Honestech, Incorporated v. Sonic Solutions

REVISED JUNE 24, 2011
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
United States Court of Appeals
Fifth Circuit
FILED
June 23, 2011
No. 10-50724
Lyle W. Cayce
Clerk
HONESTECH, INCORPORATED,
Plaintiff - Appellant
v.
SONIC SOLUTIONS,
Defendant - Appellee
Appeal from the United States District Court
for the Western District of Texas
USDC No. 1:08-CV-922
Before JOLLY, HAYNES, and GRAVES, Circuit Judges.
E. GRADY JOLLY, Circuit Judge:*
In 2005, Honestech Incorporated began selling a product in the United
States -- VHS TO DVD (“VTD”) -- that allows users to convert media from analog
format to digital format. Although Honestech never formally applied for
*
Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH CIR.
R. 47.5.4.
No. 10-50724
trademark protection, it attached a trademark insignia to its VTD label in April
2007. In July 2008, Sonic Solutions began marketing a competing product,
which it labeled “Easy VHS TO DVD” (“EVTD”).
On December 23, 2008, Honestech filed a trademark infringement suit
against Sonic. Sonic hired Dr. Bruce Isaacson to conduct a survey evaluating
whether the VTD mark had acquired secondary meaning; his survey concluded
that the mark had no secondary meaning. On November 2, 2009, Honestech
moved to strike Isaacson’s survey, arguing that it was methodologically flawed.
The district court denied Honestech’s motion.
At trial, Honestech presented circumstantial evidence of secondary
meaning, and Sonic presented Dr. Isaacson’s testimony. The jury found in
Sonic’s favor. Honestech asked the district court to grant a new trial, arguing
that the improper admission of Isaacson’s survey had affected its substantial
rights. The district court denied the motion.
Honestech appeals; its sole argument is that the district court abused its
discretion in admitting Isaacson’s survey. Indeed, at oral argument it conceded
that we should affirm if we determine that the survey was properly admitted.1
We hold that the survey was admissible and we therefore AFFIRM.
I.
This court reviews a trial court's decision regarding the admissibility of
expert testimony under an abuse of discretion standard, and it will reverse the
district court only if “the ruling is manifestly erroneous.” Guy v. Crown Equip.
Corp., 394 F.3d 320, 324-25 (5th Cir. 2004) (internal citations omitted).
1
Although Honestech notes that at least one circuit has held that intentional copying,
standing alone, “establishes a prima facie case of secondary meaning[,]” see Larsen v. Terk
Techs. Corp., 151 F.3d 140, 148-49 (4th Cir. 1998), it conceded at oral argument that its appeal
hinges on whether Isaacson’s survey was admissible. Stated differently, Honestech does not
specifically ask us to reverse the jury verdict based solely on Sonic’s intent, nor did it ask the
district court to instruct the jury that intent is dispositive.
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No. 10-50724
“Manifest error is one that is plain and indisputable, and that amounts to a
complete disregard of the controlling law.” Id. (internal marks and citation
omitted). “If it is found that the district court abused its discretion . . . this court
must then consider whether the error was harmless, affirming the judgment
unless the ruling affected a substantial right of the complaining party.”
Primrose Operating Co. v. Nat'l Am. Ins. Co., 382 F.3d 546, 561 (5th Cir. 2004).
In urging us to hold that the district court abused its discretion in
admitting the survey, Honestech’s arguments, broadly stated, are two.
Honestech first argues that Isaacson’s methodology was flawed. It
contends that he failed to conduct appropriate market research, and that as a
result his survey universe was over inclusive. Honestech argues that the
appropriate universe consisted solely of mature males who had previously
purchased analog to digital products or who, in response to questioning,
indicated that they were interested in purchasing one. It further contends -- but
only in the factual statement and argument summary of its brief -- that
Isaacson’s results were unreliable because his questions did not control for the
fact that Sonic had released its EVTD line.
Honestech’s second argument is that the district court abdicated its
gatekeeping function. Honestech complains that the district court seemed to say
that it routinely ignores the substance of Daubert motions, and it contends that
the court perpetuated this deficient practice here.
A.
“In assessing the validity of a survey, we look to two factors: first, the
manner of conducting the survey, including especially the adequacy of the
universe; and second, the way in which participants are questioned.” Scott
Fetzer Co. v. House of Vacuums Inc., 381 F.3d 477, 487 (5th Cir. 2004) (internal
citation omitted). “In an infringement action, the appropriate universe should
include a fair sampling of those purchasers most likely to partake of the alleged
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No. 10-50724
infringer's goods or services.” Id. at 487-88 (internal quotation marks and
citation omitted). This standard does not require the surveyor to solicit the
responses of past purchasers of the product; indeed, focusing too closely on such
individuals renders the survey unreliable. See Sno-Wizard Mfg., Inc. v.
Eisemann Prods. Co., 791 F.2d 423, 427 (5th Cir. 1986). Finally, the general rule
is that “methodological flaws in a survey bear on the weight the survey should
receive, not the survey’s admissibility.” Scott Fetzer Co., 381 F.3d at 488.
Honestech’s primary point of attack on the survey is the inadequacy of
Isaacson’s universe. It argues that Isaacson failed to identify the relevant
consumers: individuals who “ha[d] purchased or intend[ed] to purchase [from]
the product category at issue within a contextually appropriate time[ ]frame.”2
Honestech further argues that numerous district courts have deemed it
insufficient for a surveyor to identify individuals who “meet certain criteria that
make them possible purchasers” without determining “whether they have any
interest or willingness to purchase the products at issue[.]”
Honestech also criticizes Isaacson for his failure to control for the release
of Sonic’s competing EVTD line by asking whether the participants had
associated the VTD tag with only one company prior to Sonic's launch of its
EVTD line. Notably, Honestech cites no authority that would have required the
district court to exclude the survey on this basis.3
2
Honestech insists that focusing on past purchasers would not have skewed the results;
in a related vein, it contends that there is no evidence suggesting that consumers will purchase
an analog-to-digital converter only once. To understand this argument, we need to briefly
revisit the district court's order denying Honestech's motion. The district court noted that “the
survey concerned a product likely to be purchased only once in a lifetime, not a product (like
pizza, groceries, or car insurance) that is likely to be purchased repeatedly over a consumer's
lifetime.” The district court further noted that when this one-time-purchase type of item is at
issue, “surveying those who had already bought the product skew[s] the results, . . . .”
3
Indeed, it is likely that this argument is inadequately briefed, as it is presented only
in Honestech's factual statement and argument summary -- not in its argument section -- and
Honestech does not cite any supporting authority. “[T]he appellant's argument [must] contain
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No. 10-50724
In responding to Honestech’s attack on the survey, Sonic counters that the
survey was not flawed. It points out that Isaacson limited the universe based
on a host of variables, including, inter alia, whether the individual “bought or
participated in selecting computers and/or audio and video equipment for their
household; “owned . . . at least one device capable of playing analog content;”
and “had audio or video material recorded in an analog format . . . .” Sonic
further argues that the district court properly determined that past purchasers
would at best be able to “identify the product that they had already purchased
and used.” It urges that this rationale is especially compelling where, as here,
the product is one that a consumer will likely purchase only once, and it argues
that, for the same reason, it would be unreasonably difficult to locate individuals
who had a fixed intent to buy the product. Finally, Sonic reiterates the general
rule that “methodological flaws in a survey bear on the weight the survey should
receive, not the survey’s admissibility.” Scott Fetzer Co., 381 F.3d at 488.
We must agree with Sonic. Isaacson’s screening questions reflect a
reasonable attempt to identify individuals who would be interested in buying the
software. At the very least, these questions eliminated individuals that would
be unlikely to have any need for the product. Moreover, the district court used
common sense in observing that this product is unlike food in that consumers
are unlikely to purchase it time and time again. In any event, the district court
could reasonably conclude that, under our precedent, surveying consumers who
had already purchased the product would skew the results. Sno-Wizard Mfg.,
Inc., 791 F.2d at 427. Similarly, although Honestech finds fault with Isaacson’s
failure to pinpoint individuals who intended to buy the product in the future,
the reasons he deserves the requested relief with citation to the authorities, statutes and parts
of the record relied on.” Yohey v. Collins, 985 F.2d 222, 225 (5th Cir. 1993) (emphasis added).
“[O]nly the issues presented and argued in the brief are addressed.” Id. (emphasis added). We
will nevertheless address this argument, because, as we explain, it does not change the
outcome of this case.
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No. 10-50724
requiring such exactitude would likely make it impossible to conduct a survey
in this case. As stated by the district court: “Without a pattern of . . . purchases,
it is difficult to predict future purchases.”
In any event, a survey need not be perfect to be admitted into evidence.
This court has never required a surveyor to identify with mathematical precision
the individuals who have a fixed intent to buy the relevant product; instead, it
had merely required that the survey universe reflect a “fair sampling of those
purchasers most likely to partake of the alleged infringer's goods or services."
Scott Fetzer Co., 381 F.3d at 487-88 (emphasis added). Isaacson’s survey
satisfies this threshold.
Stated differently, methodological errors generally speak to “weight . . . not
. . . admissibility.” Id. at 488. This rule speaks most directly to Honestech’s
argument that Isaacson failed properly to account for the presence of two
competing products in the marketplace. Although Isaacson’s survey might have
been more reliable if he had subjected potential participants to the questioning
that Honestech prefers, his failure to do so does not render the survey unreliable
so as to be excluded from the jury’s consideration. Finally, we note that
Honestech was permitted to attempt to discredit Dr. Isaacson and his survey
through aggressive cross-examination.
B.
As earlier noted, Honestech contends that the district court failed to follow
proper procedure in allowing Isaacson to testify. It correctly notes that district
courts are given gate-keeping responsibilities with regard to expert testimony.
See Daubert v. Merrell Dow Pharm., Inc., 509 U.S. 579, 589 (1993). Honestech
argues that the district court admitted that it had abdicated this gatekeeping
function when it said that it doesn’t “have time, with the docket to go through
and decide, in the abstract . . . all of the Daubert motions that the Supreme
Court has blessed us with because none of them tried lawsuits.”
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No. 10-50724
Sonic counters with a different interpretation of the judge’s comments:
that the district court was merely discouraging Sonic’s attorney from introducing
into evidence the order permitting Isaacson to testify, and that it therefore
emphasized that its order did not endorse the merits of Isaacson’s survey. Sonic
further urges that the order itself demonstrates the motion was given full and
proper consideration because it addresses all of Honestech’s admissibility
arguments.
On its face, the district court’s statement raises some concern. The court
seemed to imply that it routinely allows experts to testify without evaluating
whether their testimony will be reliable; this, it cannot do. Daubert, 509 U.S. at
598. On the other hand, when viewed in context, the court’s statement seems
to reflect only a rhetorical flourish. The record shows that Kim Brightwell, who
was one of Sonic’s trial attorneys, stated that he intended to introduce for the
jury’s consideration the district court’s order admitting Isaacson’s survey. In
response, the district court cautioned Mr. Brightwell that his proposal may not
be so bright: “I don’t think I would do that because then, I would instruct the
jury that all I said was he would be able to present testimony to the jury. I did
not find as a matter of law based on the briefs that he was unqualified.” Only
after this back and forth did the court make the complained-of statement. It
thus seems that the court was using rhetoric to emphasize to Mr. Brightwell that
it would not allow its order to be portrayed as a merits endorsement of Isaacson’s
survey. The court’s statement does not require us to reverse the jury verdict,
because the survey was admissible, and the court’s order denying the motion to
exclude -- which carefully discusses the relevant facts and precedent in detail --
demonstrates that the motion was given full and proper consideration.
Because we have determined that the district court did not abuse its
discretion by admitting Isaacson’s survey, we need not consider whether the
admission of the evidence affected Honestech’s substantial rights. We similarly
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No. 10-50724
need not address Honestech’s argument that the district court abused its
discretion in denying its motion for a new trial, as Honestech presented one --
and only one -- argument to the district court in urging it to grant a new trial:
that the court had erred in admitting Isaacson’s survey.4
II.
We tally the points of this opinion: Honestech, a company that sells
software that converts media from analog format to digital format, sued one of
its competitors, Sonic Solutions, alleging that Sonic had infringed Honestech’s
trademark. More specifically, Honestech argued that the “VHS TO DVD” label
attached to its product had acquired secondary meaning and that Sonic had
created confusion among consumers by marking its similar product “Easy VHS
TO DVD.”
Sonic responded with a survey conducted by Dr. Bruce Isaacson; the
survey results suggested that Honestech had failed to establish secondary
meaning. Honestech asked the district court to exclude Isaacson’s survey,
arguing that it was unreliable because of its flawed methodology. The district
court refused to exclude the report, and the case proceeded to trial. At trial,
Honestech presented circumstantial evidence of secondary meaning. Sonic
called Dr. Isaacson as a witness, who testified to the results of his survey.
Thus, the jury heard both sides of the arguments regarding secondary
meaning. It then found that Honestech’s mark was merely descriptive and that
Honestech had failed to establish secondary meaning, returning a verdict in
Sonic’s favor. Honestech sought a new trial, arguing that Isaacson’s unreliable
survey had tainted the jury. The district court refused to grant a new trial; it
4
Honestech says in its appellate brief that Isaacson's trial testimony “only confirmed
Honestech's original reasons for opposing [the survey's] admission[,]” and that “the Court's
refusal to correct this error following trial, thus, constituted an abuse of discretion for precisely
the same reasons.”
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No. 10-50724
concluded that the survey was properly admitted, and further concluded that
any error in its admission was harmless.
On appeal, Honestech again insists that the survey was improperly
admitted. Sonic insists that the survey was reliable, and notes that this court
has never said that a surveyor must use laser-like precision in crafting a survey
universe.
We have held today that the district court did not abuse its discretion in
admitting Isaacson’s survey. The survey, although not perfect, was sufficiently
reliable to be admitted; in other words, any methodological errors spoke to its
weight, not its admissibility.
We have found no error in the admission of the survey, and the judgment
of the district court is therefore, in all respects,
AFFIRMED.
9