IP Law Daily, TRADEMARK—S.D.N.Y.: Dutch company’s plastic bag closures could infringe, dilute Kwik Lok’s trade dress, (Oct 2, 2014)

By Thomas Long, J.D.

Kwik Lok Corp. can go forward with trade dress infringement and dilution claims against a Dutch manufacturer of plastic bag-closing clips, as well as infringement and dilution counterclaims against the Dutch company’s U.S. subsidiary, the federal district court in New York City has ruled (Schutte Bagclosures Inc. v. Kwik Lok Corp., September 29, 2014, Koeltl, J.). There were genuine issues of material fact as to whether clips introduced into the United States by Schutte Bagclosures B.V., to be marketed by Schutte Bagclosures Inc., were confusingly similar to Kwik Lok’s registered and unregistered trade dress. Declaratory judgment claims brought by Schutte Bagclosures Inc., seeking declarations of non-infringement and non-dilution, were dismissed for lack of an actual controversy, with regard to plastic clip products that were not yet being marketed in the United States. Kwik Lok agreed to drop all of its claims and counterclaims regarding those products.

Background. The case concerned the trade dress of small plastic clips commonly used to close bags of items such as bread and fruit. Plaintiff Schutte Bagclosures Inc. (“Schutte” or “Schutte Inc.”) requested a declaratory judgment of non-infringement and non-dilution of defendant Kwik Lok’s U.S. trade dress rights by five of Schutte’s products in its “Clipps” product line. Schutte’s products were generally square or rectangular, with four rounded corners with four small jagged protrusions near each rounded corner, a “v” shaped opening along one side, and a concave side opposite the side with the opening. Schutte also claimed damages under Sec. 43(a) of the Lanham Act and New York law for Kwik Lok’s alleged false advertising.

Kwik Lok moved to dismiss the claims. It also filed third-party claims against Schutte’s Netherlands-based parent company, Schutte Bagclosures B.V. (“Schutte BV”), for federal trade dress infringement and dilution, as well as infringement and dilution counterclaims against Schutte Inc.

Personal jurisdiction. Schutte BV moved to dismiss the complaint against it for lack of personal jurisdiction. Kwik Lok argued that personal jurisdiction over Schutte BV because Schutte BV had directed business transactions at New York. Kwik Lok argued that Schutte BV established Schutte Inc. in New York for the purpose of marketing the products at issue in this case. In addition, Kwik Lok alleged that Schutte BV shipped reels containing at least 100,000 bag closures to New York; sent promotional materials to a U.S. business services company, TABS Inc., to be sent to New York bakeries prior to the formation of Schutte Inc.; and hired a New York law firm for representation in obtaining a U.S. trademark registration for its products.

Kwik Lok’s factually supported allegations as to Schutte BV’s contacts with New York were sufficient to exercise jurisdiction over Schutte BV, the court said. Schutte BV purposefully availed itself of New York’s laws, and this action arose out of those contacts. Schutte BV designed, developed, and sent samples and promotional materials to Schutte Inc. and TABS Inc., which were in turn sent to potential customers in New York.

Kwik Lok also made out a prima facie case of jurisdiction over Schutte BV based on Schutte Inc.’s acts as an agent, the court held. Schutte Inc. engaged in purposeful activities in New York by conducting marketing and promotion of Clipps products. Schutte BV incorporated Schutte Inc. in order to market the products that Schutte BV designed, manufactured, and promoted. Schutte Inc. had no employees, and its only two corporate directors were also the corporate directors of Schutte BV. Schutte Inc.’s actions could be imputed to Schutte BV for jurisdictional purposes.

The exercise of personal jurisdiction against Schutte BV comported with due process, according to the court. It satisfied the minimum contacts requirement and comported with traditional notions of fair play and substantial justice. Schutte BV had sufficient minimum contacts with New York based on its shipments of samples and promotional materials into New York with the intent to expand its marketing in New York. It also incorporated Schutte Inc. to act on its behalf in New York. There had been prior trade dress disputes between the parties. Therefore, Schutte BV sought to introduce materials that it knew Kwik Lok would claim to be infringing, and Schutte BV could reasonably have expected to be subject to suit in New York.

The exercise of jurisdiction over Schutte BV would also be reasonable. Although Schutte BV argued that it would incur a substantial burden as a Netherlands corporation litigating in New York, this argument was not persuasive given its purposeful actions directed towards New York, the court said. Moreover, given its close relationship with Schutte Inc., the presence of Schutte BV in the lawsuit would not cause any substantial additional burden or expense to Schutte BV.

Declaratory judgment—actual controversy. Schutte Inc. sought a declaratory judgment that its use of five of its Clipps products did not infringe or dilute Kwik Lok’s registered and unregistered trademarks. Kwik Lok moved for partial summary judgment as to Schutte Inc.’s declaratory judgment claims for all of Schutte Inc.’s products, except for the Clipps G-Series line, claiming that Schutte Inc. had taken no action to introduce any other products into the United States market. According to Kwik Lok, there was no actual controversy regarding the other four products.

Schutte Inc. argued that it had to proceed cautiously in bringing its products to the United States due to fear of litigation from Kwik Lok, although it had the present intention and capacity to ship its products into the United States. Schutte pointed to prior disputes between the parties in the Netherlands, which involved the same essential products. Schutte also alleged that Kwik Lok’s vice president of sales had stated, while at a meeting in the Netherlands, that Kwik Lok would “undertake all measures to prevent [Schutte] from bringing [its] plastic bag closures to the United States.”

The court determined that Schutte failed to show that it had taken steps to introduce the other four Clipps products in the United States. In addition, Schutte could not show that there was sufficient adversity of legal interests at the time the complaint was filed as to products other than the Clipps G-Series. The Netherlands litigation alone could not be treated as a claim by Kwik Lok that Schutte violated its United States trademark rights, because Kwik Lok only asserted its European trademark rights in that litigation. The statement allegedly made by Kwik Lok during the course of the Netherlands litigation could only be taken as relating to that litigation.

Therefore, there was no jurisdiction over the claims by Schutte Inc. for a declaratory judgment as to non-infringement and non-dilution with respect to any of the Clipps products other than the Clipps G-Series, the court concluded.

False advertising. Kwik Lok moved for summary judgment dismissing Schutte Inc.’s federal and state-law false advertising claims. After Schutte alleged that Kwik Lok made false and misleading statements on its website regarding its products’ patent protections, Kwik Lok removed the allegedly misleading statements. Schutte did not contest Kwik Lok’s motion for summary judgment dismissing those claims.

Motion to dismiss counterclaims for infringement and dilution. The only counterclaims by Kwik Lok against Schutte Inc. that remained were those relating to the Clipps G-series product. Schutte moved to dismiss Kwik Lok’s trademark infringement and dilution counterclaims with respect to the Clipps G-series.

In its motion to dismiss, Schutte relied principally on affidavits to argue that Kwik Lok’s allegations were not plausible. However, the court declined to consider the affidavits. At the motion to dismiss stage, the court could only rely on documents that were referenced in the complaint, documents that Schutte relied on in bringing suit and that were either in Schutte’s possession or that Schutte knew of when bringing suit, or matters of which judicial notice could be taken. Therefore, Schutte’s motion to dismiss the counterclaims was denied.

Motion for summary judgment on trade dress infringement counterclaims. Schutte Inc. moved for summary judgment dismissing Kwik Lok’s counterclaims for trade dress infringement regarding Kwik Lok’s beveled and notched product configuration. The court denied the motion.

The court first noted that Kwik Lok’s registration for its trade dress had achieved “incontestable” status”; therefore, the validity of the trade dress could be challenged only on limited grounds. Factual issues precluded a determination that the trade dress was generic; Kwik Lok produced evidence that its design was unique in the industry and that it had gone to great lengths to promote this design as its own. In addition, Schutte failed to show that Kwik Lok had abandoned the trade dress. There also were genuine issues of material fact as to whether the unregistered trade dress at issue had acquired secondary meaning.

Schutte’s primary contention was that, even if Kwik Lok’s registered and unregistered trademarks were found to be valid, Kwik Lok’s counterclaims for infringement could not succeed because there could be no likelihood of confusion between Kwik Lok’s products and the Clipps G-Series. Specifically, Schutte argued that (1) Kwik Lok’s simple design and history of promoting only the functionality of the product made it a weakly protected mark; (2) Kwik Lok’s and Schutte Inc.’s marks were dissimilar; (3) there was no actual confusion; (4) there was a high level of consumer sophistication in the relevant market; and (5) the products were not in close market proximity.

The court determined that Schutte’s arguments were not supported by sufficient evidence in the record so as to preclude a genuine dispute of material fact. With respect to the strength of its marks, Kwik Lok showed that it had invested a significant amount of resources into advertising and promotion and had achieved a high degree of sales success. Second, a reasonable factfinder could find that the test for similarity was met; Kwik Lok presented evidence that the overall impression of the products was similar.

Schutte Inc. sought to market its Clipps G-Series in the United States in direct competition with the Kwik Lok bag closures and to the same market, the court noted. A showing of actual confusion was not required to establish a likelihood of confusion, particularly given the fact that Schutte’s entry into the market was just underway.

With regard to the factor of intent or bad faith, it was plain that Schutte Inc.’s parent company, Schutte BV, was well aware of Kwik Lok’s products and sought to compete directly against them by introducing a similar product, the court said.

Therefore, Schutte’s motion for summary judgment was denied.

Motion for summary judgment on dilution counterclaim. Schutte Inc. did not argue that Kwik Lok’s federal dilution claim should be dismissed because Kwik Lok’s marks were not “famous,” as required by the Trademark Dilution Revision Act. In fact, Schutte Inc. apparently conceded that Kwik Lok’s trade dress product configurations had acquired fame based on the combination of the products’ continued use over many years, extensive promotion at trade shows and over the Internet, and the significant number of sales.

Schutte argued, rather, that to the extent Kwik Lok’s products had acquired some degree of fame, it was only on the basis of their promotion and not on any distinctiveness. However, the fame that Schutte conceded was possessed by Kwik Lok’s products was sufficient to raise at least an issue of fact with respect to fame necessary to avoid summary judgment, the court said.

Kwik Lok showed that there were issues of fact as to whether Schutte Inc.’s marketing of its Clipps G-Series would cause dilution of Kwik Lok’s trade dress through blurring, according to the court. Therefore, Schutte’s motion for summary judgment dismissing Kwik Lok’s counterclaim for dilution was denied.

The case is No. 12 Civ. 5541 (JGK).

Attorneys: Carl Maria Reinier Van Der Zandt (Hand Baldachin & Amburgey LLP) for Schutte Bagclosures Inc. Brian McQuillen (Duane Morris, LLP) for Kwik Lok Corp.

Companies: Schutte Bagclosures Inc.; Schutte Bagclosures B.V.; Kwik Lok Corp.

Cases: Trademark NewYorkNews