BG's new carburetors. Holley took no action against BG at that time. Two months after BG began marketing its Claw carburetors, Holley suspended selling parts to BG under the Bulk Program. After hearing rumors that Holley intended to bring suit, BG initiated a meeting with Holley's current president, Jeff King, and Holley's counsel in October of 1997. At that meeting, the parties discussed BG's Claw series and Holley's objections to it. In November of 1997 at the SEMA show, one of the largest trade shows in the industry, BG's Gold Claw won first place for best new race product and BG's Silver Claw was runner-up for best engineered product. In June of 1998, BG began marketing the Sports Claw, the third in the Claw series.
In July of 1998, Holley purchased a BG Silver Claw carburetor from JEG's High Performance Mail Order, a supplier of carburetors and other automotive parts. This carburetor was made with some Holley parts, including the dual fuel bowls. The fuel bowls on this BG Silver Claw carburetor still had the Holley part number and mold dimples, but had the name Holley machined off the side face of the fuel inlet. Grant admitted that BG used some Holley parts in its early Claw series carburetors. Grant maintained that this was dictated by the large inventory of Holley parts BG was forced to maintain under the Bulk Program and tooling delays from BG's venders for some of BG's custom parts. Grant testified that to the extent that BG used Holley fuel bowls in its early models, BG removed the Holley name to avoid confusion and included a card indicating that the substitute fuel bowls would be replaced with a genuine BG fuel bowls as soon as they were available.
On August 14, 1998, Holley filed the present suit against BG. In order to avoid litigation, BG redesigned its carburetor based on Holley's identification in its complaint of the objectionable features of the Claw series. BG altered the external configuration of the fuel bowls from a "cathedral" design to a "cowl" configuration. BG also redesigned its metering blocks to make them an internal part rather than external part. Grant testified that these non-functional changes increased BG's costs of production. BG also changed the name of its redesigned carburetors from "Claw" to "Demon," and did not use the designation "BG" in conjunction with the Demon carburetor. Holley contends that the Demon also infringes upon the trade dress of Holley.
On November 3, 1998, Plaintiff moved for entry of a preliminary injunction enjoining the Defendant from (a) using the letters BG on any carburetors except legitimate modified Holley carburetors; (b) using the word "Claw" on any carburetors; (c) from infringing the trade dress rights of Holley; and (d) from competing unfairly with Holley.
II. Preliminary Injunction Standard
Plaintiff moves for entry of a preliminary injunction pursuant to Fed.R.Civ.P. 65(a). A preliminary injunction is an extraordinary remedy that is used to preserve the status quo between the parties pending a final determination of the merits of the action. In determining whether to issue a preliminary injunction, the Court must consider four factors: (A) the likelihood of the movant's success on the merits; (B) the irreparable harm which could result to the movant without the relief requested; (C) the possibility of harm to others; and (D) the impact on the public interest. Schenck v. City of Hudson, 114 F.3d 590, 593 (6th Cir. 1997); Transamerica Ins. Finance Corp. v. North American Trucking Ass'n, Inc., 937 F. Supp. 630, 633 (W.D. Ky. 1996). "It is important to recognize that the four considerations applicable to preliminary injunctions are factors to be balanced and not prerequisites that must be satisfied. These factors simply guide the discretion of the court; they are not meant to be rigid and unbending requirements." In re Eagle-Picher Industries, Inc., 963 F.2d 855, 859 (6th Cir. 1992) (citations omitted).
A. Likelihood of Success on Merits
Section 43(a) of the Lanham Act creates a civil cause of action for trademark infringement. 15 U.S.C. § 1125(a). This protection against infringement is not limited to "goods, services or commercial activities" protected by registered trademarks. It extends, in certain circumstances, to the unregistered "trade dress" of an article. Esercizio v. Roberts, 944 F.2d 1235, 1238 (6th Cir. 1991), cert. denied, 505 U.S. 1219 (1992). "`Trade Dress' refers to `the image and overall appearance of a product.'"Id. at 1238-39. "It embodies `that arrangement of identifying characteristics or decorations connected with a product, whether by packaging or otherwise, intended to make the source of the product distinguishable from another and to promote its sale.'"Id. at 1239 (citation omitted).
In addressing whether Plaintiff will succeed on the merits of its claim, the following standard applies: To prove a violation of section 43(a), Plaintiff's burden is to show, by a preponderance of the evidence (1) that the trade dress of Holley's carburetors is inherently distinctive or has acquired a secondary meaning; (2) that there is a likelihood of confusion on the part of consumers as to the source or affiliation of BG's products; and (3) that the appropriated features of Holley's trade dress are primarily nonfunctional. Esercizio, 944 F.2d at 1239. For purposes of discussing the likelihood of success on the merits, the Court shall first address the functionality of the Holley trade dress.
Trademark or trade dress protection extends only to product features that are nonfunctional. "A product feature is functional `if it is essential to the use or purpose of the article or if it affects the cost or quality of the article.'" Id. at 1246 (citation omitted). In addition, "`a functional feature is one which competitors would have to spend money not to copy but to design around.'" Windmill Corp. v. Kelly Foods Corp., 76 F.3d 380, 1996 WL 33251, * 4 (6th Cir. 1996), cert. denied, 117 S.Ct. 298 (1996). As discussed by the Sixth Circuit in Windmill:
[A] design is legally functional, and thus unprotectable, if it is one of a limited number of equally efficient options available to competitors and free competition would be unduly hindered by according the design trademark protection. This serves to assure that competition will not be stifled by the exhaustion of a limited number of trade dresses.Id. (quoting Two Pesos, Inc. v. Taco Cabana, Inc., 505 U.S. 763, 775 (1992)). See also Thomas Betts Corp. v. Panduit Corp., 138 F.3d 277, 297 (7th Cir. 1998); In re Bose Corp., 772 F.2d 866, 872 (Fed. Cir. 1985); Western Chemical Pumps, Inc. v. Superior Mfg., Inc., 989 F. Supp. 1112 (D. Kan. 1997) ("A design may be functional if it is one of a limited number of superior designs." Id. at 1129).
Holley argues that BG cannot assert or present any evidence that the product configuration of Holley's carburetors is optimal in terms of engineering, economy of manufacture or accommodation of utilitarian function or that alternatives are not available. According to Holley, it has presented evidence that several other manufacturers compete successfully in the carburetor market without misappropriating the unique trade dress product configuration of Holley carburetors. Holley maintains that because equally efficient options for carburetor configuration are available to competitors and competition would not be harmed by protecting Holley's trade dress for its carburetors, the design of Holley's carburetors is non-functional.
It should be noted that the burden of proof in the Sixth Circuit on the issue of nonfunctionality of the configuration of Holley carburetors is on the Plaintiff, not on the Defendant.
The Court disagrees. Based upon the evidence currently before the Court, the Court finds that Holley failed to prove that the exterior shape and features of the Holley carburetor were nonfunctional. The Court concludes that the overall carburetor configuration that comprises each component listed in ¶ 8 of the complaint is functional. The Court bases its conclusions on the testimony of Barry Grant and Defendant's expert, Robert Miller. Miller was employed at Holley for 28 years. He retired from Holley in 1993 as Vice-President of Engineering and is currently the President of Engineering Consulting Services. Miller was involved in the design and development of Holley's carburetors from 1965 to 1993, including the design of Holley's modular carburetors. Miller testified that based on his experience with Holley carburetors, it was his opinion that all the features on the Holley carburetor are functional.
Some of the items listed in the complaint are actually internal components of the Holley carburetors and therefore are not entitled to trade dress protection.
The Court has considered the affidavit of Michael Calvin submitted by Defendants in which Calvin disagrees with the majority of Miller's conclusions.
Specifically, the Court finds that the modular carburetor design is functional because it allows for easy changes and modifications which is necessary in the high performance racing industry. The Court concludes that the "Cathedral" or inverted "V" shape is also dictated by function. According to Grant, the bowls need to have a sufficient capacity to supply enough fuel for high horsepower applications, which dictates their size. Similarly, Miller testified that the need to maintain the fuel at a specific level also dictates the arrangement of the fuel inlets, creating the functionality of the inverted "V" shape fuel inlets. According to Miller, the upward angled fuel inlets are necessary to allow the introduction of the fuel at the top of the bowl, above the fuel line. Introduction of the fuel down or below the fuel line would create vapors and sudsing and cause the fuel level to meter incorrectly. The angled inlets are also required to clear the drop base style air cleaners typically used in racing engines.
While there is no need at this time to decide whether there is a substantial similarity or a likelihood of confusion of the designs, the Court would note that BG's Claw carburetor series fuel bowls contain sight glasses for visual adjustment of the fuel level. None of Holley's carburetors contain such a feature.
In addition, the Court concludes it would be expensive for BG to design around the dual fuel bowls. Grant testified that in attempting differentiate the appearance of its fuel bowls from Holley's fuel bowls, BG added additional metal to its Demon carburetor series. The additional metal added approximately 2 pounds of nonfunctional weight to the fuel bowls and approximately $4.00 to $6.00 in material costs per carburetor.
Additionally, the Court finds that the location of the fuel bowls fore and aft of the main carburetor center section is dictated by function as well. According to Grant, it is necessary to locate the fuel bowls fore and aft in order to have the carburetor universally accepted in all forms of the extreme performance and higher end performance racing market. Grant testified that if the fuel bowls were mounted on the side, one side of the engine would shut off under hard cornering because the jets would be uncovered.
Grant Preliminary Injunction Hearing Testimony, December 21, 1998.See also Miller Affidavit at ¶ 5.
Holley argues that other alternative designs for carburetors exist and are available in the market making Holley's trade dress nonfunctional. As evidence of other possible designs, Holley maintains that manufacturers such as Rochester, Edelbrock, and Carter produce automotive performance carburetors and compete successfully in the carburetor market. The Court rejects this argument. "The availability of alternative designs alone does not establish that the design of a product is nonfunctional. Rather, the alternative designs must effectively eliminate a competitor's need for the features that plaintiff is asserting as protectable product configuration." Western Chemical Pumps, 989 F. Supp. at 1129. BG has identified the need for the modular carburetor design, the inverted "V" shape of the fuel bowls, and the fore and aft location of the fuel bowls. This evidence reflects that the configuration of the Holley carburetor is one of a limited number of superior designs for its purpose. Id.
Based upon the evidence currently before the Court, the Court finds that Holley failed to prove that the exterior shape and features of the Holley carburetor were nonfunctional. For this reason, the Court finds that Holley does not have a strong likelihood of success on the merits of their claims.
B. Irreparable Harm
The second factor the Court must consider is whether Plaintiff will suffer irreparable harm in the absence of a preliminary injunction. Holley maintains that Courts have recognized that trademark or trade dress infringement gives rise to a presumption of irreparable injury. See Lone Star Steakhouse Saloon, Inc. v. Alpha of Virginia, Inc., 43 F.3d 922, 939 (4th Cir. 1995).
The Court finds that the presumption of irreparable harm that sometimes arises in trademark or trade dress infringement cases does not apply in the present case because of Holley's undue delay in seeking preliminary injunctive relief.
[A]ny such presumption of irreparable harm is inoperative if the plaintiff has delayed either in bringing suit or in moving for preliminary injunctive relief. . . . Though such delay may not warrant the denial of ultimate relief, it may, "standing alone, . . . preclude the granting of preliminary injunctive relief," . . . because the "failure to act sooner undercuts the sense of urgency that ordinarily accompanies a motion for preliminary relief and suggests that there is, in fact, no irreparable injury."Tough Traveler v. Outbound Products, 60 F.3d 964, 968 (2d Cir. 1995), cert. denied, ___ F.3d ___, 1998 WL 743725 (2d Cir. 1998) (citations omitted). In April of 1997, BG began making carburetors under the name "BG Gold Claw" and "BG Silver Claw." Two weeks prior to the introduction of the Claw series to the market, BG invited two senior Holley representatives to view BG's new carburetors. Holley took no action against BG at that time. In June of 1998, BG began marketing the Sports Claw, the third in the Claw series. Holley filed the present lawsuit on August 14, 1998, which was sixteen months after BG began manufacturing the Claw. After filing the action, Holley further delayed almost three months, until November 3, 1998, before seeking preliminary injunctive relief. The overall delay was nineteen months.
Holley argues that its failure to file suit earlier was due in part to the sale of Holley. Additionally, Holley maintains that it did not consider BG a threat until it began to manufacture the Sports Claw in June of 1998. These reasons are insufficient to account for the delay in requesting preliminary injunctive relief. In fact, Holley's conduct rebuts its claim of irreparable injury. Tough Travelor, 60 F.3d at 968; Krueger Intern, Inc. v. Nightingale, 915 F. Supp. 595, 611-612 (S.D.N Y 1996). As a result, the Court concludes that Holley has not demonstrated that it would suffer irreparable injury without the injunctive relief it seeks.
C. The Possibility of Harm to Others
The third factor in determining whether to issue a preliminary injunction is "whether the injunction would harm others." This factor is most commonly examined in terms of the balance of hardship between the parties. Plaintiff asserts that its interest in protecting its legitimate rights clearly outweighs any desire Defendant may have to continue its wrongful activity.
BG maintains that it will suffer substantial injury if an injunction is issued. BG argues that it is a small company with a large investment in its carburetors. The tooling costs exceeded $ 1.5 million and the new machine centers were financed at a costs of over $2 million. According to BG, if the injunction is entered, BG will have no cash flow from carburetor sales, and will not be able to make the payments on its machinery. Due to the fact the machinery is new, BG maintains that it cannot even be sold for enough money to allow BG to repay its loans for the machinery. According to Grant, if BG is enjoined from selling its Claw and Demon series carburetors, it will be forced into bankruptcy; sixty to seventy people will loose their jobs; BG's vendors and creditors will also be harmed. This evidence is uncontradicted . The Court finds if it were to issue a preliminary injunction in favor of Holley, BG would suffer substantial economic loss. Balancing the hardship of the parties, the Court finds that this factor weighs in favor of BG.
D. Public Interest
The final factor the Court must consider is whether the public interest will be served by the preliminary injunction. Holley argues that the public interest favors the granting of a preliminary injunction in that the confusion created in the marketplace by BG's wrongful use of Holley's distinctive trade dress for its carburetors will be halted. Due to the Court's decision with respect to likelihood of Holley's success on the merits, the Court finds that free competition would be unduly burdened by granting the injunction sought by Holley. The Court concludes that the public interest factor weighs in favor of BG.
III. Conclusion
Upon consideration and balancing of the four factors, and the Court being otherwise sufficiently advised, IT IS HEREBY ORDERED that the motion by Plaintiff, Holley Performance Products, Inc., for a preliminary injunction [DN 16] is denied.