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Georgia-Pacific Consumer Prods. LP v. Von Drehle Corp.

United States Court of Appeals, Fourth Circuit

March 30, 2015

GEORGIA-PACIFIC CONSUMER PRODUCTS LP, Plaintiff - Appellee,
v.
Von Drehle CORPORATION, a North Carolina corporation, Defendant - Appellant, and GEORGIA-PACIFIC CORPORATION, Plaintiff, and CAROLINA JANITORIAL & MAINTENANCE SUPPLY, a North Carolina corporation, Defendant, MYERS SUPPLY, INCORPORATED, Intervenor/Defendant

Argued December 11, 2014

As Amended April 15, 2015.

Appeal from the United States District Court for the Eastern District of North Carolina, at Raleigh. (5:05-cv-00478-BO). Terrence W. Boyle, District Judge.

ARGUED:

Carter Glasgow Phillips, SIDLEY AUSTIN LLP, Washington, D.C., for Appellant.

Miguel A. Estrada, GIBSON, DUNN & CRUTCHER LLP, Washington, D.C., for Appellee.

ON BRIEF:

Michael P. Thomas, PATRICK HARPER & DIXON, LLP, Hickory, North Carolina; Richard Klingler, Jacqueline G. Cooper, Nicolas W. Thompson, John Paul Schnapper-Casteras, SIDLEY AUSTIN LLP, Washington, D.C., for Appellant. Stephen P. Demm, John Gary Maynard, III, HUNTON & WILLIAMS LLP, Richmond, Virginia; Jonathan C. Bond, GIBSON, DUNN & CRUTCHER LLP, Washington, D.C.; W. Kyle Carpenter, WOOLF, MCCLANE, BRIGHT, ALLEN & CARPENTER, PLLC, Knoxville, Tennessee, for Appellee.

Before NIEMEYER, SHEDD, and KEENAN, Circuit Judges. Judge Niemeyer wrote the opinion, in which Judge Shedd concurred as to Parts I, III, IV, and V and Judge Keenan concurred in full. Judge Shedd wrote a separate opinion, concurring in part and dissenting in part.

OPINION

Page 711

NIEMEYER, Circuit Judge

This trademark infringement case presents several issues regarding the appropriate relief that may be granted under the

Page 712

Lanham Act, 15 U.S.C. § § 1051-1141n, specifically § 1116 (authorizing injunctive relief) and § 1117 (authorizing monetary relief).

Georgia-Pacific Consumer Products LP owns the trademark " enMotion," which it uses to brand a paper-towel dispenser that dispenses paper towels when a motion sensor is triggered by the user. Georgia-Pacific designed its enMotion dispenser to dispense only ten-inch paper towels that it manufactured.

Von Drehle Corporation, a North Carolina corporation that competes with Georgia-Pacific in the sale of paper towels, designed a less expensive paper towel -- the " 810-B" paper towel -- that it sold specifically for use in Georgia-Pacific's enMotion towel dispensers.

In response to Von Drehle's practice of selling its 810-B paper towels for " stuffing" into enMotion towel dispensers, Georgia-Pacific commenced three separate actions against Von Drehle or its distributors. Each action alleged that the " stuffing" practice constituted contributory trademark infringement of Georgia-Pacific's enMotion mark, in violation of the Lanham Act, 15 U.S.C. § 1114(1)(a). Specifically, in this action, Georgia-Pacific claimed that Von Drehle " knowingly and intentionally" manufactured the 810-B paper towel " specifically and solely for use" in Georgia-Pacific's enMotion towel dispensers and that the practice of stuffing enMotion dispensers with the 810-B paper towel was " likely to cause confusion and . . . deceive End-User Customers." In January 2012, a jury agreed that Von Drehle's conduct constituted contributory trademark infringement and, as requested at closing argument, awarded Georgia-Pacific $791,431, which represented all of the profits that Von Drehle earned from the sale of its 810-B paper towels from 2005 to the date of trial. After the jury returned its verdict, the district court entered a permanent, nationwide injunction prohibiting Von Drehle from directly or indirectly infringing Georgia-Pacific's trademark rights. In addition, because the court found that Von Drehle's infringement was " willful and intentional," it (1) trebled the jury's award from $791,431 to $2,374,293; (2) awarded Georgia-Pacific attorneys fees in the amount of $2,225,782; and (3) awarded it prejudgment interest in the amount of $204,450. Finally, the court awarded Georgia-Pacific $82,758 in court costs.

In a parallel action that Georgia-Pacific commenced in the Western District of Arkansas against one of Von Drehle's distributors, the district court had, by the time of the trial in this action, already ruled against Georgia-Pacific, concluding that the practice of stuffing Von Drehle's 810-B paper towel into Georgia-Pacific's enMotion dispensers " did not create a likelihood of confusion," Georgia-Pacific Consumer Prod. LP v. Myers Supply, Inc., No. 6:08-cv-6086, 2009 WL 2192721, at *8 (W.D. Ark. July 23, 2009), and the Eighth Circuit affirmed, 621 F.3d 771, 777 (8th Cir. 2010) (holding that the district court did not " clearly err in finding that the trademark on a dispenser does not indicate the source of the paper towels inside, and concluding that there was no likelihood of confusion, and thus no trademark infringement" ).

In the second parallel action, which Georgia-Pacific commenced against one of Von Drehle's distributors in the Northern District of Ohio, the district court had, by the time of the trial in this action, also ruled against Georgia-Pacific. The court held that the Arkansas judgment precluded Georgia-Pacific from relitigating its trademark infringement claim, see Georgia-Pacific Consumer Prods. LP v. Four-U-Packaging, Inc., 821 F.Supp.2d 948

Page 713

(N.D. Ohio 2011), and the Sixth Circuit affirmed, 701 F.3d 1093, 1103 (6th Cir. 2012).

On appeal from the remedies award in this case, Von Drehle challenges the geographical scope of the district court's injunction, arguing that the Eighth and Sixth Circuits' rulings against Georgia-Pacific render the injunction entered by the district court unduly broad. It also challenges the monetary awards, contending that the district court applied the wrong legal standards for trebling the jury award and for awarding attorneys fees and prejudgment interest.

Because we agree with Von Drehle, we reverse the district court's judgment in part and vacate and remand in part, with instructions. As to the injunction, we instruct the district court to narrow it to cover only the geographical area of the Fourth Circuit. As to the monetary awards, (1) we reverse the treble damages award and instruct the district court to reinstate the jury's award of $791,431; (2) we vacate the award of attorneys fees and remand for application of the appropriate standard; and (3) we reverse the award of prejudgment interest.

I

In 2005, after learning of Von Drehle's practice of " stuffing" or " causing to be stuffed" Georgia-Pacific enMotion towel dispensers with Von Drehle 810-B paper towels, Georgia-Pacific sent Von Drehle a letter " [d]emand[ing] . . . that Von Drehle immediately cease and desist marketing, selling and distributing the 810 towel." Von Drehle rejected Georgia-Pacific's demand, stating that it considered its conduct to be legitimate competition that did not infringe Georgia-Pacific's enMotion trademark.

Georgia-Pacific thereafter commenced this action, alleging that Von Drehle's stuffing practices constituted contributory trademark infringement, in violation of the Lanham Act, 15 U.S.C. § 1114(1)(a). It alleged that Von Drehle " knowingly and intentionally manufactured -- or directed the manufacture -- and sold -- or directed the sale of -- finished paper towel rolls designed specifically and solely for use in enMotion dispensers," and that this practice was " likely to cause confusion and . . . to deceive End-User Customers . . . ." Georgia-Pacific sought injunctive relief, an accounting of Von Drehle's profits, and damages.

The district court granted Von Drehle's motion for summary judgment, concluding that Georgia-Pacific had " failed to show that Von Drehle's sale of its 810-B paper towel roll to distributors for use in enMotion dispensers caused consumer confusion." Georgia-Pacific Consumer, Prods. LP v. Von Drehle Corp., 645 F.Supp.2d 532, 536 (E.D.N.C. 2009). The court considered the end-users in this context to be " those business owners who purchase[d] paper towel rolls from distributors for the enMotion dispensers installed in their premises," a class of consumers who " kn[e]w exactly from which company they [were] purchasing the paper towel rolls." Id. at 537. By order dated August 10, 2010, we reversed and remanded, holding that the district court " erred in limiting its likelihood of confusion inquiry to distributors who purchased 810-B Toweling and their respective end-user customers," such as hotels. Georgia-Pacific Consumer Prods., LP v. Von Drehle Corp., 618 F.3d 441, 453 (4th Cir. 2010). We pointed out that " Fourth Circuit case law makes room for the factfinder to consider confusion among the non-purchasing public in the likelihood-of-confusion inquiry." Id.

On remand, Von Drehle filed a motion seeking judgment as a matter of law, arguing that the decision of the Western District of Arkansas, which rejected Georgia-

Page 714

Pacific's infringement claims, should preclude Georgia-Pacific from advancing those same claims in this case. The district court, however, denied Von Drehle's motion and set the matter for trial, explaining that Von Drehle had inordinately delayed raising its preclusion argument.

At the three-day trial, Georgia-Pacific presented its case to the jury for contributory trademark infringement and requested injunctive relief and disgorgement of Von Drehle's profits. At closing argument to the jury, counsel for Georgia-Pacific stated:

So what we want is for [Von Drehle] to quit doing it, and we want damages. The damages we want and I think from the Judge's instructions you will find if we prevail we are entitled to this -- [is] for them to give up the profits that they made selling knock-off paper to put into our trademarked dispenser. And the only number in the record on that is in Plaintiff's Exhibit 266 [summarizing Von Drehle's annual gross profits from the sale of 810-B paper towels from 2004 through 2011]. They made a profit of $794,000 from the time that they put it on the market in 2004 through 2011. And that's what we're asking you for, the profits, give us the profits that you made trading on our name and our trademark. So I submit to you when you get back there and you go through all these packages, get to the verdict form, the first question is, have we proven trademark infringement? Yes. The second question is, what are the damages? $794,000.

(Emphasis added). Just as Georgia-Pacific's counsel requested, the jury returned a verdict answering " yes" to the question whether Von Drehle infringed Georgia-Pacific's trademark and awarding Georgia-Pacific: " $791,431 when the cease [and desist] letter came out Jan 05." Because Exhibit 266, to which counsel referred at closing argument, included profit for 2004 in the amount of $2,569, which was earned before the cease and desist letter was sent, the jury apparently subtracted that sum from the $794,000 amount requested to arrive at its award of $791,431. The jury thus awarded Georgia-Pacific 100% of the profits that it requested for the period beginning with its cease-and-desist letter in January 2005 and ending in December 2011.

Following trial, Von Drehle renewed its motion for judgment as a matter of law based on claim and issue preclusion, and the district court granted it, vacating the jury verdict and entering judgment for Von Drehle. Georgia-Pacific Consumer Prods. LP v. Von Drehle Corp., 856 F.Supp.2d 750, 757 (E.D.N.C. 2012). The court explained:

The question submitted to the jury in this case was whether " plaintiff established by a preponderance of the evidence that the defendant infringed on plaintiff's valid trademark." The jury responded to this question in the affirmative. However, because another court had previously decided this same question in the negative, this Court now holds that Defendant should be permitted to raise the affirmative defense of claim and issue preclusion and that judgment as a matter of law is appropriate.

Id. at 753 (citation omitted). On appeal, we again reversed, concluding that " Von Drehle [had] waived its preclusion defenses" and that " the district court abused its discretion by allowing Von Drehle to assert its preclusion defenses 16 months after the substantive basis for those defenses was known to Von Drehle." Georgia-Pacific Consumer Prods., LP v. Von Drehle Corp., 710 F.3d 527, 536 (4th Cir.), cert. denied, 134 S.Ct. 393, 187 L.Ed.2d 146 (2013).

Page 715

We remanded the case with instructions to reinstate the jury verdict and to consider the other relief that Georgia-Pacific had requested. Id.

On remand, the district court granted Georgia-Pacific the injunctive relief it requested and, finding Von Drehle's infringement to have been willful and intentional, trebled the jury verdict, awarded attorneys fees, and awarded prejudgment interest. Including court costs, the total monetary award amounted to $4,887,283.51.

From the judgment entered on July 28, 2013, Von Drehle filed this appeal, challenging the geographical scope of the injunction and each monetary award except court costs.

II

As part of the post-verdict relief granted, the district court entered a permanent, nationwide injunction prohibiting Von Drehle " from interfering directly or indirectly with [Georgia-Pacific's] trademark rights," which, the court stated, included " the right of [Georgia-Pacific] to enforce the use of only their paper towel products in their enMotion dispensers." Georgia-Pacific Consumer Prods. LP v. Von Drehle Corp, No. 5:05-cv-478-BO, 2013 WL 3923984, at *2 (E.D.N.C. July 29, 2013). Von Drehle contends that the district court should not have issued a nationwide injunction that " conflict[s] with the decisions of other circuits" and that " undermine[s] the prerogatives of courts of appeals that have yet to address the relevant legal issues." As noted, both the Eighth and the Sixth Circuits have concluded that Georgia-Pacific may not enforce its enMotion mark to prohibit the practice of stuffing Von Drehle's 810-B paper towels into enMotion towel dispensers. See Myers Supply, 621 F.3d at 777; Four-U-Packaging, 701 F.3d at 1103.

We review the scope of a permanent injunction for abuse of discretion. See Tuttle v. Arlington Cnty. Sch. Bd., 195 F.3d 698, 703 (4th Cir. 1999).

Neither party contends that a district court, as a general matter, lacks authority to issue a nationwide injunction prohibiting trademark infringement. See 15 U.S.C. § 1116(a); see also Va. Soc'y for Human Life, Inc. v. FEC, 263 F.3d 379, 393 (4th Cir. 2001) (" Nationwide injunctions are appropriate if necessary to afford relief to the prevailing party" ), abrogation on other grounds recognized in Real Truth About Abortion, Inc. v. FEC, 681 F.3d 544, 550 n.2 (4th Cir. 2012); Richmond Tenants Org., Inc. v. Kemp, 956 F.2d 1300, 1302, 1309 (4th Cir. 1992) (holding that a nationwide injunction was " appropriately tailored to prevent irreparable injury" where the various plaintiffs resided in different parts of the country); see also United States v. AMC Entm't, Inc., 549 F.3d 760, 770 (9th Cir. 2008) (" [T]he court has the power to enforce the terms of the injunction outside the territorial jurisdiction of the court, including issuing a nationwide injunction" ). Nonetheless, equity requires that injunctions be carefully tailored, especially where, as here, questions of inter-circuit comity are involved. See Va. Soc'y, 263 F.3d at 393-94; AMC Entm't, 549 F.3d at 773 (" Principles of comity require that, once a sister circuit has spoken to an issue, that pronouncement is the law of that geographical area" ); id. at 770 (" Courts ordinarily should not award injunctive relief that would cause substantial interference with another court's sovereignty" ).

Within the 11 States comprising the Eighth and Sixth Circuits, courts of appeals have held that Georgia-Pacific may not enforce its enMotion mark to prohibit the stuffing of Von Drehle 810-B paper towels into enMotion ...


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