Hayward Indus., Inc. v. Saltwater Pool Supplies

• Decision Date: 14 May 2021
• Docket Number: Civ. No. 20-6105 (KM)(ESK)
• Parties: HAYWARD INDUSTRIES, INC., Plaintiffs, v. SALTWATER POOL SUPPLIES, ET AL. Defendants.
• Court: U.S. District Court — District of New Jersey

HAYWARD INDUSTRIES, INC., Plaintiffs, v. SALTWATER POOL SUPPLIES, ET AL. Defendants.

Civ. No. 20-6105 (KM)(ESK)

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW JERSEY

May 14, 2021

OPINION

KEVIN MCNULTY, U.S.D.J.

:

This matter comes before the Court on the unopposed motion (DE 13)¹ for default judgment of plaintiff Hayward Industries, Inc. Plaintiff, a manufacturer of equipment for commercial and residential swimming pools, initiated this action against defendant Saltwater Pool Supplies ("Salt Pool Store"), d/b/a Salt Pool Store and d/b/a SaltPoolStore.com, and Salt Pro Systems ("Salt Pro") d/b/a Salt Pro Systems LLC, d/b/a Salt Pro System Direct and d/b/a SaltProDirect.com (collectively "Salt Pool Store") for trademark infringement, false advertising, counterfeiting, passing off, false designation oforigin, unfair competition, and related claims, all in violation of the Lanham Act (15 U.S.C. § 1051 et seq), as well as New Jersey statutory and common law. The Amended Complaint asserts on information and belief that defendants "are all affiliated or owned and controlled by the same ownership or management entity." (Am. Compl. ¶4). Therefore, I refer to those entities as a single defendant.

Defendant has failed to respond to the initial and Amended Complaint or this motion. For the reasons provided herein, I will grant plaintiff's motion (DE 13) and enter default judgment.

I. Summary

a. Factual Allegations

Plaintiff is a "manufacturer of equipment for commercial and residential swimming pools, such as pumps, heaters, filters, and chlorination systems." (Am. Compl. ¶9). Plaintiff offers products under numerous brands including, HAYWARD®, its house mark, as well as AQUA RITE®, SWIMPURE®, GOLDLINE®, TURBO CELL®, T-CELL-3®, T-CELL-9®, T-CELL-15®, GLX-CELL™, and GLX-CELL-15-1™. (Am. Compl. ¶10). One of plaintiff's most popular and profitable products is known as a "salt cell," a part of the salt chlorination system which is used to covert saltwater into chlorine for purposes of sanitization. (Am. Compl. ¶¶11-12). Plaintiff manufactures and sells salt cells under its federally registered marks. (Am. Compl. ¶¶11, 14). The Amended Complaint alleges that Plaintiff has continuously used most of it marks "on and in connection with electrolytic chlorine generators and salt cells for at least the past 20 years and, in some cases, even longer." (Am. Compl. ¶27).

Salt cells need to be replaced periodically and, therefore, "a market for replacement salt cells has arisen." (Am. Compl. ¶32). Plaintiff sells its salt cells, including replacement salt cells, through authorized retailers. (Am. Compl. ¶31). Plaintiff alleges that defendant unfairly competes in the salt cell replacement market "by falsely advertising or passing off its replacement salt cells as HAYWARD® replacement cells, by infringing Hayward's trademarks, bycounterfeiting, and by improperly trading on Hayward's brand recognition and good will." (Am. Compl. ¶33).

The Amended Complaint alleges that defendant engages in unlawful conduct in the form of (1) bait-and-switch tactics, (2) passing-off and trademark infringement, (3) false advertisements and false association, and (4) passing-off and counterfeiting. (Am. Compl. ¶¶ 34-69). Because of that unlawful conduct, plaintiff submits, it is directly harmed by actual customer confusion. (Am. Compl. ¶¶70-77).

i. Bait-and-Switch Tactics

Regarding the bait-and-switch scheme, the Amended Complaint alleges that defendant falsely advertises and passes off its generic salt cells "by luring customers with pop-up ads" that state, for example, "Hayward's T-Cell-15 Just $269.00 40,000 Gallons 5 Year Warranty." (Am. Compl. ¶34). Upon clicking the advertisement, the customer is directed to "Salt Pool Store's own 'Platinum Edition replacement salt cell for HAYWARD T-CELL-15' on Salt Pool's website." (Am. Compl. ¶35). Plaintiff submits that defendant's use of the HAYWARD® and other marks lures current and potential Hayward customers into visiting defendant's website and mistakenly purchasing a competing product, believing it to be a genuine Hayward product. (Am. Compl. ¶36). Additionally, defendant's "ads appear when a potential customer conducts an Internet search seeking a genuine HAYWARD® product." (Am. Compl. ¶38).

ii. Passing-Off and Trademark Infringement

The Amended Complaint further asserts that defendant's "advertisements prominently display and use the Hayward Marks . . . to pass of Salt Pool Store's own generic salt cells as genuine HAYWARD® branded salt cells or salt cells that are somehow affiliated with, or authorized by Hayward." (Am. Compl. ¶44). For example, the Amended Complaint includes a photo of defendant's website depicting a header labeled "Hayward/ Aqua Rite Replacement Cells." (Id.). Under that header is the product named "PLATINUM EDITION REPLACEMENT SALT CELL FOR HAYWARD-CELL-15|40,000 GALLONS| 5-Year WARRANTY." (Id.). The description for that product states,inter alia, "compatible with Goldline" and "Aqua Rite" and "[r]eplacement for Hayward T-CELL-15 and GLX-CELL-15-W." (Id.).

Plaintiff contends that defendant's statement of compatibility is false or misleading and that the repeated use of its marks causes confusion and suggests that Hayward is affiliated with the product. (Am. Compl. ¶¶45-49). Additionally, the advertisement suggests that the generic products are covered under Hayward's warranty. (Am. Compl. ¶50). Because the product is not so covered, "dissatisfied customers will think poorly of Hayward and are likely to complain" on customer ratings sites and social media, which "harms Hayward's good will and reputation among [its] current and prospective customers." (Am. Compl. ¶51).

iii. False Advertisements and False Association

Next, the Amended Complaint alleges that defendant's "replacement cells do not work perfectly and prompt many consumer complaints" to plaintiff, suggesting that defendant's statements of compatibility constitute false advertisement and false association. (Am. Compl. ¶¶53-55). Additionally, defendant's website "inaccurately states" that its salt is "is equivalent to the T-CELL-3 and T-CELL-9." (Am. Compl. ¶56). Plaintiff submits that defendant uses the Hayward name and marks "to capitalize on Hayward's goodwill" and to "promote its knock-off products as HAYWARD® brand salt cells or as products that Hayward has sponsored or authorized to work with pool systems manufactured and sold by Hayward." (Am. Compl. ¶57).

iv. Passing-Off and Counterfeiting

Finally, the Amended Complaint alleges that defendant engages in counterfeiting and passing-off its generic products as genuine Hayward products (Am. Compl. ¶¶59-69). Plaintiff ordered a product from defendant's website, which was then shipped to a Hayward employee in New Jersey. (Am. Compl. ¶59). The shipping label for that product stated: "Content Description T-Cell-15 40,000 GALLONS 5 YEAR WARRANTY." (Am. Compl. ¶60). However, the product is not a Hayward T-Cell-15® and is not covered under Hayward's warranty. (Am. Compl. ¶61). Additionally, the product's Instructional Manualstates that it is a "generic replacement cell for Aqua Rite Turbo Cell" which, contends plaintiff, "is not only false but it misleadingly and confusingly suggests to consumers that this product is a genuine Hayward product or product approved by Hayward." (Am. Compl. ¶64). Further, the manual states that "no re-configuration is necessary" when replacing an existing Hayward product with the generic product, but, as alleged in the Amended Complaint, "re-configuration is necessary unless it is an authorized direct replacement." (Am. Compl. ¶66). Moreover, the back of the manual states "Platinum Goldline Manual" which "misleadingly suggest[s] that the product is a genuine Hayward GOLDLINE® product or sponsored, affiliated or authorized by Hayward." (Am. Compl. ¶67).

Plaintiff submits that it is directly harmed by actual consumer confusion, given the allegations of unlawful conduct described above. (Am. Compl. ¶¶70-73). Further, the Amended Complaint alleges that "overwhelming numbers of customers [are] dissatisfied with Salt Pool Store and its 'comparable with Hayward' products" as depicted by negative reviews. (Am. Coml. ¶70).

b. Procedural History

On April 2, 2020, plaintiff "demanded that Salt Pool Store stop the false ads and infringement" and "asked that Salt Pool Store respond by April 10, 2020." (Am. Compl. ¶73). When defendant failed to respond, plaintiff initiated this action. (Id.). The Amended Complaint asserts these claims:

Count 1: False advertising in violation of Section 43(a) of the Lanham Act, 15 U.S.C. § 1125(a) (Am. Compl. ¶¶78-91);

Count 2: Federal trademark infringement of the HAYWARD® mark in violation of Section 32(1) of the Lanham Act, 15 U.S.C. § 1114(1) (Am. Compl. ¶¶92-101);

Count 3: Federal trademark infringement of the AQUA RITE® mark in violation of Section 32(1) of the Lanham Act, 15 U.S.C. § 1114(1) (Am. Compl. ¶¶102-111);Count 4: Federal trademark infringement of the GOLDLINE® mark in violation of Section 32(1) of the Lanham Act, 15 U.S.C. § 1114(1) (Am. Compl. ¶¶112-119);

Count 5: Federal trademark infringement of the SWIMPURE® mark in violation of Section 32(1) of the Lanham Act, 15 U.S.C. § 1114(1) (Am. Compl. ¶¶120-127);

Count 6: Federal trademark infringement of the TURBO CELL® mark in violation of Section 32(1) of the Lanham Act, 15 U.S.C. § 11141(1) (Am. Compl. ¶¶128-135);

Count 7: Federal trademark infringement of the T-CELL-3® mark in violation of Section 32(1) of the Lanham Act, 15 U.S.C. § 1114(1) (Am. Compl. ¶¶136-143);

Count 8: Federal trademark infringement of the T-CELL-9® mark in violation of Section 32(1) of the Lanham Act, 15 U.S.C. § 1114(1) (Am. Compl. ¶¶144-151);

Count 9: Federal trademark infringement of the T-CELL-15® mark in violation of Section 32(1) of the Lanham Act, 15 U.S.C. § 1114(1) (Am. Compl. ¶¶152-159);

Count 10: Federal trademark counterfeiting in violation of Section 32 of the Lanham Act, 15 U.S.C. §

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