Uatp Ip, LLC v. Kangaroo, LLC

• Court: Court of Appeals for the Federal Circuit
• Decided: February 16, 2024
• Docket: 22-2047
• Status: Unpublished

Opinion

Case: 22-2047 Document: 67 Page: 1 Filed: 02/16/2024

NOTE: This disposition is nonprecedential.

United States Court of Appeals for the Federal Circuit ______________________

UATP IP, LLC, UATP MANAGEMENT, LLC, Plaintiffs-Appellees

v.

KANGAROO, LLC, Defendant-Appellant

AIR ENTERTAINMENT GROUP, LLC, HAI CHANH QUACH, DAN TRINH, RAYMON HUNG, EDGAR ALEJANDRO GUERRERO, ALAN TRINH, TINA LUU, GOLDEN STAR GROUP, LTD., Defendants ______________________

2022-2047 ______________________

Appeal from the United States District Court for the Southern District of Texas in No. 4:21-cv-02478, Judge Drew B. Tipton. ______________________

Decided: February 16, 2024 ______________________

CHRIS PAUL HANSLIK, BoyarMiller, Houston, TX, ar- gued for plaintiffs-appellees.

STEVEN JON KNIGHT, Chamberlain Hrdlicka, Houston, Case: 22-2047 Document: 67 Page: 2 Filed: 02/16/2024

TX, argued for defendant-appellant. Also represented by AMBER ALI, AJ FOREMAN, DAVID MIGUEL MEDINA. ______________________

Before REYNA, TARANTO, and CHEN, Circuit Judges. CHEN, Circuit Judge. This interlocutory appeal arises from a motion for a preliminary injunction filed below by Appellees UATP IP, LLC and UATP Management, LLC (collectively, UATP) based on alleged patent and trade dress infringement by Kangaroo, LLC (Kangaroo). The United States District Court for the Southern District of Texas granted the pre- liminary injunction, enjoining Kangaroo from operating the “Adventure Hub” in its trampoline park, using certain colors, and using UATP’s confidential information. UATP IP, LLC v. Kangaroo, LLC, 2022 WL 2898951, at *2 (S.D. Tex. June 28, 2022) (Order). After full briefing and argu- ment, we conclude the district court abused its discretion by failing to make the requisite findings to support its grant of the preliminary injunction. Further, we find that UATP failed to prove in its briefing below that it was likely to succeed on the merits of its patent infringement claim. Accordingly, we reverse the district court’s grant of the pre- liminary injunction as to the patent infringement claim, and vacate and remand as to the trade dress infringement claim. BACKGROUND UATP and Kangaroo are operators of “adventure parks”—indoor play facilities that include trampolines, zi- plines, ropes courses, and other attractions. UATP oper- ates at least 160 facilities (known as Urban Air Adventure Parks) throughout the country, primarily through fran- chisees. Kangaroo operates a single play park in Laredo, Texas that is located in the same building, and uses much of the same equipment, as a previously existing Urban Air Adventure Park franchise. Case: 22-2047 Document: 67 Page: 3 Filed: 02/16/2024

UATP IP, LLC v. KANGAROO, LLC 3

UATP sued Kangaroo on July 30, 2021 on several grounds, including patent and trade dress infringement. In its operative complaint, UATP alleges that Kangaroo in- fringes U.S. Patent No. 10,702,729 (’729 patent), entitled “Multi-level Play Equipment.” UATP also alleges that Kangaroo infringes its trade dress, which UATP describes in its motion for preliminary injunction as “includ[ing] the neon orange, yellow, Urban Air Lime Green, and Cosmic Dust Blue color scheme prevalent throughout Urban Air franchises, Attractions and equipment and the layout and placement of the same, signage (content, lettering, and col- oring), white ball pit, redundancy trampolines, no hold net- ting, configuration of the safety harnesses and attachment of same to the equipment, and one way directional tracking of the zip coaster . . . .” App. 614 (footnotes omitted). UATP filed its motion for preliminary injunction on June 9, 2022, over ten months after it filed its original com- plaint. The district court granted the motion on the grounds that UATP was likely to succeed on the merits of both its patent and trade dress infringement claims, and that UATP was entitled to a rebuttable presumption of ir- reparable harm that Kangaroo failed to rebut. Order, 2022 WL 2898951, at *1–2. DISCUSSION This court generally reviews preliminary injunctions according to the law of the regional circuit (here, the Fifth Circuit), but “gives dominant effect to Federal Circuit prec- edent insofar as it reflects considerations specific to patent issues,” such as likelihood of success on the merits. Tinnus Enters., LLC v. Telebrands Corp., 846 F.3d 1190, 1202–03 (Fed. Cir. 2017). Both the Federal Circuit and the Fifth Circuit review preliminary injunctions for an abuse of dis- cretion. Id. at 1203. A party may establish an abuse of discretion “by showing that the court made a clear error of judgment in weighing relevant factors or exercised its dis- cretion based upon an error of law or clearly erroneous Case: 22-2047 Document: 67 Page: 4 Filed: 02/16/2024

factual findings.” Abbott Lab’ys v. Andrx Pharms., Inc., 452 F.3d 1331, 1335 (Fed. Cir. 2006) (quoting Polymer Techs., Inc. v. Bridwell, 103 F.3d 970, 973 (Fed. Cir. 1996)). “A preliminary injunction is an extraordinary remedy never awarded as of right.” Winter v. Nat. Res. Def. Coun- cil, Inc., 555 U.S. 7, 24 (2008). A party seeking a prelimi- nary injunction must establish “a reasonable likelihood of success on the merits, irreparable harm in the absence of a preliminary injunction, a balance of hardships tipping in its favor, and the injunction’s favorable impact on the pub- lic interest.” Murata Mach. USA v. Daifuku Co., 830 F.3d 1357, 1363 (Fed. Cir. 2016) (quoting Nat’l Steel Car, Ltd. v. Canadian Pac. Ry., 357 F.3d 1319, 1324–25 (Fed. Cir. 2004)). Under Federal Rule of Civil Procedure 52(a)(2), a district court must offer findings of fact and conclusions of law to justify the grant or denial of a preliminary injunc- tion motion. Id. (citing Ali v. Quarterman, 607 F.3d 1046, 1048 (5th Cir. 2010)). I We turn first to UATP’s patent infringement claim. For a preliminary injunction motion, “[t]he burden is al- ways on the movant to show that it is likely to succeed on the merits.” BlephEx, LLC v. Myco Industries, Inc., 24 F.4th 1391, 1398 (Fed. Cir. 2022). To establish a likelihood of success on the merits, “the patentee seeking a prelimi- nary injunction in a patent infringement suit must show that it will likely prove infringement, and that it will likely withstand challenges, if any, to the validity of the patent.” Titan Tire Corp. v. Case New Holland, Inc., 566 F.3d 1372, 1376 (Fed. Cir. 2009). We find that UATP’s showing was legally insufficient to demonstrate likelihood of success on the merits of its pa- tent infringement claim. “[W]hether performed at the pre- liminary injunction stage or at some later stage in the course of a particular case, infringement and validity anal- yses must be performed on a claim-by-claim basis.” Case: 22-2047 Document: 67 Page: 5 Filed: 02/16/2024

UATP IP, LLC v. KANGAROO, LLC 5

Amazon.com, Inc. v. Barnesandnoble.com, Inc., 239 F.3d 1343, 1351 (Fed. Cir. 2001). But neither UATP’s motion for preliminary injunction nor the Order ever identified any claim of the ’729 patent that Kangaroo allegedly in- fringes. Instead of comparing Kangaroo’s allegedly infring- ing equipment to any of the claims of the ’729 patent, UATP and the district court appear to have assumed that Kanga- roo’s equipment infringes the patent because it was previ- ously used in an Urban Air Adventure Park. But the district court never determined that Urban Air Adventure Parks practice a specific claim of the ’729 patent. By as- suming that similarities between Kangaroo’s equipment and the equipment in an Urban Air Adventure Park con- stitute infringement without any discussion of the claims, the district court erred in finding a likelihood of success on the merits. The district court likewise erred in failing to make any findings on irreparable harm, balance of the equities, or the public interest in its analysis relating to UATP’s patent in- fringement claim. See Fed. R. Civ. P. 52(a)(2) (“In granting or refusing an interlocutory injunction, the court must [] state the findings and conclusions that support its ac- tion.”). II We turn next to UATP’s trade dress infringement claim. In the Fifth Circuit, to establish likelihood of suc- cess on the merits of a trade dress infringement claim, the plaintiff “must prove that: (1) its trade dress qualifies for protection; and (2) the trade dress has been infringed by demonstrating a likelihood of confusion in the minds of po- tential consumers.” Beatriz Ball, LLC v. Barbagallo Co. LLC, 40 F.4th 308, 317 (5th Cir. 2022). To qualify for pro- tection, a trade dress must be (a) non-functional, and (b) distinctive, either inherently or through acquired Case: 22-2047 Document: 67 Page: 6 Filed: 02/16/2024

secondary meaning. 1 Wal-Mart Stores, Inc. v. Samara Bros., Inc., 529 U.S. 205, 210–11 (2000). Unlike UATP’s failure to present an adequate patent infringement case, UATP briefed all the necessary ele- ments of its trade dress infringement claim in the proceed- ings below. However, the district court failed to make any findings on whether UATP’s alleged trade dress was non- functional, inherently distinctive, or had acquired second- ary meaning. Instead, the district court found that UATP’s “trade dress claim against Kangaroo is likely to succeed on the merits, because it has shown that Kangaroo substan- tially imitated Urban Air’s total image by using the same colors, attraction structures, and park layout.” Order, 2022 WL 2898951, at *1. The district court’s failure to explain how it arrived at this finding in view of the relevant trade dress likelihood of confusion factors, see Xtreme Lashes, LLC v. Xtended Beauty, Inc., 576 F.3d 221, 227 (5th Cir. 2009), and failure to address the non-functionality or dis- tinctiveness of UATP’s alleged trade dress, render its anal- ysis too conclusory to permit meaningful appellate review.

1 The parties dispute whether UATP must show that its alleged trade dress has acquired secondary meaning, or whether a showing of inherent distinctiveness suffices. See UATP’s Response Brief at 23; Kangaroo’s Reply Brief at 10–11. Which showing is required depends on whether UATP’s alleged trade dress is product packaging or product design. While product-packaging trade dress may be shown to be inherently distinctive, product-design trade dress can never be inherently distinctive and therefore can- not be protected without a showing of secondary meaning. Wal-Mart Stores, Inc. v. Samara Bros., Inc., 529 U.S. 205, 214–15 (2000). We do not reach the issue of whether UATP’s alleged trade dress is product packaging or product design here, but provide this framing for the benefit of the parties and the district court upon remand. Case: 22-2047 Document: 67 Page: 7 Filed: 02/16/2024

UATP IP, LLC v. KANGAROO, LLC 7

See, e.g., Gechter v. Davidson, 116 F.3d 1454, 1458 (Fed. Cir. 1997) (“A district court therefore may not merely state its findings in conclusory terms, but must provide suffi- cient detail to elucidate the reasoning by which the court reached its ultimate finding on an issue of fact or conclu- sion on an issue of law; otherwise, the appellate court is unable to carry out its appellate review function.”). The district court’s findings relating to irreparable harm are also deficient. First, the district court erred in failing to address UATP’s ten-month delay in moving for a preliminary injunction. See Hybritech Inc. v. Abbott Lab’ys, 849 F.2d 1446, 1457 (Fed. Cir. 1988) (“The period of delay exercised by a party prior to seeking a preliminary injunc- tion in a case involving intellectual property is [] one factor to be considered by a district court in its analysis of irrep- arable harm.”). Second, the district court erred in finding that UATP was entitled to a rebuttable presumption of ir- reparable harm under 15 U.S.C. § 1116(a). Section 1116(a) entitles a plaintiff seeking a preliminary injunction under 15 U.S.C. § 1125 to a rebuttable presumption of irrepara- ble harm “upon a finding of likelihood of success on the merits for a violation.” Because the district court’s analysis was premised on a flawed likelihood of success finding, the court’s application of the presumption cannot stand. By failing to address UATP’s delay in filing its preliminary in- junction request, and by improperly applying the statutory presumption, the district court erred. Finally, as with its analysis relating to the patent in- fringement claim, the district court’s analysis relating to the trade dress infringement claim failed to make sufficient findings on the balance of the equities or the public inter- est. Because the district court failed to “state the findings and conclusions that support its action” in granting the preliminary injunction, as required by Federal Rule of Civil Procedure 52(a)(2), the court erred. Case: 22-2047 Document: 67 Page: 8 Filed: 02/16/2024

CONCLUSION We find that the district court abused its discretion by failing to make the requisite findings to support its grant of the preliminary injunction. Further, we find that there was a failure of proof in UATP’s briefing below on the like- lihood of success on the merits of its patent infringement claim. Accordingly, we reverse the district court’s grant of the preliminary injunction as to the patent infringement claim. We vacate and remand as to the trade dress in- fringement claim. REVERSED-IN-PART, VACATED-IN-PART, AND REMANDED COSTS Costs to Kangaroo.