Otr Wheel Engineering v. West Worldwide Services
897 F.3d 1008 (2018)
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Rule of Law:
Reverse passing off under the Lanham Act applies when a producer misrepresents another's genuine goods as its own, distinguishing it from mere copying of intellectual property; additionally, fraud on the U.S. Patent and Trademark Office must be established by clear and convincing evidence.
Facts:
- OTR Wheel Engineering, Inc. (OTR) and West Worldwide Services, Inc. (West) were competitors in the business of selling industrial tires.
- OTR sold a tire called the "Outrigger" and held a registered trademark for its name and a registered trade dress for its unique tire tread design.
- OTR partnered with Solideal, which then contracted with Superhawk, a Chinese manufacturer, to produce 355-size Outrigger-branded tires for the Chinese market.
- In December 2011, West began discussions with Superhawk about manufacturing 355-size tires for his potential customer, Genie, who was also an OTR customer.
- In spring 2012, West asked Superhawk for 16 of the 355-size tires for testing by Genie and explicitly requested that Superhawk "buff off the Solideal name on the sidewall or just remove the plate" to remove identifying information.
- West further suggested to Superhawk, "Will your mold be the same as the [S]olideal mold? If we take out the nameplate and all the sidewall information, nobody will know."
- West then asked Superhawk to manufacture 50 tires for Solideal, even though Solideal had not yet placed an order, with the intention of taking 10 of these tires to provide to Genie as his own "development tires."
- In May 2012, Superhawk confirmed to West that its 355-size tires were, in fact, OTR Outrigger tires produced for Solideal.
- In summer 2013, Genie ceased purchasing 355-size tires from OTR and began buying them from West.
Procedural Posture:
- OTR Wheel Engineering, Inc. (OTR) sued West Worldwide Services, Inc. (West) in the United States District Court for the Eastern District of Washington, asserting claims under the Lanham Act (for trade dress infringement, trade dress counterfeiting, and reverse passing off) and state law (Washington Consumer Protection Act, trade secret misappropriation, and tortious interference).
- The case proceeded to a jury trial.
- The jury found West liable for reverse passing off under the Lanham Act, for violating the Washington Consumer Protection Act, and for tortious interference with certain contracts and business relationships.
- The jury also found that OTR's claim for protected trade dress was invalid and that its trade dress registration had been obtained through fraud on the PTO.
- Following the trial, OTR filed a post-trial motion, and the district court granted it in part, setting aside the jury’s determination that OTR had obtained its trade dress registration through fraud as a matter of law.
- The district court otherwise entered judgment based on the jury’s findings, including the finding that OTR’s protected trade dress claim was invalid, and directed the PTO to cancel OTR’s trade dress registration.
- The district court awarded OTR actual damages of $967,015, along with prejudgment and post-judgment interest, and maintained a preliminary injunction against West.
- West (Defendants-Appellants/Cross-Appellees) appealed the district court's judgment to the Ninth Circuit.
- OTR (Plaintiffs-Appellees/Cross-Appellants) cross-appealed certain aspects of the district court's rulings.
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Issue:
1. Does the Lanham Act's prohibition on reverse passing off apply when a competitor obtains and rebrands another company's genuine products, rather than merely copying their intellectual property? 2. What is the standard of proof required to establish fraud on the U.S. Patent and Trademark Office?
Opinions:
Majority - Clifton, Circuit Judge
Yes, the Lanham Act's prohibition on reverse passing off applies because West passed off genuine OTR products as his own, rather than merely copying OTR's intellectual property. The Supreme Court's decision in Dastar Corp. v. Twentieth Century Fox Film Corp., 539 U.S. 23 (2003), precludes reverse passing off claims for the copying of intellectual property, but it does not apply to situations where a producer misrepresents someone else's genuine goods as their own. The evidence showed West intentionally sought and obtained tires from an anticipated OTR (Solideal) order, instructed the manufacturer (Superhawk) to remove OTR's identifying information, and then presented these as his own "development tires" to a shared customer (Genie). The court found that a reasonable jury could conclude that these were genuine OTR products and that consumers would likely be confused as to their origin, thereby supporting the reverse passing off verdict. No, fraud on the U.S. Patent and Trademark Office (PTO) was not established by clear and convincing evidence. The court confirmed that fraud on the PTO must be proven by clear and convincing evidence, aligning with the Federal Circuit. West failed to meet this high standard. Regarding the Patrick Smith declaration, the court found his statement that the Outrigger tire was "immediately identifiable" to be a sincerely held subjective opinion, not a false statement of fact. Furthermore, the PTO examiner ultimately relied on proof of acquired distinctiveness through continuous use in commerce (Section 2(f)), not Smith's initial declaration, indicating no actual, reasonable reliance on the alleged misrepresentation. As for the Ray Evans email, the court determined there was no omission of a material fact regarding the tire's self-cleaning functionality, as OTR had previously disclosed this information to the PTO, and the specific angle of the tread (which OTR sought to protect) was argued not to affect this function. Therefore, the district court correctly set aside the jury's finding of fraud on the PTO. The court also affirmed the district court's denial of a new trial on the issue of trade dress validity. A finding of fraud on the PTO does not automatically invalidate a trademark but cancels its registration, shifting the burden back to the plaintiff to prove distinctiveness and non-functionality for an unregistered mark. The jury's finding of invalidity was supported by substantial evidence, including the possibility that the tread design was functional or not distinctive enough to acquire secondary meaning. Lastly, the court affirmed the district court's rejection of OTR's proposed jury instruction for an unregistered trade dress claim. OTR's complaint, which cited Section 43 of the Lanham Act, did not sufficiently put West on notice of an unregistered claim that encompassed a broader scope than the registered trade dress, thus preventing a new theory of recovery after the close of discovery.
Analysis:
This case significantly clarifies the scope of reverse passing off claims under the Lanham Act, reiterating that `Dastar` applies to mere copying of intellectual property, but not to the rebranding of genuine goods. It firmly establishes the 'clear and convincing evidence' standard for proving fraud on the PTO in the Ninth Circuit, aligning with the Federal Circuit. The ruling also provides crucial guidance on the interplay between registered and unregistered trade dress claims, emphasizing that a cancelled registration does not preclude an unregistered claim but shifts the burden of proof, and that unregistered claims, especially broader ones, must be clearly pleaded to ensure adequate notice to opposing parties.
