Westinghouse Elec. Corp. v. General Circuit Breaker & Elec. Supply Inc., BREAKER-ELECTRIC

Decision Date27 March 1997
Docket Number94-56769,94-56765,BREAKER-ELECTRIC,Nos. 94-56436,94-56771,94-56709,s. 94-56436
Citation106 F.3d 894,41 U.S.P.Q.2d 1741
Parties, 41 U.S.P.Q.2d 1741, 97 Cal. Daily Op. Serv. 931, 97 Daily Journal D.A.R. 1391 WESTINGHOUSE ELECTRIC CORPORATION, Plaintiff-Counter-Defendant-Appellant, v. GENERAL CIRCUIT BREAKER & ELECTRIC SUPPLY INC.; AC Circuit Breaker-Electric Supply, Inc.; General Circuit Breaker & Electric Supply Inc.; Xavier Contreras; Pencon International, Inc.; General Magnetics/Electric Wholesale; The Estate of Charley Contreras; Panelboard Specialties Wholesale Electric, Inc.; Jaime A. Contreras, Defendants-Appellees, Joe A. Contreras, Defendant-Counter-Claimant-Appellee. In re CIRCUIT BREAKER LITIGATION WESTINGHOUSE ELECTRIC CORPORATION, Plaintiff-Counter-Defendant-Appellant, v. AC CIRCUITSUPPLY, INC.; Joe A. Contreras; General Circuit Breaker & Electric Supply Inc.; Xavier Contreras; Pencon International, Inc.; The Estate of Charley Contreras; Panelboard Specialties Wholesale Electric, Inc.; General Magnetics/Electric Wholesale; Jaime A. Contreras, Defendants-Counter-Claimants-Appellees. WESTINGHOUSE ELECTRIC CORPORATION, Plaintiff-Counter-Defendant-Appellee, v. GENERAL CIRCUIT BREAKER & ELECTRIC SUPPLY INC.; Joe A. Contreras; AC Circuit Breaker-Electric Supply, Inc.; General Circuit Breaker & Electric Supply Inc.; Xavier Contreras; Pencon International, Inc.; General Magnetics/Electric Wholesale; The Estate of Charley Contreras, Defendants-Counter-Claimants, and Panelboard Specialties Wholesale Electric, Inc.; Jaime A. Contreras, Defendants-Counter-Claimants-Appellants. WESTINGHOUSE ELECTRIC CORPORATION, Plaintiff-Counter-Defendant-Appellee, v. GENERAL CIRCUIT BREAKER & ELECTRIC SUPPLY INC.; Joe A. Contreras; AC Circuit Breaker-Electric Supply, Inc.; General Circuit Breaker-Electric Supply Inc.; Xavier Contreras; Panelboard Specialties Wholesale Electric, Inc.; Jaime A. Contreras, Defendants-Counter-Claimants, and Pencon International, Inc.; General Magnetics/Electric Wholesale; The Estate of Charley Contreras, Defendants-Counter-Claimants-Appellants. In re CIRCUIT BREAKER LITIGATION
CourtU.S. Court of Appeals — Ninth Circuit

Gregory P. Stone (argued), Joseph D. Lee, and Ted G. Dane, Munger, Tolles & Olson, Los Angeles, CA, for the plaintiffs-appellants-cross-appellees.

George A. Oakes, Alan H. Stanfill (argued), and David A. Huffaker, Throckmorton, Beckstrom, Oakes & Tomassian, Pasadena, CA, for defendants-appellees-cross-appellants General Circuit Breaker & Electric Supply, Inc. and Xavier Contreras.

J. Scott Bennett, Law Offices of J. Scott Bennett, Lake Elsinore, CA, and George A. Oakes, Throckmorton, Beckstrom, Oakes & Tomassian, Pasadena, CA, for defendants-appellees-cross-appellants Panelboard Specialties Wholesale Electric, Inc. and Jaime Contreras.

Mark D. Rutter (argued), Moore, Rutter & Evans, Long Beach, CA, and Michael J. Emling, Law Offices of Michael J. Emling, Long Beach, CA, for defendants-appellees-cross-appellants Pencon International, Inc., General Magnetics/Electric Wholesale, and the Estate of Charley Contreras.

Appeals from the United States District Court, for the Central District of California, Richard A. Gadbois, District Judge, Presiding. D.C. Nos. CV-88-03012-RG, CV-88-03012-RG-2.

Before: BRUNETTI, TROTT and THOMAS, Circuit Judges.

TROTT, Circuit Judge.

I. OVERVIEW

This appeal arises from a suit brought by Westinghouse Electric Corporation ("Westinghouse") against several electronics vendors ("defendants") for reselling used Westinghouse circuit breakers after reconditioning them and attaching labels bearing the Westinghouse trademark. 1 After a jury trial, the district court entered judgment in favor of the defendants on all of Westinghouse's claims. In reaching this judgment, the district court upset one jury verdict in favor of Westinghouse on its trademark infringement claim. The district court concluded that this verdict had resulted from an erroneous jury instruction regarding the elements necessary to prove the defendants' affirmative defenses of estoppel, acquiescence, and laches. That instruction had required the defendants to show that Westinghouse knew the defendants were copying the Westinghouse trademark--rather than merely using an original trademark without permission--in order to establish their affirmative defenses. To correct the instructional error, the district court examined the pattern of jury verdicts, determined the facts necessarily found by the jury in reaching those verdicts, and applied the correct law to those implicit factual findings. This application led the district court to set aside the jury's verdict on the trademark infringement claim and enter judgment in favor of the defendants on all claims.

On appeal, Westinghouse argues that the district court erred: 1) by concluding that the jury instructions misstated the law; 2) by upsetting the jury verdict as a remedy for the instructional error rather than ordering a new trial; and 3) by denying Westinghouse's request to permanently enjoin the defendants from misusing the Westinghouse trademark. We agree with the district court's holding that the jury instructions focused the jury's attention on an irrelevant concern--whether Westinghouse knew the labels were duplicated rather than simply used without permission. Because in the limited circumstances of this case it is possible to determine the jury's implicit factual findings from the pattern of verdicts and thereby to remedy the prejudice caused by the flawed instructions, we affirm the district court's entry of judgment against Westinghouse. Also, because the district court's reasons for denying the permanent injunction are legally sufficient and well-supported by the record, we affirm the district court's order denying the injunction.

II. FACTUAL AND PROCEDURAL BACKGROUND
A. The Parties

Westinghouse manufactures "molded case circuit breakers," safety devices that interrupt electrical flow in the event of an overload or short-circuit. Westinghouse attaches labels to each breaker. The labels bear the Westinghouse trademark and, as required by various electrical codes and standards, provide information about the breaker's electrical characteristics.

The defendants are vendors of circuit breakers who recondition, and then resell, used Westinghouse breakers. Prior to this case, and as part of the reconditioning process, the defendants typically cleaned the breakers and sometimes replaced the internal components. In addition, when the breaker labels were faded or otherwise illegible, the defendants often replaced the labels. The defendants would obtain replacement labels from Westinghouse employees or would make copies of the original labels. The labels attached by the defendants never noted the breakers had been reconditioned; they bore the same information as the original label, including the Westinghouse trademark.

B. The Trial and the Jury Verdicts

In 1988, Westinghouse brought suit against the defendants for: (1) trademark counterfeiting under section 32 of the Lanham Act, 15 U.S.C. § 1114 ("trademark counterfeiting" claim); (2) unfair competition under section 43 of the Lanham Act, 15 U.S.C. § 1125 ("unfair competition" claim); and (3) unfair competition and trademark dilution under California law ("state law" claims). Westinghouse sought a permanent injunction forbidding the defendants from reproducing its trademarks and requiring them to disclose the condition of the breakers they sell. Westinghouse also sought damages for past infringement.

The defendants admitted the facts underlying Westinghouse's claims--that they had sold reconditioned breakers bearing the Westinghouse mark without noting they had been reconditioned. The defendants argued, however, that they never intended to deceive anyone; they only intended to comply with regulations requiring the breakers to bear labels describing their electronic characteristics. The defendants also argued Westinghouse knew or should have known the defendants were selling reconditioned breakers bearing the Westinghouse mark, because Westinghouse itself knowingly purchased reconditioned breakers from the defendants and resold them without labelling them as reconditioned. Based on this evidence, the defendants raised several affirmative defenses, including estoppel, laches, acquiescence, and unclean hands.

Following trial, the jury received four verdict forms, one for each defendant. For each of Westinghouse's five claims, the form asked the jury to determine whether Westinghouse had proved the claim and then whether the defendant had proved any affirmative defenses to that claim. The form did not require the jury to make express findings of fact. Rather, it simply asked the jury to make separate legal conclusions regarding each of Westinghouse's claims and the affirmative defenses to those claims.

On July 16, 1993, the jury returned its verdict forms. The forms indicated that Westinghouse had established both its unfair competition claim and its trademark counterfeiting claim, as well as one of their state law claims. The forms also stated, however, that defendants had established affirmative defenses to all of Westinghouse's claims except the trademark counterfeiting claim.

C. The District Court Judgment

The district court was perplexed by the jury's seemingly contradictory verdicts on the defendants' affirmative...

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