Court Opinion

ID: 6330970
Source: CourtListenerOpinion
Date Created: 2022-04-13 17:02:14.029162+00
Date Added: 2024-06-11T09:22:55.166591
License: Public Domain

FOR PUBLICATION

  UNITED STATES COURT OF APPEALS
       FOR THE NINTH CIRCUIT

BLUETOOTH SIG INC., a Delaware           No. 21-35561
corporation,
                Plaintiff-Appellee,        D.C. No.
                                        2:18-cv-01493-
                 v.                          RAJ

FCA US LLC, a Delaware limited
liability company,                         OPINION
                Defendant-Appellant.

      Appeal from the United States District Court
        for the Western District of Washington
       Richard A. Jones, District Judge, Presiding

         Argued and Submitted March 10, 2022
                 Seattle, Washington

                  Filed April 6, 2022

   Before: Jacqueline H. Nguyen, Eric D. Miller, and
          Patrick J. Bumatay, Circuit Judges.

                  Per Curiam Opinion
2                 BLUETOOTH SIG V. FCA US

                          SUMMARY *

                           Trademark

    Vacating the district court’s partial summary judgment
in favor of the plaintiff and remanding in an action under the
Lanham Act, the panel held that the first sale doctrine applies
when a trademarked product has been incorporated in a new
product.

    Bluetooth SIG Inc. (“the SIG”), a nonprofit that
administers standards for short-range wireless technology,
owns “Bluetooth” marks. To use any of these marks, a
product manufacturer must join the SIG, execute a licensing
agreement, submit declarations of compliance, and pay fees.
Manufacturers of technological components are subject to
testing requirements, but end product manufacturers may not
need further testing if they incorporate a previously qualified
product. The SIG brought trademark claims against FCA
US LLC, which makes cars that contain Bluetooth-equipped
head units that are manufactured by third-party suppliers and
have been qualified by the SIG. FCA uses the SIG’s marks
on its head units and in product publications.

    Under the first sale doctrine, the right of a producer to
control the distribution of its trademarked product does not
extend beyond the first sale of the product, and trademark
rights are “exhausted” as to a given item upon the first
authorized sale of that item. Thus, a purchaser who does no
more than stock, display, and resell a producer’s product
under the producer’s trademark violates no right conferred
    *
      This summary constitutes no part of the opinion of the court. It
has been prepared by court staff for the convenience of the reader.
                BLUETOOTH SIG v. FCA US                       3

upon the producer by the Lanham Act. The panel held that
the first sale doctrine also applies when a mark is used to
refer to a component incorporated into a new end product,
so long as the seller adequately discloses how the
trademarked product was incorporated. The panel remanded
for the district court to address the fact-intensive issue
whether FCA adequately disclosed its relationship with, and
qualification to use, Bluetooth technology.

                         COUNSEL

Judith A. Powell (argued), Charles H. Hooker III, Kilpatrick
Townsend & Stockton LLP, Atlanta, Georgia; for
Defendant-Appellant.

Peter J. Willsey (argued) and Vincent Badolato, Brown
Rudnick LLP, Washington, D.C.; Jessica T. Lu, Melanie
Dahl Burke, and Stephanie P. Calnan, Brown Rudnick LLP,
Boston, Massachusetts; for Plaintiff-Appellee.

                          OPINION

PER CURIAM:

    This interlocutory appeal concerns the scope of the first
sale doctrine in trademark law. Defendant-appellant FCA
US LLC invoked the first sale doctrine as a defense to
trademark claims asserted against it by plaintiff-appellee
Bluetooth SIG Inc. (“the SIG”). After granting summary
judgment for the SIG on the first sale issue, the district court
certified the following question to us: does the first sale
doctrine apply “when a trademarked product has been
incorporated in a new product?” We answer “yes,” and we
4                 BLUETOOTH SIG V. FCA US

accordingly vacate the district court’s summary judgment
and remand for further proceedings.

                                  I

   The SIG is a nonprofit that administers standards for
short-range wireless technology. The SIG owns the word
mark, “Bluetooth,” the design mark , and the composite
        .1

    To use any of these marks, a product manufacturer must
join the SIG, execute a licensing agreement, submit
declarations of compliance, and pay fees. Manufacturers of
technological components are subject to testing
requirements, but end product manufacturers may not need
further testing if they incorporate a previously qualified
product.

    FCA makes cars under the brands Fiat, Chrysler, Dodge,
Jeep, and Ram. FCA vehicles contain Bluetooth-equipped
head units. Those head units are manufactured by third-
party suppliers and have been qualified by the SIG, but FCA
has not taken the further steps required by the SIG to qualify
the Bluetooth capabilities of its cars. FCA uses the SIG’s
marks on its head units and in product publications.

    The SIG brought trademark claims against FCA, and
FCA asserted numerous defenses, including under the first
sale doctrine. Ruling on cross-motions for summary
judgment, the district court found triable issues on whether

    1
      The word and composite are certification marks, which are “owned
by one person and used by others in connection with their goods and
services to certify quality, regional or other origin.” McCarthy on
Trademarks and Unfair Competition § 19:91 (5th ed. 2022).
                BLUETOOTH SIG v. FCA US                      5

(1) the Bluetooth word mark is generic, (2) there was a
likelihood of confusion under the nominative fair use
doctrine, (3) the SIG had abandoned its marks in the
automotive industry through naked licensing, and (4) laches
applied. The district court granted partial summary
judgment for the SIG on the first sale issue. The district
court reasoned that the first sale doctrine was inapplicable
because FCA’s conduct went beyond “stocking, displaying,
and reselling a producer’s product.”

    After vacating a trial date set in September 2020 due to
the COVID-19 pandemic, the district court certified for
interlocutory appeal whether the first sale doctrine applies
“when a trademarked product has been incorporated into a
new product.” A motions panel of this court granted FCA’s
petition for interlocutory appeal. The district court then
stayed proceedings pending resolution of this appeal. We
have jurisdiction under 28 U.S.C. § 1292(b).

                              II

    Under the first sale doctrine, “with certain well-defined
exceptions, the right of a producer to control the distribution
of its trademarked product does not extend beyond the first
sale of the product.” Sebastian Int’l, Inc. v. Longs Drug
Stores Corp., 53 F.3d 1073, 1074 (9th Cir. 1995) (per
curiam). “Trademark rights are ‘exhausted’ as to a given
item upon the first authorized sale of that item.” McCarthy
on Trademarks and Unfair Competition § 25:41.

    The district court’s narrow view of the first sale doctrine
was based on our statement in Sebastian that “[i]t is the
essence of the ‘first sale’ doctrine that a purchaser who does
no more than stock, display, and resell a producer’s product
under the producer’s trademark violates no right conferred
upon the producer by the Lanham Act.” 53 F.3d at 1076.
6               BLUETOOTH SIG V. FCA US

Sebastian never purported to articulate the outer bounds of
the first sale doctrine. It simply captured that the
unauthorized resale of genuine goods presents an easy case
for protecting a downstream seller. See id. (explaining that
“[w]hen a purchaser resells a trademarked article under the
producer’s trademark, and nothing more, there is no
actionable misrepresentation under the statute.”).

     Binding precedent extends the first sale doctrine beyond
what Sebastian described as the doctrine’s “essence.” The
first sale doctrine in trademark law derives from
Prestonettes, Inc. v. Coty, 264 U.S. 359 (1924). See Au-
Tomotive Gold Inc. v. Volkswagen of Am., Inc., 603 F.3d
1133, 1136 (9th Cir. 2010). Prestonettes itself applied the
first sale doctrine to conduct exceeding the resale of genuine
goods.

    In Prestonettes, the defendant was a cosmetics
manufacturer that purchased genuine powder manufactured
by the plaintiff, and then “subject[ed] it to pressure, add[ed]
a binder to give it coherence and s[old] the compact in a
metal case.” 264 U.S. at 366. The Supreme Court held that
trademark law did not prohibit the defendant from using the
plaintiff’s mark “collaterally, not to indicate the goods, but
to say that the trade-marked product is a constituent in the
article now offered as new and changed.” Id. at 369. So
long as the public was “adequately informed” who modified
the powder, the Court reasoned, the public was “likely to
find it out” if the defendant’s process degraded the quality of
the plaintiff’s powder. Id.

    Following Prestonettes, we applied the first sale doctrine
to a retailer’s repackaging of a manufacturer’s trademarked
goods. In Enesco Corp. v. Price/Costco Inc., we held that
the first sale doctrine protected a retailer that resold
porcelain dolls in allegedly inadequate packaging to the
                   BLUETOOTH SIG v. FCA US                                7

extent the repackaging was disclosed. 146 F.3d 1083, 1086–
87 (9th Cir. 1998). We explained that “[i]f the public were
adequately informed that Price/Costco repackaged the
figurines and the figurines were subsequently chipped, the
public would not likely be confused as to the cause of the
chipping.” Id. at 1087 (citing Prestonettes, 264 U.S. at 369).

     Under Prestonettes and Enesco, the first sale doctrine
applies when a mark is used to refer to a component
incorporated into a new end product. 2 Both Prestonettes and
Enesco focused on a seller’s disclosure of how a
trademarked product was incorporated and explained that
the first sale doctrine places limits on a seller’s liability to
the extent that adequate disclosures are made. See
Prestonettes, 264 U.S. at 368 (explaining that a trademark
“does not confer a right to prohibit the use of the word or
words” and cannot be used “to prevent its being used to tell
the truth”); Enesco, 146 F.3d at 1086–87 (holding that the
first sale doctrine did not apply to the extent the product
manufacturer sought to compel disclosure of how the
product was repackaged but did apply to the extent further
relief was sought); see also Champion Spark Plug Co. v.
Sanders, 331 U.S. 125, 130 (1947) (citing Prestonettes and
explaining that “[f]ull disclosure” of alterations to a

    2
       In addition to precedent, that conclusion is supported by influential
treatises. See McCarthy on Trademarks and Unfair Competition
§ 25:35.50 (“[U]se of an ingredient trademark is proper so long as
consumers are not confused or deceived into thinking that the maker of
the ingredient is responsible for the nature or quality of the finished
product.”); Callmann on Unfair Competition, Trademarks and
Monopolies § 22:51 (4th ed. 2021) (“[T]he seller of the finished product
is allowed to use the supplier’s mark to identify the source of such parts
or materials. . . . But the manufacturer of the new product or
combination may not mislead the public regarding the extent of the new
product composed of that ingredient. . . .”).
8                BLUETOOTH SIG V. FCA US

manufacturer’s product “gives the manufacturer all the
protection to which he is entitled”). In addressing the role of
disclosure at oral argument, the parties disagreed about
whether FCA had adequately disclosed its relationship with,
and qualification to use, Bluetooth technology. Because the
district court never reached this fact-intensive issue, we
remand for the district court to address it in the first instance.

     Relying on our statement in Au-Tomotive Gold that the
first sale doctrine is “generally focused on the likelihood of
confusion among consumers,” 603 F.3d at 1136, the SIG
also argues that summary judgment can be affirmed because
the district court determined that a triable issue exists as to
likelihood of confusion.           The first sale doctrine
“accommodate[s] between [the] strong and potentially
conflicting forces” of, on the one hand, protecting good will
and preventing confusion, and on the other, “preserv[ing] an
area for competition by limiting the producer’s power to
control the resale of its product.” Sebastian, 53 F.3d at 1075.
In the context of pure resales, that balance is easily struck
because “confusion ordinarily does not exist when a genuine
article bearing a true mark is sold.” NEC Elecs. v. CAL
Circuit Abco, 810 F.2d 1506, 1509 (9th Cir. 1987). But
under Prestonettes and Enesco, in the context of
incorporated products, how those conflicting purposes are
reconciled will depend in some way on how a seller uses the
mark of the incorporated product in connection with a new
product. While our jurisdiction is not strictly limited to the
certified question, see Yamaha Motor Corp., U.S.A. v.
Calhoun, 516 U.S. 199, 205 (1996), the district court is
better positioned to address these questions in the first
                   BLUETOOTH SIG v. FCA US                               9

instance with the benefit of briefing and specific analysis of
how FCA uses the SIG’s marks. 3

   Accordingly, we VACATE the district court’s grant of
summary judgment to the SIG on the first sale issue and we
REMAND for further proceedings.

    3
      For the same reason, we decline to reach the other alternate ground
on which the SIG asks us to affirm – the exceptions to the first sale
doctrine. Because the district court concluded that the first sale doctrine
was categorically inapplicable in the incorporation context, it never
addressed the SIG’s arguments on the exceptions. The district court may
consider these arguments on remand.