[00:00:00] Speaker 03: OK, the next argued case is number 21, 2311, Soclean Incorporated against Sunset Health Care Solutions. [00:00:13] Speaker 03: Mr. Labbe. [00:00:20] Speaker 04: Good morning, Your Honors. [00:00:22] Speaker 04: May it please the Court, John Labbe on behalf of defendant appellant Sunset Health Care Solutions. [00:00:30] Speaker 04: We raised two issues in our appeal, Your Honors, that of secondary meaning and functionality. [00:00:36] Speaker 04: I'd like to first address the issue of secondary meaning. [00:00:40] Speaker 04: This is a case about trade dress. [00:00:42] Speaker 04: And as the Court knows, in the context of trade dress, there are two different types of trade dress. [00:00:46] Speaker 04: There's trade dress in product packaging, and there's also a trade dress. [00:00:52] Speaker 02: It's also a case of a preliminary injunction. [00:00:55] Speaker 04: It is a case of a preliminary injunction. [00:00:56] Speaker 02: That's reviewed on an abuse of discretion. [00:00:59] Speaker 02: And the trial court was very careful and issued a very narrow preliminary injunction. [00:01:08] Speaker 04: That is correct, Your Honor. [00:01:10] Speaker 04: The district court did issue an arrow in Jiangxin, but it nevertheless did so in making several errors in finding that the plaintiff is likely to succeed on the issue of secondary meaning in this case. [00:01:24] Speaker 00: I hate to interrupt your train of thought, but I just thought maybe this is opportune to ask you, what's the current status of this case? [00:01:31] Speaker 00: Is it proceeded to trial, or is it [00:01:35] Speaker 04: The case is not proceeded to trial, Your Honor. [00:01:38] Speaker 04: There are a number of motions pending at the district court that have not been decided. [00:01:44] Speaker 04: There is a motion pending to enforce a settlement agreement, Your Honor, and that is pending before the district court. [00:01:52] Speaker 04: I'm sorry, Your Honor. [00:01:54] Speaker 00: OK. [00:01:54] Speaker 00: That's enough to know. [00:01:55] Speaker 00: I just wanted to know if anything dispositive had been done so far. [00:01:59] Speaker 04: Nothing dispositive has been done, Your Honor. [00:02:02] Speaker 04: Yes, correct. [00:02:04] Speaker 00: Sorry to interrupt your change. [00:02:06] Speaker 04: Not at all, Your Honor. [00:02:07] Speaker 04: But I would like to address the errors that the Disha Court made in reaching this conclusion. [00:02:12] Speaker 04: In the case of product configuration trade dress, the Supreme Court has said that product configuration can only be protected as trade dress upon a showing of secondary meaning, upon acquired distinctiveness. [00:02:25] Speaker 04: It can never be inherently distinctive. [00:02:27] Speaker 04: And that's very important because product configuration, the configuration of a product itself, [00:02:33] Speaker 04: typically does not serve a trademark function. [00:02:37] Speaker 04: It typically does not serve as a source identifier. [00:02:41] Speaker 04: And therefore, if you go to the trademark office and sync a registration, you're required to present actual evidence of acquired distinctiveness in order to obtain a registration on product configuration. [00:02:54] Speaker 00: So which, I mean, there are a lot of arguments in the breach. [00:02:56] Speaker 00: So I'm getting confused on which one you're talking about. [00:02:59] Speaker 00: So are you now on your argument about there was no presumption [00:03:03] Speaker 00: that should have a nerd here, or are you now arguing on, even if you have the burden, you met it? [00:03:08] Speaker 00: Can you be a little more specific? [00:03:11] Speaker 04: Yes, Your Honor, and I was just teeing up the issue somewhat. [00:03:14] Speaker 04: But I would say that the argument that we're making is that, yes, there's a presumption, but it's been overcome here. [00:03:22] Speaker 04: And we think that the district court made two different errors. [00:03:25] Speaker 00: Overcome because the registration was faulty in terms of an issue? [00:03:29] Speaker 00: Or overcome based on the record in this case? [00:03:32] Speaker 04: Both issues. [00:03:34] Speaker 04: Both issues, Your Honor, yes. [00:03:36] Speaker 04: So we think that the district court made two mistakes here. [00:03:38] Speaker 04: We think the district court made a mistake in giving too much deference to the trademark examiner, where there was never any evidence of actual, no actual evidence of secondary meaning was presented to the trademark examiner. [00:03:51] Speaker 04: And we think the district court made an error by applying a heightened standard of proof that called upon our client to present vigorous evidence that there was no secondary meaning [00:04:01] Speaker 04: What happened in this instance is that the trademark examiner issued the registration based only on a declaration of five years of use. [00:04:10] Speaker 04: But the declaration of five years of use is not evidence that the product configuration has been used in a trademark way. [00:04:19] Speaker 04: And that's what's important. [00:04:20] Speaker 00: But the problem for you is the law. [00:04:22] Speaker 00: You could have opposed the registration, the application, which you did not do. [00:04:27] Speaker 00: And it seems quite clear. [00:04:29] Speaker 00: that at this stage of the game, the district court is not free to reassess the validity of the initial thing and that there's a presumption of validity. [00:04:40] Speaker 00: And there's a statutory requirement. [00:04:42] Speaker 00: Registration shall be prima facie evidence of the validity of the registered mark. [00:04:47] Speaker 00: So you're saying that in this instance, the district court in a preliminary injunction should have reevaluated whether the registration was properly issued in the first instance and not applied the statutory presumption. [00:05:00] Speaker 00: Is that your argument? [00:05:01] Speaker 04: Well, the statutory presumption would apply, Your Honor. [00:05:03] Speaker 04: But we're talking about what needs to be shown to overcome that statutory presumption. [00:05:08] Speaker 00: OK, that's a different issue. [00:05:09] Speaker 00: OK, so that's whether it's in its preponderance of the evidence. [00:05:12] Speaker 04: Correct, Your Honor. [00:05:12] Speaker 04: But I think it's very important that acquired distinctiveness must be demonstrated. [00:05:18] Speaker 04: Because this is an application under section 2f of the Lanham Act that requires a demonstration of acquired distinctiveness. [00:05:25] Speaker 04: And Section 2F does allow for the possibility that five years' use can be prima facie evidence, but that does not apply in this instance because what the statute calls for is what the statute says is that five years' use may be prima facie evidence that the mark has become distinctive because with proof of substantially exclusive and continuous use thereof as a mark. [00:05:52] Speaker 04: there has to be evidence that the product configuration was used in commerce as a mark, that it was used in a trademark way. [00:05:59] Speaker 00: So again, are you questioning the initial registration and asking the judge not to apply the presumption of validity based on that registration? [00:06:08] Speaker 04: I think it's a little nuanced, Your Honor, in the sense that I'm not saying that. [00:06:12] Speaker 04: No. [00:06:12] Speaker 04: What I am saying, however, is that the district court may look at the evidence and should look at the evidence that was presented to the examiner. [00:06:19] Speaker 04: in considering whether there was ever any evidence, any actual evidence of secondary meaning. [00:06:25] Speaker 04: Here, the district court found that there was no actual evidence of secondary meaning attributed to this product configuration. [00:06:31] Speaker 04: The district court said there was a dearth of such evidence. [00:06:34] Speaker 04: And so on the one hand, you have no evidence of secondary meaning in a product configuration [00:06:41] Speaker 04: How can that be protectable as a trademark where there is no evidence of secondary meaning with respect to that product configuration? [00:06:53] Speaker 04: I think that it's inconsistent both with the statutory requirement. [00:06:57] Speaker 04: It's also inconsistent with controlling case law. [00:07:00] Speaker 04: I would note that the way that I'm emphasizing the statute 2F, that the [00:07:06] Speaker 04: that the product configuration must be used as a mark is something that this court has recognized in in Ray R.M. [00:07:12] Speaker 04: Smith that we cite in our brief at page 17, emphasizing that same language, finding in that case that eight years of use of a product wasn't enough because it wasn't demonstrated that the product was used in a trademark way. [00:07:25] Speaker 04: And as the First Circuit noted in the Yankee Candle case, yes, using a product, extensive use of a product over a period of time [00:07:36] Speaker 04: is one piece of evidence, but it doesn't show that the product configuration is being used in a trademark way. [00:07:46] Speaker 04: Basically, any product, anybody, after they've been selling a product for five years, could apply for a trade dress registration based on the shape of their product. [00:07:56] Speaker 04: They can obtain that trade dress registration. [00:07:58] Speaker 04: Your Honor correctly noted that we didn't oppose it. [00:08:00] Speaker 04: Our client didn't happen to know about it at the time. [00:08:03] Speaker 00: Well that's, I mean there's notice, statutory notice provided, so that's not, that's on you. [00:08:11] Speaker 04: Well I understand that, but nevertheless you can envision a situation like the one here where someone could obtain the registration without having to demonstrate secondary meaning and then obtain a [00:08:23] Speaker 00: but the statute says that there'll be a presumption of validity given the registration so you're saying that that really doesn't apply or that only applies if your client knew about it [00:08:39] Speaker 00: and didn't challenge, I don't understand how you expect us to deviate. [00:08:45] Speaker 00: Has any circuit deviated from application of that requirement, notwithstanding questions that might be raised about the initial registration? [00:08:53] Speaker 04: We're not saying that, Your Honor. [00:08:54] Speaker 04: We're not saying that there's not a presumption here. [00:08:57] Speaker 04: We are saying, however, that it's corrected that the district court should not have ignored the evidence that was put forth in favor of the registration. [00:09:05] Speaker 04: The district court [00:09:06] Speaker 04: found that its hands were essentially tied because of the presumption. [00:09:10] Speaker 04: But the district court has authorized the fine. [00:09:12] Speaker 00: Well, you had the ability here to rebut the presumption under ponderance of the evidence. [00:09:17] Speaker 00: You had an opportunity to put on evidence. [00:09:19] Speaker 00: And the district court weighed the evidence and rejected your evidence. [00:09:25] Speaker 04: Well, but only by applying a heightened standard of review, Your Honor. [00:09:28] Speaker 04: The district court. [00:09:29] Speaker 04: Go ahead. [00:09:30] Speaker 04: But the district court said that it was on us to come forth with vigorous evidence to disprove. [00:09:37] Speaker 00: Yeah, I get that. [00:09:38] Speaker 00: So that's your second argument, and I appreciate that. [00:09:41] Speaker 00: I just think [00:09:42] Speaker 00: speaking obviously only for myself, that even though that phrase may be a little problematic, at the end of the day, it's kind of harmless error because her conclusion, her ultimate conclusion was that your evidence was equivocal at best. [00:10:00] Speaker 00: And I think that's the argument I think the other side makes. [00:10:07] Speaker 00: that it's kind of harmless error, because when you look at the entirety of her review of the evidence, she didn't deviate from the preponderance of the evidence. [00:10:17] Speaker 04: So your honor, I would suggest that the district court would have reached a different conclusion in this case if it had not applied that standard, because we did have some evidence. [00:10:25] Speaker 04: And I know that the district court says it's equivocal, but there was some evidence. [00:10:29] Speaker 04: If you look at their advertising, [00:10:31] Speaker 04: They never advertise this feature as a source identifier. [00:10:33] Speaker 04: Instead, they tell it. [00:10:34] Speaker 02: The district court said Sunset has not introduced any survey evidence tending to indicate that SoClean's product design has not acquired a secondary meaning. [00:10:47] Speaker 02: And so ultimately, it relied on a presumption of validity. [00:10:55] Speaker 04: Well, that's correct, Your Honor. [00:10:56] Speaker 04: We did not come forth with survey evidence. [00:10:58] Speaker 04: But survey evidence is not required. [00:11:00] Speaker 04: You can have circumstantial evidence as to secondary meaning or a lack thereof. [00:11:06] Speaker 03: Some rebuttal is required by the statute when there's a presumption, and I gather there wasn't any. [00:11:14] Speaker 04: Well, there was some rebuttal in that we were pointing to the type of advertising that they used. [00:11:19] Speaker 03: Rebuttal was an attorney argument. [00:11:23] Speaker 04: The rebuttal was circumstantial evidence, Your Honor. [00:11:26] Speaker 04: The rebuttal was pointing to the type of advertising that they used, pointing to the testimony of their chief marketing officer, who was unable to identify and acknowledge that customers actually associate this design with the filter. [00:11:40] Speaker 03: I think that the... You're saying they didn't meet the requirement for the presumption, not that you met the requirement for rebuttal. [00:11:54] Speaker 03: Is that what I hear you say? [00:11:55] Speaker 04: Well, I don't intend to say it that way, Your Honor. [00:11:57] Speaker 04: I understand the issue here, as you're putting it. [00:12:01] Speaker 04: But to us, there has to be some evidence at some point required of the applicant that there was some evidence of secondary meaning. [00:12:11] Speaker 04: And here, the district court found that there was none, that there had never been any actual evidence. [00:12:15] Speaker 04: And I understand that there's a presumption, but that presumption [00:12:18] Speaker 04: to be overcome by a preponderance of the evidence, it seems to us that on the one hand, you've got a birth of evidence. [00:12:23] Speaker 04: On the other hand, you've got just a little bit of evidence. [00:12:26] Speaker 04: That should be enough to say that the examiner made a mistake. [00:12:28] Speaker 00: Was it complaining not about the presumption, but about the standard that they didn't meet the preponderance of the evidence, that you didn't meet the preponderance of the evidence standard? [00:12:38] Speaker 00: Your argument keeps on shifting. [00:12:39] Speaker 00: I'm sorry. [00:12:40] Speaker 00: But there are two separate issues in my mind. [00:12:43] Speaker 00: And you keep on sort of moving back and forth between this presumption issue and then assuming there is a presumption, whether you met the correct standard, whether the district court applied the correct standard. [00:12:54] Speaker 00: And I'm getting a little confused. [00:12:57] Speaker 04: We're not saying there's not a presumption, Your Honor. [00:12:59] Speaker 04: So if I make it sound like that's what we're saying, I don't intend to do so. [00:13:04] Speaker 04: But we are questioning what is required to overcome that presumption. [00:13:08] Speaker 00: And I think the first point I would make is it not the preponderance of evidence? [00:13:12] Speaker 00: So you're not disputing that as the legal standard? [00:13:18] Speaker 04: That is what the cases have said. [00:13:20] Speaker 00: So is your argument just that the district court got it wrong by concluding that you had not met the ponderance of the evidence standard? [00:13:27] Speaker 04: Well, we think that the district court only reached the conclusion it did by applying a heightened standard, by saying that the standard was on us to come forward with vigorous evidence, and by also saying that its hands were tied and that it couldn't review what the examiner had done. [00:13:40] Speaker 04: We think that the statute expressly authorizes it to review what the examiner had done. [00:13:44] Speaker 04: And we think it's different than a patent case. [00:13:46] Speaker 04: Here, they were proceeding under Section 2F of the Lanham Act that requires evidence of acquired distinctiveness. [00:13:51] Speaker 04: I'm not saying there wasn't a presumption once the examiner issued that registration. [00:13:55] Speaker 04: I'm just saying that the district court was then authorized to review that registration and to find that it should not have issued, that there was a likelihood of success on our side. [00:14:04] Speaker 02: Council, at bottom, we're talking about an abusive discretion standard here. [00:14:09] Speaker 02: And I haven't heard that language. [00:14:11] Speaker 02: You're really arguing the merits. [00:14:13] Speaker 04: Well, we're arguing that the District Court applied an erroneous legal standard, which the First Circuit has said is always an abuse of discretion. [00:14:20] Speaker 04: So the erroneous legal standard was applying a heightened standard of review and finding that its hands were tied. [00:14:26] Speaker 04: I see that I'm running a little on time. [00:14:27] Speaker 04: I don't know if you'd like me to address the functionality issue or perhaps I should reserve my time. [00:14:31] Speaker 03: Let's hear from the other side on these slides. [00:14:34] Speaker 01: Okay. [00:14:34] Speaker 03: Thank you, your honor. [00:14:36] Speaker 03: Mr. Cox, when you're ready. [00:14:38] Speaker 01: Thank you very much, your honor. [00:14:38] Speaker 01: Good morning, your honor. [00:14:39] Speaker 01: My name is Brendan Cox. [00:14:41] Speaker 01: May it please the court. [00:14:43] Speaker 01: The most important element of the entire petition to keep in mind is that the nature of the injunction that was issued is [00:14:55] Speaker 01: very precisely tailored, narrowly tailored, and appropriately evaluated after the judge's, after the district court's assessment of the evidence presented, and a correct application of the law to enjoin, so to speak, defendant, appellant, sunset, only from marketing, selling its identical, indistinguishable filters with no other markings. [00:15:25] Speaker 00: We appreciate that. [00:15:26] Speaker 00: But if we all agree that the examiner, something went awry here during the examination, is there any way to fix it? [00:15:37] Speaker 00: Is there any way, once it gets to court or whatever, or does that presumption of validity stick no matter what? [00:15:46] Speaker 01: That's an interesting question. [00:15:49] Speaker 02: All questions from the bench are presumed to be interesting. [00:15:53] Speaker 01: I appreciate that, and I would love to take an hour over a cup of coffee or a cup of tea to discuss it in depth. [00:15:59] Speaker 01: But with the time that I have here, I would say that the presumption at this stage, at the stage of a preliminary injunction evaluation, the presumption has to control. [00:16:10] Speaker 01: The district court judge doesn't have [00:16:12] Speaker 00: necessarily before it uh... a full fully are you record full uh... fully detailed records that you had said yes it's sticks and they can overcome it but this the group presumption remains because they could have challenged it at the outset we're not going there okay let me ask you [00:16:33] Speaker 00: On assuming the presumption applies, there's a second issue about the district court having applied a heightened standard that is beyond the standard she should have applied. [00:16:44] Speaker 00: And it sure sounds like talking about vigorous evidentiary requirements, either by direct or circumstantial evidence, seems [00:16:55] Speaker 00: stronger or different than preponderance of evidence. [00:16:59] Speaker 00: So is your view that she was right in the standard or that it was harmless error? [00:17:04] Speaker 00: Because if you look at the details of her analysis, she did the right thing under the appropriate standard. [00:17:10] Speaker 01: From SoClean's perspective, Your Honor, it is both SoClean's position that the district court judge applied the correct standard, which is preponderance of the evidence. [00:17:19] Speaker 01: However, if she applied a vigorous evidentiary standard, it was harmless error. [00:17:24] Speaker 01: From SoClean's perspective, I would say that the references to the vigorous evidentiary standard are essentially dicta in this memorandum and order. [00:17:32] Speaker 01: They are quoting the language from Yankee Candle in the district court's analysis of the secondary meaning evaluation, what she did to evaluate the secondary meaning. [00:17:45] Speaker 01: And in that context, she's just quoting the [00:17:49] Speaker 01: the language of Yankee Candle, but in her actual analysis, in the district court judge's actual analysis of secondary meaning, she applies the correct proponents of the evidence standard by frankly, in SoClean, excuse me, in Sunset, the defendant appellant seems to want to discredit all of SoClean's circumstantial or secondary consideration, secondary meaning evidence. [00:18:18] Speaker 01: but only give credit, only give weight to Sunset's own purported evidence with respect to secondary meaning. [00:18:27] Speaker 01: But that's not how it works. [00:18:28] Speaker 01: And the district court judge evaluated that. [00:18:31] Speaker 01: SoClean did have and does have substantial evidence that was before the district court judge and that's in the record of secondary meaning, including the length of SoClean sales, for example, the length of SoClean sales, the type and nature of its advertising, [00:18:46] Speaker 01: Frankly, the district court judge in the record of the transcript of the hearing on the preliminary injunction, the judge noted that Sunset's item, the filter, is identical and indistinguishable. [00:19:09] Speaker 01: And Sunset has failed to distinguish that filter in any way, which suggests, frankly, [00:19:15] Speaker 01: as does this appeal, that there is some secondary meaning in the filter itself. [00:19:19] Speaker 01: There's some reason that Sunset, defendant appellant, wants to market and sell that filter online without obvious branding that the filter comes from Sunset instead of SoClean. [00:19:33] Speaker 01: That suggests secondary meaning as well. [00:19:35] Speaker 01: So there is evidence before the court, there was evidence before the district court, also evidence in the appendix for this appeal, that suggests there is ample [00:19:45] Speaker 01: or at least enough on so clean side evidence to find secondary meaning with respect to this trade dress, at least enough at the preliminary injunction stage to both support a finding of secondary meaning and also then in conjunction with the presumptions of validity with respect to the trademark, defeat any challenge or defeat the, as the district court judge noted, equivocal evidence presented by Sunset with respect to that issue. [00:20:18] Speaker 01: So with respect to that, that's Sunset's position, or sorry, excuse me, that's Soclean's position. [00:20:24] Speaker 02: I apologize for that. [00:20:30] Speaker 01: It's those S's they get me. [00:20:32] Speaker 01: However, with that said, the fact remains that from Soclean's position, plaintiff of police position, the issue before the court is very clear. [00:20:44] Speaker 01: It's pretty straightforward on the law. [00:20:46] Speaker 01: uh... it is an abuse of discretion standard barring some clear with respect to uh... uh... finding a fact or application of a release legal standard which i mentioned from so clean's position with respect to the legal standard district court has applied the correct one or to the extent that she may not have it was harmless air given the uh... evidence before the court and with that and frankly [00:21:12] Speaker 01: I'm happy to address any other questions that the court may have or the panel may have, but I think it's fairly straightforward. [00:21:17] Speaker 02: Do you think the issue is so clear? [00:21:19] Speaker 01: I do think that the issue is clear. [00:21:21] Speaker 01: To be candid with the court, I do. [00:21:26] Speaker 01: All the district court just said was, if Sunset wants to sell its filters online, it has to do so with markings that are obvious enough or evident enough or prominent enough to avoid a likelihood of confusion for the customer. [00:21:42] Speaker 01: And that is an appropriate, well-tailored decision that is well-reasoned in the district court's memorandum and order from SoClean's perspective. [00:21:58] Speaker 03: Any more questions? [00:21:59] Speaker 03: Okay. [00:22:00] Speaker 03: Thank you, counsel. [00:22:02] Speaker 04: Thank you, Your Honor. [00:22:03] Speaker 04: Thank you, Your Honors. [00:22:04] Speaker 04: I'll just attempt to briefly conclude here. [00:22:09] Speaker 04: We understand that there's an abuse of discretion standard here, but just again, our view is that the district court entered this preliminary injunction only by making errors of law. [00:22:19] Speaker 04: And just focusing on the secondary meaning issue, we continue to believe that there were two errors of law. [00:22:25] Speaker 04: One, finding that the district court's hands were tied in reviewing what the trademark office did. [00:22:31] Speaker 04: And secondly, in applying a heightened standard of proof. [00:22:35] Speaker 04: And I would just underscore the language of the First Circuit [00:22:38] Speaker 04: in the Yankee Candle decision where the court said in the absence of any evidence that the claim trade dress actually does identify a product source, the trade dress should not be entitled to protection. [00:22:49] Speaker 04: And that's consistent with the language of the Lanham Act section 2F that requires evidence that the mark is used as a mark. [00:23:00] Speaker 04: It has to be evidence that the mark was used as a mark. [00:23:03] Speaker 04: And while we understand that there was a registration was issued here [00:23:07] Speaker 04: the district court should have looked at the evidence and applying merely upon the evidence standard on the one hand, where there was a dearth of evidence of secondary meaning. [00:23:17] Speaker 04: On the other hand, some evidence that there was not secondary meaning, the district court should have corrected the patent offices, the trademark offices mistake and found that there was a likelihood of success that the registration would have been found invalid and not issued an injunction. [00:23:35] Speaker 04: With that, I'll conclude and we respectfully ask the court to reverse the district court's entry of a preliminary injunction. [00:23:46] Speaker 04: Thank you, Your Honors. [00:23:47] Speaker 03: Thank you. [00:23:48] Speaker 03: Thanks to both counsels. [00:23:50] Speaker 03: The case is taken under submission.