Jet, Inc. v. Sewage Aeration Systems

• Decision Date: 25 February 1999
• Docket Number: No. 97-3677,97-3677
• Citation: 49 USPQ2d 1355,165 F.3d 419
• Parties: JET, INC., Plaintiff-Appellant, v. SEWAGE AERATION SYSTEMS, Defendant-Appellee.
• Court: U.S. Court of Appeals — Sixth Circuit

Page 419

165 F.3d 419

49 U.S.P.Q.2d 1355

JET, INC., Plaintiff-Appellant, v. SEWAGE AERATION SYSTEMS, Defendant-Appellee.

No. 97-3677.

United States Court of Appeals Sixth Circuit.

Argued July 31, 1998.

Decided Jan. 6, 1999.

As Amended on Denial of Rehearing and Suggestion for

Rehearing En Banc Feb. 25, 1999. ^*

Thomas H. Odom (argued and briefed), Roger P. Furey (briefed), Arter & Hadden, LLP, Washington, D.C., for Appellant.

Jeffrey D. Harty (argued and briefed), Edmund J. Sease (briefed), Zarley, McKee Before: JONES, RYAN, and MOORE, Circuit Judges.

Thomte, Voorhees & Sease, Des Moines, IA, for Appellee.

OPINION

MOORE, Circuit Judge.

Jet, Inc. ("Jet") appeals the magistrate judge's entry of summary judgment for Sewage Aeration Systems ("SAS") on Jet's federal claims of trademark infringement and false designation of origin, and state claims of trademark infringement, unfair competition, and dilution. Jet also appeals the magistrate judge's refusal to grant leave for Jet to amend its complaint to add claims for trademark dilution under federal law and for cancellation of SAS's trademark. Because the parties' marks are not sufficiently similar to warrant trial on Jet's trademark claims, and because amendment of Jet's complaint would have been futile, we affirm the grant of summary judgment to SAS.

I. BACKGROUND

Both Jet and SAS manufacture sewage and waste-water treatment devices for homes. Jet began doing business in the 1950s under the name Jet Aeration, and in 1969 it officially changed its name to Jet, Inc. It first registered the trademark JET in 1969. SAS's product is sold under the trademark AEROB-A-JET, which SAS registered in 1992, although it has used the mark since 1971. According to Jet, SAS first went into competition with Jet when SAS began making an AEROB-A-JET device available for home use in 1991. Jet Br. at 4.

Each party makes a product that uses a spinning shaft to create vacuums in waste water, thereby drawing ambient air down into the water. The presence of oxygen encourages the proliferation of aerobic bacteria, which consume toxic materials. Jet's product is available as part of a complete package, with a specially fitted septic tank. The cost to the homeowner varies widely but is approximately $2,600 or more for the entire package, including installation. SAS's device is usually added to an existing septic tank, although it can also be installed as part of a new system. The homeowner's cost is $800 to $900.

Jet brought this action against SAS in December 1994, claiming trademark infringement under 15 U.S.C. § 1114 (Count One), false designation of origin under 15 U.S.C. § 1125(a) (Count Two), common law trademark infringement and unfair competition (Count Three), and common law dilution of a trademark (Count Four). Joint Appendix at 294-96 (Sec.Am.Compl.pp 21-34). Counts Three and Four are governed by Ohio law. The parties consented to present their case to a magistrate judge and appeal directly to this court rather than to a district judge. See 28 U.S.C. § 636(c).

SAS challenged the district court's personal jurisdiction and did not file its answer until October 1995. In June 1996, Jet sought to amend its complaint to make technical corrections; to add a count for cancellation of SAS's trademark; and to add a count for trademark dilution under 15 U.S.C. § 1125(c), which went into effect in January 1996. While permitting one technical correction, the magistrate judge otherwise denied the motion to amend without explanation.

On SAS's motion for summary judgment, the magistrate judge held that simultaneous use of the JET and AEROB-A-JET marks was unlikely to cause confusion in the marketplace, thereby disposing of Counts One, Two, and Three of Jet's complaint. See Daddy's Junky Music Stores, Inc. v. Big Daddy's Family Music Ctr., 109 F.3d 275, 288 (6th Cir.1997) (noting that trademark infringement under Ohio common law, like trademark infringement and false designation of origin under federal law, requires proof of likelihood of confusion). The magistrate judge also found that SAS was entitled to judgment as a matter of law on Count Four, the common law claim of trademark dilution, and therefore granted SAS's motion for summary judgment on all counts. We have jurisdiction over Jet's timely appeal. See 28 U.S.C. § 636(c)(3).

II. ANALYSIS

A. LIKELIHOOD OF CONFUSION

To determine whether simultaneous use of two trademarks is likely to cause confusion, we consider the following factors:

1. strength of the plaintiff's mark,

2. relatedness of the goods or services,

3. similarity of the marks,

4. evidence of actual confusion,

5. marketing channels used,

6. likely degree of purchaser care,

7. the defendant's intent in selecting its mark, and

8. likelihood of expansion of the product lines.

See Frisch's Restaurants, Inc. v. Elby's Big Boy of Steubenville, Inc., 670 F.2d 642, 648 (6th Cir.), cert. denied, 459 U.S. 916, 103 S.Ct. 231, 74 L.Ed.2d 182 (1982).

Likelihood of confusion is a mixed question of fact and law. See Wynn Oil Co. v. Thomas, 839 F.2d 1183, 1186 (6th Cir.1988). After a bench trial, we review a trial court's underlying factual findings for clear error but review de novo whether these facts indicate a likelihood of confusion. See id. SAS argues that we should therefore defer to the magistrate judge's finding on each factor unless the judge was clearly erroneous. In essence, SAS argues that the magistrate's judge decision should be treated as if it were the outcome of a trial. SAS misunderstands the nature of summary judgment. On SAS's motion for summary judgment, the magistrate judge could decide the likelihood of confusion issue only if there were no material facts in dispute. We review de novo both whether that standard was met and whether the magistrate judge drew the correct legal conclusion from the undisputed facts. See Daddy's Junky Music, 109 F.3d at 279-80.

The magistrate judge was clearly correct in his resolution of several of the Frisch factors. It was correct to classify the parties' devices as "related" under the broad standard used to decide whether two trademarks are competing in the same market (factor two). See, e.g., Wynn, 839 F.2d at 1187 (finding that car wash service and seller of car care products "fundamentally are selling the same thing--a clean car"); Little Caesar Enters., Inc. v. Pizza Caesar, Inc., 834 F.2d 568, 571 (6th Cir.1987) (finding that sit-down restaurant and carry-out operation sold "quite closely related" goods and services). Similarly, with respect to factor five, it is clear from the record that both parties use similar marketing channels and that there is a possibility of overlap. Because Jet has offered no evidence that SAS intended to cause confusion or to infringe on Jet's rights, factor seven is irrelevant. See Champions Golf Club, Inc. v. The Champions Golf Club, Inc., 78 F.3d 1111, 1121 (6th Cir.1996).

With respect to the first factor, Jet is entitled to a presumption that its mark is strong. Because Jet's trademark was registered for five years without successful challenge, it has "incontestable" status. See 15 U.S.C. § 1065. While courts normally evaluate the strength of a trademark in terms of where the mark fits along a spectrum ranging from "(1) generic ... and (2) merely descriptive to (3) suggestive and (4) arbitrary or fanciful," Induct-O-Matic Corp. v. Inductotherm Corp., 747 F.2d 358, 362 (6th Cir.1984), "[a]n infringement action may not be defended on the grounds that a mark is merely descriptive, if that mark has met the requirements of incontestability." Wynn, 839 F.2d at 1187 (citing Park 'N Fly, Inc. v. Dollar Park and Fly, Inc., 469 U.S. 189, 105 S.Ct. 658, 83 L.Ed.2d 582 (1985)). While SAS has offered evidence that Jet's mark has been weakened by widespread use of similar marks, the evidence is not sufficient to rebut as a matter of law the presumption conferred by incontestable status. Therefore, because this case is before us on SAS's motion for summary judgment, we accept Jet's claim that its mark is famous in its field.

The magistrate judge was also correct to find that purchasers of Jet and SAS's products are likely to exercise a great deal of care (factor six).

Generally, in assessing the likelihood of confusion to the public, the standard used by the courts is the typical buyer exercising ordinary caution. However, when a buyer has expertise or is otherwise more sophisticated with respect to the purchase of the services at issue, a higher standard is proper. Similarly, when services are expensive or unusual, the buyer can be expected to exercise greater care in her purchases. When services are sold to such buyers, other things being equal, there is less likelihood of confusion.

Homeowners Group, Inc. v. Home Mktg. Specialists, Inc., 931 F.2d 1100, 1111 (6th Cir.1991). Most purchasers of the parties' products are contractors, who are experts in their fields and therefore less likely to be confused than lay people. In addition, the high cost of either product--and of installing a septic system in general--is likely to induce great care even in the non-expert homeowner.

We agree with Jet that the magistrate judge erred in concluding that the potential for expanded competition between the parties (factor eight) was irrelevant. We have held that this factor is relevant even when the parties are already in competition, since increased overlap in product lines or geographic territory could increase the likelihood of confusion. See Champions, 78 F.3d at 1121-22 (holding that expansion was relevant because it could lead to further actual confusion). We also believe that the magistrate judge gave too much weight to Jet's inability to produce evidence of actual confusion (factor four). However, these factors are less significant than factor three, the similarity of the marks. Jet's infringement claims ultimately fail because JET and AEROB-A-JET simply are not similar enough to cause...