Opinion ID: 755178
Heading Depth: 3
Heading Rank: 1

Heading: Ownership of the APR Service Mark

Text: 15 At trial, the parties stipulated that the contested marks were confusingly similar and agreed that all of the state, federal, and common law claims in this case could be disposed of by determining ownership of the contested mark. The magistrate judge, recognizing that ownership rights in a service mark flow only from prior appropriation and actual use in the market, Homeowners Group, Inc. v. Home Mktg. Specialists, Inc., 931 F.2d 1100, 1105 (6th Cir.1991), concluded that the entire dispute could be resolved by determining the priority of use of the trademark under the Trademark Act of 1946 (Lanham Act), codified as amended at 15 U.S.C. §§ 1051-1127 (1994). Although neither party on appeal addresses any of the claims under Ohio state law, trademark claims under Ohio law follow the same analysis that courts employ when considering analogous federal claims. Rock & Roll Hall of Fame & Museum, Inc. v. Gentile Prods., 134 F.3d 749, 754 (6th Cir.1998). Therefore, our review of the Lanham Act counts will determine the outcome of the service mark ownership dispute in this case. 16 This case includes two types of claims under the Lanham Act. Plaintiff asserted a claim of infringement under 15 U.S.C. § 1114, 1 and plaintiff and defendants each alleged a federal false designation of origin count under 15 U.S.C. § 1125(a). 2 These competing claims can be resolved with a single inquiry into who first used the APR mark. In federal trademark infringement claims under 15 U.S.C. § 1114, the touchstone of liability ... is whether the defendant's use of the disputed mark is likely to cause confusion among consumers regarding the origin of the goods offered by the parties. Daddy's Junky Music Stores, Inc. v. Big Daddy's Family Music Ctr., 109 F.3d 275, 280 (6th Cir.1997). The parties stipulated to that issue in the instant case, and our review focuses on whether the defendants can prove a prior continuous use of the mark and gain protection under the innocent prior user affirmative defense to infringement of a federally registered trademark. See 15 U.S.C. § 1115(b)(5); Champions Golf Club, Inc. v. Champions Golf Club, Inc., 78 F.3d 1111, 1123-24 (6th Cir.1996). Turning to the second type of claims, the essential elements of a federal false designation of origin claim under 15 U.S.C. § 1125(a) are as follows: 17 (1) ownership of a specific service mark in connection with specific services; (2) continuous use of the service mark; (3) establishment of secondary meaning if the mark is descriptive; and (4) a likelihood of confusion amongst customers due to the contemporaneous use of the parties' service marks in connection with the parties' respective services. 18 Homeowners Group, Inc., 931 F.2d at 1105. Because only the first two of these elements are at issue here, the competing false designation claims also will be resolved by determining the priority of use of the marks in question. 19 Plaintiff first challenges several of the lower court's findings of fact, and then argues that the magistrate judge misapplied the standard for determining what constitutes a legally sufficient prior use of a service mark. We consider plaintiff's challenges to the court's underlying factual findings before reviewing the court's legal conclusion that defendants established prior ownership of the APR mark.
20 The determination of prior use of a service mark presents a mixed question of law and fact. We review the trial court's findings of fact for clear error, but review de novo the legal conclusion that defendants' prior use was sufficient to establish ownership of the service mark. See, e.g., Champions Golf Club, Inc., 78 F.3d at 1116 (applying same two-tiered standard of review to question of likelihood of confusion between two trademarks); Martahus v. Video Duplication Servs., Inc., 3 F.3d 417, 421 (Fed.Cir.1993) (We review any factual findings underlying a priority determination for clear error.).
21 Plaintiff argues that the trial court made several erroneous findings of fact. First, plaintiff challenges the court's findings that defendants generated revenue in 1994 and that plaintiff did not receive revenue until June of 1994. These contested factual findings are irrelevant to our disposition of the question before us. Neither party challenges the lower court's conclusion that plaintiff first used the APR OF OHIO mark on March 30, 1994. Therefore, the pivotal question in this case is whether defendants used the APR mark in commerce before that date. Because it is undisputed that neither side to this dispute earned any revenue before that March 30, 1994, any factual error regarding when either party actually earned revenues is of no consequence to the priority determination in this case. 22 Plaintiff next argues that the trial court incorrectly found that companies in Ohio received written and oral communications in which the APR mark was used in association with the provision of permanent employee placement services by Heagren and New APR. This finding was not clearly erroneous. The record contained evidence of Heagren's use of the APR mark when he sent resumes and at least one fax to companies that did business in Ohio. Moreover, Steve Stuthard, an executive at Lane Bryant, testified that in 1993 and 1994 he associated the mark APR with Heagren, and considered Allard Programming Resources a knock-off of Heagren's company. Vince Carter, a supervisor of staffing at AT & T, testified that Heagren and New APR offered the placement of permanent employees during the relevant period, and that he associated APR with Heagren. Thus, there was evidence that companies doing business in Ohio received communications from Heagren that used the APR mark, and that they associated the name APR with Heagren. 23 Plaintiff also contends that the court failed to explain that Heagren's contact with Carter was on behalf of AGS and that Stuthard contacted Heagren at AGS. This argument is without merit. Both Carter and Stuthard testified that Heagren distinguished his association with APR and the placement of permanent employees from his connection with AGS and the placement of temporary employees. 24 Finally, plaintiff challenges the lower court's finding that Heagren announced his intention to operate New APR as a part-time business until he left Keane, arguing that whether or not Heagren announced an intent to use the mark is not relevant to the determination of whether he had established a prior use of the APR mark. Because the priority determination focuses on whether defendants established a bona fide prior use of the mark, as opposed to an intention to use the mark, we agree that the question of whether Heagren announced an intention to use the mark is irrelevant to our disposition of the case before us. See, e.g., Zazu Designs v. L'Oreal, S.A., 979 F.2d 499, 504 (7th Cir.1992) ([A]n intent to use a mark creates no rights a competitor is bound to respect.); 2 J. THOMAS MCCARTHY, MCCARTHY ON TRADEMARKS AND UNFAIR COMPETITION § 16:11 (4th ed. 1997) (The mere fact that a party conceived the idea of a trademark and discussed it with others does not establish priority as of the date of those events.). In sum, none of the contested findings of fact that were relevant to the disposition of this case were clearly erroneous.
25 One of the bedrock principles of trademark law is that trademark or service mark ownership is not acquired by federal or state registration. Rather, ownership rights flow only from prior appropriation and actual use in the market. Homeowners Group, Inc., 931 F.2d at 1105. Allard Enterprises' federal registration of the APR OF OHIO service mark, however, serves as prima facie evidence of ownership and places on defendants the burden of showing their prior appropriation and continued use of their APR mark. Id. at 1105 & n. 2; see also Zazu Designs, 979 F.2d at 504 (Registration itself establishes only a rebuttable presumption of use as of the filing date.). Thus, we must determine whether defendants carried their burden of showing that their uses of the APR mark before March 30, 1994 were legally sufficient to establish prior ownership. Our analysis focuses on the meaning of the phrase use in commerce. 26 In 1988, Congress passed the Trademark Law Revision Act of 1988 (TLRA), Pub.L. No. 100-667, 102 Stat. 3935 (1988), which amended the Lanham Act and redefined the term use in commerce as the bona fide use of a mark in the ordinary course of trade, and not made merely to reserve a mark. 15 U.S.C. § 1127. This section of the Lanham Act further provides that a mark shall be deemed to be in use in commerce ... on services when it is used or displayed in the sale or advertising of services and the services are rendered in commerce. Id. The Trademark Trial and Appeal Board (TTAB) has explained that the purpose of this revision was to eliminate 'token use' as a basis for registration, and that the stricter standard contemplates instead commercial use of the type common to the particular industry in question. Paramount Pictures Corp. v. White, 31 U.S.P.Q.2d 1768, 1774, 1994 WL 484936 (Trademark Tr.& App. Bd.1994), aff'd, 108 F.3d 1392 (Fed.Cir.1997) (Table). One commentator described the TLRA's revisions to the process of trademark registration as follows: 27 Prior to 1989, in order to qualify for federal registration, the extent of actual use of the mark was irrelevant so long as it amounted to more than a mere sham attempt to conform with statutory requirements. However, effective November 16, 1989, Congress changed the statutory definition of use so as to require a greater degree of activity. 28 2 J. THOMAS MCCARTHY, MCCARTHY ON TRADEMARKS AND UNFAIR COMPETITION § 16:8 (4th ed.1997) (footnote omitted). The revised Lanham Act, however, now allows an applicant to register a mark without claiming even a token use by showing that it has a bona fide intention ... to use a trademark in commerce. 15 U.S.C. § 1051(b). The applicant then must file a statement of actual use within six months. Id. § 1051(d). Because an applicant may extend the deadline for filing the statement of actual use for up to twenty-four months, the Lanham Act now allows applicants to apply for registration of a mark two years before it is actually used in commerce. Id. § 1051(d). Contingent upon registration, the filing of an application to register establishes constructive use of the mark as of the date of filing. Id. § 1057(c). 29 We have explained these statutory revisions at length because plaintiff argues that the magistrate judge ignored these changes in the law and improperly analyzed this case under case law that antedated the revisions to the Lanham Act. We find no merit to this argument. The statutory definition of use in commerce as the bona fide use of a mark in the ordinary course of trade, and not made merely to reserve a mark, id. § 1127, and the accompanying explanation that a service mark the shall be deemed to be in use in commerce ... when it is used or displayed in the sale or advertising of services and the services are rendered in commerce, id., are entirely consistent with the traditional rules governing common-law ownership of trademarks. In the absence of registration, rights to a mark traditionally have depended on the very same elements that are now included in the statutory definition: the bona fide use of a mark in commerce that was not made merely to reserve a mark for later exploitation. 30 For example, in Blue Bell, Inc. v. Farah Manufacturing Co., Inc., 508 F.2d 1260 (5th Cir.1975), the Fifth Circuit considered which one of two competing manufacturers first used the trademark TIME OUT in connection with men's clothing. Farah Manufacturing sold and shipped one pair of slacks bearing the mark to each of its regional sales managers on July 3, but did not ship clothing bearing the mark to customers until September. In an attempt to gain priority, Blue Bell attached the TIME OUT mark to clothes that were designed for, and were identified by, a different label. Blue Bell shipped the clothing bearing the two marks on July 5, but did not ship the line of clothing designed for the TIME OUT mark until October. In its oftcited opinion, the Fifth Circuit noted that common-law ownership of a trademark accrues when goods bearing the mark are placed on the market, id. at 1265, and held that Farah's sale of clothes to its sales managers was insufficiently public to secure trademark ownership, because [s]ecret, undisclosed internal shipments are generally inadequate to support the denomination 'use.'  Id. It further explained that the phrase bona fide use in trade requires that the mark be affixed to the merchandise actually intended to bear the mark in commercial transactions. Id. at 1267. The court found that Blue Bell's addition of the TIME OUT mark to items bearing the label of another line of clothes was not a bona fide use because it was intended to reserve the mark for the future, not to identify a particular line of goods. It concluded that the first bona fide use of the mark was Farah's public shipment of clothes that were labeled with and designed for the TIME OUT mark. 31 Some seventeen years later, in Zazu Designs v. L'Oreal, S.A., 979 F.2d 499 (7th Cir.1992), the Seventh Circuit engaged in a similar analysis when it considered which of two shampoo makers first used the trademark Z AZU. L'Oral applied to register the Z AZU mark in June of 1986, and by August of that year had advertised and sold shampoo under that name across the nation. Id. at 501. In the previous year, a salon in suburban Chicago, named Zaz Hair Designs (ZHD), had begun developing a line of shampoo that it intended to bear the same mark. Between November of 1985 and February of 1986, ZHD sold some of its first samples to its customers and sold forty bottles to a hair stylist in Florida. The court found this latter shipment was designed to interest the Floridian in the future marketing of the product line. These bottles could not have been sold to the public, because they lacked labels listing the ingredients and weight. Id. at 502. The Zazu court concluded that ZHD was trying to reserve a mark for 'intended' exploitation. ZHD doled out a few samples in bottles lacking labeling necessary for sale to the public. Such transactions are the sort of pre-marketing maneuvers that ... cases hold insufficient to establish rights in a trademark. Id. at 505. 32 These two cases illustrate the longstanding principle that, in the absence of federal registration, prior ownership of a mark is only established as of the first actual use of a mark in a genuine commercial transaction. 3 See, e.g., United Drug Co. v. Theodore Rectanus Co., 248 U.S. 90, 97, 39 S.Ct. 48, 63 L.Ed. 141 (1918) ([T]he right to a particular mark grows out of its use, not its mere adoption....); Hydro-Dynamics, Inc. v. George Putnam & Co., Inc., 811 F.2d 1470, 1474 (Fed.Cir.1987) (Subsequent adoption of the mark does not convert a shipment for the purpose of advisory consultation on the merits of a proposed trademark into a bona fide use of the mark in commerce.); La Societe Anonyme des Parfums Le Galion v. Jean Patou, Inc., 495 F.2d 1265, 1274 (2d Cir.1974) (holding that sales of perfume motivated by desire to preserve mark for later use were insufficient to obtain enforceable rights in the mark); Paramount Pictures Corp., 31 U.S.P.Q.2d at 1775, 1994 WL 484936 (finding that applicant failed to make a bona fide use of his mark for board games in commerce because neither game nor its instructions were serious or genuine in nature and because applicant had no real trade in games). 33 As long as there is a genuine use of the mark in commerce, however, ownership may be established even if the first uses are not extensive and do not result in deep market penetration or widespread recognition. As the Blue Bell court explained, [t]he exclusive right to a trademark belongs to one who first uses it in connection with specified goods. Such use need not have gained wide public recognition, and even a single use in trade may sustain trademark rights if followed by continuous commercial utilization. 508 F.2d at 1265 (citations omitted). In an earlier case, the Fifth Circuit held that low volumes of door-to-door sales of metal and wood polish over a period of ten years were sufficient to establish priority, reasoning that [t]he mere fact that a business is small and its trade modest does not necessarily militate against its being an established business capable of acquiring goodwill and rights in a trademark. Sheila's Shine Prods., Inc. v. Sheila Shine, Inc., 486 F.2d 114, 123 (5th Cir.1973). See also Hydro-Dynamics, Inc., 811 F.2d at 1474 (recognizing that single bona fide shipment in commerce may support registration); Kathreiner's Malzkaffee Fabriken v. Pastor Kneipp Medicine Co., 82 F. 321, 326 (7th Cir.1897) (holding that for rights in a mark to accrue,[i]t is not essential that its use has been long continued, or that the article should be widely known, or should have attained great reputation); Bell v. Streetwise Records, Ltd., 640 F.Supp. 575, 580 (D.Mass.1986) (initial use of mark need not result in instant success); E.I. Du Pont De Nemours & Co. v. Big Bear Stores, Inc., 161 U.S.P.Q. 50, 51 (1969) (finding that small volume of sales as part of test marketing plan were sufficient to show a continuous use of the mark in question). 34 In other instances, however, courts have concluded that sporadic or minimal uses of a mark may indicate the mere intent to reserve a mark for later use rather than the present commercial utilization of the mark. For example, in La Societe Anonyme des Parfums Le Galion v. Jean Patou, Inc., 495 F.2d 1265 (2d Cir.1974), the Second Circuit considered a perfume manufacturer that recorded eighty-nine sales of perfume bearing a particular trademark over a period of twenty years. The court concluded that it could not agree [with the district court] that such a meager trickle of business constituted the kind of bona fide use intended to afford a basis for trademark protection. Id. at 1272. In contrast to other cases where protection was warranted because the trademark usage, although limited, was a part of an ongoing program to exploit the mark commercially, id., the court found that the low-level sales in this case indicated a mere desire to warehouse the mark for potential use at sometime in the future. It explained that  '[t]rademark rights are not created by sporadic, casual, and nominal shipments of goods bearing a mark. There must be a trade in the goods sold under the mark or at least an active and public attempt to establish such a trade.'  Id. at 1274 (quoting Clairol, Inc. v. Holland Hall Prods., Inc., 165 U.S.P.Q. 214, 217, 1970 WL 9887 (1970)). 35 On appeal, plaintiff discredits defendants' uses of the APR mark as part of a word-of-mouth marketing plan that targeted personal friends, and asserts that such secretive, minimal, and sporadic uses are neither sufficiently commercial nor public to qualify as bona fide uses of a service mark. For the following reasons we disagree. First, we agree with the magistrate judge's finding that whether or not this ... word-of-mouth or 'relationship' marketing is the preferred or optimal way to conduct this type of business, it is not so atypical that no reasonable person could view it as 'commercial.'  In contrast to the internal shipments and pre-marketing consultations that courts held inadequate in such cases as Blue Bell, Inc. and Zazu Designs, defendants in the case before us used the APR mark on at least one fax, on at least one resume, and in numerous other solicitations, as they offered New APR's services to several employers doing business in Ohio. Defendants were not engaged in pre-marketing maneuvers, the disingenuous uses of a trademark, or the mere attempt to reserve the APR mark for later utilization. Defendants used the APR mark as they attempted to complete genuine commercial transactions, with the understanding that they would be paid if an employee was hired. Second, these commercial uses also were sufficiently public to qualify for protection. The use of a mark need not have gained wide public recognition to establish priority, Blue Bell, Inc., 508 F.2d at 1265, and there was evidence in this case that several large companies that did business in Ohio identified the APR mark with Heagren and his permanent employee placement services. Finally, we find that defendants' use of the APR mark over the course of 1993 and into 1994 was consistent and continuous, if not high-volume. Defendants' trademark usage, although limited, was a part of an ongoing program to exploit the mark commercially. La Societe Anonyme des Parfums Le Galion, 495 F.2d at 1272. For these reasons, we conclude that defendants established both the bona fide use in commerce of the APR mark before plaintiff's first use on March 30, 1994 and the continuous use of that mark since then. Therefore, we affirm the trial court's determination that defendants established prior ownership rights to the APR mark.