United States Court of Appeals FOR THE EIGHTH CIRCUIT

_________________________ Nos. 97-1018MN, 97-1019MN

_________________________

_____________ * * No. 97-1018MN *

_____________ * * Minnesota Mining & Manufacturing * Company, * On Appeal from the United * States District Court Appellant, * for the District of * Minnesota. v. * * Rauh Rubber, Inc.; Gaia Enterprises, * Inc.; James T. Rauh; and * James Thomas, * * Appellees. *

_____________ * * No. 97-1019MN *

_____________ * * Minnesota Mining and Manufacturing * Company, * On Appeal from the United * States District Court Appellee, * for the District of * Minnesota. v. * * Rauh Rubber, Inc.; Gaia Enterprises, * Inc.; and James T. Rauh, * * Appellants. *The Hon. John R. Tunheim, United States District Judge for the District o f 1 Minnesota. -2- ___________ Submitted: October 20, 1997 Filed: December 11, 1997

___________ Before RICHARD S. ARNOLD, Chief Judge, LOKEN and HANSEN, Circuit Judges.

___________ RICHARD S. ARNOLD, Chief Judge. In this case, Minnesota M ining & Manufacturing Company (“3M”) appeals the Di strict Court’s order granting only in part 3M’s motion for a preliminary injunction. This litigation involves claims by 3M against Rauh Rubber, Inc., GAIA Enterprises , Inc., James T . Rauh, and James Thomas (the “Rauh defendants”), alleging trademark infringement in violation of the Lanham Trademark A ct of 1946, 15 U.S.C. §§ 1114(1) and 1125( a) (1994); trademark dilution in violation of the Lanham Act, 15 U.S.C

. § 1125(c); common-law breach of express and implied contract; and deceptive trade pr actices in violation of § 43(a) of the Lanham Act, 15 U.S.C. § 1125(a)(1), and th e Minnesota Deceptive Trade P ractices Act, Minn. Stat. §§ 325D.43 - 325D.58 (1997). Rauh Rubber and GAIA Enterprises cross-appeal, arguing that the district judge erred 1 in denying their motion to increase the amount of the bond 3M was required to deposit wit h the District Court. We now affirm the District Court’s holding as to both th e appeal and the cross-appeal.

I.-3-

3M is a Delaware corporation based in St. Paul, Minnesota, which manufactures in dustrial, commercial, residential, and office products. Part of 3M’s busines s involvesthemanufacture of reflective material, which is done primarily at a facility in B rownwood, Texas. The reflective material is manufactured in large rolls and then is subject edto an extensive quality-control process. Surplus or inadequate reflectiv e material is e ither sold or discarded in a landfill. Beginning in September 1993, 3 M began selling this surplus or inadequate material to Rauh Rubber, Inc., a family-owned Ohio co rporation which buys scrap material to resell or recycle it. James Rauh is a n of ficer and 40% shareholder in Rauh Rubber. Rauh and his family own and operat e both R auh Rubber and GAIA Enterprises, Inc., which also buys and then resells o r recycles scrap products, and which also bought reflective materials from 3M.
After purchasing these materials from 3M, Rauh Rubber and GAIA began to sell th em to 3M’s customers at lower prices than 3M was offering for its own reflectiv e mat erial. In September 1994, when 3M learned that Rauh Rubber and GAIA wer e selling t hese materials, 3M began negotiating the repurchase of the materials. Th e negot iations continued through 1995, and were not successful. 3M filed a complain t with the District Court on March 3, 1996, alleging trademark infringement, trademark di lution, breach of contract, and unfair trade practices on the part of the Rau h defendants.

OnMarch 8, 1996, after a hearing, the District Court granted 3M’s motion fo r a temporary restraining order, which prevented the Rauh defendants from selling o r disposing of any reflective materials they had purchased from 3M. The Court als o required 3M to post a $100,000 bond. The Dis trict Court conducted an extensive fourday heari ng in May 1996 to consider a motion by 3M for a preliminary injunction and motions by the Rauh defendants to dismiss the complaint for lack of persona l jurisdiction and improper venue. At this hearing, both sides presented evidence of the quality of the reflective materials 3M sold to the Rauh defendants and evidence o f confusion of the Rauh defendants’ customers as to the quality of the materials thatT he District Court granted the Rauh defendants’ motion to dismiss th e 2 complaint against Joseph Rauh, an officer an d shareholder in Rauh Rubber and GAIA, for lack of personal jurisdict ion. The Court denied the motions to dismiss as to James Rauh, R auh Rubber, and GAIA. Neither party raises these issues on appeal, so w e need not consider them. 3M does not contest on appeal thelimited holding that it is not likely to prevail 3 on the merits of its claim

that an express or implied contract not to resell the materials existed between it and the Rauh defendants. 3M is free to pursue its breach-of-contract claim in a trial on the merits. -4- Rauh Rubber and GAIA had bought from 3M. On October 17, 1996, the District Court issued an opinion denying most of the Rauh defen dants’ motion to dismiss and granting in part 3M’s motion for a preliminary injunction. 2

In its October 17 order, the District Court held that 3M is unlikely to prevail in a trial on the merits on it s claim that an express or an implied contract existed between 3M and the Rauh defendants obl igating the Rauh defendants not to resell the reflective material bought from 3M, but instead to grind it up for use in rubber products. Th e 3 Dist rict Court also held that 3M is likely to succeed on its trademark-infringemen t claims, because it de monstrated that some of the reflective material it sold to the Rauh defendants was not “genuine,” and that there was some likelihood of confusion by the Rauh defendants’ customers as to the quality of the reflective materials. Next, the Court held that 3M is not likely to prevail in its trademark-dilution claim. Finally, the Court held that 3M is likely to prevail in its state and federal unfair-trade-practices claim s against the Rauh de fendants. The Court went on to consider any irreparable harm 3M might have faced i f the District Court did not issue an injunction, to balance the harms each party mig ht face, and to consider the public interest in issuing an injunction. See Minnesota Minin g & Manufacturing Co. v. Rauh Rubber, Inc. , 943 F. Supp. 1117 (D. Minn. 1996).-5-

Taking these factors into account, the Distric t Court granted in part 3M’s motion for a preliminary injunction. In an order dated November 15, 1996, the Court required the Ra uh defendants to include the following written disclosure statement on an y documents accompanying an offer to sell or deliver the reflective materials they bought from 3M:

Please take notice that this product may not be first-quality goods. This product was purchased by Seller from 3M as rejected, excess and/o r scrapped mater

ial. Seller is not an authorized 3M dealer and 3M has not authorized the sale of this product. You shoul d do your own inspection or testing to determine whether this product i s suitable for your intended use. 3M does not extend any express or implied guarantees, representations, or warranties with respect to this product.
In this order, the Court also denied an earlier motion by the Ra uh defendants to increase the bond 3M was required to submit to the Court. This cas e is now before us on appeal of 3M, whic h argues that this injunction was insufficient, and that the District Court should have enjoined the Rauh defendants from selling any reflective materials the y bou ght from 3M. The Rauh defendants cross-appeal, arguing that the District Court should have increased the amount of 3M’s bond.

Inaffirming the District Court’s order, we emphasize the preliminary nature of
ourh olding. This opinion reflects our view that the District Court’s injunctio n adequately preserves the status quo while protecting the interests of all parties and the public at this stage of the litigation. Any conclusions of law we announce today ar e tent ative, and 3M is not prohibited from pursuing claims raised in its complaint with respect to the Rauh defendants’ pre-suit conduct in a trial on the merits.-6- II.

A.
A district court considering a motion for a prelimi nary injunction should consider the likelihood t

hat the moving party will prevail on the merits, the threat of irreparable harmto the moving party, the balance between the harm to the moving party and th e harm the injunction will ca use to other parties, and the public interest. Goff v. Harper , 60 F.3d 518 , 520 (8th Cir. 1995). The District Court considered these factors i n deciding whether to issue an injun ction, including the likelihood that 3M would prevail on the merits on its trademark-infringement claim.

In order to prevail on a trademark-infringement claim, a plaintiff must prove a likelihood of consumer confusion, which is the “hallmark of any t rademark infringement claim.” Polymer Technology Corp. v. Mimran , 37 F.3d 74, 80 (2 d Cir. 1994). See also Shell Oil Co. v. Commercial Petroleum, In c. , 928 F.2d 104, 107-08 (4th Cir. 1991). In determining whether a likelihood of confusion exists, a court should take the following factors into consideration:
1) the strength of the owner’s mark; 2) the similarity between the owner’s mark and the alleged infringer’s mark; 3) the degree to which the products compete w ith each other; 4) the alleged infringer’s intent to pass off it s goods as tho se of the trademark owner . . .; 5) incidents of actua l confusion; and 6) wh ether the degree of purchaser care can eliminate any likelihood of confusion which would otherwise exist.

Life Techn ologies, Inc. v. Gibbco Scientific, Inc. , 826 F.2d 775, 776 (8th Cir. 1987 ) (citing SquirtCo v. Seven-Up Co. , 628 F.2d 1086, 1091 (8th Cir. 1980)). This Court reviews a district court’s finding of a likelihood of confusion under th e clearly erroneous standard of review. Id. at 776.-7-

We can not say that the District Court erred in holding that requiring the Rau h defendants to include disclosure language in sales documents would suffic iently remedy, for the period before trial on the merits, any likelihood of confusion. The issue in this
case is th e likelihood that the Rauh defendants’ customers will be confused as to th e quality of the reflective materials . Because sales contracts will feature prominently the court-ordereddisclosure statement, there is little likelihood that a consumer woul d confuse scrap reflective materials sold by the Rauh defendants with high-quality ref lective materials sold by 3M. It is true that the strength of 3M’s trademark i s unco ntested, that 3M’s mark is the same as the mark on the scrap sold by the Rau h def endants, and that 3M and the Rauh defendants may continue to compete with on e another for buyers. H owever, the other three factors to be considered militate in favor of the District Court’s injunction. The District Court found no evidence to suggest the Rauh def endants attempted to represent themselves as authentic 3M dealers. Th e evidence presented at t

he hearing revealed that even before the District Court required the disclos ure statement to be placed in sales documents, very few actual customer s believed they were buying quality 3M materia l from the Rauh defendants. A purchaser exercising a minimal degree of care will r ealize that he may potentially be buying scrap if he reads the warning on the sales documents. See Prestonettes, Inc. v. Coty , 264 U.S. 359, 36 8 (1924) (“When the [trademark] is used in a way that does not deceive th e public we see no such s anctity in the word as to prevent its being used to tell the truth. It is not taboo.”) (Holmes, J.).

3M a rgues that the District Court’s injunction would be effective only i f disc losure language were included on every piece of scrap material sold by the Rau h defendant s. However, given the weak evidence of actual confusion by the Rau h de fendants’ customers before the District Court issued the injunction, we cannot hold that t he Court erred in requiring the language to appear only in sales contracts an d documents. Therefore, we affirm the District Court’s holding that an injunctio n requiring the Rauh defendants to disclose the quality of the scrap reflective material in sales contracts is sufficient to avoid a likelihood of c onsumer confusion. Because proof-8-

of consumer confusion is a necessary element of a trademark-infringement claim, and becau se we hold, on the basis of the record now before us, that the District Court’ s injunction remedies the likelihood of future consumer confusion, we need not now reach the other trademark-infringement issues in this case.

B.

We als o uphold the District Court’s finding that 3M failed to demonstrate a likelihood of success on the merits of a trademark-dilution claim under the Lanham Act, 15 U.S.C. § 1125(c), and that an injunction absolutely prohibiting the re-sale of 3M’s reflective material was therefore inappropriate. As the District Court noted, 3M wa s able to prod uce little evidence that the Rauh defendants’ sale of scrap materials i t bought from 3M tarnished, degraded, or diluted 3M’s own mark.

C.

Fin ally, we agree that the injunction issued by the District Court will preven t possible violations by the Rauh defendants of deceptive trade practices prohibited by the La nham Act, 15 U.S.C. § 1125(a), and the Minnesota Deceptive Trade Practice s Act, Minn. Stat. § 325D.44. Both of these statutes prohibit false or misleadin g represent ations or representations which have a tendency to deceive. The injunctio n ordered by the District Court prevents misrepresentations as to the quality of th e reflective material sold by the Rauh defendants, because it warns customers that th e material they a

re buying may be scrap and may not be of the highest quality. Because this injunction remedies the problems add ressed by these two deceptive trade-practices statutes, we affirm the District Court’s order.-9- III.

As tothe Rauh defendants’ cross-appeal, we uphold the District Court’s denial of the motion to increase the amount of 3M’s $100,000 bond. We find no abuse o f discretion on the part of the District Court, given the fact that even if the Rau h defendants h ave been or will be damaged by the injunction against them, they are free to pursue 3M, a s olvent corporation, for the full extent of the damages. The $100,000 bondis a security device, not a limit on the damages the Rauh defendants may obtain against 3M if the facts warrant such an award.

IV.
For the reasons discussed above, the order of the District Court is affirmed.
A true copy.

Attest:
CLERK, U.S. COURT OF APPEALS, EIGHTH CIRCUIT.