Summary
In Black Diamond, the plaintiff brought suit alleging that the defendant infringed its use of the "Black Diamond" trademark on ski wear.
Summary of this case from RBC Nice Bearings, Inc. v. Peer Bearing Co.Opinion
No. 06-3508-cv.
October 5, 2007.
Appeal from the United States District Court for the District of Vermont (J. Garvan Murtha, Judge).
UPON DUE CONSIDERATION, IT IS HEREBY ORDERED, ADJUDGED, AND DECREED that the judgment of the district court, entered on August 25, 2005, is AFFIRMED.
APPEARING FOR APPELLANT: JAMES G. GOGGIN (Peter S. Black, on the brief), Verrill Dana, LLP, Portland, Maine.
APPEARING FOR APPELLEE: WILLIAM N. BER KOWITZ, Neil McGaraghan, Bingham McCutchen LLP, Boston, Massachusetts, R. Bradford Fawley, Downs Rachlin Martin PLLC, Brattleboro, Vermont, Richard S. Luskin, Black Diamond Equipment, Ltd., Salt Lake City, Utah.
Plaintiff Black Diamond Sportswear, Inc. ("BDS") appeals from an award of summary judgment to defendant Black Diamond Equipment, Ltd. ("BDE") on BDS's claims of trademark infringement, false designation of origin, and dilution under federal common law and the Lanham Act, 15 U.S.C. §§ 1114, 1125. BDS contends that the district court erred in holding that its claims were barred by the equitable doctrine of laches because significant factual disputes exist that preclude the application of that defense. BDS also asserts that, even if laches does bar its claim for monetary damages, the district court should nevertheless have granted its request for injunctive relief. We assume the parties' familiarity with the facts and record of prior proceedings, which we reference only as necessary to explain our decision.
Preliminarily, we observe that the standard of review applicable to a grant of summary judgment based on laches is unsettled in this circuit.See Ikelionwu v. United States, 150 F.3d 233, 236-37 (2d Cir. 1998) (discussing conflicting authority). We need not resolve this issue, however, because the district court's judgment must be affirmed under either de novo or abuse of discretion review.
A. The District Court Properly Applied Laches to Bar BDS's Claims
It is well established that the defense of laches may be asserted in trademark infringement cases, see United States v. Milstein, 401 F.3d 53, 63 (2d Cir. 2005); Conopco, Inc. v. Campbell Soup Co., 95 F.3d 187, 193 (2d Cir. 1996), in which case the defense must be resolved before reaching the merits of plaintiff's trademark claims, see Patsy's Brand, Inc. v. I.O.B. Realty, Inc., 317 F.3d 209, 216 (2d Cir. 2003). Laches will apply where (1) plaintiff had knowledge of defendant's use of its marks, (2) plaintiff inexcusably delayed in taking action with respect to defendant's use, and (3) defendant suffered prejudice as a result. See Saratoga Vichy Spring Co., Inc. v. Lehman, 625 F.2d 1037, 1040 (2d Cir. 1980).
"Although laches is an equitable defense, employed instead of a statutory time-bar, analogous statutes of limitation remain an important determinant in the application of a laches defense." Conopco, Inc. v. Campbell Soup Co., 95 F.3d at 191. Because the Lanham Act establishes no limitations period and because no corresponding federal statute of limitations exists, "we look to the most appropriate or the most analogous state statute of limitations for laches purposes." Id. (internal quotation marks omitted). That statute, in turn, determines which party has the burden of proving or rebutting the laches defense.
[P]rior to the running of the most closely analogous state statute of limitations there is no presumption of laches and the burden remains on the defendant to prove the defense. Alternatively, once the analogous statute has run, a presumption of laches will apply and plaintiff must show why the laches defense ought not be applied in the case.
Id. In the instant case, the parties agree that Vermont's six-year statute of limitations for civil actions applies. See 12 V.S.A. § 511.
1. No Genuine Issues of Material Fact Exist
BDS contends that summary judgment was precluded by material factual disputes, specifically pertaining to (1) the extent of BDE's infringement of BDS's mark prior to 1998, (2) when BDS knew or should have known of such infringement, and (3) whether BDE has been prejudiced by any delay in filing suit. According to BDS, BDE's infringement prior to 1998 wasde minimis and thus the laches period did not begin to run until 1998. Because BDS filed its lawsuit on October 15, 2003, within the analogous six-year state statute of limitations, BDS argues that BDE is not entitled to a presumption of laches and cannot meet its burden of proving the defense. We disagree.
A plaintiff is not "obligated to sue until its right to protection has ripened such that plaintiff knew or should have known, not simply that defendant was using the potentially offending mark, but that plaintiff had a provable infringement claim against defendant." Physical Therapy Ctr. v. Pro-Fit Orthopedic Sports Physical Therapy, 314 F.3d 62, 70 (2d Cir. 2002). Under the doctrine of progressive encroachment, a plaintiff has "some latitude in the timing of its bringing suit" because the laches period begins to run, not at the first sign of a de minimis infringing use, but rather, when "the likelihood of confusion looms large." Id. (internal quotation marks omitted). We have recognized that "any other rule would require each trademark owner to sue first and ask questions later, and would foster meritless litigation." Id. (internal quotation marks and alteration omitted).
In granting summary judgment to BDE on its laches defense, the district court concluded that BDS engaged in unreasonable delay in bringing suit because "BDS had to be aware by the mid-1990s that a company using a similar mark was selling goods in direct competition with it." We agree. It is undisputed that BDE began using the Black Diamond mark in 1990, that BDS was aware of that fact, and that, prior to 1998, BDE sold skiwear products — including gloves, mittens, hats, and t-shirts — that competed directly with BDS's gloves, mittens, ski hats, and t-shirts. Although BDS contends that BDE's pre-1998 products "did not directly compete with the bulk of BDS's line," Appellant's Reply Br. at 18 (emphasis added), BDS fails to identify any "hard evidence" in the record supporting this assertion, D'Amico v. City of New York, 132 F.3d 145, 149 (2d Cir. 1998) (noting that at summary judgment, non-moving party "must offer some hard evidence showing that its version of the events is not wholly fanciful"). Even if BDS could identify such evidence, moreover, the doctrine of progressive encroachment only excuses delay in filing suit where "defendant, after beginning its use of the mark, redirected its business so that it more squarely competed with plaintiff." Pro-Fit Orthopedic Sports Physical Therapy,
314 F.3d at 70 (emphasis added). In the instant case, BDE's products competed directly at the outset with those of BDS when it began selling skiwear in 1990. See Tillamook Country Smoker, Inc. v. Tillamook County Creamery Ass'n, 465 F.3d 1102, 1110 (9th Cir. 2006) ("A junior user's growth of its existing business and the concomitant increase in its use of the mark do not constitute progressive encroachment."). Although BDS attempts to narrow the relevant clothing category to "fleece skiwear," this claim is belied both by BDS's federal trademark registration for "ski wear" generally and by its own CEO's testimony identifying BDS's market as "outdoor ski wear."
The record also demonstrates that BDS should have known of BDE's infringing use of the mark on its pre-1998 products. A trademark owner is "`chargeable with such knowledge as he might have obtained upon [due] inquiry.'" Polaroid Corp. v. Polarad Electronics Corp., 182 F. Supp. 350, 355 (E.D.N.Y. 1960) (quoting Johnston v. Standard Mining Co., 148 U.S. 360, 370 (1893)); see 6 J. Thomas McCarthy, McCarthy on Trademarks and Unfair Competition, § 31:38, at 31-97 (4th ed. 2007) (noting that trademark owner has "duty to police its rights against infringers"). As noted, it is undisputed that BDS was aware of BDE's use of the Black Diamond mark on ski equipment as early as 1990. The possibility of it expanding into skiwear was hardly far-fetched. Had BDS exercised due diligence in policing its mark, it would readily have learned that BDE was, in fact, selling skiwear in direct competition with plaintiff's clothing line as early as 1990. BDE marketed its products in widely distributed catalogues, at yearly trade shows in which BDS and BDE both participated, and through retail stores nationwide, including in BDS's home state of Vermont. The district court correctly found that, if BDS had policed any of these obvious distribution channels from 1990 onwards, it would have known that the likelihood of confusion with BDE's skiwear products "loom[ed] large." Physical Therapy Ctr. v. Pro-Fit Orthopedic Sports Physical Therapy, 314 F.3d at 70. Accordingly, we conclude that no genuine issue of material fact exists regarding the existence of "a provable infringement claim" by the mid-1990s — and certainly well before October 15, 1997, the earliest date within the six-year analogous statute of limitations — and that a presumption in favor of laches therefore applies. Conopco, Inc. v. Campbell Soup Co., 95 F.3d at 191. We further conclude that BDS failed to rebut this presumption, including the presumption of prejudice, and that the district court therefore properly relied on laches to dismiss BDS's claims.
2. BDE Did Not Act in Bad Faith
BDS also contends that the district court erred in applying laches because the record contains sufficient evidence to support a reasonable inference that BDE acted in bad faith. It is well established that a defendant must have "clean hands" to assert the equitable defense of laches. Hermès Int'l v. Lederer De Paris Fifth Avenue, Inc., 219 F.3d 104, 107 (2d Cir. 2000); see Precision Instrument Mfg. Co. v. Automotive Maintenance Mach. Co., 324 U.S. 806, 814 (1945) (observing that "he who comes into equity must come with clean hands" (internal quotation marks omitted)). Although "[b]ad faith may be inferred from the junior user's actual or constructive knowledge of the senior user's mark," Star Indus. v. Bacardi Co. Ltd., 412 F.3d 373, 389 (2d Cir. 2005), a junior user's knowledge of the mark may still be consistent with good faith unless the evidence indicates "an intent to promote confusion or exploit good will or reputation," id. at 388.
As the district court correctly concluded, nothing in the record evidence supports a conclusion that BDE's selection of the Black Diamond mark related to BDS's use of the mark or that BDE ever "sought to pass off its products as those of BDS." Although the district court did not expressly address BDS's claim of reverse confusion, see id. at 388 n. 3 (explaining that reverse confusion occurs where "the junior user is able to amass such trademark strength in its imitative mark that the senior user's products become associated with the junior user in the minds of consumers"), the record evidence does not support a reasonable inference that BDE intended to promote such confusion, for example, by flooding the market with its skiwear products and causing consumers to believe erroneously that BDS's goods were produced by BDE. See Lang v. Retirement Living Publishing Co., 949 F.2d 576, 583 (2d Cir. 1991) (observing that "[r]everse confusion is the misimpression that the junior user is the source of the senior user's goods" (internal quotation marks omtited));see also Freedom Card, Inc. v. JPMorgan Chase Co., 432 F.3d 463, 473 (3d Cir. 2005) ("The offender in a reverse confusion case will typically exploit confusion to push the senior user out of the market."). Accordingly, we conclude that the district court properly determined at summary judgment that BDE did not act in bad faith and that BDS's claims were barred by laches.
B. The District Court Correctly Denied Injunctive Relief
BDS contends that, even if laches bars its claim for monetary damages, the district court should still have granted its request for injunctive relief. We have recognized that, even where laches is a valid defense to damages, "a court may nonetheless grant injunctive relief if it determines that the likelihood of confusion is so great that it outweighs the effect of plaintiff's delay in bringing suit." ProFitness Physical Therapy Ctr. v. Pro-Fit Orthopedic Sports Physical Therapy, 314 F.3d at 68. The purpose of this exception to laches "is to vindicate the public interest in avoiding inevitable confusion in the marketplace."SunAmerica Corp. v. Sun Life Assurance Co., 77 F.3d 1325, 1334-36 (11th Cir. 1996). We have noted that "the public's interest is especially significant when health and safety concerns are implicated." Conopco, Inc. v. Campbell Soup Co., 95 F.3d at 194. That is not this case.
Although BDS's CEO testified that consumers have mistaken BDS for BDE numerous times at numerous retail trade shows, these instances involved customers' confusion about the existence of two companies called Black Diamond, rather than confusion about "mistaken purchasing decisions."Lang v. Retirement Living Publishing Co., 949 F.2d at 583 (noting that "trademark infringement protects only against mistaken purchasing decisions and not against confusion generally" (internal quotation marks omitted)). The only other evidence of confusion in the record is the CEO's testimony that BDS received a pair of "Scarpa hiking boots" from a consumer who was trying to return the merchandise to BDE. Given that BDE and BDS have both been selling skiwear for seventeen years, this isolated incident of post-sale confusion, coupled with the lack of any record evidence suggesting a high likelihood of confusion or the existence of a compelling public interest, is clearly insufficient to override the defense of laches so as to mandate injunctive relief in this case.
We have considered all of BDS's other arguments and find them to be without merit. The judgment of the district court entered on August 25, 2005, is hereby AFFIRMED.