Uatp Ip, LLC v. Kangaroo, LLC

Case: 22-2047    Document: 67    Page: 1   Filed: 02/16/2024




        NOTE: This disposition is nonprecedential.


   United States Court of Appeals
       for the Federal Circuit
                 ______________________

     UATP IP, LLC, UATP MANAGEMENT, LLC,
                Plaintiffs-Appellees

                            v.

                   KANGAROO, LLC,
                   Defendant-Appellant

 AIR ENTERTAINMENT GROUP, LLC, HAI CHANH
  QUACH, DAN TRINH, RAYMON HUNG, EDGAR
  ALEJANDRO GUERRERO, ALAN TRINH, TINA
       LUU, GOLDEN STAR GROUP, LTD.,
                   Defendants
             ______________________

                       2022-2047
                 ______________________

    Appeal from the United States District Court for the
 Southern District of Texas in No. 4:21-cv-02478, Judge
 Drew B. Tipton.
                 ______________________

                Decided: February 16, 2024
                 ______________________

    CHRIS PAUL HANSLIK, BoyarMiller, Houston, TX, ar-
 gued for plaintiffs-appellees.

    STEVEN JON KNIGHT, Chamberlain Hrdlicka, Houston,
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 2                               UATP IP, LLC v. KANGAROO, LLC




 TX, argued for defendant-appellant. Also represented by
 AMBER ALI, AJ FOREMAN, DAVID MIGUEL MEDINA.
                 ______________________

     Before REYNA, TARANTO, and CHEN, Circuit Judges.
 CHEN, Circuit Judge.
     This interlocutory appeal arises from a motion for a
 preliminary injunction filed below by Appellees UATP IP,
 LLC and UATP Management, LLC (collectively, UATP)
 based on alleged patent and trade dress infringement by
 Kangaroo, LLC (Kangaroo). The United States District
 Court for the Southern District of Texas granted the pre-
 liminary injunction, enjoining Kangaroo from operating
 the “Adventure Hub” in its trampoline park, using certain
 colors, and using UATP’s confidential information. UATP
 IP, LLC v. Kangaroo, LLC, 

2022 WL 2898951

, at *2 (S.D.
 Tex. June 28, 2022) (Order). After full briefing and argu-
 ment, we conclude the district court abused its discretion
 by failing to make the requisite findings to support its
 grant of the preliminary injunction. Further, we find that
 UATP failed to prove in its briefing below that it was likely
 to succeed on the merits of its patent infringement claim.
 Accordingly, we reverse the district court’s grant of the pre-
 liminary injunction as to the patent infringement claim,
 and vacate and remand as to the trade dress infringement
 claim.
                        BACKGROUND
     UATP and Kangaroo are operators of “adventure
 parks”—indoor play facilities that include trampolines, zi-
 plines, ropes courses, and other attractions. UATP oper-
 ates at least 160 facilities (known as Urban Air Adventure
 Parks) throughout the country, primarily through fran-
 chisees. Kangaroo operates a single play park in Laredo,
 Texas that is located in the same building, and uses much
 of the same equipment, as a previously existing Urban Air
 Adventure Park franchise.
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 UATP IP, LLC v. KANGAROO, LLC                               3



      UATP sued Kangaroo on July 30, 2021 on several
 grounds, including patent and trade dress infringement.
 In its operative complaint, UATP alleges that Kangaroo in-
 fringes 

U.S. Patent No. 10,702,729

 (’729 patent), entitled
 “Multi-level Play Equipment.” UATP also alleges that
 Kangaroo infringes its trade dress, which UATP describes
 in its motion for preliminary injunction as “includ[ing] the
 neon orange, yellow, Urban Air Lime Green, and Cosmic
 Dust Blue color scheme prevalent throughout Urban Air
 franchises, Attractions and equipment and the layout and
 placement of the same, signage (content, lettering, and col-
 oring), white ball pit, redundancy trampolines, no hold net-
 ting, configuration of the safety harnesses and attachment
 of same to the equipment, and one way directional tracking
 of the zip coaster . . . .” App. 614 (footnotes omitted).
     UATP filed its motion for preliminary injunction on
 June 9, 2022, over ten months after it filed its original com-
 plaint. The district court granted the motion on the
 grounds that UATP was likely to succeed on the merits of
 both its patent and trade dress infringement claims, and
 that UATP was entitled to a rebuttable presumption of ir-
 reparable harm that Kangaroo failed to rebut. Order, 

2022 WL 2898951

, at *1–2.
                         DISCUSSION
     This court generally reviews preliminary injunctions
 according to the law of the regional circuit (here, the Fifth
 Circuit), but “gives dominant effect to Federal Circuit prec-
 edent insofar as it reflects considerations specific to patent
 issues,” such as likelihood of success on the merits. Tinnus
 Enters., LLC v. Telebrands Corp., 

846 F.3d 1190

, 1202–03
 (Fed. Cir. 2017). Both the Federal Circuit and the Fifth
 Circuit review preliminary injunctions for an abuse of dis-
 cretion. 

Id. at 1203

. A party may establish an abuse of
 discretion “by showing that the court made a clear error of
 judgment in weighing relevant factors or exercised its dis-
 cretion based upon an error of law or clearly erroneous
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 4                                 UATP IP, LLC v. KANGAROO, LLC




 factual findings.” Abbott Lab’ys v. Andrx Pharms., Inc.,
 

452 F.3d 1331, 1335

 (Fed. Cir. 2006) (quoting Polymer
 Techs., Inc. v. Bridwell, 

103 F.3d 970, 973

 (Fed. Cir. 1996)).
      “A preliminary injunction is an extraordinary remedy
 never awarded as of right.” Winter v. Nat. Res. Def. Coun-
 cil, Inc., 

555 U.S. 7, 24

 (2008). A party seeking a prelimi-
 nary injunction must establish “a reasonable likelihood of
 success on the merits, irreparable harm in the absence of a
 preliminary injunction, a balance of hardships tipping in
 its favor, and the injunction’s favorable impact on the pub-
 lic interest.” Murata Mach. USA v. Daifuku Co., 

830 F.3d 1357, 1363

 (Fed. Cir. 2016) (quoting Nat’l Steel Car, Ltd. v.
 Canadian Pac. Ry., 

357 F.3d 1319

, 1324–25 (Fed. Cir.
 2004)). Under Federal Rule of Civil Procedure 52(a)(2), a
 district court must offer findings of fact and conclusions of
 law to justify the grant or denial of a preliminary injunc-
 tion motion. Id. (citing Ali v. Quarterman, 

607 F.3d 1046, 1048

 (5th Cir. 2010)).
                               I
     We turn first to UATP’s patent infringement claim.
 For a preliminary injunction motion, “[t]he burden is al-
 ways on the movant to show that it is likely to succeed on
 the merits.” BlephEx, LLC v. Myco Industries, Inc., 

24 F.4th 1391

, 1398 (Fed. Cir. 2022). To establish a likelihood
 of success on the merits, “the patentee seeking a prelimi-
 nary injunction in a patent infringement suit must show
 that it will likely prove infringement, and that it will likely
 withstand challenges, if any, to the validity of the patent.”
 Titan Tire Corp. v. Case New Holland, Inc., 

566 F.3d 1372, 1376

 (Fed. Cir. 2009).
     We find that UATP’s showing was legally insufficient
 to demonstrate likelihood of success on the merits of its pa-
 tent infringement claim. “[W]hether performed at the pre-
 liminary injunction stage or at some later stage in the
 course of a particular case, infringement and validity anal-
 yses must be performed on a claim-by-claim basis.”
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 UATP IP, LLC v. KANGAROO, LLC                                5



 Amazon.com, Inc. v. Barnesandnoble.com, Inc., 

239 F.3d 1343, 1351

 (Fed. Cir. 2001). But neither UATP’s motion
 for preliminary injunction nor the Order ever identified
 any claim of the ’729 patent that Kangaroo allegedly in-
 fringes. Instead of comparing Kangaroo’s allegedly infring-
 ing equipment to any of the claims of the ’729 patent, UATP
 and the district court appear to have assumed that Kanga-
 roo’s equipment infringes the patent because it was previ-
 ously used in an Urban Air Adventure Park. But the
 district court never determined that Urban Air Adventure
 Parks practice a specific claim of the ’729 patent. By as-
 suming that similarities between Kangaroo’s equipment
 and the equipment in an Urban Air Adventure Park con-
 stitute infringement without any discussion of the claims,
 the district court erred in finding a likelihood of success on
 the merits.
     The district court likewise erred in failing to make any
 findings on irreparable harm, balance of the equities, or the
 public interest in its analysis relating to UATP’s patent in-
 fringement claim. See Fed. R. Civ. P. 52(a)(2) (“In granting
 or refusing an interlocutory injunction, the court must []
 state the findings and conclusions that support its ac-
 tion.”).
                                 II
     We turn next to UATP’s trade dress infringement
 claim. In the Fifth Circuit, to establish likelihood of suc-
 cess on the merits of a trade dress infringement claim, the
 plaintiff “must prove that: (1) its trade dress qualifies for
 protection; and (2) the trade dress has been infringed by
 demonstrating a likelihood of confusion in the minds of po-
 tential consumers.” Beatriz Ball, LLC v. Barbagallo Co.
 LLC, 

40 F.4th 308, 317

 (5th Cir. 2022). To qualify for pro-
 tection, a trade dress must be (a) non-functional, and (b)
 distinctive, either inherently or through acquired
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 6                              UATP IP, LLC v. KANGAROO, LLC




 secondary meaning. 1 Wal-Mart Stores, Inc. v. Samara
 Bros., Inc., 

529 U.S. 205

, 210–11 (2000).
      Unlike UATP’s failure to present an adequate patent
 infringement case, UATP briefed all the necessary ele-
 ments of its trade dress infringement claim in the proceed-
 ings below. However, the district court failed to make any
 findings on whether UATP’s alleged trade dress was non-
 functional, inherently distinctive, or had acquired second-
 ary meaning. Instead, the district court found that UATP’s
 “trade dress claim against Kangaroo is likely to succeed on
 the merits, because it has shown that Kangaroo substan-
 tially imitated Urban Air’s total image by using the same
 colors, attraction structures, and park layout.” Order, 

2022 WL 2898951

, at *1. The district court’s failure to explain
 how it arrived at this finding in view of the relevant trade
 dress likelihood of confusion factors, see Xtreme Lashes,
 LLC v. Xtended Beauty, Inc., 

576 F.3d 221, 227

 (5th Cir.
 2009), and failure to address the non-functionality or dis-
 tinctiveness of UATP’s alleged trade dress, render its anal-
 ysis too conclusory to permit meaningful appellate review.



     1    The parties dispute whether UATP must show that
 its alleged trade dress has acquired secondary meaning, or
 whether a showing of inherent distinctiveness suffices. See
 UATP’s Response Brief at 23; Kangaroo’s Reply Brief at
 10–11. Which showing is required depends on whether
 UATP’s alleged trade dress is product packaging or product
 design. While product-packaging trade dress may be
 shown to be inherently distinctive, product-design trade
 dress can never be inherently distinctive and therefore can-
 not be protected without a showing of secondary meaning.
 Wal-Mart Stores, Inc. v. Samara Bros., Inc., 

529 U.S. 205

,
 214–15 (2000). We do not reach the issue of whether
 UATP’s alleged trade dress is product packaging or product
 design here, but provide this framing for the benefit of the
 parties and the district court upon remand.
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 UATP IP, LLC v. KANGAROO, LLC                                7



 See, e.g., Gechter v. Davidson, 

116 F.3d 1454, 1458

 (Fed.
 Cir. 1997) (“A district court therefore may not merely state
 its findings in conclusory terms, but must provide suffi-
 cient detail to elucidate the reasoning by which the court
 reached its ultimate finding on an issue of fact or conclu-
 sion on an issue of law; otherwise, the appellate court is
 unable to carry out its appellate review function.”).
      The district court’s findings relating to irreparable
 harm are also deficient. First, the district court erred in
 failing to address UATP’s ten-month delay in moving for a
 preliminary injunction. See Hybritech Inc. v. Abbott Lab’ys,
 

849 F.2d 1446, 1457

 (Fed. Cir. 1988) (“The period of delay
 exercised by a party prior to seeking a preliminary injunc-
 tion in a case involving intellectual property is [] one factor
 to be considered by a district court in its analysis of irrep-
 arable harm.”). Second, the district court erred in finding
 that UATP was entitled to a rebuttable presumption of ir-
 reparable harm under 

15 U.S.C. § 1116

(a). Section 1116(a)
 entitles a plaintiff seeking a preliminary injunction under
 

15 U.S.C. § 1125

 to a rebuttable presumption of irrepara-
 ble harm “upon a finding of likelihood of success on the
 merits for a violation.” Because the district court’s analysis
 was premised on a flawed likelihood of success finding, the
 court’s application of the presumption cannot stand. By
 failing to address UATP’s delay in filing its preliminary in-
 junction request, and by improperly applying the statutory
 presumption, the district court erred.
     Finally, as with its analysis relating to the patent in-
 fringement claim, the district court’s analysis relating to
 the trade dress infringement claim failed to make sufficient
 findings on the balance of the equities or the public inter-
 est. Because the district court failed to “state the findings
 and conclusions that support its action” in granting the
 preliminary injunction, as required by Federal Rule of Civil
 Procedure 52(a)(2), the court erred.
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 8                              UATP IP, LLC v. KANGAROO, LLC




                        CONCLUSION
      We find that the district court abused its discretion by
 failing to make the requisite findings to support its grant
 of the preliminary injunction. Further, we find that there
 was a failure of proof in UATP’s briefing below on the like-
 lihood of success on the merits of its patent infringement
 claim. Accordingly, we reverse the district court’s grant of
 the preliminary injunction as to the patent infringement
 claim. We vacate and remand as to the trade dress in-
 fringement claim.
     REVERSED-IN-PART, VACATED-IN-PART, AND
                   REMANDED
                            COSTS
 Costs to Kangaroo.