(tooth decay preventative) preparation in chewable tablet and capsule form to establish a transfer of goodwill.
Even minor differences can be enough to threaten customer deception. In the oft-cited Pepsico, Inc. v. Grapette Co., 416 F.2d 285 (8th Cir. 1969), the court found that assignor's cola-flavored syrup and assignee's pepper-flavored syrup were sufficiently different to prevent a transfer of goodwill, and thus invalidate the assignment: "[The assignee]'s intended use of the mark is one simply to describe its new pepper beverage. The evidence is clear that [the assignee] did not intend to adopt or exploit any 'goodwill' from the [trademark] and [the assignor]'s long association and use of it with a cola syrup." Id. at 289-90.
The facts of record in this case support a finding of assignment in gross here. Sears sold only women's pixie boots under the mark "Heartland," while plaintiffs immediately applied it only to men's shoes, then later to men's hiking boots. The markets for the two goods are substantially distinct; it is unlikely that men buying plaintiffs' "Heartland" shoes would be considering a reputation for footwear generally that Sears built by selling women's boots. That plaintiffs was using the "Heartland" mark before the assignment is also relevant, in that it tends to show that plaintiffs sought only to gain the ability to use the name "Heartland" rather than the goodwill associated with it. Cf. Pepsico. This is further supported by the fact that plaintiffs did not attempt to obtain the assignment from Sears until after Sears threatened to bring opposition proceedings to prevent plaintiffs from registering the "Heartland" trademark.
Since the assignment from Sears was an assignment in gross, defendants have shown priority in the use of the name "Heartland" and, therefore, plaintiffs may not enjoin defendants from using the "Heartland" name for the sale of its current line of products.
Assuming arguendo that the assignment from Sears was not an assignment in gross, injunctive relief would not be appropriate. Even where a party has a valid trademark and there is some likelihood of confusion, the issuance of an injunction barring use of the junior user's mark is not mandatory. As the Second Circuit observed in Jim Beam Brands Co. v. Beamish & Crawford, Ltd., 937 F.2d 729, 737 (2d Cir. 1991), cert. denied, 117 L. Ed. 2d 415, 112 S. Ct. 1169 (1992):
the court may, after "equitably balancing the conflicting interest of the parties involved", McGregor-Doniger, Inc. v. Drizzle, Inc., 599 F.2d at 1140, . . . determine that no injunctive relief would be appropriate . . .
See also Vitarroz Corp. v. Borden, Inc., 644 F.2d 960, 969 (2d Cir. 1981).
I find that defendants adopted the use of the "Heartland" name in good faith. There is no evidence that when defendants began using the "Heartland" mark in 1985 they had any knowledge of the prior use of that mark by Sears. Plaintiffs argue that defendants did not act in good faith because defendants were aware in 1986 that the "Heartland" name had been registered as a trademark for carpets and t-shirts. While these facts may explain the reluctance of the defendants to attempt to register their name at that time, there is no evidence that defendants thought that any of the other known uses of the "Heartland" name would preclude them from using it for shirts, sweaters, trousers and jackets.
In order for the registered trademark owner, such as plaintiffs, to obtain an injunction to bar a junior user's use of a trademark on a different product, the owner must show the "likelihood that the prior owner would bridge the gap Polaroid Corp. v. Polarad Electronics Corp., 287 F.2d 492, 495 (2d Cir.), cert. denied, 368 U.S. 820, 82 S. Ct. 36, 7 L. Ed. 2d 25 (1961). As of the time plaintiffs commenced this action in 1992, they had not bridged the gap by distributing clothing similar to that on which defendants' mark appeared. Rather it was because they were planning to go into this area that they brought this action.
When defendants commenced using "Heartland" in 1985, plaintiffs, through their predecessor Sears, were using the name only in women's boots. At that time, there was no real likelihood that plaintiffs would bridge the gap by applying the "Heartland" label to the types of products defendants were selling. See Mushroom Makers, Inc. v. R. G. Barry Corp., 580 F.2d 44, 49 (2d Cir. 1978) (per curiam), cert. denied, 439 U.S. 1116, 99 S. Ct. 1022, 59 L. Ed. 2d 75 (1979). Since then, defendants, acting in good faith, have built up substantial goodwill in the name "Heartland" as applied to clothing. It would be inequitable to allow plaintiffs to exploit defendants' substantial goodwill at this late date, simply because they are the senior user. As Judge Learned Hand stated in discussing expansion into related markets: "The owner's rights in such appendant markets are easily lost; they must be asserted early, lest they be made the means of reaping a harvest which others have sown." Dwinell-Wright Co. v. White House Milk Co., 132 F.2d 822 (2d Cir. 1943); see also McCarthy, supra, at §§ 24:5, 31:7. "Merely winning the race to the trademark office door does not entitle a senior user to relief in equity." Mushroom Makers, Inc., 580 F.2d at 49.
While the above disposes of the plaintiffs' claims, defendants have made a cross-claim for an order cancelling plaintiffs' trademark registration or requiring the issuance of a registration to defendants for its clothing products. 15 U.S.C. § 1119. The Court finds that cancellation of plaintiffs' trademark would be inequitable, but that defendants are entitled to have the Patent and Trademark Office accept their application for registration as to clothing.
Although defendants' determination not to seek trademark registration in 1985 did not amount to bad faith, that delay does make it appropriate for the Court to conclude that defendants' request for equitable relief is barred by the doctrine of laches. Construction Technology, Inc. v. Lockformer Co., 704 F. Supp. 1212 (S.D.N.Y. 1989); Simon Says Enters., Inc. v. Schaefer, 214 U.S.P.Q. 436 (S.D.N.Y. 1986); Haviland & Co. v. Johann Haviland China Corp., 269 F. Supp. 928, 937 (S.D.N.Y. 1967). Accordingly, the Court will not order cancellation of plaintiffs' trademark registration.
However, because the Court finds that plaintiffs and defendants can continue in their respective businesses without substantial likelihood of confusion, defendants shall be permitted to proceed with application for registration of the "Heartland" mark for clothing, plaintiffs' registration notwithstanding. See Massa v. Jiffy Prods. Co., 240 F.2d 702 (9th Cir.), cert. denied, 353 U.S. 947, 77 S. Ct. 825, 1 L. Ed. 2d 856 (1957); In re Fortex Ind., Inc., 18 U.S.P.Q. 1224 (Comm'r PTO 1991).
For the foregoing reasons, plaintiffs' and defendants' applications for injunctions are denied, and the complaint and counterclaims are dismissed, except as to the request for an order allowing defendants' application for registration to proceed.
Defendant, The Heartland Company, Ltd., shall have the right to register on the Principal Register of the U.S. Patent and Trademark Office the trademarks (a) "The Heartland Company Ltd." and (b) "The Heartland Company Ltd." and mailing frank design, as applied to clothing products not including shoes; the Commissioner of Patents and Trademarks is ordered to grant said defendant such registrations, subject to publication for opposition and all other required procedures, except that plaintiffs' registration No. 1,449,814 shall be no bar to registration.
Dated: January 6, 1993
JOHN S. MARTIN, JR., U.S.D.J.