V & V Food Products, Inc. v. Cacique Cheese Co.

• Decision Date: 05 April 1988
• Docket Number: No. 86 C 8695.,86 C 8695.
• Citation: 683 F. Supp. 662
• Parties: V & V FOOD PRODUCTS, INC., Plaintiff, v. CACIQUE CHEESE CO., INC., and V.F. Garza & Sons, Defendants.
• Court: U.S. District Court — Northern District of Illinois

683 F. Supp. 662

V & V FOOD PRODUCTS, INC., Plaintiff, v. CACIQUE CHEESE CO., INC., and V.F. Garza & Sons, Defendants.

No. 86 C 8695.

United States District Court, N.D. Illinois, E.D.

April 5, 1988.

COPYRIGHT MATERIAL OMITTED

Melvin M. Goldenberg, Margaret M. O'Brien, Sandra B. Weiss, Jones, Day, Reavis & Pogue, Chicago, Ill., for plaintiff.

Allen H. Gerstein, Terrence W. McMillin, Richard M. LaBarge, Marshall, O'Toole, Gerstein, Murray & Bicknell, Chicago, Ill., for defendants.

MEMORANDUM ORDER

BUA, District Judge.

The parties to this action tried their case before a jury in October 1987. None of the parties is entirely satisfied with the jury's verdict. Defendants have filed a motion for judgment notwithstanding the verdict. They have also asked the court to make additional findings regarding the parties' respective trademark rights. Plaintiff has countered by filing its own motion for judgment NOV, or in the alternative, for a new trial. For the reasons stated herein, this court grants both plaintiff's and defendants' motions for judgment NOV. Furthermore, in order to clarify the scope of the parties' rights, the court makes the following additional findings: Defendants may not use the RANCHERO trademark in the states of Illinois, Indiana, Michigan, and Wisconsin; and plaintiff may not use the RANCHERITO trademark outside those states. Finally, this court grants plaintiff's motion for a new trial solely for the purpose of determining the damages caused by defendants' infringement of plaintiff's CHIHUAHUA trademark.

FACTS

Plaintiff V & V Food Products, Inc., ("V & V") is in the business of manufacturing, distributing, and selling food products. In the mid-1960s, V & V first used RANCHERITO as a trademark for a type of Mexican cheese sold in the Chicago metropolitan area. On September 9, 1966, V & V obtained an Illinois trademark registration for its RANCHERITO trademark. It obtained another Illinois registration for the same trademark on August 9, 1976. V & V renewed this trademark on March 12, 1986.

In 1975, V & V first used the mark CHIHUAHUA for another Mexican-style cheese distributed under its label. V & V obtained an Illinois registration for its CHIHUAHUA trademark in the early 1980s. In 1982, V & V filed two applications for federal registration of its CHIHUAHUA trademark, both of which were denied. In 1987, however, V & V successfully obtained federal registration of the CHIHUAHUA mark.

Defendant Cacique Cheese Co. ("Cacique") began its business in the mid-1970s in California. It adopted the trademark RANCHERO for its own Mexican-style cheese. Cacique obtained a federal registration for its RANCHERO trademark on April 28, 1981. Subsequently, Cacique obtained distributors and expanded its business into Hispanic markets in New York, Florida, and Texas. In 1985, Cacique learned that V & V's RANCHERITO product was being sold in the Texas market.

On January 31, 1986, V & V applied for federal registration of its RANCHERITO trademark. The trademark examiner refused registration of this trademark, however, because of Cacique's prior registration of its RANCHERO trademark.¹ V & V then filed a petition to cancel Cacique's federal registration of the RANCHERO trademark in the United States Patent and Trademark Office ("PTO") on March 28, 1986.

On November 7, 1986, V & V filed suit against Cacique and V.F. Garza & Sons (Cacique's Chicago-area distributor), alleging infringement of its rights to use the RANCHERITO trademark. V & V later amended its complaint to add a federal count for infringement of its CHIHUAHUA trademark. Cacique asserted counterclaims against V & V for infringement of its allegedly superior rights to the RANCHERO trademark based upon its federal registration of that mark. V & V's application to register its RANCHERITO trademark and its petition to cancel Cacique's RANCHERO trademark both have been stayed pending the outcome of this case.

The parties tried this case before a jury. The jury found that both Cacique's federal registration for RANCHERO and V & V's federal registration for CHIHUAHUA were invalid. Cacique moved for judgment notwithstanding the verdict pursuant to Fed.R.Civ.P. 50(b). Cacique also asked this court to make additional findings with respect to the parties' territorial rights to their trademarks pursuant to Fed.R.Civ.P. 49(a). In addition, Cacique moved to enjoin V & V from using its RANCHERITO trademark in the territories that this court awards to Cacique, pursuant to Fed.R. Civ.P. 59(e). V & V, on the other hand, filed a motion to amend the judgment based on Rule 59(e), alleging that Cacique infringed its trademark rights to RANCHERITO. V & V also moved for judgment notwithstanding the verdict, or in the alternative, for a new trial with respect to that portion of the verdict which invalidated the federal registration of its CHIHUAHUA trademark.

DISCUSSION

I. Cacique's Motions for JNOV and for the Court to Make Additional Findings

A. Motion for JNOV

A court should enter judgment notwithstanding the verdict only if "all of the evidence, when viewed in its aspect most favorable to the opponent, so overwhelmingly favors movant that no contrary verdict based on that evidence could ever stand." Geldermann & Co. v. R.A. Hartley & Son, Inc., 543 F.Supp. 1062, 1063 (N.D.Ill.1982) (quoting Pedrick v. Peoria and E.R.R., 37 Ill.2d 494, 510, 229 N.E.2d 504, 514 (1967)).

In the case at bar, the jury returned a verdict finding Cacique's federal registration for its RANCHERO trademark to be invalid. The jury's decision can only rest on one of two possible bases: Either Cacique procured the trademark through fraud, or V & V had superior rights to the mark based on prior use. Because the allegation of fraud finds no support in the evidence, and because the assertion of prior use does not justify the complete invalidation of the RANCHERO mark, the jury's verdict cannot stand.

1. Fraud

The Lanham Trade-Mark Act, which governs federally registered trademarks, provides that a registration may be canceled if it was obtained by fraud. 15 U.S. C. § 1064(c) (1982). To establish fraud, the party objecting to the registration must produce clear and convincing evidence of a deliberate attempt to mislead the PTO into registering the trademark. Money Store v. Harriscorp Finance, Inc., 689 F.2d 666, 670 (7th Cir.1982). The Lanham Act, however, does not require a federal registrant to investigate and report to the PTO all other possible users of a similar mark. Id. at 671. Rather, the registrant will be found to have acted fraudulently if, at the time he signed the statutory oath in the application for federal registration, he actually possessed knowledge of the existence of another person's right to use that mark in commerce. Id. at 672. In Cacique's application to register RANCHERO, it stated in its oath that it did not have knowledge of another person's right to use a similar mark. V & V offers no evidence that Cacique in fact knew of the existence of V & V's RANCHERITO trademark at the time it filed its oath. Even if Cacique later became aware of the RANCHERITO mark, Cacique had no duty to inform the PTO of any similar mark that it discovered after signing the oath. Id. at 671. Therefore, V & V has failed to establish by clear and convincing evidence that Cacique procured its trademark through fraud.

2. Prior Use

V & V also claims that its prior use of the RANCHERITO trademark should have precluded Cacique's federal registration of the confusingly similar RANCHERO trademark. V & V observes that rights to a particular trademark generally arise from prior use rather than registration. See Volkswagenwerk Aktiengesellschaft v. Wheeler, 814 F.2d 812, 815 (1st Cir.1987). Nonetheless, if a second business adopts the same or a similar mark in good faith, prior use does not prevent the subsequent user from using its trademark in an area that is geographically remote from the market appropriated by the first user. Big O Tire Dealers, Inc. v. Goodyear Tire & Rubber Co., 408 F.Supp. 1219, 1239 (D.Colo.1976), modified, 561 F.2d 1365 (10th Cir.1977). A second user acts in good faith if he begins using the mark without knowledge of its prior use by someone else. Money Store, 689 F.2d at 674.

In the case at bar, it has already been established that Cacique applied for its RANCHERO trademark registration without knowledge of the existence of a similar mark in use elsewhere. Although the PTO did issue a federal registration for Cacique's mark, V & V was using the RANCHERITO trademark before Cacique obtained its registration. V & V's prior use in certain geographic markets, however, does not warrant complete invalidation of Cacique's federal registration. Cacique has the right to use its trademark "except to the extent that such use infringes what valid right any previous users have acquired by their continuous use of the same mark prior to Cacique's federal registration." Burger King of Florida, Inc. v. Hoots, 403 F.2d 904, 907 (7th Cir.1968); see also Natural Footwear Ltd. v. Hart, Schaffner & Marx, 760 F.2d 1383, 1395 (3d Cir.), cert. denied, 474 U.S. 920, 106 S.Ct. 249, 88 L.Ed.2d 257 (1985). This conclusion flows logically from a legal principle long recognized by the Supreme Court: Prior use of a trademark in a remote geographic area does not justify the cancellation of a second user's trademark rights acquired in good faith. United Drug Co. v. Theodore Rectanus Co., 248 U.S. 90, 100, 39 S.Ct. 48, 51-52, 63 L.Ed. 141 (1918); Hanover Star Milling Co. v. Metcalf, 240 U.S. 403, 415, 36 S.Ct. 357, 361, 60 L.Ed. 713 (1916). Thus, V & V may contest Cacique's federal registration only to the extent that V & V had acquired common law rights prior to the publication date of the registration. Wrist-Rocket Mfg. Co. v. Saunders Archery Co., 578 F.2d 727, 731 (8th Cir.1978).²

Because Cacique applied for federal registration of its RANCHERO trademark in good faith, and the trademark was...