Beer Nuts, Inc. v. Clover Club Foods Co.

• Decision Date: 20 November 1986
• Docket Number: No. 85-1525,85-1525
• Citation: 805 F.2d 920
• Parties: BEER NUTS, INC., Plaintiff-Appellant, v. CLOVER CLUB FOODS COMPANY, Defendant-Appellee.
• Court: U.S. Court of Appeals — Tenth Circuit

Page 920

805 F.2d 920

231 U.S.P.Q. 913

BEER NUTS, INC., Plaintiff-Appellant, v. CLOVER CLUB FOODS COMPANY, Defendant-Appellee.

No. 85-1525.

United States Court of Appeals, Tenth Circuit.

Nov. 20, 1986.

Robert M. Newbury (Craig S. Fochler and Thomas P. Arden, of Pattishall, McAuliffe & Hofstetter, Chicago, Ill., and Robert R. Mallinckrodt, of Mallinckrodt & Mallinckrodt, Salt Lake City, Utah, with him on briefs), of Pattishall, McAuliffe & Hofstetter, Chicago, Ill., for plaintiff-appellant.

Richard D. Seibel (R. William Johnston, of Christie, Parker & Hale, Pasadena, Cal., with him on brief), of Christie, Parker & Hale, Pasadena, Cal., for defendant-appellee.

Before SEYMOUR, McWILLIAMS and TACHA, Circuit Judges.

TACHA, Circuit Judge.

This is the second appeal in this case involving an alleged trademark infringement. In the first appeal, this court reversed the district court's dismissal of the action and remanded for reconsideration on the issue of the likelihood of confusion between the two trademarks. In the present appeal, we again review the district court's determination that there is no likelihood of confusion between the two marks.

Beer Nuts, Inc. (Beer Nuts) is the successor to a business begun in 1953 for the marketing and sale of sweetened, salted peanuts and cashews under the name BEER NUTS. BEER NUTS was registered as a trademark in 1955 and became incontestable under 15 U.S.C. Sec. 1065 in 1960. Clover Club Foods Company (Clover Club) was a distributor for Beer Nuts in the mountain states from 1959 until 1974. From 1974 to 1978, Clover Club sold sweetened, salted peanuts manufactured by another company under the name BREWBERS. In 1977, Clover Club decided to market sweetened, salted peanuts under its own trademark. Clover Club calls its product BREW NUTS and displays those words along with an overflowing stein on the front of the package. Clover Club also uses a smaller CLOVER CLUB trademark on the front of the package. Clover Club began selling BREW NUTS in 1978. Both the BEER NUTS and BREW NUTS packages are cellophane and are similar in size and shape. The marketing and advertising techniques are the same for both products.

Beer Nuts sued Clover Club alleging trademark infringement. Clover Club counterclaimed, seeking a declaration that the registered trademark BEER NUTS is void. After a bench trial on the merits, the district court ruled that Clover Club had not used BREW NUTS as a trademark but merely as a description of its product and that there was no likelihood of confusion concerning the origin of the competing products. Thus, Clover Club had not infringed Beer Nuts' trademark. The district court denied Clover Club's counterclaim that the BEER NUTS trademark is void. Beer Nuts, Inc. v. Clover Club Foods Co., 520 F.Supp. 395 (D.Utah 1981).

On appeal, this court reversed and remanded the case. We found that Clover Club used the BREW NUTS logo not as a descriptive term but as a trademark. We also held that the district court erred in finding no likelihood of confusion based solely on a side-by-side comparison of the similarity between the BEER NUTS and BREW NUTS packages. We outlined the relevant factors in determining likelihood of confusion as to the source of the products and remanded for reconsideration of this issue under the legal standards set forth in our opinion. We upheld the district court's determination that the term BEER NUTS is not generic but rather a descriptive term with secondary meaning, and therefore the BEER NUTS trademark is not void. ¹ Beer Nuts, Inc. v. Clover Club Foods Co., 711 F.2d 934 (10th Cir.1983). On remand, the district court found that Clover Club's use of the words BREW NUTS together with a picture of an overflowing stein does not create a likelihood of confusion with the BEER NUTS trademark and thus Clover Club has not infringed the BEER NUTS trademark. Beer Nuts, Inc. v. Clover Club Foods Co., 605 F.Supp. 855 (D.Utah 1985). We reverse the decision of the district court and remand for determination of the relief to be granted in accordance with this opinion. ²

I.

The question that the district court faced on remand was whether Clover Club's use of the words BREW NUTS with an overflowing stein as a trademark constitutes infringement of the BEER NUTS trademark. In our initial consideration of this case, we set forth specific legal standards that were to govern the factual analysis by the district court. These legal standards are premised upon the findings that the BEER NUTS trademark is incontestable and, as a matter of law, Clover Club used the words BREW NUTS with a picture of an overflowing stein as a trademark. 711 F.2d at 937-38. Important legal consequences flow from these findings. The district court's initial error seems to stem from a misunderstanding of those consequences.

The purpose of a trademark is to identify a producer's goods and distinguish them from those of other producers. Id. at 939. In our previous opinion, we discussed the four types of marks: generic, descriptive, suggestive and arbitrary or fanciful. Id. at 939-40; see also Soweco, Inc. v. Shell Oil Co., 617 F.2d 1178, 1183 (5th Cir.1980), cert. denied, 450 U.S. 981, 101 S.Ct. 1516, 67 L.Ed.2d 816 (1981). The trademark protection afforded each type of mark is related to how closely the mark identifies the source of the product. "Because a generic mark refers to a general class of goods, it does not indicate the particular source of an item. Consequently, such a mark receives no legal protection and may not be registered alone as a trademark." 711 F.2d at 939. At the other end of the spectrum, suggestive and fanciful marks may be registered without proof that they identify the source of the product. Id. Descriptive terms fall in the middle on the continuum.

Because a descriptive term is one which a competitor would likely need to use in describing his product, the term does not indicate that a product comes from a single source. Therefore, a trademark that is descriptive may be registered only if it has acquired a secondary meaning by becoming "distinctive of the applicant's goods in commerce."

Id. at 939-40 (footnote and citations omitted).

A registered trademark, even a descriptive mark, may become incontestable if it has been in continuous use for five years following the date of its registration. 15 U.S.C. Sec. 1065. Once a mark has become incontestable, its registration constitutes "conclusive evidence" of the holder's right to use the mark. ³ Id. An "incontestable" mark cannot be challenged as lacking secondary meaning; such marks are conclusively presumed to be nondescriptive or to have acquired secondary meaning. Park 'N Fly, Inc. v. Dollar Park and Fly, Inc., 469 U.S. 189, 105 S.Ct. 658, 661-63, 83 L.Ed.2d 582 (1985); Soweco, 617 F.2d at 1184-85; Union Carbide, 531 F.2d at 377.

It is unchallenged that BEER NUTS was registered as a trademark in 1955 and has become incontestable under 15 U.S.C. Sec. 1065. Thus, even if the words BEER NUTS can be considered descriptive of the product, the BEER NUTS mark is presumed to have secondary meaning; the mark identifies to consumers the source of the product. It cannot now be challenged as descriptive. ⁴

Under the Lanham Act, use of a mark constitutes infringement of a registered trademark and leads to liability if it "is likely to cause confusion" in the marketplace concerning the source of the different products. 15 U.S.C. Sec. 1114(1)(a); see also 711 F.2d at 940 (citing Vitek Systems, Inc. v. Abbott Laboratories, 675 F.2d 190, 192 (8th Cir.1982)). Thus, the district court's inquiry on remand should have been whether Clover Club's use of the words BREW NUTS with an overflowing stein as a trademark is likely to cause confusion in the marketplace as to the source of BREW NUTS and BEER NUTS.

The district court's factual inquiry should have been premised upon treating both the BEER NUTS and the BREW NUTS marks as trademarks identifying the source of the products for the purpose of Lanham Act protection. Instead, the district court erred in again assessing the proper legal status of the trademarks. The district court engaged in a lengthy analysis of whether the two marks identify source or use of the products. 605 F.Supp. at 860. That inquiry was inappropriate because the legal status of the marks had already been determined. This failure to base its analysis on the proper legal standard regarding the scope of protection afforded the BEER NUTS mark led the district court to reach erroneous factual conclusions regarding likelihood of confusion.

II.

In our previous opinion, we set forth the factors to be considered in determining whether there is a likelihood of confusion between the two marks. Although the list is not exhaustive and no one factor is determinative, the following criteria should be used as a guideline:

"(a) the degree of similarity between the designation and the trade-mark or trade name in

(i) appearance;

(ii) pronunciation of the words used;

(iii) verbal translation of the pictures or designs involved;

(iv) suggestion;

(b) the intent of the actor in adopting the designation;

(c) the relation in use and manner of marketing between the goods or services marketed by the actor and those marketed by the other;

(d) the degree of care likely to be exercised by purchasers."

711 F.2d at 940 (quoting Restatement of Torts Sec. 729 (1938)). It must be stressed that these factors are interrelated and must be considered as such in assessing likelihood of confusion. For example, a small degree of similarity between two marks may lead to a finding that confusion is likely when the products are identical, inexpensive items. On the other hand, very similar marks may not generate confusion as to the source of the products where the products are very different or relatively expensive.

The district court considered the appropriate factors in its analysis of the likelihood of confusion, but because it did not...