Nutri/System, Inc. v. Con-Stan Industries, Inc.

• Citation: 1 U.S.P.Q.2d 1809,809 F.2d 601
• Decision Date: 04 February 1987
• Docket Number: CON-STAN,No. 85-6449,85-6449
• Parties: NUTRI/SYSTEM, INC., Plaintiff-Appellant, v.INDUSTRIES, INC., Defendant-Appellee.
• Court: United States Courts of Appeals. United States Court of Appeals (9th Circuit)

Page 601

809 F.2d 601

1 U.S.P.Q.2d 1809

NUTRI/SYSTEM, INC., Plaintiff-Appellant, v. CON-STAN INDUSTRIES, INC., Defendant-Appellee.

No. 85-6449.

United States Court of Appeals,

Ninth Circuit.

Argued and Submitted Nov. 7, 1986.

Decided Feb. 4, 1987.

James C. McConnon, Philadelphia, Pa., for plaintiff-appellant.

Mario A. Martella and Maurice B. Pilosof, Los Angeles, Cal., for defendant-appellee.

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

Before BROWNING, GOODWIN and FARRIS, Circuit Judges.

GOODWIN, Circuit Judge:

Nutri/System, Inc. ("Nutri/System") appeals from a judgment in favor of Con-Stan Industries, Inc. ("Con-Stan") on its suit for service mark infringement.

Nutri/System currently owns some 650 weight loss centers across the United States. The centers offer a weight control program involving diet, exercise, counseling and the use of Nutri/System food products. Nutri/System staffs its centers with managers, weight counselors or salespersons, full and part-time nurses, and a behavior education counselor with training in psychology or counseling. Nutri/System equips its centers, located in small shopping centers and medical buildings, with exercise and office equipment. The centers usually remain open five days a week. Middle-income females over thirty who live within five miles of a center constitute the core of each center's clientele. Yearly membership costs about $300 and food items cost about $30 per week.

In 1976, Nutri/System incorporated under the name of Shape-up Weight Control Centers of America, Inc. In 1977, it became Weight Loss Medical Centers of America and began offering food products under the name Nutri/System 2000 Foods of the Future. The next year Nutri/System applied for a patent and trademark on the name and products. In 1979, the company requested that its franchisees change their name to Nutri/System Weight Loss Medical Centers. Finally, in 1980, it became Nutri/System, Inc.

From 1976 to 1980, Nutri/System advertised locally with leaflets and newspapers. In 1981, the company began a national advertising program. The ads principally featured "testimonials" from named, successful Nutri/System clients, the Nutri/System black and white logo, descriptions of the food and supervision offered, and references to the weight loss program's simplicity.

Since 1960, Con-Stan has offered health products under various registered names using the prefix "Nutri-": Nutri-Cal, Nutri-Metics, Nutri-Science, Nutri-Clean, and Nutri-Dent. In 1975, Ruby Miller, an independent contractor affiliated with Con-Stan, developed a successful weight loss program called "Trim-Away" which did not involve fees, dues, or fines. In 1980, Con-Stan decided to expand the Trim-Away Program and began using the name "Nutri-Trim" in relation to the weight loss counseling services.

Con-Stan schedules its Nutri-Trim meetings in community rooms, schoolrooms, or church facilities on a weekly basis. Clients pay only for the weight loss products Con-Stan offers for sale. The centers cater to a clientele attracted by its lower fees. Con-Stan has no national advertising budget; it generally accomplishes its "advertising" by sending letters and flyers to independent contractors. In 1980, Con-Stan filed an application to register the name Nutri-Trim as a service mark, but the Patent and Trademark Office stayed the application pending the outcome of this suit.

In July 1981, under the direction of Con-Stan, a Con-Stan licensee published a newspaper advertisement using the name Nutri-Trim and describing the weight loss counseling centers. Other ads subsequently appeared in newspapers. The ads featured a line drawing of a man and woman, some reference to "no fees, no dues, and no fines," and the Nutri-Trim International logo.

In 1982, Nutri/System filed the present complaint against Con-Stan. Nutri/System alleged federal trademark infringement and various pendent claims. After extensive discovery and trial, the district court entered judgment in favor of Con-Stan.

A. Trademark/Service Mark Protection

First, Nutri/System contends that the district court improperly analyzed its service mark claim by failing to distinguish between service marks and trademarks. The Lanham Act ("the Act") defines trademarks and service marks at 15 U.S.C. Sec. 1127. The former includes any name or symbol used to distinguish goods from those manufactured by others. Id. "[A] service mark is used as an identification mark which performs the same function in the selling and advertising of services that a trademark performs in respect of goods." Crazy Eddie, Inc. v. Lois Pitts Gershon, Inc., 600 F.Supp. 537, 541 (S.D.N.Y.1984), citing 3 Callman, Unfair Competition, Trademarks and Monopolies Sec. 68.1 at 71.

Nutri/System bases its challenge of the court's analysis on the fact that a service mark, unlike a trademark, may be acquired and infringed by advertising alone. See Londontown Manufacturing Co. v. Cable Raincoat Co., 371 F.Supp. 1114, 1117 (S.D.N.Y.1974). Nutri/System focuses on Con-Stan's "invasion" of Nutri/System's "channel of trade" by placing ads in newspapers long after Nutri/System began its own advertising campaign. Given this focus, Nutri/System contends that the court should have concentrated only on the effect Con-Stan's advertising had on the association between Nutri/System's service and its mark. Therefore, Nutri/System claims the court committed reversible error by treating its case as a "run of the mill" trademark infringement suit.

Nutri/System's argument confuses the acquisition of service marks via advertising with the protection afforded them. Rights in a service mark may be acquired by use in advertising alone. See 15 U.S.C. Sec. 1127. It does not follow, however, that the test for determining infringement must differ from that applied to trademarks or service marks acquired by more than advertising alone. Section 1053 of the Act provides the same protection to holders of service marks and trademarks. Id. Sec. 1053. The courts consistently interpret this section to mean that "identical standards" govern trademark and service mark infringement cases. West & Co., Inc. v. Arica Institute, Inc., 557 F.2d 338, 340 n. 1 (2nd Cir.1977). See also Jellibeans, Inc. v. Skating Clubs of Georgia, Inc., 716 F.2d 833, 839 n. 15 (11th Cir.1983); Boston Professional Hockey Association, Inc. v. Dallas Cap & Emblem Manufacturing, Inc., 510 F.2d 1004, 1009 (5th Cir.), cert. denied, 423 U.S. 868, 96 S.Ct. 132, 46 L.Ed.2d 98 (1975); Crazy Eddie, Inc., 600 F.Supp. at 541; American Diabetes Association, Inc. v. National Diabetes Association, 533 F.Supp. 16, 18 n. 1 (E.D.Pa.1981), aff'd, 681 F.2d 804 (3rd Cir.1982).

This court has applied the same test for both service mark and trademark infringement cases without expressly so stating. See Park 'N Fly, Inc. v. Dollar Park and Fly, Inc., 782 F.2d 1508, 1509 (9th Cir.1986); Shakey's Inc. v. Covalt, 704 F.2d 426, passim (9th Cir.1983). The Patent and Trademark Office also explained the similarities between service marks and trademarks in Ex parte Belnap & Thompson, Inc., 90 U.S.P.Q. 123 (1951):

Service marks might just as well have been called trade marks for services, leaving conventional trade marks to be referred to as trade marks for goods.... Inasmuch as a service mark is not used with goods, it obviously can not be attached to the goods as is a trade mark for goods, and hence a service mark is used when it is used or displayed in the sale or advertising of the services. In addition, the definition of service mark offers a greater variety of possible marks than is the case with trade marks for goods. Aside from these differences, the trade mark sections [of the Lanham Act] and the various provisions thereof apply to service marks, that is, to trade marks for services, as they do to trade marks for goods.

Id. at 125.

Accordingly, Nutri/System's extensive advertising does not alter the method of analyzing its claim for service mark infringement. The district court did not err in assessing the claim for infringement under the same standard employed for trademarks.

B. "Likelihood of Confusion"

In any trademark suit, the trial court principally inquires into whether the defendant's mark is likely to cause confusion. See Shakey's, 704 F.2d at 431. We review the district court's findings as to "likelihood of confusion" under the clearly erroneous standard. Levi Strauss & Co. v. Blue Bell, Inc., 778 F.2d 1352, 1355-56 (9th Cir.1985) (en banc).

"Likelihood of confusion exists when consumers are likely to assume that a product or service is associated with a source other than its actual source because of similarities between the two sources' marks or marketing techniques." Shakey's, 704 F.2d at 431. In a series of cases, we developed a multi-factor analysis for determining the "likelihood of confusion" between trademarks or service marks. These factors include: (1) strength of the mark; (2) similarity of the marks; (3) marketing channels and proximity of the goods or services; (4) good faith and intent; and (5) evidence of actual confusion. See Park 'N Fly, 782 F.2d at 1509; Alpha Industries, Inc. v. Alpha Steel Tube & Shapes, Inc., 616 F.2d 440, 444 (9th Cir.1980); AMF Inc. v. Sleekcraft Boats, 599 F.2d 341, 348 (9th Cir.1979).

1. Strength of the Mark

With regard to the first factor, Nutri/System argues that the district court erred in characterizing its mark as "suggestive" and weak rather than "arbitrary" and strong. In general, the more unique or arbitrary a mark, the more protection a court will afford it. In Surgicenters of America v. Medical Dental Surgeries, 601 F.2d 1011 (9th Cir.1979), we established a continuum of marks from "generic," afforded no protection; through "descriptive" or "suggestive," given moderate protection; to "arbitrary" or "fanciful," awarded maximum protection. Id. at 1014-15.

Arbitrary or fanciful marks (i.e., Kodak) are...