373 F.3d 786 (6th Cir. 2004), 01-6571, AutoZone, Inc. v. Tandy Corp.

Docket Nº:01-6571.
Citation:373 F.3d 786
Party Name:71 U.S.P.Q.2d 1385 AUTOZONE, INC. and Speedbar, Inc., Plaintiffs-Appellants, v. TANDY CORP., Defendant-Appellee.
Case Date:June 29, 2004
Court:United States Courts of Appeals, Court of Appeals for the Sixth Circuit
 
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373 F.3d 786 (6th Cir. 2004)

71 U.S.P.Q.2d 1385

AUTOZONE, INC. and Speedbar, Inc., Plaintiffs-Appellants,

v.

TANDY CORP., Defendant-Appellee.

No. 01-6571.

United States Court of Appeals, Sixth Circuit

June 29, 2004

Argued April 21, 2004.

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[Copyrighted Material Omitted]

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Alan S. Cooper (argued and briefed), Shaw Pittman, Washington, DC, Robb S. Harvey (briefed), Waller, Lansden, Dortch & Davis, Nashville, TN, for Plaintiff-Appellant.

Douglas R. Pierce (briefed), King & Ballow, Nashville, TN, Jane Michaels (argued and briefed), Holland & Hart, Denver, CO, Timothy P. Getzoff (briefed), Holland & Hart, Boulder, CO, for Defendant-Appellee.

Before: BATCHELDER and MOORE, Circuit Judges; CALDWELL, District Judge.[*]

OPINION

KAREN NELSON MOORE, Circuit Judge.

This case springs from a trademark dispute between two large nationwide retailers in the seemingly disparate markets of automotive parts and electronics. Plaintiff-Appellant AutoZone, Inc. ("AutoZone") is a nationwide retailer of consumer automotive products that uses the mark AUTOZONE. AutoZone and its wholly owned subsidiary Speedbar, Inc. brought an action against Defendant-Appellee Tandy Corporation ("Tandy" or "Radio

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Shack"), which owns the Radio Shack chain, after Tandy began using its POWERZONE mark to promote a section of its retail outlets dedicated to selling various power-related items, such as batteries, extension cords, and chargers for electronics. AutoZone alleged that Tandy's use of POWERZONE constituted trademark infringement, tradename infringement, unfair competition, breach of contract, and trademark dilution. The United States District Court for the Middle District of Tennessee granted Tandy's motion for summary judgment and dismissed all of AutoZone's claims. Because AutoZone has not presented enough evidence such that a reasonable jury could conclude that there existed a "likelihood of confusion" between POWERZONE and AUTOZONE or that Tandy's use of POWERZONE diluted the AUTOZONE mark, we AFFIRM the judgment of the district court.

I. FACTS AND PROCEDURE

A. The 1982 Litigation

Although this particular round of legal action was instigated by Tandy's adoption of the POWERZONE mark, AutoZone and Tandy's litigious relationship dates back two decades. In 1979, AutoZone's predecessor Malone & Hyde, Inc. ("M & H") opened a chain of retail-auto parts stores in Tennessee and Arkansas under the name "Auto Shack." Tandy brought a trademark infringement action against M & H for the use of the AUTO SHACK mark. Tandy Corp. v. Malone & Hyde, Inc., 581 F.Supp. 1124, 1126-27 (M.D.Tenn.1984), rev'd, 769 F.2d 362 (6th Cir. 1985). The parties settled in 1987: M & H ceased using AUTO SHACK, Tandy agreed to M & H's use of AUTOZONE, and Tandy was contractually barred from using AUTOZONE or any other name or mark confusing similar to AUTOZONE.

B. AutoZone, Tandy, and the Disputed Trademarks

1. AutoZone

In the years following the settlement, AutoZone blossomed into a large, successful national chain, which currently owns or franchises more than 3,000 stores in forty-two states and Mexico and which reported $4.5 billion in sales in 2000. AutoZone sells a wide variety of automotive parts and supplies, including car batteries, tires, engine parts, and assorted automotive peripherals. Some products sold at AutoZone are also sold at Radio Shack, including automobile power adapters, car stereos, amplifiers, cables, connectors, switches, radar detectors, alarms, and citizen's band radio receivers. AutoZone also sells commonly available consumer items, such as batteries, extension cords, power strips, and tools, all of which a consumer could find at Radio Shack, as well as at a variety of convenience stores, supermarkets, and department stores. Depending on the size of the store, an AutoZone outlet carries either 21,500 different products (as measured by stock keeping units, or SKUs) or 55,100 different products. Of the 325 products sold by Radio Shack in its POWERZONE section, 132 products are also carried by AutoZone. Thus, less than 1% of all the products offered by AutoZone overlap with those sold in the POWERZONE section.

The AUTOZONE mark consists of the word "AutoZone" slanted to the right and spelled with a capital "A" and "Z." The mark also features a "speedbar" design, which consists of diagonal bars of decreasing thickness intended to convey an impression of rapidity or movement. When in color, the word "AutoZone" is red, and the speedbar design is orange. When color advertising is not available, the AutoZone

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mark naturally appears in black and white. Generally, the speedbar design is located either to the left or to the right of the word "AutoZone," but occasionally the speedbar design appears on both sides of the name. There is no dispute that AutoZone properly registered the name and the speedbar design with the Patent and Trademark Office ("PTO").

2. Tandy

Tandy is largest nationwide retailer of consumer electronics. Through its 7,186 Radio Shack outlets, it reported $4.1 billion in sales in 1999. As a marketing tactic, Radio Shack pursued a "store within a store concept": it physically grouped its core target products into separate sections within its retail outlets. For example, within a Radio Shack outlet a consumer might find a Sprint Communications Store, an RCA Digital Entertainment Center, a Microsoft Information Center, and a Compaq Creative learning center. At some point in the mid-1990s, Radio Shack sought to create a store-within-a-store for one of its primary anchors--"the business of connecting things," which includes batteries, power supplies, cords, connectors, and resistors. Joint Appendix ("J.A.") at 168 (David Edmondson Dep.). Market research conducted by Radio Shack demonstrated that consumers preferred POWERZONE as the name for the new power-related store-within-a-store. Before launching the POWERZONE concept, Radio Shack hired a trademark search firm, which discovered a Georgia business that used the POWERZONE mark and sold various types of batteries. Radio Shack purchased the rights to the POWERZONE mark from this firm and began using the mark on July 2, 1998.

The POWERZONE mark features the word "PowerZone," spelled with a capital "P" and a capital "Z," bookended by graphic elements consisting of same-sized diagonal lines slanting to the right. The word "PowerZone" generally appears on a clearly defined, cylindrical object that closely resembles a battery and is centered in between the slanted lines moving outward from the battery. The words Radio Shack and an "R" with a circle around it, which is a Radio Shack trademark, also appear on the battery. In some advertisements, the battery, containing the word "PowerZone" and the Radio Shack mark, appears without the slanted lines. Additionally, in some advertisements, the word "PowerZone" is depicted without any accompanying graphics. The POWERZONE mark almost always appears in black and white. However, in color advertisements, the word PowerZone is written in white, and the battery has a coppery yellow-orange color.

With limited exceptions, Radio Shack uses POWERZONE either as a complement to or in close physical proximity with the Radio Shack name and the Radio Shack house mark, such that a consumer would be unlikely to see one without the other whether in advertising or at an actual Radio Shack outlet. AutoZone uncovered at least one example in which POWERZONE appeared without the accompanying Radio Shack mark on Radio Shack's website. In this example, the words "Radio Shack" and "RadioShack.com" appear multiple times in close proximity to the word POWERZONE, and a consumer would not see the word POWERZONE without either purposely going to or being directed to RadioShack.com.

C. Procedural Background

Shortly after Radio Shack began using the POWERZONE mark, AutoZone requested that Radio Shack stop and retract its application to register the mark. AutoZone

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sent Radio Shack a formal cease-and-desist letter on February 1, 1999. Radio Shack refused to comply. AutoZone filed this action in the United States District Court for the Middle District of Tennessee on September 15, 1999. It asserted five claims for relief: 1) service mark and trademark infringement, see 15 U.S.C. § 1114(1); 2) tradename infringement, see id.; 3) unfair competition, see 15 U.S.C. § 1125(a); 4) service mark and trademark dilution under both federal and Tennessee statutes, see 15 U.S.C. § 1125(c) and Tenn.Code Ann. § 47-25-513; and 5) breach of contract. The district court properly asserted jurisdiction over claims one through four pursuant to 15 U.S.C. § 1121(a) and 28 U.S.C. §§ 1331, 1338(a) (trademark claim), 1338(b) (unfair competition). The court also properly exercised jurisdiction over AutoZone's breach of contract claim and Tennessee state dilution claim pursuant to 28 U.S.C. §§ 1332(a)(1), 1367(a).1 As part of the discovery that took place through 2000 and 2001, AutoZone commissioned a consumer survey from its expert, Michael Rappeport ("Rappeport"). The purpose of the survey, the methodological validity and significance of which are highly disputed, was to demonstrate the strength of the AUTOZONE mark, although AutoZone also believes that the study demonstrates actual confusion between AUTOZONE and POWERZONE. Additionally, for the purposes of demonstrating that third-party use of trademarks containing ZONE was pervasive, Radio Shack discovered that as of March 16, 2001, there were 745 active trademarks that used or incorporated ZONE. At least sixteen of the registered marks were used in the automotive or travel-related industries. At least forty-three entities operated websites that use ZONE either alone or in conjunction with other words.

Radio Shack filed a motion for summary judgment on March 19, 2001, which the district court granted in its entirety on November 9, 2001....

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