Shakespeare Co. v. Silstar Corp. of America, Inc.

• Citation: 9 F.3d 1091
• Decision Date: 15 November 1993
• Docket Number: No. 92-2311,92-2311
• Parties: , 28 U.S.P.Q.2d 1765 SHAKESPEARE COMPANY, Plaintiff-Appellant, v. SILSTAR CORPORATION OF AMERICA, INCORPORATED, Defendant-Appellee.
• Court: United States Courts of Appeals. United States Court of Appeals (4th Circuit)

Page 1091

9 F.3d 1091

62 USLW 2337, 28 U.S.P.Q.2d 1765

SHAKESPEARE COMPANY, Plaintiff-Appellant, v. SILSTAR CORPORATION OF AMERICA, INCORPORATED, Defendant-Appellee.

No. 92-2311.

United States Court of Appeals, Fourth Circuit.

Argued March 31, 1993.

Decided Nov. 15, 1993.

Jack Lewis Renner, Renner, Kenner, Greive, Bobak, Taylor & Weber, Akron, OH, argued (Reese Taylor, Sylvia Petrosky, Renner, Kenner, Greive, Bobak, Taylor & Weber, Akron, OH; James M. Brailsford, III, Frank R. Ellerbe, III, Robinson, McFadden & Moore, Columbia, SC, on the brief), for plaintiff-appellant.

Francis Morris Pinckney, Shefte, Pinckney & Sawyer, Charlotte, NC, argued (William C. Cleveland, Haynsworth, Marion, McKay & Guerard, Charleston, SC, on the brief), for defendant-appellee.

Before WIDENER and NIEMEYER, Circuit Judges, and CHAPMAN, Senior Circuit Judge.

OPINION

CHAPMAN, Senior Circuit Judge:

This appeal presents an issue of first impression for this court: whether a district court considering cancellation, pursuant to Sec. 37 of the Lanham Act (15 U.S.C. Sec. 1119 (1988)), of a trademark that has been registered more than five years, and is incontestable pursuant to 15 U.S.C. Sec. 1065 (1988), can order cancellation on the ground that the trademark is found to be functional, even though functionality is not one of the grounds set forth in 15 U.S.C. Sec. 1064. We hold that Congress adopted 15 U.S.C. Sec. 1119 to give the district court power concurrent with, but not in excess of, the Patent and Trademark Review Board and that the district court is also limited by the language of the statutes controlling the Board. We therefore hold that the district court improperly canceled the registration on the ground of functionality because functionality is not one of the statutorily enumerated grounds upon which a trademark registered more than five years may be canceled.

FACTS

Shakespeare, a manufacturer of fishing rods, is located in Columbia, S.C. In 1976 Shakespeare inaugurated its immensely successful line of "Ugly Stik" fishing rods for both salt and fresh water fishing. About 80-90% of these rods, as well as some of Shakespeare's other rods, feature a section of solid fiberglass near the tip which appears clear or translucent. The "clear tip," as Shakespeare calls it, is the subject of this litigation.

The clear tip rods are manufactured in a two-stage process, which was perfected in the 1970's. First, a fiberglass cloth is wrapped around a hollow graphite tube. Second, fiberglass fibers are stretched lengthwise from the handle of the rod to the tip. Some of these fibers extend beyond the end of the graphite tube and form the solid fiberglass tip. This composition represented the culmination of a series of techniques developed by Shakespeare and it resulted in a superior rod that is both lightweight and very strong.

Before Shakespeare began production of the clear tip it had used polyester resin compatible fiberglass in its fishing rods. This type of fiberglass naturally solidifies into a whitish-frosty (not clear) color. In producing the clear tip rods, however, Shakespeare began to use epoxy resin compatible fiberglass because they found it to be the most compatible for use with the graphite tube. This second type of fiberglass solidifies naturally into a clear or translucent color. The Ugly Stiks, and other Shakespeare rods using epoxy resin compatible fiberglass, therefore, feature a clear or translucent tip and a darker-colored rod.

On May 5, 1978 Shakespeare filed for registration of Trademark Registration number 1,261,786. That registration states:

[Shakespeare] claims no proprietary right in the configuration of the fishing rod itself as a trademark when it lacks the whitish, translucent tip portion feature. The mark is used by applying it to the goods in that the mark is the color configuration of the fishing rod as shown in the drawing in which the tip portion of the shaft between the tip and the second line guide elements consists of a whitish, translucent material in contrast to the opaque remainder of the shaft.

J.A. at 544.

Initially, the request for registration of the clear tip as a trademark was denied by the United States Patent and Trademark Office ("PTO"), which reasoned that the "mark appears to be in the nature of an ornamental design and, as such, does not serve the purpose of indicating origin of the goods in applicant." The PTO offered Shakespeare the opportunity to submit evidence that the clear tip was viewed in the marketplace as an indication that Shakespeare was the source of the rod. Shakespeare submitted copies of advertisements and catalogs as evidence that the clear tip had been promoted as a trademark of the company. It also submitted seven identical affidavits of buyers and retailers who testified that the clear tip "automatically" identified the rods as coming from Shakespeare.

The trademark was placed on the Principal Register on December 20, 1983.

On November 13, 1989, after it had been on the register for five years and other conditions had been satisfied, the trademark became "incontestable" pursuant to 15 U.S.C. Sec. 1065 (1988). ¹ Incontestability is "conclusive evidence of the validity of the registered mark and of the registration of the mark, of the registrant's ownership of the mark, and of the registrant's exclusive right to use the mark in commerce." 15 U.S.C. Sec. 1115(b) (1988).

In July 1990 Silstar Corporation ("Silstar"), a Korean-owned manufacturer of fishing rods, with its principal place of business in Lexington, South Carolina, introduced a line of fishing rods called the Silstar Power Tip Crystal rods. Shakespeare representatives testified they first became aware of this line through Silstar's advertisement in the July 1990 issue of Fishing Tackle Retailer. The Silstar rods featured a color combination, with a clear fiberglass section, similar to that of the Shakespeare clear-tip line.

Shakespeare instituted this action July 20, 1990 in the United States District Court for the District of South Carolina, Columbia Division. It asserted three claims against Silstar: trademark infringement under Section 32(1) of the Lanham Trademark Act of 1946 ("the Lanham Act"), 15 U.S.C. Sec. 1114(1) (1988); unfair competition in violation of Section 43(a) of the Lanham Act, 15 U.S.C. Sec. 1125(a) (West 1982 & Supp.1993); and common law trademark infringement and unfair competition.

Silstar answered and defended on the grounds that its use of the clear tip was a "fair use" under Sec. 1115(b)(4). Silstar also counter-claimed seeking cancellation of Shakespeare's trademark on the grounds that the mark was both functional and generic.

On July 20, 1990 Shakespeare also filed a motion for a temporary restraining order and for a preliminary injunction against Silstar's distribution of the Power Tip Crystal rods. These motions were heard by then District Judge Clyde H. Hamilton, who found the motion for TRO moot but granted Shakespeare a preliminary injunction.

After a bench trial March 19-20, 1992, 802 F.Supp. 1386, before Judge Dennis Shedd, the court dissolved the preliminary injunction, ruled in favor of Silstar on each of Shakespeare's claims, and canceled Shakespeare's trade-mark on the clear tip.

The District Court's reasoning may be summarized as follows: that there was no dispute that Shakespeare's trademark on the clear tip had become "incontestable" pursuant to Sec. 1065; that such status was conclusive evidence of Shakespeare's ownership of the trademark and its right to control it, pursuant to Sec. 1115(b); that Silstar could defend by proving that its use of the mark was a fair use because the mark was merely descriptive of its product; that Silstar's use of the clear tip was a fair use because the court found the clear tip was merely descriptive of the contents of the product, namely fiberglass; that Silstar was not using the clear tip as a trademark or in bad faith; and that this determination rendered the trademark merely prima facie evidence of Shakespeare's right to own and control the clear tip. The court then found Silstar was entitled to raise equitable defenses to the infringement action under Sec. 1115(a).

The court held that an element of a product that is functional is not subject to trademark protection, and that fiberglass was selected to compose the tip because it is the strongest, most practical material for the tip of a fishing rod. It found the clear tip to be functional because its very appearance communicates to the consumer that it is composed of fiberglass. Finding the clear tip to be functional and not intended to communicate a brand of origin, the district court concluded that it was required to cancel the trademark.

The district court's determination that there was no trademark infringement resulted in the dismissal of the dependent statutory claim for unfair competition, and the common law claims for trademark infringement and unfair competition.

I.

The issue is whether a district court, pursuant to its power under Sec. 1119, can cancel the registration of a trademark on grounds not enumerated in Sec. 1064, namely "functionality," if the registration is more than five years old.

A.

Federal trademark protection was overhauled and consolidated with the passage of the Trademark Act of 1946 (Lanham Act), 60 Stat. 427, as amended, 15 U.S.C. Sec. 1051 (1988), et seq. It was adopted to establish consistent nationwide protection for trademarks by creating a system of registration, by instituting safeguards for those trademarks registered for a period of time, and by setting forth an administrative process for infringement actions. Park 'N' Fly, Inc. v. Dollar Park and Fly, Inc., 469 U.S. 189, 193, 105 S.Ct. 658, 661, 83 L.Ed.2d 582 (1985).

As previously noted, Shakespeare's trademark on the clear tip was placed on the principal register in 1983, and by the time of this lawsuit it had achieved incontestable status, pursuant to 15...