Golan v. Pingel Enterprise, Inc.

• Decision Date: 07 November 2002
• Docket Number: No. 01-1626.,01-1626.
• Parties: Ilan GOLAN (doing business as Golan Products), Plaintiff-Appellant, v. PINGEL ENTERPRISE, INC., Wayne Pingel, Donna M. Pingel, and Arlen Ness, Defendants-Appellees.
• Court: U.S. Court of Appeals — Federal Circuit

310 F.3d 1360

Ilan GOLAN (doing business as Golan Products), Plaintiff-Appellant, v. PINGEL ENTERPRISE, INC., Wayne Pingel, Donna M. Pingel, and Arlen Ness, Defendants-Appellees.

No. 01-1626.

United States Court of Appeals, Federal Circuit.

November 7, 2002.

COPYRIGHT MATERIAL OMITTED

Jon E. Hokanson, Small Larkin, LLP, of Los Angeles, California, argued for plaintiff-appellant. With him on the brief was J. Thomas Gilbride, of Whittier, California.

Kenneth B. Axe, Lathrop & Clark LLP, of Madison, Wisconsin, argued for defendants-appellees. With him on the brief was Donald L. Heaney.

Before NEWMAN, GAJARSA, and PROST, Circuit Judges.

GAJARSA, Circuit Judge.

The plaintiff-appellant, Ilan Golan ("Golan"), seeks review of the final judgment of the United States District Court for the Central District of California granting summary judgment to the defendants-appellees, Pingel Enterprise, Inc., Wayne and Donna Pingel, and Arlen Ness (together "Pingel"), on Golan's federal and state antitrust and unfair competition claims, and state tort claims. The district court determined that none of Golan's claims could survive Pingel's motion for summary judgment because Pingel made no actionable false or misleading statements. We affirm the grant of summary judgment dismissing the federal and state antitrust claims because Golan failed to show Pingel possessed monopoly power in the relevant market. We also affirm the grant of summary judgment dismissing the federal and state unfair competition claims and state tort claims because Golan has not presented clear and convincing evidence sufficient for a reasonable jury to conclude Pingel acted in bad faith. Finally, because the district court applied the wrong law to the statements relating to trademark infringement, we reverse and remand for proceedings consistent with our opinion herein.

I. BACKGROUND

Pingel manufactures after-market motorcycle fuel valves, also called "petcocks," for Harley-Davidson motorcycles. Petcocks regulate the flow of fuel between the fuel tanks and the engine. Pingel sells its petcocks under the unregistered trademark "Power-Flo," and owns utility and design patents relating to motorcycle fuel valves.

Golan also manufactures after-market products for Harley-Davidson motorcycles. Golan's product line includes a fuel filter, and a fuel valve. Golan markets both the filter and the valve under the trademark "Peak Flow." Through distributors, Golan advertised the Peak Flow filter as early as 1997. The Peak Flow fuel valve became available sometime in 1998. The record contains evidence that Golan showed a prototype of the Peak Flow fuel valve at a trade show in February 1998, but both Golan and Pingel represented to the district court that Golan's first sale of the Peak Flow valve was in October, 1998.

In 1997, one distributor, Rivera Engineering ("Rivera"), issued a promotional brochure advertising Golan's Peak Flow filter. Pingel received this brochure, which advertised that the Peak Flow filter was "flow rated @ 6.3 gallons per minute," and requested a sample Peak Flow filter from Golan. Golan provided the sample. Wayne Pingel testified that he tested the Peak Flow filter and found that it failed to exhibit the advertised flow rate. Pingel then faxed a handwritten note to Rivera, on September 24, 1997. This facsimile, addressed to "Distributor," indicated that Wayne Pingel had tested the filter, and stated:

I don't recommend these filters with my or stock HD valves. Don't be mislead [sic], they will not flow 6 gal. per minute on any gravity system.

The district court found that in response, "Rivera apparently ignored Pingel's warning and continued to carry the fuel filter."

In late 1998, Pingel became aware that Golan was selling the Peak Flow fuel valve. Pingel obtained a sample of the valve, and consulted his then-patent attorney. The district court found that "[i]n consultation with his long-time patent attorney,... Pingel determined that [Golan's] valve infringed a [Pingel] utility patent, a [Pingel] design patent, and [Pingel's] `Power-Flo' trademark for petcock valves."

Through his patent attorney, Pingel sent a cease-and-desist letter to Golan. The letter, dated October 30, 1998, accused Golan of infringing United States Patent No 4,250,921 ("the '921 patent"), United States Patent No. Des. 363,533 ("the '533 design patent"), and Pingel's Power-Flo mark for petcocks. The letter demanded that Golan "immediately cease and desist all manufacturing and all sales of [Golan's] petcock." The letter also warned that failure to terminate manufacturing and selling of the valves "will result in legal action for patent and trademark infringement." Wayne Pingel testified that at the time this letter was sent, Pingel was contemplating a lawsuit against Golan.

On November 2, 1998, several days after sending the cease-and-desist letter to Golan, Pingel sent a letter to each of its twenty-two distributors. This letter stated:

The purpose of this letter is to alert our distributors that a petcock manufactured and distributed by Golan Products, [sic] infringes patents and a trademark held by Pingel Enterprise, Inc. We are taking immediate action to halt the production and sale of this product.

If you are approached to distribute a petcock for Golan Products, or if you have any questions or comments, please call me....

Pingel's letter to the distributors failed to specify which patents and trademark Golan's fuel valve allegedly infringed. Golan presented evidence that subsequent to receiving this letter, one distributor, Custom Chrome, cancelled a purchase order for Golan's valves that had already been filled and paid for.

The record contains evidence that just before February, 1999, Wayne Pingel called Mel Magnet, President of Rivera. Mr. Pingel allegedly opened this conversation by asking, "[i]sn't one fuel valve enough," and stating that Golan's valve infringed Pingel's valve, and that it would be "a pleasure to take you down." On February 5, 1999, Pingel, through its attorney, sent a letter to Mel Magnet of Rivera demanding that Rivera cease and desist all sales of Golan's Power-Flow petcock. Pingel's attorney also sent a letter requesting that Golan's attorney agree to accept service of a summons and complaint for infringement on Golan's behalf.

During his deposition, Pingel's attorney, White, admitted that when he sent this letter, Pingel had not authorized him to file an infringement suit. Additionally, Pingel testified that he had not authorized White to initiate litigation against Golan and that he had no intention of suing Rivera when he sent Rivera the letter demanding that Rivera cease and desist selling Golan's valve.

After sending these letters, Pingel contacted at least two additional outside attorneys in order to assess the likelihood of prevailing on the merits of its infringement claims. Both outside attorneys told Pingel the litigation would be expensive and that the issues were "close." The first outside attorney issued one opinion orally. The second outside attorney sent Pingel a letter on March 31, 1999, stating that "whether Pingel would prevail on any of [its potential] claims is a close issue." The letter also informed Pingel, albeit incorrectly, that "[t]he '921 patent expires April 23, 1999, which is 20 years from after the filing of its application."¹ The letter also advised Pingel "to engage an independent intellectual property attorney to formally evaluate these claims and offer an opinion as to whether there is infringement." Pingel did not initiate patent or trademark infringement litigation against Golan.

In March, 1999, less than five months after Pingel's cease-and-desist letter, Golan initiated the present action. Golan sought declaratory judgment of noninfringement for the "Power-Flo" trademark and for several patents owned by Pingel, including the two patents referenced in the cease-and-desist letter. Golan also alleged federal and state antitrust claims, federal and state unfair competition claims, and state law business tort claims.

Pingel filed an answer and counterclaims. Pingel's answer alleged that the district court lacked subject matter jurisdiction due to the absence of a case or controversy regarding the patents other than the '533 design patent and the '921 patent. Pingel's counterclaims included trademark and unfair competition claims pertaining to the Power-Flo mark, and infringement of the '533 design patent. Although Pingel did not counterclaim for infringement of the '921 patent, neither did it represent that the court lacked jurisdiction for want of a case or controversy regarding that patent. Rather, Pingel admitted that the '921 patent expired on May 10, 1998, but stated that the defendants lacked knowledge regarding when Golan's Peak Flow petcock was first offered for sale.

Golan moved for partial summary judgment of noninfringement of the '533 design patent and of the '921 patent. Golan filed its motion regarding the '921 patent on August 27, 1999. Pingel filed an opposition to Golan's motion for summary judgment of noninfringement of the '921 patent on October 4, 1999. The opposition stated, for the first time, that there was no case or controversy because the '921 patent had expired, that Golan testified he first sold the Peak Flow petcock after the expiration of the patent, and that Pingel had asserted no claim of past or present infringement. The opposition acknowledged that the October 10, 1998 cease-and-desist letter from Pingel's counsel to Golan was sent after the patent expired. In addition to its opposition, Pingel also filed a statement of nonliability, in which Pingel covenanted not to sue Golan or any of its customers for infringement of the '921 patent.

The district court granted Golan's motion for summary judgment of noninfringement of the '533 design patent. Golan v. Pingel Enter., Inc., No. CV 99-3143 (C.D.Ca. Nov. 4, 1999) (memorandum of decision granting...