Energy Jet, Inc. v. Forex Corp.

• Decision Date: 11 May 1984
• Docket Number: Civ. A. No. 83-2476.
• Citation: 589 F. Supp. 1110
• Parties: ENERGY JET, INC., Plaintiff, v. FOREX CORPORATION, Defendant.
• Court: U.S. District Court — Western District of Michigan

589 F. Supp. 1110

ENERGY JET, INC., Plaintiff, v. FOREX CORPORATION, Defendant.

Civ. A. No. 83-2476.

United States District Court, E.D. Michigan, S.D.

May 11, 1984.

COPYRIGHT MATERIAL OMITTED

James J. Walsh, Barbara B. Bluford, Detroit, Mich., for plaintiff.

Stephen K. Valentine, Jr., West Bloomfield, Mich., for defendant.

ORDER GRANTING PLAINTIFF'S MOTION FOR PRELIMINARY INJUNCTION

JULIAN ABELE COOK, Jr., District Judge.

Plaintiff, Energy Jet, Inc., commenced this action to enjoin Defendant, Forex Corporation Forex, from using the trademark "Energy Jet" on air replacement ventilation systems and to otherwise enjoin Forex from infringing upon its trademark which is registered to Energy Jet, Inc. in Canada and in the United States.¹ Forex counterclaimed, asserting that Energy Jet, Inc. is not the owner of the disputed trademark. Rather, Forex contends that it is the entity with whom consumers associate the Energy Jet trademark, which is imbued with Forex's "good will" and reputation. Forex contends that it is the true owner of the subject trademark in the United States and that the Court should enjoin Energy Jet, Inc. from use of the trademark "Energy Jet."

The matter was set for an evidentiary hearing which was conducted over several weeks. Each party presented witnesses and documents in support of their respective positions. This Memorandum Opinion represents this Court's Findings of Fact and Conclusions of Law, pursuant to Fed. R.Civ.P. 52(a).

FINDINGS OF FACT

Plaintiff, Energy Jet, Inc., is a Canadian corporation that was incorporated under the Canada Business Corporation Act. It is a subsidiary of another Canadian corporation; to wit, Dunford-Liscio, Inc. Dunford-Liscio.

Defendant, Forex Corporation Forex, is a Michigan corporation. Defendant, James F. Hall Hall, is President and sole stockholder of Forex.²

Prior to 1980, Dunford-Liscio manufactured unfired air makeup systems for Solaquaire, a Canadian Company. These systems are energy conservation devices that replace air in a structured environment through the action of its two main components; to wit, a fan unit that propels air, and a duct unit that distributes the air. Solaquaire distributed the systems under the "Multi-Jet" trademark through Forex in the United States and through Henlex, Inc. Henlex in Canada.

In early 1979, Hall, in his capacity as President of Forex, concluded that he was no longer interested in being a distributor for Solaquaire because the price of the Multi-Jet units was not competitive. After Solaquaire terminated its relationship with Dunford-Liscio, Henlex decided that it would no longer represent Solaquaire as a distributor of Multi-Jet units in Canada.

In February of 1979, Hall retained an attorney to undertake a patent search on the Multi-Jet name. He was advised that the name might be available for registration. Nevertheless, Hall determined that he did not wish to use the Multi-Jet name and, accordingly, did not pursue the matter further. Hall undertook a new search for the name of Ener-Jet and, on September 20, 1979, instructed his attorney to institute a patent and trademark search under that name. On the basis of that search and the opinion of his attorney, Hall decided that the registration of Ener-Jet was not feasible.

Thereafter, Hall, Gerald Lemieux (the principal stockholder of Henlex), and John Dunford Dunford (a principal stockholder of Dunford-Liscio) held several meetings at Dunford's offices to discuss the manufacture and distribution of an unfired air makeup system without the participation of Solaquaire. In the course of these meetings, the parties discussed various potential trade names. The trade name of Energy Jet was chosen by Dunford despite Hall's belief that he had searched the Ener-Jet name and determined that it was unavailable for use. These meetings culminated in an informal understanding that Dunford-Liscio would continue to manufacture the air replacement systems and distribute them directly through Forex and Henlex. The parties did not reach an agreement regarding the ownership of the Energy Jet trademark.

In a letter, dated February 8, 1980, from Dunford to Henlex, he proposed that (1) Henlex would be the distributor of the Dunford-Liscio air replacement system in Quebec and Eastern Ontario, and (2) the system would be manufactured by Energy Jet, Inc.

On February 13, 1980, Dunford wrote to Hall and proposed that Forex would be the distributor of the Energy Jet system in the United States. The letter stated:

Dear Sir:

Further to our recent telephone conversation we would like to confirm our understanding and commitment of the following:

(a) Our associated company Energy-Jet Inc. will manufacture and supply energy related air replacement equipment to Forex Corporation as exclusive manufacturers representative for the United States market.

(b) Forex Corporation will purchase and distribute only, Energy Jet Products for air replacement, from Energy-Jet Inc.

(c) It is understood that the name Energy-Jet Inc. will be used on all sales brochures and other advertising. Coop advertising local and national will be accepted on the basis of 50/50 cost sharing. Mutual effort and acceptance would be required on the advertisement material and wording.

(d) Any agreement that may be made with Solaquair Corporation now or in the future will not effect our supplying of equipment or change our commitment with Forex Corporation.

With your acceptance of the above we can proceed with a formal agreement.

Very truly yours DUNFORD-LISCIO (ONTARIO) INC John Dunford President Lemieux responded to the Dunford communication on February 27, 1980, in which he said:

Dear John:

In reply to your letter of February 8, 1980, we wish to advise that we would be happy to represent Energy Jet, Inc. for Quebec and Eastern Ontario.

I will be meeting Jim Hall in Toronto on March 5th and 6th at which time we both will be to see you to discuss the matter further.

We will also bring with us our notes on what we feel should be included in the initial sales brochure.

Yours very truly Henlex, Inc. G.A. Lemieux, President

In a reply letter to Dunford, dated February 20, 1980, Hall expressed a difference in the understanding which had been reached at the prior meetings among the parties. The letter stated, in part: "I did not understand that Henlex and/or Forex would become involved with Dunford-Liscio to form a company you mention i.e., Energy-Jet, Inc. According to my understanding of our agreement, this should read Dunford-Liscio will manufacture the Energy Jet make-up air unit only for Henlex, Inc. and the Forex Corp. or put more simply Forex Corp. owns Energy-Jet in the United States and Henlex Ind. owns Energy-Jet in Canada and they own it jointly in all other territories." Moreover, Hall claimed that the provision, which required Forex to purchase and distribute only Energy Jet products from Energy Jet, Inc. was unacceptable. He stated that "it would prevent us from having anyone else manufacture the Energy Jet units and would require us to purchase all other air replacement equipment we are now marketing and distributing i.e. heat make-up air, supply fans and exhaust fans, etc. from Dunford-Liscio." In essence, Hall took issue with each of the proposals in the February 13, 1980 letter from Dunford. On the same day, Hall sent a handwritten letter to Lemieux, along with a copy of the Dunford letter of February 13, 1980 and Hall's reply letter of February 20, 1980. Lemieux did not receive the letter until February 27, 1980. Dunford testified that he never received Hall's letter of February 20, 1980.

Despite the differences which had been expressed in Hall's letter, the parties proceeded to manufacture and market the Energy Jet system. Their subsequent conduct was consistent with the proposal in Dunford's letter of February 13, 1980. However, Forex chose not to utilize the cooperative advertising, which had been offered by Dunford in that correspondence.

Energy Jet, Inc. was incorporated on February 18, 1980. Thereafter, it applied for registration of the Energy Jet trademark in Canada and in the United States. The trademark was registered to Energy Jet, Inc. by the Canadian Register of Trademarks on July 31, 1981. Similarly, the United States Patent and Trademark Office registered the Energy Jet trademark on August 3, 1983.

Despite an expressed unequivocal statement in the February 13, 1980 letter that a formal agreement would follow upon Hall's acceptance of the terms which had been stated therein, no such formal agreement was prepared or sent. Moreover, Dunford did not seek or inquire of Hall's acceptance of the terms. The principals of Dunford-Liscio stated that they did not discuss the terms of the agreement with Hall again because of their desire not to formalize the agreement and commit themselves to Forex.

Since its incorporation in 1980, all air make-up systems, which were manufactured by Energy Jet, Inc., have been labeled with the "Energy Jet" trademark. The Company designed and paid for the labels. It was the only entity to affix labels to the Energy Jet units. The principal advertising of the Energy Jet system was a four page brochure which prominently displayed Energy Jet in conjunction with the logo. After 1980, the logo was changed. Nonetheless, on the last page of every new brochure, Energy Jet, Inc. is described as the manufacturer of the Energy Jet system. As Energy Jet's distributor, Forex gave these brochures to customers and potential customers. Forex is listed as a distributor on some of the brochures. On others, Forex is not mentioned.

When Forex learned that there were brochures which omitted its name and that of Henlex, there was an immediate protest to Dunford, who indicated that the only reason for the omission of the Forex and/or Henlex names from the brochure was due to the distribution of the brochures in a small territory in which direct sales from Energy Jet, Inc. were...