Rust Environment & Infrastructure, Inc. v. Teunissen

Decision Date11 December 1997
Docket NumberNo. 97-2462,97-2462
Citation131 F.3d 1210
PartiesRUST ENVIRONMENT & INFRASTRUCTURE, INC., f/k/a SEC Donohue, Inc., f/k/a Donohue & Associates, Inc., Plaintiff-Appellant, v. Larry TEUNISSEN, Donohue & Associates, Inc., and Donohue & Associates of Illinois, Inc., Defendants-Appellees.
CourtU.S. Court of Appeals — Seventh Circuit

Peter K. Richardson (argued), Michael, Best & Friedrich, Milwaukee, WI, for Plaintiff-Appellant.

David O. Gass, William TeWinkle (argued), Rohde, Dales, Melzer, TeWinkle & Gass, Sheboygan, WI, for Defendants-Appellees.

Before CUMMINGS, EASTERBROOK and KANNE, Circuit Judges.

CUMMINGS, Circuit Judge.

Plaintiff Rust Environment & Infrastructure, Inc. ("Rust") brought suit against defendants Donohue & Associates and founder Larry Teunissen for false designation of origin pursuant to § 43(a) of the Lanham Act, 15 U.S.C. § 1125(a), common law unfair competition, and deceptive advertising under Wis. Stats. § 100.18(1). Rust sought preliminary injunctive relief prohibiting defendants from using the trade name "Donohue & Associates" in connection with their wastewater engineering consulting services. The United States District Court for the Eastern District of Wisconsin refused to grant a preliminary injunction. From the order denying the injunction, plaintiff Rust appeals under 28 U.S.C. § 1292(a)(1). For the following reasons, we affirm.

I. Facts

Rust is an environmental and engineering consulting firm providing services to private companies and governmental entities throughout the country. To frame this dispute, it is necessary to understand the history of Rust. In 1991, WMX Technologies, Inc. ("Waste Management") acquired Donohue & Associates ("Donohue I"), a corporation specializing in high-quality engineering and architectural services, particularly in the areas of water and wastewater engineering. Waste Management bought Donohue I and all its assets in a stock purchase from its employee shareholders, including defendant Teunissen. Donohue I received state and national recognition for its engineering achievements. From the late 1970s until 1993, at least $10 million was invested in marketing the Donohue name.

In 1992, Waste Management merged Donohue I with another environmental consulting firm to form SEC Donohue, Inc., and in March 1993, Waste Management changed the name from SEC Donohue to its current name of Rust Environment & Infrastructure. While plaintiff Rust alleges it used the Donohue name through early 1994, defendants claim that Rust intentionally moved away from any association with the Donohue name and toward a more national reputation under the Rust name.

Defendants are a newly formed engineering consulting firm, Donohue & Associates ("Donohue II"), and Larry Teunissen, a founder-employee who sold his ownership interest in Donohue II after this lawsuit began. Teunissen along with four other Rust employees formed Donohue II in January 1997. None are named Donohue. Defendants contend that the reason for the name choice was the founders' prior association with Donohue I and their hope of recalling the concept of an "employee-owned corporation with a strong team attitude." They believed that the name was "legally available for use as a corporate name." Defendants claim that they have tried to inform their potential clients that they are not affiliated with Rust, noting that this is apparent because their organization is much smaller than Rust, having only nine employees in contrast to Rust's approximately 2000. Rust contacted Donohue II several times in February and March of 1997 to perform services for Rust.

On March 11, 1997, Rust brought suit for false designation of origin pursuant to § 43(a) of the Lanham Act, 15 U.S.C. § 1125(a), common law unfair competition, and deceptive advertising under Wis. Stats. § 100.18(1). 1 Rust sought a preliminary injunction banning defendants from using the trade name "Donohue & Associates" in connection with their wastewater engineering consulting services. 2 On June 4, 1997, the United States District Court for the Eastern District of Wisconsin denied preliminary injunctive relief. We affirm.

II. Preliminary Injunction Standards

A party seeking a preliminary injunction must demonstrate that (1) the moving party has a reasonable likelihood of success on the merits; (2) no adequate remedy at law exists; (3) the moving party will suffer irreparable harm without injunctive relief; (4) the irreparable harm suffered without injunctive relief outweighs the irreparable harm the defendant will suffer if the injunction is granted; and (5) the injunction will not harm the public interest. Nalco Chemical Co. v. Hydro Technologies, Inc., 984 F.2d 801, 802 (7th Cir.1993); Mil-Mar Shoe Co., Inc. v. Shonac Corp., 75 F.3d 1153, 1156 (7th Cir.1996). In order to prevail, the plaintiff must satisfy each element of this five-part test. Roland Machinery Co. v. Dresser Industries, Inc., 749 F.2d 380, 386-388 (7th Cir.1984).

The threshold factor is likelihood of success on the merits. See O'Connor v. Board of Ed. of School Dist. No. 23, 645 F.2d 578, 580 (7th Cir.1981), certiorari denied, 454 U.S. 1084, 102 S.Ct. 641, 70 L.Ed.2d 619. Thus, this Court turns to the merits of the trademark dispute, cautioning that the analysis which follows is tentative, since this case involves a preliminary injunction and we do not to wish to prejudice the outcome of the trial on the merits. Indianapolis Colts, Inc. v. Metropolitan Baltimore Football Club Ltd. Partnership, 34 F.3d 410, 412 (7th Cir.1994).

III. Lanham Act Unfair Competition Claim

Federal trademark law is governed by the Lanham Act. Section 43(a) of the Lanham Act prohibits a person from falsely designating the origin of his or her goods or services in the practice of unfair competition and provides that

Any person who, on or in connection with any goods or services, * * * uses in commerce any word, term, name, symbol, or device, or any combination thereof, or any false designation of origin * * * which is likely to cause confusion, or to cause mistake, or to deceive as to the affiliation * * * of such person with another person, or as to the origin, sponsorship, or approval of his or her goods, services, * * * shall be liable in a civil action by any person who believes that he or she is likely to be damaged by such act.

15 U.S.C. § 1125(a)(1).

Under sec.1125(a), a plaintiff making a claim of false designation of origin must show that the mark is entitled to protection as a trademark, Mil-Mar Shoe, 75 F.3d at 1161, and that the false designation of origin creates a likelihood of confusion. 15 U.S.C. § 1125(a)(1). However, under 15 U.S.C. § 1127, abandonment of a mark is an affirmative defense to a trademark infringement action. See Sands, Taylor & Wood v. Quaker Oats Co., 978 F.2d 947, 954-955 (7th Cir.1992) (citing 15 U.S.C. § 1127), certiorari denied, 507 U.S. 1042, 113 S.Ct. 1879, 123 L.Ed.2d 497. Therefore, the threshold question is whether plaintiff Rust's abandonment of the name "Donohue & Associates" bars a trademark claim.

A. Abandonment

Under 15 U.S.C. § 1127, "[a] mark shall be deemed to be 'abandoned' * * * (1) When its use has been discontinued with intent not to resume such use * * * * Nonuse for two consecutive years shall be prima facie evidence of abandonment." See Sands, Taylor & Wood, 978 F.2d at 955. Based on this standard, plaintiff Rust has abandoned the name "Donohue & Associates."

Rust relies on this Court's decision in Indianapolis Colts, Inc. v. Metropolitan Baltimore Football Club Ltd. Partnership, 34 F.3d 410 (7th Cir.1994), in arguing that such prima facie evidence of abandonment is not the end of the inquiry. Rust points to the panel's language stating that "[w]hen a mark is abandoned, it returns to the public domain, and is appropriable anew--in principle. In practice, because 'subsequent use of [an] abandoned mark may well evoke a continuing association with the prior use, those who make subsequent use may be required to take reasonable precautions to prevent confusion.' " Id. at 412-413 (quoting 2 J. Thomas McCarthy, McCarthy on Trademarks and Intellectual Property § 17.01, at 17-3 (3d ed.1994)). However, Rust's reliance on Indianapolis Colts is misguided. That case is readily distinguishable because there plaintiffs were continuing to use a mark confusingly similar to the abandoned mark, whereas here Rust abandoned the Donohue mark without continuing to use any mark even remotely resembling "Donohue & Associates."

In Indianapolis Colts, the Indianapolis Colts, a National Football League team, sought to enjoin the defendants from naming their Canadian Football League team the Baltimore CFL Colts. The Indianapolis Colts had been formerly known as the Baltimore Colts until the team moved to Indiana in 1984 and changed its name to reflect its new location. Nine years later, the Canadian Football League granted a franchise for a Baltimore team which ultimately named itself the Baltimore CFL Colts. The Indianapolis Colts claimed confusion between the new "Baltimore CFL Colts" and the "Indianapolis Colts" in violation of 15 U.S.C. § 1125(a). Id. at 411. We affirmed the district court's issuance of a preliminary injunction against the defendants prohibiting use of the name "Baltimore CFL Colts." Id. at 416.

In reaching its decision, this Court first addressed the issue of abandonment, finding that the Indianapolis Colts technically abandoned the name "Baltimore Colts" when they moved to Indianapolis because "they were no longer playing football under the name 'Baltimore Colts,' so could not have used the name as the team's trademark." Id. at 412. The panel emphasized that abandonment may not be the end of the inquiry where "as in this case, the former owner of the abandoned mark continues to market the same product or service under a similar name, though we cannot find any previous cases of this kind." Id....

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