OTR Wheel Engineering Inc et al v. West Worldwide Services Inc et al

Filing 74

ORDER Denying 50 Motion for Reconsideration; denying 51 Motion to Stay. Signed by Senior Judge Lonny R. Suko. (PL, Case Administrator)

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UNITED STATES DISTRICT COURT

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EASTERN DISTRICT OF WASHINGTON

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OTR WHEEL ENGINEERING, INC.,
BLACKSTONE/OTR, LLC, and F.B.T.
ENTERPRISES, INC.,

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Plaintiffs,
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v.
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WEST WORLDWIDE SERVICES, INC., )
and SAMUEL J. WEST, individually and )
his marital community,
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Defendants.
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___________________________________ )

No. CV-14-085-LRS
ORDER DENYING
MOTION FOR
RECONSIDERATION

BEFORE THE COURT are Defendants’ Motion For Reconsideration

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(ECF No. 50) and Motion For Stay (ECF No. 51).1 These motions are heard

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without oral argument.

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I. RECONSIDERATION STANDARD
Defendants ask the court to reconsider its May 14, 2014 “Order Granting

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Motion For Preliminary Injunction” (ECF No. 46) pursuant to Fed. R. Civ. P.

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60(b)(6).

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Although Defendant Samuel J. West has appeared in this action through

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counsel, his appearance is limited and he has reserved his right to challenge this

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court’s personal jurisdiction over him and has now filed a Motion To Dismiss

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(ECF No. 49) on that basis.
ORDER DENYING MOTION
FOR RECONSIDERATION-

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Rule 60(b)(6) permits a court to relieve a party from an order for “any

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reason that justifies relief.” It “is to be used sparingly as an equitable remedy to

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prevent manifest injustice and is to be utilized only where extraordinary

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circumstances exist.” Harvest v. Castro, 531 F.3d 737, 749 (9th Cir. 2008). “A

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motion for reconsideration should not be granted, absent highly unusual

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circumstances, unless the district court is presented with newly discovered

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evidence, committed clear error, or if there is an intervening change in the

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controlling law.” Marlyn Nutraceuticals, Inc. v. Mucos Pharma GmbH & Co.,

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571 F.3d 873, 880 (9th Cir. 2009).

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II. DISCUSSION

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A. Trade Secret Misappropriation

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This court found there was a likelihood Plaintiffs will succeed on the trade

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secret misappropriation claim they have asserted pursuant to Washington’s

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Uniform Trade Secrets Act (UTSA). RCW 19.108.010 et seq.. The court’s

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analysis was as follows:

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At this juncture, a reasonable inference arises from the
evidence presented by Plaintiffs (collectively “OTR”) that
they have legally protectable trade secrets regarding the
design of their Outrigger tire which were misappropriated
by Defendants in that Defendants knew or had reason to
know those trade secrets were acquired by improper means
and used to manufacture their competing tire (now called
“Extremelift”).
Plaintiffs licensed intellectual property rights to Camoplast Solideal
to allow Camoplast to build Outrigger design molds and use the
molds to manufacture Outrigger tires. In 2007, Camoplast
subcontracted the manufacture of the Outrigger tire to Shandong
Hawk International Rubber Co. Ltd. (“Superhawk”). Sometime
thereafter, Superhawk contracted to manufacture tires for Defendant
West Worldwide Services, Inc. (“West”). These are the tires which
Plaintiffs allege infringe upon their trade dress (tire tread design).
The design of these tires appears to be virtually identical to the design
of Plaintiffs’ Outrigger tires. A reasonable inference is that
Superhawk, in breach of confidentiality agreements with Camoplast
and its predecessor (World Tyres, Ltd.), improperly used Outrigger
design molds to manufacture the West tires and/or improperly used
Plaintiffs’ proprietary information to make replica Outrigger design
ORDER DENYING MOTION
FOR RECONSIDERATION-

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molds to manufacture the West tires. A reasonable inference is that
West knew or had reason to know Plaintiffs’ trade secrets were used
to manufacture West’s tires.

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(ECF No. 46 at p. 3).
The court continues to believe there is a reasonable inference that

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Superhawk used Outrigger molds to manufacture the West tires and/or made

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replica molds from which to manufacture the West tires. In order to manufacture

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Outrigger tires, Superhawk necessarily used the tire “recipe” provided to it by

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Camoplast Solideal. A reasonable inference is that it used that same “recipe” to

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manufacture the West tire which appears to be identical to the Outrigger tire.2
At this preliminary injunction stage, Plaintiffs have offered sufficient

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evidence of the uniqueness and novelty of their tire “recipe” so as to establish at

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least a fair chance of proving that it constitutes a legally protectable trade secret.

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See Declarations of Frederick B. Taylor (ECF No. 4 at Paragraph 8) and Scott

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Peck (ECF No. 5 at Paragraph 8c.).
Plaintiffs have also offered sufficient evidence through the Declaration of

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David Fleischauer (ECF No. 11) to reasonably suggest that when Superhawk

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commenced manufacturing Outrigger tires, it obligated itself through certain

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“Processing Agreements” to maintain the confidentiality of Plaintiffs’ tire

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“recipe.” Although it was not until June 5, 2013 that Superhawk “intervened” in

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the new Processing Agreement between Solideal and Laizhou Xiongying Rubber

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Industry Co. Ltd., Mr. Fleischauer also indicates:

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See Declaration of Scott Peck, ECF No. 5 at Paragraph 4: “In 2007 . . .

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Solideal . . ., a member of OTR contracted with . . . Superhawk, to manufacture

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Outrigger tires. At that time, Solideal provided Superhawk with molds and

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specific instructions on how to prepare and manufacture the Outrigger tires.”

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ORDER DENYING MOTION
FOR RECONSIDERATION-

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In March 2005, the predecessor of a Solideal affiliate by
the name of World Tyres, Ltd. entered into a Processing
Agreement with Laizhou Xiongying Rubber Industry Co.,
Ltd.- an affiliate of Shandong Hawk International Rubber
Industry Co. Ltd. (“SuperHawk”)- in which Solideal’s
affiliate agreed to purchase certain tires.

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(ECF No. 11 at Paragraph 2)(Emphasis added). The evidence reasonably suggests
that pursuant to the March 2005 agreement, Superhawk was contractually bound
to maintain the confidentiality of Plaintiffs’ tire “recipe” when it commenced the
manufacturing of those tires in 2007.3
Based on the aforementioned evidence, Plaintiffs have a fair chance of
establishing that Defendants knew or had reason to know that Plaintiffs’ tire
“recipe” was used to manufacture Defendants’ tires. See definition of
“Misappropriation” at RCW 19.108.010(2).4
B. Trade Dress Infringement

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Defendants assert the court erred in finding that Plaintiffs have at least a fair
chance of succeeding on their trade dress infringement claim. Defendants contend
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Defendants indicate the March 2005 agreement was amended in June

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2007, although it is not clear if this amendment was the contract between Solideal

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and Superhawk testified to by Mr. Peck in n. 2 supra, or how it otherwise relates

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to that contract.

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The court clarifies that its trade secret analysis is based on Plaintiff’s tire

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“recipe,” not the trade dress (tire tread design), which as Defendants’ point out is

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not a secret, but is subject to a registered trademark in the public domain.

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Hence, the court will not address Defendants’ arguments which assume the court

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found Plaintiffs’ trade dress incorporates trade secrets (alleged failure to retrieve

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molds sold in bankruptcy; Michael Zhang’s declaration testimony that molds used

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to make Defendants’ tires do not employ any OTR secrets).
ORDER DENYING MOTION
FOR RECONSIDERATION-

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Plaintiffs failed to meet their burden of proving their tire tread design is inherently

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distinctive or has acquired distinctiveness through secondary meaning.5

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In its previous order, this court noted that Plaintiffs’ certificate of

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registration gives rise to a presumption of acquired distinctiveness through

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secondary meaning and relieves them of the burden of proving secondary

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meaning. Sand Hill Advisors, LLC v. Sand Hill Advisors, LLC, 680 F.Supp.2d

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1107, 1116 (N.D. Cal. 2010). Defendants assert it is error to rely on the

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presumptions associated with registration for a finding of distinctiveness or

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secondary meaning, citing Aromatique, Inc. v. Gold Seal, Inc., 28 F.3d 863 (8th

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Cir. 1994). While the court does not have an actual record of the proceedings

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before the U.S. Patent and Trademark Office (USPTO) on Plaintiffs’ trademark

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application, the statements made by the parties in their briefing and at oral

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argument indicate the USPTO raised an objection to the inherent distinctiveness of

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Plaintiffs’ tire tread design which Plaintiffs then overcame by presenting evidence

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of secondary meaning. Plaintiffs’ trade dress was therefore registered pursuant to

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15 U.S.C. §1052(f). This registration issued on October 9, 2012. This is the date

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on which the presumption of secondary meaning became effective. Aromatique,

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28 F.3d at 870, citing Harsco Corp. v. Electrical Sciences, Inc., 9 U.S.P.Q.2d

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(BNA) 1570, 1571-72 (TTAB 1988). Defendants assert that because Plaintiffs

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Defendants also summarily take issue with the court’s finding that

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Plaintiffs offered sufficient proof their tire tread design is non-functional and that

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there is a likelihood Defendants’ tire will be confused with Plaintiffs’ tire. The

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court relies on the analysis in its previous order and summarily rejects Defendants’

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summary contentions which are relegated to a single footnote. (ECF No. 50 at p.

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15, n. 8). The court agrees that the relevant inquiry in the likelihood of confusion

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analysis is whether there was an intent to trade on the goodwill of the Plaintiffs.

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This court so found in its previous order. (ECF No. 46 at pp. 6-7).
ORDER DENYING MOTION
FOR RECONSIDERATION-

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first saw an “infringing tire” in October 2012, and “[a]s these tires were

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manufactured in China and shipped into the United States for delivery in Oregon,

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there is no doubt any alleged infringing use of the trade dress occurred prior to

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October 9, 2012- and thus prior to the date on which any presumption of

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secondary meaning even arises.”

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The evidence presented thus far does not permit the court to conclude there

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is “no doubt” that alleged infringement occurred prior to October 2012 such that

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Plaintiffs are not entitled to the presumption that their trade dress has acquired

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secondary meaning.6 Accordingly, for the purposes of its preliminary injunction

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analysis, this court did not clearly err in finding Plaintiffs’ trade dress registration

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gives rise to a presumption of secondary meaning which relieves them, at least for

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the moment, of the burden of proving secondary meaning. As this litigation

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proceeds, Defendants will have an opportunity to establish that the presumption

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should not apply and even if it does apply, an opportunity to present evidence to

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overcome the presumption.

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In its preliminary injunction order, this court found Plaintiffs had offered

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compelling evidence that Defendants’ tire is a virtual carbon copy of Plaintiffs’

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Outrigger tire, and that this supported a finding of secondary meaning. Cybergun,

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S.A., v. JAG Precision, 2012 WL 4868104 at *6 (D. Nev. 2012), citing Swatch,

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S.A. v. SIU Wong Wholesale, 1992 WL 142745, *6 (S.D.N.Y. 1992) (“Evidence

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that the trade dress or product design was intentionally copied by a competitor can

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support an inference of secondary meaning if the circumstances indicate an intent

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In Aromatique, there was “no doubt” that alleged infringement preceded

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the trade dress registration. Aromatique alleged Gold Seal used as early as 1985 a

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trade dress the same as or similar to the dress Aromatique registered under Section

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2(f) in 1988. Therefore, Aromatique was not entitled to the presumption that its

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trade dress had acquired secondary meaning. 28 F.3d at 870.
ORDER DENYING MOTION
FOR RECONSIDERATION-

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to benefit from the goodwill of the prior user through confusion”). Defendants

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dispute that they copied Plaintiffs’ trade dress, but note that “[w]here there is a

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demand for a type of product, capitalizing on that demand by copying that product

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does not necessarily indicate that the original product has secondary meaning.”

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Aromatique, 28 F.3d at 871, citing Cicena Ltd. v. Columbia Telecommunications

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Group, 900 F.2d 1546, 1552 (Fed. Cir. 1990). Defendants say that is the situation

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here where both tires utilize trademark names (Outrigger and Extremelift) on the

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tires themselves and in advertising. Defendants further assert that all other

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evidence offered by Plaintiffs is not probative of secondary meaning “because

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none of that evidence separates the claimed trade dress [tire tread design] from the

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[Outrigger] mark that is also used to identify the tires as those of Plaintiffs.”

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In Aromatique, the Eighth Circuit found that “Gold Seal’s conspicuous

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placement of its identifying marks must be seen as an attempt to distinguish its

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potpourri from Aromatique’s.” 28 F.3d at 871, citing L.A. Gear, Inc. v. Thom

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McAn Shoe Co., 988 F.2d 1117, 1134 (Fed. Cir. 1993)(holding that defendant’s

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trade dress was not likely to be confused with that of plaintiff because of

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conspicuous placement on accused dress of defendant’s identifying marks).

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Therefore, “it was clearly erroneous to infer from Gold Seal’s copying of

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Aromatique’s product that the marks at issue here had acquired secondary

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meaning.” Id.

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As the analysis in Aromatique makes clear, whether a trade dress has

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acquired secondary meaning is not divorced from the issue of the likelihood of

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consumer confusion. As this court noted in its preliminary injunction order, the

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question is whether “Plaintiffs’ tire tread design has acquired secondary meaning

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over the years such that consumers in the relevant market (manufacturers and

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users of aerial work platforms) associate the design with the Outrigger tire.”

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Frederick B. Taylor, the CEO of OTR Wheel Engineering, Inc. says “[t]he target

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consumers of the Outrigger tires are aerial work platform . . . manufacturers, of
ORDER DENYING MOTION
FOR RECONSIDERATION-

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which there are approximately ten in the world,” of whom seven are OTR

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customers. (ECF No. 34 at p. 2, Paragraph 5). Considering the prevalence of

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Outrigger tires in this narrow and specialized market, it is reasonably possible a

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consumer would believe, by virtue of the tread design on the Extremelift tire, that

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it is purchasing an Outrigger tire. The evidence presented so far indicates only

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one other tire has a tread design identical to the Outrigger tire and that is the

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Extremelift tire. And even if the consumer were to notice the Extremelift mark on

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the tire7 (and prior thereto, the Exmile mark8), that might not necessarily dissuade

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it, at least initially and before making further inquiry, from believing this to

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perhaps be a new and improved version of the Outrigger tire for use on aerial

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work platforms.

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As the court noted in its preliminary injunction order, “Plaintiffs have

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presented evidence of actual confusion, that being an instance where Genie sought

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to purchase the West tire from Plaintiffs.” (ECF No. 46 at p. 10). This court

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reasonably believes that Plaintiffs could produce more such evidence at trial. In

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Sierra On-Line, Inc. v. Phoenix Software, Inc., 739 F.2d 1415, 1423 (9th Cir.

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1984), the Ninth Circuit affirmed the trial court’s issuance of a preliminary

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injunction, finding Sierra had a fair chance of success in proving its mark had

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acquired secondary meaning because it produced correspondence from consumers

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stating they understood “Hi-Res Adventure” to identify Sierra’s products and

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“[t]he court could reasonably assume that more evidence in the same vein could be

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produced at trial.”

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None of this is to suggest Defendants cannot or will not ultimately prevail

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on their arguments that Plaintiffs’ trade dress has not acquired secondary meaning.

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Unlike Aromatique which involved an appeal from a final judgment on the merits

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Registered on October 15, 2013. (ECF No. 9-1 at p. 4).

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ECF No. 5 at pp. 5-6, Paragraph 9.

ORDER DENYING MOTION
FOR RECONSIDERATION-

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of a trade dress infringement claim, the captioned matter involves issuance of a

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preliminary injunction. As the Ninth Circuit explained in Sierra:
[T]he [preliminary] injunction is not a preliminary adjudication
on the ultimate merits: it is an equitable device for preserving
rights pending final resolution of the dispute. The district court
is not required to make any binding findings of fact; it need
only find probabilities that the necessary facts can be proved.

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739 F.2d at 1423. As in Sierra, this court has found no more than that Plaintiffs

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have at least a fair chance of success in proving their tire tread design has acquired

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secondary meaning and in prevailing on their trade dress infringement claim.

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C. Injunction Bond

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At the preliminary injunction hearing, the court inquired about an

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appropriate bond amount, but only Plaintiffs’ counsel offered any suggestion in

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that regard. Defendants’ counsel had an opportunity to weigh in on the issue, but

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offered nothing regarding an appropriate bond amount. The court will not alter

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the significant $1.8 million bond amount which has already been posted by

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Plaintiffs.

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D. Stay

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Having determined on reconsideration that a preliminary injunction is still

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warranted, the court will not stay that injunction pending Defendants’ appeal to

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the Ninth Circuit. To do otherwise would undermine and be contrary to the

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court’s reasoning, initially and on reconsideration, finding a preliminary injunction

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was and remains appropriate. The court understands, however, that Defendants

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have moved this court for a stay so that they may subsequently seek a stay from

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the Ninth Circuit in conjunction with their appeal of this court’s preliminary

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ORDER DENYING MOTION
FOR RECONSIDERATION-

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injunction order and presumably now, this reconsideration order as well. Fed. R.

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App. P. 8.9

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III. CONCLUSION
“Serious questions” have been raised by Plaintiffs’ evidence as to: 1)

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whether their tire “recipe” constitutes a legally protectable trade secret which has

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been improperly acquired by or disclosed to Defendants; and 2) whether

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Defendants’ trade dress (tire tread design) has been infringed upon by

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Defendants. These “[s]erious questions are ‘substantial, difficult and doubtful, so

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as to make them a fair ground for litigation and thus for more deliberative

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investigation.’” Republic of the Philippines v. Marcos, 862 F.2d 1355, 1361-62

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(9th Cir. 1988) (en banc), cert. denied, 490 U.S. 1035, 109 S.Ct. 1933 (1989).

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These “[s]erious questions need not promise a certainty of success, nor even

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present a probability of success, but must involve a ‘fair chance of success on the

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merits.’” Id., quoting National Wildlife Fed’n v. Coston, 773 F.2d 1513, 1517 (9th

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Cir. 1985).

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Because Plaintiffs have shown there are serious questions going to the

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merits and that the balance of hardships tips sharply in their favor, and because

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they have also shown they are likely to suffer irreparable harm and the public

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interest favors a preliminary injunction, they are entitled to a preliminary

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injunction under Ninth Circuit law. Shell Offshore, Inc. v. Greenpeace, Inc., 709

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F.3d 1281, 1291 (9th Cir. 2013), quoting Alliance for the Wild Rockies, 632 F.3d

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1127, 1135 (9th Cir. 2011).

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The court did not clearly err in finding Plaintiffs have a fair chance of

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success in proving: 1) that their tire “recipe” constitutes a legally protectable trade

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The court makes no finding at this time whether there has been a violation

of its preliminary injunction order.
ORDER DENYING MOTION
FOR RECONSIDERATION-

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secret which has been improperly acquired by or disclosed to Defendants; and 2)

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that their trade dress has acquired secondary meaning and has been infringed upon

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by Defendants.

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Defendants’ Motion For Reconsideration (ECF No. 50) and Motion To Stay
(ECF No. 51) are DENIED.
IT IS SO ORDERED. The District Executive shall forward copies of this

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order to counsel of record.

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DATED this

18th

day of June, 2014.

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s/Lonny R. Suko

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LONNY R. SUKO
Senior United States District Judge

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ORDER DENYING MOTION
FOR RECONSIDERATION-

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