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National Products, Inc. v. Arkon Resources, Inc.

United States District Court, W.D. Washington, Seattle

February 14, 2018

NATIONAL PRODUCTS, INC., Plaintiff,
v.
ARKON RESOURCES, INC., Defendant.

          ORDER ON THE PARTIES' POST-TRIAL MOTIONS

          JAMES P. DONOHUE CHIEF UNITED STATES MAGISTRATE JUDGE

         I. INTRODUCTION AND SUMMARY CONCLUSION

         This matter comes before the Court on several post-trial motions filed by both parties, plaintiff National Products, Inc. (“NPI”) and defendant Arkon Resources, Inc. (“Arkon”), following a five-day jury trial for trade dress infringement. Dkts. 182, 186, 188, 190, 196. The Court, having considered the parties' motions, all submissions filed in support of and opposition to the motions, the governing law, and the balance of the record, hereby ORDERS as follows: NPI's renewed Rule 50(b) motion for judgment as a matter of law that Arkon violated the Washington Consumer Protection Act (Dkt. 182) is DENIED; Arkon's unopposed motion to seal several exhibits (Dkt. 188) is GRANTED; Arkon's renewed Rule 50(b) motion for judgment as a matter of law (Dkt. 186) is DENIED; Arkon's motion for a new trial as to damages or remittitur (Dkt. 190) is DENIED, conditional upon NPI accepting a remittitur reducing the damages award from $193, 598 to $167, 239.55; and Arkon's motion to alter or amend the judgment (Dkt. 196) is DENIED.

         II. DISCUSSION

         A. NPI's Renewed Motion under Rule 50(b) for Judgment as a Matter of Law that Arkon Violated the Washington Consumer Protection Act

         1. Background

         The Court conducted a jury trial in this matter from December 4, 2017 to December 8, 2017, on NPI's claims against Arkon for infringement of NPI's federally registered trademark[1]in violation of the Lanham Act, 15 U.S.C. § 1114(1), as well as the Washington Consumer Protection Act (“WCPA”). NPI's trade dress is the hourglass shaped design of a mounting arm, which is used to attach a cell phone (or similar device) to a base in the interior of a vehicle. Arkon denied NPI's claims, arguing that NPI's trade dress was invalid as functional, as lacking secondary meaning, and as generic. Alternatively, if the jury found that NPI's trade dress was valid, Arkon argued that there was no infringement.

         On December 8, 2017, the jury returned a verdict in NPI's favor on its trade dress infringement claim, finding that NPI's trade dress was valid, and infringed, and that the infringement was “deliberate or willful.” However, the jury found in favor of Arkon on NPI's WCPA claim. The jury awarded NPI money damages in the amount of $193, 598. Dkt. 177 (jury verdict). The Court entered judgment on December 11, 2017. Dkt. 179.

         During the trial, NPI moved for judgment as a matter of law pursuant to Fed.R.Civ.P. 50(a)(1) that Arkon had infringed NPI's hourglass shape trade dress, that this infringement was willful, and that Arkon's conduct violated the WCPA. Dkt. 169. NPI argued that the infringement took place in Washington, and that Arkon's conduct automatically satisfied four of the five elements necessary to establish a violation of the WCPA pursuant to Hangman Ridge Training Stables, Inc. v. Safeco Title Ins. Co., 105 Wash.2d 778, 780, 719 P.2d 531 (1986). With respect to the fifth and final element of the Hangman Ridge test, NPI argued that Arkon has not presented evidence of “usual or unforeseen circumstances” as required to show that the infringement did not satisfy the remaining “public interest” prong of the Hangman Ridge test. The Court denied NPI's Rule 50(a) motion on the record on December 7, 2017. Dkt. 170; Dkt. 195 (Karish Decl.), Ex. A (Trial Tr. 12/07/17).

         Following the jury's verdict, NPI timely filed the instant renewed motion for judgment as a matter of law under Fed.R.Civ.P. 50(b). Dkt. 182. NPI argues that although the jury found in favor of Arkon on NPI's WCPA claim, Dkt. 177, this finding is incorrect as a matter of law because Washington law mandates that trademark infringement is a violation of the WCPA absent evidence of “unforeseen or unusual circumstances.” See Nordstrom, Inc. v. Tampoulos, 107 Wash.2d 735, 740-42, 733 P.2d 208 (1987). NPI asserts that there was no evidence of “unforeseen or unusual circumstances” presented at trial, and the jury's finding that Arkon's infringement was willful establishes that it was of the kind that necessarily establishes a violation of the WCPA. Dkt. 182. Arkon responds that a finding of trademark infringement does not mandate a finding that the WCPA has been violated, and therefore the Court should not disturb the jury's reasonable finding as to NPI's WCPA claim. Dkt. 194.

         2. Legal Standard for Rule 50(b) Motions

         The Court may grant NPI's renewed motion for judgment as a matter of law on its WCPA claim if it “finds that a reasonable jury would not have a legally sufficient evidentiary basis” to find for Arkon on this claim. See Fed. R. Civ. P. 50(a). The Court must view the evidence and draw all reasonable inferences in favor of the nonmoving party, Arkon, in whose favor the jury returned its verdict on this claim. Ostad v. Oregon Health Sci. Univ., 327 F.3d 876, 881 (9th Cir. 2003). The jury's verdict is upheld if substantial evidence supports the jury's conclusion, even if a contrary conclusion could have been reached. Harris v. City of Los Angeles, 533 F.3d 1010, 1021 (9th Cir. 2008). Granting a motion for judgment as a matter of law is proper if “the evidence permits only one reasonable conclusion, and the conclusion is contrary to that reached by the jury.” Id. Judgment as a matter of law “is appropriate when the jury could have relied only on speculation to reach its verdict.” Lakeside-Scott v. Multnomah Cnty., 556 F.3d 797, 802-03 (9th Cir. 2009).

         A proper post-verdict Rule 50(b) motion is limited to the grounds asserted in the pre-deliberation Rule 50(a) motion. EEOC v. GoDaddy Software, Inc., 581 F.3d 951, 961-62 (9th Cir. 2009). Thus, a party cannot properly raise arguments in its post-trial motion under Rule 50(b) that it did not raise in its pre-verdict Rule 50(a) motion. Id. (citing Freund v. Nycomed Amersham, 347 F.3d 752, 761 (9th Cir. 2003)).

         3. NPI's Washington Consumer Protection Act Claim

         The Washington Consumer Protection Act, or WCPA, provides that “unfair methods of competition and unfair or deceptive acts or practices in the conduct of any trade or commerce are hereby declared unlawful.” RCW 19.86.020. The Washington Supreme Court has held that a plaintiff bears the burden of proving the following elements to establish a violation of the WCPA: (1) an unfair or deceptive practice; (2) occurring in trade or commerce; (3) affecting the public interest; (4) that injures the plaintiff in his or her business or property; and (5) a causal link between the unfair or deceptive act and the injury suffered. Hangman Ridge Training Stables, Inc. v. Safeco Title Ins. Co., 105 Wash.2d 778, 719 P.2d 531, 535-39 (1986). See also Nordstrom, Inc., 107 Wash.2d at 739.

         This Court has stated on numerous occasions that federal claims under the Lanham Act and state claims under the WCPA are “substantially congruous, ” and “the elements necessary to establish a likelihood of confusion for . . . statutory unfair competition claims in Washington are the same as for federal trademark infringement and unfair competition.” Safeworks, LLC v. Teupen Am., LLC, 717 F.Supp.2d 1181, 1192 (W.D. Wash. 2010) (“The elements necessary to establish a likelihood of confusion for common law and statutory unfair competition claims in Washington are the same as for federal trademark infringement and unfair competition.”). However, in recent years this Court has been more careful to acknowledge the Washington Supreme Court's holding that these elements are not necessarily “the same, ” and that there will be exceptional circumstances where a party's conduct constitutes trademark infringement, but not necessarily deceptive or unfair competition under the WCPA.

         In Nordstrom v. Tampourlos, the Washington Supreme Court stated that typically such “confusion of the public [resulting from trade name infringement], absent some unusual or unforeseen circumstances, will be sufficient to meet the public interest requirement of the Consumer Protection Act. This is not a per se rule, but rather a function of what we perceive as the overlapping nature of proof in both trade name infringement cases and Consumer Protection Act violations.” Nordstrom, 107 Wash.2d at 743. In Seattle Endeavors, Inc. v. Mastro, the Washington Supreme Court concluded that because the mark at issue was weak and the infringement was inadvertent, the plaintiff in that case had failed to establish the elements of a WCPA claim. 12 Wash.2d 339, 350-51, 868 P.2d 120 (1994). Thus, the Washington Supreme Court's holding in Seattle Endeavors reaffirms that trademark infringement does not constitute a per se violation of the WCPA.

         In Experience Hendrix L.L.C. v. HendrixLicensing.com, Ltd., this Court denied a motion for summary judgment on a WCPA claim, despite granting summary judgment on a trademark infringement claim, because “the Washington Supreme Court made clear that trademark infringement does not necessarily establish a violation of the CPA[.]” Case No. 2:09-cv-285-TSZ, 2010 WL 5463822, *2 (W.D. Wash. 2010) (citing Seattle Endeavors, 12 Wash.2d at 350). The Court also noted that its prior decision in Lahoti v. Vericheck, Inc., 708 F.Supp.2d 1150, 1168 (W.D. Wash. 2010), affd, 636 F.3d 501 (9th Cir. 2011), was in accord, and “does not support a per se argument.” Id. at *2. Specifically, this Court observed that “the Lahoti court did not simply rest on a finding of trademark infringement, but rather the court, citing Nordstrom and Seattle Endeavors, made amended findings, after a bench trial and following remand from the Ninth Circuit, of both a strong, inherently distinctive, mark and intentional infringement before concluding that the defendant was liable for violating the CPA” Id. (citing Lahoti, 708 F.Supp.2d at 1168).

         Thus, although as a general proposition, conduct that constitutes federal trademark infringement will also satisfy the five Hangman Ridge elements and therefore violate the WCPA, the Washington Supreme Court has clearly held that there will be exceptions. As discussed below, the Court declines to disturb the jury's reasonable finding that this case constitutes just such an exception. Specifically, because NPI's trade dress was not inherently distinctive[2] or a strong mark, and the jury could reasonably conclude that the “public interest” element of the Hangman Ridge test was not satisfied in this case. As a result, the jury's finding that Arkon did not violate the WCPA was supported by substantial evidence in the record.

         (a) An Unfair or Deceptive Practice

         With respect to the first Hangman Ridge element of NPI's WCPA claim, an unfair or deceptive act or practice, “a plaintiff need not show that the act in question was intended to deceive, ” but only that “the alleged act had the capacity to deceive a substantial portion of the public.” Hangman Ridge, 105 Wash.2d at 785. NPI argues that because the jury concluded that Arkon infringed NPI's registered trade dress, which necessarily involves a finding that Arkon's use of NPI's registered trade dress was likely to cause confusion about the source of NPI or Arkon's goods, this first element is satisfied. Dkt. 182 at 4.

         The Court agrees with NPI that, in light of the jury's finding that NPI's trade dress was valid and infringed by Arkon, the first element of the WCPA has been met. The jury found that Arkon infringed NPI's trade dress, which is likely to cause confusion about the source of NPI or Arkon's goods regardless of whether Arkon actually intended to deceive the public.

         (b) Occurring in Trade or Commerce

         The second Hangman Ridge element, that the act occurred in “trade or commerce, ” is satisfied. RCW 19.86.010(2) broadly defines the scope of “trade” or “commerce” as including “the sale of assets or services, and any commerce directly or indirectly affecting the people of the state of Washington.”[3] The Washington Supreme Court has broadly interpreted this provision to include every person conducting unfair acts in any trade or commerce. Nordstrom, 107 Wash.2d at 740. Specifically, the court held that “in this type of case, involving the use of a trade name advertising to the public, the sale of goods and services falls squarely within [the] broad definition [of trade or commerce in RCW 19.86.010(2)].” 107 Wash.2d at 740. The Lanham Act similarly requires “use in commerce” to establish trademark infringement. 15 U.S.C. § 1114(1)(a). Thus, the jury's finding that Arkon infringed NPI's trade dress under the Lanham Act included a finding that Arkon used NPI's trade dress “in commerce, ” thereby meeting the second Hangman Ridge element. Dkt. 177 (jury verdict).

         (c) Injury to NPI's Business or Property, and a Causal Link Between the Unfair or Deceptive Act and the Injury Suffered

         The fourth Hangman Ridge element requires a showing that plaintiff was injured in his or her “business or property.” Hangman Ridge, 105 Wash.2d at 780; RCW 19.86.090. No monetary damages need be proven, as nonquantifiable injuries such as loss of goodwill suffice for this element. Nordstrom, 107 Wash.2d at 741 (finding that infringement, which injured plaintiff s goodwill and reputation, satisfies the injury requirement). The fifth Hangman Ridge element is causation, as only a plaintiff who has been injured in his business or property by a violation of RCW 19.86.020 may bring a private action. Id.; RCW 19.86.090. NPI asserts that the jury not only found trademark infringement, but awarded NPI damages, thereby recognizing that Arkon's infringing conduct caused injury to NPI. Dkt. 182 at 8.

         By awarding NPI monetary damages, the jury reasonably concluded that Arkon's conduct caused injury to NPI. NPI presented evidence regarding potential loss of customers, as well as harm to its reputation and goodwill. Accordingly, the Court finds that the fourth and fifth Hangman Ridge elements were satisfied in this case.

         (d) Affecting the Public Interest

         With respect to the third and final Hangman Ridge element, which requires the plaintiff to show that the unfair or deceptive act “affects the public interest, ” NPI assert that a finding of trademark infringement typically satisfies this element because it involves deception or confusion of the public. Dkt. 182 at 5 (citing Lahoti, 636 F.3d at 510). See also Nordstrom, 107 Wash.2d at 743. NPI contends that by finding that Arkon infringed NPI's trade dress, the jury necessarily found the existence of likelihood of confusion, which affects the public interest. Dkt. 182 at 6. NPI argues that, unlike the case of Seattle Endeavors, this case did not involve “unusual or unforeseen circumstances” that could warrant a departure from the general rule that the likelihood of confusion inherent in trademark infringement pursuant to the Lanham Act will also violate the WCPA. Id. As noted above, in Seattle Endeavors, the Washington Supreme Court held that two specific factors - “inadvertent infringement” by the defendant and the “weak” nature of the mark at issue - constituted an “unusual and unforeseen circumstance” that did not satisfy the public interest element of the WCPA. The Court will briefly address each of these factors.

         (i) Willful versus Inadvertent Infringement

         NPI argues that the two factors identified by the Washington Supreme Court in Seattle Endeavors are not present here, because the jury found that Arkon's infringement was “deliberate or willful” - the opposite of “inadvertent” - and the jury rejected Arkon's arguments that the infringed mark was “weak” through either genericness or lacking secondary meaning. Dkt. 182 at 6 (citing Dkt. 177). NPI asserts that substantial evidence at trial established that NPI's mark was not “weak, ” and therefore there was no legally sufficient evidentiary basis for a reasonable jury to depart from the general rule in Nordstrom that the public interest element is automatically satisfied through the likelihood of confusion resulting from trade dress infringement. Dkt. 182 at 7.

         The Court finds that, contrary to NPI's arguments, the Seattle Endeavors case illustrates exactly why a reasonable jury in this case could have concluded that Arkon's trade dress infringement did not affect the public interest. Although the jury did indeed find that Arkon's infringement was “deliberate or willful” rather than “inadvertent, ” the jury was instructed that “willful infringement carries a connotation of deliberate intent to deceive, or willful blindness to facts that would put Arkon on notice that it was infringing NPI's trade dress; that is, Arkon suspected wrongdoing and deliberately failed to investigate. Deliberate, false, misleading, or fraudulent conduct meets this standard.” Dkt. at 30 (Jury Instr. No. 23 -Willfulness) (emphasis added). The jury submitted a single question to the Court during their deliberations: “Is there a legal definition of willful blindness? If so, please send it to us.” Dkt. 176. In response, the Court advised the jury that the answer to their question was contained in Jury Instruction No. 23. Thus, it is possible that the jury found that Arkon did not, in fact, intend to deceive the public by infringing NPI's trade dress, but deliberately failed to conduct an adequate investigation. The jury could reasonably find that the “willful blindness” resulting from Arkon's failure to conduct an adequate investigation would satisfy the definition of “willfulness” provided to them. Arkon's conduct - although damaging to NPI - was not equally harmful to the public.

         Based upon the testimony from Arkon's representatives at trial, the jury could have reasonably concluded that Arkon was not actually aware of NPI's trade dress. Substantial evidence at trial showed that Arkon's goal in copying NPI's mounts was to compete in the marketplace by creating a product based upon NPI's expired U.S. Patent 5, 845, 885, an act that actually promotes the public interest and consumer welfare by ensuring that consumers do not bear the high prices that come from a patent monopoly after the innovations in the patent have been dedicated to the public. See e.g., Smith v. Chanel, Inc., 402 F.2d 562, 567-68 (9th Cir. 1968) (“Since appellee's perfume was unpatented, appellants had a right to copy it, as appelless concede. There was a strong public interest in doing so, for imitation is the life blood of competition. It is the unimpeded availability of substantially equivalent unit that permits the normal operation of supply and demand to yield the fair price society must pay for a given commodity.”) (internal citations omitted).

         Thus, although the jury did not find that Arkon's infringement was “inadvertent, ” substantial testimony at trial (as well as the jury's question to the Court seeking a definition of “willful blindness”) indicated that the jury's finding of willfulness was likely predicated on Arkon's failure to investigate whether NPI had a registered trade dress, rather than knowing infringement. Trademark law makes clear that the public interest in protecting trademarks is only in preventing consumer confusion. Here, the jury was not presented with a consumer survey or other evidence of widespread consumer confusion, apart from testimony by plaintiffs representatives and two of its resellers.[4] In light of the scant evidence of actual consumer confusion presented in this case, the jury could reasonably conclude that although Arkon's infringement of NPI's registered trade dress likely caused some harm to NPI, it was not equally harmful to the public under the circumstances.

         (ii) ...


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