McGraw-Edison Co. v. Walt Disney Productions

• Decision Date: 04 April 1986
• Docket Number: GRAW-EDISON,No. 85-1255,85-1255
• Parties: , 229 U.S.P.Q. 355 McCOMPANY, Plaintiff-Appellant, v. WALT DISNEY PRODUCTIONS and Bally Manufacturing Corporation, Defendants-Appellees.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 1163

787 F.2d 1163

54 USLW 2600, 229 U.S.P.Q. 355

McGRAW-EDISON COMPANY, Plaintiff-Appellant, v. WALT DISNEY PRODUCTIONS and Bally Manufacturing Corporation,

Defendants-Appellees.

No. 85-1255.

United States Court of Appeals, Seventh Circuit.

Argued Dec. 5, 1985.

Decided April 4, 1986.

Charles A. Laff, Laff, Whitesel, Conte & Saret, Chicago, Ill., for plaintiff-appellant.

David Goldberg, Cowan, Liebowitz & Latman, New York City, for defendants-appellees.

Before WOOD and COFFEY, Circuit Judges, and GRANT, Senior District Judge. ^*

COFFEY, Circuit Judge.

Plaintiff-appellant, McGraw-Edison Company ("McGraw-Edison"), brought this action against the defendants-appellees, Walt Disney Productions ("Disney") and Bally Manufacturing Corporation ("Bally"), alleging that the defendants' use of the plaintiff's TRON trademark violates sections 32 and 43 of the Lanham Act, 15 U.S.C. Secs. 1114(1) ¹ and 1125(a), ² the Illinois Anti-Dilution Act, Ill.Rev.Stat. ch. 140, Sec. 22, ³ the Illinois Deceptive Trade Practices Act, Ill.Rev.Stat. ch. 121 1/2, Secs. 311-317, ⁴ and the common law of the State of Illinois. The district court granted summary judgment in favor of Disney and Bally, and McGraw-Edison appeals. We reverse.

I

Since 1900 McGraw-Edison has engaged in the manufacture, distribution, and sales of electrical and mechanical products and related services for both consumer and commercial applications. The Bussmann division of McGraw-Edison manufacturers, distributes, and sells fuses and fuse accessories, and is the world's largest manufacturer of small and medium dimension fuses. McGraw-Edison registered its trademark TRON in 1958 (for electrical fuses) and 1968 (for fuse holders, clip clamps and fuse clips) and has used the trademark TRON to identify a line of fuses and fuse accessories, placing the TRON mark on both the product and its packaging. The defendants do not dispute that McGraw-Edison's registrations for the trademark TRON are in full force and effect and are the only registrations for the mark TRON on the U.S. Trademark Register.

Between 1970 and 1983, McGraw-Edison sold more than $85 million worth of TRON fuse products and spent more than $1.5 million in advertising TRON products. TRON fuse products are sold in a variety of outlets, including drug stores, grocery stores, discount stores (e.g., Target, K-Mart, Venture, Woolco-Woolworths), hardware stores (e.g., Ace Hardware, True Value Hardware), and electrical supply and catalog houses (e.g., Advent, Newark). TRON products are advertised in magazines, trade directories, catalogs and through point of sale materials.

Walt Disney Productions is in the entertainment industry, notably the production of motion pictures, television programs and the operation of amusement parks. In June 1980, Disney purchased a screenplay entitled TRON, and developed a motion picture with the same name. ⁵ In early 1981 Disney began to develop a merchandising program "to attract prospective manufacturers to produce and sell merchandise associated with the 'TRON' motion picture." At the same time that Disney was developing the merchandise licensing program, it engaged TCR Service, Inc. to conduct a trademark search in order that Disney might determine whether the use of the name TRON would conflict with third party uses of similar names on like goods. Disney discovered that the Mego Toy Company ("Mego") owned a federal trademark registration for the mark TRONS for futuristic toys, dolls, and toy robots, as well as federal registrations for variations of the term TRON--such as BIOTRON, MICROTRON, ALPHATRON, and BETATRON,--also for use on futuristic toys, dolls, and robots. Disney negotiated with Mego and acquired Mego's registrations and rights in the mark TRONS and the variations of TRON (BIOTRON, MICROTRON, etc.) owned by Mego. Disney's trademark search also disclosed McGraw-Edison's registration for the trademark TRON covering electric fuses and accessories, but Disney's senior legal counsel did not consider McGraw-Edison's registrations as a bar to Disney's use of the mark TRON.

As a result of its licensing and merchandising program, Disney entered licensing agreements with manufacturers for a wide variety of products displaying the TRON mark for sale throughout the country. Specifically, Disney licensed the mark TRON to the defendant Bally for video games and software and to other manufacturers for items such as telephones, phonograph records, wristwatches, tee shirts and sweatshirts, posters, paperback books, nightgowns, pajamas and robes, masquerade costumes, caps, sheets, pillow cases, comforters, bed spreads, curtains, coordinated active wear, warm-up suits, infant and toddler knit shirts and sleepwear, jewelry, buttons and pins, sleeping bags, wallets and bags, beach towels, board games, sun glasses, books, toy figures, View Master slides, puzzles, soaps, thermal mugs and tumblers. From the inception of its merchandising program in 1981 through April 2, 1983, the TRON products licensed by Disney generated $58 million in sales, with more that $52 million of that total attributable to electronic products, such as computer video games and software.

In June 1982, prior to the scheduled July release of the motion picture TRON, McGraw-Edison contacted Disney and Bally (licensed by Disney to manufacture a video game entitled "TRON") and asserted its rights in its registered trademark TRON. After negotiations failed to resolve the dispute between McGraw-Edison and Disney and Bally, Disney brought a declaratory judgment action in the United States District Court for the Southern District of New York; on the same day, McGraw-Edison filed its complaint in the present action against Disney and Bally. ⁶ Count I of McGraw-Edison's complaint alleged that Disney's and Bally's use of the TRON mark is likely to cause confusion, or mistake, or to deceive consumers as to the origin and sponsorship of the products of McGraw-Edison, Disney and Bally in violation of the Lanham Act. 15 U.S.C. Sec. 1114(1), Sec. 1125(a). Count II claimed that the defendants' use of McGraw-Edison's TRON trademark constituted unfair competition, caused injury to McGraw-Edison's business reputation and good will and diluted the distinctive character and quality of McGraw-Edison's TRON mark in violation of Ill.Rev.Stat. ch. 140, Sec. 22, ch. 121 1/2, Secs. 311-17, and Illinois common law. McGraw-Edison sought to enjoin Disney and Bally from further use of the TRON mark, requested an accounting of all profits the defendants derived from their use of the mark TRON, and prayed for compensatory as well as punitive damages.

The defendants filed a motion for summary judgment, arguing that the undisputed facts demonstrated "that the continued respective uses by the parties of the name 'TRON' cannot result in confusion. Nor is it likely that [the] defendant's continued use of the name 'TRON' will diminish the value of plaintiff's trademark used in connection with the sale and promotion of its fuse products." The district court granted summary judgment in favor of the defendants on both counts of the complaint, and rejected McGraw-Edison's claim that the existence of material issues of fact precluded summary judgment stating, "those issues [presented by McGraw-Edison] are either not material or are legally based."

In determining whether the defendants had created a likelihood of confusion as to the origin of its products, as required to prove a violation of 15 U.S.C. Secs. 1114, 1125, the district court considered the seven factors delineated by this court in Helene Curtis Industries, Inc. v. Church & Dwight Co., Inc., 560 F.2d 1325 (7th Cir.1977), cert. denied, 434 U.S. 1070, 98 S.Ct. 1252, 55 L.Ed.2d 772 (1978): (1) similarity of the marks; (2) similarity of the product; (3) area and manner of concurrent advertising and use; (4) degree of care likely to be exercised by consumer; (5) strength of plaintiff's mark; (6) actual confusion; and (7) intent of the infringer to palm off its products as those of another. Id. at 1330. The district court concluded:

"In light of the lack of evidence of actual confusion on the part of consumers, the lack of concurrence of markets and advertising, the difference in printing of the two marks, and the lack of intent on the part of defendants to pawn off their products as plaintiff's the court finds that no likelihood of confusion exists."

With respect to McGraw-Edison's state law claims in Count II, the court noted that the Illinois Deceptive Trade Practices Act, Ill.Rev.Stat. ch. 121 1/2, Sec. 312, imposes liability upon an infringer only if a likelihood of confusion exists. The court concluded that the defendants were not liable under the statute, referring to its previous conclusion that no likelihood of confusion existed. The district court also granted summary judgment with respect to the plaintiff's claim under the Illinois Anti-Dilution Act, Ill.Rev.Stat. ch. 140, Sec. 22, on the basis of its finding that McGraw-Edison's mark TRON was not distinctive. On appeal, McGraw-Edison claims that there are genuine issues of material fact which preclude summary judgment on the issue of likelihood of confusion, and that the district court committed errors of law in dismissing its dilution claim.

II

In reviewing the district court's grant of summary judgment, "we note that judgment is appropriate when 'there is no genuine issue as to any material fact and ... the moving party is entitled to a judgment as a matter of law.' " Black v. Henry Pratt Co., 778 F.2d 1278, 1281 (7th Cir., 1985) (quoting Fed.R.Civ.P. 56(c)); see also Poller v. Columbia Broadcasting System, Inc., 368 U.S. 464, 82 S.Ct. 486, 7 L.Ed.2d 458 (1962). "The party moving for summary judgment has the burden of establishing the lack of a genuine issue of material fact." Big O Tire Dealers, Inc. v. Big O Warehouse, 741 F.2d 160, 163 (7th Cir.1984). Thus, "in determining whether factual issues exist, a reviewing...