Dawn Donut Company v. Hart's Food Stores, Inc.

• Decision Date: 21 May 1959
• Docket Number: Docket 25110.,No. 108,108
• Citation: 267 F.2d 358
• Parties: DAWN DONUT COMPANY, Inc., Plaintiff-Appellant, v. HART'S FOOD STORES, INC. and Starhart Bakeries, Inc., Defendants-Appellants.
• Court: U.S. Court of Appeals — Second Circuit

267 F.2d 358 (1959)

DAWN DONUT COMPANY, Inc., Plaintiff-Appellant, v. HART'S FOOD STORES, INC. and Starhart Bakeries, Inc., Defendants-Appellants.

No. 108, Docket 25110.

United States Court of Appeals Second Circuit.

Argued December 9, 1958.

Decided May 21, 1959.

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Townsend F. Beaman, Jackson, Mich. (Charles Shepard, Rochester, N. Y., on the brief), for plaintiff-appellant.

Justin L. Vigdor, Rochester, N. Y. (MacFarlane, Harris, Martin, Kendall & Dutcher, Rochester, N. Y., on the brief), for defendants-appellees.

Before CLARK, Chief Judge, and HINCKS and LUMBARD, Circuit Judges.

LUMBARD, Circuit Judge.

The principal question is whether the plaintiff, a wholesale distributor of doughnuts and other baked goods under its federally registered trademarks "Dawn" and "Dawn Donut," is entitled under the provisions of the Lanham Trade-Mark Act to enjoin the defendant from using the mark "Dawn" in connection with the retail sale of doughnuts and baked goods entirely within a six county area of New York State surrounding the city of Rochester. The primary difficulty arises from the fact that although plaintiff licenses purchasers of its mixes to use its trademarks in connection with the retail sales of food products made from the mixes, it has not licensed or otherwise exploited the mark at the retail level in defendant's market area for some thirty years.

We hold that because no likelihood of public confusion arises from the concurrent use of the mark in connection with retail sales of doughnuts and other baked goods in separate trading areas, and because there is no present likelihood that plaintiff will expand its retail use of the mark into defendant's market area, plaintiff is not now entitled to any relief under the Lanham Act, 15 U.S.C.A. § 1114. Accordingly, we affirm the district court's dismissal of plaintiff's complaint.

This is not to say that the defendant has acquired any permanent right to use the mark in its trading area. On the contrary, we hold that because of the effect of the constructive notice provision of the Lanham Act, should the plaintiff expand its retail activities into the six county area, upon a proper application and showing to the district court, it may enjoin defendant's use of the mark.

With respect to defendant's counterclaim to cancel plaintiff's registration on the ground that its method of licensing its trademarks violates the Lanham Act, a majority of the court holds that the district court's dismissal of defendant's counterclaim should be affirmed. They conclude that the district court's finding that the plaintiff exercised the degree of control over the nature and quality of the products sold by its licensees required by the Act was not clearly erroneous, particularly in view of the fact that the defendant had the burden of proving its claim for cancellation. I dissent from this conclusion because neither the finding of the trial judge nor the undisputed evidence in the record indicates the extent of supervision and control actually exercised by the plaintiff.

We are presented here with cross-appeals from a judgment entered by the District Court for the Western District of New York dismissing both plaintiff's complaint for infringement of its federally registered trademarks and defendant's counterclaim to cancel plaintiff's federal registrations.

Plaintiff, Dawn Donut Co., Inc., of Jackson, Michigan since June 1, 1922 has continuously used the trademark "Dawn" upon 25 to 100 pound bags of doughnut mix which it sells to bakers in various states, including New York, and since 1935 it has similarly marketed a line of sweet dough mixes for use in the baking of coffee cakes, cinnamon rolls and oven goods in general under that mark. In 1950 cake mixes were added to the company's line of products. Dawn's sales representatives call upon bakers to solicit orders for mixes and the orders obtained are filled by shipment to the purchaser either directly from plaintiff's Jackson, Michigan plant, where the mixes are manufactured, or from a local warehouse within the customer's state. For some years plaintiff maintained a warehouse in Jamestown, New York, from which shipments were made, but sometime prior to the commencement of this suit in 1954 it discontinued this warehouse and has since then shipped its mixes to its New York customers directly from Michigan.

Plaintiff furnishes certain buyers of its mixes, principally those who agree to become exclusive Dawn Donut Shops, with advertising and packaging material bearing the trademark "Dawn" and permits these bakers to sell goods made from the mixes to the consuming public under that trademark. These display materials are supplied either as a courtesy or at a moderate price apparently to stimulate and promote the sale of plaintiff's mixes.

The district court found that with the exception of one Dawn Donut Shop operated in the city of Rochester, New York during 1926-27, plaintiff's licensing of its mark in connection with the retail sale of doughnuts in the state of New York has been confined to areas not less than 60 miles from defendant's trading area. The court also found that for the past eighteen years plaintiff's present New York state representative has, without interruption, made regular calls upon bakers in the city of Rochester, N. Y., and in neighboring towns and cities, soliciting orders for plaintiff's mixes and that throughout this period orders have been filled and shipments made of plaintiff's mixes from Jackson, Michigan into the city of Rochester. But it does not appear that any of these purchasers of plaintiff's mixes employed the plaintiff's mark in connection with retail sales.

The defendant, Hart Food Stores, Inc., owns and operates a retail grocery chain within the New York counties of Monroe, Wayne, Livingston, Genesee, Ontario and Wyoming. The products of defendant's bakery, Starhart Bakeries, Inc., a New York corporation of which it is the sole stockholder, are distributed through these stores, thus confining the distribution of defendant's product to an area within a 45 mile radius of Rochester. Its advertising of doughnuts and other baked products over television and radio and in newspapers is also limited to this area. Defendant's bakery corporation was formed on April 13, 1951 and first used the imprint "Dawn" in packaging its products on August 30, 1951. The district court found that the defendant adopted the mark "Dawn" without any actual knowledge of plaintiff's use or federal registration of the mark, selecting it largely because of a slogan "Baked at midnight, delivered at Dawn" which was originated by defendant's president and used by defendant in its bakery operations from 1929 to 1935. Defendant's president testified, however, that no investigation was made prior to the adoption of the mark to see if anyone else was employing it. Plaintiff's marks were registered federally in 1927, and their registration was renewed in 1947. Therefore by virtue of the Lanham Act, 15 U.S.C.A. § 1072, the defendant had constructive notice of plaintiff's marks as of July 5, 1947, the effective date of the Act.

Defendant's principal contention is that because plaintiff has failed to exploit the mark "Dawn" for some thirty years at the retail level in the Rochester trading area, plaintiff should not be accorded the exclusive right to use the mark in this area.¹

We reject this contention as inconsistent with the scope of protection afforded a federal registrant by the Lanham Act.

Prior to the passage of the Lanham Act courts generally held that the owner of a registered trademark could not sustain an action for infringement against another who, without knowledge of the registration, used the mark in a different trading area from that exploited by the registrant so that public confusion was unlikely. Hanover Star Milling Co. v. Metcalf, 1916, 240 U.S. 403, 36 S.Ct. 357, 60 L.Ed. 713; cf. White Tower System, Inc. v. White Castle System of Eating Houses Corporation, 6 Cir., 1937, 90 F.2d 67, certiorari denied, 1937, 302 U.S. 720, 58 S.Ct. 41, 82 L.Ed. 556; Note, Developments in the Law of Trade-Marks and Unfair Competition, 68 Harv.L.Rev. 814, 857-858 (1955). By being the first to adopt a mark in an area without knowledge of its prior registration, a junior user of a mark could gain the right to exploit the mark exclusively in that market.

But the Lanham Act, 15 U.S.C.A. § 1072, provides that registration of a trademark on the principal register is constructive notice of the registrant's claim of ownership. Thus, by eliminating the defense of good faith and lack of knowledge, § 1072 affords nationwide protection to registered marks, regardless of the areas in which the registrant actually uses the mark. Sterling Brewing, Inc. v. Cold Spring Brewing Corp., D.C.D.Mass.1951, 100 F.Supp. 412, 418, modified on rehearing, D.C.D.Mass.1952, 92 U.S.P.Q. 37; Roberts, Commentary on the Lanham Trade-Mark Act, 15 U.S. C.A. pp. 272, 280; Amdur, Trade-Mark Law and Practice (1948) pp. 332-333; Note, Developments in the Law of Trade-Marks and Unfair Competition, 68 Harv. L.Rev. 814, 828, 859; Note, 100 U.Pa.L. Rev. 1075 (1952); Note, 21 St. John's L. Rev. 209, 220-221 (1947); Van Valkenburg, The New Trade-Mark Law, 20 Rocky Mt.L.Rev. 76, 80 (1947).

That such is the purpose of Congress is further evidenced by 15 U.S.C.A. § 1115(a) and (b) which make the certificate of registration evidence of the registrant's "exclusive right to use the * * * mark in commerce."² "Commerce" is defined in 15 U.S.C.A. § 1127 to include all the commerce which may lawfully be regulated by Congress. These two provisions of the Lanham Act make it plain that the fact that the defendant employed the mark "Dawn," without actual knowledge of plaintiff's registration, at the retail level in a limited geographical area of New York state before the plaintiff used the mark in that market, does not entitle it either to exclude the...