Super complicated
facts; I’ll try to focus on the Lanham Act laches part because of that. “[A]fter
a squabble developed over a cabinet and closet job for a luxury home in
Charleston, South Carolina, the parties went to arbitration. The arbitration
turned out well for the homeowners and the general contractor overseeing the
home renovations but badly for the cabinet maker.” The cabinet maker nonetheless
sued in federal court, including suing people that the arbitrator had held
could not be brought into the arbitration because they weren’t bound by the
agreement. The court of appeals nonetheless found that, because the disallowed
parties were in privity with entities validly in the arbitration, res judicata
and collateral estoppel precluded any claims against them based on the job.
Design Gaps “designs
and installs cabinetry in luxury homes,” and frequently worked with defendant Shelter,
“a general contractor engaged in homebuilding and renovation.” They had
disputes during their years of working together. “For example, Design Gaps
claimed from time to time that Shelter advertised Design Gaps’ cabinets without
attributing the work to Design Gaps.” These claims were not covered by the
arbitration, but they were still barred by laches.
The parties
accepted that South Carolina’s three-year statutes of limitations for fraud and
unfair trade practices supplied the analogous limitations period. Design Gaps
filed its lawsuit on January 13, 2023, meaning that any alleged Lanham Act
violations occurring before January 2020 presumptively were barred by laches.
Design Gaps argued
that it did not have sufficient information concerning Shelter’s violations
until arbitration commenced. But it sent a C&D in April 2018 about
Shelter’s unattributed uses of Design Gaps’ work specifically referencing the
Lanham Act in connection with its failure-to-attribute objections. While “mere
knowledge that [a trademark owner] might have an infringement claim at some
future date is not sufficient to trigger the period of unreasonable delay
required for estoppel by laches,” the inquiry is objective. And the objective
evidence was that “Design Gaps knew Shelter was using Design Gaps’ cabinet work
in its promotional materials and that Shelter was not attributing that work to
Design Gaps. Design Gaps had also stated in writing that it believed such
conduct was false and misleading as to the origin of the cabinet work and that
Design Gaps was being harmed. These facts are virtually identical to those
alleged to support Design Gaps’ Lanham Act claims in this lawsuit.”
Would laches also
cover continuing the same conduct during the presumptively not-lached period? Yes.
Here, the core “claim” remained the same, so the continuing violation doctrine
extended laches to the more recent period.
Design Gaps argued
that its delay was excusable based on Citibank, N.A. v. Citibanc Group, Inc.,
724 F.2d 1540 (11th Cir. 1984); there, Citibank should have known of the
defendants’ use of its name “prior to 1960, but did not file suit until 1979.”
“When [Citibank] first learned of defendants’ adoption of Citibanc as the name
of its holding company in 1972, [Citibank] wrote letters warning that it
regarded the use of” the name “as an infringement of [Citibank]’s rights.” But,
unlike Citibank, Design Gaps did not “sen[d] several other letters over the
next few years” before bringing suit. Moreover, in Citibank, the
defendants did “not rel[y] on the delay of plaintiffs in expanding their use of
the mark; indeed, they [ ] expanded their use while asserting their right to do
so, in the face of plaintiff’s constant complaints.” By contrast, the record here
didn’t indicate that Shelter asserted its belief that it had the right to
promote its work in the way it did to Design Gaps.
Design Gaps also
argued that settlement discussions excused its delay, but the record didn’t
support the existence of discussions, only that Shelter didn’t respond to the letter.
Design Gaps also
argued that there was no prejudice. Prejudice can be economic or evidentiary.
For trademark, a defendant’s “assertion that it would suffer economic injury if
enjoined from using” a plaintiff’s mark, “without reference to any evidence
beyond the length of time it has used the mark, is simply insufficient to
establish economic prejudice.” In another false advertising case, the Fourth
Circuit found that “unreasonable delay prejudiced” the defendant “because of
[the defendant]’s continued use of the advertisement on all of its [products]
in over a dozen retail stores for years,” to the point that the plaintiff
alleged that the defendant “ha[d] been unjustly enriched by over $27 million.” The
record didn’t show that much here, but Shelter “demonstrated its continued
economic investment in promotional materials between 2015 and 2022.”
For evidentiary
prejudice, a defendant must “articulate how” intervening time “would prejudice
[its] defense specifically.” Indeed, a defendant “ha[s] an obligation to adduce
specific evidence of prejudice” to use this type of laches. Shelter relied on
the death of a Mr. Butler, one of its principals, who communicated with Design Gaps
about the challenged conduct. Design Gaps argued that it served interrogatories
and requests for production on Mr. Butler ten weeks before his unexpected death
and that Shelter’s refusal to answer discovery and deficient responses created
the prejudice Shelter claims to have suffered. “Design Gaps has not supported
this argument with citation to the record. Besides, written discovery responses
are no substitute for live testimony. Any responsibility for discovery issues
does not change the fact that Shelter has demonstrated some evidentiary
prejudice. When considered in the context of over four years of unreasonable
delay, we conclude that Shelter has carried its burden.” (Not entirely
sure why it’s Shelter’s burden given the presumption of laches, but ok.)
from Blogger http://tushnet.blogspot.com/2026/01/laches-once-established-bars-lanham-act.html
Rebecca Tushnet 