815 Tonawanda Street Corp. v. Fay's Drug Co., Inc.
| Citation | 842 F.2d 643 |
| Decision Date | 23 March 1988 |
| Docket Number | D,No. 453,453 |
| Parties | , 6 U.S.P.Q.2d 1284 815 TONAWANDA STREET CORPORATION, d/b/a "Fay's Leader Drugs," Plaintiff-Appellee, v. FAY'S DRUG COMPANY, INC., Defendant-Appellant. ocket 87-7701. |
| Court | United States Courts of Appeals. United States Court of Appeals (2nd Circuit) |
Peter K. Sommer, Buffalo, N.Y. (Sommer & Sommer, John R. Nuchereno, Buffalo, N.Y., of counsel), for plaintiff-appellee.
Richard Lehv, New York City (Weiss David Fross Zelnick & Lehrman, P.C., of counsel), for defendant-appellant.
Before VAN GRAAFEILAND, WINTER and ALTIMARI, Circuit Judges.
Fay's Drug Company, Inc., appeals from an order of the United States District Court for the Western District of New York, John T. Elfvin, Judge, granting a permanent injunction in favor of the 815 Tonawanda Street Corporation in plaintiff's action for trademark infringement and unfair competition. We conclude that plaintiff failed to establish any entitlement to relief on either its federal or state-law claims, and we reverse the judgment of the district court. The defendant is instructed to adopt a modified logo to be used on all exterior signs on the store at issue in this case.
In 1936, Fay's Cut-Rate Drugs began doing business at 815 Tonawanda St. in Buffalo, New York. Shortly thereafter, its trade name was changed to "Fay's Prescription Pharmacy." In 1955, the pharmacy became associated with the Leader drug store cooperative, and sometime thereafter changed its trade name to "Fay's Leader Drugs." In 1967, the 815 Tonawanda Street Corporation (the "Corporation" or "plaintiff"), the plaintiff in this action, purchased the inventory and goodwill of Fay's Leader Drugs. Robert A. Fiorella, a pharmacist, is president and owner of the Corporation, and continues to operate the business under the name Fay's Leader Drugs ("Fay's Leader"). Fay's Leader is located in the 14207 postal zip code region, which encompasses areas of Buffalo known as "Riverside" and "Black Rock." In 1985, Fay's Leader moved to larger quarters on the same block, at 801 Tonawanda St.
Although Fay's Leader derives as much as 50% of its revenues from the sale of prescription drugs, it also carries a wide variety of other items. The inventory includes goods typically encountered in drug stores, such as cosmetics and toiletries, as well as a selection of general merchandise. In addition to brand-name products, Fay's Leader carries a product line bearing the "Leader" private label.
Fay's Leader relies on the Leader cooperative almost exclusively for its advertising. The Leader advertising consists mainly of newspaper inserts portraying sale items available at the Leader drug stores, and listing all the Leader affiliates in the area.
According to plaintiff, Fay's Leader adopted a logo many years ago, in which the first three letters of "Fay's" are in script and the final "s" is printed. This logo currently appears on a sign overhanging the store. Directly under the word "Fay's" are the words "Leader Drug Store" enclosed in an oval. Fay's Leader never sought to register either the trade name "Fay's" or its "script/printed" logo.
The defendant in this action is Fay's Drug Company, Inc. ("Fay's Drugs"). Fay's Drugs was incorporated in 1966, and currently operates over 150 "Fay's Drugs" retail pharmacies, including 22 in the greater Buffalo area. Fay's Drugs opened its first Buffalo store in 1977. Since then it has engaged in extensive advertising in both print and broadcast media. According to defendant, Fay's Drugs has spent over $7.5 million on its Buffalo-area advertising between 1977 and the present.
The typical Fay's Drugs store is located in a "strip" shopping center, set back from the street, and has approximately 15,000 square feet of floor space. Fay's Drugs stores carry an exceptionally wide variety of general merchandise, including of course, standard drug store items. Included in the inventory are hundreds of products bearing the "Fay's Drugs" private label. Sales of prescription drugs account for approximately 30% of the company's revenues.
Apparently by coincidence, Fay's Drugs adopted a logo very similar to that used by Fay's Leader. The logo portrays the first three letters of "Fay's" in script, with the final "s" printed; the word "DRUGS" appears in block letters under the word "Fay's". The two words are enclosed within a regular trapezoidal border. Both parties claim to have been using their respective logos since the 1960s. In 1979, Fay's Drugs obtained federal registrations for its logo (to be used in connection with "retail drug store services"), and for the trademark "Fay's" (in connection with several of its private-label products).
In 1982, the storefront and sign on Fay's Leader were redesigned pursuant to a city-sponsored renovation project. The logo on the newly-erected sign was virtually identical to defendant's logo, including the trapezoid border. Robert Fiorella admitted that the new sign was an imitation of the Fay's Drugs logo, but claimed that the architects and designers were responsible for the sign's new appearance, rather than Fiorella himself.
The new Fay's Leader sign was brought to the attention of Fay's Drugs, and in March 1982, general counsel for Fay's Drugs wrote to Fiorella advising him of the probable trademark infringement. Fiorella subsequently had the sign redesigned once again, removing the trapezoid border and restoring the script/printed logo previously used by Fay's Leader.
The two Fays had no further cause to communicate until 1985, when Fiorella learned that Fay's Drugs was planning to open a retail store approximately five blocks away from Fay's Leader. Counsel for Fay's Leader wrote to the President of Fay's Drugs, asserting that "the operation of a pharmacy within the trading area of [Fay's Leader] would constitute unfair competition" and violate its common-law trademark rights. According to plaintiff, Fay's Leader had not objected to Fay's Drugs' previous entries into the Buffalo market, because none of the other Fay's Drugs stores were located in the "Riverside" or "Black Rock" sections of town.
Fay's Drugs, not surprisingly, was unwilling to scrap the plans for its newest store, which was scheduled to open in February 1987. On November 3, 1986, Fay's Leader commenced the instant action seeking to enjoin defendant from opening a new "Fay's Drugs" store at the proposed location. The complaint asserted claims for "false designation of origin" under section 43(a) of the Lanham Act, 15 U.S.C. Sec. 1125(a); common-law trademark infringement; injury to business reputation under N.Y.Gen.Bus.Law Sec. 368-d (McKinney 1984), and unfair competition under New York law. The complaint also sought a declaration that plaintiff had "a superior right to use FAY's as a mark and/or name in connection with the operation of a retail drugstore in the territory-in-question." The defendant asserted a counterclaim for infringement of a registered mark under section 32(1) of the Lanham Act, 15 U.S.C. Sec. 1114(1).
The case was tried without a jury on December 11 and 12, 1986. Judge Elfvin concluded that Fay's Leader was entitled to relief on all its claims, except for the one based on N.Y.Gen.Bus.Law Sec. 368-d. Judgment was entered granting permanent injunctive relief in favor of the plaintiff. The court's order provided:
Defendant may open its store located within the 14207 zip code region and may market its private label products therein, that the defendant may not act further to expose any exterior signs containing the name "Fay's," that any of defendant's exterior signs or exterior advertising presently containing the name "Fay's" shall be shrouded, that window display signs or advertising visible to persons outside the defendant's store shall not contain the name "Fay's," that window displays of merchandise visible to persons outside the defendant's store shall minimize the display of the name "Fay's."
Fay's Drug Company opened its new store as scheduled in February 1987, under the trade name "FDC Pharmacy."
The defendant, as noted previously, obtained federal registrations for the service mark "Fay's Drugs" and the trademark "Fay's" in 1979. These registered marks have become incontestable, pursuant to section 15 of the Lanham Act, 15 U.S.C. Sec. 1065, because the marks were in continuous use for five years following the date of registration, and defendant filed an affidavit to that effect with the Patent and Trademark Office. See 15 U.S.C. Sec. 1065(3).
Plaintiff nevertheless challenged defendant's right to use the "Fay's" marks under an exception to incontestability set forth in section 1065. This exception applies to prior users of the registered mark who have acquired "a valid right ... under the law of any State or Territory by use of a mark or trade name continuing from a date prior to the date of registration under this chapter of [the registrant's] mark." Id. According to Wrist-Rocket Mfg. Co., Inc. v. Saunders Archery Co., 578 F.2d 727, 731 (8th Cir.1978), "the plain meaning of [the Sec. 1065 exception] is that if a party has acquired common-law trademark rights continuing since before the publication of the federal registration, then to that extent the registration will not be incontestable." See also Casual Corner Assoc., Inc. v. Casual Stores of Nevada, Inc., 493 F.2d 709, 712-13 (9th Cir.1974).
The district court observed that plaintiff had used the "Fay's" mark continuously, beginning long before defendant's registration of the mark. The court then concluded that under section 1065, plaintiff would be entitled to assert against defendant any rights it had acquired in the mark as of 1979. Our task is to determine whether the district court correctly evaluated the extent of plaintiff's rights, if any, in the "Fay's" mark.
A claim for "false designation of origin" under section 43(a) of the...
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