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OTR Wheel Eng'g, Inc. v. W. Worldwide Servs., Inc.

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF WASHINGTON
Nov 30, 2015
No. CV-14-085-LRS (E.D. Wash. Nov. 30, 2015)

Opinion

No. CV-14-085-LRS

11-30-2015

OTR WHEEL ENGINEERING, INC., BLACKSTONE/OTR, LLC, and F.B.T. ENTERPRISES, INC., Plaintiffs, v. WEST WORLDWIDE SERVICES, INC., and SAMUEL J. WEST, individually and his marital community, Defendants.


ORDER RE MOTION FOR SUMMARY JUDGMENT RE "OUTRIGGER" TRADEMARK, PRE-SUIT TRADE DRESS DAMAGES, AND COUNTERFEITING

BEFORE THE COURT is "Defendants' Motion For Summary Judgment Re: No Trademark Infringement Of 'Outrigger' Trademark, No Pre-Suit Trade Dress Damages And No Counterfeiting." (ECF No. 197). This motion was heard with oral argument on October 20, 2015.

I. SUMMARY JUDGMENT STANDARD

The purpose of summary judgment is to avoid unnecessary trials when there is no dispute as to the facts before the court. Zweig v. Hearst Corp., 521 F.2d 1129 (9th Cir.), cert. denied, 423 U.S. 1025, 96 S.Ct. 469 (1975). Under Fed. R. Civ. P. 56, a party is entitled to summary judgment where the documentary evidence produced by the parties permits only one conclusion. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247, 106 S.Ct. 2505 (1986); Semegen v. Weidner, 780 F.2d 727, 732 (9th Cir. 1985). Summary judgment is precluded if there exists a genuine dispute over a fact that might affect the outcome of the suit under the governing law. Anderson, 477 U.S. at 248.

The moving party has the initial burden to prove that no genuine issue of material fact exists. Matsushita Elec. Industrial Co. v. Zenith Radio Corp., 475 U.S. 574, 586, 106 S.Ct. 1348 (1986). Once the moving party has carried its burden under Rule 56, "its opponent must do more than simply show that there is some metaphysical doubt as to the material facts." Id. The party opposing summary judgment must go beyond the pleadings to designate specific facts establishing a genuine issue for trial. Celotex Corp. v. Catrett, 477 U.S. 317, 325, 106 S.Ct. 2548 (1986).

In ruling on a motion for summary judgment, all inferences drawn from the underlying facts must be viewed in the light most favorable to the nonmovant. Matsushita, 475 U.S. at 587. Nonetheless, summary judgment is required against a party who fails to make a showing sufficient to establish an essential element of a claim, even if there are genuine factual disputes regarding other elements of the claim. Celotex, 477 U.S. at 322-23. II. "OUTRIGGER" TRADEMARK NAME ('934 REGISTRATION)

Registered on the principal register on October 26, 1999. The full registration number is 2,288,934.

15 U.S.C. §1114 of the Lanham Act defines a trademark infringer as any person who "use[s] in commerce any reproduction, counterfeit, copy, or colorable imitation of a registered mark in connection with the sale, offering for sale, distribution, or advertising of any goods or services on or in connection with which such use is likely to cause confusion, or to cause mistake, or to deceive." A mark is "use[d] in commerce" when "(A) it is placed in any manner on the goods or their containers or the displays associated therewith or on the tags or labels affixed thereto, or if the nature of the goods makes such placement impracticable, then on documents associated with the goods or their sale, and (B) the goods are sold or transported in commerce." 15 U.S.C. §1127.

Defendants assert that because they never used the word "Outrigger" in the advertising or sale of tires, Plaintiffs' trademark infringement claim regarding their word mark fails as a matter of law. According to Defendants, Plaintiffs "have produced no evidence showing West ever placed the word 'Outrigger' on any tires, tire containers, displays, tags, or label affixed to tires" and "it is undisputed that West never used the word 'Outrigger' in advertising."

Based on its review of the record, in particular the e-mails exchanged between Michael Zhang of Superhawk and Defendant Samuel West, and between West and Jeffry Tibbits of Genie Industries in April/May 2012 (see "OTR Response CSOF #104, and OTR CSOF #s 395-417), the court concludes that a reasonable inference can be drawn it was the "Outrigger" name that was "buffed off" the tires presented by Defendants to Genie for testing. Supporting the inference is that the subject line of several of those e-mails is "Outriggers." A jury will need to determine if the "Outrigger" name was "buffed off" the test tires or whether it was "Superhawk" or "SH Special Platform" that was "buffed off." (ECF No. 268-2 at WWW016585-86).

These facts are undisputed in whole or in part. To the extent they are disputed in part, the court relies only on the undisputed portion.

The e-mails themselves, however, are not an infringing "use" under 15 U.S.C. §§1114 and 1127. Nor is the court persuaded that Defendants' knowledge that third parties have used the term "Outrigger" to refer to Defendants' tires can constitute an infringing "use" by Defendants.

Defendants note that Plaintiffs' expert, Jerry Leyden, inspected one of these test tires and could not determine whether the "Outrigger" name had ever been on the tire. (ECF No. 275, Ex. CP). This, however, was only one tire and the results were inconclusive. According to Leyden:

The largest plate's surface evidences raised, smooth marking reminiscent of block letters. Examination of photos and tactile manipulation have not resulted in demonstrable identifiable letters. Examined photos using Paint Shop Pro enhancement techniques and viewing techniques. (Mirror, etc.). Nothing demonstrable, but surface evidences irregularities associated with the blank plate area, with the raised impressions/lettering suggesting an inverted, lettered plate.

The court will not grant summary judgment on the infringement claim regarding the '934 registration, mindful of the Ninth Circuit's repeated admonition that "[s]ummary judgment is generally disfavored in trademark litigation, because the nature of trademark case analysis is fact intensive." CELS Enters., Inc. v. Rock & Roll Religion, Inc., 2012 WL 3157150 (9th Cir. 2012), citing Fortune Dynamic, Inc. v. Victoria's Secret Stores Brand Management, Inc., 618 F.3d 1025, 1031 (9th Cir. 2010).

III. PRE-SUIT TRADE DRESS DAMAGES ('169 REGISTRATION)

15 U.S.C. §1111 of the Lanham Act provides:

[A] registrant of a mark registered in the Patent and Trademark Office, may give notice that his mark is registered by displaying with the mark the words "Registered in U.S. Patent and Trademark Office" or "Reg. U.S. Pat. & Tm. Off." or the letter R enclosed in a circle . . . and in any suit for infringement under this Act by such a registrant failing to give such notice of registration, no profits and no damages shall be recovered under the provisions of this Act unless the defendant had actual notice of the registration.
(Emphasis added).

Before filing their complaint in this matter on April 2, 2014 (ECF No. 1), the Plaintiffs did not display on their tire tread design the words 'Registered in U.S. Patent and Trademark Office" or "Reg. U.S. Pat. & Tm. Off." or the letter R enclosed in a circle. Defendants assert they had no "actual notice of the registration" until the Plaintiffs' Complaint was filed and therefore, Plaintiffs are limited to recovery of profits and damages after that date (April 2, 2014).

Plaintiffs contend they told Genie, a third party, that they had certain proprietary rights in the Outrigger tires. (See Statements of Material Fact Nos. 112- 120). This is insufficient to create a reasonable inference that Defendants ("West") had actual notice of the October 2012 '169 registration prior to Plaintiffs filing their Complaint on April 2, 2014. Scott Peck, V.P. of Sales for Blackstone/OTR, LLC, admitted he was unsure if anyone at Genie ever actually told West about Plaintiffs' "trade dress registration." (Statement of Fact No. 116). Peck admitted he never contacted West to tell them they were making a tire that was protected by any registered trade dress. (Statement of Fact No. 121). Frederick B. Taylor, managing member of Blackstone/OTR, LLC, admitted that even after Plaintiffs found out Superhawk was making tires for West, they did not call anyone at West to ask them to stop. (Statement of Fact No. 122).

The court is likewise not persuaded that West's knowledge that Alliance Tire was sued by Plaintiffs relating to an Outrigger mold Alliance purchased in a bankruptcy proceeding, gives rise to a reasonable inference that it provided West with actual notice of the '169 registration prior to Plaintiffs filing their Complaint on April 2, 2014. Furthermore, that Michael Zhang of Superhawk told West in an e-mail dated May 4, 2012, that he (Zhang) had a non-compete agreement with Solideal does not give rise to a reasonable inference that West had actual notice of Plaintiffs' '169 registration prior to April 2, 2014. Indeed, there was no '169 registration until October 2012, five months after Zhang's e-mail to Sam West.

Finally, Defendants accurately note that none of the cases cited by Plaintiffs (ECF No. 253 at p. 16) in support of a constructive notice presumption for "willful blindness," involve 15 U.S.C. Section 1111. /// ///

As a matter of law, Plaintiffs are precluded from recovering profits and damages under 15 U.S.C. Section 1117(a) and (b) for ordinary trademark infringement prior to the filing date of their Complaint (April 2, 2014).

IV. COUNTERFEITING

Counterfeiting is not "ordinary trademark infringement." Counterfeiting is "hard core" or "first degree" trademark infringement and is the most blatant and egregious form of "passing off." 4 McCarthy on Trademarks and Unfair Competition §25:10 (4th ed.). The Lanham Act defines a "counterfeit" as a "spurious mark which is identical with, or substantially indistinguishable from, a registered mark." 15 U.S.C. § 1127.

Defendants contend the "test tires" sent to Genie cannot, as a matter of law, be considered "counterfeit" because they were tested before the '169 registration issued in October 2012. The court agrees. As pointed out above, the Lanham Act defines a "counterfeit" as a "spurious mark which is identical with, or substantially indistinguishable from, a registered mark." 15 U.S.C. § 1127 (emphasis added). Consistent therewith, 15 U.S.C. Section 1116(d)(1)(B) defines "counterfeit mark" as "(i) a counterfeit of a mark that is registered on the principal resister in the United States Patent and Trademark Office for such goods or services sold, offered for sale, or distributed and that is in use, whether or not the person against whom relief is sought knew such mark was so registered; or (ii) a spurious designation that is identical with, or substantially indistinguishable from, a designation as to which the remedies of this chapter are made available by reason of section 220506 of Title 36." (Emphasis added).

Defendants' "production tires," however, are a different matter. Courts have construed the language- "whether or not the person against whom relief is sought knew such mark was so registered"- to mean that in the counterfeiting context (as opposed to the ordinary infringement context), the alleged counterfeiter need not have actual notice of the registration in order to be held liable for actual and treble damages under 15 U.S.C. Section 1117(a) and (b), including statutory damages under 15 U.S.C. Section 1117(c). 3 McCarthy on Trademarks and Unfair Competition §19:144 (4th ed.), citing Playboy Enterprises, Inc. v. Universal Tel-A-Talk, Inc., 1999 WL 285883 (E.D. Pa. 1999)("[C]ongress intended to recognize that counterfeiting, while a subsection of infringement, represents a greater evil than ordinary infringement, and thus allowed an alternative route to damages and a lesser degree of required notice"). Accordingly, if Defendants' production tires are counterfeits of Plaintiffs' registered tire tread design (the '169 registration), Defendants can be held liable for damages measured from as early as the date of the registration (October 2012), even if they did not have actual notice of the registration until Plaintiffs filed this lawsuit in April 2014. See also Audemars Piguet Holdings S.A. v. Swiss Watch International, Inc., 46 F.Supp.3d 255, 291 (S.D.N.Y. 2014)("Section 1111 does not foreclose Plaintiffs' remedies under New York common law and Section 1117(b)-(c)").

Section 1117(c) provides: "In a case involving the use of a counterfeit mark (as defined in section 1116(d) of this title) in connection with the sale, offering for sale, or distribution of goods and services, the plaintiff may elect, at any time before final judgment is rendered by the trial court, to recover instead of actual damages and profits under subsection (a) of this section, an award of statutory damages for any such use in connection with the sale, offering for sale, or distribution of goods and services . . . ."

Here too, Plaintiffs allege common law causes of action (tortious interference with business expectancy and unjust enrichment) and it appears remedies under those causes, and under the Washington Consumer Protection Act, are not foreclosed or limited by 15 U.S.C. Section 1111.

There is a genuine issue of material fact whether "production tires" sold by Defendants after the '169 registration constitute a "counterfeit" of Plaintiffs' registered tire tread design, notwithstanding that the sidewalls of those tires were stamped with the word mark Extremelift. The fact those tires bore that name does not per se preclude a finding they were counterfeit, nor does the inclusion of different "stampings" and "mudd breakers" on those tires.

Registered with the USPTO on October 15, 2013.

No doubt, the test of "identical with, or substantially indistinguishable from" requires a closer degree of similarity than is required for traditional trademark infringement or unfair competition. 3 McCarthy on Trademarks and Unfair Competition §25.10 (4th ed.). The "counterfeit statute's more rigorous test is quite clear" and "[s]ome decisions assume that the counterfeit standard is the more demanding and automatically satisfies the confusing similarity test of traditional infringement analysis." Id. at n. 31. In the Ninth Circuit, the "confusing similarity test of traditional infringement analysis" involves analysis of the eight factors set out in AMF, Inc. v. Sleekcraft Boats, 599 F.2d 341 (9th Cir. 1979), abrogated on other grounds 353 F.3d 792 (9th Cir. 2003). Those factors are: 1) the strength of the mark; 2) the proximity of the goods; 3) the similarity of the marks; (4) evidence of actual confusion; (5) marketing channels used; (6) type of goods and the degree of care likely exercised by the purchaser; (7) defendant's intent in selecting its mark; and (8) likelihood of expansion into other markets. Id. at 348-49. The test is "pliant" and "the relative importance of each individual factor will be case-specific." Brookfield Communications, Inc. v. W. Coast Entertainment Corp., 174 F.3d 1036, 1054 (9th Cir. 1999).

See also 4 Callman On Unfair Competition, Trademarks & Monopolies §22:33:

In cases of ordinary infringement, the defendant's mark is sufficiently distinguishable from the plaintiff's mark so that confusing similarity is arguable. But in cases of trademark counterfeiting, the defendant copies the plaintiff's mark substantially identically, i.e., as closely as the defendant's abilities allow; and so closely as to preclude suspicion that the source of the goods or services is the plaintiff.

It appears Defendants concede that if trademark validity is established as to the '169 registration, there is a genuine issue of material fact regarding ordinary infringement of that trade dress, even though they contend there is no genuine issue of material fact that they did not engage in counterfeiting of that trade dress. In the preliminary injunction phase of this case, the court applied the eight factor test regarding likelihood of confusion and reached this conclusion:

The evidence offered by Plaintiffs warrants a preliminary finding of a likelihood of confusion. The tread design on Defendants' tire is virtually identical to the design on Plaintiffs' tire; a reasonable inference is the Defendants intended to copy the design; and the strength of Plaintiffs' trade dress is significant as consumers in the relevant market recognize Plaintiffs' tire by its tread design. Defendants have yet to offer evidence suggesting why any of the factors weigh in their favor.
(ECF No. 46 at p. 7).

And in its order denying reconsideration of its order granting preliminary injunction to the Plaintiffs, this court wrote:

Frederick B. Taylor, the CEO of OTR Wheel Engineering, Inc. says "[t]he target consumers of the Outrigger tires are aerial work platform . . . manufacturers, of which there are approximately ten in the world," of whom seven are OTR customers. (ECF No. 34 at p. 2, Paragraph 5). Considering the prevalence of Outrigger tires in this narrow and specialized market, it is reasonably possible a consumer would believe, by virtue of the tread design on the Extremelift tire, that it is purchasing an Outrigger tire. The evidence presented so far indicates only one other tire has a tread design identical to the Outrigger tire and that is the Extremelift tire. And even if the consumer were to notice the Extremelift mark on the tire (and prior thereto, the Exmile mark), that might not necessarily dissuade it, at least initially and before making further inquiry, from believing this to perhaps be a new and improved version of the Outrigger tire for use on aerial work platforms.

As the court noted in its preliminary injunction order, "Plaintiffs have presented evidence of actual confusion, that being an instance
where Genie sought to purchase the West tire from Plaintiffs." (ECF No. 46 at p. 10).
(ECF No. 74 at pp. 7-8).

The court recognizes that Plaintiffs' evidentiary burden is substantially greater on summary judgment as opposed to preliminary injunction, but the record now before the court has not changed the fact that the tread design on Defendants' tire is "virtually identical" to the tread design on Plaintiffs' tire, and that the Outrigger tires are sold in a "narrow and specialized market."

The greater the similarity between the two marks at issue, the greater the likelihood of confusion. Entrepreneur Media, Inc. v. Smith, 279 F.3d 1135, 1144 (9th Cir. 2002). "[L]ess similarity between the marks will suffice when the goods are complementary, . . . the products are sold to the same class of purchasers, . . . or the goods are similar in use and function." Sleekcraft, 599 F.2d at 341.

The "proximity of goods" factor concerns the proximity or relatedness of the goods or services represented by the potentially infringing mark. "For related goods, the danger presented is that the public will mistakenly assume there is an association between the producers of the related goods, though no such association exists." Sleekcraft, 599 F.2d at 350. The proximity of the goods is measured by whether the products are: (1) complementary; (2) sold to the same class of purchasers; and (3) similar in use and function. Id.

Actual confusion as to the source of a product is "persuasive proof that future confusion is likely." Sleekcraft, 599 F.3d at 532. "The focus is confusion with respect to the source of a product or service." SunEarth, Inc. v. Sun Earth Solar Power, Co., 846 F.Supp.2d 1063, 1079 (N.D. Cal. 2012).

"Convergent marketing channels increase the likelihood of confusion." Official Airline Guides, Inc. v. Goss, 6 F.3d 1385, 1393, 28 U.S.P.Q. 1641 (9th Cir. 1993). There is a greater likelihood of confusion when products are sold in niche marketplaces.

As explained by the Ninth Circuit in Sleekcraft:

In assessing the likelihood of confusion to the public, the standard used by the courts is the typical buyer exercising ordinary caution . . . . When the buyer has expertise in the field, a higher standard is proper though it will not preclude a finding that confusion is likely. Similarly, when the goods are expensive, the buyer can be expected to exercise greater care in his purchases; again, though, confusion may still be likely.
599 F.2d at 353.

"When the alleged infringer knowingly adopts a mark similar to another's, reviewing courts presume that the defendant can accomplish his purpose: that is, the public will be deceived." Sleekcraft, 599 F.3d at 354. To the extent a party's intent is relevant, it is relevant "only insofar as it bolsters a finding that the use of the trademark serves to mislead consumers rather than truthfully inform them of their choice of products." Network Automation, Inc. v. Advanced Systems Concepts, Inc., 638 F.3d 1137, 1153, 97 U.S.P.Q. 2036 (9th Cir. 2011).

The last factor- likelihood of expansion into other markets- is unimportant where two competitors are direct competitors, such as in the instant case. Cf. Brookfield Communications, 174 F.3d at 1060.

The tire tread design on the Defendants' tire and the Plaintiffs' tire is "virtually identical," with the exception of the different "stampings" and "mudd breakers" on the Defendants' tires. (Declaration of Owsley Cheek, ECF No. 8). And in any event, because the tires are "complementary," sold to the same class of purchasers and are similar in use and function, less similarity in the tire tread design will suffice. These tires are sold in a "niche" marketplace. In addition to the instance of actual customer confusion this court cited in its preliminary injunction order (Declaration of Sean McFadin, ECF No. 6), there are other instances cited by Plaintiffs. According to the Fourth Declaration of Frederick B. Taylor, (ECF No. 251 at Paragraph 42),in July 2015, Blackstone/OTR was asked to honor a warranty claim on one of its tires, but upon inspecting the tire, discovered it bore Defendants' trade name, Extremelift, on the sidewall. In his Second Declaration (ECF No. 285), Sean McFadin, manager of Blackstone/OTR's facility in Moses Lake, says that on September 22, 2015, he was verbally advised that Genie was returning 15 sets of tire/wheel assemblies; on that same date, some the assemblies were returned to Blacktstone/OTR's facility in Redmond and the facility manager there advised McFadin he had inspected the tires and some of them were not Outriggers; McFadin traveled to Redmond and confirmed that four of the assemblies were not Outriggers, but bore the name Extremelift on the sidewall. While buyers of these tires should probably be a little more sophisticated than the average consumer, that does not preclude a conclusion that confusion is likely.

Finally, the evidence presented by Plaintiffs gives rise to a reasonable inference that Defendants' intent was to produce the same tire for Plaintiffs' primary customer, Genie, at a lower price. Particularly what the court has in mind here is the same evidence which it deems sufficient to create a reasonable inference that the Outrigger mark was "buffed off" the test tires supplied to Genie (OTR Response CSOF #104 and OTR CSOF #s 395-417), as well as certain additional evidence concerning Mr. West's interaction with Alliance Tire previous to his interaction with Mr. Zhang (OTR CSOF #s 360, 380 and 381).

These facts are undisputed in whole or in part. To the extent they are disputed in part, the court relies only on the undisputed portion.

Considering all of the Sleekcraft factors, the court concludes there is a genuine issue of material fact whether the tire tread design on Defendants' Extremelift tire is "identical with, or substantially indistinguishable from" the tire tread design on Plaintiffs' Outrigger tire (its registered mark), notwithstanding that the word "Extremelift" is stamped on the side of Defendants' production tires.

V. CONCLUSION

"Defendants' Motion For Summary Judgment Re: No Trademark Infringement Of 'Outrigger' Trademark, No Pre-Suit Trade Dress Damages And No Counterfeiting," (ECF No. 197), is DENIED regarding alleged infringement of the "Outrigger" Trademark and alleged counterfeiting regarding Defendants' production tires. It is GRANTED to the extent that Plaintiffs cannot as a matter of law sustain a counterfeiting claim against Defendants regarding the test tires Defendants sent to Genie, nor may Plaintiffs recover pre-suit trade dress damages for ordinary trademark infringement, although they are not precluded from recovering the same for counterfeiting with regard to Defendants' production tires.

IT IS SO ORDERED. The District Executive is directed to forward copies of this order to counsel of record.

DATED this 30th day of November, 2015.

s/Lonny R . Suko

LONNY R. SUKO

Senior United States District Judge


Summaries of

OTR Wheel Eng'g, Inc. v. W. Worldwide Servs., Inc.

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF WASHINGTON
Nov 30, 2015
No. CV-14-085-LRS (E.D. Wash. Nov. 30, 2015)
Case details for

OTR Wheel Eng'g, Inc. v. W. Worldwide Servs., Inc.

Case Details

Full title:OTR WHEEL ENGINEERING, INC., BLACKSTONE/OTR, LLC, and F.B.T. ENTERPRISES…

Court:UNITED STATES DISTRICT COURT EASTERN DISTRICT OF WASHINGTON

Date published: Nov 30, 2015

Citations

No. CV-14-085-LRS (E.D. Wash. Nov. 30, 2015)