Beneficial Corp. v. Beneficial Capital Corp., 80 Civ. 3145(MEL).

• Decision Date: 07 January 1982
• Docket Number: No. 80 Civ. 3145(MEL).,80 Civ. 3145(MEL).
• Citation: Beneficial Corp. v. Beneficial Capital Corp., 529 F.Supp. 445 (S.D. N.Y. 1982)
• Parties: BENEFICIAL CORPORATION, Beneficial Management Corporation of America, and Beneficial Finance Co. of New York, Inc., Plaintiffs, v. BENEFICIAL CAPITAL CORPORATION and Beneficial Capital Management Corporation, Defendants.
• Court: U.S. District Court — Southern District of New York

529 F. Supp. 445

BENEFICIAL CORPORATION, Beneficial Management Corporation of America, and Beneficial Finance Co. of New York, Inc., Plaintiffs, v. BENEFICIAL CAPITAL CORPORATION and Beneficial Capital Management Corporation, Defendants.

No. 80 Civ. 3145(MEL).

United States District Court, S. D. New York.

January 7, 1982.

Pennie & Edmonds, Walter G. Marple, Jr., New York City, for plaintiffs; James G. Foley, Pennie & Edmonds, New York City, Douglas C. Russell, Morristown, N. J., of counsel.

Solin & Breindel, P. C., New York City, for defendants.

LASKER, District Judge.

This action was brought by Beneficial Corporation, Beneficial Management Corporation of America and Beneficial Finance Co. of New York, Inc. ("Beneficial Finance") against Beneficial Capital Corp. ("Capital") and Beneficial Capital Management Corp. ("Capital Management") complaining that defendants' use of the name "Beneficial" is likely to cause confusion as to the source of defendants' services and to induce the public to deal with defendants in the mistaken belief that the services offered by defendants are in fact those of plaintiffs, in contravention of § 43(a) of the Lanham Act, 15 U.S.C. § 1125(a). Plaintiffs also claim that defendants' use of the name "Beneficial" creates a likelihood of injury to plaintiffs' business reputation or a dilution of the distinctive quality of plaintiffs' name, under N.Y. General Business Law § 368-d. A bench trial was held.

Beneficial Finance and Capital are both in the business of lending money. Beneficial Finance, a wholly-owned subsidiary of plaintiff Beneficial Corporation, makes consumer and homeowner loans to individuals which average approximately $1,500. per loan. Plaintiffs engage in a substantial amount of advertising: their radio ads, "Toot, toot, at Beneficial, you're good for more," are familiar to a large public. Plaintiff Beneficial Management Corporation of America, also a wholly-owned subsidiary of Beneficial Corporation, owns the registered service mark "Beneficial Finance System" which is used as a service identification in the offices of the subsidiaries of Beneficial Corporation.

Capital is a small business investment company licensed under the Small Business Investment Act of 1958, 15 U.S.C. §§ 681 et seq. ("SBIA") which lends only to small business concerns, as provided by the SBIA. Since 1976, it has made approximately forty loans. The loans average approximately $54,000., with the smallest to date being for $10,000. It engages in no advertising or marketing; its customers are obtained through referrals. Approximately ninety percent of its loans are to corporations.

Capital Management is a broker dealer registered pursuant to § 15(b) of the Securities Exchange Act of 1934. Its sole business to date has been advising clients on participation in tax shelters and oil and gas partnerships.

I. Secondary Meaning

In order to invoke the protection of § 43(a) of the Lanham Act, a user of an unregistered name or mark must demonstrate that its name has acquired "secondary meaning;" Vibrant Sales, Inc. v. New Body Boutique, Inc., 652 F.2d 299 (2d Cir. 1981), that is, that "the purchasing public has come to associate the name ... with goods from a single source." RJR Foods, Inc. v. White Rock Corp. 603 F.2d 1058, 1059 (2d Cir. 1979).¹

Plaintiffs produced considerable evidence of secondary meaning, including the fact that they have engaged in extensive advertising, focusing on the name Beneficial, and that the subsidiaries using the name Beneficial have entered into consumer loan arrangements amounting to billions of dollars. In addition, plaintiffs introduced a research study, Plaintiffs' Exhibit 12, entitled "A Survey on Company Names," conducted by an experienced market research company, Storm Marketing Research, Inc. The study asked individuals and small businesses randomly selected from the New York, New Jersey and Florida telephone books and contacted by telephone whether they had ever heard of a company with "Beneficial" in its name. Those who answered "yes" were then asked, "What kind of business do you think it is in?"² Of the eighty-three percent of the respondents who stated that they had heard of a company with "Beneficial" in its name, forty-four percent thought it was in the finance business, and twenty-five percent said the loan business.

Defendants argue that advertising and sales figures are not sufficient proof of secondary meaning and that the research study was seriously flawed because, inter alia, it was hurriedly designed and conducted, and limited to respondents in New York, New Jersey and Florida. Moreover, they contend that the fact that numerous other companies also use the name Beneficial demonstrates that it lacks secondary meaning.³

While advertising and sales figures are not conclusive on the question of secondary meaning, see McGregor-Doniger Inc. v. Drizzle, Inc., 599 F.2d 1126 (2d Cir. 1979), they are certainly relevant. RJR Foods, supra, 603 F.2d at 1060. Advertising is the primary means by which the connection between a name and a company is established in the public mind and sales figures are at least some indication that the advertising may have succeeded.

A number of defendants' criticisms of the research study, discussed below, are persuasive. However, on the question of its probative value as to secondary meaning, defendants point out only that the individual who designed the study conceded that it was not designed as a study of secondary meaning. (Trial Transcript, p. 242). Nevertheless, in the absence of any suggestion as to why the persons surveyed are unrepresentative of ordinary consumers or why the questions asked were inappropriate for the purpose of measuring secondary meaning, the results of this portion of the study are deemed probative. As for the fact that a number of other companies use the word "Beneficial" in their names, the mere existence of third party users of a name does not contradict a finding of secondary meaning where there is no evidence that the other names have either been promoted or are recognized by consumers. Scarves by Vera, Inc. v. Todo Imports, Ltd., 544 F.2d 1167, 1173 (2d Cir. 1976). Moreover, few of the companies listed appear to be in fields related to finance or lending.

Thus, plaintiffs have made a strong showing on the issue of secondary meaning and it therefore becomes necessary to consider the central question: Is "`an appreciable number of ordinarily prudent purchasers ... likely to be misled, or indeed simply confused as to the source of the goods or services in question?'" McGregor, supra, 599 F.2d at 1130, quoting Mushroom Makers, Inc. v. R.G. Barry Corp., 580 F.2d 44, 47 (2d Cir.), cert. denied, 439 U.S. 1116, 99 S.Ct. 1022, 59 L.Ed.2d 75 (1979).

II. Likelihood of Confusion

The factors relevant to the assessment of the likelihood of confusion are well established:

"Where the products are different, the prior owner's chance of success is a function of many variables: the strength of his mark, the degree of similarity between the two marks, the proximity of the products, the likelihood that the prior owner will bridge the gap, actual confusion, and the reciprocal of defendant's good faith in adopting its own mark, the quality of defendant's product, and the sophistication of the buyers."

Polaroid Corp. v. Polarad Electronics Corp., 287 F.2d 492, 495 (2d Cir.), cert. denied, 368 U.S. 820, 82 S.Ct. 36, 7 L.Ed.2d 25 (1961).

(1) The Strength of the Mark

The strength of a name is to be judged by "its tendency to identify the goods or services sold under that name ... as emanating from a particular ... source." McGregor, supra, 599 F.2d at 1131. The discussion above of plaintiffs' advertising, sales and name-recognition is equally applicable to the question of the strength of the name. Plaintiffs have demonstrated that the name Beneficial, as used by them, is strong.

(2) The Degree of Similarity Between the Two Names

Little needs to be said with respect to this factor, except to note that the words in defendants' names other than Beneficial, that is, "Capital" and "Management," do not substantially distinguish defendants' business from that of Beneficial Finance.

(3) The Proximity of the Products The Sophistication of the Buyers

Plaintiffs are not required to prove that their services are identical to those offered by defendants, but they must show that the services are "sufficiently related that customers are likely to confuse the source of origin." Scarves by Vera, supra, 544 F.2d at 1173.⁴

The question of the proximity of the products is considered in connection with the question of the sophistication of the buyers because of the closeness of two products is, at least in part, a function of the extent to which purchasers can and do examine and distinguish them.

Plaintiffs argue that the public does not distinguish between small consumer loans of the type made by plaintiffs and medium-sized business loans of the type made by defendant. However, we do not find that the plaintiffs have proven this to be so.

First, plaintiffs and defendant serve entirely different markets. Plaintiffs make only consumer loans; defendant's loans may be used for business purposes only, as provided by the SBIA. Plaintiffs' loans are made only to individuals; defendant has made only a few loans to individuals, and those were solely for the purpose of acquiring working capital. Moreover, the differences in average amounts loaned — plaintiffs' loans average $1,500., defendant's $54,000. — is significant evidence of the difference in their respective markets. In addition, plaintiffs and defendant engage in entirely different marketing approaches. Plaintiffs advertise heavily in all of the major media. By contrast, defendant does no advertising or marketing of any kind, relying entirely on referrals. As Judge Weinfeld stated in a recent trademark case, the services offered by the parties "appeal to different...