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Fabick, Inc. v. JFTCO, Inc.

United States Court of Appeals, Seventh Circuit

December 9, 2019

Fabick, Inc., Plaintiff-Appellant, Cross-Appellee,
v.
JFTCO, Inc., Defendant-Appellee, Cross-Appellant.

          Argued November 5, 2019

          Appeal from the United States District Court for the Western District of Wisconsin. No. 16-cv-00172 - William M. Conley, Judge.

          Before Flaum, Rovner, and Hamilton, Circuit Judges.

          FLAUM, CIRCUIT JUDGE

         Two non-competing Midwestern companies operated by brothers used marks containing the family name, Fabick. The owner of the registered mark (or "senior user") (Fabick, Inc., or "FI"), a small manufacturer of sealants, sued the "junior user" (JFTCO, Inc.), a larger distributor of Caterpillar equipment, for trademark infringement. In a mixed verdict, a jury found that JFTCO had violated the Lanham Act but had not committed common law infringement. FI sought an order permanently enjoining JFTCO from using the name "Fabick," but the district court entered limited injunctive relief requiring that JFTCO issue, for five years, disclaimers clarifying that it is not associated with FI.

         Both parties appealed. FI complains that the district court erred in setting remedies: it should have entered a broad permanent injunction against JFTCO, and further should have allowed FI to recover JFTCO's profits. JFTCO, in its counter-appeal, seeks reversal of the jury's finding that it violated the Lanham Act based on an allegedly erroneous jury instruction and the district court's refusal to overturn the jury's verdict as a mater of law.

         We now affirm on each issue.

         I. Background

         FI is a Wisconsin corporation, based in Madison, dealing in protective coatings and sealants for various uses. JFTCO is a Delaware corporation and wholly owned subsidiary of the John Fabick Tractor Company, a Caterpillar equipment dealer based in Missouri. Both companies operate in Wisconsin and the Upper Peninsula of Michigan (the "UP").

         This story of clashing family businesses begins with John Fabick, the founder of multiple business concerns operating throughout the Midwest. In 1982, his eponymous firm (the John Fabick Tractor Company, which used various marks including the word "Fabick" throughout its history) purchased two existing Caterpillar equipment dealerships serving Wisconsin and the UP. John intended for his son Joseph Fabick, Sr. (Joe Sr.) to operate the dealerships. Joe Sr. moved to Wisconsin and founded FABCO, selling new and used Caterpillar machines, vehicles, attachments, and parts. In 2001, Joe Sr.'s son Jeré took over FABCO, which continued to operate Caterpillar dealerships until 2015. For over a decade, FABCO primarily used a mark reading "FABCO CAT," highlighting its affiliation with Caterpillar.

         FI began as a subsidiary of FABCO and was incorporated in 1993. Its core business concerned spray-on sealants for use in the beds of pickup trucks and similar vehicles. Another of Joe Sr.'s sons, Joseph "Jay" Fabick, Jr., worked at FI. Apparently, tensions between the brothers Jeré and Jay became untenable and, in 1997, Jay's employment was terminated. His severance package included taking over FI (then primarily owned by FABCO) as its sole owner. FI and FABCO then operated independently, without apparent incident, for several years.

         In 1994, while still a subsidiary of FABCO, FI filed a trademark application and a service mark application with the U.S. Patent and Trademark Office for the mark "FABICK," for "polyurethane-based and polyurea-based sealers and protect-ants to be applied as a coating to hard or flexible surfaces." The service mark was granted in 1995 and the trademark in 1997. FI has used several logos featuring the "Fabick" mark.

         The dispute at hand was spurred by FABCO's sale to a newly formed subsidiary of the John Fabick Tractor Company, called JFTCO, in 2015. Having taken over FABCO's operations, JFTCO began operating as the exclusive Caterpillar dealer in Wisconsin and the UP, using the trade name "Fabick CAT." JFTCO engaged in an extensive rebranding effort under the Fabick CAT identity. FI claims that this rebranding began a long period in which customers were confused, including those who called FI seeking JFTCO and misdirected checks between the companies. FI complained that as a small company with minimal advertising, its identity was being overwhelmed by JFTCO (which extensively advertised, including at major sporting events).

         FI sued JFTCO in March 2016; its operative complaint alleged (among other charges) that JFTCO committed federal trademark infringement under the Lanham Act and at common law. The case eventually went to trial. Certain pretrial holdings, the jury verdict itself, and posttrial decisions are now on appeal. The relevant district court decisions are as follows.

         At summary judgment, JFTCO argued that FI should not be allowed to seek monetary damages because, prior to trial, it had not put forth evidence of damages due to the alleged infringement. The district court largely disagreed, noting that it would be possible for FI to prove up multiple categories of monetary damages, such as recompense for employee time spent addressing confused customers or harm to goodwill. The district court did agree, however, that FI could not seek JFTCO's profits as damages:

While plaintiff states in its opposition brief that a defendant's profits may be awarded[, ] it fails to develop any theory as to why such an award would be appropriate here, much less evidence supporting its award. On the contrary, as already noted in discussing plaintiff's reverse confusion theory, the court is hard-pressed to understand how defendants were unjustly enriched by consumers assuming that Fabick's sealants and coatings business is the same or related to JFTCO's business.

         Both sides presented their cases at trial. JFTCO argued in part that by virtue of its association with the John Fabick Tractor Company's longstanding use of a "Fabick" mark, the jury should find it established continuous prior use of the mark, a defense showing that it, and not FI, first used and was the original holder of the "Fabick" mark.

         At the close of evidence, the district court instructed the jury on the charges. In discussing Lanham Act liability, the judge diverged from strict adherence to Seventh Circuit pattern instructions, and provided the following element: "[D]efendant JFTCO used the FABICK mark in a manner that is likely to cause confusion as to the source or origin of plaintiff's product or that plaintiff has somehow become connected to JFTCO." (additional language bolded; cf. Seventh Circuit Pattern Jury Instruction 13.1.2).

         The district court based its modification to the instructions on its reading of the caselaw, namely Sands, Taylor & Wood Co. v. Quaker Oats Co., 978 F.2d 947, 957 (7th Cir. 1992), which described a case of reverse trademark confusion: "The public comes to assume that the senior user's products are really the junior user's or that the former has become somehow connected to the later. The result is that the senior user loses the value of the trademark …." Id. (emphasis added) (quoting Ameritech, Inc. v. Am. Info. Techs. Corp., 811 F.2d 960, 964 (6th Cir. 1987)).

         The jury returned a mixed verdict. It found JFTCO liable for federal trademark infringement and rejected JFTCO's defenses, including prior use. The jury also rejected FI's common law infringement claim.

          After trial, JFTCO sought judgment as a mater of law in its favor and FI sought a permanent injunction against JFTCO. FI argued that because it prevailed on its Lanham Act claim, the district court should permanently enjoin JFTCO from using the name "Fabick" as a part of its business in any way. The district court denied JFTCO's mot ion for judgment as a mate r of law and denied FI the requested permanent injunction. Instead, the district court ordered JFTCO to provide multiple notices and disclaimers:

• To defendant's employees on the intranet and on reference cards at each reception desk … for a period of five years from the date of this order. Specifically, defendant's employees are to be regularly reminded to refer questions about Fabick, Inc., or its products and services to Fabick, Inc., including providing its phone number and address, in response to internet and telephone inquiries.
• To defendant's customers in an insert with invoices and on all invoices … for a period of five years from the date of this order.
• To defendant's vendors in an insert with all purchase orders … for a period of five years from ...

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