653 F.3d 448 (7th Cir. 2011), 08-4164, Board Of Regents of University Of Wisconsin System v. Phoenix Intern. Software, Inc.

Docket Nº:08-4164.
Citation:653 F.3d 448
Opinion Judge:WOOD, Circuit Judge.
Attorney:Kristin Graham Noel (argued), Anthony A. Tomaselli, Attorneys, Quarles & Brady, Madison, WI, for Plaintiff-Appellee. Jon E. Brightmire (argued), Attorney, Doerner, Saunders, Daniel & Anderson, Tulsa, OK, for Defendant-Appellant.
Judge Panel:Before FLAUM, WOOD, and TINDER, Circuit Judges.
Case Date:August 05, 2011
Court:United States Courts of Appeals, Court of Appeals for the Seventh Circuit

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653 F.3d 448 (7th Cir. 2011)




No. 08-4164.

United States Court of Appeals, Seventh Circuit

August 5, 2011

Argued June 4, 2009.

Decided Dec. 28, 2010.

Reargued March 30, 2011.

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[Copyrighted Material Omitted]

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Kristin Graham Noel (argued), Anthony A. Tomaselli, Attorneys, Quarles & Brady, Madison, WI, for Plaintiff-Appellee.

Jon E. Brightmire (argued), Attorney, Doerner, Saunders, Daniel & Anderson, Tulsa, OK, for Defendant-Appellant.

Before FLAUM, WOOD, and TINDER, Circuit Judges.

WOOD, Circuit Judge.

This case presents complex questions about the law of trademark and the law of sovereign immunity, as the latter applies to a state university. The contending parties are Phoenix International Software, Inc., a small software developer, and the Board of Regents of the University of Wisconsin System, which is an arm of the state of Wisconsin. Their dispute centers around two computer programs, each of which holds the registered trademark " CONDOR." We delve into the details of the case below. For now, it is enough to say that two central issues have occupied us on appeal: first, the question whether the likelihood of confusion between Wisconsin's CONDOR mark and Phoenix's identical mark could be ascertained in summary judgment proceedings; and second, whether Wisconsin is entitled to immunity from Phoenix's federal counterclaims. When we first heard this case, the panel unanimously concluded that summary judgment on the trademark dispute was inappropriate and thus further proceedings were needed, and a majority ruled that the university was entitled to immunity from Phoenix's counterclaims. The panel granted rehearing limited to the immunity questions. We now reaffirm our ruling rejecting summary judgment; this portion of our opinion draws heavily on Judge Tinder's original opinion. After the benefit of the arguments on rehearing, we conclude that the state is not entitled to assert sovereign immunity over the counterclaims, and so we reverse that part of the district court's judgment as well.


Phoenix registered the CONDOR trademark in 1997 for software that runs on mainframe computers and provides online programming development, library management, and systems development; four years later, Wisconsin registered the identical mark, but for software that takes advantage of unused processing power

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across a network of computers. (For convenience, we occasionally refer to CONDOR-Phoenix and CONDOR-Wisconsin, to keep clear which product we are addressing.) In 2004, Phoenix filed a petition to cancel Wisconsin's registration with the Trademark Trial and Appeal Board (TTAB), arguing that the state's mark was likely to cause confusion in trade. See 15 U.S.C. §§ 1052(d) and 1064. Concluding that Phoenix had shown that confusion between the marks was likely, the TTAB granted the petition and cancelled Wisconsin's registration. Phoenix Software Int'l v. Board of Regents of the Univ. of Wis. Sys., Cancellation No. 92042881 (T.T.A.B. Sept. 26, 2007).

Wisconsin decided to challenge the TTAB's decision through a suit in the federal district court. This was one option that federal trademark law made available to it. See 15 U.S.C. § 1071(b). Another option would have been to appeal the TTAB's decision to the U.S. Court of Appeals for the Federal Circuit. See 15 U.S.C. § 1071(a). Phoenix responded to Wisconsin's action both by defending the TTAB's decision and by asserting counterclaims for trademark infringement and false designation of origin under the Lanham Act, see 15 U.S.C. §§ 1114 and 1125(a). The district court dismissed Phoenix's federal counterclaims on the ground that they were barred by the state's sovereign immunity. The parties then filed cross-motions for summary judgment. The district court granted Wisconsin's motion, denied Phoenix's, and thereby reversed the TTAB's decision to cancel Wisconsin's registration.

As we have noted, our first opinion concluded unanimously that Phoenix was entitled to a trial on its confusion-in-trade allegation. The question whether Wisconsin was entitled to immunity, however, proved more difficult to resolve, and we thank the parties for their patience and their additional attention to this important issue. We now hold that the Supreme Court's decision in Lapides v. Board of Regents of the University System of Georgia, 535 U.S. 613, 122 S.Ct. 1640, 152 L.Ed.2d 806 (2002), requires us to find that Wisconsin waived its sovereign immunity when it filed suit in the federal district court seeking to overturn the decision of the TTAB. To maximize its chances of reversing the agency's decision, the state availed itself of the advantages of a fresh lawsuit, choosing that path over a number of others available. It would be anomalous if, after invoking federal jurisdiction, the state could declare that the federal court has no authority to consider related aspects of the case. Cf. Lapides, 535 U.S. at 619, 122 S.Ct. 1640. Phoenix's counterclaims are compulsory in nature and thus lie well within the scope of Wisconsin's waiver of immunity. Accordingly, we reverse the district court's grant of summary judgment, reinstate Phoenix's federal counterclaims, and remand for further proceedings.



Before turning to the merits, it is necessary to say a word about the standard of review. We have mentioned that trademark law provides two avenues for review of TTAB decisions. The road not taken by Wisconsin was a direct appeal to the Federal Circuit, which would have been restricted to the record developed before the TTAB and would have focused on whether substantial evidence supported the agency's decision. CAE, Inc. v. Clean Air Eng'g, Inc., 267 F.3d 660, 675 & n. 9 (7th Cir.2001). The option Wisconsin chose was a new action in the district court. One advantage of this path for the state was the ability to expand the record

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by offering new evidence to fend off Phoenix's cancellation claim. A challenge to the TTAB's decision in a district court is " both an appeal and a new action, which allows the parties to request additional relief and to submit new evidence." Id. at 673. In such an action, the district court wears two hats: " [it] is an appellate reviewer of facts found by the TTAB and is also a fact-finder based on new evidence introduced to the court." Id. at 674. The court here properly followed this approach. It applied a deferential standard of review to the TTAB's findings, in keeping with Dickinson v. Zurko, 527 U.S. 150, 119 S.Ct. 1816, 144 L.Ed.2d 143 (1999), and CAE, 267 F.3d at 675, and for summary judgment purposes the court viewed new evidence in the light most favorable to the nonmoving party.

This standard of review, in combination with the posture of the case and the issues presented, presents a real obstacle to summary judgment in Wisconsin's favor. The central issue here— the likelihood of confusion between the parties' trademarks— is a question of fact for the jury. AutoZone, Inc. v. Strick, 543 F.3d 923, 929 (7th Cir.2008). It was Phoenix that prevailed before the TTAB, and so the district court could not have ruled in Wisconsin's favor without concluding either that no finder of fact could have thought that substantial evidence supported the TTAB's determination, or that a legal error clouded the agency's understanding of the likelihood-of-confusion issue. A party is entitled to summary judgment only if there exists no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. FED. R. CIV. P. 56. Because Wisconsin was the moving party, it would have to point to compelling facts that it neglected to bring to the TTAB's attention, and those facts had to be enough— viewed in the appropriate light— to require judgment in Wisconsin's favor, even if credit was given to all the facts the TTAB found during its proceedings.


1. Findings of the Trademark Trial and Appeal Board

Before the TTAB was testimony from Wisconsin's mainframe coordinator that " an organization that did not have a mainframe or is not involved in developing software application[s] for mainframe computers" would have no use for Phoenix's software, as well as testimony from Wisconsin's software creator stating that the state's software was not used on mainframe computers. Phoenix, however, countered with evidence that its software was not limited to mainframes. The company's sole shareholder, Fred Hoschett, pointed out that many of his CONDOR customers did not have mainframes; he testified that " effectively we can run our software, unchanged, unaltered on a workstation, on someone's desktop, as if it were on a mainframe" and that the software " often" operates on a network of workstations, which he defined as a " LAN, WAN or some other network that allows the interconnection of these workstations." Hoschett also read the description of Wisconsin's CONDOR software posted on the University's website:

Condor is a specialized workload management system for computer-intensive jobs. Like other full-featured batch systems, Condor provides a job queuing mechanism, scheduling policy, priority scheme, resource monitoring, and resource management. Users submit their serial and parallel jobs to Condor. Condor places them into a queue, chooses when and where to run the jobs based upon a policy, carefully monitors their progress, and ultimately informs the user upon completion.

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This language seriously concerned Hoschett; initially, he thought that it was describing his product. Phoenix described its software as " a toolbox of functionality to be used essentially by anyone who uses a computer to assist them in doing their jobs, whether it be programming software, submitted batch jobs and queuing batch jobs, or managing the...

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