Beer Nuts, Inc. v. Clover Club Foods Co., s. 81-1545

• Decision Date: 22 June 1983
• Docket Number: Nos. 81-1545,81-1600,s. 81-1545
• Citation: 711 F.2d 934,221 USPQ 209
• Parties: BEER NUTS, INC., Plaintiff-Appellant, Cross-Appellee, v. CLOVER CLUB FOODS COMPANY, Defendant-Appellee, Cross-Appellant.
• Court: U.S. Court of Appeals — Tenth Circuit

Page 934

711 F.2d 934

221 U.S.P.Q. 209

BEER NUTS, INC., Plaintiff-Appellant, Cross-Appellee, v. CLOVER CLUB FOODS COMPANY, Defendant-Appellee, Cross-Appellant.

Nos. 81-1545, 81-1600.

United States Court of Appeals Tenth Circuit.

June 22, 1983.

Robert M. Newbury, Chicago, Ill. (Craig S. Fochler of Pattishall, McAuliffe & Hofstetter, Chicago, Ill., and Robert R. Mallinckrodt of Mallinckrodt & Mallinckrodt, Salt Lake City, Utah, with him on the brief), of Pattishall, McAuliffe & Hofstetter, Chicago, Ill., for plaintiff-appellant, cross-appellee.

R. William Johnston, Pasadena, Cal. (Richard D. Seibel of Christie, Parker & Hale, Pasadena, Cal., and Stephen H. Anderson of Ray, Quinney & Nebeker, Salt Lake City, Utah, with him on the brief), of Christie, Parker & Hale, Pasadena, Cal., for defendant-appellee, cross-appellant.

Before BARRETT, McKAY and SEYMOUR, Circuit Judges.

SEYMOUR, Circuit Judge.

Beer Nuts, Inc. (Beer Nuts) sued Clover Club Foods (Clover Club) alleging trademark infringement under 15 U.S.C. § 1114 (1976), unfair competition under 15 U.S.C. § 1125 (1976), ¹ and a pendent claim of state law trademark infringement. These claims arose from Clover Club's use of the words "Brew Nuts" with a picture of an overflowing stein on packages containing a sweetened, salted peanut product virtually identical to a product sold by Beer Nuts. Clover Club counterclaimed, seeking a declaration that Beer Nuts' registered trademark is void. After a bench trial, the district court denied relief to both parties and both parties have appealed. We reverse and remand for further proceedings. 520 F.Supp. 395.

I. TRADEMARK USE

The term "Beer Nuts" was registered as a trademark in 1955 and has become incontestable under section 1065. ² Beer Nuts claims that its right to the exclusive use of its trademark has been infringed because Clover Club's use of the term "Brew Nuts" together with an overflowing stein constitutes a trademark likely to cause confusion. The district court stated in its memorandum opinion, however, that "Clover Club's use of the words 'Brew Nuts' is a description of its product rather than a trademark." Rec., vol. I, at 51.

The defenses to the claimed infringement of an incontestable trademark are codified in section 1115. ³ The "fair use" defense permits the use of a name or term, other than as a trademark, that is descriptive and is used fairly and in good faith only to describe the goods. § 1115(b)(4). This defense is not available if the alleged descriptive use is in fact a trademark use. Soweco, Inc. v. Shell Oil Co., 617 F.2d 1178, 1187 (5th Cir.1980), cert. denied, 450 U.S. 981, 101 S.Ct. 1516, 67 L.Ed.2d 816 (1981); Abercrombie & Fitch Co. v. Hunting World, Inc., 537 F.2d 4, 12-13 (2d Cir.1976).

We do not believe the district court's statement that "Brew Nuts" is used as a description rather than as a trademark was intended as a holding that Clover Club established a "fair use" defense under section 1115(b)(4). In the first place, Clover Club did not plead the "fair use" defense in its answer to the complaint, nor did it assert the defense as an issue in the pretrial order. Moreover, the district court made no findings that the descriptive use was accomplished "fairly and in good faith." See § 1115(b)(4); cf. M.B.H. Enterprises v In any event, the record clearly establishes that Clover Club used the words "Brew Nuts" in conjunction with an overflowing stein as a trademark. A term or symbol is used as a trademark when the producer uses it to identify the source of his goods to the public and to distinguish those goods from others. See M.B.H. Enterprises, 633 F.2d at 53-54. A trademark is a symbol that attracts public attention, is the most prominent element on the package, and dominates the package as a whole. See Venetianaire Corp. v. A. & P. Import Co., 302 F.Supp. 156, 158-59 (S.D.N.Y.1969), aff'd, 429 F.2d 1079 (2d Cir.1970).

WOKY, Inc., 633 F.2d 50, 53-54 (7th Cir.1980) (findings adequate).

In this case, the words "Brew Nuts" are much larger than the other lettering on the package and in a different type style. The words are set off in a distinctive red-brown oval, outlined in dark brown and topped by a conspicuous white circle containing a picture of an overflowing beer stein. Below or above the oval, depending on the particular package, is the phrase actually used to describe the product: "sweetened salted peanuts." Furthermore, the president of Clover Club, Robert Sanders, testified repeatedly that Clover Club uses secondary trademarks on some of its products in addition to the company name, and that "Brew Nuts" is such a trademark. ⁴

Based on our examination of the Clover Club package, the testimony of Mr. Sanders as to the trademark nature of the "Brew Nuts" logo, and the fact that Clover Club did not contend below that the "Brew Nuts" logo is not a trademark, we conclude as a matter of law that Clover Club has deliberately used "Brew Nuts" as a trademark.

II. INFRINGEMENT

The district court held that the "Beer Nuts" trademark was not infringed. Based solely on a side-by-side comparison of the Beer Nuts and Brew Nuts packages, the court determined that "the product packaging and wording are sufficiently unique so as to preclude any likelihood of confusion as to the origin of the competing products." Rec., vol. I, at 47 (emphasis in original). Beer Nuts argues that the trial court applied incorrect and incomplete legal standards in making this determination. A survey of the law applicable to the issue of infringement is necessary to provide a "A trademark is a distinctive mark, symbol, or emblem used by a producer or manufacturer to identify and distinguish his goods from those of others." Educational Development Corp. v. Economy Co., 562 F.2d 26, 28 (10th Cir.1977). "The strength or distinctiveness of a mark determines both the ease with which it may be established as a valid trademark and the degree of protection it will be accorded." McGregor-Doniger Inc. v. Drizzle, Inc., 599 F.2d 1126, 1131 (2d Cir.1979). Trademark strength is measured by "its tendency to identify the goods sold under the mark as emanating from a particular, although possibly anonymous, source." Id. The use of terms or marks falls into four broad categories for purposes of legal recognition: (1) generic, (2) descriptive, (3) suggestive, and (4) arbitrary or fanciful. Soweco, 617 F.2d at 1183. Only the first two categories are relevant to the issues on appeal. ⁵

framework for our disposition of this contention.

A generic mark has been described as referring to " 'a particular genus or class of which an individual article or service is but a member.' " Soweco, 617 F.2d at 1183 (quoting Vision Center v. Opticks Inc., 596 F.2d 111, 115 (5th Cir.1979), cert. denied, 444 U.S. 1016, 100 S.Ct. 668, 62 L.Ed.2d 646 (1980)). Because a generic mark refers to a general class of goods, it does not indicate the particular source of an item. Consequently, such a mark receives no legal protection and may not be registered alone as a trademark. A term that was once a valid trademark may become generic through usage and popular acceptance, and thus no longer be eligible for registration, e.g., escalator, thermos. See McGregor-Doniger, 599 F.2d at 1131. A generic word, such as "cola" may be part of a valid trademark, e.g., Coca-Cola. Although the holder of such a valid trademark may not prevent another from incorporating the generic term into a trademark, e.g., Pepsi-Cola, he can prevent its use in a trademark which is so similar to his own that the whole name is likely to be confused with his trademark, e.g., Koka-Cola. See Dixi-Cola Laboratories v. Coca-Cola Co., 117 F.2d 352, 355-60 (4th Cir.1941); see also American Aloe Corp. v. Aloe Creme Laboratories, Inc., 420 F.2d 1248, 1251-53 (7th Cir.), cert. denied, 400 U.S. 820, 91 S.Ct. 37, 27 L.Ed.2d 47 (1970).

"A 'descriptive' term 'identifies a characteristic or quality of an article or service,' ... as, for example, its color, odor, function, dimensions, or ingredients." Soweco, 617 F.2d at 1183 (quoting Vision Center v. Opticks Inc., 596 F.2d at 115). Because a descriptive term is one which a competitor would likely need to use in describing his product, ⁶ the term does not indicate that a Infringement of a trademark occurs when the use of a similar mark is likely to cause confusion in the marketplace concerning the source of the different products. Vitek Systems, Inc. v. Abbott Laboratories, 675 F.2d 190, 192 (8th Cir.1982). "The resolution of this issue requires the court to consider numerous factors to determine whether, under all the circumstances, there is a likelihood of confusion." Id. In making this determination, this court has used the criteria set out in Restatement of Torts § 729 (1938):

                product comes from a single source.   Educational Development Corp., 562 F.2d at 28-29.   Therefore, a trademark that is descriptive may be registered only if it has acquired a secondary meaning by becoming "distinctive of the applicant's goods in commerce."  §  1052(f);   Soweco, 617 F.2d at 1183.   To establish a secondary meaning, it is not necessary to show that the public is aware of the name of the manufacturer of a product;  it is sufficient if the public is aware that the product comes from a single, though anonymous, source. 7   Union Carbide Corp. v. Ever-Ready Inc., 531 F.2d 366, 380 (7th Cir.), cert. denied, 429 U.S. 830, 97 S.Ct. 91, 50 L.Ed.2d 94 (1976);   National Nu Grape Co. v. Guest, 164 F.2d 874, 877 (10th Cir.1947), cert. denied, 333 U.S. 874, 68 S.Ct. 903, 92 L.Ed. 1150 (1948).
                

"(a) the degree of similarity between the designation and the trade-mark or trade name in

(i) appearance;

(ii) pronunciation of the words used;

(iii) verbal translation of the pictures or designs involved;

(iv) suggestion;

(b) the intent of the actor in adopting the designation;

(c) the relation in use and manner of marketing between the goods or services marketed by...