Service Ideas, Inc. v. Traex Corp.

• Decision Date: 13 May 1988
• Docket Number: No. 87-1980,87-1980
• Citation: 6 USPQ2d 1937,846 F.2d 1118
• Parties: SERVICE IDEAS, INC., Plaintiff-Appellee, v. TRAEX CORPORATION, Defendant-Appellant.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 1118

846 F.2d 1118

6 U.S.P.Q.2d 1937

SERVICE IDEAS, INC., Plaintiff-Appellee, v. TRAEX CORPORATION, Defendant-Appellant.

No. 87-1980.

United States Court of Appeals Seventh Circuit.

Argued Jan. 21, 1988.

Decided May 13, 1988.

Donald L. Heaney, Isaksen, Lathrop, Esch, Hart & Clark, Madison, Wis., for defendant-appellant.

Malcolm L. Moore, Moore & Hansen, Minneapolis, Minn., for plaintiff-appellee.

Before CUMMINGS and HARLINGTON WOOD, JR., Circuit Judges, and WILL, Senior District Judge. ^*

CUMMINGS, Circuit Judge.

Plaintiff Service Ideas, Inc. (Service Ideas) won its trade dress infringement suit against defendant Traex Corporation (Traex) and obtained a permanent injunction prohibiting Traex from using the trade dress of an insulated beverage server it manufactured that was confusingly similar to Service Ideas' trade dress. Service Ideas unsuccessfully sought attorneys' fees for prevailing in that action.

Traex subsequently moved the district court to declare that the trade dress of its new server was not confusingly similar to Service Ideas' trade dress. The court determined that Traex's new trade dress continued to be confusingly similar to plaintiff's trade dress and that Traex should be required to pay Service Ideas' reasonable attorneys' fees of $5,045.28 incurred in defending against Traex's motion. Traex appeals, asserting that (1) the design of its trade dress is functional, (2) its new trade dress is not confusingly similar to Service Ideas' trade dress, and (3) there was no basis upon which the district court could award reasonable attorneys' fees to Service Ideas for its efforts in resisting Traex's motion. We affirm in part and reverse in part for the reasons that follow.

I

We rely here on the statement of uncontested facts proffered by both parties and largely adopted by the court below. This is an action under Section 43(a) of the Lanham Act, 15 U.S.C. Sec. 1125(a), for unfair competition based on Traex's alleged infringement of Service Ideas' trade dress. The suit therefore is subject to federal jurisdiction under 28 U.S.C. Sec. 1338(a) regardless of diversity of citizenship, which incidentally does exist here.

Plaintiff Service Ideas is a Minnesota corporation with its principal place of business in Minneapolis. Defendant Traex, a wholly owned subsidiary of Menasha Corporation, is a Wisconsin corporation with its principal place of business in Dane, Wisconsin.

Service Ideas distributes an insulated beverage server to various restaurants and other institutions in the United States. This server is sold under the trademark THERMO-SERV. The THERMO-SERV beverage server currently distributed by Service Ideas is manufactured by Thermo-Serv, Inc., a Minnesota corporation not a party to this litigation. When Service Ideas began selling the insulated beverage server in 1955, the manufacturer was NFC Engineering, Inc. (NFC). Thermo-Serv is the successor-in-interest to NFC Engineering. Thermo-Serv, in addition to manufacturing the THERMO-SERV server for sale by Service Ideas, also manufactures the identical product under its own name and markets that product under the same trademark, i.e., THERMO-SERV. Thermo-Serv markets its THERMO-SERV beverage server only to the non-institutional market, according to its agreement with Service Ideas. The institutional market, comprised of hotels, restaurants, motels, and other institutions providing food service, has been reserved to Service Ideas. Service Ideas has marketed the THERMO-SERV beverage server to the food service institutional market for over thirty years. The shape and overall external appearance of the product have not changed in that entire period of time. Approximately two and a half million of these servers have been sold by Service Ideas. Also, Service Ideas has continuously displayed and promoted the THERMO-SERV beverage server at trade shows throughout the United States since at least 1959. It has advertised its server in various trade magazines, distributor catalogs and flyers and in its own brochures and catalogs distributed throughout the country.

In 1958, Service Ideas filed a trademark registration application to register the mark THERMO-SERV for the insulated beverage server which it distributed in commerce. The THERMO-SERV beverage server next was patented under a design patent on March 31, 1959. The patent was granted for a term of fourteen years and has since expired. The trademark application was registered with the United States Patent and Trademark Office on April 7, 1959, as U.S. Trademark Registration No. 676,528. This registration was the subject of an agreement, dated June 22, 1965, between Service Ideas and NFC. This "Assignment Agreement" contained language regarding the rights reserved to Service Ideas and rights conveyed to NFC under the trademark "THERMO-SERV." NFC subsequently assigned the registration by warranty assignment to Service Ideas representing that it was sole lawful owner of the registration. This assignment concerned the quality control by Service Ideas and NFC.

The THERMO-SERV insulated beverage server incorporates a color scheme in which the central shell of the server is one color and in which the top portion, lid, handle, and base portion of the server are a common second color generally darker than the color of the central shell. This general color scheme is also shared by the other insulated beverage servers distributed into commerce by Rubbermaid Corporation, Cambro Corporation, Continental Carlisle Corporation, and Kin-Hip, Ltd. Most relevant, however, is that defendant Traex has adopted the identical combinations of colors used on the THERMO-SERV server.

In both 1978 and 1979, Traex distributed a beverage server made by Kin-Hip. This server has been sold in the United States since 1978, competing with the servers of the other distributors. The Kin-Hip beverage server is similar both in external shape and appearance to the server being marketed by Service Ideas. However, it incorporates visible differences in its external appearance, which include the following: the squared bottom as opposed to the fully rounded bottom of the THERMO-SERV server; the more straight side walls on the main body, as compared to the more rounded, bulbous shape of the THERMO-SERV server; the higher, more upwardly extending pouring lip or spout; the upwardly turned outer ends of the lid thumb rest and top of the handle; and the scalloped, finger-gripping indents on the handle. Traex ultimately dropped that product from its line because of the poor quality of the Kin-Hip server. Traex had a number of returns from customers both because the seal joints on that server were poor and its handles frequently broke loose.

In 1985, Traex decided to manufacture its own insulated beverage server. It made its server identical in overall outward appearance to the THERMO-SERV server distributed by Service Ideas and Thermo-Serv. Traex actively manufactured and distributed this insulated beverage server prior to this suit. This server is marked on its bottom clearly with the name "Traex" and does not bear either the words "THERMO-SERV" or "Service Ideas."

When the deadline for producing graphic and photographic material for the 1986 Traex catalog was near, Traex had not yet produced any of its servers. Traex purchased one of each color combination of insulated beverage server made by Service Ideas from Kessenick's, a Service Ideas' dealer in Madison, Wisconsin, and then photographed them. This color group photograph later was printed on page 13 of the Traex 1986 Commercial Products Catalog. Under its catalog display, Traex depicted the caption "Manufactured by Traex."

The servers actually sold by Traex were virtually identical to those pictured in its catalog. Traex adopted not only a color scheme the same as that on the Service Ideas THERMO-SERV beverage server, but also the identical combinations of all colors used on that server. To accomplish this, Traex broke paint chips off the THERMO-SERV containers which it purchased from Kessenick's and sent those chips as paint samples to various paint suppliers.

Traex also copied the overall external shape and appearance of the THERMO-SERV beverage server. It did this through purchasing the THERMO-SERV beverage servers and cutting them in half. Mr. Fred Salzmann, the Traex design engineer, used calipers and other devices to measure every dimension and radius on the THERMO-SERV servers. He then prepared drawings for molds and parts to produce servers virtually identical in overall appearance to that of Service Ideas.

Service Ideas filed this suit on May 9, 1986, against Traex and its parent, Menasha Corporation, alleging four counts involving trademark and trade dress infringement, unfair competition, and false advertising under Section 43(a) of the Lanham Act, 15 U.S.C. Sec. 1125(a), and Wisconsin Revised Statutes Secs. 100.18 and 100.20. These counts were based upon Traex's manufacturing and marketing a line of insulated beverage servers substantially identical in overall external appearance to those manufactured for Service Ideas, displaying photographs of the Service Ideas' servers in Traex catalogs and price sheets prior to Traex having its own full line of beverage servers available, and adopting the trademark "THERMEX SERVER," which was allegedly confusingly similar to Service Ideas' trademark "THERMO-SERV."

Through a motion for summary judgment by Menasha and Traex, Traex's changing its trademark and catalog photographs, and Service Ideas' waiver of monetary damages, Menasha was dismissed as a party to the suit and the action was tried to the district court only on the issue of trade dress infringement under Section 43(a) of the Lanham Act.

The court found that the THERMO-SERV server marketed exclusively to the institutional food-service industry by Service Ideas had obtained a secondary meaning, that the Traex server created a likelihood of confusion, and that...