695 F.2d 96 (5th Cir. 1983), 81-1386, Exxon Corp. v. Humble Exploration Co., Inc.

Docket Nº:81-1386.
Citation:695 F.2d 96
Party Name:217 U.S.P.Q. 1200 EXXON CORPORATION, Humble Oil & Refining Corporation, Humble Gas Transmission Co. and Humble, Inc., Plaintiffs-Appellees, v. HUMBLE EXPLORATION COMPANY, INC., Defendant-Appellant.
Case Date:January 10, 1983
Court:United States Courts of Appeals, Court of Appeals for the Fifth Circuit
 
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Page 96

695 F.2d 96 (5th Cir. 1983)

217 U.S.P.Q. 1200

EXXON CORPORATION, Humble Oil & Refining Corporation, Humble

Gas Transmission Co. and Humble, Inc., Plaintiffs-Appellees,

v.

HUMBLE EXPLORATION COMPANY, INC., Defendant-Appellant.

No. 81-1386.

United States Court of Appeals, Fifth Circuit

January 10, 1983

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David Ford Hunt, Richards, Harris & Medlock, Roger C. Clapp, William R. Gustavson, William D. Harris, Jr., Dallas, Tex., for defendant-appellant.

Strasburger & Price, Patrick F. McGowan, Dallas, Tex., David Goldberg, New York City, for plaintiffs-appellees.

Appeal from the United States District Court for the Northern District of Texas.

Before THORNBERRY, JOHNSON and HIGGINBOTHAM, Circuit Judges.

PATRICK E. HIGGINBOTHAM, Circuit Judge.

Humble Exploration Company, Inc. appeals from an order of the district court, 524 F.Supp. 450, enjoining its use of "Humble" as a trade name. The main issue on appeal is whether the district court erred in finding that Exxon Company, U.S.A. had not abandoned the use of the trademark HUMBLE. 1 Because we find that the limited

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arranged sales of HUMBLE products as part of Exxon's trademark maintenance program are insufficient uses to avoid prima facie abandonment under 15 U.S.C. Sec. 1127, we reverse and remand to the district court for a determination of Exxon's intent to resume use of the trademark.

I. FACTS

Humble Oil and Refining Company was founded as a Texas corporation in 1917. Its activities included oil exploration, refining and marketing. In 1959, that company and the other regional affiliated oil companies owned by Standard Oil Company of New Jersey merged to form a larger Humble Oil & Refining Company, a Delaware corporation.

In the early 1960's, the newly expanded Humble Oil & Refining Company introduced a new branding system for its products and service stations. Throughout the country, large HUMBLE signs were erected on the company's service stations, totalling over 20,000 by 1972. At each station, a second sign in an oval located at the roadside carried a regional house mark: ENCO in Texas and other western states, ESSO in the eastern states and HUMBLE in the state of Ohio. From the early 1960's through 1972, the Humble Oil & Refining Company name appeared on all of the Company's packaged products, sometimes accompanied by the trademark ESSO, ENCO or HUMBLE, depending on the intended area of sale.

Because its management concluded that the use of three trade names, HUMBLE, ESSO and ENCO, was confusing to customers, in late 1972 Humble Oil & Refining Company adopted the name EXXON as its sole primary brand name and on January 1, 1973, Humble Oil & Refining Company became Exxon Company, U.S.A. Exxon spent in excess of twelve million dollars in advertising its name change in television and print media. EXXON signs replaced the three regional signs and all packaged products were relabeled with EXXON labels before distribution. Except for inventory at the service station level, the changeover was complete by mid-1973.

On April 12, 1972, the Board of Directors of Humble Oil & Refining Company passed a resolution calling for continued use of HUMBLE after the changeover to EXXON "in ways other than as a primary brand name." Company publications expressed the intention to protect the name HUMBLE. To do so, Exxon instituted a trademark maintenance program for the mark. Initially there were two facets to the program. First, limited sales of packaged Exxon products with both HUMBLE and EXXON names on the label were made to targeted customers. According to the record, the sales totalled $9.28 in 1973, $.0 in 1974, $140.12 in 1975 and $42.05 in 1976. Second, three corporations--Humble, Inc., Humble Gas Transmission Co. and Humble Oil & Refining Corporation--were formed as "name protection companies." The companies sold bulk Exxon gasoline and diesel fuel to selected customers with the name HUMBLE on the invoice for the sale. Over a seven year period from 1973 through 1979, the sales totalled $395,814. Beginning in 1977, Exxon began shipping 55 gallon drums of its petroleum products from the Baytown, Texas refinery. The drums bore both EXXON and HUMBLE marks.

The appellant corporation was incorporated in Texas under the name Humble Exploration Company in May, 1974. Pat Holloway, the chief executive officer, testified that he selected the name "Humble" because it was abandoned when Exxon

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changed its name. At first, appellant's activities were limited to passive investments in oil ventures, but it later became actively involved in oil exploration. To date it has drilled 125 wells in the Austin Chalk trend, in Texas, selling at the wellhead its crude oil and natural gas. After Exxon became aware of appellant, it demanded on January 11, 1977 that appellant cease its use of the name "Humble." Appellant refused. On June 2, 1977, Exxon filed this suit, asking for injunctive relief.

II. ABANDONMENT OF HUMBLE

The district court framed the abandonment issue thus: "Is the limited use of a famous trademark solely for protective purposes a use sufficient to preclude abandonment under the common law and the Lanham Act?" It answered the question in the affirmative. Plaintiff-Appellee withdrew its Texas and common law claims in the district court, so the resolution of the abandonment issue must focus on the federal standards for abandonment set forth in the Lanham Act.

Under the Act,

A mark shall be deemed to be abandoned--

(a) When its use has been discontinued with intent not to resume use. Intent not to resume may be inferred from circumstances. Nonuse for two consecutive years shall be prima facie abandonment.

15 U.S.C. Sec. 1127 (1982). The burden of proof is on the party claiming abandonment, but when a prima facie case of trademark abandonment exists because of nonuse of the mark for over two consecutive years, the owner of the mark has the burden to demonstrate that circumstances do not justify the inference of intent not to resume use. See Sterling Brewers, Inc. v. Schenley Industries, Inc., 441 F.2d 675, 679 (Cust. & Pat.App.1971).

Appellant argues that Exxon has not used the HUMBLE mark since its changeover program. Since that time, Exxon has 1) sold existing inventory of packaged products bearing the name "Humble Oil and Refining Company"; 2) made periodic sales of nominal amounts of Exxon gasoline, motor oil and grease in pails bearing the names HUMBLE and EXXON; 3) sold Exxon bulk gasoline and diesel fuel to selected customers, who received HUMBLE invoices, through three corporations organized for that purpose; and 4) sold 55-gallon drum products from the Baytown, Texas refinery, all bearing a stencil with the names HUMBLE and EXXON.

The existing inventory was depleted by mid-1974; the sale of 55 gallon drums began in 1977. Whether or not these sales are "uses" for the purposes of 15 U.S.C. Sec. 1127, the period between those sales was longer than two years, and under the Lanham Act, "nonuse for two consecutive years is prima facie abandonment." 15 U.S.C. Sec. 1127. During that period between sales of inventory and sales of 55-gallon drum products, 2 Exxon can point to only two types of sales as possible uses. As earlier described, Exxon made limited sales of packaged products with both EXXON and HUMBLE on the labels to targeted customers in these amounts: $9.28 in 1973, $.0 in 1974, $140.12 in 1975 and $42.05 in 1976. Second, products in bulk form and not bearing a trade name or mark were sold to selected customers who received the explanation that they were receiving Exxon products. The only use of HUMBLE in connection with these sales was on the invoices sent to the customers. The issue, thus, is whether these two categories of arranged sales through the trademark protection program during that period constitute "use" sufficient to avoid prima facie abandonment.

Appellant relies primarily on La Societe Anonyme des Parfums LeGalion v. Jean Patou, Inc., 495 F.2d 1265 (2d Cir.1974), and Procter and Gamble v. Johnson & Johnson, Inc., 485 F.Supp. 1185 (S.D.N.Y.1979), aff'd without opinion, 636 F.2d 1203 (2d Cir.1980),

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to support its argument that arranged sales are nonuse. In Jean Patou, the plaintiff LeGalion, a French perfume manufacturer, had sold its perfume under the trademark SNOB in a number of foreign countries but was unable to sell its product in the United States because of Patou's registration for the mark in this country. Claiming that Patou had not established rights in the mark, LeGalion filed suit. The facts revealed that Patou had made 89 sales of perfume over a 20-year period and engaged in no advertising. The court found that Patou's real purpose in making the 89 sales was to keep a competitor at bay and that this "purely defensive" token use was insufficient to obtain enforceable rights in the mark. Id. at 1273-74. The court observed: "The token sales program engaged in here is by its very nature inconsistent with a present plan of commercial exploitation." Id. at 1273. It continued: "A trademark maintenance program obviously cannot in itself justify a minimal sales effort, or the requirement of good faith commercial use would be read out of the trademark law altogether." Id. at 1273 n. 10.

In Procter and Gamble, the plaintiff maintained a "Minor Brands Program" for the purpose of protecting its ownership rights in brand names not being actively used in commerce on its products. Employees not normally involved in Procter and Gamble's (P & G's) merchandising operation took an active P & G product, labeled it with a minor brand, and shipped it to customers. For example, P & G's Prell shampoo was bottled under thirteen different minor brand labels. Fifty units of each were shipped annually to at least ten...

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