Hayward Industries, Inc. v. BlueWorks Corporation

District Court, W.D. North Carolina·Decided January 25, 2024·No. 3:20-cv-00710·Unknown

Opinion

UNITED STATES DISTRICT COURT WESTERN DISTRICT OF NORTH CAROLINA CHARLOTTE DIVISION 3:20-cv-710-MOC-DSC

HAYWARD INDUSTRIES, INC., ) ) ) Plaintiff, ) ) ORDER vs. ) ) BLUE WORKS CORPORATION, et al., ) ) Defendants. ) ___________________________________ )

THIS MATTER is before the Court on Plaintiff Hayward Industries, Inc.’s Motion for Summary Judgment on Claims of Trademark Infringement, False Advertising, Passing Off, and Unfair Competition, (Doc. No. 119), Plaintiff’s Motion for Summary Judgment on Defendant’s Trademark Cancellation Counterclaim, (Doc. No. 142), Defendant Blue Works Corporation’s Motion for Summary Judgment of No False Advertising on Statements Regarding Compatibility and No Lost Profits, (Doc. No. 180), and Defendant’s Motion for Summary Judgment of Plaintiff’s Claims with Respect to the Turbo Cell, T-Cell, T-Cell-9, and T-Cell-15 Marks, (Doc. No. 189). The Court held a hearing on the motions on August 21, 2023.1 This matter is ripe for disposition. I. FACTUAL AND PROCEDURAL BACKGROUND This case involves a dispute between competitors in the pool industry. Plaintiff Hayward, which has a manufacturing facility in Charlotte, makes and sells pool chlorination systems, among other pool products. At issue here are chlorine generators, also known as “salt cell

1 Moreover, on January 18, 2024, Plaintiff submitted supplemental materials to support its summary judgment motion. systems,” that convert dissolved salt into chlorine to sanitize pools. Chlorine generator systems replace the need for liquid or tablet chlorine and are thus convenient for pool owners. Chlorine generator systems include a control panel and a “salt cell.” The control panel regulates the amount of chlorine generated by the salt cell. The cell itself, which has a limited use life, can be replaced with a new salt cell when the prior cell is exhausted. Salt cells are

roughly analogous to printer toner cartridges. Just as toner cartridges must be replaced periodically, so must salt cells. And just as toner cartridges are compatible only with printers produced by certain manufacturers, salt cells are only compatible with certain control panels. Plaintiff’s salt cells are compatible only with Plaintiff’s chlorination systems, in some cases particular versions of Plaintiff’s systems (e.g., Aquarite) and pool sizes. Consumers generally understand this usage. (See, e.g., Doc. No. 126 at 4, ¶ 15; Seraphine Decl., Ex. 4 (Paroline Depo. at 144:9–146:9, 145:20–146:9), Ex. 5 (NingboCF_000003), Ex. 6 (NingboCF_0000096)). Hayward’s salt cells are sold under various trademarks, including TURBO CELL® and T-CELL-15®, among others.

Named Defendants sell replacement salt cells compatible with Plaintiff’s chlorination systems and advertise them as such.2 Defendants use Plaintiff’s various T-Cell trademarks in their advertisements to indicate that Defendants’ salt cells are for use in specific models of Plaintiff’s various chlorination systems. Defendants’ Amazon presence offers a constructive example:

2 The named Defendants are BlueWorks Corporation, BlueWorks Innovation Corporation, Ningbo C.F. Electronic Tech Co., Ltd., and Ningbo Yishang Import and Export Co., Ltd. Plaintiff maintains that these companies are all connected and have acted in concert with one another for purposes of this lawsuit. The Court refers to these companies collectively as “BlueWorks.” 8/11/2020 Amazon.com : hayward t-cell-15 | all = hayward t-call-15 eines ae

1-16 of 99 results for “hayward t-cell-15" ‘Sort by: Featured 4 Amazon Prime Choice ; Hayward W3T-Cell-15 TurboCell Salt Chlorination Cell for In- Eligible for Free Shipping Ground Swimming Poals Free Shipping by Amazan a Ges on arders ove’ 425 shipped by i Amazon = Getit as soon as Sat, Au —_ □□ 15 me Department FREE Shipping by amazos Pool & Spa Replacement Parts Moré Buying Choices Feol Cleaning Teots'& Chemicals $404.99 (12 used & new offers) Swirnming Pool Chlorine Alternatives: Swimming Pool Chlorine Pool Pump Replacement Parts & BLUE WORKS BLT15-White Cell Compatible with Hayward deren tet Goldline AquaRite T-Cell-15 | Cell Plates Made by USA... Filters & Fitter Media 182 Pool Filters & Media eee ro Heaters & > $3 A900 ¢ 460 on See All 10 Departments \ Cog [ Get it as soon as Sat, Aug Avg, Customer Review 4 fa Shipping by Amazo! & Up & Up & Up & Up BLUE WORKS Pool Chlorine Generator Chlorinator BLH40 | Sead for 40k Gallon Pool | with Flow Switch and Salt Cell | Cell. Hayward 54 BLUE WORKS | 7 SPLASH | ‘Optimum Pool Technologies ir Géthtss san as Setup Price \ a J 1S 4 —~ FREE Shipping by Amazon Under $25 - —— $25 to $50 $50 to $100 $100 to $200 $200 & Above

Plaintiff maintains that Defendants, by using Plaintiff's various T-Cell trademarks in their advertisements, confusingly and deceptively suggest that Defendants’ salt cells are associated with or endorsed by Plaintiff. Plaintiff further contends that Defendants’ salt cells are falsely advertised as “compatible with” Plaintiff’s controllers. Plaintiff alleges that Defendants have thus used Plaintiff’s trademarks without permission and have deceptively passed off Defendants’ salt cells as endorsed, authorized, or even manufactured by Plaintiff for use in Plaintiff’s systems. Plaintiff further contends that Defendants made the following misrepresentations about Defendants’ salt cells in communications directed to Plaintiff's current and potential customers: e “Direct Replacement” for Plaintiff’s salt cells

● “Compatible with” Plaintiff’s controllers ● “Same as,” “Comparable to,” or “Equivalent to” Plaintiff’s salt cells ● “Same cell supplier as the original” ● “Made in USA same as ‘Hayward’” ● “NSF Certified”

● “Provide OEM services for the USA leading pool chlorinator manufacturers” Plaintiff brings the following claims against Defendants: trademark infringement, false advertising, counterfeiting, passing off, false designation of origin, unfair competition, and importation in violation of the Lanham Act, 15 U.S.C. § 1051 et seq.; North Carolina statutory and common law claims of unjust enrichment, tortious interference with prospective advantage, trademark infringement and unfair competition, and Unfair and Deceptive Trade Practices under N.C. Gen. Stat. § 75-1.1 et seq.; and infringement of Plaintiff’s copyright-protected works in violation of the Copyright Act. (Doc. No. 57). Defendants counterclaim, seeking an order from the Court finding that the trademarks are

invalid as generic or as having acquired secondary meaning. Plaintiff seeks summary judgment against Defendants’ counterclaim. Plaintiff also seeks summary judgment on its claims for false advertising (Count I), trademark infringement for TURBO CELL® (Count VI) T-CELL-3® (Count VII), trademark infringement for T-CELL-9® (Count VIII), trademark infringement for T-CELL-15® (Count IX), passing-off (Count XIV), false designation of origin (Counts XII and XIII), unfair competition (XVI), and North Carolina Unfair Deceptive Practices Act (Count XIX). Defendants filed their own Motion for Summary Judgment of Plaintiff’s Claims with Respect to the Turbo Cell, T-Cell, T-Cell-9, and T-Cell-15 Marks. Defendants also filed a separate summary judgment motion, asking that the Court find no false advertising based on Defendants’ statements in their ads regarding “compatibility.” Defendants also seek an order from the Court finding that Plaintiff’s damages calculation based on lost profits is flawed and should therefore be excluded. II. STANDARD OF REVIEW

The Court grants a party’s summary judgment motion “if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” FED. R. CIV. P. 56(a).

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