Southern Snow Manufacturing Co. v. SnoWizard Holdings, Inc.

NOTE: This disposition is nonprecedential.
United States Court of Appeals
for the Federal Circuit
______________________
SOUTHERN SNOW MANUFACTURING CO., INC.,
PLUM STREET SNOBALLS, THEODORE
EISENMANN, RAGGS SUPPLY, LP, SPECIAL T ICE
CO., INC., VANS SNOWBALLS, PARASOL
FLAVORS, LLC, SIMEON, INC., AND SNOW
INGREDIENTS, INC.,
Plaintiffs-Appellants,
AND
BANISTER & CO., INC. AND
MILTON G. WENDLING, JR.,
Counterclaim Defendants-Appellants,
AND
DOTY MANAGEMENT, LLC,
JULIE K. DOTY, AND RON ROBINSON,
Counterclaim Defendants,
v.
SNOWIZARD HOLDINGS, INC.,
SNOWIZARD EXTRACTS, INC., AND
SNOWIZARD SUPPLIES, INC.,
Defendants,
AND
2 SOUTHERN SNOW MANUFACTURING v. SNOWIZARD HOLDINGS
SNOWIZARD, INC., AND RONALD R. SCIORTINO,
Defendants-Cross Appellants.
______________________
2013-1586, 2014-1043
______________________
Appeals from the United States District Court for the
Eastern District of Louisiana in Nos. 06-CV-9170, 09-CV-
3394, 10-CV-0791, and 11-CV-1499, Judge Nannette
Jolivette Brown.
______________________
Decided: June 30, 2014
______________________
MARK EDW. ANDREWS, Andrews Arts & Sciences Law
LLC, of New Orleans, Louisiana, argued for plaintiffs-
appellants and counterclaim defendants-appellants.
JACK E. MORRIS, of Metaire, Louisiana, argued for de-
fendants-cross appellants. With him on the brief were
KENNETH L. TOLAR, of Metairie, Louisiana, and BRAD E.
HARRIGAN, Lugenbuhl Law Firm, of New Orleans, Louisi-
ana.
______________________
Before PROST, Chief Judge, LOURIE, and CLEVENGER,
Circuit Judges.
CLEVENGER, Circuit Judge.
A snowball is a confection of ice shavings, flavored
with various syrups and typically served in a cone-shaped
paper cup. This appeal arises from the conclusion of four
consolidated lawsuits in the United States District Court
for the Eastern District of Louisiana, involving members
of every segment of the snowball industry from manufac-
turers of the icemakers and syrups to distributors to local
SOUTHERN SNOW MANUFACTURING v. SNOWIZARD HOLDINGS 3
snowball vendors. The claims in this suit are numerous
and diverse, spanning patents, trademarks, antitrust, and
the Racketeering Influenced and Corrupt Organizations
Act (“RICO”). We have jurisdiction under 28 U.S.C.
§ 1295(a)(1). For the reasons provided below, we affirm-
in-part, reverse-in-part, vacate-in-part, dismiss-in-part,
and remand.
PATENTS
I
Ronald R. Sciortino is the inventor of U.S. Patent No.
7,536,871 (the “’871 Patent”) and No. 7,543,459 (the “’459
Patent”). He is also the owner of SnoWizard, Inc. (collec-
tively with Sciortino and related entities, “SnoWizard”), to
which he has exclusively licensed the patents.
Relevant to this appeal are the following issues: (1)
invalidity and unenforceability of the ’871 Patent due to
the on-sale bar of 35 U.S.C. § 102(b) and, alternatively, for
inequitable conduct; (2) invalidity and unenforceability of
the ’459 Patent for inequitable conduct; (3) various find-
ings of infringement of the ’871 Patent by Southern Snow
Manufacturing Co., Inc. (“Southern Snow”), Banister &
Co. (“Banister”), and Milton G. Wendling, Jr., owner of
both Banister and Southern Snow; and (4) damages.
As explained below, we hold that the ’871 Patent is
invalid under the on-sale bar, reversing the District
Court’s conclusion to the contrary. We vacate the findings
of infringement and the award of damages. We affirm the
conclusion that the ’459 Patent is not unenforceable for
inequitable conduct.
II
The law of the on-sale bar is as follows:
The on-sale bar applies when two conditions are
satisfied before the critical date: (1) the claimed
invention must be the subject of a commercial of-
4 SOUTHERN SNOW MANUFACTURING v. SNOWIZARD HOLDINGS
fer for sale; and (2) the invention must be ready
for patenting. An actual sale is not required for
the activity to be an invalidating commercial offer
for sale. An attempt to sell is sufficient so long as
it is “sufficiently definite that another party could
make a binding contract by simple acceptance.”
“In determining such definiteness, we review the
language of the proposal in accordance with the
principles of general contract law.”
An invention is “ready for patenting” when prior
to the critical date: (1) the invention is reduced to
practice; or (2) the invention is depicted in draw-
ings or described in writings of sufficient nature to
enable a person of ordinary skill in the art to prac-
tice the invention.
Hamilton Beach Brands, Inc. v. Sunbeam Prods., Inc., 726
F.3d 1370, 1374-75 (Fed. Cir. 2013) (citations omitted).
Furthermore:
Whether a patent is invalid for a public use or sale
is a question of law, reviewed de novo, based on
underlying facts, reviewed for substantial evi-
dence following a jury verdict.
Leader Techs., Inc. v. Facebook, Inc., 678 F.3d 1300, 1305
(Fed. Cir. 2012) (citation omitted).
III
Notwithstanding the legal dimensions of the on-sale
bar inquiry, the District Court submitted the entire
question to be adjudicated by the jury, which concluded
that the ’871 Patent was not invalid. 1 On motion for new
1 The question, as presented to the jury, recites:
Do you find by clear and convincing evidence that
the claimed invention was on sale, the subject of a
SOUTHERN SNOW MANUFACTURING v. SNOWIZARD HOLDINGS 5
trial or for judgment as a matter of law, Southern Snow
argued that the undisputed facts show a commercial offer
for sale of the invention before the critical date and that
the invention was ready for patenting. Given these facts,
Southern Snow argued that the District Court was obli-
gated to invalidate the ’871 Patent under the on-sale bar.
The District Court disagreed, reasoning that “the jury
reasonably found that [the burden of establishing invalid-
ity] was not satisfied” and sustained the jury verdict as
“not . . . against the weight of the evidence.” S. Snow Mfg.
Co., v. SnoWizard Holdings, Inc., No. 06-CV-9170, 2013
WL 4007068, at *7 (E.D. La. Aug. 5, 2013) (“JMOL Op.
I”). For the reasons stated below, we hold that the District
Court erred in denying judgment as a matter of law.
On September 24, 2001, SnoWizard sent two technical
sketches to its parts manufacturer, depicting parts SW1
and SW2:
commercial offer for sale, or in public use before
the “critical date” of February 6, 2003?
United States District Court for the Eastern District of
Louisiana, Verdict Form 2 (Feb. 28, 2013).
SOUTHERN SNOW MANUFACTURING v. SNOWIZARD HOLDINGS 7
The manufacturer responded with a detailed quota-
tion for each of the two parts, including a table of prices
and quantities, tooling costs, and delivery time. This note,
stamped “RECEIVED Oct 29 2001,” explicitly invited
SnoWizard to put in an order for the parts and specified
the events that will take place after “we receive your
order.” Precision Metalsmiths, Inc., Quotation (Oct. 25,
2001). On January 17, 2002, the manufacturer sent
another quotation, this time for the “COMPLETE
MACHINED ASSEMBLY,” that is, the “ASSEMBL[Y]
[OF] MACHINED SW2 TO SW1.” Precision Metalsmiths,
Inc., Quotation (Jan. 17, 2002). At the bottom of the
quotation was a hand-written note, “Both Parts Complete-
ly Machined and assembled!” Id.
Under traditional contract law principles:
An offer is the manifestation of willingness to en-
ter into a bargain, so made as to justify another
person in understanding that his assent to that
bargain is invited and will conclude it.
RESTATEMENT (SECOND) OF CONTRACTS § 24 (1981). No
reasonable jury, presented with the evidence of such
detailed quotations, could conclude that there was not an
offer for the two parts or for the assembly.
The subsequent behavior of SnoWizard and the manu-
facturer further confirm the existence of an offer for sale
sufficient to trigger the on-sale bar. The aforementioned
quotations promised 2 samples of each part for approval,
and these samples were shipped to SnoWizard on Decem-
ber 13, 2001. SnoWizard sent the manufacturer a letter
stating that “[w]e have tested both parts and they have
worked out well” but asked for “several minor adjust-
ments.” Letter from Ronald R. Sciortino to Tom Keitel
(Jan. 2, 2002). On October 12, 2002, SnoWizard submitted
a purchase order for 400 SW1 parts at $3.58 each and 525
8 SOUTHERN SNOW MANUFACTURING v. SNOWIZARD HOLDINGS
SW2 parts at $3.07 each, informing the manufacturer
that it decided to put the parts together itself. 2 At this
point, the parties have moved beyond offers and have
concluded a contract.
In support of its conclusion that the on-sale bar was
not triggered, the District Court reasoned simply that:
[Sciortino] had not approved the sample of [the
SW2 part] . . . until December 23, 2002, and the
manufacturer did not ship the first order of the
part to SnoWizard until February 12, 2003.
JMOL Op. I at *6, and thus concluded that:
the jury could reasonable [sic] conclude that it
would have been impossible for the ‘claimed in-
vention’ to have been on sale, the subject of a
commercial offer for sale, or in public use before
February 6, 2003. . . .
Id.
But as we have explained, “[a]n actual sale is not re-
quired for the activity to be an invalidating commercial
offer for sale.” Hamilton Beach Brands, 726 F.3d at 1374
(citation omitted). An offer is sufficient. The fact that the
manufacturer made the part and shipped it pursuant to
previous quotations and purchase orders provides further
evidence that there was a contract—of which an offer is a
necessary prerequisite.
2 To the extent that SnoWizard asserts that its pur-
chases of the parts was for experimental use, buying 400
or more exemplars can hardly qualify as anything other
than commercial use, especially when, as admitted to by
SnoWizard itself, it has never sold more than 383 icemak-
ers a year. Indeed, in a letter submission after the hear-
ing, SnoWizard acknowledges that the purchase of the
SW1 and SW2 are of a “production quantity.”
SOUTHERN SNOW MANUFACTURING v. SNOWIZARD HOLDINGS 9
The remaining question is whether the subject matter
of the transactions was “ready for patenting.”
The Supreme Court has held:
the invention must be ready for patenting. That
condition may be satisfied in at least two ways: by
proof of reduction to practice before the critical
date; or by proof that prior to the critical date the
inventor had prepared drawings or other descrip-
tions of the invention that were sufficiently specif-
ic to enable a person skilled in the art to practice
the invention.
Pfaff v. Wells Elecs., Inc., 525 U.S. 55, 67 (1998).
It cannot be argued, and SnoWizard does not so as-
sert, that the parts SW1 and SW2 or the assembly were
not “ready for patenting.” Here, there were detailed
drawings of the parts. SnoWizard itself wrote out, on the
October 17, 2002 purchase order, how it would fit SW1
and SW2 together. The manufacturer clearly understood
how to make the parts and how the pieces were to be put
together. When offering to sell the assembly, it stated that
it would “PROVIDE SET SCREW, ROLL PIN AND
JAMNUT AND ASSEMBLE MACHINED SW2 TO SW1.”
Precision Metalsmiths, Inc., Quotation (Jan. 17, 2002). No
reasonable jury could conclude that the ordinary artisan
with the aid of SnoWizard’s instructions would be unable
to practice the parts or the assembly.
We therefore turn our inquiry to whether the SW1
and SW2 parts, purchased by SnoWizard on October 12,
2012, or the assembly of the two, offered for sale on Janu-
ary 17, 2012, constituted the patented invention.
Claim 1 of the ’871 Patent, taken here to be repre-
sentative, recites:
1. A cam assembly for an icemaker having a push-
er arm with ratchet teeth comprising:
10 SOUTHERN SNOW MANUFACTURING v. SNOWIZARD HOLDINGS
a cam connector, the cam connector is adapted to
be coupled to a handle of said icemaker; and,
a cam member having a single elongated struc-
ture that has a gradually tapering width from
back to front, the back having a forked end pivot-
ally coupled to said cam connector and the front
having a second end, the second end has formed in
a bottom surface thereof, a indented cavity for re-
ceipt of a ratchet tooth.
The patent provides an image of the claimed “cam as-
sembly”:
’871 Patent Figure 2. The “cam member” labeled 220,
corresponds to SW1, and the “cam connector,” labeled 250,
corresponds to SW2.
On appeal, SnoWizard argues that the invention was
“[a] cam assembly for an icemaker,” not just SW1 or SW2.
It maintains that “it would have been impossible to com-
plete the machining, finishing, and assembly of improved
cam assemblies for installation in SnoWizard SnoBall
Machines before March 2003 at the earliest” because the
delivery of SW2 took place 6 days after the critical date.
Appellee Br. 17.
SOUTHERN SNOW MANUFACTURING v. SNOWIZARD HOLDINGS 11
As we have explained, “[g]enerally, the preamble does
not limit the claims.” Allen Eng’g Corp. v. Bartell Indus.,
299 F.3d 1336, 1346 (Fed. Cir. 2002). SnoWizard has not
provided any persuasive reason why this general pro-
scription should not apply. SnoWizard may not escape the
consequences of the on-sale bar by mere recitation to the
portion of the preamble referring to the “icemaker having
a pusher arm with ratchet teeth.”
The law only requires that the invention be “ready for
patenting,” that is, the “descriptions of the invention . . .
were sufficiently specific to enable a person skilled in the
art to practice the invention.” Pfaff, 525 U.S. at 67. It is
not necessary for the assemblies or the part to be ready to
be put into operation for the on-sale bar to apply.
SnoWizard has utterly failed to point to any evidence as
to what else, beyond the parts or the assembly, the ordi-
nary artisan would need to practice the claimed invention.
Accordingly, the ’871 Patent is invalid under the on-
sale bar. We need not consider whether inequitable con-
duct renders it unenforceable. We vacate the findings of
infringement and the award of damages.
IV
Appellants seek a holding that the ’459 Patent, which
was not asserted by SnoWizard, is unenforceable for
inequitable conduct.
The underlying patent application was allowed on
March 12, 2007. On May 11, 2007, SnoWizard’s then-
patent attorney withdrew from representation at the
USPTO for nonpayment, vouching that he “ha[d] notified
[SnoWizard] of any responses that may be due and the
time frame within which [it] must respond.” Seth M.
Nehrbass, Request for Withdrawal as Attorney of Record
(May 11, 2007). The application was deemed abandoned
on June 13, 2007 for nonpayment of the issuing fee. On
October 10, 2007, SnoWizard hired a new patent counsel.
12 SOUTHERN SNOW MANUFACTURING v. SNOWIZARD HOLDINGS
The petition to revive the abandoned application was
signed by Sciortino on February 16, 2009, but it was not
filed until March 3, 2009. When filing the petition to
revive, Sciortino had to and did file a statement that the
delay was unintentional. At trial, Appellants asserted
that the delay could not have been unintentional and
charged SnoWizard with lying to the USPTO.
The jury found for SnoWizard that there was no will-
ful material misrepresentation in the revival of the appli-
cation. Appellants challenge the jury verdict on appeal.
The only supporting evidence in favor of SnoWizard,
according to Appellants, is the testimony of their patent
expert on the subject matters of allowance, abandonment,
and revival. However, they assert that the testimony
should have been stricken because it was not in her
expert report. They also maintain that the testimony is
wrong.
SnoWizard argues that the District Court was within
its discretion to permit the testimony concerning “routine
PTO procedure” and that the contents of the expert’s
testimony were not wrong. Appellee Br. 19, 22. To further
buttress the jury verdict, SnoWizard points to such evi-
dence as the testimony by Sciortino that he never received
the notice of abandonment from the USPTO.
We affirm the conclusion that the ’459 Patent is not
unenforceable for inequitable conduct. Regardless of any
possible error connected with the contents or the admis-
sion of expert testimony, the jury was entirely free to
credit Sciortino’s testimony that he never knew the appli-
cations were abandoned and that the delay in prosecution
was unintentional. Appellants did not provide good reason
to disturb the jury verdict.
SOUTHERN SNOW MANUFACTURING v. SNOWIZARD HOLDINGS 13
TRADEMARKS
I
Southern Snow and Simeon, Inc. (“Simeon”), both
owned by Wendling, asserted the Louisiana registered
trademark of SNOBALL against SnoWizard. While the
jury found that Southern Snow and Simeon owned a valid
and enforceable trademark in SNOBALL, it also found
that that SnoWizard did not infringe the mark and that
the suit against SnoWizard was groundless, brought in
bad faith, or brought for purposes of harassment. The
District Court sustained the jury verdict. JMOL Op. I, at
*9.
On appeal, Simeon and Southern Snow do not appeal
the noninfringement verdict. Rather, they challenge the
finding that the infringement claim was groundless. First,
they contend that, because the jury upheld the validity of
the SNOBALL mark, their claim for infringement cannot
be groundless. Second, they assert that the finding of
groundlessness cannot be reconciled with a jury verdict
that their related state unfair competition claim was not
groundless, brought in bad faith, or brought for purposes
of harassment.
Southern Snow and Simeon’s appeal lacks merit. As
the District Court aptly observed, “it is entirely possible to
have a valid trademark . . . and nevertheless file a lawsuit
in bad faith or for purposes of harassment.” Id. As to the
alleged discrepancy between the findings of groundless-
ness with respect to the SNOBALL trademark claim and
to the unfair competition claim, the District Court rightly
stated that there may have been “better evidence in the
jury’s determination of . . . bad faith in filing trademark
infringement claims.” Id.
Accordingly, we affirm the finding that the SNOBALL
infringement claim was groundless, brought in bad faith,
or for purposes of harassment.
SOUTHERN SNOW MANUFACTURING v. SNOWIZARD HOLDINGS 15
Parasol Yes, $100 in
Flavors, Willful profits
SNOSWEET Yes
LLC
(“Parasol”)
On motion for a new trial or for judgment as a matter
of law, the District Court found that substantial evidence
supported the verdicts that the use of the marks by
Southern Snow, Snow Ingredients, and Parasol (collec-
tively, the “Accused Infringers”) created a likelihood of
confusion. JMOL Op. I, at *8. It noted that there was
“evidence . . . that Southern Snow used SnoWizard’s
trademarks on identical goods, and that Parasol used a
colorable imitation of SNOSWEET on identical goods.” Id.
The Accused Infringers argued that they showed their
house brands on the accused products, but the District
Court did not find the defense persuasive because “evi-
dence was presented that the flavors were asked for by
name by customers who may not have seen the house
brand displayed on the bottle[s].” Id.
The Accused Infringers appeal. They contend that,
where there was no evidence of actual customer confusion
and where the evidence shows that the parties all traded
under their brand names, a jury finding of infringement is
unreasonable. They maintain that they should not be
found to infringe where, with the same type of evidence,
SnoWizard was found not to infringe SNOBALL.
In response, SnoWizard cites to admissions that
Southern Snow actually copied the trademarks of CAJUN
RED HOT, WHITE CHOCOLATE & CHIPS, and
MOUNTAIN MAPLE. As to Parasol’s infringement of
SNOSWEET, SnoWizard points to evidence that Parasol
copied the mark and that Parasol knew of SnoWizard’s
application for federal registration.
16 SOUTHERN SNOW MANUFACTURING v. SNOWIZARD HOLDINGS
The District Court did not err in denying the Accused
Infringers’ motion for a new trial or for judgment as a
matter of law. The Fifth Circuit has held:
In determining whether a likelihood of confusion
exists, we often consider these “digits of confu-
sion”: (1) the type of trademark allegedly in-
fringed, (2) the similarity between the two marks,
(3) the similarity of the products or services, (4)
the identity of the retail outlets and purchasers,
(5) the identity of the advertising media used, (6)
the defendant’s intent, and (7) any evidence of ac-
tual confusion. “Courts also consider (8) the de-
gree of care exercised by potential purchasers.”
The “digits of confusion” are not exhaustive, and
no single factor is dispositive. “Actual confusion
that is later dissipated by further inspection of the
goods, services, or premises, as well as post-sale
confusion, is relevant to a determination of a like-
lihood of confusion.”
Nat’l Bus. Forms & Printing, Inc. v. Ford Motor Co., 671
F.3d 526, 532 (5th Cir. 2012) (citations omitted).
The evidence pointed to by SnoWizard and relied on
by the District Court fit squarely within the 2nd, 3rd, and
6th digits of confusion. The jury was free to conclude that
the display of house brands is insufficient to prevent a
likelihood of confusion.
Accordingly, we affirm the findings of infringement of
SnoWizard’s marks.
III
Plum Street Snoballs (“Plum Street”) asserted
ORCHID CREAM VANILLA against SnoWizard. The jury
found that the mark was valid, enforceable, and infringed,
and awarded $5,000 in lost profits. In the District Court,
SnoWizard challenged the jury verdicts of validity and
infringement. S. Snow Mfg. Co. v. SnoWizard Holdings,
SOUTHERN SNOW MANUFACTURING v. SNOWIZARD HOLDINGS 17
Inc., No. 06-CV-9170, 2013 WL 3983886 (E.D. La. Aug. 1,
2013) (“JMOL Op. II”). The District Court concluded, after
reviewing the testimony of the owner of Plum Street, that
there was sufficient evidence for the jury to reach both
conclusions. Id. at *8.
SnoWizard appeals the finding of the mark’s validity.
It also challenges the finding of infringement and asserts
a defense of laches.
In support of its validity and infringement positions,
SnoWizard primarily relies on the consent judgment,
which Plum Street joined, that was reached the day
before the jury rendered its verdict. In the document,
Plum Street consented to a judgment that ORCHID
CREAM VANILLA “be and hereby [is] declared generic
for flavor concentrates for shaved ice confections or food
flavorings.” United States District Court for the Eastern
District of Louisiana, Consent Judgment 1 (Feb. 27,
2013). SnoWizard asserts that its only use of the phrase
“occurred in connection with the sale of its eponymous
flavor concentrate,” and that therefore it could not be
found to have infringed. Appellant Rep. 3.
Plum Street asserts that, while the mark is generic as
to flavor concentrates, it is not generic as to snowballs. It
points to evidence of Plum Street’s continuous use of the
trademark since 1945 and of SnoWizard’s intent to copy
Plum Street’s mark.
SnoWizard’s cross-appeal fails. As the District Court
found, Plum Street is “[a] vendor[] of snowballs at retail to
the general public.” S. Snow Mfg. Co. v. SnoWizard Hold-
ings, Inc., 921 F. Supp. 2d 527, 533 (E.D. La. 2013). As a
vendor of snowballs, it asserts a right to “ORCHID
CREAM VANILLA snowballs.” Am. Compl. ¶ 187.
SnoWizard neither makes any effort to argue that
ORCHID CREAM VANILLA is generic with respect to
snowballs nor shows how the jury improperly found it to
18 SOUTHERN SNOW MANUFACTURING v. SNOWIZARD HOLDINGS
have caused a likelihood of confusion with Plum Street’s
snowballs.
Furthermore, the jury’s infringement finding is sup-
ported by evidence of SnoWizard’s intent to copy Plum
Street’s flavor. Plum Street rightly attacks SnoWizard for
using evidence of copying to argue in favor of verdicts of
infringement of its own marks while appealing an adverse
verdict of infringement that is in turn supported by
evidence of copying.
There is therefore no reason to disturb the jury find-
ings of validity and infringement concerning ORCHID
CREAM VANILLA.
As to laches, SnoWizard asserts that Plum Street’s
suit should be barred because of a 13 year delay in the
filing of suit, and contends that the trial court erred in not
submitting the question to the jury. Plum Street responds
that the question of laches has never been presented in
the District Court and therefore is waived. In reply,
SnoWizard points to the transcript record where it at-
tempted to raise the issue before the District Court.
SnoWizard’s laches defense has no merit. First, as
this Court has held:
As equitable defenses, laches and equitable estop-
pel are matters committed to the sound discretion
of the trial judge and the trial judge’s decision is
reviewed by this court under the abuse of discre-
tion standard.
A.C. Aukerman Co. v. R.L. Chaides Constr. Co., 960 F.2d
1020, 1028 (Fed. Cir. 1992) (en banc). The District Court
never needed to submit the question to the jury. Second,
the record shows that the District Court refused to con-
sider the issue because SnoWizard failed to raise the
question in the final pretrial order. The District Court did
not abuse its discretion in refusing SnoWizard’s resort to
this defense.
SOUTHERN SNOW MANUFACTURING v. SNOWIZARD HOLDINGS 19
Accordingly, we affirm the findings of validity and in-
fringement of ORCHID CREAM VANILLA.
IV
15 U.S.C. § 1120 provides:
Any person who shall procure registration in the
Patent and Trademark Office of a mark by a false
or fraudulent declaration or representation, oral
or in writing, or by any false means, shall be liable
in a civil action by any person injured thereby for
any damages sustained in consequence thereof.
Southern Snow, Parasol, and Simeon (collectively, the
“§ 1120 Appellants”) brought multiple § 1120 claims
against SnoWizard based on its prosecution of various
marks. The District Court on Rule 12(b)(6) motion dis-
missed those claims that were predicated on the prosecu-
tion of CAJUN RED HOT, CHAI LATTEA, COOKIE
DOUGH, SWISS ALMOND COCO, TIRAMISU,
ZEPHYR, and SNOBALLS (a trade dress design for a
concession trailer), which, at the time, had not yet been
registered. S. Snow Mfg. Co. v. SnoWizard Holdings, Inc.,
No. 06-CV-9170, slip. op. at 5-8. (E.D. La. Aug. 17, 2010).
The § 1120 Appellants challenge the dismissal, urging
that the statute does not require actual registration. They
argue that they were prejudiced because some of the
marks became registered in the course of the litigation
and because they “were left with no relief and nothing to
effectively challenge those 2 registrations.” Appellant
Resp. & Rep. 30.
SnoWizard responds with citations to a number of
cases from district courts and from the Seventh Circuit
holding that actual registration is required for a § 1120
claim.
Whether a § 1120 claim may be asserted on the basis
of a pending trademark registration is a question of first
20 SOUTHERN SNOW MANUFACTURING v. SNOWIZARD HOLDINGS
impression in both this Court and the Fifth Circuit. The
Seventh Circuit is the only Circuit Court to have consid-
ered the question. Its reasoning for requiring actual
registration is as follows:
Section 38 tells courts to award damages to per-
sons injured by a registration fraudulently pro-
cured in the PTO. Competing firms would be
injured by the registration and use of the mark,
not by the application itself. Registration does not
create the right to use a mark, which comes from
the association between the mark and the goods it
denotes. Hanover Star Milling Co. v. Metcalf, 240
U.S. 403, 420–21, 36 S. Ct. 357, 363, 60 L. Ed. 713
(1916). . . . Registration makes it hard for new
firms to use marks that represent related goods,
and an “incontestable” registration, as its name
suggests, puts the mark beyond challenge on the
ground that it is “descriptive”. 15 U.S.C. § 1065.
Unless the PTO grants the application, however,
the consequences of registration (as opposed to
use) do not come to pass, and no damages are
“sustained in consequence thereof”. Firms might
incur expenses to oppose the application, but as a
rule legal fees are not “damages” in American law.
Section 38 makes sense when “procure” is taken to
mean “obtain” and little sense when taken to
mean “apply for”. Powerful legislative history
might counterbalance this inference, but the only
interesting history shows that many bills have
been introduced proposing to penalize false appli-
cations, e.g., H.R. 6248, 69th Cong., 1st Sess. § 27
(1925), H.R. 2828, 71st Cong., 2d Sess. § 26
(1929), but that none has been enacted. From the
first version of § 38 in 1870, 16 Stat. 198, 212 (fol-
lowed by 21 Stat. 502, 504 (1881), 33 Stat. 724,
730 (1905), and then the Lanham Act in 1946), the
law has consistently forbidden procuring registra-
SOUTHERN SNOW MANUFACTURING v. SNOWIZARD HOLDINGS 21
tion by fraud and neglected the possibility of pe-
nalizing those who seek but [do] not get registra-
tion via fraud.
Country Mut. Ins. Co. v. Am. Farm Bureau Fed’n, 876
F.2d 599, 600-01 (7th Cir. 1989).
The Seventh Circuit’s construction of § 1120 is per-
suasive. The § 1120 Appellants were not prejudiced when
they were barred from asserting § 1120 claims based on
SnoWizard’s unregistered marks. SnoWizard may assert
claims of infringement whether or not the underlying
marks are registered. There is therefore no “consequence”
arising from the applications themselves, even if the
applications were fraudulently prosecuted in the USPTO.
And should the trademarks become registered, the § 1120
Appellants could have amended their pleadings or filed a
new suit.
We therefore affirm the District Court’s dismissal of
the § 1120 claims.
V
The cast of Appellants include Southern Snow, Sime-
on, Snow Ingredients, Eisenmann, Parasol, Raggs Supply,
LP (“Raggs”), and Special T Ice Co., Inc. (“Special T”). The
District Court provided the following findings about their
relationships:
1) “Southern Snow, Simeon, and Snow Ingredients
are closely related entities that share common
ownership by Milton G. Wendling, Jr.,” 921 F.
Supp. 2d at 542;
2) “Mr. Eisenmann sold his FLAVOR SNOW busi-
ness to Southern Snow in 2006, and maintains a
financial interest in the sale of Southern Snow and
Snow Ingredients products,” and “[his] participa-
tion in this lawsuit is by virtue of an ongoing fi-
nancial arrangement between Southern Snow and
22 SOUTHERN SNOW MANUFACTURING v. SNOWIZARD HOLDINGS
Mr. Eisenmann and the sale of his FLAVOR
SNOW business to Southern Snow,” id.;
3) Special T and Raggs are “distributors of products
at issue in this lawsuit that were manufactured by
Southern Snow, Snow Ingredients and Parasol,”
id. at 543.
As of April 18, 2011, Southern Snow, Parasol, and
Simeon (collectively, “Old Plaintiffs”) were the only plain-
tiffs. Id. at 532. The District Court dismissed numerous
claims they brought against SnoWizard for asserting its
trademark rights. Id. at 535.
On June 24, 2011, Snow Ingredients, Eisenmann,
Raggs, and Special T (collectively, “New Plaintiffs”)
became plaintiffs, also asserting claims based on SnoWiz-
ard’s assertion of trademark rights. On the grounds that
the facts alleged are the same and that the New Plaintiffs
and the Old Plaintiffs were in privity with each other, the
District Court granted summary judgment on a large
number of claims, finding them duplicative of those that
had been dismissed as to the Old Plaintiffs. Id. at 541, 42-
43, 47.
New Plaintiffs assign error to the dismissal of their
claims on duplicative grounds. They do not deny that the
claims deemed duplicative are legally and factually the
same as those dismissed on the merits as to the Old
Plaintiffs. Rather, they argue that:
The 2 manufacturers make things that the 2 dis-
tributors distribute and the 2 snowball stands
purchase, but participating in the snowball busi-
ness does not make all the participants in privity
with each other.
Appellant Br. 51. New Plaintiffs point out, for example,
that Raggs is located in a different state from all the other
Appellants and has been separately sued by SnoWizard in
unrelated trademark and patent suits. They contend
SOUTHERN SNOW MANUFACTURING v. SNOWIZARD HOLDINGS 23
therefore that Southern Snow and Parasol could not have
represented their interests.
SnoWizard defends the dismissals, maintaining that
manufacturers and distributors of the same goods are
legally in privity with each other. 3
This Court applies the law of the regional circuit
when determining privity. Transclean Corp. v. Jiffy Lube
Int’l, Inc., 474 F.3d 1298, 1304 (Fed. Cir. 2007). The Fifth
Circuit has held that:
parties which are sufficiently related to merit the
application of claim preclusion are in privity.
Russell v. SunAmerica Sec., Inc., 962 F.2d 1169, 1174 (5th
Cir. 1992).
In Transclean, we held:
It is important to recognize that under this stand-
ard [of privity, where privity is a label that ex-
presses the conclusion that a particular nonparty
in earlier litigation should be treated the same as
a party to that litigation for claim preclusion pur-
poses], a manufacturer or seller of a product who
is sued for patent infringement typically is not in
privity with a party, otherwise unrelated, who
does no more than purchase and use the product.
In other words, ordinarily such parties are not so
closely related and their litigation interests are
not so nearly identical that a patentee’s suit
against one would bar a second action against the
other under the doctrine of claim preclusion.
3 SnoWizard also argues that the issue was not
raised in the District Court and was therefore waived.
New Plaintiffs correctly point to their briefings before the
District Court where they argued that they are not in
privity with Old Plaintiffs.
24 SOUTHERN SNOW MANUFACTURING v. SNOWIZARD HOLDINGS
474 F.3d at 1306.
The District Court did not err in finding that Snow
Ingredients was the same party as Simeon and Southern
Snow “based on the express legal relationship of shared
ownership.” 921 F. Supp. 2d at 542. It also did not err in
finding that Eisenmann was, for purposes of the suit, the
same party as Southern Snow and Snow Ingredients,
given that his stake in the suit stems from his “financial
interest in the sale of Southern Snow and Snow Ingredi-
ents products.” Id. We therefore affirm the dismissal of
Eisenmann and Snow Ingredients’ claims as duplicative.
The question of privity as to Special T and Raggs,
which are distributors of products made by Old Plaintiffs,
is of a different nature. The District Court found that
Special T and Raggs are “in an express legal relationship
with [Old Plaintiffs] by virtue of the distributorship.” Id.
at 543.
As we have held in Transclean, with regard to ques-
tions of intellectual property infringement and invalidity,
the person who buys an allegedly infringing product is not
considered to be in privity with the person who sells him
the product. As distributors, Raggs and Special T are
persons who bought the allegedly infringing goods from
the Old Plaintiffs, and, without more, cannot be consid-
ered “in privity” with the Old Plaintiffs.
Accordingly, the conclusion that Raggs and Special T
are in privity with Old Plaintiffs “by virtue of the distrib-
utorship” is erroneous. Id. at 543. The District Court
dismissed Counts 19-21, 24-27, 29-81, and 83-84 as dupli-
cative. Id. at 547. We reinstate only a portion of the
dismissed claims, namely, Counts 27, 33, 37, 41, 42, 50,
54, 68, 72, 74, and 84, for Raggs and Special T for the
following reasons:
1) The District Court dismissed as to all Appellants
with prejudice Counts 20, 26, 32, 34, 36, 53, 55, 57,
SOUTHERN SNOW MANUFACTURING v. SNOWIZARD HOLDINGS 25
59, 61, 63, 65, 67, 69, 71, 73, 75, 77, and 79, for
damages for alleged fraudulent procurement of
trademark registrations under 15 U.S.C. § 1120,
La. Rev. Stat. 51:221, and La. Rev. Stat. 51:1409
for “[failure] to produce any evidence of a cogniza-
ble injury or ascertainable loss, or, for that matter,
even respond to the instant motion on this issue,”
id. at 545, and Counts 19, 23, 25, 29, 51, 80-81,
and 83, for unfair competition under 15 U.S.C. §
1125, La. Rev. Stat. 51:1409, Louisiana Civil Code
Article 2315, and Texas Business and Commercial
Code § 17.46, for failure to establish a tendency to
deceive, id. at 548. Raggs and Special T have failed
to appeal these dismissals;
2) Counts 21, 30, 35, 38, 43, 44, 45, 46, 47, 48, 49, 52,
56, 58, 60, 62, 64, 66, 70, 76, are for declaratory
judgments of invalidity (federal or state) of the
marks, ORCHID CREAM VANILLA, SNOBALL,
HURRICANE, BUTTERCREAM, BUTTERED
POPCORN, CAKE BATTER, COOKIE DOUGH,
DILL PICKLE, GEORGIA PEACH, KING CAKE,
MUDSLIDE, PRALINE, and TIRAMISU. SnoWiz-
ard gave up rights to all of these marks by consent
judgment; and
3) Count 24 is an infringement claim of SNOW
SWEET, which is asserted only by Parasol. Am.
Compl. ¶¶ 937-39.
ANTITRUST
Appellants brought claims against SnoWizard under
the Clayton Act, 15 U.S.C. § 15 and § 26, the Sherman
Antitrust Act, 15 U.S.C. § 2, Louisiana antitrust law, La.
Rev. Stat. 51:123, and Texas antitrust law, Tex. Bus. &
Com. Code § 15.05, for:
false patent marking of the entire ice-shaving ma-
chine, invalidity of Patent No. 7,543,459 and Pa-
26 SOUTHERN SNOW MANUFACTURING v. SNOWIZARD HOLDINGS
tent No. 7,536,871, infringement of Plaintiffs’
claimed trademarks ORCHID CREAM VANILLA
and SNOW SWEET, and fraudulent assertion of
rights in trademarks ORCHID CREAM
VANILLA, SNOSWEET, SNOBALL, SNOBALL
MACHINE, HURRICANE, MOUNTAIN MAPLE,
BUTTER-CREAM, BUTTER POPCORN, CAKE
BATTER, CAJUN RED HOT, COOKIE DOUGH,
DILL PICKLE, GEORGIA PEACH, KING CAKE,
MUDSLIDE, PRALINE, & WHITE CHOCOLATE
& CHIPS . . . .
United States District Court for the Eastern District of
Louisiana, Verdict Form 7 (Feb. 28, 2013). The District
Court instructed the jury on the “five essential elements”
that Appellants must prove:
1) a relevant geographic market and product market;
2) SnoWizard’s anticompetitive conduct; and
3) SnoWizard’s specific intent to achieve monopoly
power;
4) a dangerous probability of achieving such monopo-
ly power; and
5) the attempted monopolization, as established by
the above four elements, was the proximate cause
of damages to Appellants’ businesses and proper-
ties.
The jury found for Appellants on the first three ele-
ments, but concluded that there was not a dangerous
probability of achieving monopoly power. On appeal,
Appellants attack the jury verdicts on two grounds. First,
they maintain that the District Court improperly used the
Noerr-Pennington doctrine to bar evidence that would
support an antitrust theory premised on SnoWizard’s
patent and trademark filings, counterclaims, and litiga-
tion. The resulting evil, in Appellants’ view, was that
28 SOUTHERN SNOW MANUFACTURING v. SNOWIZARD HOLDINGS
2008 $783,517 $889,180 $130,714
2009 $840,828 $911,195 $148,666
2010 $855,587 $1,046,079
2011 $989,840 $1,191,196
2012 $1,000,531 $1,328,598
Joint Exhibit J-1 (Feb. 20, 2013).
SnoWizard retracted the stipulated sales figure for
2007 on Day 5 of the trial, when it asserted that the
proper number is $600,847.73 instead of $370,557. Over
Appellants’ objections, the District Court permitted
SnoWizard to restate its numbers.
Once the District Court gave SnoWizard its permis-
sion to retract its stipulations—which Appellants do not
challenge on appeal and which we therefore do not re-
view—it was up to them to discredit SnoWizard’s testi-
mony. That the Appellants failed to exploit the
opportunity is not a reason for us to upset the verdict.
We therefore affirm the finding of no antitrust viola-
tion.
RICO
I
The District Court identified five categories of civil
RICO claims brought by Appellants:
1) fraudulent assertion of patent rights;
2) fraudulent assertion of trademark rights with re-
spect to 20 trade-marks;
3) fraudulent assertion of ETL certification for ice-
makers;
SOUTHERN SNOW MANUFACTURING v. SNOWIZARD HOLDINGS 29
4) extortion by sending 4 cease and desist letters to
Southern Snow, Para-sol, and the Yellow Pages
over 9 years, and by suing Raggs for trademark in-
fringement, unfair competition, trademark dilu-
tion, and defamation; and
5) infringement of trademarks.
S. Snow Mfg. Co. v. SnoWizard Holdings, Inc., 912 F.
Supp. 2d 404, 412-13 (E.D. La. 2012) (“RICO Op. I”).
On motion under Rule 12(b)(6), the District Court
dismissed all these claims for failure to establish predi-
cate acts of mail fraud, wire fraud, or extortion. Id. at 424.
Relying on Fifth Circuit precedent, St. Germain v. How-
ard, 556 F.3d 261 (5th Cir. 2009), the District Court
stated that Appellants “must plead a set of facts sufficient
to plausibly establish the predicate criminal acts of mail
or wire fraud,” RICO Op. I, at 420.
Appellants challenge the dismissal of the first four
categories of RICO claims. They take the position that the
claims do not require predicate acts that were criminal.
They assert that allegations of a “pattern of racketeering
activity,” not criminal activities, is sufficient to sustain
their RICO claims. Appellant Br. 45. To the extent the
District Court relied on the precedents of the Fifth Cir-
cuit, Appellants request this Court to “distinguish, disre-
gard, or overrule” them. Id. at 43.
SnoWizard contends that a criminal predicate act is
necessary to sustain a RICO claim. That Appellants failed
to allege any criminal predicate act is, in its view, fatal to
their RICO claims.
We affirm the dismissal of Appellants’ RICO claims.
As the Supreme Court stated:
RICO’s legislative history reveals Congress’ intent
that to prove a pattern of racketeering activity a
plaintiff or prosecutor must show that the racket-
30 SOUTHERN SNOW MANUFACTURING v. SNOWIZARD HOLDINGS
eering predicates are related, and that they
amount to or pose a threat of continued criminal
activity.
H.J. Inc. v. Nw. Bell Tel. Co., 492 U.S. 229, 239 (1989)
(second emphasis added). To survive Rule 12(b)(6) dismis-
sal, Appellants must therefore allege some sort of racket-
eering activity that “amount to or pose a threat of
continued criminal activity.” Appellants do not argue that
any of the alleged predicate acts are actually criminal,
and the District Court did not err in dismissing the RICO
claims.
II
SnoWizard moved the District Court for Rule 11 sanc-
tions against Appellants and their attorney, Andrews, for
asserting the RICO claims. The District Court denied the
motion without prejudice, stating that it could not, “at
this time,” determine that the RICO claims are manifestly
unwarranted or that the motive for filing the claims was
for the purpose of harassment. S. Snow Mfg. Co. v.
SnoWizard Holdings, Inc., No. 06-CV-9170, slip. op. at 2
(E.D. La. Aug. 17, 2010) (“RICO Op. II”). It further ex-
plained that it denied the motion “[i]n the interest of
encouraging professionalism and civility.” Id. On cross-
appeal, SnoWizard challenges the denial of sanctions.
We dismiss SnoWizard’s cross-appeal. The District
Court denied SnoWizard’s motion without prejudice, and
SnoWizard has reurged the motion, which, as SnoWizard
confirmed to us at oral argument on June 5, 2014, re-
mains pending. We express no view as to the appropriate-
ness of sanctions and will permit the District Court to
adjudicate the merits in the first instance.
CONCLUSIONS
We hold that the ’879 Patent is invalid under the on-
sale bar. Accordingly, we vacate the judgments of literal
infringement, equivalents infringement, and willfulness,
SOUTHERN SNOW MANUFACTURING v. SNOWIZARD HOLDINGS 31
as well as the award of damages. We sustain the enforce-
ability of the ’459 Patent against the inequitable conduct
challenge.
We reverse the dismissal of Counts 27, 33, 37, 41, 42,
50, 54, 68, 72, 74, and 84 as to Raggs and Special T and
remand for further proceedings. We affirm the findings of
the validity of ORCHID CREAM VANILLA with respect
to snowballs and of the infringement of ORCHID CREAM
VANILLA, CAJUN RED HOT, WHITE CHOCOLATE &
CHIPS, MOUNTAIN MAPLE, and SNOSWEET. We
further affirm the dismissal of Southern Snow, Parasol,
and Simeon’s § 1120 claims against SnoWizard for failure
to allege registered trademarks.
We affirm the District Court’s findings of no antitrust
violation and its dismissal of Appellants’ RICO claims. We
dismiss SnoWizard’s appeal of the denial of Rule 11
sanctions.
AFFIRMED-IN-PART, REVERSED-IN-PART,
VACATED-IN-PART, DISMISSED-IN-PART, AND
REMANDED
COSTS
No costs.