Southco Inc v. Kanebridge Corp ( 2003 )

Opinions of the United
2003 Decisions States Court of Appeals
for the Third Circuit
3-27-2003
Southco Inc v. Kanebridge Corp
Precedential or Non-Precedential: Precedential
Docket 02-1243
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PRECEDENTIAL
Filed March 26, 2003
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
No. 02-1243
SOUTHCO, INC.,
Appellant
v.
KANEBRIDGE CORPORATION
Appeal from the United States District Court
for the Eastern District of Pennsylvania
(D.C. Criminal Action No. 99-cv-04337)
District Judge: Honorable Norma L. Shapiro
Argued on December 3, 2002
Before: ROTH, SMITH, and
CUDAHY,* Circuit Judges
(Opinion filed: March 26, 2003)
James C. McConnon, Esquire
(Argued)
Alex R. Sluzas, Esquire
Paul & Paul
2000 Market Street, Suite 2900
Philadelphia, PA 19103
Counsel for Appellant
* The Honorable Richard D. Cudahy, Circuit Court Judge for the Seventh
Circuit, sitting by designation.
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Stanley H. Cohen, Esquire
Caesar, Rivise, Bernstein
Cohen & Pokotilow
1635 Market Street
Seven Penn Center, 12th Floor
Philadelphia, PA 19103
Steven B. Pokotilow (Argued)
Stroock, Stroock & Lavan
180 Maiden Lane
New York, NY 10038
Counsel for Apellee
OPINION OF THE COURT
ROTH, Circuit Judge:
In this appeal, we must determine to what extent a
District Court is bound by a ruling by this Court on a prior
appeal that had reversed the District Court’s grant of a
preliminary injunction.
The present appellant, Southco, Inc., filed a complaint
alleging that Kanebridge Corp. had violated Southco’s
copyright and trademark, and engaged in unfair
competition, by reprinting the product numbers Southco
uses to describe its captive screw fasteners. Southco sought
a preliminary injunction on its copyright cause of action,
which the District Court granted. Kanebridge appealed and
we reversed the preliminary injunction. We determined that
Southco had not shown a likelihood of success on the
merits because Southco’s product numbers were
mechanically dictated by its numbering system. On
remand, the District Court granted Kanebridge’s motion for
summary judgment despite Southco’s submission of a
declaration from Robert H. Bisbing, the inventor of
Southco’s captive screw fasteners, who described the
process by which he developed the product numbers for
this new line of fasteners. The District Court held that it
was bound by the prior panel’s decision. Southco appealed.
For the reasons stated below, we will reverse the judgment
3
of the District Court and remand this case to it for
consideration of the Bisbing declaration.
I. Facts and Procedural History
Southco manufactures a variety of fasteners, rivets,
latches, handles, and screws, including captive screws.1 In
order to assist its employees and customers in identifying
and distinguishing among its products, Southco has
developed a unique product numbering system that serves
as a shorthand description of the relevant characteristics of
every product and component manufactured by Southco.
The product numbers are used not only in the ordering
process but also in the manufacturing process to insure the
precisely correct identification of each product and its
components. In developing the number, Southco assigns
nine-digits to each product, with each digit describing a
specific physical characteristic of that product. Southco
publishes these numbers in various Handbooks. Southco’s
numbering system has become the industry standard. As a
result, Kanebridge, a distributor of competing captive screw
fasteners, uses the system when taking orders from
customers. To facilitate its customers’ use of the numbers
when ordering fasteners, Kanebridge began publishing
Southco’s numbers in advertisements and other
publications.
On August 27, 1999, Southco filed a civil complaint in
the United States District Court for the Eastern District of
Pennsylvania, alleging copyright infringement in violation of
17 U.S.C. § 101 et seq., trademark infringement in violation
of 15 U.S.C. § 1114(1), unfair competition in violation of 15
U.S.C. § 1125(a), and common law trademark infringement
and trademark dilution in violation of 54 Pa. C.S.A. § 1124.
The parties agreed to a temporary restraining order. They
also agreed to enter a preliminary injunction on consent
1. Captive screws are used to fasten panels together, as for instance in
computers and telecommunications equipment. A captive screw consists
of a screw, a ferrule, and a knob. The screw is mounted in one panel by
means of the ferrule and the other panel contains an internally threaded
insert that receives the screw. See Southco, Inc. v. Kanebridge Corp., 258
F.3d 148, 149 and fn 1 (3d Cir. 2001) (“Southco I”).
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but were unable to agree on the scope of the injunction.
Southco then filed a motion for a preliminary injunction
based on its copyright cause of action. Following a one day
hearing, the District Court granted the motion and enjoined
Kanebridge from infringing Southco’s copyright. Kanebridge
appealed. See Southco, Inc. v. Kanebridge Corp., 258 F.3d
148 (3d Cir. 2001) (“Southco I”).
The Southco I panel held that Southco had no likelihood
of success on the merits because its product numbers
failed to satisfy the originality requirement. Id. at 151. In
reaching this conclusion, the panel distinguished between
the numbering system and the actual part numbers. The
panel found that, while Southco exercised creativity and
choice in developing the numbering system, it did not claim
that Kanebridge improperly used the numbering system
and the “part numbers are completely devoid of originality
and instead result from the mechanical application of the
numbering system.” Id. at 152. Consequently, the Southco
I panel reversed the order of the District Court granting
Southco’s motion for a preliminary injunction. Id. at 156.
On remand, Kanebridge filed a motion for summary
judgment to dismiss the copyright infringement cause of
action. In opposition, Southco submitted a declaration from
Robert H. Bisbing, who has designed numerous fasteners
for Southco and assigned them product numbers. In the
declaration, Bisbing discussed his invention of a new type
of captive screw, the enclosed retractable captive screw,
and how he assigned a product number to his invention.
Bisbing stated that, according to Southco practice, each
new product is assigned a nine digit number. Each Southco
product has values, unique to that product, which are
physical characteristics related to the product and its use.
The elements of the product number reflect certain of those
values. In creating a product number, he will first decide
upon the value or values to be represented in each of the
four groups of the number. The groups are designated A
through D. The first two digit group (A) identifies the
product class; the second two digit group (B) identifies
whether the product is an assembled product or a
component part; the third three digit group (C) identifies
variations among similar products; and the final two digit
5
group (D) identifies different materials and finishes among
similar products. The procedure is flexible to allow for
variations in the needs of particular products.
Turning to the assignment of a product number for the
new enclosed retractable captive screw, Bisbing stated that,
when he created the new captive screw in 1971, he chose
the number 47 for the product class, even though captive
screws already existed in product classes 12, 17, 51 and
53. He stated that he could not use any of the existing
product classes for the new captive screw because the
systems of product numbers in the existing classes
identified particular values and characteristics pertinent to
those products that would not be useful in the new
product. He therefore had to determine the values and
characteristics to be reflected in Groups B, C, and D and to
create the numbers for them.
Turning to Group B, Bisbing stated that he used the first
digit to designate whether the part was an assembly, sub-
assembly, or a component because, due to the large
number of values that the part numbers would have to
express, he would need the second digit for other values.
He assigned 1 to indicate assemblies with flare-in ferrules
and 6 to indicate assemblies with press-in ferrules.2 Bisbing
decided to use the second digit in Group B to indicate how
far the screw projected beyond the outer panel surface.
Bisbing then assigned the first digit in Group C to indicate
thread size, and the second and third digit in Group C to
designate the range of panel thickness to which the ferrule
was adapted.3 Finally, for Group D, naturally finished
aluminum was originally the only material or finish
available. Thus, all enclosed retractable captive screws were
assigned the number 10. However, Bisbing added other
numbers as other finishes and materials became available.
Bisbing concludes that he created these digits of the new
2. Bisbing assigned several other numbers for internal manufacturing
operations. Thus, 2 indicates a ferrule, 3 indicates a spring, 4 indicates
a knob, and 5 indicates a screw.
3. Only flared-in ferrules require this set of numbers. Thus, for press-in
ferrules, where the first digit of group B is 6, the second and third digits
of Group C are 01.
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product number “in accordance with the then existing
Southco part numbering procedure,” and that:
These numbers were not dictated by any numbering
system. Not only each number as a whole, but each
group of digits and each digit in each number was
created by me based upon the specific products which
I had created and my determination of the values of
those products to be represented and the digits to be
used. The part number for each new part was created
on the basis of my decisions.
Despite the Bisbing declaration, the District Court
granted Kanebridge’s motion for summary judgment,
rejecting Southco’s argument that this new evidence, not
before the Southco I panel, established the originality of the
part numbers and their protectability. At argument on the
motion for summary judgment, the District Judge
expressed her strong disagreement with our ruling in
Southco I. She went on to explain, however, that she was
ruling against Southco on remand because the Southco I
panel’s ruling was “a decision on a matter of law.” She
concluded:
In that circumstance, it’s not just the entry of the
preliminary injunction is improper, but any relief to
you on your copyright claim I believe would subject me
to contempt by the Court of Appeals.
In the Order, granting summary judgment to Kanebridge,
the court held that Southco’s “argument ignores the plain
mandate of the Court of Appeals. Plaintiff ’s submission
does not provide evidence of additional creativity that would
satisfy that court.” The District Court entered final
judgment on December 27, 2001.4 Plaintiff timely appealed.
II. Jurisdiction and Standard of Review
The District Court had jurisdiction over this matter
pursuant to 28 U.S.C. § 1331, as it constitutes a civil
action arising under the laws of the United States. We have
jurisdiction pursuant to 28 U.S.C. § 1291.
4. The non-copyright claims were dismissed by stipulation of the parties.
7
We exercise plenary review over a grant of summary
judgment. Chisolm v. McManimon, 275 F.3d 315, 321 (3d
Cir. 2001). Summary judgment is appropriate if there is no
genuine issue of material fact and the moving party is
entitled to judgment as a matter of law. Fed. R. Civ. P.
56(c); Anderson v. Liberty Lobby Inc., 477 U.S. 242, 250
(1986).
III. Discussion
We conclude that the District Court erred when it
concluded that the Southco I panel’s decision precluded the
District Court from considering the Bisbing declaration.
Under the law of the case doctrine, “one panel of an
appellate court generally will not reconsider questions that
another panel has decided on a prior appeal in the same
case. The doctrine is designed to protect traditional ideals
such as finality, judicial economy and jurisprudential
integrity.” In re City of Philadelphia Litig., 158 F.3d 711,
717-18 (3d Cir. 1998). The law of the case doctrine
precludes review of only those legal issues that the prior
panel actually decided, either expressly or by implication,
so it does not apply to dictum. See id. at 718. Further, the
doctrine does not restrict a court’s power, but rather
governs its exercise of discretion. See id. Therefore, the
doctrine does not preclude reconsideration of previously
decided issues in “extraordinary circumstances,” such as
where (1) new evidence is available; (2) a supervening new
law has been announced; or (3) the earlier decision was
clearly erroneous and would create manifest injustice. Id.However, “while the law of the case doctrine bars courts
from reconsidering matters actually decided, it does not
prohibit courts from revisiting matters that are avowedly
preliminary or tentative.” Council of Alternative Political
Parties v. Hooks, 179 F.3d 64, 69 (3d Cir. 1999) (quotation
omitted). Preliminary injunctions are, by their nature,
tentative and impermanent. See R.R. Yardmasters of Am. v.
Pennsylvania R.R. Co., 224 F.2d 226, 229 (3d Cir. 1955). As
the Supreme Court notes:
The purpose of a preliminary injunction is merely to
preserve the relative positions of the parties until a
8
trial on the merits can be held. Given this limited
purpose, and given the haste that is often necessary if
those positions are to be preserved, a preliminary
injunction is customarily granted on the basis of
procedures that are less formal and evidence that is
less complete than in a trial on the merits. A party
thus is not required to prove his case in full at a
preliminary-injunction hearing, and the findings of fact
and conclusions of law made by a court granting a
preliminary injunction are not binding at trial on the
merits.
Univ. of Texas v. Camenisch, 451 U.S. 390, 395 (1981)
(citation omitted).
In this case, because the only issue before the panel in
Southco I was whether Southco was entitled to a
preliminary injunction, the District Court erred in
concluding that it was bound by Southco I to grant
Kanebridge’s motion for summary judgment. While the
Southco I panel reviewed the likelihood of success on the
merits of the “originality” claim, the panel did not address
the distinct issue of whether Southco is actually entitled to
succeed on the merits of the claim. In both Council of
Alternative Political Parties and ACLU of New Jersey v.
Black Horse Pike Regional Board of Education, 84 F.3d
1471, 1477 (3d Cir. 1996) (en banc), a District Court denied
a preliminary injunction, and we reversed, ordering that the
District Court enter a preliminary injunction. As in the
present case, the District Court in both Council of
Alternative Political Parties and ACLU of New Jersey entered
summary judgment on the merits on remand, finding that
it was bound by our decision on preliminary relief.
However, as we stated in ACLU of New Jersey:
The district court erred in concluding that it was so
bound. The [prior] panel assessed the merits . . . under
the standard for the granting of a preliminary
injunction — a standard which differs from the
standard for granting a permanent injunction. Its
decision to grant a preliminary injunction was based
on an assessment of the likelihood that plaintiffs would
succeed on the merits, and neither constitutes nor
substitutes for an actual finding that plaintiffs have
9
succeeded on the merits and are entitled to permanent
relief.
84 F.3d at 1477. That the first appellate panels in Council
of Alternative Political Parties and ACLU of New Jersey
found a likelihood of success on the merits, while the first
panel in this case found no likelihood of success on the
merits, does not alter this conclusion. In both cases, the
first panel was dealing in probabilities of success and was
not addressing the ultimate issue of whether the claim has
merit.
The argument that an appellate decision regarding
preliminary relief does not compel summary judgment on
the merits is stronger in the present case than it was in
ACLU of New Jersey. In ACLU of New Jersey, after we
ordered the District Court to issue a preliminary injunction,
the District Court entered a preliminary and a permanent
injunction, finding that “[a]dditional hearings or new
evidence might have put a different cast on the issues, but
as the record has not been augmented since the motion for
a preliminary injunction, we feel constrained to enter a final
judgment in accordance with the Third Circuit’s order . . . .”
84 F.3d at 1476. On the other hand, in the present case,
Southco augmented the record on remand with additional
evidence, namely the Bisbing declaration. This declaration
raises a genuine issue of material fact that assigning
product numbers to the enclosed retractable captive screw
involved creativity and choice about how the fastener
should be characterized, and thus that the product
numbers are not mechanically derived from the numbering
system. See Southco I, 258 F.3d at 156.
The District Court on remand concluded that it could not
consider the Bisbing declaration because it was the same
as the evidence that was before the Southco I panel, namely
the testimony of Tom Demrick, the Southco Business
Manager for Captive Hardward. However, the Bisbing
declaration differs from Demrick’s testimony because
Demrick focused on how people use the product numbers
to describe physical characteristics of a fastener, while
Bisbing’s declaration described how Southco inventors
created the product numbers to represent what the
inventor considered to be the important physical values and
10
characteristics of a new product. The only testimony from
Demrick regarding the creation of the numbers for a
particular product was as follows:
Q. Now, when a new Captive screw is created by
Southco, is it assigned an arbitrary, random part
number?
A. No, not at all. The — the scheme — this coding
scheme is utilized and, possibly, expanded, but the
same basic system is applied to new products.
This description is a far cry from Bisbing’s detailed
description of how he assigned a product number to the
enclosed retractable captive fastener. Unlike Bisbing,
Demrick does not explain how the system is applied to a
new product, how it may be expanded, or how much choice
an author has in developing product numbers.
The District Court also concluded that it could not
consider the Bisbing declaration because it related to the
creation of the numbering system rather than to the
development of product numbers. The District Court
considered that the Southco I panel came to a legal
conclusion when it determined that Southco exercised no
originality in developing the product numbers. For that
reason, it determined that additional facts would not alter
the outcome. However, the Southco I panel’s conclusion
regarding originality involved, at least in part, factual
determinations regarding the process by which Southco
developed numbers. The Bisbing declaration suggests that
the panel’s conclusions regarding the relationship between
the numbering system and the product numbers has no
basis in fact. Based on the limited evidence at the
preliminary injunction phase, which focuses on the use of
the product numbers, the Southco I panel concluded that
the product numbers are mechanically dictated by a
preexisting numbering system. The Southco I panel
explained:
Under [the numbering] system, there is simply no room
for creativity when assigning a number to a new panel
fastener. The part has certain relevant characteristics,
and the numbering system specifies certain numbers
for each of those characteristics. As a result, there is
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only one possible part number for any new panel
fastener that Southco creates. This number results
from the mechanical application of the system, not
creative thought. If Southco were to develop a new
fastener and for some reason decide to exercise
creativity when assigning it a number, the resulting
part number would fail to accomplish its purpose.
Regardless of how small the change is, customers
could not effectively identify the relevant characteristics
of the panel fastener by simply looking at its part
number.
258 F.3d at 153.
The new evidence that Southco has submitted at the
merits phase, however, calls into doubt the Southco I
panel’s factual conclusions about the process by which
Southco assigns numbers to new fasteners. Bisbing’s
declaration does not indicate that the inventor of a new
fastener determined the physical characteristics of the new
fasteners and then consulted Southco’s numbering system
to mechanically assign a product number that described
those physical characteristics. To the contrary, the Bisbing
declaration states that Bisbing exercised creativity and
choice in determining the values to be reflected in the
numbers. Therefore, this case will be remanded to the
District Court for consideration of the Bisbing declaration.
In conclusion, we note that the Southco I panel
considered the ruling by the Seventh Circuit Court of
Appeals in American Dental Association v. Delta Dental
Plans Association, 126 F.3d 977 (7th Cir. 1997), to be
distinguishable from the present case. The relevance of the
holding in American Dental has to be reexamined in light of
the factual findings of the District Court on remand. On
remand, the District Court is entitled to reconsider that
relevance in light of the facts presented to it. For example,
the court might determine, in light of the Bisbing
declaration, that choosing the values and characteristics to
incorporate into a product number involves at least a
modicum of creativity. If so, it would then be helpful for the
District Court to consider the reasoning in American Dental.
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IV. Conclusion
For the reasons stated above, the judgment of the District
Court will be reversed, and the case will be remanded to
the District Court for further proceedings consistent with
this opinion, including consideration of the Bisbing
declaration.
A True Copy:
Teste:
Clerk of the United States Court of Appeals
for the Third Circuit