Hanger, Inc. v. Original Bending Brace, LLC

• Decision Date: 13 February 2017
• Docket Number: No. 2:16-cv-01519-DCN,2:16-cv-01519-DCN
• Parties: HANGER, INC. and HANGER NATIONAL LABORATORIES, LLC, Plaintiffs, v. ORIGINAL BENDING BRACE, LLC and CLARENCE RALPH HOOPER, JR., Defendants.
• Court: U.S. District Court — District of South Carolina

HANGER, INC. and HANGER NATIONAL LABORATORIES, LLC, Plaintiffs,
v.
ORIGINAL BENDING BRACE, LLC
and CLARENCE RALPH HOOPER, JR., Defendants.

No. 2:16-cv-01519-DCN

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF SOUTH CAROLINA CHARLESTON DIVISION

February 13, 2017

ORDER

This matter is before the court on United States Magistrate Judge Bristow Marchant's report and recommendation ("R&R"), ECF No. 29, that the court deny plaintiffs Hanger, Inc. and Hanger National Laboratories, LLC's (collectively, "Hanger") motion for a preliminary injunction and deny defendants Original Bending Brace, LLC and Clarence Ralph Hooper, Jr.'s (collectively, "Hooper") motion for a preliminary injunction. For the reasons set forth below, the court adopts the R&R and denies Hanger's motion for a preliminary injunction and denies Hooper's motion for a preliminary injunction. Additionally, the court adopts those portions of the R&R which are not inconsistent with this Order.

I. BACKGROUND

The instant cross-motions for preliminary injunction arise out of a business dispute over the Charleston Bending Brace, an orthotic device used to treat children with scoliosis. Pls.' Mot. 1. Hooper and Dr. Frederick Reed ("Reed"), a physician colleague, invented the Charleston Bending Brace in 1979. Defs.' Resp. 5. Shortly thereafter,

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Hooper and Reed entered into an agreement ("the Agreement") with Dobi-Simplex, Inc. ("Dobi-Simplex") under which Dobi-Simplex was given the exclusive license to manufacture, use, and sell the orthotic device. Id. at 5-7. Hooper founded the Charleston Bending Brace Research and Education Foundation ("CRB") in 1991. Id. at 6. In conjunction with his work at the foundation, Hooper acquired the domain rights for www.CBB.org in 1996. Id. During the course of the business relationship, both parties used the website to advertise and market the Charleston Bending Brace. Id.; Pls.' Mot. 9.

Through a series of corporate acquisitions, Dobi-Simplex became DOBI Assets Acquisition Corporation in 1992 and changed its name back to Dobi-Simplex, Inc. ("Dobi 2"). Pls.' Mot. 2-3. Dobi 2, Hanger's predecessor in interest, filed an application with the U.S. Patent and Trade Office ("USPTO") to register the trademark Charleston Bending Brace on March 6, 1995. Id. at 8. The USPTO granted Registration No. 2,101,865 for the Charleston Bending Brace on September 30, 1997.¹ Id., Ex. C. Dobi 2 then merged with Hanger, and Hanger was assigned the trademark. Id. at 8, Ex. C. Hanger and Hooper attempted to renegotiate the terms of the Agreement, which had previously expired, in early 2016 but were unsuccessful. Defs.' Resp. 8. On April 27, 2016, Hanger was informed that Hooper had solicited business from one of its referring physicians and was using a similar designation of the "Original Bending Brace of Charleston." Pls.' Mot. 9.

Hanger filed the instant lawsuit against Hooper on May 10, 2016, seeking damages and injunctive relief for Hooper's alleged trademark infringement of the

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Charleston Bending Brace mark. Compl. ¶ 1. Hanger then filed a motion for preliminary injunction on June 10, 2016, to enjoin Hooper from using the Charleston Bending Brace mark as well as what it considered to be a "confusingly similar designation." ECF No. 8. Hooper filed a response in opposition on July 8, 2016, and likewise sought to enjoin Hanger from using the Charleston Bending Brace mark until the instant litigation is resolved. ECF No. 13.

The magistrate judge issued the R&R on August 26, 2016, recommending the court deny both motions, with Hanger's motion being denied without prejudice. ECF No. 29. Hooper did not file any objection to the R&R within the deadline. Hanger, however, filed timely objections to the R&R on September 12, 2016 arguing that its motion for preliminary injunction should be granted. ECF No. 30. Hooper filed a reply on September 21, 2016. ECF No. 31. The matter is now ripe for the court's review.

II. STANDARD

A. De Novo Review

This court is charged with conducting a de novo review of any portion of the magistrate judge's report to which specific, written objections are made, and may accept, reject, or modify, in whole or in part, the recommendations contained in that report. 28 U.S.C. § 636(b)(1). The magistrate judge's recommendation does not carry presumptive weight, and it is the responsibility of this court to make a final determination. Mathews v. Weber, 423 U.S. 261, 270-71 (1976). A party's failure to object may be treated as agreement with the conclusions of the magistrate judge. See Thomas v. Arn, 474 U.S. 140, 150 (1985).

B. Preliminary Injunction

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"The purpose of a preliminary injunction is merely to preserve the relative positions of the parties until a trial on the merits can be held." United States v. South Carolina, 840 F. Supp. 2d 898, 914 (D.S.C. 2011) (quoting Univ. of Tex. v. Camenisch, 451 U.S. 390, 395 (1981)). "A plaintiff seeking a preliminary injunction must establish that he is likely to succeed on the merits, that he is likely to suffer irreparable harm in the absence of preliminary relief, that the balance of the equities tips in his favor, and that an injunction is in the public interest." Winter v. Nat. Res. Def. Council, Inc., 555 U.S. 7, 20 (2008). The Supreme Court has noted that a preliminary injunction is "an extraordinary remedy that may only be awarded upon a clear showing that the plaintiff is entitled to such relief." Id. at 22.

III. DISCUSSION

A. Hanger's Objection

Hanger lists two objections to the R&R, arguing that the magistrate judge improperly: (1) presumes that Hooper's "bald assertion" that it has ceased the infringing acts renders the requested preliminary injunction unnecessary; and (2) fails to consider whether Hooper has met its heavy burden of showing that there is no reasonable expectation that any wrong will be repeated, rendering the requested preliminary injunction unnecessary. ECF No. 30-3. The court finds that both of these objections center on mootness concerns and Hanger uses mootness cases in support of its argument. However, the reasoning in the R&R denying Hanger a preliminary injunction rested not on mootness but on the irreparable harm factor of Winter. As there is no dispute between the parties as to whether the request for a preliminary injunction is moot, the court need not address this threshold justiciability doctrine. The court finds that the Winter factors,

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especially that of "likelihood of success on the merits," are not fulfilled such that a preliminary injunction should issue. Even if irreparable harm exists, Hanger has not shown that the remaining Winter factors have been fulfilled, because as explained below it has not made a clear showing that it is likely to succeed on the merits.

1. Likelihood of Succeeding on the Merits

For a preliminary injunction to issue, Hanger must first make a clear showing that it is likely to succeed on the merits. See Winter, 555 U.S. at 20. Hanger argues it is likely to succeed on the merits in this action because it can prove each element of its trademark infringement claim. Pl.'s Mot. 6.

"To establish trademark infringement under the Lanham Act, a plaintiff must prove: (1) that it owns a valid mark; (2) that the defendant used the mark 'in commerce' and without plaintiff's authorization; (3) that the defendant used the mark (or an imitation of it) 'in connection with the sale, offering for sale, distribution, or advertising' of goods or services; and (4) that the defendant's use of the mark is likely to confuse customers."

Rosetta Stone, Ltd. v. Google, Inc., 676 F.3d 144, 152 (4th Cir. 2012); see also 15 U.S.C. § 1114(1)(a). The court addresses each element in turn.

a. Valid Trademark

Hanger argues it has a valid and protectable trademark because the USPTO granted registration for the Charleston Bending Brace trademark to Dobi 2—its predecessor in interest—on September 30, 1997. Pls.' Mot. 7. Hooper argues the mark was obtained fraudulently, stating he has filed a petition with the USPTO to have the registration cancelled. Defs.' Resp. 10.

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Generally, "the party claiming ownership of a mark must be the first to use the mark in the sale of goods. The party claiming ownership must also use the mark as a trademark, that is, the mark must be used to identify the source of the goods to potential customers." George & Co., LLC v. Imagination Entm't Ltd., 575 F.3d 383, 400 (4th Cir. 2009) (internal citation omitted). As long as the party claiming ownership of a mark "is the first to use a particular mark to identify his goods in a given market, and so long as that owner continues to make use of the mark, he is 'entitled to prevent others from using the mark to describe their own goods' in that market." Id. (quoting Defiance Button Mach. Co. v. C & C Metal Prods. Corp., 759 F.2d 1053, 1059 (2d Cir. 1985)). The Fourth Circuit has held that "federal registration" of a trademark "is prima facie evidence that the registrant is the owner of the mark." Id. at 400 n.15 (emphasis omitted); see also 15 U.S.C. § 1115(a) (providing that "a mark registered on the principal register provided by this chapter and owned by a party to an action shall be . . . prima facie evidence of the validity of the registered mark and of the registration of the mark, of the registrant's ownership of the mark, and of the registrant's exclusive right to use the registered mark in commerce"). "Registration grants a presumption of ownership, dating ownership to the filing date of the federal registration application, and the party challenging the registrant's ownership must overcome this presumption by a preponderance of the evidence." George & Co., 575 F.3d at 400 n.15.

In this case, Hanger enjoys a presumption of ownership dating back to March 6, 1995, the date on which its predecessor in interest filed its application with the USPTO to register the Charleston Bending Brace. See id. (noting "[r]egistration grants a presumption of ownership...