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American Cruise Lines, Inc. v. HMS American Queen Steamboat Co. LLC

United States District Court, D. Delaware

August 14, 2017

American Cruise Lines, Inc., Plaintiff,
HMS American Queen Steamboat Company LLC and American Queen Steamboat Operating Company, LLC, Defendants.

          Mary B. Graham, Stephen J. Kraftschik, MORRIS, NICHOLS, ARSHT & TUNNELL LLP, Wilmington, Del.; David Williams (argued), Michael R. Naccarato, Wayne H. Xu, GORMAN & WILLIAMS, Baltimore, Md., attorneys for Plaintiff American Cruise Lines, Inc.

          Richard A. Barkasy, SCHNADER HARRISON SEGAL & LEWIS LLP, Wilmington, Del.; Dennis D. Murrell (argued), Brian P. McGraw, MlDDLETON REUTLINGER, Louisville, Ky., attorneys for Defendants HMS American Queen Steamboat Company LLC and American Queen Operating Company, LLC.


          Andrews, U.S. District Judge.

         Just sit right back and you'll hear a tale, a tale of two competing cruise lines. Plaintiff American Cruise Lines operates the vessels America, American Pride, American Spirit, American Star, American Glory, Independence, Queen of the West, and Queen of the Mississippi with the American Constellation soon to come. Defendant American Queen Steamboat Company[1] operates the American Queen and American Empress vessels. Their boats[2] sail on, among others, the Mississippi River and the Columbia and Snake Rivers, as well as along the United States coast.

         The weather started getting rough between the parties when Defendant, after purchasing the American Queen from the Government, adopted the name Great American Steamboat Company ("GASC"). Plaintiff sued; the suit settled, giving Plaintiff the rights to the GASC trademark; and Defendant changed its operating name to American Queen Steamboat Company ("AQSC"). Having settled, it would seem the disagreement over the GASC mark would be water under the bridge. Apparently not.

         Here is the three hour tour of the dispute between the parties. Plaintiff claims Defendant breached the settlement agreement and is cybersquatting on its GASC mark. The dispute over the GASC mark was again the basis of this suit. (D.I. I 1). Plaintiffs complaint stirred the waters. Now, the case has spiraled into a full-blown trademark dispute.

         Plaintiff claims Defendant's use of the AQSC mark infringes Plaintiffs American Cruise Lines ("ACL") mark. Plaintiffs ACL mark is senior to Defendant's AQSC mark. Defendant, in turn, claims Plaintiffs ACL and American vessel marks infringe Defendant's senior American Queen mark.

         Looking for any port in the storm, the parties turned to attacking the validity of each other's marks. Plaintiff claims Defendant's American Queen mark was abandoned when the vessel sat in dry dock under government control for over three years. Defendant claims Plaintiffs American Eagle mark was fraudulently procured.

         Plaintiff (D.I. 172, 216) and Defendant (D.I. 170, 212) have filed cross-motions for summary judgment on various issues. Each party has also moved to exclude expert witnesses proffered by the other. (D.I. 167, 182).

         I will begin with a voyage through the Daubert motions. Those resolved, I will set sail for the summary judgment motions.

         I. Daubert Motions

         Defendant proffers, and Plaintiff lodges (D.I. 167) Daubert challenges at, the testimony of two expert witnesses: Dr. Basil Englis and Cate Elsten. Likewise, Defendant brings Daubert challenges[3] (D.I. 182) to the testimony of four of Plaintiffs experts: Gary Krugman, Bruce Silverman, Christine Duffy, and Peter Kent. After reviewing the relevant legal standard, I will address the fitness to sail of each expert's proffered testimony.[4]

         A. Legal Standard

         "[T]he district court acts as a gatekeeper" to ensure that expert testimony is reliable and helpful. Schneider v. Fried, 320 F.3d 396, 404 (3d Cir. 2003). "The primary locus of this obligation is [Federal Rule of Evidence] 702...." Daubert v. Merrell Dow Pharma., Inc., 509 U.S. 579, 589 (1993). It reads:

         A witness who is qualified as an expert by knowledge, skill, experience, training, or education may testify in the form of an opinion or otherwise if:

(a) the expert's scientific, technical, or other specialized knowledge will help the trier of fact to understand the evidence or to determine a fact in issue;
(b) the testimony is based on sufficient facts or data;
(c) the testimony is the product of reliable principles and methods; and
(d) the expert has reliably applied the principles and methods to the facts of the case.

Fed. R. Evid. 702.

         Rule 702 codified the Supreme Court's holding in Daubert. Calhoun v. Yamaha Motor Corp., 350 F.3d 316, 320 (3d Cir. 2003). The Daubert Court rejected the then widely used Frye test. See Daubert, 509 U.S. at 589. The Frye test required an expert's theory or process be "generally accepted as reliable in the relevant scientific community." Id. at 584. The test was seen as imposing too "rigid" a requirement. See Id. at 588. This rigidity was "at odds with the liberal thrust of the Federal Rules and their general approach of relaxing traditional barriers to opinion testimony." Id. at 588.

         i. Burden of Proof

         Daubert replaced the Frye test with a "trilogy" of requirements: (1) qualification, (2) reliability, and (3) fit. Schneider, 320 F.3d at 404. My determination that proffered testimony complies with these prerequisites is governed by Federal Rule of Evidence 104(a). Daubert, 509 U.S. at 592. As such, I must find Daubert's trilogy of requirements is met by a preponderance of the evidence. In re Paoli R.R. Yard PCB Litig., 35 F.3d 717, 744 (3d Cir. 1994).

         On the one hand, this showing requires the party proffering expert testimony do more than make a prima facie case of reliability. Id. at 743. On the other hand, the "evidentiary requirement of reliability is lower than the merits standard of correctness." Id. The proffering party does not "have to prove their case twice-they do not have to demonstrate to the judge by a preponderance of the evidence that the assessments of their experts are correct, they only have to demonstrate by a preponderance of evidence that their opinions are reliable." Id. at 744.

         ii. Qualification

         The first prerequisite, qualification, "refers to the requirement that the witness possess specialized expertise." Schneider, 320 F.3d at 404. While the language of Daubert is couched in terms of scientific expertise and knowledge, the qualification requirement, as well as the fit and reliability requirements, are imposed on other technical or specialized knowledge. Calhoun, 350 F.3d at 321 (citing Kumho Tire Co. u. Carmichael, 526 U.S. 137, 141 (1999)).

         The Third Circuit has interpreted the qualification requirement "liberally" and has "eschewed imposing overly rigorous requirements of expertise...." Paoli, 35 F.3d at 741. Generalized qualifications are sufficient, id., but "more specific knowledge is required to support more specific opinions, " Calhoun, 350 F.3d at 322.

         iii. Reliability

         "[A]n expert's testimony is admissible so long as the process or technique the expert used in formulating the opinion is reliable." Paoli, 35 F.3d at 742. Reliability does not require certainty, Daubert, 509 U.S. at 590, but does require "validity, " Paoli, 35 F.3d at 742.

         As with all of the Daubert requirements, I have a gatekeeping role to play in assessing the reliability of the expert testimony. "When there is a serious question of reliability of evidence, it is appropriate for the court to exercise to some degree an evidentiary screening function." Paoli, 35 F.3d at 743 (quoting United States v. Downing, 753 F.2d 1224, 1240 n. 21 (3d Cir. 1985)).

         That being said, the Third Circuit has warned that "the reliability requirement must not be used as a tool by which the court excludes all questionably reliable evidence." Id. at 744. An expert's opinion must be founded on good grounds, not perfect ones. Id. I can conclude there are good grounds for the opinion even if I "think[] there are better grounds for some alternative conclusion" or that the expert's methodology "has some flaws such that if they had been corrected, the scientist would have reached a different result." Id. The Third Circuit has directed that a "judge frequently should find an expert's methodology helpful even when the judge thinks that the expert's technique has flaws sufficient to render the conclusions inaccurate." Id. at 744-45.

         iv. Fit

         For expert testimony to be admitted, it must be capable of "help[ing the jury to] understand the evidence or to determine a fact in issue...." Fed.R.Evid. 702. This fit requirement asks whether the proffered testimony is sufficiently helpful. See Daubert, 509 U.S. at 591 ("Expert testimony which does not relate to any issue in the case is not relevant and, ergo, non-helpful."). "[H]elpfulness requires more than bare logical relevance, but there is a strong preference for admission." Paoli, 35 F.3d at 745. The same liberalness in evaluating reliability applies in evaluating fit. Id. at 745. "Once again, [the Third Circuit] emphasize[s] that the standard is not that high." Id.

         v. Rule 403

         Assuming an expert meets the requirements of qualification, reliability, and fit, there is still "some room for Rule 403 to operate independently." Paoli, 35 F.3d at 746. "The court may exclude relevant evidence if its probative value is substantially outweighed by a danger of one or more of the following: unfair prejudice, confusing the issues, misleading the jury, undue delay, wasting time, or needlessly presenting cumulative evidence." Fed.R.Evid. 403.

         On the one hand, the Supreme Court has explained, "Expert evidence can be both powerful and quite misleading because of the difficulty in evaluating it. Because of this risk, the judge ... exercises more control over experts than over lay witnesses" under Rule 403. Daubert, 509 U.S. at 595 (citations omitted). On the other hand, the Third Circuit has warned: "[A] district court cannot exclude a scientific technique as too confusing and overwhelming simply based on its conclusion that scientific techniques by their very nature confuse and overwhelm the jury." Paoli, 35 F.3d at 746. Instead, in order to exclude expert evidence under Rule 403, there "must be something about the particular [] technique such as its posture of mythic infallibility that makes is especially overwhelming." Id.

         B. Dr. Basil Englis

         Defendant proffers, and Plaintiff challenges, Dr. Basil Englis as an expert on likelihood of confusion. Dr. Englis is a long-time marketing professor at Berry College, where he chairs the Marketing Department. (Englis at ¶ 1). He has a doctorate in experimental social psychology from Dartmouth College. (Englis Ex. A). Dr. Englis has authored over 100 published and refereed conference papers. (Id.).

         Dr. Englis is not an expert in the cruise industry specifically or travel industry generally. He has had two prior engagements in the travel industry: one for an airline where he studied the use of trademark terms as paid search keywords and one for a hotel booking website. (D.I. 168-1 at 65, 75).

         Dr. Englis proffers an opinion that there is a likelihood of confusion between Plaintiffs and Defendant's marks. As is a regular practice in trademark cases, Dr. Englis often conducts surveys to measure consumer confusion. (Id. at 77). He did not conduct such a survey here. (Id. at 78). Instead, his opinions are based on his review of qualitative evidence. (Id. at 84-85).

         I am excluding Dr. Englis's likelihood of confusion opinion except that I will allow Dr. Englis to testify on Plaintiffs use of paid search keywords and confusion.

         Dr. Englis fails to moor his conclusions in reliable methodology or reasoned analysis. Outside of his discussion of paid search keywords. Dr. Englis's expert report is nothing more than a recitation of facts paired with bare assertions. For example, in his actual confusion opinion, once factual accounts of confused consumers and travel agents are removed, all he offers is an assertion that "actual confusion is occurring in the marketplace" and that "the activities of [Plaintiff] are implicated as causes of confusion in that consumers are contacting [Plaintiff] believing they are contacting [Defendant]...." (See Englis at ¶¶ 28-52). His other opinions do not offer more than facts and conclusions either.

         The jury is capable of assessing the facts narrated by Dr. Englis in his report and he offers no analysis to help them in doing it. Cf. Cheesebrough-Pond's, Inc. v. Faberge, Inc., 666 F.2d 393, 397-98 (9th Cir. 1982) (stating a district court could have excluded an expert testifying on likelihood of confusion because his testimony touched on matters of "common knowledge and experience"). Conclusory statements of basic facts will not help the jury and fail to offer a reliable methodology. See Betterbox Commc'ns v. BB Tech., Inc., 300 F.3d 325, 329 (3d Cir. 2002) (suggesting expert's methodology in a likelihood of confusion case involving computer product catalogues was flawed because he simply evaluated the catalogues, "informally surveyed colleagues, " and looked at the target market). Thus, I am excluding Dr. Englis's testimony on likelihood of confusion under Rule 703.

         Plaintiff asserts other grounds for me to exclude Dr. Englis's testimony, including his assumption that the vessel name American Queen is iconic without citation to evidence or analysis and his questionable use of data to calculate revenues and marketing expenditures. Because I am excluding his testimony as unhelpful, I need not address those arguments.

         Dr. Englis's opinion on Plaintiffs use of Defendant's marks as paid search keywords stands in contrast to his other proffered opinions. This use is part of Defendant's infringement case. In broad strokes, Plaintiff paid search engines like Google to have its own ads appear as sponsored content when consumers entered Defendant's marks in the search engine.

         In opining on Plaintiffs use of paid search keywords, Dr. Englis offers more than mere recitation of facts; he offers explanation. For example, in opining on the significance of using Defendant's marks as a paid search keyword, he references and explains the funnel effect, a concept related to how consumers search for products. His opinions cite and incorporate research to provide context. Thus, I find that Dr. Englis's opinion on Plaintiffs use of paid search keywords would be helpful to the jury. He is qualified to offer this opinion having previously studied and published on the topic.

         While Dr. Englis can testify on Plaintiffs use of Defendant's mark in creating confusion, he cannot opine on Plaintiffs intent. Dr. Englis, in his report, proffers an opinion that Plaintiffs use of Defendant's marks demonstrates Plaintiff intended to cause and to benefit from consumer confusion. (Englis at ¶¶ 97-101).[5] Intent is not a proper topic for expert testimony. E.g., AstraZeneca LP v. TAP Pharma. Products, 444 F.Supp.2d 278, 293 (D. Del. 2006). Thus, while Dr. Englis can testify that Plaintiffs paid search keyword practices caused confusion, he cannot proffer an opinion on how Plaintiffs practices speak to its intent.

         C. Cate Elsten

         Plaintiff challenges Defendant's damages expert, Cate Elsten, as offering opinions outside of her expertise and as expanding on facts unnecessary to her opinion.

         Elsten is a finance and licensing expert with a focus on intellectual property. (Elsten at App. C). She currently serves as the Managing Director of Ocean Tomo, "an integrated intellectual property consulting firm providing financial products and services including expert testimony, valuation, investments, risk management and transactions." (Id. at p. 1).

         While most of Elsten's two reports, an opening report and a rebuttal report, are appropriate and supported, her opinions sometimes drift outside of her area of expertise. For example, Elsten analyzes product differentiation between the two companies. (Elsten Rebuttal at pp. 11-19). Defendant has not satisfied its burden to show Elsten is qualified to opine on how consumers make purchasing decisions. Likewise, Elsten has not been qualified to interpret the survey results proffered by Hal Poret, Plaintiffs expert.

         Elsten also offers up factual accounts with questionable relevance to her damages opinion. For example, she summarizes instances of actual confusion, discusses Plaintiffs use of paid search keywords, and recounts all of the facts relevant to abandonment.[6] To the extent Elsten's factual narratives exceed that necessary to explain the opinions actually proffered and she proffers opinions for which she has not been qualified, her opinions are excluded. Her opinions are otherwise allowed.

         D. Gary Krugman

         Gary Krugman is a trademark attorney who previously served as an examiner in the U.S. Patent and Trademark Office and as an attorney examiner and then administrative trademark judge at the Trademark Trial and Appeal Board. (Krugman at ¶¶ 4-7, 9). Plaintiff proffers Krugman to ...

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