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Innovation Ventures, LLC, D/B/A Living v. N.V.E.

September 13, 2012

INNOVATION VENTURES, LLC, D/B/A LIVING ESSENTIALS, PLAINTIFF-APPELLANT/CROSS-APPELLEE,
v.
N.V.E., INC., DEFENDANT-APPELLEE/CROSS-APPELLANT.



Appeal from the United States District Court for the Eastern District of Michigan at Detroit. No. 2:08-cv-11867--Lawrence P. Zatkoff, District Judge.

The opinion of the court was delivered by: Boggs, Circuit Judge.

RECOMMENDED FOR FULL-TEXT PUBLICATION

Pursuant to Sixth Circuit Rule 206

Argued: April 18, 2012

Before: BOGGS and GRIFFIN, Circuit Judges; BARZILAY, Judge.*fn1

OPINION

This is a powerful appeal. Innovation Ventures, LLC, d/b/a Living Essentials (LE), creator of the "5-hour ENERGY" energy shot, asserts that N.V.E. Inc. (NVE), creator of the "6 Hour POWER" energy shot, infringed its trademark, in violation of the Lanham Act. 15 U.S.C. § 1125(a). After LE obtained a decision in its favor in another case against a different competitor, LE distributed a "recall notice" stating that NVE's "'6 Hour' energy shot" had been recalled. NVE claims that the notice constituted false advertising in violation of the Lanham Act and anti-competitive conduct in violation of the Sherman Act, 15 U.S.C. § 2. The district court granted cross-motions for summary judgment, dismissing the three claims that are now on appeal. It first found that a likelihood of confusion did not exist between "6 Hour POWER" and "5-hour ENERGY" and then held that the recall notice did not constitute false advertising or a violation of the Sherman Act. We reverse the judgment of the district court with respect to the trademark infringement and false advertising claims and affirm the judgment with respect to the Sherman Act claims.

I

In September 2004, LE, a Michigan limited-liability company, began to test- market "5-hour ENERGY," an energy shot. The Patent and Trademark Office denied LE's 2004 application for registration of "5-hour ENERGY" as a trademark on the grounds that the name was descriptive. Starting in June 2005, LE marketed "5-hour ENERGY" in national drug-store chains, convenience stores, and retailers nationwide.

NVE, a New Jersey company, has been in the business of selling various diet, stimulant, and other nutritional products since 1980 under its Stacker 2® mark. After declaring bankruptcy in August 2005 due to numerous lawsuits resulting from products containing ephedra, a substance banned by the FDA in 2004, NVE decided to enter the energy-shot market. In March 2006, NVE introduced the "6 Hour POWER" energy shot. The packaging of the two products is shown below.

The preceding facts are largely undisputed. The rest of the litigation is complicated.

II

In May 2008, LE brought suit against NVE, claiming trademark infringement under 15 U.S.C. § 1114, 15 U.S.C. § 1125(a), and state common law, asserting that a likelihood of confusion existed between "5-hour ENERGY" and "6 Hour POWER." The district court declined to exercise supplemental jurisdiction and dismissed the common-law claims. NVE had filed two cases against LE in district court in New Jersey, also in May 2008, which were transferred to the Eastern District of Michigan and consolidated with this litigation in December 2008. NVE alleged eight counterclaims, primarily arising from a recall notice LE distributed: (1) violation of the

Anticybersquatting Consumer Protection Act; (2) false advertising, in violation of 15 U.S.C. § 1125(a); (3) "business and product disparagement"; (4) tortious inference with contract; (5) tortious inference with business relations; (6) monopolization in violation of the Sherman Act; (7) attempted monopolization; and (8) violation of the Michigan Consumer Protection Act. LE and NVE filed cross-motions for summary judgment.

The district court granted summary judgment in favor of NVE, finding that a likelihood of confusion did not exist between "6 Hour POWER" and "5-hour ENERGY." The district court granted summary judgment in favor of LE on the nine counterclaims. LE appeals the grant of summary judgment with respect to the trademark-infringement claim. NVE appeals the grant of summary judgment with respect to the false-advertising and Sherman Act claims.

III

A

A claim under 15 U.S.C. § 1125(a) presents a mixed question of fact and law. Gen. Motors Corp. v. Lanard Toys, Inc., 468 F.3d 405, 412 (6th Cir. 2006). When a district court grants summary judgment under § 1125(a), this court "appl[ies] an entirely de novo standard of review" to both the district court's review of the eight factors and its likelihood-of-confusion finding. Daddy's Junky Music Stores, Inc. v. Big Daddy's Family Music Ctr., 109 F.3d 275, 280 (6th Cir. 1997). "We therefore may affirm the grant of summary judgment to defendant only if the record, when viewed in the light most favorable to plaintiff, contains no genuine issue of material fact." Ibid.

The Lanham Act provides a private cause of action for violations of protected trademark rights:

Any person who, on or in connection with any goods or services, or any container for goods, uses in commerce any word, term, name, symbol, or device, or any combination thereof . . . which--(A) is likely to cause confusion, or to cause mistake, or to deceive as to the affiliation, connection, or association of such person with another person, or as to the origin, sponsorship, or approval of his or her goods, services, or commercial activities by another person . . . shall be liable in a civil action by any person who believes that he or she is or is likely to be damaged by such act.

15 U.S.C. § 1125(a)(1)(A).

This court has adopted a two-step approach to consider claims under § 1125(a). First, we determine "whether the [plaintiff's] mark is protectable," and second, "whether there is a likelihood of confusion as a result of the would-be infringer's use of the mark." See Tumblebus Inc. v. Cranmer, 399 F.3d 754, 761 (6th Cir. 2005).

B

The parties dispute whether the plaintiff's mark is protectable--an issue the district court did not address.

NVE argues that "LE has no common law trademark rights superior to NVE: it failed to offer the evidence required to establish secondary meaning in any particular geographic area before NVE's first use of the accused mark in March 2006." Appellee Br. at 57. Specifically, asserting that "5-hour ENERGY" is only descriptive, NVE claims that LE failed to show that the mark was distinctive. Further, NVE argues that LE cannot prove that prior to March 2006--when "6 Hour Power" entered the market--"5-hour ENERGY" had acquired secondary meaning. Burke-Parsons-Bowlby Corp. v. Appalachian Log Homes, Inc., 871 F.2d 590, 595-96 (6th Cir. 1989).

1

First we consider whether LE waived this defense by not raising it in its initial brief. NVE claims that LE "did not contest the Court's ruling that the mark is descriptive" rather than distinctive. Appellee Br. at 45. Thus, NVE argues in its leading brief that any challenge with respect to the distinctiveness of the mark is waived. LE counters that it is not raising a new argument but responding to the alternative basis for affirmance advanced by NVE on appeal: "[w]hen an appellee raises in its answer brief an alternative ground for affirmance, the appellant is entitled to respond in its reply brief." United States v. Brown, 348 F.3d 1200, 1213 (10th Cir. 2003). NVE replies that this argument is inapposite, as arguments that "relate to the basis of the district court's ruling" are waived, even if responsive to arguments raised by appellee. Id. at 1210. According to NVE, "LE's new argument disputing descriptiveness not only relates to a basis of the district court's ruling but relates to one of the two pivotal factors." We read the district court's discussion of distinctiveness differently.

In consideration of the first of the eight factors in the test for likelihood of confusion--the strength of the plaintiff's mark--the district court found that, "[g]iven the descriptive nature of Plaintiff's mark, i.e., that it provides users with five hours of energy, the mark itself has little strength." District Ct. Op. at 21-22 (emphasis added). Later, the district court concluded that, "[h]aving considered the above eight factors together, the Court finds that no genuine issues of material fact are present regarding the likelihood of confusion. Pivotal in the Court's decision is the dissimilarity between the marks, especially when combined with the descriptive nature of Plaintiff's 5-hour ENERGY mark." Id. at 26 (emphasis added). NVE reads the district court opinion as "explicitly identif[ying] the descriptive nature of 5-hour ENERGY as one of the two most important factors underlying its decision." NVE is correct about the district court's holding with respect to likelihood of confusion and strength of LE's mark. However, the district court was silent with respect to whether the mark was distinctive enough to warrant protection under the Lanham Act.

The district court's discussion of descriptiveness occurred in the context of determining that there was no likelihood of confusion, not in deciding whether the trademark was protectable. While distinctiveness was certainly "pivotal" for the former test, it was not even mentioned for the latter test. The district court's opinion did not contain any analysis about whether the mark was protectable. LE would not have been on notice that it needed to address in its initial brief an issue not even discussed by the district court. Consequently, there is no waiver, and we find that LE properly responded to the alternative basis for affirmance raised on appeal by NVE. We now turn to the merits.

NVE claims that the term "5-hour ENERGY" is not a distinctive mark, but is a descriptive mark.*fn2 A descriptive mark, by itself, is not protectable. However, "[a] merely descriptive term . . . can, by acquiring a secondary meaning, i.e., becoming distinctive of the applicant's goods . . . , become a valid trademark." Induct-O-Matic Corp. v. Inductotherm Corp., 747 F.2d 358, 362 (6th Cir. 1984) (internal quotation marks omitted). LE counters that the "5-hour ENERGY" mark is not descriptive, but rather is distinctive, due to the mark's suggestiveness. Such a mark "suggests rather than describes an ingredient or characteristic of the goods and requires the observer or listener to use imagination and perception to determine the nature of the goods." Id. at 362. "Suggestive . . . marks are inherently distinctive and are protectable so long as the putative owner has actually used the mark." Tumblebus, 399 F.3d at 761 (citing Two Pesos, Inc. v. Taco Cabana, Inc., 505 U.S. 763, 768 (1992)). Because a suggestive mark is inherently distinctive, it "can be protected without proof of a secondary meaning." Induct-O-Matic, 747 F.2d at 362-63.

The "5-hour ENERGY" mark could be characterized as merely descriptive, in the sense that it simply describes a product that will give someone five hours of energy. But that is not the end of such an inquiry. The first question one would ask is how would the energy be transferred? Through food? Through drink? Through injections? Through pills? Through exercise? Also, one would ask what kind of energy is the mark referring to? Food energy (measured in Calories)? Electrical energy? Nuclear energy? With some thought, one could arrive at the conclusion that the mark refers to an energy shot. But it is not as straightforward as NVE suggests. Such cognitive inferences are indicative of "suggestive" rather than descriptive marks.

The nature of the "5-hour ENERGY" mark "shares a closer kinship with those marks previously designated as suggestive than those labeled merely descriptive because of the degree of inferential reasoning necessary for a consumer to discern" that the "5- hour ENERGY" mark relates to an energy shot. Tumblebus, 399 F.3d at 763. The connection between "5-hour" and "ENERGY" is "not so obvious that a consumer seeing [5-hour ENERGY] in isolation would know that the term refers to" an energy shot rather than, for example, a battery for electronics, an exercise program, a backup generator, or a snack for endurance sports. Ibid. Connecting the mark "5-hour ENERGY" with the energy-shot product requires "imagination and perception to determine the nature of the goods." Induct-O-Matic, 747 F.2d at 362.

"The line between merely descriptive and suggestive marks is admittedly hazy and can be difficult to discern." Tumblebus, 399 F.3d at 763. However, we disagree with NVE's contention that the mark is not distinctive and thus not protectable. The "5- hour ENERGY" mark is "suggestive." We decline NVE's request to affirm on an alternate ground. Because the "5-hour ENERGY" mark is ...


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