UNITED STATES DISTRICT COURT DISTRICT OF NORTH DAKOTA
Member Link: Document 43 Filed 09/29/17 Page 1-28
States' Response to AEM Motion for Preliminary Injunction
Wayne K. Stenehjem State of North Dakota Attorney General
Page 7 - The harm to the State of North Dakota from enjoining its duty and obligation to protect its citizens outweighs any inconvenience to Plaintiffs.
Farm equipment manufacturers have, over the years, changed the fundamental terms of their dealership agreements. The relationship was once based upon trust and an economically balanced relationship in which a dealer would continue to represent the manufacturer for as long as the dealer performed the basic job of selling and servicing the manufacturer's products. However, in more recent years, manufacturers have resorted to one-sided economic relationships that have been reflected in standardized, one-sided form dealership agreements.
Page 8 - Significantly, manufacturers do not give dealers the opportunity to negotiate the terms of these agreements; rather, the dealers, who already are locked into a relationship with the manufacturer by reason of the substantial investments that they have made, have little choice but to sign these agreements since the manufacturers present them on a “take it or leave it basis.” Realistically, the dealer does not have the option to “leave it,” since that would amount to an abandonment of the huge investment the dealer has made in its business and livelihood.
Page 10 - If Manufacturers are permitted free rein to take action arbitrarily; to make them buy huge quantities of useless products, to refuse to allow them to sell to qualified buyers, to make them drop lines that they need in order to survive, or to condition the continuance of their businesses upon agreement to onerous and unfair dispute resolution terms -- the narrow margin that dealers subsist on today will likely be disrupted.
Page 11-12 - Furthermore, because the contracts at issue are private and, thus, there is no danger that the State is using its regulatory power to serve its own pecuniary interests, the Court should ‘refuse to second-guess’ the legislature’s determination that further regulating equipment manufacturers through enacting the aegis of SB 2289 was “a reasonable and necessary way to address its concern.”
Moreover, farm equipment dealerships reflect long-established, substantial investments and are economic anchors in their communities and critical links in maintaining the vitality of agriculture-the largest industry in the State.
The wide dispersion of dealers throughout the state is critical to farmers, since they must be relatively close to dealers in order to obtain and maintain their equipment.
Page 16 - Senate Bill 2289 does not implicate the Lanham Act because its provisions do not permit a dealer to alter a manufacturer’s product or federally registered trademark.
Plaintiffs argue SB 2289 violates their rights to control the quality associated with their trademarks and the Lanham Act preempts state law. On the contrary, SB 2289 does not permit a dealer to alter, or affect in any way, the quality of a manufacturer’s products or trademark.
In general, the disputed provisions liberate dealers from unreasonable restrictions regarding the operations of their implement dealerships. While the disputed provisions provide more autonomy for the dealers, they do not violate the Lanham Act.
Page 17 - Plaintiffs do not indicate how any of the disputed provisions allow a dealer to alter a trademark or require additional items to be displayed in a mark.
Rather, SB 2289 does not permit a dealer to alter a manufacturer’s trademark.
Page 18 - . . .the disputed provisions here allow a dealer to decide the product display within the dealership to be free from forced premises renovations, to be free from a required amount of inventory, and to propose a transfer of license agreements. The disputed provisions do not, however, allow a dealer to alter the quality of the product or the trademark associated with a product.
For example, SB 2289 would allow a dealer to place a John Deere combine next to a Kubota combine on the dealership lot. But SB 2289 does not permit a dealer to alter either combine or to place a John Deere trademark on Kubota equipment. Consequently, the quality of the products are not affected and a manufacturer still retains full control over the quality of the product stamped with its trademark.
Page 19-20 Although the Plaintiffs do not cite the specific Lanham Act violation, they broadly argue public interest will be served by “reducing the risks for consumer confusion or deception caused by Senate Bill 2289’s effects on federally registered trademarks.”
This fourth factor weighs heavily in favor of Defendants. Once again, no provision in SB 2289 allows a dealer to alter a trademark or product. The notion that a dealer would be allowed to place a Case tractor next to a Caterpillar tractor is not a cause for confusion.
Plaintiffs argue that members of the public have come to know and rely upon a manufacturer’s trademarks as signs of quality, consistency, and value. The Defendants agree.
However, SB 2289 does not allow a dealer to alter a manufacturer’s equipment or trademark. Under SB 2289, the equipment will retain the same quality from manufacturer to consumer.
Placing two competing manufacturers’ products side-by-side on the dealer lot does not implicate the Lanham Act. Indeed, public interest would be served by allowing consumers to select the most appropriate product for their needs and reducing the distance a consumer has to travel in rural North Dakota to shop for the various products offered by farm equipment implement dealers.
CONCLUSION For the foregoing reasons, the State respectfully requests that Plaintiffs’ motion for preliminary injunction be denied.