875 F.3d 426
9th Cir.2017Background
- Stone Creek began using the STONE CREEK mark (red oval logo) in Arizona in 1990, obtained state protection in 1992, and federally registered the mark in 2012.
- Omnia, a leather furniture manufacturer, manufactured STONE CREEK‑branded furniture for Stone Creek under a business relationship beginning in 2003.
- Beginning in 2008 Omnia copied Stone Creek’s logo and sold identical STONE CREEK‑branded furniture to retailer Bon‑Ton for Midwest sale without Stone Creek’s authorization; Omnia admitted this use in email communications discovered in 2013.
- Omnia’s STONE CREEK‑labeled products were sold at Bon‑Ton stores and reached purchasers within ~200 miles of those stores across several Midwest states.
- Stone Creek sued in the District of Arizona for federal and common‑law trademark infringement and unfair competition; the district court found no likelihood of confusion and rejected some claims, prompting this appeal.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Likelihood of confusion under the Lanham Act | Stone Creek: identical marks on identical goods sold in overlapping channels create a strong likelihood of confusion (fanciful mark, evidence of actual confusion, Omnia’s intent) | Omnia: geographic separation and limited brand recognition in the Midwest reduce confusion | Reversed district court: use of identical mark on identical goods, fancifulness, overlapping channels, actual confusion, and Omnia’s intent establish likelihood of confusion |
| Tea Rose–Rectanus common‑law defense (remote good‑faith use) | Stone Creek: Omnia knew of Stone Creek’s prior use, so no good faith; defense inapplicable | Omnia: acquired prior common‑law rights in the Midwest before Stone Creek’s federal registration and acted in good faith | Affirmed district court rejection: knowledge defeats Tea Rose–Rectanus good‑faith requirement; Omnia cannot claim the defense |
| Willfulness as prerequisite for disgorgement of profits | Stone Creek: 1999 amendment to §1117 removed willfulness requirement for profit disgorgement | Omnia: Ninth Circuit precedent requires willfulness before awarding defendant’s profits | Willfulness remains required under Ninth Circuit law; remanded to determine if Omnia acted willfully |
| Sanctions under 28 U.S.C. §1927 | Stone Creek: summary judgment motion on willfulness and pursuit of actual damages were reasonable given unsettled law | Omnia: motions multiplied proceedings and forced unnecessary defense costs | Mixed: reversed sanctions for Stone Creek’s willfulness summary‑judgment motion (nonfrivolous); affirmed sanctions for pursuing a meritless actual damages claim after lacking evidence |
Key Cases Cited
- Rearden LLC v. Rearden Commerce, Inc., 683 F.3d 1190 (9th Cir. 2012) (describes likelihood of confusion standard)
- Gilman v. Brown, 814 F.3d 1007 (9th Cir. 2016) (review standards where district court applied wrong legal standard)
- AMF Inc. v. Sleekcraft Boats, 599 F.2d 341 (9th Cir. 1979) (Sleekcraft multi‑factor likelihood of confusion test)
- Brookfield Commc’ns, Inc. v. W. Coast Entm’t Corp., 174 F.3d 1036 (9th Cir. 1999) (virtual identity of marks on identical goods is dispositive)
- Lindy Pen Co. v. Bic Pen Corp., 982 F.2d 1400 (9th Cir. 1993) (profits disgorgement in trademark cases requires willfulness under principles of equity)
- Hanover Star Milling Co. v. Metcalf, 240 U.S. 403 (U.S. 1916) (origin of Tea Rose doctrine; good faith tied to lack of knowledge)
- United Drug Co. v. Theodore Rectanus Co., 248 U.S. 90 (U.S. 1918) (Tea Rose–Rectanus explained; protection for innocent remote users)
- Romag Fasteners, Inc. v. Fossil, Inc., 817 F.3d 782 (Fed. Cir. 2016) (analysis concluding 1999 amendment did not eliminate willfulness requirement)