Trademark Law | Expert Legal Commentary

December 20, 2007

Custom Manufacturing v. Midway Services Case: No Likelihood of Confusion If There Is No Actual Perception

Custom Manufacturing and Engineering, Inc. v. Midway Services, Inc., et al.

By Olivier Taillieu of The Taillieu Law Firm

Custom Manufacturing v. Midway Services Case: No Likelihood of Confusion If There Is No Actual Perception

Component parts manufacturers will want to pay attention to this case. In Custom Mfrg. V. Midway et al, 508 F.3d 641 (2007), the 11th Circuit found that when there is minimal likelihood that a potential customer will see the allegedly infringing product, there is no likelihood of confusion, and therefore no infringement. The Court also narrowly interpreted the notion of who might be a potential “customer” for purposes of analysis of the “likelihood of confusion” element.

Background

The Plaintiff in the underlying case, Custom Manufacturing and Engineering, makes circuit boards for water meter reading systems. Custom was commissioned to design a water meter reading system for Midway Services – the final designed circuit boards bore a legend that read: “MFG by Custom Manufacturing and Engineering Inc. for Midway Services Inc.” The circuit boards were each fully encased in an opaque plastic housing unit and installed in apartment buildings.

Less than a year into the contract, the circuit boards began malfunctioning – Midway blamed the design and Custom blamed the installation. Midway cancelled the contract and hired replacements. Custom sued for damages; Midway countersued for breach of contract.

During the course of discovery in that litigation, Custom learned that the circuit boards installed by Midway subsequent to terminating the contract were based on Custom’s design and bore the Custom legend. Custom then initiated this case as a separation litigation matter.

Among the counts in the complaint , Custom sued Midway, as well as the companies that replaced Custom in the Midway contract, for violation of Section 43(a) the Lanham Act, which forbids:

“[A]ny false designation of origin, false or misleading description of fact, or false or misleading representation of fact,” which is “likely to cause confusion, or to cause mistake, or to deceive… as to origin, sponsorship, or approval of his or her goods, services, or commercial activities by another person.” 15 USC §1125(a)(1)(A).

Along the with trademark infringement count discussed herein, Custom also claimed violation of the Florida Deceptive and Unfair Trade Practices Act, Fla. Stat. § 501.201 et seq., and an allegation that the replacement companies had tortiously interfered with Custom’s business relationship in violation of Florida law. The Court granted summary judgment in favor of the defendants as to all counts. Only the infringement claim and Deceptive and Unfair Trade Practices Act claims were the basis of Custom’s appeal, and the appellate court stated that the latter claim must fail, by definition, because of its analysis of the infringement claim. 508 F3d at 652-653. The district court granted summary judgment in the defendants’ favor as to all counts. Custom appealed.

No customer was likely to see the part, so there was no likelihood of confusion

The 11th Circuit began its analysis by differentiating trademark infringement claims from other types of infringement, stating: “Unlike the general prohibition against unauthorized copying that exists in patent and copyright law…the touchstone of liability in a trademark infringement action is not simply whether there is unauthorized use of a protected mark, but whether such use is likely to cause consumer confusion.” 508 F.3d at 647.

The Court noted that Custom was specifically making a false designation of origin claim – claiming that the defendant has passed off the plaintiff’s products as his own. Id. In order to establish a prime facie case, Custom would need to show: 1) that the plaintiff had enforceable trademark rights in the mark or name, and 2) that the defendant made unauthorized use of it ‘such that consumers were likely to confuse the two.’” Id. (quoting Lone Star Steakhouse & Saloon Inc. v. Longhorn Steaks Inc., 106 F.3d 355, 358 (11th Cir. 1997)).

In the substantive portion of its decision, the Court only discussed the second factor – likelihood of confusion – because that was the sole basis of the parties’ arguments and the district court’s decision. The Court did have a lot to say about the first factor, however, as discussed below.

Regarding the second factor, likelihood of confusion, the Court acknowledged that the preferred way of analyzing this factor was through application of the seven factors set forth in Frehling Enters. Inc. v. Int’l Select Group, 192 F.3d 1330, 1335-41 (11th Cir. 1999). The Court noted that the district court had not relied on the Frehling factors, but that failure did not constitute reversible error, because likelihood of confusion analysis is not based on “mechanistic summation of the number of factors on each side; it involves an evaluation of the ‘overall balance…’ [A] court must also take into account the unique facts of each case.” 508 F.3d at 649.

The Court itself opted to forego analysis of the Frehling factors, and instead discussed the general likelihood of confusion in this particular case, saying: “This case does not resemble the paradigmatic ‘passing off’ case.” Id. at 650. The Court focused on two factors in particular: the likelihood that anyone would actually even see the legend on the offending circuit boards, and, if anyone did see that legend, who those people might be.

The Court talked about the difficulty someone would have to undergo in order to see the legend – they would have to find the transceivers in an attic or on a roof and, because it would likely be high up, they would have to get to it. Then, once they got to it, they would have to remove the plastic housing unit to see the board. Given these factors, the Court found it “unlikely” that the apartment owners and managers to whom Midway sold the water meter reading systems would remove these covers and examine the circuit boards contained therein.” Id. at 650.

Custom pointed out that it was not terribly unlikely that a repair technician or fire marshal or similar official might have occasion to view the circuit board, but the Court said; “This argument does not cut the mustard.” Id. at 651. The Court held that neither repair technicians nor fire marshals can be considered actual or potential customers for analysis under the Lanham Act. Id. Moreover, the remote possibility that one of these people might see the circuit board is insufficient. “[R]ecovery under the Lanham Act requires, at a minimum, ‘that confusion, mistake, or deception be ‘likely,’ not merely ‘possible.’” Id. (quoting Sears Roebuck & Co. v. All StatesLife Ins. Co., 246 F.2d 161, 168 (5th Cir. 1957)).

Ultimately, the Court found that even if there were an enforceable trademark, there was no actionable likelihood of confusion. The Court wrote: “Like a proverbial tree falling in the forest, the unauthorized use of a trademark that is never perceived by anyone cannot be said to create a likelihood of consumer confusion.” 508 F.3d at 652.

Defendants should have also attacked the enforceability of the claimed mark

In its opinion, the appellate court was clearly frustrated by defendants’ failure to attack the first element of the prima facie case – that Custom had an enforceable trademark in the first place. Rather than attack it, defendants had simply conceded that the mark was enforceable and focused its arguments on the likelihood of confusion element.

In a long footnote, the 11th Circuit analyzed Custom’s claimed mark, finding that “at worst, [it] is a generic mark,” which would have no Lanham Act protection at all, and “at best, [it] is descriptive,” which would require Custom to prove that its name had achieved a secondary meaning in the marketplace to warrant protection. 508 F.3d 641, n.8. The Court expressed serious doubt that Custom would have been able to demonstrate that its mark did warrant protection under the Lanham Act and noted that, had the defendants raised this argument, it would have ended the analysis without further inquiry into the likelihood of confusion.

Lessons for trademark holders and practitioners

When bringing an infringement action, it is prudent to clearly identify the relevant “customers” and provide as much evidence of a “likelihood of confusion” as possible. Even if the Frehling factors don’t all go your way, you may be able to swing the court by focusing heavily on a couple of more significant factors.

Component part manufacturers in particular may want to consider how to frame an argument regarding customer confusion, given the Custom Mfrg case. Because component parts are often placed into and sometimes covered up by other parts, it may give rise to the situation raised by the Custom court – a customer or potential customer may never see the part, depending how you frame those terms.

For defendants in infringement actions—don’t leave meat on the bone. Don’t concede to any element of the claim unless it’s clear that you should. Give the court as many outs as possible – if you can give the Court ammunition to end its analysis quick and early, do it.

About the Author

Olivier Taillieu is the Principal at The Taillieu Law Firm, a litigation boutique firm specializing in complex litigation.

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Olivier Taillieu

Companies Mentioned

Automated Engineering Corp.

Custom Manufacturing and Engineering, Inc.

MDCO, Inc.

Midway Services, Inc.

NTU Electronics, Inc.

Also See:

Brown v. Electronic Arts, Inc.: Lanham Act Protects Video Games, not Athletes

Already, LLC v. Nike, Inc.: Supreme Court Affirms that Covenant Not to Sue Can Moot Trademark Case

Louboutin v. Yves Saint Laurent: Second Circuit Upholds Trademark Protection for Red-Soled Shoes

Louis Vuitton Malletier S.A., v. Ly USA: Second Circuit Splits, Allows Attorney’s Fees Under § 1117(c) Trademark Infringement

Chloé v. Queen Bee: Exercising Personal Jurisdiction for Infringement in Internet Transactions

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Companies Mentioned

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The following companies are mentioned in Trademark Law Updates:

Louis Vuitton Malletier S.A.

Tiffany (NJ) Inc.

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eBay, Inc.

University of Southern California

University of Oklahoma

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Ohio State University

Louisiana State University

Collegiate Licensing Company

NTU Electronics, Inc.

Trademark Trial and Appeal Board

Midway Services, Inc.

MDCO, Inc.

Custom Manufacturing and Engineering, Inc.

Automated Engineering Corp.

Internet Specialties West, Inc.

Woofies, LLC d.b.a. Woofie’s Pet Boutique

International Trademark Association

Haute Diggity Dog, LLC

JA Apparel Corp.

Houndstooth Corp.

Harringbone Creative Services, Inc.

Mars, Inc.

Chute Gerdeman, Inc.

Take-Two Interactive Software, Inc.

Rockstar Games, Inc. d.b.a. Play Pen

Volkswagen of America, Inc.

Shokan Coachworks, Inc.

Audi AG

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Adagen Medical International, Inc.

Pfizer Inc.

Utah Lighthouse Ministry

JetAngel.com

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ESS Entertainment 2000, Inc. e.s.a. Rockstar Games, Inc.

Foundation for Apologetic Information & Research

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General Conference of Seventh-day Adventists

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U.S. Patent and Trademark Office

The Associated Press

Creation Seventh Day & Adventist Church

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