VARIETY STORES, INC., a Delaware corporation, Plaintiff - Appellant,
WAL-MART STORES, INC., a Delaware corporation, Defendant-Appellee VARIETY STORES, INC., a Delaware corporation, Plaintiff - Appellee,
WAL-MART STORES, INC., a Delaware corporation, Defendant-Appellant. VARIETY STORES, INC., a Delaware corporation, Plaintiff - Appellee,
WAL-MART STORES, INC., a Delaware corporation, Defendant-Appellant.
Argued: January 25, 2018
Appeals from the United States District Court for the Eastern
District of North Carolina, at Raleigh. Terrence W. Boyle,
District Judge. (5:14-cv-00217-BO)
Thad Adams, III, SHUMAKER, LOOP & KENDRICK, LLP,
Charlotte, North Carolina, for Appellant/Cross-Appellee.
S. Puzella, FISH & RICHARDSON P.C., Boston,
Massachusetts, for Appellee/Cross-Appellant.
A. Long, Jr., Christina D. Trimmer, SHUMAKER, LOOP &
KENDRICK, LLP, Charlotte, North Carolina; Scott P. Shaw, CALL
& JENSEN, A PROFESSIONAL CORPORATION, Newport Beach,
California, for Appellant/Cross-Appellee.
William W. Wilkins, Kirsten E. Small, NEXSEN PRUET, LLC,
Greenville, South Carolina; John A. Dragseth, Minneapolis,
Minnesota, R. David Hosp, Sheryl Koval Garko, Boston,
Massachusetts, Elizabeth E. Brenckman, Michael A. Anderson,
Jeffrey C. Mok, FISH & RICHARDSON P.C., New York, New
York, for Appellee/Cross-Appellant.
KING, FLOYD, and THACKER, Circuit Judges.
appeal arises from a protracted trademark dispute between
appellant Variety Stores, Inc. ("Variety"), and
cross-appellant and appellee Wal-Mart Stores, Inc.
("Walmart"). The district court granted partial
summary judgment in Variety's favor, finding Walmart
liable for trademark infringement. Following a subsequent
bench trial, the district court ordered Walmart to disgorge
$32.5 million in profits made from 16 states and the District
of Columbia. The district court denied Variety's request
for a separate jury trial to determine additional
non-disgorgement damages and ordered Walmart to reimburse
Variety for reasonable costs and attorneys' fees. Variety
appeals from the district court's calculation of
disgorged profits and denial of its request for a jury trial.
Walmart cross-appeals from the district court's grant of
partial summary judgment in Variety's favor and award of
profit disgorgement, costs, and attorneys' fees. Because
the district court improperly granted summary judgment in
Variety's favor, we dismiss the appeal in part, affirm in
part, vacate in part, and remand.
trademark dispute concerns whether Walmart's use of the
mark "Backyard Grill" on its grills and grilling
supplies infringes on Variety's use of its registered
mark, "The Backyard, " and unregistered marks,
"Backyard" and "Backyard BBQ, " that it
claims it owns.
is a Delaware corporation that operates retail stores in 16
states and the District of Columbia and sells various outdoor
products, such as lawn and garden equipment, grills, and
grilling products. In 1997, Variety purchased Rose's
Stores, Inc. ("Rose's"), and acquired its
registered trademark "The Backyard" for
"retail store services in the field of lawn and garden
equipment and supplies." J.A. 61. When Rose's
applied for the trademark in 1994, the U.S. Patent and
Trademark Office ("USPTO") registered the mark
without requiring proof of secondary meaning, which is
required when the submitted mark is relatively weak and
generally unregistrable. At some point, Variety began using
variations of "The Backyard"-"Backyard"
and "Backyard BBQ"- for selling not just lawn and
garden equipment but also grills and grilling supplies.
2010, Walmart decided to adopt a private label for its grills
and grilling supplies. According to Karen Dineen,
Walmart's Senior Director for General Merchandise,
the time, Walmart was selling its grilling products under
multiple manufacturer names and concluded that having one
uniform label would improve branding and lower costs.
Walmart's branding team embarked on an iterative
development process of generating a list of brand names,
performing a legal clearance for trademarks, and conducting
surveys to gauge customer reactions to those names.
considered brand names such as "Grill Works, "
"Backyard Barbeque, "and "Backyard BBQ, " but
it ultimately adopted "Backyard Grill" as the name
for its grills. Dineen testified that Walmart's legal
team advised the branding team not to adopt "Grill
Works, " "Backyard Barbeque, " and
"Backyard BBQ." In a subsequent declaration, Dineen
noted that Walmart knew that Variety owned the federal
trademark registration for "The Backyard" mark for
lawn and garden equipment and supplies. Dineen further
submitted, however, that "Walmart was not aware of any
of Variety's claimed unregistered or 'common law'
uses of marks incorporating the word 'backyard' in
connection with any products, including lawn and garden
products." J.A. 1515. Dineen also explained
that Walmart typically "comparison shop[s]" in its
large competitors' stores, such as Lowe's and Home
Depot, and that it was unlikely that "somebody from
[Walmart] would have gone to a Variety store somewhere just
see how they were using their mark." Walmart Opening Br.
25; see also J.A. 1612.
Walmart decided to adopt "Backyard Grill" and began
selling grills bearing that mark in late 2011. On August 17,
2011, Walmart filed its trademark application for
"Backyard Grill" with the USPTO, while disclaiming
the exclusive right to use the word "Grill." On
July 10, 2012, the USPTO published Walmart's application
for 30 days to allow the public to file any opposition to the
became aware of Walmart's trademark application for
"Backyard Grill" and filed an opposition to the
application with the Trademark Trial and Appeal Board
("TTAB") in July 2012. After limited discovery
before the TTAB, Variety commenced civil action in the
federal district court in April 2014, which stayed the TTAB
proceedings. Variety brought claims for trademark
infringement and unfair competition under federal law, 15
U.S.C. §Â§1114, 1125, and unfair and deceptive practices
and trademark infringement under North Carolina law, N.C.
Gen. Stat. §Â§75-1.1, 80-11.
moved for partial summary judgment with regards to
Walmart's liability. Walmart also cross-moved for summary
judgment. Variety submitted evidence showing that it had used
"The Backyard" and its variations
"Backyard" and "Backyard BBQ"
(collectively, the "'Backyard' marks")
since 1993; sold over $56 million worth of products bearing
the "Backyard" marks, with over $8 million in sales
of grills and grilling accessories; and spent
"millions" to advertise its products. Variety,
however, did not quantify exactly how much it spent on
promoting the mark on grills or grilling products. Variety
also did not provide any evidence of confusion among
Walmart submitted extensive evidence in support of its
summary judgment motion. Most notably, Walmart submitted two
expert surveys conducted after the commencement of this suit
to gauge the level of actual confusion among customers. These
surveys asserted that customers did not confuse the two
marks. Additionally, Walmart presented evidence showing that:
(1) 527 registered trademarks and pending trademark
applications contained the term "backyard, " (2)
121 of these marks were in the same class for which
Variety's "The Backyard" mark is registered,
and (3) 23 registered marks or pending applications including
the term "backyard" list "grill" in the
description of goods covered by the marks.
hearing, the district court granted partial summary judgment
in Variety's favor on December 8, 2015. The district
court held, first, that all of Variety's marks were
protectable pursuant to its trademark registration and common
law right and beyond the registered purpose of retail sales
of lawn and garden products, and, second, that Walmart's
mark created a likelihood of confusion. Regarding the
likelihood of confusion analysis, the district court
concluded that: Variety's "Backyard" marks were
strong conceptually and commercially; Walmart ignored its own
counsel's advice and adopted "Backyard Grill, "
thus exhibiting an intent to confuse consumers; the surveys
showing no confusion lacked persuasiveness; and this was a
case involving a large corporation trying to outlast a
smaller company in competition or litigation.
summary judgment, the remedies phase of the litigation began.
After a bench trial, the district court ordered Walmart to
disgorge approximately $32.5 million in profits. The district
court calculated the amount of disgorgement not based on
Walmart's nationwide sales ($910 million), but based on
Walmart's sales from the 17 jurisdictions in which
Walmart and Variety directly competed ($395 million). In
accordance with the parties' stipulation that Walmart be
able to deduct the cost of goods sold, the district court
deducted $285.5 million. The district court further deducted
approximately $77 million in selling, general, and
administrative ("SG&A") costs associated with
Walmart's fixed overhead. Following the $32.5 million
disgorgement order, Variety moved for a separate jury trial
to determine additional non-disgorgement damages. The
district court denied the motion on the grounds that
disgorgement provided a sufficient remedy and
non-disgorgement damages would amount to an inequitable
double remedy. The district court also ordered Walmart to pay
costs and attorneys' fees.
appeal, Variety argues that the district court erred in: (1)
geographically limiting the scope of disgorgement to the 17
jurisdictions in which Variety owns stores and competed with
Walmart, (2) allowing Walmart to deduct SG&A costs, and
(3) denying its request for a jury trial to determine
additional non-disgorgement damages. Walmart cross-appeals by
arguing that the district court erred in: (1) granting
partial summary judgment in ...