TEC Engineering v. Budget Molders

• Court: Court of Appeals for the First Circuit
• Decided: May 1, 1996
• Docket: 95-1975
• Status: Published

Opinion

USCA1 Opinion

United States Court of Appeals
                            United States Court of Appeals

                                For the First Circuit
                                For the First Circuit

                                 ____________________



        No. 95-1975



                                TEC ENGINEERING CORP.,



                                 Plaintiff, Appellee,



                                          v.



                           BUDGET MOLDERS SUPPLY, INC. AND

                           PLASTIC PROCESS EQUIPMENT, INC.,



                               Defendants, Appellants.



                                 ____________________



                     APPEAL FROM THE UNITED STATES DISTRICT COURT



                          FOR THE DISTRICT OF MASSACHUSETTS



                   [Hon. Nathaniel M. Gorton, U.S. District Judge]
                                              ___________________



                                 ____________________



                                        Before



                                Cyr, Boudin and Stahl,

                                   Circuit Judges.
                                   ______________



                                 ____________________



            Louis  M. Ciavarra  with whom  Barry  A.  Bachrach and  Bowditch &
            __________________             ___________________      __________

        Dewey were on brief for appellants.
        _____

            James C.  Donnelly,  Jr. with  whom  Charles  B. Straus,  III  and
            ________________________             ________________________

        Mirick, O'Connell, Demallie & Lougee were on brief for appellee.
        ____________________________________


____________________



                                    April 30, 1996

                                 ____________________



STAHL, Circuit Judge.  Budget Molders Supply, Inc.,
                      STAHL, Circuit Judge.
                             _____________



            and Plastic Process Equipment, Inc.,  (collectively "Budget")



            appeal  from   a  preliminary  order   enjoining  them   from



            manufacturing, marketing or  distributing certain  industrial



            conveyors  alleged  to  be confusingly  similar  to conveyors



            manufactured  and sold  by  appellee,  TEC Engineering  Corp.



            ("TEC").  Because  the district court failed to make findings



            of fact  and  conclusions of  law sufficient  to support  its



            decision as required by Fed. R. Civ. P.  52(a), we modify the



            injunction and remand for further proceedings.



                                          I.
                                          I.
                                          __



                                     Background1
                                     Background
                                     __________



                      TEC manufactures  a series  of conveyors  under the



            model  name "Ultraline,"  which it  markets primarily  to the



            plastics processing industry.   The  conveyors are  generally



            used  to transport lightweight  plastic products from molding



            machines in  which  they are  formed  to other  machines  for



            packaging.  TEC sells  the Ultraline conveyors under the  TEC



            name through independent sales representatives.  In addition,



            TEC authorizes an independent distributor,  Injection Molders



            Supply,  Inc.   ("IMS"),  to  advertise,  promote   and  sell


____________________



            1.  Our recitation of the  facts is hampered by the  district

            court's  failure   to  make  any  findings   in  issuing  the

            injunction.    To  provide  context, we  draw  the  following

            statement  from what  we perceive  as essentially  undisputed

            facts.   The statement is  not intended to  be binding on the

            district court.  



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Ultraline conveyors under the IMS tradename through IMS's own



            product   catalogues.    In   1994,  combined   domestic  and



            international  sales of  Ultraline  conveyors exceeded  2,000



            units, generating revenues of approximately $3 million.



                      Budget  has competed  with TEC  and  other conveyor



            manufacturers in the plastics  processing industry market for



            over five  years.   Budget markets its  conveyors exclusively
                                



            through direct-catalogue sales.   About January 1995,  Budget



            decided  to   modify  the  design  of  its  primary  line  of



            conveyors.    Consequently, Budget  soon  began  to market  a



            redesigned conveyor  under the  "Supraline"  model name  that



            closely resembled  TEC's Ultraline  conveyor.  Budget  labels



            each Supraline conveyor with the name "Budget Molders Supply,



            Inc."  in several  different places  on the  machine.   While



            these  Budget labels  cannot be  seen in  every advertisement



            photograph of  a Supraline  conveyor included in  the record,



            each Supraline advertisement prominently features  the Budget



            name (although not necessarily on the pictured conveyor), and



            several include the statement "Made in the USA by Budget."



                      It   appears  largely   undisputed  that   the  two



            conveyors, when  placed side by side,  are strikingly similar



            in  appearance.  Many of  the similarities shared  by the two



            machines,  however,  are  to  some  extent  functional.    In



            addition,  the  record  includes several  advertisements  for



            conveyors  sold by companies other than TEC or Budget.  These


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conveyors,   at  least   as   they  are   presented  in   the



            advertisements, also appear somewhat similar to the Ultraline



            and  Supraline  conveyors.     Moreover,  apparently  several



            companies  other than  TEC or  Budget incorporate  the suffix



            "line"  in the  model  names of  their respective  conveyors.



            Budget   notes  that,   in   addition   to  "Ultraline"   and



            "Supraline," other model names  for conveyors marketed to the



            plastics processing industry  include "A-line,"  "Flex-line,"



            "Slim-line," "Omni-line," and "Direct-line."



                      On  July  12, 1995,  TEC  brought  this action  for



            trademark infringement under section 43(a) of the Lanham Act,



            15  U.S.C.   1125(a).   In its complaint,  TEC alleges, inter
                                                                    _____



            alia,  that the trade dress  of its Ultraline  conveyors is a
            ____



            well-established mark in the industry and that, by developing



            and  marketing  its Supraline  conveyors, Budget  intended to



            exploit the goodwill  associated with that  trade dress.   On



            July 21, 1995,  the district  court held a  hearing on  TEC's



            request for  preliminary injunctive relief.   At the hearing,



            an Ultraline and a Supraline conveyor  were made available to



            the district court for review.



                      At the  close of  the hearing, the  court indicated



            that "it  believed the products are  confusingly similar" and



            that,  therefore, it  was  "inclined to  enter  some sort  of



            injunctive relief."  Nonetheless, the court declined to enter



            a ruling  at that time and  urged the parties to  resolve the


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matter  themselves.    Eventually,  on August  1,  1995,  the



            districtcourt enteredan orderenjoiningBudget from,inter alia,
                                                              _____ ____



                      manufacturing,  distributing,  promoting,

                      advertising, and/or selling:



                           1)    the horizontal,  inclined

                           and  variable  inclined  Budget

                           Supraline Conveyors; and

                           2)  any other conveyor which is

                           likely  to  cause confusion  or

                           mistake  in  the  minds of  the

                           public or to deceive purchasers

                           into   the   belief  that   the

                           defendant's   goods   are   the

                           plaintiff's   goods    or   are

                           affiliated with or sponsored by

                           the plaintiff.2 



                      Budget now appeals from this order.



                                         II.
                                         II.
                                         ___



                                      Discussion
                                      Discussion
                                      __________



                      In  ruling on  a preliminary  injunction motion,  a



            district  court  must  ask   whether  the  moving  party  has



            established  that  (1) it  has  a  substantial likelihood  of



            success  on   the  merits,  (2)  there   exists,  absent  the



            injunction, a  significant risk of irreparable  harm, (3) the



            balance of hardships tilts in its favor, and (4) granting the



            injunction will  not negatively  affect the  public interest.



            See, e.g.,  Hypertherm, Inc.  v. Precision Prods.,  Inc., 832
            ___  ____   ________________     _______________________



            F.2d 697, 699 n.2 (1st Cir. 1987).  Though the district court


____________________



            2.  The order  also  enjoins Budget  "from  producing  and/or

            distributing .  . . any advertising  or promotional materials

            which  depict the  Supraline  Conveyor or  any other  product

            which is confusingly similar to the Ultraline Conveyor."



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enjoys  considerable  discretion in  applying this  test, its



            decision  to grant or  deny a preliminary  injunction must be



            supported  by adequate  findings of  fact and  conclusions of



            law.    See Fed.  R.  Civ. P.  52(a);  Knapp  Shoes, Inc.  v.
                    ___                            __________________



            Sylvania Shoe Mfg. Corp., 15 F.3d 1222, 1228 (1st Cir. 1994).
            ________________________


The  requirements of  Rule  52(a)  are intended  to



            assure   that   the   district   court    gives   appropriate



            consideration to all essential relevant factors  and provides



            an  adequate basis  for  meaningful appellate  review of  its



            decision.  See  generally 9A  Charles A. Wright  & Arthur  R.
                       ___  _________



            Miller, Federal Practice and Procedure    2751, at 478-80 (2d
                    ______________________________



            ed. 1994).   The rule, however, is not intended to change the



            preliminary nature  of the  proceeding; in  the context  of a



            preliminary injunction motion,  the district court's findings



            need not be overly detailed, and  they do not bind the  court



            in subsequent proceedings.  See Aoude v. Mobil Oil Corp., 862
                                        ___ _____    _______________



            F.2d 890, 895 (1st Cir. 1988).  Moreover, the absence of Rule



            52(a)  findings  and conclusions  will  not be  fatal  in all



            cases.   We may overlook the defect, if our own review of the



            record substantially  eliminates all  reasonable doubt  as to



            the  basis  of  the  district  court's  decision.    See  New
                                                                 ___  ___



            Hampshire Motor Transp. Assoc. v. Flynn, 751 F.2d 43, 47 (1st
            ______________________________    _____



            Cir. 1984)  (citing Pullman-Standard v. Swint,  456 U.S. 273,
                                ________________    _____



            292 (1982)); Conservation Law Found., Inc. v. Busey, Nos. 92-
                         _____________________________    _____


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1335, 1464, 95-1019, 1020, 1047, 1048, slip op. at 48-49 (1st



            Cir. April  2, 1996)  (failure to adhere  to requirements  of



            Rule  52(a) is  harmless  error where  undisputed documentary



            evidence  combined with district court's extensive discussion



            of  other  findings  and  conclusions   adequately  clarifies



            otherwise unexplained finding of irreparable harm).



                      In this  case, the district court  made no explicit



            findings of  fact  or conclusions  of law  in granting  TEC's



            request  for a  preliminary  injunction.   In its  three-page



            written order, the court merely recited the traditional four-



            prong preliminary injunction  test and summarily  stated that



            TEC had met its burden in establishing it.  The transcript of



            the relatively brief hearing on TEC's motion, provides little



            further  insight into  the district  court's reasoning.   The



            total  extent  of the  court's  oral  findings following  the



            hearing is limited to its statement that "it believed the two



            products were confusingly similar."   In the context of  this



            case, such  minimal findings do not provide an adequate basis



            for appellate review.



                      Moreover, our  own review of the  relatively sparse



            record does not allow us to affirm the district court's order



            in the absence of Rule 52(a) findings.  Suffice it to say, we



            believe  that the  pertinent issues  are close  and that  the



            evidence  in the record does  not compel a  ruling for either



            side.  Indeed,  in a case  such as this  one, where a  proper


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evaluation  of  the  plaintiff's  claim  requires  a  careful



            balancing  of  a  number  of nondispositive  factors  by  the



            district  court, the  absence of  any subsidiary  findings of



            fact or  conclusions of  law renders it  virtually impossible



            for this court to do anything  but speculate as to the  basis



            of the district court's ruling.  Accordingly, because  we are



            unable to  engage in  meaningful appellate review,  we remand



            the case to the  district court for further findings  of fact



            and conclusions of law.  See Allied Mktg.  Group, Inc. v. CDL
                                     ___ _________________________    ___



            Mktg., Inc., 878 F.2d 806, 813-14 (5th Cir. 1989) (remand for
            ___________



            findings in trade dress infringement action); Inverness Corp.
                                                          _______________



            v. Whitehall Labs., 819 F.2d 48, 50-51 (2d Cir. 1987) (same);
               _______________



            cf.  Knapp Shoes,  15 F.3d at  1228-29 (decision  to dissolve
            ___  ___________



            preliminary injunction in unfair competition case vacated for



            lack of detailed findings).   On  remand, the  district court



            will have to apply  the four-part preliminary injunction test



            and  set forth the  basis for its  ruling on each  prong.  In



            this case,  TEC alleges that Budget  has impermissibly copied



            the trade dress  of its  Ultraline conveyor  in violation  of



            section  43(a) of the  Lanham Act, 15  U.S.C.    1125(a).  To



            establish  such a  violation,  TEC must  prove  (1) that  its



            design is inherently distinctive  or has acquired a secondary



            meaning, and (2) that there  is a likelihood that prospective



            purchasers  of conveyors will be confused as to the source of



            the Budget conveyor.   See  Two Pesos, Inc.  v. Taco  Cabana,
                                   ___  _______________     _____________


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Inc., 505 U.S. 763, 769 (1992); Mana Prods., Inc. v. Columbia
            ____                            _________________    ________



            Cosmetics  Mfg., Inc.,  65 F.3d  1063,  1068 (2d  Cir. 1995);
            _____________________



            Duraco Prods.,  Inc. v. Joy  Plastics Enters., Ltd.,  40 F.3d
            ____________________    ___________________________



            1431, 1439 (3d  Cir. 1994).   Whether a violation  ultimately



            exists will  also depend on  the functionality of  the copied



            design.  See  Two Pesos,  505 U.S.  at 769.3   In  addressing
                     ___  _________



            TEC's likelihood  of success, the district  court should make



            subsidiary findings of fact and conclusions of law sufficient



            to  explain its  evaluation of  the evidence with  respect to



            each of these three factors.



                      Furthermore, we think  that on remand  the district



            court  should also  give specific  consideration  to Budget's



            claim that,  even if the injunction was  rightly entered, the



            second  paragraph is  overbroad.   Similar language  has been



            disapproved in  John H. Harland  Co. v. Clarke  Checks, Inc.,
                            ____________________    ____________________



            711  F.2d  966, 984-85  (11th  Cir.  1983).   See  also 1  J.
                                                          ___  ____



            McCarthy,  Trademarks  and  Unfair  Competition    8.01[1][c]
                       ____________________________________



            (1995).  There is no compelling reason for us to resolve  the


____________________



            3.  We find it unnecessary to decide at this juncture whether

            functionality  is an element  of the plaintiff's  claim or an

            affirmative  defense  to be  raised  by the  defendant.   See
                                                                      ___

            Fisher Stoves,  Inc. v.  All Nighter  Stove Works,  Inc., 626
            ____________________     _______________________________

            F.2d  193,  196  (1st  Cir.  1980)  (assuming  arguendo  that
                                                           ________

            defendant bears  burden to  prove functionality); see  also 3
                                                              ___  ____

            Louis Altman, Callman  on Unfair  Competition Trademarks  and
                          _______________________________________________

            Monopolies     19.33  (4th  ed. 1994)  (discussing  split  in
            __________

            circuits on whether functionality is an affirmative defense).

            In either event,  we think it  is a factor that  the district

            court   should  consider   in   ruling  on   the  preliminary

            injunction.



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                                          9



issue  at this time, and we express  no view on the merits of



            this overbreadth claim.



                                         III.
                                         III.
                                         ____



                                      Conclusion
                                      Conclusion
                                      __________



                      For the  foregoing reasons,  we remand the  case to



            the  district   court  for  further  findings   of  fact  and



            conclusions of  law consistent  with this  opinion.  For  the



            moment,  we leave  the preliminary  injunction in  place, but



            modify  the order  such that  the injunction will  expire two



            months  from the  issuance  of this  court's mandate,  absent



            further  action by the district court.  See Allied Mktg., 878
                                                    ___ ____________



            F.2d at 814.



                      So ordered.
                      So ordered.
                      ___________


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