Union Carbide Corp. v. Ever-Ready Inc.

• Decision Date: 16 March 1976
• Docket Number: EVER-READY,No. 75--1371,75--1371
• Parties: , 1976-1 Trade Cases 60,790 UNION CARBIDE CORPORATION, Plaintiff-Appellant, v.INCORPORATED, a corporation, and Mark Gilbert, an individual, Defendants-Appellees.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 366

531 F.2d 366

188 U.S.P.Q. 623, 1976-1 Trade Cases 60,790

UNION CARBIDE CORPORATION, Plaintiff-Appellant, v. EVER-READY INCORPORATED, a corporation, and Mark Gilbert, an individual, Defendants-Appellees.

No. 75--1371.

United States Court of Appeals Seventh Circuit.

Argued Oct. 22, 1975.

Decided Jan. 30, 1976.

As Amended on Denial of Rehearing

March 11, 1976.

As Amended March 16, 1976.

Bert A. Collison, William K. Guild, Nims, Howes, Collison & Isner, New York City, for Union Carbide Corp., plaintiff-appellant; John H. Morrison, Kirkland & Ellis, Chicago, Ill., of counsel.

Francis J. McConnell, Richard P. Compbell, Chicago, Ill., for defendants-appellees.

Before CLARK, Associate Justice (Retired), ^* and PELL and SPRECHER, Circuit Judges.

PELL, Circuit Judge.

Union Carbide Corporation brought this action against Ever-Ready Incorporated ¹ alleging trademark infringement and unfair competition. ² In issue on this appeal are 1) whether the district court erred in declaring Carbide's trademark, EVEREADY, invalid; 2) whether the district court erred in finding that defendants' use of Ever-Ready on electrical products was not likely to cause confusion; and 3) whether the district court erred in holding that defendants' use of Ever-Ready does not constitute unfair competition or dilution under Illinois statutes. In the district court Ever-Ready raised the affirmative defenses of laches and misuse of trademark in violation of the antitrust laws. Prior to trial the antitrust issues were severed for separate trial pursuant to Fed.R.Civ.P. 42(b) and are not involved in this appeal.

In 1898 plaintiff's predecessor, American Electrical Novelty & Manufacturing Company, adopted the term EVER READY to distinguish its products. In 1901 the mark was changed to EVEREADY. In 1909 the company changed its name to American Ever Ready Company, and in 1914 it assigned all its assets to the National Carbon Company, Carbide's predecessor.

Currently plaintiff sells under its trademark, EVEREADY, alone or in combination with other words and designs, an extensive line of electric batteries, flashlights, and miniature bulbs for automobile and marine use. Carbide presently is the owner of five United States trademark registrations on its trademark, EVEREADY, alone, and with other words and distinctive designs. Affidavits have been filed pursuant to 15 U.S.C. §§ 1058 (for continued validity) and 1065 (for incontestability). Carbide has advertised these products extensively and since 1966 has had sales of its EVEREADY products in excess of one hundred million dollars per year. From October 1965 through July 1967 Carbide sold certain bulbs under its EVEREADY mark in blister packages which indicated that they were for high-intensity reading lamps. Carbide has continued to sell identical bulbs packaged for automotive and other uses.

In 1944 defendant Mark Gilbert began business as Ever-Ready Fluorescent Company and still continues to conduct a fluorescent light maintenance service. In 1946 a new company was formed to import and distribute electrical supplies, stationery, gift items, and accessories, including lamps, light bulbs, light fixtures, and flashlights. After several changes of form and name this company became the defendant, Ever-Ready Incorporated. The products listed above are primarily distributed under names other than Ever-Ready, although Ever-Ready's promotional material, which is distributed within the trade, contains its corporate logo.

In 1969 defendants commenced importing miniature lamp bulbs having the term Ever-Ready stamped on their bases and selling these bulbs in blister packages containing the term Ever-Ready in a four-sided logo and indicating that they are for high-intensity lamps. Ever-Ready also imports the high-intensity lamps with Ever-Ready stamped on them or on labels attached to them. The literature accompanying the lamps also contains the logo. The name of the manufacturer is also indicated on the lamps.

Carbide sought an injunction against Ever-Ready's use of the term Ever-Ready on or in connection with the advertising or sale of electrical products. Carbide also requested that Ever-Ready be required to deliver up to it all material containing the allegedly infringing marks. No damages were sought. The district court found no infringement, no dilution under Illinois law, no unfair competition, and declared Carbide's mark, EVEREADY, invalid. ³ This appeal followed.

I. Validity of Plaintiff's Trademark

A. Validity is in Issue

Plaintiff argues that the validity of its mark was not in issue before the trial court and that it was improper for the trial court to address the issue in its opinion. Plaintiff relies on a stipulation entered before trial which stated that plaintiff's registrations were in full force; on the statement of issues, which were part of the pretrial order; and on defendants' proposed findings of facts and conclusions of law, which contained no finding of invalidity.

The stipulation is of little help to plaintiff. That a registration is in force is not necessarily inconsistent with the invalidity of a trademark, for example, where the trademark has become a generic term. At most the stipulation is ambiguous. We are, however, troubled by the failure to include the question of validity in the statement of issues in the pretrial order. Invalidity is, of course, a defense to an infringement action. If the defendants wished to rely on it, it should have been a part of the statement of issues. On the other hand, remarks during trial, at least by defendants' counsel, indicate that validity, was in issue. The trial judge concluded that it was in issue.

Having carefully considered these factors, we conclude that we must face the issue of invalidity. Plaintiff may or may not have been prejudiced before the district court if counsel did not adequately brief or argue the validity of the trademark because he did not view it as in issue; nevertheless, counsel has not shown this court that it was prejudiced because evidence was not introduced which would have been had counsel believed validity was in issue. The legal issues have been fully briefed before this court.

B. Effect of Incontestability

A mark may become 'incontestable' if the requirements of 15 U.S.C. § 1065 are met. ⁴ Defendant does not dispute that Carbide has complied with the requirements of § 1065 on incontestability but disputes the effect and scope of that achievement. Section 1115 prescribes the effects of registration and incontestability in an infringement action. It provides in relevant part:

'(a) Any registration . . . of a mark registered on the principal register provided by this chapter and owned by a party to an action shall be admissible in evidence and shall be prima facie evidence of registrant's exclusive right to use the registered mark in commerce on the goods or services specified in the registration subject to any conditions or limitations stated therein, but shall not preclude an opposing party from proving any legal or equitable defense or defect which might have been asserted if such mark had not been registered.

'(b) If the right to use the registered mark has become incontestable under section 1065 of this title, the registration shall be conclusive evidence of the registrant's exclusive right to use the registered mark in commerce on or in connection with the goods or services specified in the affidavit filed under the provisions of said section 1065 subject to any conditions or limitations stated therein except when one of the following defenses or defects is established . . ..'

Section defenses then follow, but none are relevant in this appeal. ⁵

It is not disputed that the prima facie presumption of § 1115(a) may be used in an infringement action. Contrary to defendants' assertions, nothing in the statute indicates that the conclusive evidence rule of § 1115(b) cannot be used similarly. Three of the defenses enumerated in the section clearly contemplate the use of incontestability in infringement actions by plaintiffs. Subsections 1115(b)(4), 1115(b)(5), and 1115(b)(6) describe situations where a plaintiff's mark shall not be conclusive evidence in infringement actions. This implies that in other situations, assuming none of the other enumerated defenses are applicable, incontestability may be used by a plaintiff in establishing his case. Nevertheless, courts have not given the section uniform treatment. Opinions range from strict to liberal.

Defendants argue that incontestability is a narrow defensive device which cannot be used offensively by a plaintiff in an infringement action. Certainly no such limitation is expressed in the statute, but there is a line of cases which provides support for defendants' position. John Morrell & Co. v. Reliable Packing Co., 295 F.2d 314 (7th Cir. 1961), is procedurally similar to the present case. In Morrell, plaintiff, owner of an incontestable registration, used for statutory trademark infringement, unfair competition, and dilution under an Illinois statute. The essence of the court's holding was that plaintiff had failed to sustain its burden to show a likelihood of confusion between its mark, 'E--Z Cut,' and defendant's, 'Easy-Carve.' In reaching this conclusion the court relied on the parties' practices of using these marks in connection with their name (Morrell E--Z Cut and Thompson Farms Brand Easy Carve). Plaintiff had apparently argued that the court could not consider this because its mark was incontestable. The district court did not limit its discussion to holding that confusion was not likely, but cited language in Rand McNally & Co. v. Christmas Club, 105 U.S.P.Q. 499 (Comm. of Pat. 1955), aff'd, 242 F.2d 776, 44 CCPA 861 (1957), which indicated that incontestability has a defensive, not an offensive, effect and that when a mark becomes incontestable, the owner's rights in the mark are not broadened. We note that in Morrell the court...