Court Opinion

ID: 2967642
Source: CourtListenerOpinion
Date Created: 2015-09-22 03:01:44.568773+00
Date Added: 2024-06-11T15:28:09.037427
License: Public Domain

PUBLISHED

UNITED STATES COURT OF APPEALS
                FOR THE FOURTH CIRCUIT

U. S. SEARCH, LLC, a Virginia          
corporation,
                Plaintiff-Appellant,
                 v.                             No. 01-1285
US SEARCH.COM INCORPORATED, a
California corporation,
                 Defendant-Appellee.
                                       
U. S. SEARCH, LLC, a Virginia          
corporation,
                Plaintiff-Appellant,
                 v.                             No. 01-1782
US SEARCH.COM INCORPORATED, a
California corporation,
                 Defendant-Appellee.
                                       
          Appeals from the United States District Court
        for the Eastern District of Virginia, at Alexandria.
              Claude M. Hilton, Chief District Judge;
                  T. S. Ellis, III, District Judge.
                         (CA-00-554-A)

                        Argued: June 6, 2002
                      Decided: August 16, 2002

      Before MICHAEL and GREGORY, Circuit Judges, and
         Robert R. BEEZER, Senior Circuit Judge of the
       United States Court of Appeals for the Ninth Circuit,
                      sitting by designation.
2              U. S. SEARCH, LLC v. US SEARCH.COM
Affirmed by published opinion. Judge Gregory wrote the opinion, in
which Judge Michael and Senior Judge Beezer joined.

                            COUNSEL

ARGUED: Bradford Elby Kile, KILE, GOEKJIAN, LERNER &
REED, P.L.L.C., Washington, D.C., for Appellant. Roger E. Warin,
STEPTOE & JOHNSON, L.L.P., Washington, D.C., for Appellee.
ON BRIEF: Andrew J. Sloniewsky, STEPTOE & JOHNSON,
L.L.P., Washington, D.C., for Appellee.

                             OPINION

GREGORY, Circuit Judge:

   U.S. Search, LLC (LLC) brought this action against U.S.
Search.com, Inc. (DotCom) alleging false designation of origin under
the Lanham Act, 15 U.S.C. § 1125(a), and unfair competition under
Virginia common law. LLC, claiming first use of the mark "U.S.
Search," sought to enjoin DotCom from using the term and asked the
district court to direct the Commissioner for Patents and Trademarks
to cancel DotCom’s previously registered service mark, "1-800-U.S.
Search." The court found that "U.S. Search" was not entitled to ser-
vice mark protection when used in connection with LLC’s executive
recruiting services and granted summary judgment in favor of defen-
dant DotCom. Finding no error, we affirm.

                                 I.

   Appellant LLC is an executive recruiting and placement firm that
specializes in recruiting for the plastics industry. The company,
located in Falls Church, Virginia, was formed in December 1998 by
Arnold Hiller. Hiller is the company’s president and sole recruiter.
LLC focuses primarily on placing senior level management candi-
dates, serving both employers seeking applicants and applicants seek-
                  U. S. SEARCH, LLC v. US SEARCH.COM                        3
ing employment. Its fees are usually derived from a percentage of first
year compensation, often exceeding $15,000 per placement.1

   Appellee DotCom is a publicly traded corporation that has pro-
vided access to online public record information over the Internet and
through the use of its toll-free telephone number, 1-800-US-
SEARCH, since 1995. DotCom is a Delaware corporation with its
principal place of business in Los Angeles, California. Traditionally,
DotCom’s services were marketed and used to locate missing people,
such as relatives, friends, or old college roommates.

   In October of 1996, DotCom, through its predecessor 800-U.S.
Search, Inc., filed a service mark application for the mark "1-800-U.S.
Search" for "computer services, namely providing databases in the
field of individual telephone numbers, addresses, and social security
numbers," in International Class 42. The application listed 1994 as the
year of first use, but the date was later amended to February 16, 1995.
The mark was registered with the United States Patent and Trademark
Office (PTO) on September 29, 1998.

  In the last quarter of 1999, DotCom began offering its business
customers the ability to verify a prospective employee’s credentials
and background after the employer had identified the candidate. Dot-
Com does not interview prospective clients, nor does it present candi-
dates to an employer for placement or negotiate terms of employment.
The added services it now offers are merely screening services, where
DotCom completes criminal background checks and checks refer-
ences, after candidates have been identified. The charge for employee
  1
   Prior to forming LLC, Hiller owned and operated U.S. Search, Inc.
(Inc.), where he also specialized in executive recruiting for the plastics
industry. Hiller formed the company in 1982. He began operations with
approximately twelve recruiters working in a number of different fields
of employment specialization. In 1991, Inc. terminated business and filed
for Chapter 7 bankruptcy. When doing so, it listed no trademarks, pat-
ents, or other forms of intellectual property as assets. Hiller also filed for
individual bankruptcy. After closing Inc., Hiller conducted his executive
recruiting services from his home in Arlington, Virginia for several
years, before moving the operation out of his home and later forming
LLC in 1998.
4               U. S. SEARCH, LLC v. US SEARCH.COM
screening services begins at approximately $50, and rarely exceeds
$200. In 2000, after DotCom began marketing its business services,
LLC claims that it received over 325 telephone calls that were
intended for DotCom.

   On April 3, 2000, LLC filed a two count complaint against Dot-
Com alleging violations of the Lanham Act, 15 U.S.C. § 1125(a), and
unfair competition under Virginia common law. DotCom counter-
claimed, alleging infringement of its federally registered mark, 15
U.S.C. §§ 1114, 1116-18, false designation of origin, 15 U.S.C.
§ 1125(a), and common law unfair competition.

   Days after filing suit, LLC submitted an application to the PTO to
register "U.S. Search" as a service mark.2 On December 5, 2000, the
PTO issued an office action refusing registration because LLC’s
mark, when used on or in connection with the identified services, so
resembled two other marks, "1-800-U.S. Search" and "U.S. Record
Search," that it was "likely to cause confusion, to cause mistake, or
to deceive." J.A. 676.3

  After discovery, DotCom moved for summary judgment, raising
four grounds. It asserted that 1) LLC’s action was time barred, 2)
    2
    The application listed LLC’s services as "employment consulting ser-
vices to businesses and individuals in the field of employee screening,
recruitment, referrals and placement and staffing; promotion and produc-
tivity decisions; job definition and development; motivational counsel-
ing; salary and benefit surveying and assisting in staff reorganizations;
evaluating pre-employment applications and pre-employment surveys
and providing hiring guidance to prospective employers; employment
recruiting services, namely, identifying, screening and evaluating poten-
tial new candidates; . . . employment placement services, namely, sched-
uling and arranging interviews, interview assistance, and resume
assistance. . . ."
  The application also stated that LLC provided "pre-employment back-
ground verification services, namely obtaining court records of potential
employees, checking personal, professional and/or financial references
and educational background of potential employees." J.A. 667.
  3
    The PTO also suggested that LLC disclaim any rights in the word
"search."
                 U. S. SEARCH, LLC v. US SEARCH.COM                       5
LLC could not claim first use of the mark, 3) LLC’s use of the mark
is generic, or at best descriptive with no evidence of secondary mean-
ing, and 4) if LLC’s mark is protectable, LLC cannot demonstrate a
likelihood of confusion. After a hearing, the district court granted
summary judgment in favor of DotCom, finding that "U.S. Search"
was at best descriptive, and because LLC provided no evidence of
secondary meaning, the term was not entitled to service mark protec-
tion. On January 26, 2001, the court entered an order dismissing both
counts of LLC’s complaint with prejudice and ordering the matter to
proceed to trial on DotCom’s counterclaims. A month later, DotCom
stipulated to the dismissal of its counterclaims. In March 2001, Dot-
Com moved for an award of costs under Federal Rule of Civil Proce-
dure 54(d). The district court, after a hearing, awarded DotCom
$2,482 in costs. This appeal followed.

                                    II.

   LLC’s main argument on appeal is that the district court erred in
finding that its mark was not entitled to service mark protection, and
thus erred in granting summary judgment in favor of DotCom.4 We
review a district court’s grant of summary judgment de novo, apply-
ing the same standards employed by the district court. Lone Star
  4
   LLC raises two other arguments, which merit only brief discussion.
First, it argues that the district court improperly refused to consider pro-
posed expert testimony by Gary D. Krugman, a trademark attorney in
private practice and former Administrative Trademark Judge with the
Trademark Trial and Appeal Board. The district court explained that Mr.
Krugman’s proffered testimony was nothing more than a legal opinion
and was thus inadmissible. Reviewing the trial court’s decision for abuse
of discretion, we find no error. See Cooper v. Smith & Nephew, Inc., 259
F.2d 194, 200 (4th Cir. 2001). Second, LLC asserts that the district court
abused its discretion in awarding DotCom certain costs associated with
the litigation. LLC suggests that DotCom was not a prevailing party, see
Fed. R. Civ. P. 54(d)(1), because it voluntarily dismissed its counter-
claim against LLC. However, even though DotCom dismissed its coun-
terclaim, it did so only after prevailing on its summary judgment motion
in LLC’s case against it. The district court ruled in DotCom’s favor on
summary judgment, and dismissed LLC’s complaint with prejudice.
Costs were within the court’s discretion. See Cherry v. Champion Int’l
Corp., 186 F.3d 442, 446 (1999).
6               U. S. SEARCH, LLC v. US SEARCH.COM
Steakhouse & Saloon, Inc. v. Alpha of Virginia, Inc., 43 F.3d 922, 928
(4th Cir. 1995); Perini Corp. v. Perini Construction, Inc., 915 F.2d
121, 123-24 (4th Cir. 1990). Summary judgment is proper when "the
pleadings, depositions, answers to interrogatories, and admissions on
file, together with the affidavits, if any, show that there is no genuine
issue as to any material fact and that the moving party is entitled to
a judgment as a matter of law." Fed. R. Civ. P. 56(c). In evaluating
a motion for summary judgment, the court views the record in the
light most favorable to the nonmoving party. Lone Star, 43 F.3d at
928.

                                  III.

   Section 43(a) of the Lanham Act, prohibiting the use of false desig-
nations of origin, protects against service mark infringement even if
the mark has not been federally registered. See 15 U.S.C. § 1125(a);
Microstrategy Inc. v. Motorola, Inc., 245 F.3d 335, 341 (4th Cir.
2001) (citing Two Pesos, Inc. v. Taco Cabana, Inc., 505 U.S. 763,
768 (1992)); Ale House Mgmt. Inc. v. Raleigh Ale House, Inc., 205
F.3d 137, 140 (4th Cir. 2000). A party claiming prior use of a trade
or service mark may, as LLC does here, seek to enjoin a defendant’s
use of its registered mark and cancel that defendant’s registration of
the mark under § 14 of the Lanham Act, 15 U.S.C. § 1064. See Mar-
con, Ltd. v. Helena Rubenstein, Inc., 694 F.2d 953, 956 (4th Cir.
1982). However, before a federal registration may be cancelled, the
plaintiff must prevail in its infringement action. In order to prevail in
an action for service mark infringement and unfair competition under
§ 43(a) of the Lanham Act, a plaintiff must "first and most fundamen-
tally prove that it has a valid and protectable mark." Microstrategy,
245 F.3d at 341. If the plaintiff’s mark is deemed to be protectable,
it still cannot prevail unless it can show that the defendant’s use of
an identical or similar mark is likely to cause confusion among consum-
ers.5 Perini, 915 F.2d at 124. Here, summary judgment was appropri-
ate because LLC cannot clear the first hurdle; that is, it cannot show
that its mark, in relation to the executive recruiting services it pro-
vides, is entitled to service mark protection.
    5
   The test for trademark infringement and unfair competition under the
Lanham Act is essentially the same as that for common law unfair com-
petition under Virginia law. See Lone Star, 43 F.3d at 930, n.10.
                 U. S. SEARCH, LLC v. US SEARCH.COM                     7
   To ascertain whether a mark is protected, we must determine
whether it is 1) generic, 2) descriptive, 3) suggestive or 4) arbitrary
or fanciful. Perini, 915 F.2d at 124 (citing Abercrombie & Fitch Co.
v. Hunting World, Inc., 537 F.2d 4, 9 (2d Cir. 1976)). "The protection
accorded trademarks [and service marks] is directly related to the
mark’s distinctiveness." Sara Lee Corp. v. Kayser-Roth Corp., 81
F.3d 455, 464 (4th Cir. 1996). If a term is generic (the common name
for a product or service), it is ineligible for protection. The public has
an inherent right to call a product or service by its generic name. Per-
ini, 915 F.3d at 124; see Sara Lee, 81 F.3d at 464. Fanciful (made-up
words expressly coined to serve as trade or service marks), arbitrary
(common words applied in unfamiliar ways), and suggestive marks
(words that connote, rather than describe, some quality or characteris-
tic of a product or service) are inherently distinctive, and thus receive
the greatest protection against infringement.6 Sara Lee, 81 F.3d at
464. A descriptive mark may be eligible for protection, but only if it
has acquired a "secondary meaning" in the minds of the public. Id.

   The district court found that "U.S. Search," as a composite mark,
is not fanciful, arbitrary, or suggestive when used in connection with
LLC’s services. The court explained that the mark was either generic
or descriptive, and even assuming it was descriptive, the record was
devoid of any showing of secondary meaning. Viewing the facts in
the light most favorable to LLC, we agree with the district court for
the reasons that follow.

                                   A.

   LLC asserts first that the term "U.S. Search" is suggestive rather
than merely descriptive when applied to its executive recruiting ser-
vices. Suggestive terms, as the word implies, suggest rather than
describe goods or services. They require the observer or listener to
use imagination and perception to determine the nature of the goods
or services. Pizzeria Uno Corp. v. Temple, 747 F.2d 1522, 1527 (4th
Cir. 1984). "Generally speaking, if the mark imparts information
directly, it is descriptive. If it stands for an idea which requires some
  6
   Examples of fanciful marks include Clorox (R), Kodak (R), Polaroid
(R), and Exxon (R). Sara Lee, 81 F.3d at 464. Camel (R) cigarettes and
Apple (R) computers are examples of arbitrary marks. Id.
8                U. S. SEARCH, LLC v. US SEARCH.COM
operation of imagination to connect it with the goods [or services], it
is suggestive." Id. (quoting Union Carbide Corp. v. Ever-Ready, Inc.,
531 F.2d 366, 379 (7th Cir. 1976)).7

   The burden was on LLC to show that its use of "U.S. Search" was
entitled to service mark protection. See Ale House, 205 F.3d at 140.
LLC contends that clear evidence existed to demonstrate that its mark
was suggestive. Specifically, it argues that the fact that the PTO
allowed DotCom to register its "1-800-U.S. Search" mark, without
requiring a showing of secondary meaning, is prima facie evidence
that LLC’s "U.S. Search" is suggestive rather than descriptive.

   It is well established that when the PTO issues a certificate of reg-
istration, that registration provides the registrant with prima facie evi-
dence of 1) the validity of the mark and its registration, 2) the
registrant’s ownership, and 3) the registrant’s "exclusive right" to use
the mark on or in connection with the goods and services specified
in the certificate of registration. America Online, Inc. v. AT & T
Corp., 243 F.3d 812, 816 (4th Cir. 2001). Thus, with the certificate
of registration, "the registrant obtains prima facie evidence that its
mark is not generic in the eyes of the relevant public, see 15 U.S.C.
§ 1064(3), and that its mark is not ‘merely’ descriptive, but at a mini-
mum is descriptive and has obtained secondary meaning, see 15
U.S.C. § 1052(e)." Id. (emphasis in original). We have held that a dis-
trict court should not freely substitute its opinion for that of the PTO
because a decision to register a mark, without requiring evidence of
secondary meaning, is "powerful evidence that the registered mark is
suggestive and not merely descriptive." RFE Indus., Inc. v. SPM
Corp., 105 F.3d 923, 926 (4th Cir. 1997). The prima facie evidence
provided by the certificate of registration is generally sufficient to
establish a question of material fact that cannot be resolved on sum-
mary judgment. America Online, 243 F.3d at 818.

    7
   Coppertone (R), Orange Crush (R), and Playboy (R) are good exam-
ples of suggestive marks because they conjure images of the associated
products without directly describing those products. Sara Lee, 81 F.3d at
464. Examples of merely descriptive marks include After Tan post-
tanning lotion, 5 Minute Glue, and Yellow Pages phone directory. Id.
                U. S. SEARCH, LLC v. US SEARCH.COM                    9
   The critical distinction to be made between the above-mentioned
cases and the case at hand is that here, DotCom’s mark has been reg-
istered by the PTO, LLC’s has not. LLC asks us to find evidence that
its mark is suggestive because DotCom’s mark was found to be sug-
gestive. At first blush, LLC’s argument indeed seems to make some
intuitive sense. The marks are, after all, nearly identical. However, if
we were to accept this argument, we would be ignoring a fundamental
tenant of trademark law, namely, that the distinctiveness of a mark is
measured in connection with the particular goods or services that are
being offered. The distinctiveness of a mark cannot be determined in
the abstract, but only by reference to the goods or services upon
which the mark is used. 2 J. Thomas McCarthy, McCarthy on Trade-
marks and Unfair Competition, § 11:64 (4th ed. 2001). For example,
the term "brilliant" may be descriptive when used in connection with
a shop that sells diamonds, suggestive when denominating a furniture
polish company, and arbitrary when used in connection with an apple-
sauce cannery. Id.

   DotCom’s mark was registered by the PTO for "computer services,
namely, providing databases in the field of individual telephone num-
bers, addresses and social security numbers." That the PTO deemed
DotCom’s mark to be suggestive simply has no bearing on whether
LLC’s use of "U.S. Search," in connection with different services
(executive recruiting), is suggestive as well.8

   In contrast to the paucity of evidence relied on by LLC to show
that its use of "U.S. Search" is deserving of service mark protection,
DotCom produced substantial evidence tending to show that the term
is generic, or at most, descriptive. For example, DotCom provided
numerous documents generated by Hiller and LLC that repeatedly use
"search" as a synonym for executive recruiting and refer to recruiting
  8
   LLC also argues that the PTO’s December 5, 2000 office action,
which asked LLC to disclaim the word "search" (and also rejected LLC’s
application for registration due to a likelihood of confusion with Dot-
Com’s mark and the mark of U.S. Record Search), was evidence that the
PTO had determined that LLC’s composite mark "U.S. Search" was sug-
gestive. We reject this argument. Nowhere was it indicated in the office
action that the PTO had considered the distinctiveness of "U.S. Search"
in its entirety.
10               U. S. SEARCH, LLC v. US SEARCH.COM
as a "search process." DotCom also submitted web page print-outs
from several other recruiting firms that consistently use the word
"search" as a synonym for executive recruiting. A Thompson &
Thompson report indicated that over 3,600 employment placement
firms use the word "search" in their name. DotCom also provided
numerous examples of media references to executive recruiting com-
panies as "search firms." We agree with the district court that the
composite term, "U.S. Search," for executive recruiting services,
operates to describe a service in a manner readily understandable to
the consumer.9

                                     B.

   LLC next argues that even assuming the district court was correct
in finding "U.S. Search" to be merely descriptive, the court improp-
erly ignored evidence of secondary meaning. We disagree. Secondary
meaning is defined as "the consuming public’s understanding that the
mark, when used in context, refers not to what the descriptive word
ordinarily describes, but to the particular business that the mark is
meant to identify." Perini, 915 F.3d at 125. Though no single factor
is determinative, we have held that the following factors are relevant
to the question of secondary meaning: 1) advertising expenditures, 2)
consumer studies linking the mark to a source, 3) sales success, 4)
unsolicited media coverage of the product, 5) attempts to plagiarize
the mark, and 6) the length and exclusivity of the mark’s use. Id. (cit-
ing Thompson Medical Co. v. Pfizer, Inc. 753 F.2d 208, 217 (2d Cir.
1985)).

  Proof of secondary meaning entails a rigorous evidentiary standard.
Perini, 915 F.2d at 125.10 Though the existence of secondary meaning
  9
    LLC seems to suggest that because it listed in its application for regis-
tration that it provides "pre-employment background verification ser-
vices," its mark should be deemed suggestive. However, even if a mark
may be suggestive or arbitrary as applied to some goods or services, that
mark should be deemed descriptive if it is descriptive of any of the goods
or services for which registration is sought. See 2 McCarthy on Trade-
marks, § 11:51. "U.S. Search" is merely descriptive of executive recruit-
ing services.
   10
      LLC had the burden to show secondary meaning 1) in DotCom’s
trade area and 2) prior to the time DotCom entered the market. Perini,
915 F.2d at 125-26.
                 U. S. SEARCH, LLC v. US SEARCH.COM                      11
is generally a question for the trier of fact, the district court, recogniz-
ing that the burden of proving secondary meaning is on the party
asserting it, found the record to be "wholly devoid of any such show-
ing." J.A. 1129. Even evaluating the record in the light most favorable
to LLC, LLC has failed to satisfy any of the factors relevant to sec-
ondary meaning. For example, the record shows that LLC has spent
minimal amounts of money on advertising and has enjoyed limited
sales success.11 LLC presented no evidence of attempts to plagiarize
the mark, no evidence of any unsolicited media coverage, no con-
sumer studies, and no evidence of exclusive use.12 On the other hand,
DotCom offered a consumer study it commissioned of individuals in
the plastics industry who used, or were likely to use a recruiting firm.13
This study showed that only 2% of those queried appeared to know
"U.S. Search," the type of firm it is, and the services it provides.

   Because LLC failed to demonstrate that "U.S. Search" has acquired
secondary meaning, the district court was correct in finding the term
to be ineligible for service mark protection. For this reason, the dis-
trict court was not required to examine the issue of likelihood of con-
fusion.

                                    IV.

  For the foregoing reasons, the decision of the district court granting
summary judgment in favor of DotCom is affirmed.

                                                              AFFIRMED
  11
      Evidence of misdirected telephone calls to LLC that were intended
for DotCom does not constitute evidence of secondary meaning. If any-
thing, it shows only that the public associates the name "U.S. Search"
with DotCom, rather than with LLC.
   12
      Even assuming Hiller has used "U.S. Search" continuously since
1982 (despite closing his former company, bankruptcy, and moving the
business), length of time alone is insufficient to establish secondary
meaning.
   13
      Survey evidence is generally thought to be the most direct and per-
suasive way of establishing secondary meaning. See Zatarains, Inc. v.
Oak Grove Smokehouse, Inc., 698 F.2d 786, 795 (5th Cir. 1983).