Interstate Brands Corp. v. Way Baking Co., Docket No. 31305

• Decision Date: 09 November 1977
• Docket Number: Docket No. 31305
• Parties: , 199 U.S.P.Q. 317 INTERSTATE BRANDS CORP., Plaintiff-Appellant, v. WAY BAKING COMPANY, Defendant-Appellee.
• Court: Court of Appeal of Michigan — District of US

Page 84

261 N.W.2d 84

79 Mich.App. 551, 199 U.S.P.Q. 317

INTERSTATE BRANDS CORP., Plaintiff-Appellant, v. WAY BAKING COMPANY, Defendant-Appellee.

Docket No. 31305.

Court of Appeals of Michigan.

Nov. 9, 1977.

Released for Publication Jan. 12, 1978.

Susskind & Hedstrom, P. C. by Jerome A. Susskind, Jackson, for plaintiff-appellant; Schmidt, Johnson, Hovey & Williams, Kansas City, Mo. by Robert D. Hovey, Kansas City, Mo., of counsel.

Dykema, Gossett, Spencer, Goodnow & Trigg by Alan R. Dominick, Jackson, for defendant-appellee.

Before RILEY, P. J., and J. H. GILLIS and MAHER, JJ.

PER CURIAM.

Interstate Brands Corporation brought this action to enjoin defendant, Way Baking Company, from using the trademark "Holsum" in a loosely defined area called the Lansing territory and to recover damages for Way's use of that trademark. The trial court, sitting without a jury, found that plaintiff Interstate was using the trademark "Holsum" as a defensive measure to stifle competition from Way and denied the requested relief. Plaintiff appeals the trial court's decision as of right.

In 1929 the W. E. Long Company first registered the "Holsum" trademark in Michigan. It has since been continuously renewed by Long. Defendant Way is a baking company based in Jackson, Michigan. Way began using the "Holsum" mark in Jackson in 1955 as a licensee of Long.

The Roskam Baking Company was plaintiff's predecessor in the Lansing area. Roskam began operations in the Grand Rapids, Michigan area in the 1930's and did not expand outside of the Grand Rapids area till 1960. In approximately 1945, Roskam commenced use of the name "Holsum" to designate its bakery products being sold in Grand Rapids.

In 1949 Roskam attempted to register the trademark in Michigan but registration was refused because defendant's assignor, W. E. Long, objected on the basis of its prior registration. Later, Long withdrew its objections and permitted registration of the mark by Roskam "in the territory in which Roskam (was then) * * * marketing bread and bakery products under the trade name 'Holsum' ", i. e., the Grand Rapids area. The trademark was renewed by Roskam and assigned to Interstate Brands in 1973 when Roskam sold plaintiff all its assets. The registration contained no geographical limits.

Roskam moved into the Lansing area in 1960 and sold, among other brands, Holsum bread, without objection from defendant. In 1964 defendant Way briefly introduced its product in the Lansing market area under the name "Holsum", but withdrew its product after Roskam objected.

In February, 1974, shortly after the sale of assets by Roskam to plaintiff, defendant began selling bread under the "Holsum" brand in the Lansing area. The trial court found that before defendant's reentry into the Lansing area, from 1970 to 1973, plaintiff had been phasing out the name "Holsum" in favor of the name "Butternut". For those years, the court found, the sale of Holsum bread by Roskam amounted to less than 5% of Roskam's sales. "(After) defendant's re-entry, plaintiff's Holsum product * * * reappeared sporadically".

The trial court accepted the version of events given by defendant's witness, a present employee of Way and a former employee of plaintiff's predecessor, Roskam. It found that before defendant's reentry into the Lansing market area with its Holsum product in 1974, "retail shelves in plaintiff's outlets (had) been bare of its Holsum product * * * . There is no evidence that plaintiff intends in the future to increase its use of the trade name Holsum, and the plaintiff offered no evidence of legitimate business reasons tending to show a lack of intent to abandon the name".

At the outset, we recognize that the standard by which we review the trial court's findings of fact is contained in GCR 1963, 517.1 which provides:

"Findings of fact shall not be set aside unless clearly erroneous. In the application of this principle, regard shall be given to the special opportunity of the trial court to judge the credibility of those witnesses who appeared before it."

We must view the trial court's conclusions on trademark usage as findings of fact not to be easily disturbed.

Trademark rights arise out of appropriation and use. Generally, the right belongs to one who first appropriates and uses the mark. United Drug Co. v. Theodore Rectanus Co., 248 U.S. 90, 39 S.Ct. 48, 63 L.Ed. 141 (1918). But mere adoption of a particular mark is inadequate. Rights grow out of usage. Trade Mark Cases, 100 U.S. 82, 25 L.Ed. 550 (1879); Hanover Star Milling Co. v. Metcalf, 240 U.S. 403, 36 S.Ct. 357, 60 L.Ed. 713 (1916).

Usage must satisfy good faith requirements. Pretense or pro forma use is not an acceptable substitute for bona fide use. O'Connor & Gordon, Inc. v. Handicraft Publications, Inc., 206 Misc. 1087, 136 N.Y.S.2d 558 (1954). Sham transactions designed merely to satisfy the trademark laws are not acceptable. Blue Bell, Inc. v. Jaymar-Ruby, Inc., 497 F.2d 433 (CA 2, 1974).

What constitutes sufficient bona fide use can only be determined on a case by case basis because the equities of each situation must be carefully balanced. See Chandon Champagne Corp. v. San Marino Wine Corp., 335 F.2d 531 (CA 2, 1964). In a particular case, it is the function of the fact finder to balance the equities and determine how a party is making use of a trademark.

The trial court found plaintiff's use of the trademark "Holsum" to be defensive. We realize that in a sense every use of a trademark is defensive. A trademark is a potent weapon in the competitive contest, Callman, The Law of Unfair Competition, Trademarks, and Monopolies, § 65, p. 3 (3d Ed., 1969), which operates as a guarantee to the trademark owner against deprivation of his profit. Macmahan Pharmacal Co. v. Denver Chemical Mfg. Co., 113 F. 468 (CA 8, 1901). It protects the owner's good will against the sale of another's products as his. United Drug Co. v. Rectanus, supra, 248 U.S. at 97, 39 S.Ct. 48.

While a certain amount of defensive use attaches to every use of a trademark, use of a mark solely for a defensive purpose is not bona fide. The owner of a trademark may not make a negative and merely prohibitive use of a...