Opinion ID: 2051720
Heading Depth: 1
Heading Rank: 3

Heading: Common law trademarks.

Text: Plaintiff Commercial Savings asserts that the district court erred in concluding that the name COMMERCIAL, when used either alone or in combination with other words or symbols in connection with its banking products and services, does not constitute a common-law trademark for plaintiff.
To succeed on a common-law trademark infringement claim and to obtain injunctive relief, a plaintiff must prove (1) that it has a valid trademark or a protectable proprietary right in the name it seeks to exclude others from using, and (2) that there has been infringement of that right. See Gulf Coast Bank v. Gulf Coast Bank & Trust Co., 652 So.2d 1306, 1309 (La.1995). Trademarks are signs or symbols used to identify goods (referred to as trademarks) or services (referred to as service marks). Pundzak, Inc. v. Cook, 500 N.W.2d 424, 430 (Iowa 1993) (emphasis added); see also Iowa Auto Market v. Auto Market & Exchange, 197 Iowa 420, 422, 197 N.W. 321, 322 (1924); Restatement (Third) of Unfair Competition § 9 (1995) [hereinafter Restatement] (defining a trademark as a word, name, symbol, device, or other designation,... that is distinctive of a person's goods or services and that is used in a manner that identifies those goods or services and distinguishes them from the goods or services of others). We recognized long ago that trademarks are a form of common-law property right. See Pundzak, 500 N.W.2d at 430. Registration of trademarks is therefore not a prerequisite to protection from infringement. See id.; see also William C. Holmes, 1 Intellectual Property & Antitrust Law § 3.02, at 3-4 (1998) [hereinafter Holmes] (Acquiring ownership of a trademark requires no governmental action whatsoever, but is instead accomplished through the physical act of using the mark in trade to identify a product or service as coming from a particular source.). Trademarks perform the important economic function of identifying the products of one business and distinguishing them from those of its competitors. Holmes, § 3.01, at 3-3. Trademark infringement is considered a form of unfair competition because the similarity in the marks could lead a prospective buyer to believe that defendant's goods are those of the plaintiff. See Rudolf Callmann, 3A The Law of Unfair Competition, Trademarks & Monopolies § 20.02, at 9 (4th ed.1988) [hereinafter Callmann]. Thus, potential customers may be attracted to the reputation and name built up by the first user. Id. § 20.12, at 80. The danger is not that the sophisticated buyer will actually purchase from the defendant/second user believing that he has purchased from plaintiff/first user, but rather that the purchaser will be misled into an initial interest in defendant based on a mistaken belief as to a potential interrelationship between the two businesses. Id. § 20.03, at 12. In such cases, a defendant should not be permitted to benefit or trade upon any misleading suggestion of a relationship with the plaintiff's business or products. Id. § 20.04, at 20. Thus, a plaintiff's market share may be diminished where the purchaser stops buying plaintiff's product because it is dissatisfied with defendant's product and believes there to be some connection between plaintiff and defendant. Id. § 20.04, at 18. The justification for an injunction is that the plaintiff, as owner of the infringed trademark, is entitled to insist that its reputation shall be of its own making alone and that quality of its products or services lies within its exclusive control. Id. § 20.04, at 21. Thus, `[w]hat is infringed is the right of the public to be free of confusion and the synonymous right of a trademark owner to control [its] product's reputation.' Phipps Bros. v. Nelson's Oil & Gas, 508 N.W.2d 885, 886 (S.D.1993) (quoting James Burrough Ltd. v. Sign of the Beefeater, Inc., 540 F.2d 266, 274 (7th Cir.1976)).
As noted above, a trademark is a sign or symbol used to identify goods. See Pundzak, 500 N.W.2d at 430. Thus, to meet the first requirement in a common-law trademark infringement claimthe existence of a valid common-law trademarkthe plaintiff must prove that there has been use of a name or designation that is sufficiently distinctive such that consumers (i.e., customers and potential customers) identify the mark with the goods or services provided by the claimant. See First Bank v. First Bank Sys., Inc., 84 F.3d 1040, 1044-45 (8th Cir. 1996). Use of a name or designation is not usually difficult to show. The more complicated question concerns whether the name or designation is sufficiently distinctive of the plaintiff's goods or services such that it deserves protection against use or infringement by another. In terms of analysis, courts determine whether an alleged trademark is sufficiently distinctive by classifying it into one of four categories: (1) generic; [2] (2) descriptive; (3) suggestive; [3] or (4) arbitrary or fanciful. [4] See id. at 1045; accord Duluth News-Tribune v. Mesabi Publ'g Co., 84 F.3d 1093, 1096 (8th Cir.1996). Here, the parties seem to agree that the name COMMERCIAL is descriptive. A descriptive designation is one that is merely descriptive of the nature, qualities, or other characteristics of the goods, services, or business with which it is used. Restatement § 14. Thus, words describing the purpose or function of a product, the effect of its use, or the class of intended purchasers is considered to be descriptive in nature. See Restatement § 14 cmt. a. In prior cases, we have stated that words which are generic or which are merely descriptive of the goods or business to which they apply are not inherently distinctive and will not be protected as a trademark or trade name. See Iowa Auto Market, 197 Iowa at 422, 197 N.W. at 322-23. We have likewise noted, however, that terms which may be considered descriptive in nature may, by long use in connection with the goods or business of a particular dealer, come to be understood in a secondary sense as designating the goods or business of such dealer, and in such cases their deceptive use by another will be restrained as unfair competition. Id. at 423, 197 N.W. at 323 (concluding that the words Auto Market in business name were too generic to constitute a trademark or trade name so as to justify enjoining defendant from using those words in its business name); Restatement § 13(b). We have explained: To have this protection, the party complaining must show that, by continued use, the secondary meaning has become established in the public mind, and that his goods have become known and recognized by the public under the name, device, or symbol, with its secondary meaning. The secondary meaning only comes from use. Before the courts will afford protection in its use, it must be shown, that, as to the party complaining, it has a secondary meaning in the public mind; that it designates and is understood to represent the goods of the party complaining, so that one appropriating it and using it, after such meaning had attached, would be in a position to practice a fraud upon the complainant and upon the public. Motor Accessories Mfg. Co. v. Marshalltown Motor Material Mfg. Co., 167 Iowa 202, 208-09, 149 N.W. 184, 187 (1914). [5] The Restatement has adopted principles similar to our statements in Iowa Auto Market and Motor Accessories concerning a trademark's secondary meaning. See Restatement § 13(b). Specifically, the Restatement rule provides that descriptive terms are not inherently distinctive and are only protectable where secondary meaning is shown. See id. § 13 cmt. a. The person claiming rights in a mark or name bears the burden of proving that the designation is inherently distinctive or that it has become distinctive by acquiring secondary meaning. Id. Acquired distinctiveness, or secondary meaning, exists when the relevant consuming public has come to recognize the designation as one that identifies the business. See id. § 13(b). Said another way, secondary meaning simply refers to the connection in the consumer's mind between the mark and the provider of the service. See Investacorp, Inc. v. Arabian Inv. Banking Corp., 931 F.2d 1519, 1525 (11th Cir.1991). Secondary meaning can be established through direct evidence, such as consumer surveys and customer testimony, or through circumstantial evidence, such as evidence of exclusivity of use, length and manner of the designation's use, amount and manner of advertising, amount of sales, market share, and number of customers. See Madison Reprographics v. Cook's Reprographics, 203 Wis.2d 226, 552 N.W.2d 440, 445 (Ct.App.1996); Restatement § 13 cmt. e.
Upon our review, we disagree with the district court's finding that plaintiff Commercial Savings has not acquired distinctiveness with respect to the name COMMERCIAL through secondary meaning. Commercial Savings has operated under the name COMMERCIAL SAVINGS BANK since 1917 and did so exclusively under that mark until 1991. No other bank in the eight-county area operated under that name during that time. Plaintiff has used the marks COMMERCIAL, COMMERCIAL BANK, and COMMERCIAL SAVINGS BANK in many forms of advertising and promotional activities, including newspapers, brochures, signs and radios ads. The evidence also shows that plaintiff's president, Patrick Moehn, a long time resident of Carroll County, testified that Carroll County residents refer to plaintiff as COMMERCIAL, COMMERCIAL SAVINGS, and COMMERCIAL BANK. Thomas Gronstal, president of the Carroll County State Bank and longtime resident of Carroll, also testified that people in the community generally refer to plaintiff as COMMERCIAL or COMMERCIAL SAVINGS. This evidence causes us to find that consumers in the eight-county area have come to associate the name COMMERCIAL with banking goods and services provided by plaintiff. Cf. First Federal, Council Bluffs v. First Federal Sav. & Loan Assoc. of Lincoln, 929 F.2d 382, 384 (8th Cir.1991) (plaintiff First Federal Council Bluffs had developed secondary meaning in name FIRST FEDERAL through exclusive use of that name for twenty-five years and community involvement and support). As a whole, the evidence in the record is sufficient to establish a secondary meaning in the name COMMERCIAL, such that consumers in the eight-county area would associate that designation with banking products and services provided by plaintiff. We therefore conclude that plaintiff met its burden of proving it has a protectable common-law property right in the mark COMMERCIAL.