Court Opinion

ID: 9483598
Source: CourtListenerOpinion
Date Created: 2023-08-05 09:25:39.895812+00
Date Added: 2024-06-11T17:49:43.119620
License: Public Domain

CUDAHY, Circuit Judge,
dissenting.
On the important issue of good faith, L’Oréal’s conduct here merits a very hard look. In the case of Riviera, a men’s clothing retailer, L’Oréal was careful to pay $125,000 for an agreement not to sue. Yet men’s clothing and hair cosmetics marketed to women hardly seem related at all. On the other hand, a women’s hair salon developing a line of hair care products is a purveyor of goods and services that seem closely related to hair cosmetics. Therefore, L’Oréal’s knowledge of ZHD’s use defeats any claim L’Oréal may have to priority.
One of the keys here seems to be the use of ZAZU as a service mark connected with the provision of salon services by ZHD. A service mark can be infringed by its use on a closely related product.1 See, e.g., Re Hyper Shoppes (Ohio), Inc., 837 F.2d 463 (Fed.Cir.1988) (affirming refusal to register two “closely related” marks: one for furniture and the other for general merchandise services that included the sale of furniture); Steelcase, Inc. v. Steelcare, Inc., 219 U.S.P.Q. 433 (TMTAB 1983) (mark used for furniture refinishing service likely to be confused with mark used for office furniture); see also 2 J. Thomas McCarthy, Trademark and Unfair Competition § 24:6, at 71 (2d ed. 1984 & Supp.1991) (stating that “[wjhere the services consist of retail sales services, likelihood of confusion is found when another mark is used on goods which are commonly sold through such a retail outlet”). A service and a product are related if buyers are likely to assume a common source or sponsorship. Tisch Hotels, Inc. v. Americana Inn, Inc., 350 F.2d 609, 612 (7th Cir.1965); 2 McCarthy, supra, § 24:6 at 183 (“The ‘related goods’ test is merely a facet of the ultimate and final test of ‘likelihood of confusion.’ ”). The salon services and hair products at issue in this case, which are nearly as kindred as a service and product can be, offer the paradigmatic illustration of things that are closely related. Thus the majority’s disregard for ZHD’s substantial use of ZAZU in connection with salon services is unfounded.
As the majority correctly notes, the standard for granting federal registration is somewhat less exacting than that for establishing common law trademark rights. See La Societe Anonyme des Parfums le Galion v. Jean Patou, Inc., 495 F.2d 1265 (2d Cir.1974). But that distinction is so slight as to be inconsequential here. While any bona fide transaction that is more than a “mere sham” will, when combined with intent to continue use, suffice to support federal registration, Avakoff v. Southern *510Pacific Co., 765 F.2d 1097, 1098 (Fed.Cir.1985); 1 McCarthy, supra, § 19:37 at 967, any use greater than de minimis will still warrant trademark protection in the absence of registration. See SweeTarts v. Sunline, Inc., 380 F.2d 923, 929 (8th Cir.1967) (market penetration “need not be large” but must be “significant enough to pose the real likelihood of confusion”); 1 McCarthy, supra, § 16:2(B) at 723; § 16.-2(C) at 726. Thus, bona fide test marketing or small experimental sales — indeed, any use that is not nominal or token — can satisfy the test. E.I. du Pont de Nemours & Co. v. G.C. Murphy Co., 199 U.S.P.Q. 807, 812 (TMTAB 1978); 1 McCarthy, supra, § 16:2(B) at 723.
In this case, ZHD’s use of the ZAZU mark, both in its highly successful salon service business, which drew some out-of-state clients, and in its local and interstate product sales to customers and to a potential marketer, surely is more than de min-imis. The extensive evidence of ZHD’s intent to step up hair product sales — such as its order for 25,000 ZAZU-emblazoned bottles and its inquiry about advertising rates in a national magazine — bolsters this assessment. Even if ZHD did fail to demonstrate more than a de minimis market penetration nationally, at the very least it successfully established exclusive rights within its primary area of operation. The salon’s substantial advertising, increasing revenue and staff and preliminary product sales indicate sufficient market penetration to afford trademark protection in that region. See Natural Footwear Ltd. v. Hart, Schaffner & Marx, 760 F.2d 1383 (3d Cir.) (senior user can establish common law rights in geographic areas where it achieved market penetration), cert. denied, 474 U.S. 920, 106 S.Ct. 249, 88 L.Ed.2d 257 (1985); SweeTarts, 380 F.2d at 928 (plaintiff’s prior use of trademark within a given market area entitles it to exclusive use of that mark within that area); V & V Food Products, Inc. v. Cacique Cheese Co., 683 F.Supp. 662 (N.D.Ill.1988).
L’Oréal concedes that ZHD has exclusive rights to use ZAZU for salon services in the Hinsdale area. Those exclusive rights also preclude L’Oréal from using the mark on hair products in the local area because of the likelihood of confusion between those products and ZHD’s salon services, even apart from any confusion between the two parties’ products. Given the deferential standard of review on the factual question of use, therefore, I think it clear that ZHD has achieved market penetration and exclusive rights to the ZAZU mark at the very least in the Chicago area.
ZHD’s contention that its rights in the ZAZU mark extend beyond the local area is enhanced by evidence that L’Oréal did not, as we have noted, act in good faith. The majority’s consideration of the good faith issue minimizes the important role good faith plays in trademark disputes, particularly disputes involving unregistered marks. See 2 McCarthy, supra,' § 26:4 at 292 (noting thát good' faith • has “significant, if not independent, importance” in disputes involving unregistered marks). Bad faith can defeat claims to priority. See, e.g., A.J. Canfield Co. v. Honickman, 808 F.2d 291 (3rd Cir.1986) (stating the doctrine that a senior user “has enforceable rights against any junior user who adopted the mark with knowledge of its senior use”); Johanna Farms, Inc. v. Citrus Bowl, Inc., 468 F.Supp. 866, 876 (E.D.N.Y.1978) (stating that junior users who do not adopt the mark in good faith “will not be accorded the right to exploit the mark, even in areas previously untouched by the senior user”); 2 McCarthy, supra, § 26:3 at 289; § 26:4 at 292. Contrary to the majority’s, narrow characterization of bad faith as a concept employed solely to.deter attempts to reserve marks prior to genuine sales, courts have examined junior users’ good faith in a variety of contexts. In fact, this court has held that a good faith junior user is simply one that begins using a mark without knowledge that another party already is using it. The Money Store v. Harriscorp Finance, Inc., 689 F.2d 666, 674 (7th Cir.1982); see 2 McCarthy, supra, § 26:4 at 292 (equating good faith to “the junior user’s lack of knowledge”). And while such knowledge may not automatically negate good faith, only the most unusual situations encom*511pass both knowledge and good faith. See GTE Corp. v. Williams, 904 F.2d 536, 541 (10th Cir.), cert. denied, - U.S. -, 111 S.Ct. 557, 112 L.Ed.2d 564 (1990).
In sum, I believe ZHD’s sale of ZAZU services and products constituted sufficient use to establish exclusive trademark rights in the Chicago area, if not nationally. In any event, L’Oréal’s pursuit of its line of hair cosmetics in spite of its knowledge of ZHD’s use defeats L’Oréal’s position. Therefore, I respectfully dissent.

. Our recent opinion in Sands, Taylor & Wood Co. v. Quaker Oats Co., 24 U.S.P.Q.2d 1001 (7th Cir.1992), states explicitly that modern trademark law prohibits the use of a senior user’s mark on products that are closely related to the senior user’s, as well as those products in direct competition. See 24 U.S.P.Q.2d at 1010; International Kennel Club, Inc. v. Mighty Star, Inc., 846 F.2d 1079, 1089 (7th Cir.1988). This "protects the owner’s ability to enter product markets ... into which it might reasonably be expected to expand in the future.” Sands, Taylor & Wood, 24 U.S.P.Q.2d at 1011; 2 J. Thomas McCarthy, Trademark and Unfair Competition § 24:5, at 177 (2d ed. 1984).