TY INC., Plaintiff-Appellee, Counterdefendant-Appellee, v. SOFTBELLY‘S, INC., et al., Defendants-Appellants, Counterplaintiffs-Appellants, v. TY WARNER, Counterdefendant-Appellee.
No. 03-1592
United States Court of Appeals For the Seventh Circuit
ARGUED OCTOBER 20, 2003—DECIDED DECEMBER 22, 2003
Before POSNER, KANNE, and WILLIAMS, Circuit Judges.
Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. No. 00 C 5230—Charles R. Norgle, Sr., Judge.
The issues at the trial were three. The first was whether “Beanies,” which Ty claims to be a common law trademark owned by it (it has a registered trademark on “Beanie Babies“), has become a generic term for small plush toys, in the shape of animals, that are filled with bean-like materials to give the toys a soft and floppy feel. If “Beanies” has become a generic term—has become, that is, beanies—it cannot be a legally protected trademark. The second issue is whether, if “Beanies” has not become generic, the designation “Screenie Beanies” is likely to make consumers think that Softbelly‘s product is actually a Ty brand. The third issue is whether “Screenie Beanies” dilutes the Beanies or Beanie Babies trademarks.
On the first issue, on which the burden of proof rested on Ty because “Beanies” is not a registered mark, Mil-Mar Shoe Co. v. Shonac Corp., 75 F.3d 1153, 1156 (7th Cir. 1996); Filipino Yellow Pages, Inc. v. Asian Journal Publications, Inc., 198 F.3d 1143, 1146 (9th Cir. 1999); Blinded Veterans Ass‘n v. Blinded American Veterans Foundation, 872 F.2d 1035, 1041 (D.C. Cir. 1989), Ty presented the following evidence in an effort to prove that “Beanies” is not generic:
- A survey by Dr. Henry Ostberg of 220 men and women over the age of 18, interviewed at nine different malls throughout the country, found that 60 percent of the respondents thought “Beanies” a brand name. Ostberg selected the age-18 cutoff because he was told by Ty that most of the purchasers of beanbag toys are over 18. If 60 percent of the relevant consuming public thinks “Beanies” a brand name, as many of 40 percent may think it generic—and in fact 36 percent of the respondents in Ostberg‘s survey did. But the legal test of genericness is “primary significance,” Kellogg Co. v. National Biscuit Co., 305 U.S. 111, 118-19 (1938); Wesley-Jessen Division of Schering Corp. v. Bausch & Lomb Inc., 698 F.2d 862, 865 (7th Cir. 1983); King-Seeley Thermos Co. v. Aladdin Industries, Inc., 321 F.2d 577, 581 (2d Cir. 1963); 2 J. Thomas McCarthy, McCarthy on Trademarks and Unfair Competition § 12:6 (4th ed. 2003); 5 id. § 32:192; and Ostberg‘s results are evidence that the primary significance of “Beanies” is still as the name of Ty‘s brand.
- A linguist testified that 98 percent of the references in news articles to the word “Beanie” were to Ty‘s products and that dictionaries do not list it as a generic (lower-case) word.
- A statistician sampled eBay and Yahoo auctions and found that more than 80 percent of all references to “beanie(s)” were to Ty‘s products.
- In a phone survey conducted in 1999, more than 60 percent of the respondents identified “Beanies” as relating to Ty or Beanie Babies.
- Ty polices the use of “Beanie(s)” vigorously by filing lawsuits, sending cease and desist letters, and opposing trademark applications for the word or its cognates.
This evidence was not conclusive. But Softbelly‘s presented very little contrary evidence. In fact, the only evidence it placed before the jury was a survey of 13- to 18-year-old girls which found that many of them consider “beanies” the name of the product rather than just Ty‘s brand name; the testimony of a teenage girl that she considers “beanies” the name of the product; and a statement by Ty Warner, Ty‘s CEO, that refers to another firm‘s having sold a “Zoo Beanies” product in 1998. The judge was right that Softbelly‘s evidence was not enough, in the face of Ty‘s evidence, to create a triable issue whether “Beanies” is generic. The testimony of one teenager proves nothing at all, and the survey was worthless—13- to 18-year-old girls being an arbitrary subset of consumers of beanbag stuffed animals. See Universal City Studios, Inc. v. Nintendo Co., 746 F.2d 112, 118 (2d Cir. 1984); 5 McCarthy, supra, § 32:159; Robert C. Bird, “Streamlining Consumer Survey Analysis: An Examination of the Concept of Universe in Consumer Surveys Offered in Intellectual Property Litigation,” 88 Trademark Rep. 269 (1998). Softbelly‘s argues that Ty Warner has identified teenage girls as his product‘s largest group of consumers. Not so; in the testimony Softbelly‘s cites, Warner states that his prime market consists of girls 5 to 14, followed by girls/women 14 to 80. (Of course, this testimony also casts a shadow over Dr. Ostberg‘s testimony for Ty.) And Warner‘s reference to “Zoo Beanies” proves nothing at all, for the name might be an infringement of Ty‘s trademark.
To determine that a trademark is generic and thus pitch it into the public domain is a fateful step. It penalizes the trademark‘s owner for his success in making the trademark a household name and forces him to scramble to find a new trademark. And it may confuse consumers who continue to associate the trademark with the owner‘s brand when they encounter what they thought a brand name on another seller‘s brand. (Think of Ostberg‘s 60 percent—and there would be a problem even if they were only 10 percent.) The fateful step ordinarily is not taken until the trademark has gone so far toward becoming the exclusive descriptor of the product that sellers of competing brands cannot compete effectively without using the name to designate the product they are selling. Imagine the pickle that sellers would be in if they were forbidden to use “brassiere,” “cellophane,” “escalator,” “thermos,” “yo-yo,” or “dry ice” to denote products—all being former trademarks that have become generic terms. The problem is not that language is so impoverished that no other words could be used to denote these products, but that if no other words have emerged as synonyms it may be difficult for a seller forbidden to use one of the trademarked words or phrases to communicate effectively with consumers.
Sometimes a trademark owner will sponsor a generic term precisely in order to avoid its mark becoming generic. Xerox succeeded with “copier,” and “Sanka” was saved from becoming generic by the emergence of “decaf” to denote the product of which Sanka was for long the best-known brand. But because “beanies” is so much shorter and punchier than the alternatives that have emerged so far for designating the product, such as “plush beanbag animals,” Ty may be fighting a losing war to keep its “Beanies” trademark from becoming “beanies” a generic term. But it won this battle.
More precisely it won this battle on the basis of the evidence that the judge permitted to be presented to the jury,
Nevertheless the judge was too severe in these rulings, especially when his lenity toward Ty is weighed in the balance. The suit had been filed in 2000, but no trial date was set until December 17 of the following year, when the judge announced that trial would begin on February 1, 2002, only six weeks later. The parties were surprised and jointly
The district judge agreed that Ty had delayed unreasonably in disclosing its experts but he was content to administer a slap on the wrist in the form of a $20,000 fine payable by Ty to Softbelly‘s, a payment that didn‘t help Softbelly‘s prepare for trial. It would have been better had the judge fixed a new deadline for Ty to disclose its experts, once the 90-day deadline had gone by the board. Indeed, in the absence of such a deadline, it is not clear what rule Ty violated that would authorize the imposition of a fine. But that is a side issue (Ty is not protesting the fine); the pertinent point is that the fine did nothing to repair the harm to Softbelly‘s from Ty‘s last-minute disclosure. Yet when Softbelly‘s inadvertently omitted documents from the exhibit list attached to the pretrial order, the judge, rather than slapping Softbelly‘s on the wrist, excluded so much of
Now it is possible that because the final pretrial order was due only three days before the trial was scheduled to begin, Ty would not have had time to prepare fully to deal with the additional documents that Softbelly‘s wanted to present. But the judge could have postponed the trial a few days and should have done so anyway to enable Softbelly‘s to complete deposing Ty‘s experts. Expedition in the conduct of litigation is highly praiseworthy, but here passed over into unjustifiable impatience. Ungar v. Sarafite, 376 U.S. 575, 589 (1964); United States v. Santos, 201 F.3d 953, 958-59 (7th Cir. 2000); McAllister v. FDIC, 87 F.3d 762, 766 (5th Cir. 1996); Menendez v. Perishable Distributors, Inc., 763 F.2d 1374, 1379-80 (11th Cir. 1985).
We do not criticize the judge for wanting to push the case to a conclusion. When he set the trial date, the parties had had more than a year to conduct discovery. Although he didn‘t give them much notice, maybe an unexpected slot had appeared in his trial schedule (this happens all the time, because many cases settle on the eve of trial) and he wanted to fill it. And district judges have to wedge civil cases into calendars dominated by criminal trials that must conform to the Speedy Trial Act. But when a judge announces a trial date on short notice, he must allow the parties at least the bare minimum amount of time that they reasonably require to get ready for the trial.
Had Ty asked the judge to enter a final judgment in its favor as a sanction for Softbelly‘s having submitted an untimely list of documents for trial, the judge would doubtless have refused on the sound ground that sanctions
The judge committed a different kind of procedural error in excluding another item of Softbelly‘s evidence. One of Softbelly‘s star witnesses was to be a man named Harold Nizamian, a competitor of Ty for whom Ty Warner had worked before forming his own business. Nizamian was prepared to testify that as early as 1988, before Ty began selling “Beanie Babies,” the word “beanie” was being used in the trade names of other manufacturers of “plush beanbag animals” and indeed that the word had become generic. On the Friday before the Monday on which the trial began, Softbelly‘s lawyer deposed Warner and in the course of the deposition disclosed that Nizamian would be testifying that “beanies” was a generic term. On Monday, when the lawyer called Nizamian to schedule his testimony, Nizamian said that he had been telephoned by Warner and was no longer willing to testify. Putting two and two together, at the trial Softbelly‘s lawyer asked Warner whether he had told Nizamian not to testify. Ty objected and the judge sustained the objection.
We do not understand the judge‘s ruling. If Warner asked Nizamian not to testify, this would entitle the jury to infer that Nizamian‘s testimony would have supported Softbelly‘s contention that “beanies” had become a generic term. “[A]n attempt by a litigant to persuade a witness not to testify is properly admissible against him as an indication of his own belief that his claim is weak or unfounded or false.” Newark Stereotypers’ Union No. 18 v. Newark Morning Ledger Co., 397 F.2d 594, 599 (3d Cir. 1968); see also Crabtree v. National Steel Corp., 261 F.3d 715, 721 (7th Cir. 2001); Aramburu v. Boeing Co., 112 F.3d 1398, 1407 (10th Cir. 1997); Vodusek v. Bayliner Marine Corp., 71 F.3d 148, 156 (4th Cir. 1995). Ty points out that whether a term is generic depends on what consumers think, and that is true, but experienced businessmen know a great deal about what consumers think; that is personal knowledge, Central Illinois Light Co. v. Consolidation Coal Co., 349 F.3d 488, 492-93 (7th Cir. 2003); Agfa-Gevaert, A.G. v. A.B. Dick Co., 879 F.2d 1518, 1523 (7th Cir. 1989); Kansas City Power & Light Co. v. Ford Motor Credit Co., 995 F.2d 1422, 1432 (8th Cir. 1993), not hearsay that would require a witness such as Nizamian to be qualified as an expert before he would be permitted to testify to it. Nizamian could easily have been qualified as an expert, which does not require academic-type credentials, Tuf Racing Products, Inc. v. American Suzuki Motor Corp., 223 F.3d 585, 591 (7th Cir. 2000); Circle J Dairy, Inc. v. A.O. Smith Harvestore Products, Inc., 790 F.2d 694, 700 (8th Cir. 1986), though Softbelly‘s did not attempt to do so—and did not have to.
Warner admits that he telephoned Nizamian in order to inquire whether he was going to testify, and after the trial was over Softbelly‘s lawyer deposed Nizamian who in his deposition stated that Warner had told him that if he testified it would cost Warner “a tremendous amount of
These errors taken together require that there be a new trial, but even if we disregarded them we would have to remand for a new trial on likelihood of confusion. On this issue Ty had the burden of proof, and while it presented some evidence that consumers thought “Screenie Beanies” a Ty product, a rational jury could have concluded otherwise. Although the actual Screenie Beanies so closely resemble Beanie Babies that we were surprised that Ty didn‘t sue Softbelly‘s for copyright infringement, the tag attached to each Screenie Beanie does not resemble the distinctive Ty tag very closely, the Screenie Beanies are sold through different outlets, and the suggested retail price of Screenie Beanies is twice that of most Beanie Babies—$10 versus $5. Someone shopping for Beanie Babies would be unlikely to be looking for them in a computer store and if he found them there would wonder why they cost twice as much. This evidence is no more conclusive against a finding of
And finally the judge‘s ruling as a matter of law that Softbelly‘s use of the term “Beanies” diluted Ty‘s “famous” mark (dilution of famous marks now being a violation of federal trademark law,
Ty argues that no consumer survey or indeed any other evidence is required when the allegedly diluting trademark is identical to the allegedly diluted one, citing the following passage in the Supreme Court‘s opinion: “It may well be, however, that direct evidence of dilution such as consumer surveys will not be necessary if actual dilution can reliably be proven through circumstantial evidence—the obvious case is one where the junior and senior marks are identical.” 537 U.S. at 434. The Court did not explain and no one seems to know what that “circumstantial evidence” might be. No matter. Neither “Beanies” nor “Beanie Babies” is identical to “Screenie Beanies.”
So the case must be remanded. But the new trial (if one is held—see next point) should be limited to liability, and not revisit damages. Ty presented uncontradicted evidence of Softbelly‘s gross revenues from the sale of Screenie Beanies. The burden then shifted to Softbelly‘s to show what part of those revenues represented cost rather than profit.
We move now to the
The district judge‘s response to the motion was perfunctory. Without conducting a hearing to determine what exactly Warner had told Nizamian, the judge denied relief on the ground that Nizamian had said in his statement “that the reason he would not testify was due to his own time constraints. The witness also stated that he told Ty Warner that he would testify and that Mr. Warner had made no threats or attempted to dissuade the witness from testifying.” It is true that Nizamian gave time constraints as one reason for not testifying, but as is apparent from the passages that we quoted earlier from his deposition, that was not the only reason. Indeed, the deposition suggests that it was not the decisive reason. For it was in answer to the question what the “specific reason” for his changing his mind about testifying was that he said that he had “realized after speaking to Ty that it was a very important matter to
Witness tampering is extremely serious misconduct, as we have said, and it would be particularly egregious if committed by a person of Warner‘s wealth and standing in the business community. We do not say that he did tamper with Nizamian, that if he did it was the cause of Nizamian‘s not testifying, or that dismissal of the suit would be the only appropriate sanction. And we are mindful of cases that say that fraud, when alleged as a basis for relief under
We need not decide; all we hold is that Nizamian‘s deposition, in conjunction with Warner‘s admission to having called Nizamian on the eve of trial to discuss the case, required further investigation by the judge. Had the judge concluded that Nizamian‘s version of the phone conversation was accurate, there would have been compelling evidence of serious misconduct on Warner‘s part, requiring a
Some other issues are raised, but they are either unimportant or likely to wash out at a new trial if one is held.
The judgment for Ty and the order denying Softbelly‘s
REVERSED AND REMANDED.
A true Copy:
Teste:
_____________________________
Clerk of the United States Court of Appeals for the Seventh Circuit
USCA-02-C-0072—12-22-03