Home Box Office, Inc. v. Showtime/The Movie Channel Inc.

• Decision Date: 03 November 1987
• Docket Number: 376,D,Nos. 349,s. 349
• Citation: 832 F.2d 1311
• Parties: , 4 U.S.P.Q.2d 1789 HOME BOX OFFICE, INC., Plaintiff-Appellant-Cross-Appellee, v. SHOWTIME/THE MOVIE CHANNEL INC., Defendant-Appellee-Cross-Appellant. ockets 87-7640, 87-7716.
• Court: U.S. Court of Appeals — Second Circuit

Page 1311

832 F.2d 1311

56 USLW 2336, 4 U.S.P.Q.2d 1789

HOME BOX OFFICE, INC., Plaintiff-Appellant-Cross-Appellee, v. SHOWTIME/THE MOVIE CHANNEL INC., Defendant-Appellee-Cross-Appellant.

Nos. 349, 376, Dockets 87-7640, 87-7716.

United States Court of Appeals, Second Circuit.

Argued Sept. 25, 1987.

Decided Nov. 3, 1987.

John E. Nathan, New York City (Fish & Neave, New York City, Vincent N. Palladino, Susan Progoff, Lisa E. Cristal, Home Box Office, Inc., New York City, Thomas M. Woodbury, Harold E. Akselrad, of counsel), for plaintiff-appellant-cross-appellee.

Richard Z. Lehv, New York City (Weiss Dawid Fross Zelnick & Lehrman, P.C., New York City, Janet L. Hoffman, Stephen F. Mohr, of counsel), for defendant-appellee-cross-appellant.

Before LUMBARD, OAKES and KEARSE, Circuit Judges.

LUMBARD, Circuit Judge:

Plaintiff Home Box Office (HBO) appeals from an order of the Southern District of New York by Judge Richard J. Daronco denying a motion brought by HBO for a preliminary injunction and instead granting a limited injunction. HBO began this action by seeking an injunction against defendant Showtime to prevent Showtime from using certain slogans in an advertising and promotional campaign for Showtime's cable television services. On July 15, 1987 following a hearing, the district court enjoined Showtime from using the contested slogans unless they were accompanied by disclaimers adequate to avoid confusing consumers. In that order, the district court specifically exempted certain promotional materials that Showtime presented to the court at the hearing. 665 F.Supp. 1079.

HBO contends that the district court erred by (1) considering Showtime's proposed amended advertisements at the preliminary injunction hearing instead of those originally submitted by the parties as the basis for the injunction, (2) denying HBO's motion for preliminary injunction, (3) ruling on Showtime's proposed advertisements when HBO did not have notice of, or the opportunity to be heard concerning those advertisements and by assigning HBO the burden of proof and (4) incorrectly applying the test for a preliminary injunction. Showtime cross-appeals, requesting that this court reverse the district court's grant of the preliminary injunction. We affirm the district court's issuance of a preliminary injunction order but vacate the portions of the order specifically exempting the promotional material presented by Showtime at the preliminary injunction hearing and making disclaimers an acceptable alteration of the promotional materials which would allow Showtime to continue using the slogan.

I.

HBO and Showtime are competitors in the subscription television field. Both programming services offer a variety of movies, concerts, sporting events and other programs. Both sell their television services primarily to cable operators who then sell them to consumer subscribers.

HBO identifies its service through its federally registered servicemark and trademark "HBO" which appears at the beginning of each program. HBO frequently promotes its companion "Cinemax" television service in tandem with its "HBO" service with slogans such as "HBO & CINEMAX." Showtime also frequently promotes its companion service, "The Movie Channel," along with its "Showtime" service with slogans such as "SHOWTIME/THE MOVIE CHANNEL."

At the National Cable Television Association Convention held in Las Vegas on May 17-20, 1987 (an industry trade show), Showtime launched a new advertising and promotional campaign using a new slogan as its theme. The primary slogan used was "SHOWTIME & HBO. It's Not Either/Or Anymore." (the "slogan"); the related slogans were: "THE MOVIE CHANNEL & HBO. It's Not Either/Or Anymore.", "SHOWTIME & HBO. Together is Better.", "Why SHOWTIME & HBO make such a perfect pair.", and "Play the Showtime PERFECT (HBO, Showtime) PAIR Instant Winner Game." The slogan was featured on a number of materials displayed or distributed at or near the Convention site. The materials included an outdoor highway billboard and a hot air balloon located outside the Convention Center; a rolling billboard that was driven around the Convention area; promotional videotapes played in public at the Las Vegas airport and in Convention hotel rooms; signs located in Showtime's Convention booth; promotional pens, tote bags, sunglasses, buttons and cookies distributed at Showtime's booth and/or to the hotel rooms of Convention attendees; advertisements that were distributed at the Convention and which appeared in trade publications at or about the time of the Convention; packages of promotional material distributed to Showtime's cable affiliates at or about the time of the Convention; game cards; and a brochure emphasizing the value of subscribing to both HBO and Showtime. Some, but not all, of these materials contained disclaimers stating that HBO and Showtime were unrelated services.

HBO brought this action on June 30, 1987 for (1) the wrongful use in commerce of false designations of origin, false descriptions and false representations under 15 U.S.C. Sec. 1125(a) [Lanham Act Sec. 43(a) ], (2) service mark infringement under 15 U.S.C. Sec. 1114(1) [Lanham Act Sec. 32(1) ]; for service mark and trade name infringement and unfair competition at common law; and for violation of the New York Anti-Dilution Statute, New York General Business Law Sec. 368-d. HBO's motion for preliminary injunction was designed to prevent Showtime from using the slogan and the related slogans in any future promotional materials.

HBO maintains that the slogan is confusing because it suggests that HBO and Showtime have merged or are engaged in a cooperative promotional campaign. To prove this, HBO produced evidence in the district court which tended to show that the slogan was the source of confusion because some observers perceived it to be part of a joint promotional campaign. The evidence presented by HBO included the promotional materials or representations of the materials used by Showtime at the Convention, a Boston Globe article that described the confusion caused by the slogan at the Convention among members of the cable television trade and a consumer reaction study in four cities that tested reactions to the videotaped commercial and the billboard that Showtime used at the Convention.

Showtime maintains that it adopted the slogan and undertook the related promotional campaign to educate consumers that Showtime has exclusive movies that are not available from HBO. Showtime asserts that its goal in using the slogan was to differentiate the two services and to convince consumers to subscribe to its service as well as to HBO. Showtime thus emphasizes that it sought to inform the public that Showtime and HBO are different, not to suggest any link between the services. It points to the disclaimers of any link between HBO and Showtime, and especially to the new promotional materials presented to the district court at the preliminary injunction hearing that featured disclaimers more prominently than did the materials that Showtime displayed and distributed at the Convention.

HBO also applied for a temporary restraining order on June 30, 1987. The parties agreed to a consent order at a pretrial meeting on July 1 and began settlement negotiations. No agreement was reached, however, and on July 15, the district court held a preliminary injunction hearing. At that hearing, Showtime presented mock-ups of revised promotional materials and a modified videotape commercial. HBO objected to the district court's consideration of the modified materials on several grounds, including the grounds that it had not been accorded adequate notice of the new promotional materials and that Showtime was seeking an advisory opinion. The court overruled the objection and admitted the proposed materials into evidence.

Although finding that the slogan was not "patently false," Judge Daranco credited the results of HBO's study and found that, if used alone without "adequate disclaiming information appropriate to the selected medium," it was ambiguous and likely to confuse and mislead consumers. Based on its findings, the district court enjoined Showtime from using the slogan and the related slogans "unless a prominent disclaimer, appropriate to the selected medium accompanies their use." The court thus enjoined the materials used at the Convention and any other materials not featuring an adequate disclaimer but it specifically exempted the materials presented at the hearing from the terms of the order. This court granted HBO's motion to hear this appeal on an expedited basis.

II.

The Lanham Act creates a claim for trademark infringement when a trademark holder can demonstrate that the use of its trademark by another is likely to confuse consumers as to the source of the product. See 15 U.S.C. Secs. 1114(1)(a), 1125(a); Mushroom Makers, Inc. v. R.G. Barry Corp., 580 F.2d 44, 47 (2d Cir.1978), cert. denied, 439 U.S. 1116, 99 S.Ct. 1022, 59 L.Ed.2d 75 (1979). It is well established that in situations such as that presented by this case, the Lanham Act, 15 U.S.C. Secs. 1051-1127, was designed to prevent likely confusion in the minds of consumers as to (1) the relationship between the trademark holder and a competitor seeking to use that trademark or a substantially similar mark in its own marketing efforts and (2) the source of the product being represented by the trademark or a substantially similar mark. See Lois Sportswear, U.S.A., Inc. v. Levi Strauss & Co., 799 F.2d 867, 871 (2d Cir.1986).

We agree with the district court that to succeed on a motion for preliminary injunction the movant must establish: (a) irreparable harm and (b) either a likelihood of success on the merits or sufficiently serious questions going to the merits to...