Lead Opinion
For over 30 years, Bar’s Products (Bars) and Bars Products International (BPI) shared the worldwide market for “Bar’s Leaks” brand automotive supplies. Bars sold in the United States and Canada; BPI sold internationally. This relationship soured in 2007 when Bars started selling products abroad under a different brand name, and BPI responded by promoting its products at a Las Vegas trade show. Bars sued BPI, alleging trademark infringement and unfair competition; BPI countered with breach-of-contract and unfair-competition claims. The district court dismissed all of Bars’s claims but allowed a jury to consider BPI’s counterclaims. The jury awarded BPI $1,560,195 for breach of contract and $974,849 for unfair competition. On appeal, Bars argues that the district court erred in denying its motion for judgment as a matter of law on both of BPI’s counterclaims and by refusing to grant Bars leave to amend its trademark claim. We AFFIRM in part and REVERSE in part.
I.
In 1947, Fred Barton developed a radiator stop-leak product and later established Bars to market it. Barton protected his invention through patents and trademarks, holding some in his individual capacity and others through Bars or Barton’s wholly-owned company, Huki Lau. Over the next two decades, Barton built an international distribution chain by selling raw materials to companies licensed to produce and sell Bars’s signature brand of “Bar’s Leaks” products.
BPI began as one of Bars’s foreign licensees. In 1973, Barton, Huki Lau, and Bars executed a series of agreements to “sell, assign and transfer” to BPI “all foreign business in any and all countries foreign to the United States except Canada including all right, title and interest in any and all ... foreign inventions, patents, trademarks '... together with the good will of the foreign business.” Bars was a party to only one of those agreements; Barton or Huki Lau executed the rest in their own names.
This relationship deteriorated in the early 2000s when Bars increased the price of raw materials and proposed to purchase back all of BPI’s assets and goodwill. When BPI refused, Bars demanded a two-month lead time on all orders, which, when combined with the price increase, prompted BPI to open its own plant to manufacture the ingredients necessary to produce Bar’s Leaks products. Bars later purchased the rights to the “Rislone” brand and began selling automotive products internationally under that label in 2007. At trial, Bars’s President admitted that some Rislone products it sold abroad were the “same thing” as what Bars sold domestically. Moreover, some of those products referenced “Bar’s Leaks” or “Bar’s Products” on their labels. This marked the first time Bars sold products outside the United States without BPI’s blessing.
BPI attended the Las Vegas products expo with its own independent booth for the first time in 2010. Displeased, Bars filed the present lawsuit, asserting trademark infringement and unfair competition. BPI counterclaimed for breach of contract and unfair competition, maintaining that Bars breached the 1973 agreements by selling automotive products abroad.
The district court dismissed Bars’s trademark claim and refused leave to amend. Following three-and-a-half years of motion practice, Bars and BPI finally tried the case before a jury. At the close of evidence, BPI moved under Federal Rule of Civil Procedure 50 for judgment as. a matter of law on Bars’s remaining claims, which the court granted, and Bars does not appeal. The district court denied Bars’s Rule 50 motion on BPI’s breach-of-contract and unfair-competition counterclaims. The jury then returned a verdict for BPI on both counterclaims and awarded it $1,560,195 in breach-of-contract damages and $974,849 as damages for unfair competition. After the verdict, Bars renewed its motion for judgment as a matter of law, or in the alternative for a new trial or remittitur, which the district court denied. Bars appeals, taking issue with the district court’s denial of its Rule 50 motions and the court’s refusal to grant it leave to amend its trademark claim.
II.
A. Breach of Contract
Bars first argues that the district court should have granted its renewed motion for judgment as a matter of law on BPI’s breach-of-contract counterclaim. We review this decision de novo. Barnes v. City of Cincinnati,
1. Scope of the 1973 Agreements
Bars argues that the district court erred by allowing the jury to consider all the 1973 transferring assignments as part of the “contract” that obligated Bars, even though Barton and Huki Lau, not Bars, signed many of those assignments. At trial and on appeal, Bars maintains it should be bound only by the single agreement it signed.
The parol evidence rule forbids the introduction of evidence of prior or contemporaneous agreements to vary the terms of a written instrument that purports to be the “final expression of [the parties’] agreement.” Mich. Comp. Laws § 440.2202; United Precision Prods, Co. v. Avco Corp.,
Nothing in the single agreement Bars signed identifies the writing as the “final expression” of the parties’ agreement. All the extrinsic evidence points in the other direction. Barton founded Bars and served as its president and majority shareholder for over 20 years until just before he made the assignments at issue. Barton also owned Huki Lau, which shared an address with Bars in 1973. And during the period leading up to the 1973 agreements, Bars, Barton, and Huki Lau operated as a single entity: Bars sold product through license agreements that Barton held in his individual capacity, using intellectual property that Barton or Huki Lau owned. A 1973 letter from Bars’s counsel to BPI—written after Barton sold his shares in Bars— acknowledges this reality. The letter references “proper Assignments from Frederic D. Barton, Huki Lau Inc. and [Bars] to [BPI],” and confirms that “[t]hese assignments are perfect and everything now appears to be in order for commencing transfer of all rights to [BPI].”
Despite all this, Bars claims that “BPI failed to submit any evidence that Barton had the authority to enter into agreements on behalf of Bars.” Yet, as the district court noted, none of the signatories testified at trial, meaning that BPI needed to rely on circumstantial evidence to show that Bars intended to be bound by the Barton and Huki Lau assignments. That evidence strongly suggests that the 1973 agreements were a package deal.
2. Breach
Bars argues that even considering all the agreements as a single contract, BPI' produced no evidence of breach. At trial, BPI argued that Bars breached the contract by: (1) applying for foreign trademark registrations in countries where BPI owned the relevant trademarks; (2) selling products with the “Bar’s Leaks” trademark outside the U.S. and Canada; and (3) selling products .under the “Rislone” brand to customers outside the U.S. and Canada.
The jury awarded BPI $1,537,659 in damages for “sales of items other than Bar’s Leaks outside the United States and Canada.” This could only mean Rislone and the raw materials used to make Ris-
BPI disclaims ever arguing that the 1973 agreements contain a non-compete provision or implied non-solicitation covenant. BPI maintains that it purchased “the exclusive rights to sell the Bars’ product line in all countries (outside of the U.S. and Canada),” and Bars breached by selling automotive products abroad, whether labeled as “Bar’s Leaks” or “Rislone,” and regardless of whether those products existed in 1973.
The district court instructed the jury that it could construe the contract as including either an agreement that limits competition or an implied non-solicitation covenant. The general verdict form, however, asked only whether “Bars breached an enforceable contract.”
“When one of several claims submitted to the jury should not have been submitted, ‘a general verdict ... cannot stand.’ ” Doherty v. Am. Motors Corp.,
a. Non-Competition Theory
Bars argues that in the absence of a non-compete provision in the 1973 agreements, BPI could have no tenable claim. According to Bars, non-compete agreements must be “expressly reserved in a contract,” and because the 1973 assignments did not do so, the district court ought to have ruled in favor of Bars on BPI’s non-competition theory of breach.
- Before addressing the merits, BPI suggests that Bars waived this argument by failing to object to the jury instructions. But because Bars argued that the agreements lack a non-compete agreement in multiple motions before the district court—including in its motion for judgment as a matter of law before the court gave the pertinent instructions—Bars preserved this argument for appeal. See K&T Enters., Inc. v. Zurich Ins. Co.,
By framing our interpretative task narrowly—does the contract include an express non-competition provision—Bars invites the answer: clearly not. That, says BPI, is not the right question: The jury was not asked to find an express non-competition provision in the contract. The district court instructed the jury that it could find the parties to have “entered into an agreement that limit[s] competition.” The question then becomes: could the jury have construed the contract in a way that “limits competition.”
Contract interpretation is generally a question of law but becomes a question of fact if the contract language is ambiguous.
At the outset, Bars faults the district court for allowing course-of-eon-duct evidence before finding the agreements ambiguous. The district court did err in this regard: the court instructed the jury that it could “consider the conduct of the parties” only if it “find[s] the contract is ambiguous.” Although the court’s -instruction correctly states the trigger for allowing extrinsic evidence, it gets the actor wrong: the judge, not the jury, should make a finding of ambiguity. See, e.g., Klapp,
The 1973 agreements are “susceptible to two or more reasonable interpretations,” and therefore ambiguous. City of Wyandotte,
This language could reasonably be read to transfer not only the foreign rights in Bars’s automotive and radiator cooling products circa 1973, but also the right to market Bars’s future product line of radiator and cooling products. The words “including but not being limited to” and “any and all foreign countries” clearly contemplate the transfer of intellectual property other than what is described in the contract, making the transfer of associated future business a reasonable contract interpretation.
Bars resists a finding of ambiguity by focusing on the way the contracts describe the “foreign business” BPI sought to buy. All the 1973 agreements explain that Bars “is doing business pertaining to radiator and cooling system products” and specify that BPI “is desirous of acquiring such business in all countries foreign to the United States except Canada.” According to Bars, the use of the present-tense verb “is” makes clear that the parties intended to transfer only Bars’s foreign business and intellectual property as of 1973,
Bars’s argument has force, but the use of the present-tense verb does not bear the controlling weight that Bars assigns to it. “[L]egal drafters frequently use the present tense to cover the present and the
Because we find the 1973 agreements ambiguous, only harmless error resulted from letting the jury determine ambiguity. And given this ambiguity, the jury could properly consider extrinsic evidence to discern the parties’ intent. At trial, BPI found support for its reading of the 1973 agreements in the parties’ course of conduct. First, Bars sent BPI a letter shortly after all the agreements were executed stating that “[tjhese assignments are perfect and everything now appears to be in order for commencing transfer of all rights to [BPI].” Second, Bars sold no products outside the United States, Canada, or Mexico for over thirty years between 1973 and 2007, and instead treated BPI as its exclusive international partner even as BPI’s presence expanded beyond the markets that Bars serviced in 1973. Third, when Bars wanted to sell products in Mexico in 1998, it sought and obtained a license from BPI in exchange for the payment of licensing fees. From this conduct a reasonable juror could find that Bars granted BPI the exclusive right to sell its current and future products abroad.
b. Implied Nonr-Solicitation Theory
Bars next argues that no reasonable juror could have found a breach of the implied non-solicitation covenant. “[U]nder Michigan law, the sale of a business along with its accompanying good will gives rise to a covenant precluding the seller from soliciting back to himself that which he has sold.” Worgess Agency, Inc. v. Lane,
Bars’s argument is flawed in several respects. To begin, Bars cites no case that would require the district court (or this court) to find that Bars’s only customers as of 1973 were its foreign distributors. That Bars only sold through distributors does not mean that end-users are not its customers as a matter of law. Many companies make products intended for mass consumption but choose to sell through distributors. The implied covenant would be toothless if such a company - could sell its entire business and goodwill, and then turn around and set up an identical business so long as it reaches consumers
Bars’s argument that BPI was required to show solicitation of one of the 1973 distributors also assumes that the 1973 agreements transferred only Bars’s then-existing foreign business. As discussed above, however, the jury could construe the contract to transfer to BPI all foreign business in radiator and cooling products, not just the business Bars was doing in 1973. And because the core of a Worgess claim is “soliciting back ... that which [is] sold,” Worgess,
c. Alleged Scope and Duration Errors
Bars presents two final arguments—both flawed—for why the district court erred in denying its motion for judgment as a matter of law on BPI’s breach-of-contract counterclaim. Bars argues that even if the district court properly submitted the non-compete theory to the jury, the court “erred by failing to impose a reasonable scope and duration on the alleged” agreements. And to the extent the jury found breach of a non-solicitation covenant, Bars maintains that any covenant lasting decades is not supported by Wor-gess.
Bars’s first argument—that a perpetual worldwide non-compete is unreasonable— seems at first, well, reasonable. No one disputes that “[njever is a long time.” Wolverine Sign Works v. Powers,
Even if we entertain Bars’s argument and analyze the 1973 agreements as we would an express non-compete, we would still not fault the district court for denying judgment as a matter of law. “Agreements not to compete are permissible under Michigan law as long as they are reasonable.” Thermatool Corp. v. Borzym, 227 Mic.App. 366,
Because the parties disputed almost every material fact regarding what the 1973 agreements conveyed, the district court properly allowed- the jury to decide the reasonableness of the contract’s competition-limiting effect. See Certified Restoration,
Bars’s objection to the lack of a time limitation on the implied non-solicitation covenant is equally unconvincing. Bars latches onto language in Worgess stating that the covenant only lasts “for a sufficient length of time in order to allow [the buyer] to attract to itself and make its own that which [the seller] sold.” Worgess,
Of course, just because an issue is a question of fact does not mean the district court must accept anything the jury finds. Were we the factfinder, we might agree with Bars that an implied covenant expired before Bars began selling Rislone. But respect for Worgess and respect for the jury’s role prevents us from entering judgment as a matter of law unless “no reasonable juror” could have found the implied covenant to still be in effect. Kiphart,
Viewing the evidence in the light most favorable to BPI, both the non-compete and non-solicitation theories submitted to the jury enjoy legal and evidentiary support. We accordingly affirm the district court’s judgment with respect to BPI’s breach-of-contract counterclaim.
B. Unfair Competition
Bars next argues that it is entitled to judgment as a matter of law on BPI’s
Michigan law prohibits “any conduct that is fraudulent or deceptive and tends to mislead the public.” ATCO Indus., Inc. v. Sentek Corp., Nos. 232055, 235398,
The jury awarded BPI $974,849 in damages for unfair competition. In opposing Bars’s renewed motion for judgment as a matter of law, BPI cited three acts that arguably show breach of a duty “separate and distinct” from breach of contract. The district court relied on these acts in denying Bars’s motion. First, the court credited testimony suggesting that Bars registered trademarks in foreign countries where BPI owned the relevant marks. Second, the court cited evidence that Bars attempted to sell raw materials to Sonax—one of BPI’s European licensees—for use in “Bar’s Leaks” products, and “conspired with others to sell products [in] countries where BPI held the trademarks of the products.” Third, the court concluded that Bars “may have attempted to deceive the public or those purchasing the products that [it] had the authority to sell such products outside the United States and Canada.”
Assuming, without deciding, that these acts constitute unfair competition under Michigan law, BPI failed to prove damages causally connected to that conduct. The district court properly instructed the jury that BPI must prove damages “sustained ... as a result of Bar’s unfair competition.” At trial, however, BPI failed to distinguish between breach-of-contract and unfair-competition damages at all. In fact, BPI did not even attempt to calculate its losses from the conduct that it claims was unfair. BPI’s damages model calculated lost profits due to Bars’s international sales of Bar’s Leaks, Rislone, and raw materials, but BPI’s position at trial and on appeal is that these sales constitute breach of contract. Indeed, BPI’s damages expert testified that his model assumed that Bars’s sale of Bar’s Leaks, .Rislone, and raw materials outside the United States or Canada would “violate[ ] the contract” between BPI and Bars. At oral argument BPI’s counsel conceded that its expert made no attempt to distinguish between breach-of-contract and unfair-competition damages.
Because BPI shouldered the burden of proving damages causally connected to its unfair-competition claim, its failure to do
C. Bar’s Lanham Act Claim
The last appealed issue is whether the district court erred in dismissing Bars’s trademark-infringement claim and denying its motion to amend. Because the district court denied leave to amend on futility grounds, we review that denial de novo. See Evans v. Pearson Enters., Inc.,
To state a claim for trademark infringement under the Lanham Act, Bars needed to plead sufficient facts to establish that: (1) it owns a registered trademark; (2) the defendant used the mark in commerce; and (3) the use was likely to cause confusion. 15 U.S.C. § 1114(1); Hensley Mfg., Inc. v. ProPride, Inc.,
The district court denied Bars’s motion to amend. It allowed that BPI’s display of the Bar’s Leaks mark at AAPEX “may ... establish ] that [BPI] used the mark in commerce.” But given Bars’s admission that BPI attended AAPEX as Bars’s guest for many years, the court determined that BPI “had the authority to use the mark” at AAPEX. With this authority, the court concluded, BPI’s use of a separate booth alone could not constitute infringement. And because Bars did not allege any additional acts of infringement, such as the “use of the mark in any products sold within the United States and Canada,” the court deemed amendment, futile.
Before addressing the merits, we must undertake the threshold question of how to construe the district court’s conclusion that BPI “had the authority to use the mark.” The court cited Allard Enterprises., Inc. v. Advanced Programming Resources, Inc.,
The court’s rationale is more properly grounded in. the • doctrine of “acquiescence.” An affirmative defense to trademark infringement, acquiescence requires
Courts should not dismiss based on an affirmative defense unless “the undisputed facts conclusively establish an affirmative defense as a matter of law,” Hensley Mfg.,
Here, the allegations in Bars’s proposed amended complaint do not “conclusively establish” the defense of acquiescence “as a matter of law.” Hensley Mfg.,
Of course, the district court might have disregarded Bars’s statement disclaiming BPI’s authority as eonclusory or belied by other allegations in the complaint. But even if we disregard that single averment, the complaint as a whole still fails to unambiguously establish acquiescence. For one thing, the complaint says nothing about whether BPI actually used the “Bar’s Leaks” trademark when BPI was a guest at Bars’s booth. The complaint states that Bars was the “exhibitor” and that BPI was a “guest[ ] at the Plaintiff’s booth,” but is silent on whether BPI actually displayed or otherwise used the marks. At most, the complaint establishes that Bars allowed BPI to be physically present in Bars’s booth, where Bars displayed its own marks. For another, even if Bars had affirmatively consented to BPI displaying the “Bar’s Leaks” mark, Bars consented to such use in its own booth. It is certainly possible that to the extent inviting BPI can be construed as consent at all, it was contingent on BPI displaying its product side-by-side with Bars. See Just Add Water, Inc. v. Everything But Water, Inc., No. Civ. 3:04-CV-2085-H,
In sum, the complaint allegations do not conclusively establish that Bars acquiesced to BPI’s use of the Bar’s Leaks trademark at AAPEX. It may be that BPI ultimately succeeds in establishing acquiescence, but such a conclusion is not dictated by the complaint. Accordingly, we reverse the district court’s denial of Bars’s motion for leave to amend.
One final point warrants brief discussion. Bars argues that the district court refused leave to amend on the alternative grounds that mere promotional use of a trademark, absent proof of infringing sales, is not trademark infringement. But the district court did no such thing. The district court simply held that because Bars consented to BPI’s display of the mark at AAPEX, Bars would have to allege some other infringing conduct to state a claim. Because the district court erred in finding consent at the pleading stage, it had no occasion to address whether proof of infringing sales is necessary to state a trademark claim. We too express no view on that issue.
III.
For these reasons we AFFIRM the district court’s judgment in favor of BPI that denied Bars’s post-verdict renewed motion on the breach-of-contract claim.
We agree that BPI could show no separate damages to support its unfair-competition claim and thus REVERSE the district court’s judgment that denied Bars’s post-verdict renewed motion on that claim.
We REVERSE the district court’s denial of Bars’s motion for leave to file an amended trademark claim and remand for further proceedings.
Concurrence Opinion
concurring in part and dissenting in part.
The issues raised on appeal are narrow. For that reason, I concur with the majori
Reversing a district court’s denial of a renewed motion for judgment as a matter of law requires a showing that “viewing the evidence in a light most favorable to the non-moving party, giving that party the benefit of all reasonable inferences, there is no genuine issue of material fact for the jury, and reasonable minds could come to but one conclusion in favor of the moving party.” Balsley v. LFP, Inc.,
The majority is correct that a plaintiff suffering damages from unfair competition can recover only for the “loss actually sustained by plaintiff as the direct and natural consequence of [defendant’s unfair] acts.” Liberty Oil Corp, v. Crowley, Milner & Co.,
The trial record demonstrates that the jury heard evidence from fact witnesses and experts about deceptive conduct and losses attributable to such conduct. Among other things, the BPI’s expert testified that his damages models assumed “liability is found” and parsed “which sales attributed to the breach.” The expert provided various calculations depending on the legal theory asserted, accounting for product similarity and'dissimilarity when including and excluding units. BPI’s counsel during oral argument characterized the damages between the counterclaims as “cumulative,” although not “apportioned.” Still,
Bars fails to persuade that the record compels the singular conclusion that more particularized evidence is required to prove unfair competition. Neither Bars nor the majority cites case law requiring a separate jury argument on damages for each cause of action, as opposed to one lump sum request. See Pa. R.R. Co. v. McKinley,
The jury’s verdict on unfair competition should not be disturbed. The trial court concluded as much: “The Court finds that the jury’s damages award are within the range of evidence presented at trial in light of testimony presented by BPI’s fact and expert witnesses.” Bar’s Prods. v. Bar’s Prods. Int’l, No. 10-14321,
Notes
. Bars admitted at oral argument that it did not object to the jury instructions, suggesting that its motion practice preserved its legal theories. Our law is clear that Bars’s conduct amounts to waiver. See, e.g., Clarksville-Montgomery Cnty. School Sys. v. U.S. Gypsum Co.,
Concurrence Opinion
concurring.
I concur in the majority opinion but would say a bit more in connection with the remand of Bar’s infringement claim. The majority notes that the district coui-t had no occasion to address whether proof of infringing sales is necessary to state a trademark claim. But the district court may well have to address on remand whether the conduct here can constitute infringement. Although our court has no authority on point, the great weight of authority is that “mere advertising ... standing alone, [does] not constitute ‘use’ of the mark within the meaning of the Lahnam Act.” Buti v. Perosa, S.R.L.,