Larsen v. Ortega, Civ. No. N-89-302(JGM).

• Citation: 816 F. Supp. 97
• Decision Date: 30 March 1992
• Docket Number: Civ. No. N-89-302(JGM).
• Court: U.S. District Court — District of Connecticut
• Parties: Per F. LARSEN d/b/a The Dinghy Place v. Ray ORTEGA d/b/a The Dinghy Dock.

816 F. Supp. 97

Per F. LARSEN d/b/a The Dinghy Place v. Ray ORTEGA d/b/a The Dinghy Dock.

Civ. No. N-89-302(JGM).

United States District Court, D. Connecticut.

February 10, 1992.

Ruling on Motion to Alter or Amend Judgment March 30, 1992.

COPYRIGHT MATERIAL OMITTED

Robert H. Montgomery, Robert H. Montgomery, P.C., New Haven, CT, for plaintiff.

Charles Graham, Annunziata and Grillo P.C., New Haven, CT, for defendant.

Ruling on Plaintiff's Motion to Alter or Amend Judgment March 30, 1992.

MEMORANDUM OF DECISION

MARGOLIS, United States Magistrate Judge.

On June 23, 1989, plaintiff Per Frigast Larsen, d/b/a The Dinghy Place, commenced this four-count action against defendant Raymond-Edward Ortega, d/b/a The Dinghy Dock, alleging trademark infringement in violation of 15 U.S.C. § 1114 (Count I), false designation of origin in violation of 15 U.S.C. §§ 1121 & 1125(a) (Count II), unfair competition (Count III), and violation of the Connecticut Unfair Trade Practices Act "CUTPA", Conn.Gen.Stat. § 42-110a et seq. (Count IV). On September 22, 1989, defendant Ortega filed his answer, with two special defenses, i.e., permitted use and estoppel, along with a counterclaim under CUTPA.

On September 6, 1991, the parties consented to a court trial before this Magistrate Judge, with any appeal to be taken directly to the Second Circuit. (Dkt. # 40). On September 24, 1991, the parties filed their lengthy Joint Response to Standing order Regarding Trial Memoranda in Civil Cases (Dkt. # 44), which response included a forty-four paragraph stipulation of facts "Jt.Stip.". A four-day trial was held on October 7-10, 1991, at which nine witnesses testified.¹ Post-trial briefs were submitted by plaintiff on November 22, 1991 and December 6, 1991 (Dkt. ## 50 & 55) and by defendant on December 4, 1991 (Dkt. # 53).²

For the reasons stated herein, judgment may enter for Larsen on his complaint and on Ortega's counterclaim.

I. FINDINGS OF FACT

The following constitutes the Court's findings of fact pursuant to F.R.Civ.P. 52(a):

Around 1980, Arthur F. Ferguson "Ferguson" founded The Dinghy Place, located at 16 Old Post Road, Westbrook, Connecticut; in May 1980, he obtained Registration No. 1,209,259 for the tradename and service mark "The Dinghy Place." (Jt.Stip. ¶¶ 5-7; Exhs. A-B). Such registration has been in continuous use since then, is in full force and effect until September 14, 2002, and is incontestable under 15 U.S.C. § 1065. (Jt.Stip. ¶¶ 5, 7, 10). The trademark specifically provides that "No claim is made to exclusive use of `Dinghy' apart from the mark as shown." The mark consists of the three words "The Dinghy Place," in which a drawing of a dinghy, pointing to the left, is substituted for the capital letter "D" in "Dinghy," followed by a series of wavelets immediately to the right of the word "Place." (Exh. A).

The Dinghy Place is one of the largest dealers of small boats in New England, concentrating on small sail boats, row boats, canoes, inflatable boats, and other marine supplies and accessories. (Jt.Stip. ¶ 8; Exhs. W, KK). The Dinghy Place has built up substantial good will and has a high reputation. (Jt. Stip. ¶ 9). Larsen described it as a "niche business." (Tr. 142, 144). The prices of these boats start at approximately $250 for an unpainted wooden frame, with inflatables ranging from $710 to $9,000, rowing dinghies from $500 to $700, and sailing dinghies from $1,050 to $1,450. (Id. 89-90). The purchasers of such boats generally fall into two distinct categories—(1) the first-time buyers, who require "tactful advice," and (2) experienced yachtsmen, who consider themselves "absolute experts" and who are very knowledgeable and "keen shoppers." (Id. 90-91, 145-46). The latter category of purchasers far outweighs the former. (Id. 146). Larsen considers The Dinghy Place's sales area to include the entire state of Connecticut, the remaining New England states, New York, and New Jersey; he has placed sales with customers as far away as Virginia and Wisconsin. (Id. 27-28).

The Dinghy Place has two large signs facing the Post Road in Westbrook: (1) a long rectangular sign affixed to the building with its trademark and the words "WORLD HEADQUARTERS," followed by the registration sign (an "R" inside a circle) (Exhs. D-1 & D-3) and the other a squarish free-standing sign, again with the trademark, with the words, "DINGHIES," "DAYSAILORS," "INFLATABLES," "CANOES," "OUT-BOARD MOTORS," "TRAILERS," and "HARDWARE" beneath it. (Exh. D-2). The background of both signs is white, with blue lettering upon it. (Tr. 120).³

In March 1988, Ortega approached Ferguson with regard to Ortega opening a similar store of his own; Ferguson convinced Ortega to become a part-time employee at The Dinghy Place in order to learn the business. (Jt.Stip. ¶¶ 16-18, 25, 32-33). Ferguson taught Ortega all aspects of this business and became Ortega's "mentor" as a result. (Id. ¶ 18). During the spring of 1988, Ferguson and Ortega discussed the possibility of Ortega opening a branch of The Dinghy Place in a location west of New Haven. (Id. ¶¶ 20, 34). Ferguson suggested that Ortega have an attorney draft a franchise agreement, which would form the basis of any further discussions between them; Ferguson wanted Ortega to take the initiative, in order to demonstrate his good faith in any future transaction. (Id. ¶ 20; Tr. 19-21, 23, 99-100). On May 10, 1988, Ortega's attorney forwarded to him a draft of a license agreement, under which Ortega could use the name "The Dinghy Place," provided that he purchase all his inventory from Ferguson at five percent over Ferguson's cost. (Jt.Stip. ¶¶ 21, 35; Exhs. G-H). This agreement never was executed, as Ferguson claimed he had difficulty in finding an attorney with expertise in franchise law and Ferguson was entering his busy season. (Jt.Stip. ¶ 36; Tr. 111-12).

The relationship between Ferguson and Ortega thereafter is an ambiguous one, which ambiguity forms the basis for this lawsuit. After Ortega found a suitable location in Milford, he had discussions with Ferguson about using the name "The Dinghy Dock"; Ortega testified that he liked the alliteration, as the name had "a certain ring to it." (Jt.Stip. ¶ 37; Tr. 51-52). Ferguson testified that he was not pleased with that name and discouraged Ortega from using it, but that he did not reject it outright. (Tr. 94-95, 112-13). On May 23, 1988, Ortega applied for, and did receive, a sales tax permit for "The Dinghy Dock." (Jt.Stip. ¶¶ 30-31).

On June 1, 1988, Ortega opened his store, located at 512 Boston Post Road, Milford, Connecticut for business, under the name "Milford Marine—The Dinghy Dock." (Id. ¶ 30; Tr. 28-29). It carried a line of products identical to that of The Dinghy Place. (Jt.Stip. ¶¶ 13, 19, 27).⁴ Ortega obviously was aware of the existence and high reputation of The Dinghy Place. (Id. ¶ 14). Between June 1988 and October 1988, Ortega purchased his inventory from Ferguson (Exhs. 3-4); The Dinghy Place's invoices listed the customer either as "Milford Marine/T.D.D." or simply as "Milford Marine." (Exh. 4). Ortega and Ferguson operated under an "oral understanding," under which Ortega would purchase his inventory from Ferguson at five percent over Ferguson's cost, precisely as set forth in the unexecuted draft franchise agreement. (Tr. 56, 104). Ferguson believed that by increasing his own purchases from the manufacturers, such an arrangement would enhance his relationship with his own suppliers. (Tr. 103-07). Ferguson allowed Ortega to use his name as a sponsor for membership in the Connecticut Marine Trade Association "CMTA". (Jt.Stip. ¶ 38; Exh. 2).

When the store opened, Ortega used a blue-and-white business card which he designed himself, on which a dinghy facing left appears in lieu of the "D" in both words "Dinghy Dock"; the card also indicates that the store sells "Canoe, row, sail, inflatables & accessories." (Exh. L; Tr. 26-27). Ortega concedes that this business card "substantially copied" plaintiff's registered service mark. (Jt.Stip. ¶ 15).

When the Milford store initially opened, apparently there was no large sign above it, but merely a sandwich-board free-standing sign. (Tr. 79, 110-11). In early June 1988, Ortega met with Leonard Morano, the principal of Sign Maintenance Co. in Bridgeport, who designed a sign for Ortega. (Tr. 4-5, 12-13; Exhs. 9-10). Morano testified that he never saw plaintiff's service mark before. (Tr. 7, 13-14). Morano conceded, however, that in the initial pencil sketch of the sign, done with Ortega present, the capital "D" does resemble a boat, and recalled that Ortega had made that suggestion. (Id. at 14, 16-17, 18). The final sign, which was installed by Morano in early June 1988 (see Exh. 10), reads in large blue letters, "THE DINGHY DOCK," with one large "D" commencing both words. (Exh. E). To the right, in significantly smaller letters, are the two words "MILFORD MARINE." Directly beneath all five words is a series of blue wavelets, with the words "INFLATABLES. ROWERS. SAILERS. CANOES. OUTBOARDS. TRAILERS. ETC." (Id.) Morano testified that the large "D" comes from a standard typeset book, and that he had suggested the blue color and wavelets, which are common for marine products. (Tr. 5-6, 14, 19).

Ferguson placed two advertisements in the July 1988 issue of Soundings, a nautical publication sold on newsstands and is directed to the boating public. (Jt.Stip. ¶¶ 22-24). This issue was available for distribution in late May 1988. (Tr. 13). The first ad announced: "Coming soon to Milford ... a second location on the Post Rd. Milford, CT," with The Dinghy Place service mark, with the registration sign, directly beneath it. (Exh. I; Jt.Stip. ¶ 24). The second ad, which appeared only in the trade edition of the publication, read as follows:

ONE OF A KIND SMALL BOAT business established 8 years, in the heart of Conn's. sic boating country. Room for expansion. Business, inventory, showroom, house. $5

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