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GUARDIAN LIFE INS. CO. OF AMERICA v. AMERICAN GUAR

August 13, 1996

THE GUARDIAN LIFE INSURANCE COMPANY OF AMERICA V. AMERICAN GUARDIAN LIFE ASSURANCE COMPANY


The opinion of the court was delivered by: PADOVA

 Padova, J.

 August 13, 1996

 Plaintiff, the Guardian Life Insurance Company of America, brings this action against Defendant, American Guardian Life Assurance Company, for trademark infringement and unfair competition under the Lanham Trademark Act and Pennsylvania law, seeking damages and injunctive relief. Currently before the Court are the parties' cross-motions for summary judgment and Plaintiff's motion in limine to exclude evidence. For the reasons that follow, Defendant's motion for summary judgment will be denied. Plaintiff's motion for summary judgment will be granted in part and denied in part and Plaintiff's motion in limine will be denied in part.

 I. FACTUAL BACKGROUND

 Plaintiff, a New York corporation with its principal place of business in New York City, is one of the largest mutual insurers in the United States, specializing in individual life insurance, disability insurance, group health and life insurance, equities, and annuities. Plaintiff claims it has used the corporate name THE GUARDIAN LIFE INSURANCE COMPANY OF AMERICA and the marks GUARDIAN and THE GUARDIAN ("THE GUARDIAN names and marks") throughout the United States for over seventy years and is the owner of numerous United States Service Mark Registrations. Plaintiff has been licensed to sell insurance in all fifty states and the District of Columbia since 1948 and has sold insurance in the Commonwealth of Pennsylvania under the name and mark GUARDIAN for over fifty years.

 Defendant, American Guardian Life Assurance Corporation, is a Maryland corporation with its principal place of business in Blue Bell, Pennsylvania. Defendant is licensed to sell insurance in approximately 40 states and the District of Columbia and specializes in term and whole life insurance as well as annuities. Because Defendant's corporate history is relevant to the analysis that follows, it is set forth here in detail.

 Defendant's history begins in late 1971 when Philadelphia Financial Group acquired the license and assets of a Pennsylvania corporation named 20th Century Life Insurance Company. After the acquisition, the name was changed to American Guardian Life Assurance Company ("AGL-PA"). From approximately 1972 to 1978, AGL-PA sold insurance exclusively in Pennsylvania. In approximately 1978, AGL-PA obtained a license to sell insurance in Delaware.

 In the early 1980's, AGL-PA entered into a joint venture with Integrity Life Insurance Company ("Integrity") whereby AGL-PA marketed its products under Integrity's name in several jurisdictions outside the states in which AGL-PA was licensed. AGL-PA later assumed the business of Integrity. On January 23, 1986, AGL-PA obtained a Pennsylvania state service mark registration for the mark "American Guardian Life Assurance Company" superimposed over the enlarged letters "AGL." *fn1"

 In December 1984, AGL-PA and Plaintiff entered into a reinsurance treaty whereby Plaintiff provided AGL-PA with surplus relief to protect against claims brought by AGL-PA policy holders. The treaty was a financing arrangement created to increase AGL-PA's surplus position to meet minimum capital/surplus requirements. The treaty was executed on behalf of Plaintiff by John C. Angle, Plaintiff's president at the time, and by Thomas Kabele, Plaintiff's Vice President and Corporate Actuary. The treaty remained in force until September 1988.

 In 1985, AGL-PA acquired a shell corporation named Annapolis Life Insurance Company ("Annapolis"). Annapolis was incorporated in Maryland and licensed to sell insurance in 21 states and the District of Columbia. *fn2" At the time of its acquisition, Annapolis had no existing insurance business, no agents and no policy holders.

 AGL-PA operated Annapolis as a separate entity from 1985 to 1991. *fn3" On January 1, 1991, AGL-PA transferred virtually all of its assets to Annapolis, including its insurance policies currently in force. *fn4" Annapolis changed its name to American Guardian Life Assurance Company, the Defendant in this case. AGL-PA, now only a shell, simultaneously changed its name to Omni Life, and became a subsidiary of Defendant. As of December 1991, Omni Life was liquidated and all its remaining assets were transferred to Defendant. As a result of this transfer of assets, Defendant was licensed to sell insurance in 23 states and the District of Columbia.

 Following the asset transfer in 1991, Defendant sought to expand its business by acquiring licenses to sell insurance in additional states. To date, Defendant is licensed to sell insurance in 40 states, and is actively conducting business in approximately 33 of those states.

 On September 12, 1994, Plaintiff mailed a notice of infringement to Defendant demanding that it cease use of the term "GUARDIAN." Defendant alleges that on September 28, 1994, Plaintiff sent a letter to the Insurance Commissioner of the State of Hawaii protesting the issuance of a license to Defendant. Defendant alleges that Plaintiff sent similar letter to the Insurance Commissioners of eleven other states. The letters allegedly contained the following representations of fact, each of which Defendant contends is false:

 
1. Defendant has recently expanded its use of the name American Guardian from its initial two-state sales territory to twenty-seven states;
 
2. Defendant has changed its product mix from annuities to term and ordinary life insurance as well as health and disability insurance; and
 
3. Defendant's geographic expansion, change of product emphasis from annuities to life insurance, and expansion into health insurance appears to be designed to create confusion.

 II. PROCEDURAL BACKGROUND

 Plaintiff filed its four count Complaint on June 27, 1995, asserting: (1) trademark infringement in violation of § 32 of the Lanham Act, 15 U.S.C.A. § 1114 (West 1963 & Supp. 1996) (Count I); (2) false designation of origin, descriptions and/or representations in violation of § 43 of the Lanham Act, 15 U.S.C.A. § 1125 (West 1982 & Supp. 1996) (Count II); (3) dilution under the Pennsylvania Trademark Act, 54 Pa. Cons. Stat. Ann. § 1124 (West Supp. 1996) (Count III); and (4) unfair competition under Pennsylvania common law (Count IV).

 Plaintiff filed a motion to dismiss Defendant's counterclaims pursuant to Fed. R. Civ. P. 12(b)(6). In a Memorandum and Order filed December 11, 1995, this Court granted Plaintiff's motion as to Counts I and II of Defendant's counterclaims and denied the motion as to Defendant's remaining counterclaims. Plaintiff's subsequent motion for reconsideration was also denied.

 Many disputes arose between the parties during the course of discovery. Among the most contentious was Defendant's desire to take oral depositions of numerous third party users of the term "GUARDIAN." Defendant sought such depositions from third party users both inside and outside the insurance industry. At a hearing to resolve the parties' discovery disputes, the Court determined that the information sought by Defendant was relatively simple and could be procured by stipulation of the parties. In the absence of a sufficiently developed record, the Court declined to rule on the admissibility of such evidence. However, Plaintiff expressly reserved its right to object to the admissibility of the stipulations at the appropriate time. The parties have submitted their joint stipulations as to these users, although Plaintiff maintains its objections to the admissibility of this evidence.

 III. STANDARD OF REVIEW

 Rule 56(c) of the Federal Rules of Civil Procedure provides that summary judgment "shall be rendered forthwith if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed. R. Civ. P. 56(c).

 An issue is "genuine" only if there is sufficient evidence from which a reasonable jury could find for the non-moving party. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249, 106 S. Ct. 2505, 2511, 91 L. Ed. 2d 202 (1986). Furthermore, bearing in mind that all uncertainties are to be resolved in favor of the non-moving party, a factual dispute is only "material" if it might affect the outcome of the case. See id. at 248, 106 S. Ct. at 2510.

 A party seeking summary judgment always bears the initial responsibility of informing the Court of the basis for its motion and identifying those portions of the record that it believes demonstrate the absence of a genuine issue of material fact. See Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S. Ct. 2548, 2553, 91 L. Ed. 2d 265 (1986). Where the non-moving party bears the burden of proof on a particular issue at trial, the movant's initial Celotex burden can be met simply by "pointing out to the district court that there is an absence of evidence to support the non-moving party's case." Id. at 325, 106 S. Ct. at 2554. After the moving party has met its initial burden, summary judgment is appropriate if the non-moving party fails to rebut by making a factual showing "sufficient to establish an element essential to that party's case, and on which that party will bear the burden of proof at trial." Id. at 322, 106 S. Ct. at 2552. With these standards in mind I address the parties' motions.

 IV. DEFENDANT'S MOTION FOR SUMMARY JUDGMENT

 Defendant bases its motion for summary judgment on four closely related affirmative defenses. They are: (1) violation of the applicable limitations period; (2) laches; (3) equitable estoppel; *fn5" and (4) acquiescence. As the factual allegations supporting these defenses are essentially the same, I will examine the parameters of each defense seriatim and then discuss the factual contentions relevant to all of the asserted defenses.

 A. Statute of Limitations

 In infringement litigation over a federally registered mark, the Lanham Act provides no express statute of limitations, but vests the court with the power to grant injunctions "according to the principles of equity" 15 U.S.C.A. § 1116(a), and to award profits and damages "subject to the principles of equity." 15 U.S.C.A. § 1116. The general rule is that where a federal statute provides no express statute of limitations, the court must look to the state statute of limitations for analogous types of actions. Monkelis v. Scientific Sys. Serv., 653 F. Supp. 680, 684 (W.D. Pa. 1987) (citing Fox Chemical Co. v. Amsoil, Inc., 445 F. Supp. 1355, 1357 (D. Minn. 1978)).

 Counts I and II of Plaintiff's Complaint are brought pursuant to §§ 32 and 43 of the Lanham Act respectively. Plaintiff's infringement action under § 32 is based on the same conduct underlying the § 43(a) claim. Many courts have held that actions under § 43(a) of the Lanham Act are most closely analogous to actions for fraud, and that the statute of limitations for state fraud actions applies. *fn6" See e.g., Mylan Lab., Inc. v. Pharmaceutical Basics, Inc., 808 F. Supp. 446, 453-54 (D. Md. 1992); Johannsen v. Brown, 797 F. Supp. 835, 839-40 (D. Or. 1992); Monkelis, 653 F. Supp. at 684; Pepsico, Inc. v. Dunlop Tire & Rubber Corp., 578 F. Supp. 196, 199 (S.D.N.Y. 1984). In Pennsylvania, the limitations period for fraud is two years. 42 Pa. Cons. Stat. Ann. § 5524(7).

 Count III states a claim for dilution under the Pennsylvania Trademark Act. 54 Pa. Cons. Stat. Ann. § 1124. Like the Lanham Act, the Pennsylvania Trademark Act does not provide an express limitations period. However, 42 Pa. Cons. Stat. Ann. § 5524(7) provides a two year limitation period in any "action or proceeding to recover damages for injury to person or property which is founded on negligent, intentional, or otherwise tortious conduct" unless otherwise specified. Dilution fits within the purview of § 5524(7) thereby making the limitations period 2 years.

 Count IV of Plaintiff's Complaint asserts a claim for unfair competition. The elements of a cause of action for unfair competition under Pennsylvania common law are identical to those for a claim under § 43(a) of the Lanham Act, with the exception that the goods need not have traveled in interstate commerce. Moore Push-Pin Co. . Moore Business Forms, Inc., 678 F. Supp. 113, 119 (E.D. Pa. 1987) (quoting Mercury Foam Corp. v. L & N Sales & Marketing, 625 F. Supp. 87, 91 n.1 (E.D. Pa. 1985)). Therefore, the same 2 year limitations period under § 5524(7) applies.

 Having concluded that Pennsylvania' two year statute of limitations applies to each of Plaintiff's claims, the question of what effect the limitations period has in the instant case remains. It is undisputed that because the alleged offensive conduct is a continuing wrong, application of the statute of limitations will not bar to prospective injunctive relief. What is less clear is the effect the statute of limitations has on Plaintiff's claims for an accounting of profits and damages stemming from Defendant's past use of the term "GUARDIAN." Some courts have applied statutes of limitations to preclude claims under the Lanham Act that fall outside the statutory period. See e.g. Gordon & Breach Science Publishers v. AIP, 859 F. Supp. 1521, 1529 (S.D.N.Y. 1994); Construction Technology v. Lockformer Co., Inc., 704 F. Supp. 1212 (S.D.N.Y. 1989); Pepsico, Inc. v. Dunlop Tire & Rubber Corp., 578 F. Supp. 196, 201 (S.D.N.Y. 1984). Other courts have rejected this approach, holding that the equitable doctrine of laches, and not statutes of limitations, is the appropriate method for determining the availability of damages and injunctive relief under the Lanham Act. See Ediciones Quiroga S.L. v. Fall River Music, Inc., 1995 U.S. Dist. LEXIS 2641, 35 U.S.P.Q.2D (BNA) 1814, 1818 (S.D.N.Y. 1995) (declining to adopt the reasoning of Gordon, Construction Technology, and Pepsico, supra, and deciding instead that laches provides the proper defense under the Lanham Act). See also Tandy Corp. v. Malone & Hyde, Inc., 769 F.2d 362, 365 (6th Cir. 1985) (applying statute of limitations only to raise a presumption of laches).

 Court's within the Third Circuit have not spoken to this issue. However, it is not necessary for this Court to resolve this question at this juncture. As will be discussed in greater detail infra, genuine issues of material fact exist with regard to when Plaintiff knew or reasonably should have known of Defendant's alleged infringement. *fn7" It is therefore impossible to know with certainty when the limitations period began to run, and whether Plaintiff initiated suit within two years thereof. I conclude that Defendant's statute of limitations argument cannot serve as the basis for granting Defendant's motion for summary judgment.

 B. Estoppel by Laches

 The doctrine of laches consists of two elements: (1) inexcusable delay in instituting suit and (2) prejudice resulting to the defendant from such delay. University of Pittsburgh v. Champion Prods., Inc., 686 F.2d 1040, 1044 (3d Cir. 1982); Gruca v. United States Steel Corp., 495 F.2d 1252, 1258 (3d Cir. 1974). Laches is an equitable doctrine; its existence depends on the particular equitable circumstance of each case. It is a question left to the sound discretion of the district judge whose determination will not be disturbed on appeal absent an abuse of that discretion. University of Pittsburgh, 686 F.2d at 1945; Gruca, 495 F.2d at 1258; Anaconda Co. v. Metric Tool & Die Co., 485 F. Supp. 410 (E.D. Pa. 1980).

 Laches may act to bar both monetary and prospective injunctive relief. See Procter & Gamble Co. v. J. L. Prescott Co., 102 F.2d 773, 780 (3d Cir.), cert. denied, 308 U.S. 557, 60 S. Ct. 80, 84 L. Ed. 468 (1939) (denying counterclaim injunction in infringement action, despite likelihood of confusion, due to unexplained eight year delay). However, the more typical case of laches results in a denial of plaintiff's claim for an accounting of past infringement, but allows prospective injunctive relief to prevent future infringement and confusion. See University of Pittsburgh, 686 F.2d at 1044 (noting that, in the context of "mere delay" or "laches without more," "the much more common situation [is one] in which the plaintiff's less egregious delay will bar its claim for an accounting for past infringement but not for prospective injunctive relief").

 The relationship between statutes of limitations and laches is unclear in trademark cases. In other contexts, courts within the Third Circuit have applied a burden shifting analysis to a laches defense where the delay exceeds the applicable limitations period. In Anaconda Co. v. Metric Tool & Die Co., 485 F. Supp. 410 (E.D. Pa. 1980), the defendant asserted a laches defense to an allegation of misappropriation of trade secrets. The court held that the allocation of the burden of proof in a laches defense depends on the length of the plaintiff's delay.

 
If the delay is shorter than the applicable statute of limitations, then the defendant has the burden of proof. If, on the other hand, the delay is longer than the applicable statute of limitations, then the defendant is entitled to a rebuttable presumption of both elements of laches.

 Id. at 427; accord Frank W. Winne & Son, Inc. v. Palmer, 1991 U.S. Dist. LEXIS 11183, Civ. A. No. 91-2239, 1991 WL 155819, at *5 (E.D. Pa. Aug. 7, 1991).

 While this burden shifting analysis is also used by courts in patent infringement litigation, See McCarthy on Trademarks § 31.08[1], it is not clear whether it is transferable to trademark cases. In University of Pittsburgh, 686 F.2d at 1045, the United States Court of Appeals for the Third Circuit, in the context of analyzing a trademark laches defense, noted in dicta the significance of recent cases within the Third Circuit that held, in other contexts, that where the plaintiff "sleeps on his rights for a period of time greater than the applicable statute of limitation, the burden of proof [in a laches defense] shifts to the plaintiff to prove the absence of such prejudice to the defendant as would bar all relief." Id.

 The United States Court of Appeals for the Sixth Circuit has expressly held that, in trademark cases under the Lanham Act, if the analogous state statute of limitations has not elapsed there is a strong presumption that the plaintiff's delay in bringing suit for monetary relief is reasonable. Tandy Corp. v. Malone & Hyde, Inc., 769 F.2d 362, 366 (6th Cir. 1995); see also Ambrit, Inc. v. Kraft, Inc., 812 F.2d 1531, 1546 (11th Cir. 1986) (citing Tandy Corp. with approval); but see Clamp Mfg. Co. Inc. v. Enco Mfg. Co., Inc., 870 F.2d 512, 515 (9th Cir. 1989) (declining to adopt the rule in Tandy Corp. and finding no laches defense on other grounds). The corollary of the rule in Tandy Corp. is that a delay in excess of the relevant limitations period raises a presumption that the delay is unreasonable.

 I conclude that the burden shifting analysis that courts within the Third Circuit have applied in other contexts is equally applicable to a laches defense in cases of trademark infringement. If Plaintiff's delay in bringing suit exceeds the applicable two year statute of limitations, a rebuttable presumption is raised that the delay was unreasonable. The Defendant continues to carry the burden of proving prejudice resulting from the delay and the scope of the relief afforded will depend on the unique equitable circumstances of each case.

 C. Estoppel by Acquiescence

 
"There is much semantic confusion in the case opinions over the distinction, if any, between 'laches,' 'estoppel by laches' and 'acquiescence.' . . . . To preserve some semantic sanity in the law, it is appropriate to reserve the word 'acquiescence' for use only in those cases where the trademark owner, by affirmative word or deed, conveys its implied consent to another. That is, laches denotes a merely passive consent, while acquiescence implies active consent. In this set of definitions, we would have 'estoppel by laches' as distinct from 'estoppel by acquiescence.'"

 McCarthy on Trademarks § 31.14[1].

 To succeed in its acquiescence defense, Defendant must demonstrate that Plaintiff undertook some affirmative action that conveyed its implied consent to ...


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