E. Iowa Plastics, Inc. v. PI, Inc.

• Decision Date: 11 August 2016
• Docket Number: No. 15-2757,15-2757
• Citation: 832 F.3d 899,119 U.S.P.Q.2d 1871
• Parties: East Iowa Plastics, Inc., Plaintiff–Appellee v. PI, Inc., Defendant–Appellant
• Court: U.S. Court of Appeals — Eighth Circuit

832 F.3d 899

119 U.S.P.Q.2d 1871

East Iowa Plastics, Inc., Plaintiff–Appellee

v.PI, Inc., Defendant–Appellant

No. 15-2757

United States Court of Appeals, Eighth Circuit.

Submitted: February 11, 2016

Filed: August 11, 2016

Rehearing Denied September 15, 2016

Counsel who presented argument on behalf of the appellant was Dana L Oxley, of Cedar Rapids, IA. The following attorney also appeared on the appellant brief; Kevin J. Caster, of Cedar Rapids, IA.

Counsel who presented argument on behalf of the appellee was Glenn Johnson, of Cedar Rapids, IA. The following attorney also appeared on the appellee brief; Jeff Harty, of Cedar Rapids, IA.

Before SHEPHERD, BEAM, and KELLY, Circuit Judges.

KELLY

, Circuit Judge.

This trademark case involves a challenge to the district court's award of attorney's fees to the plaintiff. We find that the district court lacked jurisdiction to cancel the defendant's federal trademark registrations, and that as a result, the plaintiff was not entitled to attorney's fees.¹

I

The history of this case begins not with the parties, but with a company called KenTech, which was the owner of the “PAKSTER” trademark in the late 1990s. KenTech used the mark in connection with the molded plastic goods it manufactured for use in the egg and poultry industries. Two commonly-used methods of manufacturing plastic goods are thermoforming and injection molding: the former involves heating a flat sheet of plastic until pliable and then forming it over a mold, while the latter involves injecting heated plastic into a closed mold. See J. Scott Smith & Y.H. Hui, Food Processing: Principles and Applications 110 (2008). KenTech's operations used both techniques.

KenTech manufactured its thermoformed PAKSTER goods in Independence, Iowa, and its injection molded PAKSTER products in Hopkinsville, Kentucky, until 1997, when it sold both product lines. Its thermoformed goods line was sold to a company called East Iowa Plastics (EIP), also located in Independence. The sale was accomplished through an Asset Purchase Agreement (APA), which transferred to EIP KenTech's entire manufacturing operation in Iowa, including all the assets comprising its manufacturing facility.

Among the assets transferred to EIP by the APA were KenTech's rights to the PAKSTER trademark. But the APA included a “license back,” which provided that KenTech would be granted “a license to use the ‘Pakster’ name and mark in connection with the production and sale of injection molded plastic products.” The license back specified that the license was to be “exclusive ... within North America,” “perpetual and irrevocable,” “royalty-free,” and “freely assignable.”

The assignability provision did not go unused. Shortly afterwards, KenTech sold its injection molds, which were imprinted with the PAKSTER mark, to PI, a company based in Athens, Tennessee. For the next several years, EIP proceeded to make PAKSTER-branded products using the thermoforming method, while PI made PAKSTER-branded products using injection molding. For the most part, the two companies made different products under the PAKSTER brand: EIP made ventilation doors, feeder trays, and a light hood, while PI made chicken coops, egg baskets, a chick box, and plastic pallets. The one product both companies made, albeit using different manufacturing methods, was egg trays, which the parties and the district court refer to as “egg flats.”

Ten years later, PI applied for and acquired two trademark registrations from the United States Patent and Trademark Office: one for the word “PAKSTER” itself and the other for an image of a rooster with the word “PAKSTER.” In filling out both applications, PI certified—falsely, as it now acknowledges—that to the best of its “knowledge and belief no other person, firm, corporation, or association ha[d] the right to use the mark in commerce.” In reality, PI had long been aware of EIP's use of the PAKSTER mark.

On January 27, 2012, PI sent EIP a cease and desist letter, accusing it of trademark infringement and unfair competition under the Lanham Act for using the “PAKSTER” trademark. It threatened legal action unless EIP responded with written assurances that it would stop using the PAKSTER trademark. EIP responded on March 5, 2012, explaining that it had bought the PAKSTER trademark from KenTech and attaching a copy of the APA. PI replied on April 3, 2012, contending that because of the APA's license back, and the fact that PI, unlike EIP, possessed a federally-registered trademark, EIP had no right to use the PAKSTER mark in connection with either thermoformed or injection molded products.

Shortly thereafter, PI offered to sell its PAKSTER molds to EIP for about $3 million. When EIP refused to buy, PI sent a third cease and desist letter on December 4, 2012, repeating the claims in its second letter and again threatening suit if EIP refused to stop using the PAKSTER mark.

But instead of PI suing EIP, on December 10, 2012, EIP sued PI, bringing claims for: (1) cancellation of the federal registrations of the PAKSTER marks and damages under sections 37 and 38 of the Lanham Act, 15 U.S.C. §§ 1119

, 1120 ; (2) false statements and unfair competition under section 43(a) of the Lanham Act, 15 U.S.C. § 1125(a) ; (3) trademark infringement, misappropriation, misuse and unfair competition under section 43(a) of the Lanham Act and common law; (4) conversion; and (5) breach of contract. It additionally sought a declaration that it owned the PAKSTER trademark.

On January 30, 2013, PI filed counterclaims for trademark infringement under section 32 of the Lanham Act, 15 U.S.C. § 1114

, and unfair competition under section 43(a) of the Lanham Act. On March 12, 2015, about a month before trial was scheduled to begin, PI voluntarily dismissed its counterclaims with prejudice. EIP then dismissed its breach of contract claim on April 3, 2015. The case proceeded to trial on April 13, 2015. At the end of the trial, the district court granted PI's motion for judgment as a matter of law on claims (2)–(4) above, finding that the evidence was insufficient for the jury to award damages.

The district court then issued findings of fact and conclusions of law. As relevant to this appeal, it cancelled PI's two federal trademark registrations and found that EIP was the prevailing party “because it established its ownership of the Trademark.” It held that PI's “actions here were deliberate, willful, and taken in bad faith, making this an exceptional case under section [35] of the Lanham Act, warranting reasonable attorneys' fees.” And it further held that fees were “also warranted under section [38] due to fraud on the PTO.” It finished by awarding EIP attorney's fees of $585,000 and denying EIP an injunction.

PI now appeals the grant of attorney's fees, arguing that section 38 of the Lanham Act does not permit fee shifting, and that EIP did not prevail on its section 35 claims.

II

In awarding attorney's fees, the district court cited both section 38 and section 35 of the Lanham Act. We address each of these two potential bases for an award of attorney's fees in turn, and then discuss whether EIP is entitled to attorney's fees based on obtaining a declaration that it owned the PAKSTER trademark.

A

Section 38 of the Lanham Act, codified at 15 U.S.C. § 1120

, prohibits registering a trademark with the United States Patent and Trademark Office by means of a false or fraudulent declaration or representation. The statute reads in full:

Any person who shall procure registration in the Patent and Trademark Office of a mark by a false or fraudulent declaration or representation, oral or in writing, or by any false means, shall be liable in a civil action by any person injured thereby for any damages sustained in consequence thereof.

15 U.S.C. § 1120

. The district court found that although PI had violated section 38, EIP had not suffered any damages from that violation and was not entitled to an injunction. EIP does not challenge either conclusion on appeal.

Despite finding no damages, the district court went on to cancel PI's federal registrations of the PAKSTER trademarks as a remedy for the section 38 violation. See 15 U.S.C. § 1119

(permitting courts to cancel trademark registrations in an action involving a registered mark). EIP argues that it therefore prevailed on its section 38 claim, and that this provides a basis for the district court's award of attorney's fees. Although neither party raised any jurisdictional issues in their initial briefing, we asked them to file supplemental briefs on whether the district court had jurisdiction to cancel the federal registrations. See Huggins v. FedEx Ground Package Sys., Inc., 566 F.3d 771, 773 (8th Cir. 2009) (“We are obligated to consider sua sponte our jurisdiction to entertain a case where, as here, we believe that jurisdiction may be lacking.”). Having carefully reviewed the briefs, we conclude that it did not.²

Article III of the Constitution confines federal courts to deciding “Cases” or “Controversies,” a requirement that has been interpreted to require parties suing in federal court to have suffered a “concrete and particularized injury” in order for a federal court to have jurisdiction to decide their claims. Hollingsworth v. Perry, ––– U.S. ––––, 133 S.Ct. 2652, 2661, 186 L.Ed.2d 768 (2013)

. At the outset of a suit, a nonfrivolous claim of injury is enough to establish jurisdiction, even if the possibility exists that the plaintiff will ultimately not be able to succeed in its claim—else courts would have to resolve the merits of the claim in order to determine whether they had jurisdiction to hear it in the first place. See Bell v. Hood, 327 U.S. 678, 682, 66 S.Ct. 773, 90 L.Ed. 939 (1946) ; City of St. Louis v. Dep't of Transp., 936 F.2d 1528, 1532 (8th Cir. 1991). It is equally true, however, that standing must “persist throughout all stages of litigation,” Hollingsworth, 133 S.Ct. at 2661, and must be demonstrated “separately for each form of relief...