–Dan Kelly, Attorney

Back in September of 2010, I discussed a couple of then-recent cases about Georgia-Pacific’s trademark lawsuits over the “stuffing” of non-Georgia-Pacific paper towels into GP’s proprietary dispensers.  By way of brief review, the Eighth Circuit affirmed a lower court decision out of the Western District of Arkansas holding that the practice of “stuffing” does not constitute trademark infringement.  The Fourth Circuit had held that GP was entitled to a trial on the issue of trademark infringement in its case in the Eastern District of North Carolina.

Just this past Monday, GP won its jury trial in North Carolina, and the jury awarded GP about $790,000 in damages.  Unfortunately, being a jury trial, there is no written opinion to review or report upon.  I suspect that there will be an appeal.

So the obvious question is this:  how can GP lose its case in Arkansas, lose the subsequent appeal, then go on to win in North Carolina on substantially the same facts and claims?  Well, that’s a good question, and one that may feature in an appeal of the North Carolina case.  There is a principle in law called “issue preclusion.”  The idea is that once a party has tried a particular legal issue on particular facts, others may rely upon the outcome of that decision and hold it against the party that tried the issue.  Here, GP lost on its trademark infringement claim in Arkansas, therefore, in theory, it should lose that issue on the same facts in North Carolina.  Unfortunately, the defendant in the North Carolina case, in the court’s opinion, waited too long to raise the defense of issue preclusion, so the court denied application of the doctrine.

In my first week of law school, my Torts professor stressed the importance of procedural posture in each case and how it can affect outcomes.  This case is a good example, and the possible negative impact of the delay is amplified by a few other GP cases pending around the country:

  • On Sept. 8, 2011, GP survived a motion to dismiss a suit in the Southern District of Ohio where the motion was based upon applying issue preclusion from the Arkansas / 8th Circuit case.
  • On Nov. 4, 2011, GP lost a motion to dismiss a stuffing suit in the Northern District of Ohio based upon the application of issue preclusion from the Arkansas / 8th Circuit case.  GP is currently appealing to the Sixth Circuit Court of Appeals.  (The other Ohio case above is currently stayed pending the outcome of the appeal, which is likely to be binding in that case.)
  • Another case pending in the District of Nevada is stayed until at least next month.  This case has been stayed since late 2010, initially awaiting the outcome of the 8th Circuit appeal, and now likely awaiting the outcome of the 6th Circuit appeal.

It looks like the North Carolina jury award will not be the final word in this matter, and even if it is, I have a difficult time believing that $800k will cover GP’s attorneys fees in five federal lawsuits and three appeals (possibly four).  It appears that GP is questing to have paper towel dispensers treated like soda fountains–insuring that the product in the machine matches the label on the front.  Unfortunately, as the 8th Circuit pointed out, even GP will sell towels for use in others’ dispensers.

We shall stay tuned to see if the score changes…

  • John Welch

    Are you confusing issue preclusion with claim preclusion? The fact that GP lost on the claim of infringement in one court does not mean it can’t sue another, different defendant. Were the products and the defendants the same or different? If different, then no claim preclusion.

    Issue preclusion might apply to, say, validity of the GP mark, or the issue of functionality.

    JLW

  • John,

    I don’t think I’m confusing issue preclusion with claim preclusion, but your question points to the need for some clarification on my part. It appears that the North Carolina defendant, VonDrehle, is the maker of paper towels that fit the GP enMotion(r) machines that are the subject of all of the suits. In addition, it is my understanding that the defendants in all of the other mentioned cases are distributors of the VonDrehle towels. Each court that has reviewed the point has referred to it as “issue preclusion.”

    My pocket edition of Black’s cross-references claim preclusion with res judicata, and issue preclusion with collateral estoppel. I understand these concepts as follows:

    Res Judicata — “a thing decided;” when two parties have previously litigated an issue to conclusion, the issue cannot be relitigated (perhaps absent a material change in facts or law).

    Claim Preclusion — when a first party attempts to assert a new claim against a second party that could have been asserted in a previous suit between the same two parties, it is precluded from doing so; requires the same parties and facts.

    Issue Preclusion — a doctrine barring a party from relitigating an issue determined against it in an earlier action; does not require both parties to be the same as in the previous action, but does require the same controlling facts for the legal point at issue; (Black’s terms this “collateral estoppel” and notes that it can be used offensively or defensively.)

    The elements of each may differ in more ways than I have identified above, and each usually requires that the party against whom the estoppel or preclusion is sought had a full and fair opportunity to litigate the issue or claim in the prior proceeding.

    For what it is worth, the application of issue preclusion on such a fact-intensive issue as trademark infringement is probably rare, and probably more common on the legal issues that you identify, such as validity and functionality. If I recall correctly, the Southern District of Ohio concluded that the application of issue preclusion was not warranted because with a different defendant, facts like intent could be materially different in the infringement analysis. The court noted that it was a close case.

    I’ve seen plenty of confusion on these points over the years. I have certainly seen different explanations by different courts, and I’m not convinced that there is uniform agreement about these doctrines, so feel free to recommend a good authority or summary. Black’s certainly appears to be migrating away from “claim preclusion” and “issue preclusion,” but I don’t agree with its failure to distinguish between res judicata and claim preclusion.