Prudential Ins. Co. of America v. Gibraltar Financial Corp. of California

• Citation: 694 F.2d 1150
• Decision Date: 31 January 1983
• Docket Number: No. 81-5874,81-5874
• Parties: , 12 Fed. R. Evid. Serv. 180 The PRUDENTIAL INSURANCE COMPANY OF AMERICA, Plaintiff-Appellant, v. GIBRALTAR FINANCIAL CORPORATION OF CALIFORNIA, and Gibraltar Savings & Loan Association, Defendants-Appellees.
• Court: United States Courts of Appeals. United States Court of Appeals (9th Circuit)

Page 1150

694 F.2d 1150

217 U.S.P.Q. 1097, 12 Fed. R. Evid. Serv. 180

The PRUDENTIAL INSURANCE COMPANY OF AMERICA, Plaintiff-Appellant, v. GIBRALTAR FINANCIAL CORPORATION OF CALIFORNIA, and Gibraltar

Savings & Loan Association, Defendants-Appellees.

No. 81-5874.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted Nov. 1, 1982.

Decided Dec. 16, 1982.

As Amended Dec. 22, 1982.

Rehearing Denied Jan. 31, 1983.

John S. Kingdon, Howrey & Simon, Washington, D.C., for plaintiff-appellant.

Marvin Jubas, Alex Chartove, Spensley Horn Jubas & Lubitz, Los Angeles, Cal., for defendants-appellees.

Appeal from the United States District Court for the Central District of California.

Before GOODWIN, HUG and BOOCHEVER, Circuit Judges.

GOODWIN, Circuit Judge.

This dispute is about the likeness of a rock. Prudential Insurance Company of America alleges that Gibraltar Financial Corporation of California and Gibraltar Savings & Loan Association (collectively, Gibraltar) have misappropriated its corporate symbol, a picture of the Rock of Gibraltar. Prudential sued for injunctive relief alleging (1) infringement of a registered service mark under the Lanham Act, 15 U.S.C. Secs. 1051-1127, (2) dilution of a registered service mark in violation of Cal.Bus. and Prof.Code Secs. 14320-14330, and (3) unfair competition. Gibraltar counterclaimed, alleging that Prudential has abandoned four older versions of Prudential's logo. The district court held for Gibraltar on all issues and ordered cancellation of four of Prudential's trademark registrations. This appeal followed.

In 1896, Prudential adopted a likeness of the Rock of Gibraltar as its service mark. Prudential registered different versions of its mark in 1948, 1955, 1965, 1973 and 1979. The first four registrations had achieved incontestability status at the time of this action.

Gibraltar Savings and Loan Association was formed in 1952 and first used a rock logo in 1954. Gibraltar Financial Corporation was formed in 1959 and from that date until 1968, used a globe as its corporate mark. Gibraltar Savings and Loan expanded from 1 branch in 1960 to 77 branches in 1980.

In 1979, Prudential first complained to Gibraltar about Gibraltar's use of a rock logo. Prudential sued after Gibraltar had used the rock logo for twenty-eight years. Prudential is barred by laches.

Prudential contends that laches may preclude damages, but cannot bar injunctive relief. Prudential relies on Menendez v. Holt, 128 U.S. 514, 523-524, 9 S.Ct. 143, 145, 32 L.Ed. 526 (1888); McLean v. Fleming, 96 U.S. 245, 24 L.Ed. 828 (1877); and Stork Restaurant, Inc. v. Sahati, 166 F.2d 348, 363 (9th Cir.1948). These cases do not support the proposition. The Supreme Court explicitly made laches available as an equitable defense barring injunctive relief in United Drug Co. v. Rectanus Co., 248 U.S. 90, 102-103, 39 S.Ct. 48, 52-53, 63 L.Ed. 141 (1918); and French Republic v. Saratoga Vichy Spring Co., 191 U.S. 427, 436-437, 24 S.Ct. 145, 146-147, 48 L.Ed. 247 (1903). These cases limited the Menendez and McLean rationale to situations involving fraudulent imitation or conscious infringement. United Drug, 248 U.S. at 102, 39 S.Ct. at 52. The Stork court found no laches based on the facts, Stork Restaurant v. Sahati, 166 F.2d 348, 362-363 (9th Cir.1948), and stated in dicta that laches could not bar injunctive relief. In light of United Drug and Saratoga Vichy, Stork Restaurant should be read for the limited proposition that the defense of laches was not made out in that case. See National Van Lines v. Dean, 237 F.2d 688, 693-694 (9th Cir.1956) (defense of laches not made on facts). ¹

Four of Prudential's rock marks have incontestable status under 15 U.S.C. Sec. 1065. Prudential alleges that only the defenses enumerated in 15 U.S.C. Sec. 1115(b) can apply against incontestable marks; laches is not one of these. Gibraltar responds that 15 U.S.C. Sec. 1116 calls on the courts "to grant injunctions, according to the principles of equity...." in protecting trademark registrants' rights and, therefore, laches can apply. ² This court considers incontestability to be a defensive provision only. It helps protect the registrant's mark from cancellation but is of no offensive use. Incontestability does not preclude a defense of laches. Tillamook County Creamery Ass'n v. Tillamook Cheese and Dairy Ass'n, 345 F.2d 158, 163 (9th Cir.), cert. denied, 382 U.S. 903, 86 S.Ct. 239, 15 L.Ed.2d 157 (1965).

Prudential invites this court to overrule Tillamook. We decline for two reasons: First, precedent should be followed unless good reason counsels change. No such reason exists. The effect of 15 U.S.C. Sec. 1115(b) is unclear; and both positions regarding the offensive/defensive distinction are reasonable readings of the statute. ³ Second, the availability of a laches defense narrows the protection afforded trademarks. For policy reasons, this circuit has expressed a preference to read the Lanham Act narrowly. International Order of Job's Daughters v. Lindeburg & Co., 633 F.2d 912, 918 (9th Cir.), cert. denied, 452 U.S. 941, 101 S.Ct. 3086, 69 L.Ed.2d 956 (1981). The Act protects against fraud and consumer confusion. See James Burrough Ltd. v. Sign of Beefeater, Inc., 540 F.2d 266, 276 (7th Cir.1976) (trademark laws exist not to protect trademarks, but to protect consuming public from confusion, concomitantly protecting trademark owner's right to nonconfused public). To read the Act more broadly invites anticompetitive and irrational market behavior. Smith v. Chanel, Inc., 402 F.2d 562, 566 (9th Cir.1968). See Brown, Advertising and the Public Interest, 57 Yale L.J. 1165, 1185-1206 (1948) (distinguishes "informative" from "persuasive" functions of trademarks and argues only former should be legally protected).

Prudential makes three factual allegations in an attempt to avoid the application of laches: (1) Gibraltar did not use the Rock logo continuously; (2) Gibraltar changed its rock to look more like Prudential's rock over the years; and (3) Gibraltar grew prodigiously from 1 office in the early 1960's to 77 offices in 1980.

The first allegation is unsupported. Gibraltar Financial Corporation and Gibraltar Financial, Insurance Division, used marks other than variations of the rock between 1959 and 1968. However, it is uncontroverted that Gibraltar Savings and Loan used the rock logo from 1954 until today. The rock logo also represented all of the Gibraltar family of organizations from 1954 to 1959, and from 1968 until today.

Prudential alleges Gibraltar more closely imitated its rock over the years. Prudential relies on inferences drawn from comparison of the respective changes made in the design of the rock logo by the companies over the years. Inspection of the marks provided in Prudential's brief fails to show increasing similarity between Prudential and Gibraltar logos. The marks of the two companies looked as similar twenty-eight years ago as they look today, probably because they represent the same rock, albeit with decreasing fidelity to the real thing.

Prudential's third allegation is that because Gibraltar has progressively encroached upon Prudential's mark over time, laches cannot bar injunctive relief. The argument appears to be two-pronged: (1) Gibraltar's business has expanded over time; and (2) Gibraltar's use of the symbol has expanded and progressively encroached on Prudential's symbol.

Prudential bases its theory of symbolic encroachment on two allegations: (1) that Gibraltar modified its mark over the years to approximate Prudential's mark more closely; and (2) that Gibraltar recently entered the television advertising arena. The first allegation has already been discussed. The record shows that Gibraltar has engaged in TV advertising for nearly twenty years. The volume of Gibraltar's television advertising has increased, and the use of the rock logo has become more frequent. However, these facts are not adequate to support the theory of gradual encroachment.

Prudential also alleges that Gibraltar's expansion in type and amount of business constitutes progressive encroachment and thus laches is no bar to relief. Prudential relies on California Packing Corp. v. Sun-Maid Raisin Growers, 81 F.2d 674 (9th Cir.), cert. denied, 298 U.S. 668, 56 S.Ct. 833, 80 L.Ed. 1391 (1936). Sun-Maid is inapposite because it is a contract case in which plaintiff and defendant agreed to defendant's use of the Sun-Maid label on raisins only. When defendant expanded its product line to other fruits, plaintiff immediately protested. The court held that use of the Sun-Maid label as allowed by contract did not raise a laches defense to use of "Sun-Maid" on other fruits in violation of the contract. Id. at 676, 679-680.

Prudential also relies on a number of other progressive encroachment cases, principally Chandon Champagne Corp. v. San Marino Wine Corp., 335 F.2d 531, 535 (2nd Cir.1964); Miss Universe, Inc. v. Patricelli, 271 F.Supp. 104, 110 (D.Conn.1967), affirmed, 386 F.2d 997 (2nd Cir.1967); Standard Oil Co. v. Standard Oil Co., 252 F.2d 65 (10th Cir.1958); Independent Nail & Packing Co. v. Stronghold Screw Products, Inc., 205 F.2d 921, 927 (7th Cir.), cert. denied, 346 U.S. 886, 74 S.Ct. 138, 98 L.Ed. 391 (1953). These cases all rely on the principle that if the junior user of a mark moves into direct competition with the senior user, selling the same "product" through the same channels and causing actual market confusion, laches is no defense. Gibraltar has not moved into direct competition with Prudential as contemplated in these cases. Gibraltar and Prudential do not offer the same services to any substantial extent and there is no evidence that actual confusion of their services has occurred.

As for expansion in amount of business, it is true that Gibraltar has grown tremendously, but growth alone does not infringement make. See, e.g., Polaroid Corp. v. Polarad Electronics Corp., 287 F.2d 492, 498 (2d Cir....