Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caDC-97-07093/USCOURTS-caDC-97-07093-0/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 

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United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued February 23, 1998 Decided July 10, 1998

No. 97-7092

Material Supply International, Inc.,

Appellant/Cross-Appellee

v.

Sunmatch Industrial Co., Ltd.,

Appellee/Cross-Appellant

Consolidated with

No. 97-7093

Appeals from the United States District Court

for the District of Columbia

(No. 94cv01184)

Larry Klayman argued the cause for appellant/crossappellee, with whom Paul J. Orfanedes was on the briefs.

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Louis S. Mastriani argued the cause for appellee/crossappellant, with whom Michael L. Doane was on the briefs.

Before: Edwards, Chief Judge; Ginsburg and Sentelle,

Circuit Judges.

Opinion for the Court filed by Circuit Judge Ginsburg.

Ginsburg, Circuit Judge: Material Supply International,

Inc., an Oregon corporation, sells pneumatic power tools.

Sunmatch Industrial Co., Ltd., a Taiwanese company, manufactures and exports pneumatic tools. Both claim ownership

of the SUNTECH trademark for pneumatic tools. The

Trademark Trial and Appeal Board (TTAB) ruled in favor of

Sunmatch. The district court held a bench trial on MSI's

challenge to the ruling of the TTAB and submitted the other

issues to a jury. Both parties appeal from various of the

district court's decisions.

I. Background

The key issue in the case is which party first used the

SUNTECH trademark. Daniel L.S. Chen, president and

general manager of Sunmatch, testified that he created the

SUNTECH mark in March 1985. In April of that year

Sunmatch applied to register the SUNTECH mark in Taiwan; its application was granted in November. Between

April and August Sunmatch used the mark in advertisements,

in catalogues, on letterhead, on sample tools, at a display at

the National Hardware Show in Chicago, and in meetings

after the show with potential distributors, including MSI. In

August Chen traveled to Oregon to meet with Chuck Minnick,

then the president of MSI, and they began negotiations

regarding Sunmatch's sale of pneumatic tools to MSI. In

November 1985 the parties entered into an Exclusive Sales

Agreement under which Sunmatch would manufacture pneumatic tools and MSI would "represent and sell [the tools] on

an exclusive basis for the entire North American continent

and the State of Hawaii." The Agreement states that

[t]he Supplier [Sunmatch] agrees to give the Agent

[MSI] exclusive rights to sales of all Suntech Pneumatic

Tools and accessories for the period of this contract with

the exception of special tools now being supplied to AIM

Corporation.

(Emphases in original.)

In October 1985 MSI began importing, advertising, and

selling SUNTECH tools to various customers. In 1990 the

relationship between MSI and Sunmatch began to deteriorate. MSI discovered that Sunmatch was advertising SUNTECH tools in the United States and became concerned

about Sunmatch's sales of private label tools in the U.S.,

which MSI contends caused it to lose sales and distributors.

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plied to the Patent and Trademark Office to register the

SUNTECH trademark, and in October 1991 the PTO issued

the registration. Sunmatch petitioned the TTAB for cancellation of MSI's mark. In 1994 the TTAB granted summary

judgment in favor of Sunmatch and canceled MSI's registration; the only affidavit MSI submitted did not raise a dispute

over any material fact because it was not based upon the

affiant's personal knowledge of the events surrounding the

beginning of the relationship between the two companies.

See Sunmatch Indus. Co. v. Material Supply Int'l, Inc.,

Cancellation No. 20,482, at 16-17 (T.T.A.B. 1994) (citing Federal Rule of Civil Procedure 56(e)).

In May 1994 MSI sued Sunmatch and Mr. Chen pursuant

to 15 U.S.C. s 1071(b)(1), which authorizes a party "dissatisfied" by a decision of the TTAB to bring a civil action in

district court. In addition, MSI sought a declaratory judgment that it owned, and an injunction against Sunmatch

using, the SUNTECH mark. MSI also sought damages from

Sunmatch for trademark infringement and unfair competition

under the Lanham Act, unfair competition under state law,

breach of contract, breach of fiduciary duty, fraud upon the

TTAB, and fraud upon MSI. Sunmatch counterclaimed for

trademark infringement and unfair competition under the

Lanham Act, fraud upon the PTO, unfair competition under

state law, and breach of contract.

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The district court simultaneously held a bench trial of

MSI's challenge to the decision of the TTAB and a jury trial

of all the other claims in the case. After the close of evidence

but before charging the jury the court upheld the decision of

the TTAB. The court determined that Sunmatch owned the

SUNTECH mark principally because it was the first to use it.

Based upon this ruling, the court also dismissed, pursuant to

Rule 50(a) (judgment as a matter of law), MSI's claims for

trademark infringement and unfair competition. The court

informed the jury that Sunmatch owned the mark and submitted the remaining claims for the jury's consideration.

The jury upheld MSI's claim against Sunmatch for breach

of fiduciary duty, for which it awarded MSI $50,000 in

compensatory and $100,000 in punitive damages, but it rejected MSI's claims against Sunmatch for breach of contract and

for fraud. The jury upheld Sunmatch's counterclaims against

MSI for trademark infringement, fraud upon the PTO, and

breach of contract, for which it awarded Sunmatch $908,500,

but it rejected Sunmatch's claim of unfair competition under

both the Lanham Act and state law. Both parties appealed.

II. Analysis

On appeal MSI argues that the district court (1) violated its

Seventh Amendment right to a jury trial when the court itself

decided that Sunmatch owns the SUNTECH mark and so

informed the jury; and (2) erred in the course of rejecting

MSI's challenge to the TTAB decision that Sunmatch owned

the SUNTECH mark, by (a) placing upon MSI the burden of

proof, (b) admitting into evidence various documents showing

Sunmatch's first use of the mark, (c) deciding that there was

"clear and convincing" proof of the date Sunmatch first used

the SUNTECH mark, and (d) giving insufficient weight to

MSI's evidence regarding customer perception. MSI also

challenges the district court's rulings (3) denying MSI's posttrial motion for judgment upon, or for a new trial of, Sunmatch's counterclaims for trademark infringement, breach of

contract, and fraud upon the PTO; (4) declining to eliminate

or reduce the jury's award of MSI's profits to Sunmatch; (5)

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granting Sunmatch's motion to amend its answer in order to

assert a statute-of-limitations defense while denying MSI's

motion to amend its answer in order to assert assignment as

a defense; (6) instructing the jury regarding Sunmatch's

statute-of-limitations defense; and (7) denying MSI's motion

to compel discovery.

For its part Sunmatch argues that the district court erred

in denying Sunmatch's motions (1) for judgment as a matter

of law upon MSI's claim for breach of fiduciary duty; (2) to

vacate or reduce the jury's award of damages to MSI; and (3)

to award Sunmatch (a) enhanced damages, (b) costs, and (c)

attorney's fees under the Lanham Act; and (4) for prejudgment interest.

A. MSI's Right to a Jury Trial

As noted above, the district court itself resolved MSI's

challenge to the decision of the TTAB. At the close of

evidence but before the case was submitted to the jury, the

court upheld the TTAB's decision that Sunmatch owned the

SUNTECH mark and informed the jury of its decision as

follows:

I have decided the appeal affirming the decision of the

TTAB ... which found in favor of the defendant in this

case. From my decision two facts flow. One, Sunmatch

is the owner of the trademark and, two, MSI, the plaintiff in this action, did not own the trademark at the time

it filed its application for registration for the Suntech

trademark.

While the jury was deliberating the court placed on the

record its findings of fact and conclusions of law relevant to

its decision affirming the TTAB. The court indicated that it

found many of the witnesses for both sides to be less than

truthful and that it "closely scrutinized the manner and

content of the testimony and applied what all jurors are

required to use and that is common sense." The court found

that Sunmatch was the first to use the SUNTECH mark and

therefore it held that Sunmatch owned the mark. The court

then outlined the "consequences" of that decision:

The factual issue[s] of ownership and first use have a

presence of [sic] other aspects of this case as it proceeds

to the jury in that the parties have brought jury triable

claims that implicate this issue. But as in any case in

which a decision for the court [has an] impact on what

remains for the jury to decide, this court recognizes that

pursuant to Rule 50, the determination of an issue

against a party may re-configure what remains for the

jury to decide.

Having determined the fact de novo that first use

renders the defendant [Sunmatch] the owner and rightful

registrant of the trademark in this case as a matter of

law, this issue cannot be redetermined by the jury and

consequently the plaintiff's claims are affected as we

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have already discussed on the record, dropping certain

things out and eliminating certain things for the jury's

decision-making.

MSI contends that the district court violated its right to a

jury trial when the court decided that Sunmatch owned the

trademark before submitting the parties' other claims to the

jury. We agree. The Seventh Amendment to the Constitution of the United States provides:

In Suits at common law, where the value in controversy

shall exceed twenty dollars, the right of trial by jury

shall be preserved, and no fact tried by a jury, shall be

otherwise reexamined in any Court of the United States,

than according to the rules of the common law.

As a general matter the Seventh Amendment affords the

right to a jury trial "in those actions that are analogous to

'Suits at common law' "--that is, "suits brought in the English

law courts"--and not in actions "analogous to 18th-century

cases tried in courts of equity or admiralty." Tull v. United

States, 481 U.S. 412, 417 (1987) (emphasis in original).

Most important for this case, the Supreme Court has held

that "[w]hen legal and equitable claims are joined in the same

action, 'the right to jury trial on the legal claim, including all

issues common to both claims, remains intact.' " Lytle v.

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Household Mfg., Inc., 494 U.S. 545, 550 (1990) (quoting Curtis

v. Loether, 415 U.S. 189, 196 n.11 (1974)); see Dairy Queen,

Inc. v. Wood, 369 U.S. 469, 472-73 (1962); Beacon Theatres,

Inc. v. Westover, 359 U.S. 500, 510-11 (1959). In such a case

the jury first must resolve any common issue of fact; the

district court then can resolve those claims that are for it to

determine. See Lytle, 494 U.S. at 556 n.4; Dairy Queen, 369

U.S. at 472-73.

In this case the parties do not dispute that the district

court was correct in itself trying MSI's challenge to the

decision of the TTAB and in submitting all of MSI's other

claims and Sunmatch's counterclaims to the jury. See Dairy

Queen, 369 U.S. at 476-77 (claims for damages based upon

breach of contract and trademark infringement sound in law).

The dispute is over the sequence in which the court and the

jury should have proceeded, considering that MSI's challenge

to the decision of the TTAB and all of Sunmatch's claims

against MSI involved the common legal issue of which party

owned the SUNTECH trademark, resolution of which in turn

depended upon the common factual issue of which party first

used the mark. The teaching of the Supreme Court cases

cited in the preceding paragraph is that the district court

should have let the jury first decide this common question of

fact and then itself decided the TTAB appeal based upon the

jury's resolution of that question.

Sunmatch contends nonetheless that because, in the event,

the district court resolved MSI's challenge to the TTAB

decision before submitting the case to the jury, MSI was

barred by the doctrine of issue preclusion from re-litigating

the factual question of first use. The Supreme Court rejected a similar contention in Lytle, stating that "in cases involving a wrongful denial of a petitioner's right to a jury trial" the

Court has "never accorded collateral-estoppel effect to the

trial court's factual determinations." 494 U.S. at 552-53. As

the Court explained:

[T]he purposes served by collateral estoppel do not justify applying the doctrine in this case. Collateral estoppel

protects parties from multiple lawsuits and the possibility

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of inconsistent decisions, and it conserves judicial resources. Application of collateral estoppel is unnecessary here to prevent multiple lawsuits because this case

involves one suit in which the plaintiff properly joined his

legal and equitable claims.

Id. at 553 (citation omitted).

Next Sunmatch asserts that the district court's action must

not violate the Seventh Amendment because otherwise courts

could never dismiss claims based upon Rules 12, 50, or 56.

Sunmatch misses the point. Of course the trial court may

dismiss claims based upon those rules--but only if it can do

so as a matter of law. In this case the court, acting as the

finder of fact, evaluated the demeanor and determined the

credibility of witnesses, balanced the evidence, and found that

Sunmatch first used the mark. By resolving this factual issue

common to the claims tried to the court and those tried to the

jury, the court violated MSI's right to a jury trial.

Upon remand MSI is entitled to a jury trial of all causes of

action that entail the question which party owned the

SUNTECH trademark, namely, MSI's challenge to the TTAB

decision, and its claims for trademark infringement and unfair

competition under the Lanham Act and unfair competition

under state law; and Sunmatch's claims for trademark infringement and unfair competition under the Lanham Act,

fraud upon the PTO, and unfair competition under state law.

Sunmatch's claim for breach of contract also must be retried

because it too implicates the question of ownership. Sunmatch has offered two theories in support of this claim, both

of which depend upon ownership of the mark: First, in its

complaint Sunmatch alleged that "[b]y claiming ownership of

Sunmatch's trademark SUNTECH and filing a U.S. application therefor, [MSI] breached its duty under the sales agreement." Second, in its brief Sunmatch contends that "when

MSI began to purchase pneumatic tools from other suppliers

and place the SUNTECH trademark on those products, it

was clearly violating the Agreement." The issue of who

owned the mark is relevant under either theory, and therefore the claim must be retried.

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Finally, we note that MSI does not seek retrial based upon

the Seventh Amendment for its claims for breach of fiduciary

duty, breach of contract, and fraud upon MSI, the latter two

of which the jury rejected. (During the trial MSI withdrew

its claim of fraud upon the TTAB.) Accordingly, these claims

will not be retried upon remand, and we need not consider

whether they implicate the issue of ownership. We turn now

to the arguments that the parties need to have resolved in

order to retry the claims that we remand to the district court.

B.Burden of Proof in MSI's Challenge to the TTAB

Decision

MSI argues that the district court incorrectly placed upon

it the burden of proof in its challenge to the decision of the

TTAB. A party to a cancellation proceeding who is dissatisfied with a decision of the TTAB has two options: First, the

party may appeal to the United States Court of Appeals for

the Federal Circuit. 15 U.S.C. s 1071(a)(1). Second, the

party may "have remedy by a civil action" in district court.

Id. s 1071(b)(1). With respect to these two options, a leading

treatise states:

Congress gave such alternate remedies of review because

each possessed its own unique advantages. If appeal is

made to the Federal Circuit, the case proceeds on a

closed record and no new evidence is permitted. But if

review is sought in a federal [district] court, review is a

form of "de novo" scrutiny and new evidence is permitted.

3 J. Thomas McCarthy, McCarthy on Trademarks & Unfair

Competition s 21:20, at 21-24 (4th ed. 1997); see also 15

U.S.C. s 1071(b)(3) (in district court the record before the

TTAB "shall be admitted on motion of any party ... without

prejudice to the right of any party to take further

testimony"). Although courts sometimes refer to the district

court's review of the TTAB's decision as a "de novo" proceeding, see, e.g., Spraying Sys. Co. v. Delavan, Inc., 975 F.2d

387, 391 (7th Cir. 1992); Wilson Jones Co. v. Gilbert &

Bennett Mfg. Co., 332 F.2d 216, 218 (2d Cir. 1964), that is

something of a misnomer:

While district court review is called "de novo" because

new evidence may be introduced, it is a unique procedure

because unlike a true de novo proceeding, findings of fact

made by the [TTAB] are given great weight and not

upset unless new evidence is introduced which carries

thorough conviction.

3 McCarthy, supra, s 21:21, at 21-26; see Esso Standard Oil

Co. v. Sun Oil Co., 229 F.2d 37, 40 (D.C. Cir. 1956) (adopting

standard of review for decisions of Patent Office set forth in

Morgan v. Daniels, 153 U.S. 120, 125 (1894), i.e., finding of

fact made by TTAB "must be accepted as controlling, unless

the contrary is established by evidence 'which, in character

and amount carries thorough conviction' "); accord, Spraying

Sys., 975 F.2d at 391; Coach House Restaurant, Inc. v. Coach

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& Six Restaurants, Inc., 934 F.2d 1551, 1557 (11th Cir. 1991);

Wells Fargo & Co. v. Stagecoach Properties, Inc., 685 F.2d

302, 306 (9th Cir. 1982); Aloe Creme Laboratories, Inc. v.

Texas Pharmacal Co., 335 F.2d 72, 74 (5th Cir. 1964); Wilson

Jones Co., 332 F.2d at 218; Century Distilling Co. v. Continental Distilling Co., 106 F.2d 486, 489 (3d Cir. 1939); see

also 3 McCarthy, supra, s 21:22, at 21-27 ("vast majority of

courts" apply the thorough conviction standard); 1 Jerome

Gilson & Jeffrey M. Samuels, Trademark Protection & Practice s 3.05[4](b)(ii), at 3-200 (1997) (same).

In this case, however, the TTAB did not resolve any

disputed issue of fact. Rather, it entered summary judgment

in favor of Sunmatch because MSI failed to raise a material

issue of fact by submitting an affidavit based upon the

affiant's personal knowledge. As the Seventh Circuit pointed

out in Spraying Systems Co. v. Delavan, Inc., 975 F.2d at

391, "the thorough conviction standard cannot apply to the

TTAB's grant of summary judgment." When the TTAB

grants summary judgment it does not make findings of fact;

rather, it applies Federal Rule of Evidence 56 and concludes

as a matter of law that there are no material issues of fact in

dispute. See id. at 391-92; see also Sunmatch Indus. Co. v.

Material Supply Int'l, Inc., Cancellation No. 20,482, at 4-5

(T.T.A.B. 1994) (applying Rule 56 in this case); cf. 37 C.F.R.

s 2.116(a) ("Except as otherwise provided, and wherever

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applicable and appropriate, procedure and practice in inter

partes proceedings shall be governed by the Federal Rules of

Civil Procedure"). Moreover, courts apply the thorough conviction standard to the TTAB's findings of fact largely in

deference to the TTAB's expertise in handling trademark

cases. There is no reason, however, for the district court to

defer to the TTAB when that body grants summary judgment; the district court is just as able as the TTAB to

determine an issue of law. We conclude that because the

TTAB granted summary judgment to Sunmatch on the issue

of who owned the SUNTECH trademark, the district court

upon remand should review the decision of the TTAB based

upon a true de novo standard, as it would any question of law.

As the petitioner seeking cancellation before the TTAB,

Sunmatch had the burden of proving by a preponderance of

the evidence that it owned the SUNTECH mark. See, e.g.,

Cerveceria Centroamericana, S.A. v. Cerveceria India, Inc.,

892 F.2d 1021, 1023 (Fed. Cir. 1989); Massey Junior College,

Inc. v. Fashion Inst. of Tech., 492 F.2d 1399, 1402-04

(C.C.P.A. 1974); see also 3 McCarthy, supra, s 20:64, at 20-

106 (petitioner to cancel must rebut presumption of validity

by preponderance of evidence). Because the TTAB decided

against MSI and MSI sought review of that decision in

district court, we think MSI had the burden of going forward,

that is, of submitting to the court evidence or argument to

counter the decision of the TTAB. Nevertheless, because

Sunmatch had the burden of proof before the TTAB and

because the district court must review the TTAB's decision de

novo, Sunmatch must bear the burden of persuasion in district court.

C. Motions to Amend

MSI argues that the district court abused its discretion by

(1) a few weeks before trial granting Sunmatch's motion to

amend its answer to include a statute-of-limitations defense to

MSI's claim for breach of contract; and (2) at the close of

evidence denying MSI's motion to amend its answer to include a defense of assignment. We need not reach the

second issue, however, because upon remand MSI will have

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another opportunity to seek leave to amend its answer prior

to the retrial of Sunmatch's claims against MSI. See Harris

v. Secretary, U.S. Dep't of Veterans Affairs, 126 F.3d 339, 345

(D.C. Cir. 1997) (stating that upon remand Department may

petition to amend); 6 Charles A. Wright, et al., Federal

Practice & Procedure s 1488, at 655-57 (2d ed. 1990).

Federal Rule of Civil Procedure 15(a) provides that leave to

amend a pleading "shall be freely given when justice so

requires." See Foman v. Davis, 371 U.S. 178, 182 (1962)

(absent "any apparent or declared reason--such as undue

delay, bad faith or ... undue prejudice to the opposing party"

leave should be freely given). We review for an abuse of

discretion the district court's decision to grant or deny a

motion to amend. See, e.g., Atchinson v. District of Columbia, 73 F.3d 418, 426 (D.C. Cir. 1996).

We do not see how MSI can maintain that the district court

abused its discretion in permitting Sunmatch to amend its

answer to add the statute-of-limitations defense. MSI conclusorily claims it was prejudiced by the delay, but it does not

say how and no prejudice is apparent. MSI had plenty of

notice: the court granted Sunmatch's motion on January 19

and the trial did not begin until February 5; moreover,

Sunmatch had mentioned the statute-of-limitations defense

the previous November in a filed memorandum regarding

choice of law. Although MSI points out that discovery was

closed it does not identify any discovery it required in order

to meet the statute-of-limitations defense.

MSI also argues that Sunmatch waived its statute-oflimitations defense by failing to raise the defense in its

original answer. This argument confuses "waiver" and "forfeiture."

A Rule 15 amendment, if allowed by the trial court, will

cure any problem of timeliness associated with forfeiture

[of a statute-of-limitations defense]. However, if a party

"waives," i.e., intentionally relinquishes or abandons an

affirmative defense, no cure is available under Rule 15.

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Harris, 126 F.3d at 343 n.2. There is no indication that

Sunmatch ever intentionally relinquished the defense; therefore its request for an amendment cured its failure to include

the defense in its original answer. We conclude that the

court properly granted Sunmatch's motion.

D.Jury Instruction Regarding Statute of Limitations

MSI next argues that the district court incorrectly instructed the jury regarding when the statute of limitations began to

run on its breach of contract claim. In its initial charge to

the jury the district court stated:

For purposes of the parties' breach of contract ...

claims, you must rule against either party if you find that

it waited more than three years after any breach of

contract ... before it raised the claim.

During deliberations the jury sent the court a note that

stated in part:

At what point in time does the clock start ticking for the

statute of limitations on the breach of contract? I.e. a)

At the time the breach occurred? b) At the time a party

became aware of the breach? c) At the time damages

were incurred?

The court answered that the statute of limitations begins to

run at the time a party discovers the breach.

District of Columbia law governs the issue of the proper

statute of limitations in this case. See A.I. Trade Fin., Inc. v.

Petra Int'l Banking Corp., 62 F.3d 1454, 1458 (D.C. Cir. 1995)

(in diversity case federal court looks to forum state's choiceof-law rules; D.C. treats statute of limitations as procedural

and applies its own rule); cf. Sun Oil Co. v. Wortman, 486

U.S. 717, 726 (1988) (Supreme Court has "reject[ed] the

notion that there is an equivalence between what is substantive under the Erie doctrine and what is substantive for

purposes of conflict of laws"). The general rule in the

District is that a claim for breach of contract accrues "when

the contract is first breached." Capitol Place I Assoc. L.P. v.

George Hyman Constr. Co., 673 A.2d 194, 198 (D.C. 1996).

MSI asserts that the district court should have instructed

the jury that "the statute of limitations begins to run from

[the] date of the breach, or [the] date of the termination of

the contract, whichever is later." For this proposition it

provides a case citation ungarnished by any reasoning. See

Computer Data Sys., Inc. v. Kleinberg, 759 F. Supp. 10

(D.D.C. 1990). The District of Columbia Court of Appeals

does recognize that there may be situations in which the

breach occurs only upon the completion of the contract. For

example, where the claim is based upon the breach of an

implied warranty that equipment the defendant installed

would operate properly, the breach does not occur until the

installation (and hence performance of the contract) was

completed and the equipment did not, in fact, work. See

Sears, Roebuck & Co. v. Goudie, 290 A.2d 826, 830 & n.2

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(D.C. 1972). Applying such a rule, however, requires an

analysis of the facts of the particular case in order to determine whether the breach occurred at the time of completion

of the contract or at some other time. MSI suggests no

reason, however, why it is entitled to an instruction that

Sunmatch's breach occurred at termination of the Agreement

and we do not see any analogy here to the cases involving the

breach of an implied warranty. Therefore, we adhere to the

general rule that the cause of action accrues and the statute

of limitations begins to run when the defendant breaches the

contract.

Whether the district court erred by instructing the jury

that the cause of action accrued at the time of discovery

rather than at the time of breach, we need not decide because

any error was certainly harmless. See Fed. R. Civ. P. 61.

Running the statute of limitations from discovery could not

have given MSI less time to file because obviously a party can

discover a breach only when it occurs or later. Not surprisingly, therefore, MSI does not identify any prejudice it suffered from the instruction--other than to say that it must

have been prejudiced because the jury rejected its claim,

which is circular.

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E. MSI's Motion to Compel

MSI asserts that the district court abused its discretion by

denying as untimely MSI's motion to compel Sunmatch to

produce evidence regarding Sunmatch's private label sales.

MSI contends that if it had had this information for trial it

could have proven additional damages arising from Sunmatch's breach of fiduciary duty.

The scheduling order governing pretrial procedures provided that discovery had to be completed by April 1, 1995,

dispositive motions were due by May 1, and "[a]ll other

motions" were due by September 11. MSI filed its motion to

compel on September 11 and the court held it untimely

because that was after the close of discovery. We think the

court was well within its discretion to interpret its order as

requiring a motion to compel discovery to be made within the

discovery period.

F. Breach of Fiduciary Duty

Sunmatch argues that the district court erred in denying

its motion for judgment as a matter of law, or in the alternative for a new trial, on MSI's claim for breach of fiduciary

duty. Our review is de novo; we ask "whether the evidence

was sufficient for a reasonable jury to have reached the

verdict." Kirkland v. District of Columbia, 70 F.3d 629, 635

(D.C. Cir. 1995).

Sunmatch mounts four attacks upon the decision of the

district court not to grant the motion. Sunmatch's first

argument is that under the relevant law (namely, that of

Oregon) a manufacturer does not have a fiduciary duty to its

dealer(s) unless they had a "special relationship," and it

claims that MSI did not present sufficient evidence of such a

"special relationship." MSI's response is that Sunmatch is

bound by the jury instruction the parties jointly submitted to

the district court, which did not mention the need for a

special relationship. In its reply brief, Sunmatch makes no

attempt to respond to MSI's point. In these circumstances,

although we may doubt that there is a special relationship

and therefore a fiduciary duty here, we can hardly conclude

that Sunmatch has carried its burden of demonstrating that

the judgment of the district court is in error, and hence we

proceed upon the assumption that Sunmatch owed a fiduciary

duty to MSI.

Sunmatch's other arguments are all closely related: Sunmatch argues that as a principal it had the right to compete

with its agent MSI by selling private label tools unless the

Agreement expressly stated otherwise; that assuming it had

a duty not to interfere with MSI's sales of SUNTECH tools

the evidence fails to support the conclusion that it breached

that duty; and that the jury's verdict that Sunmatch breached a fiduciary duty it owed to MSI is inconsistent with its

verdict that Sunmatch did not breach the Agreement because

both claims were based upon Sunmatch's sales of private label

tools.

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Sunmatch's reasoning misses the point of MSI's claim for

breach of fiduciary duty. According to MSI's theory, even if

under the Agreement Sunmatch could legitimately sell private label tools in North America and Hawaii, the Agreement

clearly gave MSI the exclusive right "to represent and sell

[SUNTECH tools]" for a specific period of time in that

territory, and Sunmatch interfered with that exclusive right

by using the SUNTECH mark to solicit private label sales,

thereby diverting to it sales that would have gone to MSI. In

other words, although Sunmatch might have had the right to

compete with MSI by selling private label tools, the Agreement is express that Sunmatch did not have the right to

exploit the SUNTECH mark in North America in order to

make those sales.

Moreover, contrary to Sunmatch's argument, there is sufficient evidence to support MSI's theory: Sunmatch used the

SUNTECH name in advertisements, catalogues, business

cards, and sample tools which it circulated in the United

States in order to solicit sales of private label tools. Although

there is, as Sunmatch points out, countervailing evidence,

there is sufficient evidence in the record for a reasonable jury

to conclude that Sunmatch used the SUNTECH mark to

attract customers in North America to whom it would sell

private label tools.

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Finally, the jury's verdicts with respect to breach of contract and breach of fiduciary duty were not inconsistent

because, assuming Sunmatch had a right to sell private label

tools, the jury could find that Sunmatch breached its putative

fiduciary duty by using the SUNTECH logo to divert to itself

private label sales that should have gone to MSI. Accordingly, we hold that Sunmatch was not entitled to judgment as a

matter of law, or in the alternative, to a new trial.

G. Sunmatch's Challenge to the Award of Damages

The jury awarded MSI $50,000 in compensatory damages

and $100,000 in punitive damages for Sunmatch's breach of

fiduciary duty. Sunmatch argues that the district court

should have granted it judgment as a matter of law with

respect to the award of damages. In the alternative, Sunmatch contends that the district court abused its discretion in

failing to grant remittitur of the damages.

1. Judgment as a matter of law

As noted above, we review de novo an order denying

judgment as a matter of law; thus, we ask here whether

there was sufficient evidence for a reasonable jury to have

awarded compensatory or punitive damages. With respect to

the latter, Sunmatch argues that no reasonable jury could

conclude that Sunmatch's actions were wanton, malicious, or

criminally indifferent because it reasonably believed that

under the Agreement it could make private label sales. As

we have seen, however, under MSI's theory of breach of

fiduciary duty it does not matter whether the Agreement

allowed Sunmatch to sell private label tools. The Agreement

gave MSI the exclusive right "to represent and sell

[SUNTECH tools]" in North America and Hawaii. A reasonable jury could have concluded based upon the evidence

presented at trial that MSI maliciously used the SUNTECH

trademark in that territory--which it must have known it had

no right to do--specifically in order to divert sales from MSI

to itself. Accordingly, Sunmatch was not entitled as a matter

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of law to a judgment vacating the jury's award of punitive

damages.

With respect to the compensatory damages, Sunmatch

argues that the $50,000 award must derive from MSI's claim

that it spent $46,000 to replace eight sales representatives,

that most of that sum went to pay salaried MSI employees to

find replacement representatives, and that MSI would have

incurred this expense in any event. There is no reason,

however, to tie the $50,000 figure to MSI's claim for time

spent replacing sales representatives just because the

amounts are similar. MSI claimed and put on evidence of

other damages as well--for interest charges incurred to carry

excess inventory, and for lost profits and goodwill. Because a

reasonable jury surely could have awarded MSI $50,000 in

compensatory damages we reject Sunmatch's argument for

judgment as a matter of law.

2. Remittitur

In the alternative, Sunmatch argues that the district court

abused its discretion in declining to remit the jury's award of

compensatory and punitive damages. See, e.g., Hooks v.

Washington Sheraton Corp., 578 F.2d 313, 316 (D.C. Cir.

1977). Sunmatch's claim for remittitur of the compensatory

damages appears to be the same as its claim for judgment as

a matter of law, which we have already rejected. Sunmatch

argues that the punitive damages should be reduced because

they are "excessive." On the contrary, precedent establishes

that the punitive damages are not excessive in relation to the

harm to MSI. See Pacific Mut. Life Ins. Co. v. Haslip, 499

U.S. 1, 23-24 (1991) (upholding award of punitive damages

which were four times the amount of compensatory damages);

cf. BMW of N. Am., Inc. v. Gore, 517 U.S. 559, 582, 585-86

(1996) (finding punitive damages of 500 times amount of

actual harm to be constitutionally excessive). Therefore, we

will not set aside or reduce the award.

III. Conclusion

We hold as follows: (1) The district court violated MSI's

Seventh Amendment right to a jury trial when it decided on

the merits MSI's challenge to the TTAB decision before

submitting the remainder of the case to the jury. (2) Upon

remand the district court must review de novo the TTAB's

grant of summary judgment to Sunmatch, which bears the

burden of persuasion with respect to the issue of ownership of

the SUNTECH mark. (3) The district court did not abuse its

discretion when it granted Sunmatch's motion to amend its

answer in order to assert a statute-of-limitations defense to

MSI's claim for breach of contract. (4) Any error the district

court may have made in instructing the jury about the statute

of limitations for breach of contract was harmless. (5) The

district court did not abuse its discretion in denying MSI's

motion to compel discovery. (6) Sunmatch is not entitled to

judgment as a matter of law or to a new trial on MSI's claim

for breach of fiduciary duty. (7) Sunmatch is not entitled to

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judgment as a matter of law or to remittitur of the jury's

award of compensatory and punitive damages. The judgment

of the district court is affirmed with respect to MSI's claims

for breach of contract, breach of fiduciary duty, fraud upon

the TTAB, and fraud upon MSI.

Because of the Seventh Amendment violation, the following

claims are remanded for a new trial: MSI's challenge to the

decision of the TTAB, its claims for trademark infringement

and unfair competition under the Lanham Act, and its claim

for unfair competition under state law; Sunmatch's claims for

trademark infringement and unfair competition under the

Lanham Act, fraud upon the PTO, unfair competition under

state law, and breach of contract.

The case is remanded to the district court for further

proceedings consistent with this opinion.

So ordered.

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