Xylem Trademark Suit Must Go Before a Jury

     (CN) – Companies that sell plumbing products to Home Depot must face a jury trial over the Xylem that they claim is worth millions of dollars, a federal judge ruled.
     The dispute arose after ITT Corp., a White Plains, N.Y.-based, global high-technology manufacturer, announced in January 2011 that it would separate itself into three publicly traded companies.
     Baker & McKenzie, an international law firm, reported months later that there may be “high difficulty” in obtaining trademark protections for ITT’s water-technology branch, Xylem.
     Apparently for the last six years, the Roswell, Ga.-based firm Xylem Group (XG) had been using the mark for its bathroom furniture and fixture design business.
     ITT nonetheless created Xylem Inc. in June to sell to wholesale plumbing distributors and retail chain stores like Ferguson and Home Depot.
     After XG sent ITT a cease-and-desist letter the next month, alleging trademark infringement, ITT and Xylem Inc. sued XG on Oct. 26, seeking a declaratory judgment that their use of the Xylem name and mark does not infringe on XG’s registrations.
     Their marketing expert, American University professor emeritus Michael Mazis, testified that ITT’s Xylem subsidiary does not cause customer confusion.
     XG in turn filed a counterclaim, alleging that XG received at least 58 checks and 23 emails and faxes intended for Xylem Inc. and at least 38 phone calls regarding its products, while Xylem, Inc. received at least eight checks intended for XG – all between November 2011 and September 2012.
     XG further claims that,, while its sales to Ferguson and nearly 40 other distributors totaled more than $1.4 million from Nov. 1, 2011 through July 31, 2012, Xylem Inc.’s sales to these overlapping customers during that time totaled nearly $8.3 million.
     XG asserted trade-name and trademark infringement and unfair competition. It later added requests for injunctive relief, damages, attorneys’ fees and costs, prejudgment interest, and punitive damages.
     ITT and Xylem had also solicited an expert opinion from Philip Hampton II, a former assistant commissioner for trademarks at the U.S. Patent and Trademark Office. Hampton concluded that the value of a licensing agreement between XG and ITT “would have been significantly less than $250,000.”
     While XG’s accounting expert, Robert Hutchins, estimated the minimum reasonable royalty amount at $45 million, ITT and Xylem’s expert, Robert Yerman, calculated royalties at no more than $3.3 million plus a control premium nearly equal to XG’s total equity.
     All parties moved for partial summary judgment and to exclude expert opinions, and U.S. District Judge William Duffey Jr. of the Northern District of Georgia awarded both sides only slight relief Monday.
     “The court finds that while the factors may tip in favor of XG on whether Xylem Inc.’s use of the Xylem name and mark created confusion, including actual confusion, the facts here are unique in that the market and product overlap is limited, and the marketing activity disparate,” Duffey wrote. “While XG appears, based on its registration and an analysis of the seven factors, to have a stronger factual and legal argument in favor of ‘likelihood of confusion,’ in viewing the evidence in the light most favorable to plaintiffs, the court cannot find that no reasonable juror would find there is no confusion created by Xylem Inc.’s use of the Xylem name and mark. The issue of infringement is required to be decided by a jury.”
     XG may be entitled to damages for lost sales, the judgment states.
     “The record evidence here is that XG lost sales in November 2011 and December 2011 in an amount that XG estimates to be $93,790.85,” Duffey wrote. “The court cannot conclude that no reasonable juror would find that actual damages were incurred by XG as a result of lost sales in this amount, and there is a genuine issue of material fact whether XG suffered actual damages due to lost sales. For this reason alone, plaintiffs’ motion for partial summary judgment as to damages is required to be denied.”
     The court denied the motions to exclude Mazis, Hutchins and Yerman’s opinions, holding that the trier of fact must determine their credibility and persuasiveness.
     Duffey granted ITT and Xylem summary judgment on XG’s counterclaim for punitive damages and he excluded certain testimony from Hampton.
     Xylem, the ITT subsidiary, is an S&P 500 company with annual revenue of about $3.8 billion. The decision says XG’s total equity was valued at approximately $3 million in 2009.

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