Custom Mfg. and Engineering v. Midway Services

• Citation: 508 F.3d 641
• Decision Date: 21 November 2007
• Docket Number: No. 05-12906.,05-12906.
• Parties: CUSTOM MANUFACTURING AND ENGINEERING, INC., Plaintiff-Appellant, v. MIDWAY SERVICES, INC., Automated Engineering Corporation, MDCO, Inc., NTU Electronics, Inc., et al., Defendants-Appellees.
• Court: United States Courts of Appeals. United States Court of Appeals (11th Circuit)

508 F.3d 641

CUSTOM MANUFACTURING AND ENGINEERING, INC., Plaintiff-Appellant, v. MIDWAY SERVICES, INC., Automated Engineering Corporation, MDCO, Inc., NTU Electronics, Inc., et al., Defendants-Appellees.

No. 05-12906.

United States Court of Appeals, Eleventh Circuit.

November 21, 2007.

John A. Turner, Buckingham, Doolittle & Burroughs, LLP, West Palm Beach, FL, Robin S. Trupp, Tampa, FL, for Plaintiff-Appellant.

Robert V. Potter, Jr., Johnson, Pope, Baker, Buppel & Burns, Clearwater, FL, for Defendants-Appellees.

Appeal from the United States District Court for the Middle District of Florida.

Before TJOFLAT, BARKETT and HILL, Circuit Judges.

TJOFLAT, Circuit Judge:

The claims alleged in this trademark infringement case surfaced during the litigation of a contract action between Custom Manufacturing and Engineering, Inc. ("Custom") and Midway Services, Inc. ("Midway") in Florida state court. Custom had agreed to design for Midway a water meter reading system to be installed in residential complexes, but Midway had cancelled the contract (on the ground that Custom had breached it) and hired Automated Engineering Corporation ("AEC"), MDCO, Inc. ("MDCO"), NTU Electronics, Inc. ("NTU"), and engineers to finish the job. Custom sued for damages, and Midway counterclaimed, alleging breach of contract.

During the discovery phase of that lawsuit, Custom learned that the water meter reading system that had been installed had used printed circuit boards that had been modified from the design it had created, but retained a printed legend containing Custom's trade name. Armed with this discovery, Custom brought this lawsuit, claiming trademark infringement against Midway, AEC, MDCO, and NTU, and tortious interference with a business relationship against AEC and the engineers involved in modifying the circuit boards.

On considering the defendants' motions for summary judgment, the district court found that Custom had failed to establish the likelihood that the purchasing public would be confused by the presence of Custom's trade name on the circuit boards and therefore dismissed Custom's trademark infringement claim. As for Custom's tortious interference claim, the district court dismissed the claim as meritless and imposed sanctions on Custom's counsel under Federal Rule of Civil Procedure 11. We find no error in the district court's grants of summary judgment or an abuse of discretion in a discovery ruling Custom challenges, and therefore affirm the district court's judgment in all respects.

The relevant facts are presented in Part I of this opinion. Part II summarizes Custom's claims and the procedural background of this appeal. Part III analyzes the substance of Custom's arguments and concludes that they are without merit.

I.

Founded in 1997, Custom is a privately-held technology company that provides research and development, engineering, software, and manufacturing services to the government and industrial markets. Midway is a contractor of plumbing, electrical, submetering, and air conditioning services. AEC and MDCO are contract electronic manufacturers, and NTU is a manufacturer of printed circuit boards.¹

Midway wished to market a system that could remotely read the water meters installed in each unit of multiple-unit residential complexes such as apartment buildings. In early 1998, Midway contracted with Custom to design and manufacture such a system. Custom designed a system that used radio waves to gather and transmit water usage data, and consisted of four components: meter transmitters, transceivers, repeaters, and collectors. Each of these components was to contain a two-inch by three-inch printed circuit board. Custom, in turn, contracted with NTU to manufacture and supply these circuit boards, and also contracted with MDCO to assist with affixing components on the circuit boards and assembling other system parts.² Custom specified that the circuit boards manufactured by NTU were to contain a legend with Custom's trade name. Appearing in small, plain font in the upper left-hand corner of each circuit board were the words: "MFG by Custom Manufacturing and Engineering, Inc., for Midway Services, Inc."³ Each of the circuit boards was fully encased in an opaque plastic housing unit. Midway marketed the system to owners and managers of apartment buildings in several states.

Although the system prototype had functioned properly, in the fall of 1998 Midway reported to Custom that the system was malfunctioning. Unsurprisingly, the parties disagree as to the reason; Midway believes that the fault lay in the design of the transceiver component, while Custom chalks up the problem to Midway's improper installation of the system. In early 1999, with Custom's knowledge, Midway retained Judd Sheets to evaluate the system and diagnose the problem. Sheets professed unfamiliarity with the system and requested permission to consult with Genium, Inc. ("Genium") and its president, James Stosic. Together, Sheets and Stosic determined that there were flaws in the design of the transceiver component and recommended that it be redesigned. Because Sheets and Stosic were too busy to create a modified design themselves, they referred Midway to two other engineers, James Baughman and Randy Bell, to do the job. Sheets and Stosic met with Baughman and Bell to discuss their recommendations. Sheets's involvement with the entire matter lasted less than a month, while Stosic's involvement was approximately half that time.

To the extent possible, Baughman and Bell sought to incorporate the components of the original system in the modified design. They decided to redesign the original transceiver component so that it would function only as a receiver. Meanwhile, the relationship between Midway and Custom soured as a result of Custom's alleged inability to adhere to the delivery schedule, causing Midway to begin looking for a new supply source. In April 1999, Midway issued a purchase order to AEC for the component parts of the original system. AEC, in turn, contacted NTU to manufacture the circuit boards for the components. Because NTU would not provide circuit boards to AEC using Custom's tools and test fixtures, Midway sent NTU the necessary information to construct the circuit boards. Although the record is unclear as to what process of manufacture was used, NTU apparently duplicated all of the markings on the original circuit boards, including the legend containing Custom's trade name.

On June 16, 1999, Midway sent a letter to Custom that terminated the contract and instructed Custom to stop all work. Later that month, Midway learned that MDCO had previously supplied some components as a contract manufacturer for Custom. Midway contracted directly with MDCO to supply 1000 transmitters, which were constructed using circuit boards manufactured by NTU. None of the defendants noticed that the circuit boards that NTU supplied to AEC and MDCO — approximately 6000 or 7000 in total — retained the legend with Custom's trade name. By July 1999, Baughman and Bell completed their redesign of the new receiver component. This new receiver used a new circuit board that was not manufactured by NTU and did not contain the legend.

In 1999, Custom sued Midway in Florida state court for breach of contract. Midway countersued. Discovery in that action unearthed the use of Custom's trade name on the circuit boards supplied to AEC and MDCO, and this litigation ensued.

II.

On December 22, 2003, Custom brought suit in the United States District Court for the Middle District of Florida against the defendants in this appeal and against Sheets, Stosic, and Genium. Count 1 of Custom's complaint alleged unfair competition in violation of section 43(a) of the Lanham Act, 15 U.S.C. §§ 1051 et seq.⁴ Count 2 alleged violation of the Florida Deceptive and Unfair Trade Practices Act ("FDUTPA"), Fla. Stat. § 501.201 et seq.⁵ Finally, Count 3 alleged that AEC, Stosic, Genium, and Sheets tortiously interfered with a business relationship in violation of Florida law.

The court granted summary judgment in favor of the defendants with respect to Counts 1 and 2. The court also granted summary judgment in favor of AEC, Sheets, Stosic, and Genium on Count 3, and imposed sanctions on Custom's counsel pursuant to Federal Rule of Civil Procedure 11. Custom timely appealed the judgment on Counts 1 and 2 only, and the district court's order denying Custom's motion to compel discovery relating to Midway's customers.

We review a district court's grant of summary judgment de novo and apply the same legal standards as the district court. Summary judgment is appropriate where, viewing the evidence (all "pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any," Fed.R.Civ.P. 56(c)), and all reasonable factual inferences drawn therefrom in the light most favorable to the non-moving party, there remains no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law. See Johnson v. Bd. of Regents, 263 F.3d 1234, 1243 (11th Cir. 2001) (citation omitted). Summary judgment is mandated where a party "fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial." Id. (quotation marks and citation omitted).

III.

Count 1 of Custom's complaint alleged a claim pursuant to section 43 of the Lanham Act, codified as 15 U.S.C. § 1125. "Section 43(a) of the Lanham Act creates a federal cause of action for unfair competition" in interstate commerce, and "forbids unfair trade practices involving infringement of . . . trademarks, even in the absence of federal trademark registration." Univ. of Florida v. KPB, Inc., 89 F.3d 773, 775-76 (11th Cir.1996) (per curiam).⁶ Unlike the general prohibition against unauthorized copying that exists in patent and copyright law, see B.H. Bunn Co. v....