July/August 2010 Issue
Civil Cases
Georgia Pacific Consumer Prods., L.P. v. Von Drehle Corp.,
2010 WL 3155646 (4th Cir. Aug. 10, 2010)
ABSTRACT
The Fourth Circuit Court of Appeals reversed the district court’s summary-judgment ruling in favor of defendant in this suit between competing paper-towel manufacturers. Plaintiff produced a paper-towel dispenser that was intended to be used only with its high-quality toweling. Defendant manufactured and marketed allegedly inferior-quality toweling specifically designed to be used in plaintiff’s dispenser, which it sold to end users who actually put defendant’s towels in plaintiff’s dispensers. The appeals court found that, if the end users’ actions constituted direct trademark infringement, then defendant’s inducement of end users to use the inferior toweling could constitute contributory trademark infringement. The appeals court also found that plaintiff had presented sufficient evidence for a jury to conclude that the end users’ use of the inferior toweling led to a likelihood of confusion and trademark infringement. In making this finding, the appeals court found that the district court erred in not recognizing the possibility of postsale confusion among restroom visitors who ultimately used the paper towels.
CASE SUMMARY
FACTS
Georgia-Pacific Consumer Products, L.P. (“G-P”) is a leading designer/manufacturer of paper products and dispensers for such products. In 2002, G-P introduced the ENMOTION touchless paper-towel dispenser (the “ENMOTION Dispenser”) and paper toweling with a high-quality, fabric-like feel designed specifically for use in the ENMOTION Dispenser (the “ENMOTION Toweling”). G-P sells ENMOTION Toweling to janitorial-supply distributors, who, in turn, sell it to their respective end-user customers (e.g., hotels, stadiums, restaurants, etc.), and G-P leases ENMOTION Dispensers to such distributors, who, in turn, are permitted to sublease them to end-user customers. The leases and subleases expressly provide that only ENMOTION Toweling can be used in ENMOTION Dispensers, and stickers on the inside of ENMOTION Dispensers reinforce this limitation. The face of every ENMOTION Dispenser bears several registered G-P trademarks (“the G-P Marks”).
In 2005, Von Drehle Corporation (“VD”), a G-P competitor, started marketing and selling to distributors an inferior-quality paper toweling specifically manufactured by VD for use in ENMOTION Dispensers (“VD’s 810-B Toweling”). In response, G-P brought this suit against VD, alleging contributory trademark infringement and unfair competition, among other claims. G-P argued that VD’s inducement and facilitation of the stuffing of ENMOTION Dispensers with VD’s 810-B Toweling created postpurchase confusion as to the source of such toweling among restroom visitors.
On cross-motions for summary judgment, the district court granted summary judgment in favor of VD on all G-P’s claims, and G-P appealed.
ANALYSIS
The appeals court first explained in detail the measures G-P had taken to tie ENMOTION Dispensers to ENMOTION Toweling in the minds of consumers. For many years, G-P (and VD) had sold “universal dispensers,” which are intended to accept paper toweling from multiple manufacturers. However, with the introduction of its ENMOTION Dispensers, G-P sought to introduce a nonuniversal dispenser tied directly to the G-P Marks, i.e., one that G-P intended would only operate with, and that the restroom visitor would expect to dispense, ENMOTION Toweling. The court analogized G-P’s goal to a branded Coca-Cola soda fountain, which the user expects to dispense only genuine Coca-Cola products.
G-P’s claims were all based upon the same intentional conduct by VD, namely, VD’s express marketing and sale of its 810-B Toweling to distributors and end-user customers for use with ENMOTION Dispensers, resulting in postpurchase confusion as to the source of toweling dispensed from ENMOTION Dispensers among restroom visitors. Because VD did not itself physically stuff its 810-B Toweling in ENMOTION Dispensers, the court found that G-P’s claims must be analyzed under the doctrine of contributory, not direct, trademark infringement.
The contributory-trademark-infringement doctrine holds “that a manufacturer or distributor could be held liable to the owner of a trademark if it intentionally induced a merchant down the chain of distribution to pass off its product as that of the trademark owner’s or if it continued to supply a product which could readily be passed off to a particular merchant whom it knew was mislabeling the product with the trademark owner’s mark.”
If the stuffing of ENMOTION Dispensers with VD’s 810-B Toweling by end-user customers were held to constitute trademark infringement, the appeals court held that a reasonable jury could find VD liable for contributory trademark infringement by directly inducing such infringement and continuing to supply its product to distributors, knowing that such infringement was taking place.
Because VD could not be liable for contributory trademark infringement without corresponding direct trademark infringement, the ultimate question was whether there was sufficient evidence for a reasonable jury to find that the stuffing of ENMOTION Dispensers with VD’s 810-B Toweling by end-user customers constitutes trademark infringement.
The court found that the G-P Marks were registered and presumably valid, and that by stuffing ENMOTION Dispensers with VD’s 810-B Toweling, end-user customers used one or more of the G-P Marks in commerce in connection with the distribution of VD’s 810-B Toweling.
The central question was whether the end-user customers used the plaintiff’s trademark in a manner likely to cause confusion among the relevant public. The identity of the “relevant public” or “relevant audience” was the most hotly debated issue on appeal. The district court had rejected G-P’s legal theory that restroom visitors who consume toweling from ENMOTION Dispensers in hotels, stadiums, and restaurants constitute the relevant audience for purposes of the likelihood-of-confusion analysis. G-P argued this ruling was at odds with well-established precedent recognizing that postpurchase confusion can be actionable under the Lanham Act.
The Fourth Circuit agreed with G-P that the district court erred in limiting its likelihood-of-confusion inquiry to distributors who purchased VD’s 810-B Toweling and their respective end-user customers. The appeals court found that the fact-finder may consider confusion among the nonpurchasing public in the likelihood-of-confusion inquiry if it can “be shown that public confusion will adversely affect the plaintiff’s ability to control his reputation among its laborers, lenders, investors, or other groups with whom plaintiff interacts.”
The appeals court concluded that G-P had presented sufficient evidence for a reasonable jury to find a likelihood of confusion among restroom visitors as to the source of the paper toweling being dispensed from ENMOTION Dispensers when such dispensers are stuffed with 810-B Toweling. In particular, there was sufficient evidence for a reasonable jury to find that the G-P Marks are strong, they appear on the front of ENMOTION Dispensers, and VD’s 810-B Toweling is inferior to ENMOTION Toweling, but nonetheless was intentionally made to fit and operate in ENMOTION Dispensers. The record also included three empirical studies, which the Fourth Circuit found could lead a reasonable jury to find that stuffing VD’s 810-B Toweling in ENMOTION Dispensers created a significant amount of consumer confusion as to the source of the paper toweling being dispensed; each showed that a large percentage of consumers expected there to be an association of various degrees between the source of ENMOTION Dispensers and the source of the toweling being dispensed, or expected the toweling in ENMOTION Dispensers to be the same brand as the dispenser.
Finally, as to the adverse effect on G-P’s reputation among its laborers, lenders, investors, or other groups with whom G-P interacts, the appeals court found that loss of the ability to control the quality of the toweling used in ENMOTION Dispensers put G-P at risk of injury to the reputation of the G-P Marks. In addition, although proof that VD’s 810-B Toweling is inferior to ENMOTION Toweling is unnecessary in order to establish this element, the record showed that VD actually received complaints from at least the distributor level about the inferior quality of its 810-B Toweling as compared to ENMOTION Toweling.
The Fourth Circuit vacated the district court’s grant of summary judgment in favor of VD with respect to G-P’s Lanham Act and unfair-competition claims, and remanded for further proceedings consistent with this opinion.
CONCLUSION
This case demonstrates an interesting intersection of the contributory-trademark-infringement and postsale-confusion doctrines. Although neither VD nor its customers used any trademarks that were confusingly similar to G-P’s marks, the court nevertheless found that trademark liability can exist because VD intentionally usurped G-P’s ability to control the quality of the products associated with its trademarks. The court also made clear that in the contributory-infringement context, the general public’s confusion as to the source of products, even after those products have been purchased by distributors or other customers who were not confused, can be actionable.
