Georgia-Pacific Consumer Products, LP ("GP") is the
designer and manufacturer of enMotion touchless paper towels dispensers and
paper towels designed specifically for use in the enMotion dispensers. GP leases
the enMotion dispensers to janitorial supply distributors, who then sublease the
dispensers to their customers such as hotels, stadiums, restaurants, etc. GP
actually sells the enMotion towels to the janitorial supply distributors who
sell it to the end-user customers. The dispenser leases and subleases expressly
provide that only enMotion towels can be used in the enMotion dispensers.
In 2005, one of GP's competitors, the Von Drehle
Corporation ("VD"), began manufacturing an inferior paper towel product. The
paper towel product was specifically manufactured for use in the enMotion
dispensers. GP brought suit against VD alleging contributory trademark
infringement in violation of § 32 of the Lanham Act, 15 U.S.C. § 1114(1),
among other things. The lower court granted summary judgment in favor of VD,
and GP appealed.
Although automatic paper towel dispensers have long
saturated the market, the introduction of the enMotion dispensers was
intended to be a new twist on an old product – a high end dispenser that
supplied top of the line premium fabric-like towels. The towels, although
free of any trademarks or other branding, would also be manufactured by GP.
GP designed and manufactured the high end enMotion dispenser and required
that it operate only with the non-standard, ten-inch enMotion premium
towels. The dispensers bore the GP trademark and enMotion label.
In 2004, the competitor VD discovered the enMotion
dispenser and studied the machine. By mid-2004, VD specifically developed a
ten-inch towel for use in the enMotion dispenser. VD's towels were of lower
quality than the enMotion towels and had a slick, scratchy feel. By August
2004, VD launched a sales campaign through sales personnel to put the
inferior towels in the hands of distributors for sale to end-user consumers
of enMotion dispensers. Since VD's price point for its towels was lower than
that of enMotion's towels, the lower quality towels still gained popularity
and sales steadily increased.
GP argued that VD, by introducing inferior towel
product, created post-purchase confusion as to the source of the towels
among restroom visitors. This could risk potential harm to its reputation
and goodwill. GP brought claims sounding in trademark infringement, unfair
competition under the Lanham Act, and common law unfair competition. The
Fourth Circuit explained that based on the instant facts, the test for these
three claims was the same and focused on the likelihood of confusion as the
source of the goods involved. Accordingly, the Fourth Circuit addressed the
single issue to settle all three claims – whether GP had proffered
sufficient evidence for a reasonable jury to find that VD was liable for
contributory trademark infringement. The elements for determining whether
there is trademark infringement include:
- that the plaintiff possesses one or more trademarks;
- that the end-user customers use one or more of plaintiff’s trademarks;
- in commerce;
- in connection with the sale, offering for sale, distribution or
advertising of
goods; and
- in a manner likely to cause confusion in the relevant public.
Here, GP satisfied the first element because it
possessed a trademark. A trademark is "any word, name, symbol, or device
used by an individual to identify and distinguish its goods from those
manufactured or sold by others and to indicate the source of the goods, even
if that source is unknown." See Georgia-Pacific v. Von Drehle, No. 09-1942,
P. 15 citing 15 U.S.C. § 1127 (internal quotes omitted). GP registered its
marks with the United States Patent and Trademark Office. Accordingly, a
reasonable jury could find that the GP marks displayed on the enMotion
dispensers are valid and protected
Further, the Court found the second, third and fourth
elements were satisfied. The Court explained that because the VD towels were
substituted for enMotion towels, end-users consumed the imitation towels
under the guise of the enMotion trademark. The Court likened the situation
to a hotel placing a Coca-Cola brand fountain dispenser in its facilities
for complimentary consumption by its patrons. Instead of stocking the
Coca-Cola brand product, however, the Court would stock the machine with
generic brand cola. In that scenario, the Court reasoned that there would be
no question that the hotel was using the Coca-Cola trademark to service its
customers. Similarly, commercial lessees of the enMotion towel dispensers
would be using the enMotion brand to dispense generic towels.
The fifth element was the point of contention for the
parties' legal battle. This element focused upon whether VD used the
enMotion trademark in a manner that was likely to cause confusion in the
relevant public. GP argued below that the relevant public included restroom
visitors who consumed towels from the enMotion dispensers and hotels,
stadiums, and restaurants. Stated alternatively, GP contends that
post-purchase confusion is actionable under the Lanham Act for trademark
infringement. The lower court rejected this argument and determined that the
relevant public was actually the commercial janitorial consumer who acquired
the lease to place the enMotion dispensers in their facilities.
The Fourth Circuit agreed with GP. The lower court
erroneously limited its likelihood of confusion analysis to distributors who
purchased the towel dispenser. Contrary to VD's position, the Fourth Circuit
case law allows a fact finder to consider confusion among the non-purchasing
public in the likelihood of confusion inquiry if it can be shown that
"public confusion will adversely affect the plaintiff's ability to control
[its] reputation among its laborers, lenders, investors, or other group with
whom plaintiff interacts." Georgia-Pacific, No. 09-1942 at 17 citing Perini
Corp. v. Perini Constr., 915 F.2d 121, 128 (4th Cir. 1990).
As the Court determined that the lower trial court
erred in limiting its likelihood of confusion inquiry, the Fourth Circuit
also addressed whether there was sufficient evidence on a record for a
reasonable jury to determine that confusion among after-purchase consumers,
i.e. restroom visitors, as to the source of the paper towel product being
dispensed from enMotion dispensers would adversely affect GP's reputation.
For this inquiry, the Fourth Circuit considered empirical studies. These
studies demonstrated that there was a significant amount of actual consumer
confusion as to the source of the paper towels being dispensed. For
instance, one study demonstrated that seventy percent of participants
expected there to be an association between the enMotion dispenser and the
brand of the paper towel product.
The Court determined that a reasonable jury could find
that this confusion harmed GP's reputation because the record also
demonstrated that VD received complaints regarding its inferior paper towel
product. Accordingly, the Court determined a reasonable jury could attribute
the inferior paper towels to enMotion based on after-purchase consumer
confusion. Accordingly, the case was reversed and remanded.
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