Axxiom Mfg., Inc. v. McCoy Invs., Inc.

• Decision Date: 31 January 2012
• Docket Number: Civil Action No. H–09–3735.
• Citation: 2012 Copr.L.Dec. P 30192,846 F.Supp.2d 732
• Parties: AXXIOM MANUFACTURING, INC., Plaintiff, v. McCOY INVESTMENTS, INC. d/b/a Forecast Sales, Defendant.
• Court: U.S. District Court — Southern District of Texas

846 F.Supp.2d 732

2012 Copr.L.Dec. P 30,192

AXXIOM MANUFACTURING, INC., Plaintiff,

v.McCOY INVESTMENTS, INC. d/b/a Forecast Sales, Defendant.

Civil Action No. H–09–3735.

United States District Court,

S.D. Texas,

Houston Division.

Jan. 31, 2012.

William Shawn Staples, Houston, TX, for Plaintiff.

Patrick Nichols Smith, Ramsey Murray PC, Houston, TX, for Defendant.

MEMORANDUM AND OPINION

LEE H. ROSENTHAL, District Judge.

Axxiom Manufacturing, Inc. has sued McCoy Investments, Inc. d/b/a Forecast Sales (“Forecast”), alleging copyright infringement, in violation of 18 U.S.C. § 501; unfair competition, in violation of the Lanham Act, 15 U.S.C. § 1125; and unfair business practices under Texas law.¹ (Docket Entry No. 27). The parties have cross-moved for partial summary judgment on the copyright-infringement claims, (Docket Entry Nos. 49, 94), and Forecast has moved for partial summary judgment on the Lanham Act and state-law claims, (Docket Entry No. 62).² Forecast also has moved to strike certain evidence, (Docket Entry No. 67), for leave to designate responsible third parties, (Docket Entry No. 95), and to exclude the expert testimony of certain Axxiom witnesses, (Docket Entry Nos. 98–100).

Based on the motions and numerous related filings, the record, and the applicable law, this court orders as follows:

• Forecast's motion for partial summary judgment on the copyright-infringement claims, (Docket Entry No. 94), is granted. Axxiom's cross-motion, (Docket Entry No. 49), is denied.

• Forecast's motion for partial summary judgment on the Lanham Act and state-law claims, (Docket Entry No. 62), is denied.

• Forecast's motion to strike certain evidence, (Docket Entry No. 67), is denied.

• Forecast's motion for leave to designate responsible third parties, (Docket Entry No. 95), is granted in part.

• The court reserves ruling on Forecast's motions to exclude expert-witness testimony, (Docket Entry Nos. 98–100), until the discovery hearing to be held on February 1, 2012.

The reasons for these rulings are explained below.

I. BackgroundA. Axxiom

Axxiom designs, manufactures, and markets abrasive-blasting products under the Schmidt brand name. These products include the Schmidt Thompson Valve, the Schmidt Micro Valve, and the Schmidt Combo Valve. (Docket Entry No. 49, ¶ 1.2). The Schmidt brand originated with Schmidt Manufacturing, Inc., a predecessor company that also designed, manufactured, and marketed abrasive-blasting products, including the Thompson Valve and the Micro Valve. In 1997, U.S. Filter, Inc. acquired Schmidt. Six years later, in 2003, U.S. Filter sold Schmidt's intellectual property to International Surface Preparation Group. That same year, Axxiom was formed. Axxiom purchased certain Schmidt assets and licensed Schmidt's intellectual property from International Surface. In 2006, Axxiom purchased Schmidt's intellectual property. (Docket Entry No. 61, Ex. L, ¶ 2).³

In 1987, Schmidt published an Operating and Maintenance Manual for its 1.5, 3.5, 6.5, 10 & 20 Cu. Ft. Portable Pressure Blasters. (Docket Entry No. 94, Ex. A). This manual included exploded-parts hand drawings of the components comprising the Thompson Valve, the Micro Valve, and the Combo Valve. Each drawing had component-part descriptions and numbers. ( Id., at 16–18). According to Steven Ambriz, Axxiom's engineering supervisor, (Docket Entry No. 49, Ex. B, ¶ 2), earlier versions of this 1987 manual dated back to approximately 1980, (Docket Entry No. 94, Ex. B, at 27–28). Only the 1987 manual, however, is in the record. For this manual, Axxiom has conceded that Schmidt did not attach the required copyright notice under the then-applicable 1976 Copyright Act. (Docket Entry No. 96, at 4); see generally 2 Melville B. Nimmer & David Nimmer, Nimmer on Copyright §§ 7.02[A]-[B] (2011).

Ten years later, in 1997, U.S. Filter published an Owner's Manual for its 1.5, 3.5, 6.5, 8, 10 & 20 Cu. Ft Abrasive Blasters. (Docket Entry No. 56, Ex. A). Although this manual differs from its 1987 predecessor in some respects—there are numerous textual differences, for example ⁴—the exploded-parts drawings and accompanying legends are extremely similar. This is true for the Thompson Valve, Micro Valve, and Combo Valve. The 1997 manual's component-part descriptions were, according to Ambriz, “pretty much the same” as the older manuals' descriptions. (Docket Entry No. 94, Ex. B, at 30). The valve drawings, on the other hand, were somewhat different. Unlike the 1987 manual's drawings, which were created by hand, the 1997 manual's drawings were created by computer. ( Id., at 31). Ambriz explained that U.S. Filter used the hand drawings in creating the computer drawings. ( Id., at 40–42; see also id., at 35–38 (discussing three methods of using the hand drawings to create the computer drawings, but admitting he was unsure which method was used)). The 1997 exploded-parts computer drawing of the Thompson Valve, (Docket Entry No. 56, Ex. A, at 20), looks very similar to the 1987 hand drawing, (Docket Entry No. 94, Ex. A, at 17). The same is true for the Micro Valve, ( compare Docket Entry No. 56, Ex. A, at 14; with Docket Entry No. 94, Ex. A, at 16), and the Combo Valve ( compare Docket Entry No. 56, Ex. A, at 15; with Docket Entry No. 94, Ex. A, at 18).

Axxiom, claiming a written transfer agreement from U.S. Filter, registered the copyright on the 1997 manual effective July 7, 2010. The 1997 manual's listed date of first publication was December 31, 1997. (Docket Entry No. 61, Ex. I).

After Axxiom took over the Schmidt product line, it published at least two additional manuals after the 1997 manual. The first, published in 2004, also was an Owner's Manual for 1.5, 3.5, 6.5, 8, 10 & 20 Cu. Ft. Abrasive Blasters. (Docket Entry No. 56, Ex. B). The 1997 and 2004 manuals are similar. The covers reflect the different companies ⁵; one of the warnings is reworded ⁶; and the 2004 manual contains a drawing for a new valve, the Thompson Valve II, that the 1997 manual lacks.⁷ But the pages on the Micro Valve, Combo Valve, and Thompson Valve are extremely similar. The drawings appear to be identical, although there are slight variations in the descriptions. ( Compare Docket Entry No. 56, Ex. A, at 14–15, 20; with Docket Entry No. 56, Ex. B, at 14–15, 20). Axxiom claims to be the author of the manual text and artwork. It registered the copyright on the 2004 manual effective July 7, 2010. The 2004 manual's listed date of first publication was December 31, 2004. (Docket Entry No. 61, Ex. K).

Axxiom published another manual in 2008. (Docket Entry No. 49, Ex. E). This manual differs significantly from its predecessors. It is 86 pages long; the 2004 manual, by contrast, is 26 pages. The 2008 manual contains substantially more information than its predecessors, including a step-by-step assembly guide. The drawings and descriptions of the Micro Valve, Combo Valve, and Thompson Valve are little changed from the 1997 and 2004 manuals. ( Id., at 66, 68–69). The 2008 manual's exploded-parts drawing of the Micro Valve, and accompanying text, appear to be identical to the 2004 manual's drawing. ( Compare id., at 66; with Docket Entry No. 56, Ex. B, at 14). The same is true for the 2008 manual's and 2004 manual's exploded-parts drawings for the Combo Valve, although the 2008 manual contains two additional pictures enlarging items 4 and 10. ( Compare Docket Entry No. 49, Ex. E, at 68; with Docket Entry No. 56, Ex. B, at 15). And the same is true for the 2008 manual's and the 2004 manual's Thompson Valve, although the 2008 manual rotates the assembled valve slightly in the drawing and points out the location of the valve's “Air Signal Port.” ( Compare Docket Entry No. 49, Ex. E, at 69; with Docket Entry No. 56, Ex. B, at 20).

Ambriz confirmed that the exploded-parts drawings of the Thompson Valve, Micro Valve, and Combo Valve in the 2008 and 2004 manuals are identical to the ones in the 1997 manual. (Docket Entry No. 94, Ex. B, at 53). Forecast's counsel asked Ambriz which pages in older Schmidt manuals Axxiom “incorporated” into its 1997 manual.⁸ Ambriz responded: “The general design of the cover and the—the warning notes and the safe procedures.” (Docket Entry No. 94, Ex. B, at 28). Forecast's counsel then attempted to go page-by-page through the 1997 manual and ask whether that page was incorporated from the 1980 manual. ( Id., at 28–29). Ambriz responded, “Well, just to keep it short, I would say that all these pages .... because you—you're carrying on and developing year after year.” ( Id., at 29). In a post-deposition declaration submitted after Forecast's most recent motion for summary judgment, however, Ambriz denied that the exploded-parts drawings in the 1997, 2004, and 2008 manual were “based on the Schmidt Manufacturing Inc. 1987 manual or any other manual[.]” (Docket Entry No. 96, Ex. 1, ¶ 6).

B. Forecast

Forecast has been in the abrasive-blasting business for over 35 years. It designs, manufactures, and markets abrasive-blasting products under the name “Pirate Brand.” Forecast admits that “[t]he origin of the name [ ] comes from the fact that we got our start by manufacturing aftermarket (commonly referred to as ‘pirated’) replacement parts as an alternative to other manufacturers ['] OEM parts.” (Docket Entry No. 83, Ex. 1, at 1). “OEM” is an acronym for “[o]riginal equipment manufacturer.” (Docket Entry No. 83, Ex. 3, at 34). In this case, OEM refers to Schmidt brand products manufactured by Axxiom. ( Id., at 35).

In May 2009, Forecast published a User's Manual for its Pirate Brand 3.5 / 6.5—SPH / SPR Series Blasters. (Docket Entry No. 29, Ex. 2, at 1). The Pirate Brand valves correspond to the Axxiom Schmidt valves. The Pirate Brand Combination Valve ⁹ corresponds to the Schmidt Combo Valve.¹⁰ (Docket Entry No. 83, Ex. 2, at 35). The Pirate Brand APV (Automatic Plunger Valve) ¹¹ corresponds to the Schmidt Thompson Valve.¹² ( Id., at 33). Forecast originally called this...