Homeowners Group, Inc. v. Home Marketing Specialists, Inc.

• Decision Date: 24 April 1991
• Docket Number: No. 90-1665,90-1665
• Parties: HOMEOWNERS GROUP, INC., Plaintiff-Appellee, v. HOME MARKETING SPECIALISTS, INC., Defendant-Appellant.
• Court: U.S. Court of Appeals — Sixth Circuit

Page 1100

931 F.2d 1100

18 U.S.P.Q.2d 1587

HOMEOWNERS GROUP, INC., Plaintiff-Appellee, v. HOME MARKETING SPECIALISTS, INC., Defendant-Appellant.

No. 90-1665.

United States Court of Appeals Sixth Circuit.

Argued Feb. 15, 1991.

Decided April 24, 1991.

Richard E. Rassel, Susan Carino Nystrom, Mark R. Lezotte, Butzel, Long, Gust, Klein & Van Zile, Detroit, Mich., Mark S. Bicks, Alfred N. Goodman (argued), Washington, D.C., for plaintiff-appellee.

Scott D. Moore, Bushnell, Gage, Doctoroff & Reizen, Southfield, Mich., Paul R. Gupta (argued), Boston, Mass., for defendant-appellant.

Before MERRITT, Chief Judge, KENNEDY and JONES, Circuit Judges.

KENNEDY, Circuit Judge.

This is a service mark infringement case involving two companies with service marks containing the initials HMS. Homeowners Group, Inc. ("Homeowners") brought this suit asserting that use of a mark containing the letters HMS by Home Marketing Specialists, Inc. ("Specialists") in connection with real estate brokerage services constitutes a false designation of origin in violation of the Lanham Trademark Act, 15 U.S.C. Sec. 1125(a); an unfair trade practice under the Michigan Consumer Protection Act, Mich.Comp.Laws Ann. Secs. 445.901--.922 (West 1989); and unfair competition, service mark infringement, and dilution under the common law of Michigan. Homeowners seeks injunctive relief and cancellation of Specialists' federally registered mark. Specialists denies that Homeowners is entitled to any equitable relief and counterclaims for infringement, requesting cancellation of Homeowners' federally registered mark containing the initials HMS. Upon motions for summary judgment, the District Court ruled in favor of Homeowners on all counts, dismissed Specialists' counterclaim, permanently enjoined Specialists' use of any mark containing HMS, and ordered the cancellation of Specialists' federally registered mark. Specialists then filed this appeal. Because we find that the District Court erred in determining that no issues of material fact existed, we REVERSE and REMAND.

I. BACKGROUND OF DISPUTE

Plaintiff-appellee Homeowners is a nationwide company that sells a variety of products and services to thousands of real estate brokers in over forty states. Homeowners' predecessor in title, Homeowners' Marketing Services, Inc. ("Services"), was formed in Florida in 1980. By 1982 Services was providing its services in other states including Michigan, using the mark shown below.

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This mark was apparently abandoned by Homeowners although the record provides no information regarding the time of such abandonment. In early 1987, Services designed the HMS-roof design service mark shown below.

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This new mark was first used nationally and in Michigan beginning in July 1987 and continues to the present. In 1988, Homeowners was formed and in July 1988 the service marks belonging to Services were assigned to Homeowners; this assignment was recorded with the U.S. Patent and Trademark Office. In addition to these marks incorporating the initials HMS with a design, Homeowners claims that Services, and then Homeowners, also used the initials HMS alone as a service mark.

Defendant-appellant Specialists is a licensed real estate broker providing real estate brokerage services on a non-commission, flat-fee basis to the general public. Although Specialists competes directly with Homeowners' customers, who are commissioned real estate brokers, Specialists' primary customers are individual home sellers. Specialists was incorporated in Michigan in 1986 and continues to do virtually 100% of its business in Michigan although it has plans to franchise its brokerage services in other states. Specialists uses the service mark shown below.

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Specialists claims that it has used this mark continuously since its inception in March 1986. Specialists also uses the initials HMS alone as a mark.

Homeowners claims that at the end of July 1987, Homeowners' predecessor Services first learned of the existence of Specialists and of Specialists' use of the marks containing the initials HMS. Homeowners alleges that it investigated the matter and concluded that no confusion was likely. Shortly thereafter, perhaps coincidentally, both Homeowners and Specialists filed applications for federal registration of their respective HMS-roof design service marks. Specialists' application was filed in the U.S. Patent and Trademark Office ("Office") on September 14, 1987, while Homeowners' application was filed on September 17, 1987.

The Office notified Homeowners of a potential conflict with Specialists' pending registration. The examiner was concerned that section 2(d) of the Lanham Act would bar Homeowners' registration. Section 2(d) bars registration of a mark that

so resembles a mark registered in the [Office] or a mark or trade name previously used in the United States by another and not abandoned, as to be likely, when applied to the goods of the applicant, to cause confusion, or to cause mistake, or to deceive....

15 U.S.C. Sec. 1052(d). In response, Homeowners wrote a memorandum to the Office arguing that there was little likelihood of confusion for two reasons. First, the companies were in different businesses with substantial differences in the channels of trade, and second, the two HMS-roof design marks were very different in appearance. Apparently convinced that no confusion was likely, the Office allowed registration by both Specialists and Homeowners on July 26, 1988 and September 27, 1988, respectively.

However, Homeowners claims that in October 1988, it learned of several instances of actual confusion by its real estate broker customers. According to Homeowners, some of its customers saw newspaper advertisements for Specialists and mistakenly believed that Homeowners was sponsoring or was otherwise affiliated with Specialists. According to Homeowners, the confusion was caused by the use of the initials HMS in Specialists' service mark.

Homeowners notified Specialists of the confusion and requested Specialists to cease and desist from using the initials HMS in a service mark. These requests were unavailing and, in April 1989, Homeowners brought this complaint. A bench trial was scheduled for June 1990. After extensive discovery both parties filed motions for summary judgment. The crux of Homeowners' claim is that Homeowners has priority of use of the service mark HMS and that the contemporaneous use of marks containing the initials HMS by Homeowners and Specialists, when applied to their respective services, is likely to cause confusion in the marketplace. Specialists denied infringing on Homeowners' service mark and argued, inter alia, that there is no likelihood of confusion between the parties' respective HMS-roof design service marks and, even if there was confusion caused by the parties' use of those two marks, Homeowners was infringing on Specialists' mark because Specialists first used an HMS-roof design mark and possesses a valid prior federal registration.

The District Court granted summary judgment in favor of Homeowners and denied Specialists' motion. We review the grant of summary judgment de novo and the denial of summary judgment for abuse of discretion. Pinney Dock & Transport Co. v. Penn Cent. Corp., 838 F.2d 1445, 1472 (6th Cir.), cert. denied, 488 U.S. 880, 109 S.Ct. 196, 102 L.Ed.2d 166 (1988). The specific findings and rulings of the District Court are set out in the discussion below where appropriate.

II. APPLICABLE LEGAL STANDARDS

In deciding the parties' motions, the District Court held that the Michigan statutory and common law counts involved the same dispositive questions as the federal Lanham Act count. This is a question of state law that the parties do not challenge on appeal. Therefore, we treat this holding as correct. ¹ As a result, our determination of whether the District Court properly decided the Lanham Act count will apply to the Michigan statutory and common law counts.

The District Court correctly stated the requirements necessary to make out a claim for infringement under 15 U.S.C. Sec. 1125(a) as follows: (1) ownership of a specific service mark in connection with specific services; (2) continuous use of the service mark; (3) establishment of secondary meaning if the mark is descriptive; and (4) a likelihood of confusion amongst consumers due to the contemporaneous use of the parties' service marks in connection with the parties' respective services. The District Court held that Homeowners had satisfied these requirements and therefore was entitled to judgment as a matter of law. We find that the District Court erred in two respects. First, the court's determination of ownership of the relevant marks was improper, resulting in a potentially incorrect comparison of the parties' marks for purposes of determining whether a likelihood of confusion exists. Second, the court's likelihood of confusion analysis was insufficient. We express no opinion regarding the District Court's conclusions with respect to the other elements of the infringement claims.

III. OWNERSHIP OF SERVICE MARKS

It is elementary that service mark ownership is not acquired by federal or state registration. Rather, ownership rights flow only from prior appropriation and actual use in the market. See 1 J. McCarthy, Trademarks and Unfair Competition, Sec. 16:5, at 733 (2d ed. 1984). However, while registration of a service mark is not dispositive on the question, it is at least prima facie evidence of the registrant's ownership and exclusive right to use of a mark. 15 U.S.C. Secs. 1057(b), 1115(a).

One difficulty of this case is deciding which marks are owned by whom, and which marks are to be compared for purposes of determining whether a likelihood of confusion exists. The parties both...