S.C. Johnson & Son, Inc. v. Nutraceutical Corporation, 082914 WIEDC, 11-C-861

Docket Nº11-C-861.
Opinion JudgeRUDOLPH T. RANDA, District Judge.
Party NameS.C. JOHNSON & SON, INC., Plaintiff-Counterclaim Defendant, v. NUTRACEUTICAL CORPORATION and NUTRAMARKS, INC., Defendants-Counterclaimants.
Case DateAugust 29, 2014
CourtUnited States District Courts, 7th Circuit, United States District Court of Eastern District of Wisconsin

S.C. JOHNSON & SON, INC., Plaintiff-Counterclaim Defendant,

v.

NUTRACEUTICAL CORPORATION and NUTRAMARKS, INC., Defendants-Counterclaimants.

No. 11-C-861.

United States District Court, E.D. Wisconsin.

August 29, 2014.

DECISION AND ORDER

RUDOLPH T. RANDA, District Judge.

The following Decision and Order constitutes the Courts findings of fact and conclusions of law pursuant to Rule 52(a)(1) of the Federal Rules of Civil Procedure in this trademark infringement action relating to the parties' competing claims to the use of the trademark "BUG OFF" in conjunction with insect repellant products. The Court conducted a bench trial on the claims of the Plaintiff, S.C. Johnson & Son, Inc. ("SCJ"), and the counterclaims of the Defendants, Nutraceutical Corporation ("Nutraceutical") and NutraMarks, Inc. ("NutraMarks") (collectively the "Defendants").

SCJ has pending claims for trademark counterfeiting (count I) and trademark infringement (count II) in violation of the Lanham Act, 15 U.S.C. § 1114; false designation of origin (count III) and unfair competition (count IV) in violation of 15 U.S.C. § 1125; and unfair competition under Wisconsin common law (count V).1 (ECF No. 1.) The Defendants have pending counterclaims against SCJ for false designation of origin under § 43(a) of the Lanham Act (first counterclaim); declaratory judgment of trademark invalidity pursuant to 15 U.S.C. § 1052(d) and 28 U.S.C. §§ 2201 and 2202 (second counterclaim); and for trademark cancellation pursuant to 15 U.S.C. § 1119 (third counterclaim). (ECF No. 5.)

The parties filed post-trial proposed findings of fact and conclusions of law, and responses (ECF Nos. 77-79, 84-86.) In responding to the Defendants' proposed findings, SCJ raised several evidentiary issues. Those objections have been considered in the Courts analysis of the testimony and evidence presented at trial.

This Court has subject matter jurisdiction over this action pursuant to 15 U.S.C. § 1121; 28 U.S.C. § 1331; and 28 U.S.C. § 1338(a), and over the Wisconsin unfair competition cause of action under 28 U.S.C. 1338(b) and 28 U.S.C. § 1367. Venue in this District is proper pursuant to 28 U.S.C. § 1391(b) and (c).

Before launching into the factual findings, the Court provides a birds eye view of the case. SCJs trademark claims arise from three federal registrations for the mark BUG OFF the earliest of which, referred to as the Chervitz registration, has a June 22, 1998, priority date. The Defendants' counterclaims are based on their claimed ownership of nationwide common law rights to BUG OFF predating SCJs registered trademark rights. The parties agree that the BUG OFF marks are confusingly similar. The issues before the Court are whether the Defendants have established nationwide common law rights in BUG OFF, whether the Defendants abandoned any common law trademark, whether SCJs earliest trademark that began in 1998 is invalid, and whether SCJ has abandoned its BUG OFF trademarks.

Findings of Fact

Although many consumers are painfully aware of the importance of insect repellants, they may not be aware of the market size. In 1998-99, the market for insect repellents in the United States was approximately $230 million. The 2013 market was approximately $336 million. While there are various types of insect repellants, many types are sold in the same sections of stores, and even in the same product display, as shown by a Target store display with clip-on products, natural repellants, and traditional spray-on repellants in one display. (Trial Exs. 20, 1050.)

SCJ is a corporation organized under Wisconsin law with its principal place of business located in Racine, Wisconsin. SCJ makes, distributes, and sells dozens of insect repellant products, including various formulations of aerosol sprays and spritzers (such as Off!, Naturals, Deep Woods Off, and Deep Woods Dry), as well as candles, clip-ons, and other products all falling under the primary Off! brand. Several of these products are also sold under the sub-brand name "Deep Woods." Promoting the Off! brand is SCJs first priority, followed by promotion of the Deep Woods sub-brand. SCJs OFF! line has about 51% of the market today, and had 55% of the market in the late 1990s.

Nutraceutical and NutraMarks are Delaware corporations with their principal place of business in Park City, Utah. Nutraceutical manufactures and markets a variety of products primarily geared to consumers interested in natural and organic products. Its approximate annual sales are in excess of $200 million. NutraMarks holds the rights to the intellectual property of Nutraceutical, which includes ownership of over 290 trademarks. In February 2011, Nutraceutical became the successor-in-interest to Sunfeather Natural Soap Company ("Sunfeather"), a Potsdam, New York company founded by Sandy Maine ("Maine"). Sometime in the early 1980s, Maine began making and bottling an all-natural bug repellant that she named "BUG OFF."

Chervitz & Kaz Registrations

The earliest of the three BUG OFF trademarks owned by SCJ was originally the subject of an application for U.S. Registration No. 2, 369, 898 filed on June 22, 1998, by Melvin Chervitz ("Chervitz") (the "Chervitz registration") for the mark BUG OFF used with "wristbands for repelling insects." The registration provided January 26, 1998, as the date of first use in commerce and a priority date of June 22, 1998, based on its PTO (United States Patent and Trademark Office) filing date. The Chervitz registration issued on July 25, 2000. To support the claim that BUG OFF was used in commerce as of June 22, 1998, Chervitz relied on a price list from Seven Cs International Liquid Crystal Products, 2 which included a listing for a "BUG OFF ™ Bracelet." The price list does not include information indicating any actual sales, purchasers, or locations where sales took place to support his use-based trademark registration.

Chervitz later filed a supplemental declaration dated February 5, 2003, with exhibits providing additional information regarding his sales activity. (Trial Ex. 11.) Chervitz traveled from Missouri to Texas on January 28, 1998, taking samples of the BUG OFF wristbands with him to make them available for purchase. On May 26, 1998, Chervitzs BUG OFF wristband was highlighted on a St. Louis radio station. Chevitz made a May 28, 1998, sale of six units of the BUG OFF product to Sandy Parres, who told him she heard about the product on the radio program. Chervitz also reported a May 30, 1998, sales call on Spicers, a St. Louis novelty and gift store, and subsequent sales of a number of BUG OFF products to Spicers. Chervitz also sent samples of BUG OFF product in April and June 1998 to an out-of-state company. The supplemental declaration originally included exhibits, which SCJ no longer has. The exhibits were records of sales but SCJ does not recall exactly what they consisted of.

SCJs second of three trademarks to BUG OFF originated with the June 23, 1998, filing of an intent-to-use ("ITU") application to register the mark BUG OFF and an accompanying design by DeJay Corporation ("DeJay"), which was acquired by Kaz, Inc. ("Kaz") in August 1998. The PTO examiner cited the Chervitz registration as a basis to refuse to register the DeJay/Kaz ITU application (the "Kaz application"). In January 2001, Kaz responded with a petition to cancel the Chervitz registration, claiming that Chervitz had not made actual use in commerce of the mark as of the filing date.3

Chervitz was deposed on October 23, 2003, as part of the Trademark Trial and Appeal Board ("TTAB") cancellation proceeding4 and testified he had sold approximately one gross of the product to Spicers of St. Louis in either May, June, or July 1998. However, he had "no documentation that reflect[ed] that sale, " the variety store did not appear on Chervitzs customer list for 1998, and he could not recall the unit price. (Trial Ex. XXXX-XX-XXXX-XX.)

The TTAB did not rule on the merits of Kazs petition to cancel because the parties settled. In April 2004, Chervitz assigned his rights and registration in the BUG OFF trademark to Kaz. After that, the PTO advanced the Kaz application to registration in 2007 as U.S. Registration No. 3, 303, 024 (the "2017024 registration" or the "Kaz registration").

SCJ's 2003 BUG OFF Trademark Application

The third of SCJs three BUG OFF trademarks originated with its filing of a January 29, 2003, ITU trademark application (Ser. No. 78/208245) (the "SCJ application") with the PTO for BUG OFF for "Citronella candles, insect repellants, and insect repelling pads, lamps, and candle lanterns for insect repelling."

On June 23, 2003, SCJ received a letter from Sunfeathers attorney, expressing concern over the application and informing SCJ that Sunfeather had been using BUG OFF on an insect repellant product since at least as early as 1992. (Trial Exs. 35, 1064, 1019). Sunfeathers attorney asked several specific questions regarding SCJs planned use of BUG OFF to assist Sunfeather in determining whether there would be a likelihood of confusion. ( Id. )

In response, Sally Davis ("Davis"), SCJs corporate counsel in charge of pest control, telephoned Sunfeathers attorney and stated that Sunfeather was infringing SCJs OFF! mark. Davis never provided any information to Sunfeather regarding SCJs intended use of BUG OFF because the conversation ended relatively quickly once the issue of OFF! was raised. Davis also stated that SCJ had owned an earlier BUG OFF registration from the late 1980s until the early 1990s, which would have prevented the acquisition of common law rights while it was in force. After Davis stated that Sunfeathers use was infringing SCJs trademark rights, Sunfeathers counsel represented that she would review their respective rights and get back to Davis with a response, but Davis never heard back. Aside from that conversation, SCJ has never asserted that Sunfeather was...

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