618 F.3d 441 (4th Cir. 2010), 09-1942, Georgia Pacific Consumer Products, LP v. Von Drehle Corp.

Docket Nº:09-1942, 09-2054.
Citation:618 F.3d 441
Opinion Judge:HAMILTON, Senior Circuit Judge:
Party Name:GEORGIA PACIFIC CONSUMER PRODUCTS, LP, Plaintiff-Appellant, v. VON DREHLE CORPORATION, a North Carolina corporation, Defendant-Appellee. Georgia Pacific Consumer Products, LP, Plaintiff-Appellee, v. Von Drehle Corporation, a North Carolina Corporation, Defendant-Appellant.
Attorney:Stephen Patrick Demm, Hunton & Williams, LLP, Richmond, Virginia, for Appellant/Cross-Appellee. Albert P. Allan, Allan Law Firm, PLLC, Charlotte, North Carolina, for Appellee/Cross-Appellant. Thomas G. Slater, Jr., John Gary Maynard, III, George P. Sibley, III, Hunton & Williams, LLP, Richmond, V...
Judge Panel:Before KEENAN, Circuit Judge, HAMILTON, Senior Circuit Judge, and SAMUEL G. WILSON, United States District Judge for the Western District of Virginia, sitting by designation. WILSON, District Judge, concurring specially:
Case Date:August 10, 2010
Court:United States Courts of Appeals, Court of Appeals for the Fourth Circuit
 
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618 F.3d 441 (4th Cir. 2010)

GEORGIA PACIFIC CONSUMER PRODUCTS, LP, Plaintiff-Appellant,

v.

VON DREHLE CORPORATION, a North Carolina corporation, Defendant-Appellee.

Georgia Pacific Consumer Products, LP, Plaintiff-Appellee,

v.

Von Drehle Corporation, a North Carolina Corporation, Defendant-Appellant.

Nos. 09-1942, 09-2054.

United States Court of Appeals, Fourth Circuit.

August 10, 2010

Argued May 11, 2010.

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ARGUED:

Stephen Patrick Demm, Hunton & Williams, LLP, Richmond, Virginia, for Appellant/Cross-Appellee.

Albert P. Allan, Allan Law Firm, PLLC, Charlotte, North Carolina, for Appellee/Cross-Appellant.

ON BRIEF:

Thomas G. Slater, Jr., John Gary Maynard, III, George P. Sibley, III, Hunton & Williams, LLP, Richmond, Virginia; Mark G. Arnold, Husch Blackwell Sanders LLP, St. Louis, Missouri, for Appellant/Cross-Appellee.

Stephen L. Curry, North Little Rock, Arkansas; Michael P. Thomas, Patrick Harper & Dixon, LLP, Hickory, North Carolina, for Appellee/Cross-Appellant.

Before KEENAN, Circuit Judge, HAMILTON, Senior Circuit Judge, and SAMUEL G. WILSON, United States District Judge for the Western District of Virginia, sitting by designation.

OPINION

HAMILTON, Senior Circuit Judge:

Georgia-Pacific Consumer Products, LP (G-P), successor-in-interest to Georgia Pacific Corporation, is a leading designer/manufacturer of, inter alia, paper products and dispensers for such products for the home and the away-from-home setting ( e.g., hotels, stadiums, restaurants, etc). This case implicates two related products first introduced by G-P in October 2002-the touchless paper towel dispenser ( Dispenser) and paper toweling with a high-quality,

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fabric-like feel designed specifically for use in and problem-free operation of Dispensers ( Toweling). Although G-P actually sells Toweling to janitorial supply distributors, who, in turn sell it to their respective end-user customers ( e.g., hotels, stadiums, restaurants, etc.), G-P only leases Dispensers to such distributors, who, in turn, are permitted to sublease them to their respective end-user customers. The leases and subleases expressly provide that only Toweling can be used in Dispensers and stickers on the inside of Dispensers reinforce the limitation.

The face of every Dispenser bears four registered trademarks owned by G-P-, ,, and or . Collectively, we refer to the first three of these trademarks as " the G-P Marks," which are the three trademarks at issue on appeal.

On July 8, 2005, after one of G-P's competitors, von Drehle Corporation (VD), started marketing and selling to distributors an inferior paper toweling specifically manufactured by VD for use in Dispensers, G-P brought the present civil action against VD, alleging the following four causes of action at issue on appeal: (1) unfair competition in violation of § 43(a) of the Lanham Act, 15 U.S.C. § 1125(a); (2) contributory trademark infringement in violation of § 32 of the Lanham Act, 15 U.S.C. § 1114(1); (3) unfair competition in violation of North Carolina common law; and (4) tortious interference with contractual relationships in violation of North Carolina common law.1 VD counterclaimed for violation of the North Carolina Unfair and Deceptive Trade Practices Act (NC UDTPA), N.C. Gen.Stat. § 75-1.1. Ultimately, on cross-motions for summary judgment with respect to all of G-P's claims, the district court granted summary judgment in favor of VD. The district court also granted summary judgment in favor of G-P with respect to VD's counterclaim.

G-P now appeals the district court's summary judgment ruling with respect to its four claims set forth above, and VD cross-appeals the district court's summary judgment ruling with respect to its single counterclaim. For reasons that follow, we vacate the district court's grant of summary judgment in favor of VD with respect to G-P's claims for contributory trademark infringement and unfair competition under the Lanham Act, unfair competition under North Carolina common law, and tortious interference with contract under North Carolina common law, and remand for further proceedings consistent with this opinion. We affirm the district court's grant of summary judgment in favor of G-P with respect to VD's counterclaim under the NC UDTPA.

I.

In analyzing de novo whether the district court erred in granting summary judgment in favor of VD, we view the facts and draw all reasonable inferences therefrom in the light most favorable to G-P, as the nonmoving party. Garofolo v. Donald B. Heslep Assocs., Inc., 405 F.3d 194, 198 (4th Cir.2005). G-P's claims are based upon the following facts.

For many years, G-P has designed, manufactured, and sold what those in the paper towel dispenser industry call " universal dispensers." Other companies, including

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VD, also design, manufacture, and sell universal dispensers. Universal dispensers accept and are intended to accept paper toweling from multiple manufacturers. However, with the introduction of Dispensers, G-P sought to introduce a non-universal dispenser tied directly to the G-P Marks- i.e., one that G-P intended would only operate with, and one in which the restroom visitor would expect to dispense, Toweling. In this way, G-P sought to create a branded-dispenser situation akin to a branded Coca-Cola ® soda fountain dispenser, which the user expects to dispense only genuine Coca-Cola ® products.

Turning to the specifics of Dispensers, they dispense a pre-measured amount of paper toweling upon activation of an electronic motion sensor, without the user having to touch the dispenser in any manner, thus providing a hygienic experience superior to that of a manual paper towel dispenser otherwise requiring the user to touch the dispenser. At the time of their introduction in October 2002, Dispensers were the only electronic, hands-free, paper towel dispensers available in the marketplace.

G-P invented the high-end Dispenser with the intent that it would operate with only non-standard, ten-inch Toweling, which toweling has a soft-fabric like feel created by using a through-air-dried (TAD) process. Although the packaging of Toweling bears the G-P marks, Toweling itself bears no source identifying marks. To reinforce G-P's desire to create a branded dispenser situation akin to the Coca-Cola ® soda fountain dispenser, every Dispenser bears a sticker-notice inside of it stating that such dispenser " is the property of Georgia-Pacific" and " may be used only to dispense the trademark-bearing products identified on its exterior." (J.A. 36). Although G-P uses its mark only with Dispensers,2 it uses the marks and on many of its other products, such as Brawny ® paper towels and Quilted Northern ® toilet paper. Notably, VD does not dispute that Dispensers have been an extremely successful product for G-P and that many commercial facilities in the United States have installed Dispensers.

G-P leases Dispensers to distributors via a pre-printed lease agreement furnished by G-P. Such lease agreement grants a distributor permission to sublease Dispensers " to the end-user customers that shall be approved by G-P...." (J.A. 1086). A typical example of this supply chain is when G-P leases Dispensers to a distributor, who in turn subleases them to a hotel operator for use in the hotel's public restrooms. Notably, although G-P argues that it is a party to the subleases between distributors and the end-user customers ( i.e., the sublessees), the record does not support such a finding.

Also to reinforce its desire to create a branded dispenser situation akin to the Coca-Cola ® soda fountain dispenser, the lease agreements between G-P and its distributors provided that Dispensers would remain the property of G-P and that " only G-P branded towels ... shall be used in" Dispensers-the " [u]se of other unauthorized product(s) is strictly prohibited." Id. Moreover, the lease agreements provided, in relevant part:

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Use of Dispensers by Others

2.1 Distributor shall sublease the Dispensers to the end-user customers that shall be approved by G-P and set forth in Exhibit " A" attached hereto (" Customers" ). All subleases of Dispensers to Customers shall be solely upon the terms and conditions of this Agreement and of the Sublease Registration Form (" Sub Form" ) which is attached hereto as Addendum 1.

2.2 The Sub Form must be fully executed by Distributor for each Customer location in which Dispensers are to be installed. Execution of the Sub Form does not transfer ownership of the Dispensers by G-P to Distributor or Customer.

Id.

VD is a corporation organized under the laws of North Carolina, with its principal place of business in Hickory, North Carolina. Like G-P, VD manufactures paper towel products for the away-from-home market. With one exception not relevant to this appeal, VD sells its products throughout the continental United States to janitorial supply distributors who, in turn, sell to end-user customers such as hotels and restaurants. Notably, although VD actually sells its products to distributors, it directly markets its products to end-user customers via its sales personnel either by themselves or in conjunction with the sales personnel of distributors making in-person sales calls on such customers to encourage them to purchase VD products from the distributors. Brothers Raymond von Drehle and Steven von Drehle, who each hold a fifty-percent stake in VD, run the company, with Raymond serving as VD's chairman and Steven as its president.

By 2004, VD knew about and its sales personnel had inspected Dispensers. Then, in July 2004, VD specifically...

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