Kason Industries, Inc. v. Component Hardware Group, Inc.

• Decision Date: 29 August 1997
• Docket Number: No. 96-9157,96-9157
• Citation: 120 F.3d 1199
• Parties: , 11 Fla. L. Weekly Fed. C 434 KASON INDUSTRIES, INC., Plaintiff-Counter-defendant-Appellant, v. COMPONENT HARDWARE GROUP, INC., Peachtree Distributing, Inc., Defendants-Counter-claimants-Appellees.
• Court: U.S. Court of Appeals — Eleventh Circuit

Page 1199

120 F.3d 1199

43 U.S.P.Q.2d 1831, 11 Fla. L. Weekly Fed. C 434

KASON INDUSTRIES, INC., Plaintiff-Counter-defendant-Appellant, v. COMPONENT HARDWARE GROUP, INC., Peachtree Distributing Inc., Defendants-Counter-claimants-Appellees.

No. 96-9157.

United States Court of Appeals Eleventh Circuit.

Aug. 29, 1997.

Robert B. Kennedy, Michael J. Powell, Kennedy & Kennedy, Atlanta, GA, for Plaintiff-Counter-defendant-Appellant.

Christian Civiletto Carey, Jerry B. Blackstock, Jacqueline Michelle Hutter, Powell, Goldstein, Frazer & Murphy, Atlanta, GA, Stuart L. Pachman, Brach, Eichler, Rosenberg & Silver, Roseland, NJ, for Defendants-Counter-claimants-Appellees.

Appeal from the United States District Court for the Northern District of Georgia.

Before HATCHETT, Chief Judge, ANDERSON, Circuit Judge, and LAY ^*, Senior Circuit Judge.

LAY, Senior Circuit Judge:

Kason Industries, Inc., a New York corporation with its principal place of business in Georgia, has manufactured and distributed commercial refrigeration and food services equipment hardware since 1928. Kason brought claims for both monetary and injunctive relief against Component Hardware Group, Inc. (CHG) and Peachtree Distributing, Inc. under § 43(a) of the Lanham Act, 15 U.S.C. § 1125(a), the Georgia Fair Business Practices Act, O.C.G.A. § 10-1-390 et seq., and state common-law claims of trademark infringement and unfair competition. The essence of Kason's complaint is that CHG produced and marketed hardware nearly identical to that which Kason produces and sells, thereby creating a likelihood of confusion in the marketplace. ¹ The district court granted summary judgment to CHG on the Lanham Act claims under the equitable doctrine of laches and similarly granted summary judgment on the state claims under both laches and the state statute of limitations. ² We vacate the judgment of the district court and remand the case for further consideration. ³

Background

The commercial refrigeration and food services equipment hardware industry includes two market segments: original equipment manufacturers (OEMs) and replacement parts distributors. OEMs purchase and incorporate certain latches and hinges into the final products they manufacture, such as commercial refrigerators. Replacement parts distributors sell the hardware to commercial equipment owners who need the original hardware replaced. Kason and CHG compete in these markets.

The 533D and 5330 Latches

Kason has manufactured a latch designated "533D" since 1957. Kason's 533D latch is a snap-action chrome-finished latch and handle used on commercial refrigerators. It was Kason's most popular item for the first fifteen years of its manufacture, and Kason contends it has become a "standard within the industry." The primary market for the 533D, and the relevant difference between those markets for purposes of likelihood of confusion analysis, is unclear from the district court's opinion and the record. On one hand, Frank McAteer, Kason's vice president of sales, estimated that in 1995 sixty to seventy percent of 533D latches were sold in the replacement market. On the other hand, Kason urges in its pleadings and briefs that its primary market, upon which CHG slowly encroached, is the OEM market.

In 1985, CHG began manufacturing a latch that Kason claims is virtually identical to its 533D latch. CHG's latch is designated "R26-5330," ⁴ and is sold primarily in the replacement market.

After Kason learned of CHG's 5330, Kason's patent counsel sent a letter to CHG claiming that the manufacture of 5330 and its numeric designation violated Kason's trade dress rights. ⁵ In the letter, dated June 21, 1986, Kason demanded that CHG cease manufacturing the 5330 product. On August 4, 1986, CHG responded and refused, stating that it did not believe manufacture of the latch violated Kason's rights. Kason did not answer CHG's response. Kason urges that at that time of the exchange, its knowledge of CHG's entry into even the replacement market was minimal. It maintains it was not until several years later that it discovered CHG had entered the OEM market.

The 171 and 1700 Latches

Since 1960, Kason has manufactured and sold its "171" latch, which is a magnetic latch used on commercial refrigerators and ovens. In 1989, CHG began manufacturing a similar latch, which it designated as R25-1700 (the 1700). Sometime in 1990, Kason became aware that CHG was manufacturing the 1700, and conducted an internal investigation to assess the similarity of the 1700 to its own 171. Kason concluded that the products were virtually identical. CHG attempted to market its product to Kason's customers, which for the 171 are mostly OEMs. According to McAteer, however, Kason was able to maintain its customers by lowering the price on the 171.

The 215 and 1010 Hinges

The third product at issue is an edgemount hinge used on commercial kitchen equipment. Kason has manufactured and sold its "215 hinge" since 1964. In 1990, CHG began manufacturing a "1010 hinge." Sometime between 1990 and 1993, Kason learned of the 1010, again conducted internal tests, and concluded that it is almost identical to Kason's 215. It is unclear whether CHG marketed the 1010 to the OEM market, the replacement market, or both. Burl Finkelstein, Kason's vice president of engineering, noted that "[w]hen [the 1010] first came out ... we heard of it being offered and we felt we had the customers using it pretty well sewed up."

Until this lawsuit was filed, other than the 1986 letter, Kason did not take any action against CHG regarding the manufacture or sale of these products. Finkelstein stated at the time that he did not "know what we could do," because he was not aware of any legal protection available to Kason.

Discussion

Laches

The equitable defense of estoppel by laches may be applied to bar claims for trade dress or trademark infringement brought under the Lanham Act. Conagra, Inc. v. Singleton, 743 F.2d 1508, 1517 (11th Cir.1984). Though the doctrine is an equitable doctrine that should be applied flexibly, a defendant must demonstrate the presence of three elements in order to successfully assert laches as a defense: (1) a delay in asserting a right or a claim; (2) that the delay was not excusable; and (3) that there was undue prejudice to the party against whom the claim is asserted. AmBrit, Inc. v. Kraft, Inc., 812 F.2d 1531, 1545 (11th Cir.1986). The Lanham Act does not contain a statute of limitations. However, in trademark cases this circuit has followed the Sixth Circuit, which applies the period for analogous state law claims as the touchstone for laches. Id. at 1546 (citing Tandy Corp. v. Malone & Hyde, Inc., 769 F.2d 362, 365 (6th Cir.1985)). The district court here followed this rule, and found that Georgia's Fair Business Practices Act, O.C.G.A § 10-1-390 et seq. (FBPA), is the state statute most analogous to Kason's Lanham Act claims. It then applied the FBPA's two-year limitations period as the touchstone for Kason's claims. See O.C.G.A. § 10-1-401. Kason's only proffered excuse for the delay was that "it did not believe that it was being sufficiently harmed to warrant bringing the action earlier." The court refused to excuse Kason's delay. It found in abbreviated discussion that Kason's delay caused CHG to suffer prejudice. CHG maintains records only for two years. Thus, the district court reasoned that CHG did not have ample opportunity to demonstrate prejudice, because CHG could not show that it had expended substantial funds for advertising, production, or construction of the allegedly infringing products. The court held that "such an impediment is itself prejudicial to the rights of CHG."

Applicable Limitations Period

Kason challenges the district court's application of the FBPA as the action under state law most analogous to § 43(a) of the Lanham Act. Kason urges that the more analogous statute is the Georgia Uniform Deceptive Trade Practices Act, O.C.G.A. § 10-1-370 et seq. (UDTPA), which does not contain a statute of limitations.

Section 43(a) of the Lanham Act generally proscribes "false designations of origin and false descriptions" of goods or services. 15 U.S.C. § 1125(a). This circuit has long held that claims available under § 43(a) include a cause of action for trade dress infringement. See, e.g., AmBrit, 812 F.2d at 1535; Original Appalachian Artworks, Inc. v. Toy Loft, Inc., 684 F.2d 821, 830-32 (11th Cir.1982). The standard for proof of liability under § 43(a) is the " 'likelihood of confusion' resulting from the defendant's adoption of a trade dress similar to the plaintiff's." Original Appalachian Artworks, 684 F.2d at 831-32, quoted in AmBrit, 812 F.2d at 1538. The UDTPA is similar: it provides a cause of action when a person, "in the course of his business, vocation, or occupation ... [c]auses likelihood of confusion or of misunderstanding as to the source, sponsorship, approval, or certification of goods or services." O.C.G.A. § 10-1-372(a)(2). It should be apparent that § 43(a) of the Lanham Act and § 10-1-372(a)(2) of the UDTPA provide analogous causes of action governed by the same standard. ⁶

In contrast, the FBPA is essentially a consumer protection statute, covering only "consumer transactions" and "consumer acts or practices." O.C.G.A. § 10-1-393(a). ⁷ The Georgia Supreme Court has refused to "expand the coverage of the Act to the commercial market as a whole," reading a consumer marketplace requirement into the statute, so that a defendant who sells a product to retailers is not within the scope of the act. State ex rel. Ryles v. Meredith Chevrolet, Inc., 145 Ga.App. 8, 244 S.E.2d 15, 18-19, aff'd, 242 Ga. 294, 249 S.E.2d 87 (1978). Without commenting on whether Kason can succeed on the merits of its claim under the FBPA, it is clear to us that the FBPA is significantly different from the UDTPA and the Lanham Act, because of the former statute's focus on the consumer (as opposed to the commercial) marketpl...