IP Law Daily Post-trial consideration of S.C. Johnson’s continuous-use argument was reversible error
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Friday, August 26, 2016

Post-trial consideration of S.C. Johnson’s continuous-use argument was reversible error

By Mark Engstrom, J.D.

In a priority fight over the trademark BUG OFF, a federal district court abused its discretion by considering S.C. Johnson’s post-trial argument that Nutraceutical failed to prove continuous use of the BUG OFF mark after 2012, the U.S. Court of Appeals in Chicago has ruled. Because S.C. Johnson was estopped from relying on that argument, the district court’s infringement finding and permanent injunction against Nutraceutical could not be salvaged. The circuit court thus reversed the judgment of the district court and directed it to vacate the injunction against Nutraceutical (S.C Johnson & Son, Inc. v. Nutraceutical Corp., August 25, 2016, Wood, D.).

In its appeal, Nutraceutical accused S.C. Johnson of executing a "bait-and-switch maneuver," and the Seventh Circuit agreed. First, S.C. Johnson had admitted, in numerous pretrial filings, that Nutraceutical and company called Sunfeather—Nutraceutical’s predecessor-in-interest—had continuously used the BUG OFF mark for insect repellents from at least June 1998 through the present. Later, when S.C. Johnson sought summary judgment, it stated as an undisputed fact that Nutraceutical had "continued selling … Bug Off insect repellants." Finally, S.C. Johnson argued for the first time in a post-trial filing that Nutraceutical had failed to prove that its use of the BUG OFF mark was continuous from 2012 to the present.

Although S.C. Johnson mentioned continuity of use in its pretrial report, it did so only for a period that was identified as "prior to June of 1998." Nowhere did it mention continuous use after 2012. Similarly, S.C. Johnson challenged Nutraceutical’s continuity—in general—during its opening statement at trial, but at no point did it challenge Nutraceutical’s use of the BUG OFF mark after 2012.

Estoppel. The court noted that S.C. Johnson’s post-trial briefing asserted for the first time that: (1) no testimonial evidence supported continuous use (a false statement, according to the court) and (2) Nutraceutical had submitted documentary evidence of sales "only for 2011 and 2012, not for 2013 and 2014." Because S.C. Johnson could not raise those assertions for the first time after trial, the district court abused its discretion in accepting them, and thus erred by relying on them to grant judgment in favor of S.C. Johnson, the Seventh Circuit ruled.

S.C. Johnson argued that Nutraceutical was "on notice" of its obligation to prove continuity between 2012 and the present because S.C. Johnson had challenged continuity of use generally, and because Nutraceutical had mentioned recent sales in its opening argument. S.C. Johnson further argued that a challenge to post-2012 continuity was "subsumed in and implicit in the issues" in its pretrial report.

The Seventh Circuit disagreed. S.C. Johnson did not mention the post-2012 period in its issues for trial, the court explained, and the company expressly stated that the trial issues would be limited to the period that preceded 1998.

Because issues for trial were ordinarily limited to issues that were disputed at summary judgment, and because the issue of post-2012 continuity was not disputed at summary judgment, any reasonable litigant would have assumed that proof of post-2012 continuity would not be required at trial, the court reasoned. Significantly, S.C. Johnson had specifically argued at summary judgment that Nutraceutical’s post-2012 facts were immaterial, and by that time, the company had already admitted the very facts that it would dispute for the first time post-trial—after the presentation of evidence had concluded—when Nutraceutical had no chance to respond.

Ultimately, S.C. Johnson raised its argument about post- 2012 continuity too late. Whether the court used the theory of waiver or estoppel was inconsequential; in either case, Nutraceutical was entitled to rely on S.C. Johnson’s factual admissions. Consequently, the district court abused its discretion when it allowed S.C. Johnson to argue that Nutraceutical did not prove continuous use after 2012.

Merits. Even if S.C. Johnson’s post-trial arguments were not estopped, the result would be the same: the Seventh Circuit would conclude that the district court had committed reversible error in finding that Nutraceutical did not prove continuous use after 2012.

Significantly, the district court had relied exclusively on Nutraceutical’s lack of sales records to prove sales after 2012, but evidence of actual sales was not necessary to establish ownership. In any event, the record did contain evidence of sales after 2012. Further, Nutraceutical did not have to show either a high volume of sales or widespread recognition of the mark, as S.C. Johnson had argued on appeal.

According to the court, S.C. Johnson’s admission that Sunfeather’s BUG OFF products were sold at retail shops around the country, in conjunction with evidence that the trademarked goods were provided through Sunfeather’s website, was sufficient. Although the website was a passive site, it was available nationwide.

For those reasons, the district court’s ruling that Nutraceutical failed to prove continuous use after 2012 was clearly erroneous, even if S.C. Johnson’s post-trial arguments were not barred by waiver or estoppel.

The case is No. 15-3337.

Attorneys: Patricia L. Jenness (Michael Best & Friedrich LLP) for S.C. Johnson & Son, Inc. Peggy A. Tomsic (Magleby, Cataxinos & Greenwood) for Nutraceutical Corp. and Nutramarks, Inc.

Companies: S.C. Johnson & Son, Inc.; Nutraceutical Corp.; Nutramarks, Inc.

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