Lane Capital Mgmt. v. Lane Capital Mgmt.

• Decision Date: 01 August 1998
• Docket Number: Docket No. 98-9173
• Citation: 192 F.3d 337
• Parties: (2nd Cir. 1999) LANE CAPITAL MANAGEMENT, INC., Plaintiff-Counter-Defendant-Appellee, v. LANE CAPITAL MANAGEMENT, INC., Defendant-Counter-Claimant-Appellant
• Court: U.S. Court of Appeals — Second Circuit

Page 337

192 F.3d 337 (2nd Cir. 1999)

LANE CAPITAL MANAGEMENT, INC., Plaintiff-Counter-Defendant-Appellee, v. LANE CAPITAL MANAGEMENT, INC., Defendant-Counter-Claimant-Appellant.

Docket No. 98-9173

August Term, 1998

UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT

Argued: January 7, 1999

Decided: September 22, 1999

Appeal from the order of the United States District Court for the Southern District of New York (Denny Chin, Judge) entered August 6, 1998, granting in part plaintiff-appellee's motion for summary judgment and enjoining defendant-appellant from using the mark "Lane Capital Management," or any confusingly similar mark, in connection with its services on a nationwide basis.

Affirmed.

[Copyrighted Material Omitted]

[Copyrighted Material Omitted] J. Christopher Jensen, New York, NY (Richard S. Mandel, Jonathan Z. King, Cowan, Liebowitz & Latman, P.C., New York, NY, of counsel), for Defendant-Counter-Claimant-Appellant.

Rose Auslander, New York, NY (Barbara A. Solomon, Fross, Zelnick, Lehrman & Zissu, P.C., New York, NY, of counsel), for Plaintiff-Counter-Defendant-Appellee.

Before: PARKER, SACK, and MAGILL^*, Circuit Judges.

PARKER, Circuit Judge:

Defendant-appellant Lane Capital Management, Inc. appeals from an order of the United States District Court for the Southern District of New York (Denny Chin, Judge) entered August 6, 1998, granting in part the motion for summary judgment by plaintiff-appellee Lane Capital Management, Inc., and enjoining appellant from using the service mark "Lane Capital Management," or any confusingly similar mark, in connection with its services on a nationwide basis.

Appellee sued appellant for infringement of appellee's service mark "Lane Capital Management." On appellee's motion for summary judgment, Judge Chin found that no genuine issue of material fact existed as to whether appellee's mark was valid and protectible, or as to whether appellant's use of the mark caused a likelihood of confusion in the marketplace. Judge Chin further found that appellant's unlawful use defense had been waived due to appellant's failure to plead it. Lane Capital Management, Inc. v. Lane Capital Management, Inc., 15 F. Supp. 2d 389 (S.D.N.Y. 1998). After judgment was entered, appellant moved to amend its answer to include the unlawful use defense, but Judge Chin denied that motion.

On appeal, appellant argues that genuine issues of material fact remain as to whether appellee's mark is inherently distinctive and, hence, valid and protectible. Appellant also argues that Judge Chin abused his discretion in denying the motion to amend the answer to add the unlawful use defense, and that genuine issues of material fact exist on that defense. For the reasons set forth in the discussion that follows, we reject appellant's arguments and affirm the order appealed from.

I. BACKGROUND

A. The Parties

Paul Fulenwider founded appellee and is the firm's manager and owner. Appellee was incorporated in Delaware on December 23, 1993, and immediately began business as an investment advisor. Appellee manages three investment funds which have $200 million in equity. Investors in the funds include individuals and entities "from around the globe." Additionally, appellee manages three individual accounts: one for a wealthy individual, one for a foundation, and one unspecified. Fulenwider chose the name "Lane Capital Management" at the suggestion of his wife. Lane was his father's nickname and middle name, and is his son's middle name. Fulenwider also asserts that he chose the name because "it's like a narrow path or channel. It's a relatively straight and narrow path. You know, it can be a shipping lane, an air lane, or a bowling lane. And in the context of being a risk management type firm, the idea of having a channel or a path or a tightly controlled thing had a very interesting meaning."

Douglas C. Lane is the president and majority shareholder of appellant, which manages stock portfolios and provides investment advice for individuals. Appellant was incorporated in New York on July 6, 1994. Douglas Lane began soliciting clients the first week of July 1994 and began providing investment advisor services to clients on July 25, 1994. Appellant has 700 clients with portfolios or accounts valued at $700 million. At the suggestion of his wife, Douglas C. Lane chose the name "Lane Capital Management" because Lane is his surname and he wished to benefit from the good will he had built in his name over the course of his career as an investment advisor.

B. The Events Leading to the Suit

Appellee first became aware of appellant in April 1996, when appellee applied to register as a foreign corporation in New York. Fulenwider contacted appellant in June 1996 and requested that appellant change its name. Appellant took the position that appellee should change its name.

On November 12, 1996, appellee applied to the U.S. Department of Commerce, Patent and Trademark Office ("PTO"), for a service mark for "Lane Capital Management" to be listed on the principal register.

C. The Suit

Appellee commenced this action on February 14, 1997. Appellee alleged service mark infringement under 15 U.S.C. § 1125(a) and related federal and state claims. Appellant answered on March 24, 1997, raising a number of affirmative defenses, but not the unlawful use defense.¹

On January 27, 1998, the PTO granted appellee's application for a service mark for the principal register for "financial services, namely investment management in the field of securities, commodities and other investment media . . . ." On February 11, 1998, appellee moved for summary judgment.

As relevant to this appeal, appellant raised two grounds in opposition to the motion. First, appellant contended that a genuine issue of material fact existed as to whether appellee's service mark was inherently distinctive. Appellant contended that the fact-finder could find that the purchasing public perceived appellee's mark to be primarily merely a surname. If the fact-finder did so find, then appellant's mark would not be inherently distinctive, and appellant would prevail on the infringement claim because there had been no showing of acquired distinctiveness. Appellant proffered three pieces of evidence in support of its argument that a genuine issue of material fact existed on this point. As an initial matter, appellant produced evidence that Lane is the 170th most popular surname in the United States and that in the New York City area there are almost 1,000 residential listings for individuals with the surname "Lane." Appellant also proffered evidence that there are numerous companies in New York City, nationwide, and on the Internet, who use Lane in their business names. Specifically, appellant pointed to over 125 business listings in the New York City area for companies with the name "Lane"; to a trademark research report that indicates "many more" companies who use the word "Lane" as a trade name in connection with financial services, insurance, or related businesses nationwide; and, to five companies that do business on the Internet under the name "Lane." Finally, appellant alleged that it is a common industry practice for financial institutions to employ surnames in their trade names. With respect to this last contention, appellant produced no actual evidence that employing surnames is a common industry practice, and thus relied on the conclusion that such fact is common knowledge. See 9 Wigmore, Evidence § 2570 at 726 (Chadbourn rev. 1981) (in drawing conclusions, fact-finder may resort to facts upon which people "have a common fund of experience and knowledge, through data notoriously accepted by all").

Second, appellant argued that a genuine issue of material fact existed as to the unlawful use defense. According to appellant, if the fact-finder determined that appellee had held itself out as a investment adviser, then appellee's failure to register as an investment adviser with the Securities and Exchange Commission ("SEC") violated the Investment Advisers Act of 1940. As such, argued appellant, the use of the mark in commerce was unlawful and could not establish protectible rights.

D. Judge Chin's Ruling

Judge Chin found that appellee's registered mark was inherently distinctive and that appellant's use of the mark would cause confusion in the marketplace. He found that appellant's unlawful use defense was an affirmative defense that had been waived because it had not been pleaded; and, in the alternative, that appellant had failed to raise a triable issue on the defense. Lane, 15 F. Supp. 2d at 394-400.

E. Motion for Reargument

On August 10, 1998, appellant filed a motion for reargument or, "in the alternative, for an order pursuant to Rule 15 . . . permitting [appellant] to amend its answer to plead an affirmative defense" of unlawful use. Judge Chin denied the motion, and appellant appealed.

II. DISCUSSION

As noted, the two issues on appeal are whether Judge Chin properly granted summary judgment for appellee on the issue of the validity and protectibility of the mark, and the independent issue of whether Judge Chin properly prohibited appellant from amending its complaint to add the unlawful use defense.

In this context, a number of potential issues not contested on appeal bear mention. First, appellee did not assert at the summary judgment stage that its mark had acquired distinctiveness-secondary meaning-and that issue is not in the case.

Second, except in the context of the unlawful use defense, appellant does not dispute Judge Chin's finding that appellee was the senior user. Similarly, except to the extent of challenging the validity of appellee's mark in the first instance, appellant does not dispute that its subsequent use of the mark caused a likelihood of confusion in the marketplace, or that the issuance of the injunction, or its scope, was proper.

Third, appellant does not challenge Judge Chin's treatment of the mark...