Chattanoga Mfg., Inc. v. Nike, Inc.

• Decision Date: 21 August 2002
• Docket Number: No. 01-1897.,No. 01-2039.,01-1897.,01-2039.
• Citation: 301 F.3d 789
• Parties: CHATTANOGA MANUFACTURING, INC., Plaintiff-Appellant, Cross-Appellee, v. NIKE, INC., Defendant-Appellee, Cross-Appellant, and Michael Jordan and Does # 110, Defendants-Appellees.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 789

301 F.3d 789

CHATTANOGA MANUFACTURING, INC., Plaintiff-Appellant, Cross-Appellee, v. NIKE, INC., Defendant-Appellee, Cross-Appellant, and Michael Jordan and Does # 110, Defendants-Appellees.

No. 01-1897.

No. 01-2039.

United States Court of Appeals, Seventh Circuit.

Argued April 4, 2002.

Decided August 21, 2002.

Timothy J. Riordan, Defrees & Fiske, Chicago, IL, Robert I. Goodman, Rye Brook, NY, Kenneth F. McCallion, McCallion & Associates, New York, NY, for Plaintiff-Appellant, Cross-Appellee in 01-1897, 01-2039.

Keith W. Medansky, Alan S. Dalinka (Argued), Piper Rudnick, Chicago, IL, Frederick J. Sperling (Argued), Schiff, Hardin & Waite, Chicago, IL, for Defendants-Appellees/Cross-Appellant in 01-1897, 01-2039.

Before RIPPLE, KANNE, and EVANS, Circuit Judges.

KANNE, Circuit Judge.

Chattanoga Manufacturing, Inc. sued Nike Inc. and Michael Jordan, alleging trademark infringement and unfair competition in violation of the Lanham Act, 15 U.S.C. §§ 1114(1) & 1125(a). Nike filed counterclaims, alleging that Chattanoga's trademark was improperly registered by the United States Patent and Trademark Office ("PTO") and should be cancelled. The district court found that Chattanoga's trademark infringement claims were barred under the doctrine of laches and that Michael Jordan could not be held liable in his personal capacity. We affirm.

I. Background

A. Chattanoga Manufacturing, Inc.

In 1979, Morris Moinian and Jimmy Soufian founded Chattanoga and its Jordan Blouse Division in order to manufacture women's blouses and other women's apparel, such as tank tops, shirts, jumpsuits, sweaters, pants, and dresses. Chattanoga manufactures and sells only women's apparel, and it has never sold, made, or distributed men's clothing or footwear. Initially coined by Moinian, Chattanoga's Chairman, Chattanoga claims to have continuously used the mark JORDAN to identify its Jordan Blouse Division products, although defendants disagree and note that Chattanoga has used other labels on its products.

In 1997, Chattanoga applied for trademark registration for JORDAN for use on "women's wearing apparel, namely blouses, sweaters, tee shirts[,] jackets, vests, pants, trousers, skirts, suits, dresses, jumpers, jump suits, jogging suits, exercise wear and women's underwear." Although the PTO initially rejected Chattanoga's trademark application on several grounds, the PTO granted a Certificate of Registration on Chattanoga's second trademark application for JORDAN in October 1998.

B. Nike, Inc. and Michael Jordan

Nike was established in 1971 and is one of the world's leading sports and fitness companies. Nike designs, manufactures, and markets expensive footwear, apparel, equipment, and accessory products and sells its products through foreign and domestic retail accounts and distributors. Throughout Michael Jordan's highly-regarded professional basketball career, his uniform has prominently displayed the name "Jordan" and the number "23," except for a brief use of the number "45."

In 1984, Nike and Jordan entered into a very successful business relationship, and since that time, Nike has manufactured and distributed many millions of dollars of Michael Jordan-endorsed footwear, apparel, and accessories. Nike has often described Michael Jordan-endorsed products as "Jordan [type of product]." For example, in Nike's Fall 1990 catalog, there are apparel products identified as "Jordan Pullover," "Jordan Shooting Shirt," "Jordan Short," and "Jordan Muscle Tank." Additionally, Nike also uses the name "Jordan" in combination with Nike's Jumpman logo.¹ Beginning in 1985, the Jumpman logo always accompanied "Jordan," even when the only word Nike displayed on a product was "Jordan." Further, all Michael Jordan-endorsed Nike products display indicia of Michael Jordan, including the Jumpman logo and one or more of the following: photographs of Michael Jordan, the initials MJ, and/or the number 23, which is sometimes depicted as "two3." Under the current contract between Nike and Jordan, Nike has the right to use Jordan's name and image in connection with a variety of Nike products in exchange for compensation. The contract states that Nike is the "sole and absolute owner" of the Michael Jordan-related marks.

Since 1984, all of the Michael Jordan-endorsed Nike apparel and footwear products have been designed for men, boys, and very small children, with the exception of one type of women's athletic shoes sold in 1999. Over the years, several different business units within Nike were responsible for Nike's Michael Jordan-endorsed products. However, in 1997, Nike established the Jordan Brand Division of Nike, a specific internal business unit devoted to Nike's Michael Jordan-endorsed products.

C. District Court Proceedings

In October 1999, Chattanoga filed suit seeking damages and injunctive relief, alleging that Nike's use of the term Jordan constituted infringement and unfair competition under the Lanham Act. Defendants responded, inter alia, by asserting the equitable defense of laches and by filing counterclaims, which alleged that Chattanoga's JORDAN trademark was invalid and should be canceled. The parties filed cross-motions for summary judgment, and the district court granted Nike's and Michael Jordan's motion on the ground of laches but denied summary judgment on the remaining issues.²

With respect to laches, the district court began by attributing Chattanoga with constructive notice of the alleged infringement as early as 1985 and no later than 1990. The court noted Nike's prominent advertisement campaign and Chattanoga's admission that the media often referred to Nike's Michael Jordan-endorsed products as "Jordan products." Next, the district court noted that Chattanoga's delay was three times longer than the applicable statute of limitations, thereby creating a presumption of unreasonable delay. Because Chattanoga failed to excuse its delay, the district court found Chattanoga's delay to be unreasonable. Finally, the district court found that the substantial amount of money invested by Nike in marketing and advertising its Michael Jordan endorsed products constituted sufficient prejudice to Nike if Chattanoga was allowed to assert its alleged rights at this time.

Chattanoga appeals, claiming that the district court abused its discretion in finding laches because any delay was reasonable. Nike cross-appeals, alleging that its counterclaims should not have been dismissed, or in the alternative, should have been dismissed without prejudice.

II. Analysis

A. Laches

While we review de novo whether there are any disputed issues of material fact, our review of whether the district court properly applied the doctrine of laches is for an abuse of discretion. See Hot Wax, Inc. v. Turtle Wax, Inc., 191 F.3d 813, 819 (7th Cir.1999). The doctrine of laches is derived from the maxim that those who sleep on their rights, lose them. See id. at 820. For laches to apply in a trademark infringement case, the defendant must show that the plaintiff had knowledge of the defendant's use of an allegedly infringing mark, see Saratoga Vichy Spring Co. v. Lehman, 625 F.2d 1037, 1040 (2d Cir.1980), that the plaintiff inexcusably delayed in taking action with respect to the defendant's use, and that the defendant would be prejudiced by allowing the plaintiff to assert its rights at this time. See Hot Wax, 191 F.3d at 820; see also 5 J. Thomas, McCarthy, McCARTHY ON TRADEMARKS AND UNFAIR COMPETITION § 31:1, at p. 31-8 (2001).

Addressing the first part of the analysis, it is clear that a plaintiff must have actual or constructive notice of the defendant's activities. See Blue Ribbon Feed Co. v. Farmers Union Cent. Exch., Inc., 731 F.2d 415, 419 (7th Cir.1984); Safeway Stores, Inc. v. Safeway Quality Foods, Inc., 433 F.2d 99, 103-04 (7th Cir.1970); see also 5 McCARTHY § 31:38, at p. 31-78. With regard to constructive notice, the United States Supreme Court stated over one hundred years ago that:

[T]he law is well settled that where the question of laches is in issue the plaintiff is chargeable with such knowledge as he may have obtained upon inquiry, provided the facts already known by him were such as to put upon a man of ordinary intelligence the duty of inquiry.

Johnston v. Standard Mining Co., 148 U.S. 360, 370, 13 S.Ct. 585, 37 L.Ed. 480 (1893). Further, we have previously held that a trademark owner is "chargeable with information it might have received had due inquiry been made." Safeway, 433 F.2d at 103.

The district court attributed constructive notice to Chattanoga as early as 1985 and no later than 1990, and we agree. First, it is undisputed that Nike launched a prominent, national advertising campaign for its Michael Jordan-endorsed products in 1985. Since then, Nike has produced and aired numerous advertisements involving Michael Jordan and Jordan-endorsed Nike products and those products are often called "Jordan" products. Given the prominence of Nike's advertising of its Michael Jordan-endorsed products, we believe that Chattanoga had constructive notice of Nike's use of their Jordan marks in 1985.³ See Safeway, 433 F.2d at 103-04; see also E-Systems, Inc. v. Monitek, Inc., 720 F.2d 604 (9th Cir.1983) (finding that laches barred injunction even though "[a] few consumers may be confused," because plaintiff "ought to have discovered defendant's use sooner had it been diligently seeking to enforce its mark"). Moreover, Chattanoga concedes that "since at least 1990, the media in the United States have referred to products identified or associated with Defendant Michael Jordan, including products manufactured, sold and/or distributed by Nike, with the term `Jordan' (`Jordan' shorts, caps, shoes, etc.)." Therefore, the district court did not error in concluding that Chattanoga was chargeable with knowledge of Nike's use of its Jordan marks no later than 1990. See Safeway, 433 F.2d at 104.

Next, we turn to whether Chattanoga's delay was...