Sara Lee Corp. v. Kayser-Roth Corp.

Citation38 U.S.P.Q.2d 1449,81 F.3d 455
Decision Date17 April 1996
Docket NumberKAYSER-ROTH,No. 94-2562,94-2562
Parties, 38 U.S.P.Q.2d 1449 SARA LEE CORPORATION, Plaintiff-Appellant, v.CORPORATION, Defendant-Appellee.
CourtUnited States Courts of Appeals. United States Court of Appeals (4th Circuit)

Appeal from the United States District Court for the Middle District of North Carolina, at Winston-Salem; Frank W. Bullock Jr., Chief District Judge. CA-92-460-6.

ARGUED: George Lester Little, Jr., Rodrick John Enns, Petree Stockton, L.L.P., Winston-Salem, North Carolina, for Appellant. Alan William Duncan, Smith, Helms, Mulliss & Moore, L.L.P., Greensboro, North Carolina, for Appellee. ON BRIEF: Daniel R. Taylor, Jr., J. David Mayberry, Petree Stockton, L.L.P., Winston-Salem, North Carolina, for Appellant. Jonathan A. Berkelhammer, Smith, Helms, Mulliss & Moore, L.L.P., Greensboro, North Carolina, for Appellee.

Before WIDENER, HALL, and WILKINS, Circuit Judges.

Reversed and remanded with instructions by published opinion. Judge HALL wrote the majority opinion, in which Judge WILKINS concurred. Judge WIDENER wrote a separate dissenting opinion.

OPINION

K. K. HALL, Circuit Judge:

Sara Lee Corporation appeals the district court's entry of judgment for Kayser-Roth Corporation in Sara Lee's action for trademark infringement. The district court found that Kayser-Roth's use of the mark Leg Looks TM on a line of its No nonsense TM hosiery products sold in food, drug, and mass merchandising outlets did not infringe on Sara Lee's L'eggs TM trademark. Because the court's finding was clearly erroneous, we reverse its judgment and remand the case with directions to enter judgment for Sara Lee. We further instruct the district court to grant Sara Lee's request that Kayser-Roth be permanently enjoined from using its Leg Looks TM trademark in a manner that infringes on the L'eggs TM mark.

I.

Sara Lee manufactures pantyhose and other hosiery products for retail sale under the Hanes TM and L'eggs TM trademarks. Until L'eggs TM penetrated the "FDM market" 1 in the early 1970s, women's hosiery was sold only in department stores. Sara Lee's most popular L'eggs TM product is its Sheer Energy TM line of light support pantyhose, made from nylon and spandex. Sara Lee also manufactures nylon-only products, but its nylon-and-spandex brands account for the largest share of its profits from hosiery sales. Sara Lee dominates the nylon-and-spandex pantyhose market; about three of every four pairs sold are Sheer Energy TM products.

Kayser-Roth is Sara Lee's only nationwide competitor. It followed Sara Lee into the FDM market in 1973, when it introduced its No nonsense TM line of pantyhose. In contrast to Sara Lee's, Kayser-Roth's sales of nylon-only products far exceed those of its nylon-and-spandex lines.

Over the last twenty-odd years, Kayser-Roth and Sara Lee have spent hundreds of millions of dollars in advertising their hosiery products. As a result, the companies have reaped billions in sales, and both No nonsense TM and L'eggs TM have become household names.

Sara Lee and Kayser-Roth are intense rivals and frequent court opponents. In early 1992, Kayser-Roth learned of Sara Lee's plan to introduce L'eggs Everyday TM, a new line of nylon-only hosiery. Kayser-Roth decided to respond by simultaneously introducing its own new line of nylon-and-spandex hosiery, designed to be priced lower than Sheer Energy TM.

The new line required a name. Kayser-Roth had, during the previous summer, applied to the United States Patent and Trademark Office to register the designations "Sheer Vigor" and "Sheer Invigoration." Sara Lee learned of the applications, and it filed the instant suit for declaratory and injunctive relief on July 22, 1992, alleging that Kayser-Roth had violated Sections 32 and 43(a) of the Lanham Act, 15 U.S.C. § 1051 et seq. 2

Kayser-Roth instead marketed its new product as "Leg Looks TM," a trademark that it already owned. Undaunted, Sara Lee amended its complaint on September 9, 1992, to assert that the name Leg Looks TM infringed on its L'eggs TM mark, and that the product's packaging was confusingly similar to the trade dress of its Sheer Energy TM line. See note 2, supra. Sara Lee also amended its prayer for relief to request money damages. Kayser-Roth counterclaimed, alleging that Sara Lee had engaged in numerous antitrust violations and in false advertising.

The case was assigned to a magistrate, who recommended that Kayser-Roth be preliminarily enjoined from continuing to sell Leg Looks TM as packaged. The district court adopted the magistrate's recommendation; Kayser-Roth thereafter recalled its Leg Looks TM products and changed the packaging. 3 Kayser-Roth nevertheless continued to affix the Leg Looks TM mark to its new nylon-and-spandex product.

On January 11, 1993, Sara Lee moved to supplement its amended complaint to reassert all of its federal and state claims as to the repackaged Leg Looks TM product; in March, it once again moved for a preliminary injunction. The magistrate conducted a ten-day hearing on the motion in August 1993. At the conclusion of the hearing, the parties and the district court agreed, inter alia, that (1) Sara Lee would waive all claims for money damages, (2) Sara Lee's remaining claims for equitable relief would be bifurcated from Kayser-Roth's counterclaims, and (3) the just-concluded hearing would be treated as a trial on the merits of Sara Lee's equitable claims, with the matter referred to the magistrate for decision, subject to de novo review by the district court. 4

On November 30, 1993, the magistrate issued a report and recommendation; he advised the district court to enter judgment for Sara Lee on all claims. The magistrate recommended that Kayser-Roth be permanently enjoined from using its Leg Looks TM trademark in the FDM market. 5

Kayser-Roth objected to the magistrate's report and recommendation. The district court examined the record anew, and, on October 13, 1994, filed an opinion that adopted many of the magistrate's underlying findings, yet disagreed with his conclusions.

The court found, as an initial matter, that Sara Lee's federal trademark claim was foreclosed by the doctrines of laches and acquiescence; it further determined that, even if Sara Lee's trademark claim were not equitably barred, Kayser-Roth's use of the Leg Looks TM mark did not violate the Lanham Act. The court likewise saw no merit in Sara Lee's claim that Kayser-Roth's marketing of Leg Looks TM in the redesigned package infringed on the trade dress of Sara Lee's Sheer Energy TM products. 6 Consequently, the district court entered judgment for Kayser-Roth on all of Sara Lee's claims. Sara Lee appeals.

II.

Although trademark law is imbued with numerous idiosyncracies, the standard governing our review of the district court's findings of fact in a trademark case is familiar. Generally speaking, we may set aside such findings only if they are clearly erroneous, Fed.R.Civ.P. 52(a); Pizzeria Uno Corp. v. Temple, 747 F.2d 1522, 1526 (4th Cir.1984). However, we owe no deference to the district court's findings if they are derived as a result of the court's misapplication of the law. Pizzeria Uno at 1526.

III.

We must address at the threshold the district court's findings that Sara Lee slept on its rights or, alternatively, that it acquiesced to Kayser-Roth's current use of the Leg Looks TM mark.

A.

During the 1980s, Kayser-Roth used the Leg Looks TM mark on a line of "fashion" nylon-only hosiery products in competition with Sara Lee's Hanes TM line; after peaking in 1985, sales of Leg Looks TM dropped precipitously throughout the remainder of the decade. In their original incarnation, Leg Looks TM products were available only in upscale department stores. No L'eggs TM products have ever been sold in such outlets.

From the outset, the Hanes TM division kept its corporate master fully apprised of Kayser-Roth's marketing of Leg Looks TM; nonetheless, Sara Lee has not challenged Kayser-Roth's use of the Leg Looks TM mark until now. The question before us is whether, as Kayser-Roth asserts, "now" is too late.

In a trademark case, courts may apply the doctrine of estoppel by laches to deny relief to a plaintiff who, though having knowledge of an infringement, has, to the detriment of the defendant, unreasonably delayed in seeking redress. See 4 J. Thomas McCarthy, McCarthy on Trademarks and Unfair Competition, § 31.02 (3d ed.1995) [hereinafter McCarthy] ("Estoppel by laches [is] defined as that type of delay in filing suit which causes prejudice to defendant and when weighed with all other relevant equitable factors, results in a bar to relief, either injunctive or monetary, or both.") (citation and internal quotation marks omitted). 7

However, the doctrine is sparingly applied where, as here, a plaintiff seeks only equitable relief. See id. at § 31.03[b] (reviewing cases); 8 see also Skippy, Inc. v. CPC Int'l, Inc., 674 F.2d 209, 212 (4th Cir.) ("While the availability of laches as a defense to claims for injunctive relief may be limited ... laches will bar a claim for damages for bad faith infringement.") (citations omitted), cert. denied, 459 U.S. 969, 103 S.Ct. 298, 74 L.Ed.2d 280 (1982). Moreover, in consideration of the public interest, estoppel by laches may not be invoked to deny injunctive relief if it is apparent that the infringing use is likely to cause confusion. 4 McCarthy at § 31.04; see University of Pittsburgh v. Champion Products, Inc., 686 F.2d 1040, 1044 (3d Cir.) ("Because laches is an equitable doctrine, its application is inextricably bound up with the nature and quality of the plaintiff's claim on the merits relevant to a prospective injunction."), cert. denied, 459 U.S. 1087, 103 S.Ct. 571, 74 L.Ed.2d 933 (1982).

In finding that Sara Lee was estopped by laches from asserting its infringement claim, the district court failed to consider the relative unavailability of that defense to preclude injunctive relief. In...

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