Shatel Corp. v. Mao Ta Lumber and Yacht Corp.

• Decision Date: 14 February 1983
• Docket Number: No. 81-6187,81-6187
• Citation: 697 F.2d 1352
• Parties: SHATEL CORP., Plaintiff-Appellee, v. MAO TA LUMBER AND YACHT CORPORATION, Defendant-Appellant.
• Court: U.S. Court of Appeals — Eleventh Circuit

Page 1352

697 F.2d 1352

220 U.S.P.Q. 412

SHATEL CORP., Plaintiff-Appellee, v. MAO TA LUMBER AND YACHT CORPORATION, Defendant-Appellant.

No. 81-6187.

United States Court of Appeals, Eleventh Circuit.

Feb. 14, 1983.

Curtis Carlson, Fowler, White, Burnett, Hurley, Banick & Strickroot, P.A., Miami, Fla., for defendant-appellant.

Richard H. Compere, Hume, Clement, Brinks, Willian & Olds, Ltd., Chicago, Ill., Richard A. Goetz, Hodgson, Russ, Andrews, Woods & Goodyear, Fort Lauderdale, Fla., for plaintiff-appellee.

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

Before RONEY and JOHNSON, Circuit Judges, and DYER, Senior Circuit Judge.

JOHNSON, Circuit Judge:

Shatel Corporation is a Fort Lauderdale, Florida, corporation in the business of selling and importing yachts. Appellant Mao Ta Lumber and Yacht Corporation is a Taiwanese corporation and a manufacturer of yachts. In 1979 Mao Ta sent corporate officers to the United States to obtain a sales representative for the line of boats it was then manufacturing in Taiwan. Mao Ta contacted the president of Shatel and interested him in a 51-foot sailing yacht. As a result of subsequent negotiations Shatel entered a written agreement with Mao Ta whereby appellant was to manufacture and appellee was to exclusively distribute the 51-foot boat which would be built pursuant to Shatel's specifications and standards and sold under the trademark SKYE. Mao Ta acknowledged that the trademark SKYE would be Shatel's sole property and would not be used by Mao Ta in the promotion and sale of the boat without Shatel's prior written permission. Shatel filed trademark applications in the United States and in twenty-five other countries to register the mark SKYE. Shatel supplied various parts to Mao Ta that were to be incorporated into the SKYE 51 boats being manufactured, and Shatel spent substantial sums of money and time in advertising, promoting and selling the 51-foot yacht under the trademark SKYE.

On July 26, 1981, Mao Ta ended the distributorship arrangement because Shatel did not order the minimum twelve vessels in a twelve-month period required by the distribution agreement. Since that date there have been no sales of Mao Ta's 51-foot boat in the United States. On August 4, 1981, Rex Yacht Sales, Inc. of Fort Lauderdale, Florida, sent a Telex to Mao Ta requesting information about its production lines. On August 7, Mr. Tai, the president of Mao Ta, sent a return Telex stating: "THKS UR TLK RCVD. SAILBOATS 36', 41', 46', N', SKYE 51' R UR PRESENT PRODUCTION LINES. HVING NO AGREEMENT IN THE U.S., WE HANDLE ALL BUSINESS." The president of Rex Yacht Sales testified that his impression on receiving this Telex was that he was being offered a SKYE 51. Mao Ta also gave information to Odyssey Yacht Sales of Seabrook, Texas, concerning the boats that it manufactured. Odyssey put out a brochure offering Mao Ta's 51-foot boat as the SKYE 51. The brochure was made up principally of photo-copies from a brochure previously printed by Shatel. There is no evidence that Mao Ta was the source of the brochure, but hull numbers of 51-foot boats in Mao Ta's inventory were included in the brochure.

On August 28, 1981, Shatel filed a complaint in the United States District Court for the Southern District of Florida against Mao Ta for both federal and common law unfair competition and for breach of contract. The unfair competition counts were based on Shatel's claim that Mao Ta had infringed its trademark SKYE. Shatel filed a motion for a preliminary injunction which was limited to the trademark infringement issue. ¹ Subsequent to the presentation of testimony, documentary evidence and argument the district court made findings of fact and conclusions of law, and entered an order enjoining Mao Ta, its agents and employees from "the use of the designation SKYE or another designation which will cause confusion as to the vessel's origin and designation."

The grant or denial of a preliminary injunction rests within the sound discretion of the district court and is reversible on appeal only for an abuse of that discretion, Dallas Cowboys Cheerleaders v. Scoreboard Posters, 600 F.2d 1184, 1187 (5th Cir.1979), or if contrary to some rule of equity. Meccano, Ltd. v. John Wanamaker, 253 U.S. 136, 141, 40 S.Ct. 463, 465, 64 L.Ed. 822 (1920). A preliminary injunction, however, is an extraordinary remedy, and the boundaries within which the district court may exercise its discretion are clearly marked. Vision Center v. Opticks, Inc., 596 F.2d 111, 114 (5th Cir.1979), cert. denied, 444 U.S. 1016, 100 S.Ct. 668, 62 L.Ed.2d 646 (1980). The district court should issue an injunction only if the moving party clearly satisfies the following four prerequisites: (1) a substantial likelihood that the movant will ultimately prevail on the merits; (2) a showing that the movant will suffer irreparable injury unless the injunction issues; (3) proof that the threatened injury to the movant outweighs whatever damage the proposed injunction may cause the opposing party; and (4) a showing that the injunction, if issued, would not be adverse to the public interest. Id.

Mao Ta argues that according to the rules of equity the preliminary injunction was improperly granted because the plaintiff's hands were unclean. It claims that Shatel used the federal registration symbol in connection with the mark SKYE in two advertisements when SKYE was not a federally registered trademark in order to ward off others inclined to use the same mark. Shatel replies that its use of the registration symbol was inadvertent and was not done with the intent of deceiving or misleading the public. Although SKYE was not a registered trademark in the United States at the time of these ads, it had already been registered in several countries. Mr. Atlass, the president of Shatel, testified that he thought the registration symbol could be used since the ads, which appeared in Yachting Magazine, would be distributed in countries where the mark was registered.

The law on "unclean hands" in a trademark case is well stated in Worden & Co. v. California Fig Syrup Co., 187 U.S. 516, 23 S.Ct. 161, 47 L.Ed. 282 (1903):

[W]hen the owner of a trade-mark applies for an injunction to restrain the defendant from injuring his property by making false representations to the public, it is essential that the plaintiff should not in his trade-mark, or in his advertisements and business, be himself guilty of any false or misleading representations; that if the plaintiff makes any material false statement in connection with the property which he seeks to protect, he loses the right to claim the assistance of a court of equity; that where any symbol or label claimed as a trademark is so constructed or worded as to make or contain a distinct assertion which is false, no property can be claimed on it, or, in other words, the right to the exclusive use of it cannot be maintained.

Id. at 528, 23 S.Ct. at 164 (use of the mark "Syrup of Figs" not protected because figs were not a main ingredient in the laxative). The type of material misrepresentation considered in Worden is far different than Shatel's misuse of a registration symbol. Worden held that a court should not protect the exclusive right to use a name or mark which is misleading to the public. Accord Holzapfel's Compositions Co. v. Rahtjen's American Composition Co., 183 U.S. 1, 8, 22 S.Ct. 6, 8, 46 L.Ed. 49 (1901) ("Rahtjen's Patent Composition" not protectable trademark because composition was not patented). The mark SKYE is not misleading, and Shatel is not trying to protect the right to use the registration symbol in connection with the mark. Because misunderstandings about the use of federal registration symbols are common, see U.S. Department of Commerce, Trademark Manual of Examining Procedure Sec. 902.04 (1979), courts have been reluctant to find unclean hands where the misuse of the registration symbol was negligent or immaterial to the litigation. Gilson, Trademark Protection & Practice, Sec. 8:12(13)(iii) (1979). Mao Ta has introduced no evidence to show that Shatel's use of the registration symbol was anything other than inadvertent, and we consider its use immaterial to this litigation. Application of the equitable doctrine of unclean hands lies within the sound discretion of the district court. Wolf v. Frank, 477 F.2d 467, 474 (5th Cir.), cert. denied, 414 U.S. 975, 94 S.Ct. 287, 38 L.Ed.2d 218 (1973). We hold that the district court did not abuse its discretion by refusing to apply the doctrine of unclean hands.

Mao Ta's principal argument is that the district court abused its discretion by granting the injunction since Shatel's evidence did not show a substantial likelihood of success on the merits. ² Mao Ta claims that Shatel could not have prevailed on the merits because there is no evidence that, through use of the mark SKYE, Mao Ta has caused any 51-foot boats to enter into commerce.

In order to make out a violation of 15 U.S.C.A. Sec. 1125(a) Shatel must show (1) that Mao Ta used a false designation of origin, or a false...