Bd. of Gov. of Univ. of NC v. Helpingstine

• Decision Date: 09 January 1989
• Docket Number: Civ. No. C-87-447-D.
• Court: U.S. District Court — Middle District of North Carolina
• Parties: The BOARD OF GOVERNORS OF the UNIVERSITY OF NORTH CAROLINA, and The University of North Carolina at Chapel Hill, Plaintiffs, v. Charles HELPINGSTINE, Johnny T-Shirt, JTS Promotions, and Michael W. Helpingstine, Defendants.

714 F. Supp. 167

The BOARD OF GOVERNORS OF the UNIVERSITY OF NORTH CAROLINA, and The University of North Carolina at Chapel Hill, Plaintiffs, v. Charles HELPINGSTINE, Johnny T-Shirt, JTS Promotions, and Michael W. Helpingstine, Defendants.

Civ. No. C-87-447-D.

United States District Court, M.D. North Carolina, Durham Division.

January 9, 1989.

Edwin M. Speas, Jr., Kaye R. Webb, N.C. Dept. of Justice, Raleigh, N.C., for plaintiffs.

Larry L. Coats, David E. Bennett, Raleigh, N.C., for defendants.

Bruce O. Baumgartner, R. Scott Keller, Baker & Hostetler, Cleveland, Ohio, CCI/ICE — amicus curiae atty.

MEMORANDUM OPINION

BULLOCK, District Judge.

Plaintiffs instituted this action against Defendants under the Lanham Act, specifically 15 U.S.C. §§ 1114 and 1125, and N.C. Gen.Stat. § 75-1.1, alleging trademark infringement, false designation of source or origin, and unfair and deceptive trade practices. Defendants denied such practices and brought counterclaims under the Sherman Act, 15 U.S.C. § 1, and N.C.Gen.Stat. §§ 66-58 and 75-1.1, asserting restraint of trade, unlawful competition with state citizens in the sale of goods, and unfair and deceptive trade practices. Defendants also claimed that their activities were protected by the First Amendment to the United States Constitution.

Defendants have moved for summary judgment on their claims under N.C.Gen. Stat. § 66-58 and Plaintiffs' claims under the Lanham Act. Plaintiffs have countered with their own motion for summary judgment on their trademark infringement claim as well as all of the Defendants' counterclaims. For the reasons stated below, summary judgment will be denied on both parties' motions regarding the alleged Lanham Act violations; summary judgment will also be denied on Defendants' motion on their claim under N.C.Gen.Stat. § 66-58. However, summary judgment will be granted for Plaintiffs on all of the Defendants' counterclaims.

STATEMENT OF FACTS

The record reveals the following facts to be undisputed:

The University of North Carolina is comprised of sixteen institutions including its main campus at Chapel Hill (hereinafter "UNC-CH"). UNC-CH opened its doors to students in 1795 and has developed a tradition of excellence with regard to both its academic and athletic programs.

As the University's reputation expanded, a market emerged for items bearing the University's name, symbols, and insignia. Prior to 1982, the University made no efforts to license the manufacture and retail sale of such items. By the University's own admission, at least 107 suppliers and 79 manufacturers were users of the symbols in 1982.

However, in late 1982, the University, prompted in large measure by the proliferation of collegiate products, decided to develop and implement a trademark licensing program. As part of this program UNC-CH registered four trademarks with the United States Patent and Trademark Office: (1) the University seal; (2) the letters "UNC"; (3) the words "University of North Carolina"; and (4) the Tarheel foot. Also, effective October 1, 1982, UNC-CH granted to Golden Eagle Enterprises (now Collegiate Concepts, Inc.) the "right to use and the exclusive right to grant sub-licenses" to use its registered trademarks "on merchandise sold in the United States" in the manner set forth in the agreement. This agreement is currently in full force and effect, and today approximately 225 manufacturers have been licensed under the agreement.

Licensing is not automatic, though; instead, applications are reviewed by UNC-CH officers who approve or disapprove of the applications according to criteria developed in 1982. These criteria include whether the merchandise is offensive, whether the use of the merchandise might result in injury, whether the use of the merchandise would suggest University sponsorship, and whether the price of the merchandise is commensurate with its quality. Products which have been rejected under these criteria include items promoting alcoholic beverage consumption, play football helmets, and blankets and other merchandise with a high degree of flammability.

In August 1983 the Defendants Helpingstine opened Johnny T-Shirt, a retail shop in Chapel Hill, North Carolina. The business was incorporated in January of 1987 and currently employs between twenty and forty persons in various capacities. Its gross sales revenue for 1986, the most recent figure before this court, was $621,681.05.

Johnny T-Shirt sells collegiate merchandise, fraternity and sorority merchandise, and other types of apparel and merchandise to the public. It also imprints plain merchandise with various names, symbols, and other designs through various processes. Although UNC-CH and its licensing agent have offered on many occasions to grant Johnny T-Shirt a license to utilize the University's marks on apparel and other merchandise, Johnny T-Shirt has always refused to accept such license. Thus, since 1983 Johnny T-Shirt has never been nor is it now licensed to sell merchandise bearing UNC-CH's registered trademarks. However, it is undisputed that a large portion of the merchandise sold by Johnny T-Shirt bears UNC-CH's registered marks.

Defendant JTS Promotions is a companion business to Johnny T-Shirt, incorporated in October of 1986. JTS's primary business is the sale of advertising specialties. JTS has also sold items bearing UNC-CH's registered trademarks despite the fact that it also is not licensed to sell such merchandise.

Defendants admit that they have sold goods bearing UNC's marks knowing that the University has a trademark program and that it has claimed trademark rights in the marks. Defendants have also added that they were aware of the trademark licensing program even before they opened Johnny T-Shirt in 1983. However, Defendants maintain that even with this knowledge and use they have not infringed UNC-CH's trademarks because the trademarks were abandoned through extensive non-licensed used prior to 1982, and also that even if such marks are valid UNC-CH has not established the requisite likelihood of confusion that is the hallmark of copyright infringement. These contentions are discussed below.

DISCUSSION

A. Plaintiffs' Claim of Infringement of Trademark

In determining the outcome of a trademark dispute, two questions must be addressed: first, does the plaintiff have a protectable property right in the name or mark it seeks to defend; and second, is defendant's use of a similar mark likely to cause confusion, mistake or deception in the market as to the source, origin, or sponsorship of the products on which the marks are used. Security Center Ltd. v. First Nat'l Sec. Centers, 750 F.2d 1295, 1298 (5th Cir.1985). If both of these questions are answered in the affirmative, then trademark infringement has been established. However, simply because the plaintiff has a valid trademark does not mean that another's use of a similar or even the same mark will always meet the likelihood-of-confusion test necessary to establish infringement.

Plaintiffs contend that as its marks are validly registered and there is no dispute that Johnny T-Shirt is using the exact marks registered by Plaintiffs, both elements of the test are met as a matter of law and thus UNC is entitled to summary judgment on its claims. Defendants contend, however, that as Plaintiffs abandoned their trademark rights by allowing widespread uncontrolled use of the marks prior to 1982, they cannot now assert valid trademark rights in these marks. Alternatively, Defendants contend that their use does not create likelihood of confusion. Each prong of the test will be discussed below.

1. Plaintiffs' property right in marks

Under Section 7(b) of the Lanham Act, 15 U.S.C. § 1057(b), registration of a mark with the United States Patent and Trademark Office constitutes prima facie evidence that the registrant owns the mark and has the exclusive right to use the mark as well as that the registration itself is valid. As it is undisputed that UNC-CH has registered the four marks in question with the Patent and Trademark Office, it is entitled to the presumptions of Section 7(b). Several courts have recognized that both public and private institutions of higher education have a legitimate interest in protecting their names, logos, and other insignia and may register such marks. See University of Georgia Athletic Ass'n v. Laite, 756 F.2d 1535, 1540-41 (11th Cir. 1985); University of Notre Dame du Lac v. J.C. Gourmet Foods Imports Co., 703 F.2d 1372, 1374 (Fed.Cir.1983); University of Pittsburgh v. Champion Products, 686 F.2d 1040, 1043 (3d Cir.), cert. denied, 459 U.S. 1087, 103 S.Ct. 571, 74 L.Ed.2d 933 (1982); President and Trustees of Colby College v. Colby College-New Hampshire, 508 F.2d 804, 808 (1st Cir.1975).

Defendants do not dispute that UNC-CH's registration of the marks in question constitutes prima facie evidence of their validity, but they point out that the presumptions of Section 7(b) are rebuttable. See WSM, Inc. v. Hilton, 724 F.2d 1320, 1326 (8th Cir.1984) (presumption created by Lanham Act is a rebuttable one which shifts burden to the one questioning the trademark); Vision Center v. Opticks, Inc., 596 F.2d 111, 119 (5th Cir.1979), cert. denied, 444 U.S. 1016, 100 S.Ct. 668, 62 L.Ed.2d 646 (1980) (although Lanham Act provides statutory presumption of validity to registered marks, presumption is rebuttable). Defendants maintain that they have rebutted the presumptions in this case through evidence that the University abandoned its rights in the marks at issue. Defendants assert that this abandonment occurred in two interrelated ways — first, by UNC-CH's failure to prosecute those individuals who used its marks prior to 1982; and, second, by UNC-CH's allowance of substantial uncontrolled use of the marks prior to 1982.

Defendants are correct that abandonment is one means by which an individual or entity can relinquish rights to a mark in which it once had a property...