Cfm Majestic, Inc. v. Nhc, Inc.

• Decision Date: 15 March 2000
• Docket Number: No. Civ. 1:99-CV-120.,Civ. 1:99-CV-120.
• Citation: 93 F.Supp.2d 942
• Parties: CFM MAJESTIC, INC., Plaintiff, v. NHC, INC., Defendant.
• Court: U.S. District Court — Northern District of Indiana

93 F.Supp.2d 942

CFM MAJESTIC, INC., Plaintiff, v. NHC, INC., Defendant.

No. Civ. 1:99-CV-120.

United States District Court, N.D. Indiana, Fort Wayne Division.

March 15, 2000.

COPYRIGHT MATERIAL OMITTED

Thomas A. Herr, Barrett and McNagny, Fort Wayne, IN, Michael H. Baniak, Jeffrey A. Pine, Christina L Brown, Baniak Nicholas Pine and Gannon, Evanston, IL, for CFM Majestic, Inc., Plaintiff.

Stephen J. Weyer, Randall J. Knuth PC, Robert S. DiPalma, David Borsykowsky, Paul Frank & Collins Inc, Burlington, VT, Randall J. Knuth, Fort Wayne, IN, for NHC INC, a Vermont Corporation, Defendant.

FINDINGS OF FACT AND CONCLUSION OF LAW

COSBEY, United States Magistrate Judge.

I. INTRODUCTION

This is an action brought by CFM Majestic, Inc. ("CFM") for infringement of CFM's federally registered trademark, VERMONT CASTINGS ("VERMONT CASTINGS"), under Section 32 of the Lanham Act, 15 U.S.C. § 1114, Unfair Competition under Section 43(a) of the Lanham Act, 15 U.S.C. § 1125(a), and state and common law unfair competition, by reason of NHC, Inc.'s ("NHC") use in commerce of the name "VermontHearth."

This Court has jurisdiction over the subject matter of this action under 28 U.S.C. § 1331; 15 U.S.C. § 1121, 28 U.S.C. § 1338(a) and (b); and pursuant to the principles of supplemental jurisdiction under 28 U.S.C. § 1367. The parties concede that venue is proper in this district pursuant to 28 U.S.C. § 1391.

At issue in this case is whether NHC has violated either federal trademark, or federal or state unfair competition law by using the name VermontHearth to identify a new line of cast-iron stoves that it has recently introduced into the market.

Originally set for a preliminary injunction hearing in December 1999, by agreement of counsel the June 20, 2000 trial date was advanced on the calendar so that the matter could also be heard on the merits at the earliest possible date. Thus, the case was ultimately tried to the Court¹ on January 27 and 28, 2000. The Plaintiff was present by counsel, Michael H. Baniak, Jeffrey A. Pine and Christina L. Brown. The Defendant was present by counsel, Robert S. DiPalma and David Borsykowsky. The Court has considered the testimony of the in-court witnesses, the deposition testimony that was offered, and the exhibits introduced into evidence. (Hereinafter, "Plnf.Exh.____"; or "Def. Exh____"). A two volume transcript of the trial proceedings has been prepared and filed. (Hereinafter, "Tr.____" or "Tr. II ____.")

At the close of the Plaintiff's case in chief and again at the close of all of the evidence, the Defendant orally moved for the entry of a judgment in its favor pursuant to Fed.R.Civ.P. 52(c). The Court took those motions under advisement. At the close of all the evidence the Court directed counsel to submit proposed Findings of Fact and Conclusions of Law and established a schedule for post-trial briefing. Proposed Findings of Fact and Conclusions of Law, and all post-trial briefing have now been submitted.

Following these extensive submissions, on March 7, 2000, CFM filed a motion seeking to reopen the proceedings based upon new evidence. As discussed more fully infra, that motion will be denied.

Having considered the arguments and the evidence submitted, the Court makes its Findings of Fact and Conclusions of Law pursuant to Fed.R.Civ.P. 52(a) and Fed.R.Civ.P. 65 based upon a preponderance of the evidence.

II. FINDINGS OF FACT²

There are those who would say that the story of Vermont Castings is almost uniquely American. In 1973, a young Duncan Syme was frustrated that he could not find a high-quality, well-designed wood stove for a home he had built, so he decided to build one. (Tr. 43, 46). Shortly thereafter, in 1975, Syme and his brother-in-law began selling those wood stoves under the name VERMONT CASTINGS ("VERMONT CASTINGS"). (Tr. 55). From such humble beginnings, both Vermont Castings, Inc. ("Vermont Castings"), and indeed, an entire industry arose.

Vermont Castings, which started as a consumer-direct company (Tr. 28), soon became identified by the public as the manufacturer of reliable, high-quality, wood and coal-burning stoves. (Tr. 135). The rise of the company, initially fueled in some measure by the fortuitously coincident "energy shortage" of the 1970's, soon came to the attention of the media.³ Early on, Vermont Castings acquired an excellent national and international reputation for high-quality hearth products, including stove attachments and accessories. Indeed, since the mid-seventies, Vermont Castings has been a recognized industry leader and innovator, sparking the development of a multi-million dollar stove industry. (Tr. 146).

Vermont Castings holds two incontestible federal trademark registrations relating to its VERMONT CASTINGS mark:

(a) Registration No. 1,252,241 for the mark VERMONT CASTINGS issued September 27, 1983, for the identification of wood and coal burning stoves; stove parts; stove attachments and accessories in U.S. Class 34;

(b) Registration No. 1,323,976 for the mark VERMONT CASTINGS issued March 12, 1985, for the identification of high temperature paint for stoves, metal snips, splitting malls, axes, ash shovels, stove gloves, heat shields, safety guard screens, coat hooks, benches, trivets, portable ash containers, canvas log carriers, T-shirts, belt buckles, hearth rugs and coin banks in U.S. Class 2, 13, 16, 22, 23, 26, 29, 32, 39, 40, 42 and 50.

(See Plaintiff's Exhibits 1 and 2; Tr. 60). Over the last twenty-four years, the VERMONT CASTINGS trademark has become exclusively identified with all Vermont Casting products including wood, coal, and gas-burning stoves (the latter line added in 1991) as well as stove attachments and accessories.

The company continues to enjoy an excellent reputation (Tr. 133), has been featured on television shows, (see, Plnf. Exh. 63; Tr. 61) numerous magazine articles (see, n. 3, supra), and on various forms of marketing and promotional items (see Plnf. Exhs. 15, 41-48, 50-51, 72-73, 75-82), which are sometimes sent by direct mail, or placed within the national print media. (Tr. 69-78). Vermont Castings also has an Internet website with a full product catalog, and does national seasonal television advertising, most recently on the Weather Channel. (Tr. 78). Of course, the company's marketing staff also attend four or five trade shows annually. (Tr. 79). In general, these promotional efforts have been effective in producing customer "leads." (Tr. 133-34, 138).

In the recent past, both Vermont Castings and CFM have annually expended between $900,000 and $1,500,000 advertising the VERMONT CASTINGS trademark directly to the ultimate end-user. (Tr. 79). Additional advertising featuring the trademark also has been directed towards hearth product dealers, so on average, $3,000,000 to $3,500,000 is spent each year promoting the VERMONT CASTINGS trademark. (Tr. 80).⁴

All of this is necessary because the hearth industry has become competitive. (Tr. 141). One of Vermont Castings competitors is NHC's "HearthStone Quality Home Heating Products, Inc." ("HearthStone"), a Vermont company with its principal place of business in Morrisville, Vermont. While HearthStone is considerably smaller, as discussed more fully infra, both companies market their stoves the same way, often through the same dealers, and always to the same potential purchasers. (Tr. 140; Tr. II 28, 90-91).

In 1996, CFM⁵ was interested in expanding into the retail business in the United States, so it purchased Vermont Castings, including its trademark, for over $48,000,000.00. (Tr. 41). Indeed, obtaining the VERMONT CASTINGS trademark, and the company's associated goodwill, was a major factor to CFM because not only was it buying instant consumer name recognition, but it also immediately inherited the company's high esteem. (Tr. 104, 122, 228-30). Nevertheless, in part to grow the brand, CFM has increased the name's recognition by adding more products under the VERMONT CASTINGS name, such as barbeques, outdoor furniture, and space heaters. (Tr. 251).

There is keen competition in the industry for dealer sales, with both Vermont Castings and HearthStone attending national shows and publishing in trade publications. (See, e.g., Plnf. Exh. 29). Those dealers are generally specialty retailers who sell multiple brands of hearth products and often other seasonal items, like spas and casual furniture. (Tr. 79-82). The stove customers who visit are sometimes interested in energy independence, and sometimes they are just interested in making a design statement for their home (Tr. 85), but no matter what the reason, they often have no expertise when it comes to stove purchasing. (Tr. 161-69).

Consequently, while the extensive advertising of Vermont Castings' might generate consumer interest, once those consumers arrive at the dealer's showroom it becomes "open season" for their business. (Tr. 84-86). Indeed, it is entirely possible that the dealer does not even carry the Vermont Castings line. However, even if Vermont Castings stoves are in the showroom, the dealer or his salespersons might seek to steer the unwitting customer to a another line either because of existing inventory, sales incentives, or product knowledge. (Tr. 86, 100). This can be done with relative ease because both product appearance and placement is fairly close, even before the introduction of any confusingly-similar names. (Tr. 93-6; 102-3; 165-69). The danger here to the stove manufacturer is significant given that once a stove sale is made, there is not likely to be a second chance considering the products' long life. (Tr. 134-35).

HearthStone started in the mid-70's, but stopped doing business in 1988. (Tr. 198). By 1991 the company was again doing business, but was essentially bankrupt and its reputation was in shambles. (Tr. II 18-19). However, since 1991 the company has experienced something of a rebound, and last year sold about 12,000 stoves.⁶ (Tr. II 20). HearthStone...