Hypertherm, Inc. v. Precision Products, Inc., 87-1489

• Decision Date: 09 October 1987
• Docket Number: No. 87-1489,87-1489
• Parties: , 4 U.S.P.Q.2d 1799 HYPERTHERM, INC., Plaintiff, Appellee, v. PRECISION PRODUCTS, INC., Defendant, Appellant. . Heard
• Court: U.S. Court of Appeals — First Circuit

Page 697

832 F.2d 697

56 USLW 2348, 4 U.S.P.Q.2d 1799

HYPERTHERM, INC., Plaintiff, Appellee, v. PRECISION PRODUCTS, INC., Defendant, Appellant.

No. 87-1489.

United States Court of Appeals, First Circuit.

Heard Oct. 9, 1987.

Decided Nov. 6, 1987.

Joseph M. Kerrigan with whom Kimberly M. Sack, Hamblett & Kerrigan, Nashua, N.H., John H. Pearson, Jr., and Pearson & Pearson, Lowell, Mass., were on brief, for appellant.

Ernest B. Murphy, Boston, Mass., with whom Gary Ellis Hicks and Wiggin & Nourie, Manchester, N.H., were on brief, for appellee.

Before CAMPBELL, Chief Judge, TORRUELLA and SELYA, Circuit Judges.

SELYA, Circuit Judge.

Hypertherm, Inc. (Hypertherm), plaintiff-appellee, cut a considerable swath through the arcane world of plasma are electric heat technology. The firm exploited an industrial need and fashioned a lucrative niche for itself in the manufacture and sale of systems useful in cleaving metals. As an adjunct of this endeavor, Hypertherm sold consumable components and replacement parts for use with its equipment. Spying a good thing and wanting a slice of the business, so to speak, defendant-appellant Precision Products, Inc. (PPI) slashed its way into the aftermarket, offering make-do parts and components (not manufactured by or with plaintiff's permission) for sale to the trade. PPI represented them as being interchangeable with genuine Hypertherm parts and capable of working compatibly with Hypertherm's systems. To make certain that the promotional point was not missed, appellant tried strenuously--too strenuously, as matters turned out--to downplay any dissimilarities between its products and Hypertherm's.

Although imitation is thought in some circles to be the most sincere form of flattery, the appellee was not pleased. Some months after PPI began its sales campaign, Hypertherm brought suit in the United States District Court for the District of New Hampshire. The plaintiff claimed, inter alia, trademark and trade dress infringement and unfair competition, predicating its suit on both federal and state law. Hot on the heels of its complaint, plaintiff moved for preliminary injunctive relief. Fed.R.Civ.P. 65.

The district court referred the motion to a United States magistrate for a report and recommendation. 28 U.S.C. Sec. 636; Fed.R.Civ.P. 72. After conducting a comprehensive evidentiary hearing which focused on three separate types of consumable parts sold by appellant for use with Hypertherm equipment--each of which attempted to replicate a comparable artifact manufactured by plaintiff ¹--the magistrate issued a report finding that the rival components (i.e., Hypertherm's "authentic" items and PPI's "ersatz" items) looked the same to the naked eye, but that PPI's parts in fact deviated from Hypertherm's specifications. For this reason, the copies, when inserted in place, caused an occasional malfunction. Moreover, PPI had closely emulated Hypertherm's packaging and assignment of parts numbers. In consequence of this combination of factors, abetted by appellant's careful choice of promotional techniques which tended to blur what few distinctions existed, end users were often confused as to the source and sponsorship of the imperfect parts. Thus, when the systems went out, plaintiff's reputation was squarely on the line.

The magistrate opined that Hypertherm would probably succeed on the merits of its claims and that, absent an injunction, it would be irreparably harmed. He specifically found that the plaintiff had satisfied each and all of the four criteria necessary for preliminary injunctive relief, see, e.g., Massachusetts Ass'n of Older Americans v. Sharp, 700 F.2d 749, 751 (1st Cir.1983); Auburn News Co. v. Providence Journal Co., 659 F.2d 273, 277 (1st Cir.1981), cert. denied, 455 U.S. 921, 102 S.Ct. 1277, 71 L.Ed.2d 461 (1982); Planned Parenthood League of Massachusetts v. Bellotti, 641 F.2d 1006, 1009 (1st Cir.1981), ² and recommended that PPI be restrained accordingly. The district court adopted the magistrate's report, accepted the recommendations contained therein, and entered an injunction. PPI appealed.

We need not dwell on the evidence before the magistrate or on his findings. He had the benefit of examining specimens of the parties' wares in reaching a practical conclusion that appellant's trade dress was beyond the pale. We have consistently held that the trial court's inferences "drawn from its examination of real evidence" will be accepted unless clearly erroneous. Keebler Co. v. Rovira Biscuit Corp., 624 F.2d 366, 377 (1st Cir.1980). No error--clear or otherwise--appears in this respect. Hypertherm presented a strong prima facie case demonstrating a probability that it would prevail on its trade dress and unfair competition claims at trial.

Next, consumer confusion and customer uncertainty as to whether or not Hypertherm was responsible for the shoddy components was proven. ³ This was, in turn, a potent basis for a finding of irremediable injury. Few harms are more corrosive in the marketplace than the inability of a trademark holder to control the quality of bogus articles thought (erroneously) to derive from it. The threat of substantial damage to Hypertherm's hard-won business and reputation made out a sufficient showing of irreparable harm to warrant immediate redress. Cf. Helene Curtis Industries v. Church & Dwight Co., 560 F.2d 1325, 1332 (7th Cir.1977), cert. denied, 434 U.S. 1070, 98 S.Ct. 1252, 55 L.Ed.2d 772 (1978) ("damage to the goodwill and prominence of the [plaintiff's] trademark through public confusion of it with the [respondent's] trademark is, in itself, an irreparable injury").

The remaining prongs of the four-part paradigm were likewise shown. Evidence of the relative economic impact associated with giving or withholding injunctive relief was adequate, once the magistrate found the subsidiary facts in appellee's favor, to tip the balance of hardships in Hypertherm's direction. And, given the societal value of full disclosure and fair competition, together with the policy of the law to provide at least minimal protection to established trade names, it was reasonable to conclude the public interest was served by an order barring appellant from continuing to cut so many corners. On this record, the court below did not abuse its considerable discretion in finding that injunctive relief pendente lite should issue.

The more troublesome question before us relates to the scope of that relief. The district court, properly we think, restrained PPI from using "words, numbers or designs which do, may or might confusingly simulate the Hypertherm marks and numbers" and from "selling plasma arc cutting systems, components or replacement parts in packaging or with labelling which is, may or might reasonably be [thought] confusingly similar to the Hypertherm trade dress...." But, the court went further: it also forbid appellant to use the name "Hypertherm" or the Hypertherm product list or parts numbers at all. This, we believe, was error.

One has a right to ape--if he can--the unpatented product of another. Sears, Roebuck & Co. v. Stiffel Co., 376 U.S. 225, 231-33, 84 S.Ct. 784, 788-89, 11 L.Ed.2d 661 (1964); Compco Corp. v. Day-Brite Lighting, Inc., 376 U.S. 234, 237-38, 84 S.Ct. 779, 781-82, 11 L.Ed.2d 669 (1964). In the absence of false representations or palming off, the sale of unpatented replacement parts by one other than the manufacturer of the original equipment is neither unlawful nor actionable. B.H. Bunn Co. v. AAA Replacement Parts Co., 451 F.2d 1254, 1263-67 (5th Cir.1971). Even if the parts are substandard, the rule holds--so long as their origin is not obscured. Id. Notwithstanding some slight danger of confusion, it would (as we have said before) "be difficult to take seriously" an assertion that every such sale comprises unfair competition. Electronics Corp. of America v. Honeywell Inc., 428 F.2d 191, 194 (1st Cir.1970). Producing an unpatented machine does not give the producer a legal monopoly on its component parts. If a potentially lucrative aftermarket develops, imitators will flock to obtain and offer make-do surrogates, often claiming equivalent performance and some added premium (e.g., faster delivery, cheaper pricing). In the entrepreneurial world as elsewhere, copycats have always been commonplace.

Given these verities, it follows logically that a firm, like PPI, which has labored (lawfully) to replicate another's parts, may ordinarily use the originator's trademark descriptively, that is, to identify the product it has copied, so long as no misrepresentation is made and no confusion is generated as to the source, sponsorship, or identity of the ersatz goods. In...