U.S. Structures, Inc. v. J.P. Structures, Inc.

• Decision Date: 03 December 1997
• Docket Number: No. 96-1016,96-1016
• Citation: 130 F.3d 1185
• Parties: U.S. STRUCTURES, INCORPORATED, a foreign corporation, Plaintiff-Appellee, v. J.P. STRUCTURES, INCORPORATED, a Michigan corporation, and Joseph J. Pilat, Defendants-Appellants.
• Court: U.S. Court of Appeals — Sixth Circuit

Page 1185

130 F.3d 1185

45 U.S.P.Q.2d 1027

U.S. STRUCTURES, INCORPORATED, a foreign corporation Plaintiff-Appellee, v. J.P. STRUCTURES, INCORPORATED, a Michigan corporation, and Joseph J. Pilat, Defendants-Appellants.

No. 96-1016.

United States Court of Appeals Sixth Circuit.

Argued March 18, 1997.

Decided Dec. 3, 1997.

Kenneth J. McIntyre (briefed), K. Scott Hamilton (argued and briefed), Dickinson, Wright, Moon, Van Dusen & Freeman, Detroit, MI, for Plaintiff-Appellee.

John F. Fleming, Fraser, MI, Arnold S. Weintraub, Lisa M. DuRoss (argued and briefed), Weintraub, DuRoss & Brady, Bingham Farms, MI, for Defendants-Appellants.

Before: KENNEDY, CONTIE, and NORRIS, Circuit Judges.

ALAN E. NORRIS, Circuit Judge.

Defendants, J.P. Structures, Inc., and Joseph J. Pilat, appeal from the district court's order granting summary judgment for plaintiff, U.S. Structures, Inc., in a trademark infringement action brought under both the Lanham Act, 15 U.S.C. §§ 1051-1127, and Michigan law. Defendants argue that the district court erred in concluding that they misused U.S. Structures' trademark, and that they acted willfully in doing so. Defendants also challenge the district court's award of damages and attorneys' fees. For the reasons that follow, we affirm the district court on the merits, but reverse and remand as to the court's award of attorneys' fees.

I.

In August 1988, defendant Joseph J. Pilat executed a franchise agreement with plaintiff U.S. Structures, Inc. The agreement provided that Pilat would operate a deck construction business under the name J.P. Structures, Inc., and it authorized him to use U.S. Structures' trademark, "Archadeck," and other related trademarks. The franchise operated without problems until February 15, 1994, when U.S. Structures informed Pilat that it would terminate the Archadeck franchise unless the sales royalties required by the agreement were paid within twenty days.

On March 15, 1994, U.S. Structures terminated the franchise agreement for lack of payment. Defendants admit that they continued to use the Archadeck trademark while they attempted to negotiate a settlement of their dispute with U.S. Structures. In addition, it appears that defendants participated in an advertising program which utilized the Archadeck trademark while they were authorized Archadeck franchisees, and that they did not terminate their participation in the program when their franchise was canceled. Defendants received numerous referrals through this program, even though they were no longer authorized to use the Archadeck trademark.

On June 28, 1994, U.S. Structures sued to enjoin defendants from infringing upon the Archadeck trademark, and to recover damages for past infringements under the Lanham Act, 15 U.S.C. §§ 1051-1127. The complaint alleged that defendants continued to "willfully and intentionally" represent to the public that they were an authorized Archadeck franchise after they received notice that their franchise had been terminated, and that they continued to use the Archadeck trademark and phone numbers in violation of the franchise agreement. The complaint stated causes of action for (1) trademark infringement in violation of the Lanham Act; (2) false description or false representation as to defendants' affiliation with U.S. Structures in violation of the Lanham Act; (3) trademark infringement in violation of Michigan law; (4) common law conversion of U.S. Structures' property interest in the telephone numbers and trademarks associated with the Archadeck name; (5) breach of the franchise agreement; (6) violation of the Michigan Consumer Protection Act; (7) unfair competition in violation of Michigan common law; and (8) infringement of a service mark in violation of Michigan common law. U.S. Structures prayed for an accounting, delivery of phone numbers and other materials associated with the Archadeck name, damages, treble damages, injunctive relief and attorneys' fees and costs, and such other relief as may have been available under the Lanham Act and applicable state law.

After discovery was completed, U.S. Structures moved successfully for summary judgment. The district court held that U.S. Structures was entitled to relief as a matter of law for trademark infringement and unfair competition in violation of sections 32 (15 U.S.C. § 1114) and 43 (15 U.S.C. § 1125) of the Lanham Act. The court then awarded U.S. Structures the following damages: (1) $2,155.00, plus interest, representing defendants' profits after the termination of the franchise agreement (calculated at a rate of twenty percent of all contracts entered into after 3/31/94); (2) $862.00, plus interest, representing unpaid royalties (calculated at a rate of eight percent of all contracts entered into after 3/31/94); (3) $6,465.00, representing treble damages under 15 U.S.C. § 1117(a) and (b); (4) $47,333.15 in attorneys' fees pursuant to 15 U.S.C. § 1117(b); and (5) $10,603.50, representing all past due royalties. With regard to the award of attorneys' fees, the court found that defendants' infringement was "willful, deliberate, and intentional." Finally, the court enjoined defendants from operating a similar business for one year from October 7, 1994. ¹ This appeal followed.

II.

A.

Defendants argue that the district court erred in granting summary judgment to U.S. Structures on the issue of trademark infringement, and that it erred in determining the amount of past royalties and profits due to U.S. Structures. We review a district court's grant of summary judgment de novo. Brooks v. Am. Broad. Cos., Inc., 999 F.2d 167, 174 (6th Cir.1993). Summary judgment is proper when the "pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c). The "mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48, 106 S.Ct. 2505, 2510, 91 L.Ed.2d 202 (1986). In reviewing the evidence, we must draw all justifiable inferences in favor of the non-moving party. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 1356, 89 L.Ed.2d 538 (1986).

The Lanham Act prohibits the unauthorized use of a registered trademark when selling or advertising a good or service using the trademark is likely to confuse or deceive consumers. In order to defeat summary judgment in a Lanham Act case alleging violations of sections 32 ² and 43, ³ defendants must raise a genuine issue of fact as to (1) whether their use of the trademark was without the registered owner's consent, or (2) whether their unauthorized use was likely to cause confusion in the marketplace as to the origin or sponsorship of the product. 15 U.S.C. §§ 1114(1)(a), 1125(a). See generally Holiday Inns, Inc. v. 800 Reservation, Inc., 86 F.3d 619, 622-23 (6th Cir.), cert. denied, --- U.S. ----, 117 S.Ct. 770, 136 L.Ed.2d 715 (1997).

B.

Defendants argue first that the district court erred when it granted summary judgment for plaintiff, because there is a genuine issue of material fact as to whether U.S. Structures consented to their use of the Archadeck trademark after the franchise agreement was terminated. In support of its motion for summary judgment, U.S. Structures offered testimony by its president, Richard Provost, and its intellectual property attorney, Peter Ludwig, both of whom stated that U.S. Structures did not consent to defendants' continued use of its trademark. In opposition, defendants offered the deposition testimony of defendant Pilat that his intellectual property attorney, Larry Trigger, told him that U.S. Structures had agreed to let defendants operate as a quasi-franchise while the parties negotiated a settlement to their dispute. Defendants contend that Pilat's testimony, along with evidence that defendants were referred to potential customers as an Archadeck franchise even after their franchise was terminated, raise a question concerning U.S. Structures' authorization of their use of the trademark.

We conclude that there is no genuine issue of material fact as to whether defendants' use of the Archadeck trademark was unauthorized. Summary judgment in favor of U.S. Structures on this issue was appropriate, since defendants failed to offer any admissible evidence in response to U.S. Structures' evidence that it did not consent to defendants' use of the trademark after their franchise was terminated. Under Fed.R.Civ.P. 56(e), evidence submitted in opposition to a motion for summary judgment must be admissible. See, e.g., Monks v. Gen. Elec. Co., 919 F.2d 1189, 1192 (6th Cir.1990). Hearsay evidence, as well as evidence which is irrelevant to the issue presented, must be disregarded. Dole v. Elliott Travel & Tours, Inc., 942 F.2d 962, 968-69 (6th Cir.1991). Because Pilat's testimony consists only of hearsay statements regarding U.S. Structures' alleged consent, it must be disregarded. Similarly, the job referrals are irrelevant to the issue of consent and must be disregarded, because there is no evidence that U.S. Structures was involved in making them.

C.

Second, defendants argue that summary judgment was improper because there is a genuine issue of material fact regarding whether their conduct created a "likelihood of confusion" in the marketplace. The "likelihood of confusion" element requires plaintiff to show that the public believes that "the mark's owner sponsored or otherwise approved the use of the trademark." Carson v. Here's Johnny Portable Toilets, Inc., 698 F.2d 831, 834 (6th Cir.1983) (quoting Warner Bros., Inc. v. Gay Toys, Inc., 658 F.2d 76, 79 (2d Cir.1981)). This court has identified several elements which...