Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

S INDUS. v. STONE AGE EQUIP.

June 23, 1998

S INDUSTRIES, INC., Plaintiff,
v.
STONE AGE EQUIPMENT, INC., d/b/a FIVE TEN, d/b/a 5.10; RECREATIONAL EQUIPMENT, INC., d/b/a REI; EREHWON MOUNTAIN OUTFITTERS, INC., Defendants. 1



The opinion of the court was delivered by: CASTILLO

MEMORANDUM OPINION AND ORDER

 This lawsuit presents serious issues about the ethics of the plaintiff's principal and his counsel. "S Industries, Inc. . . . appears to have entered into a new industry -- that of instituting federal litigation." S Indus., Inc. v. Hobbico, Inc., 940 F. Supp. 210, 211 (N.D. Ill. 1996) (Shadur, J.). To this we might add litigation lacking in merit and approaching harassment. Of the five merits-related decisions spawned by S Industries' ("SI") 1996 trademark litigation siege, three have entered summary judgment against SI and two have seriously questioned the validity of SI's complaints. *fn2" Our decision continues in this vein, and thus signifies a continuing pattern of bad faith litigation by SI, who has been represented by the same counsel in each case.

 This suit stems from SI's claim that it owns the trademark STEALTH for use on various sporting goods and equipment and on athletic shoes and boots. SI contends that defendant Stone Age Equipment's (denoted here as "Five Ten") use of STEALTH on rubber soles for rock-climbing shoes and water-terrain navigation boots (think fly-fishing) infringes these trademarks; defendants REI and Erehwon allegedly infringed SI's marks by selling Five Ten's STEALTH-soled products. SI asserts several offenses based on this conduct: infringement of a registered trademark under the Lanham Act, 15 U.S.C. § 1114 (Count I); unfair competition and false designation of origin under the Lanham Act, 15 U.S.C. 1125 (Counts II and III); and violations of the Illinois Consumer Fraud and Deceptive Trade Practices Act, 815 ILCS 505/1 et seq., and the Illinois Uniform Deceptive Trade Practices Act, 815 ILCS 510/1 et seq. (Count IV). *fn3"

 But this Court's exhaustive review of the pleadings and rather voluminous record demonstrates a striking absence of proof supporting these claims -- most notably, SI's failure to produce any evidence permitting a reasonable jury to find that a STEALTH shoe ever existed, much less reached the public -- frequent misrepresentations of the evidence and unsupported legal arguments. Consequently, on the cross-motions for summary judgment before us, we rule for the defendants and against SI. We also award the defendants reasonable attorneys' fees and defense costs as prevailing parties, see 15 U.S.C. § 1117(a) and 815 ILCS 505/10a(c), finding that this is just the type of suit that the Seventh Circuit would deem "oppressive." See Door Sys., Inc. v. Pro-Line Door Sys., Inc., 126 F.3d 1028, 1031-32 (7th Cir. 1997).

 RELEVANT FACTS *fn4"

 A. Leo Stoller and His Companies

 SI is in the business of assisting its affiliated companies in importing, marketing, distributing and selling a wide variety of consumer goods, some of which bear the STEALTH trademark. Its current President, CEO and sole shareholder is Leo Stoller. Stoller, who began doing business in 1981 as the sole proprietorship Sentra Sporting Goods, U.S.A., incorporated SI in 1985 and founded its affiliated entities around the same time: Sentra Industries (incorporated in 1984), Stealth Industries (1984), and Chestnut Industries (1985) (collectively the "Stoller companies"). All are based in Illinois.

 Stoller claims that Sentra Sporting Goods, U.S.A. was the first to use the STEALTH mark "as a trade name, 'house' mark, service mark and trademark" on consumer goods -- including sporting goods and, allegedly, athletic shoes -- and that, through various inter-company license agreements and assignments, SI and the other Stoller companies began to use the mark on those goods as well, with SI retaining ownership rights. *fn5" Stoller Decl. PP 4-10. Stoller states that under a ten-year marketing and licensing plan he established in 1985, his companies have "spent a great [sic] money promoting [and] building the mark STEALTH into a national brand, recognized by buyers throughout the United States and the entire World." Stoller Decl. PP 11-13.

 SI currently holds title to seven federal registrations for the STEALTH mark, two of which are relevant here. Registration No. 1,332,378 covers "sporting goods, specifically, tennis rackets, golf clubs, tennis balls, basketballs, baseballs, soccer balls, golf balls, cross bows, tennis racket strings and shuttle cocks." The Patent and Trademark Office ("PTO") issued this registration on April 23, 1985, with January 15, 1981 listed as the date of the mark's "first use" in commerce. Registration No. 1,434,642, issued by the PTO on March 31, 1987, encompasses "bicycles, motorcycles, and boats" and lists January 1982 as the date of first use. *fn6" None of the STEALTH registrations mentions athletic shoes or boots, rubber, or rubber shoe soles. Stoller nevertheless claims that his companies have been using the STEALTH mark on athletic shoes since at least 1985. SI and Stoller do own registrations covering shoes under the trademarks SENTRA, LOVE YOUR BODY, WHITE LINE FEVER, and DARK STAR, but not STEALTH.

 The Stoller companies market and sell STEALTH sporting goods products (and, allegedly, STEALTH athletic shoes) directly through catalogs and sales representatives, and wholesale through broad-based retailers such as Wal-Mart and K-Mart. In addition, the Stoller companies have entered into numerous license agreements permitting third parties to use the STEALTH mark on sporting goods. Four license agreements specifically allow third-party use of STEALTH on footwear. Stealth Industries executed the first of these with Puma USA.

 In December 1988, one of Puma's attorneys, Bert Collison, contacted Stealth Industries to ask whether it had used the STEALTH mark on shoes. Stealth Industries' attorney, John Brezina, replied that the company had been using the mark on shoes since at least 1985. Collison Dep. at 17. He supplied Collison with the following proof: a May 28, 1986 invoice for a black referee shoe, which does not indicate what mark, if any, is on the shoe; two undated photocopies of catalog pages with four pictures of shoes, none of which visibly bears the STEALTH mark but which are described respectively as STEALTH athletic shoes, STEALTH oxfords, white STEALTH tennis shoes and black STEALTH tennis shoes; an undated photocopy of what looks like a shoe with the word STEALTH on one side of the heel (attorney Brezina states that he made this photocopy from a STEALTH shoe that Stoller gave him); and a typed page from a June 3, 1988 Stealth Industries general ledger listing "shoes" as one of the items and displaying the handwritten words "ALL STEALTH BRAND" at the top. Collison Dep. Ex. 111-115. Collison does not remember whether he ever saw an actual STEALTH shoe, but "assumes" that he must have.

 SI and Puma executed an agreement on February 1, 1989 that made Puma USA the exclusive licensee for the STEALTH mark on "footwear." Payment was on a royalty basis. Among other things, the agreement required Puma to pay a $ 10,000 fee upon signing, an annual advance minimum royalty of $ 4000, and 2% of its net sales of STEALTH footwear. In return, Stealth Industries promised to file an application with the PTO to register the STEALTH mark for footwear. It appears that in 1990 Puma promoted basketball shoes designated as "PUMA Stealth," but none of Puma's ads shows the STEALTH mark appearing on the shoe. *fn7"

 As promised, on February 27, 1989, John Brezina filed Stealth Industries' application to register the mark STEALTH for use on "Sport and Atheletic [sic] Shoes." *fn8" To demonstrate the mark's use on shoes, Brezina supplied the PTO with a photocopy that resembled the one he had provided to Puma. He listed January 1984 as the date that STEALTH was first used on shoes in commerce. On May 9, 1989, the PTO mailed Stealth Industries an Office Action that contained some preliminary determinations. First, the Examining Attorney noted that Stealth Industries' mark was "likely to be confused" with the mark STEALTHWEAR, which had already been registered by Covington Industries for use on camouflage clothing. The Examining Attorney also observed that Five Ten had an earlier pending application to use STEALTH on "shoe soles, [and] kits for resoling footwear comprised of rubber, cement and instructions," and that "there may be a likelihood of confusion" with this mark as well. To this day, the PTO has made no determination on Stealth Industries' application -- the PTO's Trademark Trial and Appeal Board ("TTAB") suspended it to await the outcome of this litigation.

 Thereafter, Stoller and his companies entered three other STEALTH footwear license agreements: a 1994 non-exclusive license permitting Cabela's, Inc. to use the STEALTH mark on "footwear"; a 1995 non-exclusive license allowing The Sportsman's Guide to use the mark -40 [degrees] STEALTH on hunting boots; and a 1996 five-year license giving Mitsushiba International, Inc. the right to use STEALTH on golf shoes.

 Stoller states that his companies continue to market and sell "a broad range of consumer products including athletic and sport shoes." Stoller Decl. P 10. He attends trade shows that focus on athletic equipment and apparel for team and court sports participants. *fn9" And he continues to license the STEALTH mark for use on a wide variety of goods, aiding his efforts by appearing at the Licensing Industry Merchandiser's Association ("LIMA") show from 1995-1997, and the World Licensing Exposition in 1996. The mid-nineties have also marked Stoller's aggressive campaign to police his registered and common-law STEALTH trademarks in sporting goods and other products. He has been involved in at least 100 PTO actions and has filed over forty district court cases. Stoller Dep. at 465, 697.

 B. Five Ten, REI and Erehwon

 Five Ten was founded in 1985 and incorporated in 1987 by its current CEO, Charles Cole. The California-based company manufactures and markets footwear, specializing in high-end rock climbing shoes. These shoes have soles made of a sticky, high-friction black rubber bearing the trademark STEALTH or STEALTH C4. The STEALTH mark appears only on the shoe soles or hangtags, never on the shoe uppers.

 Cole, an avid rock climber who possesses both a mechanical engineering degree and an MBA from the University of Michigan, invented the sticky rubber, hoping to improve climbers' ability to navigate precipitous terrain. The name "Stealth" stems from Cole's days as a factory worker manufacturing parts for the B-1 Stealth Bomber, connoting his intentions to keep the rubber compound's formula top secret. Cole uses "master batches" of the compound to manufacture sheets of black STEALTH rubber, then markets the rubber on his Five Ten shoe soles and in sole replacement kits. The STEALTH rubber products appear exclusively in stores that specialize in outdoor and adventure sports equipment. Defendants Erehwon and REI, both outdoor retailers, sell various models of Five Ten shoes with STEALTH soles.

 Cole states that he began selling STEALTH rubber for use on shoe soles in August 1987. He provides two invoices dated August 4 and 5, 1987 for the sale of "5.10 resole rubber . . . 'Stealth'" to Mekan Custom Boots in Kearns, Utah and to Dave Page Cobbler in Seattle Washington. The record also contains two sales slips dated August 4 and 11, 1987 for "5.10 Resole Rubber 'Stealth'" made out to Brad Singer of California and Steven Handler of Maryland, respectively.

 Cole started advertising STEALTH rubber in the February 1988 issue of Climbing magazine. The ad begins, "Introducing 5.10 STEALTH Rubber. After one year of rigorous testing Five Ten is proud to introduce the most advanced climbing boot rubber ever developed," and lists the names, addresses and phone numbers of several "official 5.10 resolers," including Mekan Custom Footwear and Dave Page Cobbler. An interview with Cole in the March/April 1998 issue of Rock & Ice followed, during which he discussed the characteristics and advantages of STEALTH rubber. In the same issue, Wheeler and Wilson Sports advertised that they were providers of "5.10's new STEALTH rubber." In June 1998, Climbing magazine published a product review, remarking that "this year's model" of a popular climbing shoe "uses 5.10's latest top-secret Stealth rubber." The first time pictures of shoes appear in an ad for STEALTH rubber is the August 1988 issue of Climbing. The full-page ad is titled "The Guts of our Boots," and depicts three climbing shoes above the words "STEALTH RUBBER." Below this is advertising text plugging the rubber and encouraging the reader to "ask [a top climber] what kind of rubber is really on the bottoms of his boots. Chances are that it will be 5.10 Stealth." The ad lists Five Ten's name, address and phone number at the bottom.

 On November 1, 1988, Five Ten filed an application with the PTO to register STEALTH for use on "boots, shoes and sandals; sheet rubber for soling or resoling footwear; kits of rubber, cement and instructions for resoling footwear," *fn10" listing August 4, 1987 as the date STEALTH was first used on these goods. The Examining Attorney later amended Five Ten's application to cover "shoe soles; kits for resoling footwear comprised of rubber, cement and instruction." The PTO published Five Ten's mark for opposition in The Official Gazette11 on July 18, 1989, prompting Stealth Industries to formally oppose (Opposition 81,164) the application on September 18, 1989. The TTAB suspended proceedings on Opposition 81,164 on July 25, 1997, pending final resolution of this case.

 Although its initial application remains unresolved, Five Ten was nonetheless successful in registering the STEALTH mark under a slightly different description of goods. On January 13, 1992, it applied to register the mark STEALTH for use on "sheet rubber having high friction and damping characteristics, and for use in the manufacture of gripping and antiskid surfaces, and for vibration isolation." *fn12" The date of first use in commerce is listed as August 4, 1987. The PTO issued Registration No. 1,782,681 for these goods on July 20, 1993. Not to be outdone, Stealth Industries filed a petition to cancel (Cancellation No. 24,688) the registration on January 16, 1996. Again, the TTAB suspended proceedings on Cancellation 24,688 in deference to this litigation, leaving Five Ten's registration intact.

 Five Ten has continued to advertise in publications directed at outdoor adventure enthusiasts, to showcase its products at trade shows (such as Outdoor Retailer) that feature outdoor adventure goods, and to sell its shoes through outdoor adventure specialty stores. The record contains evidence that STEALTH soles are extremely popular among climbers because of the rubber's high-friction, rock-gripping characteristics. STEALTH rubber soles now appear on an expanded Five Ten product line, which includes approach shoes (closer to a hiking boot), river shoes, and all terrain shoes. In addition, Five Ten worked with LL Bean to create a new formulation of STEALTH rubber -- "Aqua Stealth" -- for underwater traction boots used in sports such as fly-fishing. LL Bean began selling a boot with the Aqua Stealth sole in its 1996 fly fishing catalogue.

 C. This Lawsuit

 Apparently not satisfied with the pace of the administrative battle before the PTO, SI filed suit in this Court on July 12, 1996. It claims that the defendants' manufacture and sale of Five Ten's STEALTH-soled climbing shoes and water terrain footwear (including LL Bean's boot with Aqua Stealth soles) infringe its two federally registered trademarks for sporting goods and "bicycles, motorcycles, and boats" (Count I); infringe its federal common-law rights in the STEALTH mark on athletic shoes and boots (Counts II and III); and violate various state-law consumer protection statutes (Count IV). As relief, SI seeks both a permanent injunction and monetary damages.

 The parties have filed cross-motions for summary judgment on all claims. Because we find that defendants have not infringed any of SI's STEALTH trademarks as a matter of law, we grant the defendants' motion and deny SI's motion.

 LEGAL STANDARDS

 I. Summary Judgment

 Summary judgment is proper when the record shows that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(c); Cincinnati Ins. Co. v. Flanders Elec. Motor Serv., Inc., 40 F.3d 146, 150 (7th Cir. 1995). A genuine issue for trial exists when "the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 91 L. Ed. 2d 202, 106 S. Ct. 2505 (1986). The court must view all evidence in a light most favorable to the nonmoving party, and draw all reasonable inferences from the evidence in the nonmovant's favor. Cincinnati Ins., 40 F.3d at 150. But if the evidence is merely colorable, or is not significantly probative, or just raises "some metaphysical doubt as to the material fact," summary judgment may be granted. Liberty Lobby, 477 U.S. at 261; Matsushita Elec. Indus. v. Zenith Radio Corp., 475 U.S. 574, 586, 89 L. Ed. 2d 538, 106 S. Ct. 1348 (1986). In making its determination, the court's sole function is to determine whether sufficient evidence exists to support a verdict in the nonmovant's favor. Credibility determinations, weighing evidence, and drawing reasonable inferences are jury functions, not those of a judge deciding a motion for summary judgment. Liberty Lobby, 477 U.S. at 255.

 When the parties submit cross-motions for summary judgment, the court is not required to grant judgment as a matter of law for one side or the other. Heublein, Inc. v. United States, 996 F.2d 1455, 1461 (2d Cir. 1993). The court must evaluate each party's motion on its own merits, resolving factual uncertainties and drawing all reasonable inferences against the party whose motion is under consideration. Id.; Buttitta v. City of Chicago, 803 F. Supp. 213, 217 (N.D. Ill. 1992), aff'd, 9 F.3d 1198 (7th Cir. 1993).

 II. Lanham Act Claims -- Federal Trademark Infringement

 SI's federal trademark infringement claims (Counts I, II and III) are governed by two different sections of the Lanham Act: 15 U.S.C. § 1114(a) (prohibiting infringement of registered marks) and § 1125(a) (providing relief for unfair competition, including false designation of origin). To prove infringement of its registered marks under § 1114(a), SI must show that (1) its marks are registered; (2) the defendants used the marks in commerce without SI's consent; and (3) that the defendants' unauthorized use is likely to confuse consumers or deceive the public. S Indus., Inc. v. Diamond Multimedia Sys., Inc., 991 F. Supp. 1012, 1017 (N.D. Ill. 1998); S Indus., Inc. v. GMI Holdings, Inc., 1998 U.S. Dist. LEXIS 1780, 1998 WL 67627, at *3 (N.D. Ill. Jan. 30, 1998); Dunkin' Donuts, Inc. v. Towns Family, Inc., 1996 U.S. Dist. LEXIS 7982, 1996 WL 328018, at *2 (N.D. Ill. 1996). SI Holds two federal registrations for STEALTH, which cover sporting goods and "bicycles, motorcycles, and boats." It is undisputed that Five Ten, REI, and Erehwon use the STEALTH mark in commerce. As such, likelihood of confusion is the only remaining section 1114 issue.

 Section 1125(a) "prohibits a broader range of practices" than § 1114(a), Two Pesos, Inc. v. Taco Cabana, Inc., 505 U.S. 763, 768, 120 L. Ed. 2d 615, 112 S. Ct. 2753 (1992) (internal quotations and citations omitted), extending its reach to protect both registered and unregistered marks from unfair competition that is likely to confuse or deceive consumers. See Diamond, 991 F. Supp. at 1017. SI brings two claims under this section: one for unfair competition and one for false designation of origin (which is really just a species of unfair competition). Both require SI to prove (1) prior, protectable rights in (a.k.a. "senior use" of) a mark; and (2) that the defendants' junior use of the mark is likely to confuse consumers or deceive the public. Diamond, 991 F. Supp. at 1017-18 (citing Dunn v. Gull, 990 F.2d 348, 351 (7th Cir. 1993)); see Forum Corp. v. The Forum, Ltd., 903 F.2d 434, 439 (7th Cir. 1990); see also G. Heileman Brewing Co. v. Anheuser-Busch, Inc., 873 F.2d 985, 999 (7th Cir. 1989) ("The first user of a mark may maintain an action for unfair competition under the Lanham Act by showing a likelihood of confusion as to the source of the goods in question.").

 It is undisputed that SI owns prior protectable rights in the STEALTH mark for the goods identified in its federal registrations. *fn13" The parties disagree, however, over who has prior rights in STEALTH for various shoes and shoe-related products, which are not listed in SI's registrations. The parties also disagree on the likelihood of confusion resulting from the defendants' uses of the STEALTH mark.

 Left for this Court's determination on the Lanham Act claims, then, are two issues: (1) did SI use the STEALTH mark on athletic shoes and boots before Five Ten started using the mark on high-friction rubber and climbing shoe soles; and (2) are the defendants' uses of the STEALTH mark likely to cause confusion in light of (a) SI's registered marks or (b) the Stoller companies and their licensees' use *fn14" of STEALTH on athletic shoes and boots. *fn15" We acknowledge that a negative answer to the first question would relieve us from having to consider issue (2)(b). Nevertheless, we address all the issues to underscore the lack of merit to SI's claims.

 ANALYSIS

 I. Five Ten Used STEALTH on Rubber Soles Before SI Used it on Athletic Footwear

 A. Trademark Rights Derive From Use

 "Trademark rights are acquired by adoption and use, not by registration." Diamond, 991 F. Supp. at 1018. Although registration establishes a rebuttable presumption that the mark was first used on the filing date, Zazu Designs v. L'Oreal, S.A., 979 F.2d 499, 504 (7th Cir. 1992), SI has only applied to register STEALTH for use on athletic shoes and boots. Simply filing an application is not sufficient to create rights in the mark. See Diamond, 991 F. Supp. at 1019 (citing Hydro-Dynamics, Inc. v. George Putnam & Co., 811 F.2d 1470, 1472 (Fed. Cir. 1987)). Consequently, SI must establish its rights to STEALTH on athletic footwear under the common law, which confers ownership on the person who employs the "first actual use of a mark in a genuine commercial transaction." Allard Enters., Inc. v. Advanced Programming Resources, Inc., 146 F.3d 350, 1998 U.S. App. LEXIS 11694, 1998 WL 285218 (6th Cir. 1998). In short, "one must win the race to the marketplace." Zazu, 979 F.2d at 503.

 "Use" under the common law means that the mark was attached to a product sold to the public. Id. at 503; Blue Bell, 508 F.2d 1260 at 1265. The use must be continuous and bona fide to impart ownership -- de minimus sales, a few shipments, or pre-marketing tactics that attempt to "reserve" the mark will not do. See Zazu, 979 F.2d at 503, 505 ("Only active use allows consumers to associate a mark with particular goods and notifies other firms that the mark is so associated;" "reserving a mark is forbidden"; dispensing a few sample products is a "pre-marketing maneuver" that is insufficient to confer trademark rights); Allard, 1998 WL 285218, at *9 (single use in trade must be "followed by continuous commercial utilization" to establish trademark rights) (quoting Blue Bell, Inc. v. Farah Mfg. Co., 508 F.2d 1260, 1265 (5th Cir. 1975)); Diamond, 991 F. Supp. at 1018 ("It is axiomatic that the right to a distinctive mark belongs to the person who first continuously uses the mark to identify or distinguish goods or services in commerce."). Likewise, the mere intent to use a mark is insufficient. Zazu, 979 F.2d at 504; Allard, 1998 WL 285218, at *7. In any given case, the amount of activity that constitutes "use" depends on the facts. Lucent Info. Mgmt., Inc. v. Lucent Tech., Inc., 986 F. Supp. 253, 258 (D. Del. 1997). The guiding principle is that the activity be "sufficiently public to identify or distinguish the marked goods in an appropriate segment of the public mind as those of the adopter of the mark." Blue Bell, 508 F.2d at 1266.

 SI contends that the Stoller companies made continuous, bona fide commercial use of STEALTH on athletic shoes and boots since 1985, establishing priority over the defendants' allegedly later use of STEALTH on rubber and climbing shoe soles. *fn16" Defendants rejoin that SI has no evidence that the Stoller companies ever sold a STEALTH shoe to the public or engaged in any activity that constitutes adoption and use. Even assuming Puma used the mark on shoes as a licensee, defendants argue, Five Ten used STEALTH on its products well before the ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.