SC Johnson & Son Inc v. Nutraceutical Corporation et al
Filing
89
ORDER DISMISSING CASE signed by Judge Rudolph T. Randa on 8/29/2014. Plaintiff has prevailed on Lanham Act and common law unfair competition claims against Defendants; Defendants' counterclaims DISMISSED with prejudice; Plaintiff GRANTED a permanent injunction against Defendants (see Order for details); this action is TERMINATED. Plaintiff may file bill of costs with Clerk of Court. (cc: all counsel)(cb)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF WISCONSIN
S.C. JOHNSON & SON, INC.,
Plaintiff-Counterclaim Defendant,
v.
Case No. 11-C-861
NUTRACEUTICAL CORPORATION and
NUTRAMARKS, INC.,
Defendants-Counterclaimants.
DECISION AND ORDER
The following Decision and Order constitutes the Court‘s findings of fact and
conclusions of law pursuant to Rule 52(a)(1) of the Federal Rules of Civil Procedure in
this trademark infringement action relating to the parties‘ competing claims to the use of
the trademark ―BUG OFF‖ in conjunction with insect repellant products. The Court
conducted a bench trial on the claims of the Plaintiff, S.C. Johnson & Son, Inc. (―SCJ‖),
and the counterclaims of the Defendants, Nutraceutical Corporation (―Nutraceutical‖) and
NutraMarks, Inc. (―NutraMarks‖) (collectively the ―Defendants‖).
SCJ has pending claims for trademark counterfeiting (count I) and trademark
infringement (count II) in violation of the Lanham Act, 15 U.S.C. § 1114; false
designation of origin (count III) and unfair competition (count IV) in violation of 15
U.S.C. § 1125; and unfair competition under Wisconsin common law (count V).1 (ECF
No. 1.) The Defendants have pending counterclaims against SCJ for false designation of
origin under § 43(a) of the Lanham Act (first counterclaim); declaratory judgment of
trademark invalidity pursuant to 15 U.S.C. § 1052(d) and 28 U.S.C. §§ 2201 and 2202
(second counterclaim); and for trademark cancellation pursuant to 15 U.S.C. § 1119
(third counterclaim). (ECF No. 5.)
The parties filed post-trial proposed findings of fact and conclusions of law, and
responses (ECF Nos. 77-79, 84-86.) In responding to the Defendants‘ proposed findings,
SCJ raised several evidentiary issues. Those objections have been considered in the
Court‘s analysis of the testimony and evidence presented at trial.
This Court has subject matter jurisdiction over this action pursuant to 15 U.S.C. §
1121; 28 U.S.C. § 1331; and 28 U.S.C. § 1338(a), and over the Wisconsin unfair
competition cause of action under 28 U.S.C. 1338(b) and 28 U.S.C. § 1367. Venue in
this District is proper pursuant to 28 U.S.C. § 1391(b) and (c).
Before launching into the factual findings, the Court provides a bird‘s eye view of
the case. SCJ‘s trademark claims arise from three federal registrations for the mark BUG
OFF the earliest of which, referred to as the Chervitz registration, has a June 22, 1998,
priority date. The Defendants‘ counterclaims are based on their claimed ownership of
nationwide common law rights to BUG OFF predating SCJ‘s registered trademark rights.
The same standards that govern SCJ‘s Lanham Act claims govern its state unfair
competition claims. Mid-West Mgmt., Inc. v. Capstar Radio Operating Co., 04-C-720-C, 2004 WL
2535404, at *3 (W.D. Wis. Oct. 21, 2004).
1
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The parties agree that the BUG OFF marks are confusingly similar. The issues before the
Court are whether the Defendants have established nationwide common law rights in
BUG OFF, whether the Defendants abandoned any common law trademark, whether
SCJ‘s earliest trademark that began in 1998 is invalid, and whether SCJ has abandoned
its BUG OFF trademarks.
Findings of Fact
Although many consumers are painfully aware of the importance of insect
repellants, they may not be aware of the market size. In 1998-99, the market for insect
repellents in the United States was approximately $230 million. The 2013 market was
approximately $336 million. While there are various types of insect repellants, many
types are sold in the same sections of stores, and even in the same product display, as
shown by a Target store display with clip-on products, natural repellants, and traditional
spray-on repellants in one display. (Trial Exs. 20, 1050.)
SCJ is a corporation organized under Wisconsin law with its principal place of
business located in Racine, Wisconsin. SCJ makes, distributes, and sells dozens of insect
repellant products, including various formulations of aerosol sprays and spritzers (such as
Off!, Naturals, Deep Woods Off, and Deep Woods Dry), as well as candles, clip-ons, and
other products all falling under the primary Off! brand. Several of these products are also
sold under the sub-brand name ―Deep Woods.‖ Promoting the Off! brand is SCJ‘s first
priority, followed by promotion of the Deep Woods sub-brand. SCJ‘s OFF! line has about
51% of the market today, and had 55% of the market in the late 1990‘s.
Nutraceutical and NutraMarks are Delaware corporations with their principal
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place of business in Park City, Utah. Nutraceutical manufactures and markets a variety of
products primarily geared to consumers interested in natural and organic products. Its
approximate annual sales are in excess of $200 million. NutraMarks holds the rights to
the intellectual property of Nutraceutical, which includes ownership of over 290
trademarks.
In February 2011, Nutraceutical became the successor-in-interest to
Sunfeather Natural Soap Company (―Sunfeather‖), a Potsdam, New York company
founded by Sandy Maine (―Maine‖). Sometime in the early 1980s, Maine began making
and bottling an all-natural bug repellant that she named ―BUG OFF.‖
Chervitz & Kaz Registrations
The earliest of the three BUG OFF trademarks owned by SCJ was originally the
subject of an application for U.S. Registration No. 2,369,898 filed on June 22, 1998, by
Melvin Chervitz (―Chervitz‖) (the ―Chervitz registration‖) for the mark BUG OFF used
with ―wristbands for repelling insects.‖ The registration provided January 26, 1998, as the
date of first use in commerce and a priority date of June 22, 1998, based on its PTO
(United States Patent and Trademark Office) filing date. The Chervitz registration issued
on July 25, 2000. To support the claim that BUG OFF was used in commerce as of June
22, 1998, Chervitz relied on a price list from Seven C‘s International Liquid Crystal
Products,2 which included a listing for a ―BUG OFF ™ Bracelet.‖ The price list does not
include information indicating any actual sales, purchasers, or locations where sales took
Neither the parties nor the Court‘s review of the record disclose the nature of the
relationship between Chervitz and Seven C‘s International Liquid Crystal Products.
2
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place to support his use-based trademark registration.
Chervitz later filed a supplemental declaration dated February 5, 2003, with
exhibits providing additional information regarding his sales activity. (Trial Ex. 11.)
Chervitz traveled from Missouri to Texas on January 28, 1998, taking samples of the
BUG OFF wristbands with him to make them available for purchase. On May 26, 1998,
Chervitz‘s BUG OFF wristband was highlighted on a St. Louis radio station. Chevitz
made a May 28, 1998, sale of six units of the BUG OFF product to Sandy Parres, who
told him she heard about the product on the radio program. Chervitz also reported a May
30, 1998, sales call on Spicer‘s, a St. Louis novelty and gift store, and subsequent sales of
a number of BUG OFF products to Spicer‘s. Chervitz also sent samples of BUG OFF
product in April and June 1998 to an out-of-state company.
The supplemental
declaration originally included exhibits, which SCJ no longer has. The exhibits were
records of sales but SCJ does not recall exactly what they consisted of.
SCJ‘s second of three trademarks to BUG OFF originated with the June 23, 1998,
filing of an intent-to-use (―ITU‖) application to register the mark BUG OFF and an
accompanying design by DeJay Corporation (―DeJay‖), which was acquired by Kaz, Inc.
(―Kaz‖) in August 1998. The PTO examiner cited the Chervitz registration as a basis to
refuse to register the DeJay/Kaz ITU application (the ―Kaz application‖). In January
2001, Kaz responded with a petition to cancel the Chervitz registration, claiming that
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Chervitz had not made actual use in commerce of the mark as of the filing date.3
Chervitz was deposed on October 23, 2003, as part of the Trademark Trial and
Appeal Board (―TTAB‖) cancellation proceeding4 and testified he had sold approximately
one gross of the product to Spicer‘s of St. Louis in either May, June, or July 1998.
However, he had ―no documentation that reflect[ed] that sale,‖ the variety store did not
appear on Chervitz‘s customer list for 1998, and he could not recall the unit price. (Trial
Ex. 1111-06-1111-07.)
The TTAB did not rule on the merits of Kaz‘s petition to cancel because the
parties settled. In April 2004, Chervitz assigned his rights and registration in the BUG
OFF trademark to Kaz. After that, the PTO advanced the Kaz application to registration
in 2007 as U.S. Registration No. 3,303,024 (the ―‗024 registration‖ or the ―Kaz
registration‖).
SCJ’s 2003 BUG OFF Trademark Application
The third of SCJ‘s three BUG OFF trademarks originated with its filing of a
January 29, 2003, ITU trademark application (Ser. No. 78/208245) (the ―SCJ
application‖) with the PTO for BUG OFF for ―Citronella candles, insect repellants, and
insect repelling pads, lamps, and candle lanterns for insect repelling.‖
On June 23, 2003, SCJ received a letter from Sunfeather‘s attorney, expressing
3
A petition to cancel is an inter partes proceeding resembling a lawsuit that includes written
discovery and depositions.
4
SJC asserts that the testimony was superseded by supplemental declaration. (SCJ Resp. to
Defs.‘ PFOF ¶ 7.) However, the supplemental declaration was given in February 2003, prior to
Chervitz‘s October 2003 deposition.
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concern over the application and informing SCJ that Sunfeather had been using BUG OFF
on an insect repellant product since at least as early as 1992. (Trial Exs. 35, 1064, 1019).
Sunfeather‘s attorney asked several specific questions regarding SCJ‘s planned use of
BUG OFF to assist Sunfeather in determining whether there would be a likelihood of
confusion. (Id.)
In response, Sally Davis (―Davis‖), SCJ‘s corporate counsel in charge of pest
control, telephoned Sunfeather‘s attorney and stated that Sunfeather was infringing SCJ‘s
OFF! mark.
Davis never provided any information to Sunfeather regarding SCJ‘s
intended use of BUG OFF because the conversation ended relatively quickly once the
issue of OFF! was raised. Davis also stated that SCJ had owned an earlier BUG OFF
registration from the late 1980s until the early 1990s, which would have prevented the
acquisition of common law rights while it was in force.
After Davis stated that
Sunfeather‘s use was infringing SCJ‘s trademark rights, Sunfeather‘s counsel represented
that she would review their respective rights and get back to Davis with a response, but
Davis never heard back. Aside from that conversation, SCJ has never asserted that
Sunfeather was infringing the OFF! mark, in this litigation or otherwise.
On July 13, 2003, SCJ received a PTO office action refusing its registration based
on likelihood of confusion with the Chervitz registration. The Kaz application was also
cited by the PTO examiner as a basis to refuse to register the SCJ application. Rather than
contesting the PTO examiner‘s determination, SCJ decided to initiate cancellation
proceedings against Kaz seeking cancellation of the Chervitz registration. SCJ‘s July 22,
2005, petition presented two grounds for cancellation: (1) the likelihood of confusion
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with SCJ‘s long-standing rights in the OFF! mark dating back to 1957; and, (2) upon
information and belief Chervitz had not made sufficient use of the BUG OFF mark in
commerce to support his application to register the mark. SCJ alleged:
For more than three years, Kaz pursued cancellation of the
[Chervitz] Registration on the very grounds of no use at the
time of application filing that [SCJ] now alleges here. Kaz
would have to change its prior position 180 degrees to avoid
the implications and affect [sic] of the allegations it made . .
. namely, that the BUG OFF mark was not in use at the time
the application for the Registration was filed and therefore
was subject to cancellation.
(Trial Ex. 1058-07 (SCJ‘s Pet. for Cancellation) ¶¶ 20, 21.) In October 2005 SCJ also
opposed the Kaz application. The TTAB consolidated the two proceedings.
During discovery related to the TTAB proceedings, Kaz provided SCJ with
information, including a declaration, documentation, and product samples, that Chervitz
had produced to Kaz. SCJ did not have access to this information when it filed its petition
to cancel. The information caused SCJ to decide that Chervitz had established use-based
activities in interstate commerce that would be sufficient to support an actual use
application. Consequently, SCJ and Kaz resolved their dispute by an agreement dated
January 18, 2007, that provided, among other things, an assignment to SCJ of the Chervitz
registration and, upon issuance, the Kaz registration, as well as the rights associated with
those registrations. SCJ paid Kaz $1.1 million for the Chervitz and Kaz registrations and
other rights and responsibilities. (Trial Ex. 9.)
As part of the agreement, SCJ licensed the Chervitz Registration back to Kaz
royalty-free, allowing Kaz to continue selling BUG OFF wristbands until December 31,
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2009. (Id.) Kaz could not manufacture or sell any product after December 31, 2009, but
it was not required to recall already-shipped inventory.
Kaz abided by the license
agreement and ceased all sales of the BUG OFF wrist bands by the stated date, but some
BUG OFF wristband products may have remained in the stream of commerce through
2010 as third-party retailers continued to sell off their existing inventory. (Trial Ex. 32.)5
Beginning in 1999, millions of Kaz BUG OFF wristbands were sold throughout
the United States, including at Wal-Mart stores. The packaging labeled the wristbands as
citronella and as non-toxic. (See Trial Ex. 1065.) In 2007, total sales of Kaz BUG OFF
wristbands were $2.3 million. In 2008, total sales exceeded $642,000.
SCJ’s BUG OFF Registrations
Based on evidence of continued use in commerce, the PTO renewed SCJ‘s BUG
OFF registrations in 2009. SCJ is the successor-in-interest to the Chervitz and Kaz
registrations in connection with their BUG OFF trademark rights.
In 2008, SCJ conducted a focus group for an insect repellant wristband concept.
(See Trial Ex. 22.) SCJ tested this ―paper concept‖ with consumers to gauge interest. A
working prototype was created for the purpose of testing within SCJ‘s entomology
research center. The prototype was not tested on consumers because that would not have
5
The Defendants challenge the admissibility trial exhibit 32, which was identified as a
document generated by SCJ from the ACNielsen database which tracks actual sales by retail outlet for
particular product. (Trial Tr. 1, at 58.) The Defendants assert that the Court should give the
document limited weight because it does not say that it is from ACNielsen, Davis did not obtain the
document herself and does not have first-hand knowledge of how ACNielsen inputs the data.
However, the document is supported sufficiently by the direct testimony of Davis, in-house counsel
for SCJ, who explained how the data is collected, and how SCJ obtained access to the information.
(See id at 58, 100-02.)
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been allowed by the EPA.
SCJ began using the BUG OFF trademark on insect repellant spray in March
2010, placing it in block print on the back of its 11 oz. aerosol cans of ―Off! Deep Woods‖
spray. SCJ makes twelve to fifteen insect repellant products, each of which contain the
same formula, though some have more or less DEET.
BUG OFF appears on the back of SCJ two products — the 9- and 11-oz. cans of
Off! Deep Woods, as shown in the photos. The BUG OFF mark on the top of the back of
the can is featured next to the OFF mark so it is prominent when the can‘s back is viewed
by the consumer. If use of a mark had no branding value, SCJ‘s marketing department
would veto it.
SCJ sells an 8-oz. can of Off! Deep Woods aerosol spray, which looks nearly
identical to, and contains the same formula as, the 9- and 11-oz. cans. However, in place
of BUG OFF it bears the mark TICKS OFF. SCJ uses the marks BUG OFF and TICKS
OFF on the back of the can as an additional way for consumers to recognize its products
and to keep its future options open from a branding perspective. Research establishes that
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consumers of these insect repellants look at and read the back of the can before making a
purchase.
SCJ often uses marks on the backs of products. Based on specimens of use, SCJ
has obtained trademark registrations for marks used only on the backs of products. As an
example, SCJ uses the registered mark, ―We work hard so you won‘t have to‖ solely on
the back of Scrubbing Bubbles products. (Trial Ex. 46.)
An August 4, 2010, email from an SCJ in-house paralegal advised that SCJ should
―keep using these [wrist bands] in order to keep the registration [for wrist bands for
repelling insects] active. If we are not using products under the BUG-OFF name, a third
party could petition to cancel our registration.‖ (Tr. Ex. 1062.) (ECF No. 45-47.)
Purchasing the Chervitz registration from Kaz made it possible for SCJ to proceed
with obtaining an additional registration for BUG OFF for ―insect repellants‖ as reflected
in the SCJ application. Because SCJ had still not used BUG OFF on candles, pads, lamps,
or lanterns, SCJ divided the application leaving these remaining items the subject of a
continuing ITU application. (See Trial Ex. 7.) The application remains ―intent to use‖ for
citronella candles, insect repelling pads, and lamp and candle lanterns. The PTO allowed
the SCJ application for the BUG OFF trademark for insect repellents to advance to
registration under Registration No. 3,963,304 (the ―SCJ registration‖), which issued May
17, 2011.
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An August 16, 2011, internal SCJ email from Jason Allen6 regarding the
continuing application BUG-OFF for ―citronella candles and insect repelling pads; lamps
and candle lanterns for insect repelling‖ suggests adding the wording to the back panel of
either SCJ‘s Club PowerPad SKU7 or its Sportsman Power Pad SKU to ―protect the
Trademark,‖ which was the ―same tactic‖ SCJ had used to protect other trademarks.
(Trial Ex. 1063 (August 16, 2011, email).)
There is no evidence of any sales, advertising, or other use of BUG OFF for
wristbands after 2010. Aside from the license to Kaz, SCJ never licensed any other entity
to sell BUG OFF wristbands. SCJ has never sold a wristband itself. SCJ does not
currently have the technology to develop a wristband able to deliver the level of insect
repellency that it wants consumers to associate with the BUG OFF and OFF! Brands.
However, wristbands come up frequently during SCJ project meetings because SCJ knows
that consumers love them.
BUG OFF is not a primary brand for any SCJ bug repellant product, has never
appeared on the front of any product, and has never appeared in any advertising for any
product. The only market research SCJ has done regarding use of BUG OFF as a brand
was a 2008 paper concept board study. SCJ sold 2.1 million units of the 9- and 11-oz.
Off! BUG OFF aerosol spray cans from 2010 through the date of the trial, totaling
6
Allen‘s position at SCJ was not identified at trial.
7
SKU is an acronym for ―store keeping unit.‖ (Trial Tr. 1, 141.)
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approximately $11.6 million dollars in gross sales.8 For 2010 to 2012, SCJ had expenses
of $5,713,477. SCJ did not provide its claimed costs or net profit for 2013, instead simply
providing its gross revenue number as part of $11.6 total above. Therefore, for the entire
time period of SCJ‘s sales from 2010 through 2013, when applied to the $11.6 million
dollars in gross sales, SCJ‘s total revenue was $5,886,523.
At least one SCJ product bearing the BUG OFF mark is carried in 3,500 WalMart stores. SCJ has plans to increase the use of BUG OFF because it is a smart and
clever play on its main brand OFF! It is a slow process because of the limited size of the
product containers and the EPA requirements regarding extensive label contents on those
containers.
Sunfeather’s Use of Bug-Off
In 1979 the Defendants‘ predecessor-in-interest, Maine, founded a sole
proprietorship, Sunfeather, in Potsdam, New York. Until about 1989 her product line was
limited to handmade artisan soaps.
While working as an Adirondack wilderness guide in the 1980s, Maine recognized
a need for a DEET-free bug repellant with a more pleasing smell than the pine tar product
she had been using. At an herbal conference she obtained a recipe for an all-natural bug
repellant formula which she developed, bottled under the BUG OFF mark in the early
1980s, and gave to her wilderness-guide clients who were overwhelmingly positive about
The parties disagree on the amount of SCJ‘s costs. (See SCJ‘s Response to Defs. PFOF ¶¶
45-46.) However, based on the trial testimony of Anne Brolly, SCJ‘s Senior Director of Brand
Marketing on Raid and OFF! for North America, the costs/expenses were obtained by adding the
numbers for delivered profit and marketing spend. (Tr. Tran. 1, 158:23-159:11, Tr. Ex. 31.)
8
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the product. Maine did not do any trademark searches before she selected the name BUG
OFF, and she used the name because she thought it was cute, sassy, and eye-catching.
Maine was aware of the OFF! brand because her mother used it on her when she was a
child.
Because BUG OFF had received such a positive response, Sunfeather began
selling it through the Potsdam Consumer Co-Op, again under the mark BUG OFF. In
1992, Sunfeather started marketing and selling BUG OFF at craft fairs in Maryland,
Pennsylvania, West Virginia, and Virginia, each of which Sunfeather attended twice a
year. These fairs were professionally promoted and would draw as many as 30,000
attendees in the Spring and 60,000 attendees in the Fall. Customers came from all over
the region.
In 1993, Sunfeather began marketing BUG OFF at trade shows in addition to craft
fairs, starting with the Rochester, New York trade show and then adding George Little
Management shows which were held in Arkansas, Atlanta, California, Chicago, Denver,
Miami, New York City, Ohio, Philadelphia, Seattle, and Tennessee. Included was the
New York International Gift Fair, which fills four floors of the New York Javits Center
and is attended by buyers from every state and several countries.
Sunfeather marketed at approximately 24 trade shows in 1992, increasing to 30 to
40 trade shows ―[a]t the peak‖ in 1997. At these shows Sunfeather‘s multiple soap
varieties and other products were marketed. With the exception of two specialty trade
shows, BUG OFF was always displayed at the craft fairs and trade shows and Sunfeather
took ―many, many orders‖ for the product from people from ―every imaginable state.‖
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(Trial Tr. 2, at 11:4–12:4; 14:25–15:1).
Sunfeather lacked its own physical retail location, so the trade shows were its
―lifeblood‖ because that is how it got orders and expanded its market presence more
broadly. At the trade shows Sunfeather often gave interviews and provided ―media kits‖
which described all the Sunfeather product lines to the press room. Many of the trade
show customers were mom-and-pop stores and gift boutiques which purchased Sunfeather
BUG OFF for resale in their brick-and-mortar stores. Over a 20-year period, Maine
visited at least 10 or 15 different retailers carrying the BUG OFF product.
By 1992, Sunfeather offered and sold BUG OFF through its own wholesale
catalog. Sunfeather distributed 200 to 300 of these catalogs at every trade show and craft
fair it attended, and upon request. Also in 1992, Sunfeather began marketing BUG OFF
on its website, which was available to consumers nationwide. Sunfeather‘s report of
inventory sales/wholesale for BUG OFF shows sales of 130 units9 for 1992, 1,079 units
for 1993, 5,714 units for 1994, and 1,387 units for 1995. (Trial Ex. 1006.) In 1997 BUG
OFF sold a total of 3,518 units. (Trial Ex. 1100-05 BR line.10)
Sunfeather printed 5,000 copies of its wholesale catalog in 1992, which it
distributed until 1993. In 1993, it printed another 15,000 copies, which were distributed
from 1993 to 1996 at the rate of about 7,500 catalogs per year. In 1996, Sunfeather
9
See Maine Dep. at 58.
10
BR was the code used to denote BUG OFF.
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printed another 20,000 copies for distribution through 1998.11
Beginning in 1994, BUG OFF was carried by Smith & Hawken, a national
gardening retailer. Sunfeather‘s BUG OFF was offered in Smith & Hawken catalogs from
1994 until the company was sold in 2004. (See Trial Ex. 1002 (Excerpt of 1994 Catalog).)
The 1994 catalog features a photo of BUG OFF with the Sunfeather label. (Id.)
No
1995 catalog was provided. By 1996, the Smith & Hawken catalogs show the BUG OFF
product with Smith & Hawken‘s name on the front of the bottle. (See Trial Exs. 1069,
1070.) In the spring of 1996, BUG OFF was featured both as a ―staff favorite‖ and later in
the catalog. The 1997 catalogs also include BUG OFF. (See Trial Ex. 1073.)
The catalog was Smith & Hawken‘s primary marketing vehicle and was
distributed to every state in the United States. BUG OFF was included in Smith &
Hawken‘s spring (two distributions, or ―drops‖ per year) and summer catalogs (three
―drops‖ per year), as well as the tool catalog (one ―drop‖ per year).
In 1994 the spring and summer catalogs had an approximate circulation of one
million copies (200,000 copies per drop). The tool catalog had an additional circulation of
approximately 200,000 annually. Catalog circulation increased roughly 5-10% over the
next few years. BUG OFF was sold through the Smith & Hawken catalog continuously
from approximately 1994 through 2004.
Sunfeather sold thousands of units of BUG OFF through Smith & Hawken each
11
SCJ challenges paragraph 61 of the Defendants‘ proposed findings of fact as contradictory
and asserts it should be disregarded. However, the Court does not find SCJ‘s argument persuasive.
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year. The inclusion of BUG OFF in Smith & Hawken‘s catalogs doubled Sunfeather‘s
sales and increased its marketplace notoriety At some point the BUG OFF sold through
Smith & Hawken bore labels with the Smith & Hawken mark on the front and the
Sunfeather trademark on the back. Maine believed that customers noticed the Sunfeather
trademark on the back of these products and that its placement there was valuable.
To earn a place in Smith & Hawken‘s catalog, products had to meet or exceed its
sales goals. At $8 per bottle, Sunfeather‘s BUG OFF had to sell in high volume —
roughly 700 units per season — to be considered a ―best seller‖ and earn repeated
placement in the catalog. The fact that it was included in the catalog for more than seven
years means that it met these sales goals. Marta Benson (―Benson‖), Smith & Hawken‘s
catalog merchandise manager from 1992 to 1996, considered Sunfeather BUG OFF to be
iconic to the Smith & Hawken catalog.
From 1994 until 1996, Sunfeather BUG OFF was also carried in Smith &
Hawken‘s four brick-and-mortar stores in California.
After Smith & Hawken was
purchased by a publicly traded holding firm in 1996, it began opening more stores, and
by the summer of 1997 it had 25 retail stores in Arizona, California, Colorado,
Connecticut, Illinois, Indiana, Maryland, New York, Ohio, Oregon, Pennsylvania, Texas,
Virginia, and Washington. By 2000 Smith & Hawken operated 43 stores in twenty
states.
Its catalogs were always available in the stores and offered to interested
customers. Sunfeather BUG OFF was also available on the Smith & Hawken website at
least as early as 2000.
In late 1996, Sunfeather also started selling BUG OFF through Frontier Natural
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Products‘ Co-op (―Frontier‖), a wholesale co-op based in Norway, Iowa that distributes its
catalogs and products nationwide to the natural foods market.
(See Trial Ex. 1082
(Member Patronage List—includes all U.S. states).) During the relevant time period,
Frontier published and distributed a wholesale catalog twice a year and a retail catalog
annually. Sunfeather‘s BUG OFF repellant first appeared in the 1997 spring/summer
edition of the wholesale catalog (see Trial Ex. 1081, at 06) which contained nearly four
two-column pages listing Sunfeather‘s products, including BUG OFF. (Id.) There are no
photographs of the products.
The wholesale catalog was distributed to approximately 15,000 wholesalers in the
spring of 1997, although the figure might vary from 5,000 to 10,000 either way.
Frontier‘s wholesale catalog was distributed to a nationwide customer base and had a
general trend of increasing circulation through 2002.
Sunfeather‘s BUG OFF was
distributed through Frontier‘s retail catalog approximately once a year from 1998 through
about 2007. Frontier sales records demonstrate actual sales of BUG OFF as early as
November 1996 through June 1998, and additional actual sales of BUG OFF through
Frontier from 1998 through 2001. (Trial Ex. 1097.)
In the mid-1990s, Smith & Hawken was Sunfeather‘s biggest BUG OFF
customer, followed by Frontier.
By 1997 Sunfeather sales were growing at
approximately 15% per year, and Maine added 14 employees to handle administration
and sales. In 2001, Sunfeather added other BUG OFF products, including a balm, a
spritzer, a soy candle, and a soap and shampoo bar.
According to Maine‘s testimony, during her first year of business — before she
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added BUG OFF to the line — Sunfeather‘s sales were $90, the second year they were
$900, the third year $9,000, and the fourth year $90,000. By 1998, Sunfeather‘s total
sales topped $1 million. From 1997 to 1998 BUG OFF was included in approximately
85% of all Sunfeather‘s customer orders, representing approximately 15% of the
company‘s sales. The record contains no evidence of actual sales of BUG OFF repellant
from any trade or craft show that Sunfeather attended. The record also contains no
evidence of the number of potential customers that actually visited Sunfeather‘s booths at
trade or craft shows. A document purporting to summarize Sunfeather‘s sales to Smith &
Hawken from 1998-2007 shows no sales through Smith & Hawken in 1998. (Trial Ex.
1004.)12
Throughout the 1990s and 2000s, Sunfeather continued to market its BUG OFF
product through nationwide trade show appearances, catalogs, and other types of
marketing.
In December 2002, Sunfeather filed three separate applications to register the
BUG OFF mark. One, for insect repellant oil, recited a date of first use of March 1992,
and the other two, for a soy candle, and cosmetics and personal care products, recited a
first use date of 2001. The PTO refused to register Sunfeather‘s mark citing both the
Chervitz and Kaz registrations. The PTO found that all three applications would pose a
likelihood of confusion with the Chervitz and Kaz registrations. (Trial Exs. 39, at 010-11;
12
There is a reference to Smith & Hawken at the top of page 1004-01. However, its meaning
is unclear.
- 19 -
40 at 009-10; 41 at 012-13, 234-49.) Sunfeather responded with the argument, which was
rejected by the TTAB, that its goods were different from those covered by the Chervitz
and Kaz registrations.
The TTAB affirmed the PTO‘s finding of a likelihood of
confusion. (Trial Ex. 41 at 251-65.)
Sunfeather did not assert that it owned trademark rights in BUG OFF predating
the Chervitz or the Kaz registration. In order to make that argument, Maine‘s attorney
told her that Sunfeather would have had to file a petition to cancel with the TTAB, which
could cost more than $150,000 — an amount that was ―not within [Sunfeather‘s] grasp.‖
(Trial Tr. 2, at 41:11-19.)13 However, neither Maine nor her attorney wrote Chervitz or
Kaz to assert that Sunfeather had superior rights or common law rights, although Maine
agreed that such letters would not have been expensive.
In February 2011 Sunfeather sold its assets including the BUG OFF trademark
rights for $285,000 to the Defendants, who took over the sales and distribution of the
Sunfeather BUG OFF branded products. (Trial Ex. 1021-07.) Sunfeather continues to
manufacture its soap, but various entities within Nutraceutical manufacture the BUG OFF
products. Through at least 2012, Nutraceutical continued to sell and distribute BUG OFF
bug repellant soap, herbal oil, spritzer, and balm under the Sunfeather name. The products
are available for purchase online at http://www.sunfeather.com/outdoor.html.
Sales
records demonstrate continued sale of Sunfeather BUG OFF from the time of acquisition
13
A cancellation petition would have been significantly more expensive than simply
responding to the PTO‘s initial refusal by arguing no likelihood of confusion.
- 20 -
through 2012. (See Trial Ex. 1108 (Nutra 00330).)14 The sales records indicate that BUG
OFF products were sold in 31 states during the first two years following Sunfeather‘s
acquisition by the Defendants.
Sunfeather’s Sales Records
Sunfeather‘s sales data for 2008 through 2011 was in pretty good order because
Nutraceutical required that information to place a monetary value on Sunfeather prior to
acquisition. Company sales had declined due to the recession, and in 2008 sales to all
sources were 3,586 units sold to 230 customers.
However, in the early 1990‘s Sunfeather had used Oak Street software to track its
sales records.
In 1997 Oak Street crashed and Sunfeather replaced it with another
program called MAS 90. Maine indicated that after the crash in 1997, she still had records
demonstrating use sufficient to support her 2002 trademark applications.
In 1998,
Sunfeather‘s computers crashed again, and it lost much of its accounting records.
After Nutraceutical purchased Sunfeather in February of 2011, and prior to this
lawsuit, Maine hired a service to shred many historical paper records, including boxes of
invoices containing potentially sensitive credit card information. Nutraceutical paid for
the destruction of documents despite understanding its obligation to preserve such
documents to prove common law rights.
In connection with this lawsuit, Sunfeather attempted to find all documents related
to actual sales of BUG OFF in the early 1990‘s. It attempted to retrieve files from an old
14
Trial Ex. 1041 is a scanned copy of the identical document.
- 21 -
laptop used in the 1990‘s, which it sent to MAS 90 so it could attempt to retrieve
documents from that software. MAS 90 verified that the financial documents were on the
laptop, but most were too corrupted by age to be recovered. As a result, Sunfeather was
unable to produce complete financial records showing where and to whom sales were
made in the 1990‘s. The records that were obtained and produced were not complete,
because even within retrievable records some of the information was corrupted (See Trial
Ex. 1040).
ANALYSIS
Because SCJ owns three current federally registered trademarks in BUG OFF and
the parties agree that there is a likelihood of confusion, the focus of the litigation has
been on the Defendants‘ affirmative defenses. Federal registration of a mark under the
Lanham Act is prima facie evidence that the registrant has exclusive rights to use the
registered mark in commerce, subject to any common law legal and equitable defenses
which would be otherwise assertible if the mark were unregistered. 15 U.S.C. § 1115(a).
Common Law Rights to BUG OFF
Even when a plaintiff has a federally registered trademark, a defendant may have
rights to use that mark in the areas in which it had trademark rights and in good faith used
them continuously prior to the plaintiff‘s registration application. 15 U.S.C. § 1115(b);
Safeway Stores, Inc. v. Safeway Quality Foods, Inc., 433 F.2d 99, 104 (7th Cir. 1970)
(holding that the defendant‘s innocent continuous use of the mark prior to plaintiff‘s
registration was a defense to a trademark infringement claim for geographic areas where
the defendant, but not the plaintiff, was using the mark prior to plaintiff‘s federal
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registration); Burger King of Fla., Inc. v. Hoots, 403 F.2d 904, 907 (7th Cir. 1968) (stating
that defendants who adopted a mark without knowledge of the plaintiff‘s prior use and
who had continuously used the mark from a date prior to plaintiffs‘ federal registration of
the mark are entitled to protection in the area of such earlier remote use).
Prior to federal registration, trademark priority is determined by the first use in a
market area. Zazu Designs v. L’Oreal, S.A., 979 F.2d 499, 503 (7th Cir. 1992) (―Under
the common law, one must win the race to the marketplace to establish the exclusive right
to a market‖). A second user who uses the mark in good faith may still use its trademark
in areas geographically remote from the market appropriated by the first user. V & V
Food Prods., Inc. v. Cacique Cheese Co., Inc., 683 F. Supp. 662, 666 (N.D. Ill. 1988).
The second user has the right to use its trademark ―except to the extent that such use
infringes what valid right [any previous users] have acquired by their continuous use of
the same mark prior to plaintiff‘s federal registration.‖ Burger King, 403 F.2d at 907; see
also Natural Footwear Ltd. v. Hart, Schaffner & Marx, 760 F.2d 1383, 1395 (3d Cir.
1985).
The Defendants assert that they are the senior user of the BUG OFF mark and are
entitled to a nationwide zone of exclusion over SCJ — the junior user.15 SCJ admits that
As terms of art used in the field of trademark law, ―senior user‖ denotes ―the first seller to
adopt and use a mark in the United States,‖ and ―junior user‖ denotes ―the second seller to adopt the
mark, even though the junior user may be the first in time within a given remote territory.‖ J. Thomas
McCarthy, 5 McCarthy on Trademarks and Unfair Competition § 26:1 at 26-4 (4th ed. 2014).
15
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Sunfeather used the BUG OFF mark but asserts that it did not prove market penetration in
any geographic market prior to SCJ‘s BUG OFF trademark dating to June 22, 1998. In its
final brief, SCJ‘s position becomes more nuanced in that it asserts, for the first time, that it
had an earlier trademark for BUG OFF (Trial Ex. 4), and therefore Sunfeather could not
have accrued any rights until after April 10, 1995, when that earlier trademark was
cancelled. (SCJ‘s Resp. to Defs. Post-Trial Conclusions of Law, 2.) (ECF No. 86.)
SCJ‘s earliest federal registration for the BUG OFF mark in connection with
insect repellant, U.S. Registration No. 1,506,763 (the ―‘763 registration‖) was issued on
October 4, 1988, based on use in commerce dating back to October 10, 1985, and was in
effect until April 10, 1995, when the PTO cancelled the mark for failure to file an
acceptable declaration of use under Section 8 of the Lanham Act, 15 U.S.C. § 1058. (See
Trial Ex. 4.) (See also, Court‘s Jan. 14, 2014, Decision & Order, at 6.) (ECF No. 65.)
However, registration does not give a registrant the benefit of the date of first use
alleged in its application. See Harvey Aluminum (Inc.) v. Am. Screen Prods. Co., 305
F.2d 479, 481 (C.C.P.A. 1962). A registration on the Principal Register provides prima
facie evidence of the registrant‘s ownership and exclusive right to use the mark, 15
U.S.C. § 1057(B), as well as proof of the continual use of the mark dating back to the
filing date of the application for registration, see J.C. Hall Co. v. Hallmark Cards, Inc.,
340 F.2d 960, 962 (C.C.P.A. 1965). Furthermore, a Principal Register registration is
constructive notice of a claim of ownership so as to eliminate any defense of good faith
adoption. See 15 U.S.C. § 1072. The impact of SCJ‘s BUG OFF trademark between
October 1988 and April 10, 1995, on common law rights claimed by the Defendants will
- 24 -
be further discussed.
The parties disagree regarding the proper test for establishing a common law
interest in a trademark and whether a party may prove a nationwide common law
trademark.
SCJ asserts that ―[c]ourts use the market penetration test to determine
whether a party has established legally significant common law trademark rights.‖
(SCJ‘s Post-Trial Proposed Conclusions of Law, ¶ 14 (citing Natural Footwear Ltd.,
Schaffner & Marx, 760 F.2d at 1395.) (ECF No. 79.) The Defendants counter that SCJ‘s
argument is contrary to a least a century of legal precedent, citing Diamond Crystal Salt
Co. v. Worcester Salt Co., 221 F. 66, 66-67 (2d Cir. 1915), and that SCJ‘s ―professed
ignorance ‗of any [such] cases,‘ [is striking] because SCJ itself argued for and prevailed
upon [the totality of the circumstances] principle only five years ago,‖ citing Buzz Off
Insect Shield, LLC v. S.C. Johnson & Son, Inc., 606 F. Supp. 2d 571 (M.D.N.C. 2009)
(―BuzzOff‖). (Defs.‘ Reply, 3.) (ECF No. 84.)
The Defendants contend that the contradictions between SCJ‘s positions in this
action and in BuzzOff raise the specter of judicial estoppel.
(Id. at 7.) (citing
Grochocinski v. Mayer Brown Rowe & Maw, LLP, 719 F. 3d 785, 795 (7th Cir. 2013)
(―Judicial estoppel is a flexible equitable doctrine designed to prevent the perversion of
the judicial process.
The doctrine protects the courts from being manipulated by
chameleonic litigants who seek to prevail, twice, on opposite theories.‖)) (Internal
citations omitted). The Defendants maintain that SCJ should not be permitted to argue
against the same principle it championed and prevailed upon only five years ago, just
because it no longer suits SCJ‘s present day needs. (Defs.‘ Reply, 7.)
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Indeed in litigating BuzzOff outside this Circuit, SCJ advocated and prevailed with
its contention that ―[e]stablishment of common law rights is determined ‗on a case by
case basis, considering the totality of the circumstances.‘ Johnny Blastoff, Inc. v. L.A.
Rams Football Co., 188 F.3d 427, 433 (7th Cir. 1999) (affirming determination of prior
established common law rights as basis for infringement and injunctive relief).‖ (Ex. A,
Defs.‘ Reply (SCJ‘s Mem. Support Permanent Nationwide Inj. ) 8.) (ECF No. 84-1.) SCJ
now argues for a market penetration test and does not mention Johnny Blastoff — a
decision which is binding on this Court. At best, SCJ‘s position regarding the proper test
for establishing nationwide common law rights is chameleonic, and its contradictory
behavior concerns the Court.
Regardless, the Court will consider the totality of the circumstances to determine
whether the Defendants have established protectable rights in a mark.
See Johnny
Blastoff, Inc., 188 F.3d at 433. A party can acquire protectable trademark rights only
through use of the mark in connection with its product. See id. However, actual sales are
not necessary to establish trademark rights. See id. at 434. Rather, the Defendants must
show appropriation of the mark and ―‗use in a way sufficiently public to identify or
distinguish the marked goods in an appropriate segment of the public mind as those of
[the adopter of the mark].‘‖ See id. at 433-34 (quoting New W. Corp. v. NYM Co. of Cal.,
Inc., 595 F.2d 1194, 1200 (9th Cir. 1979)). Public sales alert others that they should not
invest resources to develop a mark similar to one already used in the trade.
Zazu
Designs, 979 F.2d at 503 (citing Blue Bell, Inc. v. Farah Mfg. Co., 508 F.2d 1260, 126465 (5th Cir. 1975)).
- 26 -
With respect to the bona fide use of a trademark, an entity only acquires rights in a
trademark through commercial use of the mark. Johnny Blastoff, Inc., 188 F.3d at 433-34.
Under common law, ownership is conferred upon the person who employs the first actual
use of a mark in a genuine commercial transaction. Also under common law, the winner
of the race to the marketplace establishes exclusive use of the mark. Zazu Designs, 979
F.2d at 503. To establish use, the mark must be attached to the product or service sold to
the public and must be continuous and bona fide. See DSMR, LLC v. Goldberg, No. 02-C5203, 2004 WL 609281, at *4 (N.D. Ill. Mar. 25, 2004). See also Specht v. Google Inc.,
747 F.3d 929, 935 (7th Cir. 2014).
As long as there is genuine use of the mark in commerce, ownership may be
established even if the first uses are not extensive and do not result in ―deep market
penetration or widespread recognition.‖
See Allard Enters., Inc. v. Advanced
Programming Res. Inc., 146 F.3d 350, 358 (6th Cir. 1998); Kathreiner’s Malzkaffee
Fabriken v. Pastor Kneipp Medicine Co., 82 F. 321, 326 (7th Cir. 1897) (for rights in a
mark to accrue, ―[i]t is not essential that its use has been long continued, or that the article
should be widely known, or should have attained great reputation.‖).
The determination of rights between two users of the same mark, when one has a
federally registered mark, does not simply involve a determination of which party presents
evidence to demonstrate that it was the first user in each market in question. Rather, the
party without the federal registration must prove its prior and continuous rights in a
market that preempts the registrant‘s constructive nationwide rights.
15 U.S.C. §
1115(b)(5); Allard Enters., Inc., 146 F.3d at 361. The determination of sufficient activity
- 27 -
to constitute use is a factual question, in which the use must be enough so that ―an
appropriate segment of the public mind‖ identifies the mark as a source designator of the
products or services. See Specht v. Google Inc., 758 F. Supp. 2d 570, 588 (N.D. Ill. 2010)
(quoting S Indus., Inc. v. Stone Age Equip., Inc., 12 F.Supp.2d 796, 805 (N.D. Ill. 1998)),
judgment entered, 09 C 2572, 2011 WL 4737179 (N.D. Ill. Oct. 6, 2011) and aff‘d, 747
F.3d 929 (7th Cir. 2014).
The Defendants have shown appropriation of the BUG OFF mark beginning in the
1980s with Sunfeather‘s use of the recipe for bug repellant that Maine bottled and gave to
fellow hikers in New York‘s Adirondacks.
Even after an area cooperative began
handling the product, the use of the mark prior to 1995 was within the Potsdam and
upstate New York Adirondack Mountain area. Sunfeather would have common law
rights to that area, but the evidence does not establish that Sunfeather had nationwide
rights as of October 1988.
Within the following decade the distribution of Sunfeather‘s BUG OFF repellant
expanded.
However, from October 1988 until April 10, 1995, when SCJ‘s ‗763
registration was cancelled, Sunfeather‘s rights common law rights were ―frozen.‖ See
Brandt Indus., Ltd. v. Pitonyak Mach. Corp., 1:10-CV-0857-TWP-DML, 2012 WL
4467654, at *2 (S.D. Ind. Sept. 26, 2012); Pure Imagination, Inc. v. Pure Imagination
Studios, Inc., 03 C 6070, 2004 WL 2967446, at *10 (N.D. Ill. Nov. 15, 2004); Quill
Corp. v. LeBlanc, 654 F. Supp. 380, 385 (D. N.H. 1987). Therefore, the evidence
regarding Sunfeather‘s BUG OFF use from October 1988 until April 10, 1995, may only
be considered with respect to any nationwide common law rights, if the use continued
- 28 -
beyond that date.
The next time frame during which Sunfeather could have obtained common law
rights is from April 11, 1995, until June 22, 1998, the priority date for the Chervitz
registration. See Specht, 747 F.3d at 935 (holding that once a trademark was abandoned
it returned to the public domain, could be appropriated anew, and [defendant] became the
senior user.)
As previously discussed, between 1995 and 1998 Sunfeather‘s BUG OFF
advertising and promotion expanded beyond Potsdam and the New York Adirondack
Mountain area. Sunfeather had an internet site and was selling its BUG OFF repellant on
line. It was mailing between 7,500 and 13,333 catalogs annually to its customer list
nationwide. Sunfeather was marketing BUG OFF and selling at trade and craft shows
across the country.16 Sunfeather‘s products were promoted and sold by retailer Smith &
Hawken, particularly in its catalog which was mailed throughout the country and was
readily available to store customers. Beginning in 1997 BUG OFF was sold through
Frontier‘s spring and summer wholesale catalogs, sent to 15,000 wholesalers throughout
the country, and its annual retail catalog.
The totality of the circumstances indicate that
Sunfeather has established a national presence based on the promotion and sales of its
product in Frontier and Smith & Hawken‘s catalogs, its availability in Smith & Hawken‘s
Sunfeather‘s sales records for April through the end of June 1998 indicate that it sold BUG
OFF products in 14 states: Pennsylvania, Ohio, Maine, Massachusetts, Tennessee, Indiana, Virginia,
Montana, New York, Texas, West Virginia, Connecticut, Georgia, and California. In addition, it
promoted its products through trade shows in Chicago, Illinois; Miami, Florida; Seattle, Washington;
and Arkansas. That establishes that Sunfeather had sales and/or promotions in 18 states.
16
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stores, its internet presence, its own national catalog circulation, and its marketing and
sales at craft and trade shows. Thus, Sunfeather has presented sufficient evidence that it
was the senior user of the BUG OFF mark and it was using the mark nationally from the
cancellation of SCJ‘s mark until June 22, 1998. See Johnny Blastoff, Inc., 188 F.3d at
433-34
Despite this national use of BUG OFF, the Defendants‘ defense based on its
common law use of the mark falters because they have not presented evidence that they
have continuously used the BUG OFF mark. In terms of any common law rights, the
Defendants have the burden of showing that they continuously maintained use of the mark
in the claimed area. ―Continuing‖ is not the same as lack of abandonment: it means use
without significant interruption. See McCarthy on Trademarks and Unfair Competition, §
26:55 at 101. Non-use for one year negates ―continuing.‖ Casual Corner Assocs., Inc. v.
Casual Stores of Nev., Inc., 493 F.2d 709, 712 (9th Cir. 1974).
Smith & Hawken and Frontier no longer promote the Defendants BUG-OFF.
Through 2012 Nutraceutical continued to sell and distribute BUG OFF bug repellant soap,
herbal oil, spritzer, and balm sold under the Sunfeather name. The products are available
for purchase online at http://www.sunfeather.com/outdoor.html. The Defendants‘ sales
records demonstrate continued sale of Sunfeather BUG OFF from the time of acquisition
through 2012, but they do not demonstrate continued sales after 2012. This constitutes
non-use for more than one year.
Therefore, the Defendants have not demonstrated
continuous use of the BUG OFF mark.
Abandonment
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The Defendants assert that SCJ has abandoned its trademark interests under the
Chervitz and Kaz registrations because it has not sold a wristband since 2009 or 2010 and
has no intent to do so. SCJ contends that the Defendants have waived any claim of
abandonment because it was not raised as an affirmative defense or in discovery. It
further contends that even if not waived, the Defendants have not established the defense.
The Defendants counter that SCJ has known of their contention that SCJ‘s trademarks are
invalid since they filed their answer, and they did not specifically plead abandonment in
their answer because they did not learn of the defense until they took the Rule 30(b)(6)
deposition. They further state that SCJ cannot contend it was surprised or prejudiced
because the abandonment defense was raised by the Defendants in their summary
judgment papers with no objection by SCJ, they listed the defense first in the statement of
issues in their final pretrial report (ECF No. 61), and the defense was explicitly addressed
by both parties at trial.
Rule 8(c) of the Federal Rules of Civil Procedure directs parties to raise
affirmative defenses in the pleadings; however, a delay in raising an affirmative defense
only results in waiver if the other party is prejudiced as a result. See Schmidt v. Eagle
Waste & Recycling, Inc., 599 F.3d 626, 632 (7th Cir. 2010). SCJ has not presented any
argument or showing that it has been prejudiced. Therefore, the Defendants are not to be
deemed to have waived the affirmative defense.
Trademark rights are acquired and retained only through actual use of a mark. See
Sands, Taylor & Wood Co. v. Quaker Oats Co., 978 F.2d 947, 954-55 (7th Cir. 1992)
(―Because trademark rights derive from the use of a mark in commerce . . . , the owner of
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a mark will lose his exclusive rights if he fails actually to use it.‖). A mark is used in
commerce in connection with services ―when it is used or displayed in the sale or
advertising of services and the services are rendered in commerce.‖ 15 U.S.C. § 1127.
If SCJ had abandoned and never resumed use of the mark, the Defendants could
not have infringed on SCJ‘s intellectual property by their use of BUG OFF. Specht, 747
F.3d at 934 (citing 15 U.S.C. § 1127; Central Mfg., Inc. v. Brett, 492 F.3d 876, 881 (7th
Cir. 2007)). A trademark is abandoned if its ―use in commerce‖ has been discontinued
with no intent to resume use. Id. (citing 15 U.S.C. § 1127; Rust Env’t & Infrastructure,
Inc. v. Teunissen, 131 F.3d 1210, 1214 (7th Cir. 1997)).
Under the Lanham Act,
―[n]onuse for 3 consecutive years shall be prima facie evidence of abandonment,‖ 15
U.S.C. § 1127.‖ Id. A prima facie showing of abandonment may be rebutted with
evidence excusing the nonuse or demonstrating an intent to resume use. Id. (citing Sands,
Taylor & Wood Co. v. Quaker Oats Co., 978 F.2d 947, 955 (7th Cir. 1992)). But the
intent to resume use in commerce must be formulated within the three years of nonuse.
Id. The statutory language clarifies that ―‗use‘ of a mark means the bona fide use of such
mark made in the ordinary course of trade, and not made merely to reserve a right in a
mark.‖ Id.
Three consecutive years of nonuse creates a presumption that the owner intended
not to resume use of the mark. Id. If the presumption is triggered, the owner of the mark
―has the burden of producing evidence of either actual use during the relevant period or
intent to resume use. The ultimate burden of proof (by a preponderance of the evidence)
remains always on the challenger.‖ Emergency One, Inc. v. Am. FireEagle, Ltd., 228 F.3d
- 32 -
531, 536 (4th Cir. 2000) (citations omitted); see also Roulo v. Russ Berrie & Co., Inc., 886
F.2d 931, 938-39 (7th Cir. 1989).
No wristbands were sold after 2010. Thus, three years had passed as of the
February 2014 trial of this action, and SCJ is presumed not to intend to resume the use of
the mark. However, SCJ has made use of the mark on a closely related product — the
back of two sizes of cans of its insect repellant products. The spray-on repellants sold by
SCJ are related to insect repellant wrist bands. (See Ex. 41, at 251-65 (TTAB decision in
In re Sunfeather Natural Soap Co., Ser. No. 76/480170, mailed on Sept. 25, 2008,
upholding PTO examiner‘s refusal to register Sunfeather‘s BUG OFF mark because of
the likelihood of confusion with registered mark and finding that Sunfeather‘s goods,
including insect repellant sprays, and the Chervitz and Kaz insect repellant wrist bands
were ―related inasmuch as they are insect repellants in various forms for personal use,‖
id. at 265).).
The Defendants assert that SCJ is disingenuous or simply trying to improperly
reserve the mark because it is only using it on two out of more than a dozen potential
products. They also point to the SCJ email that refers to using a mark on the back of the
can as a tactic. However, neither argument persuades the Court that SCJ is not actually
using the mark. ―[T]he fact that a product bears more than one mark does not mean that
each can not be a valid trademark.‖ Old Dutch Foods, Inc. v. Dan Dee Pretzel & Potato
Chip Co., 477 F.2d 150, 154 (6th Cir. 1973).
Davis‘s conflicting testimony regarding what she thought of the use of the word
―tactic‖ by a SCJ colleague is more demonstrative of her loyalty to SCJ, and her attempt
- 33 -
to diminish the weight of her colleague‘s comment, than to what SCJ is doing with the
mark. The Court is persuaded that container size may not permit the extra mark on some
cans and that the process of revising the product labels is not swift. Furthermore, it also
finds the testimony that SCJ will not market a wristband until the quality satisfies its
standards credible.
The Defendants rely on Exxon Corp. v. Humble Exploration Co., Inc., 695 F.2d
96, 100 (5th Cir. 1983) and Procter & Gamble Co. v. Johnson & Johnson Inc., 485 F.
Supp. 1185, 1204 (S.D.N.Y. 1979), aff‘d, 636 F.2d 1203 (2d Cir. 1980), in asserting that
the Court should not allow SCJ to engage in a trademark maintenance program. They also
cite Imperial Tobacco Ltd. v. Philip Morris, Inc., 899 F.2d 1575, 1581 (Fed. Cir. 1990);
Blue Bell, Inc. v. Farah Mfg. Co, Inc., 508 F.2d 1260, 1267 (5th Cir. 1975). (Def.‘s Prop.
FOF and Conclusions of Law ¶¶ 146, 142.)
Each of the cases cited by the Defendants is distinguishable. Exxon Corp, 695
F.2d at 100, held that limited arranged sales of ―HUMBLE‖ products as part of Exxon‘s
trademark maintenance program did not constitute ―use‖ sufficient to avoid prima facie
abandonment under Lanham Act where the mark ―Humble‖ was used only on isolated
products or selected invoices sent to targeted customers, and no sales were made that
depended upon the mark for identification of source.
In Procter & Gamble, plaintiff Procter and Gamble (―P & G‖) maintained a
―Minor Brands Program‖ for the purpose of protecting its ownership rights in brand
names not being actively used in commerce on its products. Employees not normally
involved in P & G‘s merchandising operation took an active P & G product, labeled it
- 34 -
with a minor brand, and shipped it to customers. For example, P & G‘s Prell shampoo
was bottled under 13 different minor brand labels. Fifty units of each were shipped
annually to at least ten states. The court held that P & G had no enforceable rights in the
mark SURE for tampons on the basis of its inclusion in this minor brands program.
Procter & Gamble, 485 F. Supp. at 1204-07.
Imperial Tobacco, Ltd., 899 F.2d at 1582-83, held that promotional use of a mark
in sales of whiskey, pens, watches, sunglasses, and food did not constitute use of the
mark for cigarettes, and that as a result, the mark had been abandoned.
Blue Bell, Inc., 508 F.2d at 1265,17 involved competing claims to identical marks
by manufacturers of men‘s clothing. The court held that Farah‘s shipment of one pair of
slacks bearing the mark to each of its twelve regional sales managers, who paid for the
pants and became owners of the garments, was insufficient to constitute use of the mark
because the sales were not made to customers, but served as an accounting device to
charge the salesmen with their cost in case of loss. The ―sales‖ did not matter because
they were not made to the public.
SCJ‘s conduct is not analogous to that addressed in the cases relied on by the
Defendants. The Defendants have not met their burden of establishing that SCJ intends
to abandon the BUG OFF mark.
The court was applying Texas law but drew from ―general principles of trademark law‖
because no cases had yet been decided under the Texas law enacted a year earlier. See Blue Bell, Inc.,
508 F.2d at 1264.
17
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Chervitz Registration
With respect to the Chervitz registration relied upon by SCJ to claim priority as of
June 1998, the Defendants contend that the Chervitz registration lacked a bona fide use at
the time of registration. SCJ contends that the Defendants‘ challenge is barred by laches
because the Defendants, through their predecessor Sunfeather, had actual knowledge of
the Chervitz registration in 2003 and did nothing against the registration or against
Chervitz; the window to seek cancellation of Chervitz registration based on insufficient
use in commerce closed in July 2005; and even if a challenge were allowed, there is
ample evidence of use in commerce to support the application for, and issuance of the
registration. The Defendants maintain that laches does not apply to its claim of lack of a
bona fide use as a defense to trademark infringement.
The Court will not explore SCJ‘s reliance on laches or incontestability of the
Chervitz registration because it agrees with SCJ that, even if the Defendants‘ argument
regarding lack of bona fide use were considered on its merits, the Defendants would fail.
Their argument does not take into account the information contained in the supplemental
Chervitz declaration as previously outlined in the findings of fact.
That evidence
establishes sufficient use in commence to satisfy the requirement for a trademark
application. See Zazu Designs, 979 F.2d at 503.
Conclusions of Law
SCJ has three valid trademarks to BUG OFF, and is currently using the BUG OFF
mark in conjunction with insect repellants, a product closely related to insect repellant
wristbands. The Defendants have not established their prior common law continuous use
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of the BUG OFF mark, SCJ‘s abandonment of the mark, or the invalidity of the mark.
The Defendants‘ use of the mark has infringed upon SCJ‘s BUG OFF trademark. Due to
the likelihood of confusion between the parties‘ BUG OFF marks, SCJ has established the
elements of its federal trademark infringement and state common law claims.
The Defendants have failed to establish that they owned rights to the BUG OFF
trademark superior to those of SCJ. Therefore, their counterclaims are dismissed with
prejudice.
SCJ asserts it is entitled to permanent injunction against the Defendants‘ use of
BUG OFF. The Defendants have not responded to SCJ‘s request for injunctive relief.
The Lanham Act allows the owner of a registered trademark whose rights have been
knowingly and intentionally violated to obtain injunctive relief to prevent further
violations. 15 U.S.C. § 1116. A party seeking a permanent injunction must satisfy the
following four factors: 1) The existence of irreparable injury (including a continuing and
imminent threat of harm); 2) remedies at law are inadequate to compensate for that threat
of harm; 3) whether the balance of hardships between plaintiff and defendant tips in favor
of a remedy in equity; and 4) the public interest would not be disserved by a permanent
injunction. Monsanto Co. v. Geertson Seed Farms,
U.S.
, 130 S.Ct. 2743, 2747-48
(2010) (citing eBay Inc. v. MercExchanges, L.L.C., 547 U.S. 388, 391 (2006)).
―[I]t is well settled that injuries arising from Lanham Act violations are presumed
to be irreparable, even if the plaintiff fails to demonstrate a business loss.‖ Promatek
Indus., Ltd. v. Equitrac Corp., 300 F.3d 808, 813 (7th Cir. 2002). Likewise, the difficulty
in assessing the damages associated with a loss of goodwill supports finding that the
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plaintiff lacked an adequate remedy at law. Id.; see also Ty, Inc. v. Jones Group, Inc., 237
F.3d 891, 902 (7th Cir. 2001) (noting that ―it is virtually impossible to ascertain the
precise economic consequences of intangible harms, such as damage to reputation and
loss of goodwill, caused by [trademark] violations‖) (citation omitted); Meridian Mut. Ins.
Co. v. Meridian Ins. Grp., Inc., 128 F.3d 1111, 1120 (7th Cir. 1997) (noting that injury to
goodwill ―can constitute irreparable harm for which a plaintiff has no adequate remedy at
law‖). The Defendants have not identified any hardships that they will experience due to
a permanent injunction.
―In trademark infringement cases, [the Seventh Circuit has] stated that ‗the
relevant consideration [in determining whether the public interest will be disserved by the
grant of an injunction] is the consumer's interest in not being deceived about the products
they purchased.‘‖ Int’l Kennel Club of Chi., Inc. v. Mighty Star, Inc., 846 F.2d 1079, 1092
n.8 (7th Cir. 1988) (citation omitted). Given that the parties agree there is a likelihood of
confusion among consumers, the Court finds that the public would be best served by
entering a permanent injunction against the Defendants. Therefore, SCJ‘s request for
permanent injunctive relief is granted.
SCJ‘s Complaint described its request for
injunctive relief, and that request has been incorporated below. The Court has added a
deadline for the turnover order.
NOW, THEREFORE, BASED ON THE FOREGOING, IT IS HEREBY
ORDERED THAT:
SCJ has PREVAILED on its Lanham Act and common law unfair competition
claims against the Defendants;
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The Defendants‘ counterclaims are DISMISSED with prejudice.
SCJ is GRANTED a permanent injunction against the Defendants as follows:
The Defendants and their agents, servants, employees and attorneys and all
persons in active concert or participation with them or acting for, with, by, through or
under them, are permanently enjoined from counterfeiting and infringing SCJ‘s BUGOFF® Mark, from unfair competition with SCJ and from falsely designating the origin of
the SCJ goods; and,
No later than September 28, 2014, the Defendants must deliver up for destruction
to SCJ all unauthorized products and/or advertisements in its possession or under its
control bearing the infringing BUG OFF mark or any simulation, reproduction,
counterfeit, copy or colorable imitation thereof, pursuant to 15 U.S.C.§ 1118.
This entire action is TERMINATED;
The Clerk of Court is DIRECTED TO ENTER judgment accordingly; and
SCJ MAY FILE a bill of costs with the Clerk of Court;
Dated at Milwaukee, Wisconsin, this 29th day of August, 2014.
BY THE COURT:
__________________________
HON. RUDOLPH T. RANDA
U.S. District Judge
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