Wynn Oil Co. v. American Way Service Corp.

• Citation: 943 F.2d 595,19 USPQ2d 1815
• Decision Date: 18 September 1991
• Docket Number: 90-1871 and 90-2035,Nos. 90-1817,s. 90-1817
• Parties: WYNN OIL COMPANY, Plaintiff-Appellee/Cross-Appellant, v. AMERICAN WAY SERVICE CORPORATION, and Thomas A. Warmus, Defendants-Appellants/Cross-Appellees.
• Court: United States Courts of Appeals. United States Court of Appeals (6th Circuit)

Page 595

943 F.2d 595

19 U.S.P.Q.2d 1815

WYNN OIL COMPANY, Plaintiff-Appellee/Cross-Appellant, v. AMERICAN WAY SERVICE CORPORATION, and Thomas A. Warmus,

Defendants-Appellants/Cross-Appellees.

Nos. 90-1817, 90-1871 and 90-2035.

United States Court of Appeals,

Sixth Circuit.

Argued Aug. 2, 1991.

Decided Aug. 20, 1991.

Rehearing Denied Sept. 18, 1991.

Charles J. Gerlach (briefed), Raymond L. Morrow (argued and briefed), Kemp, Klein, Umphrey, Endelman & Beer, Troy, Mich., for defendants-appellants/cross-appellees.

Before MARTIN and MILBURN, Circuit Judges, and CONTIE, Senior Circuit Judge.

MILBURN, Circuit Judge.

Defendants-appellants / cross-appellees American Way Service Corporation ("American Way") and Thomas Warmus, the president and sole shareholder of American Way, appeal from an order amending the judgment of the district court. Defendants challenge both the original judgment entered in favor of plaintiff-appellee/cross-appellant Wynn Oil Company ("Wynn") and the amended judgment entered June 26, 1989. Wynn's cross-appeal challenges the district court's failure to award damages upon finding that defendants had engaged in trademark infringement and unfair competition. Also, defendants appeal the district court's order of August 16, 1990, awarding costs and attorney fees of $47,303.47 to plaintiff.

The principal issues presented in this appeal are: (1) whether the district court erred in determining that defendants' use of the mark constituted trademark infringement in violation of 15 U.S.C. § 1114; (2) whether the district court erred in determining that defendants' use of the mark constituted unfair competition in violation of 15 U.S.C. § 1125(a); (3) whether the district court erred in determining that defendants' use of the mark constituted trademark infringement and unfair competition under Michigan common law; (4) whether the district court erred in declining to award damages to Wynn based on defendants' profits; (5) whether the district court erred in finding this to be an exceptional case which justified the award of approximately $47,000 in attorney fees; and (6) whether the district court erred in granting injunctive relief as originally ordered or as amended. For the reasons that follow, we affirm in part, reverse in part, and remand.

I.

A.

On June 5, 1989, Wynn filed this action against defendants seeking damages from defendants' use of Wynn's registered trademark "X-TEND," and demanding an injunction against further use of the mark. Wynn alleged trademark infringement and unfair competition in violation of 15 U.S.C. §§ 1114 and 1125(a) as well as trademark infringement and unfair competition under Michigan common law. ¹

On March 13 and 14, 1990, the district court held a two-day bench trial. On April 30, 1990, the district court issued its opinion and order finding that the defendants' use of Wynn's X-TEND mark constituted trademark infringement and unfair competition under federal law, as well as common law trademark infringement and unfair competition. Wynn Oil Co. v. American Way Service Corp., 736 F.Supp. 746 (E.D.Mich.1990).

Despite the district court's finding of intentional infringement, it declined to award damages or profits as directed by 15 U.S.C. § 1117(a) because it could not "ascertain the profits made as a result of Defendants' willful infringement." The district court enjoined defendants from further use of the mark and determined, partly on the basis of its perceived inability to grant a monetary award, that "this is the exceptional case in which the award of attorneys fees is appropriate [pursuant to 15 U.S.C. § 1117(a) ]." Accordingly, the court ordered Wynn to submit a petition, supported by affidavit, for attorney fees and costs.

Wynn filed its motion for attorney fees on May 14, 1990. In the meantime, on May 9, 1990, Wynn filed a motion to amend the original judgment by broadening the scope of injunctive relief. The original judgment only "enjoined ... further use of Plaintiff's X-TEND mark...." In an order entered July 3, 1990, the district court granted the motion to amend and broadened the injunctive relief to bar use of "the word or term 'X-TEND' or any other designation confusingly similar to 'X-TEND'...." (emphasis added).

On July 24, 1990, defendants filed their notice of appeal challenging both the original and amended judgments, and on July 30, 1990, plaintiff filed its notice of cross-appeal challenging the failure to award damages. The district court ruled on Wynn's motion for attorney fees and costs in an order entered August 30, 1990, awarding a total of $47,303.47 "in lieu of damages." Defendants' notice of appeal from this ruling was filed on September 13, 1990.

B.

Wynn is a California corporation engaged primarily in the manufacture of car care products. ² Since the early 1970s, Wynn has maintained two product lines. The first is a line of personal car care items for use directly by the automobile owner. This line is typically marketed under the registered trademark "Wynn's" by automotive supply outlets, discount chains, hardware stores, and similar retailers.

The second line is designed for use by the professional automobile repairman in servicing a customer's automobile. This line is marketed primarily through service stations, independent repair shops, and automobile dealers. It is typically marketed under the registered trademark "Wynn's X-TEND." (U.S. Patent Office Trademark Nos. 822,881; 997,417; 1,482,081; 1,525,053). X-TEND was first registered by another entity on January 10, 1967, and assigned to Wynn on October 15, 1971. Recently the term "Wynn's" has been deleted, and the products are now marketed under the label "X-TEND."

In the early 1970s, Wynn also began to market a product warranty program called "Wynn's X-TEND Guarantee." Under this program, a consumer who bought a "product warranty kit" (made up of X-TEND products) received a warranty against certain repair costs, provided the consumer regularly used Wynn's X-TEND auto products. This program was typically marketed through new and used automobile dealers who sold the X-TEND product line. In 1980, Wynn changed the name of its warranty program to "Wynn's Product Warranty." The marketing methodology remained essentially the same. In fact, the product warranty kit still includes a pamphlet promoting use of the X-TEND product line. The price of the warranty varies depending upon the dealer and scope of coverage selected.

Although Wynn does not advertise directly to the purchasing public, it publicizes the X-TEND mark through its distributors and retailers. Wynn encourages distributors and retailers to place advertisements in local newspapers and trade journals by providing them with an advertising allowance. Wynn also provides point of sale advertising to the distributors and retailers including posters, banners, and flags, as well as promotional items such as ink pens, thermos jugs, etc., bearing the mark "X-TEND." Hats, jackets, shirts, and other miscellaneous items of clothing bearing the logo are provided to distributors and their employees. In the state of Michigan, approximately sixteen distributors' vehicles prominently bear the mark "Wynn's X-TEND," and the mark is displayed on more than a thousand servicing machines.

Defendant American Way is a Michigan corporation based in Southfield, Michigan. Defendant Warmus is the president and sole shareholder of American Way. American Way deals primarily in insurance. In 1980, American Way introduced an extended warranty program to new and used car dealers. This program allowed the dealer to sell the contract directly to the purchaser, and American Way then administered the contract. In general, the service contract covered repair costs incurred during the period of coverage that were not otherwise covered by the manufacturer's warranty. Like Wynn's product warranty, contracts were limited to repairs necessitated by the failure of internally lubricated parts.

As early as 1985, American Way released forms, brochures, and other written literature describing its service contract as "The American Way X-TEND." Emphasis was placed on the term X-TEND. This promotional program was begun without conducting any search or investigation whatsoever to ascertain whether the term X-TEND was registered or in use.

In July 1987, Wynn became aware of American Way's use of the term X-TEND. However, according to Wynn, it was not able to ascertain American Way's address until January of 1989. On February 9, 1989, counsel for Wynn sent a letter demanding that American Way cease using the mark. Having received no response by April 10, 1989, Wynn sent a second letter explaining that it would institute litigation unless it received timely notification that American Way had ceased using the mark. On April 21, 1989, Warmus responded that he was willing to take his chances in court. This action followed.

II.

A.

In this case, the important recurring question is whether defendants' use of the term X-TEND created a likelihood of confusion among ordinary consumers.

This Circuit considers the question of whether there is a likelihood of confusion a mixed question of fact and law. When reviewing a lower court's decision in these cases, we apply a clearly erroneous standard to findings of fact supporting the likelihood of confusion factors, but review de novo the legal question whether, given the foundational facts as found by the lower court, these facts constitute a "likelihood of confusion."

Wynn Oil Co. v. Thomas, 839 F.2d 1183, 1186 (6th Cir.1988) (hereinafter Wynn I ) (quoting Frisch's Restaurant, Inc. v. Shoney's, Inc., 759 F.2d 1261, 1264 (6th Cir.1985)).

B.

"The general concept underlying the likelihood of confusion [test] is that the public believe that 'the mark's owner sponsored or otherwise approved the use of the trademark.' " Carson v. Here's Johnny Portable Toilets, Inc., 698 F.2d 831, 834 (6th Cir.1983) (emphasis in original), quoted...