Kardex Systems, Inc. v. SISTEMCO NV, Civ. No. 83-0369 P.

• Decision Date: 23 March 1984
• Docket Number: Civ. No. 83-0369 P.
• Citation: 583 F. Supp. 803
• Parties: KARDEX SYSTEMS, INC., Plaintiff, v. SISTEMCO N.V. Remstar International, Inc., Kenneth W. Byers, Defendants.
• Court: U.S. District Court — District of Maine

583 F. Supp. 803

KARDEX SYSTEMS, INC., Plaintiff, v. SISTEMCO N.V. Remstar International, Inc., Kenneth W. Byers, Defendants.

Civ. No. 83-0369 P.

United States District Court, D. Maine.

March 23, 1984.

COPYRIGHT MATERIAL OMITTED

John A. Graustein, Portland, Me., Siegrun D. Kane, New York City, for plaintiff.

Thomas B. Wheatley, Portland, Me., James F. McKeown, Washington, D.C., for defendant.

FINDINGS OF FACT, CONCLUSIONS OF LAW, OPINION AND ORDER ON CROSS MOTIONS FOR PRELIMINARY INJUNCTION

GENE CARTER, District Judge.

I. PROCEDURAL BACKGROUND

A. Jurisdiction

This is an action for infringement of registered and unregistered trademarks and for state law-based claims of unfair competition and false association. The latter cause of action is also based upon alleged violations of the Lanham Act, 15 U.S.C. § 1052(a). Jurisdiction of this Court exists under the provisions of 15 U.S.C. § 1121 and 28 U.S.C. §§ 1332 and 1338.

B. The Complaint

The Complaint alleges the following facts. The Plaintiff, Kardex Systems, Inc. ("Kardex" hereinafter), is a New York corporation with a principal office and place of business in Marietta, Ohio. Kardex, formerly known as R.Q.A. Office Systems Products, Inc., is presently and has for many years been engaged in the business of manufacturing and selling office systems, office supplies and related equipment. By an Asset Sale Agreement dated September 1, 1978, Kardex purchased from Sperry Rand Corporation ("Sperry" hereinafter) certain trademarks, goodwill and other assets of Sperry's Office Systems Business. The trademarks in question consist of various specific marks registered in the United States, which, it is asserted, are valid, subsisting, uncancelled and unrevoked. The validity of these registered marks has become incontestable under the provisions of 15 U.S.C. § 1065. Kardex also purchased various unregistered marks previously used by its predecessor, Sperry. These include the mark "Industriever" and various "Rem" combination marks, including "Remcraft," "Remklip," "Rem-Stik," "Remtag," and "Remtex." Kardex and Sperry have used these marks to identify high-quality products originating from a single source. According to the Complaint, the identified marks have built up valuable goodwill of which Kardex is presently the owner. Under the Asset Sale Agreement, Kardex acquired from Sperry its "entire existing inventory of products and literature, including products and literature bearing the marks Remington, Remington Rand and other "Rem" combinations." Complaint ¶ 20.

It is further alleged that the Defendant, Sistemco, N.V. ("Sistemco" hereinafter), a corporation of the Netherlands Antilles with a principal place of business at Curacao, Netherlands Antilles, acquired by assignment from Sperry the right to use outside of the United States various marks including "Kardex," "Remington," and various "Rem" combinations. Sistemco allegedly did not acquire any rights by such assignment to the use of the identified marks in the United States. Therefore, Sistemco and the other Defendants "are attempting to capitalize on the goodwill of Plaintiff Kardex in the United States by claiming rights to the names and marks Kardex, Industriever and Remstar in the United States and by using these names and marks in a manner likely to cause confusion and to unfairly compete with the Plaintiff." Complaint ¶ 26. Subsequent to Kardex's acquisition by the asset sale from Sperry of its rights in the identified marks, Sistemco filed applications in the United States Patent and Trademark Office to register the marks Kardex, serial no. 309,453, Industriever, serial no. 257,987, and Rem-Star, serial no. 292,797, for automatic storage and retrieval apparatus. Kardex opposed the applications for the marks "Kardex" and "Remstar." Kardex filed no opposition to the application for use of the mark "Industriever" issued to Sistemco by Reg. No. 1,174,934 "because Kardex was unaware of said application." Id., ¶ 28. Plaintiff asserts that Sistemco's claim of ownership of an exclusive right to the use of the three marks through its applications to register those marks in the United States was known to be false when made and constitutes a fraud on the United States Patent and Trademark Office. Id., ¶ 31.

It is further alleged that Sistemco has established as its subsidiary in the United States the Defendant, Remstar International, Inc. ("Remstar" hereinafter), and that this subsidiary of Sistemco has offered for sale in the United States mechanized storage and retrieval units under the marks "Industriever" and "Remstar." Id., ¶ 35. Remstar's representatives "have held themselves out as being associated with Kardex." Id., ¶ 36. Also, according to the Complaint, the conduct of the Defendants in claiming the right to the use of the names and marks "Kardex," "Industriever," and "Remstar" in the United States and the actual use of those names and marks in the United States is likely (1) to cause confusion, mistake and deception as to the relationship of Sistemco and Remstar with Kardex; (2) to "imbue Defendants' products and business with the quality and reputation associated with plaintiff's products and business," id., ¶ 37(b); (3) to lead to the products of Sistemco and Remstar being passed off as the products and business of Kardex, id., ¶ 37(c); and (4) falsely to induce potential customers and existing customers of Kardex to believe that Sistemco and Remstar are successors to Sperry. Id., ¶ 37(d). These effects of the Defendants' conduct allegedly will cause substantial and irreparable injury to the interests of the Plaintiff and of the public. Id., ¶ 37. The Defendants, Sistemco and Remstar, undertook the use of the specified marks with the knowledge of Kardex's and Sperry's prior use of them in the United States. Such conduct, it is asserted, constitutes "the use of false designations of origin, false descriptions or representations, tending to falsely describe and/or represent defendants' goods and business as those of plaintiff's." Id., ¶ 39. Finally, it is asserted that the Defendants have caused or procured the utilization of the described names and marks and that Plaintiff believes that it is likely to be damaged by the described conduct of the Defendants which is asserted to be in violation of the Lanham Act, 15 U.S.C. § 1125(a). Id., ¶ 40.

On the allegations represented by the foregoing summary of the Complaint are founded Kardex's claims for violation of the Lanham Act, infringement of Kardex's registered and unregistered trademarks, unfair competition and false association. In the Complaint Kardex seeks to obtain an injunction permanently prohibiting the Defendants from further pursuit of the conduct described in the Complaint. Plaintiff additionally seeks cancellation of Sistemco's U.S. Registration No. 1,174,934 for the "Industriever" mark, as well as an order requiring Sistemco to abandon with prejudice its applications for the "Kardex" and "Remstar" marks. Finally, Plaintiff seeks punitive damages for willful and deliberate infringement of Kardex's marks and the recovery of the costs of the present suit, including reasonable attorneys' fees.

C. The Answer and Affirmative Defenses

The Defendants answered the Complaint on December 5, 1983, denying the operative substantive allegations of the Complaint and asserting numerous affirmative defenses. These include:

(1) the denial that the Defendants infringe "any valid and subsisting marks, whether registered or unregistered, of Kardex ....", Answer at 9;

(2) the allegation that Sistemco and Remstar "have the sole and exclusive right to use the marks `Industriever' and `Remstar' for automatic storage and retrieval apparatus," id.;

(3) the allegation that Sistemco is the owner of specific U.S. trademark registrations for the names "Industriever," "Remstar," and Remdex," which registrations are asserted to be valid and subsisting, id. at 9-10;

(4) the allegation that the unregistered mark "Industriever" had been abandoned by Sperry over two years prior to the Asset Sale Agreement between Sperry and Kardex's predecessor, id. at 10;

(5) the denial of the occurrence of any actual confusion by virtue of Remstar's use of the "Industriever" mark on its products, id. at 10;

(6) the allegation that Kardex is estopped to challenge Sistemco's right to the "Industriever" mark as federally registered by virtue of its failure to initiate a cancellation proceeding against Sistemco in the U.S. Patent and Trademark Office, id. at 10-11;

(7) the denial that Kardex has any exclusive right to the use of "triever" or a suffix similar thereto for automatic storage and retrieval products, id. at 11;

(8) the allegation that Kardex is estopped by laches because it has brought the pending action belatedly after Remstar has invested substantial amounts of effort and money in promoting products under the "Industriever" and "Remstar" marks, id.;

(9) the allegation that Kardex unsuccessfully opposed Sistemco's "Remstar" application before the U.S. Patent and Trademark Office, id. at 11-12;

(10) the allegation that Kardex "is guilty of inequitable conduct" because it has allegedly marked brochures distributed to the public indicating that certain marks containing the suffix "triever" were registered marks when, in fact, such was not the case, id. at 12.

D. The Counterclaims

Sistemco and Remstar then assert counterclaims against Kardex for alleged infringement by Kardex of the "Industriever" mark on the following allegations of fact. They allege that Sistemco is the owner of a valid and subsisting U.S. Trademark Registration, id., and that Sistemco and Remstar have the right to the exclusive use of the "Industriever" mark for automatic storage and retrieval apparatus in the United States. Id. at 12-13. Defendants further allege that Kardex commenced using the "Industriever" mark in advertising automatic storage and retrieval apparatus only after it had actual or...