11-502-cv
Tecnimed SRL v. Kidz-Med, Inc.

                                  UNITED STATES COURT OF APPEALS
                                      FOR THE SECOND CIRCUIT

                                               SUMMARY ORDER
RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A
SUMMARY ORDER FILED ON OR AFTER JANUARY 1, 2007, IS PERMITTED AND IS GOVERNED BY
FEDERAL RULE OF APPELLATE PROCEDURE 32.1 AND THIS COURT’S LOCAL RULE 32.1.1. WHEN
CITING A SUMMARY ORDER IN A DOCUMENT FILED WITH THIS COURT, A PARTY MUST CITE
EITHER THE FEDERAL APPENDIX OR AN ELECTRONIC DATABASE (WITH THE NOTATION
“SUMMARY ORDER”). A PARTY CITING TO A SUMMARY ORDER MUST SERVE A COPY OF IT ON
ANY PARTY NOT REPRESENTED BY COUNSEL.

       At a stated term of the United States Court of Appeals for the Second Circuit, held
at the Daniel Patrick Moynihan United States Courthouse, 500 Pearl Street, in the City of
New York, on the 10th day of February, two thousand twelve.

PRESENT: BARRINGTON D. PARKER,
         REENA RAGGI,
         RAYMOND J. LOHIER, JR.,
                  Circuit Judges.
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TECNIMED SRL,
                                       Plaintiff-Counter-
                                       Defendant-Appellee,
                                 v.                                                     No. 11-502-cv

KIDZ-MED, INC.,                       AMERICAN              SCIENTIFIC
RESOURCES, INC.,
                                       Defendants-Counter-
                                       Claimants-Appellants.
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FOR APPELLANTS:                        Richard C. Yeskoo, Thomas T. Tamlyn, Yeskoo Hogan &
                                       Tamlyn, LLP, New York, New York.

FOR APPELLEE:                          Jennifer B. Furey, Matthew P. Horvitz, Cooley Manion Jones
                                       LLP, Boston, Massachusetts; Anthony L. Miele, Miele Law
                                       Group PC, Boston, Massachusetts.
       Appeal from an order of the United States District Court for the Southern District of

New York (Paul G. Gardephe, Judge).

       UPON DUE CONSIDERATION, IT IS HEREBY ORDERED, ADJUDGED, AND

DECREED that the order entered on January 18, 2011, is AFFIRMED.

       Defendants Kidz-Med, Inc. and American Scientific Resources, Inc. (collectively,

“Kidz-Med”) appeal from an order granting a preliminary injunction barring Kidz-Med’s

continued use of the trade dress for its non-contact thermometer, and requiring a recall of its

thermometers featuring that trade dress and use of a new trade dress design. Kidz-Med

maintains that the district court erred in determining that plaintiff Tecnimed SRL established

the likelihood of success on the merits and irreparable harm required for a preliminary

injunction, see Salinger v. Colting, 607 F.3d 68, 77–78 (2d Cir. 2010), or the propriety of a

product recall as a remedy. We review the grant of a preliminary injunction for abuse of

discretion, and we will reverse only if the injunction is based on an error of law or a clearly

erroneous assessment of the evidence, or if it cannot be located within the range of

permissible outcomes. See Oneida Nation of N.Y. v. Cuomo, 645 F.3d 154, 164 (2d Cir.

2011). We assume the parties’ familiarity with the facts and the record of prior proceedings,

which we reference only as necessary to explain our decision to affirm.

1.     Likelihood of Success on the Merits

       a.     Trade Ownership

       Kidz-Med submits that the district court erred in finding that Tecnimed, the

manufacturer of the Thermofocus non-contact thermometer, established a likelihood of

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success in demonstrating ownership of the challenged trade dress, which was created for use

with the Thermofocus. Kidz-Med, which distributed the Thermofocus in the United States,

claims that the evidence shows that it invented and first affixed the trade dress to the

Thermofocus, making it the trade dress’s owner. See 15 U.S.C. § 1125(a); Sengoku Works

Ltd. v. RMC Int’l, Ltd., 96 F.3d 1217, 1220 (9th Cir. 1996) (identifying various factors used

to determine trademark’s ownership between manufacturer and distributor, including “which

party invented and first affixed the mark onto the product”); see also ITC Ltd. v. Punchgini,

Inc., 482 F.3d 135, 147 (2d Cir. 2007) (“[S]o long as a person is the first to use a particular

mark to identify his goods or services in a given market, and so long as that owner continues

to make use of the mark, he is entitled to prevent others from using the mark to describe their

own goods in that market.” (internal quotation marks omitted)). We need not decide which

legal standard applies to trade dress ownership disputes between a manufacturer and a

distributor because the parties agree that, here, the Sengoku factors apply, see Tecnimed SRL

v. Kidz-Med, Inc., 763 F. Supp. 2d 395, 403 (S.D.N.Y. 2011), and we identify no clear error

in the district court’s findings with respect to those factors and the ultimate issue of

ownership.

       The record shows that Tecnimed and Kidz-Med worked together to create the trade

dress for Thermofocus thermometers sold in the United States. Although Kidz-Med

undoubtedly devised the final package design, that design was based on key elements first

conceived by Tecnimed, including “the purple and blue color scheme; the phrase ‘5 in 1’; the

photograph of the mother holding a sleeping baby; and the five small illustrations depicting

                                              3
a child, bottle, formula, nursery, and bathwater.” Id. at 404. Moreover, the record shows that

the trade dress Kidz-Med developed was approved by Tecnimed before it was used for the

Thermofocus. These facts permitted the district court to find that Tecnimed invented the

trade dress at issue.

          While the district court did not identify which party first affixed the trade dress, that

omission does not render clearly erroneous the finding that Tecnimed demonstrated a

likelihood of success on the merits on the question of who owned the trade dress. Although

the record is clear that Kidz-Med, not Tecnimed, affixed the trade dress to the Thermofocus

thermometers sold in the United States, Kidz-Med did so pursuant to its distribution

agreement with Tecnimed, which obligated Kidz-Med to “make use of Tecnimed’s

trademarks, trade names or any other symbols, for the only purpose of identifying and

advertising the Products, within the scope of his activity as distributor of Tecnimed and in

Tecnimed’s sole interest.” Bellifemine Decl., Ex A ¶ 8.1. In short, because Kidz-Med

affixed the trade dress at the instruction, and for the benefit, of Tecnimed, the district court

did not clearly err in according this action little weight in determining ownership. Further,

record evidence showed that Tecnimed had used its earlier iteration of the Thermofocus trade

dress, on which Kidz-Med’s design was based, in the United States. Finally, Kidz-Med does

not dispute the remaining factors on which the district court relied in concluding that

Tecnimed likely owned the trade dress, including that Tecnimed manufactured the

Thermofocus, and that Kidz-Med’s name on the packaging did not outweigh the presence of

Tecnimed’s “Thermofocus” mark. See Tecnimed SRL v. Kidz-Med, Inc., 763 F. Supp. 2d

at 404.

                                                  4
       b.     Bad Faith

       Kidz-Med challenges the district court’s finding that it acted in bad faith in adopting

the disputed trade dress for its non-contact thermometer, which informed the court’s further

determinations that use of the trade dress would cause consumer confusion and that a recall

was necessary. See Starbucks Corp. v. Wolfe’s Borough Coffee, Inc., 588 F.3d 97, 115 (2d

Cir. 2009) (identifying “evidence that the imitative mark was adopted in bad faith” as one

factor to consider in determining likelihood of consumer confusion); Perfect Fit Indus., Inc.

v. Acme Quilting Co., 646 F.2d 800, 807 (2d Cir. 1981) (considering defendant’s intentional,

bad faith acts in reviewing district court’s recall). We are not persuaded that this finding was

clearly erroneous.

       The district court identified the following facts as supporting a bad faith finding:

(1) Kidz-Med acted intentionally in employing a trade dress for its non-contact thermometers

that looked similar to, and was designed to create confusion with, the Thermofocus

packaging; (2) Kidz-Med issued misleading promotional materials that included testimonials

from Thermofocus users; (3) Kidz-Med’s website conflated the Thermofocus and Kidz-Med

thermometers; (4) Kidz-Med tried to pass off its thermometer as the Thermofocus; and

(5) Kidz-Med continued to use this trade dress despite receiving a cease-and-desist letter, the

complaint in this lawsuit, and a warning from the district court at the preliminary injunction

hearing that the trade dress probably infringed Tecnimed’s mark. See Tecnimed SRL v.

Kidz-Med, Inc., 763 F. Supp. 2d at 408–09, 414. Kidz-Med insists that its refusal to stop

using its trade dress during this litigation is not indicative of bad faith, but demonstrates a

good faith belief in the strength of its defense.

                                               5
       Kidz-Med misunderstands the import of the district court’s finding. The district court

identified bad faith in the totality of the evidence referenced. It emphasized Kidz-Med’s

conduct during this litigation only in reasoning that a recall order was appropriate because

Kidz-Med had “deliberately sailed in harm’s way” by continuing to use the trade dress

despite warnings that it could lose. Id. at 415 (quoting Cherry River Music Co. v. Simitar

Entm’t, Inc., 38 F. Supp. 2d 310, 323 (S.D.N.Y. 1999)). This manifests no clear error in the

overall finding of bad faith. Indeed, Kidz-Med concedes that it intentionally used the

Thermofocus packaging as the basis for its non-contact thermometer’s packaging, and the

remaining findings as to deliberate confusion or deception are supported by the record.1

2.     Irreparable Harm

       Kidz-Med faults the district court’s finding that Tecnimed would suffer irreparable

harm if Kidz-Med’s infringing trade dress remained on the market. Kidz-Med maintains that

the district court clearly erred in finding that Tecnimed was still selling the Thermofocus in

the United States, and that those sales would be diminished by Kidz-Med’s marketing of its

competing thermometer.

       At the preliminary injunction hearing, Tecnimed introduced evidence that

Thermofocus thermometers distributed by Kidz-Med in the purple/blue packaging were still

available for purchase in the United States from online distributors and brick-and-mortar


       1
         The Trademark Amendments Act of 1999 § 5, Pub. L. 106-43 (Aug. 5, 1999),
codified at 15 U.S.C. § 1125(a)(3), amended Section 43(a) of the Lanham Act to require that
the person asserting trade dress protection also prove that the alleged trade dress is not
“functional.” See Yurman Design, Inc. v. PAJ, Inc., 262 F.3d 101, 116 (2d Cir. 2001). The
issue was not raised in the district court and has not been raised to us on appeal. Therefore,
we consider it no further.

                                              6
retail shops. Although Kidz-Med put forward evidence indicating that those thermometers

were no longer being sold, the district court was entitled to resolve this factual dispute in

favor of Tecnimed. See Arch Ins. Co. v. Precision Stone, Inc., 584 F.3d 33, 39 (2d Cir.

2009) (holding that on clear error review, appellate court cannot “second-guess the trial

court’s choice between permissible competing inferences” (internal quotation marks and

ellipses omitted)). Nor did the district court clearly err in finding that consumers would think

Kidz-Med’s non-contact thermometer was associated with, or a successor to, the

Thermofocus, in light of Kidz-Med’s prior distribution of the Thermofocus, its affixation of

its mark to the Thermofocus packaging, and its use of a trade dress for its non-contact

thermometers that could confuse consumers.

       We reject Kidz-Med’s argument that the district court erred in allocating the burden

of proving irreparable harm. Kidz-Med conflates the district court’s ruling on Tecnimed’s

preliminary injunction motion with the denial of Kidz-Med’s subsequent motion to stay the

proceedings. As the district court correctly held, it was Kidz-Med’s burden to demonstrate

its entitlement to a stay pending appeal. See In re World Trade Ctr. Disaster Site Litig., 503

F.3d 167, 170 (2d Cir. 2007).

3.     Recall Order

       Nor did the district court abuse its discretion in finding that a recall of Kidz-Med’s

non-contact thermometers would be more beneficial to Tecnimed than burdensome to Kidz-

Med. See Perfect Fit Indus., Inc. v. Acme Quilting Co., 646 F.2d at 807 (stating that district

court should consider relative benefit to trademark owner and burden to infringer when

determining whether product recall is appropriate remedy). Kidz-Med does not dispute the

                                               7
district court’s finding that a recall would require it to contact five retailers and would cost

$95,000 to complete. See Tecnimed SRL v. Kidz-Med, Inc., 763 F. Supp. 2d at 416. It

complains that the district court did not weigh these facts against Kidz-Med’s precarious

financial condition. In fact, the record shows that the district court specifically concluded

that Kidz-Med should bear the costs despite its imminent insolvency because it had assumed

the risk of a recall by intentionally keeping its non-contact thermometers on the market

during this litigation’s pendency. See id.; see also Perfect Fit Indus., Inc. v. Acme Quilting

Co., 646 F.2d at 807 (holding that defendant’s intentional acts to infringe plaintiff’s

trademark supported district court’s recall order).

4.     Conclusion

       We have considered Kidz-Med’s remaining arguments and find them to be without

merit. Accordingly, we AFFIRM the order of the district court.

                                    FOR THE COURT:
                                    CATHERINE O’HAGAN WOLFE, Clerk of Court




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