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IP Alert: Seventh Circuit Affirms Finding of Summary Judgment for Defendant Despite Improper Disclosure of Consumer Survey

July 12, 2019

Consumer survey evidence is often introduced in trademark cases, and, when used, such evidence almost always requires expert testimony. The expert generally must be disclosed to the opposing party in accordance with Rule 26 of the Federal Rules of Civil Procedure. A recent case from the Seventh Circuit, Uncommon, LLC v. Spigen, Inc., exemplifies a circumstance where the court excused the defendant’s failure to disclose its expert. On the somewhat unusual facts of this case, the appellate court affirmed the district court’s judgment that the failure to submit a Rule 26 expert report for the expert who conducted the consumer survey was harmless under Rule 37(c)(1).

Plaintiff Uncommon, a manufacturer and retailer of cellphone cases, registered the trademark CAPSULE for goods specifically adapted for the protection and storage of consumer electronics. Spigen, a competitor, sold cellphone cases under various marks each including the word “Capsule.” Uncommon sued Spigen for trademark infringement and unfair competition. Spigen countersued, seeking cancellation of Uncommon’s registration and claiming that consumers did not associate the term “capsule” with Uncommon’s goods.

In support of its countersuit, Spigen disclosed two experts—Doug Bania and Kirk Martensen. Bania was slated to testify on the lack of confusion, the descriptiveness of Uncommon's mark, secondary meaning, and damages. Martensen was, according to Spigen, a “non-testifying expert” who was to conduct a consumer survey that could be used by Bania. Martensen might also “be called to testify on the methodology of the survey if needed.” Uncommon elected not to depose Martensen.

The parties filed cross-motions for summary judgment. Spigen relied on the consumer survey in its opening motion, and Uncommon responded that such use of the survey was improper because no expert could testify to its methodology. Spigen then submitted a declaration from the expert explaining the methodology used. In response, Uncommon asserted that the declaration was untimely and inadequate.

The district court held that although Spigen failed to disclose its expert as a testifying witness, such error was harmless. The court also held that the survey was sufficient to establish that consumers did not, in fact, associate the term “capsule” with Uncommon’s products. Relying in part on the survey, the court canceled Uncommon’s registration and entered summary judgment in Spigen’s favor on all of Uncommon’s claims.

On appeal, Uncommon argued in part that the district court had erred in considering the Martensen declaration. The Seventh Circuit observed that Rule 37(c)(1) allows admission of evidence if the failure to disclose was “harmless.” Spigen had timely disclosed its survey and related materials as required in Rule 26(a). Uncommon did not inquire into the survey’s methodology and Bania’s reliance on it, but instead waited to argue at summary judgment. For these reasons, Spigen’s failure to follow Rule 26 in disclosing its survey expert was harmless. Thus, the Seventh Circuit affirmed the district court.

The Seventh Circuit considered several factors in its analysis that were important to this case. First, because Spigen timely disclosed Martensen's survey with its underlying data—a two-page document summarizing the expert’s credentials and Bania’s report, which relied heavily on the survey—the court found that Spigen’s failure to disclose was not a surprise tactic. It also did not cause any disruption to the proceeding and was not done in bad faith. Additionally, the court determined that Uncommon had the ability to cure any potential prejudice as provided in Rule 37: “Rule 37 . . . provides recourse for parties actually harmed by a litigant's noncompliance with disclosure obligations. It does not safeguard a party's decision to sense an error, seize on it, and then, when it is resolved, claim incurable harm in the face of apparent remedies.” Uncommon could have deposed the expert, but chose not to. Thus, Spigen’s failure to disclose was determined to be harmless. Because the survey was admissible, the Seventh Circuit proceeded to consider whether the term “capsule” was descriptive.

In its analysis of the distinctiveness of “capsule,” the court considered how and how often the relevant market uses the term, third-party registrations, as well as the “degree-of-imagination” and the dictionary tests. The court concluded that each test demonstrated that “capsule” was directly descriptive of some function of the goods and, thus, not inherently distinctive. In the absence of secondary meaning, which is required for a descriptive trademark to be valid, the Seventh Circuit affirmed the district court’s invalidation of Uncommon’s registration.

The Seventh Circuit’s decision illustrates the flexibility of Rule 26. Although the facts of this case are unusual, litigants should disclose all related materials required in litigation to avoid the possibility of courts barring substantive evidence. Moreover, parties who may be harmed by one’s noncompliance with Rule 26 must cure any prejudice that occurs as a result. As the Seventh Circuit stated, “Litigation is adversarial, not a game of gotcha.” Both plaintiffs and defendants have responsibilities to proactively assert and oppose arguments throughout the legal process.

For more information on this decision, please contact Fitch Even attorney Kerianne A. Strachan, author of this alert.
 

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