581 F.Supp. 1124 (M.D.Tenn. 1984), 82-3380, Tandy Corp. v. Malone & Hyde, Inc.
| Citation | 581 F.Supp. 1124 |
| Party Name | 222 U.S.P.Q. 599 TANDY CORPORATION v. MALONE & HYDE, INC. |
| Case Date | March 01, 1984 |
| Court | United States District Courts, 6th Circuit, U.S. District Court — Middle District of Tennessee |
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I.C. Waddey, Jr., Nashville, Tenn., for plaintiff.
Walter H. Crouch, Nashville, Tenn., for defendant.
MEMORANDUM
WISEMAN, District Judge.
This action is before the Court on defendant's motion for summary judgment based on the equitable defense of estoppel by laches. Plaintiff Tandy Corporation is a publicly held Delaware Corporation, headquartered in Fort Worth, Texas, and is record owner of the marks RADIO SHACK, THE SHACK, and SHACK. Plaintiff owns or franchises more than six thousand RADIO SHACK retail outlets that specialize in consumer electronic goods, including merchandise designed for automotive use.
Defendant Malone & Hyde, Inc., is a Tennessee corporation headquartered in Memphis, Tennessee, that traditionally has engaged in food distribution and specialty retailing. Since July 1979 defendant has operated a chain of retail auto parts stores under the trade name and source mark AUTO SHACK.
Plaintiff's complaint in this case alleges service mark and trademark infringement, false designation of origin, unfair competition and trademark dilution, with damages and injunctive relief requested. Jurisdiction
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of the Court, which is uncontested, is authorized under 15 U.S.C. § 1121 and 28 U.S.C. §§ 1332(a)(1), 1338(a), and 1338(b).
I. Background
In 1977 defendant began investigating the retail auto parts industry to determine whether it might profitably enter the industry by acquiring an existing retail auto parts business. A number of potential acquisition candidates were considered and rejected 1 during 1977 and 1978, and an unsuccessful bid made to acquire Chief Auto Parts in southern California. In the spring of 1978 defendant became interested in Auto Shack, Inc., a retail auto parts business founded in 1975 by Mr. Albert J. Scavariel and headquartered in Phoenix, Arizona. In 1978 Mr. Scavariel was operating six or seven Auto Shack outlets, including one opened in 1976 at 3334 West Van Buren in the same shopping center with a Radio Shack. Defendant decided that Auto Shack, Inc., was the best-managed retail auto chain it had encountered and in September 1978 reached a tentative merger agreement with Mr. Scavariel. Mr. Scavariel ultimately decided not to consummate the proposed merger, but he indicated he very much wanted to resume merger negotiations in the future. In addition, Mr. Scavariel offered to help defendant start its own retail auto parts business.
Mr. Scavariel introduced defendant to his suppliers, advised defendant on inventory design and invited defendant's employees to work for a couple of weeks in his Auto Shack stores to observe his operation firsthand. Meanwhile, defendant began searching for a name for its new business and hired outside trademark counsel to investigate the availability of any name selected. In late 1978 defendant considered the names "Auto Wise" and "Auto Mart," but abandoned them when counsel advised that those names were registered and in use.
With an eye to future affiliation, Mr. Scavariel offered in January 1979 to let defendant use the name AUTO SHACK in states other than Arizona. Up to that time Mr. Scavariel had never received objections to the AUTO SHACK name from plaintiff or anyone else, even though plaintiff was aware of Mr. Scavariel's use of the name as early as August 1976. 2 Mr. Scavariel is especially fond of the AUTO SHACK name because it mirrors his initials, A.S. Defendant was enthusiastic about using the AUTO SHACK name because of close cooperation with Mr. Scavariel and the hopes for future acquisition of Auto Shack, Inc. of Arizona.
Upon receiving Mr. Scavariel's offer, defendant directed its outside trademark counsel to research the availability and registerability of the AUTO SHACK name for retail auto parts stores. The search revealed a CYCLE SHACK and a VAN SHACK 3 in use, but failed to disclose any possible conflict with any of plaintiff's marks. Counsel advised defendant that no conflict existed and defendant decided to adopt the AUTO SHACK name. Mr. Scavariel wrote a letter to defendant dated January 23, 1979, stating that he "would be pleased for Malone & Hyde to use the name AUTO SHACK, YOUR SUPERMARKET FOR AUTO PARTS, for its new chain of auto stores." Mr. Scavariel's letter also stated that he wished to retain exclusive use of the name in Arizona. Defendant opened its first AUTO SHACK store in early July 1979.
Plaintiff learned of defendant's use of the name AUTO SHACK in July 1979 and
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in August 1979 consulted outside counsel with the resolution to sue defendant for trademark infringement. Plaintiff, however, neglected to notify defendant of its objections or intent to sue until March 1982, nearly three years after plaintiff decided to take action. In August 1979 defendant had opened five AUTO SHACK stores and had spent approximately $25,000 in promoting the name. By March 1982, when defendant first learned of plaintiff's objections, defendant had opened an additional 55 AUTO SHACK stores in seven states and had spent approximately $1.5 million promoting the name. Throughout the period from July 1979 to March 1982, plaintiff closely monitored the expansion of defendant's business and was aware of defendant's plans to expand to 150 stores by the mid-80's. In addition, during this time plaintiff failed to take legal action against Mr. Scavariel's use of AUTO SHACK, or against other AUTO SHACK stores of which it was aware in Alabama, Florida, Utah, and California. 4 Plaintiff, however, pursued a substantial number of infringement claims between 1976 and 1982 with demand letters that almost always were sent within several months and most often within one month, after the time plaintiff became aware of the offending use.
Plaintiff filed this suit for infringement on April 15, 1982. Defendant moves for summary judgment and argues estoppel by laches. Both parties have filed depositions, answers to interrogatories, affidavits and briefs, and a hearing on the motion was held on October 26, 1983. For the following reasons, the Court grants defendant summary judgment on the basis of laches and accordingly denies plaintiff all relief requested.
II. Estoppel by Laches
A. General Requirements
The defense of estoppel by laches denies relief to a litigant who has been guilty of unreasonable delay in enforcing his rights when that delay results in a prejudicial reliance by the opposing party. 5 American Home Products Corp. v. Lockwood Manufacturing Co., 483 F.2d 1120 (6th Cir.1973); Callman, Unfair Competition, Trademarks & Monopolies§ 22.21 (4th Ed). The length of delay necessary to establish laches depends on the circumstances of each case, and especially on the degree of injury and prejudice to the party asserting the defense. See Fruit Industries v. Bisceglia Brothers, 101 F.2d 752 (3d Cir.1939) (three year delay held sufficient). The holder of a trademark may not wait to see how successful an alleged infringer's business will be before seeking relief. Polaroid Corp. v. Polorad Electronics, 287 F.2d 492 (2d Cir.1961).
Defendant in this case contends that plaintiff's 32 month delay in communicating any objection concerning defendant's use of AUTO SHACK, in addition to plaintiff's longstanding failure to protest Mr. Scavariel's use of the mark, was inexcusable delay upon which defendant relied in expanding its business and spending $1.5
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million in promotions. Defendant contends that had it been made aware of plaintiff's objections in July or August 1979, when very little investment had been made in the mark, that defendant would have chosen a different name to avoid expensive and protracted infringement litigation.
Plaintiff argues that the 32 month delay in notifying defendant was a reasonable amount of time to cautiously and maturely investigate the suspected infringement before provoking a controversy, and that the failure to protest Mr. Scavariel's use of AUTO SHACK is irrelevant to this action. In addition, plaintiff contends that defendant did not detrimentally rely on plaintiff's delay because defendant was aware of the RADIO SHACK mark, was aware of confusion between the two marks early in the expansion process, and would have expanded and promoted AUTO SHACK even if plaintiff had objected in August 1979. Plaintiff concludes that the issues of delay and reliance at the very least remain in dispute, which makes this action inappropriate for summary judgment.
The Court finds that plaintiff's delay in this case was inexcusable and unreasonable. No excuse exists and none was offered to explain plaintiff's failure to at least notify defendant in late 1979 that plaintiff objected to the use of AUTO SHACK, especially since sending timely demand letters is plaintiff's normal practice. Lack of knowledge may be an excuse, Chandon Champagne Corporation v. San Marino Wine Corporation, 335 F.2d 531 (2d Cir.1964), but plaintiff admits it was fully aware of defendant's use of the mark in July 1979 and even decided to pursue litigation by August 1979. Plaintiff made a half-hearted attempt to offer a "pending litigation" excuse. Courts have held that delays in filing trademark causes of action may be reasonable in cases in which plaintiff is involved in other litigation on the mark. Electronic Communications, Inc. v. Electronic Components For Industry Co., 443 F.2d...
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