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East Iowa Plastics, Inc. v. PI, Inc.

United States Court of Appeals, Eighth Circuit

August 11, 2016

East Iowa Plastics, Inc. Plaintiff- Appellee
v.
PI, Inc. Defendant-Appellant

          Submitted: February 11, 2016

         Appeal from United States District Court for the Northern District of Iowa, Waterloo

          Before SHEPHERD, BEAM, and KELLY, Circuit Judges.

          KELLY, Circuit Judge.

         This trademark case involves a challenge to the district court's award of attorney's fees to the plaintiff. We find that the district court lacked jurisdiction to cancel the defendant's federal trademark registrations, and that as a result, the plaintiff was not entitled to attorney's fees.[1]

         I

         The history of this case begins not with the parties, but with a company called KenTech, which was the owner of the "PAKSTER" trademark in the late 1990s. KenTech used the mark in connection with the molded plastic goods it manufactured for use in the egg and poultry industries. Two commonly-used methods of manufacturing plastic goods are thermoforming and injection molding: the former involves heating a flat sheet of plastic until pliable and then forming it over a mold, while the latter involves injecting heated plastic into a closed mold. See J. Scott Smith & Y.H. Hui, Food Processing: Principles and Applications 110 (2008). KenTech's operations used both techniques.

         KenTech manufactured its thermoformed PAKSTER goods in Independence, Iowa, and its injection molded PAKSTER products in Hopkinsville, Kentucky, until 1997, when it sold both product lines. Its thermoformed goods line was sold to a company called East Iowa Plastics (EIP), also located in Independence. The sale was accomplished through an Asset Purchase Agreement (APA), which transferred to EIP KenTech's entire manufacturing operation in Iowa, including all the assets comprising its manufacturing facility.

         Among the assets transferred to EIP by the APA were KenTech's rights to the PAKSTER trademark. But the APA included a "license back, " which provided that KenTech would be granted "a license to use the 'Pakster' name and mark in connection with the production and sale of injection molded plastic products." The license back specified that the license was to be "exclusive . . . within North America, " "perpetual and irrevocable, " "royalty-free, " and "freely assignable."

         The assignability provision did not go unused. Shortly afterwards, KenTech sold its injection molds, which were imprinted with the PAKSTER mark, to PI, a company based in Athens, Tennessee. For the next several years, EIP proceeded to make PAKSTER-branded products using the thermoforming method, while PI made PAKSTER-branded products using injection molding. For the most part, the two companies made different products under the PAKSTER brand: EIP made ventilation doors, feeder trays, and a light hood, while PI made chicken coops, egg baskets, a chick box, and plastic pallets. The one product both companies made, albeit using different manufacturing methods, was egg trays, which the parties and the district court refer to as "egg flats."

         Ten years later, PI applied for and acquired two trademark registrations from the United States Patent and Trademark Office: one for the word "PAKSTER" itself and the other for an image of a rooster with the word "PAKSTER." In filling out both applications, PI certified - falsely, as it now acknowledges - that to the best of its "knowledge and belief no other person, firm, corporation, or association ha[d] the right to use the mark in commerce." In reality, PI had long been aware of EIP's use of the PAKSTER mark.

         On January 27, 2012, PI sent EIP a cease and desist letter, accusing it of trademark infringement and unfair competition under the Lanham Act for using the "PAKSTER" trademark. It threatened legal action unless EIP responded with written assurances that it would stop using the PAKSTER trademark. EIP responded on March 5, 2012, explaining that it had bought the PAKSTER trademark from KenTech and attaching a copy of the APA. PI replied on April 3, 2012, contending that because of the APA's license back, and the fact that PI, unlike EIP, possessed a federally-registered trademark, EIP had no right to use the PAKSTER mark in connection with either thermoformed or injection molded products.

         Shortly thereafter, PI offered to sell its PAKSTER molds to EIP for about $3 million. When EIP refused to buy, PI sent a third cease and desist letter on December 4, 2012, repeating the claims in its second letter and again threatening suit if EIP refused to stop using the PAKSTER mark.

         But instead of PI suing EIP, on December 10, 2012, EIP sued PI, bringing claims for: (1) cancellation of the federal registrations of the PAKSTER marks and damages under sections 37 and 38 of the Lanham Act, 15 U.S.C. §§ 1119, 1120; (2) false statements and unfair competition under section 43(a) of the Lanham Act, 15 U.S.C. § 1125(a); (3) trademark infringement, misappropriation, misuse and unfair competition under section 43(a) of the Lanham Act and common law; (4) conversion; and (5) breach of contract. It additionally sought a declaration that it owned the PAKSTER trademark.

         On January 30, 2013, PI filed counterclaims for trademark infringement under section 32 of the Lanham Act, 15 U.S.C. § 1114, and unfair competition under section 43(a) of the Lanham Act. On March 12, 2015, about a month before trial was scheduled to begin, PI voluntarily dismissed its counterclaims with prejudice. EIP then dismissed its breach of contract claim on April 3, 2015. The case proceeded to trial on April 13, 2015. At the end of the trial, the district court granted PI's ...


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