No papering over competitor’s towel stuffing

United States of America
In Georgia Pacific Consumer Products v Von Drehle Corp (Case 09-1942, September 10 2010), the US Court of Appeals for the Fourth Circuit has ruled that a paper towel maker that induced its customers to fill trademark-bearing towel dispensers with potentially 'inferior' paper towels may be liable as a contributory infringer if there is sufficient evidence for a jury to find a likelihood of confusion among restroom visitors as to the source of the paper towelling being dispensed. The case has now been remanded for trial.

Georgia-Pacific Consumer Products (G-P) designs and manufactures paper products and dispensers. In 2002 G-P introduced its enMotion dispensers, a 'touchless' paper towel dispenser designed to use G-P’s 'fabric-like' towelling. The dispensers bear the marks ENMOTION, GEORGIA-PACIFIC and a stylised GP. G-P leases the enMotion dispensers to distributors (which, in turn, sub-lease them to end users) through an agreement designating that only G-P-branded towels should be used in the dispensers. 

Von Drehle Corp is a competitor of G-P. In 2004 Von Drehle began selling lower-quality towelling designed for use in enMotion dispensers. G-P sued Von Drehle, alleging contributory trademark infringement and unfair competition under the Lanham Act. Von Drehle counterclaimed, asserting deceptive trade practices under North Carolina law.

G-P argued that Von Drehle, by inducing and facilitating the end user’s 'stuffing' of enMotion dispensers with Von Drehle’s towelling, created post-purchase confusion as to the source of such towelling among restroom visitors, thus creating the potential to harm its reputation and goodwill. On cross motions for summary judgment, the district court granted summary judgment in favour of Von Drehle on G-P’s claims, but in favour G-P on Von Drehle’s counterclaims. Both parties appealed.

In its de novo review of the district court’s summary judgment decisions, the Fourth Circuit, quoting the following passage from the Supreme Court’s 1982 decision in Inwood Laboratories v Ives Laboratories, vacated the district court’s summary judgment in favour of Von Drehle: 

"Liability for trademark infringement can extend beyond those who actually mislabel goods with the mark of another. Even if a manufacturer does not directly control others in the chain of distribution, it can be held responsible for their infringing activities under certain circumstances. Thus, if a manufacturer or distributor intentionally induces another to infringe a trademark, or if it continues to supply its product to one whom it knows or has reason to know is engaging in trademark infringement, the manufacturer or distributor is contributorially responsible for any harm done as a result of the deceit."

On the issue of contributory infringement, the court stated that, assuming that the stuffing of enMotion dispensers with Von Drehle’s towelling by end-user customers constitutes trademark infringement, the record contained sufficient evidence for a reasonable jury to find that Von Drehle was liable for contributory trademark infringement.

Turning to the issue of whether the end-user stuffing constituted direct trademark infringement, the Fourth Circuit explained that, to make its case, G-P needed to prove that:
  • it possessed a trademark;
  • an end-user customer used the trademark in commerce in connection with the sale, offering for sale, distribution or advertising of goods; and
  • an end user did so in a manner likely to cause confusion among the relevant public.
Addressing each of the above elements of a prima facia case of trademark infringement, the Fourth Circuit concluded that, by stuffing enMotion dispensers with Von Drehle’s towelling, end-user customers used one or more of the G-P marks in commerce in connection with the distribution of goods, leaving only the likelihood of confusion issue open for discussion.

Regarding confusion, the Fourth Circuit agreed with G-P that the district court had erred in limiting its likelihood of confusion inquiry to distributors who purchased Von Drehle paper towelling and their respective end-user customers, noting that:

"Fourth Circuit case law makes room for the factfinder 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 his reputation among its labourers, lenders, investors, or other group with whom plaintiff interacts.’"

After noting that several of the likelihood of confusion factors, including the similarity of the two marks, were irrelevant in the present situation, the court concluded that G-P had presented sufficient evidence for a reasonable jury to find “in favour of G-P with respect to each element of its contributory trademark infringement claims” and its common law unfair competitor claim.

The case shows that, in situations in which it is not practical to file suit against a direct trademark infringer, a trademark rights holder should consider contributory infringement and unfair competition claims. 

Paul Devinsky, McDermott Will & Emery, Washington DC

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