Penn Eng'g & Mfg. Corp. v. Peninsula Components, Inc.

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PENN ENGINEERING & MANUFACTURING CORP., Plaintiff v. PENINSULA COMPONENTS, INC., Defendant

Civil Action No. 19-513

United States District Court, E.D. Pennsylvania

August 24, 2022

MEMORANDUM

GENE E.K. PRATTER, United States District Judge.

PennEngineering designs and manufactures various fasteners and other types of industrial and mechanical equipment. PennEngineering's products are advertised and sold using one of its trademarks in either the “PEM Family of Marks” (based on the name of its holding company), or other registered or common law marks. Peninsula Components allegedly sells fasteners using marks that are identical to some of PennEngineering's marks. PennEngineering alleges 22 counts of Lanham Act and common law trademark infringement trademark counterfeiting, and unfair competition.

Peninsula filed a motion for partial summary judgment with five subparts, and PennEngineering filed five partial summary judgment motions that generally align with those subparts. Because there are core factual disputes regarding the likelihood of customer confusion, the Court will deny the dueling summary judgment motions, except as to three narrow issues: (1) hidden use of trademarks for keyword conquesting (2) counterfeiting, and (3) claims based on 20 registered marks and 31 common law marks not used by Peninsula. On these three issues, the Court grants partial summary judgment for Peninsula. For the remainder, a jury will have to resolve the nuts and bolts of the parties' extensive disputes.

Background

PennEngineering and Peninsula are competitors in the market for industrial fasteners. PennEngineering is the industry leader, while Peninsula represents itself as a “second source or an alternate source” for industrial clients. Hr'g Tr at 43:18, Doc. No. 308; Pl.'s Resp. to Def.'s Statement of Material Facts, Doc. No. 283-25 ¶ 22 (discussing PennEngineering's market share of over 75% for an undefined market). PennEngineering previously challenged Peninsula's advertising tactics as trademark infringement and unfair competition in a 2007 lawsuit that ostensibly concluded with a settlement. In its Second Amended Complaint in the present litigation, PennEngineering raises claims based on trademark infringement and unfair competition for 24 registered trademarks in the “PEM family,” as well as over 100 other registered and common law trademarks. Second Am. Compl. ¶¶ 23, 28, Doc. No 211. Peninsula contends that its conduct is aggressive competition within the bounds of applicable law.

In keeping with the parties' litigious history, discovery disputes in this litigation were legion and numerous. The parties filed 35 motions to compel and 7 sanctions motions, along with a battery of other discovery disputes. The Court referred the discovery disputes to a Special Discovery Master (first Magistrate Judge Timothy Rice and then Magistrate Judge Lynn Sitarski, both of whom demonstrated admirable skill and patience).

Now, at the close of discovery, the parties have filed six dueling partial motions for summary judgment. These six motions-without even counting the opposition, reply, and sur-reply filings-involve over 13,000 pages of briefing and attachments. From this voluminous record, the parties ask the Court to determine that there are no disputes of material fact.

Legal Standard

Summary judgment should be granted only “if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). “Where the record taken as a whole could not lead a rational trier of fact to find for the non-moving party, there is no ‘genuine issue for trial.'” Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986). “The mere existence of a scintilla of evidence in support of the plaintiff's position will be insufficient; there must be evidence on which the jury could reasonably find for the plaintiff.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 252 (1986).

“The evidence of the non-movant is to be believed, and all justifiable inferences are to be drawn in his favor.” Anderson, 477 U.S. at 252. “Summary judgment may not be granted . . . if there is a disagreement over what inferences can be reasonably drawn from the facts even if the facts are undisputed.” Nathanson v. Medical College of Pa., 926 F.2d 1368, 1380 (3d Cir. 1991).

Discussion

Given the overlapping nature of the six partial motions for summary judgment, the Court will analyze the motions in the context of PennEngineering's underlying claims for trademark infringement and false advertising.

I. Trademark Infringement

Although, in its Second Amended Complaint, PennEngineering asserts claims across many of its registered and common law trademarks, its summary judgment motions focus on its “PEM” and “Double Squares” trademarks. Hr'g Tr. at 33:11-14, Doc. No. 308. PennEngineering alleges that Peninsula has infringed on its PEM trademarks through a combination of activities including use of the trademarks in Google Ads keywords and cross-reference charts. PennEngineering also asserts that Peninsula infringes on its marks by offering a “square-in-square” clinching nut similar to PennEngineering's “Double Squares Marks” and selling counterfeit versions of PennEngineering's products. Second Am. Compl. ¶¶ 47-52, Doc. No. 211. Peninsula raises several defenses to these trademark infringement claims, asserting that its use of trademarks in Google Ads and cross-reference charts is fair use that is not likely to cause confusion, that the “Double Squares Marks” are invalid trademarks because they are functional designs, and that its limited reselling activities are permitted by the first sale doctrine. PennEngineering and Peninsula both move for summary judgment on these trademark infringement claims and defenses.

Courts analyzing trademark infringement claims for competing goods use the so-called Lapp factors:

(1) the degree of similarity between the owner's mark and the alleged infringing mark;

(2) the strength of the owner's mark;

(3) the price of the goods and other factors indicative of the care and attention expected of consumers when making a purchase;

(4) the length of time the defendant has used the mark without evidence of actual confusion arising;

(5) the intent of the defendant in adopting the mark;

(6) the evidence of actual confusion;

(7) whether the goods . . . are marketed through the same channels of trade and advertised through the same media;

(8) the extent to which the targets of the parties' sales efforts are the same;

(9) the relationship of the goods in the minds of consumers, whether because of the near-identity of the products, the similarity of function, or other factors;

(10) other facts suggesting that the consuming public might expect the prior owner to manufacture both products, or expect the prior owner to manufacture a product in the defendant's market, or expect that the prior owner is likely to expand into the defendant's market.

A & H Sportswear, Inc. v. Victoria's Secret Stores, Inc., 237 F.3d 198, 215 (3d Cir. 2000) (citing Interpace Corp. v. Lapp, Inc., 721 F.2d 460, 463 (3d Cir. 1983)). Each of PennEngineering's

trademark infringement claims raise issues to which the Court will apply these Lapp factors (or a modified subset).

A. Keyword Conquesting (Doc. Nos. 259 & 261)

First, both parties seek summary judgment on the “keyword conquesting” theory of trademark infringement. PennEngineering moves for summary judgment on Peninsula's use of its “PEM” trademark-hidden and visible-for keyword conquesting. Doc. No. 261-1 ¶¶ 117-120. Peninsula argues that the Court should reject PennEngineering's theory of keyword conquesting as a form of trademark infringement because there is no likelihood of confusion (except as to two instances where the use of “PEM” showed up in an advertisement). Mem. in Supp. of Def.'s Mot. for Partial Summ. J., Doc. No. 259-1, at 14. The Court will separately address the hidden and visible uses of “PEM” for keyword conquesting.

1. Hidden Uses of Trademark for Keyword Conquesting

PennEngineering defines keyword conquesting as “the practice of one company using, purchasing or bidding on internet search terms or keywords that contain the brand, tradename, trademark, or service mark of a competitor to trigger that company's paid advertisements.” Mem. of Law in Supp. of Pl.'s Mot. to Compel, Doc. No. 250-1, at 1. Under this theory, PennEngineering argues that Peninsula's use of its trademarks as keywords that trigger advertisements in search results (through Google AdWords) causes initial interest confusion. Initial interest confusion applies where “similar marks could ultimately affect a consumer's consideration of the defendant's product as well as affect the plaintiff's goodwill with its customers.” Checkpoint Sys., Inc. v. Check Point Software Techs., Inc., 269 F.3d 270, 293 (3d Cir. 2001). This is akin to a “‘bait and switch scheme.'” Id. at 294.

The first advertisement below is an example of what PennEngineering labels infringing conduct by Peninsula (using its “PenCom” website):

(Image Omitted)

Ex. 59, Doc. No. 262-13, at ECF 203. Another court in this district has explained Google's AdWords program as follows:

Among other services, Google provides an internet search engine that finds websites related to terms provided by internet users. An internet user seeking information will enter various terms into a space provided on Google's website, and Google's computers will search its database for websites relevant to the terms provided. The Google search engine then will present an ordered list of relevant websites identified by the Google database with the most relevant website listed first. The Google search engine

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