Court: District Court, W.D. Wisconsin; November 7, 2017; Federal District Court
William M. Conley, District Judge, addresses the complexities of business relationships among family members, particularly regarding trademark use. Plaintiff Fabick, Inc. has filed claims of trademark infringement against defendants FABCO Equipment, Inc. and JFTCO, Inc. for their use of the "Fabick CAT" name since July 2015. The court is considering cross motions for summary judgment and will deny both, except for FABCO's request to dismiss claims of direct trademark infringement.
Regarding a motion to strike certain affirmative defenses raised by defendants, the court notes that a previous order allowed for an amended complaint, which permits defendants to introduce new defenses in response to new allegations. The defendants added a fair use defense under 15 U.S.C. 1115(b)(4), which the court finds reasonable due to new factual allegations in the second amended complaint. However, the fraudulent procurement defense under 15 U.S.C. 1115(b)(1) is treated differently, as defendants did not assert it was based on new allegations but rather on information learned during Jay Fabick's deposition. This defense was not included in their amended answers, leading the court to conclude that defendants should have sought leave to amend before introducing it.
The court expresses reluctance to prioritize procedural formality over substantive issues, particularly in light of the defendants' amended complaint that seeks to introduce a new defense under 15 U.S.C. 1115(b)(1). Generally, amendments to pleadings are liberally allowed under Fed. R. Civ. P. 15(a)(2), but courts may deny such requests based on undue delay, potential prejudice to the opposing party, or futility of the amendment. In this case, although the defendants claim they were unaware of the new defense until a deposition on March 14, 2017, they filed their answers over three months later, on June 28, 2017. The court notes that while the delay is significant, it does not appear to cause undue prejudice to the plaintiff, which is a critical factor in deciding the motion. The defendants’ unclean hands defense aligns with the factual basis of the fraudulent procurement defense, and the plaintiff has not demonstrated how its discovery or trial preparations would be adversely affected. Consequently, the court denies the plaintiff's motion to strike the defenses of fair use and fraudulent procurement.
Additionally, regarding the defendants' motion to compel discovery, the court has partially granted it by excluding the plaintiff’s reliance on an advice of counsel defense in summary judgment and limiting related testimony at trial. However, the court denied part of the motion concerning the production of certain privileged documents and has reserved judgment on another category pending further arguments. After reviewing withheld documents in camera, the court concludes that FABCO's attorney-client privilege transferred to JFTCO upon the acquisition of FABCO's assets.
The court directs the plaintiff to produce the "first category" of documents for in camera review as previously ordered. The defendants assert that the authority to claim attorney-client privilege transfers to new management upon a corporate asset transfer, referencing case law that supports this principle. The plaintiff contends that any attorney-client privilege was lost during a previous stock transfer in 1997, arguing that the privilege transferred from FABCO to Fabick, Inc. However, it is clarified that the representation by the law firm Foley & Lardner was joint, protecting the interests of both FABCO and Fabick, meaning that the privilege held by FABCO was not transferred to Fabick. The plaintiff's assertion that FABCO could not unilaterally transfer the privilege to JFTCO is countered by the fact that JFTCO, having acquired most of FABCO's assets, is not merely a third party. Courts typically recognize that privileges transfer to successor corporations, even in joint representations. Additionally, the privilege may have been waived due to Fabick’s litigation against FABCO, which falls under the adverse litigation exception. Consequently, the court grants the defendants' motion to compel, ordering the plaintiff to produce the specified documents promptly.
Fabick, Inc. is a Wisconsin corporation based in Madison that specializes in developing, selling, and applying protective coatings and sealants for various industries. FABCO Equipment, Inc., previously a Wisconsin corporation based in Milwaukee, was the exclusive Caterpillar dealer for Wisconsin and parts of Michigan until its assets were purchased by co-defendant JFTCO, Inc. on July 1, 2015. Following the acquisition, FABCO changed its name to FEI Legacy, Inc. and was dissolved on June 29, 2016. JFTCO, a Delaware corporation and a subsidiary of John Fabick Tractor Company, commenced operations under the "Fabick CAT" name on the same date, taking over FABCO's dealership responsibilities in Wisconsin and Northern Michigan.
The history of FABCO traces back to a family dispute involving Joseph Fabick, Sr. and his brothers. In 1982, John Fabick Tractor Company acquired two Caterpillar dealerships in Wisconsin and Michigan, allowing Joseph to establish FABCO, which he led as President and CEO until 2001, after which his son Jeré Fabick succeeded him. FABCO operated multiple retail locations and offered three distinct services: FABCO Equipment (Caterpillar machines), FABCO Power Systems (Caterpillar engines and generators), and FABCO Rents (equipment rentals). FABCO's operations continued until its sale on June 30, 2015.
FABCO specialized in selling new and used Caterpillar equipment, including trucks and attachments, while also providing servicing and parts sales. Its customer base included diverse industries such as farming, mining, manufacturing, government, construction, and contracting. Family members of Joe Fabick, including his sons Jay and Jeré, held various roles within the company. Jay worked at FABCO from 1982 to 1997, while Jeré was employed from 1982 until its sale to JFTCO in 2015, eventually rising to President and CEO in 2001. Jeré became the sole shareholder in 2004 and led the company until it ceased operations.
In parallel, Fabick was established as a division of FABCO, initially named FABCO Surface Protection, and incorporated in December 1993, specializing in spray-on bedliners for trucks. Joe Fabick was a majority shareholder at incorporation, later acquiring 25% of Fabick's stock. Jay played a key role in Fabick's development, temporarily stepping back from his FABCO duties to focus on it. Joe was also heavily involved in its inception, with claims that he was the primary supporter of Fabick. Tom Svetnicka, involved in FABCO's marketing since 1987, contributed to Fabick's launch, including logo design and advertising. While under FABCO, Fabick utilized the company's customer lists and marketing resources to establish its business.
Fabick developed a sales manual and kit for Product Sales Representatives (PSRs) detailing its offerings and engaged in various promotional activities, including sending letters and direct mail to FABCO's customers, participating in customer meetings and trade shows, and advertising in shared media outlets. Following Jay's termination from FABCO on December 30, 1997, he was offered a severance package that included acquiring Fabick, Inc., which he took ownership of on December 31, 1997. Since then, Jay has served as the President and sole shareholder of Fabick, with both entities operating independently without issues for several years. Fabick filed a trademark application for the "FABICK" mark in 1994 while a subsidiary of FABCO, with the service mark granted in 1995 and the domain name www.fabick.com registered in December 1995. Jay asserts that the FABICK marks are well-known in the coatings and sealants industry, and the basic logo has remained unchanged since the trademark applications. The defendants contend that Fabick has utilized multiple logos, though these have similar core features. The plaintiff brings claims against JFTCO and FABCO for trademark infringement and false advertising under the Lanham Act, as well as state common law trademark infringement, with the court addressing various arguments raised in cross motions for summary judgment related to these claims.
Defendants move for summary judgment against claims involving FABCO, arguing it lacks liability due to not using the name FABICK in commerce. To establish direct infringement under federal and state law, "use in commerce" is necessary, as outlined in 15 U.S.C. 1114(1) and 15 U.S.C. 1125(a)(1)(A). These statutes require proof of the defendant's use of a registered mark in a manner likely to cause confusion or deception. The Wisconsin common law claim mirrors these federal requirements.
In 2014, Jeré initiated a succession plan for FABCO, contemplating an acquisition or merger with the John Fabick Tractor Company, led by Doug Fabick. Prior to this, he sought Caterpillar's approval for the merger. Communication with Caterpillar included a December 9, 2014, letter indicating a transition from the FABCO brand to "FABCO—a Fabick family company." Jeré's deposition clarified that this rebranding aimed for a smooth transition to elevate the Fabick family name. By December 2014, the decision to rebrand as "Fabick CAT" was finalized, and JFTCO was established in 2015 to facilitate the acquisition of FABCO's assets. Caterpillar approved the merger on January 27, 2015, with announcements made to employees and customers in February regarding the integration of the two companies, projecting a transition period of 36 months. A February 2015 press release and subsequent advertisements referenced "Fabick family dealerships" and used the "Fabick CAT" branding. While defendants acknowledge these events, they contend that references to "Fabick" were limited in scope and duration.
Tom Svetnicka, Vice President of Marketing for JFTCO, previously worked with FABCO since 1987 and developed several versions of the Fabick CAT logo. Initially, defendants planned a 36-month phase-out of FABCO in favor of Fabick CAT but chose to expedite this process. By July 1, 2015, when JFTCO began operating the Wisconsin and Northern Michigan Caterpillar dealership, all FABCO logos were replaced with Fabick logos, incurring over $250,000 in signage costs in 2015 and an additional $45,000 in 2016. FABCO's websites have ceased operations, and certain signs were changed to reflect only the "Fabick" name without "CAT," although these were removed following the plaintiff's complaint.
Defendants assert that FABCO and FEI Legacy did not use the Fabick CAT mark commercially prior to July 1, 2015, claiming that any prior mentions were insufficient to constitute "use in commerce," referencing legal precedents that support this view—specifically, that mere preparations for future use do not qualify. In contrast, the plaintiff argues that FABCO is liable for contributory infringement due to its involvement in decisions related to the infringing name and logo. To prove contributory infringement, the plaintiff must demonstrate the defendant's intent and knowledge of the infringing actions.
The legal context for contributory infringement typically involves a manufacturer-distributor relationship, where manufacturers can be liable for knowingly enabling trademark infringement. The plaintiff cites a precedent indicating that trademark infringement is treated as a tort and that liability can extend to various parties involved. FABCO is accused of having knowledge of its FABICK trademarks and facilitating JFTCO's adoption of an infringing mark, with ongoing factual disputes regarding FABCO's knowledge and involvement being highlighted for further consideration.
FABCO arranged and financed Fabick's legal representation for trademark applications in 1994 and 1995, and Tom Svetnicka, a FABCO employee, contributed to the design of the Fabick mark. This raises a genuine issue regarding FABCO's actual knowledge of the trademarks. Defendants claim the John Fabick Tractor Company independently decided to use the Fabick name, based on its historical use; however, evidence suggests FABCO participated in discussions with this company regarding rebranding post-acquisition. Svetnicka's design work, even if limited to italicizing the name, supports the argument that FABCO was involved in the decision to adopt the Fabick name, making it potentially liable for contributory infringement, although not for direct infringement.
Defendants also seek summary judgment, arguing that the John Fabick Tractor Company's longstanding use of the Fabick name preempts the plaintiff's claims. Under trademark law, the first party to use a mark acquires superior rights, which can negate later registrations. The Lanham Act allows for defenses based on prior use, stating that even incontestable marks must yield to prior users. The John Fabick Tractor Company's use of the "Fabick" mark dates back to its incorporation in 1927, following a history that began with John Fabick, Sr. selling tractors in 1917. The leadership of the company has remained within the Fabick family, linking it to the original use of the name.
Joe, previously an executive at the John Fabick Tractor Company before establishing his own Caterpillar dealership, FABCO, had significant awareness of the "Fabick" name's extensive use by the company while pursuing trademarks for FABCO and Fabick. The John Fabick Tractor Company and its subsidiaries, collectively known as "the Fabick Companies," actively sell and service Caterpillar heavy equipment. Historical documentation, including a 1976 employment application and promotional materials from the 1940s, supports the claim of prior use of the "Fabick" surname. For its 75th anniversary in 1992, the Missouri History Museum archived materials showcasing the "Fabick" name. The company has also utilized domain names incorporating "Fabick" since the mid-1990s.
Since at least 2002, the John Fabick Tractor Company and its subsidiaries have operated under the FABICK CAT branding, while FABCO represented itself as FABCO CAT. After acquiring FABCO's assets, the John Fabick Tractor Company updated its logo to reflect elements of FABCO's design. Caterpillar Inc. regulates branding, allowing for customization within specific parameters. The defendants argue that the prior use of "Fabick" in the pipeline equipment sector strengthens their claim over the plaintiff's. The John Fabick Tractor Company has historically been a key dealer in supplying pipeline equipment, without territorial restrictions on sales, and established a significant customer base by the early 1990s. Evidence of substantial pipeline-related sales and the use of the "Fabick" name across invoices and promotional materials further supports their position, with documented sales in Wisconsin exceeding half a million dollars in certain years. The company's history of selling used equipment also reinforces the claim, as it involved similar branding practices without territorial limitations.
By the 1970s, the John Fabick Tractor Company has been actively advertising its used equipment in the Midwest, including Wisconsin and Michigan, particularly through the Construction Equipment Guide since the 1990s. This publication has a circulation of 24,805, affirming the company's national use of the "FABICK" name. Defendants assert that this continuous use supports their claim of superior rights over the mark.
In response, the plaintiff raises two main arguments: first, that the John Fabick Tractor Company (JFTCO) cannot benefit from the prior use of the mark by its parent company, and second, that even if it could, it must prove that the previous "JOHN FABICK TRACTOR COMPANY" mark is legally equivalent to the current "FABICK CAT" mark. The plaintiff cites a Trademark Trial and Appeal Board (TTAB) decision, Noble House Home Furnishings, which involved a situation where a parent company's use did not benefit its subsidiary due to a lack of control or a licensing agreement, leading to a finding of abandonment of the mark by the subsidiary.
However, the legal context from the Noble House case does not apply here, as JFTCO is not defending against a claim of abandonment but is instead asserting rights based on its parent company's prior use. The critical issue is whether JFTCO and its parent company operated in a manner that led the public to perceive them as a single entity, which is essential for establishing the claimed superior rights.
Separate corporate and personal entities operating as a single unit in the eyes of the public can be treated as such for trademark purposes, as established in *W. Fla. Seafood, Inc. v. Jet Restaurants, Inc.* Defendants assert that the John Fabick Tractor Company and its subsidiaries, all sharing the "Fabick" name, are perceived by the public as a single entity, pointing to their shared branding, websites, and management structure. The plaintiff counters by noting that invoices require payment to JFTCO, arguing this indicates separate identities, which the court deems inadequate to establish undisputed facts that the public does not view the entities as unified.
The plaintiff also contests the defendants' prior use defense, claiming they must prove that the prior use of the JOHN FABICK TRACTOR COMPANY mark is legally equivalent to the FABICK CAT mark under the "tacking" theory. For tacking to be established, the marks must create the same commercial impression for consumers, a determination generally reserved for a jury. The defendants argue their focus is on the prior use of the FABICK mark, not the JOHN FABICK TRACTOR COMPANY mark itself. Factual disputes exist regarding public perception of the previous FABICK mark in relation to the current use of the JFTCO's Fabick CAT mark.
Key unresolved questions include: 1) whether the John Fabick Tractor Company's use of the "Fabick" mark constituted sufficient prior use; 2) whether the public views JFTCO and the John Fabick Tractor Company as one entity; and 3) whether the current Fabick CAT mark is legally equivalent to the prior FABICK mark. Consequently, the court denies the defendants' motion for summary judgment based on prior use. The likelihood of confusion between the parties' marks also remains a matter for factual determination by a jury, as both sides present conflicting interpretations of the same facts.
To establish claims under the Lanham Act, the plaintiff must demonstrate that their mark is protectable and that the defendants' use of the mark is likely to cause consumer confusion. The focus for summary judgment is primarily on the likelihood of confusion, assessed through seven factors: 1) similarity of the marks, 2) similarity of the products, 3) area and manner of concurrent use, 4) consumer care, 5) strength of the plaintiff's mark, 6) existence of actual confusion, and 7) the defendant's intent to mislead. No single factor is decisive, and the court may weigh them differently depending on the case context. However, the Seventh Circuit highlights three critical factors: mark similarity, the defendant's intent, and actual confusion.
The analysis of mark similarity involves evaluating sound, sight, and meaning, considering elements like packaging and labeling. A prominent word in a composite trademark may carry more weight, but the overall mark is assessed in its entirety. Courts are urged to compare marks based on marketplace realities rather than minor stylistic differences, especially when the marks are not encountered together by the public. In this case, the prominence of "Fabick" in both marks suggests a potential advantage for the plaintiff, although the defendants argue that additional descriptive words and the use of "CAT" along with Caterpillar's color scheme could mitigate this. Ultimately, the presence of genuine issues of material fact indicates that further proceedings are warranted, leading to the denial of both parties' motions.
Defendants contend that certain factors undermine the finding of similarity between the marks in question. The court identifies that key factual inquiries for the jury include determining whether "FABICK" or "CAT" is the more prominent element in the respective marks. Though the court acknowledges the fame of the "CAT" mark, its significance in differentiating the "Fabick CAT" from "FABICK" remains a jury question, particularly since the plaintiff is pursuing a reverse confusion claim, as discussed in *Sorensen v. WD-40 Co.*. Additionally, the jury must evaluate whether variations in font, color, and style diminish the importance of the shared name.
Regarding product similarity, Fabick specializes in selling coatings and sealants for various industries, including construction and automotive, offering products designed for specific applications like bedliners for dump trucks. In contrast, JFTCO does not sell chemical coatings or sealants but focuses on new and used Caterpillar equipment and parts, as well as repair services. Their customer base primarily consists of commercial and governmental entities, with significant purchases often requiring competitive bidding. The parties agree that they do not sell identical products, which is pertinent in the context of trademark law.
Prohibitions exist against using a senior user's trademark on products that are not only in direct competition but also on those deemed 'closely related.' A 'closely related' product is defined as one that consumers might reasonably believe comes from the same source as the trademark owner. The plaintiff presents evidence of potential cross-selling opportunities with JFTCO's products, such as liners for dump truck beds and coatings for heavy equipment. However, the defendants highlight that the plaintiff's sales since 2010 show minimal engagement with JFTCO's business. The plaintiff has shifted to primarily supplying chemicals, with its largest customer being a furniture manufacturer, while bedliner products contribute insignificantly to revenue. Even if consumer confusion were to occur, it would likely benefit the plaintiff by enhancing consumer confidence in its offerings. The similarity of products factor may therefore counteract a finding of likelihood of confusion, pending jury assessment of the relationship between Fabick's sealants and JFTCO's products. Additionally, the significance of this factor is diminished compared to the similarity of marks, evidence of actual confusion, and the defendants' intent in using the contested mark.
The court also evaluates the area and manner of concurrent use, considering geographical distribution, evidence of direct competition, retail environments, product placement within stores, and marketing channels. Although the plaintiff claims trademark infringement from the defendants' use of the Fabick name in Wisconsin, where Fabick operates nationally and internationally but has its sole location, the defendants have numerous locations in Wisconsin. Notably, there is no direct competition or shared retail locations, though the plaintiff asserts that both parties market their products to overlapping customers and utilize similar marketing channels.
Fabick's coatings, applicable to various machinery such as dump trucks, heavy equipment, and snowplows, are customizable and can be applied via a mobile coating system or by outside applicators throughout Wisconsin. Fabick provides equipment and promotional materials to these applicators. Although defendants acknowledge the availability of these applications, they argue that applying Fabick's products to FABCO and JFTCO's machinery is uncommon. The plaintiff seeks to expand its market share in off-highway dump truck bed coatings and anti-skid surfaces, claiming a shared customer base with defendants, including at least 90 common customers. Defendants counter that many of these customers have not purchased from Fabick since January 2010 and assert that the overlap is minimal. Shared customers include notable entities like the University of Wisconsin-Madison and the Wisconsin Department of Corrections. Under Jay's ownership since 1997, Fabick has targeted the same customers and industry groups as the defendants, utilizing similar marketing strategies. However, defendants highlight that Fabick has not provided proof of recent advertising expenditures, particularly noting no advertising expenses in 2015. Overall, both parties have historically shared marketing channels and some customers in Wisconsin.
Factual issues exist regarding whether Fabick and JFTCO share customers and sales channels post-July 2015, as well as the relevance of this factor. The court must adopt the perspective of an ordinary purchaser, who typically exercises less care when buying widely accessible and inexpensive products. A lower degree of care increases the likelihood of confusion among consumers, while professional buyers are expected to be more discerning, potentially mitigating confusion. The primary focus of the infringement claim involves "forward confusion," where consumers mistakenly believe JFTCO's services are connected to Fabick's products. However, Fabick's case primarily addresses "reverse confusion," where a larger junior user like JFTCO saturates the market with a similar trademark, potentially harming the senior user by diluting their brand identity and goodwill. Although Fabick presents evidence of consumer confusion, it is uncertain whether the degree of care supports their claim. Fabick highlights the low cost of rentals to argue that the purchasing decision lacks significance, yet it is acknowledged that JFTCO's clientele consists of sophisticated buyers. Furthermore, Fabick cites the declaration of a sales manager who mistakenly attributed their product to JFTCO, positing that confusion among sales professionals indicates broader consumer confusion.
Defendants' challenges to Walsh's declaration were noted during his deposition, but the record indicates that JFTCO's customers are diligent in their purchasing decisions. The court leans towards favoring defendants regarding customer care, although this does not decisively lead to summary judgment for either party. The strength of the plaintiff's trademark, which is categorized as descriptive due to its surname nature, is assessed based on distinctiveness and recognition; stronger marks receive greater legal protection. The Fabick mark, used broadly by Jay Fabick and family in multiple business ventures, appears weak due to a lack of licensing agreements or royalty payments to the plaintiff. The plaintiff claims the mark is strong among customers, but does not substantiate this claim. Given the context of reverse confusion, the jury will need to evaluate the strength of the "Fabick CAT" mark compared to the less prominent Fabick mark. Ultimately, the significance of the strength factor in determining likelihood of confusion is ambiguous and does not decisively favor either party.
Evidence of actual confusion serves as strong proof of the likelihood of confusion in trademark cases. The plaintiff presents significant, largely undisputed evidence of confusion since July 1, 2015, despite the defendants challenging its admissibility. While the plaintiff does not clearly outline its evidence collection process, multiple employees reported instances of confusion, including phone calls and misdirected mail. Specifically, four or five employees logged 104 phone calls, 67 shipments, and several checks and visits mistakenly directed to Fabick instead of JFTCO. Additionally, there were instances where vendor accounts were updated to reflect a connection between the two companies.
Elizabeth Fabick, General Counsel of Fabick, Inc., compiled these instances based on logs from other employees. Her declaration details seven personal calls meant for JFTCO and is supported by similar accounts from other Fabick employees, which are admissible under Federal Rule of Evidence 803(3) to demonstrate customer confusion. The defendants retain the right to cross-examine the deponents, but the court finds no reason to exclude this evidence from summary judgment or the trial. Overall, this evidence indicates a pattern of confusion between Fabick and JFTCO, which is critical for assessing the likelihood of confusion in the case.
Fabick was incorrectly named as a defendant instead of the John Fabick Tractor Company in a small claims lawsuit. Defendants contend that the plaintiff's records of erroneous calls merely indicate that callers realized their mistake and hung up, suggesting any confusion was resolved quickly. However, this does not negate the existence of initial confusion. Defendants argue the plaintiff cannot demonstrate lost sales or significant injury due to this confusion, a point the plaintiff largely concedes while asserting a reverse confusion theory—claiming the public associates Fabick with heavy equipment sales rather than JFTCO’s coatings and sealants. While defendants' critique is pertinent to assessing damages, it does not counter the evidence of actual confusion. The court finds sufficient grounds for a likelihood of confusion at the summary judgment stage but notes that the jury's assessment of this factor may be affected by the defendants' lack of intent to infringe.
Regarding evidence presented by Fabick, it cites a slowdown in its epoxy business as indicative of actual confusion, noting no inquiries for epoxy work in early 2017, although its sales records show limited projects over the years. The court observes that plaintiff has not provided evidence linking the alleged trademark infringement to this business downturn, and thus the jury could only speculate about the cause of any delays in bidding. Consequently, the court dismisses the relevance of the epoxy business slowdown for trial due to lack of causation evidence.
Lastly, the court examines defendant's intent, clarifying that proving fraudulent intent is not necessary to establish infringement where likelihood of confusion is evident. Intent may be inferred from intentional copying, which suggests the defendants anticipated consumer confusion for profit. However, mere awareness of the senior user's trademark does not suffice to indicate intent. Both FABCO and the John Fabick Tractor Company aimed to operate under a unified identity in their respective territories.
The FABICK CAT identity was chosen for the combined dealership because the John Fabick Tractor Company, the acquiring party, has a longstanding history of over fifty years associated with the Fabick name. Although the plaintiff argues that the John Fabick Tractor Company is the sole owner of the acquiring entity, JFTCO, it is noted that the FABICK CAT mark was not utilized until at least 2002. The court finds no reasonable basis for a jury to conclude that the defendants adopted the FABICK CAT mark with intent to infringe upon the plaintiff's trademarks. While evidence of actual confusion supports the plaintiff's position, other factors relating to the likelihood of confusion are inconclusive or favor the defendants, leading the court to deny both parties' motions for summary judgment on this issue.
Regarding the unclean hands defense in trademark infringement, the defendants present two arguments: first, that Jay signed declarations for trademark applications without knowledge of others using the mark; second, that he transferred trademarks to an unauthorized shell LLC. In his declarations supporting these applications in 1994, Jay certified that, to the best of his knowledge, no other entity had rights to use the mark in a way that could cause confusion. However, he failed to disclose the existence of the John Fabick Tractor Company and its use of the "Fabick" name to the USPTO. Jay’s awareness of the use of the Fabick mark is corroborated by his history with the company.
Jay began his association with the John Fabick Truck Company in high school and held stock in the company, later transferring his interest to FABCO stock. He worked as a heavy equipment operator on the Alaska Pipeline in the mid-1970s, potentially using equipment from the John Fabick Tractor Company. His employment with the John Fabick Tractor Company included roles as a sales trainee from May 1976 to January 1977 and as a sales representative from February 1977 until his termination on August 17, 1981. The company's name was prominently displayed at his workplace in Sikeston, Missouri.
Defendants argue that either Jay's representation to the United States Patent and Trademark Office is accurate, negating any likelihood of confusion, or he misrepresented market conditions to obtain his trademarks. In November 1997, Jay was notified of the closure of Fabick, Inc. and the impending end of his employment with FABCO. Subsequently, he formed J.G. Fabick, L.L.C. on December 19, 1997, which was presented as a real estate holding company, although Jay could not confirm if it ever owned real estate.
The operating agreement stated that management was vested in Jay as the sole member. On the same day, Jay transferred the Fabick trademark and service mark to J.G. Fabick. The plaintiff does not dispute this transfer but claims that an implied license was granted to Fabick, Inc., or that the company retained the goodwill associated with the mark, arguing that the assignment was invalid. At the time, Jay was president, and FABCO owned 75% of Fabick stock, with Joe owning the remaining 25%. Defendants assert that Jay lacked authority to transfer the intellectual property without formal approval from Fabick, Inc., a claim the plaintiff disputes based on Jay's position.
Jay indicated that the transfer was likely recommended by an attorney, although this explanation is disregarded due to attorney-client privilege. It is inferred that Jay aimed to maintain control of the mark in the event of Fabick, Inc.'s dissolution. On July 8, 2002, J.G. Fabick transferred the marks back to Fabick, Inc. without explanation. During J.G. Fabick's ownership, Fabick continued to represent ownership of the marks, engaging in licensing agreements that purported to transfer intellectual property rights associated with the marks to dealers.
At the time of the stock transfer agreement, FABCO was unaware of Jay Fabick's registration of the "Fabick" trademark under Fabick, Inc. However, plaintiff presents evidence indicating that FABCO's CEO Joe and marketing manager Svetnicka were involved in discussions regarding the trademark registration and were aware of the associated legal fees paid by FABCO. The court views the equitable relief defense as a matter for judicial determination rather than a jury issue, but notes that neither party has provided guidance on this matter. The court emphasizes that the merits of the defense cannot be resolved at the summary judgment stage, particularly regarding whether the earlier use of the Fabick mark by John Fabick Tractor Company constitutes prior use, which would impact the validity of the plaintiff's trademark claims.
Additionally, the defense requires an assessment of Jay's intent that is best evaluated through live testimony. While Jay’s actions may indicate malfeasance, the defendants fail to establish a direct connection between his transfer of the trademarks to a shell LLC and the trademark infringement claims. Consequently, the court denies the defendants' motion for summary judgment and indicates that relevant testimony and exhibits should be presented outside the jury's presence during the trial.
The transfer of the Fabick marks to J.G. Fabick, L.L.C. and its lack of use for four and a half years raises the issue of abandonment under 15 U.S.C. § 1114(a). Defendants argue that this abandonment would invalidate the plaintiff's claims under the Lanham Act, as the Act only pertains to registered marks, and abandonment serves as an affirmative defense against trademark infringement claims.
Under the Lanham Act, a trademark is deemed abandoned if its use has been discontinued with the intent not to resume, with nonuse for three consecutive years serving as prima facie evidence of abandonment (15 U.S.C. § 1127). Once abandoned, a mark reverts to the public domain, allowing others to use it (Specht v. Google, Inc., 747 F.3d 929, 934-935). Rights lost due to abandonment cannot be revived by subsequent use (3 J. Thomas McCarthy, McCarthy on Trademarks, Unfair Competition, § 17:2; AmBrit, Inc. v. Kraft, Inc., 805 F.2d 974).
In this case, Fabick asserts that it has consistently used the FABICK marks in the coatings and sealants industry since their inception. The plaintiff argues that the transfer of the marks to J.G. Fabick was legally inconsequential as Jay Fabick maintained control, or alternatively, that there was an implied license allowing continued use during that period. Although Fabick's ongoing use complicates the abandonment claim, defendants argue that J.G. Fabick abandoned the marks during its ownership, despite permitting Fabick's use.
Defendants reference a precedent, Noble House, where a parent company's use of a trademark did not prevent the abandonment claim against a subsidiary that failed to use the mark itself. The court noted that a distinct legal entity structure cannot be disregarded to benefit one party. For Fabick to claim its use of the mark during J.G. Fabick's ownership, it must show that both entities are "related companies" as defined by 15 U.S.C. § 1127, which allows for use by related companies to benefit the registrant.
The term "related company" refers to any entity whose use of a trademark is controlled by the trademark owner concerning the quality and nature of the associated goods or services. Evidence indicates that Jay Fabick exercised total control over both entities during the alleged abandonment period, suggesting that Fabick and J.G. Fabick qualify as "related parties" legally. A heightened standard of proof is likely required for this abandonment defense, which most courts interpret as necessitating clear and convincing evidence. Due to uncertainties stemming from previous case law and the limited impact of this defense—only affecting the plaintiff's claim under 15 U.S.C. § 1114—the court denies the defendants' motion regarding the abandonment defense.
Regarding fair use, 15 U.S.C. § 1115(b)(4) provides an affirmative defense if the use of a name or term is non-trademark use related to an individual's business or descriptive of their goods or services. To establish this defense, defendants must demonstrate: 1) non-trademark use of "Fabick," 2) that the term is descriptive, and 3) that the use was fair and in good faith. The plaintiff's motion for summary judgment on this defense is based on two main arguments: first, that FABCO used the Fabick mark solely in relation to Fabick, Inc., and second, that any transfer of rights from FABCO to JFTCO constitutes infringement. Defendants clarify that FABCO's use of the Fabick name was strictly to highlight its affiliation with the Fabick family and its historical connection to John Fabick, Sr. Thus, defendants do not assert a fair use defense against JFTCO's use after July 2015. This negates the plaintiff's second argument regarding the transfer of rights, as the Asset Purchase Agreement (APA) clearly indicates that Fabick is not listed among the intellectual property assets transferred to JFTCO. The APA also includes a merger clause that further supports this position.
FABCO's defense is narrowly focused on using the Fabick name solely to indicate family lineage, leading the court to deny the plaintiff's motion for summary judgment. However, defendants cannot claim a broader fair use defense than what has been presented. Regarding monetary damages, defendants argue that the plaintiff has not provided sufficient evidence of damages from the alleged infringement, as required under Federal Rule of Civil Procedure 26(a)(1)(A)(iii). They assert that the plaintiff cannot demonstrate lost sales or customers, highlighting that 2015 was the plaintiff's best year and 2016 was its third best. While the plaintiff's evidence of actual confusion was noted, they failed to present a concrete theory linking that confusion to lost sales.
Nonetheless, the court acknowledges alternative bases for potential damages, such as time spent managing confusion, which could justify a jury's award based on employee hours and opportunity costs. Additionally, claims regarding harm to goodwill are viable, with the plaintiff citing $740,000 in advertising expenditures, though they must substantiate this claim and show that their goodwill was negatively impacted by the defendants' actions. The court will not dismiss this avenue of damages at the summary judgment stage. However, the plaintiff's claim for damages based on the defendants' profits is unsupported, as the plaintiff has not provided a theory or evidence justifying such an award.
The court expresses difficulty in understanding how the defendants were unjustly enriched by consumer assumptions regarding the relationship between Fabick's and JFTCO's businesses in the context of the plaintiff's reverse confusion theory. The court decides to deny the defendants' motion for summary judgment regarding the plaintiff's basis for monetary damages, although it limits the claim to specified damages.
The court issues several orders:
1) Fabick, Inc.'s motion for summary judgment is denied.
2) Defendants FABCO Equipment, Inc. and JFTCO, Inc.'s motion for summary judgment is partially granted, specifically in favor of FABCO concerning the direct infringement claim, but denied in other respects.
3) The plaintiff's motion to strike the answers to the amended complaint is denied.
4) The defendants' motion for leave to file supplemental responses is granted.
5) The defendants' previously reserved motion to compel discovery is granted, directing the plaintiff to produce specific documents promptly.
Additionally, the court notes a potential shift in the representation of Fabick by Foley from joint to sole representation. This shift complicates the argument regarding FABCO's involvement in the trademark application process. The court highlights uncertainty about whether FABCO is a proper party in the lawsuit, which will be addressed at the Final Pretrial Conference. For clarity, individuals with the last name "Fabick" will be referred to by their first names in the opinion.
Svetnicka asserts that his role with Fabick was minimal, constituting less than 5% of his weekly responsibilities. The admissibility of a letter related to Joe's involvement with Fabick is disputed. The court considers it for summary judgment purposes, as it is presented to demonstrate involvement rather than the truth of its contents, potentially fitting within the hearsay exception of Federal Rule of Evidence 803(16). Although Fabick is defunct, its claim against FABCO raises questions about necessity, but this issue is not addressed due to lack of argument from the parties.
Svetnicka did not perform trademark searches before creating the new FABICK CAT logo. The plaintiff suggests FABCO may be liable for direct infringement related to the phrase "A Fabick Family Company" used in advertisements prior to the rebranding on July 1, 2015; however, this contradicts the plaintiff’s primary assertion that confusion arose post-rebranding. Evidence indicates FABCO utilized the "Fabick" name, although it is minimal and contradicted by testimony stating that FABCO primarily marketed itself under its own name. The plaintiff challenges the defendants' claims regarding the use of the "Fabick" name without sufficient detail on subsidiaries and timing.
The court acknowledges the plaintiff's right to object to the authenticity of documents from the Missouri History Museum but applies the ancient documents rule for summary judgment. The plaintiff's hearsay objection is questioned since the documents are not used for their truth and may qualify under the hearsay exception for documents over 20 years old. Additionally, the court notes that PipeLine Machinery International, spun off from the John Fabick Tractor Company in 2005, still relies on it for parts and services. The plaintiff objects to certain sales data provided by the defendants, citing a failure to establish a proper foundation under Federal Rule of Evidence 1006.
Steve Overkamp's declaration establishes the basis for the documents supporting the summary of sales data, utilizing pre-2002 software to generate historical sales reports. Defendants must provide these underlying documents to the plaintiff to confirm the summary's accuracy, or risk exclusion at trial. In their response to proposed findings, defendants submitted historical advertisements featuring the "Fabick" name, indicating extensive use across the U.S. The court acknowledges that a summary judgment ruling does not eliminate the possibility of a directed verdict on the defense, given the evidence of prior use of the FABICK mark. The common law trademark infringement claim evaluates the validity of the mark and likelihood of confusion, with the Lanham Act stating that registration serves as prima facie evidence of validity and exclusivity. Defendants' challenge to the plaintiff's trademark protectability relates to prior use defenses, supported by expert testimony from Dr. Neeraj Arora. The court deems summary judgment inappropriate regarding mark similarity and likelihood of confusion, thus deferring the plaintiff's motion to strike Arora's testimony to a future Daubert motion. Fabick has developed an epoxy coating for use in construction projects, sold to the State of Wisconsin and municipalities, and has worked alongside FABCO on job sites. The court notes that FABCO ceased operations on June 30, 2015, and references to customers or advertising strategies pertain to FABCO before this date and JFTCO thereafter. Plaintiff's advertising efforts have been minimal, spending only $681.78 in 2016, with no advertising expenses reported in 2015. Defendants dispute the reliability of Jay's proposed findings, questioning whether his statements are based solely on personal knowledge, although Jay's extensive experience with the plaintiff supports his testimony regarding confusion.
The second challenge pertains to the weight of evidence, particularly regarding the admissibility of Elizabeth's compilation of employee logs, which may be contested at trial. Keith Walsh, a sales manager for Madison Auto Trim, submitted a declaration expressing confusion about Fabick's identity, mistakenly referring to it as "the company on the beltline." Defendants aim to supplement the record after deposing Walsh, arguing his testimony undermines the notion that he is a "sophisticated buyer" since he is not involved in purchasing decisions. While the court permits the record to be supplemented, Walsh's confusion is deemed insufficient to influence the summary judgment decision, allowing both parties to address this issue at trial.
Defendants argue that confusion over Fabick's business identity is due to Fabick's own negligence in managing business service records. Elizabeth Fabick, the plaintiff's General Counsel, indicated concerns about the use of the "Fabick" name to JFTCO, which reportedly refused to cease its usage. Despite this, the plaintiff did not seek a preliminary injunction. Defendants assert that upon learning of the confusion, they took steps to mitigate it through employee education and by directing calls appropriately.
Additionally, historical context is provided regarding a 2000 lawsuit involving Jay, a former employee who gained full control of Fabick's stock after a settlement in 2002, raising questions about any resultant harm from his actions. There is also a potential connection between alleged misrepresentations in Jay's declaration to the USPTO and the denial of benefits to the John Fabick Tractor Company from its prior use of the Fabick name. The court emphasizes that disclosures not made timely under Rule 26(a)(1)(A)(iii) cannot be introduced at trial, indicating the need for the plaintiff to clarify its damage claims at the upcoming pretrial conference. Lastly, the court dismisses the plaintiff's claims for damages related to FABCO's transfer of the FABICK mark in the asset purchase to JFTCO.
