Covertech Fabricating, Inc. v. TVM Building Products, Inc.
855 F.3d 163
| 3rd Cir. | 2017Background
- Covertech (manufacturer) developed and sold reflective-insulation products under the rFOIL umbrella (including the ULTRA mark); Covertech had a U.S. registration for rFOIL and later registered ULTRA in Canada.
- TVM (exclusive U.S. distributor) had a verbal exclusive distribution agreement (no written ownership clause); Covertech manufactured and sold products to TVM for resale; TVM handled U.S. marketing, customer service, and advertising.
- Relations soured after TVM bought competing products and on multiple occasions passed off competitors’ goods as Covertech’s; Covertech later entered a private-label arrangement with TVM, then terminated all dealings when illicit purchases continued.
- TVM filed a PTO application to register ULTRA in its name; Covertech filed an adverse petition at the PTO and sued TVM in federal court seeking cancellation, damages, and other relief for trademark infringement and fraud.
- District Court held for Covertech on ownership, fraud, acquiescence, and awarded TVM’s profits (~$4.05M); on appeal the Third Circuit affirmed ownership and fraud, rejected acquiescence defense, but vacated and remanded damages as an abuse of discretion.
Issues
| Issue | Covertech's Argument | TVM's Argument | Held |
|---|---|---|---|
| Ownership of ULTRA (unregistered) | Manufacturer presumptively owns mark; first-use and McCarthy factors favor Covertech | TVM argued it was first user/distributor and thus owner | Third Circuit adopts McCarthy test (presumption for manufacturer) and holds Covertech owns ULTRA (affirmed) |
| Fraud on the PTO (cancellation of TVM registration) | Boulding knowingly misrepresented TVM’s rights when applying; registration procured by fraud | TVM claimed mistake/no intent to deceive | Court found Boulding not credible and that intent to deceive was proven; registration cancelled (affirmed) |
| Acquiescence / Laches | No implied consent; Covertech acted reasonably once widespread infringement was discovered | TVM argued Covertech’s delay and prior tolerance barred relief | Laches waived on appeal; acquiescence rejected — no affirmative consent, suit timely after discovery (affirmed) |
| Damages (award of defendant’s profits) | District Court’s profits award appropriate under equitable discretion | TVM argued award lacked evidentiary foundation; requested statutory damages alternative | Third Circuit held award was unsupported guesswork (used gross industry sales and arbitrary 30% reduction); vacated and remanded to allow plaintiff to elect statutory damages (vacated/remanded) |
Key Cases Cited
- United Drug Co. v. Theodore Rectanus Co., 248 U.S. 90 (recognition of first-in-time, first-in-right principle for unregistered marks)
- Ford Motor Co. v. Summit Motor Prods., Inc., 930 F.2d 277 (3d Cir.) (application of first use test)
- Doeblers’ Pa. Hybrids, Inc. v. Doebler, 442 F.3d 812 (3d Cir.) (discussing McCarthy factors in manufacturer-distributor context)
- Sengoku Works Ltd. v. RMC Int’l, Ltd., 96 F.3d 1217 (9th Cir.) (endorsing a McCarthy-based approach)
- TMT N. Am., Inc. v. Magic Touch GmbH, 124 F.3d 876 (7th Cir.) (approving McCarthy factors)
- In re Bose Corp., 580 F.3d 1240 (Fed. Cir.) (standard for fraud on the PTO: knowing, material misrepresentation with intent to deceive)
- Marshak v. Treadwell, 240 F.3d 184 (3d Cir.) (intent to deceive may be inferred from circumstantial evidence)
- Banjo Buddies, Inc. v. Renosky, 399 F.3d 168 (3d Cir.) (district court discretion in awarding profits; reliance on record evidence required)
- Venture Tape Corp. v. McGills Glass Warehouse, 540 F.3d 56 (1st Cir.) (upholding profits awards when gross sales tied to infringing sales)
- WMS Gaming Inc. v. WPC Productions Ltd., 542 F.3d 601 (7th Cir.) (similar guidance on grounding profit awards in record)