4Semo.Com Inc. v. Southern Illinois Storm Shelters, Inc., 100719 FED7, 18-1998

Docket Nº:18-1998, 18-2095
Opinion Judge:Sykes, Circuit Judge.
Party Name:4SEMO.com Incorporated, Plaintiff-Appellee/Cross-Appellant, v. Southern Illinois Storm Shelters, Inc., Ingoldsby Excavating, Inc., and Bob Ingoldsby, Defendants-Appellants/Cross-Appellees, and Roman A. Basi and Alfred E. Sanders Jr., Intervenors/Appellees.
Judge Panel:Before Easterbrook, Sykes, and Brennan, Circuit Judges.
Case Date:October 07, 2019
Court:United States Courts of Appeals, Court of Appeals for the Seventh Circuit
 
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4SEMO.com Incorporated, Plaintiff-Appellee/Cross-Appellant,

v.

Southern Illinois Storm Shelters, Inc., Ingoldsby Excavating, Inc., and Bob Ingoldsby, Defendants-Appellants/Cross-Appellees,

and

Roman A. Basi and Alfred E. Sanders Jr., Intervenors/Appellees.

Nos. 18-1998, 18-2095

United States Court of Appeals, Seventh Circuit

October 7, 2019

Argued April 1, 2019

Appeals from the United States District Court for the Southern District of Illinois. No. 3:13-cv-00297 DRH/SCW - David R. Herndon, Judge.

Before Easterbrook, Sykes, and Brennan, Circuit Judges.

Sykes, Circuit Judge.

This appeal involves a long-running trademark dispute over ownership and misuse of a word-mark and logo for below-ground storm shelters. The story begins in 2005 when a Missouri-based home-remodeling firm known as 4SEMO.com Inc. began selling storm shelters manufactured by Southern Illinois Storm Shelters, Inc. ("SISS"), an Illinois company run by Robert "Bob" Ingoldsby and his brother Scott. The dealership agreement gave 4SEMO the exclusive right to sell SISS shelters in portions of Missouri and Arkansas. As part of its marketing campaign, 4SEMO created a wordmark-"Life Saver Storm Shelters" - and a logo using that name, which it affixed to the shelters. In 2006 the Ingoldsbys asked 4SEMO for permission to use these marks on shelters marketed in southern Illinois. 4SEMO granted a limited license for that purpose, but the Ingoldsbys violated it by using the marks on products sold throughout the country.

SISS sued 4SEMO for trademark infringement, claiming prior use and ownership of the "Life Saver" wordmark. That claim did not survive summary judgment. 4SEMO counter-claimed for trademark infringement and false endorsement under the Lanham Act, along with several state-law claims. The counterclaims were tried to the bench, and the district judge found for 4SEMO across the board, entered a cease-and-desist order, and awarded more than $17 million in disgorged profits as damages. The judge denied 4SEMO's motion for vexatious-litigation sanctions under 28 U.S.C. § 1927 and attorney's fees under the Lanham Act.

On appeal SISS does not contest the judge's factual findings. It argues instead that 4SEMO's logo violates a statute that makes it a crime to use the iconic emblem reserved to the American Red Cross: a red Greek cross on a white background. SISS also raises a novel legal argument to attack 4SEMO's ownership of the wordmark. Finally, SISS challenges the eight-figure monetary award. In a cross-appeal 4SEMO seeks review of the denial of § 1927 sanctions and Lanham Act attorney's fees.

We affirm for the most part. SISS's statutory argument is meritless and its legal theory challenging 4SEMO's ownership of the marks is new on appeal and thus is waived. We also reject the challenge to the damages award; the judge's conclusion that SISS engaged in trademark infringement on a vast scale is well supported by the evidence. Finally, although the judge reasonably concluded that § 1927 sanctions were not warranted, his summary denial of Lanham Act fees cannot be squared with his factual findings and legal conclusions on the merits of the infringement claim. Because those findings and conclusions satisfy the Act's standard for recovery of attorney's fees, we remand for the limited purpose of determining a reasonable fee award.

I. Background

Ray Fielack is the president of 4SEMO, a home-remodeling company located in southeast Missouri. Bob and Scott Ingoldsby have been manufacturing storm shelters since 1998. They began operating under the SISS name in 2000 and continued to do so as Ingoldsby Excavating, Inc., since 2008.

In 2004 4SEMO purchased a storm shelter from an SISS dealer and installed it at the direction of a remodeling client. Pleased with the product, 4SEMO expressed interest in buying more shelters from the dealer and began promoting them to potential customers. The dealer asked if 4SEMO would be interested in simply purchasing its existing inventory and becoming a dealer in its own right. 4SEMO agreed to do so.

Fielack decided that a set of identifiable trademarks would assist his company's foray into storm-shelter marketing and installation. In late March or early April 2005, he settled on the name "Life Saver Storm Shelters." He also designed a logo: a red Greek cross on a black background with the "Life Saver" product name written across its horizontal bar in yellow lettering. Fielack testified at trial that no one at 4SEMO had seen the name or logo before.

4SEMO took possession of the former dealer's inventory, stenciled its new logo and wordmark onto the shelters, and displayed them for sale. Starting in April or early May 2005, 4SEMO's brochures and signage, and the shelters it sold, featured the marks as shown below:

(Image Omitted.)

On May 5 4SEMO signed a formal dealership agreement with SISS. The contract granted 4SEMO exclusive retail rights in a territory that included portions of Missouri and Arkansas. It did not mention the marks. Around this time Scott Ingoldsby visited 4SEMO to exchange one of the inventory shelters for an updated model. He expressed no familiarity with the marks. 4SEMO continued to market its inventory under the "Life Saver Storm Shelters" brand.

In February 2006 the Ingoldsbys asked 4SEMO for permission to use the "Life Saver Storm Shelters" marks in connection with retail sales and installations in southern Illinois. 4SEMO orally agreed to permit use of the marks in that region on three conditions: only shelters manufactured by the Ingoldsbys could be sold under the marks, the Ingoldsbys would install all branded shelters in a manner familiar to 4SEMO, and 4SEMO would maintain control over all promotional materials bearing the...

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