Competition Specialties v. Competition Specialties

Citation: Competition Specialties, Inc. v. Competition Specialties, Inc., No. C00-0038L (W.D. Wash. 2001), aff'd, 87 Fed. Appx. 38 (9th Cir. 2004).

Factual Background
Both parties are in the business of specialty parts used for drag-car racing. Plaintiff, based in Washington state, federally registered the mark COMPETITION SPECIALTIES, INC. for wholesale store services in the field of automotive parts and accessories in 1995 and used this mark as well as the mark CSI nationwide since 1976.

Plaintiff registered the mark CSI in 1999 for similar services. Defendant, based in Florida, used the marks COMPETITION SPECIALTIES, INC. and CSI since 1990 and owned the domain names "csicsi.com" and "csiperformance.com." Plaintiff sent defendant a cease-and-desist letter in 1995. Defendant failed to respond, but plaintiff did not sue for infringement, cybersquatting, and other related claims until 2000.

Trial Court Proceedings
In 2001, the district court denied plaintiff's motion for a preliminary injunction because both parties had used the same mark in the same industry for a number of years. Regarding plaintiff's motion for summary judgment, the court initially found that plaintiff was the senior user of both COMPETITION SPECIALTIES, INC. and CSI nationwide and in Florida. But the court denied defendant's motion for summary judgment because it could not rule on the issue of likelihood of confusion due to factual disputes or an insufficient factual record regarding the strength of plaintiff's mark, the parties' marketing channels, and the degree of purchaser care.

The district court next found that plaintiff's claims were not barred by abandonment, laches, or estoppel. Because defendant did not plead abandonment in its answer, abandonment was unavailable as a defense. The court ruled that plaintiff's suit was not barred by laches under the doctrine of progressive encroachment, based on plaintiff's allegations that defendant's growth was slow.

And the court rejected defendant's argument that plaintiff's claims were barred by prosecution history estoppel. It noted that plaintiff's arguments made to the PTO dealt with a party that had a different name and different mark and that plaintiff never argued that there would be no likelihood of confusion between companies using identical marks in the same industry in the same geographic areas.

Defendant also moved for judgment as a matter of law regarding plaintiff's cybersquatting claim. The court granted defendant's motion stating that plaintiff's evidence did not show that defendant acted in bad faith or that the domain names were confusingly similar to plaintiff's marks.

Following the trial, the jury found that defendant infringed plaintiff's trademarks (the CSI mark intentionally) but that the infringement caused no damage. The court then permanently enjoined defendant from using the disputed marks but gave defendant a two-year period to phase out its use.

Appellate Court Proceedings
Both parties cross-appealed, and the Ninth Circuit affirmed. The court of appeals first rejected defendant's claim that the district court erred in not allowing a laches defense because it properly bypassed the traditional laches test due to defendant's progressive encroachment. Moreover, laches was unavailable to the CSI mark because of the jury's finding of intentional infringement.

The court of appeals also rejected defendant's argument that plaintiff could be the prior user only if it established secondary meaning in the mark before defendant began using it. Because a showing of secondary meaning is required only when a mark is not distinctive and because defendant never argued below that the disputed marks were not distinctive, defendant was precluded from raising this issue on appeal.

Regarding the injunction, the Ninth Circuit rejected defendant's argument that it was overly broad, stating that an injunction was the appropriate remedy following the finding of infringement. And the Ninth Circuit rejected plaintiff's cross-appeal regarding the two-year phase out for the injunction, finding that the district court did not abuse its discretion as it "could reasonably consider the terms of the injunction to be an appropriate remedy under the total circumstances presented."

The Ninth Circuit also rejected plaintiff's argument that the district court erred in refusing to grant attorney's fees, concluding that despite the jury's finding that defendant knowingly and intentionally infringed the CSI mark, "[defendant's] conduct was not sufficiently egregious to make this an exceptional case." Regarding plaintiff's argument that the cybersquatting issue should have been determined by the jury and not on defendant's motion for judgment as a matter of law, the court of appeals affirmed the district court's decision "because the evidence did not show that [defendant] acted in bad faith and that the domain names were confusingly similar."

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