Nichino America Inc v. Valent USA LLC ( 2022 )

PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
______________
No. 21-1850
______________
NICHINO AMERICA, INC.,
Appellant
v.
VALENT U.S.A. LLC
______________
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
Before: BIBAS, MATEY, and PHIPPS, Circuit Judges
(Filed: August 12, 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
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OPINION OF THE COURT
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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
2
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 LLC’s allegedly
infringing mark. Finding no reversible error in the District
Court’s 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
CENTAUR’s 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
SENSTAR’s launch. A suit that would become one of the first
to apply the newly effective TMA.
1
Pub. L. No. 116-260, H.R. 133, 116th Cong. subtit. B,
§§ 221–26 (2020).
3
B. District Court Proceedings
Nichino argued that Valent’s use of the SENSTAR
mark would create confusion among consumers, a necessary
element in a trademark infringement claim. See A & H
Sportswear, Inc. v. Victoria’s Secret Stores, Inc., 237 F.3d 198,
210 (3d Cir. 2000). 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 Interpace
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. Kos Pharms., Inc. v. Andrx Corp., 369 F.3d
700, 708 (3d Cir. 2004). These burdens are all borne by
Nichino. Ferring Pharms., Inc. v. Watson Pharms., Inc., 765
F.3d 205, 210 (3d Cir. 2014).
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
Corp. v. Lapp, Inc., 721 F.2d 460, 462–63 (3d Cir. 1983); see
also A & H Sportswear, Inc., 237 F.3d at 213 (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 Valent’s intent in selecting the mark) in Valent’s
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 Valent’s 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
4
The factors summarized in Lapp break into three
categories. First, facts about the plaintiff’s mark, including its
distinctiveness. Second, facts about the defendant’s 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 Lapp, 721 F.2d at 463–64 (holding that trial court
adequately addressed “every relevant area of inquiry” without
“formally apply[ing]” the factors when it made findings about
“[t]he plaintiff’s 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
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 Court’s
finding that Valent had rebutted the presumption of irreparable
harm.6 Finding no reversible error that disturbs the District
Court’s conclusion, we will affirm.7
II.
Nichino contends that the TMA precluded the District
Court’s decision about irreparable harm. But the District Court
admirably navigated Congress’ newly minted rebuttable
presumption. While our discussion builds on the District
Court’s insights, we arrive at the same conclusion. Valent
5
Here, the District Court appropriately cited Nichino’s
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 Kos Pharms.,
Inc., 369 F.3d at 726 (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 Court’s factual findings for
clear error, the legal conclusions de novo, and the decision
whether to grant an injunction for abuse of discretion. Osorio-
Martinez v. Att’y Gen., 893 F.3d 153, 161 (3d Cir. 2018).
6
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
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 Shady Grove Orthopedic
Assocs., P.A. v. Allstate Ins. Co., 559 U.S. 393, 398, 399
(2010), we interpret such Rules using the traditional tools of
statutory interpretation to discover their ordinary meaning. See,
e.g., UGI Sunbury LLC v. A Permanent Easement for 1.7575
Acres, 949 F.3d 825, 832–33 (3d Cir. 2020) (interpreting
Federal Rule of Evidence 702 according to its text); see also
United States v. Melvin, 948 F.3d 848, 852 (7th Cir. 2020)
(explaining that courts interpret the Federal Rules using the
“words’ ordinary, contemporary, common meaning by looking
at what they meant when . . . enacted”) (citing Pavelic &
LeFlore v. Marvel Entm’t Grp., 493 U.S. 120, 123 (1989)).
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
7
framework applies here because the TMA creates a rebuttable
presumption without explaining how it applies. Lupyan v.
Corinthian Colls. Inc., 761 F.3d 314, 320 (3d Cir. 2014)
(“Federal Rule [of] Evidence 301 provides the default rule for
how presumptions operate in federal civil cases.”); Cappuccio
v. Prime Cap. Funding LLC, 649 F.3d 180, 190 (3d Cir. 2011)
(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 Cappuccio, 649 F.3d at 189.
Instead, courts must ask only whether the rebuttal evidence is
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 fact-
finder on the issue, always remains with the same party. Id.;
see also McCann, 458 F.3d at 287 (“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); St. Mary’s
Honor Ctr. v. Hicks, 509 U.S. 502, 507 (1993) (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).
8
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 TMA’s rebuttable
presumption.
Step 1. The TMA’s rebuttable presumption
requires courts considering a trademark injunction to assess the
plaintiff’s 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., Kos
Pharms., Inc., 369 F.3d at 709; NutraSweet Co. v. Vit-Mar
Enters, Inc., 176 F.3d 151, 153 (3d Cir. 1999) (“A plaintiff’s
failure to establish any element in its favor renders a
preliminary injunction inappropriate.”).
10
That small quantum of evidence is all we have
required to rebut Rule 301 presumptions. In Cappuccio, we
held that a borrower’s own testimony that her lender had not
properly explained the right to cancel her home mortgage was
enough to rebut the Truth in Lending Act’s presumption that
notice was received. 649 F.3d at 189–90. 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 McCann, 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. 458 F.3d at 287–88.
9
Step 2. If the plaintiff’s 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 Cappuccio, 649 F.3d at 189. But note again the sequence.
So far, the court has not assessed any of the evidence for likely
irreparable harm. Rather, the TMA’s presumption means the
court assumes irreparable harm, even if the plaintiff has
proffered nothing in support. The focus trains on the
defendant’s evidence, and whether it is sufficient to rebut the
TMA’s presumption. A meaningful consideration of the facts,
not a box-checking review of the Lapp factors, is key, aimed at
determining whether the defendant’s 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
TMA’s 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
McCann v. Newman Irrevocable Trust, 458 F.3d 281, 287–88
(3d Cir. 2006). 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 McKenna
v. Pac. Rail Serv., 32 F.3d 820, 830 (3d Cir. 1994))). Here
again, the evaluation outlined in Lapp may prove useful to
10
assess whether consumer confusion will lead to irreparable
harm.11
B. The District Court’s Rebuttal Analysis Follows Rule
301
The District Court’s finding that Valent rebutted the
TMA’s 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 Nichino’s
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 Valent’s rebuttal evidence. Here, the District
11
Contrary to Nichino’s 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 Court’s 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.
11
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 Nichino’s 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 Nichino’s 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
Court’s judgment. The Court also credited Valent’s 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
12
the TMA’s 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 Court’s conclusion, and its decision to deny injunctive
relief, correct, as “[a] plaintiff’s failure to establish any element
in its favor renders a preliminary injunction inappropriate.”
NutraSweet Co., 176 F.3d at 153.14
13
Nichino is right that “the standard of care [in
purchasing] . . . will be equal to that of the least sophisticated
consumer in the class,” Ford Motor Co. v. Summit Motor
Prods., 930 F.2d 277, 293 (3d Cir. 1991), 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 Court’s balancing of equities. Ample evidence
supports the Court’s conclusion that an injunction would cause
Valent to lose significant sales while it reapplied, and awaited
approval, for a new trademark. Those amounts, using Valent’s
pre-release projections, measured in millions of lost dollars.
(See S. App. at 445.) Nor is there error in the Court’s 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.)
13
III.
For these reasons, we will affirm the District Court’s
order denying Nichino’s motion for a preliminary injunction.
14