Source: https://m.openjurist.org/165/f3d/1047/circuit-city-stores-inc-v-carmax-inc
Timestamp: 2019-11-12 01:13:02
Document Index: 203538034

Matched Legal Cases: ['§ 32', '§ 1114', '§ 4165', '§ 1338', '§ 13', '§ 43', '§ 2']

165 F3d 1047 Circuit City Stores Inc v. Carmax Inc | OpenJurist
165 F. 3d 1047 - Circuit City Stores Inc v. Carmax Inc
165 F3d 1047 Circuit City Stores Inc v. Carmax Inc
165 F.3d 1047
49 U.S.P.Q.2d 1507
CIRCUIT CITY STORES, INC., et al., Plaintiffs-Appellees,
CARMAX, INC.; Philip Artz; Harold Artz, Defendants-Appellants.
Richard M. Knoth (argued and briefed), Jayne L. Jakubaitis (briefed), Arter & Hadden, Cleveland, OH, Nancyellen Keane (briefed), Glen Allen, VA, for Plaintiff-Appellee.
Bruce O. Baumgartner (argued and briefed), Baker & Hostetler, Raymond Rundelli (briefed), Benesch, Friedlander, Coplan & Aronoff, Cleveland, OH, for Defendants-Appellants.
MERRITT, J., delivered the opinion of the court, in which SILER, J., joined. JONES, J. (pp. 1056-57), delivered a separate concurring opinion.
The defendants have made continued use of the CarMax mark since Circuit City's application for federal registration of the mark on June 22, 1993. On September 11, 1996, Circuit City filed a complaint against the defendants for trademark infringement and unfair competition under the Lanham Act §§ 32, 45(a), 15 U.S.C.A. §§ 1114, 1125(a). Circuit City also brought claims of unfair competition and deceptive trade practices under Ohio Rev.Code Ann. § 4165.02 (West 1998) and Ohio common law. The defendants answered Circuit City's complaint and offered an affirmative defense, claiming that they were the senior user of the CarMax mark in Northeast Ohio. The defendants alleged that they "adopted and began using the trade name 'CarMax' at least as early as June 1991," which was two years prior to Circuit City's intent to use application to the Trademark and Patent Office. The defendants also brought a counterclaim against Circuit City, alleging that Circuit City fraudulently obtained federal registration of the CarMax mark and name. The District Court had jurisdiction over Circuit City's suit under 28 U.S.C. § 1338(a), (b). District Court Judge David D. Dowd, Jr. conducted a bench trial of all the parties' claims and counterclaims in June 1997.
Are you ready for a new car, but when you visited the dealership came down with a bad case of sticker shock, then you need to come see us at CarMax in Willoughby. CarMax cures sticker shock. We have a huge inventory of late model used cars, most with the remainder of the factory warranty, all quality inspected. CarMax offers low milage (sic) used cars and we save you thousands off the price of a new car. Why by (sic) a new car when you can save thousands on a late model, low mileage used car at CarMax. If you cant (sic) tell the difference why pay the difference? So if you have come down with a bad case of sticker shock, come see us, were (sic) conveniently located on the corner of Erie and Vine in Willoughby. At CarMax we have the cure for sticker shock.
to the best of [O'Neil's] knowledge and belief, no other person, firm, corporation or association has the right to use said mark in commerce either in the identical form or in such near resemblance thereto as to be likely when used in connection with the goods or services of such other person to cause confusion or to cause mistake, or to deceive[ ].
On August 20, 1997, Judge Dowd issued a Judgement Entry and Permanent Injunction against the defendants. The District Court rejected the defendants' affirmative defense of common law ownership because the defendants did not meet their burden of proving actual use of the CarMax mark and secondary meaning. The District Court also rejected the defendants' fraud claim because Circuit City had a good faith belief that it possessed a superior right to the CarMax mark.
A. The Defendants' Affirmative Defense
1. Findings of Fact--We find no mistake in the District Court's finding that there was no "independent and convincing evidence" of the frequency of the defendants' radio ads for CarMax. The defendants claim that their testimony showed that forty-five to seventy-five CarMax ads were played over the radio every month during the relevant time period. These ads allegedly reached hundreds of thousands of listeners in eighteen counties across Northeast Ohio. The defendants' only evidence of the forty-five to seventy-five monthly rate of radio ads came from the oral testimony of various witnesses. Philip Artz was one of these witnesses. As one of the parties to this lawsuit, Artz was hardly an independent witness. His testimony was far from convincing as well. Artz claimed that he "could make a pretty good guess of how many spots [the Artz Auto Group] had a month" on the following radio stations: WDOK, WMMS, WQAL, WNCX and their AM sister stations. Philip Artz ultimately testified that the number was "probably ... over 300 spots per month," of which fifteen to twenty-five percent (i.e., forty-five to seventy-five) where for CarMax. Artz presented no documentary evidence to buttress his allegations of the volume of CarMax ads on the radio during the relevant time period. Judge Dowd remarked that he was "left with ... the total absence of any documents that support [Philip Artz's] testimony," thereby leaving him with the "responsibility to weigh and decide [the] credibility" of Artz. Given the fact that Philip Artz had admitted that he fabricated the original copy of the alleged 1990 letter to Budget, Judge Dowd was certainly free to find that Artz was not a credible witness.
I have credibility to determine in this case ... And what I'm focused on here is that I gather nobody can present me anything in writing or on tapes that established the fact of the use of the name CarMax in the radio advertisement, just people's memory. You don't have any way in your station of demonstrating that there was a 25 percent use of the word CarMax in the commercial. You don't have copies. You don't have transcripts of what was on the commercial. And you don't have the tapes.
In light of the defendants' effort to fabricate evidence, we cannot say that the District Court erred in deciding that their case was less than persuasive. Without any documentary foundation to their witnesses' testimony, the District Court could only look to the witnesses' credibility for assurances of sincerity. Indeed, the District Court had a duty to "appraise the testimony and demeanor of witnesses." See United States v. Diapulse Corp., 457 F.2d 25, 30 (2d Cir.1972). It did not have a duty, as the defendants urge, to accept the oral testimony of witnesses simply because it was uncontradicted at trial.
2. Legal Standard--The District Court held that the defendants' right to the CarMax mark hinged on whether they could prove that the mark had acquired "secondary meaning" through usage. Secondary meaning is defined as public association of a product or service with a single source1--in this case, the defendants' used car operation with the CarMax mark. Proof of "secondary meaning" is required for the protection of marks perceived by the public to be "personal names." See 2 J. Thomas McCarthy, McCarthy on Trademarks & Unfair Competition § 13.2 (4th ed.1998). The District Court held that proof of secondary meaning was necessary because CarMax was a personal name since it was "constructed from the names of Philip Artz's children." We disagree.
In In re Standard Elektrik Lorenz Aktiengesellschaft, 54 C.C.P.A. 1043, 371 F.2d 870, 873 (1967), the Court held that a composite mark consisting of two personal names is not necessarily a personal name as well. This rule was later elaborated in In re Hutchinson Technology, Inc., 852 F.2d 552, 554 (Fed.Cir.1988) (holding that the issue presented by a composite mark consisting of personal names is "what the purchasing public would think when confronted with the mark as a whole"). No evidence was offered during trial that the public perceives the CarMax mark to be a composite of the names of Philip Artz's two sons, Carson and Max. We believe that the public would view the CarMax mark as connoting something about the sale or service of cars. There is thus no basis to find that the CarMax mark is a personal name in trademark law.
The CarMax mark is more appropriately considered a "suggestive" mark under trademark law. A suggestive mark "suggests ... an ingredient or characteristic of the goods [or services] and requires the observer or listener to use imagination and perception to determine the nature of the goods [or services]." Induct-O-Matic Corp. v. Inductotherm Corp., 747 F.2d 358, 362 (6th Cir.1984). The CarMax mark is "suggestive" because it tells the public that the defendants are involved in the automobile industry but leaves the precise nature of the defendants' business, i.e., sale of used cars, to the consumer's imagination.
A party need only prove "actual use" and not "secondary meaning" to establish common law rights in a suggestive mark. See Champions Golf Club, Inc. v. The Champions Golf Club, Inc., 78 F.3d 1111, 1117 (6th Cir.1996). The evidence simply does not show that the defendants made sufficient use of the CarMax mark to establish any rights to it. Rights to service marks are acquired and protected in the same way as rights to trademarks. See Accuride Int'l, Inc. v. Accuride Corp., 871 F.2d 1531, 1534-35 (9th Cir.1989). Rights to trade names are also acquired and protected in the same way as rights to trademarks (and service marks). See American Steel Foundries v. Robertson, 269 U.S. 372, 380, 46 S.Ct. 160, 70 L.Ed. 317 (1926); Victor Tool & Machine Corp. v. Sun Control Awnings, Inc., 299 F.Supp. 868, 875 (E.D.Mich.1968), aff'd, 411 F.2d 792 (6th Cir.1969).2 A party establishes a common law right to a trademark only by demonstrating that its use of the mark was "deliberate and continuous, not sporadic, casual or transitory." La Societe Anonyme des Parfums le Galion v. Jean Patou, Inc., 495 F.2d 1265, 1272 (2d Cir.1974).
The most helpful case for the defendants in this Circuit is Allard Enterprises, Inc. v. Advanced Programming Resources, 146 F.3d 350 (6th Cir.1998). The Court held that common law ownership of a service mark "may be established even if the first uses are not extensive and do not result in deep market penetration or widespread recognition." Id. at 358. The Court found that the defendants successfully established prior ownership rights to a service mark even though the plaintiff had registered the mark with the United States Patent and Trademark Office. The defendants used the service mark at issue in Allard to signify an employee placement business. The evidence before the Court showed that the defendants had used the service mark "on at least one fax, on at least one resume, and in numerous [oral] solicitations" during the period before the plaintiff's registration. Id. at 359. Although the Allard Court found that the defendants' use of the service mark was not "high-volume," it was "consistent and continuous" and thus sufficient to establish a right of prior ownership. Id. The Court also recognized that the defendants' use of the service mark was "sufficiently public to qualify for protection" since there was evidence that several large companies (i.e., potential clients of the defendants) associated the mark with the defendants' services. Id.
A close reading of the opinion shows that the Allard Court did not abandon the long-standing rule that ownership rights stem only from deliberate and continuous rather than sporadic use of a mark. The Allard Court did not point to any evidence showing that the defendants used the mark selectively or that they failed to use it pervasively in all their commercial dealings, even if these dealings were low in volume. Furthermore, though the Allard Court granted ownership rights to the defendants based only on oral testimony of various "solicitations" and insubstantial documentary evidence of prior use, the Court noted that there was also good evidence of widespread public recognition of the defendants' use of the service mark. Evidence of public recognition is only necessary in cases requiring proof of secondary meaning, but such evidence may be probative of a party's actual use of a mark in cases where secondary meaning is not required. See id.; see also Florida v. Real Juices, Inc., 330 F.Supp. 428, 431 (M.D.Fla.1971) (holding that the plaintiff established a right to a slogan based on evidence of public recognition of its use by the plaintiff). Public recognition is probative of a party's actual use of a mark for the obvious reason that the public cannot be aware of a mark's association with a service or product unless the party has actually used the mark to create this association. Admitting evidence of public recognition also tends to promote trademark law's role in minimizing confusion and deceit concerning products that are publicly associated with a single source.
The Allard case has two all important differences with the case now before us. In Allard, the Court did not indicate that there was evidence of any material non-use of the service mark by the defendants. In this case, the defendants repeatedly failed to use the CarMax mark in basic commercial contexts such as their telephone listing, store signs, newspaper ads and other customer information. The Allard Court also expressly recognized that there was evidence of public awareness of the disputed service mark's association with the defendants' business. The record before us contains no such evidence.B. Evidentiary Ruling
The District Court properly awarded injunctive relief to Circuit City upon finding that the defendants were liable for trademark infringement and unfair competition. The defendants claim that the District Court erred in awarding injunctive relief because it wrongly found that Circuit City was likely to enter the defendants' Northeast Ohio market in the near future. We conclude that once there is as finding of infringement, as in this case, the District Court was not required to find that Circuit City was about to enter the defendants' market in order to grant injunctive relief. The law of this Circuit holds that no particular finding of likelihood of entry or irreparable harm is necessary for injunctive relief in trademark infringement or unfair competition cases. See Wynn Oil Co. v. American Way Serv. Corp., 943 F.2d 595, 608 (6th Cir.1991). The Wynn Court noted that irreparable injury "ordinarily follows when a likelihood of confusion or possible risk to reputation appears" from infringement or unfair competition. Id. (quoting Koppers Co. v. Krupp-Koppers GmbH, 517 F.Supp. 836, 849 (W.D.Pa.1981)). Thus, a court need only find that a defendant is liable for infringement or unfair competition for it to award injunctive relief. The Sixth Circuit has an eight point test for infringement liability under the Lanham Act. See Daddy's Junky Music Stores, Inc. v. Big Daddy's Family Music Ctr., 109 F.3d 275, 279 (6th Cir.1997). Likelihood of entry is just one of the eight factors under this test, and it is not dispositive of liability. See id. at 287 ("A finding that the parties will not expand their markets significantly ... 'does not address' the ultimate issue of likelihood of confusion"). The District Court found that the defendants were liable for trademark infringement, and its award of injunctive relief was therefore proper.
I join the panel's thoughtful and well-reasoned opinion, but write separately to express my understanding of the decision's effect. In their appeal, the defendants urged this court to apply the "Dawn Donut Rule" as articulated in the Second Circuit's decision in Dawn Donut v. Hart's Food Stores, 267 F.2d 358 (2d Cir.1959). In that case, the Second Circuit set forth a per se rule that there could never be a likelihood of confusion-and an injunction could not be issued--so long as the parties operated in separate and distinct geographical markets, and the senior trademark user had no imminent plans to expand into the infringer's territory. Id. at 364. Over time, the Dawn Donut Rule gained acceptance in the majority of the circuits. See, e.g., American Foods, Inc. v. Golden Flake, Inc., 312 F.2d 619, 626 (5th Cir.1963); Holiday Inns of America, Inc. v. B & B Corp., 409 F.2d 614, 618-19 (3d Cir.1969); Mister Donut of America, Inc. v. Mr. Donut, Inc., 418 F.2d 838, 844 (9th Cir.1969); Coach House Restaurant v. Coach and Six Restaurants, 934 F.2d 1551, 1562 & n. 49 (11th Cir.1991); Minnesota Pet Breeders v. Schell & Kampeter, 41 F.3d 1242, 1246 (8th Cir.1994); Lone Star Steakhouse & Saloon v. Alpha of Virginia, 43 F.3d 922, 931-33 (4th Cir.1995). We, ourselves, once expressed approval of the Dawn Donut Rule in dicta. See Old Dutch Foods, Inc. v. Dan Dee Pretzel & Potato Chip Co., 477 F.2d 150, 157 n. 6 (6th Cir.1973).
However, as section II-C of the panel opinion makes clear, the Sixth Circuit instead employs an eight-point test to assess the likelihood of confusion of two competing marks. The likelihood of entry is but only one factor to be considered in determining whether a senior user is entitled to an injunction. See, e.g., U.S. Structures, Inc. v. J.P. Structures, Inc., 130 F.3d 1185, 1189-90 (6th Cir.1997). We first adopted the eight-point test in Frisch's Restaurants, Inc. v. Elby's Big Boy, 670 F.2d 642, 648 (6th Cir.1982). Even though Frisch's Restaurants did not explicitly reject the Dawn Donut Rule, the facts and disposition of that case strongly disfavored a per se rule against injunctions when the parties do not compete in the same geographical market. The plaintiff in Frisch's Restaurants had the exclusive right to use the contested term "Big Boy" for its restaurant establishments in the state of Ohio, whereas the defendant had the right to use the mark in West Virginia. Id. at 644-45. The plaintiff sought relief under the Lanham Act since consumers in Eastern Ohio were allegedly left with the false impression that there was a connection between the plaintiff's and defendant's operations, even though the plaintiff itself did not operate any restaurants in the Eastern Ohio area. Id. at 649. Nevertheless, we held that the plaintiff was entitled to an injunction since it otherwise satisfied the eight-point test. Most telling is our holding that "it is evident that [plaintiff] suffers a cognizable injury in this instance because it would have to combat consumer misperceptions about the availability of Big Boy products if it were to expand into the area itself or license restaurants in that area to operate under the Big Boy trademark." Id. (emphasis added).
Application of the eight-point test enunciated in Frisch's Restaurants to determine the propriety of an injunction makes perfect sense. The trademark laws protect a senior holder from confusing exploitation of its commercial marks. Yale Elec. Corp. v. Robertson, 26 F.2d 972, 974 (2d Cir.1928) (Learned Hand, J.). If a plaintiff can otherwise demonstrate a likelihood of confusion by a strong showing on the other seven factors, it seems an odd result that the same plaintiff cannot obtain an injunction against an infringer simply because the parties operate in different geographical regions.
See David E. Rigney, Annotation, Application of secondary meaning test in action for trademark or tradename infringement under § 43(a) of the Lanham Act, 86 A.L.R. Fed. 489, 1988 WL 546634 (1988) § 2[5(a)] (1988)
The defendants argue that they had a senior right to the CarMax mark both as a trade name and a service mark. The defendants thus draw a distinction without a difference for the purposes of this case, and the Court will treat the defendants' various alleged uses of the CarMax mark under the same legal standard
Circuit City's claim that the defendants must prove secondary meaning to establish rights to the CarMax trade name simply because it is a trade name is a misstatement of the law. The cases do not distinguish between trade names and trademarks and do not require proof of secondary meaning in cases involving suggestive marks, regardless of whether the mark is defined as a trademark or trade name. See Champions Golf Club, Inc. v. The Champions Golf Club, Inc., 78 F.3d 1111, 1117 (6th Cir.1996).