Payless Shoesource, Inc. v. Reebok Intern. Ltd., 93-1035

• Decision Date: 20 July 1993
• Docket Number: No. 93-1035,93-1035
• Citation: 998 F.2d 985,27 USPQ2d 1516
• Parties: PAYLESS SHOESOURCE, INC., Plaintiff-Appellee, v. REEBOK INTERNATIONAL LIMITED and Reebok International Ltd., Defendants-Appellants.
• Court: U.S. Court of Appeals — Federal Circuit

Page 985

998 F.2d 985

27 U.S.P.Q.2d 1516

PAYLESS SHOESOURCE, INC., Plaintiff-Appellee, v. REEBOK INTERNATIONAL LIMITED and Reebok International Ltd. Defendants-Appellants.

No. 93-1035.

United States Court of Appeals Federal Circuit.

July 20, 1993.

William M. Ried, Lewin & Laytin, P.C., New York City, argued for defendants-appellants and David K.S. Cornwell, Sterne, Kessler, Goldstein & Fox, of Washington, DC, argued for defendants-appellants.

Before MAYER, LOURIE, and RADER, Circuit Judges.

LOURIE, Circuit Judge.

Reebok International Limited and Reebok International Ltd. ("Reebok") appeal from the order of the United States District Court for the District of Kansas denying Reebok's motion for a preliminary injunction enjoining Payless Shoesource, Inc. from infringing Reebok's trademarks, trade dress, and design patents. Payless Shoesource, Inc. v. Reebok Int'l Ltd., 804 F.Supp. 206, 25 USPQ2d 1130 (D.Kan.1992). We vacate and remand.

BACKGROUND

Payless is a footwear retailer of low and medium priced shoes sold through a nationwide chain of self-service shoe stores. Its shoes bear private "unbranded" labels and are only available for sale in Payless stores. Reebok is a manufacturer and retailer of brand name REEBOK footwear sold in the United States and throughout the world in athletic footwear stores, sporting goods stores, and department stores. On August 25, 1992, Payless filed a complaint for declaratory judgment against Reebok in which Payless sought a declaration that its footwear did not infringe Reebok's trademarks, trade dress, or design patents. Reebok filed a counterclaim alleging trademark infringement under 15 U.S.C. § 1114(1) (1988), federal unfair competition ¹ and trade dress infringement under 15 U.S.C. § 1125(a) (1988), patent infringement under 35 U.S.C. § 271 (1988), and unfair competition under Kansas state common law.

Reebok's counterclaims were directed to five models of shoes sold by Payless: ProWings HK 48, ProWings 9620, ProWings 9153, XJ 900, and Attack Force 9160. Reebok claimed that (1) the HK 48 model infringed Reebok's STARCREST and STRIPECHECK trademarks and the trade dress of its "Freestyle" shoe; (2) the 9620 model infringed Reebok's STARCREST mark and the trade dress of its "Princess" shoe; (3) the 9153 model infringed the trade dress of Reebok's "THE PUMP" shoe and U.S. Patent Des. 307,508; (4) the XJ 900 model infringed the trade dress of Reebok's "Omni Zone II" shoe and U.S. Patent Des. 326,353; and (5) the Attack Force 9160 model infringed the trade dress of Reebok's "Blacktop the Boulevard" shoe and U.S. Patent Des. 325,809.

Reebok also filed a motion for a preliminary injunction enjoining Payless from "purchasing, importing, distributing or selling shoes infringing Reebok's federally registered trademarks or trade dress or from making, using or selling shoes infringing Reebok's U.S. design patents." 804 F.Supp. at 208, 25 USPQ2d at 1131 (quotation omitted). An evidentiary hearing was held by the district court and the motion was denied on October 2, 1992.

Concerning Reebok's trademark infringement claim, the district court determined as a preliminary matter that the STRIPECHECK and STARCREST marks were valid, and it thus confined the bulk of its analysis to the likelihood of confusion between the competing products at issue. Although the court found that the Reebok and Payless shoes were "similar in appearance," it determined that other factors "weigh[ed] strongly against the likelihood that a consumer will be confused when confronted in the marketplace with the Reebok and the Payless shoes." Id. at 212, 25 USPQ2d at 1135. Thus, the court concluded that Reebok failed to establish that it was "substantially likely" to succeed on the merits of its trademark infringement claim.

The district court also concluded that Reebok did not show a substantial likelihood of success on the merits of its federal unfair competition claims. ² With respect to Reebok's contention that Payless had designed a "knock-off" Reebok shoe in violation of section 43(a) of the Lanham Act, the court determined that the evidence was insufficient to show that Payless had improperly passed off its shoes as Reebok's. Additionally, the court found that its prior likelihood of confusion analysis was also applicable to and dispositive of Reebok's trade dress claim. ³

As to the design patent infringement claim, the district court applied the test set forth in Gorham Co. v. White, 81 U.S. (14 Wall.) 511, 20 L.Ed. 731 (1871). Although the court acknowledged some similarity between Payless' accused shoes and the design patents at issue, it also found "major differences." 804 F.Supp. at 215, 25 USPQ2d at 1137. The court determined that "[t]he similarities between the shoes in question [were] overshadowed by the many differences," id., and thus concluded that Reebok had not shown a reasonable likelihood of success on the merits of its patent infringement claim.

Upon weighing the other preliminary injunction factors, including the balance of harms and the public interest, the district court concluded that "a preliminary injunction is ill-advised at this time" and denied Reebok's motion. Id. at 216, 25 USPQ2d at 1138. Reebok appealed to this court. We have jurisdiction over the appeal pursuant to 28 U.S.C. §§ 1292 and 1295 (1988).

DISCUSSION

A. Choice of Law

As a general rule, we review procedural matters under the law of the regional circuit in which the district court sits. Panduit Corp. v. All States Plastic Mfg. Co., 744 F.2d 1564, 1574-75, 223 USPQ 465, 471 (Fed.Cir.1984). Additionally, we defer to the law of the regional circuit when addressing substantive legal issues over which we do not have exclusive subject matter jurisdiction. See U.S. Philips Corp. v. Windmere Corp., 861 F.2d 695, 702, 8 USPQ2d 1885, 1890 (Fed.Cir.1988), cert. denied, 490 U.S. 1068, 109 S.Ct. 2070, 104 L.Ed.2d 635 (1989). Here, we defer to the law of the Tenth Circuit in reviewing the district court's decision to deny Reebok's motion for preliminary injunctive relief from alleged trademark and trade dress infringement.

Under Tenth Circuit law, the denial of a preliminary injunction is reviewed to determine whether "the trial court's action was clearly erroneous or constitutes an abuse of discretion." Otero Savs. & Loan Ass'n v. Federal Reserve Bank, 665 F.2d 275, 276 (10th Cir.1981). A moving party seeking preliminary injunctive relief in the Tenth Circuit must establish: (1) a substantial likelihood that the movant will eventually prevail on the merits; (2) a showing that the movant will suffer irreparable injury unless an injunction issues; (3) proof that the threatened injury to the movant outweighs whatever damage the proposed injunction may cause the opposing party; and (4) a showing that an injunction, if granted, would not be adverse to the public interest. Id. at 278.

With regard to substantive issues within our exclusive appellate jurisdiction, including patent law, we apply our own law. See Braun Inc. v. Dynamics Corp. of Am., 975 F.2d 815, 819, 24 USPQ2d 1121, 1124 (Fed.Cir.1992). We will not disturb a denial of a preliminary injunction under 35 U.S.C. § 283 (1988) unless a district court "abused its discretion, committed an error of law, or seriously misjudged the evidence." Smith Int'l, Inc. v. Hughes Tool Co., 718 F.2d 1573, 1579, 219 USPQ 686, 691 (Fed.Cir.), cert. denied, 464 U.S. 996, 104 S.Ct. 493, 78 L.Ed.2d 687 (1983). In deciding whether a moving party is entitled to preliminary injunctive relief under section 283, a district court must consider (1) whether the movant has sufficiently established a reasonable likelihood of success on the merits; (2) whether the movant would suffer irreparable harm if an injunction were not granted; (3) whether the balance of hardships tips in the movant's favor; and (4) the impact, if any, of an injunction on the public interest. Hybritech Inc. v. Abbott Lab., 849 F.2d 1446, 1451, 7 USPQ2d 1191, 1195 (Fed.Cir.1988).

Having stated those rules, we are mindful of the "heavy burden" that an appellant has in overcoming the denial of a motion for a preliminary injunction. Smith Int'l, 718 F.2d at 1579, 219 USPQ at 691.

B. Trademark and Trade Dress Infringement

The critical inquiry concerning a claim under section 32 or section 43(a) of the Lanham Act is whether a party's use of a mark is likely to confuse customers as to the source of a product. 15 U.S.C. §§ 1114(1), 1125(a). The Tenth Circuit treats the issue of likelihood of confusion as a question of fact subject to review under the clearly erroneous standard. See, e.g., Amoco Oil Co. v. Rainbow Snow, Inc., 809 F.2d 656, 661, 1 USPQ2d 1403, 1407 (10th Cir.1987). The Tenth Circuit has identified a number of factors relevant to determining whether there is a likelihood of confusion, including " '(a) the degree of similarity between the designation and the trade-mark ...; (b) the intent of the actor in adopting the designation; (c) the relation in use and manner of marketing between the goods or services marketed by the actor and those marketed by the other; (d) the degree of care likely to be exercised by purchasers.' " Beer Nuts, Inc. v. Clover Club Foods Co., 711 F.2d 934, 940, 221 USPQ 209, 215 (10th Cir.1983) (quoting Restatement of Torts § 729 (1938)). This list is not exhaustive and the factors enumerated therein are interrelated, with no one factor being dispositive. Jordache Enters., Inc. v. Hogg Wyld. Ltd., 828 F.2d 1482, 1484, 4 USPQ2d 1216, 1218 (10th Cir.1987).

In reaching its determination concerning trademark infringement, the district court focused on the likelihood of confusion between Reebok's and Payless' shoes in the marketplace. Particularly persuasive to the district court were what it considered "vast" differences in the manner of marketing and the channels of trade employed by the two companies. For example, the court found that Payless and Reebok shoes were never sold in the same...