Opposition Brief — Lindy Pen Co. v. Bic Pen Corp.
Supreme Court brief1993
Ask Donna
What actually matters in this document.
Text
ADE 13 1993
OLA
a
eee ane
No. 92-1829
IN THE
Supreme Court of the United States
October Term, 1992
LINDY PEN COMPANY, INC. and
BLACKFEET PLASTICS, INC.,
Petitioners,
VS.
BIC PEN CORPORATION,
Respondent.
OPPOSITION TO PETITION FOR A WRIT OF
CERTIORARI TO THE UNITED STATES COURT
OF APPEALS FOR THE NINTH CIRCUIT
JONATHAN A. MARSHALL
Counsel of Record
Rory J. RADDING
THOMAS A. CANOVA
PENNIE & EDMONDS
1155 Avenue of the Americas
New York, New York 10036-2711
(212) 790-9090
Counsel for Respondent
Bic Pen Corporation
August 13, 1993
PT BEST AVAILABLE COPY
COUNTER STATEMENT
OF THE QUESTION PRESENTED
Whether the Ninth Circuit’s third opinion in this 134 year
old case is consistent with Sixth Circuit precedent in applying
this Court’s holding in Mishawaka Mfg. Co. v. Kresge Co. , 316
U.S. 204 (1942), regarding the burden of proving a trademark
infringer’s profits under 15 U.S.C. §1117(a), where:
(1) in order to determine infringer’s profits under 15
U.S.C. § 1117(a), a trademark owner has the burden of proving
infringer’s gross sales of the infringing item, and the infringer
must prove its cost or deduction from such gross sales;
(2) this Court, in Mishawaka, held that, where sales of the
infringing item were “commingled” with sales of non-infringing
items, it was improper to place on the trademark owner the
“impossible” burden of proving infringer’s sales which the
trademark owner would have made “but for" the infringement,
specifically those sales made to “particular purchasers" who
were "induced" to buy the infringing item because they
mistakenly believed it to be the trademark owner’s product;
(3) in applying 15 U.S.C. § 1117(a) and this Court’s ruling
in Mishawaka, the Sixth Circuit, in Wynn Oil Co. v. American
Way Service Corp., 943 F.2d 595 (6th Cir. 1991), held that,
where the infringer claimed that it was “impossible” to
determine sales of the infringing item because they were
"commingled" with sales of non-infringing products, infringer
has the burden of apportioning non-infringing sales from
infringing sales;
(4) it is well-settled law of the present case that the only
possible infringement herein involves “innocent” sales of "BIC
Auditor’s Fine Point PF" pens in only one of several markets,
namely, the judicially-defined narrow telephone order market,
and only those telephone order sales which were made in a very
specific manner, namely, by use of the word “Auditor’s" alone,
without reference to brand names (BIC and LINDY) or model
numbers (PF and 460-F), without an opportunity for customers
to view catalogs, promotional material, the pens themselves or
the boxes or packaging of the pens, and without an established
relationship between the customer and dealer;
(5) in the present case, infringer did not commingle sales of
infringing and non-infringing products, and the trademark
owner had discovery of infringer’s records which showed the
number of "BIC Auditor’s Fine Point PF" pens sold to the types
of customers who, based on law of this case, could possibly
have been involved in the telephone order market; and
(6) in applying 15 U.S.C. §1117(a) and this Court’s ruling
in Mishawaka, the Ninth Circuit in the present case held that,
since it was possible to prove from infringer’s sales records a
reasonable estimate of gross sales of the possibly infringing item
(i.e., gross sales in the telephone order market), the trademark
owner bears the burden of proving gross telephone order sales,
thereby requiring infringer to apportion or isolate those
telephone order sales which were not made in a manner
judicially defined as an infringement (i.e., reference to the term
"Auditor’s" alone), and further requiring infringer to prove all
other elements of cost or deduction from gross telephone order
sales.
iii
PARTIES
Pursuant to Supreme Court Rule 29.1, Respondent Bic Pen
Corporation (hereinafter referred to as "Bic"), which changed
its name to Bic Corporation on May 18, 1982, identifies its
parent company as Societé Bic S.A.
Petitioners are Lindy Pen Company, Inc. and Blackfeet
Plastics, Inc. (hereinafter referred to as “Lindy").
iV
TABLE OF CONTENTS
PAGE
COUNTER STATEMENT
OF THE QUESTION PRESENTED ............. i
py ey er rae vi
ar eke Kk ps ec a Re 1
COUNTER STATEMENT OF THE CASE ........ |
SUMMARY OF ARGUMENT ................ 7
REECE EET SCT Se CRT TRE ETS 11
THERE IS NO CONFLICT BETWEEN THE
NINTH AND SIXTH CIRCUITS REGARDING
THE BURDEN OF PROVING A TRADEMARK
INFRINGER’S PROFITS SINCE BOTH
CIRCUITS ARE CONSISTENT IN APPLYING
15 U.S.C. §1117(a) AND THIS COURT’S
HOLDING IN "MISHAWAKA" TO THE
PARTICULAR FACTS OF THE CASES BEFORE
THEM, INCLUDING THE PRESENT CASE ... 11
A. > UA SUSU 6 ee ew eee eee 11
B. This Court’s Ruling In Mishawaka ....... 11
PAGE
eal The Sixth Circuit’s Ruling In Wynn ...... 15
D. The Ninth Circuit’s Ruling In Lindy JI] .... 18
oo A ee ee eee en Pen eee ee 23
vi
TABLE OF AUTHORITIES
PAGE
CASES
Champion Spark Plug Co. v. Sanders,
ah Sa Gee 6k va eA eee 24
Highway Cruises of Cal., Inc. v. Security Industries, Inc.,
ee Bed. BS A, | re 24
Maier Brewing Co. v. Fleischmann Distilling Corp.,
Le Bie ek. > 2 | err are 24
Maltina Corp. v. Cawy Bottling Co.,
og we Fe gs | ee eer 4
Mishawaka Mfg. Co. v. Kresge Co.,
119 F.2d 316 (6th Cir. 1941), rev'd, 316 U.S. 203,
62 S.Ct. 1022, 86 L.Ed. 1381 (1942) ...... passim
W.E. Bassett v. Revion, Inc.,
pe £ Fe Cs Serre 22
Wynn Oil Co. v. American Way Service Corp.,
736 F.Supp. 746 (E.D. Mich. 1990), aff'd in part,
rev'd in part and remanded, 943 F.2d 595
Sra, Seed + as chek wee wee eae passim
vil
PAGE
STATUTES
SNORE” Seek eee ea ee 22
SRP EEE. ok ab a ee ees eee es passim
Note: Emphasis is added throughout this Opposition
unless otherwise indicated.
OPINIONS BELOW
The three Opinions of the United States Court of Appeals
for the Ninth Circuit-in this case, reported at 725 F.2d 1240
(9th Cir. 1984), 796 F.2d 254 (9th Cir. 1986), and 982 F.2d
1400 (9th Cir. 1993), and the Supplemental Order Re Damages
of the United States District Court for the Central District of
California, dated December 15, 1989 and reported at 14
U.S.P.Q.2d 1533, attached to Lindy’s Petition for Writ of
Certiorari as Appendices A, B, C and D, are incorporated
herein by reference.
In addition, the district court’s Order Re Damages, dated
August 1, 1989 and reported at 14 U.S.P.Q.2d 1528, and the
district court’s two liability decisions, the first of which is
reported at 550 F.Supp. 1056 (C.D. Cal. 1982) and the second
of which is unreported but located at the district court Clerk’s
Record Docket No. ("CR") 202, are reprinted as Appendices 1,
2 and 3 of this Opposition, respectively.
COUNTER STATEMENT OF THE CASE
The Liability Decisions
After 134 years of litigation, Bic has been completely
exonerated of Lindy’s charge of infringement with respect to all
of the major markets within which the parties intended to sell,
and in fact almost entirely did sell their subject pens, namely
the mail order, telephone solicitation, retail over-the-counter and
manufacturer-to-intermediary markets.’
| After trial, Judge Cynthia H. Hall (since elevated to the Ninth
Circuit) found that the pens in suit were totally distinguishable and
the packaging and collateral display material were completely
dissimilar in graphics and textual content, that the distinct brand
(continued...)
The only market wherein any court has found the possibility
of a likelihood of confusion and, hence, infringement, to exist
is 2 narrow market in which Bic did not even intend to sell its
subject pens, specifically the telephone order market, wherein
“some retail or commercial customers use[d] the telephone to
place orders for pens with office supply stores or other
wholesale dealers." CR 202 at 2; 796 F.2d 254, 257.
The several liability decisions in this case have further
limited the scope of Bic’s infringement to sales made in the
telephone order market only in a particular manner, namely,
sales in the telephone order market involving use of the term
“Auditor’s" alone, without reference to manufacturer/brand
name (BIC or LINDY) or model number (PF or 460-F), withour
an opportunity for the customer to view catalogs, the pens, their
packaging, or promotional material, and without an established
relationship between customer and seller. 725 F.2d at 1245-46;
CR 202 at 4; 796 F.2d at 256.
I(.. continued)
names BIC and LINDY were prominently and repeatedly displayed
on such packaging and promotional material, that Bic’s use of the
term “Auditor's” on its subject pens was in conjunction with the
words “Fine Point" as well as the famous BIC tradename, that
Lindy'’s customers primarily referred to model number “460-F"
when ordering, that there was "no showing of actual confusion" , and
that Bic adopted the “Auditor's Fine Point" designation “to identify
its pen as having an extra-fine point" and “[t]}here is no indication
in the record that defendant sought to capitalize on plaintiffs mark".
550 F.Supp. 1056.
The Damages Decisions
On the accounting/damages remand, the district court, in
its Order Re Remand dated August 7, 1987, entered an
injunction (even though Bic made no profit and indeed lost
money on its "BIC Auditor’s Fine Point PF" pens, and
voluntarily stopped using the accused designation in 1984). The
court also ordered that the parties “conduct discovery regarding
damages and profits", and that, upon completion of discovery,
the parties file Statements of Position to include “[t]he amount
of telephone order sales of Bic pens. The parties should
address the propriety and feasibility of a breakdown of sales
based on orders requesting pens by manufacturer’s name, model
number and "AUDITOR’S’". CR 224 at 2.
After almost two years of damages discovery, and upon
consideration of the parties’ Statements of Position (CR 289,
290), on August 1, 1989, the district court issued its Order Re
Damages, holding that "[b]ecause the defendant’s infringement
in this case was innocent, the Court hereby DENIES the
plaintiffs’ request for an award of the defendant’s profits" (and
attorneys’ fees) under 15 U.S.C. §1117(a). 14 U.S.P.Q.2d at
1530.
The district court also held that Lindy’s evidence
purporting to establish the “amount of damages resulting from
infringement" was, for several specified reasons, “problematic,
to say the least", holding that "[bJecause of the flaws inherent
in the plaintiffs’ damage calculations, this Court is unable to
determine a reasonable forecast of the plaintiffs’ lost sales." Jd.
at 1531-32.
The accounting/damages remand should finally have ended
at that point;? however, the district court, giving Lindy an
unprecedented second opportunity to prove damages, ordered
Lindy to submit an additional “lost profit assessment" showing
Lindy’s telephone order sales during a 6-year pre-infringement
base period and 6-year infringement period. Jd. at 1532.
The district court also offered, sua sponte, that “[i]f the
plaintiffs cannot establish lost profits by this method with
reasonable certainty, they may use an unjust enrichment method
to measure their damages. The plaintiffs are cautioned,
however, that they bear the burden of establishing the
defendant's sales in the telephone order submarket.... The
defendant then must prove any costs or deductions from this
figure." Jd. at 1532-33 (citing Mishawaka and 15 U.S.C.
§1117(a)).?
Two months later, Lindy filed its (second) Memorandum
Calculating Damages (CR 300) which, while using 6-year pre-
2 See Maltina Corp. v. Cawy Bottling Co., 613 F.2d 582, 587 (5th
Cir. 1980) ("plaintiffs have had an opportunity to show their
damages and have failed to do so. This Court concludes that
plaintiffs should not have another opportunity to show their
damages.... In the ten years since the plaintiffs filed their original
petition, this case has been before us three times. All litigation
must end").
3 - Under 15 U.S.C. §1117(a), the district court had already denied
Lindy’s request for an award of Bic’s infringing profits (if any) in
view of Bic’s “innocent” infringement. Jd. at 1530. The same
equitable considerations upon which the district court relied in
denying an award of Bic’s alleged profits under 15 U.S.C. §1117(a)
should also have applied in denying an award of Bic’s alleged
profits under the unjust enrichment theory.
infringement and infringement periods, still failed to comply
with the district court’s order for a showing of Lindy’s own
telephone order sales. Disregarding the district court’s clear
directive, Lindy’s second evidentiary submission also did not
even attempt to establish Bic’s telephone order sales.
The district court thus issued its Supplemental Order Re
Damages, dated December 15, 1989, holding that “[dJespite
access to proof, such as Lindy’s customer lists, and extensive
discovery on the issue of damages... plaintiffs have failed to
sustain their burden of proving reasonably forecast profits." Jd.
at 1534. The court also held:
The plaintiff's burden in this case, under this [unjust
enrichment] alternative method of calculation, is to
prove the defendant’s sales of the infringing article --
the sales of Bic “Auditor’s fine point" pens in the
telephone order submarket. Rather than attempt to
meet this burden, however, the plaintiffs offer only a
calculation of the defendant’s total sales of Bic
“Auditor’s fine point" pens. Because the plaintiffs
have failed to establish the defendant’s sales of Bic
“Auditor’s fine point" pens in the telephone order
submarket, the Court cannot base an award on the
plaintiffs’ alternative method of calculating damages.
Id.
On Lindy’s third appeal, the Ninth Circuit held that, in
view of the well-settled law of the case that Bic’s infringement
was innocent, the district court did not abuse its discretion in
denying an accounting of Bic’s alleged profits under 15 U.S.C.
§1117(a) (and in denying an award of treble damages and
attorneys’ fees under 15 U.S.C. §1117(b)). 982 F.2d at 1406.
The Ninth Circuit further held that, since Lindy failed to
establish its own telephone order sales, it “never furnished the
court with any reasonable estimate of its own sales" and thereby
"declined to provide the court with any evidence of its loss
caused by Bic’s wrongdoing". Id. at 1408. The Ninth Circuit
concluded that "[i]t would have been error for the district court
to select an arbitrary percentage of total sales to represent the
more narrow submarket of telephone sales," and "[t}he court
was correct, therefore, in finding that Lindy failed to sustain its
burden of proving reasonably forecast profits." Jd.
The Ninth Circuit then rejected Lindy’s contention that, by
requiring Lindy to prove Bic’s gross telephone order sales, the
district court improperly shifted to the trademark owner, the
burden of apportioning infringing sales from non-infringing
sales. The Ninth Circuit explained:
However, an accounting is intended to award profits
only on sales that are attributable to the infringing
conduct. The plaintiff has only the burden of
establishing the defendant’s gross profits from the
infringing activity with reasonable certainty. Once the
plaintiff demonstrates gross profits, they are presumed
to be the result of the infringing activity. Mishawaka
Rubber & Woolen Mfg. Co. v. S.S. Kresge Co., 316
U.S. 203, 206-07, 62 S.Ct. 1022, 1024-25, 86 L.Ed.
1381, 1385-86 (1942). The defendant thereafter bears
the burden of showing which, if any, of its total sales
are not attributable to the infringing activity, and,
additionally, any permissible deductions for overhead.
15 U.S.C. 1117(a).
Id.
The Ninth Circuit held:
Lindy failed to come forward with any evidence of
sales of the Bic “Auditor’s Fine Point" in the
infringing market. Lindy instead brought forth proof
of Bic’s total sales. Lindy averred to the court that a
division of Bic’s sales into the telephone submarket "is
impossible from Bic’s records since Bic never
separated its pens according to telephone sales...." To
the contrary, Lindy had access through discovery to
Bic’s records from which a reasonable estimate could
have been accomplished.
Id.‘
The Ninth Circuit affirmed the district court, concluding
that Lindy did not present “competent evidence of its lost profits
or Bic’s unjust enrichment arising from the infringement." /d.
at 1409.
Lindy, thereafter, petitioned this Court for a Writ of
Certiorari.
SUMMARY OF ARGUMENT
Lindy argues that this Court should grant its Petition in
order to resolve a purported conflict between the Ninth and
Sixth Circuits regarding the burden of proving a trademark
infringer’s profits under 15 U.S.C. § 1117(a), which provides
* — The Court also recognized that Bic offered evidence of cost and
deduction showing that it made no profit on its pens, but declined
to consider such evidence since “Lindy failed to make a prima facie
showing of Bic’s unjust enrichment." /d.
that a trademark owner prove only infringer’s gross sales of the
infringing product, after which the infringer prove its cost or
deduction from such gross sales. Specifically, Lindy alleges
that the Sixth Circuit, in Wynn, followed this Court’s ruling in
Mishawaka by requiring the infringer to apportion its sales of
the infringing item from sales of other products, while the Ninth
Circuit in its third opinion in the present case allegedly has
failed to follow Mishawaka in requiring Lindy to prove Bic’s
gross telephone order sales.
However, in Mishawaka, the infringer made it "impossible"
to determine gross sales of the infringing product, by
commingling sales of the infringing product with sales of other
products (i.e., infringing and non-infringing shoe heels
"indiscriminately mixed" and sold from the same bins). This
Court held that, under such circumstances, it is improper for the
trademark owner to bear the burden of proving gross sales of
the infringing product which the trademark owner would have
made “but for" the infringement, since that would require the
trademark owner to prove, through a "procession of witnesses,“
each sale made by the infringer to customers who were
"induced" to purchase the infringing product specifically
because they mistakenly believed it to be the trademark owner’s
product. See 316 U.S. 203.
Similarly, in Wynn, a willful infringer commingled sales of
the infringing product with sales of other products (infringing
and non-infringing auto repair warranties sold to the same
customers), and then affirmatively relied on such commingling
in asserting that it was "impossible" to determine gross sales of
the infringing product. The Sixth Circuit, following
Mishawaka, held that, under such circumstances, the willful
infringer, not the trademark owner, has the burden of
apportioning gross sales of the infringing product from gross
sales of non-infringing products. See 943 F.2d 595.
Es mel OL ATR
ponte
In the present case, infringing sales are only those sales of
"BIC Auditor’s Fine Point PF" pens in the telephone order
market made in a very specific manner, namely through use of
the term “Auditor’s" alone, without reference to brand names
(BIC or LINDY) or model number (PF or 460-F), without an
opportunity for customers to view catalogs, promotional
material, the pens themselves or the boxes containing the pens,
and without an established customer-seller relationship. 725
F.2d 1240; CR 202; 796 F.2d 254.
Under 15 U.S.C. § 1117(a), Lindy must prove gross sales
of the infringing item, and, as such, in the present case bears
the burden of proving gross sales of "BIC Auditor’s Fine Point
PF" pens made in the telephone order market in the specific
manner judicially-defined as an infringement. The Ninth
Circuit, however, required only that Lindy prove Bic’s gross
telephone order sales, not even those made in an infringing
manner, thereby placing the burden on Bic to apportion gross
infringing telephone order sales from non-infringing telephone
order sales, and, further, to prove all other elements of cost or
deduction from gross infringing telephone order sales, in order
to determine infringing profits.
Thus, Lindy was not required to prove the amount of Bic’s
telephone order sales that Lindy would have made “but for"
Bic’s infringement, and therefore was not required to show, by
a "procession of witnesses" or otherwise, the amount of
telephone order sales of "BIC Auditor’s Fine Point PF" pens
which were made to specific consumers who were induced to
purchase because they mistakenly believed the pens to be
"LINDY Auditor’s 460-F" pens.
Moreover, Bic did mot commingle sales of its "BIC
Auditor’s Fine Point PF" pens with sales of its other pens, and
did not commingle its "BIC Auditor’s Fine Point PF" pens sold
10
to customers possibly involved in the telephone order market
with those sold to customers involved in other markets. To the
contrary, Bic’s records, produced during the 2-year damages
discovery period, apportion sales of the "BIC Auditor’s Fine
Point PF" pens among several categories of Bic customers,
including specifically-identified customers who are the types of
companies which, based on the district court’s definition of the
various markets, could possibly have been involved in telephone
order sales, i.e., “office supply stores or other wholesale
dealers." CR 202 at 2.
Consequently, it was not "impossible" for Lindy to show
a reasonable basis for an approximate amount of Bic’s gross
telephone order sales. In fact, as the Ninth Circuit held, "[t]o
the contrary, Lindy had access through discovery of Bic’s
records from which a reasonable estimate could have been
accomplished." 982 F.2d at 1408.
Contrary to Lindy’s allegations, therefore, since Bic did not
commingle infringing products with non-infringing products,
nor made it impossible to determine a reasonable estimate of
gross sales of the infringing item, and Lindy was nor required
to show the amount of telephone order sales Lindy would have
made “but for" the infringement, nor required to apportion
Bic’s infringing and non-infringing sales, the Ninth Circuit in
Lindy III correctly applied Mishawaka to the facts of the present
case regarding the burden of proving Bic’s alleged infringing
profits under 15 U.S.C. § 1117(a), and, thus, is consistent with
the Sixth Circuit in this regard.
Accordingly, since there is no conflict among Circuits, Bic
respectfully requests that this Court deny Lindy’s Petition and
bring to a complete close the final chapter of this 13'4-year old
case.
11
ARGUMENT
THERE IS NO CONFLICT BETWEEN THE NINTH
AND SIXTH CIRCUITS REGARDING THE BURDEN
OF PROVING A TRADEMARK INFRINGER’S
PROFITS SINCE BOTH CIRCUITS ARE
CONSISTENT IN APPLYING 15 U.S.C. §1117(a) AND
THIS COURT’S HOLDING IN "MISHAWAKA" TO
THE PARTICULAR FACTS OF THE CASES
BEFORE THEM, INCLUDING THE PRESENT CASE
A. 15 U.S.C. §1117(a)
As set forth in Section 35 of the Lanham (Trademark) Act,
"[iJn assessing profits the plaintiff shall be required to prove
defendant’s sales only; defendant must prove all elements of
cost or deduction claimed." 15 U.S.C. § 1117(a). [See App. E
to Lindy’s Petition].
B. This Court’s Ruling In Mishawaka
In Mishawaka Mfg. Co. v. Kresge Co., 119 F.2d 316 (6th
Cir. 1941), rev’d, 316 U.S. 203, 62 S.Ct. 1022, 86 L.Ed. 1381
(1942), petitioner Mishawaka for many years manufactured,
sold and distributed footwear, and manufactured rubber heels
for its footwear. Also for many years, Mishawaka had used, as
trademarks, circular plugs of contrasting colored rubber
embedded in the heels of its shoes. Respondent Kresge
operated retail stores where it sold several types of detached
rubber heels, which variously had red, orange and green
circular plugs, an indented diamond-shaped plug, and a circular
American Eagle plug. Kresge’s differently-marked heels were
"indiscriminately mixed together at the same counters" and
displayed and sold from the same bins. 119 F.2d at 321-22.
12
The district court held that only certain of Kresge’s heels
infringed Mishawaka’s colored circular marks, and issued an
injunction against Kresge’s rubber heels “with a red or reddish
circular ball figure.” Jd. at 322. The district court also ordered
that Kresge account to Mishawaka for profits from sales of
"rubber heels bearing a red or reddish circular mark ... to
purchasers who were induced to buy because they believed the
heels to be those of appellant [Mishawaka] and which sales
appellant otherwise would have made." /d.
On appeal, Mishawaka argued that Kresge should account
for profits on the sale of all heels with the colored circular
marks, "regardless of any direct evidence of positive deception
or whether or not appellant would otherwise have made the
sales." Id.
The Sixth Circuit held:
But, before he [appellant trademark owner] is
entitled to an accounting of profits for the use of his
mark, the burden rests on him to show by a fair
preponderance of evidence that either actual or
reasonably probable deception or confusion has
resulted and regard must be given to the class of
persons who purchase the articles and to the
circumstances ordinarily attending their sale. From
the circumstances of this case, there appears no
reasonable probability that there was confusion or
deception without evidence of the fact. Therefore,
the burden was upon appellant to prove that appellee
had made profits attributable in whole or in part to
the use of appellant’s trade-mark, even though they
used identical or similar colors.
13
We agree with the District Court that the burden is
upon appellant to prove that the appellee has made
profits attributable in whole or in part to its trade-
mark.
Id. at 325-26.
After granting Mishawaka’s petition for a writ of certiorari,
this Court explained:
Infringement and damage having been found, the
[Trademark] Act requires the trade-mark owner to
prove only the sales of articles bearing the infringing
mark.
Although the award of profits is designed to make
the plaintiff whole for losses which the infringer has
caused by taking what did not belong to him,
Congress did not put upon the despoiled the burden -
- as often as not impossible to sustain -- of showing
that but for the defendant’s unlawful use of the
mark, particular customers would have purchased
the plaintiff's goods.
316 U.S. at 206.
The Court continued:
If it can be shown that the infringement had no
relation to profits made by the defendant, that some
purchasers bought goods bearing the infringing mark
because of the defendant’s recommendation or his
reputation or for any reason other than a response to
the diffused appeal of the plaintiff's symbol, the
burden of showing this is upon the poacher. The
14
plaintiff of course is not entitled to profits
demonstrably not attributable to the unlawful use of
his mark. The burden is the infringer’s to prove that
his infringement had no cash value in sales made by
him. If he does not do so, the profits made on sales
of goods bearing the infringing mark properly
belong to the owner of the mark.
Id. at 206-207 (citations omitted).
The Court then recognized that the decree below "awarded
only those profits which [the plaintiff trademark owner] can
affirmatively prove to have resulted from sales ’to purchasers
who were induced to buy because they believed the heels to be
those of plaintiff, and which sales une would otherwise
have made.’" Jd. at 207.
The Court further explained:
The decree in effect requires the petitioner to prove
by a procession of witnesses, that when they bought
heels from the infringer they had a clear, well-
focussed consciousness that they were buying the
petitioner’s heels and that otherwise they would not
have bought them. But the shoe is on the other foot.
Id. at 207-208.
Accordingly, the Court vacated the Sixth Circuit’s decision
in order to remand the case to the district court.
15
C. The Sixth Circuit’s Ruling In Wynn
In Wynn Oil Co. v. American Way Service Corp., 736
F.Supp. 746 (E.D. Mich. 1990), aff'd in part, rev'd in part and
remanded, 943 F.2d 595 (6th Cir. 1991), plaintiff Wynn since
the early 1970’s marketed a line of car care products under the
mark "X-TEND", and marketed a product warranty program
called "Wynn’s X-TEND Guarantee" under which consumers
received a warranty against certain auto repair costs provided
they regularly used Wynn’s X-TEND auto products. In 1980,
defendant American Way introduced an extended warranty
program to car dealers to cover certain auto repair costs. By
1985, American Way marketed its warranty program under the
mark "The American Way X-TEND."
After finding that American Way’s use of X-TEND was
likely to cause confusion and constituted willful trademark
infringement, the district court issued an injunction. However,
the court did not award damages or profits because defendant’s
testimony regarding infringing sales was self-contradictory and
also not credible since it was based heavily upon records which
defendant originally claimed did not exist. The court explained:
Defendant Warmus [American Way’s president and
sole shareholder] testified that since 1985, American
Way’s gross receipts from the administration of its
service contracts have never been less than Five
Million Dollars per year. No other figures have
been provided, as Defendants had maintained
throughout discovery that income and profits from
the program were “trade secrets". Warmus also
testified that it is impossible to ascertain from his
records what portions of the income of his
corporation may be attributed to his credit life
insurance business, and which portion to his X-
16
TEND program. However, he further testified to
the contrary that the real moneymaker is the credit
life branch of the business, and the X-TEND
program is a mere accommodation to keep his credit
life customers, and generates no income. .
In further contradiction, Warmus testified that his
“meticulous records" indicate expenses of up to
Three Million Dollars per year in promotional
banners, flags, posters, etc. for his X-TEND
program similar to those which Plaintiff placed in
evidence. That testimony begs the question of why
promotion would be necessary for an accommodation
made at a loss.
Warmus additionally testified that, of the X-TEND
receipts he reported pursuant to a magistrate’s
discovery order, 99% must be paid to an insurance
company (his) to pay premiums for the coverage
offered, and the balance is absorbed in
administrative expenses. Moreover, he staied that
all premiums not paid out to adjust claims must be
returned to the dealers.
Although the Court is confident that Defendants do
not operate the X-TEND program as a charitable
endeavor, it cannot on the facts of record ascertain
the profits made as a result of Defendants’ willful
infringement.
Accordingly, no damages will be awarded.
Id. at 757-58.
17
On appeal, the Sixth Circuit explained that, under 15
U.S.C. §1117(a), “fit is not the plaintiff's burden to prove the
profits with exactness because the statute places the burden on
the defendant once the plaintiff comes forward with proof of the
defendant’s gross sales." 943 F.2d at 605.
The Court stated:
In this case, plaintiff went to great lengths to
ascertain the profits made by defendants through use
of the X-TEND mark. Their efforts were largely
Srustrated by defendants’ elusive tactics. Defendants
resisted discovery on the ground that the sales
information was a “trade secret." The magistrate in
charge of discovery matters ordered defendants to
disclose “the total dollar receipts from service
contracts for the years 1985 through 1989."
Defendants furnished a figure and claimed later that
it was impossible to determine the sales from service
contracts using the X-TEND mark because they were
commingled with other sales and included monies
which merely flowed through defendants. Defendant
Warmus also claimed that he provided the X-TEND
service contracts as a mere accommodation to his
customers and that the program generated no
income.
The district court found that Warmus’ denial of
profits on the service contracts was self-
contradictory and devoid of credibility; however, it
declined to award the unjust profits because of
uncertainty as to the amount. Defendants argue that
the district court’s approach was correct because
Wynn failed to meet the burden of proving gross
sales. Defendants argue that Wynn was responsible
18
for apportioning the “total receipts" into sales of
service contracts, other receipts, etc.
Id. at 605-606.
Relying on Mishawaka, the Sixth Circuit held:
However, both common sense and the statute [15
U.S.C. § 1117(a)] suggest that the burden of
apportioning the profits should be placed on the
defendants.
Id. at 606.
Since defendants created and then affirmatively relied upon
the alleged "impossibility" of isolating its gross sales of the
infringing product, the Sixth Circuit held that the district court
abused its discretion in refusing to award defendants’ profits,
and remanded with instructions to “place the burden on
defendants to prove deductions from the gross receipts from
service contracts and resolve uncertainty in [plaintiff] Wynn’s
favor." Id. at 607.
D. The Ninth Circuit’s Ruling In Lindy III
Bic does not suggest, and the Ninth Circuit in Lindy II] did
not hold, that Lindy must show that “but for" Bic’s use of the
term “Auditor’s", "particular customers would have purchased"
Lindy’s “Auditor’s" 460-F pens because they purchased Bic’s
pens with a “clear, well-focussed consciousness that they were
buying the petitioner’s [pens] and that otherwise they would not
have bought them." 316 U.S. at 206-208. The Ninth Circuit
also did not hold that Lindy may be awarded “only those profits
which it can affirmatively prove to have resulted from sales ‘to
purchasers who were induced to buy because they believed the
19
[BIC Auditor’s Fine Point PF pens] to be those of [Lindy], and
which sales [Lindy] would otherwise have made.’" Jd. at 207.
Instead, the Ninth Circuit required Lindy only to show
Bic’s gross sales in the telephone order market regardless of
whether "but for" Bic’s use of the term “Auditor’s" in the
telephone order market, “particular customers would have
purchased" Lindy’s pens, and regardless of whether particular
purchasers "were induced to buy because they believed" the
BIC PF pens were Lindy “Auditor’s." Jd. at 206-208. The
Ninth Circuit, thus, placed the burden on Bic to apportion any
such sales "demonstrably not attributable to the unlawful use of
[Lindy’s] mark" (e.g., telephone order sales made through use
of manufacturer name, model number, catalogs, or established
relationship). Jd. at 206.
Lindy incorrectly contended before the Ninth Circuit that
a showing of gross telephone order sales was “impossible" since
such evidence resides with Bic’s customers. However, as a pen
manufacturer for over 20 years, Lindy has long known the
identity of the customers of its competitors, including Bic’s
customers. In fact, several witnesses at the liability trial,
including Lindy’s own witnesses, testified that they bought both
Lindy and Bic pens. Furthermore, during the
accounting/damages discevery period, Bic produced the names
and addresses of every Bic customer which purchased “BIC
Auditor’s Fine Point PF" pens, and Lindy even retained as an
"expert" Bic’s former national sales manager who was
responsible for sales of "BIC Auditor’s Fine Point PF" pens and
was well aware of the identity and size of Bic’s customers.
Indeed, in a letter to a Bic customer dated May 20, 1988,
Lindy admitted that it has the burden of proving gross telephone
order sales, stating:
20
Since we must determine, as best we can, how many
of the *Auditor’s’ pens made by Bic were sold
responsive to telephone orders and how many were
sold responsive to mailed in orders, I called you.
“xk *
These are important questions for Blackfeet....
Blackfeet, however, must make the determination of
percentage of sales of these pens made by telephone,
and needs your assistance. (CR 240 at Ex. B).
Lindy, thus, had ready access to evidence of Bic’s
telephone order sales. Lindy simply never engaged in typical,
rudimentary discovery at any point during the
accounting/damages remand -- Lindy did not, at any time
during the 2 year damages discovery period, depose or
subpoena the records of any of Bic’s customers, and Lindy
made no effort, during the additional two month second chance
offered by the district court, to obtain evidence from any of
Bic’s customers, not even those who were Lindy witnesses at
trial eleven years ago. Lindy has only itself to blame for its
repeated failure of proof.
Lindy now claims that, since it allegedly could only obtain
proof of Bic’s telephone order sales from Bic’s customers,
Lindy was improperly required to prove such sales to
“particular customers" through the “procession of witnesses"
which Mishawaka held was infringer’s burden. However,
unlike defendants in Mishawaka and Wynn, as noted above, Bic
did not commingle sales of its "BIC Auditor’s Fine Point PF"
pens with sales of its other pens or other products, and did nor
commingle sales of its "BIC Auditor’s Fine Point PF" pens sold
to customers possibly involved in the telephone order market
with those sold to customers involved in other markets.
21
On the contrary, Bic’s records, produced during the 2-year
damages discovery period, apportion sales of the subject pens
among several categories of Bic customers, including
specifically-identified customers who are the types of companies
which, based on the district court’s definition of the various
markets, could possibly have been involved in telephone order
sales, i.e., “office supply stores or other wholesale dealers."
CR 202 at 2.
Thus, Lindy did not even need to obtain discovery from
Bic’s customers in order to reasonably estimate Bic’s telephone
order sales. In fact, as the Ninth Circuit held, "|t]o the
contrary, Lindy had access through discovery of Bic’s records
from which a_ reasonable estimate could have _ been
accomplished." 982 F.2d at 1408.°
Even were this Court to assume, contrary to law and fact,
and contrary to Lindy’s prior admission, that Lindy does not
have the burden of showing Bic’s telephone order sales but may
instead rely on evidence of overall sales, Lindy would still not
be entitled to an award of alleged profits since Bic’s detailed,
comprehensive and unrebutted “cost or deduction" evidence
reliably demonstrates that Bic made no profit, but instead lost
money on its overall sale of “BIC Auditor’s Fine Point PF"
pens, regardless of market.
Moreover, Bic also proffered "cost or deduction" evidence
relating specifically to sales of "BIC Auditor’s Fine Point PF"
5 By requiring Lindy to show only Bic’s gross telephone order sales,
Bic, not Lindy, had the burden of apportioning, perhaps through a
“procession of witnesses,” non-infringing telephone order sales (i.e.,
made through reference to brand names, model numbers, catalogs,
etc.).
22
pens to those customers which correspond to the district court’s
definition (on the first remand) of the types of businesses even
possibly involved in the telephone order market, namely “office
supply stores or other wholesale dealers". CR 202 at 2. Even
assuming that every "BIC Auditor’s Fine Point PF" pen sold to
every one of these Bic customers was sold in the telephone
order market, and assuming that every such telephone order sale
was made without reference to manufacture/brand name or
model number, without an opportunity for the customer to view
catalogs, promotional material, the pens or the boxes containing
the pens, and without an _ established customer-seller
relationship, Bic’s unrebutted calculations relating to these sales
show that Bic lost money during the total period of such sales,
made a slight profit of $4,000 in 1979 (a year not even within
the appropriate accounting period under 15 U.S.C. §1111 since
Lindy failed to place a registration notice on the price sheet
located by Bic in 1979, see 550 F.Supp. at 1058) and a slight
profit of $5,000 in 1980.°
In any event, in view of the availability of Bic’s records
from which Lindy could have proffered a reasonable estimate
of Bic’s gross telephone order sales, the Ninth Circuit,
6 Significantly, Lindy long ago recognized and admitted that Bic did
not profit from its innocent, de minimus infringement. Specifically,
on the accounting/damages remand before the district court, Lindy
attempted to compare the facts of the present case to that of a W.E.
Bassett v. Revlon, Inc. , 435 F.2d 656 (2d Cir. 1970) (an inapposite
case involving willful infringement). In so doing, however, Lindy
admitted:
There [in Bassett v. Revlon], as here, the infringer’s
profits attributable to the infringement are seemingly
small, even non-existent. (CR 244).
23
consistent with 15 U.S.C. § 1117(a) and the Sixth Circuit,
followed Mishawaka by correctly requiring Lindy to bear its
admitted burden of proving gross telephone order sales, thereby
requiring Bic to apportion non-infringing telephone order sales
and prove all other elements of its cost and deductions.
CONCLUSION
The several rulings in this case demonstrate that Bic’s
infringement was entirely “innocent.” See 550 F.Supp. at
1058-59, 1060-61; 725 F.2d at 1243-44; CR 202 at 3; 796 F.2d
at 257; 14 U.S.P.Q. 2d at 1530; 982 F.2d at 1405-1407.
Bic’s use of the accused designation did not infringe in the
major markets (over-the-counter retail, mail order, telephone
solicitation, manufacturer-to-intermediary). After over a decade
of costly litigation to Bic, the only market within which Bic has
been held liable is the narrow telephone order market, a truly
insignificant market in which Bic did not even intend to sell its
“BIC Auditor’s Fine Point PF" pen, and it is only certain sales
within the telephone order market which can be considered
infringing sales (e.g., use of the term “Auditor’s" alone,
without reference to manufacturer/brand name or model
number, without an opportunity for the customer to view
catalogs, promotional material, the pens or the boxes containing
the pens, and without an established customer-seller
relationship). See 550 F.Supp. 1056; 725 F. 2d 1240; CR 202;
796 F. 2d 254.
The record evidence overwhelmingly establishes that the
amount of "BIC Auditor’s Fine Point PF" pens sold in the
telephone order market in a manner that could be construed to
be infringing is totally speculative and, if even existent,
certainly de minimus. In any event, Bic made no profit but lost
money on the sale of its subject pens. Lindy has admitted as
24
much when it long ago stated that "here, the infringer profits
attributable to the infringement are seemingly small, even non-
existent.” CR 244.
Moreover, Bic voluntarily discontinued selling its "BIC
Auditor’s Fine Point PF" pens many years ago, after judgment
was reaffirmed in favor of Bic on the first remand. CR 220.’
Finally, Lindy’s claimed "damage" is simply not the result
of Bic’s innocent and de minimus infringement in the telephone
order market, but is attributable to a host of other factors which
caused Lindy’s entire business and sales of all Lindy pens, not
merely its "Auditor’s" pen, to dramatically decline long before
Bic’s 1979 adoption of the accused designation. See 550
F.Supp. at 1059; 725 F.2d at 1244 ns. 2 and 3.
Under these circumstances, an injunction is appropriate and
sufficient relief and Lindy is not entitled to any monetary
award, as a matter of law. See Champion Spark Plug Co. v.
Sanders, 331 U.S. 125 (1947); Maier Brewing Co. v.
Fleischmann Distilling Corp., 390 F.2d 117, 120 (9th Cir.
1968); Highway Cruises of Cal., Inc. v. Security Industries,
Inc. , 374 F.2d 875 (9th Cir. 1967).
Nevertheless, even assuming that Lindy is entitled to an
award of Bic’s alleged infringing profits under the “unjust
enrichment" theory of damages, since it was not impossible for
In addition to voluntarily ceasing use of the accused designation, Bic
has already been punished and has suffered enough by the
tremendous expense it has incurred in costs and attorneys’ fees in
defending Lindy’s overreaching charges for over a decade, while
Lindy’s case has been fueled on a contingency fee at little or no
expense to Lindy.
25
Lindy to show a reasonable estimate of Bic’s gross telephone
order sales, after which Bic would have to isolate or apportion
those telephone order sales which were not made in an
infringing manner, and would have to also demonstrate all other
elements of cost or deduction, the Ninth Circuit in Lindy III,
consistent with the Sixth Circuit in Wynn, correctly applied this
Court’s ruling in Mishawaka in requiring Lindy to show Bic’s
gross telephone order sales in order to determine infringing
profits under 15 U.S.C. § 1117(a).
Accordingly, Bic respectfully requests that the Court deny
Lindy’s Petition for a Writ of Certiorari in its entirety, and fully
and finally resolve this 13'4 year old case.
Respectfully submitted,
By: /s/ Jonathan A. Marshall
JONATHAN A. MARSHALL
Counsel of Record
RORY J. RADDING
THOMAS A. CANOVA
PENNIE & EDMONDS
1155 Avenue of the Americas
New York, New York 10036-2711
(212) 790-9090
Counsel for Respondent
Bic Pen Corporation
August 13, 1993
SBE aide
APPENDIX 1
UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
LINDY PEN COMPANY,
INC., and BLACKFEET
PLASTICS, INC.,
No. CV 80-010-
WDK(Ex)
Plaintiffs,
v. ORDER RE DAMAGES
BIC PEN CORPORATION,
Defendant.
ll i i i i i
In 1986, the United States Court of Appeals for the
Ninth Circuit reversed and remanded this case to this Court for
a determination of damages after finding that the plaintiffs had
established a likelihood of confusion in the telephone order
market "resulting from the direct competition of pens with
virtually identical marks." Lindy Pen Co. v. Bic Pen Corp.,
796 F.2d 254, 257 (9th Cir. 1986). Despite finding that "Bic
did not intend to capitalize on Lindy’s mark," the Court of
Appeals instructed this Court "to order an accounting and to
award damages and other relief as appropriate." Jd. In
response, this Court issued an Order Re Remand, directing the
parties to submit a written statement of position, with
supporting exhibits, on the following points:
1) The amount of telephone order sales of Bic pens.
The parties should address the propriety and feasibility
of a breakdown of sales based on orders requesting pens
by manufacturer’s name, model number and "Auditor’s."
Al-l
2) Lindy’s sales of its Auditor’s line before and during
the period at issue.
3) Lindy’s total attorney’s fees incurred in prosecuting
this action and those attributable to the theory on which
it has prevailed. The statement of attorney’s fees should
include a brief description of the services rendered, the
attorney who performed them, that attorney’s applicable
billing rate, the date rendered, and the time billed to the
tenth of an hours.
4) Any equitable factors for the Court to consider
under §1117(a).
(Order Re Remand, August 7, 1987, at 2.) The parties have
submitted their briefs in response to the Order. The plaintiffs
claim attorney’s fees and costs, damages, and profits. After
considering the briefs, exhibits and other evidence submitted by
the parties, the Court has determined that live testimony on
damages is not necessary.
DISCUSSION:
1. Attorney’s Fees:
Under 15 U.S.C. section 1117(a), “[t}he Court in
exceptional cases may award reasonable attorney fees to the
prevailing party." 15 U.S.C.A. section 1117(a) (West Supp.
1989). In this circuit, attorney’s fees may be awarded only on
a showing of fraud or bad faith. Transgo, Inc. v. Ajac
Transmission Parts Corp., 768 F.2d 1001, 1014 (9th Cir.
1985), cert. denied, 474 U.S. 1059 (1986). Thus, an
“exceptional case" meriting an award of attorney’s fees is one
in which the proponent produces evidence of malicious,
fraudulent, deliberate, or willful infringement. /Jnternational
Olympic Committee v. San Francisco Arts & Athletics, 781 F.2d
733, 738 (9th Cir. 1986), aff'd, 483 U.S. 522 (1987); accord,
WSM, Inc. v. Wheeler Media Services, Inc., 810 F.2d 113, 116
Al-2
(6th Cir. 1987). In this case, the plaintiff has been unable to
prove bad faith conduct by the defendant. See Lindy Pen Co.
v. Bic Pen Corp., 796 F.2d at 257 ("Bic did not intend to
capitalize on Lindy’s mark...."); Lindy Pen Co., Inc. v. Bic Pen
Corp. , 725 F.2d 1240, 1244 (9th Cir. 1984) ("The district court
found ... that Bic adopted designation ‘Auditor’s fine point’
without intent to capitalize on Lindy’s mark.... [This finding is
not} clearly erroneous."), cert. denied, 469 U.S. 1188 (1985).
Because this case involves an innocent infringement, an award
of attorney’s fees is inappropriate. For these reasons, the Court
hereby DENIES the plaintiffs’ request for an award of
attorney’s fees and costs.
2. Profits:
Under 15 U.S.C. section 1117(a),
When a violation of any right of the registrant of a mark
registered in the Patent and Trademark Office shall have
been established in any civil action arising under this
chapter, the plaintiff shall be entitled, subject to the
provisions of sections 1111 and 1114 of this title, and
Subject to the principles of equity, to recover ( 1)
defendant’s profits... In assessing profits the plaintiff shall
be required to prove defendant’s sales only; defendant must
prove all elements of cost or deduction claimed.... If the
court shall find that the amount of the recovery based on
profits is either inadequate or excessive the court may in its
discretion enter judgment for such sum as the court shall
find to be just, according to the circumstances of the case.
Such sum ... shall constitute compensation and not a
penalty.
15 U.S.C.A. section 1117(a) (West Supp. 1989). Ordering the
remedy of an accounting of profits is within the discretion of
the trial court. Playboy Enterprises v. Baccarat Clothing Co.,
Inc., 692 F.2d 1272, 1275 (9th Cir. 1982). However, it is an
abuse of discretion for the court to refuse to order an
Al-3
Saal o
accounting when the infringement is deliberate and motivated by
profit. Jd. Thus, if the defendant is “‘attempting to gain the
value of an established name of another,’" the court must order
an accounting. Nalpac, Lid. v. Corning Glass Works, 784 F.2d
752, 755 (6th Cir. 1986), quoting Maier Brewing Co. v.
Fleischmann Distilling Corp., 390 F.2d 117, 123 (9th Cir.),
cert. denied, 391 U.S. 966 (1968).
In other situations, an accounting is appropriate if
injunctive relief proves insufficient to protect trademark rights.
Transgo, Inc. v. Ajac Transmission Parts Corp., 768 F.2d at
1030. Generally, in an innocent infringement, an injunction
preserves the complainant’s rights by preventing the future use
of the trademarked name. Maier Brewing Co. v. Fleischmann
Distilling Corp., 390 F.2d at 123. As the Ninth Circuit has
noted,
Causes exist where an infringement is entirely innocent;
where rather than attempting to gain the value of an
established name of another, the infringer has developed
what he imagined to be a proper trade name only to find
out later that his name caused confusion as to the source
of, and therefore infringed, a product with a registered
trademark. [Cite omitted] In such cases, an injunction
fully satisfies both the policy of the Act and the equities
of the case. Champion Spark Plug v. Sanders, 331
U.S. 125, 67 S.Ct. 1136, 91 L.Ed. 1386 (1947).
Maier Brewing Co. v. Fleischmann Distilling Corp. , 390 F.2d
at 123. Thus, where there is no intent to capitalize on the trade
name of another, an accounting of profits is not warranted.
As noted above, the defendant had no intent to capitalize
on the plaintiffs’ trademarked “Auditor’s" name. Instead, the
defendant adopted the mark in order to “identify its pen as
having an extra fine point." Lindy Pen Co., Inc. v. Bic Pen
Corp. , 550 F. Supp. 1056, 1059 (C.D.Cal. 1984), aff'd in part,
Al-4
rev'd in part, 725 F.2d 1240 (9th Cir. 1984), cert. denied, 469
U.S. 1188 (1985). Because the defendant’s infringement in this
case was innocent, the Court thereby DENIES the plaintiffs’
request for an award of the defendant’s profits.
a Damages:
Under 15 U.S.C. section 1117(a),
When a violation of any right of the registrant of a mark
registered in the Patent and Trademark Office shall have
been established in any civil action arising under this
chapter, the plaintiff shall be entitled, subject to the
provisions of sections 1111 and 1114 of this title, and
subject to the principles of equity, to recover ... (2) any
damages sustained by the plaintiff.... In assessing
damages the court may enter judgment, according to the
circumstances of the case, for any sum above the
amount found as actual damages, not exceeding three
times such amount.... Such sum ... shall constitute
compensation and not a penalty.
15 U.S.C.A. section 1117(a) (West Supp. 1989). To recover
damages under section 1117(a), a plaintiff must prove both the
fact and the amount of damages. See 2 J. McCarthy,
Trademarks and Unfair Competition §30:27, at 510 (2d ed.
1984). This two-pronged test ensures that the defendant does
not retain the fruits of his unauthorized use while preventing the
plaintiff from reaping a windfall. Bandag, Inc. v. Al Bolser’s
Tire Stores, Inc., 750 F.2d 903, 918 (Fed. Cir. 1984).
The plaintiffs must first establish the fact of damages in
the telephone order submarket as a consequence of the
defendant’s infringing use of the "Auditor’s" trademark. The
1980 trial testimony of Raymond Poje, the Vice President and
Secretary-Treasurer of Inventory Central Wholesale, a
wholesale office supply distributor, proves the requisite damage
from infringement. Mr. Poje testified:
Al-5
Q: If a customer were to call you today and ask for
Auditor’s pens, whose pens would you fill that order
with?
A: Since I don’t buy Lindy anymore, I would fill it
with a Bic pen.
Q: Are there any other reasons that you would fill the
order with Bic pens?
A: If they didn’t specifically ask me for a Lindy
Auditor, I would fill it with a Bic only because to me,
is cheaper than a Lindy. So I make more money on it.
Q: Have you ever while - have you ever switched a
customer over from a Lindy pen which he asked for to
a Bic pen?
A: Yes.
Q: Did the name on the box of the pen enable you to
make that switch?
A: The name Auditor, you mean?
Q: Yes.
A: Well, if someone specifically - I used to verify
all the orders. The salesman would write an order, and
I would verify it the next day. If they wrote it for an
Auditor’s pen, I would send out the Bic pen because
there’s more profit in it for me. If they specifically
asked for a Lindy pen, I would send - fill it with a
Lindy pen.
Al-6
Q: If they asked you for a Lindy pen today and you
don’t carry it, would you sell them a Bic pen?
A: 1 would try to, yes.
Q: How would you be able to sell and switch them
over to a Bic pen?
A: Because the name Auditor’s is on both boxes.
(Plaintiffs’ Brief on Damages and Accounting, Vol. I,
Reporter’s Transcript of Proceedings 743, at 745-47.)
The plaintiffs must next establish the amount of damages
resulting from infringement. There are two possible ways to
measure damages - the plaintiffs’ actual damages, or lost profits
from the sale of Lindy “Auditor’s" pens in the telephone order
submarket, or, if actual damages are unclear, the defendant’s
unjust enrichment in the form of its profits from the sale of Bic
“Auditor’s fine point" pens in the telephone order submarket.
Bandag, Inc. v. Al Bolser’s Tire Stores, Inc., 750 F.2d at 919-
20. To establish their lost profits as a measure of damages, the
plaintiffs must make a “prima facie showing of reasonably
forecast profits." 2 J. McCarthy, Trademarks and Unfair
Competition §30:27, at 511. To establish the defendant’s
profits as a measure of recovery, the plaintiffs must only
establish the defendant’s sales in the relevant market. 15
U.S.C.A. section 1117(a). The plaintiffs have attempted to
prove both measures of recovery.
To demonstrate their lost profits, the plaintiffs seek to
use the sales of all Lindy pens other than the “Auditor’s" line
as a control group. The plaintiffs note that during a fifteen
month period between February, 1978 and April, 1979, when
Bic began selling its “Auditor’s fine point" pens, Lindy’s sales
averaged 818,122 pens per month. During a twenty-six month
period from August, 1979, which the plaintiffs assert was “the
beginning of full market-place infringement," to September,
Al-7
1981, the last full month before Lindy closed its plant, Lindy’s
sales averaged 924,542 pens per month, an increase in sales of
thirteen percent.
The plaintiffs mext compare the sales of Lindy
"“Auditor’s” pens in the fifteen month "pre-infringement period"
with sales of Auditor’s" pens in the twenty-six month
"infringement period.” During the "pre-infringement period,"
“Auditor’s" pen sales averaged 156,078 pens per month.
During the “infringement period,” “Auditor’s" pen sales
decreased to an average of 87,865 pens per month, a decrease
in sales of approximately forty-four percent.
The plaintiffs then compare the two sales figures, and
conclude that the total decrease in "Auditor’s" pen sales as a
result of the defendant’s infringement was approximately fifty-
seven percent, or 88,0503 pens per month. The plaintiffs
contend that the infringement by the defendant occurred from
August, 1979 through December, 1985, the last date on which
the defendant offered its "Auditor’s" pens for sale through
telephone order sales. Using a profit per pen of $0.27349, the
lost profits that the plaintiffs seek over the seventy-seven
months of infringement aggregate to $1,863,760.70.
The plaintiffs’ determination of damages is problematic,
to say the least. First, the plaintiffs do not attempt to isolate
telephone order sales from total sales of either Lindy
“Auditor’s" pens or all other Lindy pens. The Ninth
Circuit found a likelihood of confusion only in the telephone
order submarket of the telephone sales market, not in the mail
order market or the telephone solicitation submarket of the
telephone sales market. As a result, the plaintiffs’ lost sales
figures, even if accepted at face value, are inflated.
Second, the fifteen month “pre-infringement period”
selected by the plaintiffs is suspect. This period, not by
happenstance, coincides with a period of rapidly increasing sales
of Lindy pens exclusive of the “Auditor’s" line. In years
Al-8
previous to this carefully bracketed period, as a graph compiled
by the defendant demonstrates, the plaintiffs had suffered a
severe diminution in pen sales of these same lines. (See
Defendant’s Exhibits to Statement of Position, Ex. 21.) The
plaintiffs have not disputed the accuracy of these figures. (See
Plaintiff's Statement of Position, at 20 n. *.) A more accurate
measure of the plaintiffs’ pre-infringement sales would reflect
this loss of sales, thereby selalagies any lost profits in the
infringement period.
Third, the plaintiffs have inexplicably left a four-month
gap between the end of their fifteen month "pre-infringement
period" and the commencement of their twenty-six month
"infringement period.” If included in the “infringement
period," the increasing sales in these months would further
reduce the disparity between sales of Lindy “Auditor’s" pens
and all other Lindy pens - thereby further diminishing the
purported effect of the defendant’s infringement. (See
Plaintiff's Statement of Position, Ex. 359A.)
Fourth, the plaintiffs use one definition of an
infringement period to calculate lost sales and another definition
by which to calculate lost profits. The first period, twenty-six
months in length, ends with the closing of Lindy Pen
Company’s plant and the sale of its assets to Blackfeet Plastics,
Inc. The second period extends seventy-seven months to the
last date on which the defendant’s “Auditor’s fine point" pens
were Offered for sale. This disparity is troubling. Blackfeet
Plastics, Inc. continued to market Lindy pens through December
31, 1985. As a result, Blackfeet’s sales data is probative of the
plaintiffs’ damage from infringement. Thus, the use of two
different “infringement periods," one to establish lost sales and
the other to calculate lost profits, casts doubt on the plaintiffs’
measure of their damages.
Because of the flaws inherent in the plaintiffs’ damage
calculations, this Court is unable to determine a reasonable
forecast of the plaintiffs’ lost sales. Accordingly, the plaintiffs
Al-9
are hereby ORDERED to submit a lost profit assessment
according to the following principles:
1) The pre-infringement base period will extend from
June, 1973 to April, 1979. This eighty-three month
period is equivalent in length to the infringement period
adopted by the Court and will serve as a basis of
comparison with the infringement period. For Lindy
“Auditor’s" pens, the plaintiffs must submit the
following breakdown of information: a monthly and
yearly compilation of total sales and of sales in the
telephone order submarket; an average monthly sales
figure for total sales and for sales in the telephone order
submarket; a profit-per-pen figure for each year; and a
monthly, yearly, and total profit calculation for total
sales and for sales in the telephone order market. The
same information must be submitted for the aggregate
of all other Lindy pens.
2) The infringement period will extend from April,
1979 through December, 1985. The plaintiffs must
submit the information described in paragraph (1) for
both Lindy Pen Company and Blackfeet Plastics, Inc.,
as relevant, for this entire period.
3) The plaintiffs must compare the figures for the pre-
infringement base period with the figures for the
infringement period and calculate the percentage change
in sales for each period in the plaintiffs’ total sales and
sales in the telephone order submarket. From this
determination, the plaintiffs must then determine the
approximate dollar amount of any lost sales.
If the plaintiffs cannot establish lost profits by this
method with reasonable certainty, they may use an unjust
enrichment method to measure their damages. The plaintiffs
are cautioned, however, that they bear the burden of
establishing the defendant’s sales in the telephone order
Al-10
submarket. See Mishawaka Mfg. Co. v. Kresge Co., 316 U.S.
203, 206 (1942). The defendants then must prove any costs or
deductions from this figure. See id.; see also 15 U.S.C.A.
section 1117(a).
The plaintiffs are hereby ORDERED to submit their
calculation of damages, in a brief limited to fifteen pages
exclusive of supporting exhibits, within forty days of the date
of this Order. The defendants may submit their response,
subject to the same page limitation, within twenty days of date
of the plaintiffs’ filing.
IT IS SO ORDERED.
/s/ William D. Kell
William D. Keller
United States District Judge
DATED: August 1, 1989
Al-11
a8, See bait a
eT sition +
;
’
-
tte ae hides (aed ‘3
UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
LINDY PEN COMPANY,
INC., and BLACKFEET
PLASTICS, INC.,
Plaintiffs, No. CV 80-010-CHH
v.
BIC PEN CORPORATION,
Defendant.
ee
This action came before the Court for trial June 22
through July 1, 1982. The Court, having considered the
evidence and briefs of the parties, makes the following Findings
of Fact and Conclusions of Law:
FINDINGS OF FACT
1. Plaintiff, Lindy Pen Company, Inc. (Lindy), a
California corporation having its principal place of business in
North Hollywood, California, manufactures and sells various
types of ball point pens identified by the trademark and name
LINDY.
2. On or about December 4, 1981, plaintiff Blackfeet
Plastics, Inc. (Blackfeet) acquired substantially all of the assets
of plaintiff Lindy, including the trademark and name LINDY.
Blackfeet is a Montana corporation, having its principal place
of business in Browning, Montana.
A2-1
3. Defendant Bic Pen Corporation (Bic), formerly
known as Waterman-BIC Pen Corporation, is a New York
corporation having its principal place of business at Milford,
Connecticut. Bic manufactures and sells various types of ball
point pens throughout the United States (including the Central
District of California), identified by the trademark and name
BIC.
4. On September 20, 1966, United States Trademark
Registration No. 815,488 was issued to Lindy for the word
“Auditor’s" in connection with ball point pens. Lindy perfected
the registration by filing declarations under Sections 8 and 15
of the Lanham Trademark Act, 15 U.S.C. §§ 1058 and 1065.
Lindy assigned this trademark to Blackfeet on December 2,
1981.
5. Lindy has been diligent in policing adoptions of the
term "Auditor’s" or variations thereof as marks for ball point
pens. In some ten instances Lindy has notified various ball
point pen manufacturers or distributors of its trademark, each
of whom, including -Bic, voluntarily stopped using the term
“Auditor’s."
6. In March, 1965, Bic published a catalog showing,
and apparently sold, ball point pens having the mark
"Auditor’s" stamped on their barrels. On May 17, 1965, Mr.
Sidney Linden, president of Lindy, wrote to Bic claiming
trademark rights in the term “Auditor’s" and requesting that Bic
cease its use of that mark. Thereafter, correspondence ensued
between outside counsel for Bic and counsel for Lindy. The
“controversy” was resolved by Bic’s agreeing to cease the use
of the term “Auditor’s" on its pens after the exhaustion of its
then existing inventory.
7. In 1979 Bic began selling ball point pens with the
legend "Auditor’s Fine Point" stamped on the barrels. For 14
years prior to 1979, Bic did not use such a legend or term on
any of its products.
A2-2
~~ ¥
fe is
8. Bic decided to adopt the legend “Auditor’s Fine
Point" in 1979 upon the suggestion of Joel Fishkin, Bic’s
national commercial sales manager. Mr. Fishkin proposed to
take Bic’s "Fine Point" pen and “dress it up" to justify a higher
list price. The pen was to be sold in the commercial market at
a price substantially reduced from the list price. Bic chose the
term “Auditor’s" to identify the pen as having an extra-fine
point. Bic did not use its existing legend “Accountant Fine
Point" because it did not want to interfere with sales of that
pen, which is sold in the retail market.
9. Before Bic approved the use of the legend
“Auditor’s Fine Point," Bic’s in-house counsel Alan Lipson
made an inquiry into the propriety of using that legend. Mr.
Fishkin showed Mr. Lipson three catalog sheets and a pen, all
from different manufacturers, in which the term “Auditor’s" or
"Auditor" was used to describe a ball point pen. One of the
catalog sheets was for Lindy pens. The catalog sheet made no
reference to any claim of a proprietary interest, such as a
trademark, for the term “Auditor’s." After reviewing this
information, Mr. Lipson concluded that the terms "Auditor" and
"Auditor’s" were commonly used descriptive terms in which no
one was claiming registration rights. At the time Bic began
using the legend “Auditor’s Fine Point" in 1979, it was unaware
of Lindy’s registered trademark. All references to the earlier
1965 correspondence between Bic and Lindy were held by
outside counsel and were unknown to in-house counsel.
10. Mr. Lipson first became aware of Lindy’s
registered trademark when Lindy filed its complaint. Lindy
made no attempt to contact Bic to discuss Bic’s use of the
legend “Auditor’s Fine Point" prior to filing the complaint.
11. The term “Auditor’s" was selected by Lindy and
has been used by it to inform purchasers that these fine point
pens were designed for or would appeal to auditors, accountants
and others requiring a fine-point pen.
A2-3
12. Lindy’s customers, when ordering pens of the type
in suit, primarily refer to them as "460-F", a model number
used by Lindy.
13. Bic’s legend “Auditor’s Fine Point" was intended
as a grade or style designation, as distinguished from other
writing instruments manufactured by Bic and bearing such
legends as Medium Point, Deluxe Medium Point, Fine Point
and Accountant Fine Point. All of these pens were also
identified by defendant’s trademark and name BIC.
Bic chose the term “Auditor’s" to identify the pen as
having a fine point, and to be able to list the pen at a higher
price than its "Fine Point" pen. In addition, Bic did not want
to interfere with sales of its "Accountant’s Fine Point" sold in
the retail market.
14. The pens in suit are distinguishable. In addition,
the packaging and collateral display materials used by the
parties in connection with the sale of the respective pens are
dissimilar in graphic and textual content.
15. The trademarks and names BIC and LINDY are
prominently and repeatedly displayed on the parties’ respective
packaging and collateral promotional materials so as to avoid
any likelihood of confusion, mistake or deception as to source,
sponsorship or origin.
16. The term “Auditor’s" signifies a class of end users
as well as a specific type or model of fine point pen
manufactured by plaintiffs and defendant.
17. While Lindy advertised its pens, it has failed to
establish that it spent significant sums advertising _ its
"Auditor’s" pens as opposed to its other pens or Lindy pens in
general.
A2-4
18. Sales of Lindy’s pens have been decreasing for
several years. The decreasing sales of the “Auditor’s" pen is
consistent with the overall decline in Lindy’s business.
19. Strength of Plaintiffs’ Trademark. Plaintiffs’ mark
is weak. “Auditor’s" is a meaningful word in common usage
and, when used in the present contest, denotes a type or model
of pen distinguishable from broad point pens, laundry and dry
cleaning pens, chain-type pens, steno pens, desk pens and other
models or types of pens manufactured and sold by plaintiffs and
identified by the trademark and name LINDY.
20. Similarity of the Marks. Although Bic uses the term
“Auditor’s,” it is used in conjunction with other words ("Fine
Point") and defendant’s trademark and name ("BIC").
Considering the marks and names in their entirety and as they
appear in the marketplace, the marks are not confusingly
similar.
21. Evidence of Actual Confusion. There has been no
showing of actual confusion.
22. Proximity of the Goods and Marketing Channels
Used. Bic sells the “Auditor’s Fine Point" in the mail order
and telephone solicitation markets for resale to commercial and
industrial users. Some of these pens have been distributed for
sale in the retail market by third parties. While the exact
percentage of "Auditor’s Fine Point" pens produced that reaches
the retail market is unknown, it is only a small percentage.
Plaintiffs sell the “Auditor’s" pen to wholesalers for resale in
the retail market. Although some of Bic’s “Auditor’s Fine
Point" pens reach the retail market, on balance it is not
significant enough to put the two companies in the same channel
of trade.
23. Defendant’s Intent in Selecting the Mark. There is
no indication in the record that defendant sought to capitalize on
plaintiffs’ mark. Defendant’s use of its trademark and name
A2-5
"BIC" rebuts such an inference. As set forth above, Bic chose
the term to identify its pen as having an extra-fine point.
24. Likelihood of Expansion. There is no indication that
Bic intends to introduce the "Auditor’s Fine Point" pen into the
retail market. To do so could damage the sales of its
"Accountant Fine Point" pen. At this time it is only speculative
whether Blackfeet will distribute Lindy products in the
commercial market. In fact, the record indicates that one of
Blackfeet’s reasons for purchasing Lindy was to enter in the
retail market.
25. Type of Goods and the Degree of Care Likely to be
Exercised by the Purchaser. Plaintiffs and defendant sell ball
point pens of a variety fairly described as _ relatively
inexpensive, throw-away ball point pens having non-replaceable
ink cartridges so that when the ink supply is exhausted it is
expected that the customer will discard the pen and purchase a
new one. There is no indication that purchasers of plaintiffs’
and defendant’s ball point pens do not exercise ordinary
caution.
26. To the extent that any Conclusions of Law are
deemed Findings of Fact, they are incorporated herein.
CONCLUSIONS OF LAW
1. To the extent that any Findings of Fact are deemed
Conclusions of Law, they are incorporated herein:
I. Jurisdiction
2. This Court has jurisdiction over this case pursuant
to 28 U.S.C. §§ 1331(a) and 1338(a). Venue is proper under
28 U.S.C. § 1391(c).
Il. Trademark Infringement, Unfair Competition and False
Designation of Origin.
[1,2] 3. For plaintiffs to succeed on their trademark
infringement, unfair competition or false designation claims, the
Court must conclude that defendant’s use of plaintiffs’ mark
will cause a likelihood of confusion or deception as to the origin
of the goods. New West Corp. v. Nym Co., 595 F.2d 1194,
1201 (9th Cir. 1979); Carter-Wallace, Inc. v. Procter &
Gamble Co., 434 F.2d 794, 799-800 (9th Cir. 1970); Golden
Door, Inc. v. Odisho, 437 F.Supp. 956 (N.D. Cal.1977), aff'd,
646 F.2d 347 (9th Cir.1980). The same finding is required
under California law. Toho Co. v. Sears, Roebuck & Co., 645
F.2d 788, 791 (9th Cir.1981). “The test is not that there might
be a possibility of confusion as to the source of plaintiffs’ and
defendant(s} business, but rather whether there is a likelihood
of confusion as to source." HMH Publishing Co. v. Lambert,
482 F.2d 595, 598 (9th Cir. 1973).
4. The Ninth Circuit in AMF Inc. v. Sleekcraft Boats,
599 F.2d 341, 348-349 (9th Cir.1979), set forth the following
factors to consider in determining whether confusion is likely:
(A) Strength of plaintiffs’ trademark. "A ‘strong’
mark is one which is used only in a ‘fictitious, arbitrary and
fanciful manner’ ... whereas, a ‘weak’ mark is a mark that is
a meaningful word in common usage ... or is merely a
Suggestive or descriptive trademark .... A ‘strong’ mark is
entitled to a greater degree of protection than is a ‘weak’ one
because of its unique usage ....". New West Corporation v.
NYM Co., 595 F.2d at 1201-02 (quoting J.B. Williams Co. v.
Le Conte Cosmetics, Inc. 523 F.2d 187 (9th Cir.1975)
(Citations omitted)). Plaintiff’s mark is weak.
(B) Similarity of the marks. “Similarity of the
marks is tested on three levels: sight, sound, and meaning ....
Each must be considered as they are encountered in the
marketplace." AMF Inc. v. Sleekcraft Boats, 599 F.2d at 351.
- Bp
See also, Alpha Indus, Inc. v. Alpha Steel Tube & Shapes, Inc.
616 F.2d 440, 444 (9th Cir. 1980); Pignons S.A. de Mecanique
dePrecision v. Polaroid Corp., 657 F.2d 482, 487 (lst
Cir.1981). The marks in suit are not confusingly similar.
(C) Evidence of Actual Confusion. "‘Evidence that
use of two marks has already led to confusion is persuasive
proof that future confusion is likely .... Proving actual
confusion is difficult, however, ... and the courts have often
discounted such evidence because it was unclear or
insubstantial’ .... Moreover, selection of a mark with a common
word, just as one with a common surname, ‘naturally entails a
risk of some uncertainty and the law will not assume absolute
protection.’" Alpha Indus, Inc. v. Alpha Steel Tube & Shapes,
Inc. 616 F.2d at 445 (citations omitted). here there has been no
showing of actual confusion.
(D) Proximity of the Goods and the Marketing
Channels Used. Convergent marketing channels increase the
likelihood of confusion, AMF Inc. v. Sleekcraft Boats, 599
F.2d at 353, but the Court should consider the entire situation
"on balance" in determining whether products are in the same
channel of trade. See Alpha Indus., Inc. v. Alpha Steel Tube
& Shapes, Inc. 616 F.2d at 445. The pens in suit are generally
not in the same channel of trade.
(E) Defendant’s Intent in Selecting the Mark. "If
the latecomer adopts the name or mark deliberately to capitalize
on the prior user’s tradename and thus cause and benefit from
confusion, that is an important factor in finding the likelihood
of confusion.” Id. at 446. To raise an inference of a likelihood
of confusion, plaintiffs must show that Bic intended to profit by
confusing consumers. Toho Co. v. Sears, Roebuck & Co., 645
F.2d at 791 n. 2. There is no indication in the record that
defendant sought to capitalize on plaintiffs’ mark.
(F) Likelihood of Expansion. "[A] ‘strong
possibility’ that either party may expand his business to compete
A2-8
eo
ae ee
with the other will weigh in favor of finding that the present use
is infringing." AMF Inc. v. Sleekcraft Boats, 599 F.2d at 354.
There is no such finding in this case.
(G) Type of Goods and the Degree of Care Likely
to be Exercised by the Purchaser. “In assessing likelihood of
confusion to the public, the standard use by the courts is the
typical buyer exercising ordinary caution." Id. at 353.
5. The Court’s findings of fact regarding these factors
are set forth above. Based on those findings, I conclude that
there is no likelihood of confusion as to the source of plaintiffs’
or defendant’s pens, and that Bic has not infringed plaintiffs’
trademark and is not guilty of unfair competition or false
designation of origin.
III. Incontestability
6. Plaintiffs’ trademark is valid and "incontestable"
under § 15 of the Lanham Trademark Act, 15 U.S.C. § 1065.
[3,4] ]7. Assuming that § 15 may be used as a “sword,” see
Union Carbide Corp. v. Ever-Ready Inc. 531 F.2d 366, 371-
377 (7th Cir.), cert. denied, 429 U.S. 830, 97 S.Ct. 91, 50
L.Ed.2d 94 (1976); but see Tillamook County Creamery Ass’n
v. Tillamook Cheese and Dairy Ass’n, 345 F.2d 158, 163 (9th
Cir.), cert. denied, 382 U.S. 903, 86 S.Ct. 239, 15 L.Ed2d 157
(1965), I find that defendant uses the term “Auditor’s"
“otherwise than as a trade or service mark" and that the term
"is descriptive of and used fairly and in good faith only to
describe ... its pens." 15 U.S.C. § 1115(b)(4). Defendant uses
the legend “Auditor’s Fine Point" to tell the public what type of
product it is by referring to a class of user for whom the pen is
suited. Defendant’s “fair use" is therefore a defense to
infringement. See Abercrombie & Fitch Co. v. Hunting World,
Inc. 537 F.2d 4, 12 (2d Cir.1976); see generally Ideal Indus..,
Inc. v. Gardner Bender, Inc. 612 F.2d 1018, 1027 (7th
Cir.1979), cert. denied, 447 U.S. 924, 100 S.Ct. 3016, 65
A2-9
}
L.Ed.2d 1116 (1980); 1 J. McCarthy, Trademarks and Unfair
Competition § 11.17 (1973). When a plaintiff chooses a mark
with some descriptive qualities, he cannot exclude all competing
uses even though the mark is properly registered. Abercrombie
& Fitch Co. v. Hunting World, Inc., 537 F.2d at 12. As in
that case, “it is significant that [Bic] did not use [’Auditor’s’}
alone ... as it would doubtless have done if confusion had been
intended." Id. at 13. And even if Bic were aware of plaintiffs’
trademark, more than simple knowledge of prior use is needed
to show an intent to misappropriate good will where, as here,
plaintiffs chose a highly descriptive mark and defendant merely
chose a descriptive word to identify its product. E.R. Squibb
& Sons, Inc. v. Cooper Laboratories, Inc., 536 F.Supp. 523,
532 (S.D.N.Y.1982).
IV. Breach of Contract
[5] 8. Plaintiffs’ breach of contract claim is groundless.
The record is devoid of any evidence of a binding agreement
between the parties precluding Bic from using the term
"Auditor’s."
V. Dilution
[6] 9. Bic has not diluted plaintiffs’ trademark within the
meaning of California Business and Professional Code § 14330.
"The dilution doctrine has been described as granting protection
to strong, weil recognized marks even in the absence of a
likelihood of confusion, if defendant’s use is such as to tarnish,
degrade or dilute the distinctive quality of the mark.’" Toho
Co. v. Sears, Roebuck & Co., 645 F.2d at 793. Plaintiffs’
mark is neither strong nor distinctive and plaintiffs have failed
to prove that Bic has tarnished, degraded or diluted plaintiffs’
mark. See AMF Inc. v. Sleekcraft Boats, 599 F.2d at 345
Se P
A2-10
VI. Reverse Confusion
[7] 10. Plaintiffs have failed to establish “reverse
confusion" as defined by the Court in Big O Tire Dealers, Inc.
v. Goodyear Tire & Rubber Co., 561 F.2d 1365, 1371 (10th
Cir.1977), cert. dismissed, 434 U.S. 1052, 98 S.Ct. 905, 54
L.Ed.2d 805 (1978). As discussed above, there is no likelihood
of confusion as to the source of plaintiffs’ or defendant’s pens.
VII. Additional Conclusions of Law.
11. Plaintiffs’ mark is “merely descriptive” and not
"suggestive"; little imagination is needed to reach a conclusion
as to the nature of the product. Allowing plaintiffs the
exclusive use of the term “Auditor’s” would unduly inhibit the
legitimate use of the mark by other sellers; and there is no
indication that the public views plaintiffs’ trademark as an
indication of the product’s origin rather than a description. See
AMF Inc. v. Sleekcraft boats, 599 F.2d at 349.
12. Plaintiffs have not shown that their trademark has
acquired secondary meaning. “The basic element of secondary
meaning is a mental recognition in buyers’ and potential buyers’
minds that products connected with the symbol or device
emanate from or are associated with the same source. As
recognized in this circuit, "[s}Jecondary meaning has been
defined as association[{,] nothing more.’" Levi Strauss & Co.
v. Blue Bell, Inc., 632 F.2d 817, 820 (9th Cir. 1980). The
words must connote to the public a product from a unique
source. 1 J. McCarthy, Trademarks and Unfair Competition §
11:9 (1973).
13. Defendant’s estoppel argument and reliance on the
pre-Lanham Act case Walgreen Drug Stores, Inc. v. Obear-
Nester Glass Co., 113 F.2d 956 (8th Cir.), cert. denied, 311
U.S. 708, 61 S.Ct. 174, 85 L.Ed, 459 (1940), is without merit
and was previously rejected by this Court.
A2-11
Accordingly, judgment shall be entered in favor of
defendant Bic and against plaintiffs Lindy and Blackfeet.
A2-12
APPENDIX 3
UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
LINDY PEN COMPANY,
INC., and BLACKFEET
PLASTICS, INC.,
ee ee ee ee
Plaintiffs, No. CV 80-010-CHH
v. ) SUPPLEMENTAL
) FINDINGS OF
BIC PEN CORPORATION, ) FACT AND
) CONCLUSIONS OF
Defendant. ) LAW
)
Pursuant to the directions of the Court of Appeals for the
Ninth Circuit in Lindy Pen Co., Inc. v. Bic Pen Corp., 725
F.2d 1250 (9th Cir. 1984), the Court hereby enters the
following Supplemental Findings of Fact and Conclusions of
Law. These findings of fact supplement the Findings of Fact
previously issued by the Court in Lindy Pen Co., Inc. v. Bic
Pen Corp., 550 F. Supp. 1056 (C.D. Cal. 1982), and the
Conclusions of Law contained herein are specifically directed
to the issue of trademark infringement in the telephone sales
market for plaintiffs’ and defendant’s ballpoint pens.
FINDINGS OF FACT
1. The “telephone sales market" is comprised of two
separate submarkets. First, pens are sold by telephone
solicitors to large commercial and industrial users. This
submarket will be referred to as the “telephone solicitation
market." Second, some retail or commercial customers use the
telephone to place orders for pens with office supply stores or
A3-1
other wholesale dealers. This submarket will be referred to as
the “telephone order market."
2. Bic sells a substantial number of “Auditor’s Fine
Point" pens to companies that resell the pens in the telephone
solicitation market. Lindy, on the other hand, has never sold
more than a minimal fraction of its “Auditor’s" 460-F pens in
the telephone solicitation market, and did not appear to sell any
such pens in this market at the time of trial.
3. The name "Bic" is an important factor to consumers
who purchase pens in the telephone solicitation market.
4. The ultimate consumer in the telephone solicitation
market is the purchasing agent of large- to medium-sized
corporations and purchasing agents or owners of retail stores.
These consumers are sophisticated purchasers who exercise
caution in making purchases, and are not as likely to be
confused or deceived as consumers who buy pens from retail
outlets.
5. There is no evidence that any purchasers in the
telephone solicitation market ever returned any pens io the
seller, or otherwise complained to the seller, because they
received Bic pens instead of Lindy pens, or vice versa. There
is no evidence of any actual confusion between Bic and Lindy
pens arising among purchasers in the telephone solicitation
market.
6. Both Bic and Lindy pens are sold by wholesale or
retail outlets, such as office supply stores, to customers in the
telephone order market.
7. Sales in the telephone order market are initiated by
customers, not by the seller (as is the case in the telephone
solicitation market).
A3-2
8. Telephone order customers use various terms to
describe the pens they wish to purchase. Some customers refer
to the pens by the name of the manufacturer, others use the
model number, while others simply ask for an “Auditor’s" pen.
9. Telephone order customers have an opportunity to
inspect the pens they purchase upon delivery. There is no
evidence that any customers have ever returned pens to the
seller, or complained to the seller, because they received Bic
pens instead of Lindy pens, or vice versa. There is no evidence
of any actual confusion between Bic and Lindy pens arising
among purchasers in the telephone order market.
10. Any Conclusion of Law deemed a Finding of Fact
is incorporated herein.
CONCLUSIONS OF LAW
1. Any Finding of Fact deemed a Conclusion of Law
is incorporated herein.
2. Plaintiffs’ mark is a weak one. Bic adopted the
designation “Auditor’s Fine Point" without intent to capitalize
on Lindy’s mark. Lindy Pen Co., Inc. v. Bic Pen Corp., 725
F.2d 1240, 1244 (9th Cir. 1984).
3. The marks "Auditor’s Fine Point" and “Auditor’s"
are confusingly similar when initially encountered in the
telephone sales market, since the purchaser is not able to view
the product at the time of purchase. /d. at 1246. A purchaser
may, however, view the pens when they are delivered following
the purchase. At this time, the marks are "readily
distinguishable," Jd. at 1245, due to the opportunity for a visual
examination of the pens and their packaging.
4. There is no evidence of actual confusion in either
the telephone solicitation or telephone order markets.
A3-3
5. Lindy and Bic sell pens in “convergent marketing
channels." Jd. at 1244-45.
6. There does not appear to be any likelihood that
either party will expand its business so as to increase the
convergence of the marketing channels. Lindy Pen Co., Inc. v.
Bic Pen Corp., 550 F. Supp. 1056, 1061 (C.D. Cal. 1982).
7. Consumers in the telephone solicitation and order
markets exercise a greater degree of caution than consumers in
the retail market. The telephone solicitation market targets
purchasing agents who buy large quantities of office supplies.
As professional purchasers, these consumers exercise great care
in ensuring that they understand whether they are receiving Bic
or Lindy pens. Consumers in the telephone order market are
also professional purchasers, and use a high degree of care in
their purchases. In cases where a particular purchaser deals
with the same seller over an extended period of time, the seller
will generally know whether Bic or Lindy pens are desired even
if the buyer simply orders "Auditor’s" pens.
8. In weighing all of the factors enumerated above,
Lindy has failed to establish a likelihood of confusion between
its and Bic’s pens in the telephone sales market.
9. Bic has not infringed plaintiffs’ trademark.
10. Bic has not engaged in unfair competition with
Lindy.
11. Bic is not liable for false designation of origin.
Dated: August 29, 1984.
/s/ Cynthia Holcomb Hall _
Cynthia Holcomb Hall
United States District Judge
A3-4
This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.