Court Opinion

ID: 1003559
Source: CourtListenerOpinion
Date Created: 2013-07-04 18:28:13.162783+00
Date Added: 2024-06-11T15:26:17.377353
License: Public Domain

UNPUBLISHED

UNITED STATES COURT OF APPEALS
               FOR THE FOURTH CIRCUIT

KARL STORZ ENDOSCOPY-AMERICA,         
INCORPORATED,
               Plaintiff-Appellant,
                v.                              No. 00-1032

FIBER TECH MEDICAL, INCORPORATED,
               Defendant-Appellee.
                                      
           Appeal from the United States District Court
            for the District of Maryland, at Baltimore.
              William N. Nickerson, District Judge.
                        (CA-98-869-WMN)

                     Argued: October 31, 2000

                     Decided: February 5, 2001

     Before WILLIAMS and MICHAEL, Circuit Judges, and
  Joseph F. ANDERSON, Jr., Chief United States District Judge
     for the District of South Carolina, sitting by designation.

Affirmed by unpublished per curiam opinion.

                            COUNSEL

ARGUED: Mark Richard Kravitz, WIGGIN & DANA, New Haven,
Connecticut, for Appellant. David Henry Bamberger, PIPER, MAR-
BURY, RUDNICK & WOLFE, L.L.P., Washington, D.C., for Appel-
lee. ON BRIEF: Susan H. Pope, PIPER, MARBURY, RUDNICK &
WOLFE, L.L.P., Washington, D.C., for Appellee.
2        KARL STORZ ENDOSCOPY-AM. v. FIBER TECH MEDICAL
Unpublished opinions are not binding precedent in this circuit. See
Local Rule 36(c).

                             OPINION

PER CURIAM:

                                  I.

   This appeal arises from an action for trademark infringement and
false designation of origin under sections 32(1)(a) and 43(a) of the
Lanham Trade-Mark Act, 15 U.S.C. §§ 1114(1)(a) and 1125(a).
Appellant Karl Storz Endoscopy-America ("KSEA") is the exclusive
United States distributor for Karl Storz rigid endoscopes. Appellee
Fiber Tech Medical, Inc. ("Fiber Tech"), a subsidiary of GE Medical
Systems, Inc., repairs and rebuilds damaged rigid endoscopes, includ-
ing endoscopes of Karl Storz origin, for their owners.

   KSEA sought to enjoin Fiber Tech from providing these repair ser-
vices within the United States based on its concern that the repaired
or rebuilt Karl Storz rigid endoscopes may be mistaken by surgeon
users for genuine Karl Storz products and thus might injure, trade
upon, or appropriate the reputation and goodwill of KSEA and the
Karl Storz brand. The district court granted Fiber Tech’s motion for
summary judgment, finding that the activities at issue did not consti-
tute "use in commerce" and were, therefore, not actionable under the
Lanham Act. We now affirm that opinion.

   Rigid endoscopes typically are owned by hospitals. It is the hospi-
tals that ordinarily send damaged rigid endoscopes directly to Fiber
Tech for repair. The surgeons are, however, the end-users of these
instruments. It is, therefore, the surgeons who generally make judg-
ments as to the quality and performance characteristics of the endo-
scopes, and who greatly influence, if not dictate, purchasing decisions
for these instruments.

  Fiber Tech provides the hospitals with complete disclosure of the
extent of the repairs made. This disclosure is included on paperwork
         KARL STORZ ENDOSCOPY-AM. v. FIBER TECH MEDICAL                3
returned to the hospital, in duplicate. The documentation contains a
written request that the end-user be provided with a copy of the docu-
mentation of the repair. For present purposes, it is presumed that the
actual end-users, the surgeons, do not receive the paperwork. KSEA
has also presented evidence that surgeons have, in fact, been confused
as to whether they were using an original or rebuilt endoscope.

   Accepting the facts stated above as true, the district court granted
Fiber Tech’s motion for summary judgment based on its conclusion
that there was no "use in commerce" as required under the relevant
sections of the Lanham Act. The district court held, in critical part,
that the Lanham Act requires a "sale to a third party," and Fiber
Tech’s activities did not, as a matter of law, constitute a sale. Rather,
Fiber Tech’s activities constituted repair or reconditioning, which is
outside the purview of the Act. The validity of this conclusion of the
district court is the only issue on appeal.

                                   II.

   This court reviews the district court’s grant of summary judgment
de novo. Brown & Williamson Tobacco Corp. v. Food & Drug
Admin., 153 F.3d 155, 160 (4th Cir. 1998). All justifiable factual
inferences are drawn in favor of plaintiff-appellant, KSEA:

    The standard that an appellate court applies in reviewing an
    order which grants summary judgment is the same as that
    which governs the district court’s initial action under Fed.
    R. Civ. P. 56(c). Summary judgment is proper where there
    is no genuine issue as to any material fact and the moving
    party is entitled to judgment as a matter of law. The facts,
    and the inferences to be drawn from the facts, must be
    viewed in the light most favorable to the party opposing the
    motion.

Ballinger v. North Carolina Agric. Extension Serv., 815 F.2d 1001,
1004 (4th Cir. 1987) (citations omitted). Issues of statutory construc-
tion are reviewed de novo. See, e.g., United States v. Linney, 134 F.3d
274, 282 (4th Cir. 1998).
4        KARL STORZ ENDOSCOPY-AM. v. FIBER TECH MEDICAL
   For present purposes, therefore, this court accepts the following as
true: (1) the delicate and highly sensitive use of rigid endoscopes and
the surgeon-users’ reliance on their accuracy and consistency; (2)
KSEA’s extensive investment in building its name and reputation for
reliability and accuracy; (3) the extent of Fiber Tech’s activities in
remanufacturing rigid endoscopes, which, upon completion bear only
KSEA’s trademarks and trade dress and display no indication of the
fact or extent of Fiber Tech’s repair or rebuilding; (4) the inability of
surgeon-users of the rebuilt endoscopes to visibly identify these
instruments as having been modified or rebuilt by Fiber Tech; and (5)
the ease with which Fiber Tech could identify itself, rather than
KSEA, as the repairer-rebuilder of the non-genuine instruments.

                                  III.

   KSEA sought relief below under section 32(1)(a) (15 U.S.C.
§ 1114(1)(a)) and section 43(a) (15 U.S.C. § 1125(a)) of the Lanham
Act. Section 32 provides that:

    Any person who shall, without the consent of the registrant
    —

      (a) use in commerce any reproduction, counterfeit, copy,
    or colorable imitation of a registered mark in connection
    with the sale, offering for sale, distribution, or advertising of
    any goods or services on or in connection with which such
    use is likely to cause confusion, or to cause mistake, or to
    deceive . . .

      shall be liable in a civil action by the registrant for the
    remedies hereinafter provided.

15 U.S.C. § 1114(1)(a).

  Section 43(a) of the Act creates a cause of action against any per-
son who misuses a mark in a manner that is likely to cause confusion,
and extends this protection to unregistered marks as well as registered
marks and to "any false designation or origin":
         KARL STORZ ENDOSCOPY-AM. v. FIBER TECH MEDICAL                5
    Any person who, on or in connection with any goods or ser-
    vices . . . uses in commerce any word, term, symbol or
    device, . . . or any combination thereof, or any false designa-
    tion of origin, . . . which —

    (A) is likely to cause confusion, or to cause mistake, or to
        deceive, as to the affiliation, connection, or associa-
        tion 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).

   In the present case, Fiber Tech has not copied a trademark but has
modified a product bearing an existing, true, trademark. It is undis-
puted that leaving the original marks intact can itself constitute trade-
mark infringement. "The happenstance of having trademarks made by
the owner in one’s possession, so that one doesn’t have to copy them,
has no relevance to the purposes of the statute. Indeed, the danger of
confusion is even greater because the ‘imitation’ is not merely color-
able, but perfect." General Elec. Co. v. Speicher, 877 F.2d 531, 534
(7th Cir. 1989). See also Westinghouse Elec. Corp. v. General Circuit
Breaker & Elec. Supply Inc., 106 F.3d 894, 900 (9th Cir. 1997) ("the
distinction between using a duplication [of a mark] versus using an
original has no relevance to the purposes of trademark law"). The
question, therefore, becomes whether the district court improperly
restricted the meaning of the phrase "use in commerce" to require a
sale when it stated that "repair or reconditioning of a trademarked
item [has never been held to be covered by the Lanham Act] absent
the sale to a third party."

   As an initial matter, this court does not read the district court’s
opinion (as appellant would), to limit "use in commerce" to sales.
Rather, this court reads the district court’s "sale" requirement only to
limit that category of cases where the challenged activity involves
repair or rebuilding of a trademarked product, without advertising or
6        KARL STORZ ENDOSCOPY-AM. v. FIBER TECH MEDICAL
other distribution efforts suggesting authorization or endorsement by
the owner of the mark.

   After careful analysis of the limited authority available on this
issue, this court concludes, as did the district court, that the Lanham
Act does not apply in the narrow category of cases where a trade-
marked product is repaired, rebuilt or modified at the request of the
product’s owner. This ruling presumes that there is no misrepresenta-
tion of the repairer’s authority to the owner and that the owner is not,
to the repairer’s knowledge, merely obtaining modifications or repairs
for purposes of resale. Neither of these circumstances are presented
in this case.

   The cases relied on by KSEA all involve the sale of repaired or
modified items to a third party. In these cases, the courts have found
coverage under the Lanham Act and have issued injunctive relief. For
instance, in Champion Spark Plug Co. v. Sanders, 331 U.S. 125
(1947), the Court required that permanent marks disclosing the fact
and source of reconditioning be added to reconditioned Champion
brand spark plugs which were intended for resale to the public.

   In a more recent series of watch repair and modification cases, the
courts have either required removal of the original trademark or addi-
tion of other identifying marks. Each of these cases involved a sale
directly to the public or to dealers who obtained the modifications for
the purpose of reselling the watches to the public. See Rolex Watch
U.S.A., Inc. v. Michel Co., 179 F.3d 704 (9th Cir. 1999) (prohibiting
sale of watches bearing Rolex trademark by business which recondi-
tioned or modified the watches using non-Rolex parts then sold the
watches to jewelry dealers and retailers); Rolex Watch U.S.A., Inc. v.
Meece, 158 F.3d 816 (5th Cir. 1998) (similar injunction as to modi-
fied new and used Rolex watches); Bulova Watch Co., Inc. v. Allerton
Co., Inc., 328 F.2d 20 (7th Cir. 1964) (company that placed Bulova
watch movements into non-Bulova diamond-decorated cases and
resold the watches through catalog houses was enjoined under the
Lanham Act from retaining the Bulova trademark on the watches).
While it is merely dictum, the court in Michel noted that Rolex had
not sought and the court had not "enjoin[ed] [defendant] from altering
          KARL STORZ ENDOSCOPY-AM. v. FIBER TECH MEDICAL                  7
Rolex watches at the specific request of an individual watch owner."
179 F.2d at 710 n.8.1

   The watch repair line of cases discussed above can be distinguished
from those situations in which the ultimate owner requests modifica-
tion and intends to retain ownership. In this latter category, the courts
have declined to find a Lanham Act violation. See U.S. Surgical
Corp. v. Orris, Inc., 5 F. Supp. 2d 1201 (D. Kan. 1998) (repair con-
sisting of sharpening and sterilizing surgical instruments intended by
their manufacturer for single use only did not fall within the coverage
of the Lanham Act where the reconditioning was requested by the
hospital-owner purchaser), affirmed, 185 F.3d 885 (Fed. Cir. 1999);
Excalibur Auto. Co. v. Elite Autoworks, 733 F. Supp. 65 (E.D. Wis.
1990) (defendant which modified luxury automobiles into stretch lim-
ousines did not violate the Lanham Act because it "does not sell
Excalibur automobiles; rather, it offers a service to owners of Excali-
bur automobiles who wish to stretch their sedans into limousines").
See also Nellcor Puritan Bennett, Inc. v. Medical Taping Systems,
1996 WL 865817 (N.D. Cal. 1996) (declining to issue preliminary
injunction barring modification of trademarked medical device where
modifications were requested by the devices’ hospital-owner). While
the above cases involving owner-requested repairs may not all have
focused on the use-in-commerce requirement, they, nonetheless, dem-
onstrate the reluctance of the courts to extend the Lanham Act’s scope
to owner-requested repairs.2
  1
     The footnote quoted in the text uses the carefully limited phrase "at
the specific request of an individual watch owner." Such wording leaves
open the possibility that the courts might preclude retention of the trade-
mark if the modifications were requested by jewelry store "owners" of
watches obtaining the repairs solely for purposes of further sales. This
distinction is further suggested by the initial statement in Michel that
some of the repairs were requested by dealers on behalf of individual
customers. Whatever the limit of this distinction, however, this court
need not resolve it. The owner here is not a dealer which resells surgical
equipment, but a hospital which maintains the equipment for use in its
facilities.
   2
     In U.S. Surgical Corp. v. Orris, the court expressly addressed the use-
in-commerce requirement and found that because Orris neither resold nor
advertised using U.S. Surgical’s name, the Act was not properly invoked.
8         KARL STORZ ENDOSCOPY-AM. v. FIBER TECH MEDICAL
   This court declines to extend the reach of the Lanham Act to
repairs or modifications made at the request of the owner, at least
absent indications that the owner intends to sell the products to third
parties. This ruling relates solely to the activities of the repairer. The
question of whether the owner’s use of the product in providing ser-
vices to third parties, in this case patients and surgeons, is not before
this court.

                                                             AFFIRMED

In Excalibur, the court blurred the distinction between use-in-commerce
and risk-of-confusion but repeatedly noted that the defendant "does not
buy or sell automobiles, but rather performs customization services for
the owners." (Emphasis added). In Nellcor, as well, the court discussed
the fact that the reconditioning was requested by a sophisticated hospital
user-owner, in the context of discussing risk of confusion.