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January 25, 1996


The opinion of the court was delivered by: CHIN


 In 1859, Henry Wood Carter started the company now known as H.W. Carter & Sons, Inc. ("H.W. Carter") in Lebanon, New Hampshire, selling merchandise out of horse-drawn wagons. Just six years later, William Carter founded the company now known as the William Carter Company ("Wm. Carter") in Highlandsville, Massachusetts, manufacturing cardigan jackets in the kitchen of his home.

 In 1994, H.W. Carter granted a license to American Marketing Enterprises, Inc. ("AME") to use its trademark, CARTER'S WATCH THE WEAR, in the sale of certain children's apparel. In early 1995, AME launched a new line of boy's clothing under the mark CARTER'S WATCH THE WEAR. Shortly thereafter, Wm. Carter wrote to plaintiffs, objecting to the use of the CARTER'S name in the "launch" of the new line of clothing. Indeed, Wm. Carter requested that plaintiff's withdraw the new line of clothing and eliminate the word CARTER'S from the mark CARTER'S WATCH THE WEAR.

 This action followed. Plaintiffs H.W. Carter and AME sued for a declaration that their use of the mark CARTER'S WATCH THE WEAR did not infringe upon Wm. Carter's trademarks, and defendant Wm. Carter immediately counterclaimed, alleging that plaintiffs' use of the mark CARTER'S WATCH THE WEAR infringed on its registered trademark CARTER'S. Wm. Carter then sent a letter to several dozen customers, including a number of large retailing companies, accusing plaintiffs of trademark infringement. Plaintiffs responded by filing an amended complaint adding claims that Wm. Carter's letter to the trade contained false and misleading statements in violation of section 43(a) of the Lanham Act, 15 U.S.C. § 1125(a)(2) (1988). Both sides have also asserted unfair competition claims under New York State common law.

 This case was tried to the Court in June and July 1995. Because I find that H.W. Carter is the senior user of the CARTER'S name in the sale of children's clothing, judgment will be entered in favor of plaintiffs on their trademark claims. Judgment will be entered in favor of defendant, however, on plaintiffs' claims based on the letter to the trade. Although I agree that the letter was misleading in certain respects, the misstatements were not material and do not rise to the level of a violation of the Lanham Act. Pursuant to Fed. R. Civ. P. 52, the following are my findings of fact and conclusions of law.


 A. H.W. Carter

 H.W. Carter has been in business since 1859. It began manufacturing overalls in 1870, initially selling them in the New England area. In 1883, it began using the trademark CARTER'S RAILROAD OVERALLS. It registered this mark in 1906 for use in the sale of overalls. The registration was not restricted as to size, gender, channel of trade, or product use, except that the "goods" upon which the mark was to be used were "overalls." (PX 287). After two renewals, the registration expired in 1966.

 By 1890, H.W. Carter had expanded its product line beyond overalls to include coats, jumpers and shirts. (PX 5a). It also started selling boys' overalls and eventually sold other children's clothing as well. A 1926 price list, for example, shows that H.W. Carter was selling "juvenile overalls" for children ages 4, 6, 8, 10, 12, 14, and 16 as well as "Youth's Dark Mode Khaki Pants." (PX 6). Similarly, a 1928 price list featured boys' jackets, ski coats, and sport coats. (PX 7). A 1939 H.W. Carter price list offered boys' parkajacks, mackinaw coats, snow suits, snow pants, poplin suits, and jackets, starting in size 2. (PX 8).

 All three price lists prominently featured the mark CARTER'S. (PX 6, 7, 8). Indeed, a 1926 trademark registration represented that H.W. Carter had been "continuously" using the mark CARTER'S in the sale of, among other things, wool mackinaw coats and sports jackets for men, boys, and women since 1915. PX 286). This 1926 registration expired in 1946.

 In 1929, H.W. Carter acquired The Watch the Wear Overall Co. of Keene, New Hampshire and with it the mark WATCH THE WEAR. In 1930, H.W. Carter registered the trademark CARTER'S WATCH THE WEAR with a logo featuring drawings of a steam locomotive and a worker shining a customer's shoes. (PX 202). The mark was registered for overalls, pants, coats, jackets, and aprons, but it was not restricted as to size, gender, channel of trade, or product use. In 1955, the registration was amended to eliminate the drawings, leaving only the words CARTER'S WATCH THE WEAR. (Id.). The registration was renewed in 1970 and again in 1990 and remains valid today. (PX 288; Tr. at 454). *fn1"

 In 1938, H.W. Carter registered the mark CARTER'S EASTERN SLOPES for "sports wear, such as jackets, coats, vests, shirts, snow suits, and pants . . ., for men, women, and children." (PX 292). This registration expired in 1958.

 Hence, H.W. Carter started selling children's clothing as early as 1890 and continued to do so throughout the 1900's, not only in the Northeast, but in other regions of the country as well. (See, e.g., Follensbee Dep. at 5-9, 21; Tr. at 49-51, 58-61, 100-14; Penfield Dep. at 8-12, 23-24, 33-35, 47, 58-61, 68-69; PX 2, 6, 7, 8, 10, 14, 47-72). For the most part, H.W. Carter's sales of children's clothing consisted of sales of outerwear and "workwear," such as overalls, jeans, and other denim and flannel products that carpenters and other workers would wear. (See, e.g., PX 12, 13, 16, 17, 18, 19, 20, 21, 36, 85, 86, 88). To a lesser extent, H.W. Carter sold other types of children's clothing over the years as well, including shortalls, skirtalls, vests, shirts, tee-shirts, sweatshirts, blouses, jumpers, and infantwear. (See, e.g., PX 22, 23, 28, 89, 110; Tr. at 105-07, 130-32, 138, 147, 221-22). Nonetheless, at least since the late 1980's, H.W. Carter has sought to promote itself, through use of the CARTER'S WATCH THE WEAR label, as a jeanwear company specializing in workwear and clothing with a more "rugged" look and feel. (Tr. at 181-82).

 In recent years, workwear, including "vintage" clothing such as railroad and carpenter coats, has become increasingly fashionable. As a result, H.W. Carter itself became the subject of favorable publicity. (Tr. at 163, 170-71, 175-81; PX 152 (photo featuring children wearing H.W. Carter overalls), 157 (photo featuring boy wearing H.W. Carter overalls), 191 ("Manly fashions -- the kind a bluecollar worker might wear to shimmy down a sewer, grease an axle, harvest the grain or down a cold brew after a hard day's work -- are the rage."), 192 (the "workwear trend") 332 (photo spread featuring glamorous model wearing H.W. Carter apron dress and jeans); see also PX 3, 4). To take advantage of this trend, H.W. Carter reinstituted the use of a steam locomotive in its logo and it has sought to emphasize its long history in workwear. (See, e.g., PX 150, 151, 152; see also DX F-1, F-2).

 Over the years, the ownership of H.W. Carter changed several times. *fn2" In 1987, H.W. Carter's then-parent corporation went into bankruptcy. Shortly thereafter, Norman Moskowitz purchased H.W. Carter's physical assets (including inventory and work in process) and acquired its trademarks as well, including the mark CARTER'S WATCH THE WEAR. Moskowitz continued to use the H.W. Carter name and the mark CARTER'S WATCH THE WEAR in the sale of children's apparel. (See, e.g., Tr. at 117-21, 145-47, 163). H.W. Carter's gross sales were $ 3.9 million in 1993 and $ 4.5 million in 1994. (Tr. at 184).

 B. Wm. Carter

 Wm. Carter has been in business since 1865. By the late 1800's, Wm. Carter was manufacturing underwear, union suits, and mittens. It soon became well known as a manufacturer of branded underwear and other undergarments. In 1907, it registered the trademark CARTER'S for "knitted union suits, [corset covers,] vests, drawers, [abdominal bands, shirt bands]," (DX A-1) (brackets in original), also described as "certain underclothing." (PX 281 at WC 0001783-86). This registration has been renewed four times and remains in force today. (PX 282; Tr. at 458).

 In 1922, Wm. Carter was issued a second registration for the trademark CARTER'S, this time covering:

 (DX B-1). This 1922 registration has been renewed three times and is still valid today. (Tr. at 461).

 In 1979, Wm. Carter acquired yet another registration for the mark CARTER'S, specifically covering:

clothing for infants and children -- namely, underwear, swimwear, shirts, blouses, dresses, skirts, pants, slacks, shorts, coveralls, creepers, overalls, jackets, vests, sleepwear, bunting, bibs, booties, bonnets, and slippers . . . .

 (DX Q-1). The 1979 registration is still valid today.

 Over the years Wm. Carter had great success as its sales grew substantially. In part because of its pioneering efforts in advertising, Wm. Carter became well known not just for underwear but also for infantwear and layettes. Its "heritage" was built on "the baby business" (Rowan Dep. at 25), although starting in the mid-1900's it also achieved some success in playwear and children's apparel in general. (See PX 252; Tr. at 806-07). It did not start selling any children's playwear until the 1950's. (Tr. at 803; see id. at 799). *fn3" By the mid-1960's, playwear accounted for roughly one-third of Wm. Carter's business, with underwear and layette accounting for another one-third and sleepwear the remaining one-third. (Tr. at 804). Wm. Carter did not start selling any denim items until the 1970's. (Tr. at 820-21).

 Wm. Carter's nationwide sales of children's clothing with the CARTER'S mark have been continuous and substantial for many years. As a consequence, its mark CARTER'S became and remains extremely strong. *fn4"

 C. Wm. Carter's Knowledge of H.W. Carter's Use of the CARTER'S Name

 Although both Carter companies used the CARTER'S name in selling children's clothing, and although Wm. Carter employees were aware of H.W. Carter's existence over the years, *fn5" no litigation was filed until the present suit. The issue did arise, however, on a number of prior occasions.

 In August 1964, Wm. Carter's then-attorneys commissioned a search of the records of the United States Patent and Trademark Office (the "PTO"), which showed H.W. Carter's 1930 registration of the mark CARTER'S WATCH THE WEAR. (PX 108). The CARTER'S WATCH THE WEAR mark was also brought to Wm. Carter's attention in November 1964 in proceedings brought by Wm. Carter ...

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