Beltronics V Midwest 04-09-09
Beltronics V Midwest 04-09-09
Beltronics V Midwest 04-09-09
April 9, 2009
PUBLISH Elisabeth A. Shumaker
Clerk of Court
UNITED STATES COURT OF APPEALS
TENTH CIRCUIT
Plaintiff - Appellee,
v. No. 07-3340
MIDWEST INVENTORY
DISTRIBUTION, LLC; I-NET
DISTRIBUTORS, LLC; AUDIO
VIDEO MAN; KEVIN BURKE;
STEVE WEBB,
Defendants - Appellants.
Derek T. Teeter (Maxwell Carr-Howard, with him on the briefs), Husch Blackwell
Sanders LLP, Kansas City, Missouri, appearing for Appellants.
Brett A. Schatz (Thomas W. Flynn, with him on the brief), Wood, Herron &
Evans, L.L.P. Cincinnati, Ohio, appearing for Appellee.
Midwest appeals the district court’s order preliminarily enjoining it from selling
Beltronics equipment not bearing an original Beltronics serial number label. See
I. BACKGROUND
Beltronics trademark. At all times relevant to this case, Beltronics sold its
equipment to at least two authorized distributors who agreed to sell the products
in turn resold them as “new” on the internet auction site eBay. To prevent
Beltronics from discovering that Midwest’s inventory had been supplied by the
two distributors, the distributors either replaced each radar detector’s original
serial number label with a phony label or removed the original label altogether
supplied Midwest with a radar detector bearing an original serial number label,
detectors bearing an original serial number label are eligible to receive certain
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products and services, including software upgrades, rebates, product use
information, service assistance, warranties, and recalls. Beltronics learned that its
radar detectors were being sold without original serial labels when Midwest’s
purchasers contacted Beltronics with warranty requests for detectors that had
affidavit stating that those purchasers were confused, thinking that they were
stated that the customers expressed their belief that they did not receive what they
thought they had purchased and that Beltronics had deceived them. He explained
that they became irate when they learned their radar detector was not covered by
Beltronics’s warranty and did not come with other services such as recalls and
and goodwill.
U.S.C. § 1114; (2) false designation or origin under 15 U.S.C. § 1125; and (3)
1
Beltronics also filed an ex parte application for a seizure order pursuant to
15 U.S.C. § 1116(d). After initially authorizing the seizure of certain goods and
records in Midwest’s possession, the district court held a hearing and determined,
inter alia, that Beltronics had failed to demonstrate that Midwest “would destroy,
(continued...)
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hearing on October 31, 2007, the district court determined that Beltronics had
enjoined Midwest from selling or offering for sale any Beltronics products that do
not bear an original serial number label. Midwest filed a timely notice of
II. DISCUSSION
establish that four equitable factors weigh in its favor: (1) it is substantially likely
to succeed on the merits; (2) it will suffer irreparable injury if the injunction is
denied; (3) its threatened injury outweighs the injury the opposing party will
suffer under the injunction; and (4) the injunction would not be adverse to the
public interest. See Westar Energy, Inc. v. Lake, 552 F.3d 1215, 1224 (10th Cir.
2009). On appeal, Midwest challenges only the district court’s determination that
1
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move, hide, or otherwise make the seized goods inaccessible.” Beltronics USA,
Inc. v. Midwest Inventory Distrib’n LLC, 522 F. Supp. 2d 1318, 1323 (D. Kan.
2007). See 15 U.S.C. § 1116(d)(4)(B)(vii). It therefore dissolved the seizure
order. See Beltronics, 522 F. Supp. 2d at 1324. That issue is not raised in this
appeal.
2
Midwest moved the district court to stay all other proceedings pending the
resolution of this interlocutory appeal. The district court has granted that motion.
See Beltronics USA, Inc v. Midwest Inventory Distrib’n LLC, 545 F. Supp. 2d
1188, 1190 (D. Kan. 2008).
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Beltronics has a substantial likelihood of prevailing on the merits of its claim for
See Pac. Frontier v. Pleasant Grove City, 414 F.3d 1221, 1231 (10th Cir. 2005).
“A district court abuses its discretion when it commits an error of law or makes
clearly erroneous factual findings.” Wyandotte Nation v. Sebelius, 443 F.3d 1247,
extraordinary remedy, the right to relief must be clear and unequivocal.” Greater
Yellowstone Coal. v. Flowers, 321 F.3d 1250, 1256 (10th Cir. 2003); see also
United States ex rel. Citizen Band Potawatomi Indian Tribe of Okla. v. Enter.
Mgmt. Consultants, Inc., 883 F.2d 886, 888–89 (10th Cir. 1989) (stating that a
[and] should be granted only in cases where the necessity for it is clearly
established.”); Gen. Motors Corp. v. Urban Gorilla, LLC, 500 F.3d 1222, 1226
(10th Cir. 2007) (“In general, a preliminary injunction . . . is the exception rather
We have also explained that injunctions that disrupt the status quo are
disfavored and “must be more closely scrutinized to assure that the exigencies of
the case support the granting of a remedy that is extraordinary even in the normal
course.” Schrier v. Univ. of Colo., 427 F.3d 1253, 1259 (10th Cir. 2005)
(quotations omitted). An injunction disrupts the status quo when it changes the
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“last peaceable uncontested status existing between the parties before the dispute
developed.” Id. at 1260. In such instances, the district court may not grant a
preliminary injunction unless the plaintiff “make[s] a strong showing both with
regard to the likelihood of success on the merits and with regard to the balance of
973, 976 (10th Cir. 2004) (en banc). This heightened standard accords with the
positions of the parties until a trial on the merits can be held.” Univ. of Tex. v.
Camenisch, 451 U.S. 390, 395 (1981). See also O Centro, 389 F.3d at 977 (stating
that the purpose of a preliminary injunction “is to assure that the non-movant does
not take unilateral action which would prevent the court from providing effective
Midwest argues that the district court’s injunction disrupted the status quo
products on eBay. It thus contends that the district court was required to examine
merits of its trademark infringement claim. We need not decide this question,
however, because even assuming the heightened standard applies in this case,
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counterfeit, copy, or colorable imitation of a registered mark in a way that is likely
Bank System, Inc., 101 F.3d 645, 651 (10th Cir. 1996) (citing 15 U.S.C.
likelihood of consumer confusion. See Team Tires Plus, Ltd v. Tires Plus, Inc.,
394 F.3d 831, 832 (10th Cir. 2005); see also Australian Gold, Inc. v. Hatfield, 436
F.3d at 1238 (“The party alleging infringement has the burden of proving
likelihood of confusion.”). Midwest argues that the district court erred both
that its sale of radar detectors under the Beltronics trademark is protected by the
first sale doctrine and the district court committed an error of law in concluding
otherwise. Alternatively, Midwest argues that even if the first sale doctrine does
not apply, the district court’s determination that its disclosure to consumers was
Those who resell genuine trademarked products are generally not liable for
trademark infringement. See Davidoff & CIE, S.A. v. PLD Int’l Corp., 263 F.3d
1297, 1301 (11th Cir. 2001); NEC Elecs. v. CAL Circuit Abco, 810 F.2d 1506,
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1509 (9th Cir. 1987). “The reason is that trademark law is designed to prevent
product, which confusion ordinarily does not exist when a genuine article bearing
a true mark is sold.” NEC Elecs., 810 F.2d at 1509 (citing Prestonettes, Inc. v.
Coty, 264 U.S. 359, 368–69 (1924)). See also United States v. Giles, 213 F.3d
1247, 1252 (10th Cir. 2000) (“‘[T]he purpose of trademark law is . . . to guarantee
that every item sold under a trademark is the genuine trademarked product, and not
a substitute.’”) (quoting Gen. Elec. Co. v. Speicher, 877 F.2d 531, 534 (7th Cir.
1989)). Accordingly, under the “first sale” doctrine, “the right of a producer to
control distribution of its trademarked product does not extend beyond the first
sale of the product.” Australian Gold, 436 F.3d at 1240–41 (10th Cir. 2006)
connection with a Lanham Act claim, we observed that “the essence of the ‘first
sale’ doctrine [is] that a purchaser who does no more than stock, display, and
conferred upon the producer by the Lanham Act.” Id. at 1241 (quotations
omitted).
It logically follows that the first sale doctrine is not applicable “when an
alleged infringer sells trademarked goods that are materially different than those
sold by the trademark owner.” Davidoff, 263 F.3d at 1302. A materially different
product is not genuine and may generate consumer confusion about the source and
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the quality of the trademarked product. See id.; Gamut Trading Co. v. U.S. Int’l
Trade Comm’n, 200 F.3d 775, 779 (Fed. Cir. 1999); Iberia Foods Corp. v. Romeo,
150 F.3d 298, 303 (3d Cir. 1998). 3 We hold, as other federal circuit courts have
held, that the unauthorized resale of a materially different trademarked product can
Commc’ns, Inc., 474 F.3d 365, 370 (6th Cir. 2007); Davidoff, 263 F.3d at 1302;
Iberia Foods, 150 F.3d at 302–03; Martin’s Herend Imports, Inc. v. Diamond &
Gem Trading USA, Co., 112 F.3d 1296, 1302 (5th Cir. 1997); Societe Des Produits
Nestle, S.A. v. Casa Helvetia, Inc., 982 F.2d 633, 638–39 (1st Cir. 1992); Original
Appalachian Artworks, Inc. v. Granada Elecs., Inc., 816 F.2d 68, 73 (2d Cir.
1987). 4
3
The Lanham Act was designed to protect both consumers and trademark
owners from the effects of such confusion. See S. Rep. No. 1333, 79th Cong., 2d
Sess., 3 (1946) (“The purpose underlying [the Lanham Act] is twofold. One is to
protect the public so it may be confident that, in purchasing a product bearing a
particular trade-mark which it favorably knows, it will get the product which it
asks for and wants to get. Secondly, where the owner of a trade-mark has spent
energy, time, and money in presenting to the public the product, he is protected in
his investment from its misappropriation by pirates and cheats. This is the
well-established rule of law protecting both the public and the trade-mark
owner.”).
4
We recognize that these cases and others cited in this opinion involve the
sale of “gray market” goods—goods that bear a United States trademark, are
authorized for exclusive production and sale in a foreign country, and are
subsequently imported and sold in the United States without the trademark
owner’s consent. See Gamut, 200 F.3d at 778. The rationale in gray goods cases
applies with equal force in this context. Thus, we agree with the Third and
Eleventh Circuits that the rule “is not limited to gray goods cases.” Iberia Foods,
(continued...)
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We emphasize that not all differences are material. See Davidoff, 263 F.3d
who purchase the alleged infringer’s goods get precisely what they believed they
were purchasing [and] consumers’ perceptions of the trademarked goods are not
likely to be affected by the alleged infringer’s sales.” Iberia Foods, 150 F.3d at
holder’s goodwill.” Nestle, 982 F.2d at 638. For this reason, the materiality
analysis must be undertaken “on a case-by-case basis,” see id. at 641, and must
include “an examination of the products and markets at issue.” Brilliance Audio,
474 F.3d at 371. Although no mechanical process exists for determining the
threshold for materiality, see Nestle, 982 F.2d at 641, a difference is material if
a product.” Davidoff, 263 F.3d at 1302. Because many factors influence such
considerations, the threshold “must be kept low to include even subtle differences
4
(...continued)
150 F.3d at 302; Davidoff, 263 F.3d at 1302 n.5. See also Gamut, 200 F.3d at 778
(“The conditions under which gray-market goods have been excluded [from
import into the United States]. . . reflect a legal recognition of the role of
domestic business in establishing and maintaining the reputation and goodwill of
a domestic trademark.”).
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between trademarked goods and goods sold by an alleged infringer are material.
In support of its argument that the first sale doctrine applies in this case,
physical quality at the time of resale. It asserts that the absence of Beltronics’s
warranties and other services are “collateral” to the radar detectors’ physical
detectors from those sold by Midwest. Accordingly, Midwest claims the first sale
“the essence of the ‘first sale’ doctrine,” which is that “a purchaser who does no
more than stock, display, and resell a producer’s product under the producer’s
trademark violates no right conferred upon the producer by the Lanham Act.”
undisputed that something more than stocking, displaying, and reselling radar
differences, at least two federal circuit courts have held or observed that they may.
See SKF USA Inc. v. Int’l Trade Comm’n, 423 F.3d 1307, 1312 (Fed. Cir. 2005);
Nestle, 982 F.2d at 639 n.7. The Federal Circuit has held that “physical material
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differences are not required to establish trademark infringement . . . because
trademarked goods originating from the trademark owner may have nonphysical
characteristics associated with them, including services, such that [the sale of]
consumer and damage the owner’s goodwill.” SKF, 423 F.3d at 1312. Similarly,
the First Circuit has observed that “the appropriate test [for materiality] should not
982 F.2d at 639 n.7. We are aware of no federal circuit court that has held or
conclude that the district court did not commit an error of law in concluding that
material differences may include the warranties and services associated with
the first sale doctrine would permit any trademark owner to eliminate the resale of
its goods, shut down its competitors, and ultimately fix the price of its product
simply by limiting its warranty coverage and service commitments to those who
buy from it directly. Because under this scenario those who purchase a
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trademarked product from a reseller would not receive the same warranty and
services as those who purchase from the trademark owner, Midwest asserts the
product would be materially different and all resellers would be unavoidably and
Were the first sale doctrine the only legal principle shielding resellers from
liability in this scenario, Midwest’s argument might avail. See Davidoff, 263 F.3d
at 1301 (observing that the first sale doctrine “does not hold true . . . when an
alleged infringer sells trademarked goods that are materially different than those
sold by the trademark owner.”). However, the fact that “the resale of a
infringement,” see id. at 1302 (emphasis added), does not mean that it always
does. The Lanham Act does not proscribe material differences per se; it proscribes
sales and offers for sale that are “likely to cause confusion, or to cause mistake, or
to cause confusion in the marketplace and undermine the goodwill the trademark
owner has developed in its trademarked goods. See Iberia Foods, 150 F.3d at 303;
Nestle, 982 F.2d at 638 (noting that the sale of materially different merchandise
bearing the same name confuses consumers and impinges on the . . . trademark
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necessary steps to adequately alleviate this confusion and prevent injury to the
trigger the liability Midwest envisions. See King of the Mountain Sports, Inc. v.
Chrysler Corp., 185 F.3d 1084, 1089 (10th Cir. 1999) (“Likelihood of confusion
forms the gravamen for a trademark infringement action.”); Matrix Essentials, Inc.
v. Emporium Drug Mart, Inc., 988 F.2d 587, 591 (5th Cir. 1993) (explaining that
in several cases where trademark infringement was associated with the resale of
materially different goods, an essential element was that “a consumer would not
2. Sufficiency of Disclosure
Midwest argues that even if the Beltronics radar detectors its sells are
offered into evidence a printout from an auction on eBay that contained the
following statement:
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According to defendants, when they advertise their product on the
Internet they disclose that the manufacturer will not honor the
manufacturer warranty and that, in lieu thereof, defendants provide a
one-year replacement warranty. But, based on the evidence
presented, the court is unpersuaded that defendants’ warranty policies
are necessarily disclosed to consumers in a manner that is sufficient
to ameliorate any confusion. Beltronics became aware of defendants’
practices with respect to Beltronics radar detectors by way of
customer warranty inquiries seeking to return units for repair, and
those units appear to have come from defendants. This undercuts
defendants’ argument that they consistently disclose their warranty
policy in a prominent manner. Moreover, the radar detectors which
were seized do not contain any written disclosures concerning
defendants’ warranty policy. Additionally, the lack of a
manufacturer’s warranty is not the only implication associated with
Beltronics products not bearing legitimate serial number labels.
Customers also do not receive product and service assistance, product
use information, software upgrades, rebates, and recalls. Thus, the
court is unpersuaded that defendants’ alleged disclosures to
consumers concerning the product warranty are sufficient to
ameliorate this confusion.
conclusion. First, it contends that the court impermissibly shifted the burden of
by the court’s statement that it was “unpersuaded” that the disclosures sufficiently
ameliorated consumer confusion. The record, however, clearly shows that the
court understood that Beltronics, as the party seeking the preliminary injunction,
bore the burden of proof. At the conclusion of the evidentiary hearing on the
that “you get the last word because you bear the burden of proof.” The court’s use
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of the word “unpersuaded” in its written order does not cause us to question the
district court’s earlier and unequivocal acknowledgment that Beltronics bore the
burden of proof.
Next, Midwest argues that the court clearly erred in finding that it did not
for warranty coverage, which calls into question whether Midwest included a
warranty disclaimer in all of its sales advertisements. Midwest contends that the
may not have read the disclosures. Midwest also states that it is equally likely that
those consumers may have read the disclosures but tried to obtain warranty
light of the evidence presented, so too is the district court’s finding that Midwest
did not consistently and prominently include the disclosures in its sales material.
As such, the district court did not clearly err. See Olcott v. Delaware Flood Co.,
76 F.3d 1538, 1558 (10th Cir. 1996) (“Where there are two permissible views of
the evidence, the fact finder’s choice between them cannot be clearly
erroneous.”). 5
5
Midwest further argues that “the district court was simply wrong when it
stated that ‘the radar detectors which were seized do not contain any written
disclosures concerning [Midwest’s] warranty policy.’” Midwest points out that
every radar detector it sold included a Beltronics warranty card, which states that
(continued...)
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Moreover, to the extent that Midwest contends that the evidence of actual
meet its burden, our case law clarifies that a plaintiff must demonstrate more than
isolated instances of actual confusion when (1) the trademarked product and the
defendant’s product are not physically similar or are not used for similar purposes,
or (2) the defendant has put on its own substantial evidence demonstrating no
they were not confused. See Universal Money Ctrs., Inc. v. Am. Tel. & Tel. Co.,
22 F.3d 1527, 1534–36 (10th Cir. 1994) (de minimis evidence of actual consumer
evidence demonstrating no significant actual confusion and when the two marks
are not similar); King of the Mountain Sports, 185 F.3d at 1092–93 (de minimis
evidence of actual consumer confusion insufficient “in light of the complete lack
of similarity between the defendants’ uses and plaintiff’s mark.”). In this case,
however, the two products at issue are nearly identical in all physical respects,
they are used in the same manner, and Midwest did not offer any evidence
showing that consumers were not confused. Therefore, we do not find this
argument persuasive.
5
(...continued)
the Beltronics warranty does not apply to radar detectors lacking a serial number
or purchased on eBay. The presence of the Beltronics warranty card, however,
does not in any way undermine the district court’s finding that the radar detectors
did not come with a written explanation about Midwest’s warranty policy.
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Finally, Midwest maintains that the district court erred as a matter of law in
concluding that the disclosure was insufficient because it only relates to warranty
coverage and does not disclaim that Beltronics also refuses to provide “product
and service assistance, product use information, software upgrades, rebates, and
identify changes to the physical product itself. We reject this argument for the
same reasons identified earlier in this opinion. The first sale doctrine is
inapplicable when the resold product is materially different from the originally
purchase the product. See Davidoff, 263 F.3d at 1302. Beltronics provided
evidence that consumers rely on its product and service assistance and that
Midwest’s simple replacement warranty does not provide the level of service
expected by consumers. Thus, the district court did not err in concluding that the
disclaimer did not sufficiently ameliorate the risk of consumer confusion on these
points.
III. CONCLUSION
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