Streamline Production Systems, Inc. v. Streamline Manufacturing, Inc.
2017 U.S. App. LEXIS 4708
| 5th Cir. | 2017Background
- SPSI (Streamline Production Systems) operated since 1993, manufactured custom natural-gas processing equipment, used a "Streamline" logo and placards on equipment, and registered the mark “Streamline Production Systems” in 2013.
- SMI (Streamline Manufacturing), founded 2009, also manufactured similar equipment, used the name/brand "Streamline" and the domain streamlinetx.com (which SPSI had previously used), and attached placards to its equipment without phone number.
- SPSI encountered vendor/customer confusion (misdirected payments, calls, and equipment identification); SMI also received some misdirected contacts but claimed initial unawareness of SPSI when choosing its name.
- SPSI obtained a stipulated injunction requiring SMI to change its name and stop using the domain; SPSI then sued for infringement and damages under the Lanham Act and Texas law; the case went to a five-day jury trial.
- The jury found SPSI had a valid trademark and that SMI infringed, awarded SPSI $230,000 each for a reasonable royalty, unjust enrichment, and exemplary damages (total $690,000), but found SMI earned zero profits from the infringement.
- On appeal the Fifth Circuit affirmed infringement but vacated all three damages awards for insufficient evidentiary support.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether "Streamline Production Systems" is legally protectable (distinctive) | Mark is at least suggestive/inherently distinctive (or has secondary meaning) | Mark is descriptive and lacks secondary meaning | Jury reasonably could find mark suggestive; affirmed protectability |
| Whether SMI's use created a likelihood of confusion | Similar marks, similar products, actual confusion anecdotes, similar logos/web presence produced a probability of confusion | Customers are sophisticated; limited advertising; SMI lacked intent to confuse | Considering eight "digits," sufficient evidence supported a likelihood of confusion; infringement affirmed |
| Whether monetary damages (royalty) were supported and rationally related to infringement | A reasonable royalty (expert hypothetical negotiation) fairly compensates SPSI for unauthorized use | No prior licensing negotiations; jury found SMI earned zero attributable profits; expert did not tie royalty to scope of appropriation | Royalty award lacked sufficient evidentiary/rational correlation to the infringement and was vacated |
| Whether unjust enrichment and exemplary damages were supported | SMI gained benefits (market entry, referrals) by using the mark; willfulness warranted exemplary damages | No evidence SMI palmed off goods, engaged in fraud, or acted willfully when choosing mark; most business from preexisting relationships | Insufficient evidence of wrongful acquisition of benefits or willfulness; unjust enrichment and exemplary damages vacated |
Key Cases Cited
- Boston Prof’l Hockey Ass’n v. Dallas Cap & Emblem Mfg., 597 F.2d 71 (5th Cir.) (royalty-based damages must be tied to negotiations/rights appropriated)
- Bandag, Inc. v. Al Bolser’s Tire Stores, 750 F.2d 903 (Fed. Cir.) (royalty awards require a rational correlation to the infringement)
- Xtreme Lashes, LLC v. Xtended Beauty, Inc., 576 F.3d 221 (5th Cir.) (mark distinctiveness spectrum; jury determination appropriate)
- Smack Apparel Co. v. Board of Supervisors, 550 F.3d 465 (5th Cir.) (digits of confusion framework for likelihood of confusion)
- Seatrax, Inc. v. Sonbeck Int’l, Inc., 200 F.3d 358 (5th Cir.) (injunctive relief may satisfy equities absent actual damages or willfulness)