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S.C. Johnson & Son, Inc. v. Nutraceutical Corp.

United States Court of Appeals, Seventh Circuit

August 25, 2016

S.C. Johnson & Son, Inc., Plaintiff-Appellee,
v.
Nutraceutical Corporation and Nutramarks, Inc., Defendants-Appellants.

          Argued April 12, 2016

         Appeal from the United States District Court for the Eastern District of Wisconsin. No. 11-C-861 Rudolph T. Randa, Judge.

          Before Wood, Chief Judge, and Flaum and Williams, Circuit Judges.

          WOOD, CHIEF JUDGE.

         This case is the story of two roads, which, unlike those in the Robert Frost poem, converged in a lawsuit. See Robert Frost, The Road Not Taken, in Mountain Interval 9 (1916). Almost thirty-five years ago, Sandy Maine came out of the backwoods and entered the business of natural insect repellants. She marketed and distributed her products under the mark "BUG OFF" through a company called Sunfeather. Although her products were commercially successful, she never registered the mark. This became a problem in 1998, when Melvin Chervitz registered it. It became a much bigger problem in 2011, when S.C. Johnson & Son, Inc., which had acquired the Chervitz registration, sued Nutraceutical (Sunfeather's successor-in-interest) for trademark infringement.

         Nutraceutical defended on the ground of prior and continuous use. From the time the pleadings were filed through the trial, the parties all agreed that the period in dispute was before 1998. But the earth underneath Nutraceutical shifted after the district court requested post-trial briefing in lieu of closing argument. For the first time, SC Johnson argued that Nutraceutical had failed to prove continuous use of the mark after 2012. The district court was persuaded that this was true and ruled in S.C. Johnson's favor, granting a permanent injunction against Nutraceutical's use of the mark and ordering it to destroy all unauthorized products. Nutraceutical appeals, arguing that the district court erred in declining to find S.C. Johnson's winning argument estopped or waived. Meanwhile, SC Johnson contends that the district court clearly erred in finding that Nutraceutical established continuity of use before 2012; the alleged lack of continuity, it says, provides an alternate ground for the injunction.

         I

         In 1979, Sandy Maine founded Sunfeather as a sole proprietorship in Potsdam, New York. In the early 1980s, while working as an Adirondack wilderness guide, she developed and bottled an all-natural bug repellant under the mark "BUG OFF." She did not do any trademark searches before choosing the mark. In the early 1980s, Maine gave the bug repellant to some of her wilderness-guide clients for trial on the trail. The reviews came back from beyond the treeline: she had a hit on her hands among the GORP-and-granola crowd. She began selling her BUG OFF through the Potsdam Consumer Co-Op.

         In 1992, Maine and Sunfeather began marketing and selling BUG OFF repellant at twice-yearly craft fairs in Maryland, West Virginia, and Virginia. The fairs each drew 30, 000-60, 000 attendees from around the region. Sunfeather also began selling BUG OFF through its own wholesale catalog and website around this time. The next year, Sunfeather marketed BUG OFF at trade shows in New York, Arkansas, Atlanta, California, Chicago, Denver, Miami, New York City (including at the New York International Gift Fair, now called NY NOW, see www.nynow.com), Ohio, Philadelphia, Seattle, and Tennessee. From 1992 to 1997, Sunfeather offered BUG OFF at between 24 and 40 trade shows per year. It also developed a catalog, which it distributed at trade fairs, and a website. Between 1992 and 1998, Sunfeather printed between 5, 000 and 20, 000 copies of its catalog per year. During this period, Sunfeather took orders for BUG OFF from every state in the union.

         In 1994, Sunfeather was pleased when Smith & Hawken, a national gardening retailer, chose to carry Sunfeather's BUG OFF products in its catalog and stores. Although those products were featured in Smith & Hawken's brick-and-mortar stores only through 1996, they stayed in its catalog until 2004. Smith & Hawkin's catalog had a circulation of more than 200, 000. To stay in the catalog, BUG OFF had to sell more than 700 units per season. Sunfeather made it into Frontier Natural Products Co-op, another catalog, starting in 1997. Frontier's catalog was distributed to roughly 15, 000 wholesalers, and featured Sunfeather's BUG OFF products until 2007. By 1998, Sunfeather had more than $1 million in sales per year; BUG OFF products represented roughly 15 percent of the total.

         The second road entered the picture on June 22, 1998, when Chervitz filed an application for the BUG OFF trademark. His application stated that the mark was first used in commerce on January 26, 1998. Just over two years later, on July 25, 2000, the U.S. Patent and Trademark Office (PTO) registered Chervitz's mark. Six days after Chervitz's application, on June 28, 1998, Dejay Corporation submitted an intent-to-use application to register BUG OFF. Later that summer, Dejay was acquired by Kaz, Inc. In 1999, Kaz sold millions of BUG OFF wristbands throughout the United States.

         In 2001, apparently unaware of its competition for the mark, Sunfeather added several products to its BUG OFF line of natural insect repellants, including a balm, spritzer, soy candle, and soap and shampoo bar. Meanwhile, Kaz attacked Chervitz's registration: in January 2001, it petitioned to cancel the Chervitz registration for lack of actual use in commerce.

         In December 2002, Sunfeather filed three applications to register the BUG OFF mark. The PTO refused them based on the Chervitz and Kaz registrations, and the PTO's Trademark Trial and Appeal Board affirmed over Sunfeather's protest that its goods were different from those offered by Chervitz and Kaz. Sunfeather did not at that point assert that it owned trademark rights predating the Chervitz and Kaz registrations.

         On January 29, 2003, SC Johnson entered the picture, filing an intent-to-use application for various bug repellant products using the BUG OFF mark. On June 23, 2003, SC Johnson and Sunfeather's paths momentarily crossed: S.C. Johnson received a letter from Sunfeather's attorney expressing concern over the application and informing it that Sunfeather had been using the BUG OFF mark since at least 1992. The letter asked several questions intended to reveal whether there would be a likelihood of confusion if S.C. Johnson's application was granted. In response, SC Johnson's corporate counsel for pest control called Sunfeather's attorney and told her that Sunfeather was infringing on another of S.C. Johnson's trademarks: the "OFF!" label. Sunfeather's attorney promised to review the company's rights and respond, but never followed up. In July 2003, the PTO refused S.C. Johnson's application to register "BUG OFF, " based on likelihood of confusion with the Chervitz registration and Kaz application. Meanwhile, in April 2004, the Kaz-Chervitz battle was settled: Chervitz assigned his rights and registration in BUG OFF to Kaz.

         In 2005, SC Johnson began a campaign against Kaz's registration of the BUG OFF mark. First, on July 22, it filed a petition against Kaz for cancellation of the Chervitz registration. Then, on October 25, it opposed Kaz's application for its own registration. The Kaz application nevertheless advanced to registration in 2007. Finally, on January 18, 2007, SC Johnson and Kaz settled. Kaz assigned its rights in the Chervitz and Kaz registrations to S.C. Johnson for $1.1 million. S.C. Johnson then licensed the Chervitz registration back to Kaz royalty-free until December ...


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