Adidas America, Inc. v. Payless Shoesource, Inc.

• Decision Date: 10 March 2008
• Docket Number: No. CV 01-1655-KI.,CV 01-1655-KI.
• Parties: ADIDAS AMERICA, INC. and Adidas-Solomon AG, Plaintiffs, v. PAYLESS SHOESOURCE, INC., Defendant.
• Court: U.S. District Court — District of Oregon

540 F.Supp.2d 1176

ADIDAS AMERICA, INC. and Adidas-Solomon AG, Plaintiffs, v. PAYLESS SHOESOURCE, INC., Defendant.

No. CV 01-1655-KI.

United States District Court, D. Oregon.

March 10, 2008.

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Stephen M. Feldman, Thomas R. Johnson, Perkins Coie, LLP, Portland, OR, Jerre B. Swann, R. Charles Henn, Jr., William H. Brewster, Kilpatrick Stockton, LLP, Atlanta, GA, for Plaintiffs.

Craig D. Bachman, Kenneth R. Davis, II, Milo Petranovich, Lane Powell, PC, William B. Crow, Schwabe Williamson & Wyatt, PC, Portland, OR, Bridget A. Short, David R. Barnard, David V. Clark, William R. Hansen, Lathrop & Gage L.C., New York, NY, Gerald M. Kraai, R. Cameron Garrison, Travis W. McCallon, William A. Rudy, Lathrop & Gage, LC, Kansas City, MO, Michael G. Martin, Michael J. Roche, Phillip S. Lorenzo, Lathrop and Gage L.C., Denver, CO, Stephen J. Horace, Lathrop & Gage, LC, Boulder, CO, for Defendant.

OPINION AND ORDER

KING, District Judge.

adidas-America, Inc. and adidas-Salomon AG (collectively, "adidas") filed this action against Payless Shoesource, Inc. ("Payless") for trademark and trade dress infringement, dilution, and related federal and state law claims. On December 21, 2007, this court granted summary judgment to adidas as to, inter alia, Payless' laches, estoppel, and waiver affirmative defenses. Now before the court is Payless' Motion for Reconsideration of the Court's December 21, 2007 Order Granting Summary Judgment to Plaintiffs on Defendant's Affirmative Defenses of Laches, Waiver, and Estoppel (doc. 669). For the reasons set forth below, the motion is DENIED.

Reconsideration is an "extraordinary remedy, to be used sparingly in the interests of finality and conservation of judicial resources." Kona Enterprises, Inc. v. Estate of Bishop, 229 F.3d 877, 890 (9th Cir.2000). Federal Rule of Civil Procedure 54(b) authorizes the court to modify an interlocutory order, such as the December 21, 2007 Opinion and Order (the "Order") "which adjudicates fewer than all of the claims ... at any time before entry of judgment adjudicating all of the claims." See also Credit Suisse First Boston Corp. v. Grunwald, 400 F.3d 1119, 1124 (9th Cir.2005) (The Ninth Circuit has "long recognized the well-established rule that a district court judge always has the power to modify or to overturn an interlocutory order or decision while it remains interlocutory.") (citation omitted). Reconsideration is appropriate "if the district court (1) is presented with newly discovered evidence, (2) committed clear error or the decision was manifestly unjust, or (3) if there is an intervening change in controlling law." Sch, Dist. No. 1J, Multnomah County, Or. v. ACandS, Inc., 5 F.3d 1255, 1263 (9th Cir.1993). Motions for reconsideration are generally disfavored, and may not be used to present new arguments or evidence that could have been raised earlier. Fuller v. M.G. Jewelry, 950 F.2d 1437, 1442 (9th Cir.1991).

Payless acknowledges that its motion is not based upon any change in controlling law, or any newly discovered evidence. Thus, the motion can succeed only if Payless demonstrates that this court's Order was clearly in error, or would result in manifest injustice.

Payless argues that the Order "improperly deprived" Payless of the opportunity to avail itself of the presumption of laches. Memo in Supp., at 1. To prevail on a laches defense, a defendant must prove: (1) the claimant unreasonably delayed in filing suit; and (2) as a result of the delay, the defendant suffered prejudice. Jarrow Formulas, Inc. v. Nutrition Now, Inc., 304 F.3d 829, 835 (9th Cir.2002). A presumption of both unreasonable delay and prejudice arises if a plaintiff files suit more than two years after the plaintiff knew or should have known of the alleged infringer's activity. Id. at 836.¹

The Federal Circuit discussed at length the bursting bubble theory of presumptions in A. C. Aukerman Co. v. R.L Chaides Constr. Co., 960 F.2d 1020, 1037-39 (Fed.Cir.1992) (laches in the context of patent infringement). If the presumption applies, the burden of production shifts to the plaintiff to come forward with sufficient evidence to raise a genuine issue of fact concerning either unreasonable delay or prejudice. Id. at 1037-38. The presumption "completely vanishes upon the introduction of evidence sufficient to support a finding of the nonexistence of a presumed fact" (i.e., no unreasonable delay or no prejudice). Id. at 1037. The plaintiff may satisfy this burden, and thereby eliminate the presumption, by producing a "minimum quantum of evidence" sufficient to raise a genuine factual issue as to undue delay or prejudice. Id. The plaintiff may also offer proof that it did not delay more than two years after it knew or should have known of the alleged infringer's activity. "If a [plaintiff] is successful on this factual issue, no presumption arises." Id. at 1038.

In the Order, I did not directly address the issue of this presumption. I did find that there were disputed issues of material fact as to whether adidas knew or should have known of Payless' allegedly infringing activities prior to November 1999.

Payless contends that because the court found that the length of adidas' delay was a matter of genuine dispute, "it remains possible that Payless will be entitled to a presumption of laches." See Reply in Support, at 1. Payless further argues that "[u]nless [adidas] shows that Payless could not prevail on its laches defense, even if both elements of laches were presumed, adidas is not entitled to judgment as a matter of law." Id. In effect, Payless argues that even though the court found genuine issues of material fact which precluded a presumption of laches, adidas still bears the burden of disproving unreasonable delay and prejudice to Payless. In other words, Payless is entitled to a presumption of laches even though it failed to establish that it was so entitled. This argument is flawed.

The presumption of laches simply does not arise if there are any disputed issues of material fact as to when the plaintiff knew or should have known of the alleged infringer's activity, and thus whether the plaintiff filed suit outside the analogous statute of limitations period. A.C. Aukerman, 960 F.2d at 1037-38; see also Gloster v. Relios, Inc., No. 01-7140, 2006 WL 1737800, at *1 (E.D.Pa. June 26, 2006) (rejecting defendant's contention that the presumption of laches applied because there were issues of fact as to when plaintiff learned of its cause of action). Payless cites no authority to the contrary and the court is aware of none. Unlike the present case, the cases to which Payless cites all applied the presumption of laches because the defendant established, as an undisputed fact, that the plaintiff filed its infringement action after the analogous limitations period had passed.

Accordingly, under Aukerman, a presumption of laches does not arise because of the factual issue of when adidas knew or should have known of the allegedly infringing activities.

Even if the presumption arose, it completely vanished on "introduction of evidence sufficient to support a finding of the nonexistence of the presumed fact." Aukerman, 960 F.2d at 1037. "Once a presumption of laches arises, the patentee may offer proof directed to rebutting the laches factors. Such evidence maybe directed to showing either that the patentee's delay was reasonable or that the defendant suffered no prejudice or both. By raising a genuine issue respecting either factual element of a laches defense, the presumption of laches is overcome." Id. at 1038 (internal citation omitted).

In ruling in favor of adidas on Payless' laches defense, I noted that "[e]ven though there are genuine issues of fact as to whether adidas' delay in filing suit was unreasonable, I conclude ... Payless cannot demonstrate that it suffered prejudice as a result of adidas' delay." Opinion and Order, at 60-61. Consequently, even if the presumption arose, it vanished on the strength of adidas' proof, and Payless' inability to raise a factual issue, concerning the lack of prejudice. Next, I explain why I am unpersuaded by Payless' arguments on reconsideration concerning prejudice.

Payless disputes the court's finding that Payless cannot demonstrate expectations-based prejudice because Payless uses stripes merely for decoration, and not as a trademark. "[C]ourts that have found expectations-based prejudice ... have done so only where the defendant was using the infringing word or design as a trademark, and thus had built up goodwill in the mark as a designation of source." Opinion and Order, at 62-63 (citing Tillamook Country Smoker, Inc. v. Tillamook County Creamery Ass'n, 311 F.Supp.2d 1023, 1039 (D.Or.2004), aff'd, 465 F.3d 1102 (9th Cir.2006) (finding expectation-based prejudice where defendant "actually spent money promoting its brand name," thereby "occasioning substantial goodwill for [it]") (emphasis added); Jarrow Formulas, 304 F.3d at 839 ("If [plaintiff] had filed sooner, [defendant] could have invested its resources in shaping an alternative identity ... in the minds of the public.") (emphasis added); Grupo Gigante SA De CV v. Dallo & Co., Inc., 391 F.3d 1088, 1105 (9th Cir.2004) ("[A] defendant can make the required showing of prejudice by proving that it has continued to build a valuable business around its trademark during the time that the plaintiff delayed the exercise of its legal rights."); Bridgestone/Firestone Research, Inc. v. Automobile Club De L'Ouest De La France, 245 F.3d 1359, 1363 (Fed.Cir.2001) ("Economic prejudice arises from investment in and development of the trademark, and the continued commercial use and economic promotion of a mark over a prolonged period....") (emphasis added); McCarthy § 31:12 ("Lathes is a good defense if plaintiff's long failure to exercise its legal rights has caused defendant to rely to his detriment by building up a valuable...