American Scientific Chemical, Inc. v. American Hosp. Supply Corp.

• Decision Date: 22 October 1982
• Docket Number: No. 81-3282,81-3282
• Parties: AMERICAN SCIENTIFIC CHEMICAL, INC., Plaintiff-Appellant, v. AMERICAN HOSPITAL SUPPLY CORP., Defendant-Appellee.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 791

690 F.2d 791

216 U.S.P.Q. 1080

AMERICAN SCIENTIFIC CHEMICAL, INC., Plaintiff-Appellant, v. AMERICAN HOSPITAL SUPPLY CORP., Defendant-Appellee.

No. 81-3282.

United States Court of Appeals Ninth Circuit.

Argued and Submitted June 11, 1982.

Decided Oct. 22, 1982.

William H. Drummond, Drummond & Nelson, Phoenix, Ariz., for plaintiff-appellant.

John W. Chestnut, Chicago, Ill., argued for defendant-appellee; Tilton, Fallon, Lungmus & Chestnut, Chicago, Ill., Guy J. Rappleyea, Black, Helterline, Beck & Rappleyea, Portland, Or., on brief.

Appeal from the United States District Court for the District of Oregon.

Before CHOY, TANG and BOOCHEVER, Circuit Judges.

TANG, Circuit Judge:

This is a common law trade name infringement action. Plaintiff-Appellant American Scientific Chemical (American Scientific) sought to enjoin Defendant-Appellee American Hospital Supply Corporation (American Hospital) from changing its division's name to American Scientific Products. The district court found that American Scientific had not acquired secondary meaning in its name and had no legally protectable trademark. American Scientific appeals, arguing that the findings of fact of the district court indicate the acquisition of secondary meaning. We reverse the district court and remand for findings on likelihood of confusion.

American Scientific, founded in 1967, sells chemicals and chemical handling accessories to laboratories and hospitals. American Scientific has expanded beyond its original Oregon market, and affiliate corporations, similarly named (American Scientific & Chemical), operate in Washington, Texas, Arizona, and Canada, serving markets in those areas and in California, Idaho, Montana and New Mexico.

In 1979, American Scientific had a media advertising budget of only $6,000. It believes that media advertising is not cost effective due to its regional market and limited number of customers. American Scientific depends on personal contact between its salesmen and customers, tradeshow exhibits, and advertisements in regional trade journals and directories for its promotion.

American Hospital was founded in 1922. A giant in the health care industry, it is composed of 29 divisions, one of which is Scientific Products, founded in 1952. Scientific Products (S/P) is a wide-ranging "bio-medical" business; one portion of its business is generated by sales of chemicals and accessories sold to laboratories and hospitals. While S/P competes in every market that American Scientific has entered, S/P operates in many other markets as well. S/P's 1980 sales were almost $600,000,000, and its 1980 advertising and promotion expenditures were over $8,500,000. That portion of those receipts and expenditures attributable to laboratory chemicals and accessories sales is not distinguished in the record.

In 1976, American Hospital embarked on a "corporate identity program," intending to identify its divisions more closely with the parent company's name, American Hospital Supply. S/P decided to adopt the name "American Scientific Products," effective July 1, 1980.

In early June, 1980, American Scientific became aware of the proposed name change and protested to American Hospital this violation of its trade name. American Scientific filed suit in district court on June 23, 1980. On September 29, 1980, American Scientific filed a motion for a preliminary injunction, and an evidentiary hearing was held. In an Opinion and Order dated February 25, 1981, the district court found that the name-change had not caused actual confusion, that American Scientific's name had not acquired secondary meaning, concluded that it had no "legally protectable common-law trademark" and denied the motion. After the parties stipulated that neither party would produce additional testimony in the event of a trial on the merits, the district court dismissed the action on May 1, 1981. We reverse the holding of the district court, and remand for further proceedings.

The name American Scientific was not inherently distinctive when adopted by the plaintiff in 1967. But almost any symbol can serve as a trade name and be protected from infringement if it has acquired that degree of consumer association and recognition characterized as secondary meaning, and can show likelihood of confusion with a competitor. The district court found no secondary meaning, and consequently did not address the question of likelihood of confusion. Because the acquisition of secondary meaning is a question of fact, Norm Thompson Outfitters, Inc. v. General Motors Corp., 448 F.2d 1293, 1296 (9th Cir. 1971), the findings of the district court cannot be set aside unless clearly erroneous. The district court's finding that American Scientific had not acquired a secondary meaning in its name is clearly erroneous.

"Secondary meaning has been defined as association, nothing more". Carter-Wallace, Inc. v. Procter & Gamble Co., 434 F.2d 794, 802 (9th Cir. 1970). In order to obtain protection for its trade name, plaintiff "must show that the primary significance of the term in the minds of the consuming public is not the product but the producer". Kellogg Co. v. National Biscuit Co., 305 U.S. 111, 118, 59 S.Ct. 109, 113, 83 L.Ed. 73 (1938).

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