Tough Traveler, Ltd. v. Outbound Products, Taymor Industries, Ltd., and Taymor Industries, U.S.A., Inc.

60 F.3d 964, 35 U.S.P.Q. 2d (BNA) 1617, 1995 U.S. App. LEXIS 19701

• Court: Court of Appeals for the Second Circuit
• Decided: July 21, 1995
• Docket: 1691, Docket 94-9286
• Status: Published

Opinions

KEARSE, Circuit Judge:

Defendants Outbound Products et al. (collectively “Outbound”) appeal from an order of the United States District Court for the Northern District of New York, Con. G. Cho-lakis, Judge, in this action brought for trade dress infringement in violation of § 43(a) of the Lanham Act, 15 U.S.C. § 1125(a) (Supp. IV 1992) (“Lanham Act” or “Act”), and state-law unfair-competition principles, granting the motion of plaintiff Tough Traveler, Inc. (“Tough Traveler”), for a preliminary injunction against defendants’ sales of certain allegedly infringing products. On appeal, Outbound contends principally that the injunction was improperly granted because the district court failed to conduct a hearing on the motion and did not apply the correct legal standards. Because we agree that the court did not apply the correct legal standard with respect to whether Tough Traveler had shown a likelihood of irreparable injury, we conclude that the granting of the injunction was an abuse of discretion, and we therefore vacate and remand for further proceedings.

I. BACKGROUND

Tough Traveler is a manufacturer and seller of, inter alia, backpacks and child carriers. Outbound Products, a division of defendants Taymor Industries, Ltd., and Taymor Industries, U.S.A., Inc. (collectively “Tay-mor”), also sells child carriers. According to the complaint, filed in April 1994, Tough Traveler began in 1984 to design, manufacture, and market a backpack-type child carrier referred to as the “Kid Carrier.” The complaint alleges that the Kid Carrier, a high quality product, incorporates many inherently distinctive, nonfunctional design features and that, as a result of widespread advertising and promotion, the Kid Carrier has come to be identified by consumers as a Tough Traveler product. The complaint asserts that Outbound copied Tough Traveler’s Kid Carrier; that it caused cheaper, inferior, and confusingly similar child carriers to be manufactured abroad; and that it sold the Outbound carriers in the United States in competition with Tough Traveler. It alleges that Outbound’s products infringe Tough Traveler’s trade dress in violation of the Lanham Act and state unfair-competition laws, and that, “[u]pon information and belief, such acts have already caused confusion, mistake and deception,” causing Tough Traveler injury in excess of $300,000.

Outbound filed an answer admitting that it sells a child carrier, which it calls the “Toddler Tote,” but denying most of the other material allegations of the complaint.

In August 1994, Tough Traveler moved for a preliminary injunction forbidding Outbound to sell the Toddler Tote or similar child carriers. The motion was supported chiefly by the affidavits of Tough Traveler’s president Nancy Gold; its production and purchasing manager Christine Gauss; and a merchant, Joseph Raftis. Gold stated, inter alia, that she had seen sporting goods manu-faeturers/retailers who had confused the Outbound and Tough Traveler child carriers. Raftis stated that customers in his store had likewise been confused. Gauss stated, inter alia, that in February 1994, she had met a Mr. S.K. Choe, who said his company manufactured Outbound’s child carrier in Korea, that “Outbound had sent him ‘a Tough Traveler [child] carrier to make,’ and that he essentially made a duplicate of the Tough Traveler carrier modifying it only slightly” (Affidavit of Christine Gauss dated August 3, 1994, ¶ 7). Gauss also stated that, according to Choe, Outbound’s product is inferior to the Kid Carrier. Because of the lower cost resulting from its foreign manufacture and its inferior materials, Outbound’s Toddler Tote was sold at a lower price than the Kid Carrier.

Outbound opposed the motion on various grounds. It submitted, inter alia, the affidavit of a Taymor vice president disputing the Gold affidavit’s assertions with respect to public perceptions and the likelihood of confusion; stating that Taymor’s records did not indicate that Raftis had ever received the Toddler Tote to sell in his stores; and denying that Outbound’s child-carrier products had ever been supplied by Choe or Choe’s company.

Outbound also contended that Tough Traveler’s motion was unduly belated. In support of this contention, it submitted, inter alia, the affidavit of its sales manager Phillip K. Brown, who said that Gold had called him, inquiring about Outbound’s sales of the Toddler Tote, no later than the early or middle part of 1993. Outbound also submitted the affidavit of one Bill Chandler, an independent sales representative for several manufacturers of outdoor products including Outbound, and formerly including Tough Traveler. Chandler stated that Gold had inquired about Outbound’s child carrier after she saw it at a February 1993 trade show. Chandler also stated that he did not regard the Outbound and Tough Traveler child carriers as confusingly similar.

Gold replied with a second affidavit, stating that she had no recollection of seeing the Outbound child carrier prior to mid-summer of 1993. She stated that prior to that time, however, Chandler had told her that defendants had copied the Tough Traveler carrier. Gold also stated that after seeing the Outbound carrier, she had been unsure whether there were any sales in the United States, but that just before Tough Traveler filed its injunction motion, she had learned of defendants’ intention to reorder child carriers for distribution in the United States.

The district court, without holding a hearing, granted Tough Traveler’s motion for a preliminary injunction. In a Memorandum Decision and Order dated September 23, 1994, the court found that the overall appearance of Tough Traveler’s carrier was inherently distinctive and that Tough Traveler had raised sufficiently serious questions going to the likelihood of confusion. The court also found the likelihood of irreparable injury established because

speculation as to the amount of lost sales, the future inability to accurately account for the amount of such lost sales, and the uncertain results of consumer confusion, represent unknown and incalculable damages. Accordingly, if defendant restocks its inventory of the allegedly infringing product and is permitted to market that inventory, irreparable harm will occur.

Id. at 3 n. 3. Based on this finding of potential irreparable harm, and “in consideration of the parties’ respective sales volumes for child carriers,” id. at 5 n. 5, the court concluded that the balance of hardships tipped in favor of Tough Traveler.

The district court denied a motion by Outbound for reconsideration, which included a request for an oral hearing. This appeal followed.

II. DISCUSSION

On appeal, Outbound contends that the preliminary injunction should be vacated principally because the district court (1) failed to hold a hearing or permit oral argument before issuing the injunction; and (2) applied incorrect legal standards, in that (a) in assessing the distinctiveness of Tough Traveler’s trade dress, it failed to consider the difference between trade dress based on packaging configuration and that based on product configuration, (b) in assessing the likelihood of confusion, it relied on aspects of similarity that are based on the functional requirements of the product, and (c) in assessing the potential for irreparable injury, it failed to consider Tough Traveler’s tardiness in seeking an injunction. We find merit in the last contention and need not discuss the others.

The Lanham Act makes it unlawful for a seller of goods to use “any word, term, name, symbol, or device, or any combination thereof, or any false designation of origin” which “is likely to cause confusion ... as to the origin” of the goods. 15 U.S.C. § 1125(a)(1). The Act also protects the “trade dress” of a product, which involves its “total image ... including] features such as size, shape, color or color combinations, texture, or graphics.” LeSportsac, Inc. v. K Mart Corp., 754 F.2d 71, 75 (2d Cir.1985) (internal quotes and alterations omitted). To prevail on a claim of trade dress infringement, a plaintiff must establish (1) that its trade dress is distinctive either (a) because it is inherently so or (b) because it has acquired secondary meaning, and (2) that a likelihood of confusion exists between its product and the defendant’s product. See, e.g., Two Pesos, Inc. v. Taco Cabana, Inc., — U.S. -, -, 112 S.Ct. 2753, 2758, 120 L.Ed.2d 615 (1992).

In order to obtain a preliminary injunction, the moving party must show (1) the likelihood of irreparable injury, and (2) either (a) likelihood of success on the merits, or (b) sufficiently serious questions going to the merits and a balance of hardships tipping decidedly in the movant’s favor. See, e.g., Fisher-Price, Inc. v. Well-Made Toy Manufacturing Corp., 25 F.3d 119, 122 (2d Cir.1994); Bourne Co. v. Tower Records, Inc., 976 F.2d 99, 101 (2d Cir.1992); Citibank, N.A. v. Citytrust, 756 F.2d 273, 275 (2d Cir.1985). In a trademark case, irreparable injury may be found “where ‘there is any likelihood that an appreciable number of ordinarily prudent purchasers are likely to be misled, or indeed simply confused, as to the source of the goods in question.’ ” Joseph Scott Co. v. Scott Swimming Pools, Inc., 764 F.2d 62, 66 (2d Cir.1985) (quoting McGregor-Doniger, Inc. v. Drizzle Inc., 599 F.2d 1126, 1130 (2d Cir.1979)). When a plaintiff has shown a “high probability of confusion,” there is normally a presumption of irreparable harm because

[wjhile an injured plaintiff would be enti- . tied to recover the profits on the infringing items, this is often difficult to determine; moreover, a defendant may have failed to earn profits because of the poor quality of its product or its own inefficiency. Indeed, confusion may cause purchasers to refrain from buying either product and to turn to those of other competitors. Yet to prove the loss of sales due to infringement is also notoriously difficult.... Furthermore, if an infringer’s product is of poor quality, or simply not worth the price, a more lasting but not readily measurable injury may be inflicted on the plaintiffs reputation in the market.

Omega Importing Corp. v. Petri-Kine Camera Co., 451 F.2d 1190, 1195 (2d Cir.1971); see also Fisher-Price, Inc. v. Well-Made Toy Manufacturing Corp., 25 F.3d at 124.

Nonetheless, any such presumption of irreparable harm is inoperative if the plaintiff has delayed either in bringing suit or in moving for preliminary injunctive relief. See generally id. (suit); Majorica, S.A. v. R.H. Macy & Co., 762 F.2d 7, 8 (2d Cir.1985) (per curiam) (suit and motion); Citibank, N.A. v. Citytrust, 756 F.2d at 276-77 (suit). Though such delay may not warrant the denial of ultimate relief, it may, “standing alone, ... preclude the granting of preliminary injunctive relief,” Majorica, S.A. v. R.H. Macy & Co., 762 F.2d at 8, because the “failure to act sooner undercuts the sense of urgency that ordinarily accompanies a motion for preliminary relief and suggests that there is, in fact, no irreparable injury,” Citibank, N.A. v. Citytrust, 756 F.2d at 277 (internal quotes omitted); see also Fisher-Price, Inc. v. Well-Made Toy Manufacturing Corp., 25 F.3d at 124. Although delay may not negate the presumption of irreparable harm if the delay was caused by the plaintiffs ignorance of the defendant’s competing product or the plaintiffs making good faith efforts to investigate the alleged infringement, see id., if it is not so explainable, “delay alone may justify denial of a preliminary injunction,” Citibank, N.A. v. Citytrust, 756 F.2d at 276 (delay of suit for nine months after receiving notice in the press, and 10 weeks after receiving actual notice, negates any presumption of irreparable harm).

Tough Traveler commenced the present action in April 1994. While there is some disagreement as to precisely when it had first seen Outbound’s Toddler Tote, Tough Traveler’s president admitted to having been aware of that competing product no later than the middle of 1993. Thus, Tough Traveler waited at least nine months to commence the present law suit. After commencing the action, Tough Traveler waited some four months longer — ie., more than a year after learning of the alleged infringement — before moving for a preliminary injunction. There has been no suggestion that these delays were attributable to Tough Traveler’s pursuit of further investigation of the alleged infringement. In its brief on this appeal, Tough Traveler states that “since Outbound’s sales of child carriers occur between January and June of the calendar year, at the time Tough Traveler saw Outbound’s infringing earner no child carrier sales were being made.” Even this rationale, which presumably was directed at the 1993 selling season, since Gold admits she saw the Toddler Tote in mid-1993, cannot explain why Tough Traveler allowed what it would presumably view as Outbound’s entire 1994 selling season to pass, waiting until August 1994 to seek preliminary injunctive relief.

The district court, without discussion of the timing of Tough Traveler’s steps to protect its trade dress, adopted the general presumption of irreparable injury notwithstanding Tough Traveler’s manifest delay in bringing the action and in making the motion. We conclude that, given the leisurely pace of Tough Traveler’s pursuit of the matter, the court’s reliance on the general presumption was a misapplication of the law.

CONCLUSION

As to the issue of irreparable harm, we have considered all of Tough Traveler’s appellate contentions and have found them unpersuasive. We express no view on the merits of the parties’ contentions with respect to the other issues in the action. The order of the district court granting the preliminary injunction is vacated and the matter remanded to that court for further proceedings.

The costs of this appeal shall abide the ultimate outcome of the action.