Betterbox Communications Ltd v. Bb Technologies, Inc. Black Box Corporation

300 F.3d 325, 59 Fed. R. Serv. 3d 605, 64 U.S.P.Q. 2d (BNA) 1120, 2002 U.S. App. LEXIS 16455, 2002 WL 1856493

• Court: Court of Appeals for the Third Circuit
• Decided: August 13, 2002
• Docket: 01-2456
• Status: Published

Opinions

OPINION OF THE COURT

ALITO, Circuit Judge.

This is an appeal in a declaratory judgment action commenced by Betterbox Communications, Ltd. (“Betterbox”), against Black Box Corporation (“Black Box”) and a wholly owned subsidiary. Betterbox and Black Box sell competing computer-related products through catalog marketing. In 1995, Betterbox, a British company, applied to the United States Patent and Trademark Office (“PTO”) for trademark registration based on its intended use of the Betterbox name and box design in the United States. Black Box objected that Betterbox’s name and box design infringed on its trademarks. Bet-terbox then brought this action in federal court seeking a declaration of no infringement, and Black Box counterclaimed for trademark infringement, unfair competition, and trademark dilution. After a trial, the jury returned a verdict for Betterbox, and the District Court entered judgment accordingly on November 16, 2000. In post-trial orders, the District Court denied Black Box’s motions for a new trial under Fed.R.Civ.P. 59(a) and for relief from judgment under Fed.R.Civ.P. 60(b). This appeal followed.

On appeal, Black Box argues that the District Court erred in admitting the testimony of Betterbox’s expert witness, in admitting evidence of Betterbox’s trademark registrations in foreign countries, and in refusing to grant relief from the judgment based on newly discovered evidence. We review these rulings for an abuse of discretion. See In re Cendant Corp. PRIDES Litig., 234 F.3d 166, 170 (3d Cir.2000); Abrams v. Lightolier Inc., 50 F.3d 1204, 1213 (3d Cir.1995). We affirm.

I.

Betterbox and Black Box each sought to introduce the testimony of an expert witness on the following question: whether there was a likelihood that consumers would be confused by the Betterbox and Black Box marks. Each side also filed a pre-trial motion in limine to exclude the other’s expert, but the District Court permitted both experts to testify.

A.

Black Box argues that the District Court erred because Betterbox’s expert, John Schulte, lacked the qualifications needed by an expert. The admissibility of expert testimony is governed by Federal Rule of Evidence 702, which requires an expert witness to have “specialized knowledge” regarding the area of testimony. “The basis of this specialized knowledge ‘can be practical experience as well as academic training and credentials,’ ” and “[w]e have interpreted the specialized knowledge requirement liberally.” Waldorf v. Shuta, 142 F.3d 601, 625 (3d Cir.1998) (citation omitted). However, “ ‘at a minimum, a proffered expert witness ... must possess skill or knowledge greater than the average layman Id. (citation omitted). See also, e.g., Elcock v. Kmart Corp., 233 F.3d 734, 741 (3d Cir.2000).

In the present case, the District Court did not abuse its discretion in ruling that Schulte’s practical experience sufficed under this liberal test. Schulte had worked actively for 20 years in the field of direct marketing and mail-order catalogs. He had extensive experience in “marketing and the use of logos and how they are used in the marketplace as far as advertising.” Appendix at 317. As the chairman of the National Mail Order Association, he had consulted with the Association’s members on how to market through catalogs, had edited the Association’s publication Mail Order Digest, and had reviewed and analyzed about 10,000 catalogs in the previous five years. He had published a variety of articles on direct marketing, had taken courses in graphic design, and had designed corporate logos. Schulte even had about four years’ experience as the owner of a business involved in the direct marketing of computer products.

Black Box argues that Schulte’s experience with respect to the marketing of computers was insufficient because he had worked in that specific field for only four years and because that experience had preceded the time of the trial by eight years. See Appellant’s Br. at 17. This argument is not persuasive. Four years of experience at the helm of a company is substantial, and Black Box has not explained why the passage of eight years between that period and the commencement of the trial diminished Schulte’s qualifications. If Schulte had been called to testify as an expert regarding a field of knowledge that had changed greatly during the past few years, Black Box’s argument might have force, but Black Box has not called to our attention any such changes regarding the question whether the competing marks in this case created a likelihood of confusion.

Black Box also faults Schulte’s experience because it did not concern “the catalog marketing of electronic data communications and computer connectivity products.” Id. at 18. As noted, however, Schulte had extensive experience in catalog marketing, as well as four years of experience marketing computer products. Black Box has not pointed out anything that is fundamentally different about the catalog marketing of “data communications and computer connectivity products” as opposed to other computer products. Id. Thus, Schulte’s lack of experience in marketing the precise type of computer components sold by these companies does not establish that the District Court abused its discretion in ruling that his qualifications met the standard of Rule 702.

Black Box argues, finally, that Schulte did not have experience in evaluating the so-called Lapp factors that we have found to be useful in determining whether there is a likelihood of confusion between marks. See Interpace Corp. v. Lapp, Inc., 721 F.2d 460, 463 (3d Cir.1983); A & H Sportswear, Inc. v. Victoria’s Secret Stores, Inc., 237 F.3d 198, 210-15 (3d Cir.2000). These factors, however, are not mandatory; they “are meant to be tools, not hurdles.” A & H SpoHswear, 237 F.3d at 214. Schulte’s experience plainly related to a number of the Lapp factors, namely, factors (1), (3), (7), (8), and (9). For all these reasons, we see no basis for disturbing the District Court’s determination regarding Schulte’s qualifications.

B.

Black Box also argues that Schulte should not have been allowed to testify as an expert because his methodology was deficient. In Daubert v. Merrell Dow Pharms., Inc., 509 U.S. 579, 592-93, 113 S.Ct. 2786, 125 L.Ed.2d 469 (1993), the Supreme Court held that under Rule 702 the trial judge must make “a preliminary assessment of whether the reasoning or methodology underlying the [expert’s] testimony is scientifically valid.” The Court noted factors relating to the reliability of an expert’s scientific methodology, including whether the theory or technique “can be (and has been) tested,” whether it “has been subjected to peer review and publication,” whether the known or potential error rate is acceptable, and whether it is generally accepted within a relevant scientific community. Id. at 593-94. But the Court stressed that “[t]he inquiry envisioned by Rule 702 is ... a flexible one.” Id. at 594.

In Kumho Tire Co. v. Carmichael, 526 U.S. 137, 149-50, 119 S.Ct. 1167, 143 L.Ed.2d 238 (1999), the Court held that the basic gatekeeping function described in Daubert applies to all expert testimony, not just “scientific” testimony. But the Court added that in cases not involving scientific testimony, “ ‘[t]he factors identified in Daubert may or may not be pertinent in assessing reliability, depending on the nature of the issue, the expert’s particular expertise, and the subject of his ,testimony.’ ” Id. at 150 (citation omitted). In such cases, the Court said, “the relevant reliability concerns may focus upon personal knowledge or experience.” Id. In addition, the Court made it clear that a court of appeals is to apply an abuse-of-discretion standard, not only to a trial court’s ultimate decision to admit or exclude expert testimony, but to “the trial court’s decision about how to determine reliability.” Id. at 152.

In the present case, Schulte’s testimony was based on his “personal knowledge or experience,” Kumho Tire, 526 U.S. at 150, 119 S.Ct. 1167, rather than a methodology that satisfies the Daubert factors. Schulte testified that he examined the companies’s catalogs, that he informally surveyed colleagues, and that he evaluated the catalogs’ target market. In his report, he stated that he focused on the following factors: “[t]he perception of the names,” “[t]he sophistication of the target audience/market,” “[t]he graphic logo design,” and “[t]he presence in the market place and the look and feel of the catalogs.” Appendix at 86. Although he did not consider all of the factors that we noted in A & H Sportswear, his analysis tracked many of them.

In order to hold that the District Court erred in admitting Schulte’s testimony, we would have to conclude that the District Court abused the considerable discretion that it enjoyed to determine the criteria for judging reliability under the particular circumstances present here. We find it unnecessary, however, to decide this question because we are convinced that even if the District Court erred, the error was harmless.

In a civil case, an error is harmless if it is highly probable that it did not affect the complaining party’s substantial rights. See McQueeney v. Wilmington Trust Co., 779 F.2d 916, 924, 926 (3d Cir.1985). Under this standard, the admission of Schulte’s testimony, even if erroneous, was harmless. Our reading of the record reveals that Betterbox did not rely heavily on that testimony. For example, in his closing, Betterbox’s attorney made only a passing reference to Schulte, suggesting that the jury consider that testimony in conjunction with its own common sense. See Appendix at 792. In addition, the simplicity of Schulte’s methodology diminished the likelihood that it unduly swayed the members of the jury. The jurors were able to examine the marks themselves and consider whether, under the instructions given by the court, they were confusingly similar. The testimony of Black Box’s expert, William Dean, must also be considered. Dean testified for Black Box on likelihood of confusion, and his qualifications and methodology were nearly indistinguishable from Schulte’s. Dean’s methodology was even simpler than Schulte’s. He did not conduct any survey but instead, relying on his experience, he examined the competing catalogs and rendered an opinion of likely confusion.

The District Court, as noted, admitted the testimony of both experts. If the District Court had agreed with Black Box’s arguments regarding Schulte’s testimony, it would have been compelled to exclude Dean’s testimony as well. We see no reason to believe that Schulte’s testimony was any more convincing than Dean’s, and Black Box has not offered any such reason. Taking all these factors into account, we are convinced that any error in admitting Schulte’s testimony was harmless.

II.

At trial, Betterbox introduced evidence of its existing trademark registrations in Canada, the United Kingdom, and the European Union. Black Box argues that this evidence was irrelevant and highly prejudicial and therefore should not have been admitted. First, Black Box contends that because trademark law is territorial in nature, evidence about Bet-terbox’s trademarks in countries other than the United States was irrelevant. Second, Black Box maintains that this evidence prejudiced the jury by creating “a false impression that Betterbox had obtained rights in and to the Betterbox name and box design in the United States by virtue of having used and registered its trademarks outside the United States.” Appellant’s Br. at 24 (emphases added).

We are not persuaded by Black Box’s arguments. Below, Black Box had asserted that Betterbox was attempting intentionally and in bad faith to trade off Black Box’s name. Black Box also had alleged actual trademark confusion among consumers in Europe. See Appendix at 41, 384, 470, 761. In response, Betterbox sought to introduce evidence that it was using its trademarks in Europe lawfully. This evidence was relevant, i.e., it had a tendency to prove good faith. The District Court ruled this evidence admissible because it was “precisely this type of evidence which is relevant to [Black Box’s] allegations of willful or intentional conduct.” Appendix at 74.¹ We agree. We also see no basis for disturbing the District Court’s refusal to exclude this evidence under Federal Rule of Evidence 403. The District Court had broad discretion in ruling on the Rule 403 request, see e.g., United States v. Lopez, 271 F.3d 472, 482 (3d Cir.2001), and we note that the Court gave a limiting instruction regarding this evidence. See Appendix at 754.

III.

Black Box’s final argument is that the PTO’s cancellation of Betterbox’s trademark registration a few weeks after trial constitutes “newly discovered evidence” that entitled Black Box to relief from the judgment under Fed.R.Civ.P. 60(b).

Betterbox’s application for registration succeeded shortly after Black Box apparently ceased to oppose the application. The PTO issued to Betterbox Registration No. 2,288,337 on October 26, 1999. According to counsel for Black Box, an employee of counsel’s firm spoke by telephone to a PTO official shortly before the trial began on November 13, 2000. The official reportedly stated orally that the Betterbox registration had been inadvertently issued and would be canceled but that the PTO could not locate the Better-box file at that time.²

Black Box moved in limine to exclude the Betterbox certificate of registration. The District Court stated that it was inclined to exclude the certificate if it received “some sort of official writing from the Patent Office — that this registration is going to be recalled or revoked.” Appendix at 379. However, without such a writing, the Court stated, the registration certificate would be admissible. See id. No such writing was produced, and the Court admitted the certificate. On December 8, 2000, about three weeks after trial, the PTO issued a notice that Betterbox’s application would be forwarded to the Commissioner of Trademarks “for cancellation of inadvertently issued Registration ... and [for] restoration to pending application status.” Appendix at 164.

Under Rule 60(b), newly discovered evidence must be evidence that “by due diligence could not have been discovered in time to move for a new trial under [Fed. R.Civ.P. 59(b) ].” In addition, the evidence must be “evidence of facts in existence at the time of trial.” Bohus v. Beloff, 950 F.2d 919, 930 (3d Cir.1991); see also United States v. Jasin, 280 F.3d 355, 362 (3d Cir.2002) (criminal case).

Because newly discovered evidence must concern facts in existence at the time of trial, the notice of cancellation of the Bet-terbox registration cannot qualify as newly discovered insofar as it simply shows that the Betterbox registration was canceled. This is so because the fact of cancellation was not in existence at the time of trial. Recognizing this, Black Box suggests that the post-trial cancellation shows that, at the time of trial, the PTO had already decided to cancel the Betterbox registration but had simply not yet done so due to administrative delay. However, the December 8 notice of cancellation does not reveal that a decision to cancel had been made at the time of trial.³

Furthermore, even if such an internal decision had been made, Black Box has not shown that it exercised due diligence, in attempting to obtain evidence of such a decision. Black Box did not attempt to depose or subpoena anyone from the PTO. We suspect, as Black Box argues, that the PTO would have refused to provide any evidence about an internal decision that had not been officially released, but the fact remains that Black Box did not take the obvious steps that would have demonstrated this.

Black Box also did not ask for a trial continuance for the purpose of obtaining evidence that cancellation was imminent. We would view this appeal differently if the District Court had denied a continuance and admitted the Betterbox registration despite a credible proffer that the PTO was in the process of canceling that registration. But that is not what occurred.

We review the denial of Black Box’s Rule 60(b) motion for abuse of discretion. See In re Cendant Corporation PRIDES Litigation, 234 F.3d 166, 170 (3d Cir.2000). “ ‘[W]e will not interfere with the [District [C]ourt’s exercise of discretion unless there is a definite and firm conviction that the court ... committed a clear error of judgment.’ ” Id. (citation omitted). Under this standard, we cannot overturn the District Court’s ruling.

IV.

For the foregoing reasons, we affirm the judgment of the District Court.

1 . This evidence could reasonably be admitted to show that Betterbox's intent in entering the United States was not to poach on Black Box's established mark but rather to build on Betterbox's own goodwill, already accumulated in other countries.

2 . Several weeks after the conclusion of the trial, the PTO finally found the file of Black Box's opposition, which the PTO had been unable to locate throughout the trial. In the cancellation notice, dated December 8, 2000, the PTO offered a chronology of the proceedings concerning Betterbox’s trademark. See Appendix at 162-64.

In July 1997, Black Box filed with the PTO a notice of opposition (Opposition No. 107,-801) against Betterbox's application for trademark registration (Serial No. 75/011,373). Betterbox timely filed its answer. In June 1999, the PTO ordered Black Box to show cause why it had failed to file its brief. Then the alleged rupture in communication occurred. Black Box claims it sent a response to the PTO on July 7, 1999. "For reasons unknown to the [PTO's Trademark Trial and Appeal] Board,” this response was not “associated with the file” at the PTO until after the trial. Appendix at 164. Apparently unaware of any response from Black Box, the PTO ordered dismissal with prejudice of Black Box's opposition. Six days later, on August 26, Black Box allegedly sent the PTO a response to the dismissal order, but this response was likewise inexplicably "not associated with the file.” Appendix at 164.

Following the perceived cessation of opposition, the PTO issued Betterbox its registration in October 26, 1999. Exactly a year later, in preparation for trial, Black Box faxed copies of its two responses (dated July 7 and August 26) to the PTO. Unfortunately, the PTO was unable to locate Black Box’s opposition file in its warehouse until several weeks after trial. On December 8, 2000, the PTO ordered Betterbox's registration canceled as "inadvertently issued” and restored the application to "pending” status. Appendix at 164.

3 . We note the future tense of the December 8 notice, stating that Betterbox’s file "will be forwarded ... for cancellation.” Appendix at 164. Moreover, we cannot infer that the mere filing of Black Box’s opposition prior to trial rendered cancellation a fact in existence during the trial.

A party that disputes the right of another to register its mark can resist at two stages of the administrative process: (1) after the application (by filing an opposition) or (2) after registration occurs (by filing a petition to cancel). Filing an opposition, as Black Box did here, does not automatically nullify a trademark application. Instead, the filing initiates an adversarial process that is adjudicated by the PTO’s Trademark Trial and Appeal Board.

To successfully prosecute an opposition, the opposer has the burden of proving two ele-merits: (1) standing, i.e., the opposer will likely be damaged by the registration, and (2) valid grounds why the applicant is not entitled to register the mark it claims. See J. Thomas McCarthy, McCarthy on Trademarks and Unfair Competition § 20:1 et seg. (4th ed.2001); Siegrun D. Kane, Trademark Law. A Practitioner's Guide § 18 (3rd ed.2000). Similarly, filing a petition to cancel does not automatically cancel a trademark's registration; the opposer has the same burden of proving analogous elements. See id. Even if the proceeding results in a cancellation, the cancellation does not typically have retroactive effect. Absent contrary direction from the PTO, the registration was valid until canceled.