If you have visited the restroom in an office building in the last five years, chances are you’ve had the opportunity to use Georgia Pacific’s hands-free paper towel dispenser known as “enMotion.” In a published opinion released yesterday, the Fourth Circuit generally ruled in GP’s favor on trademark infringement, tortious interference, and unfair and deceptive trade practices claims.
The enMotion dispenser (pictured here) operates through an electronic motion sensor that dispenses towels without any physical contact from the user’s hands. The dispenser was designed for use with a proprietary paper towel sold exclusively by GP, one that the Fourth Circuit described as having “a soft-fabric like feel created by using a through-air-dried (TAD) process.” (Our own end-user experience confirms that these towels are quite supple, as commercial paper towels go). The dispensers are not sold, they are leased to distributors, who are permitted to sub-lease them to end-users (like office buildings). The leases and subleases require the end users to use only GP’s towels in the dispensers. The towels themselves are a non-standard size.
The defendant designed and manufactured a competing paper towel in the exact same non-standard size, but with a “slick, scratchy feel,” and marketed it to users of the enMotion dispensers. Those towels did not fit any other dispenser on the market.
GP sued in the Eastern District for trademark infringement, Lanham Act and common law unfair competition, and tortious interference with contract, and the defendant counterclaimed for unfair and deceptive trade practices. Judge Boyle granted summary judgment in favor of the defendant on GP’s claims and in favor of GP on the defendant’s unfair & deceptive counterclaim.
The Fourth Circuit vacated and remanded everything except the counterclaim. Without delving too deeply into the trademark issues, suffice it to say that the court was convinced that a fact issue existed due to statistical evidence of substantial consumer confusion as to the source of the towels, combined with evidence of the defendant’s intent to “stuff” the GP dispensers with its own towels.
As for the tortious interference claim, the district court ruled that the defendant’s conduct was legitimate competition and was therefore justified, creating a qualified privilege under North Carolina law. The Fourth Circuit vacated that ruling with two caveats. First, GP’s claim would be limited to tortious interference with contracts between GP and its distributors because GP did not have contractual relations with the end users themselves. Second, GP could prevail only if it also prevailed on its trademark claims. Success on those claims would make the defendant’s conduct illegal, which would destroy the qualified privilege.
Finally, the Fourth Circuit affirmed the dismissal of the defendant’s unfair & deceptive trade practices counterclaim (describing the district court’s reasoning with the Blackstonian phrase “right on the money”). Although the defendant claimed that GP’s attempts to exclude other towel manufacturers from its dispensers was unfair or deceptive, the court held that GP entered into its leases “in good faith, openly, and transparently.” Moreover, the defendant had shown no actual injury because it had been successful in competing with GP in the marketplace.