IP Law Daily Boat manufacturer’s former employee beats trade dress infringement, trade secrets misappropriation claims
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Wednesday, August 8, 2018

Boat manufacturer’s former employee beats trade dress infringement, trade secrets misappropriation claims

By Cheryl Beise, J.D.

The federal district court in Tampa did not err in deciding on summary judgment that fishing boat manufacturer Yellowfin Yachts failed to establish that a former executive and his company were liable for trade dress infringement, unfair competition, or trade secret misappropriation, the U.S. Court of Appeals in Atlanta has held, affirming summary judgment in favor of the defendants. In view of the weakness of Yellowfin’s "sweeping sheer line" trade dress, the sophistication of purchasers, and the absence of actual confusion, no reasonable jury could find a likelihood of post-sale confusion between the center-consoled fishing boats manufactured by Yellowfin and those manufactured by defendant Barker Boatworks. In addition, no reasonable jury could find that Yellowfin’s supplier or customer information qualified as trade secrets under Florida law. Yellowfin failed to employ reasonable efforts to secure its customer information and the identities of its suppliers were known and the pricing they offered had no economic value for a new manufacturer and (Yellowfin Yachts, Inc. v. Barker Boatworks, LLC, August 7, 2018, Tjoflat, J.).

Yellowfin Yachts, Inc., produces 21 to 42 foot "center-consoled, open-fisherman styled boats." According to Yellowfin, the boats have a unique "swept" sheer line, meaning a gently sloped "s"-shaped line that runs upward from the point at which a boat’s hull intersects with the deck to the boat’s lofted bow. Kevin Barker worked for Yellowfin as its vice president of sales from 2006 to 2014, when he left to form a competing fishing boat manufacturer, Barker Boatworks, LLC. On his last day at Yellowfin, Barker downloaded hundreds of files from Yellowfin’s main server, including "detailed purchasing history and specifications for all of Yellowfin’s customers," as well as "drawings" and "style images" for Yellowfin boats and "related manufacturing information."

Yellowfin sued Barker and his company (collectively, "Barker") in 2015, asserting claims for dress infringement and false designation of origin under Section 43(a) of the Lanham Act, common-law unfair competition, common-law trade dress infringement, and violation of the Florida Uniform Trade Secret Act ("FUTSA"). In February 2016, the federal district court in Tampa granted summary judgment to Barker on all claims. Yellowfin appealed.

Trade dress infringement. The district court determined that Yellowfin’s trade dress infringement claim failed because: Yellowfin’s sheer line trade dress was not distinctive; the sheer line was functional and thus not protectable; and no reasonable jury could conclude that a potential buyer would likely confuse a Barker boat for a Yellowfin boat. The lack of consumer confusion also doomed Yellowfin’s Section 43(a) false designation of origin, common-law trade dress infringement, and common-law unfair competition claims.

The Eleventh Circuit focused on likelihood of confusion as it was dispositive of all of Yellowfin’s trade dress-related claims. Yellowfin’s theory of confusion centered on confusion in the post-sale context, i.e., consumers might see a Barker boat sporting a Yellowfin-like sheer line and mistakenly believe the boat to be a Yellowfin.

Courts in the Eleventh Circuit consider seven likelihood of confusion factors in trade dress cases: (1) the strength of plaintiff’s trade dress, (2) the similarity of the products’ designs, (3) the similarity of the products themselves, (4) the similarity of the parties’ trade channels and customers, (5) the similarity of advertising media used by the parties, (6) the defendant’s intent, and (7) the existence and extent of actual confusion in the consuming public. The Eleventh Circuit found that the second, third, and fifth factor favored Yellowfin, while the most important of the factors—the strength of the plaintiff’s trade dress and actual confusion—favored Barker. The remaining two factors did not tip in either parties’ favor.

The appeals court agreed that Yellowfin’s sweeping sheer line trade dress was not strong. Yellowfin conceded that several other boats had a sweeping sheer line, but argued that its sweeping sheer line stood out from others. Yellowfin cited three excerpts from boating magazines, but none of the excerpts singled out Yellowfin’s sweeping sheer line from other features of a Yellowfin boat, such as the "proud bow" and "sleek design." Even the statements of Yellowfin’s founder failed to support the proposition that Yellowfin’s sheer line caused consumers to associate the sheer line with its source. Thus, the important first factor favored Barker.

The important actual confusion factor also favored Barker as Yellowfin failed to present any evidence of actual confusion. Regarding this factor, the district court correctly noted that the high price of center-console fishing boats likely caused customers to exercise a high degree of care when purchasing the parties’ products. The district court also found that Yellowfin failed to prove that Barker boats were of a lesser quality, as Yellowfin’s founder claimed. The Eleventh Circuit noted that proving the inferiority of the defendant’s product is not a prerequisite to finding post-sale confusion, but this error did not necessitate remand. The record was devoid of any evidence indicating a probability of post-sale confusion among relevant potential purchasers—sophisticated consumers able to notice the "highly nuanced refinements" of Yellowfin’s sheer line.

The district court determined that the parties’ boat designs were not similar based on several distinguishing features, but the Eleventh Circuit, focusing on the sheer line design, found that the second factor favored Yellowfin. As both parties manufactured fishing boats, the third factor regarding the similarity of products also favored Yellowfin. The fifth factor (advertising media) also favored Yellowfin for purposes of summary judgment, because one reasonably could infer that the parties’ use of similar advertising—fishing magazines ads and boat show displays—contributed to consumer confusion. However, the appeals court found the fourth factor regarding trade channels and customers to be "mostly irrelevant" in the post-sale context Regarding Yellowfin’s intent, the court noted that intentional copying is not enough, but must be done with intent to confuse consumers. Yellowfin put forth no evidence showing that Barker intended to copy Yellowfin’s sheer line in order to deceive consumers as to the source of Barker’s boats.

Concluding that no reasonable jury could find a likelihood of confusion between the Barker and Yellowfin boats, the Eleventh Circuit affirmed the district court’s dismissal of Yellowfin’s trade dress infringement and unfair competition claims.

Trade secret misappropriation. The district court rejected Yellowfin’s trade secret claim because Yellowfin failed to identify a protectable, misappropriated trade secret, and Yellowfin did not make "reasonable efforts" to protect all of its alleged trade secrets.

Yellowfin claimed two sets of information, both allegedly misappropriated by Barker, as trade secrets: "Source Information" relating to Yellowfin’s suppliers and their pricing and "Customer Information," including identifying and purchase information.

The district court found that Yellowfin’s Source Information failed to qualify for trade secret protection because the identity of Yellowfin’s suppliers was well known and the discounted pricing Yellowfin obtained from suppliers lacked independent value to a new manufacturer such as Barker because the discounts were based on Yellowfin’s unique relationship and volume of production. The Eleventh Circuit found no error in the district court’s reasoning regarding the Source Information.

The district court found Yellowfin’s Customer Information lacked trade secret status because Florida law requires boat registration information be made available to the public. Moreover, even if Yellowfin’s customer information was not publicly available, Yellowfin failed make reasonable efforts to keep the information secret. Although Yellowfin protected its Customer Information by limiting employee access and maintaining it on a password-protected computer system, Yellowfin "encouraged Barker to store [the] information on a personal laptop and phone" without providing instructions on how to secure the information and Yellowfin never asked Barker to delete the information from his personal devices after he left the company. The evidence also showed that Barker had refused to sign an employment agreement which would have required him to keep Yellowfin trade secrets in confidence. On these facts, the appeals court declined to find that there was an "implicit understanding" between Yellowfin and Barker that the customer information was to be kept confidential. The district court did not err in determining that no reasonable jury could find that Yellowfin employed reasonable efforts to secure the information.

The case is No. 17-11176.

Attorneys: Elliot H. Scherker (Greenberg Traurig, LLP) for Yellowfin Yachts, Inc. Brian R. Gilchrist (Allen Dyer Doppelt & Gilchrist, PA) for Barker Boatworks, LLC.

Companies: Yellowfin Yachts, Inc.; Barker Boatworks, LLC

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