Opinion
Civil Action No. 3:00-CV-0888-G
October 16, 2002
FINDINGS AND RECOMMENDATION OF TILE UNITED STATES MAGISTRATE JUDGE
Defendant Craftmade International, Inc. has filed its Second Motion for Summary Judgment on Minka Lighting, Inc's. and Pan Air Electric Co., Ltd.'s claims of unfair competition and unjust enrichment. The motion was referred to United States Magistrate Judge Irma Carrillo Ramirez for findings and recommendation pursuant to 28 U.S.C. § 636(b) and Special Order No. 3-124, filed September 11, 2002. The motion is now before the Court, has been frilly briefed, and is ripe for determination.
I. BACKGROUND
Minka Lighting, Inc. and Pan Air Electric Co., Ltd. (collectively "Plaintiffs"), hold U.S. Patent No. 380, 539 ("`539") for the ornamental design of a combined ceiling fan and light fixture. See U.S. Magistrate Judge Jeff Kaplan's Findings and Recommendation ("Mag. Find.") at 1. The `539 patent's commercial embodiment is the Viper ceiling fan, which was introduced into the United States market in 1996. See id Defendant Craftmade International, Inc. ("Defendant") produces two competing ceiling fans: the Cefiro and Solo. See id
In their Third Amended Complaint, Plaintiffs assert claims for patent infringement, unfair competition, and unjust enrichment. See Third Am. Comp. at 2-5. On February 21, 2002, Defendant moved for summary judgment as to the patent infringement claim only. See D. Mot. Sum.J. at 1. On May 15, 2002, U.S. Magistrate Judge Jeff Kaplan recommended that summary judgment be granted after finding that no reasonable jury could find a substantial similarity in the designs of the Cefiro and Solo ceiling fans and the `539 patented Viper ceiling fan. See Mag. Find, at 10. On June, 14, 2002, the District Court adopted the findings and recommendation and granted Defendant's motion for summary judgment. See Judg. at 1. With leave of court, Defendant filed the instant second motion for summary judgment on the two remaining claims: unfair competition and unjust enrichment.
Defendant argues that Plaintiffs' remaining claims cannot succeed because they are premised on the now-dismissed patent infringement issue. See D.Br. at 2. Plaintiffs concede that their claims for unfair competition and unjust enrichment are based, in part, on the dismissed infringement theory. See id, at Facts 7-8. However, plaintiffs also allege palming off and misappropriation as bases for their claim of unfair competition. See Third Am. Comp. at 4. Plaintiffs also allege that Defendant misappropriated their goodwill and reputation by marketing and selling substantially similar products and thereby was unjustly enriched. See Third Am. Comp. at 4-5.
II. ANALYSIS
A. Summary Judgment Standard
Federal Rule of Civil Procedure 56(b) provides for summary judgment by a defendant. See FED. R. Civ. P 56(b). Summary judgment is proper when there is no genuine issue as to any material fact and the movant is entitled to judgment as a matter of law. See FED. R. Civ. P. 56(c); see also Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). A dispute is genuine if the court could resolve the issue in favor of either party. See Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986); see also Thurman v. Sears, Roebuck Co., 952 F.2d 128, 131 (5th Cir. 1992). A fact is material if it might reasonably affect the outcome. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986); see also Matter of (Heasman, 933 F.2d 1277, 1281 (5th Cir. 1991).
The disposition of a case through summary judgment "reinforces the purpose of the Rules, to achieve the just, speedy, and inexpensive determination of actions, and, when appropriate, affords a merciful end to litigation that would otherwise be lengthy and expensive." Fontenot v. Upjohn Company, 780 F.2d 1190, 1197 (5th Cir. 1986).
The movant who does not bear the burden of proof at trial must show the absence of a genuine and material fact issue. See Duffy v. Leading Edge Prods., Inc., 44 F.3d 308, 312 (5th Cir. 1995); see also Tubacex, Inc. v. M/V Risan, 45 F.3d 951, 954 (5th Cir. 1995). The movant makes such a showing by informing the court of the basis of its motion and by identifying the portions of the record which reveal there are no genuine material fact issues. See Celotex Corporation v. Catrett, 477 U.S. 317, 323 (1986). Once the movant makes this showing, the nonmovant must then direct the court's attention to evidence in the record sufficient to establish that there is a genuine issue of material fact for trial. See id., at 323-24. The parties may satisfy their respective burdens by tendering depositions, affidavits, and other competent evidence. See Topalian v. Ehrman, 954 F.2d 1125, 1131 (5th Cir. 1992). However, conclusory statements, hearsay, and testimony based merely on conjecture or subjective belief are not competent summary judgment evidence. See id. The court must view all of the evidence in a light most favorable to the motionts opponent. See Anderson, 477 U.S. at 255 (1986).
B. Unfair Competition
Plaintiffs allege that defendant committed the tort of unfair competition under Texas law. Unfair competition under Texas law ""is the umbrella for all statutory and nonstatutory causes of action arising out of business conduct which is contrary to honest practice in industrial or commercial matters.'" Taylor Publishing Co. v. Jostens, Inc., 216 F.3d 465, 486 (5th Cir. 2000), quoting American Heritage Life Ins. Co. v. Heritage Life Ins. Co., 494 F.2d 3, 14 (5th Cir. 1974); c.f, United States Sporting Prods, Inc. v. Johnny Stewart Game Calls, Inc., 865 S.W.2d 214, 217 (Tex.App.-Waco 1993, writ denied). The tort requires that the plaintiff show an illegal act by the defendant which interfered with the plaintiffs ability to conduct its business; the illegal act need not necessarily violate criminal law, but must at least be an independent tort. See Taylor Publishing Co., 216 F.3d at 486, citing Schoellkopf v. Pledger, 778 S.W.2d 897, 904-05 (Tex.App — Dallas 1989, writ denied) (stating that "Without some finding of an independent substantive tort or other illegal conduct, we hold that liability cannot be premised on the tort of `unfair competition.'"); see also 70 TEX. JUR.3d Trademarks § 33 (1999) (same). As independently illegal or tortious acts, Plaintiffs allege patent infringement and misappropriation. See Third Am. Comp. at 4.
1. Patent Infringement
Plaintiffs allege that "Defendant's infringement of the `539 Patent represents illegal conduct that has interfered and continues to interfere with Plaintiffs' ability to do business." Pl. Br. at 3. Because the District Court has previously granted summary judgment for Defendant on the patent infringement claim, Plaintiffs cannot establish patent infringement as a requisite illegal act or independent tort which would support of a claim of unfair competition. See Taylor Publishing Co., 216 F.3d at 486. Therefore, Plaintiffs' unfair competition claim fails as a matter of law to the extent that the claim is premised on patent infringement.
2. Misappropriation
With regard to the misappropriation claim, Plaintiffs argue that Defendant unfairly competed by marketing, offering for sale, and selling substantially similar ceiling fans, thereby misappropriating Plaintiffs' fan's appearance. See Pl. Br. at 4. Texas courts have recognized misappropriation as an independent cause of action within the broad scope of unfair competition. See Synercom Technology, Inc. v. University Computing, 474 F. Supp. 37, 39 (N.D.Tex. 1979) (Higginbotham, J.); see also United States Sporting Goods, Inc., 865 5. W.2d at 218. To succeed on an unfair competition claim through misappropriation, a plaintiff must establish the following elements: "(i) the creation of plaintiff's product through extensive time, labor, skill and money; (ii) the defendant's use of that product in competition with Plaintiff, thereby gaining a special advantage in that competition (i.e., a "free ride") because defendant is burdened with little or none of the expense incurred by Plaintiff; and (iii) commercial damage to Plaintiff." Id., see also Conan Properties, Inc. v. Conan's Pizza, Inc., 752 F.2d 145, 156 (5th Cir. 1985); Universal City Studios v. Kamar Industries, 217 U.S.P.Q. 1162, 1168 (S.D.Tex. 1982) (explaining that "[t]he doctrine of misappropriation is a branch of the tort of unfair competition which involves the appropriation and use by the defendant, in competition with Plaintiff, of a unique pecuniary interest created by Plaintiff through the expenditure of labor, skill and money.").
Defendant argues that it cannot unfairly compete with Plaintiffs by selling ceiling fans which are visually dissimilar from Plaintiffs' ceiling fan. See Def Br. at 7. Because the District Court has previously found that Defendant's ceiling fans are visually dissimilar and do not infringe Plaintiffs' patent, Plaintiffs cannot establish the second element of their claim, i.e., that defendant was using Plaintiffs' product in competition with them. All of Plaintiffs' disputed facts seeking to prove so are either foreclosed by the Court's earlier rulings or immaterial. Plaintiffs' unfair competition claim fails as a matter of law to the extent that the claim is premised on misappropriation.
Plaintiffs' complaint appears to allege that Defendant unfairly competed by "palming off' as well as misappropriating its fans. Some courts view "palming off' as a separate cause of action under unfair competition. See, e.g., McCoy v. Mitsuboshi Cutlery, Inc., 67 F.3d 917, 925 n. 2. (Fed. Cir. 1995) (noting that Texas law recognizes unfair competition by "trade secret misappropriation, passing off, and misappropriation of business opportunity."). To the extent that Plaintiffs allege a separate cause of action and notwithstanding their failure to brief the issue, this claim also fails as a matter of law for the same reasons as the misappropriation claim.
Because both of the alleged independently tortious or illegal acts supporting Plaintiffs' claim have failed, summary judgment is proper as to the claim of unfair competition. See Taylor Publishing Co., 216 F.3d at 486; see also WoodArts Golf Inc. v. Callaway Golf Co., 196 F. Supp.2d 467, 471 (S.D. Tex. 2002) (dismissing Texas common law unfair competition claim which was was wholly contingent on a failed patent infringement claim); Aspex Eyewear, Inc. v. E'Lite Optik, Inc., 2002 WL 1751381, *25 (N.D.Tex. Apr 04, 2002) (Fitzwater, J.) (finding that summary judgment on an unfair competition claim is proper if the only other tort supporting it had been removed from the case on summary judgment).
C. Unjust Enrichment
Plaintiffs claim that Defendant profited from its alleged patent infringement, unfair competition, and misappropriation through its offer and sale of substantially similar ceiling fans and was thereby unjustly enriched under Texas common law. See Pl. Br. at 4-5. In Texas, unjust enrichment occurs where a defendant has obtained a benefit from another by fraud, duress, or the taking of an undue advantage. See Zapata Corp. v. Zapata GulfMarine Corp., 986 S.W.2d 785, 788 (Tex.App. — Houston [1st Dist.] 1999, no writ); see also Drawhorn v. Qwest Comm. Int'l, Inc., 121
F. Supp.2d 554, 562 (E.D. Tex. 2000).
As with the unfair competition claim, Plaintiffs' claim of unjust enrichment is partially premised on a cause of action which the Court previously addressed and adjudged against them. The Court's previous finding that Defendant's ceiling fans are not substantially similar to Plaintiffs' fan and the instant recommended dismissal of the unfair competition claim extinguish all grounds for Plaintiffs' unjust enrichment claim. Accordingly, Plaintiffs cannot establish the elements of unjust enrichment, and summary judgment is also proper as to this claim.
III. CONCLUSION
For the foregoing reasons, the undersigned recommends that Defendant's Second Motion for Summary Judgment be GRANTED.