2 GEORGIA PACIFIC V. VON DREHLE
Vacated and remanded in part and affirmed in part by published
opinion. Senior Judge Hamilton wrote the opinion, in which Judge
Keenan and Judge Wilson joined. Judge Wilson wrote a separate
opinion concurring specially.
________________________________________________________
COUNSEL
ARGUED: Stephen Patrick Demm, HUNTON & WILLIAMS, LLP,
Richmond, Virginia, for Appellant/Cross-Appellee. Albert P. Allan,
ALLAN LAW FIRM, PLLC, Charlotte, North Carolina, for
Appellee/Cross-Appellant. ON BRIEF: Thomas G. Slater, Jr., John
Gary Maynard, III, George P. Sibley, III, HUNTON & WILLIAMS,
LLP, Richmond, Virginia; Mark G. Arnold, HUSCH BLACKWELL
SANDERS LLP, St. Louis, Missouri, for Appellant/Cross-Appellee.
Stephen L. Curry, North Little Rock, Arkansas; Michael P. Thomas,
PATRICK HARPER & DIXON, LLP, Hickory, North Carolina, for
Appellee/Cross-Appellant.
________________________________________________________
OPINION
HAMILTON, Senior Circuit Judge:
Georgia-Pacific Consumer Products, LP (G-P),
successor-in-interest to Georgia Pacific Corporation, is a leading
designer/manufacturer of, inter alia, paper products and dispensers for
such products for the home and the away-from-home setting (e.g.,
hotels, stadiums, restaurants, etc). This case implicates two related
products first introduced by G-P in October 2002--the
® touchless paper towel dispenser ( ®
Dispenser) and paper toweling with a high-quality, fabric-like feel
designed specifically for use in and problem-free operation of
® Dispensers ( ® Toweling). Although
G-P actually sells ® Toweling to janitorial supply
distributors, who, in turn sell it to their respective end-user customers
(e.g., hotels, stadiums, restaurants, etc.), G-P only leases
GEORGIA PACIFIC V. VON DREHLE 3
® Dispensers to such distributors, who, in turn, are
permitted to sublease them to their respective end-user customers.
The leases and subleases expressly provide that only ®
Toweling can be used in ® Dispensers and stickers on
the inside of ® Dispensers reinforce the limitation.
The face of every ® Dispenser bears four
registered trademarks owned by G-P-- ®,
®, ®, and ® or ®.
Collectively, we refer to the first three of these trademarks as “the G-
P Marks,” which are the three trademarks at issue on appeal.
On July 8, 2005, after one of G-P‟s competitors, von Drehle
Corporation (VD), started marketing and selling to distributors an
inferior paper toweling specifically manufactured by VD for use in
® Dispensers, G-P brought the present civil action
against VD, alleging the following four causes of action at issue on
appeal: (1) unfair competition in violation of § 43(a) of the Lanham
Act, 15 U.S.C. § 1125(a); (2) contributory trademark infringement in
violation of § 32 of the Lanham Act, 15 U.S.C. § 1114(1); (3) unfair
competition in violation of North Carolina common law; and (4)
tortious interference with contractual relationships in violation of
North Carolina common law.1 VD counterclaimed for violation of
the North Carolina Unfair and Deceptive Trade Practices Act (NC
UDTPA), N.C. Gen. Stat. § 75.1.1. Ultimately, on cross-motions for
summary judgment with respect to all of G-P‟s claims, the district
court granted summary judgment in favor of VD. The district court
also granted summary judgment in favor of G-P with respect to VD‟s
counterclaim.
1
G-P also initially named Carolina Janitorial & Maintenance
Supply, Inc. as a defendant. Carolina Janitorial & Maintenance
Supply, Inc. has since been dismissed from the case and is not a
party on appeal.
4 GEORGIA PACIFIC V. VON DREHLE
G-P now appeals the district court‟s summary judgment
ruling with respect to its four claims set forth above, and VD cross-
appeals the district court‟s summary judgment ruling with respect to
its single counterclaim. For reasons that follow, we vacate the
district court‟s grant of summary judgment in favor of VD with
respect to G-P‟s claims for contributory trademark infringement and
unfair competition under the Lanham Act, unfair competition under
North Carolina common law, and tortious interference with contract
under North Carolina common law, and remand for further
proceedings consistent with this opinion. We affirm the district
court‟s grant of summary judgment in favor of G-P with respect to
VD‟s counterclaim under the NC UDTPA.
I.
In analyzing de novo whether the district court erred in
granting summary judgment in favor of VD, we view the facts and
draw all reasonable inferences therefrom in the light most favorable
to G-P, as the nonmoving party. Garofolo v. Donald B. Heslep
Assocs., Inc., 405 F.3d 194, 198 (4th Cir. 2005). G-P‟s claims are
based upon the following facts.
For many years, G-P has designed, manufactured, and sold
what those in the paper towel dispenser industry call “universal
dispensers.” Other companies, including VD, also design,
manufacture, and sell universal dispensers. Universal dispensers
accept and are intended to accept paper toweling from multiple
manufacturers. However, with the introduction of ®
Dispensers, G-P sought to introduce a non-universal dispenser tied
directly to the G-P Marks--i.e., one that G-P intended would only
operate with, and one in which the restroom visitor would expect to
dispense, ® Toweling. In this way, G-P sought to
create a branded-dispenser situation akin to a branded Coca-Cola®
soda fountain dispenser, which the user expects to dispense only
genuine Coca-Cola® products.
Turning to the specifics of ® Dispensers, they
dispense a pre-measured amount of paper toweling upon activation
GEORGIA PACIFIC V. VON DREHLE 5
of an electronic motion sensor, without the user having to touch the
dispenser in any manner, thus providing a hygienic experience
superior to that of a manual paper towel dispenser otherwise
requiring the user to touch the dispenser. At the time of their
introduction in October 2002, ® Dispensers were the
only electronic, hands-free, paper towel dispensers available in the
marketplace.
G-P invented the high-end ® Dispenser with
the intent that it would operate with only non-standard, ten-inch
® Toweling, which toweling has a soft-fabric like feel
created by using a through-air-dried (TAD) process. Although the
packaging of ® Toweling bears the G-P marks,
® Toweling itself bears no source identifying marks.
To reinforce G-P‟s desire to create a branded dispenser situation akin
to the Coca-Cola® soda fountain dispenser, every ®
Dispenser bears a sticker-notice inside of it stating that such
dispenser “is the property of Georgia-Pacific” and “may be used
only to dispense the trademark-bearing products identified on its
exterior.” (J.A. 36). Although G-P uses its ® mark
2
only with ® Dispensers, it uses the marks
® and ® on many of its other products,
such as Brawny® paper towels and Quilted Northern® toilet paper.
Notably, VD does not dispute that ® Dispensers have
been an extremely successful product for G-P and that many
commercial facilities in the United States have installed
® Dispensers.
G-P leases ® Dispensers to distributors via a
pre-printed lease agreement furnished by G-P. Such lease agreement
2
In addition to ® Dispensers, G-P also
manufactures a touchless ® foam soap dispenser.
6 GEORGIA PACIFIC V. VON DREHLE
grants a distributor permission to sublease ®
Dispensers “to the end-user customers that shall be approved by G-P
. . . .” (J.A. 1086). A typical example of this supply chain is when
G-P leases ® Dispensers to a distributor, who in turn
subleases them to a hotel operator for use in the hotel‟s public
restrooms. Notably, although G-P argues that it is a party to the
subleases between distributors and the end-user customers (i.e., the
sublessees), the record does not support such a finding.
Also to reinforce its desire to create a branded dispenser
situation akin to the Coca-Cola® soda fountain dispenser, the lease
agreements between G-P and its distributors provided that
® Dispensers would remain the property of G-P and
that “only G-P branded towels . . . shall be used in” ®
Dispensers -- the “[u]se of other unauthorized product(s) is strictly
prohibited.” Id. Moreover, the lease agreements provided, in
relevant part:
Use of Dispensers by Others
2.1 Distributor shall sublease the Dispensers to
the end-user customers that shall be approved by G-P
and set forth in Exhibit “A” attached hereto
(“Customers”). All subleases of Dispensers to
Customers shall be solely upon the terms and
conditions of this Agreement and of the Sublease
Registration Form (“Sub Form”) which is attached
hereto as Addendum 1.
2.2 The Sub Form must be fully executed by
Distributor for each Customer location in which
Dispensers are to be installed. Execution of the Sub
Form does not transfer ownership of the Dispensers
by G-P to Distributor or Customer.
Id.
GEORGIA PACIFIC V. VON DREHLE 7
VD is a corporation organized under the laws of North
Carolina, with its principal place of business in Hickory, North
Carolina. Like G-P, VD manufactures paper towel products for the
away-from-home market. With one exception not relevant to this
appeal, VD sells its products throughout the continental United
States to janitorial supply distributors who, in turn, sell to end-user
customers such as hotels and restaurants. Notably, although VD
actually sells its products to distributors, it directly markets its
products to end-user customers via its sales personnel either by
themselves or in conjunction with the sales personnel of distributors
making in-person sales calls on such customers to encourage them to
purchase VD products from the distributors. Brothers Raymond von
Drehle and Steven von Drehle, who each hold a fifty-percent stake in
VD, run the company, with Raymond serving as VD‟s chairman and
Steven as its president.
By 2004, VD knew about and its sales personnel had
inspected ® Dispensers. Then, in July 2004, VD
specifically developed a ten-inch toweling for use in ®
Dispensers (VD‟s 810-B Toweling). Notably, VD‟s 810-B
Toweling is of a lower quality than ® Toweling, with a
slick, scratchy feel. In a July 23, 2004 e-mail, VD Chairman
Raymond von Drehle told all five members of VD‟s industrial sales
team that each would “be receiving two rolls of the ten-inch
hardwound which will fit the GP enMotion dispenser” and directed
them to “[g]ive us some feedback from your customers ASAP.”
(J.A. 1706) (internal quotation marks omitted). In his deposition in
this case, Chairman Raymond von Drehle testified that inherent in
his direction was that his sales staff “go show [the sample 810-B
Toweling] to distributors, customers, and have them use it in the
enMotion dispenser . . .,” in order to get their feedback. (J.A. 1721).
He also testified that if he did receive feedback, he could not
remember what it was, but that he assumed that it was positive,
because he would have remembered negative feedback.
In August 2004, with its newly developed 810-B Toweling
on-line, VD embarked on a sales campaign, through its sales
personnel, to put its 810-B Toweling in the hands of distributors for
8 GEORGIA PACIFIC V. VON DREHLE
resale to end-user customers to “stuff” in ®
3
Dispensers. The record leaves no doubt on this point. First, at the
time VD developed and began selling its 810-B Toweling,
® Dispensers were the only paper towel dispensers on
the market which could accept a ten-inch wide toweling. Second,
VD‟s Chairman Raymond von Drehle and VD Sales Manager for
Virginia and North Carolina Duke Thomas, as well as some of VD‟s
other sales staff, on occasion even referred to VD‟s 810-B Toweling
as “the enMotion towel.” (J.A. 1338, 1965, 1712). Third, VD‟s
President Steven von Drehle testified in his deposition on August 7,
2006, that VD “intends for the 810-B [towel] to be stuffed in the
enMotion dispensers,” (J.A. 1399), and that “every roll of the 810-B
towel that [has been] sold to date, . . . [is] going to be used in an
enMotion dispenser,” (J.A. 1368). Fourth, VD‟s Chairman
Raymond von Drehle testified in his deposition on August 8, 2006,
that VD‟s “sales force, at least orally, has promoted the use of the
810-B towel for use in GP‟s enMotion dispenser . . .,” and that VD
designed and intended for the 810-B Toweling to be stuffed in G-P‟s
® Dispensers. (J.A. 1732). Since VD began selling its
810-B Toweling in August 2004, its sales of such steadily increased,
because its lower quality allowed VD to sell it for a lower price than
® Toweling. Some of VD‟s sales personnel, however,
did receive negative comments from some distributors about the
lower quality of VD‟s 810-B Toweling as compared to
® Toweling.
In early January 2005, after learning of VD‟s stuffing
campaign, G-P sent VD a cease and desist letter, informing it that its
conduct constituted trademark infringement and tortious interference
with contractual relations. In a response letter dated March 7, 2005,
VD defended its conduct regarding its 810-B Toweling as legitimate
competition and denied that such conduct infringed Georgia-
3
Both VD and G-P describe the loading of ®
Dispensers with VD‟s 810-B Toweling as “stuffing.”
GEORGIA PACIFIC V. VON DREHLE 9
Pacific‟s intellectual property rights or interfered with its contractual
rights.
G-P argued below and continues to argue on appeal that VD,
by inducing and facilitating the stuffing of ®
Dispensers with VD‟s 810-B Toweling, created post-purchase
confusion as to the source of such toweling among restroom visitors,
thus creating the potential to harm its reputation and goodwill. On
this issue, the record contains the results of three empirical studies
from which a reasonable jury could find that stuffing VD‟s 810-B
Toweling in ® Dispensers created a significant amount
of consumer confusion as to the source of the paper toweling being
dispensed.
In the first study, a national survey conducted in 2005 by G-
P‟s expert witness, Dr. Eli Seggev,4 70% of the study participants
expected there to be an association of various degrees between the
source of ® Dispensers and the source of the toweling
being dispensed, and 45% expected such toweling to be the same
brand as the dispenser. In the second study, conducted in 2006 by
Dr. Seggev, 74% of consumers expected there to be an association of
various degrees between the source of ® Dispensers
and the source of the toweling being dispensed, and 47% expected
the toweling in ® Dispensers to be the same brand as
the dispenser. In the third study, conducted in September 2006 by
VD‟s expert witness Kenneth Hollander, 47.9% believed that the
paper towel dispenser and the paper toweling being dispensed would
originate from the same source.
G-P appeals the district court‟s grant of summary judgment
in favor of VD with respect to its contributory trademark
infringement and unfair competition claims under the Lanham Act,
its unfair competition claim under North Carolina common law, and
4
Dr. Seggev has a Ph.D. in Marketing and Quantitative
Methods from Syracuse University.
10 GEORGIA PACIFIC V. VON DREHLE
its tortious interference with contractual relationships claim under
North Carolina common law. VD cross-appeals the district court‟s
grant of summary judgment in favor of G-P with respect to its
counterclaim alleging violation of the NC UDTPA.
II.
G-P‟s contributory trademark infringement and unfair
competition claims under the Lanham Act and its unfair competition
claim under North Carolina common law are all based upon the same
intentional conduct by VD--i.e., VD‟s express marketing of its
810-B Toweling to distributors and end-user customers and its
selling of such toweling to distributors all for the purpose of end-user
customers stuffing 810-B Toweling in ® Dispensers,
thus creating post-purchase confusion as to the source of toweling
dispensed from ® Dispensers among restroom visitors.
Notably, the parties do not dispute that, under the facts of this case,
viewed in the light most favorable to G-P, the tests for trademark
infringement and unfair competition under the Lanham Act are
essentially the same as that for common law unfair competition
under North Carolina common law; all focus on the likelihood of
confusion as to the source of the goods involved. See People for the
Ethical Treatment of Animals v. Doughney (PETA), 263 F.3d 359,
364 (4th Cir. 2001) (listing same elements for trademark
infringement and unfair competition under the Lanham Act and
Virginia common law of unfair competition); AMP, Inc. v. Foy, 540
F.2d 1181, 1188 (4th Cir. 1976) (“North Carolina law of unfair
competition is not dissimilar to the federal law of trademark
infringement . . . .”); Charcoal Steak House of Charlotte, Inc. v.
Staley, 139 S.E.2d 185, 189 (N.C. 1964) (under North Carolina
common law, unfair competition is the child of confusion).
Moreover, because VD did not itself physically stuff its 810-B
Toweling in ® Dispensers, G-P‟s claims under the
Lanham Act and its unfair competition claim under North Carolina
common law must be analyzed under the judicially created doctrine
of contributory trademark infringement, derived from the common
law of torts. See Inwood Labs., Inc. v. Ives Labs., Inc., 456 U.S.
844, 853-54 (1982); William R. Warner & Co. v. Eli Lilly & Co.,
GEORGIA PACIFIC V. VON DREHLE 11
265 U.S. 526, 530-31 (1924); Tiffany (NJ) Inc. v. eBay Inc., 600
F.3d 93, 103-04 (2d Cir. 2010). Accordingly, we analyze the three
claims simultaneously. All rise or fall, for purposes of this appeal,
upon whether G-P has proffered sufficient evidence for a reasonable
jury to find that VD is liable for contributory trademark
infringement.
Our first stop on our journey to resolve this question is the
Supreme Court‟s decision in Inwood Laboratories, Inc. v. Ives
Laboratories, Inc., 456 U.S. 844, 853-54 (1982). In Inwood, the
plaintiff, a name brand drug manufacturer, sued three generic drug
manufacturers for trademark infringement under § 32 of the Lanham
Act, after some pharmacists indisputably mislabeled the generic drug
cyclandelate, manufactured by the defendants, as plaintiff‟s
trademarked version CYCLOSPASMOL. Id. at 849. Although the
plaintiff did not allege that the generic manufacturers had actually
applied the trademark CYCLOSPASMOL to their respective generic
versions, the plaintiff did allege the defendants had “induced
pharmacists illegally to substitute a generic drug for CYCLOSPASMOL
and to mislabel the substitute drug CYCLOSPASMOL,” by marketing
their CYCLOSPASMOL look-a-like generic versions to wholesalers,
hospitals, and retail pharmacies via “catalog entries comparing prices
and revealing the colors of the generic capsules . . . .” Id. at 850.
After a bench trial, the district court found the generic
manufacturers were not liable for trademark infringement under § 32
of the Lanham Act. Inwood, 456 U.S. at 852.
In reaching that conclusion, the court first
looked for direct evidence that the [generic
manufacturers] intentionally induced trademark
infringement. Since the [generic manufacturers‟]
representatives do not make personal visits to
physicians and pharmacists, the[y] were not in a
position directly to suggest improper drug
substitutions. Therefore, the court concluded,
improper suggestions, if any, must have come from
catalogs and promotional materials. The court
12 GEORGIA PACIFIC V. VON DREHLE
determined, however, that those materials could not
“fairly be read” to suggest trademark infringement.
The trial court next considered evidence of actual instances
of mislabeling by pharmacists, since frequent improper substitutions
of a generic drug for CYCLOSPASMOL could provide circumstantial
evidence that the petitioners, merely by making available imitative
drugs in conjunction with comparative price advertising, implicitly
had suggested that pharmacists substitute improperly. After
reviewing the evidence of incidents of mislabeling, the District Court
concluded that such incidents occurred too infrequently to justify the
inference that the [generic manufacturers‟] catalogs and use of
imitative colors had “impliedly invited” druggists to mislabel.
Moreover, to the extent
mislabeling had occurred, the court found it resulted
from pharmacists‟ misunderstanding of the
requirements of the New York Drug Substitution
Law, rather than from deliberate attempts to pass off
generic cyclandelate as CYCLOSPASMOL.
Id. at 852-53 (internal citations omitted). On appeal, the Second
Circuit, without expressly stating that the district court‟s findings
were clearly erroneous, and for reasons not relevant to the issues in
the present appeal, concluded that the generic manufacturers had
violated § 32 of the Lanham Act. Inwood, 456 U.S. at 853.
The Supreme Court then granted certiorari “to consider the
circumstances under which a manufacturer of a generic drug,
designed to duplicate the appearance of a similar drug marketed by a
competitor under a registered trademark, can be held vicariously
liable for infringement of that trademark by pharmacists who
dispense the generic drug.” Id. at 846. In resolving this issue, the
Court held:
[L]iability for trademark infringement can
extend beyond those who actually mislabel goods
with the mark of another. Even if a manufacturer
does not directly control others in the chain of
GEORGIA PACIFIC V. VON DREHLE 13
distribution, it can be held responsible for their
infringing activities under certain circumstances.
Thus, if a manufacturer or distributor intentionally
induces another to infringe a trademark, or if it
continues to supply its product to one whom it knows
or has reason to know is engaging in trademark
infringement, the manufacturer or distributor is
contributorially responsible for any harm done as a
result of the deceit.
Id. at 853-54.5
In a subsequent case, the Court characterized its ultimate
holding in Inwood as observing “that a manufacturer or distributor
could be held liable to the owner of a trademark if it intentionally
induced a merchant down the chain of distribution to pass off its
product as that of the trademark owner‟s or if it continued to supply
a product which could readily be passed off to a particular merchant
whom it knew was mislabeling the product with the trademark
owner‟s mark.” Sony Corp. of Am. v. Universal City Studios, Inc.,
464 U.S. 417, 439 n.19 (1984).
The next step in our analytical journey is to apply the
teachings of Inwood to the facts of the present case. Assuming
arguendo that the stuffing of ® Dispensers with VD‟s
810-B Toweling by end-user customers constitutes trademark
infringement under the Lanham Act, the record contains sufficient
evidence for a reasonable jury to find, under the test for contributory
infringement announced in Inwood, that VD is liable for
contributory trademark infringement. More specifically, assuming
5
Ultimately, the Supreme Court reversed the Second Circuit
on the basis that the district court‟s factual findings that the generic
manufacturers had not intentionally induced the pharmacists to
mislabel generic drugs nor had continued to supply cyclandelate to
pharmacists whom the generic manufacturers knew were mislabeling
generic drugs were not clearly erroneous. Id. at 855.
14 GEORGIA PACIFIC V. VON DREHLE
arguendo that the stuffing of ® Dispensers with VD‟s
810-B Toweling constitutes trademark infringement, the record
contains sufficient evidence for a reasonable jury to find that VD
directly induced such infringement and continued to supply its
product to distributors knowing that such infringement was taking
place. VD candidly admits that it developed its 810-B Toweling for
the specific purpose of end-user customers stuffing ®
Dispensers, which dispensers were the only ones on the market at the
time to accept ten-inch wide toweling. Moreover, the record
supports a finding that VD‟s sales personnel made in-person sales
calls on distributors and end-user customers to market VD‟s 810-B
Toweling as a less expensive alternative to ®
Toweling. And, leaving no doubt as to VD‟s intentions, VD
President Steven von Drehle testified in his deposition, a year and a
half after G-P had sent its cease and desist letter to VD, that VD
“intends for the 810-B [towel] to be stuffed in the enMotion
dispensers,” (J.A. 1399), and that “every roll of the 810-B towel that
[has been] sold to date . . . [is] going to be used in an enMotion
dispenser.” (J.A. 1368).
Because VD cannot be liable for contributory trademark
infringement without corresponding direct trademark infringement,
Inwood, 456 U.S. at 853-54, the next stop on our analytical journey
requires us to decide whether the record contains sufficient evidence
for a reasonable jury to find, by a preponderance of the evidence,
that the stuffing of ® Dispensers with VD‟s 810-B
Toweling by end-user customers constitutes trademark infringement
under the Lanham Act. We would decide this question in the
affirmative, if this record contains sufficient evidence from which a
reasonable jury could find, by a preponderance of the evidence, that:
(1) G-P possesses one or more trademarks; (2) end-user customers
used one or more of such trademarks; (3) in commerce; (4) in
connection with the sale, offering for sale, distribution or advertising
of goods, and (5) in a manner likely to cause confusion in the
relevant public. 15 U.S.C. §§ 1114(1), 1125(a); PETA, 263 F.3d at
364; Perini Corp. v. Perini Const., Inc., 915 F.2d 121, 125 n.3 (4th
Cir. 1990); AMP, Inc. v. Foy, 540 F.2d 1181, 1188 (4th Cir. 1976)
(“North Carolina law of unfair competition is not dissimilar to the
GEORGIA PACIFIC V. VON DREHLE 15
federal law of trademark infringement . . . .”); Yellowbrix, Inc. v.
Yellowbrick Solutions, Inc., 181 F. Supp. 2d 575, 583 (E.D.N.C.
2001) (“The North Carolina common law of unfair competition in
the context of trademarks and tradenames is similar to the federal
law of trademark infringement.”).
The first element of this test is met on the present record.
Under the Lanham Act, a trademark includes any word, name,
symbol, or device used by an individual to identify and distinguish
his goods “from those manufactured or sold by others and to indicate
the source of the goods, even if that source is unknown.” 15 U.S.C.
§ 1127. As we recently explained:
A trademark puts the purchasing public on notice that
all goods bearing the trademark: (1) originated from
the same source; and (2) are of equal quality. Thus, a
trademark not only protects the goodwill represented
by particular marks, but also allows consumers
readily to recognize products and their source,
preventing consumer confusion between products and
between sources of products.
George & Co., LLC v. Imagination Entertainment Ltd., 575 F.3d
383, 392-93 (4th Cir. 2009) (internal quotation marks and citations
omitted). Given that G-P has registered the G-P marks with the
United States Patent and Trademark Office, from the summary
judgment record, a reasonable jury could find, by a preponderance of
the evidence, that the G-P marks displayed on the ®
Dispensers are valid and protectable trademarks. See Brittingham v.
Jenkins, 914 F.2d 447, 452 (4th Cir. 1990) (under 15 U.S.C.
§ 1057(b), “a certificate of registration of a mark serves as prima
facie evidence that the registrant owns the registered mark, has
properly registered it under the Lanham Act, and is entitled to its
exclusive use in commerce”; thus, under 15 U.S.C. § 1115(a),
“registration creates a presumption of the registrant‟s ownership of
the mark, subject to any applicable legal or equitable defenses or
defects”).
16 GEORGIA PACIFIC V. VON DREHLE
The second, third, and fourth elements are also met on the
present record. By stuffing ® Dispensers with VD‟s
810-B Toweling, end-user customers used one or more of the G-P
Marks in commerce in connection with the distribution of goods, i.e.,
the distribution of VD‟s 810-B Toweling. This situation is no
different from a hotel placing a Coca-Cola® brand fountain
dispenser in its lobby for the complimentary consumption of its
patrons, while surreptitiously stocking it with generic cola. There is
no question that, in such a case, the hotel is using the Coca-Cola®
trademark to service its customers (i.e., in commerce) by distributing
generic cola in a Coca-Cola® brand fountain dispenser.
This brings us to the fifth element, which was the centerpiece
of the parties‟ legal battling below. The fifth element focuses upon
whether the alleged infringer used the plaintiff‟s trademark in a
manner likely to cause confusion in the relevant public. Just who is
the relevant public (or relevant audience to put it differently) is the
most hotly debated issue on appeal. Below, the district court held
that VD was entitled to summary judgment in its favor with respect
to G-P‟s contributory trademark infringement and unfair competition
claims under the Lanham Act and its unfair competition claim under
North Carolina common law on the basis that no evidence existed
that VD‟s marketing and selling of its 810-B Toweling for stuffing in
® Dispensers caused confusion for the distributors or
the end-user customers. In so holding, the district court rejected G-
P‟s legal theory that restroom visitors who consume toweling from
® Dispensers in hotels, stadiums, and restaurants, etc.,
constitute the relevant audience for purposes of the required
likelihood-of-confusion analysis. On appeal, VD defends the district
court‟s reasoning, while G-P contends that it is at odds with well-
established Fourth Circuit precedent recognizing that post-purchase
confusion can be actionable under the Lanham Act.
We agree with G-P that the district court erred in limiting its
likelihood of confusion inquiry to distributors who purchased 810-B
Toweling and their respective end-user customers. While transitory
public confusion will not satisfy the likelihood of confusion element,
Fourth Circuit case law makes room for the factfinder to consider
GEORGIA PACIFIC V. VON DREHLE 17
confusion among the non-purchasing public in the
likelihood-of-confusion inquiry if it can “be shown that public
confusion will adversely affect the plaintiff‟s ability to control his
reputation among its laborers, lenders, investors, or other group with
whom plaintiff interacts.” Perini Corp., 915 F.2d at 128.
For example, in Polo Fashions, Inc. v. Craftex, Inc., 816 F.2d
145 (4th Cir. 1987), the trademark owner demonstrated likelihood of
confusion, including post-sale confusion, between its trademarked
products and counterfeit shirts manufactured by the defendant,
because anyone seeing the counterfeit shirt bearing plaintiff‟s
trademarked logo being worn by its owner would not see the
defendant‟s label on the inside back of the neck, but would only see
plaintiff‟s trademarked logo on the front of the shirt. Id. at 148.
Thus, it was likely that the observer would identify the shirt with the
plaintiff, and the plaintiff‟s reputation would suffer damage if the
shirt appeared to be of poor quality. Id. See also Beacon Mut. Ins.
Co. v. OneBeacon Ins. Group, 376 F.3d 8, 17 (1st Cir. 2004) (citing
Perini in support of holding that likelihood of confusion inquiry in
trademark case is not limited to actual or potential purchasers, but
also includes others whose confusion threatens trademark owner‟s
commercial interest in its mark); AMP Inc., 540 F.2d at 1183, 1188
(4th Cir. 1976) (in limiting its likelihood-of-confusion inquiry to
whether or not plaintiff‟s customers were likely to be confused by
defendant‟s use of the word AMP, district court used too narrow a
test for determining likelihood of confusion; inquiry should have
additionally focused on likelihood of danger that such use would
confuse public in general; remanded for reconsideration);
Restatement (Third) of Unfair Competition § 20 cmt. b (1995) (“To
be actionable . . . confusion must threaten the commercial interests
of the owner of the mark, but it is not limited to the confusion of
persons doing business directly with the actor.”); 4 J. Thomas
McCarthy, McCarthy on Trademarks & Unfair Competition § 23:7
(4th ed. 2009) (“In 1962, Congress struck out language in the
Lanham Act which required confusion, mistake or deception of
„purchasers as to the source of origin of such goods and services.‟
Several courts have noted this expansion of the test of infringement
and held that it supports a finding of infringement when even non-
18 GEORGIA PACIFIC V. VON DREHLE
purchasers are deceived.”) (footnote omitted). Cf. Lyons
Partnership, L.P. v. Morris Costumes, Inc., 243 F.3d 789, 802-03
(4th Cir. 2001) (relevant inquiry in determining whether costume
rented by costume rental company was intrinsically similar in design
to popular children‟s television character (i.e., Barney) that was
protected by copyright, as would support finding of copyright
infringement based on substantial similarity, was whether costume
and copyrighted character expressed ideas in substantially similar
manner from perspective of intended audience of young children,
rather than from perspective of adults, even though costume was
purchased by adults).
Having decided the district court erred in limiting its
likelihood of confusion inquiry to distributors who purchased 810-B
Toweling and their respective end-user customers, we are confronted
with two sequential questions. First, we must ask whether G-P has
proffered sufficient evidence for a reasonable jury to find likelihood
of confusion among restroom visitors as to the source of the paper
toweling being dispensed from ® Dispensers when
such dispensers are stuffed with 810-B Toweling. If the answer to
this question is yes, we must then ask whether G-P has proffered
sufficient evidence for a reasonable jury to find that the likelihood of
confusion among such restroom visitors will adversely affect G-P‟s
reputation among its laborers, lenders, investors, or other group with
whom G-P interacts. See Beacon Mut. Ins. Co., 376 F.3d at 15
(“[t]he fact that the injury is to a company‟s reputation or goodwill,
rather than` directly to its sales, does not render the confusion any
less actionable.”); Balance Dynamics Corp. v. Schmitt Indus., Inc.,
204 F.3d 683, 693 (6th Cir. 2000) (damages may be awarded for
actual confusion that causes harm to goodwill under Lanham Act
even if no lost sales have been shown); Int‟l Kennel Club of
Chicago, Inc. v. Mighty Star, Inc., 846 F.2d 1079, 1091 (7th Cir.
1988) (“the owner of a mark is damaged by a later use of a similar
mark which place[s] the owner‟s reputation beyond its control,
though no loss in business is shown” (emphasis and alteration in
original) (internal quotation marks omitted)).
GEORGIA PACIFIC V. VON DREHLE 19
In answering the first question, we look at nine factors, some
of which may be irrelevant under the circumstances of the present
case: “(1) the strength or distinctiveness of the plaintiff‟s mark as
actually used in the marketplace; (2) the similarity of the two marks
to consumers; (3) the similarity of the goods or services that the
marks identify; (4) the similarity of the facilities used by the
markholders; (5) the similarity of advertising used by the
markholders; (6) the defendant‟s intent; (7) actual confusion; (8) the
quality of the defendant‟s product; and (9) the sophistication of the
consuming public.” George & Co., LLC, 575 F.3d at 393. Because
the nature of the trademark infringement claim at issue is stuffing a
branded dispenser with a generic product, some of these factors are
either entirely irrelevant or only slightly relevant. For example, the
similarity of the two marks (i.e., competing marks) to consumers is
irrelevant, because VD‟s 810-B Toweling bore no trademarks.
Suffice it to say, for purposes of surviving VD‟s motion for
summary judgment, we conclude that G-P has forecast sufficient
evidence for a reasonable jury to find a likelihood of confusion
among restroom visitors as to the source of the paper toweling being
dispensed from ® Dispensers when such dispensers
are stuffed with 810-B Toweling. The record contains sufficient
evidence for a reasonable jury to find that G-P‟s marks are strong,
they appear on the front of ® Dispensers, and VD‟s
810-B Toweling is inferior to ® Toweling, but
nonetheless was intentionally made to fit and operate in
® Dispensers. Moreover, the record contains the
results of three empirical studies from which a reasonable jury could
find that stuffing VD‟s 810-B Toweling in ®
Dispensers creates a significant amount of actual consumer
confusion as to the source of the paper toweling being dispensed.
See, supra, Part I. For example, in the first study, a national survey
conducted in 2005 by G-P‟s expert witness, 70% of the study
participants expected there to be an association of various degrees
between the source of ® Dispensers and the source of
the toweling being dispensed, with 45% expecting such toweling to
be the same brand as the dispenser. The other two studies were
similarly probative, with the study conducted in September 2006 by
20 GEORGIA PACIFIC V. VON DREHLE
VD‟s expert witness Kenneth Hollander showing that 47.9% of those
surveyed believed that the paper towel dispenser and the paper
toweling being dispensed would originate from the same source.
Thus, as to the first sequential question we previously set forth, G-P
has proffered sufficient evidence for a reasonable jury to find
likelihood of confusion among restroom visitors as to the source of
the paper toweling being dispensed from ®
Dispensers, when such dispensers are stuffed with 810-B Toweling.
With respect to the second sequential question--i.e., whether
G-P has proffered sufficient evidence for a reasonable jury to find
that the likelihood of confusion among such restroom visitors will
adversely affect G-P‟s reputation among its laborers, lenders,
investors, or other groups with whom G-P interacts--we hold in the
affirmative. First, without the ability to control the quality of the
toweling used in ® Dispensers, G-P is subject to the
risk of injury to the reputation of the G-P Marks. See Zino Davidoff
SA v. CVS Corp., 571 F.3d 238, 243 (2d Cir. 2009) (“Where the
alleged infringer has interfered with the trademark holder‟s ability to
control quality, the trademark holder‟s claim is not defeated because
of failure to show that the goods sold were defective. That is
because the interference with the trademark holder‟s legitimate steps
to control quality unreasonably subjects the trademark holder to the
risk of injury to the reputation of its mark.”); Shell Oil Co. v.
Commercial Petroleum, Inc., 928 F.2d 104, 107 (4th Cir. 1991)
(“[T]he actual quality of the goods is irrelevant; it is the control of
quality that a trademark holder is entitled to maintain.”). Second,
although proof that VD‟s 810-B Toweling is inferior to
® Toweling is unnecessary in order to establish that
confusion among restroom visitors who use ®
Toweling stuffed with VD‟s 810-B Toweling will adversely affect
G-P‟s reputation among its laborers, lenders, investors, or other
groups with whom G-P interacts, the record shows that VD actually
received complaints from at least the distributor level about the
inferior quality of its 810-B Toweling as compared to
® Toweling. Third, the record shows that the TAD
process used in manufacturing ® Toweling gives it a
GEORGIA PACIFIC V. VON DREHLE 21
fabric-like feel superior to VD‟s 810-B Toweling. And fourth, in his
deposition testimony, VD Chairman Raymond von Drehle conceded
that if ® Dispensers were stuffed with a poor quality
paper towel or resulted in poor operation of such dispenser, such a
situation would likely affect how an end-user, and by reasonable
inference, a restroom visitor, would evaluate G-P‟s hands-free
product.
Because G-P has proffered sufficient evidence, viewed in the
light most favorable to G-P, for a reasonable jury to find, by a
preponderance of the evidence, in favor of G-P with respect to each
element of G-P‟s contributory trademark infringement and unfair
competition claims under the Lanham Act and its unfair competition
claim under North Carolina common law, we vacate the district
court‟s grant of summary judgment in favor of VD with respect to
those claims and remand for further proceedings consistent with this
opinion.6
III.
G-P next challenges the district court‟s grant of summary
judgment in favor of VD with respect to its North Carolina common
law claim for tortious interference with contract.7 G-P premises this
6
We note that G-P makes a highly unusual request that we
order the district court to enter judgment in its favor on these claims
without remanding for further proceedings. This we cannot do,
given that, at a minimum, summary judgment is inappropriate
because there are genuine issues of material fact.
7
G-P also briefly mentions that it is challenging the district
court‟s grant of summary judgment with respect to its North
Carolina common law claim for tortious interference with
prospective contractual relations (a.k.a. tortious interference with
prospective advantage). We need not address this claim on the
merits, however, because G-P failed to present any argument on the
claim, which has different elements than a tortious interference with
22 GEORGIA PACIFIC V. VON DREHLE
claim upon VD‟s alleged interference with the ®
leases and subleases. To overcome VD‟s motion for summary
judgment with respect to this claim, G-P had to proffer evidence
sufficient for a reasonable jury to find, by a preponderance of the
evidence, that (1) G-P had a valid contract with a third party that
gave it contractual rights; (2) VD knew of the contract; (3) VD
intentionally induced the third party not to perform the contract; (4)
VD acted without justification; and (5) G-P was thereby damaged.
Embree Const. Group, Inc. v. Rafcor, Inc., 411 S.E.2d 916, 924
(N.C. 1992). Under North Carolina law, whether a defendant‟s
conduct is justified depends upon the circumstances surrounding the
interference, the defendant‟s motive or conduct, the interests sought
to be advanced, the social interest in protecting the freedom of action
of the defendant, and the contractual interests of the other party. Id.
“Generally speaking, interference with contract is justified if it is
motivated by a legitimate business purpose, as when the plaintiff and
the defendant, an outsider, are competitors.” Id. “Numerous
authorities have recognized that competition in business constitutes
justifiable interference in another‟s business relations and is not
actionable so long as it is carried on in furtherance of one‟s own
interests and by means that are lawful.” Peoples Sec. Life Ins. Co. v.
Hooks, 367 S.E.2d 647, 650 (N.C. 1988).
Of particular relevance to the present appeal, the Supreme
Court of North Carolina has elaborated on when a defendant‟s
interference is not justified:
There are frequent expressions in judicial
opinions to the effect that malice is requisite to
liability in an action for inducing a breach of contract.
It is not necessary, however, to allege and prove
actual malice in the sense of personal hatred, ill will,
or spite in order to make out a case for the recovery
contract claim. S.N.R. Mgt. Corp. v. Danube Partners 141, LLC,
659 S.E.2d 442, 452 (N.C. Ct. App. 2008).
GEORGIA PACIFIC V. VON DREHLE 23
of compensatory damages against the outsider for
tortiously inducing the breach of the third person‟s
contract with the plaintiff. The term “malice” is used
in this connection in its legal sense, and denotes the
intentional doing of the harmful act without legal
justification. . . . A malicious motive makes a bad act
worse, but it cannot make that wrong which, in its
own essence, is lawful.
Childress v. Abeles, 84 S.E.2d 176, 182 (N.C. 1954) (internal
quotation marks omitted).
The district court granted summary judgment in favor of VD
with respect to G-P‟s tortious interference with contract claim on the
basis that VD‟s interference was justified as legitimate competition.
We vacate the district court‟s judgment with respect to this claim and
remand for further proceedings with limiting instructions. First,
because the record cannot support a finding that G-P had contractual
relationships with the end-user customers,8 this claim is limited to
whether VD tortiously interfered with G-P‟s contractual
relationships with distributors.9 Second, G-P can only prevail on this
claim at trial if it first prevails upon any one of its other remanded
claims. Such unlawful conduct on the part of VD would vitiate
VD‟s claim to justifiable interference with the ®
Dispenser leases between G-P and distributors by legitimate
competition. See Restatement (Second) of Torts § 767 cmt. c. (in
evaluating nature of defendant‟s conduct for purposes of tortious
interference with contract claim, one consideration is whether
defendant‟s conduct is unlawful; “Conduct specifically in violation
of statutory provisions or contrary to established public policy may
8
G-P was not a party to the subleases between distributors
and end-users.
9
G-P was a party to the leases between it and distributors.
24 GEORGIA PACIFIC V. VON DREHLE
for that reason make an interference improper.”). In sum, this claim
goes back under the limitations we have set forth.
IV.
On cross-appeal, VD challenges the district court‟s grant of
summary judgment in favor of G-P with respect to its claim under
the NC UDTPA.10 According to VD, G-P violated the NC UDTPA
by attempting to enforce provisions in the ® Dispenser
leases and subleases requiring that only ® Toweling be
used in ® Dispensers. VD‟s challenge is without
merit.
In order to prevail upon its claim under the NC UDTPA, VD
must prove the following, by a preponderance of the evidence: (1)
an unfair or deceptive act or practice or an unfair method of
competition by G-P, (2) in or affecting commerce, (3) which
proximately caused actual injury to VD. Walker v. Fleetwood
Homes of NC, Inc., 653 S.E.2d 393, 399 (N.C. 2007). In granting
summary judgment in favor of G-P on this claim, the district court
reasoned:
Without speaking to whether such leases are
enforceable, the Court finds no facts that demonstrate
that GP‟s attempt to enforce such leases constituted
an unfair or deceptive practice. The facts demonstrate
that GP drafted and entered into lease and sublease
agreements with distributors and end-users in good
faith, openly, and transparently. In addition, von
Drehle has failed to demonstrate an actual injury
stemming from the alleged unfair or deceptive trade
practice. The facts demonstrate that von Drehle has
competed favorably with GP in the sale of paper
10
In analyzing this claim, we view the evidence in the light
most favorable to VD as the nonmoving party.
GEORGIA PACIFIC V. VON DREHLE 25
towels for the enMotion® dispenser, despite GP‟s
attempt to enforce the lease and sublease agreements.
GP is entitled to summary judgment in its favor on
von Drehle‟s Unfair and Deceptive Trade Practices
Act claim.
(J.A. 455).
Other than the district court‟s statement that G-P entered into
sublease agreements with end-users, the district court is right on the
money with respect to its analysis of this claim. On appeal, VD has
pointed to nothing in the record, nor cited any case law, establishing
that the district court erred in granting summary judgment in favor of
G-P with respect to VD‟s claim for violation of the NC UDTPA.
Accordingly, we affirm the district court with respect to this claim.
V.
In sum, we vacate the district court‟s grant of summary
judgment in favor of VD with respect to G-P‟s claims for (1)
contributory trademark infringement and unfair competition under
the Lanham Act, (2) unfair competition under North Carolina
common law, and (3) tortious interference with contract under North
Carolina common law, and remand for further proceedings
consistent with this opinion. With respect to VD‟s cross-appeal, we
affirm the district court‟s grant of summary judgment in favor of G-P
with respect to VD‟s claim alleging G-P violated the NC UDTPA.
VACATED AND REMANDED IN PART
AND AFFIRMED IN PART
WILSON, District Judge, concurring specially:
I concur in the decision of the court but write separately to
note one matter. In the district court, von Drehle counterclaimed
against Georgia-Pacific for violations of § 1 of the Sherman Act, 15
U.S.C. § 1, and § 3 of the Clayton Act, 15 U.S.C. § 14, allegedly
carried out through illegal tying arrangements in “the away from
home market in the United States for „hands free‟ (or „touchless‟)
26 GEORGIA PACIFIC V. VON DREHLE
dispensers of hard wound paper towels (the „tying product‟), and the
market for hard wound paper towels (the „tied product‟) . . . .” (J.A.
at 228.) The district court granted Georgia-Pacific‟s motion for
summary judgment on the Clayton Act claim because “end users
[were] purchasing paper towels for the enMotion dispenser from von
Drehle,” and consequently there was no “evidence of actual coercion
by the seller that forced the buyer to accept the tied product.” (J.A.
at 452-453.) It granted summary judgment on the Sherman Act
claim because “von Drehle has competed favorably with GP in the
sale of paper towels for the enMotion dispenser” and could show no
injury. (J.A. at 453.) Of course, should Georgia-Pacific prevail on
its Lanham Act or tortious interference claims on remand, the district
court‟s reasoning would retain no vitality. But von Drehle did not
cross-appeal on this issue, and the matter will have to play out (if it
is to play out at all) on another day and, perhaps, on a different stage.