Opinion ID: 760888
Heading Depth: 3
Heading Rank: 1

Heading: The Defendants' Affirmative Defense

Text: 20 The District Court did not commit reversible error either in its findings of fact or conclusions of law with respect to the defendants' claim that they were the senior users of the CarMax mark. The defendants claim that the District Court erred both in (1) finding that there was no independent and convincing evidence of the frequency of the CarMax radio advertisements during the relevant time period and (2) requiring the defendants to prove that the CarMax mark possessed secondary meaning. We agree with the defendants that the District Court erred in requiring the defendants to prove secondary meaning, but we find that this error was harmless. The evidence before the District Court did not show that the defendants made actual use of the CarMax mark sufficient to warrant a common law right of ownership. The District Court's disregard of the limited evidence of the CarMax radio ads was not clearly erroneous, and the remainder of the evidence before the Court simply was inadequate to establish a senior right to the CarMax mark. 21 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. 22 It is true that Philip Artz's testimony was supported in part by the testimony of other witnesses, but this alone does not necessarily strengthen the defendants' allegations of the frequency of the CarMax radio ads. Philip Artz testified that the CarMax radio ads were aired over stations WDOK, WMMS, WQAL, WNCX and their AM sister stations. The defendants presented additional testimony only with respect to alleged CarMax ads over WDOK, WMMS and WRMR, WDOK's AM sister station. Like Artz's testimony, the testimony of Tom Embrescia (WDOK) and Gaye Ramstrom (WMMS) was also unsupported by any documentary evidence of the CarMax ads on their radio stations. Both witnesses testified on the frequency of CarMax ads merely from memory. With Embrescia on the stand, Judge Dowd remarked: 23 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. 24 Judge Dowd characterized Embrescia's testimony of the frequency of CarMax ads on WDOK (i.e., twenty five percent of 300 monthly ads) as speculation and estimates. In Ramstrom's case, she admitted herself that she was just guessing that the CarMax ads aired anywhere from twelve to twenty times a month on WMMS. Ramstrom also testified that she remembered actually hearing CarMax ads on the radio five or six times in 1991 and 1992 and three times in 1993. Judge Dowd ruled that this estimate involved her credibility as well. 25 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. 26 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 source 1 --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. 27 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. 28 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. 29 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). 30 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. 31 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. 32 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 33 The District Court did not err in refusing to preclude Mark O'Neil's testimony that he consulted with counsel prior to Circuit City's application for federal registration of the CarMax mark. The defendants' argument for preclusion rests on a claim that Circuit City asserted the attorney-client privilege to forbid the defendants from probing further into the communications between O'Neil and counsel. The record fails to show that the defendants were ever precluded by the attorney-client privilege from eliciting evidence at trial of O'Neil's communications with counsel. The defendants' reference to the trial testimony of O'Neil does not show that the District Court allowed Circuit City to withhold evidence of letters between counsel and O'Neil because of the attorney-client privilege. The record before us on appeal reveals that the defendants in fact never requested production of these letters at trial and instead merely demanded the preclusion of Circuit City's testimony based on the supposed assertion of the attorney-client privilege. Since the defendants did not move to request evidence of O'Neil's communications with counsel, there was no basis for the District Court to preclude Circuit City's testimony referring to these communications. C. Injunctive Relief 34 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.