Using part of an “anticipated order” from a competitor’s supplier constitutes reverse passing off, despite Dastar

OTR Wheel Eng’g, Inc. v. West Worldwide Servs., Nos.
16-35897 16-35936, 2018 U.S. App. LEXIS 20520 (9th Cir. Jul. 24,
OTR Wheel and West compete to sell industrial tires. “West
asked one of OTR’s suppliers to provide him with sample tires from OTR’s molds,
and he asked the supplier to remove OTR’s identifying information from the
tires.” This constituted reverse passing off.
Specifically, West asked the supplier, Superhawk, for 16 of
the relevant tires for testing by a potential customer. Superhawk said it would
take 50 days to make a mold for the tires. West responded, “I really need it
much sooner. . . .  Could you buff off
the [OTR] name on the sidewall or just remove the plate and let me get the tire
tested? … If we take out the nameplate and all the sidewall information, nobody
will know.”  It appears that spring
plates used with the molds were used to prevent imprinting of OTR’s mark
onto the tires, as the molds otherwise would have done.
A jury found West liable for reverse passing off and for tortiously
interfering with a contract between OTR and Superhawk, as well as
with related business relationships. West was not found liable for trade dress
infringement, trade dress counterfeiting, trade secret misappropriation, or
tortious interference with a contract between OTR and one customer, Genie.  The jury also found that OTR’s claim for
protected trade dress on its tire tread was invalid (either because the design
had functional, self-cleaning properties or because it lacked distinctiveness
from other tread designs) and that the trade dress registration had been
obtained through fraud on the PTO, though the last finding was set aside by the
trial court because of failure to meet the stringent standards for proving fraud
by clear and convincing evidence.  The
jury awarded OTR actual damages of $967,015.
West argued that Dastar
precluded the finding of reverse passing off, but the court held that, instead
of simply copying OTR’s design, West used tires from an “anticipated OTR order”
and passed those tires off as his own, meaning that the claim survived Dastar. 
This does strike me as troubling.  We have an underlying design that, per the jury’s
findings, is not itself protectable as trade dress.  Assume something more
standard, like a paper clip.  If reseller
X ordered a bunch of paper clips from a supplier who had previously only done
business with reseller Y, and thus “anticipated” more orders from Y, then it
would be ridiculous to think that X engaged in reverse passing off.  I don’t think it would change things if the
paper clip design had Y’s trademark automatically stamped on in the ordinary
course of production, such that the supplier had to change its production
methods to produce paper clips for X. 
Here, OTR claimed rights in the design, and West knew that and had to
cajole Superhawk into using the molds to make tires for it.  Nonetheless, OTR didn’t actually have rights.
In such circumstances, I would have found Dastar
to apply.

The court of appeals reasoned that it didn’t have to decide whether simple use
of the OTR mold would create a mere copy or a “genuine” OTR tire. Instead, West
passed off “actual OTR tires” because West asked Superhawk to make tires “to
fill an anticipated order” for OTR’s partner and to hold most of the tires
until the order was actually placed; West then wanted to take ten of the tires
to provide to West’s potential customer. 
“The jury could therefore conclude that the development tires were taken
from part of an anticipated OTR … order and were genuine OTR products, not just
copies.”  I think this doesn’t really
distinguish the case from my paper clip hypothetical because all of that could
have happened with standard paper clips too, even if it was only economical to
do a full production run and hope/expect that Y would buy the rest of the paper
clips.  Still, the panel purports not to
create a conflict with Kehoe Component Sales Inc. v. Best Lighting Products,
Inc., 796 F.3d 576 (6th Cir. 2015), in which the manufacturer continued to use the
same molds that it used for one customer to make additional units that it sold
in competition with the customer. Dastar
precluded a reverse passing off claim in that case, but there “the manufacturer
did not pass off products that had been produced as part of the customer’s
order. West did. ‘The right question, Dastar
holds, is whether the consumer knows who has produced the finished product.’ Here,
the product was produced for OTR, and West attributed it to himself.”  This seems to be playing linguistic games
with “produced for”—based on the timing, the product was produced when it was
produced for West, not for OTR, even
if OTR was a but-for cause of the production. 

from Blogger

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