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Pearson's Inc. v. Ackerman

United States District Court, N.D. Texas, Wichita Falls Division

July 29, 2019

ROBERT DEAN ACKERMAN, et al., Defendants.



         On January 25, 2018, Pearson's Inc. d/b/a Pearson Livestock Equipment Co. (“Pearson”), filed suit against Robert Dean Ackerman and Heather Ackerman Badley (collectively “Ackerman”) and Titan West, Inc. (“Titan”) for trademark and trade dress infringement under the Lanham Act, 15 U.S.C. §§ 1051, et seq., trade dress dilution under Section 16.103 of the Texas Business and Commerce Code, and trade dress infringement under Texas common law. (See generally, ECF No. 1). On February 16, 2018, Ackerman filed his Answer, Plea, and Counterclaims. (ECF No. 12). Ackerman asserted counterclaims against Pearson for trademark cancellation and antitrust violations. (Id.). Subsequently, Pearson nonsuited its claims against Badley (ECF No. 18), and Ackerman's antitrust counterclaims were dismissed by agreement (ECF No. 32). Before trial, Pearson settled its claims with Titan. (ECF No. 63).

         The Court conducted a three-day bench trial on April 29, 30, and May 1, 2019. During the trial, the Court heard testimony from Robert Dean Ackerman, Clint Newton, Ricky Rater, David Rater, Van Neidig, Bret Hull, Cory Knight, Patrick Carhart, and Mark McKenna. By agreement of the parties, the Court admitted in evidence Pearson's Exhibit Nos. 1-2, 62-64, 81, 82, and 90-107 and also admitted Ackerman's Exhibit Nos. 201-221, 223-228, 231-234, 236, 237, 246, and 248.

         During trial, the Court admitted Pearson's Exhibit Nos. 6, 11, 17, 20, 23, 25, 27, 32, 36, 46-49, 52, 56-58, 65, 84, 85, 108 and Ackerman's Exhibit Nos. 222, 250, and 255. Demonstrative Exhibit Nos. 9, 256, and 257 also were admitted. Pearson withdrew Exhibit No. 89, and Ackerman withdrew Exhibit Nos. 200, 230, 238, 241, 245, and 247. After the trial concluded, Pearson and Ackerman timely submitted their proposed findings of fact and conclusions of law.

         After considering the evidence and the arguments of counsel, and for the reasons set forth below, the Court finds that Pearson's mark is functional and nondistinctive. Thus, its trade dress and trademark (“Pearson mark” or “mark”) are not legally protectable. Therefore, Pearson's registered trademark No. 5, 184, 202 is canceled pursuant to 15 U.S.C. § 1119. Additionally, Ackerman has not proven his fraudulent procurement claim by clear and convincing evidence. Nor has he proven the case is exceptional under 15 U.S.C. § 1117(a). Accordingly, his request for attorney's fees is denied.


         I. History of the Pearson Chute

         Pearson designs, manufactures, and sells products for use in the cattle industry. One of its products is the “Pearson Chute, ” a manual, parallel squeeze cattle chute that it has sold since the 1970s. The chute consists of a narrow, cubical framed structure that is wide enough to accommodate a single animal. The chute is designed to immobilize an animal by uniformly squeezing it from both sides, thereby providing easy access to the animal for examination and other procedures. (Pl.'s Exh. 2 at 159). Pearson protected the chute's functional features, including the squeeze mechanism and other features, through a series of utility patents issued by the United States Patent and Trademark Office (“PTO”) in 1965, 1977, and 1982. (Pl.'s Exh. 2 at 150-55, 156-63, 164-68).

         Over the years, the design and overall look of the Pearson Chute have evolved. The appearance of the modern-day Pearson Chute has remained substantially unchanged since the early 1990s, when circular disks were incorporated at opposite ends of the raised front crossbar and rear squeeze hinge orientated forward from its corner posts. (Transcript ("Tr.") Vol. 1 at 142; Defs.' Exh. 257).

         A photograph of the modern-day Pearson Chute, without the squeeze handle in place, is shown below:

         (Image Omitted)

         (Defs.' Exh. 246 at 193).

         The original owners of Pearson sold the business to Ricky and David Rater in January 2013. (Tr. Vol. 2 at 50). Originally, Pearson only produced chutes in Thedford, Nebraska. Shortly after purchasing the business, the Raters expanded its manufacturing capabilities to Vernon, Texas. (Id. at 184). Ricky Rater is Pearson's Vice President and General Manager with overall responsibility for operations, and David Rater is Pearson's President with responsibly for banking, marketing, and distributor relationships. (Id. at 185). David Rater is Ricky Rater's father. (Id. at 174).

         Today, Pearson produces approximately 400 cattle chutes annually and sells anywhere from five to thirty-three percent of its chutes into the international market. (Id. at 54-56). Domestically, Pearson sells its products directly to consumers and through regional distributors who may or may not have local dealer relationships. (Id. at 54).

         II. Pearson's relationship with Ackerman

         Ackerman has been in the retail cattle equipment business for nearly forty years. (Tr. Vol. 1 at 180). His wife, Donna Ackerman, and daughter, Heather Badley, are employees of the business, which is located in La Salle, Colorado. (Id. at 178-80). In 1983, Ackerman began selling Pearson Chutes as a local dealer. (Id. at 180). From 1993 to 2014, Ackerman served as Pearson's exclusive regional distributor of Pearson Chutes for the Colorado Region of the United States. (Id. at 184).

         The Pearson Chute is a popular, high-quality chute with a good reputation in the cattle industry. (Id. at 183; Tr. Vol 2 at 12). Although distributing the Pearson Chute had been fairly profitable, Ackerman wanted to sell a more economical chute that functioned like a Pearson Chute, but without the price and geographical restrictions imposed by Pearson. (Id. at 186-87; Tr. Vol. 3 at 115-16). Ackerman's idea was not new. Since the 1990s, after Pearson's utility patents expired, other manufacturers of cattle chutes began incorporating aspects of the Pearson Chute's design, mimicking its function and shape. (Tr. Vol. 2 at 14, 74-83, 138-40; Defs.' Exh. 256). However, aside from the chutes co-developed by Ackerman, there is little evidence to establish the market success and adoption of these third-party competitors throughout the cattle chute industry. (See Tr. Vol. 2 at 74-83, 141-43).

         Ackerman and WW Manufacturing (“WW”), one of Pearson's competitors, developed a new cattle chute called the Next Generation Beefmaster (“Beefmaster”). (Tr. Vol. 1 at 187-90). WW already manufactured a cattle chute called the Stampede that incorporated many of the design features comprising the Pearson Chute. (Id. at 187, Tr. Vol. 2 at 15-16). As a result, the Stampede resembles the Pearson Chute, but is substantially heavier and contains additional design features making it a more expensive cattle chute than what Ackerman wanted to sell. (Id.; Tr. Vol. 2 at 6). To aid WW in designing a more economical chute, Ackerman sent a Pearson Chute to WW. (Id.). Ackerman asked WW to implement specific features of the Pearson Chute, the circular disks and removable wings or side panels, into the Beefmaster's design. (Id. at 190-91; Tr. Vol. 2 at 16-17).

         The circular disks allow the chute to operate as either a left- or right-handed chute and permit a user to orient the squeeze handle attached to the disk in multiple directions. (Tr. Vol. 2 at 16-19; Tr. Vol. 3 at 117; See Pl.s' Exh. 2 at 53, 141, 146). The circular disks' functionality, combined with the raised front crossbar and squeeze handle, provide both safety and operational benefits. (Id. at 16-19, 115-16; Tr. Vol. 3 at 117; See Pl.s' Exh. 2 at 53, 141, 146). The combination allows a user to orientate the squeeze handle to the position and stature of the user, thereby providing extra leverage and promoting safety by keeping a user out of harm's way in the event of any unforeseen release of the animal inside the chute. (Id. at 16-19; Tr. Vol. 3 at 117). The removable side panels allow for easier access to the animal once it enters the chute. (Pl.s' Exh. 2 at 53).

         Pearson learned that Ackerman sent a Pearson Chute to WW. (Tr. Vol. 1 at 191). David Rater telephoned Ackerman on or about March 20, 2014 to confront him about sending the chute to WW to be “copied.” (Id. at 193). Ackerman confirmed he sent a Pearson Chute to WW and understood that Pearson did not want him copying any Pearson Chute design features into any other competing chutes. (Id. at 195). On the call, David Rater terminated Ackerman as a Pearson distributor. (Id.; Tr. Vol. 2 at 195).

         III. Ackerman competes with Pearson

         Ultimately, the Beefmaster was unsuccessful. (Tr. Vol. 2 at 20). Undeterred, Ackerman developed a relationship with another chute manufacturer called Pro Farm Manufacturing, Inc. (“Pro Farm”), a Canadian company with manufacturing capabilities in China. (Tr. Vol. 1 at 201, 204-05). Ackerman's wife first saw a Pro Farm chute at a cattle equipment auction. (Id. at 201- 02). At the time, the Pro Farm chute was painted a green color. (Id. at 202-03; Pl.s' Exh. 6). But it had many of the same features of a Pearson Chute, including the raised front crossbar, circular disks, and squeeze handle. (Id. at 213). On or about March 18, 2014, Ackerman accompanied his wife to the auction to collect equipment she had purchased. (Tr. Vol. 3 at 119). While there, he saw the Pro Farm chute and remarked that it looked like a Pearson Chute. (Id. at 120; Tr. Vol. 1 at 213).

         Days after David Rater terminated Pearson's distributorship, Ackerman contacted Pro Farm about distributing the Pro Farm chute. (Tr. Vol. 1 at 201). After Pro Farm sent Ackerman his first order of Pro Farm chutes, a representative from Pro Farm visited Ackerman in La Salle, where the representative saw a Pearson Chute. (Id. at 206). Much like his experience with the Beefmaster, Ackerman helped develop the Pro Farm chute for the domestic market. (Id. at 209-10). Ackerman rebranded the Pro Farm chute to be named the Renegade; instructed Pro Farm to change the color of the Renegade from green to gray; advised Pro Farm on how to improve the chute; and advertised the gray Renegade chute. (Id. at 204, 214-15, 217; Pl.s' Exh. 11, 36, 65). As a result of Pro Farm and Ackerman's joint development, the Renegade Chute looks very similar to the Pearson Chute, as shown below.

         (Image Omitted)

         Ackerman distributes the majority of Pro Farm's Renegade chutes that are sold in the United States. (Id. at 211). From early 2014 through May 2018, Ackerman sold approximately 244 Renegade and eight Equalizer chutes. (Id. at 225-26). The Equalizer is a cattle chute manufactured by Titan. For unknown reasons, Ackerman allowed Titan to copy the Renegade chute. (Id. at 219). Ackerman went so far as to request that Titan incorporate the circular disks found on the Pearson Chute into the Equalizer's design. (Id.). A review of the Equalizer confirms that it is nearly identical to the Pearson Chute. (Id. at 66, 76; Pl.s' Exh. 3).

         As a result of Ackerman's actions in co-developing the Beefmaster and actively competing against Pearson with the Renegade, Pearson filed for trademark registration on September 17, 2014 to protect the shape of the Pearson Chute. (Tr. Vol. 2 at 109). A week prior to filing its trademark application, Pearson mailed to Ackerman a cease and desist letter demanding that he stop using Pearson's logo and name on his website. (Id. at 36, 103, 146). The cease and desist letter did not demand that Ackerman stop producing the Renegade or stop copying the shape of the Pearson Chute. (Id.). Ackerman stated it was clear to him from his conversation with David Rater terminating him as a distributor that Pearson did not want him to incorporate features of the Pearson Chute into other chutes. (Tr. Vol. 1 at 195). However, Ackerman did not understand the Pearson Chute could be trademarked, especially in light of other chutes that incorporated features of Pearson's mark like the 2W Wrangler and WW Stampede. (Tr. Vol. 2 at 36; Tr. Vol. 3 at 118). Pearson did not inform Ackerman that the Renegade potentially infringed the Pearson mark until Pearson filed suit in this case in January 2018. (Tr. Vol. 2 at 38, 146). After that time, Ackerman began producing and marketing the Renegade Star, another model of chute. (Id. at 38- 40). The only difference between the Renegade and Renegade Star is that the latter has a star-shaped metal plate in place of the circular disk. (Id.). Even with the star plate affixed, the circular disk outline is still present. (Tr. Vol. 1 at 225; Pl.s' Exh. 58).

         IV. Distinctiveness and Confusion

         The Pearson Chute's design has remained largely unchanged since 1993. (Tr. Vol. 1 at 142). Although Pearson did not offer any evidence of the number of chutes it sold after 1993, consumers and distributors of cattle chutes generally recognize a Pearson Chute. Testimonials presented to the PTO during prosecution of the Pearson mark showed that customers recognized the Pearson Chute. (Pl.s' Exh. 2 at 141-48). However, it is unclear whether the entire mark; individual features of the mark such as the circular disks, raised front crossarm, gray color, or removable side panels; or some combination of features is what they identify as the Pearson mark. Pearson also did not offer any consumer survey evidence to substantiate what features of the Pearson mark are recognizable in the marketplace.

         Ackerman, himself, exclaimed upon seeing the Pro Farm chute that it looked like a Pearson Chute, except that it was green instead of gray. (Tr. Vol. 1 at 213). Van Neidig, [1] a cow-calf operator and designer of several cattle chutes, testified the Renegade was a direct copy of the Pearson Chute, but manufactured at substantially lower quality. According to Neidig, Ackerman copied the arrangement of the raised front crossbar, circular disks, and squeeze handle combination from the Pearson Chute. He described how the Pearson Chute has a good reputation in the industry and is of higher quality than the Renegade. The differences between the Renegade and Pearson Chute are weight, size of material, and quality of construction.

         Bret Hull, 2 a longtime cattle rancher who mainly uses a chute manufactured by WW, also stated the Pearson Chute has a recognizable shape, specifically noting the raised front crossbar and circular disks. Hull described the look as a “praying mantis, ” recognizable from 300 yards away. Further, he noted that the gray color of the chute is distinctive to Pearson, and the basic design has not changed for the last twenty-five years. Hull also testified that he first saw a Renegade at a trade show two years earlier and was surprised to see that it was virtually identical to the Pearson Chute, specifically the raised head gate, parallel chute frame, raised circular disks, tail gate, and color. Notwithstanding the similarities, Hull was able to distinguish the Renegade from a Pearson because of its weight and quality of construction.

         Ackerman offered the testimony of Patrick Carhart, retired WW national sales manager. (Tr. Vol. 3 at 36). Carhart worked in the agricultural equipment industry for forty-five years before his retirement on January 1, 2016. (Id. at 36, 38). During his career, he sold chutes for various manufacturers and was WW's sales representative from 1995 until being promoted to national sales manager in 2004. (Id. at 37). He testified that there were around two dozen parallel squeeze chutes on the market when he retired. (Id. at 38). He stated that the Pearson Chute is recognizable because of its parallel squeeze function. (Id. at 40-41). Further, because there are similarities between parallel squeeze chutes, it would be hard to identify a Pearson Chute from a line-up of other parallel chutes. (Id. at 40). He testified that the Pearson Chute is distinguishable from other parallel chutes because of its “pull-out sheet, ” a reference to the removable side panels. (Id. at 44, 49). He also stated that although the color of a chute is an indicator of the manufacturer, there are multiple chutes using a gray color, and there is nothing special about the shade of gray used by Pearson. (Id. at 41). When asked if he could distinguish a Pearson from the other chutes he had sold or was familiar with during his career, Carhart responded in the affirmative. (Id. at 49).

         Traditionally, cattle chutes are advertised in print and at trade shows, and more recently, on the internet. (Tr. Vol. 2 at 3, 52, 57-58). Manufacturers display the functionality of their chutes through demonstrations with live cattle at trade shows. (Tr. Vol. 3 at 124). In September 2014, at the Husker Harvest Days trade show in Nebraska, industry representatives and participants confused the Renegade with the Pearson Chute at one such demonstration. (Tr. Vol. 2 at 42-43). Ackerman took two Renegade chutes to the Husker Harvest trade show. (Id. at 44; Tr. Vol. 3 at 121-22). Participants at the show remarked how the Renegade looked like a Pearson Chute. Initially, show officials prevented Ackerman from demonstrating the Renegade, thinking it was a Pearson Chute. (Id. at 45). After Ackerman explained that he was marketing the chute as a Renegade and not a Pearson Chute, he was allowed to demonstrate the Renegade. (Tr. Vol. 3 at 123). Later, at the Dakota Fest trade show, consumers who had purchased a Pearson Chute and needed replacement parts, initially confused the Renegade for a Pearson Chute. (Tr. Vol. 1 at 223; Tr. Vol. 2 at 73, 100; Pl.s' Exh. 52). Ackerman clarified the confusion.

         The Raters anecdotally discussed how consumers on and at trade shows remarked that the Renegade and Pearson Chute look similar. (Tr. Vol. 2 at 96, 99-100, 103, 198). An email from a Pearson customer asked Ricky Rater about Ackerman's website advertisement of the Renegade, questioning whether it was a Pearson Chute. (Id. at 97-98; Pl.s' Exh. 81). In the same email, the customer understood that Ackerman had previously been a Pearson distributor. (Id.).

         Consumers confused not only the shape, but also the color of the Renegade with the Pearson Chute. And, at least one consumer purchased a Pearson Chute after finding the Renegade was of lower quality. (Tr. Vol. 3 at 125-26). Although Ackerman used Pearson's name as a metadata tag in his website, aside from nonspecific, anecdotal comments made by the Raters, Pearson offered no persuasive evidence to establish that any consumer purchased a Renegade thinking it was a Pearson Chute. (Tr. Vol. 1 at 134; Tr. Vol. 2 at 32, 170-71). The Raters did not specify or generally discuss how many more Pearson Chutes would have been sold but for the existence of the Renegade and Equalizer chutes in the cattle chute market.

         V. Quality Issues

         The Raters testified that due to quality concerns related to the Renegade, Pearson's reputation had been damaged, though their testimony regarding the amount was speculative at best and was not sufficient to support an award of damages. No. expert quantified the impact or damage to Pearson. The Renegade encountered quality control problems as a result of Pro Farm's manufacturing inconsistencies. (Tr. Vol. 1 at 228-29). Because of these inconsistencies, Ackerman had to rework or repair nearly every Pro Farm chute he received before selling them. (Id. at 228- 29). The Renegade chutes as received from Pro Farm were basically unsellable before Ackerman reworked them. (Id. at 229). Ackerman even characterized some of the chutes as unsafe. (Id. at 230). Neidig testified that during trade show demonstrations of the Renegade, the chute malfunctioned, and participants in the trade show steered clear of the Renegade. Although Ackerman reworked defective Renegade chutes before selling them and provided customers with replacement parts and services, Pro Farm's manufacturing problems negatively affected the Renegade's reputation for quality. (Tr. Vol. 1 at 227; Tr. Vol. 2 at 11, 109-10, 200-01).

         VI. Pearson obtains trademark registration over elements of the Pearson Chute

         A. The registered trademark

         On September 17, 2014, several years after the Pearson Chute's patents expired, and shortly after the Husker Harvest Days trade show, Pearson applied for trademark registration with the PTO. After the PTO limited the scope of the mark, Pearson received trademark registration in the principal register (Registration No. 5, 184, 202) on April 18, 2017. Below is an illustration of the Pearson mark (highlighted for ease of reference):

         (Image Omitted)

         (PL's Exh. 2 at 12). Pearson's trademark covers the following features:

The mark consists of a three-dimensional configuration of a cattle chute, specifically having four vertical corner posts extending upwardly from a rectangular base, parallel upper side rails that connect front and rear corner posts, a rear cross arm connecting the upper side rails adjacent the rear cross arm, a raised front cross arm connecting the front vertical posts and having extensions extending rearwardly therefrom and circular disks on opposite ends, a squeeze handle extending upward from one of the disks of the front cross arm, upper and lower front squeeze hinge arms extending rearward from the front corner post, and the upper and lower rear squeeze hinge arms extending forward from the rear corner post.

(Id. at 4). Color was specifically disclaimed by Pearson and is therefore not part of the trademark.

         Nor does Pearson explicitly claim color as part of its trade dress.

         B. Prosecution of the Trademark

         Because prosecution of the trademark is at issue, a summary of the prosecution history, supporting evidence, and arguments made during prosecution are described below. The summary is based on the trademark file wrapper. (See generally Pl.'s Exh. 2 and Defs.' Exh. 246).

         1. The PTO's Initial Rejection and Pearson's Response

         The Trademark Examiner (“Examiner”) initially rejected Pearson's application because it appeared to be functional and nondistinctive, and the illustration of the trademark did not match the specimen provided by Pearson. In explaining the initial rejection, the Examiner listed several competing chutes with similar functional features, including the Stampede and Renegade chutes. Pearson responded to the Examiner's functionality rejection. It argued that (1) because the Examiner is not a consumer of cattle chutes, what may appear similar to a normal person would not be similar to a cattle chute consumer; (2) the competing chutes listed, though they may function similarly, do not incorporate the Pearson Chute's shape; and (3) the Ackerman chute is a direct copy of the Pearson Chute. In response to ...

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