After $4M Verdict, Federal Judge Denies Request for New Trial on Unsuccessful Trademark Claims

A federal judge in North Carolina denied a plaintiff’s motion for a new trial in an infringement case after a jury awarded the company nearly $5 million on different claim.

Hayward Industries, a New Jersey-based swimming pool equipment manufacturer, sought damages for trademark infringement due to allegedly improper jury instruction during trial. In March, a jury for the U.S. District Court for the Western District of North Carolina returned a $4.9 million verdict in favor of Hayward for misleading advertising by the defendants, BlueWorks Corp., and a group of Chinese-based defendants. However, the jury did not find the defendants infringed upon trademarks for salt chlorinators, labeled “T-cell” products and concluded that BlueWorks proved its use of Hayward’s marks was fair use.

Hayward argued the jury instruction for the trademark infringement claims contained two errors. However, U.S. District Judge Max O. Cogburn Jr. found that the instruction did not result in a verdict that defied the evidence presented at trial.

“[Hayward] has failed to meet the stringent standards necessary for a new trial,” Cogburn said in the Dec. 30 order. “Neither instruction challenged by [Hayward] resulted in a verdict ‘against the clear weight of the evidence’, ‘based upon evidence which is false’, or a ‘miscarriage of justice.”‘

In December 2020, Hayward filed the complaint against BlueWorks, along with Ningbo Electronic and Ningbo Import, for claims under the Lanham Act, 15 U.S.C. Section 1051. BlueWorks allegedly used Hayward’s federally registered trademarks for pool equipment, including pumps, heaters, filters, and chlorination systems, to import and sell their own products in North Carolina retail stores. The case is captioned Hayward Industries v. BlueWorks Corp.

The jury found that BlueWorks and the Ningbo defendants made “false or misleading statements in commercial advertising” that deceived consumers and harmed Hayward. They also violated the North Carolina Unfair and Deceptive Trade Practices Act, the opinion said. Although it received $4.9 million, Hayward only recovered $750 in damages after the jury found BlueWorks only infringed on a copyrighted operation and installation manual for Hayward’s AquaRite salt chlorinator.

In its new trial motion, Hayward took issue with the jury’s instruction to find its “T-cell” trademarks invalid if they were only used for “model designation” instead of source identification. The jury was also instructed that nominative fair use was an affirmative defense to the trademark infringement claim.

The court instructed the jury that a model designation could be a trademark. However, if the jury found the T-cell marks were only used as model numbers and not as trademarks, it also had to rule that the T-Cell marks were invalid.

“[W]hen viewed in the context of the overall charge, and even specifically with respect to the T-Cell marks, the jury was thoroughly instructed as to secondary meaning, and determining whether prospective purchasers have associated the mark with a single source,” Cogburn said.

Hayward claimed that the court’s jury instruction focused too much on “how the marks were used” rather than how the “relevant consuming public understood the marks.” Cogburn affirmed that the court instructed the jury on both matters.

“First, the court’s instruction relating to whether the T-Cell marks were used as trademarks or solely as model numbers was not to the exclusion of how the relevant consuming public viewed the mark,” he said. “The court instructed the jury on both.”

Hayward also argued that how the mark is used is “irrelevant” and defies “a bedrock principle of trademark law.” The Lanham Act, the court noted, defines a trademark as a word, name, symbol, or device used to indicate the source of a protected good.

“In other words, in first determining whether something is a trademark, it must be shown that the mark is being used to identify a source,” Cogburn said. “Only after a trademark is identified does the consumer perception of the mark come into play.”

Evidence presented at trial also showed that Hayward used the T-cells solely as model designations for more than 10 years before attempting to register them as source-identifying trademarks.

As to fair use, the jury was instructed to view the defendants’ use of the T-cell marks as advertising, not as source identification. BlueWorks and Ningbo’s advertising of the salt cells also noted that they were “compatible with” or “replacements for” Hayward’s salt cell products, informing customers of the right replacement part to purchase. Cogburn affirmed the jury’s verdict on fair use was supported by the evidence at trial and that its instruction on fair use was correct statement of law.

Hayward Industries was represented by Alexander L. Ried and Anne E. Shannon of McCarter & English in Boston, and B. Chad Ewing of Womble Bond Dickinson in Charlotte, North Carolina. BlueWorks and Ningbo defendants were represented by Christina Davidson Trimmer and Samuel Alexander Long of Shumaker Loop & Kendrick in Charlotte.

None of the attorneys could immediately be reached for comment.