Comidas Exquisitos, Inc. v. CARLOS McGEE'S MEX. CAFE, INC.

• Decision Date: 11 January 1985
• Docket Number: Civ. No. 83-600-D.
• Citation: 602 F. Supp. 191
• Parties: COMIDAS EXQUISITOS, INC., Plaintiff, v. CARLOS McGEE'S MEXICAN CAFE, INC., Defendant.
• Court: U.S. District Court — Southern District of Iowa

602 F. Supp. 191

COMIDAS EXQUISITOS, INC., Plaintiff, v. CARLOS McGEE'S MEXICAN CAFE, INC., Defendant.

Civ. No. 83-600-D.

United States District Court, S.D. Iowa, C.D.

January 11, 1985.

COPYRIGHT MATERIAL OMITTED

H. Robert Henderson, Henderson & Sturm, Des Moines, Iowa, for plaintiff.

Mark David Hansing, Zarley, McKee, Thomte & Voorhees, Des Moines, Iowa, for defendant.

MEMORANDUM AND ORDER

HANSON, Senior District Judge.

Plaintiff, Comidas Exquistos, Inc., brought this action for service mark infringement and related claims against defendant, Carlos McGee's Mexican Cafe, Inc. Defendant has asserted a counterclaim for unfair competition. This action came on for trial to the Court on October 16, 1984. At trial, plaintiff's Exhibits 31, 40 and 41 were received subject to defendant's hearsay objection. The Court now rules these exhibits admissible under the business records exception to the hearsay rule. Rule 803(6), Fed.R.Evid. Defendant's Exhibit E has been used by the Court only as it shows witness Ansani's interest in this action. The Court now enters the following Findings of Fact and Conclusions of Law in support of its judgment.

FINDINGS OF FACT

1. Plaintiff, Comidas Exquistos, Inc., is a Georgia corporation with its principal place of business in Atlanta, Georgia.

2. Since July 1979, plaintiff has continuously used the service mark CARLOS McGEE'S in connection with restaurant services. In July 1979, plaintiff opened its first "CARLOS McGEE'S BAR GRILL & BAR" in Atlanta, Georgia. Since then plaintiff has opened a second company-owned restaurant and a third under a license agreement, both under the same name and both in the Atlanta metropolitan area. Hereinafter, the Court will use "plaintiff" to refer to both Comidas Exquisitos, Inc. and its three restaurants.

3. On September 9, 1980, plaintiff filed application Serial No. 277,241 with the United States Patent and Trademark Office to register its service mark CARLOS McGEE'S for restaurant services. On June 1, 1982, plaintiff's application was granted as Registration No. 1,197,034. Plaintiff is still the owner of this registration.

4. Plaintiff has done a substantial amount of advertising and promotion, much of which has been directed at travelers and some of which has reached Iowa. Plaintiff has in fact served a substantial number of travelers, including some from Iowa. Approximately 20 percent of plaintiff's customers have been from outside the Atlanta area.

5. Defendant, formerly Carlos McGee's Mexican Cafe, Inc., now O'Malley & McGee's Mexican Cafe, Inc., is an Iowa corporation with its principal place of business in Ames, Iowa.

6. Defendant was originally incorporated under the name "Carlos McGee's Mexican Cafe, Inc." on June 19, 1980. Defendant opened a restaurant in Ames, Iowa under the name "Carlos McGee's Mexican Cafe" in January of 1981. Hereinafter, the Court will use "defendant" to refer to both the corporate party and its restaurant.

7. Defendant is now in the process of changing its name. Since this action was filed, defendant has changed its sign, menus, and corporate name to "O'Mally & McGee's." Defendant's liquor and food licenses are still in the name "Carlos McGee's."

8. Defendant has done virtually no advertising or promotion, relying instead on word of mouth. Defendant has admitted that it has served interstate travelers, including persons who had seen one or more of plaintiff's restaurants. However, there is no evidence to suggest that defendant has ever served substantial numbers of interstate travelers, in absolute or percentage terms.

9. Defendant was aware of use of the name "Carlos McGee's" for a restaurant in the Atlanta area before it opened its restaurant. Defendant adopted the name because it found it "catchy." In everything other than its name, defendant's restaurant was based on a "Dos Amigos" restaurant in Steamboat Springs, Colorado. Consistent with this, the evidence shows a number of differences between plaintiff and defendant. Both plaintiff and defendant serve Mexican food, but plaintiff is a "Tex-Mex" restaurant featuring such "Tex" items as steak and smoked ribs in addition to Mexican food. Defendant, on the other hand, is a standard Mexican restaurant with a few items on the menu "from the other side of the border." Though both plaintiff and defendant serve liquor, defendant's bar is subsidiary to its restaurant while plaintiff's bar has a life of its own: defendant is a restaurant with a bar, while plaintiff is a restaurant and a bar. This difference is advertised in plaintiff's and defendant's names. Plaintiff refers to itself as a "bar . grill & bar" while defendant refers to itself as a "cafe." Further, the logos used by plaintiff and defendant are very different, both in appearance and in the image they convey. Copies of plaintiff's and defendant's logos are attached hereto. Finally, as illustrated by their logos, plaintiff and defendant differ in atmosphere or "personality." Plaintiff's personality is sophisticated, up-scale, and cosmopolitan, while defendant is simple, unpretentious, and provincial.

10. The market areas of plaintiff and defendant have always been, and still are, geographically separate. Plaintiff's market has been limited to the Atlanta, Georgia metropolitan area, and defendant's market has been limited to the Ames, Iowa area.

11. At no time has there been a present likelihood that plaintiff would enter defendant's market area.

12. Plaintiff has never had a general reputation in defendant's market area.

13. Defendant's use of "Carlos McGee's" has not, at any time, caused a real, present likelihood of confusion in the marketplace.

Magistrate Longstaff was right, in his order denying defendant's motion for summary judgment, when he predicted that "plaintiff may have considerable difficulty" proving its case. If all the evidence presented at trial were presented on a motion for summary judgment, this Court believes it could grant the motion. The basic facts of this case are substantially undisputed. The parties agree about who did what when. There is a great deal of apparent dispute as to whether defendant's use of "Carlos McGee's" has caused a likelihood of confusion. However, when the nature of that issue is properly understood, it appears that there is no genuine issue of fact on that score either.

Defendant's use of "Carlos McGee's" certainly made the parties' names confusingly similar when considered in the abstract. Further, the Court does not doubt that plaintiff's and defendant's use of "Carlos McGee's" could cause confusion under some circumstances. However, to the present, defendant's actual use of "Carlos McGee's" has not, at any time, caused a real, present likelihood of confusion in the marketplace.

For there to be a real, present likelihood of confusion, there must be someone in a position to be confused — some point of contact between plaintiff's and defendant's use of "Carlos McGee's." Unicure, Inc. v. Nelson, 502 F.Supp. 284, 287 (W.D.N.Y.1980), ("Some overlap between the parties' trademark usage must exist before a likelihood of confusion ... can be found.") In the typical case, this point of contact is provided by overlap between the parties' market areas. However, as found above, plaintiff and defendant have occupied geographically separate market areas. Plaintiff has argued that it has a national market area because it serves travelers from all over, seeks a national reputation, and hopes to expand throughout the nation. However, the relevant market area is the area within which plaintiff competes for customers with other restaurants. See Holiday Inns of America, Inc. v. B & B Corp., 409 F.2d 614, 617 (3d Cir.1969) (plaintiff would be entitled to relief if plaintiff's and defendant's names were "at large in the same market to compete for the same customers"); Dawn Donut Co. v. Hart's Food Stores, Inc., 267 F.2d 358, 364 (2d Cir.1959) (finding of small market areas for donut shops based on fact that "purchasers of baked goods, because of the perishable nature of such goods, usually make such purchases reasonably close to their homes"); Fairway Foods, Inc. v. Fairway Markets, Inc., 227 F.2d 193, 196 (9th Cir.1955) (no likelihood of confusion where "neither party sells or tries to sell to any customer who buys from the other party.)" See generally, J. McCarthy, Trademarks and Unfair Competition, § 2:12, § 23:1 at 46-48 (1984) Hereinafter cited as McCarthy. It is clear that plaintiff competes for customers with other restaurants only in the Atlanta metropolitan area.

In cases involving geographically separate markets, courts have found a basis for a likelihood of confusion where there is a present likelihood that plaintiff will enter defendant's market area and where plaintiff has a general reputation in defendant's market area. See John R. Thompson Co. v. Holloway, 366 F.2d 108 (5th Cir.1966); Dawn Donut, 267 F.2d 358; Fotomat Corp. v. Cochran, 437 F.Supp. 1231, 1237, 1245 (D.Kan.1977); McCarthy § 26:13-15. Cf. McCarthy § 26:1-12 (pre-Lanham Act Law). As found above, neither of these circumstances have ever been present in this case.

Plaintiff did attempt to show a present likelihood that it would enter defendant's market area by introducing evidence showing its general hopes and plans for national expansion and its actual steps toward expansion in South Carolina, Florida, the Virgin Islands, New York, Texas, Missouri, and Illinois. However, plaintiff introduced no evidence of any concrete plans for entry into defendant's market area, as is required to establish a present likelihood of entry. See McCarthy § 26:14. Plaintiff's general hopes and plans for national expansion are insufficient. See Holiday Inns, 409 F.2d 614; Fairway Foods, 227 F.2d 193, 198; Peter Pan Restaurants v. Peter Pan Diner, 150 F.Supp. 534 (D.R.I.1957).

As to plaintiff's reputation in defendant's market area, plaintiff introduced evidence of its substantial advertising,...