Amid, Inc. v. Med. Alert Found. United States, Inc., CIVIL ACTION NO. H–16–1137

• Decision Date: 16 March 2017
• Docket Number: CIVIL ACTION NO. H–16–1137
• Parties: AMID, INC., Plaintiff, v. MEDIC ALERT FOUNDATION UNITED STATES, INC., d/b/a Medic Alert Foundation, and Justin Noland, Defendants.
• Court: U.S. District Court — Southern District of Texas

241 F.Supp.3d 788

AMID, INC., Plaintiff,

v.MEDIC ALERT FOUNDATION UNITED STATES, INC., d/b/a Medic Alert Foundation, and Justin Noland, Defendants.

CIVIL ACTION NO. H–16–1137

United States District Court, S.D. Texas, Houston Division.

Signed March 16, 2017

Arthur S. Feldman, Berg Feldman Johnson Bell, LLP, James D. Petruzzi, The Petruzzi Law Firm, Houston, TX, for Plaintiff.

Jessica Priselac, David J. Wolfsohn, Thomas W. Sankey, Duane Morris LLP, Philadelphia, PA, for Defendants.

Lee H. Rosenthal, Chief United States District Judge

MEMORANDUM OPINION SETTING OUT FINDINGS OF FACT AND CONCLUSIONS OF LAW

Table of Contents

Introduction...795

I. Procedural Background...797

A. The Evidence in the Record...797

B. The Parties and the Products...797

C. The Events Leading to this Litigation...798

II. The Legal Standards...800

A. Preliminary Injunctions...800

B. The Lanham Act ...800

C. The Copyright Act...801

III. Findings of Fact...801

A. The Trade–Dress Infringement...801

1. Inherent Distinctiveness...801

2. Secondary Meaning...808

a. The Length and Manner of Using the Trade Dress...812

b. The Sales Volume ...813

c. The Amount and Manner of Advertising...813

d. The Nature of the Use of the Mark or Trade Dress in Newspapers and Magazines...814

e. The Consumer–Survey Evidence...814

f. Direct Consumer Testimony ...818

g. MedicAlert's Intent in Selecting the Trade Dress it Used ...818

h. Weighing the Factors...819

3. Functionality ...819

4. Summary on AMID's Claim of Protected Trade Dress...821

5. An Additional Problem: Injunctive Relief and Irreparable Harm...821

B. The Copyright–Infringement Claim...823

IV. The Motion to Dismiss ...825

V. Conclusions of Law...827

VI. Conclusion and Order Setting Hearing...828

Introduction

The plaintiff, American Medical ID (AMID), wants to stop the defendant, MedicAlert Foundation United States, from using marketing methods and materials that AMID claims infringe its trade dress and copyright. (Docket Entry No. 5). Both AMID and MedicAlert make medical-identification jewelry. AMID's jewelry displays the wearer's critical medical information, so emergency personnel can see the medical conditions on the jewelry itself; MedicAlert's jewelry displays a toll-free phone number that emergency personnel can call to obtain information on the wearer's medical conditions.

Both companies market their medical-identification products in part by sending unsolicited mass-mailed countertop displays with tear-off pads attached to doctors' offices. These displays are intended to be placed in doctors' waiting rooms or lobbies, where patients gather or pass through. Both companies include a letter to each doctor's office explaining what to do with the enclosed display and the importance of patients wearing medical-identification jewelry. AMID copyrighted its letter.

AMID asserts that its unsolicited mailings of countertop easel displays is a protected marketing method and that the countertop display is protected as trade dress that MedicAlert is infringing. AMID also alleges that MedicAlert is infringing its copyrighted letter.

This dispute began after a former AMID marketing manager, codefendant Justin Noland, resigned from AMID and went to work at MedicAlert. MedicAlert had sold its medical-identification jewelry since the 1950s, but it had not mailed unsolicited countertop displays to doctors' offices for the prior six years. MedicAlert resumed the mailings after Noland began working there. AMID alleges that Noland misappropriated the marketing methods and displays and improperly provided them to MedicAlert.

AMID moves for a preliminary injunction on its trade-dress infringement and copyright-infringement claims. (Docket Entry No. 5). AMID seeks to enjoin MedicAlert's use of the unsolicited mass-mailings as a marketing method; use of the packaging that contains the displays; and use of the displays themselves. It also seeks to enjoin MedicAlert's use of the letter enclosed in those packages that contain the displays. In a three-day evidentiary hearing held in October 2016, the court received testimony from witnesses, admitted exhibits, and heard oral argument from counsel. MedicAlert has also moved to dismiss AMID's Texas common-law unfair-competition claim, arguing that the Texas Uniform Trade Secrets Act preempts it because it is based on alleged trade-secret misappropriation. (Docket Entry No. 24).

Both sides have provided the court with excellent briefs on the legal issues and thorough submissions substantiating their factual claims and defenses. Based on the pleadings, the application for preliminary injunction and the response, the motion to dismiss and the response, the prehearing briefs and submissions, the testimony, the arguments, the exhibits presented at the three-day hearing, the posthearing briefs and submissions, and the applicable law, the court enters the following findings of fact and conclusions of law. For the reasons set out in detail below, the court finds and concludes that:

• AMID has not shown that it is likely to succeed in establishing a protected trade dress in the marketing materials because the trade dress is not inherently distinctive, has not acquired secondary meaning, and is functional, and therefore AMID has not demonstrated a substantial likelihood of success on its trade-dress infringement claim under the Lanham Act;

• AMID has shown a substantial likelihood of success on the merits of its copyright-infringement claim but has not shown that the infringement poses a substantial threat of irreparable injury; and • AMID's common-law unfair-competition tort claim is not preempted because AMID could recover on the tort claim without proving that the information is protected as a trade secret.

AMID's preliminary-injunction application is denied, (Docket Entry No. 5), and MedicAlert's motion to dismiss is denied, (Docket Entry No. 24). This case is set for a status conference on April 24, 2017 at 3:00 p.m.

I. Procedural Background

A. The Evidence in the Record

AMID filed this suit in April 2016 and moved for a preliminary injunction. (Docket Entry Nos. 1, 5). AMID submitted affidavits from Rick Russell, AMID's founder and Chief Executive Officer, and Angela Flowers, AMID's director of strategic accounts and direct marketing.¹ AMID also submitted photographs of its displays showing the asserted trade dress; the letter that accompanies the displays, with its copyright registration; side-by-side photographs of AMID's and MedicAlert's countertop displays and letters; a MedicAlert press release; and a chart summarizing the results of a telephone survey AMID conducted to detect evidence of confusion by doctors' office staff. (Docket Entry No. 5, Exs. 1–20).

MedicAlert responded with a brief, (Docket Entry No. 14), and affidavits from David Leslie, MedicAlert's president and CEO; Melody Howard, MedicAlert's vice-president of call-center operations; and Justin Noland, MedicAlert's senior director of marketing. MedicAlert also submitted newspaper articles about the company and its history; photographs of marketing displays MedicAlert has used over the years; written communications between AMID and MedicAlert; side-by-side photographs of AMID's and MedicAlert's displays; a patent registration for a countertop marketing easel display; photographs of various displays AMID has used; MedicAlert's advertising-style guide; a screenshot of a Google search for "medical ids"; photographs of the letters both AMID and MedicAlert sent with their displays; and a photograph of another display, sent by a different medical-identification product marketer, also using an easel display with a tear-off pad attached. (Docket Entry No. 14, Exs. 1–23).

In the evidentiary hearing in October 2016, (Docket Entry Nos. 40–42), the witnesses included David Leslie and Melody Howard from MedicAlert; Rick Russell and Angela Flowers from AMID; Sarah Butler, AMID's survey expert; and Dr. Gary Ford, MedicAlert's survey expert. The court also admitted exhibits.²

The court analyzes the evidence under the applicable law.

B. The Parties and the Products

American Medical ID, or AMID, began in 1994. (Tr. 3:7). It sells medical identification bracelets and tags with the wearer's important medical information printed on the jewelry. (Docket Entry No. 5 at ¶ 3; Pl. Ex. 5; Tr. 1:210–211). MedicAlert Foundation is a § 501(c)(3) charitable nonprofit organization founded in 1956. (Tr. 1:87). Like AMID, MedicAlert sells medical-identification jewelry. (Id. at 1:204–206). MedicAlert's jewelry displays a toll-free phone number with the wearer's identification number. (Id. ). MedicAlert maintains medical information for individuals who subscribe to its service and provides its subscribers with medical-identification jewelry with a toll-free number and the wearer's identification number. MedicAlert operates call centers with medically trained staff who answer the toll-free number and provide the subscriber's medical information to emergency medical or other medical professionals who call. (Id. at 1:203–205). AMID sells its jewelry to patients or their families who place orders and puts the wearer's important medical conditions on the jewelry. (Id. at 1:210–211).

Justin Noland began working at AMID in March 2011 in the marketing group. He became brand manager in 2012. (Id. at 1:259). Noland learned about AMID's unsolicited mass-mailings to doctors' offices during weekly marketing meetings. (Id. at 1:259–60, 1:272–75). In one quarter, Noland himself worked on the displays sent to doctors' offices and was responsible for the artwork on the attached tear-off order forms. (Id. at 1:261–62). According to AMID, Noland learned about the vendors AMID worked with, the specialities of the doctors who received the AMID displays, and generally about the "entire direct-marketing program." (Id. at 1:263–64, 1:273–75).

Noland left AMID in May 2014 and began working at MedicAlert in June 2014. (Id. at 1:145, 2:7–9, 3:27). AMID contends that Noland violated his employment agreement, which included a...