Opinion
Civ. File Nos. 02-4862 (PAM/RLE).
July 21, 2003.
MEMORANDUM AND ORDER
This matter is before the Court on cross-Motions for Preliminary Injunctions and on a Motion to Strike. For the following reasons, the Motions are denied.
BACKGROUND
Plaintiff A L Laboratories, Inc. ("AL") supplies chemicals for dairy sanitation and udder hygiene. For a number of years, AL was the exclusive supplier of such products to DEC International, Inc. ("DEC"), a distributor which re-sold AL's products to consumers. The specific portion of DEC's business that sold these products was known as the Bou-Matic division. During the course of their business relationship, the parties entered into several written agreements, the last one of which was a Global Purchase Agreement ("GPA") signed on June 28, 2000. The purpose of the GPA was "to maintain a supplier-customer relationship between [AL] and DEC in which [AL] [would] be DEC's sole supplier . . . and DEC [would] be [AL]'s exclusive distribution channel." (Pochard Aff. Ex. A at 1-2.)
The full name of the GPA is "Global Purchase Agreement for Sanitation Chemicals Udder Health Products between DEC International, Inc., AL Laboratories, Inc. and Hypred." Hypred is AL's parent company.
DEC declared bankruptcy in August 2001. As part of the liquidation proceedings, DEC and AL amended their agreement to provide that AL could supply products directly to consumers. Defendant Bou-Matic, LLC ("Bou-Matic") subsequently purchased the pertinent part of DEC's business. Bou-Matic and AL were unable to come to terms on a new contract and this litigation ensued. Two days later, Bou-Matic filed a lawsuit in the Western District of Wisconsin against AL, Hypred, and the former and current president of AL. Subsequently, Bou-Matic unsuccessfully sought to transfer the instant matter to the Western District of Wisconsin. The Wisconsin lawsuit has since been transferred to this Court and assigned to the undersigned Judge.
The parties have now cross-moved for preliminary injunctions. Each party contends that the other party is infringing on the moving party's common-law trademarks. At issue are 65 names for the chemicals AL manufactured and DEC sold, such as "Maxikleen," "Bovi-Kote," and "Udderdine." The cross preliminary injunctions seek a determination of who owns the trademarks and an injunction against the non-owner's use of those marks.
DISCUSSION
A. Preliminary Injunctions
A preliminary injunction may be granted only if the moving party can demonstrate: (1) a likelihood of success on the merits; (2) that the balance of harms favors the movant; (3) that the public interest favors the movant; and (4) that the movant will suffer irreparable harm absent the restraining order. Dataphase Sys., Inc. v. C L Sys., Inc., 640 F.2d 109, 113 (8th Cir. 1981). Injunctive relief is considered to be a "drastic and extraordinary remedy that is not to be routinely granted." Intel Corp. v. ULSI Sys. Tech., Inc., 995 F.2d 1566, 1568 (Fed. Cir. 1993).
The parties agree that the only dispute to resolve in these Motions is who owns the 65 trademarks at issue. However, this question is not easily answered because in their various agreements, the parties did not establish the ownership of the disputed marks and, in fact, seem never to have discussed the issue at all.
The GPA sets forth terms for shipping, billing, pricing, and promotion of products, but does not contain any language regarding specific ownership of trademarks. The paragraph entitled "Trademarks" merely provides that, without written approval, DEC will not use any "name, symbol, or other identifying characteristic owned by [AL]" and that "[AL] . . . will not use . . . any name, symbol, or other identifying characteristic owned by DEC." (Pochard Aff. Ex. A at ¶ 18.) The GPA contains other language that can be construed as referencing product names, but none of this language purports to set forth who owns which product name. For example, AL agreed that products "sold under DEC's label shall be exclusive to DEC in all areas and markets," (id. at 2), implying that DEC's label information, presumably including the name of the product, was proprietary to DEC. DEC also agreed to indemnify AL against liability from "any infringement or alleged infringement of any trademarks . . . arising out of the labels or containers provided by DEC or produced according to DEC's designs, specifications, or instructions." (Id. ¶ 19(a).) However, AL also agreed to indemnify DEC should any of AL's products be alleged to infringe any trademark, (id. at 4), perhaps implying that AL owned the product formulation and name. The only matter to which the GPA left no doubt was that AL was solely responsible for the chemical composition of the products. DEC expressly acknowledged that AL "considers its formulation, processes, and know-how as confidential." (Id. at 8, ¶ 29(d).)
After DEC's bankruptcy, the DEC and AL entered into an Amendment to the GPA. The purpose of the Amendment was "to provide [AL] with the requisite approval to sell DEC branded products." (Pochard Aff. Ex. B at 1.) The Amendment goes on to give AL permission both to use the trade name "Bou-Matic" during the term of the Amendment, (id. at 2), and to use the trade names and product names associated with the products in the event the Amendment was terminated or rejected, (id. at 3). The language of the Amendment seems to imply that the names chosen for the products belong to DEC, but, again, the subject of trademark ownership is not specifically addressed anywhere in the Amendment.
Bou-Matic argues that there is a writing clearly evidencing that DEC owned the trademarks. The sale of DEC to Bou-Matic included the assignment of certain trademarks. (Weber Aff. Ex. 1.) However, if DEC did not own the trademarks in the first instance then it could not validly assign those trademarks to Bou-Matic, and the assignment cannot establish the ownership of the marks. The existence of this assignment is relevant only to the extent that it may indicate what DEC thought about the ownership of the trademarks. It is interesting to note that, while the assignment purports to assign both "certain trademarks and service marks" and "United States and foreign trademark and service mark registrations," (id. at 1), the list of trademarks attached to the assignment does not contain any of the trademarks at issue here but merely lists DEC's trademark registrations. The assignment does not provide support for Bou-Matic's position here.
The product labels themselves support Bou-Matic's claim to ownership of the trademarks. The labels on the chemicals as sold to dairy farmers informed those consumers in prominent type that the chemical was a Bou-Matic chemical. In small print on the back of the label were the words, "Manufactured for Bou-Matic by AL Laboratories." (See Kmoch Aff. Ex. K (label for Bovi-Kote).) Some labels do not mention AL at all, merely stating that the chemical is "Manufactured for: Bou-Matic." (See id. (label for Acid-40).) AL points out that every product is accompanied by a Material Safety Data Sheet which contains AL's name and does not mention Bou-Matic.
AL also contends that dairy farmers used the products in question because of the precise formulae associated with the products, which AL undisputedly owns. Bou-Matic responds that, regardless of who owns the specific formulae, diary farmers are really only concerned about the effects of the products, and those effects can be achieved through formulae other than those owned by AL.
Because the evidence on the issue of ownership, including the language of the parties' two agreements, is ambiguous at best, each party argues that it is the owner of the trademarks as a matter of law. AL claims that the manufacturer of a product and owner of the proprietary formulation for the product is presumed to be the owner of the trademark associated with that product.In re Polar Music Int'l AB, 714 F.2d 1567, 1571 (Fed. Cir. 1983) (whoever controls the quality of the goods owns the trademark). Bou-Matic contends that this presumption yields to the so-called "dealer's mark" when the distributor was responsible for placing the mark on the product. Menendez v. Holt, 128 U.S. 514 (1888). However, the issue of ownership is nearly impossible to resolve on the thin record before the Court on a motion for preliminary injunction. Resolution of the question of ownership will require the Court to examine the relevant contractual language and may also require the introduction of parol evidence to determine the meaning of that language. The Court must also determine who "invented" the names at issue. Moreover, because trademarks protect the public, the Court must examine whether the consumers of these products associate the product name with the precise chemical formulation, as AL contends, or with the effect that the product has, as Bou-Matic argues.
A trial judge hearing a request for preliminary injunction is not required to decide difficult legal and factual issues which could only be determined at a full trial. Indeed, the judge should not be expected to make a determination of a serious factual dispute based on an incomplete showing in affidavits submitted at the preliminary injunction hearing.
5 J. Thomas McCarthy, McCarthy on Trademarks and Unfair Competition § 30:45 (citations omitted). The Court needs a more-developed factual record in order to make the ownership determination required to issue a preliminary injunction.
B. Motion to Strike
Bou-Matic asks the Court to strike the affidavit of Faye Knowles submitted by AL in support of its Motion and in opposition to Bou-Matic's Motion. In this affidavit, Ms. Knowles, who represented AL during DEC's bankruptcy proceeding, purports to explain the parties' intent when entering into the Amendment. Ms. Knowles also avers that the parties did not discuss or reach agreement about the ownership of the trademarks during negotiations for the Amendment. (2d Knowles Aff. at ¶ 4.)
Bou-Matic contends that this affidavit constitutes parol evidence and is not admissible as such, and that the affidavit contains inadmissible legal opinions. Ms. Knowles' testimony is inadmissible at this stage, but may be admissible at a later stage of the lawsuit. Thus, rather than striking the affidavit, the Court will disregard the portions of the affidavit that are not admissible or that constitute legal opinions.
CONCLUSION
The Court recognizes that each party claims to be suffering irreparable harm because of the other party's use of the trademarks at issue. However, the Court cannot resolve the issues before it without a more-developed factual record. Thus, the Court encourages the parties to agree on an expedited discovery schedule so that they may present the Court with a full factual record and receive a decision on the issue of ownership as soon as possible.
Accordingly, for the foregoing reasons, and upon all of the files, records, and proceedings herein, IT IS HEREBY ORDERED that:
1. Defendant's Motion for Preliminary Injunction (Clerk Doc. No. 39) is DENIED;
2. Plaintiff's Motion for Preliminary Injunction (Clerk Doc. No. 34) is DENIED; and
3. Defendant's Motion to Strike (Clerk Doc. No. 52) is DENIED.