Pearson's Inc. v. Ackerman, Civil Action No. 7:18-cv-00013-BP

• Decision Date: 29 July 2019
• Docket Number: Civil Action No. 7:18-cv-00013-BP
• Parties: PEARSON'S INC. d/b/a PEARSON LIVESTOCK EQUIPMENT CO., Plaintiff, v. ROBERT DEAN ACKERMAN, et al., Defendants.
• Court: U.S. District Court — Northern District of Texas

PEARSON'S INC. d/b/a PEARSON LIVESTOCK EQUIPMENT CO., Plaintiff,
v.
ROBERT DEAN ACKERMAN, et al., Defendants.

Civil Action No. 7:18-cv-00013-BP

UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF TEXAS WICHITA FALLS DIVISION

July 29, 2019

MEMORANDUM OPINION AND ORDER

On January 25, 2018, Pearson's Inc. d/b/a Pearson Livestock Equipment Co. ("Pearson"), filed suit against Robert Dean Ackerman and Heather Ackerman Badley (collectively "Ackerman") and Titan West, Inc. ("Titan") for trademark and trade dress infringement under the Lanham Act, 15 U.S.C. §§ 1051, et seq., trade dress dilution under Section 16.103 of the Texas Business and Commerce Code, and trade dress infringement under Texas common law. (See generally, ECF No. 1). On February 16, 2018, Ackerman filed his Answer, Plea, and Counterclaims. (ECF No. 12). Ackerman asserted counterclaims against Pearson for trademark cancellation and antitrust violations. (Id.). Subsequently, Pearson nonsuited its claims against Badley (ECF No. 18), and Ackerman's antitrust counterclaims were dismissed by agreement (ECF No. 32). Before trial, Pearson settled its claims with Titan. (ECF No. 63).

The Court conducted a three-day bench trial on April 29, 30, and May 1, 2019. During the trial, the Court heard testimony from Robert Dean Ackerman, Clint Newton, Ricky Rater, David Rater, Van Neidig, Bret Hull, Cory Knight, Patrick Carhart, and Mark McKenna. By agreement of the parties, the Court admitted in evidence Pearson's Exhibit Nos. 1-2, 62-64, 81, 82, and 90-107 and also admitted Ackerman's Exhibit Nos. 201-221, 223-228, 231-234, 236, 237, 246, and 248.

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During trial, the Court admitted Pearson's Exhibit Nos. 6, 11, 17, 20, 23, 25, 27, 32, 36, 46-49, 52, 56-58, 65, 84, 85, 108 and Ackerman's Exhibit Nos. 222, 250, and 255. Demonstrative Exhibit Nos. 9, 256, and 257 also were admitted. Pearson withdrew Exhibit No. 89, and Ackerman withdrew Exhibit Nos. 200, 230, 238, 241, 245, and 247. After the trial concluded, Pearson and Ackerman timely submitted their proposed findings of fact and conclusions of law.

After considering the evidence and the arguments of counsel, and for the reasons set forth below, the Court finds that Pearson's mark is functional and nondistinctive. Thus, its trade dress and trademark ("Pearson mark" or "mark") are not legally protectable. Therefore, Pearson's registered trademark No. 5,184,202 is canceled pursuant to 15 U.S.C. § 1119. Additionally, Ackerman has not proven his fraudulent procurement claim by clear and convincing evidence. Nor has he proven the case is exceptional under 15 U.S.C. § 1117(a). Accordingly, his request for attorney's fees is denied.

FINDINGS OF FACT

I. History of the Pearson Chute

Pearson designs, manufactures, and sells products for use in the cattle industry. One of its products is the "Pearson Chute," a manual, parallel squeeze cattle chute that it has sold since the 1970s. The chute consists of a narrow, cubical framed structure that is wide enough to accommodate a single animal. The chute is designed to immobilize an animal by uniformly squeezing it from both sides, thereby providing easy access to the animal for examination and other procedures. (Pl.'s Exh. 2 at 159). Pearson protected the chute's functional features, including the squeeze mechanism and other features, through a series of utility patents issued by the United States Patent and Trademark Office ("PTO") in 1965, 1977, and 1982. (Pl.'s Exh. 2 at 150-55, 156-63, 164-68).

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Over the years, the design and overall look of the Pearson Chute have evolved. The appearance of the modern-day Pearson Chute has remained substantially unchanged since the early 1990s, when circular disks were incorporated at opposite ends of the raised front crossbar and rear squeeze hinge orientated forward from its corner posts. (Transcript ("Tr.") Vol. 1 at 142; Defs.' Exh. 257).

A photograph of the modern-day Pearson Chute, without the squeeze handle in place, is shown below:

Image materials not available for display.

(Defs.' Exh. 246 at 193).

The original owners of Pearson sold the business to Ricky and David Rater in January 2013. (Tr. Vol. 2 at 50). Originally, Pearson only produced chutes in Thedford, Nebraska. Shortly after purchasing the business, the Raters expanded its manufacturing capabilities to Vernon, Texas. (Id. at 184). Ricky Rater is Pearson's Vice President and General Manager with overall responsibility for operations, and David Rater is Pearson's President with responsibly for banking,

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marketing, and distributor relationships. (Id. at 185). David Rater is Ricky Rater's father. (Id. at 174).

Today, Pearson produces approximately 400 cattle chutes annually and sells anywhere from five to thirty-three percent of its chutes into the international market. (Id. at 54-56). Domestically, Pearson sells its products directly to consumers and through regional distributors who may or may not have local dealer relationships. (Id. at 54).

II. Pearson's relationship with Ackerman

Ackerman has been in the retail cattle equipment business for nearly forty years. (Tr. Vol. 1 at 180). His wife, Donna Ackerman, and daughter, Heather Badley, are employees of the business, which is located in La Salle, Colorado. (Id. at 178-80). In 1983, Ackerman began selling Pearson Chutes as a local dealer. (Id. at 180). From 1993 to 2014, Ackerman served as Pearson's exclusive regional distributor of Pearson Chutes for the Colorado Region of the United States. (Id. at 184).

The Pearson Chute is a popular, high-quality chute with a good reputation in the cattle industry. (Id. at 183; Tr. Vol 2 at 12). Although distributing the Pearson Chute had been fairly profitable, Ackerman wanted to sell a more economical chute that functioned like a Pearson Chute, but without the price and geographical restrictions imposed by Pearson. (Id. at 186-87; Tr. Vol. 3 at 115-16). Ackerman's idea was not new. Since the 1990s, after Pearson's utility patents expired, other manufacturers of cattle chutes began incorporating aspects of the Pearson Chute's design, mimicking its function and shape. (Tr. Vol. 2 at 14, 74-83, 138-40; Defs.' Exh. 256). However, aside from the chutes co-developed by Ackerman, there is little evidence to establish the market success and adoption of these third-party competitors throughout the cattle chute industry. (See Tr. Vol. 2 at 74-83, 141-43).

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Ackerman and WW Manufacturing ("WW"), one of Pearson's competitors, developed a new cattle chute called the Next Generation Beefmaster ("Beefmaster"). (Tr. Vol. 1 at 187-90). WW already manufactured a cattle chute called the Stampede that incorporated many of the design features comprising the Pearson Chute. (Id. at 187, Tr. Vol. 2 at 15-16). As a result, the Stampede resembles the Pearson Chute, but is substantially heavier and contains additional design features making it a more expensive cattle chute than what Ackerman wanted to sell. (Id.; Tr. Vol. 2 at 6). To aid WW in designing a more economical chute, Ackerman sent a Pearson Chute to WW. (Id.). Ackerman asked WW to implement specific features of the Pearson Chute, the circular disks and removable wings or side panels, into the Beefmaster's design. (Id. at 190-91; Tr. Vol. 2 at 16-17).

The circular disks allow the chute to operate as either a left- or right-handed chute and permit a user to orient the squeeze handle attached to the disk in multiple directions. (Tr. Vol. 2 at 16-19; Tr. Vol. 3 at 117; See Pl.s' Exh. 2 at 53, 141, 146). The circular disks' functionality, combined with the raised front crossbar and squeeze handle, provide both safety and operational benefits. (Id. at 16-19, 115-16; Tr. Vol. 3 at 117; See Pl.s' Exh. 2 at 53, 141, 146). The combination allows a user to orientate the squeeze handle to the position and stature of the user, thereby providing extra leverage and promoting safety by keeping a user out of harm's way in the event of any unforeseen release of the animal inside the chute. (Id. at 16-19; Tr. Vol. 3 at 117). The removable side panels allow for easier access to the animal once it enters the chute. (Pl.s' Exh. 2 at 53).

Pearson learned that Ackerman sent a Pearson Chute to WW. (Tr. Vol. 1 at 191). David Rater telephoned Ackerman on or about March 20, 2014 to confront him about sending the chute to WW to be "copied." (Id. at 193). Ackerman confirmed he sent a Pearson Chute to WW and understood that Pearson did not want him copying any Pearson Chute design features into any

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other competing chutes. (Id. at 195). On the call, David Rater terminated Ackerman as a Pearson distributor. (Id.; Tr. Vol. 2 at 195).

III. Ackerman competes with Pearson

Ultimately, the Beefmaster was unsuccessful. (Tr. Vol. 2 at 20). Undeterred, Ackerman developed a relationship with another chute manufacturer called Pro Farm Manufacturing, Inc. ("Pro Farm"), a Canadian company with manufacturing capabilities in China. (Tr. Vol. 1 at 201, 204-05). Ackerman's wife first saw a Pro Farm chute at a cattle equipment auction. (Id. at 201-02). At the time, the Pro Farm chute was painted a green color.(Id. at 202-03; Pl.s' Exh. 6). But it had many of the same features of a Pearson Chute, including the raised front crossbar, circular disks, and squeeze handle. (Id. at 213). On or about March 18, 2014, Ackerman accompanied his wife to the auction to collect equipment she had purchased. (Tr. Vol. 3 at 119). While there, he saw the Pro Farm chute and remarked that it looked like a Pearson Chute. (Id. at 120; Tr. Vol. 1 at 213).

Days after David Rater terminated Pearson's distributorship, Ackerman contacted Pro Farm about distributing the Pro Farm chute. (Tr. Vol. 1 at 201). After Pro Farm sent Ackerman his first order of Pro Farm chutes, a representative from Pro Farm visited Ackerman in La Salle, where the representative saw a Pearson Chute. (Id. at 206). Much like his experience with the Beefmaster, Ackerman helped develop the Pro Farm chute for the domestic...