429 F.Supp.3d 768
D. Kan.2019Background
- No Spill, Inc. (Plaintiff) contracted with Scepter Manufacturing, LLC and Scepter Canada, Inc. (Defendants) in a 2013 Supply Agreement for Scepter to custom-mold, test, package and stock No Spill five‑gallon fuel containers for resale.
- Agreement terms included inventory/stocking obligations (initially 8–10 truckloads, later increased to 11 then 15 truckloads), an order-acceptance procedure (supplier must accept/reject within one business day), and an option for No Spill to purchase a Bekum blow‑molding machine per Exhibit D at a formulaic price.
- No Spill alleges that, after its market share grew, Scepter (1) reduced production and weekend work, (2) failed to maintain required inventory, (3) produced defective/poor-quality cans, and (4) refused to honor No Spill’s exercised option to buy the Bekum machine.
- No Spill sued for breach of contract (production failures and refusal to sell the machine), Lanham Act trade dress infringement, and Kansas unfair competition; Scepter moved to dismiss under Rule 12(b)(6).
- The court denied dismissal of the contract and IP claims except that it dismissed allegations seeking consequential damages (lost resale profits, lost revenues, lost sales) under the contract’s limitation of liability; direct UCC damages for nondelivery remain viable.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Adequacy of pleading performance for production‑breach (Count III) | No Spill alleges regular, consistent purchase orders, notice of defects, specific dates showing inventory shortfalls, and an altered course of performance re: weekend production | Scepter says No Spill failed to plead compliance with all contractual obligations and must plead specific orders/forecasts | Court: SAC alleges nonconclusory facts showing performance/willingness to perform; dismissal denied on this basis |
| Exercise of purchase option for blow‑molding machine (Count IV) | No Spill properly exercised the option in writing identifying the machine and serial number per Exhibit D | Scepter claims No Spill failed to state a price or make an offer to purchase | Court: Price was contractually fixed and notice adequately exercised the option; dismissal denied |
| Damages—limitation of liability (consequential vs direct) | No Spill seeks lost profits/lost sales but also seeks direct UCC damages (market price for nondelivery) | Scepter relies on contract clause barring incidental, indirect, special, consequential damages including lost profits/revenues | Court: Limitation unambiguously bars consequential lost resale profits/revenues/sales; direct damages under the UCC remain available; consequential damage claims dismissed |
| Trade dress – distinctiveness and likelihood of confusion (Count V) | No Spill alleges continuous national use since 1989, prominent advertising highlighting trade dress, intentional copying by Scepter, sales through major retailers, and pictorial comparisons | Scepter argues allegations are conclusory and products differ too much for confusion | Court: Allegations collectively plausibly plead secondary meaning and likelihood of confusion; dismissal denied |
| Trade dress – functionality | No Spill contends the specific combination of features (handle, horizontal tapered spout, tethered cap, color/shape) is nonfunctional and alternative designs exist | Scepter contends those features are functional (necessary to use/pour, cap tether, color mandated) | Court: Functionality is a factual question; SAC alleges nonfunctionality and alternative designs and survives pleading stage; dismissal denied |
| Kansas unfair competition (Count VI) | Derivative of trade dress claim: No Spill owns protectable trade dress and Scepter’s product causes confusion | Scepter disputed protectability and confusion | Court: Because trade dress claim survives, unfair competition claim also survives; dismissal denied |
Key Cases Cited
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (pleading must state a plausible claim)
- Ashcroft v. Iqbal, 556 U.S. 662 (two‑step plausibility test; legal conclusions not assumed true)
- Penncro Assocs., Inc. v. Sprint Spectrum, L.P., 499 F.3d 1151 (10th Cir.) (lost profits can be direct damages and not barred by a consequential‑damages clause in appropriate circumstances)
- Gen. Motors Corp. v. Urban Gorilla, LLC, 500 F.3d 1222 (10th Cir.) (trade dress elements and likelihood‑of‑confusion framework)
- TrafFix Devices, Inc. v. Marketing Displays, Inc., 532 U.S. 23 (functionality doctrine; Inwood test controls)
- Wal‑Mart Stores, Inc. v. Samara Bros., Inc., 529 U.S. 205 (product design trade dress presumptively requires secondary meaning)
- Inwood Laboratories, Inc. v. Ives Laboratories, Inc., 456 U.S. 844 (functionality test: feature is functional if essential to use or affects cost/quality)