The U.S. Court of Appeals for the Fourth Circuit agreed with the district court that a competing paper towel maker that induced its customers to fill a trademark owner’s trademark bearing towel dispensers with “inferior” paper towels is liable as a contributory infringer where there was sufficient evidence for a jury to find a likelihood of confusion among restroom visitors as to the source of the paper toweling being dispensed. Georgia Pacific Consumer Products v. Von Drehle Corp.,Case No. 09-1942, (4th Cir., Sept. 10, 2010) (Hamilton, Sr. J.) (Wilson, J., concurring).

Georgia-Pacific Consumer Products (G-P) designs and manufactures paper products and dispensers. In 2002, G-P introduced its “enMotion” dispensers, a “touchless” paper towel dispenser designed to use G-P’s “fabric-like” toweling. The dispensers bear the G-P marks “enMotion,” “Georgia-Pacific” and a stylized “GP.” G-P leases the enMotion dispensers to distributors (who in turn sub-lease them to end users) through an agreement designating that only G-P branded towels should be used in the dispensers.

Von Drehle (VD) is a competitor of G-P. In 2004, VD began selling lower-quality toweling designed for use in enMotion dispensers. G-P sued VD, alleging contributory trademark infringement and unfair competition under the Lanham Act. VD counterclaimed, asserting deceptive trade practices under North Carolina law.

G-P argued that VD, by inducing and facilitating the end-user’s “stuffing” of enMotion dispensers with VD’s toweling, created post-purchase confusion as to the source of such toweling among restroom visitors, thus creating the potential to harm its reputation and goodwill. On cross motions for summary judgment, the district court granted summary judgment in favor of VD on G-P’s claims, but in favor G-P on VD’s counterclaims. Both parties appealed.

In its de novo review of the district court’s summary judgment decisions, the Fourth Circuit, quoting the following passage from the Supreme Court’s 1982 decision in Inwood Laboratories v. Ives Laboratories, vacated the district court’s summary judgment in favor of VD:

Liability for trademark infringement can extend beyond those who actually mislabel goods with the mark of another. Even if a manufacturer does not directly control others in the chain of distribution, it can be held responsible for their infringing activities under certain circumstances. Thus, if a manufacturer or distributor intentionally induces another to infringe a trademark, or if it continues to supply its product to one whom it knows or has reason to know is engaging in trademark infringement, the manufacturer or distributor is contributorially responsible for any harm done as a result of the deceit.

On the issue of contributory infringement, the Court favored that assuming that the stuffing of enMotion dispensers with VD’s toweling by end-user customers constitutes trademark infringement, the record contained sufficient evidence for a reasonable jury to find that VD was liable for contributory trademark infringement.

Then turning to the issue of whether the end-user stuffing constituted direct trademark infringement, the Fourth Circuit explained that to make its case, G-P needed to prove that it possessed a trademark, that an end-user customer used the trademark in commerce in connection with the sale, offering for sale, distribution or advertising of goods, as well as that an end-user did so in a manner likely to cause confusion among the relevant public.

Addressing each of the above elements of a prima facia case of trademark infringement, the Fourth Circuit concluded that by stuffing enMotion dispensers with VD’s toweling, end-user customers used one or more of the G-P marks in commerce in connection with the distribution of goods, leaving only the likelihood of confusion issue open for discussion.

Regarding confusion, the Fourth Circuit agreed with G-P that the district court erred in limiting its likelihood of confusion inquiry to distributors who purchased VD paper toweling and their respective end-user customers noting that “Fourth Circuit case law makes room for the factfinder to consider confusion among the non-purchasing public in the likelihood-of-confusion inquiry if it can ‘be shown that public confusion will adversely affect the plaintiff's ability to control his reputation among its laborers, lenders, investors, or other group with whom plaintiff interacts.’”

After noting that several of the likelihood of confusion factors, including the similarity of the two marks, were not relevant in the present situation, the Court concluded that G-P presented sufficient evidence for a reasonable jury to find “in favor of G-P with respect to each element of its contributory trademark infringement claims” and its common law unfair competitor claim.

Practice Note: In situations in which it is not practical to file suit against a direct trademark infringer, a trademark rights holder should consider contributory infringement and unfair competition claims.