In re Circuit Breaker Litigation

• Decision Date: 22 August 1994
• Docket Number: No. CV 88-03012 RG (Gx).,CV 88-03012 RG (Gx).
• Citation: 860 F. Supp. 1453
• Court: U.S. District Court — Central District of California
• Parties: In re CIRCUIT BREAKER LITIGATION.

860 F. Supp. 1453

In re CIRCUIT BREAKER LITIGATION.

No. CV 88-03012 RG (Gx).

United States District Court, C.D. California.

August 22, 1994.

Gregory P. Stone, Ted Dane, Munger, Tolles & Olson, Los Angeles, CA, for plaintiff Westinghouse Elec. Corp.

George A. Oakes, Alan H. Stanfill, Throck-morton, Beckstrom & Oakes, Pasadena, CA, for defendants General Circuit Breaker & Elec. Supply, Inc., Panelboard Specialties Wholesale Elec., Inc., Xavier Contreras, and Jaime A. Contreras.

J. Scott Bennett, Law Offices of J. Scott Bennett, Lake Elsinore, CA, for defendants Panelboard Specialties Wholesale Elec., Inc., and Jaime A. Contreras.

Steven L. Smilay, Murchison & Cumming, Los Angeles, CA, for defendants AC Circuit Breaker-Electrical Supply and Joe A. Contreras.

Michael J. Emling, Moore & Rutter, Long Beach, CA, for defendants Pencon Intern., Inc., General Magnetics/Electric Wholesale, and Charley Contreras.

ORDER RE INJUNCTION

GADBOIS, District Judge.

I.

In 1988, plaintiff Westinghouse Electric Corporation ("Westinghouse"), sued defendants Pencon International, Inc., General Magnetics/Electric Wholesale and Charley Contreras ("Pencon Defendants"), Panelboard Specialties Wholesale Electric, Inc. and Jaime A. Contreras ("Panelboard Defendants"), AC Circuit Breaker-Electrical Supply and Joe A. Contreras ("AC Circuit Defendants"), and General Circuit Breaker & Electric Supply, Inc., Xavier Contreras, and Jaime A. Contreras ("GCB Defendants") for trademark infringement, unfair competition, and state law causes of action.

A jury found that Westinghouse had established its claims for trademark counterfeiting under Section 1114 of the Lanham Act, unfair competition under Section 1125 of the Lanham Act, and unfair competition under the California Business and Professions Code. However, the jury found that defendants did not intend to deceive, and found that defendants had established the affirmative defenses of estoppel, acquiescence, laches and unclean hands to all claims. In re Circuit Breaker Litigation, 852 F.Supp. 883 (C.D.Cal.1994) (interpreting jury verdict).

In light of the jury's findings, this Court concluded that Westinghouse was not entitled to monetary recovery. Id. After further briefing on the propriety of a permanent injunction, this Court concludes that Westinghouse is also not entitled to an injunction.

A. Background

Westinghouse is a major manufacturer and seller of molded case circuit breakers. Each breaker has a label bearing the Westinghouse trademark and listing information about the breaker's electrical characteristics. Some of these labels are permanent metal plates or ink-stamps; the rest are paper.

Defendants recondition and resell used Westinghouse circuit breakers. Occasionally, reconditioning requires minimal effort. At other times, defendants must replace certain components with new Westinghouse parts. Before 1988, defendants routinely replaced the breakers' seals, and also replaced faded or otherwise illegible paper labels. Westinghouse employees gave defendants some replacement labels; defendants printed the remainder themselves.

Defendants did not add a notation to any of their breakers indicating that the breakers were reconditioned. Rather, the labels on the reconditioned breakers contained the same information as the original Westinghouse labels, including the Westinghouse trademark. These practices were no secret to Westinghouse. The jury's findings indicate that Westinghouse knew, or certainly should have known, that defendants were selling reconditioned breakers bearing the Westinghouse mark. In fact, Westinghouse itself was one of defendants' major clients, and resold defendants' reconditioned circuit breakers without labeling them "reconditioned."

In 1988, after Westinghouse objected to defendants' labelling practices, defendants offered to add new, descriptive labels to their breakers.¹ Nevertheless, Westinghouse sued, seeking damages and a permanent injunction. Although Westinghouse does not challenge defendants' current labelling practices, it asks this Court to order defendants to follow a specific, detailed labelling program.

II. Analysis

The Lanham Act gives courts the "power to grant injunctions, according to the principles of equity and upon such terms as the court may deem reasonable, to prevent the violation" of a registrant's rights. 15 U.S.C. § 1116(a). Although a registrant who proves infringement is ordinarily entitled to an injunction, "the grant of injunctive relief is not a ministerial act flowing as a matter of course." Pyrodyne Corp. v. Pyrotronics Corp., 847 F.2d 1398, 1402 (9th Cir.), cert. denied, 488 U.S. 968, 109 S.Ct. 497, 102 L.Ed.2d 533 (1988) (quoting United States Jaycees v. Cedar Rapids Jaycees, 794 F.2d 379, 382 (8th Cir.1986)). Courts consider several factors, including:

(A) Whether defendant established any affirmative defenses;

(B) The plaintiff's interests and motives;

(C) The burden of an injunction on the defendant;

(D) The injury which defendant has caused; and

(E) The public interest.

A. Affirmative Defenses.

Because the Lanham Act authorizes injunctions "according to the principles of equity," 15 U.S.C. § 1116(a), courts are less willing to grant an injunction if the defendant has proven equitable defenses. See, e.g., Pyrodyne, 847 F.2d at 1401-03; Conan Properties, Inc. v. Conans Pizza, Inc., 752 F.2d 145, 151 (5th Cir.1985) ("The district court correctly denied plaintiff's request for injunctive relief after considering the jury's findings of laches and acquiescence."); E-Systems, Inc. v. Monitek, Inc., 720 F.2d 604, 607 (9th Cir.1983) ("Laches can bar recovery in trademark or tradename actions where injunctive relief is sought."); Prudential Ins. v. Gibraltar Fin. Corp., 694 F.2d 1150, 1152 (9th Cir.1982), cert. denied, 463 U.S. 1208, 103 S.Ct. 3538, 77 L.Ed.2d 1389 (1983). In the instant case, the jury's finding of laches, equitable estoppel, acquiescence, and unclean hands militates against an injunction.

B. Plaintiff's Interests and Motives

The Lanham Act empowers courts to issue injunctions "to prevent the violation" of the registrant's rights, 15 U.S.C. § 1116(a), not to punish innocent infringers. See, e.g., United States Jaycees, 794 F.2d at 383. Defendants allege that Westinghouse seeks an injunction merely to harass them. Some evidence in the record seems to support this allegation. However, without further proof, this Court will not impute a sinister motive to Westinghouse. Trademark owners often face "the horns of a dilemma" and should not be second-guessed in such facile manner:

If it sits back and does nothing, it might see its mark so cheapened ... that it lost the last vestige of value.... On the other hand, if it embarks on too vigorous a campaign to protect its mark it may be accused of improper conduct.

Esquire, Inc. v. Esquire Slipper Mfg. Co., 243 F.2d 540, 545 (1st Cir.1957). Westinghouse has a genuine interest in enforcing its trademark rights.

C. Burden of Injunction on the Defendant

A permanent injunction may be inequitable if it imposes an excessive hardship on the defendants. See, e.g., United States Jaycees, 794 F.2d at 382. Defendants contend that an injunction will be "a daily reminder that customers must not deal with defendants lest they risk the displeasure of the Electrical Giants including Westinghouse," and will therefore make them commercial pariahs. Supplemental Brief of Panelboard Defendants at 14-15 (July 8, 1994). This argument is without merit. Although an injunction might embarrass defendants, this Court doubts that it would be the scarlet letter defendants fear.

D. The Injury Caused by Defendant

Courts are more willing to grant a permanent injunction if the infringement caused substantial injury. See, e.g., United States Jaycees, 794 F.2d at 382. In the instant case, Westinghouse did not prove that defendants' pre-1988 labelling practices caused actual, substantial injury. The jury only found that these practices were likely to cause confusion, not that they caused actual confusion, and Westinghouse presented little, if any, evidence of actual harm. The harm caused by defendants' infringement is not so great that an injunction is required.

E. The Public Interest

"A court must expand the more frequent, one-on-one, contest-between-two sides, approach in trademark litigation. A third party, the consuming public, is present and its interests are paramount." James Burrough Ltd. v. Sign of Beefeater, Inc., 540 F.2d 266, 274 (7th Cir.1976).² If the public is at risk of continued confusion, courts will often grant injunctions notwithstanding equitable defenses or the plaintiff's inequitable conduct. See Polk Bros., Inc. v. Forest City Enters., Inc., 776 F.2d 185, 193 (7th Cir.1985) ("An injunction that is otherwise appropriate may be withheld to achieve some competing objective, but not to express disapproval of the plaintiff's conduct.") (citations omitted); Ames Pub. Co. v. Walker-Davis Pubs., Inc., 372 F.Supp. 1, 14-15 (E.D.Pa.1974) ("To deny an injunction on the basis that plaintiffs are also blameworthy would leave two wrongs unremedied and thereby increase the injury to the public."). Moreover, courts grant injunctions if they suspect that defendant might infringe again, even if the infringement has ceased for the moment. See Heaton Distrib. Co. v. Union Tank Car Co., 387 F.2d 477, 486 (8th Cir.1967) ("Where a party's intentions are in doubt, as is the case here, the entry of a permanent injunction is appropriate.").³

If, on the other hand, the defendant infringed innocently, ceased before judgment and assured the court that it has no intention of infringing in the future, the public needs no protection. In these circumstances, courts usually deny requests for permanent injunctions. See Reader's Digest Ass'n, Inc. v. Conservative Digest, Inc., 821 F.2d 800, 807 (D.C.Cir.1987) ("When a defendant has ceased its infringing conduct and shows no inclination to repeat...