Material Supply International, Inc., an Oregon corporation, sells pneumatic power tools. Sunmatch Industrial Co., Ltd., a Taiwanese company, manufactures and exports pneumatic tools. Both claim ownership of the SUNTECH trademark for pneumatic tools. The Trademark Trial and Appeal Board (TTAB) ruled in favor of Sunmatch. The district court held a bench trial on MSI’s challenge to the ruling of the TTAB and submitted the other issues to a jury. Both parties appeal from various of the district court’s decisions.
I. Background
The key issue in the case is which party first used the SUNTECH trademark. Daniel L.S. Chen, president and general manager of Sunmatch, testified that he created the SUNTECH mark in March 1985. In April of that year Sunmatch applied to register the SUNTECH mark in Taiwan; its application was granted in November. Between April and August Sunmatch used the mark in advertisements, in catalogues, on letterhead, on sample tools, at a display at the National Hardware Show in Chicago, and in meetings after the show with potential distributors, including MSI. In August Chen traveled to Oregon to meet with Chuck Minnick, then the president of MSI, and they began negotiations regarding Sunmatch’s sale of pneumatic tools to MSI. In November 1985 the parties entered into an Exclusive Sales Agreement under which Sunmatch would manufacture pneumatic tools and MSI would “represent and sell [the tools] on an exclusive basis for the entire North American continent and the State of Hawaii.” The Agreement states that
[t]he Supplier [Sunmatch] agrees to give the Agent [MSI] exclusive rights to sales of all Suntech Pneumatic Tools and accessories for the period of this contract with the exception of special tools now being supplied to AIM Corporation.
(Emphases in original.)
In -October 1985 MSI began importing, advertising, and selling SUNTECH tools to various customers. In 1990 the relationship between MSI and Sunmatch began to deteriorate. MSI discovered that Sunmatch was advertising SUNTECH tools in the United States and became concerned about Sun-match’s sales of private label tools in the U.S., which MSI contends caused it to lose sales and distributors.
In January 1990, without Sunmatch’s knowledge, MSI applied to the Patent and Trademark Office to register the SUNTECH trademark, and in October 1991 the PTO issued the registration. Sunmatch petitioned the TTAB for cancellation of MSI’s mark. In 1994 the TTAB granted summary judgment in favor of Sunmatch and canceled MSI’s registration; the only affidavit MSI submitted did not raise a dispute over any material fact because it was not based upon the affiant’s personal knowledge of the events surrounding the beginning of the relationship between the two companies. See Sunmatch Indus. Co. v. Material Supply Int’l, Inc., Cancellation No. 20, 482, at 16-17 (T.T.A.B.1994) (citing Federal Rule of Civil Procedure 56(e)).
In May 1994 MSI sued Sunmatch and Mr. Chen pursuant to 15 U.S.C. § 1071(b)(1), which authorizes a party “dissatisfied” by a decision of the TTAB to bring a civil action in district court. In addition, MSI sought a declaratory judgment that it owned, and an injunction against Sunmatch using, the SUN-TECH mark. MSI also sought damages from Sunmatch for trademark infringement
The district court simultaneously held a bench trial of MSI’s challenge to the decision of the TTAB and a jury trial of all the other claims in the case. After the close of evidence but before charging the jury the court upheld the decision of the TTAB. The court determined that Sunmatch owned the SUN-TECH mark principally because it was the first to use it. Based upon this ruling, the court also dismissed, pursuant to Rule 50(a) (judgment as a matter of law), MSI’s claims for trademark infringement and unfair competition. The court informed the jury that Sunmatch owned the mark and submitted the remaining claims for the jury’s consideration.
The jury upheld MSI’s claim against Sun-match for breach of fiduciary duty, for which it awarded MSI $50,000 in compensatory and $100,000 in punitive damages, but it rejected MSI’s claims against Sunmatch for breach of contract and for fraud. The jury upheld Sunmateh’s counterclaims against MSI for trademark infringement, fraud upon the PTO, and breach of contract, for which it awarded Sunmatch $908,500, but it rejected Sunmateh’s claim of unfair competition under both the Lanham Act and state law. Both parties appealed.
II. Analysis
On appeal MSI argues that the district court (1) violated its Seventh Amendment right to a jury trial when the court itself decided that Sunmatch owns the SUNTECH mark and so informed the jury; and (2) erred in the course of rejecting MSI’s challenge to the TTAB decision that Sunmatch owned the SUNTECH mark, by (a) placing upon MSI the burden of proof, (b) admitting into evidence various documents showing Sunmateh’s first use of the mark, (c) deciding that there was “clear and convincing” proof of the date Sunmatch first used the SUN-TECH mark, and (d) giving insufficient weight to MSI’s evidence regarding customer perception. MSI also challenges the district court’s rulings (3) denying MSI’s posttrial motion for judgment upon, or for a new trial of, Sunmateh’s counterclaims for trademark infringement, breach of contract, and fraud upon the PTO; (4) declining to eliminate or reduce the jury’s award of MSI’s profits to Sunmatch; (5) granting Sunmatch’s motion to amend its answer in order to assert a statute-of-limitations defense while denying MSI’s motion to amend its answer in order to assert assignment as a defense; (6) instructing the jury regarding Sunmateh’s statute-of-limitations defense; and (7) denying MSI’s motion to compel discovery.
For its part Sunmatch argues that the district court erred in denying Sunmatch’s motions (1) for judgment as a matter of law upon MSI’s claim for breach of fiduciary duty; (2) to vacate or reduce the jury’s award of damages to MSI; and (3) to award Sunmatch (a) enhanced damages, (b) costs, and (c) attorney’s fees under the Lanham Act; and (4) for prejudgment interest.
A. MSI’s Right to a Jury Trial
As noted above, the district court itself resolved MSI’s challenge to the decision of the TTAB. At the close of evidence but before the ease was submitted to the jury, the court upheld the TTAB’s decision that Sunmatch owned the SUNTECH mark and informed the jury of its decision as follows:
I have decided the appeal affirming the decision of the TTAB ... which found in favor of the defendant in this case. From my decision two facts flow. One, Sunmatch is the owner of the trademark and, two, MSI, the plaintiff in this action, did not own the trademark at the time it filed its application for registration for the Suntech trademark.
While the jury was deliberating the court placed on the record its findings of fact and conclusions of law relevant to its decision affirming the TTAB. The court indicated that it found many of the witnesses for both sides to be less than truthful and that it “closely scrutinized the manner and content of the testimony and applied what all jurors
The factual issue[s] of ownership and first use have a presence of [sic] other aspects of this case as it proceeds to the jury in that the parties have brought jury triable claims that implicate this issue. But as in any case in which a decision for the court [has an] impact on what remains for the jury to decide, this court recognizes that pursuant to Rule 50, the determination of an issue against a party may re-configure what remains for the jury to decide.
Having determined the fact de novo that first use renders the defendant [Sunmatch] the owner and rightful registrant of the trademark in this case as a matter of law, this issue cannot be redetermined by the jury and consequently the plaintiffs claims are affected as we have already discussed on the record, dropping certain things out and eliminating certain things for the jury’s decision-making.
MSI contends that the district court violated its right to a jury trial when the court decided that Sunmatch owned the trademark before submitting the parties’ other claims to the jury. We agree. The Seventh Amendment to the Constitution of the United States provides:
In Suits at common law, where the value in controversy shall exceed twenty dollars, the right of trial by jury shall be preserved, and no fact tried by a jury, shall be otherwise reexamined in any Court of the United States, than according to the rules of the common law.
As a general matter the Seventh Amendment affords the right to a jury trial “in those actions that are analogous to ‘Suits at common law1 ” — that is, “suits brought in the English
law
courts” — and not in - actions “analogous to 18th-century cases tried in courts of equity or admiralty.”
Tull v. United States,
Most important for this case, the Supreme Court has held that “[w]hen legal and equitable claims are joined in the same action, ‘the right to jury trial on the legal claim, including all issues common to both claims, remains intact.’ ”
Lytle v. Household Mfg., Inc.,
In this case the parties do not dispute that the district court was correct in itself trying MSI’s challenge to the decision of the TTAB and in submitting all of MSI’s other claims and Sunmatch’s counterclaims to the jury. See
Dairy Queen,
Sunmatch contends nonetheless that because, in the event, the district court resolved MSI’s challenge to the TTAB decision before submitting the case to the jury, MSI was barred by the doctrine of issue preclusion from re-litigating the factual question of first use. The Supreme Court rejected a
[T]he purposes served by collateral es-toppel do not justify applying the doctrine in this case. Collateral estoppel protects parties from multiple lawsuits and the possibility of inconsistent decisions, and it conserves judicial resources. Application of collateral estoppel is unnecessary here to prevent multiple lawsuits because this case involves one suit in which the plaintiff properly joined his legal and equitable claims.
Id.
at 553,
Next Sunmateh asserts that the district court’s action must not violate the Seventh Amendment because otherwise courts could never dismiss claims based upon Rules 12, 50, or 56. Sunmateh misses the point. Of course the trial court may dismiss claims based upon those rules — but only if it can do so as a matter of law. In this case the court, acting as the finder of fact, evaluated the demeanor and determined the credibility of witnesses, balanced the evidence, and found that Sunmateh first used the mark. By resolving this factual issue common to the claims tried to the court and those tried to the jury, the court violated MSI’s right to a jury trial.
Upon remand MSI is entitled to a jury trial of all causes of action that entail the question which party owned the SUNTECH trademark, namely, MSI’s challenge to the TTAB decision, and its claims for trademark infringement and unfair competition under the Lanham Act and unfair competition under state law; and Sunmatch’s claims for trademark infringement and unfair competition under the Lanham Act, fraud upon the PTO, and unfair competition under state law. Sunmateh’s claim for breach of contract also must be retried because it too implicates the question of ownership. Sunmateh has offered two theories in support of this claim, both of which depend upon ownership of the mark: First, in its complaint Sunmateh alleged that “[b]y claiming ownership of Sun-match’s trademark SUNTECH and filing a U.S. application therefor, [MSI] breached its duty under the sales agreement.” Second, in its brief Sunmateh contends that “when MSI began to purchase pneumatic tools from other suppliers and place the SUNTECH trademark on those products, it was clearly violating the Agreement.” The issue of who owned the mark is relevant under either theory, and therefore the claim must be retried.
Finally, we note that MSI does not seek retrial based upon the Seventh Amendment for its claims for breach of fiduciary duty, breach of contract, and fraud upon MSI, the latter two of which the jury rejected. (During the trial MSI withdrew its claim of fraud upon the TTAB.) Accordingly, these claims will not be retried upon remand, and we need not consider whether they implicate the issue of ownership. We turn now to the arguments that the parties need to have resolved in order to retry the claims that we remand to the district court.
B. Burden of Proof in MSI’s Challenge to the TTAB Decision
MSI argues that the district court incorrectly placed upon it the burden of proof in its challenge to the decision of the TTAB. A party to a cancellation proceeding who is dissatisfied with a decision of the TTAB has two options: First, the party may appeal to the United States Court of Appeals for the Federal Circuit. 15 U.S.C. § 1071(a)(1). Second, the party may “have remedy by a civil action” in district court. Id. § 1071(b)(1). With respect to these two options, a leading treatise states:
Congress gave such alternate remedies of review because each possessed its own unique advantages. If appeal is made to the Federal Circuit, the case proceeds on a closed record and no new evidence is permitted. But if review is sought in a federal [district] court, review is a form of “de novo” scrutiny and new evidence is permitted.
3 J. Thomas McCarthy,
McCarthy on Trademarks & Unfair Competition
§ 21:20, at 21-24 (4th ed.1997);
see also
15 U.S.C.
While district court review is called “de novo” because new evidence may be introduced, it is a unique procedure because unlike a true de novo proceeding, findings of fact made by the [TTAB] are given great weight and not upset unless new evidence is introduced which carries thorough conviction.
3 McCarthy,
supra,
§ 21:21, at 21-26;
see Esso Standard Oil Co. v. Sun Oil Co.,
In this case, however; the TTAB did not resolve any disputed issue of fact. Rather, it entered summary judgment in favor of Sunmatch because MSI failed to raise a material issue of fact by submitting an affidavit based upon the affiant’s personal knowledge. As the Seventh Circuit pointed out in
Spraying Systems Co. v. Delavan, Inc.,
As the petitioner seeking cancellation before the TTAB, Sunmatch had the burden of proving by a preponderance of the evidence that it owned the SUNTECH mark.
See, e.g., Cervecería Centroamericana, S.A. v. Cervecería India, Inc.,
C. Motions to Amend
MSI argues that the district court abused its discretion by (1) a few weeks before trial granting Sunmatch’s motion to amend its answer to include a statute-of-limitations defense to MSI’s claim for breach of contract; and (2) at the close of evidence denying MSI’s motion to amend its answer to include a defense of assignment. We need not reach the second issue, however, because upon remand MSI will have another opportunity to seek leave to amend its answer prior to the retrial of Sunmatch’s claims against MSI.
See Harris v. Secretary, U.S. Dep’t of Veterans Affairs,
Federal Rule of Civil Procedure 15(a) provides that leave to amend a pleading “shall be freely given when justice so requires.”
See Foman v. Davis,
We do not see how MSI can maintain that the district court abused its discretion in permitting Sunmatch to amend its answer to add the statute-of-limitations defense. MSI eonelusorily claims it was prejudiced by the delay, but it does not say how and no prejudice is apparent. MSI had plenty of notice: the court granted Sunmatch’s motion on January 19 and the trial did not begin until February 5; moreover, Sunmatch had mentioned the statute-of-limitations defense the previous November in a filed memorandum regarding choice of law. Although MSI points out that discovery was closed it does not identify any discovery it required in order to meet the statute-of-limitations defense.
MSI also argues that Sunmatch waived its statute-of-limitations defense by failing to raise the defense in its original answer. This argument confuses “waiver” and “forfeiture.”
A Rule 15 amendment, if allowed by the trial court, will cure any problem of timeliness associated with forfeiture [of a statute-of-limitations defense]. However, if a party “waives,” ie., intentionally relinquishes or abandons an affirmative defense, no cure is available under Rule 15.
Harris,
D. Jury Instruction Regarding Statute of Limitations
MSI next argues that the district court incorrectly instructed the jury regarding when the statute of limitations began to run on its breach of contract claim. In its initial charge to the jury the district court stated:
For purposes of the parties’ breach of contract ... claims, you must rule against either party if you find that it waited more than three years after any breach of contract ... before it raised the claim.
During deliberations the jury sent the court a note that stated in part:
At what point in time does the clock start ticking for the statute of limitations on the breach of contract? I.e. a) At the time the breach occurred? b) At the time a party became aware of the breach? e) At the time damages were incurred?
The court answered that the statute of limitations begins to run at the time a party discovers the breach.
District of Columbia law governs the issue of the proper statute of limitations in
MSI asserts that the district court should have instructed the jury that “the statute of limitations begins to run from [the] date of the breach, or [the] date of the termination of the contract, whichever is later.” For this proposition it provides a case citation ungarnished by any reasoning.
See Computer Data Sys., Inc. v. Kleinberg,
Whether the district court erred by instructing the jury that the cause of action accrued at the time of discovery rather than at the time of breach, we need not decide because any error was certainly harmless. See Fed.R.Civ.P. 61. Running the statute of limitations from discovery could not have given MSI less time to file because obviously a party can discover a breach only when it occurs or later. Not surprisingly, therefore, MSI does not identify any prejudice it suffered from the instruction — other than to say that it must have been prejudiced because the jury rejected its claim, which is circular.
E. MSI’s Motion to Compel
MSI asserts that the district court abused its discretion by denying as untimely MSI’s motion to compel Sunmatch to produce evidence regarding Sunmatch’s private label sales. MSI contends that if it had had this information for trial it could have proven additional damages arising from Sunmatch’s breach of fiduciary duty.
The scheduling order governing pretrial procedures provided that discovery had to be completed' by April 1, 1995, dispositive motions were due by May 1, and “[a]ll other motions” were due by September 11. MSI filed its motion to compel on September 11 and the court held it untimely because that was after the close of discovery. We think the court was well within its discretion to interpret its order as requiring a motion to compel discovery to be made within the discovery period.
F. Breach of Fiduciary Duty
Sunmatch argues that the district court erred in denying its motion for judgment as a matter of law, or in the alternative for a new trial, on MSI’s claim for breach of fiduciary duty. Our review is
de novo;
we ask “whether the evidence was sufficient for a reasonable jury to have reached the verdict.”
Kirkland v. District of Columbia,
Sunmatch mounts four attacks upon the decision of the district court not to grant the motion. Sunmatch’s first argument is that under the relevant law (namely, that of
Sunmatch’s other arguments are all closely related: Sunmatch argues that as a principal it had the right to compete with its agent MSI by selling private label tools unless the Agreement expressly stated otherwise; that assuming it had a duty not to interfere with MSI’s sales of SUNTECH tools the evidence fails to support the conclusion that it breached that duty; and that the jury’s verdict that Sunmatch breached a fiduciary duty it owed to MSI is inconsistent with its verdict that Sunmatch did not breach the Agreement because both claims were based upon Sunmatch’s sales of private label tools.
Sunmateh’s reasoning misses the point of MSI’s claim for breach of fiduciary duty. According to MSI’s theory, even if under the Agreement Sunmatch could legitimately sell private label tools in North America and Hawaii, the Agreement clearly gave MSI the exclusive right “to represent and sell [SUN-TECH tools]” for a specific period of time in that territory, and Sunmatch interfered with that exclusive right by using the SUNTECH mark to solicit private label sales, thereby diverting to it sales that would have gone to MSI. In other words, although Sunmatch might have had the right to compete with MSI by selling private label tools, the Agreement is express that Sunmatch did not have the right to exploit the SUNTECH mark in North America in order to make those sales.
Moreover, contrary to Sunmatch’s argument, there is sufficient evidence to support MSI’s theory: Sunmatch used the SUN-TECH name in advertisements, catalogues, business cards, and sample tools which it circulated in the United States in order to solicit sales of private label tools. Although there is, as Sunmatch points out, countervailing evidence, there is sufficient evidence in the record for a reasonable jury to conclude that Sunmatch used the SUNTECH mark to attract customers in North America to whom it would sell private label tools.
Finally, the jury’s verdicts with respect to breach of contract and breach of fiduciary duty were not inconsistent because, assuming Sunmatch had a right to sell private label tools, the jury could find that Sunmatch breached its putative fiduciary duty by using the SUNTECH logo to divert to itself private label sales that should have gone to MSI. Accordingly, we hold that Sunmatch was not entitled to judgment as a matter of law, or in the alternative, to a new trial.
G. Sunmateh’s Challenge to the Award of Damages
The jury awarded MSI $50,000 in compensatory damages and $100,000 in punitive damages for Sunmateh’s breach of fiduciary duty. Sunmatch argues that the district court should have granted it judgment as a matter of law with respect to the award of damages. In the alternative, Sunmatch contends that the district court abused its discretion in failing to grant remittitur of the damages.
1. Judgment as a matter of law
As noted above, we review
de novo
an order denying judgment as a matter of law; thus, we ask here whether there was sufficient evidence for a reasonable jury to have awarded compensatory or punitive damages. With respect to the latter, Sunmatch argues that no reasonable jury could conclude that Sunmatch’s actions were wanton, malicious, or criminally indifferent because it reasonably believed that under the Agreement it could make private label sales. As we have seen, however, under MSI’s theory
With respect to the compensatory damages, Sunmatch argues that the $50,000 award must derive from MSI’s claim that it spent $46,000 to replace eight sales representatives, that most of that sum went to pay salaried MSI employees to find replacement representatives, and that MSI would have incurred this expense in any event. There is no reason, however, to tie the $50,000 figure to MSI’s claim for time spent replacing sales representatives just because the amounts are similar. MSI claimed and put on evidence of other damages as well' — for interest charges incurred to carry excess inventory, and for lost profits and goodwill. Because a reasonable jury surely could have awarded MSI $50,000 in compensatory damages we reject Sunmatch’s argument for judgment as a matter of law.
2. Remittitur
In the alternative, Sunmatch argues that the district court abused its discretion in declining to remit the jury’s award of compensatory and punitive damages. See,
e.g., Hooks v. Washington Sheraton Corp.,
III. Conclusion
We hold as follows: (1) The district court violated MSI’s Seventh Amendment right to a jury trial when it decided on the merits MSI’s challenge to the TTAB decision before submitting the remainder of the case to the jury. (2) Upon remand the district court must review de novo the TTAB’s grant of summary judgment to Sunmatch, which bears the burden of persuasion with respect to the issue of ownership of the SUNTECH mark. (3) The district court did not abuse its discretion when it granted Sunmatch’s motion to amend its answer in order to assert a statute-of-limitations defense to MSI’s claim for breach of contract. (4) Any error the district court may have made in instructing the jury about the statute of limitations for breach of contract was harmless. (5) The district court did not abuse its discretion in denying MSI’s motion to compel discovery. (6) Sunmatch is not entitled to judgment as a matter of law or to a new trial on MSI’s claim for breach of fiduciary duty. (7) Sun-match is not entitled to judgment as a matter of law or to remittitur of the jury’s award of compensatory and punitive damages. The judgment of the district court is affirmed with respect to MSI’s claims for breach of contract, breach of fiduciary duty, fraud upon the TTAB, and fraud upon MSI.
Because of the Seventh Amendment violation, the following claims are remanded for a new trial: MSI’s challenge to the decision of the TTAB, its claims for trademark infringement and unfair competition under the Lan-ham Act, and its claim for unfair competition under state law; Sunmatch’s claims for trademark infringement and unfair competition under the Lanham Act, fraud upon the PTO, unfair competition under state law, and breach of contract.
So ordered.