Corsearch v. Thomson & Thomson

Decision Date13 May 1992
Docket NumberNo. 91 Civ. 6706 (RPP).,91 Civ. 6706 (RPP).
PartiesCORSEARCH, INC., Plaintiff, v. THOMSON & THOMSON and Dialog Information Services, Inc., Defendants.
CourtU.S. District Court — Southern District of New York

Keck Mahin Cate & Koether by Mathew E. Hoffman, New York City, Keck, Mahin & Cate by Thomas W. Johnston, Richard L. Reinish, Chicago, Ill., for plaintiff.

Satterlee Stephens Burke & Burke by James F. Rittinger, New York City, for defendants.

OPINION FINDINGS OF FACT AND CONCLUSIONS OF LAW

ROBERT P. PATTERSON, Jr., District Judge.

In this antitrust action instituted on October 4, 1991, Corsearch, Inc. ("Corsearch") seeks an injunction requiring Defendant Thomson & Thomson, Inc. ("T & T") to permit Dialog Information Services, Inc. ("Dialog") to continue to provide T & T's on-line state trademark computer information services to Corsearch, who utilizes these services to provide services to corporations, law firms and others purchasing trademark searches, in competition with similar services offered by T & T to the same market. Corsearch moved for a preliminary injunction, the hearing on which was consolidated with a trial of the action on the merits pursuant to Rule 65(a)(2) of the Federal Rules of Civil Procedure. Trial was held from November 18, 1991 to December 12, 1991.1 There have been a number of post trial filings unauthorized by the Court, as well as motions filed by Corsearch on February 5, 1992 to supplement the record, which motion was granted, and to reopen its case, which motion was denied on February 19, 1992. This opinion and order constitutes the findings of fact and conclusions of law of the Court with respect to Counts II, III, IV, and VI of the complaint.2

Corsearch's action is based on § 2 of the Sherman Act. It alleges that T & T has monopoly power in the "comprehensive trademark search market" and that T & T terminated Corsearch's right to access to T & T's on-line computer information service, offered by Dialog under the title Trademarkscan-State ("TS-State"), in order to eliminate Corsearch as a competitor. T & T has elected not to terminate Corsearch's access to TS-State while the decision of this Court is pending. TS-State is a copyrighted on-line computer information service product of T & T which is updated at least monthly for use by subscribers to Dialog. It has been offered by Dialog since 1987 pursuant to license agreements with such subscribers and billed at a price based on the amount of computer time utilized by the subscriber and the number of trademark records retrieved by the subscriber. Dialog's revenues are shared with T & T pursuant to a contract between those corporations.

TRADEMARK SEARCHING

Persons who are intending to adopt a new trademark often wish to determine whether the same or similar trademarks are already in use by others. A trademark used or registered earlier may pose an obstacle to registration with the United States Patent and Trademark Office ("PTO") or with the Secretaries of State of the various states. The adoption of a trademark confusingly similar to an earlier trademark that is currently in use may also, under some circumstances, give rise to a claim for infringement and litigation.

The PTO, which is charged with administering federal registration of trademarks and the maintenance and storage of registrations, is by statute also the agency of record with respect to trademarks and service-marks. 15 U.S.C. § 1051. The existence of a current file at the PTO for a particular mark constitutes public notice of ownership of the mark and thereby affords the mark's owner a wide range of protection. As of 1983, the trademarks registered with the PTO were prepared and recorded in individual hard copy files.

Searching for earlier trademarks is not an exact science. Prior to filing a trade-mark registration, applicants often determine to search one or more of the following bodies of information:

(a) A search of the federal trade-marks filed at the United States Patent & Trademark Office.
(b) A common law search. This generally consists of a search of sources such as trade directories, telephone books, Dun & Bradstreet's company name database, the Thomas Register (a directory of all United States manufacturers of goods), major newspapers, and other current sources. T & T maintains its own common law database of such sources with the permission of the database owners and publishers. With today's technology, many common law searches can be performed through "on-line" computerized information services such as those operated by former Co-defendant Dialog Information Services, Inc.
(c) A state search. A state search may consist of reviewing the files of a particular state or a search of all fifty states. All states allow public searching of records by one means or another. In addition to the states' own records, state trademark information is available from private companies such as T & T and Trademark Research Corporation ("TRC") (formerly "Trademark Service Corporation" or "TSC") (a competitor of Corsearch and T & T owned by Commerce Clearing House).

To perform a "comprehensive" or "full" search means to perform all three of these searches for the trademark in question. Sometimes a party planning to adopt a trademark will ask a company such as Corsearch, T & T, or TRC to perform a comprehensive search, but thousands of federal trademark applications are filed each year without ordering a full search from any trademark information service. Instead, law firms, or the applicants themselves, perform searches in many instances where a full search is not ordered from Corsearch, T & T, or TRC. The applicants or law firms may decide to perform a "knockout" search, i.e. a preliminary screening check to eliminate marks. Tr. 71-73 (Altman). Corsearch and T & T combined performed only approximately 60,000 comprehensive searches in 1990, a substantial number of which did not result in trademark applications. 127,000 trademark applications were filed with the PTO in 1990.

THE GROWTH OF T & T'S DATABASES

T & T, formerly an intellectual property law firm, became dissatisfied many years ago with the quality of government trademark records and began to compile records of its own and to offer trademark research services to others.

Until the early 1970s, T & T maintained its federal trademark database in hard copy, primarily on index cards, and its searches were conducted manually. Manual searching was the method used by the PTO well into the 1980s. By the early 1980s, however, T & T had fully computerized its proprietary federal trademark database and was also utilizing a fully computerized fifty-state trademark database ("NCR-State"), a more complete database than TS-State, for its searches. Trademarkscan, T & T's federal database that went on line in October 1983, contained T & T's record of all active federal registrations and pending applications. It was the first trademark database available on line and permitted the subscriber to do a federal trademark search of Trademarkscan's database without ordering T & T's full federal search at a time when comprehensive searches accounted for eighty-three percent of all T & T's client requests.

THE COMPUTERIZATION OF THE TRADEMARK SEARCH BUSINESS

Recognizing the need to overhaul the federal registration system, Congress in 1980 enacted legislation requiring the Commissioner of Patents and Trademarks to formulate a plan to identify (or if necessary to develop) feasible computerized data storage and retrieval systems. In separate agreements entered into with the PTO during 1983 and 1984, T & T and two of T & T's then competitors, Compu-Mark SA ("Compu-Mark") and TCR Services, Inc. ("TCR") agreed to provide the PTO with the following:

(a) T & T was to create and develop for the PTO a computerized historic database of all federally registered trademarks as well as all servicemarks consisting of designs or images, or what are commonly known as "logos."
(b) Compu-Mark was to develop for the PTO a computerized database with respect to all active federally registered trademarks and servicemarks registered as of 1980.
(c) TCR was to develop for the PTO a software system that would encompass information "necessary for the PTO's trademark application monitoring system."

On April 11, 1984, T & T acquired TCR, including TCR's obligations to the PTO, for approximately $6 million. As a part of this acquisition of TCR, T & T acquired TCR's state database.

By 1986, the services to be performed by T & T, Compu-Mark, and TCR under the agreements had been substantially performed. Pursuant to the original agreements, the PTO had agreed that, in exchange for T & T, Compu-Mark, and TCR services to the PTO, which were performed without charge, each company would receive for a ten-year period the co-exclusive right to make the federal database available for commercial purposes. This period of exclusivity was first shortened by act of Congress and subsequently terminated by unilateral action of the PTO in approximately the fall of 1989.

In the fall of 1989, after the early termination of T & T's co-exclusive license of the federal database, the entire computerized federal database, prepared by T & T and Compu-Mark, became available for purchase from the PTO by any person or entity for what T & T maintains was a fraction of what it had cost T & T to develop. Corsearch, Mead Data Central, and others then purchased copies of the PTO federal database for utilization in the offering of trademark research services in competition with T & T.

THE OFFERING OF COMPUTERIZED ON-LINE SERVICE

In 1984, while it was developing the PTO database, T & T entered into a license agreement with former Co-defendant Dialog to sublicense the right to access a federal database (under the tradename "Trademarkscan") by means of a personal computer outfitted with a modem. The parties refer to this as "on-line" access. Shortly thereafter, Compu-Mark, which started...

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