Cooper Industries, Inc. v. Leatherman Tool Group, Inc.

Facts

In the 1980's P, introduced its Pocket Survival Tool (PST). The Court of Appeals described the PST as an 'ingenious multi-function pocket tool which improves on the classic `Swiss army knife' in a number of respects. Not the least of the improvements was the inclusion of pliers, which, when unfolded, are nearly equivalent to regular full-sized pliers... . P now dominates the market for multifunction pocket tools which generally resemble the PST. In 1995, D decided to design and market a competing multifunction tool. D planned to copy the basic features of the PST, add a few features of its own, and sell the new tool under the name 'ToolZall.' The first ToolZall was designed to be virtually identical to the PST, but the design was ultimately modified in response to this litigation. D introduced the original ToolZall in August 1996 at the National Hardware Show in Chicago. At that show, it used photographs in its posters, packaging, and advertising materials that purported to be of a ToolZall but were actually of a modified PST. When those materials were prepared, the first of the ToolZalls had not yet been manufactured. A D employee created a ToolZall 'mock-up' by grinding the P trademark from handles and pliers of a PST and substituting the unique fastenings that were to be used on the ToolZall. One of photographs was retouched to remove a curved indentation where P trademark had been. D used the pictures at the trade show and in the marketing materials and catalogs used by D's sales force throughout the United States. Cooper also distributed a touched-up line drawing of a PST to its international sales representatives. P sue for claims of trade-dress infringement, unfair competition, and false advertising under §43(a) of the Trademark Act of 1946 (Lanham Act), 60 Stat. 441, as amended, 15 U. S. C. §1125(a) (1994 ed. and Supp. V), and a common-law claim of unfair competition for advertising and selling an 'imitation' of the PST. A preliminary injunction prohibiting D from marketing the ToolZall and from using pictures of the modified PST in its advertising was issued. D withdrew the original ToolZall from the market and developed a new model with plastic coated handles that differed from the PST. D retrieved the info sent to its sales forces but did not attempt to retrieve the materials it had sent to its customers until much later. The offending promotional materials continued to appear in catalogs and advertisements well into 1997. The jury returned a verdict that answered several special interrogatories. With respect to the Lanham Act infringement claims, the jury found that P had trademark rights in the overall appearance of the PST and that the original ToolZall infringed those rights but that the infringement had not damaged P. It then found that the modified ToolZall did not infringe P's trademark rights in the PST. With respect to the advertising claims, it found D guilty of passing off, false advertising, and unfair competition and assessed aggregate damages of $50,000 on those claims. The jury found that D had engaged in false advertising. The jury awarded $4.5 million in punitive damages. The District Court considered, and rejected, arguments that the punitive damages were 'grossly excessive' under our decision in BMW of North America, Inc. v. Gore, 517 U. S. 559 (1996). The court ordered that 60% of the punitive damages would be paid to the Criminal Injuries Compensation Account of the State of Oregon. The judgment also permanently enjoined Cooper from marketing its original ToolZall in the United States or 22 designated foreign countries. D challenged both the District Court's injunction against copying the PST and the punitive damages award. The Court of Appeals issued two opinions. In its published opinion it set aside the injunction. Leatherman Tool Group, Inc. v. Cooper Industries, Inc., supra. It held that the overall appearance of the PST was not protected under the trademark laws because its distinguishing features, and the combination of those features, were functional. Accordingly, even though D had deliberately copied the PST, it acted lawfully in doing so. The Court of Appeals affirmed the punitive damages award. It found the award 'was proportional and fair, given the nature of the conduct, the evidence of intentional passing off, and the size of an award necessary to create deterrence to an entity of D's size' and concluded 'that the award did not violate D's due process rights' under the Federal Constitution. It found that D's use of the photographs of the PST did not involve 'the same sort of potential harm to P or customers as that which may arise from traditional passing off. The Court of Appeals concluded, 'the district court did not abuse its discretion in declining to reduce the amount of punitive damages.'

Issues

Rule of Law

Holding and Decision

Legal Analysis

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