CSL Silicones, Inc. v. Midsun Grp. Inc., Civil Action No. 3:14-CV-1897 (CSH)

CourtUnited States District Courts. 2nd Circuit. United States District Court (Connecticut)
Citation301 F.Supp.3d 328
Docket NumberCivil Action No. 3:14-CV-1897 (CSH)
Parties CSL SILICONES, INC., Plaintiff/Counterdefendant, v. MIDSUN GROUP INC., Defendant/Counterclaimant.
Decision Date15 March 2018

John T. Winemiller, Merchant & Gould P.C., Knoxville, TN, Michael A. Erbele, Tchao-Hou J. Thao, Merchant & Gould, Minneapolis, MN, Michael J. Rye, Cantor Colburn LLP, Hartford, CT, Rachel K. Zimmerman, Merchant & Gould, P.C., Denver, CO, for Plaintiff/Counterdefendant.

Cara C. Morris, Law Offices of Cara Morris, PL, Palm Beach Gardens, CT, Joseph R. Carvalko, Jr., Law Firm of Joseph R. Carvalko, Milford, CT, for Defendant/Counterclaimant.

OMNIBUS RULING ON SUMMARY JUDGMENT MOTIONS

CHARLES S. HAIGHT, JR., SENIOR UNITED STATES DISTRICT JUDGE

Plaintiff CSL Silicones, Inc. ("CSL") brought this action against Defendant Midsun Group Inc. ("Midsun") in connection with Midsun’s alleged improper use of CSL’s trademarks. CSL alleges that Midsun markets and sells two silicone-based coating products under marks similar to CSL’s chosen marks for its own silicone-based coating products. CSL brings claims for trademark infringement and unfair competition pursuant to the federal Lanham Act, 15 U.S.C. § 1051 et seq. , and claims pursuant to the Connecticut Unfair Trade Practices Act ("CUTPA"), Conn. Gen. Stat. § 42-110. Midsun has brought counterclaims against CSL, alleging violations of the Lanham Act and CUTPA.1 The Court has issued a number of rulings in this matter, familiarity with which is assumed.

The parties have filed cross-motions for partial summary judgment, pursuant to Rule 56 of the Federal Rules of Civil Procedure. Four motions are pending; this Ruling resolves them.

I. BACKGROUND

The following facts are derived from the parties' submissions pursuant to Local Rule 56(a);2 the uncontroverted deposition testimony; and the affidavits and exhibits attached to the parties' submissions. The facts recounted in this section are undisputed or indisputable.

CSL is a Canadian corporation with its principal place of business in Ontario, Canada. CSL’s Local Rule 56(a)(1) Statement in Support of CSL Silicones Inc.’s Motion for Partial Summary Judgment, Doc. 171-1 ¶ 1. Midsun is a Connecticut corporation with its principal place of business in Southington, Connecticut. Id. ¶ 2. Founded in 1984, CSL develops and sells high-voltage silicone-based coatings for high voltage insulator, anti-corrosion, and anti-graffiti applications in certain industries. Id. ¶ 3. Midsun was founded in 1992, and started out as a distributor and applicator of other companies' coating systems for electrical applications. Id. ¶ 8, 10; Doc. 171-3 at 2. Initially, Midsun did not manufacture its own products. Id. ¶ 9.

In 1994, Midsun and CSL entered into a distribution agreement. Id. ¶ 11. The agreement stated that Midsun "wishes to establish an exclusive marketing arrangement with a manufacturer of high quality silicones." Doc. 171-3 at 2. The agreement further provided that "CSL has developed silicone coatings; 560, 570, 579 ... for electrical applications hereafter referred to as the ‘products’ ". Id. Under the agreement, CSL appointed Midsun to be the "exclusive agent for sales, distribution, marketing and application of products[.]" Id. Midsun agreed to "use its best efforts to promote the use of the ‘products,’ " including providing "advertising, publicity, direct sales and other marketing to cover all potential customers" in the relevant territories. Id. at 3. Midsun further agreed to "do nothing which would in any way damage the reputation of CSL or its products." Id. CSL agreed, inter alia , to permit Midsun to identify itself as the exclusive agent of the products and to publish Product Data Sheets, sales literature, and press releases. Id. Thus, under the agreement, Midsun would purchase products from CSL in Canada, and would resell the products to customers in the United States. Midsun’s Local Rule 56(a)(1) Statement in Support of Midsun Group, Inc.’s Motion for Partial Summary Judgment on Plaintiff’s Counts V and VI, Doc. 161-1 ¶ 9.

In 1995, CSL and Midsun entered into a second distribution agreement, entitled "Sales, Marketing & Distribution Agreement." Doc. 171-5. Under this agreement, Midsun was again appointed as "the exclusive agent for sales and marketing of Products" in specific territories, in exchange for meeting a specified sales target. Id. at 2. CSL permitted Midsun "to advertise as the exclusive agent in the territories of the products ... and warranty that the products meet their specifications." Id. Pursuant to this agreement, Midsun purchased CSL’s products and resold the products in the United States and other locations. Doc. 161-1 ¶ 11. The agreement contained annual sales targets. Doc. 161-1 ¶ 14. While the agreements were in effect, Midsun distributed and sold CSL’s high voltage insulator coating (the ‘570’ product) and an anti-corrosion coating (the ‘579’ product) in the United States. Doc. 171-4 at 37. The 1995 Agreement was terminated by CSL on January 4, 1999. Doc. 161-1 ¶ 8.

After the termination of the Agreements, Midsun began developing its own products. Midsun’s Local Rule 56(a)(2) Statement, Doc. 183-1 ¶ 22; Deposition of Robert Vojtila, Doc. 171-4 at 11-12. Midsun purchased silicone material from CSL, blended it with other materials, and called that product ‘570.’ Doc. 171-4 at 12. Midsun used the ‘570’ number to designate its product because it was determined to be a "good idea" from a marketing and engineering standpoint, as Midsun had created a "personality" for the high voltage coating. Id. at 41; see also Deposition of Midsun’s 30(b)(6) Representative, Doc. 171-14 at 18. Around the same time, Midsun began marketing and selling an anti-corrosion coating that it designated with the ‘579’ number. Doc. 171-1 ¶¶ 26-7. Midsun did not have an internal chemistry department nor a chemist on staff, and it did not directly manufacture the silicone-coating products it sold. Id. ¶¶ 28-9.

Dr. Edward Cherney was the general manager and later the president and a director of CSL, from 1989 until he resigned from the company in 1999. Deposition of Faisal Huda, Doc. 171-22 at 10; Deposition of Edward Cherney, Doc. 171-7 at 43-4, 134; Doc. 175-1 ¶ 8. While employed by CSL, he expressly gave permission to Midsun to relabel CSL’s product as ‘Midsun 570.’ Deposition of Faisal Huda, Doc. 175-10 at 18. Cherney also had a test conducted to compare the performance of Midsun’s ‘570’ product to CSL’s ‘570’ product. Doc. 171-7 at 135-36. The testing was performed by a University of Waterloo student, at the University of Waterloo, where Cherney was also employed as a Research Professor. Id. at 136; Doc. 171-17 at 2. In a letter to Midsun, Cherney described the results of the test, stating that Midsun’s ‘570’ product was superior in performance. Doc. 171-1 ¶ 32; Doc. 171-17 at 2. Cherney was asked to resign from CSL because, in CSL’s view, he was not acting in the best interests of the company. Doc. 175-10 at 17. Soon after his resignation, Cherney was hired by Midsun as a consultant. Doc. 171-4 at 56.

Between July 1999 and October 2000, CSL sent Midsun several letters. Doc. 171-18. The first letter, sent on July 15, 1999, noted that CSL had recently become aware that, without its knowledge or approval, Midsun had sold CSL’s ‘570’ product under the name ‘Midsun 570.’ Doc. 171-18 at 8. The letter stated that CSL would only continue to supply Midsun with CSL products if Midsun agreed to cease from repackaging CSL’s products. Id.

On October 4, 1999, CSL sent another letter to Midsun, stating that CSL has "recently learned that Midsun is still selling CSL 570 HVIC under the name Midsun 570, despite [CSL’s July 15, 1999, letter]." Id. at 7. CSL stated that Midsun’s actions are "unethical and totally unacceptable and were carried out without the knowledge or consent of CSL[.]" Id. CSL demanded that Midsun cease and desist the sale of any CSL product in non-CSL packaging, and also directed Midsun to respond by a date certain. Id. On October 13, 1999, CSL wrote again to Midsun, noting that no response to its previous letter had been received, and terminating its direct supply relationship with Midsun. Id. at 6. The letter concluded by warning that "[a]ny future occurrences of Midsun Group selling CSL product under the Midsun name will result in legal action by CSL[.]" Id.

On June 8, 2000, counsel for CSL sent a letter to Midsun, asserting that ‘570’ and ‘579’ were trademarks. Id. at 5. The letter stated that CSL had learned that during Midsun’s term as CSL’s authorized distributor, Midsun relabeled CSL’s products with its own name, without CSL’s knowledge or consent. Id. at 5. The letter further stated that CSL had become aware that Midsun was selling a product that had been manufactured for it under the name ‘Midsun 570.’ Id. at 5. The letter demanded that Midsun immediately "discontinue the use of the product designations MIDSUN 570, 579 or 587 or any other product designation or trade-mark confusingly similar to CSL’s product designations and trade-marks including the trademarks 570, 579 and 587[.]" Id. at 5.

Midsun responded to this letter, stating that Midsun was "unaware that the numerals 570, 579 and 587 could be trademarked and in fact were trademarked as such. All CSL literature which we printed and which was approved by CSL never carried a ‘tm’ symbol indicating that they were anything other than just a numeral designation." Doc. 161-4 at 112. Midsun stated that it had been given consent to relabel and repackage all CSL products by Cherney. Id. The letter further represented that the former owner of CSL, Mr. Seraj Huda, had visited Midsun on three occasions in Connecticut and "was provided with literature denoting the labeling and the name Midsun 570" and that he did not stop Midsun from repackaging CSL’s products. Id.

On September 28, 2000, counsel for CSL sent a letter to counsel for Midsun offering to "settle this matter" if Midsun ...

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