Laches bars TM claims but what counts as "Made in the USA" merits trial
Consumer Law

Laches bars TM claims but what counts as “Made in the USA” merits trial

Laches bars TM claims but what counts as “Made in the USA” merits trial

Illinois Tool Works Inc. v. J-B Weld Co., 2021 WL 4310576, No.
3:19-cv-1434 (JAM) (D. Conn. Sept. 22, 2021)

The parties compete in the market for “chemical bonding
products—like epoxies, adhesives, threadlockers, gasket makers, and silicone
sealants—that someone might buy at a hardware store to fix their car or for
other mechanical projects.” Illinois Tool is well-established in the market for
bonding products known as threadlockers and gasket makers; J-B Weld is a
relative newcomer. Most of Illinois Tool’s trademark-related claims were
time-barred by the statute of limitations and laches. But genuine fact issues remained
on whether J-B Weld’s advertising of “Made in USA” was false and whether
Illinois Tool had standing.

Illinois Tool has long sold threadlockers under the
trademark “Permatex.” J-B Weld began in 2010 to sell theadlockers under the
“Perma-Lock” name. Similarly, Illinois Tool has long sold gasket makers under names
such as “Ultra Black,” “Ultra Grey,” and “Ultra Copper.” J-B Weld began in 2014
to sell gasket makers as “Ultimate Black” and “Ultimate Grey.”

Illinois Tool sued in 2019. Connecticut state law claims for
common law trademark infringement, for common law unfair competition, and for
CUTPA were all subject to a three-year statute of limitations. Thus, the statute
of limitations barred the state law claims. Nor did Illinois Tool argue that it
could attack the continuation of the allegedly infringing conduct.

As for the Lanham Act claims, laches supplied the rule, with
a presumption triggered by the expiration of the analogous state law
limitations period. (Here, the court says it’s the analogous period for “fraud,”
but more generally it is “the closest state law cause of action.”) That was
also three years, so the burden shifted to Illinois Tool to show why it would
be inequitable to dismiss its Lanham Act claims.

It was undisputed that Illinois Tool actually knew about
these products more than three years before filing this lawsuit, including a
slide presentation about J-B Weld, mentioning Ultimate and Perma-Lock by name
and describing each as a “Competitive Threat.” In 2016, it even commissioned a
survey asking customers whether they preferred “J-B Weld Ultimate Black” or
Illinois Tool’s “Permatex Ultra Black.”

JB Weld product

Illinois Tool product

Nor was Illinois Tool justified in waiting to sue until J-B
Weld grew its market share:

The very point of laches is not for
the wait-and-see convenience of a plaintiff but to avoid unfair prejudice to a
defendant. Laches requires a plaintiff to file suit for a known trademark
infringement before the defendant foreseeably commits continuing resources year
after year to promoting a product and entrenching itself in the market. … While
Illinois Tool sat on its hands, not only did J-B Weld’s sales grow, but it
expanded its brands into more stores and launched new variants (like
“Perma-Lock Green”). So the fact that J-B Weld had low sales in 2015 is not an
excuse for delaying, but rather a reason why Illinois Tool should have acted
then.

This was not a case of progressive encroachment, which only
starts the laches clock when “the likelihood of confusion looms large.” “[T]hat
rule is just a reminder that not every use of a rival’s trademark violates the
Lanham Act. The use must also cause confusion.” If a defendant slowly comes
more directly into competition with the plaintiff, that can be progressive
encroachment, but here direct competition existed since at least early 2016. “Any
confusion loomed as large from the start as it did later on.” In other words, “[a]
junior user’s growth of its existing business and the concomitant increase in
its use of the mark do not constitute progressive encroachment.” Change over
time in likelihood of confusion, not change over time in market share, is the
key.

What about bad faith as precluding laches? There was no
evidence of intentional trademark infringement. The packaging featured a large
“J-B Weld” logo (in contrast to the large “Permatex” logo appearing on Illinois
Tool’s product), “and the packaging self-evidently differs from Illinois Tool’s
in other ways as apparent from the images below”:

These similarities in packaging “fall well short of
establishing bad faith.” The limited name similarity was based on their meaning—durability
of function, “the core value of any bonding product,” and didn’t meaningfully suggest
bad faith. It reflected only “[t]he intent to compete by imitating the
successful features of another’s product” rather than intent to deceive. Illinois
Tool asked for more discovery to show bad faith, but “[t]he mere fact that
discovery is incomplete is not enough to prevent summary judgment.” Illinois
Tool didn’t identify the evidence it hoped to find or how that evidence would
help.

False advertising claims as to “Made in USA”: First, J-B Weld
argued that Illinois Tool lacked standing because it didn’t advertise its own products
as being “Made in USA.” The court has a great answer:

This argument makes little sense.
What if J-B Weld falsely advertised that its bonding products cure cancer or
stopped global warming? If J-B Weld’s sales skyrocketed at the expense of its
competitors as a result of these false claims, would only those competitors who
also claim that their products cure cancer or stop global warming be allowed to
complain? What if none of J-B Weld’s competitors made the same outlandish
claim—does no one then have standing to complain?

Competitors who can satisfy the proximate cause requirement
have standing; “[t]here is no sub-rule that only a plaintiff competitor who
truthfully makes the same type of advertising claim as a defendant who falsely
makes such a claim has standing to complain.”

Here, “it is far from speculative to conclude that Illinois
Tool has not suffered lost sales due to J-B Weld’s ‘Made in USA’ claim. J-B
Weld features this claim very prominently on its packaging, presumably because
it understands the importance of this type of claim to consumers’ purchasing
decisions.”

Nor was there no factual issue on falsity. J-B Weld didn’t
dispute for summary judgment purposes that items such as the tubes, the caps,
and the syringe applicators weren’t made in the United States. J-B Weld argued
that the Lanham Act does not apply to acts that cause confusion about the
source of “container” items like tubes, caps, and syringes, as distinct from
the underlying “good” such as the chemical bonding product within the
container. Even assuming that the distinction was correct, there were genuine
fact issues about whether these parts were “goods” or “containers.” An item can
be both, depending on the circumstances.

J-B Weld also argued that customers realize that the “Made
in USA” claim does not refer to those items. “The evidence conflicts.” For example,
the syringes are standalone items that must be actively handled, and so a
customer “might think that they are a core part of the product and covered by
the ‘Made in USA’ label.” The caps were also vital to the function of the
product, since they “keep[ ] the two components of the epoxy product separated
until they are dispensed.” And J-B Weld singles out their special anti-waste
design on the packaging, right next to its “Made in USA” label. “A customer who
sees the two claims next to each other might well think that they are related.”

package closeup

standalone parts?

J-B Weld argued that staff lawyers at the FTC investigated
its use of the label but decided not to sue. “But the letter explaining the FTC
staff’s decision is thinly reasoned, and the discretionary enforcement
decisions of FTC staff members do not bind federal courts.” And it argued that
there was no survey evidence. But Illinois Tool might; the discovery period
wasn’t over, and anyway survey evidence isn’t always required to survive
summary judgment.

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