Swatch AG (Swatch Sa) (Swatch Ltd. v. Beehive Wholesale, LLC

• Citation: 739 F.3d 150
• Decision Date: 07 January 2014
• Docket Number: No. 12–2126.,12–2126.
• Parties: SWATCH AG (Swatch SA) (Swatch Ltd.), Plaintiff–Appellant, v. BEEHIVE WHOLESALE, LLC, a limited liability company, Defendant–Appellee.
• Court: United States Courts of Appeals. United States Court of Appeals (4th Circuit)

739 F.3d 150

SWATCH AG (Swatch SA) (Swatch Ltd.), Plaintiff–Appellant,

v.BEEHIVE WHOLESALE, LLC, a limited liability company, Defendant–Appellee.

No. 12–2126.

United States Court of Appeals,

Fourth Circuit.

Argued: Oct. 30, 2013.

Decided: Jan. 7, 2014.

ARGUED:Jeffrey A. Lindenbaum, Collen IP, Intellectual Property Law, P.C., Ossining, New York, for Appellant. William Jerome Utermohlen, Oliff & Berridge, PLC, Alexandria, Virginia, for Appellee. ON BRIEF:Thomas P. Gulick, Collen IP, Intellectual Property Law, P.C., Ossining, New York, for Appellant. James A. Oliff, Oliff & Berridge, PLC, Alexandria, Virginia, for Appellee.

Before NIEMEYER, KING, and DUNCAN, Circuit Judges.

Affirmed by published opinion. Judge DUNCAN wrote the opinion, in which Judge NIEMEYER and Judge KING joined.

DUNCAN, Circuit Judge:

Appellant Swatch AG brings this action seeking reversal of the district court's order denying its opposition to appellee Beehive Wholesale, LLC's trademark application and dismissing its related claims for federal, state, and common law trademark infringement, trademark dilution, and unfair competition. Swatch appeals on the ground that the district court's underlying factual findings—that there is no likelihood of confusion between Swatch's and Beehive's marks and that Beehive's mark is not merely descriptive—are clearly erroneous. For the reasons that follow we affirm.

I.

Swatch is a well-known Swiss corporation that produces watches, clocks, jewelry, and various materials for watch collectors. It is the owner of three U.S. registrations for the mark SWATCH ¹ and for materials bearing that mark. Beehive is a Louisiana company engaged in wholesale and retail sales of a variety of products including watches and watch parts.

Beehive produces and sells watch bands and faces under the mark SWAP. The defining feature of these watch parts is that they are interchangeable. A purchaser of Beehive's watch components is able to affix any SWAP watch face to most or all SWAP watchbands. Swatch brand watches, which are typically sold at a higher price point, do not include interchangeable components.

On July 30, 2004, Beehive applied to the U.S. Patent and Trademark Office (“PTO”) to register its mark, SWAP, for use on its “[w]atch faces, ribbon watch bands, slide pendants, and beaded watch bands.” J.A. 315. Beehive's application was preliminarily granted and published for opposition ² on December 26, 2005. On April 14, 2008,³ Swatch filed a notice of opposition to Beehive's application on three grounds: 1) priority of Swatch's mark and likelihood of confusion; 2) mere descriptiveness of Beehive's mark; and 3) dilution of SWATCH by Beehive's use of SWAP. Swatch primarily argued that the similarity of Beehive's SWAP mark to its SWATCH mark in combination with the similar character of their products was likely to result in confusion among consumers as to the origin of the goods. It also argued that SWAP is too generic to be registered. The parties submitted evidence concerning their products, sales, revenue, and advertising, as well as deposition testimony regarding Beehive's selection of the SWAP mark. The opposition was heard and dismissed on all counts by the Trademark Trial and Appeal Board (“TTAB”).

Swatch then filed a civil action in the Eastern District of Virginia seeking the cancelation of Beehive's registration under 15 U.S.C. § 1071(b). Swatch added new claims for trademark infringement and federal unfair competition under the Lanham Act, 15 U.S.C. §§ 1114, 1125(a); trademark dilution under the Trademark Dilution Act, 15 U.S.C. § 1125(c); state trademark infringement under Va.Code § 59.1–92.12; and common law unfair competition. It also submitted documentary evidence not presented to the TTAB including facts relevant to the SWAP clock-face variant, the parties' channels of distribution, and Swatch's dilution-by-blurring claim. The parties agreed to forgo live testimony and have the matter decided solely on the written record. The district court, upon consideration of the materials before it, affirmed the TTAB, holding that its determinations were supported by substantial evidence. It also found facts based on evidence not presented to the TTAB pursuant to its authority under 15 U.S.C. § 1071(b)(3). The district court concluded, on the basis of these combined findings, that there was no likelihood of confusion between the two marks and no likelihood that SWAP would dilute SWATCH. It dismissed Swatch's infringement and unfair competition claims as a matter of law. It also concluded that Beehive's mark is registrable because it is not merely descriptive. This appeal followed.

II.

On appeal, we review the district court's factual findings for clear error and its legal conclusions de novo. Likelihood of confusion is an “inherently factual issue,” and we “review [ ] district court determinations regarding [it] under a clearly erroneous standard.” Petro Stopping Ctrs., L.P. v. James River Petroleum Inc., 130 F.3d 88, 91–92 (4th Cir.1997). The strength of a mark and whether it is capable of being registered are also questions of fact that we review for clear error. Pizzeria Uno Corp. v. Temple, 747 F.2d 1522, 1533 (4th Cir.1984). We have yet to provide definitive guidance as to how dilution claims should be reviewed because the Trademark Dilution Revision Act, 15 U.S.C. § 1125(c) ( “TDRA”),⁴ is a recent enactment. However, likelihood of dilution, like likelihood of confusion, is a fact-intensive inquiry, so the appropriate standard of review is clear error. Cf. Louis Vuitton Malletier S.A. v. Haute Diggity Dog, LLC, 507 F.3d 252, 264–65 (4th Cir.2007) (reciting multifactor factual tests for determining the likelihood of dilution, including proving the fame of the plaintiff mark and the likelihood that an association between two marks will impair the distinctiveness of the plaintiff mark). ⁵

III.

A.

Section § 1071(b) of Title 15 of the United States Code permits a party in a trademark suit to initiate a civil action in the place of an appeal of the TTAB's determination to the Federal Circuit. 15 U.S.C. § 1071(b)(1). A brief description of the procedural features of § 1071(b) is helpful to our analysis.

In a § 1071(b) action, the district court reviews the record de novo and acts as the finder of fact. Durox Co. v. Duron Paint Mfg. Co., 320 F.2d 882, 883–84 (4th Cir.1963). The district court has authority independent of the PTO to grant or cancel registrations and to decide any related matters such as infringement and unfair competition claims. 15 U.S.C. § 1071(b)(1). The district court must admit the PTO record if a party so moves, and if admitted, the record “shall have the same effect as if originally taken and produced in the suit.” Id. at § 1071(b)(3). Whether or not the record is admitted, the parties have an unrestricted right to submit further evidence as long as it is admissible under the Federal Rules of Evidence and Civil Procedure. Id.; see also Kappos v. Hyatt, –––U.S. ––––, 132 S.Ct. 1690, 1700, 182 L.Ed.2d 704 (2012) (interpreting § 1071(b)'s patent parallel, 35 U.S.C. § 145).

Kappos is the primary case interpreting the patent and trademark civil action statutes. In Kappos, the PTO argued that in a § 145 proceeding where new evidence is admitted, the district court should defer to its findings, and “should overturn the PTO's factual findings only if the new evidence clearly establishes that the agency erred.” ––– U.S. ––––, 132 S.Ct. 1690, 1695–96, 182 L.Ed.2d 704 (2012). The Supreme Court rejected the PTO's premise that a § 145 suit “creates a special proceeding that is distinct from a typical civil suit filed in federal district court,” id. at 1696, and adopted the Federal Circuit's position that “where new evidence is presented to the district court on a disputed fact question, a de novo finding will be necessary to take such evidence into account together with the evidence before the board.” Id. at 1700 (quoting Fregeau v. Mossinghoff, 776 F.2d 1034, 1038 (Fed.Cir.1985)). It held that the district court “does not act as the ‘reviewing court’ envisioned by the APA,” because the court must determine, among other things, “how the new evidence comports with the existing administrative record,” and “as a logical matter [it] can only make [this] determination[ ] de novo because it is the first tribunal to hear the evidence.” Id. at 1696, 1700.

Kappos also explicitly defines the only situation where consideration of the TTAB decision is permitted. The Court adopted the Federal Circuit's rule that “the district court may, in its discretion, ‘consider the proceedings before and findings of the Patent Office in deciding what weight to afford an applicant's newly-admitted evidence.’ ” Id. at 1700 (quoting Hyatt v. Kappos, 625 F.3d 1320, 1335 (Fed.Cir.2010)).⁶ In sum, where new evidence is submitted, de novo review of the entire record is required because the district court “cannot meaningfully defer to the PTO's factual findings if the PTO considered a different set of facts.” Id.

B.

We are constrained to conclude that the standard of review articulated by the district court is erroneous. Its statement that in a § 1071(b) proceeding it sits in a “dual capacity” and applies a “unique standard of review,” acting in part as an appellate body, is in tension with the statute and directly conflicts with the requirements of Kappos.Swatch, S.A. v. Beehive Wholesale, L.L.C., 888 F.Supp.2d 738, 745 (E.D.Va.2012).

However, it is not clear from the record that the district court did in fact improperly defer to the factual findings of the TTAB, and remand is therefore unnecessary. As an initial matter, the district court properly reviewed Swatch's dilution-by-blurring claim entirely de novo because the TTAB did not address it on the merits. Swatch, 888 F.Supp.2d at 756 n. 15. The district court also decided Swatch's trademark infringement and unfair competition claims, which were not before the TTAB, de novo. Altho...