International Kennel Club of Chicago, Inc. v. Mighty Star, Inc.

• Decision Date: 20 July 1988
• Docket Number: No. 86-2843,86-2843
• Citation: 846 F.2d 1079
• Parties: INTERNATIONAL KENNEL CLUB OF CHICAGO, INC., an Illinois corporation, Plaintiff- Appellee, v. MIGHTY STAR, INC., a New Jersey corporation, and DCN Industries, Inc., Defendants-Appellants.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 1079

846 F.2d 1079

6 U.S.P.Q.2d 1977

INTERNATIONAL KENNEL CLUB OF CHICAGO, INC., an Illinois corporation, Plaintiff- Appellee, v. MIGHTY STAR, INC., a New Jersey corporation, and DCN Industries, Inc., Defendants-Appellants.

No. 86-2843.

United States Court of Appeals Seventh Circuit.

Argued May 28, 1987.

Decided May 5, 1988.

As Amended July 20, 1988.

Bernard J. Nussbaum, Sonnenschein Carlin Nath & Rosenthal, Chicago, Ill., for defendants-appellants.

Jerome H. Torshen, Jerome H. Torshen, Ltd., Chicago, Ill., for plaintiff-appellee.

Before CUMMINGS, CUDAHY and COFFEY, Circuit Judges.

COFFEY, Circuit Judge.

Plaintiff-appellee International Kennel Club of Chicago, Inc. ("IKC"), brought this action against the defendants-appellants Mighty Star, Inc. ("Mighty Star") and DCN Industries, Inc. ("DCN"), alleging that the defendants' use of the plaintiff's "International Kennel Club" name violates section 43(a) of the Lanham Act, 15 U.S.C. Sec. 1125(a), as well as state statutory and common law. The district court granted the plaintiff's motion for a preliminary injunction against the defendants' use of the name. The defendants appeal. We affirm in part, reverse in part, and remand.

I.

A. Plaintiff's use of the "International Kennel Club" name

The IKC is an Illinois business corporation that sponsors dog shows in Chicago, and is a "show giving member club" of the American Kennel Club ("AKC"), a nationwide organization devoted to furthering the "sport" of showing purebred dogs. In addition to giving dog shows, the IKC serves as an information source for AKC activities in Chicago and provides assistance in the pedigree registration of purebred dogs with the AKC. The IKC also sponsors seminars and contributes funds for animal medical research, the Dog Museum of America, and 4-H programs.

The IKC sponsors two major dog shows each year, with the annual spring show having an attendance of between 20,000 to 30,000 people. An average of 1,500 to 2,000 dogs are entered in plaintiff's shows, and for the spring 1986 show, entries came from 36 different states and various Canadian provinces. Persons who attend the plaintiff's shows are often interested in canine-related paraphernalia. While the IKC does not sell such items, private vendors rent booth space at plaintiff's shows at prices ranging from $600 to $800 per booth and sell dog-related items, including stuffed dogs. In 1985 and 1986, the annual revenue from the rental of booth space averaged $60,000.

In an effort to promote its activities, the IKC spent approximately $60,000 of its total revenue of $231,226 for fiscal year 1986 to hire a full-time staff person to handle the advertising of the dog shows and public relations. The paid advertising of the IKC, consisting of advertisements in magazines with a nationwide circulation such as the American Kennel Club Gazette and Dog World Magazine, as well as advertisements in the Chicago-area media, is primarily designed to reach canine enthusiasts (the dog "fancy" ¹ in trade parlance). The activities of the IKC have also been covered in a variety of national and local publications. ²

B. Defendant's decision to market toy dogs under the name "International Kennel Club"

For almost three decades, defendants DCN and its wholly-owned subsidiary Mighty Star have sold stuffed toys in the United States, Canada, England, Australia and Asia. For many years, defendants used the trademark "Polar Puff" to refer to their top of the line products and prominently displayed the trademark on their products and in their advertisements. In the later part of 1985, the defendants decided to add to their product line of stuffed animals a line of stuffed "pedigree" dogs representing different breeds. The defendants state that at the time they had never heard of the plaintiff, and that they chose the name "International Kennel Club" in part because of the international scope of their business, and also because the products were toy dogs. The defendants utilized a marketing strategy whereby purchasers could "register" their dogs with the "International Kennel Club" and receive an "official International Kennel Club membership and pedigree certificate." Part of the defendants' registration strategy was to emphasize that the stuffed canines represent breeds "sanctioned by the International Kennel Club." Although the defendants' International Kennel Club collection of dogs was marketed in conjunction with their "24K Polar Puff" line of toy animals, the advertising for the stuffed dogs did not always use this second name along with the International Kennel Club name. Defendants' instore advertising included plaques, buttons and counter displays, all of which referred to the "International Kennel Club Center," the "International Kennel Club," or the "IKC" without also referring to the defendants' "Polar Puff" trademark.

After choosing the IKC name for its line of toy dogs, Mighty Star's counsel conducted a search of trade directories in major cities as well as a search of federally registered trademarks. The search disclosed two telephone directory listings in Chicago- --one for "inteRnational kennEl" and one for the "International Kennel Club of Chicago." Nevertheless, counsel advised the defendants that the use of the International Kennel Club name would not infringe upon the plaintiff's name given the local scope of the plaintiff's operations and the fact that the plaintiff did not directly compete with Mighty Star or DCN. ³ Thus, the defendants proceeded to market their line of stuffed dogs under that name without contacting the plaintiff to determine if the use of the International Kennel Club name would present a problem of infringement.

C. Evidence of confusion allegedly caused by the marketing of the defendants' toy dogs under the "International Kennel Club" name

In late March 1986--six months after learning of the plaintiff's existence--the defendants placed a full-page advertisement for their line of stuffed dogs in the April edition of the Good Housekeeping magazine. This advertisement was followed by ads in the June issues of Better Homes and Gardens, Vogue, and Cosmopolitan magazines that reached the public in mid-May. Following the publication of these ads, IKC officials began receiving telephone calls (at a rate of about one per day), letters, and personal inquiries from people expressing confusion as to the plaintiff's relationship to the International Kennel Club stuffed dogs. Prior to the plaintiff's spring 1986 dog show, the IKC's public relations officer, Ms. Johnson, received telephone calls asking to purchase "International Kennel Club stuffed dogs." Ms. Johnson testified that she thought the callers were referring to the stuffed dogs sold by vendors at the plaintiff's shows, and told the callers that the toy dogs would continue to be sold at the show.

The IKC learned of the defendants' line of International Kennel Club toys at the plaintiff's spring dog show on March 29 through 30, 1986. Mr. Auslander, the Secretary and Treasurer of the IKC, testified that a vendor at the show brought one of the defendants' ads to his attention, and asked "why I was involved or why our club was involved in a venture of that type." Thereafter, in early April, the IKC began to receive letters of inquiry concerning the defendants' toy canines. Eight letters requested information on purchasing the dogs, and another from a vendor expressed concern about the IKC's apparent competition. ⁴ The latter wrote that "[w]e are concerned as vendors that this practice [the plaintiff's apparent selling of toy dogs] conflicts with the stated aims of your involvement as a purebred dog club." The defendants' Executive Vice-President Sheldon Bernstein testified that neither Mighty Star nor DCN received any letters indicating confusion as to their relationship with the plaintiff.

After the plaintiff's spring 1986 dog show, Mr. Auslander attended between 15 and 20 other dog shows throughout the country during 1986. Auslander testified that at about half of these shows--including the shows in Florida, Wisconsin, Nebraska, Colorado, Massachusetts, California and Illinois--he was questioned about the relationship between the IKC and Mighty Star's toy dogs. Auslander further recounted that members of the board of directors of the American Kennel Club consulted him, expressing concern that the International Kennel Club might be involved in their sale. According to Auslander's testimony, the President of the American Kennel Club reported to Auslander that it had received questions about whether the toys were a fundraising effort for the Dog Museum of America or the American Kennel Club. Thereafter, at the request of the American Kennel Club, the plaintiff placed an ad disclaiming any relationship to the defendants' toys in the July issue of the American Kennel Club Gazette.

D. Plaintiff files suit and moves for a preliminary injunction

Confronted with the complaints and inquiries noted above, the IKC filed the instant trademark infringement action on May 23, 1986, and simultaneously filed a motion to preliminarily enjoin Mighty Star and DCN's use of the International Kennel Club name. In response to the lawsuit, the defendants cancelled almost all of their advertising of the products bearing the plaintiff's name. One of the defendants' advertisements--placed in the September issue of Good Housekeeping --used the International Kennel Club name but contained a disclaimer of any relationship to the plaintiff's dog shows. This was the last advertisement that DCN and Mighty Star placed for their line of toy canines.

On July 14-16, 1986, the trial court held a hearing on the plaintiff's motion for injunctive relief and on July 21, 1986, ruled from the bench that the plaintiff was entitled to a preliminary injunction. In so ruling, the court found:

"I believe that the preliminary injunction in this case which is sought by the plaintiff should be granted. ......