Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca10-86-02260/USCOURTS-ca10-86-02260-0/pdf.json

Parties Involved:
GTE Corporation
Appellant
David R. Williams
Appellee

Document Text:

PUBLISH 

UNITED STATES COURT OF APPEALS 

TENTH CIRCUIT 

GTE CORPORATION, 

Plaintiff-Appellant, 

v. 

DAVID R. WILLIAMS, d/b/a GENERAL 

TELEPHONE, 

Defendant-Appellee. 

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FILED 

Uuictd SMe$ Court of Appeals 

Tenth Circuit 

MAY 2 5 1990 

ROBERT L. HOECKER 

Clerk 

No. 86-2260 

Appeal from the United States District Court 

for the District of Utah 

(D.C. No. C82-1237 G) 

Jeffrey A. Schwab of Abelman Frayne Rezac & Schwab, New York, New 

York, for Plaintiff-Appellant. 

Robert S. Campbell, Jr. (Thomas P. Melloy with him on the brief), 

of Watkiss & Campbell, Salt Lake City, Utah, for DefendantAppellee. 

Before HOLLOWAY, Chief Judge, LOGAN and SEYMOUR, Circuit Judges. 

LOGAN, Circuit Judge. 

Appellate Case: 86-2260 Document: 010110555332 Date Filed: 05/25/1990 Page: 1
In this action for infringement of a federally registered 

service mark, the district court found in favor of defendant 

David R. Williams. On appeal, plaintiff GTE Corporation (GTE) 

attacks the legal and factual bases of the court's decision. 

I 

Background 

Plaintiff was formed in 1935 as "General Telephone 

Corporation." Its corporate name was changed in 1959 to "General 

Telephone & Electronics Corporation," and in 1982 to its current 

name, "GTE Corporation." GTE has four principal groups of 

subsidiaries, one of which is a network of telephone operating 

companies. Most of these telephone operating companies have names 

that begin "General Telephone Company of," followed by a 

geographic modifier. All of the telephone subsidiaries employ 

"General Telephone'' as a trade name, trademark, and service mark. 

Williams operates a sole proprietorship engaged in providing 

mobile telephone and paging services under the trade name "General 

Telephone" in the area of Utah known as the Wasatch Front. 

Williams adopted "General Telephone" as a trade name, trademark, 

and service mark in 1974, and has used it continuously in the 

Wasatch Front area since that time. 

In June 1981 GTE applied to the Patent and Trademark Office 

for registration on the Principal Register of the service mark 

"General Telephone" for provision of telecommunications services. 

The mark was registered in October 1982. GTE filed the instant 

suit shortly thereafter, alleging infringement of a federally 

registered mark under sections 32(l)(a) and (b) of the Lanham Act, 

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15 U.S.C. §§ 1114(l)(a)-(b), and false designation of origin under 

Lanham Act section 43(a), 15 U.S.C. § 1125(a). GTE sought 

injunctive relief and damages, including treble damages, pursuant 

to section 35 of the Act, 15 U.S.C. § 1117. 1 

In GTE Corp. v. Williams, 731 F.2d 676 (10th Cir. 1984), this 

court reversed the district court's order granting GTE's motion 

for a preliminary injunction. On remand, the case was tried to 

the court de novo. The district court found Williams entitled, 

pursuant to 15 U.S.C. § 1052(d), to concurrent registration of the 

mark for the Wasatch Front, and to its exclusive use in that 

region. I R. tab 127, at 16 fl 14; GTE Corp. v. Williams, 649 

F. Supp. 164, 176 (D. Utah 1986). 

The district court reasoned as follows: "General Telephone" 

is a descriptive rather than a suggestive mark, and hence is 

entitled to protection only upon a showing of secondary meaning; 

GTE failed to establish secondary meaning of the mark in the 

Wasatch Front; Williams' use of the mark in the Wasatch Front was 

not likely to cause confusion in the marketplace; Williams 

established a statutory defense to the infringement claims by 

proving adoption as an intermediate junior user of the mark 

without knowledge of the senior user's use, Lanham Act section 

33(b)(5), 15 U.S.C. § 1115(b)(5); Williams established the common 

1 Although GTE's complaint invoked the district court's pendent 

jurisdiction "for common law unfair competition," IR. tab 1, at 

2, and GTE's brief to this court mentions that this action was 

brought, in part, "for common law trademark infringement and 

unfair competition," Brief for Plaintiff-Appellant at 5, GTE did 

not in fact plead any common law cause of action in its complaint, 

the pretrial order did not set forth a common law cause of action, 

and the district court's opinion did not address a common law 

cause of action. Thus, there is no common law claim in this case. 

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law defense to infringement of good faith adoption in a remote 

area, which defense was also applicable to the section 43(a) 

claim; and, as an alternative holding, GTE's claims were barred by 

laches. 

GTE attacks every step of the court's reasoning process. We 

will deal only with those objections relevant to our decision. 

II 

Evidentiary Presumptions Arising from Registration 

First, GTE argues that because the Patent and Trademark 

Office granted the registration without requiring proof of 

secondary meaning, the trial court should have adopted a 

presumption that "General Telephone" is a suggestive rather than a 

descriptive mark. Most courts that have considered the issue do 

hold that the Patent and Trademark Office's decision to register a 

mark without requiring proof of secondary meaning creates a 

rebuttable presumption that the mark is suggestive, arbitrary, or 

fanciful rather than merely descriptive. See,~, Pizzeria Uno 

Corp. v. Temple, 747 F.2d 1522, 1528-29 (4th Cir. 1984); Money 

Store v. Harriscorp Fin., Inc., 689 F.2d 666, 673 (7th Cir. 1982); 

Abercrombie & Fitch Co. v. Hunting World, Inc., 537 F.2d 4, 11 (2d 

Cir. 1976). But see EZ Loader Boat Trailers, Inc. v. Cox 

Trailers, Inc., 746 F.2d 375, 379 (7th Cir. 1984) ("[T)he 

registration of a trademark does not confer upon that mark a 

presumption of nondescriptiveness."). The reasons for adopting 

this presumption have been articulated by the Fourth Circuit: 

"[T)he Patent and Trademark Office is the administrative 

agency initially charged with determining the 

registerability of a mark or figure and in exercising 

that function it must necessarily decide whether the 

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mark is descriptive or suggestive, since the Patent and 

Trademark Office may not grant registration to a mark 

which it finds to be 'merely descriptive.' Of course, 

if the mark is refused registration because it is found 

to be descriptive, the applicant may proceed under 

§ 1052(f) to assert that its mark, though descriptive, 

has acquired what is known as a secondary meaning and, 

if the applicf9J proves secondary meaning, it can secure 

registration. If the Patent and Trademark Office 

finds the mark suggestive on the other hand, it will 

grant registration without requiring proof of secondary 

meaning. The significance of registration without proof 

of secondary meaning ... is that the Patent and 

Trademark Office has 'concluded' that the mark or figure 

was not '"merely descriptive" "but suggestive"' and this 

'essential fact [i.e., the action of the Patent and 

Trademark Office] must be considered prima facie correct 

by a court in considering the validity of a trademark 

'" 

Pizzeria Uno, 747 F.2d at 1528-29 (footnotes and citations 

omitted). 

The record in this case reveals that the Patent and Trademark 

Office registered the mark "General Telephone" without requiring 

any proof of secondary meaning. The district court acknowledged 

the evidentiary presumption under 15 U.S.C. § 1115(a) of exclusive 

right to use a registered mark. GTE Corp., 649 F. Supp. at 168 

n.4 (quoting Value House v. Phillips Mercantile Co., 523 F. 2d 

424, 429 (10th Cir. 1975)). Nonetheless, GTE argues that Williams 

introduced no evidence on the issue of descriptive versus 

2 The Lanham Act requires the Patent and Trademark Office to 

grant registration of marks that do not fall within certain 

statutory bars, enumerated in section 2 of the Act, 15 U.S.C. 

§ 1052. The Patent and Trademark Office has the burden of proving 

"that the mark sought for registration falls within the statutory 

bars of § 2." 2 J. McCarthy, Trademarks and Unfair Competition 

§ 19:25, at 928 (2d ed. 1984). One of those bars, section 

2(e)(l), prevents registration of marks that are "merely 

descriptive." Section 2(f), however, allows for registration of a 

mark "which has become distinctive of the applicant's goods." The 

term "has become distinctive" in the Lanham Act means "has 

acquired secondary meaning." See,~, 1 id. § 15:2F. 

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suggestive, and that the district court therefore erred in not 

finding the mark suggestive and protectable without proof of 

secondary meaning. 

We need not resolve whether the district court properly 

applied the presumption, however, because even assuming the 

nationwide validity of GTE's registered mark, GTE could not 

prevail on its infringement claims without proving that Williams' 

use of the mark was likely to cause confusion in the marketplace. 

See Value House, 523 F.2d at 429; Amoco Oil Co. v. Rainbow Snow, 

748 F.2d 556, 558 (10th Cir. 1984). Further, nationwide validity 

of the mark would not preclude assertion of the common law defense 

of innocent adoption in a remote area. We conclude that the 

district court applied the proper legal standards, and its 

findings on these issues are supported by the record. Hence, its 

judgment must be affirmed. 

III 

Likelihood of Confusion 

In order to prevail on its infringement claims under sections 

32(l)(a) and (b) of the Lanham Act, GTE was required to prove that 

Williams' use of the mark "General Telephone" was "likely to cause 

confusion, or to cause mistake, or to deceive." 15 u.s.c. 

§ 1114(1). The likelihood of confusion test also governs GTE's 

false designation of origin claim under section 43(a). Amoco, 748 

F.2d at 558. We have held that likelihood of confusion is 

determined with the aid of the factors set out in Restatement of 

Torts§ 729 (1938), see,~' Beer Nuts, Inc. v. Clover Club 

Foods Co., 711 F.2d 934, 940 (10th Cir. 1983), and is "considered 

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not only in the context of confusion of source, but also in the 

context of confusion that results from a mistaken belief in common 

sponsorship or affiliation.'' Amoco, 748 F.2d at 558. Likelihood 

of confusion is a question of fact subject to the clearly 

erroneous standard of review. J.M. Huber Corp. v. Lowery 

Wellheads, Inc., 778 F.2d 1467, 1471 n.* (10th Cir. 1985). 

The district court found that ''Williams' use of the 'General 

Telephone' mark in the Wasatch Front is not likely to cause 

confusion in the marketplace concerning the source, origin or 

sponsorship of his paging and mobile/portable telephone services." 

I R. tab 127, at 16 ~ 12. GTE does not challenge this finding 

directly, acknowledging that the district court "correctly 

identified" the issue and properly relied upon Amoco. Brief for 

Plaintiff-Appellant at 31. Rather, GTE argues that the district 

court in fact considered only likelihood of confusion as to 

source, improperly giving only "lip serve [sic] to the broader 

definition" endorsed in Amoco. Id. GTE then reviews the evidence 

presented under the Restatement factors, asserting that "[w]hen 

the evidence is considered in the proper context, . a finding 

of likelihood of confusion is inescapable.'' Id. at 32. 

GTE's review of the evidence reveals that its real objection 

is to the court's weighing of the evidence, not to the legal 

standard applied. Thus GTE attacks the credibility of Williams' 

testimony, the correctness of the court's conclusion that the 

marketing areas of Williams and GTE do not overlap, and the weight 

given to evidence of actual confusion. Id. at 32-37. The court's 

factual findings are not clearly erroneous. 

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IV 

Defenses 

The absence of likelihood of confusion prevents GTE from 

obtaining any present relief against Williams' use of "General 

Telephone" in the Wasatch Front. The district court went on, 

however, to hold that Williams established certain defenses which 

give him superior rights to use of the mark in that area. 

Specifically, the court held that Williams had established a 

statutory defense under Lanham Act section 33(b)(5), 15 u.s.c. 

§ 1115(b)(5), as interpreted by this court in Value House, 523 

F.2d at 429, as well as the common law defenses of good faith 

adoption in a remote area and laches. 

A 

Section 33(b)(5) 

Section 33(a) of the Lanham Act, 15 U.S.C. § 1115(a), 

provides that registration of a mark "shall not preclude an 

opposing party from proving any legal or equitable defense or 

defect which might have been asserted if such mark had not been 

registered." This section makes available common law defenses to 

alleged infringers of registered marks. Section 33(b) provides: 

"If the right to use the registered mark has become 

incontestable und~r section 1065 of this title, the 

registration shall be considered conclusive evidence of 

the registrant's exclusive right to use the registered 

mark ... except when one of the following defenses or 

defects is established: 

(5) That the mark whose use by a party is charged 

as an infringement was adopted without knowledge of the 

registrant's prior use and has been continuously used by 

such party or those in privity with him from a date 

prior to registration of the mark under this chapter or 

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publication of the registered mark under subsection (c) 

of section 1062 of this title: Provided, however, That 

this defense or defect shall apply only for the area in 

which such continuous prior use is proved." 

15 U.S.C. § 1115(b)(5). 

In Value House, 523 F.2d at 429, we held that because the 

section 33(b)(5) defense is available even against incontestable 

marks, it must~ fortiori be available against contestable marks. 3 

This holding makes sense if section 33(b)(5) is a defense to the 

merits of an infringement action. The Supreme Court subsequently 

stated, how~ver, that 

"the seven defenses enumerated in § 33(b) are not 

substantive rules of law which go to the validity or 

enforceability of an incontestable mark. Instead, the 

defenses affect the evidentiary status of registration 

where the owner claims the benefit of a mark's 

incontestable status. If one of the defenses is 

established, registration constitutes only prima facie 

and not conclusive evidence of the owner's right to 

exclusive use of the mark." 

Park 'N Fly, Inc. v. Dollar Park and Fly, Inc., 469 U.S. 189, 199 

n.6 (1985) (citation omitted). Because section 33(b)(5) is a 

defense only to the conclusiveness of the evidentiary presumption 

arising from incontestability, it is clear that "[f]or marks whose 

registrations have not yet become incontestable, § 33(b)(5) is 

irrelevant." 2 J. McCarthy, Trademarks and Unfair Competition 

§ 26:180, at 331 (2d ed. 1984) [hereinafter Trademarks and Unfair 

Competition]. 

3 With exceptions not applicable here, a mark becomes 

incontestable if continuously used for five consecutive years 

after registration, provided it does not infringe valid rights 

acquired by common law usage before the date of publication of the 

registered mark. 15 u.s.c. § 1065. Five years had not passed 

before the contest in the instant case between GTE and Williams; 

thus GTE's mark is clearly contestable. 

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Because GTE's registration had not yet become incontestable, 

we cannot affirm the district court's finding that section 

33(b)(5) bars GTE's infringement claims. 

B 

Tea Rose-Rectanus 

The common law has long recognized that "the national senior 

user of a mark cannot oust a geographically remote good-faith user 

who has used the mark first in a remote trade area." 2 Trademarks 

and Unfair Competition§ 26:1D, at 287; see Hanover Star Milling 

Co. v. Metcalf, 240 U.S. 403 (1916) (Tea Rose); United Drug Co. v. 

Theodore Rectanus Co., 248 U.S. 90 (1918). 

Williams is an intermediate junior user (i.e., one who 

adopted the mark after the senior user but before the senior 

user's registration) for whom the Tea Rose-Rectanus defense is 

available. Williams had the burden of proof as to both the "good 

faith" and the "remoteness" elements of the defense. The court 

found that Williams met his burden. GTE challenges the court's 

findings, which we review under the clearly erroneous standard. 

1. Good Faith 

The district court found that at the time Williams adopted 

the General Telephone name and mark in 1974, he had heard of a 

company called '"General Telephone and Electronics of California' 

in the context of its involvement in some litigation in 

California." I R. tab 127, at 10 ,1 64. The court also found 

that, at the same time, Williams "had no knowledge that GTE used 

or claimed to use 'General Telephone' as a trade or service mark, 

or that any other entity used or claimed to use that mark," id. at 

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10-11, ~ 65, and that Williams did not intend to benefit from 

GTE's reputation and goodwill, id. at 11,~ 66. 

GTE argues that the level of knowledge found by the district 

court, by itself, should defeat a finding of good faith. There is 

some authority for the proposition that mere knowledge of a prior 

user's mark is sufficient to destroy the good faith of a 

subsequent user. See Money Store v. Harriscorp Fin., Inc., 689 

F.2d 666, 674-75 (7th Cir. 1982); Weiner King, Inc. v. Weiner King 

Corp., 615 F.2d 512, 522-23 n.6 (C.C.P.A. 1980); see also 2 

Trademarks and Unfair Competition§ 26:3, at 290-91. While a 

subsequent user's adoption of a mark with knowledge of another's 

use can certainly support an inference of bad faith, Jordache 

Enters., Inc. v. Hogg Wyld, Ltd., 828 F.2d 1482, 1485 (10th Cir. 

1987); Beer Nuts Inc. v. Clover Club Foods Co., 805 F.2d 920, 927 

(10th Cir. 1986), mere knowledge should not foreclose further 

inquiry. The ultimate focus is on whether the second user had the 

intent to benefit from the reputation or goodwill of the first 

user. Jordache, 828 F.2d at 1485; see also General Mills, Inc. v. 

Kellogg Co., 824 F.2d 622, 627 (8th Cir. 1987) ("Knowledge of 

another's product and an intent to compete with that product is 

not, however, equivalent to an intent ... to mislead and to 

cause consumer confusion."); Mushroom Makers, Inc. v. R.G. Barry 

Corp., 580 F.2d 44, 48 (2d Cir. 1978) (good faith despite actual 

and constructive knowledge of prior user's mark), cert. denied, 

439 U.S. 1116 (1979); El Chico, Inc. v. El Chico Cafe, 214 F.2d 

721, 726 (5th Cir. 1954) (knowledge is not inconsistent with good 

faith); Restatement of Torts§ 732 comment a (1938). In Value 

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House, we upheld a district court's finding that a defendant 

adopted a mark in good faith despite actual knowledge of use of a 

nearly identical mark by a third party, when it "did not select 

the mark for the purpose of benefiting from plaintiff's reputation 

and goodwill". 523 F.2d at 431. 

It may be that only in unusual cases will a defendant be 

found to have both knowledge of a senior user and good faith 

adoption of the allegedly infringing mark. In this case, 

defendant's admitted knowledge of a company called "General 

Telephone & Electronics of California," while not equivalent to 

knowledge of a senior user's use of the mark "General Telephone," 

would, considered by itself, appear to make his good faith claim 

somewhat improbable. But we are not the trier of fact. Federal 

Rule of Civil Procedure 52(a), which sets out the clearly 

erroneous standard of review, itself "emphasize(s] the special 

deference to be paid credibility determinations ... ," Anderson 

v. Bessemer City, 470 U.S. 564, 574 (1985), by stating 

particularly that "due regard shall be given to the opportunity of 

the trial court to judge of the credibility of the witnesses." 

The court's finding that Williams acted in good faith is not 

clearly erroneous. 

2. Remoteness 

With regard to the remoteness aspect of the defense, the 

district court made the following findings: GTE does not have, 

and has never had, any operating subsidiaries in Utah or in the 

adjacent states of Nevada, Arizona, Colorado or Idaho (with the 

exception of a portion of the northern panhandle of Idaho). IR. 

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/ 

tab 127, at 7 ,1 40. None of GTE's operating subsidiaries has ever 

done business or provi~ed services in Utah. Id. ~ 42. Before 

1974, GTE sold no products and provided no services in Utah under 

the mark "General Telephone," id. at 8 ,1,1 46-4 7, nor does it do so 

now, id. ,1 48. GTE and Williams do not compete in Utah or in any 

other place under the name or mark "General Telephone." Id. at 9 

,1 54. Neither GTE nor its operating subsidiaries has ever 

conducted advertising in Utah for specific operating subsidiaries 

(which use the "General Telephone" mark), and none of the 

advertising of and for the specific operating subsidiaries was 

ever shown or run in Utah. Id. at 7 ,1,1 39, 43. 

These findings are not clearly erroneous. They sufficiently 

establish the ''remoteness" element of the Tea Rose-Rectanus 

defense. See,~, Value House, 523 F.2d at 431. Thus GTE's 

infringement claims must fail. 

C 

Section 43(a) 

The district court held the Tea Rose-Rectanus defense 

applicable to GTE's claim under section 43(a), 15 u.s!c. 

§ 1125(a). GTE asserts that this was error. We agree with 

Professor McCarthy, however, that when 11 § 43(a) is used as the 

basis for an alternative count along with a count for infringement 

of a registered mark, a good faith remote use defense good against 

the registration should be good against the§ 43(a) count as 

well." 2 Trademarks and Unfair Competition§ 26:18D, at 331-32; 

accord Spartan Food Sys., Inc. v. HFS Corp., 813 F.2d 1279, 1282, 

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1284 (4th Cir. 1987). 4 

V 

Conclusion 

For the reasons stated above, the district court properly 

held that Williams is entitled to concurrent registration of the 

mark ''General Telephone" for the Wasatch Front (only), and to 

exclusive use of the mark in that area. 

AFFIRMED. 

4 In view of our analysis of the other issues, we do not reach 

the question of the propriety of the district court's alternative 

holding that GTE was barred by laches from enjoining Williams' use 

of the mark. 

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