Court: District Court, E.D. Wisconsin; May 24, 2011; Federal District Court
In 1987, Dr. Dietmar H. Wittmann invented a surgical patch and assigned its rights to the Medical College of Wisconsin's research foundation, which licensed them to Michael Deutsch. After initial failures to gain FDA approval, Wittmann and Deutsch formed Starsurgical, Inc. in 2000, with Deutsch as president and Wittmann as vice president. Disagreements arose regarding the patch's marketing and pricing. Deutsch registered the trademark "Wittmann Patch" in Wisconsin in 2001, while Wittmann registered it with the USPTO in 2002. Following internal disputes, Deutsch removed Wittmann from Starsurgical, and in 2009, Wittmann established two competing companies, Aperta, LLC and NovoMedicus LLC. These entities promoted a modified version of the patch, marketed as the "Wittmann Hypopack," which included the original patch and was FDA-approved for limited reuses.
Starsurgical is now suing Wittmann, Aperta, NovoMedicus, and Paul Van Deventer for violating the Lanham Act by infringing on its unregistered trademark. The plaintiff claims the defendants contacted its customers and promoted their version of the patch. Additionally, Starsurgical alleges Wittmann fraudulently registered its trademark. They seek a preliminary injunction to prevent the defendants from marketing their product as a Wittmann Patch. To obtain this injunction, Starsurgical must demonstrate a likelihood of success on the merits, lack of an adequate legal remedy, and potential for irreparable harm. The court will weigh the balance of harms and public interest, utilizing a sliding scale approach where a stronger likelihood of success requires less justification for the injunction.
Star can demonstrate a likelihood of success on its trademark infringement claim by showing it has a protectable mark and that a 'likelihood of confusion' exists. While the Defendants acknowledge that the Wittmann Patch trademark is protectable, they contest Star's ownership and the existence of confusion. Wittmann's USPTO registration provides prima facie evidence of his ownership and exclusive rights, but Star's state registration lacks this presumption. Trademark rights are obtained through commercial use, not merely registration or discovery, allowing Star's common law rights to potentially supersede Wittmann’s registration.
Defendants argue that Wittmann owns the mark because he licensed Star to use his name, invoking the related company doctrine which allows a trademark applicant to claim ownership if they controlled the use of the mark. However, evidence suggests that Star is likely to prove ownership. Wittmann's role as a shareholder and officer does not automatically confer ownership of the mark; he must have actually controlled its quality. The record indicates that Star, led by Deutsch, maintained control over product quality and marketing, undermining Wittmann's claim. Thus, Star is likely to establish ownership of the Wittmann Patch mark.
Wittmann is not implied to be a beneficiary of a trademark licensing agreement, as established in Villanova University v. Villanova Alumni Educational Foundation, Inc. The existence of an implied license is assessed through the objective conduct of the parties involved. The likelihood of consumer confusion between the parties' products is evaluated based on seven factors: similarity of the marks, product similarity, concurrent use, consumer care, strength of the plaintiff's mark, actual confusion, and defendant's intent to mislead. The similarity of marks, intent, and actual confusion are emphasized as particularly important, with the first three factors favoring Star. Both parties use the same mark on nearly identical products for the same customer base, increasing the likelihood of confusion, especially given Wittmann’s affiliation with both parties and the inclusion of a Wittmann Patch in the defendants' product, which misleads consumers into thinking it is a repackaging of Star's products.
Conversely, the sophistication of the customers—doctors and hospital administrators—suggests they may exercise a higher degree of care in purchasing decisions, which weighs slightly in the defendants' favor. However, evidence of customer confusion, such as misdirected orders and inquiries about Star's relationship with the defendants, indicates that Star has a significant chance of proving likelihood of confusion regarding the infringement claim related to the Wittmann Patch mark.
For Star to succeed on its fraudulent registration claim, it must show clear and convincing evidence that Wittmann provided materially false information to the USPTO to secure trademark registration. Fraud requires a deliberate attempt to mislead the USPTO, not merely an honest mistake. Star argues that Wittmann falsely claimed sole ownership of the trademark and asserted that no other entity had rights to it, contrary to his connection with Star's use of the mark. While applicants must certify their ownership and that no one else has rights to the mark, Wittmann was not obligated to disclose his relationship with Star in his application.
The USPTO does not require applicants to explain control over a mark used by related companies, and Star cannot establish fraud against Wittmann solely based on a mistake without clear evidence of intent to mislead. Star has not shown that its rights to the mark were clearly established to constitute fraud, hence failing to demonstrate a likelihood of success on its fraudulent registration claim. For a preliminary injunction, Star must prove no adequate legal remedy exists and that it will suffer irreparable harm without relief. Trademark infringement typically causes irreparable harm due to the inability to control the quality and reputation associated with the mark. Star and the defendants compete using identical marks, risking harm to Star's reputation and goodwill, which are difficult to quantify in monetary terms. The defendants argue that damages would suffice, but this overlooks potential confusion that may deter customers from purchasing Star's products. The analysis shifts to comparing the irreparable harm to both parties and considering public interest. Star's strong likelihood of success on its infringement claim suggests the need for preliminary relief to prevent further confusion and harm. If the injunction is denied and Star prevails later, it would suffer irreparable harm, whereas granting it may result in the defendants incurring losses but not irreparable harm.
An injunction would benefit the public by reducing consumer confusion in the marketplace, though it may temporarily remove a lower-cost product from sale. Weighing the harms, the potential damage to Star, which has used the mark for over ten years, outweighs the impact on the defendants, a startup with limited sales. The court concludes that the public interest favors granting the injunction. The defendants' use of the existing mark increases the risk of consumer confusion, making disclaimers ineffective. Consequently, the court will enjoin the defendants from using the "Wittmann Patch" trademark and similar marks related to abdominal surgical patches.
Regarding the injunction bond, Federal Rule of Civil Procedure 65(c) requires a bond to compensate any party wrongfully enjoined. The amount of the bond is at the court’s discretion and must be justified, ensuring it falls within a reasonable range. Given the defendants' estimated costs of $70,000 to change promotional materials and potential lost profits not exceeding $50,000, the bond is set at $120,000 to account for these factors and mitigate damages from any possible wrongful injunction.
Plaintiff's motion for a preliminary injunction is granted, contingent upon the plaintiff depositing $120,000 in security with the Clerk within seven days. Defendants and their associates are prohibited from using the Wittmann Patch trademark or any similar trademarks, including specific domains and variations. If the plaintiff fails to provide the security, the injunction will automatically lapse. The injunction will remain effective until further court order if the security is provided.
Star alleges that the defendants infringe on its trademark by using it as a keyword for internet advertising, leading to their website appearing in sponsored search results when users search for "Wittmann Patch." However, Star does not demonstrate how this use confuses consumers, which is necessary to establish a violation under the Lanham Act.
Wittmann's trademark registration with the USPTO serves as prima facie evidence of its validity and ownership, while Star's state registration does not carry such a presumption. Trademark rights are acquired through use in commerce, not merely through registration or discovery. Although Star sold Wittmann Patches nationally before the defendants, the defendants claim ownership based on a license agreement with Wittmann. They reference the related company doctrine, which allows a trademark applicant to establish ownership if they controlled a company using the mark, provided the first use of the mark was under their control regarding the quality of goods or services.
Wittmann's potential ownership of the mark depends on his control over Star's use of the mark, which he has not established. Evidence suggests Star is likely to prove ownership, as Wittmann’s status as a shareholder and officer does not equate to ownership. He must demonstrate actual control over the quality of the patches, a power not evidenced in the record. While Wittmann had some control as vice president, Deutsch, as majority stockholder and president, wielded greater authority, including marketing decisions and personnel changes. Consequently, Star retains control over product quality, strengthening its claim to ownership of the mark.
Furthermore, there is no basis to imply that Wittmann benefited from a trademark licensing agreement, with any such determination reliant on the parties' objective conduct. The likelihood of consumer confusion is assessed through seven factors, with the first three favoring Star: both parties use the same mark on similar products aimed at the same customers. Confusion is heightened by Wittmann's affiliation with both entities and the presence of the Wittmann Patch in the defendants' product. The sophistication of the customers, primarily doctors and hospital administrators, suggests they would exercise care in their purchasing decisions, which weighs against confusion. However, evidence of actual confusion among customers has been presented, indicating a significant risk of misunderstanding the relationship between Star and the defendants. Thus, Star has demonstrated a likelihood of success on the merits of its infringement claim regarding the use of the Wittmann Patch mark by the defendants.
To succeed on its fraudulent registration claim, Star must provide clear and convincing evidence that Wittmann knowingly submitted materially false information to the USPTO to secure trademark registration. Fraud is defined as a deliberate attempt to mislead the USPTO; a mere false statement made with honest belief does not constitute fraud. Star alleges that Wittmann fraudulently claimed sole ownership of the trademark and falsely stated that no other entity had rights to use it. However, Wittmann's claim of ownership was based on Star's use, and he was not obligated to clarify his relationship with Star in his application. The USPTO does not require an applicant to explain control over a mark when it is used by related companies.
Star cannot prove fraud simply because Wittmann was mistaken and fails to provide clear evidence of intentional deceit. Furthermore, Star's rights to the mark were not so established that Wittmann’s omission constituted fraud. Consequently, Star has not shown a likelihood of success on its fraudulent registration claim.
For a preliminary injunction, Star must demonstrate no adequate legal remedy and a risk of irreparable harm. Trademark infringement is presumed to cause irreparable injury, as it undermines the plaintiff's ability to control the quality of goods associated with their mark, which can damage reputation regardless of the infringer's product quality. In this case, both parties use the same mark for similar products and target the same customers, leading to potential reputational harm for Star if defendants continue to use the mark during the ongoing litigation. The confusion caused by the defendants' use of the mark is considered an irreparable injury to Star's goodwill and trademark prominence.
Defendants contend that monetary damages would sufficiently compensate Star, as both parties are the sole producers of the patch, and Star's losses could be gauged from the defendants' sales data. However, it is argued that defendants' sales do not accurately reflect the damage to Star's goodwill and reputation, particularly due to potential customer confusion stemming from defendants' marketing practices. The court maintains that monetary damages are inadequate for infringement cases.
Evaluating the potential irreparable harm, the court considers whether the harm to Star from denying the injunction outweighs the harm to defendants from granting it. Given Star's strong likelihood of success on its infringement claim, denying the injunction could result in significant harm to Star as defendants could mislead consumers, while granting the injunction might only lead to financial losses for defendants and inconvenience in changing promotional materials.
The public interest also favors granting the injunction, as it would reduce consumer confusion in the market, despite the possibility of removing a less expensive product temporarily. The court finds that the harm to Star, which has used the mark for over ten years, outweighs the minimal harm to defendants, who are a startup with limited sales. Additionally, the defendants accepted the risk of needing to alter their marketing by using an already established mark.
The court ultimately grants Star's request for a preliminary injunction, emphasizing that equitable relief should be flexible and appropriate to the plaintiff's rights. The defendants' suggestion of limiting the injunction to disclaimers is rejected, as such disclaimers would likely be ineffective in preventing consumer confusion, especially given the shared involvement of an individual in both companies and the overlap in their target markets.
Defendants and their agents are enjoined from using the Wittmann Patch trademark or similar marks related to abdominal surgical patches. A preliminary injunction is contingent upon the plaintiff posting a security bond, which the court must determine to cover potential damages from a wrongful injunction. The bond amount is at the court's discretion but must be justified with reasons that are reviewable by a higher court. Although the court should err on the high side when determining the bond, it must not set an arbitrary high figure without justification.
In this case, it is estimated that the defendants will incur approximately $70,000 in costs related to changing promotional materials and reversing those changes if they prevail. Additionally, potential lost profits for the defendants are estimated at no more than $50,000. Consequently, the bond is set at $120,000. The preliminary injunction is granted, requiring the plaintiff to post the bond within seven days to enforce the injunction.
If the plaintiff fails to provide the bond, the injunction will automatically lapse. If the bond is posted, the injunction will remain effective until further court order. The plaintiff also claims that the defendants infringe its trademark by using it as a keyword in search engine advertising, but fails to demonstrate consumer confusion, leading to a waiver of the argument. The use of trademarks in keyword advertising does not violate the Lanham Act without evidence of likelihood of confusion.
