Chesebrough-Pond's, Inc. v. Faberge, Inc.

• Decision Date: 22 January 1982
• Docket Number: No. 80-5117,CHESEBROUGH-POND,80-5117
• Citation: 666 F.2d 393
• Parties: , 9 Fed. R. Evid. Serv. 1229 'S, INC., a corporation, Plaintiff-counterdefendant-appellee, v. FABERGE, INCORPORATED, a corporation, Defendant-counterclaimant-appellant.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 393

666 F.2d 393

214 U.S.P.Q. 44, 9 Fed. R. Evid. Serv. 1229

CHESEBROUGH-POND'S, INC., a corporation Plaintiff-counterdefendant-appellee, v. FABERGE, INCORPORATED, a corporation Defendant-counterclaimant-appellant.

No. 80-5117.

United States Court of Appeals Ninth Circuit.

Argued and Submitted Oct. 7, 1981.

Decided Jan. 22, 1982.

William K. Rieber, Los Angeles, Cal., argued, for defendant-counterclaimant-appellant; William G. Anderson, Fulwider, Patton, Rieber, Lee & Utecht, Los Angeles, Cal., Richard Whiting, Davis, Hoxie, Faithfull & Hapgood, New York City, on brief.

Richard A. Wallen, Harris, Kern, Wallen & Tinsley, Los Angeles, Cal., for plaintiff-counterdefendant-appellee.

Appeal from the United States District Court for the Central District of California.

Before HUG, FARRIS and BOOCHEVER, Circuit Judges.

HUG, Circuit Judge:

This is an action for declaratory and injunctive relief, brought by Chesebrough-Pond's, Inc. ("Chesebrough") against Faberge, Inc. ("Faberge"). Chesebrough sought a declaratory judgment that its trademark "Match" is not so similar to Faberge's trademark "Macho" that its use constitutes trademark infringement or unfair competition. Chesebrough also sought an injunction to preclude Faberge from interfering with its use of the trademark. Faberge filed a counterclaim for trademark infringement. On a motion for summary judgment, the district court entered the declaratory judgment and injunction sought by Chesebrough and dismissed Faberge's counterclaim for infringement and unfair competition.

The issues presented in this appeal are: (1) whether a justiciable controversy existed; and (2) whether a genuine issue of fact existed as to the likelihood of confusion of the trademarks.

I FACTS

In February, 1975, Chesebrough filed an application to register its trademark "Match," for a line of men's toiletries and cosmetics. It began developing the product line, investigating marketing, and creating packaging and advertising. Chesebrough's initial investment in development was approximately $650,000.00.

In June, 1975, Faberge acquired the "Macho" trademark, which had been registered by its prior owner in February, 1973. This mark also covered a line of men's toiletries and cosmetics. Faberge has marketed products under the "Macho" mark.

After receiving notice of the pending registration of "Match," Faberge sent Chesebrough a letter on August 25, 1975, stating that it believed the two marks to be "confusingly similar," and that unless Chesebrough withdrew its application, Faberge would file opposition thereto. When Chesebrough refused, Faberge did file an opposition proceeding in the Patent and Trademark Office. It was alleged that the " 'Match' mark so resembles opposer's mark 'Macho' as to be likely ... to cause confusion, mistake and deception." Chesebrough filed an answer and a petition to cancel the "Macho" mark. The administrative action continued for three years, but remained in the discovery stage.

In October, 1978, Chesebrough filed this action in the district court seeking a declaratory judgment that use of "Match" would not infringe upon Faberge's rights in "Macho." Faberge counterclaimed for infringement and unfair competition and an injunction to prevent Chesebrough from using the term "Match." On Chesebrough's motion for summary judgment, the district court granted Chesebrough its requested declaratory and injunctive relief and entered judgment against Faberge on its counterclaim. It held that a substantial controversy existed between the parties "stemming from (Faberge's) letter of August 25, 1975." It found no likelihood of confusion of the two marks, and concluded that Chesebrough has the right to use the trademark "Match" insofar as the word itself is concerned, free from interference by Faberge. ¹

Faberge appealed on the basis that the case does not present a justiciable controversy. It also argued that even if the case was properly before the district court, the grant of summary judgment was error because factual disputes exist as to consumer practices and perceptions, marketing of products bearing the marks, and the parties' intent.

II Existence of an Actual Controversy

A. Standard

Before this court, Faberge argued that any potential threat of an infringement action is not sufficiently ripe to satisfy the case or controversy requirement, which limits declaratory judgment jurisdiction. It relied upon Merrick v. Sharp & Dohme, Inc., 185 F.2d 713 (7th Cir. 1950), cert. denied, 340 U.S. 954, 71 S.Ct. 573, 95 L.Ed. 687 (1951), which held that the filing of a notice of opposition to registration with the Patent and Trademark Office is not equivalent to a charge of infringement. This reliance on Merrick is misplaced, for we view that case as inconsistent with the approach to declaratory judgments adopted by this circuit in Societe de Conditionnement v. Hunter Engineering Co., 655 F.2d 938 (9th Cir. 1981).

The Declaratory Judgment Act, 28 U.S.C. § 2201, allows this court to consider cases in which an "actual controversy" exists. In Societe we considered under what circumstances a trademark or patent dispute ripened into an actual controversy. We held that the requirements of the Declaratory Judgment Act were satisfied "if the plaintiff has a real and reasonable apprehension that he will be subject to liability ...." Id. at 944. In applying this standard, we focused upon the position and perceptions of the plaintiff, declining to identify specific acts or intentions of the defendant that would automatically constitute a threat of litigation. The acts of the defendant were instead to be examined in view of their likely impact on competition and the risks imposed upon the plaintiff, to determine if the threat perceived by the plaintiff were real and reasonable.

Societe thus requires a flexible approach that is oriented to the reasonable perceptions of the plaintiff. The Merrick test, which offers a set rule under which the defendant's actions determine the existence of an actual controversy, does not fit with this analysis. ²

Faberge warns that a rejection of Merrick will cause the district courts to be burdened with unlimited and redundant requests for declaratory judgments based on imagined threats of infringement actions. We see no such danger. Declaratory relief is available at the discretion of the district court. 28 U.S.C. § 2201; Geni-Chlor International, Inc. v. Multisonics Development Corp., 580 F.2d 981, 985 (9th Cir. 1978). Exercise of that discretion will allow rejection of cases that are properly before the Patent and Trademark Office. In addition, as our application of the Societe standard to these facts will make clear, a simple opposition proceeding in the Patent and Trademark Office generally will not raise a real and reasonable apprehension of suit.

B. Application

The letter sent by Faberge to Chesebrough declaring its intent to file opposition proceedings, stated a prima facie case for trademark infringement, as outlined in 15 U.S.C. § 1114(1). It alleged Faberge's ownership of a registered mark and Chesebrough's use in commerce of a mark so similar to Faberge's that it was likely to cause confusion. The "likelihood of confusion" standard is relevant to both registration and infringement proceedings. 1 McCarthy, Trademarks and Unfair Competition, P 20:4 (1973). It was reasonable to infer from Faberge's letter a threat of an infringement action. Faberge did not act to dispel such an inference. It did not disclaim an intent to pursue an infringement action, but, in fact, responded to Chesebrough's complaint with a counterclaim seeking damages for infringement. The actual filing of a counterclaim for infringement bolsters Chesebrough's claim that a real threat existed. See Societe, 655 F.2d at 945.

The inference that Chesebrough drew from Faberge's actions was also reasonable in view of the business relationship of the parties. The market for men's cosmetics is expanding and highly competitive. The practical effect of the attenuated opposition proceeding before the Patent and Trademark Office was to allow expanded marketing of the "Macho" line, while chilling Chesebrough's efforts to market "Match" products. The threat that the action would move from the Patent and Trademark Office to the district court apparently was real enough to dissuade Chesebrough from further use of its mark, although it had made substantial investments in development and preliminary advertising of the line. Furthermore, a decision of the Patent and Trademark Office allowing the registration of Chesebrough's trademark would not preclude a subsequent infringement action or be determinative of the issues involved. Carter-Wallace, Inc. v. Procter & Gamble Company, 434 F.2d 794, 802 (9th Cir. 1970). See also Driving Force, Inc. v. Manpower, Inc., 498 F.Supp. 21, 25-26 (E.D.Pa.1980). Failure of this court to resolve the dispute would force Chesebrough to choose between continuing to forego competition in this quickly expanding market, and entering the market, risking substantial future damages and harm to relationships with its customers and retailers.

We therefore conclude that although there was no actual threat by Faberge that it would sue Chesebrough for trademark infringement, Chesebrough had a real and reasonable apprehension that such action would be taken. The district court correctly concluded that this case presented an actual controversy.

III Existence of Factual Issues

A. Similarity of the Marks

Faberge contends that the entry of summary judgment was improper because of the existence of a genuine issue of fact. It challenges the district court's conclusion that the two marks are so "dissimilar in connotation and impact" that no factual dispute exists as to their similarity. It is contended that the affidavit of Dr. Einbond, an associate professor of English, was sufficient to raise a factual dispute on this issue.

The district court based its...