JDR Industries, Inc. v. McDowell et al
MEMORANDUM AND ORDER that JDR's Motion for Preliminary Injunction (filing 8) is denied as moot. JDR's Motion for Partial Summary Judgment (filing 34) is granted in part and denied in part. Defendants' Motion to Dismiss Second Cause of Action of Defendants' Counterclaim (filing 50) is granted. Defendants' claim under the Nebraska Consumer Protection Act is dismissed. Ordered by Judge John M. Gerrard. (MBM)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEBRASKA
JDR INDUSTRIES, INC., a Nebraska
corporation, d/b/a Farmer's Choice,
MEMORANDUM AND ORDER
EDWIN K. McDOWELL, d/b/a
LaGrange Supply Co., and
LAGRANGE SUPPLY CO., L.L.C., a
Nebraska limited liability company,
d/b/a LaGrange Supply Co.,
This matter is before the Court on plaintiff JDR Industries' Motion for
Preliminary Injunction (filing 8) and Motion for Partial Summary Judgment
(filing 34). The present dispute concerns the right to sell welding rod under
the name "LaGrange." JDR claims that, through its predecessors-in-interest,
it has been continuously using the LaGrange trademark in connection with
the sale of welding rod since as early as approximately 1970. Since the mid to
late 1980s, defendant Edwin K. McDowell, a former employee of one of those
predecessors, has also been selling welding rod under the name LaGrange. At
some point in 2014, McDowell incorporated his company, defendant
LaGrange Supply Co., LLC ("LG Supply"), and assigned to LG Supply his
interest in the LaGrange name (whatever that interest is).
The parties dispute when JDR first became aware of McDowell's
sales—but the Court need not resolve that dispute at this time. JDR
maintains that it did not pursue any action against McDowell for his
infringing activities because his sales were minimal enough that there was
no real threat of confusion. In December 2013, however, things changed.
Around that time, JDR terminated the employment of one of its salespersons,
James Vance. Vance, who is not a party to this case, approached McDowell,
and the two entered into a licensing agreement whereby McDowell allowed
Vance to sell welding rod under the LaGrange name in exchange for
royalties. In contrast to McDowell, who had run an essentially passive sales
operation—generally relying on customers to call him—Vance relied on
telemarketing. Moreover, Vance specifically targeted a number of JDR's
customers. JDR asserts that this has resulted in significant consumer
confusion. This prompted JDR to file suit against Vance in state court. That
suit remains pending. The present suit against McDowell and LG Supply
followed thereafter. For the reasons discussed below, JDR's motion for partial
summary judgment will be granted, as to its claims, and denied, as to
defendants' counterclaims. JDR's motion for preliminary injunctive relief will
be denied as moot.
I. JDR's Claim to the LaGrange Mark
Plaintiff JDR is a Nebraska corporation. Its president is James J.
Braun. Filing 10-2 at ¶ 1. JDR traces its ownership in the LaGrange mark
through a chain of predecessors, beginning with LaGrange Equipment
Company ("LEC"). LEC was, until its dissolution in April 1986, a Nebraska
corporation with its principal place of business in Omaha, Nebraska. Its
founder and president was Dan LaGrange. Braun worked for LEC from 1982
to 1985, eventually serving as its Vice President of Marketing. Filing 25-2 at
¶¶ 3–4. At least as early as 1970, and continuing through October 1985, LEC
sold welding rod using the LaGrange mark. Filing 10-2 at ¶¶ 2–4. LEC did
not produce the welding rod itself, but purchased it from several suppliers.
Filing 10-2 at ¶ 6.
Ralston Bank was a secured creditor of LEC. In August 1985, acting in
conjunction with its holding company, Ralston Bank foreclosed on its loan to
LEC, and acquired all of LEC’s assets, equipment, and property, including
the rights in the LaGrange name (collectively, the “LEC Assets”). However,
Ralston Bank allowed LEC to continue in its operations, and so LEC
continued to sell welding rod using the LaGrange mark. Between August
1985 and October 17, 1985, Ralston Bank was the sole owner of the rights to
the LaGrange name. Filing 10-2 at ¶¶ 7–8; filing 25-3 at ¶¶ 1–7; filing 25-2 at
¶¶ 1–6; filing 35-2 at ¶¶ 1–8.
Following the 1985 foreclosure, Braun and Dan LaGrange, along with a
third partner, formed TGS Marketing, Inc.,2 which was a Nebraska
Pursuant to NECivR 56.1, a party moving for summary judgment must include in its brief
a statement of material facts about which the movant contends there is no dispute, and the
party opposing summary judgment must include in its brief a concise response to that
statement of facts, noting any disagreement. Properly referenced material facts in the
movant's statement are considered admitted unless controverted in the opposing party's
response. NECivR 56.1(b)(1). The Court has relied upon the parties' respective statements
of material fact to the extent that they were not substantively disputed. Where the facts are
genuinely in dispute, the Court has credited defendants' version of events.
corporation until its dissolution on July 3, 2003, and which did business as
"Farmer's Choice." Filing 10-2 at ¶¶ 9–11. On October 17, 1985, TGS entered
into a purchase agreement with Ralston Bank, whereby TGS purchased from
Ralston Bank all of the LEC Assets, including the rights to the LaGrange
mark. Filing 10-2 at ¶¶ 9–11; filing 10-3 at pp. 1–3; filing 25-2 at ¶¶ 9–11;
filing 25-3 at ¶ 8; filing 35-2 at ¶ 9. The transfer of the LEC assets to TGS
was essentially a "turnkey operation," whereby TGS opened the following
business day doing all of LEC's business out of the same location and using
the same office and assets. Filing 25-2 at ¶¶ 11–15. Between October 17,
1985, and June 23, 2003, TGS sold welding rod using the LaGrange mark.
Filing 10-2 at ¶¶ 12–13; see also filing 10-2 at ¶ 15; filing 10-5.
On June 23, 2003, plaintiff JDR, also doing business as Farmer’s
Choice, purchased the LEC assets from TGS, including the rights to the
LaGrange mark. Filing 10-2 at 16–17; filing 10-6 at 1–2, 7–8, 11. From that
point and continuing through the present day, JDR has sold welding rod
under the LaGrange mark. Filing 10-2 at ¶¶ 19–20.
II. Use and Registration of the LaGrange Trademark
JDR and its predecessors-in-interest (TGS and LEC) have sold welding
rod using the LaGrange mark since 1970, in over 42 states and Canada. JDR
asserts that the LaGrange line of welding rod has become "extremely well
known throughout the United States." Filing 10-2 at ¶¶ 22, 25. JDR further
asserts that it and its predecessors have spent much time and substantial
resources in promoting the LaGrange brand. JDR claims that, as a result, the
LaGrange mark has a strong reputation and has built up substantial
goodwill, such that the relevant public identifies and associated the
LaGrange line of welding rod with JDR and its predecessors. See filing 10-2
at ¶¶ 23–32.
On March 20, 2012, the United States Patent and Trademark Office
issued JDR a Registration Certificate for the LaGrange mark, for use in the
sale of metal welding rods. The certificate identified JDR's first use of the
mark in commerce as occurring on December 31, 1969. Filing 10-2 at ¶ 21;
filing 10-7 at 1–3.
III. McDowell's Business
From 1981 to 1985, McDowell worked for LEC as its national sales
recruiter. Filing 10-8 at 2–3. McDowell was responsible for selling
distributorships for LEC and training and managing four or five other LEC
employees involved in such sales. The distributorships that McDowell sold
"TGS" was an acronym for "The Grange Supply." Filing 25-2 at ¶ 8.
were composed of counties wherein each distributor could exclusively sell
LEC's products. Filing 10-8 at 2–3. After LEC closed in 1985, McDowell
partnered with various former regional managers of LEC and continued to
sell distributorships on their behalf. Essentially, McDowell continued in his
previous capacity as a sales recruiter, but instead of working for LEC, he
worked for LEC's former managers. For their part, the former regional
managers would then train the new exclusive distributors in the sale of
welding rod branded as LaGrange.
At some point in the 1980s, McDowell also began selling welding rod on
his own, out of his garage, using the LaGrange mark. McDowell has
continued these sales through the present day. Filing 10-8 at 4–6, 14–15, 19,
37; filing 23-1 at ¶¶ 4, 13–15, 23, 28, 35–36. And since 1985, McDowell has
conducted his business under the name "LaGrange Supply Co." See, filing 231 at ¶¶ 4–9, 15; filings 23-2, 23-3, 23-4, and 23-5.3 In July 1997, McDowell
registered the trade name “LaGrange Supply Co.” with the Nebraska
Secretary of State for use in the "[d]istribution of shop equipment and
supplies." Filing 10-8 at 7–8; filing 23-9 at 1–3. McDowell renewed the
registration in 2007. Filing 10-8 at 7–8; filing 23-9 at 4.
Until Vance later became involved, McDowell's sales of welding rod
were, as JDR terms it, "passive." See filing 9 at 9–11. Although McDowell
made perhaps 3 to 4 sales calls a week, he was not really running a
telemarketing operation, and he primarily relied on customers making calls
to him. Filing 10-8 at 11–12. At some point, McDowell had obtained the
telephone number formerly used by LEC in its sales of LaGrange welding
rod. McDowell would get calls from LEC's former customers whose orders he
would then fill. Additionally, McDowell contacted the family who was
assigned the telephone number TGS had formerly used to sell LaGrange
welding rod and placed a message on their answering machine directing
customers to call him to purchase LaGrange welding rod. Filing 10-8 at 12.
And in approximately 2006, McDowell developed a website (at
http://lagrangesupplycompany.com/) from which he sells welding rod branded
There is some disagreement in the record as to when, precisely, McDowell began selling
welding rod. In an affidavit from December 2014, McDowell averred that he has operated
under the trade name LaGrange Supply Co. and sold LaGrange-branded welding rod from
the fall of 1985. Filing 23-1 at ¶ 4. But in his deposition, taken in August 2014, McDowell
testified that he had begun selling welding rod branded as LaGrange "[b]y '89." Filing 10-8
at 14. McDowell's statements are not necessarily inconsistent: if he began selling welding
rod in 1985, he could honestly state that he had begun doing so "by 1989." On a motion for
summary judgment, the Court's role is not to weigh the evidence or evaluate the credibility
of witnesses. So, the Court will view the evidence in the light most favorable to McDowell,
and for purposes of this motion will assume, he began selling welding rod branded as
LaGrange in the fall of 1985.
as “LaGrange” under the LaGrange Supply Co. name, using a logo formerly
used by LEC. Filing 10-8 at 15–16, 47–50. At some point in 2014, McDowell
formed defendant LG Supply, a Nebraska limited liability corporation which
he owns with his son. McDowell then assigned his interest in the LaGrange
Supply Co. trade name to LG Supply. Filing 10-8 at 15, 46.
McDowell testified that he has long been aware that Farmer's Choice
(i.e., TGS, and then JDR) was selling LaGrange welding rod, and that Braun
was involved in selling LaGrange welding rod since before TGS existed.
Filing 10-8 at 9, 19. McDowell also admitted that he had learned that JDR
had applied for a federal trademark registration for LaGrange, but did not
taken any action to challenge the registration. Filing 10-8 at 18. The parties
dispute when Braun, JDR, or JDR's predecessors became aware of
McDowell's activities. See, filing 49 at 6–8, 10–15; filing 52 at 8–13, 17–24.
But as the Court explains below, that dispute is not material to the pending
IV. Vance's Expansion of McDowell's Business
From 1992 to 2013, James Vance was employed as a telemarketing
salesperson for TGS and then JDR. In December 2013, JDR terminated his
employment. Filing 10-8 at 9–11. Shortly thereafter, Vance arranged a
meeting with McDowell, and the two reached an agreement. Specifically,
McDowell purported to authorize Vance to sell, through telemarketing,
welding rod branded as LaGrange and to use the LaGrange Supply Co. name.
Filing 10-8 at 9–11. The record contains a copy of this "Tradename &
Trademark License Agreement." Filing 10-8 at 25–36. In the agreement,
McDowell, as "licensor," granted Vance (or more accurately, Vance's LLC) a
license to use various permutations of the LaGrange name in connection with
the sale of welding rod. Filing 10-8 at 25. In return, Vance agreed (among
other things) to pay a percentage of his proceeds as a royalty and to be
subject to certain quality control standards. See filing 10-8 at 26. Unlike
McDowell, who had relied primarily upon people calling him, Vance
commenced telemarketing operations, including making sales calls to JDR's
clients. See filing 10-2 at ¶ 36.
Braun avers that, within approximately 1 month following Vance's
termination, JDR learned, from contacts with its own customers, that
defendants and their "agents/licensees" (i.e., Vance) were directly contacting
JDR’s customers, including those customers Vance had previously serviced
while employed with JDR. Filing 10-2 at ¶¶ 36(a). Since then, JDR has begun
tracking instances of confusion by its customers and others, and JDR has
documented numerous instances in which a customer has expressed
confusion concerning defendants (and Vance's) use of the LaGrange name.
See generally, filing 25-4; filing 40-1 at ¶¶ 6–11; see also filings 10-10 through
STANDARD OF REVIEW
I. Motion for Summary Judgment
The Court may grant summary judgment on all or part of a party's
claim or defense. Fed. R. Civ. P. 56(a). Summary judgment is proper if the
movant shows that there is no genuine dispute as to any material fact and
that the movant is entitled to judgment as a matter of law. See Fed. R. Civ. P.
56(a). The movant bears the initial responsibility of informing the Court of
the basis for the motion, and must identify those portions of the record which
the movant believes demonstrate the absence of a genuine issue of material
fact. Torgerson v. City of Rochester, 643 F.3d 1031, 1042 (8th Cir. 2011) (en
banc). If the movant does so, the nonmovant must respond by submitting
evidentiary materials that set out specific facts showing that there is a
genuine issue for trial. Id.
On a motion for summary judgment, facts must be viewed in the light
most favorable to the nonmoving party only if there is a genuine dispute as to
those facts. Id. Credibility determinations, the weighing of the evidence, and
the drawing of legitimate inferences from the evidence are jury functions, not
those of a judge. Id. But the nonmovant must do more than simply show that
there is some metaphysical doubt as to the material facts. Id. In order to
show that disputed facts are material, the party opposing summary judgment
must cite to the relevant substantive law in identifying facts that might
affect the outcome of the suit. Quinn v. St. Louis Cnty., 653 F.3d 745, 751
(8th Cir. 2011). The mere existence of a scintilla of evidence in support of the
nonmovant's position will be insufficient; there must be evidence on which
the jury could conceivably find for the nonmovant. Barber v. C1 Truck Driver
Training, LLC, 656 F.3d 782, 791-92 (8th Cir. 2011). Where the record taken
as a whole could not lead a rational trier of fact to find for the nonmoving
party, there is no genuine issue for trial. Torgerson, 643 F.3d at 1042.
II. Preliminary Injunction
When deciding whether to issue a preliminary injunction, the Court
weighs the four Dataphase factors: (1) the threat of irreparable harm to the
movant; (2) the state of the balance between this harm and the injury that
granting the injunction will inflict on other parties; (3) the probability that
the movant will succeed on the merits; and (4) the public interest. Johnson v.
Minneapolis Park & Recreation Bd., 729 F.3d 1094, 1098 (8th Cir. 2013);
(citing Dataphase Sys., Inc. v. C L Sys., Inc., 640 F.2d 109, 114 (8th Cir. 1981)
(en banc)). A preliminary injunction is an extraordinary remedy, and the
movant bears the burden of establishing its propriety. Roudachevski v. AllAm. Care Centers, Inc., 648 F.3d 701, 705 (8th Cir. 2011); see also Winter v.
Natural Res. Def. Council, Inc., 555 U.S. 7, 376 (2008).
In its complaint, JDR asserts that defendants' conduct constitutes (1)
trademark infringement in violation of the Lanham Act, 15 U.S.C. § 1114(1);
(2) unfair competition in violation of the Lanham Act, 15 U.S.C. § 1125(a);
and (3) a violation of the Nebraska Uniform Deceptive Trade Practices Act
("NUDTPA"), Neb. Rev. Stat. § 87–301 et seq. JDR has asserted various other
theories of recovery in its complaint, but only these claims are before the
Court at this time.
Defendants have filed a counterclaim, seeking cancellation of JDR's
federal registration and alleging violations of the Nebraska Consumer
Protection Act, Neb. Rev. Stat. § 59–1601 et seq., and the NUDTPA.
Defendants have since moved to dismiss their claim under the Nebraska
Consumer Protection Act (filing 50), and that claim will be dismissed.
In its motion for preliminary injunctive relief, JDR asks the Court to
enjoin defendants from using the LaGrange name in connection with the sale
of welding rod. And in its motion for partial summary judgment, JDR asks
the Court to enter judgment for JDR as to several portions of its claims noted
above: for trademark infringement, unfair competition, and under the
Nebraska Deceptive Trade Practices Act. JDR also asks the Court to dismiss
defendants' counterclaim under the NUDTPA.
For reasons that will become clear, the Court will proceed in reverse of
the usual order, and will begin by examining JDR's motion for partial
summary judgment. The Court will grant JDR's motion as to its own claims.
But the Court will deny JDR's motion as to defendants' counterclaims, which
will be allowed to proceed. Finally, JDR's motion for a preliminary injunction
will be denied as moot.
I. JDR's Motion for Partial Summary Judgment (on JDR's Claims)
The elements of all of JDR's claims—for trademark infringement, for
unfair competition, and under the NUDTPA—are essentially the same. So,
for present purposes, the same analysis will—with some exceptions—govern
all of these claims. See, 1-800 Contacts, Inc. v. WhenU.Com, Inc., 414 F.3d
400, 406–07 (2d Cir. 2005); Harley–Davidson Motor Co. v. Elworth's Harley–
Davidson Sales & Service, Inc., 2010 WL 1427317, at *3 (D. Neb. April 8,
2010); Mutual of Omaha Ins. Co. v. Novak, 648 F. Supp. 905, 909 (D. Neb.
1986); Prime Home Care, LLC v. Pathways to Compassion, LLC, 809 N.W.2d
751, 764 (Neb. 2012).
To prevail on a claim of trademark infringement under 15 U.S.C. §
1114(1), a plaintiff must establish that (1) it owns a valid, protectable mark,
(2) that defendants have used the mark in commerce without the plaintiff's
consent; and (3) that there is a likelihood of confusion between the plaintiff's
mark and the defendant's mark. 15 U.S.C. § 1114(1); B & B Hardware, Inc. v.
Hargis Indus., Inc., 569 F.3d 383, 389 (8th Cir. 2009); 1-800 Contacts, 414
F.3d at 406–07. A claim of unfair competition under § 43(a) of the Lanham
Act, 15 U.S.C. § 1125(a)(1), has the same elements, except that registration of
the mark is not required. 15 U.S.C. § 1125(a)(1); Davis v. Walt Disney Co.,
430 F.3d 901, 903 (8th Cir. 2005); 1-800 Contacts, 414 F.3d at 406–07. And
conduct causing a likelihood of confusion also constitutes a "deceptive trade
practice" under the NUDTPA. See Neb. Rev. Stat. § 87-302(a)(2) and (3).
JDR has not moved for summary judgment as to the likelihood of
confusion, and so that element is not before the Court at this time. Most of
the remaining elements are undisputed. There is no dispute that defendants
have used the LaGrange mark in commerce. Nor do defendants claim to have
received JDR's consent to use the mark. So, the fighting issue at this time is
whether JDR owns a valid, protectable mark. And more specifically, the issue
is whether JDR can show that it owned a valid, protectable mark prior to
McDowell's first use of the LaGrange mark in 1985. First, however, the Court
will consider JDR's current claim to ownership of the mark.
A. JDR's Current Ownership of the Mark
There is no dispute that LEC was the first to use the LaGrange mark
in connection with the sale of welding rod, and that this use extends back to
at least 1970. JDR traces its interest in the mark all the way back to 1970
through a series of transactions between itself and TGS, TGS and LEC's
creditors, and LEC's creditors and LEC. Defendants argue that there is a gap
in this chain. They contend that there is no evidence that LEC's creditor,
Ralston Bank, actually owned transferrable rights in the LaGrange
trademark. They also point to the fact that Ralston provided TGS with only a
quitclaim deed, arguing that this (somehow) renders JDR's claim suspect.
Both of defendants' arguments are without merit. First, there is no gap
in JDR's chain of ownership. The undisputed facts, set forth above, show that
Ralston Bank, in conjunction with its holding company, acquired all of LEC's
assets, including the rights to the LaGrange name. The undisputed facts also
show that TGS then purchased those assets, including the rights to the
LaGrange name. And the undisputed facts show that LEC was allowed to
continue using the mark while its assets were in the bank's possession, and
thus there was no gap in the usage of the mark as it was transferred from
LEC to its creditors, then to TGS, and finally to JDR.
Second, defendants' argument that the use of a quitclaim somehow
renders TGS's acquisition of the mark infirm is not supported by the law. A
quitclaim is an instrument of transfer whereby the grantor transfers only the
interest the grantor has in the property at the time of conveyance. Morello v.
Land Reutilization Com'n of Cnty. of Douglas, 659 N.W.2d 310, 314 (Neb.
2003). While a quitclaim deed does not provide any assurance that the
grantor actually has good title to the property transferred, see id., it is still as
effective as any deed to transfer whatever interest the grantor does have. See,
United States v. Speidel, 562 F.2d 1129, 1132 (8th Cir. 1977) (Iowa law); Rust
Land & Lumber Co. v. Wheeler, 189 F. 321, 325 (8th Cir. 1911) (Arkansas
law); Crafts v. Pitts, 162 P.3d 382, 384 n.2 (Wash. 2007); Horn v. Gilley, 428
S.E.2d 568, 569 (Ga. 1993); Owen v. Potts, 115 So. 336, 338 (Miss. 1928). In
sum, the undisputed facts show that the LEC's creditors did acquire rights in
the LaGrange mark, which they then transferred to TGS, which ultimately
passed them on to JDR.
B. Protection and Priority of Use
JDR must show that it owns a protectable mark and that it was the
first to use the mark in commerce. Before proceeding further, it is necessary
to set forth the general principles that determine which party has priority of
use and whether a mark is protectable.
1. Ownership Is Controlled By Priority of Use
A trademark is a common law property right that exists independently
of statutory provisions for registration. Miller v. Glenn Miller Prods., Inc.,
454 F.3d 975, 989 (9th Cir. 2006). Trademark rights are acquired and
maintained through the use of a particular mark. ITC Ltd. v. Punchgini, Inc.,
482 F.3d 135, 146 (2d Cir. 2007). In other words, a party's ownership of a
protectable mark is determined on the basis of priority of use in commerce. S.
Cal. Darts Ass'n v. Zaffina, 762 F.3d 921, 930 (9th Cir. 2014). Thus, the party
claiming ownership must have been the first to actually use the mark in the
sale of goods or services. Id.
The first party to use the mark in commerce establishes common law
ownership in the geographic area where the mark is used and is known as
the senior user of the mark. Allard Enters., Inc. v. Advanced Programming
Res., Inc., 249 F.3d 564, 572 (6th Cir. 2001). While federal registration of a
mark serves as prima facie evidence of ownership and the registrant's
exclusive right to use the mark in commerce, it does not eliminate the prior
nonregistered, common law rights of others. So, the common law rights of the
senior user are superior to the federal registration of a junior user within the
senior user's geographic territory. Id. In other words, it is priority of use, not
federal registration, that creates exclusive property rights in a trademark. In
re Int'l Flavors & Fragrances, Inc., 183 F.3d 1361, 1366 (Fed. Cir. 1999). The
owner of a trademark need not register his or her mark in order to use the
mark in connection with goods or to seek to prevent others from using the
mark. Id. Rather, registration affords certain supplemental rights and
protections not provided by the common law. Id.
JDR registered the LaGrange mark in 2012. But McDowell has
presented evidence that he began using the same mark as early as 1985.
Thus, JDR's registration is ultimately of little significance to the Court's
present analysis. Priority of use, however, still goes to JDR, which has
presented undisputed evidence that it—through an unbroken chain of use in
commerce by itself and its predecessors-in-interest—first used the mark in
connection with the sale of welding rod at least as far back as 1970.
2. Marks Entitled to Protection
In addition to showing priority of use, JDR must show that the
LaGrange mark is valid, i.e., protectable. A "trademark" is "any word, name,
symbol, or device, or any combination thereof—used by a person . . . to
identify and distinguish his or her goods, including a unique product, from
those manufactured or sold by others and to indicate the source of the goods,
even if that source is unknown." 15 U.S.C. § 1127; Lovely Skin, Inc. v. Ishtar
Skin Care Products, LLC, 745 F.3d 877, 882 (8th Cir. 2014). To be
protectable, a mark must be distinct. Co-Rect Prods., Inc. v. Marvy! Adver.
Photography, Inc., 780 F.2d 1324, 1329 (8th Cir. 1985). Distinctiveness comes
in two forms: inherent and acquired. A mark is inherently distinctive if its
intrinsic nature serves to identify a particular source. See Abercrombie &
Fitch Stores, Inc. v. Am. Eagle Outfitters, Inc., 280 F.3d 619, 635 (6th Cir.
2002). A mark that is not inherently distinctive can acquire distinctiveness
through attachment of secondary meaning (more on that below). Id.
To determine whether a mark is protectable, the Court must first
categorize it. Frosty Treats Inc. v. Sony Computer Entm't Am. Inc., 426 F.3d
1001, 1004 (8th Cir. 2005). Potential trademarks fall into one of four (or five)
categories: (1) generic, (2) descriptive, (3) suggestive, or (4) arbitrary or
fanciful. Id. A generic mark refers to the common name or nature of an
article. Id. at 1005. A mark is descriptive if it conveys an immediate idea of
the ingredients, qualities, or characteristics of the goods. Suggestive marks
require imagination, thought, and perception to reach a conclusion as to the
nature of the goods. Id. An arbitrary mark has a significance recognized in
everyday life, but the thing it normally signifies is unrelated to the product or
service to which the mark is attached, such as CAMEL cigarettes or APPLE
computers. Therma-Scan, Inc. v. Thermoscan, Inc., 295 F.3d 623, 631 (6th
- 10 -
Cir. 2002). And a fanciful mark is a coined word or phrase, such as Kodak,
invented solely to function as a trademark. Dreamwerks Prod. Grp., Inc. v.
SKG Studio, 142 F.3d 1127, 1130 n.7 (9th Cir. 1998).
Generic marks are not entitled to protection. Descriptive marks lack
inherent distinctiveness, and are only entitled to protection if they are shown
to have acquired secondary meaning. Frosty Treats, 426 F.3d at 1005. By
comparison, suggestive, arbitrary, and fanciful marks are deemed inherently
distinctive, and are entitled to protection regardless of whether they have
acquired secondary meaning. Id.
The correct categorization of a given mark is a question of fact. WSM,
Inc. v. Hilton, 724 F.2d 1320, 1326 (8th Cir. 1984); see also, Juice Generation,
Inc. v. GS Enters. LLC, ___ F.3d ___, 2015 WL 4400033, at *5 (Fed. Cir. July
20, 2015); Multi Time Mach., Inc. v. Amazon.com, Inc., ___ F.3d ____, 2015
WL 4068877, at *6 (9th Cir. July 6, 2015). The demarcation between each
category is more blurred than it is definite; in other words, the categories
from generic to fanciful or arbitrary exist on a continuum. See, Knights
Armament Co. v. Optical Sys. Tech., Inc., 654 F.3d 1179, 1188 (11th Cir.
2011); DeGidio v. W. Grp. Corp., 355 F.3d 506, 512 (6th Cir. 2004). A mark's
classification is determined with regard to the goods associated with the
mark. Fair Isaac Corp. v. Experian Info. Solutions, Inc., 650 F.3d 1139, 1147
(8th Cir. 2011). So, for example, "frosty treats" is (at best) descriptive when
applied to frozen desserts. Id. And the test for descriptiveness is "what
consumers, not persons in the trade, understand the term to be." Id.
JDR asserts, with no explanation, that the LaGrange mark is arbitrary
or fanciful. It is not a coined term, so it is not fanciful. And JDR has
presented no evidence or argument as to how the mark could be considered
arbitrary. So, the mark is either descriptive or suggestive. Keeping in mind
that the categorization of a mark is a factual issue, the Court finds, for
purposes of the pending motions, that the mark is at least descriptive. The
mark may, in fact, be suggestive, but a jury could reasonably find otherwise.
First, the LaGrange mark is apparently named for the founder and
president of JDR's original predecessor, Dan LaGrange. And the general rule
is that surnames, when used as trademarks, are inherently indistinctive, and
are permitted trademark protection only upon a showing that they have
acquiring distinctiveness through secondary meaning. Flynn v. AK Peters,
Ltd., 377 F.3d 13, 20 (1st Cir. 2004); see also, Tana v. Dantanna's, 611 F.3d
767, 774 (11th Cir. 2010); Marker Int'l v. DeBruler, 844 F.2d 763, 764 (10th
Cir. 1988). Because a surname merely describes the provider of goods, it is
considered descriptive as to those goods. In re Major League Umpires, 60
U.S.P.Q. 2d 1059, 2001 WL 777067, at *2 (T.T.A.B. 2001)
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Second, the manner in which the LaGrange mark was registered
suggests that it is not suggestive. The Lanham Act prohibits the registration
of marks which are merely descriptive on the Principal Register, unless the
mark has acquired secondary meaning—otherwise known as a § 2(f)
registration. 15 U.S.C. § 1052(e)–(f); Lovely Skin, 745 F.3d at 882. And the
Eighth Circuit has held that the submission of evidence under § 2(f) amounts
to a concession that the mark sought to be registered is not inherently
distinctive. Aromatique, Inc. v. Gold Seal, Inc., 28 F.3d 863, 869 (8th Cir.
1994). JDR has submitted the certificate of registration for the LaGrange
mark, which shows that it was registered under § 2(f). Filing 10-7 at 1. At the
very least, this weighs against a finding of inherent distinctiveness and
makes it inappropriate for the Court to find the mark suggestive as a matter
In sum, viewed in the light most favorable to defendants, the Court
finds the LaGrange mark to be descriptive, rather than suggestive. As a
result, JDR must show that the LaGrange mark has acquired secondary
3. Secondary Meaning
Secondary meaning is an association formed in the minds of consumers
between the mark and the source or origin of the product. Frosty Treats, 426
F.3d at 1006. To establish secondary meaning, a plaintiff must show that its
mark serves to identify its goods and distinguish them from those of others.
Id. Secondary meaning does not require the consumer to identify a source by
name but does require that the public recognize the mark and associate it
with a single source. Id.
JDR must show not only that the LaGrange mark has acquired
secondary meaning, but that it acquired that meaning before McDowell's first
use of the mark in 1985. A "strictly logical priority rule would be to award
ownership to the party who first achieved secondary meaning." 2 McCarthy
on Trademarks and Unfair Competition § 16:34 (4th ed. 2015). But courts
It has also been held that when a claim of acquired distinctiveness is made in the
alternative or after objecting to the examiner's refusal, the claim does not constitute a
concession that the matter sought to be registered is not inherently distinctive. See The
Learning Internet v. Learn.com, Inc., 2009 WL 6059550, at *35 (D. Or. Nov. 25, 2009) (citing
Gen. Foods Corp. v. Mgd Partners, 224 U.S.P.Q. (BNA) 479, 485, 1984 WL 63162, at *6
(T.T.A.B.1984)); Trademark Manual of Examining Procedure § 1212.02(c) (July 2015),
available at http://tmep.uspto.gov/RDMS/detail/manual/TMEP/current/d1e2.xml. The
possibility of registration with objections was not discussed in Aromatique. It may be that
JDR pursued this sort of application, but the Court cannot tell from the existing record. So,
the Court hesitates to give conclusive weight to JDR's registration under § 2(f).
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instead utilize an "easier-to-apply but stricter surrogate test." Id. Thus,
"[p]riority depends not upon which mark succeeds in first obtaining
secondary meaning but upon whether the plaintiff can prove by a
preponderance of the evidence that his mark possessed secondary meaning at
the time the defendant commenced his use of the mark." Scott Paper Co. v.
Scott's Liquid Gold, Inc., 589 F.2d 1225, 1231 (3d Cir. 1978); see also, Knights
Armament, 654 F.3d at 1189; PaperCutter, Inc. v. Fay's Drug Co., Inc., 900
F.2d 558, 564 (2d Cir. 1990); Co-Rect Prods., 780 F.2d at 1330. "If the senior
user cannot demonstrate that its use of the term acquired secondary meaning
before the junior user commenced its use, there can be no infringement, 'for if
there was no secondary meaning, there was no likelihood of confusion when
the junior user arrived on the scene.'" Rockland Exposition, Inc. v. Alliance of
Auto. Serv. Providers of N.J., 894 F. Supp. 2d 288, 317 (S.D.N.Y. 2012)
(quoting 2 McCarthy on Trademarks § 16:34).
Whether a mark has acquired a secondary meaning is a question of
fact. Lovely Skin, 745 F.3d at 884. A trademark user establishes secondary
meaning by showing, that through long and exclusive use in the sale of the
user's goods, the mark has become so associated in the public mind with such
goods that the mark serves to identify the source of the goods and to
distinguish them from those of others. First Bank v. First Bank Sys., Inc., 84
F.3d 1040, 1045 (8th Cir. 1996). Although direct evidence such as consumer
testimony or surveys are most probative of secondary meaning, it can also be
proven by circumstantial evidence. Frosty Treats, 426 F.3d at 1005. Such
circumstantial evidence includes the exclusivity, length and manner of use of
the mark; the amount and manner of advertising; the amount of sales and
number of customers; the plaintiff's established place in the market; and the
existence of intentional copying. Id. at 1005–06.
JDR has presented evidence that, thanks to its efforts and exclusive
use, the LaGrange mark had acquired secondary meaning by 1985. JDR's
evidence on this matter is not overwhelming, but it is entirely undisputed.
Thus, the Court finds that, even viewing the record in the light most
favorable to defendants, JDR has presented sufficient circumstantial
evidence of secondary meaning to be entitled to partial summary judgment.
(a) Exclusivity, Length, and Manner of Use
By 1985, JDR's predecessor LEC had used the LaGrange mark in
connection with the sale of welding rod for 15 years. There is no evidence that
anyone else was using the mark during that period. Fifteen years of exclusive
use is not insignificant. 15 U.S.C. § 1052(f) states that the trademark
commissioner may accept proof of five years' exclusive and continuous use of
a mark as prima facie evidence of secondary meaning. "This suggests that
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five years' use is a strong factor in favor of secondary meaning: '[T]he general
principles qualifying a mark for registration under § 2 of the Lanham Act are
for the most part applicable in determining whether an unregistered mark is
entitled to protection under § 43(a).'" Stuart Hall Co., Inc. v. Ampad Corp., 51
F.3d 780, 789 (8th Cir. 1995) (quoting Two Pesos, Inc. v. Taco Cabana, Inc.,
505 U.S. 763, 768 (1992)).
(b) Marketing Efforts
JDR has presented an affidavit from Braun describing its marketing
efforts. Braun avers that JDR and its predecessors have spent much time and
substantial resources in promoting LaGrange welding rod and the LaGrange
brand; that they have established sales offices in several Nebraska cities, as
well as one in Missouri; and that they employ over 125 salespeople to market
LaGrange welding rod. Filing 10-2 at ¶ 23. And Braun avers that JDR and its
predecessors have regularly participated in tradeshows across the county,
providing free samples and running welding demonstrations, and then
following up with potential customers. Filing 10-2 at ¶ 24. However, Braun's
affidavit does not detail when these marketing efforts took place, and so it
provides little basis for determining whether secondary meaning had
attached by 1985.
Braun also averred that "commencing in the 1980s," JDR's
predecessors established a telemarketing department which has expanded
the sale of LaGrange welding rod from a "merely regional customer base
located mostly between Texas and North Dakota and between Colorado and
Illinois, to a nationwide and international customer base." Filing 10-2 at ¶ 31.
But once more, Braun's affidavit is short on chronological details, and the
Court cannot determine the extent to which these telemarketing efforts took
place before 1985.5
(c) Intentional Copying
Intentional copying of another's mark supports an inference of
secondary meaning, at least where the evidence supports an inference that
the junior user copied the mark in order to capitalize on the existing goodwill
associated with the mark. See Jewish Sephardic Yellow Pages, Ltd. v. DAG
Media, Inc., 478 F. Supp. 2d 340, 375–76 (E.D.N.Y. 2007). Conscious
replication may be persuasive evidence of secondary meaning, but is not itself
The Court has, of course, given no weight to Braun's conclusory (albeit uncontroverted)
statements that the LaGrange mark is "extremely well known throughout the United
States," that the mark has acquired secondary meaning, and that the mark has
accumulated substantial goodwill. See, e.g., filing 10-2 at ¶¶ 22, 26–30, 32. And in any
event, Braun has not averred that the mark achieved this status by 1985.
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sufficient to establish secondary meaning. Id. The inference of secondary
meaning can be rebutted if the junior user offers another explanation for the
copying—for example, the mark's "intrinsic consumer-desirability." Id.
McDowell adopted the LaGrange mark shortly after he left employment
with LEC. He then used the mark to sell the same product he had formerly
sold with LEC. McDowell has not offered an explanation for why he would
use the mark other than to capitalize on the existing goodwill associated with
the mark. So, McDowell's adoption of an identical mark supports an inference
of secondary meaning.
(d) Secondary Meaning Was Established by 1985
Weighing the factors above, the Court finds that there is no genuine
dispute of fact that the LaGrange mark had acquired secondary meaning by
1985. While JDR's evidence of its marketing efforts is of little to no probative
value, the remaining factors—continuous, exclusive use for 15 years and
McDowell's intentional copying—support a finding of secondary meaning.
That finding is bolstered by the nature of the LaGrange mark itself.
While the LaGrange mark may be descriptive, it is closer to the suggestive
end of the spectrum than the generic or "merely" descriptive end. Generally,
the more descriptive the term, the greater the evidentiary burden to establish
secondary meaning. Commerce Nat'l Ins. Servs., Inc. v. Commerce Ins.
Agency, Inc., 214 F.3d 432, 441 (3rd Cir. 2000) (citing 2 McCarthy § 15:28).
So, conversely, the more suggestive the term, the less evidence of secondary
meaning is required.
Professor McCarthy has articulated six questions that may aid in
determining whether a mark is descriptive or suggestive. 2 McCarthy §
11:71; see also DeGidio, 355 F.3d at 510–11 (utilizing these questions).
Summarized and condensed, those questions are:
How much imagination on the buyer's part is required in
trying to cull a direct message from the mark about the
quality, ingredients or characteristics of the product?
Does the mark directly convey a real and unequivocal idea
of some characteristic, function, quality, or ingredient of
the product or service to a reasonably informed potential
Does the mark so closely tell something about the product
or service that other sellers of like products would be likely
to want to use the term in connection with their goods?
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Perhaps a more realistic way to pose this question is to ask
whether, without any prior knowledge of this mark, others
would be likely to want to use it to describe their products?
Are, in fact, other sellers now using this term to describe
Even though the mark may tell something about the goods
or services, is it just as likely to conjure up some other,
purely arbitrary connotation?
How does the mark fit into the basic concept that
descriptive marks cannot pinpoint one source by identifying
and distinguishing only one seller? That is, are buyers
likely to regard the mark really as a symbol of origin, or
merely as another form of self-laudatory advertising?
Although the term "LaGrange" conveys an immediate idea of the
provider of the product (Dan LaGrange's company, LEC), it otherwise
describes nothing about plaintiff's welding rod. It is not as if plaintiff's
predecessors had adopted the mark "WELD-STRONG" or "STURDY-ROD."
Similarly, there appears to be nothing about the name "LaGrange" that
evokes a desirable, descriptive connotation (such as "Samson" for strength),
such that other sellers, unfamiliar with LEC, would want to use the
LaGrange mark to describe their welding rod. And the record shows that
from 1970 to 1985, no other sellers were, in fact, using the mark to sell
welding rod. The Court lacks the information to analyze the fifth question—
"LaGrange" may or may not evoke other, arbitrary connotations to the
average consumer. As to the final factor, the Court finds that buyers would
likely regard the mark as a symbol of origin, and not merely a form of selflaudatory advertising. Indeed, personal names (while presumptively
descriptive), "are frequently adopted as trademarks and readily recognized as
such by consumers. Their prima facie lack of distinctiveness may thus be
overcome more easily than in the case of descriptive terms." Restatement
(Third) of Unfair Competition § 13 cmt. e (1995).
In sum, while the LaGrange mark is descriptive, it is not far removed
from the suggestive boundary, and this, combined with JDR's other
undisputed evidence, shows that secondary meaning was established by
1985. Defendants do not argue otherwise, and the Court finds that JDR is
entitled to summary judgment on this point. So, with the exception of the
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element of likelihood of confusion, JDR is entitled to summary judgment on
the remaining elements of its claims of trademark infringement, unfair
competition, and for violations of the NUDTPA.
C. Laches and Statute of Limitations
Defendants counter that JDR is not entitled to partial summary
judgment because its claims are barred by the statute of limitations or laches.
There is no statute of limitations under the Lanham Act; instead, it expressly
provides for the defensive use of "'equitable principles, including laches.'"
Petrella v. Metro-Goldwyn-Mayer, Inc., 134 S. Ct. 1962, 1974 n.15 (2014)
(quoting 15 U.S.C. § 1115(b)(9)). Laches applies when a claimant inexcusably
delays in asserting its claim and thereby unduly prejudices the party against
whom the claim ultimately is asserted. Hubbard Feeds, Inc. v. Animal Feed
Supplement, Inc., 182 F.3d 598, 602 (8th Cir. 1999). The NUDTPA, on the
other hand, does have a statute of limitations. Civil actions under the
NUDTPA may "be brought only within four years from the date of the
purchase of goods or services." Neb. Rev. Stat. § 87-303.10. It is not entirely
clear how this statute of limitations applies to the present case.
The Court declines, at this time, to resolve either the issue of laches or
the statute of limitations under the NUDTPA. First, as a matter of
procedure, these issues are not properly before the Court. Both are
affirmative defenses. JDR has moved for partial summary judgment, but
defendants have not filed a cross-motion raising these defenses. Resolving
these issues is unnecessary to resolving JDR's partial motion for summary
Second, the Court requires further input from the parties before it can
readily evaluate either defense. As noted above, it is not entirely clear how
the NUDTPA's statute of limitations applies in the present case. Specifically,
defendants have not explained when the statute should have begun to run.
The Court is not inclined to develop defendants' legal arguments on their
behalf. Similarly, the issue of how laches should be applied in this case is not
amenable to resolution at this time. Laches is an equitable doctrine and its
application is inherently fact-intensive.6 However, in order to aid the parties
moving forward, the Court will make a few general observations about the
application of laches to this case.
This is not to say that the issue could not be resolved on a further motion. But on the
current record, there are important matters that are under-developed or disputed. For
example, questions remain about when JDR first knew (or should have known) of
McDowell's use of the LaGrange mark. These and other important considerations bearing
on the equities of this case would benefit from further attention and briefing.
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Laches is a valid defense to claims for both monetary damages and
injunctive relief. See Glenn Miller Prods., 454 F.3d at 997. That said, courts
are generally more reluctant to apply the doctrine to claims for prospective
injunctive relief, especially if the infringing use is causing consumer
confusion. See, e.g., Sara Lee Corp. v. Kayser-Roth Corp., 81 F.3d 455, 461
(4th Cir. 1996). Courts may (and should) tailor application of laches to fit the
facts and equities of each case. Thus, even if laches bars certain damages in
this case, it may not bar prospective injunctive relief. The scope of injunctive
relief can likewise be tailored.
The Court notes that McDowell apparently used the LaGrange mark
for over 20 years without causing any significant consumer confusion. JDR
claims that defendants "have essentially laid low in the weeds for a number
of years." Filing 52 at 23. But that is not necessarily a fair characterization of
the facts. McDowell obtained a state registration for use of the tradename
"LaGrange Supply Co." in 1997 and renewed it in 2007, and has been
operating a website since 2006, which is easily located using an internet
search engine. See filing 23-10. This state registration, of course, did not
affect the parties' respective rights to the trademark under the common law.
That would be true even if McDowell had obtained a state registration for the
LaGrange trademark. See Neb. Rev. Stat. § 87-143. But it may still provide at
least some degree of constructive notice to JDR that McDowell was claiming
ownership of the LaGrange mark. And that matters, for purposes of
determining when JDR knew or should have known of McDowell's use of the
On the current record, it appears that consumer confusion did not
actually arise until Vance joined defendants and began marketing more
aggressively and directly to JDR's customers. So, depending upon the
evidence adduced, equity would likely demand that Vance be enjoined from
using the mark. His use is causing confusion, and he has only been using it
for a short time; soon after he started, JDR began pursuing action against
him. But equity might also be served by allowing McDowell to carry on with
his previous, passive marketing using the LaGrange mark. McDowell may
not have relied upon JDR's inaction by, for example, investing substantial
sums into his version of the mark. But he has relied upon the mark for the
past 20-plus years, and that's not nothing.
In sum, the issue of laches may not be as straight-forward as both
parties have made it out to be, and the Court declines to wade into the matter
without the benefit of a more fully-developed factual record. (And even then,
it is quite possible that there will remain disputed issues of material fact.)
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II. JDR's Motion For Summary Judgment on Defendants' NUDTPA
In their counterclaim, defendants allege that JDR has violated the
NUDTPA by disparaging defendants, making false claims to the public, and
interfering with product suppliers. Filing 18 at 6–7. More specifically,
defendants allege that:
Since January of 2014, JDR has disparaged Defendants’ LaGrange
branded welding rods as inferior and as imitation rods from an
Since January of 2014, JDR has told members of the public that
Defendants’ use of the LaGrange mark was illegal and unauthorized.
Beginning in September of 2014, JDR has contacted wholesale welding
rod suppliers and demanded that each company cease doing business
with the Defendants or face potential litigation.
Filing 18 at ¶¶ 32–34.
The NUDTPA provides that a person engages in a deceptive trade
practice when, in the course of his or her business, he or she does one of the
following (among other things):
(2) Causes likelihood of confusion or of misunderstanding as to
the source, sponsorship, approval, or certification of goods or
(5) Represents that goods or services have sponsorship, approval,
characteristics, ingredients, uses, benefits, or quantities that they
do not have or that a person has a sponsorship, approval, status,
affiliation, or connection that he or she does not have;
(7) Represents that goods or services are of a particular standard,
quality, or grade, or that goods are of a particular style or model,
if they are of another; [or]
(8) Disparages the goods, services, or business of another by false
or misleading representation of fact . . . .
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Neb. Rev. Stat. § 87-302(a) (emphasis supplied).
The Court will begin with the defendants' two allegations. JDR asserts
that because it has a valid and protectable trademark which defendants have
used without JDR's authorization, it is not false or misleading for JDR to
disparage defendants' welding rods as inferior, imitation rods from an
untrusted source; or to state that defendants' use of the LaGrange mark was
illegal and unauthorized. Therefore, JDR argues, it is entitled to summary
judgment on the defendants' NUDTPA claim.
The Court is not inclined to grant JDR summary judgment on the
existing record and briefs. As to defendants' first allegation: defendants'
welding rod may, or may not, be inferior, and from an untrusted source. The
Court has no way of knowing from the facts before it. As to defendants'
second allegation: JDR has only moved for partial summary judgment on its
claims; therefore, the Court cannot yet say, as a matter of law, that
McDowell's use of the LaGrange mark was illegal.
That brings the Court to McDowell's third allegation: that JDR has
been contacting rod suppliers and threatening them with lawsuits if they
continue to provide rods to McDowell. JDR has not specifically addressed this
allegation, and, again, McDowell has not responded. This alleged conduct
does not seem to fit within the deceptive trade practices enumerated within
the NUDTPA. In that sense, summary judgment might be appropriate.
Here too, however, the Court is not inclined to grant summary
judgment given the dearth of evidence and argument. If this third allegation
does not form the basis for a claim under NUDTPA, then its inclusion in this
case presents no real threat to JDR. However, this third allegation may form
the basis for liability under another theory of recovery, such as tortious
interference with business relationships. And it is the facts alleged in
McDowell's counterclaim, not the legal theories of recovery, which control the
Court's analysis. See Topchian v. JPMorgan Chase Bank, N.A., 760 F.3d 843,
848–49 (8th Cir. 2014).
III. JDR's Motion for Preliminary Injunctive Relief
JDR has also asked the Court to issue a preliminary injunction,
enjoining defendants from using the LaGrange mark in connection with the
sale of welding rod. JDR's request for injunctive relief will be denied as moot.
The same claims discussed above also underlie JDR's request for
injunctive relief. So, as to the likelihood of success on the merits, the Court
has already found that JDR has actually succeeded on the merits of most of
the elements of its claims. The only element remaining is likelihood of
confusion, which JDR will also likely succeed in proving, based on the
defendants' use of an identical mark in the sale of identical goods, and based
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on the actual consumer confusion that has resulted. See Sensient Techs. Corp.
v. SensoryEffects Flavor Co., 613 F.3d 754, 763 (8th Cir. 2010) (factors
relevant to determining likelihood of confusion).
However, JDR's motion founders when it comes to the issue of
irreparable harm. The problem is not that the harm that JDR is facing is
insufficiently irreparable or likely to occur. The Court does not presume
irreparable harm based solely on its finding of likely (or actual) confusion.
See, Ferring Pharm., Inc. v. Watson Pharm., Inc., 765 F.3d 205 (3d Cir. 2014);
Herb Reed Enters., LLC v. Fla. Entm't Mgmt., Inc., 736 F.3d 1239 (9th Cir.
2013). But JDR has recorded numerous instances of actual confusion among
its customers, and on the facts of this case, that suffices to show a sufficient
threat of irreparable harm. See Herb Reed, 736 F.3d at 1250. If that were the
end of the matter, then the Dataphase factors would call for injunctive relief.7
The problem for JDR is that it must also show that that the allegedly
irreparable injury will be staved off by the requested injunctive relief.
Injunctive relief is not appropriate when the allegedly irreparable harm will
occur despite the injunction. See United States v. Parish of St. Bernard, 756
F.2d 1116, 1123 (5th Cir. 1985).
JDR has conceded that McDowell's prior, passive marketing activities
did not result in any significant or detectable customer confusion. JDR
admits that it only became aware of actual confusion among its customers
when Vance began working with defendants. See, filing 25-2 at ¶ 20(f); filing
40-1 at ¶ 3(c); filing 51-1 at ¶ 12. In other words, if irreparable harm is
occurring, it is flowing from Vance's telemarketing operations. JDR has not
shown that McDowell's "passive" sales are likely to cause confusion or
irreparable harm. And the fact that McDowell has been doing so for
somewhere between 20 and 30 years belies any claim that his limited,
passive operations are causing irreparable harm.
So, for an injunction to help JDR, it would need to bind Vance. Vance,
however, is not a party to this case. And the general rule is that injunctions
may not be enforced against nonparties. See Nat'l Spiritual Assembly of
Bahá'ís of U.S. Under Hereditary Guardianship, Inc. v. Nat'l Spiritual
Assembly of Bahá'ís of U.S., Inc., 628 F.3d 837, 848 (7th Cir. 2010). There are
exceptions to this general rule: injunctions may also bind the parties' officers,
agent, servants, and attorneys. Id.; Fed. R. Civ. P. 65(d)(2)(B). But the
relationship between McDowell and Vance is one of licensor and licensee;
The remaining factors, the balance of harms and the public's interest, would not alter the
Court's conclusion. While McDowell would certainly face harm if he were enjoined from
using the LaGrange mark, it would not be enough to tip the scales in his favor. And the
public interest would favor granting an injunction to protect JDR's superior trademark
rights and prevent further consumer confusion.
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Vance is not McDowell or LG Supply's employee. Nor has JDR pointed to
facts suggesting that Vance is an agent of defendants. And a licensee is not
necessarily an agent. See, e.g., Estate of Anderson v. Denny's Inc., 987 F.
Supp. 2d 1113, 1130 (D.N.M. 2013); Knights Armament Co. v. Optical Sys.
Tech., Inc., 2008 WL 2157108, at *6 (M.D. Fla. May 21, 2008).
The Court raised these concerns with the parties prior to the hearing
that was held on JDR's motion for a preliminary injunction. See filing 37. At
the hearing, JDR clarified that it is not seeking an injunction against Vance,
but only against the defendants in this case: McDowell and LG Supply. JDR
believes that if McDowell and LG Supply are enjoined, Vance will likewise
cease his infringing use, as Vance claims his authority to use the mark as
flowing from McDowell. The problem with this argument, as the Court has
already noted, is that McDowell's sales are not causing irreparable harm.
And since McDowell and LG Supply are not causing irreparable harm,
injunctive relief against them is inappropriate.
But although Vance is not a party to this case, he is represented by the
same counsel who represents the defendants here. And JDR is correct when
it states that Vance is asserting a right to use the mark based on his
authorization from McDowell. At the hearing on JDR's motion for
preliminary injunctive relief, defense counsel made the following statement:
"[I]f this Court rules that JDR owns the mark, then--then that's it. We're
done. I mean, Vance is not gonna sell. It--we're done. It--whether on a
preliminary injunction or summary judgment, our clients are done." Filing 47
(audio recording of hearing) at 17:05–17:50).8
The Court has ruled that JDR owned the mark, and that it acquired a
protected interest in the mark prior to McDowell. And while McDowell may
or may not have a laches defense to some or all of JDR's requested relief,
Vance will have a much harder time presenting such a defense. JDR has not
inexcusably delayed in seeking to stop Vance from infringing upon its
trademark, and it will be difficult for Vance to show reliance. In light of
defense counsel's statements and the Court's ruling on JDR's motion for
partial summary judgment, it appears that an injunction will not be needed
in order to curtail Vance's activities. Therefore, the Court will deny JDR's
motion for preliminary injunctive relief as moot.9 Accordingly,
Indeed, Vance has moved to stay JDR's suit against him in state court, on the basis that
the present motion for summary judgment "may directly address" Vance's right to use the
mark. See filing 40-2 at 75.
Of course, JDR may renew its request for preliminary injunctive relief if, moving forward,
Vance (or McDowell) use the LaGrange mark in such a way as to cause irreparably harmful
consumer confusion or damage to JDR's goodwill.
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IT IS ORDERED:
JDR's Motion for Preliminary Injunction (filing 8) is denied
JDR's Motion for Partial Summary Judgment (filing 34) is
granted in part and denied in part, as set forth above.
Defendants' Motion to Dismiss Second Cause of Action of
Defendants' Counterclaim (filing 50) is granted.
Defendants' claim under the Nebraska Consumer
Protection Act is dismissed.
Dated this 4th day of August, 2015.
BY THE COURT:
John M. Gerrard
United States District Judge
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