44 F.4th 180
3rd Cir.
2022

NICHINO AMERICA, INC., Appellant v. VALENT U.S.A. LLC

No. 21-1850

United States Court of Appeals for the Third Circuit

August 12, 2022

44 F.4th 180

Before: BIBAS, MATEY, and PHIPPS, Circuit Judges

PRECEDENTIAL. On Appeal from the United States District Court for the District of Delaware (D.C. No. 1-20-cv-00704). District Judge: Honorable Leonard P. Stark. Argued March 22, 2022.

Bradley L. Cohn [Argued]

Jacquelyn Prom

Belinda J. Scrimenti

Pattishall McAuliffe Newbury Hilliard & Geraldson

200 South Wacker Drive

Suite 2900

Chicago, IL 60606

Counsel for Appellee

Eric R. Clendening

Flaster Greenberg

1810 Chapel Avenue West

Cherry Hill, NJ 08002

Jordan A. LaVine [Argued]

Flaster Greenberg

Suite 1050

1717 Arch Street

Suite 3300

Philadelphia, PA 19103

Counsel for Appellant

OPINION OF THE COURT

MATEY, Circuit Judge.

Whether a federal court may issue an injunction against an allegedly infringing trademark can be a bit confusing. Responding, Congress passed the Trademark Modernization Act of 2020 (TMA).1 Nichino America Inc. says the District Court misapplied the TMA when it denied its motion for a preliminary injunction against Valent USA LLCs allegedly infringing mark. Finding no reversible error in the District Courts careful application of its discretion, we will affirm. Along the way, we explain how district courts should apply the rebuttable presumption of irreparable harm created by the TMA.

I.

A. The Marks

Nichino and Valent sell pesticides for farming. Since 2004, Nichino has offered a trademarked product known as CENTAUR. Valent trademarked a competing product called SENSTAR in 2019, giving it a logo resembling CENTAURs colors, fonts, and arrow artwork. Both pesticides are used in the same geographic areas against many of the same insects, and both are sold to farmers through distributors. But there are differences. SENSTAR comes as a liquid and uses a unique combination of two active chemicals. It costs $425 per gallon, and ships in cases containing four one-gallon containers. CENTAUR is manufactured as a solid and sold by the pallet, with each containing 622 pounds of pesticide packed into bags and cases, for $24 per pound. Yet the similarities were enough for Nichino to sue Valent for trademark infringement, and ask for a preliminary injunction against SENSTARs launch. A suit that would become one of the first to apply the newly effective TMA.

B. District Court Proceedings

Nichino argued that Valents use of the SENSTAR mark would create confusion among consumers, a necessary element in a trademark infringement claim. See . Confusion, said Nichino, likely to harm its reputation and goodwill, warranting injunctive relief.2 That is where the TMA enters, creating a rebuttable presumption of irreparable harm favoring a plaintiff who has shown a likelihood of success on the merits of an infringement claim.3

The District Court found Nichino narrowly demonstrated its infringement claim would likely succeed, though there is not an abundance of evidence of likelihood of confusion between the products. (App. at 176.) The District Court reached that conclusion by consulting the Lapp factors, our nearly forty-year-old, ten-part, yet non-exhaustive inquiry that guides analysis of likely confusion. See ; see also (prescribing use of the Lapp factors in all trademark cases).4 Weighing and balancing, the District Court tallied a final score of five factors favoring Nichino, two neutral, and three very important factors (overall degree of similarity, consumers purchasing habits, and Valents intent in selecting the mark) in Valents column. (App. at 161–76.) Bringing us to the TMA, which the District Court applied to presume Nichino would suffer irreparable harm without an injunction. But that presumption is rebuttable, and the District Court credited Valents evidence of a sophisticated consumer class that makes careful purchases, and noted the lack of any evidence of actual consumer confusion. Closing the circle, the District Court found Nichino failed to proffer evidence that it would likely suffer irreparable

harm without immediate injunctive relief.5 Finally, the District Court held that the balance of equities and public interest weigh against issuing a preliminary injunction.

For those reasons, the District Court denied the injunction, and Nichino appealed, challenging the Courts finding that Valent had rebutted the presumption of irreparable harm.6 Finding no reversible error that disturbs the District Courts conclusion, we will affirm.7

II.

Nichino contends that the TMA precluded the District Courts decision about irreparable harm. But the District Court admirably navigated Congress newly minted rebuttable presumption. While our discussion builds on the District Courts insights, we arrive at the same conclusion. Valent

rebutted the presumption, and Nichino did not independently show irreparable harm.

A. Federal Rule of Evidence 301 Grounds the TMA

Like all laws, the TMA does not exist in isolation. It complements existing rules and standards and is informed by their established effect. One complement, Federal Rule of Evidence 301, aids our understanding of the best ordinary meaning of the TMA.8 Rule 301 provides that, in all civil cases, absent specific statutory language to the contrary, the party against whom a presumption is directed has the burden of producing evidence to rebut the presumption. Fed. R. Evid. 301. That allocation does not shift the burden of persuasion, which remains on the party who had it originally. Id.9 That

framework applies here because the TMA creates a rebuttable presumption without explaining how it applies. (Federal Rule [of] Evidence 301 provides the default rule for how presumptions operate in federal civil cases.); (applying Rule 301 to the Truth in Lending Act, 15 U.S.C § 1601 et seq., after finding no language . . . to create a stronger presumption).

Because Rule 301 shifts the evidentiary burden of production, but leaves the burden of persuasion unmoved, the task of courts applying the TMA is limited. Over-scrutinizing the persuasive value of evidence proffered on rebuttal would violate Rule 301 by shifting the burden of persuasion, not just the burden of production. See . Instead, courts must ask only whether the rebuttal evidence is enough to allow a reasonable factfinder to conclude that irreparable harm is unlikely.10 With that guidance in hand, we sketch the steps for applying the TMAs rebuttable presumption.

Step 1. The TMAs rebuttable presumption requires courts considering a trademark injunction to assess the plaintiffs evidence only as it relates to a likelihood of success on the merits. Consulting the Lapp factors to analyze likelihood of confusion, but only to determine whether the infringement claim is likely to succeed. Anything more, including commenting on whether the proffered evidence of consumer confusion could show irreparable harm, veers impermissibly into the burden of persuasion controlled by Rule 301. If a court finds no likelihood of success on the merits, the inquiry ends and the injunction will be denied. See, e.g., ; (A plaintiffs failure to establish any element in its favor renders a preliminary injunction inappropriate.).

Step 2. If the plaintiffs evidence does establish likely trademark infringement, the TMA is triggered, and the burden of production shifts to the defendant to introduce evidence sufficient for a reasonable factfinder to conclude that the consumer confusion is unlikely to cause irreparable harm. See . But note again the sequence. So far, the court has not assessed any of the evidence for likely irreparable harm. Rather, the TMAs presumption means the court assumes irreparable harm, even if the plaintiff has proffered nothing in support. The focus trains on the defendants evidence, and whether it is sufficient to rebut the TMAs presumption. A meaningful consideration of the facts, not a box-checking review of the Lapp factors, is key, aimed at determining whether the defendants offering allows a reasonable conclusion that the consumer confusion shown by the plaintiff will not cause irreparable harm.

Step 3. If a defendant successfully rebuts the TMAs presumption by making this slight evidentiary showing, the presumption has no further effect. It has done its work and simply disappears like a bursting bubble. See . So the burden of production returns to the plaintiff to point to evidence that irreparable harm is likely absent an injunction. See id. (Under Fed. R. Evid. 301 . . . the introduction of evidence to rebut a presumption destroys that presumption, leaving only that evidence and its inferences to be judged against the competing evidence and its inferences to determine the ultimate question at issue. (quoting )). Here again, the evaluation outlined in Lapp may prove useful to assess whether consumer confusion will lead to irreparable harm.11

B. The District Courts Rebuttal Analysis Follows Rule 301

The District Courts finding that Valent rebutted the TMAs presumption follows the TMA and tracks Rule 301. The District Court began by using the Lapp factors to assess likelihood of consumer confusion to determine Nichinos likelihood of success on the merits without simultaneously considering irreparable harm.12 Finding that Nichino would likely succeed on the merits, the District Court properly applied the TMA by presuming irreparable harm and turning its attention to Valents rebuttal evidence. Here, the District

Court again appropriately referenced the Lapp factors for consumer confusion, described them as closely balanced, and found that Valent had rebutted the presumption by producing evidence of a sophisticated consumer class. (App. at 177–80.) A framework that anticipated the steps we provide today.

Nichino is correct that the District Court erred by considering Nichinos failure to produce evidence of actual confusion at this stage, when the sole focus is whether Valent had adduced affirmative evidence that irreparable harm is unlikely. As explained, the TMA shifted the burden of production to Valent when Nichino showed likely success. And Valent cannot meet that production burden simply by pointing to Nichinos lack of evidence. Faulting Nichino improperly placed the burden of production on the plaintiff at the rebuttal stage.

But that slight error does not undermine the District Courts judgment. The Court also credited Valents evidence that the relevant consumers are sophisticated buyers who exercise great care in purchasing pesticides. Among the facts noted by the Court: 1) the differing prices; 2) the expense of seasonal treatment; 3) regular reliance on expert recommendations; and 4) the consequences of misapplication, including crop destruction and corresponding disastrous economic consequences. All tending to heighten purchasing care, and all making it plausible to conclude that consumers will confirm their pesticide selection before staking their farms on an inadvertent purchase. As the District Court correctly held, this evidence meets the light burden of production that the TMAs presumption of irreparable harm placed on Valent.13

With the presumption rebutted, the burden of evidence production returned to Nichino to show likely irreparable harm absent an injunction. The District Court found that Nichino did not, and Nichino does not argue otherwise. That makes the District Courts conclusion, and its decision to deny injunctive relief, correct, as [a] plaintiffs failure to establish any element in its favor renders a preliminary injunction inappropriate. .14

III.

For these reasons, we will affirm the District Courts order denying Nichinos motion for a preliminary injunction.

Notes

1
Pub. L. No. 116-260, H.R. 133, 116th Cong. subtit. B, §§ 221–26 (2020).
2
Injunctions require the familiar showing of a likelihood of success on the merits, irreparable harm that outweighs the burden on the nonmoving party, and benefit to the public interest. . These burdens are all borne by Nichino. .
3
In relevant part, the TMA states that plaintiffs seeking an injunction shall be entitled to a rebuttable presumption of irreparable harm . . . upon a finding of likelihood of success on the merits for a violation identified in this subsection in the case of a motion for a preliminary injunction or temporary restraining order. Pub. L. No. 116-260 § 226(a).
4
The factors summarized in Lapp break into three categories. First, facts about the plaintiffs mark, including its distinctiveness. Second, facts about the defendants actions, including whether the mark was adopted to intentionally compete, overlapping sales and marketing efforts, and how long the competing mark has been in the market without confusion. Third, facts about how consumers deal with both marks. Is there evidence of actual confusion, or do costs and other differences between the goods make confusion unlikely? See (holding that trial court adequately addressed every relevant area of inquiry without formally apply[ing] the factors when it made findings about [t]he plaintiffs mark, how the defendant markets its products, and [f]inally and perhaps most important, what customers in the [relevant] field would find [] natural or likely about which company makes which product).
5
Here, the District Court appropriately cited Nichinos evidence of likely consumer confusion. Evidence of consumer confusion is relevant to both likelihood of success and irreparable harm, so the evidence that plaintiffs offer to show one will often also tend to show the other. See (highlighting the importance of consumer confusion to both inquiries).
6
The District Court had jurisdiction under 28 U.S.C. §§ 1331 and 1338(a), and we have jurisdiction under 28 U.S.C. § 1292(a)(1).
7
We review the District Courts factual findings for clear error, the legal conclusions de novo, and the decision whether to grant an injunction for abuse of discretion. .
8
Because Congress gave Federal Rules promulgated under the Rules Enabling Act, 28 U.S.C. § 2072, the status of laws of the United States, see , we interpret such Rules using the traditional tools of statutory interpretation to discover their ordinary meaning. See, e.g., (interpreting Federal Rule of Evidence 702 according to its text); see also (explaining that courts interpret the Federal Rules using the words ordinary, contemporary, common meaning by looking at what they meant when . . . enacted) (citing ).
9
The burden of production, Professor Wigmore explained, is the obligation to come forward with . . . some evidence . . . sufficient to show that disputed issues of fact exist. John Henry Wigmore, Wigmore on Evidence: Evidence in Trials at Common Law § 2491 (4th ed. 1985). Satisfying that burden shifts the same duty [to] the other party, who must produce evidence on the other side of the issue. Id. § 2493. Throughout this shifting one thing never changes: the burden of persuasion, meaning the obligation to convince the factfinder on the issue, always remains with the same party. Id.; see also (There are two distinct elements . . . the burden of going forward with proof (the burden of production) and the burden of persuading the trier of fact (the burden of persuasion).) (cleaned up); (a Rule 301 presumption shifts the burden of production to the defendant, [but] the ultimate burden of persuading the trier of fact . . . remains at all times with the plaintiff) (cleaned up).
10
That small quantum of evidence is all we have required to rebut Rule 301 presumptions. In , we held that a borrowers own testimony that her lender had not properly explained the right to cancel her home mortgage was enough to rebut the Truth in Lending Acts presumption that notice was received. . We held that such meager evidence as a single, non-conclusory affidavit . . . based on personal knowledge is enough even if the affidavit is self-serving. Id. And in , we applied the same standard to rebuttals of the common-law presumption in favor of established domicile, rejecting a more demanding clear and convincing evidence rebuttal standard. .
11
Contrary to Nichinos argument, § 226(b) of the TMA does not fight this reading. A Rule of Construction, § 226(b) states the Act shall not be construed to mean that a plaintiff seeking an injunction was not entitled to a presumption of irreparable harm before the date of enactment of this Act. Pub. L. No. 116-260 § 226(b). Read in context, that means a plaintiff is always entitled to the newly codified presumption, even if the infringing conduct predated the TMA. Nichino enjoyed that benefit here.
12
Nichino contests the District Courts finding that the degree of similarity between the marks favored Valent, but that is not clearly erroneous. The District Court found that the auditory similarity of the marks pronunciations favored Nichino, while the marks visual dissimilarities leaned toward Valent. And the Court found appearance more important than sound. All questions of fact best weighed by the District Court, and we have no occasion to disturb that conclusion.
13
Nichino is right that the standard of care [in purchasing] . . . will be equal to that of the least sophisticated consumer in the class, , but that is the standard that the District Court used by focusing on small commercial farmers, not large agribusiness operations. Nor does the sophistication of the farm workers applying the chemicals much matter, because they do not make the purchasing decisions, and we evaluate the sophistication of the buyer class, not the broader class of all users. Id.
14
While unnecessary to our decision, we see no error in the District Courts balancing of equities. Ample evidence supports the Courts conclusion that an injunction would cause Valent to lose significant sales while it reapplied, and awaited approval, for a new trademark. Those amounts, using Valents pre-release projections, measured in millions of lost dollars. (See S. App. at 445.) Nor is there error in the Courts finding that the public interest is better served by allowing continued access to an innovative product[, SENSTAR,] that can be used against all insect life stages. (App. at 181.)