
USCA1 Opinion

	




                            United States Court of Appeals                            United States Court of Appeals                                For the First Circuit                                For the First Circuit                                 ____________________        No. 95-1975                                TEC ENGINEERING CORP.,                                 Plaintiff, Appellee,                                          v.                           BUDGET MOLDERS SUPPLY, INC. AND                           PLASTIC PROCESS EQUIPMENT, INC.,                               Defendants, Appellants.                                 ____________________                     APPEAL FROM THE UNITED STATES DISTRICT COURT                          FOR THE DISTRICT OF MASSACHUSETTS                   [Hon. Nathaniel M. Gorton, U.S. District Judge]                                              ___________________                                 ____________________                                        Before                                Cyr, Boudin and Stahl,                                   Circuit Judges.                                   ______________                                 ____________________            Louis  M. Ciavarra  with whom  Barry  A.  Bachrach and  Bowditch &            __________________             ___________________      __________        Dewey were on brief for appellants.        _____            James C.  Donnelly,  Jr. with  whom  Charles  B. Straus,  III  and            ________________________             ________________________        Mirick, O'Connell, Demallie & Lougee were on brief for appellee.        ____________________________________                                 ____________________                                    April 30, 1996                                 ____________________                      STAHL, Circuit Judge.  Budget Molders Supply, Inc.,                      STAHL, Circuit Judge.                             _____________            and Plastic Process Equipment, Inc.,  (collectively "Budget")            appeal  from   a  preliminary  order   enjoining  them   from            manufacturing, marketing or  distributing certain  industrial            conveyors  alleged  to  be confusingly  similar  to conveyors            manufactured  and sold  by  appellee,  TEC Engineering  Corp.            ("TEC").  Because  the district court failed to make findings            of fact  and  conclusions of  law sufficient  to support  its            decision as required by Fed. R. Civ. P.  52(a), we modify the            injunction and remand for further proceedings.                                          I.                                          I.                                          __                                     Background1                                     Background                                     __________                      TEC manufactures  a series  of conveyors  under the            model  name "Ultraline,"  which it  markets primarily  to the            plastics processing industry.   The  conveyors are  generally            used  to transport lightweight  plastic products from molding            machines in  which  they are  formed  to other  machines  for            packaging.  TEC sells  the Ultraline conveyors under the  TEC            name through independent sales representatives.  In addition,            TEC authorizes an independent distributor,  Injection Molders            Supply,  Inc.   ("IMS"),  to  advertise,  promote   and  sell                                            ____________________            1.  Our recitation of the  facts is hampered by the  district            court's  failure   to  make  any  findings   in  issuing  the            injunction.    To  provide  context, we  draw  the  following            statement  from what  we perceive  as essentially  undisputed            facts.   The statement is  not intended to  be binding on the            district court.                                           -2-                                          2            Ultraline conveyors under the IMS tradename through IMS's own            product   catalogues.    In   1994,  combined   domestic  and            international  sales of  Ultraline  conveyors exceeded  2,000            units, generating revenues of approximately $3 million.                      Budget  has competed  with TEC  and  other conveyor            manufacturers in the plastics  processing industry market for            over five  years.   Budget markets its  conveyors exclusively                                            through direct-catalogue sales.   About January 1995,  Budget            decided  to   modify  the  design  of  its  primary  line  of            conveyors.    Consequently, Budget  soon  began  to market  a            redesigned conveyor  under the  "Supraline"  model name  that            closely resembled  TEC's Ultraline  conveyor.  Budget  labels            each Supraline conveyor with the name "Budget Molders Supply,            Inc."  in several  different places  on the  machine.   While            these  Budget labels  cannot be  seen in  every advertisement            photograph of  a Supraline  conveyor included in  the record,            each Supraline advertisement prominently features  the Budget            name (although not necessarily on the pictured conveyor), and            several include the statement "Made in the USA by Budget."                      It   appears  largely   undisputed  that   the  two            conveyors, when  placed side by side,  are strikingly similar            in  appearance.  Many of  the similarities shared  by the two            machines,  however,  are  to  some  extent  functional.    In            addition,  the  record  includes several  advertisements  for            conveyors  sold by companies other than TEC or Budget.  These                                         -3-                                          3            conveyors,   at  least   as   they  are   presented  in   the            advertisements, also appear somewhat similar to the Ultraline            and  Supraline  conveyors.     Moreover,  apparently  several            companies  other than  TEC or  Budget incorporate  the suffix            "line"  in the  model  names of  their respective  conveyors.            Budget   notes  that,   in   addition   to  "Ultraline"   and            "Supraline," other model names  for conveyors marketed to the            plastics processing industry  include "A-line,"  "Flex-line,"            "Slim-line," "Omni-line," and "Direct-line."                      On  July  12, 1995,  TEC  brought  this action  for            trademark infringement under section 43(a) of the Lanham Act,            15  U.S.C.   1125(a).   In its complaint,  TEC alleges, inter                                                                    _____            alia,  that the trade dress  of its Ultraline  conveyors is a            ____            well-established mark in the industry and that, by developing            and  marketing  its Supraline  conveyors, Budget  intended to            exploit the goodwill  associated with that  trade dress.   On            July 21, 1995,  the district  court held a  hearing on  TEC's            request for  preliminary injunctive relief.   At the hearing,            an Ultraline and a Supraline conveyor  were made available to            the district court for review.                      At the  close of  the hearing, the  court indicated            that "it  believed the products are  confusingly similar" and            that,  therefore, it  was  "inclined to  enter  some sort  of            injunctive relief."  Nonetheless, the court declined to enter            a ruling  at that time and  urged the parties to  resolve the                                         -4-                                          4            matter  themselves.    Eventually,  on August  1,  1995,  the            districtcourt enteredan orderenjoiningBudget from,inter alia,                                                              _____ ____                      manufacturing,  distributing,  promoting,                      advertising, and/or selling:                           1)    the horizontal,  inclined                           and  variable  inclined  Budget                           Supraline Conveyors; and                           2)  any other conveyor which is                           likely  to  cause confusion  or                           mistake  in  the  minds of  the                           public or to deceive purchasers                           into   the   belief  that   the                           defendant's   goods   are   the                           plaintiff's   goods    or   are                           affiliated with or sponsored by                           the plaintiff.2                       Budget now appeals from this order.                                         II.                                         II.                                         ___                                      Discussion                                      Discussion                                      __________                      In  ruling on  a preliminary  injunction motion,  a            district  court  must  ask   whether  the  moving  party  has            established  that  (1) it  has  a  substantial likelihood  of            success  on   the  merits,  (2)  there   exists,  absent  the            injunction, a  significant risk of irreparable  harm, (3) the            balance of hardships tilts in its favor, and (4) granting the            injunction will  not negatively  affect the  public interest.            See, e.g.,  Hypertherm, Inc.  v. Precision Prods.,  Inc., 832            ___  ____   ________________     _______________________            F.2d 697, 699 n.2 (1st Cir. 1987).  Though the district court                                            ____________________            2.  The order  also  enjoins Budget  "from  producing  and/or            distributing .  . . any advertising  or promotional materials            which  depict the  Supraline  Conveyor or  any other  product            which is confusingly similar to the Ultraline Conveyor."                                         -5-                                          5            enjoys  considerable  discretion in  applying this  test, its            decision  to grant or  deny a preliminary  injunction must be            supported  by adequate  findings of  fact and  conclusions of            law.    See Fed.  R.  Civ. P.  52(a);  Knapp  Shoes, Inc.  v.                    ___                            __________________            Sylvania Shoe Mfg. Corp., 15 F.3d 1222, 1228 (1st Cir. 1994).            ________________________                      The  requirements of  Rule  52(a)  are intended  to            assure   that   the   district   court    gives   appropriate            consideration to all essential relevant factors  and provides            an  adequate basis  for  meaningful appellate  review of  its            decision.  See  generally 9A  Charles A. Wright  & Arthur  R.                       ___  _________            Miller, Federal Practice and Procedure    2751, at 478-80 (2d                    ______________________________            ed. 1994).   The rule, however, is not intended to change the            preliminary nature  of the  proceeding; in  the context  of a            preliminary injunction motion,  the district court's findings            need not be overly detailed, and  they do not bind the  court            in subsequent proceedings.  See Aoude v. Mobil Oil Corp., 862                                        ___ _____    _______________            F.2d 890, 895 (1st Cir. 1988).  Moreover, the absence of Rule            52(a)  findings  and conclusions  will  not be  fatal  in all            cases.   We may overlook the defect, if our own review of the            record substantially  eliminates all  reasonable doubt  as to            the  basis  of  the  district  court's  decision.    See  New                                                                 ___  ___            Hampshire Motor Transp. Assoc. v. Flynn, 751 F.2d 43, 47 (1st            ______________________________    _____            Cir. 1984)  (citing Pullman-Standard v. Swint,  456 U.S. 273,                                ________________    _____            292 (1982)); Conservation Law Found., Inc. v. Busey, Nos. 92-                         _____________________________    _____                                         -6-                                          6            1335, 1464, 95-1019, 1020, 1047, 1048, slip op. at 48-49 (1st            Cir. April  2, 1996)  (failure to adhere  to requirements  of            Rule  52(a) is  harmless  error where  undisputed documentary            evidence  combined with district court's extensive discussion            of  other  findings  and  conclusions   adequately  clarifies            otherwise unexplained finding of irreparable harm).                      In this  case, the district court  made no explicit            findings of  fact  or conclusions  of law  in granting  TEC's            request  for a  preliminary  injunction.   In its  three-page            written order, the court merely recited the traditional four-            prong preliminary injunction  test and summarily  stated that            TEC had met its burden in establishing it.  The transcript of            the relatively brief hearing on TEC's motion, provides little            further  insight into  the district  court's reasoning.   The            total  extent  of the  court's  oral  findings following  the            hearing is limited to its statement that "it believed the two            products were confusingly similar."   In the context of  this            case, such  minimal findings do not provide an adequate basis            for appellate review.                      Moreover, our  own review of the  relatively sparse            record does not allow us to affirm the district court's order            in the absence of Rule 52(a) findings.  Suffice it to say, we            believe  that the  pertinent issues  are close  and that  the            evidence  in the record does  not compel a  ruling for either            side.  Indeed,  in a case  such as this  one, where a  proper                                         -7-                                          7            evaluation  of  the  plaintiff's  claim  requires  a  careful            balancing  of  a  number  of nondispositive  factors  by  the            district  court, the  absence of  any subsidiary  findings of            fact or  conclusions of  law renders it  virtually impossible            for this court to do anything  but speculate as to the  basis            of the district court's ruling.  Accordingly, because  we are            unable to  engage in  meaningful appellate review,  we remand            the case to the  district court for further findings  of fact            and conclusions of law.  See Allied Mktg.  Group, Inc. v. CDL                                     ___ _________________________    ___            Mktg., Inc., 878 F.2d 806, 813-14 (5th Cir. 1989) (remand for            ___________            findings in trade dress infringement action); Inverness Corp.                                                          _______________            v. Whitehall Labs., 819 F.2d 48, 50-51 (2d Cir. 1987) (same);               _______________            cf.  Knapp Shoes,  15 F.3d at  1228-29 (decision  to dissolve            ___  ___________            preliminary injunction in unfair competition case vacated for            lack of detailed findings).   On  remand, the  district court            will have to apply  the four-part preliminary injunction test            and  set forth the  basis for its  ruling on each  prong.  In            this case,  TEC alleges that Budget  has impermissibly copied            the trade dress  of its  Ultraline conveyor  in violation  of            section  43(a) of the  Lanham Act, 15  U.S.C.    1125(a).  To            establish  such a  violation,  TEC must  prove  (1) that  its            design is inherently distinctive  or has acquired a secondary            meaning, and (2) that there  is a likelihood that prospective            purchasers  of conveyors will be confused as to the source of            the Budget conveyor.   See  Two Pesos, Inc.  v. Taco  Cabana,                                   ___  _______________     _____________                                         -8-                                          8            Inc., 505 U.S. 763, 769 (1992); Mana Prods., Inc. v. Columbia            ____                            _________________    ________            Cosmetics  Mfg., Inc.,  65 F.3d  1063,  1068 (2d  Cir. 1995);            _____________________            Duraco Prods.,  Inc. v. Joy  Plastics Enters., Ltd.,  40 F.3d            ____________________    ___________________________            1431, 1439 (3d  Cir. 1994).   Whether a violation  ultimately            exists will  also depend on  the functionality of  the copied            design.  See  Two Pesos,  505 U.S.  at 769.3   In  addressing                     ___  _________            TEC's likelihood  of success, the district  court should make            subsidiary findings of fact and conclusions of law sufficient            to  explain its  evaluation of  the evidence with  respect to            each of these three factors.                      Furthermore, we think  that on remand  the district            court  should also  give specific  consideration  to Budget's            claim that,  even if the injunction was  rightly entered, the            second  paragraph is  overbroad.   Similar language  has been            disapproved in  John H. Harland  Co. v. Clarke  Checks, Inc.,                            ____________________    ____________________            711  F.2d  966, 984-85  (11th  Cir.  1983).   See  also 1  J.                                                          ___  ____            McCarthy,  Trademarks  and  Unfair  Competition    8.01[1][c]                       ____________________________________            (1995).  There is no compelling reason for us to resolve  the                                            ____________________            3.  We find it unnecessary to decide at this juncture whether            functionality  is an element  of the plaintiff's  claim or an            affirmative  defense  to be  raised  by the  defendant.   See                                                                      ___            Fisher Stoves,  Inc. v.  All Nighter  Stove Works,  Inc., 626            ____________________     _______________________________            F.2d  193,  196  (1st  Cir.  1980)  (assuming  arguendo  that                                                           ________            defendant bears  burden to  prove functionality); see  also 3                                                              ___  ____            Louis Altman, Callman  on Unfair  Competition Trademarks  and                          _______________________________________________            Monopolies     19.33  (4th  ed. 1994)  (discussing  split  in            __________            circuits on whether functionality is an affirmative defense).            In either event,  we think it  is a factor that  the district            court   should  consider   in   ruling  on   the  preliminary            injunction.                                         -9-                                          9            issue  at this time, and we express  no view on the merits of            this overbreadth claim.                                         III.                                         III.                                         ____                                      Conclusion                                      Conclusion                                      __________                      For the  foregoing reasons,  we remand the  case to            the  district   court  for  further  findings   of  fact  and            conclusions of  law consistent  with this  opinion.  For  the            moment,  we leave  the preliminary  injunction in  place, but            modify  the order  such that  the injunction will  expire two            months  from the  issuance  of this  court's mandate,  absent            further  action by the district court.  See Allied Mktg., 878                                                    ___ ____________            F.2d at 814.                      So ordered.                      So ordered.                      ___________                                         -10-                                          10
