Mil-Mar Shoe Co., Inc. v. Shonac Corp.

• Decision Date: 02 February 1996
• Docket Number: MIL-MAR,No. 95-3588,95-3588
• Citation: 75 F.3d 1153
• Parties: , 37 U.S.P.Q.2d 1633 SHOE COMPANY, INCORPORATED, Plaintiff-Appellee, v. SHONAC CORPORATION, Defendant-Appellant.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 1153

75 F.3d 1153

64 USLW 2564, 37 U.S.P.Q.2d 1633

MIL-MAR SHOE COMPANY, INCORPORATED, Plaintiff-Appellee, v. SHONAC CORPORATION, Defendant-Appellant.

No. 95-3588.

United States Court of Appeals, Seventh Circuit.

Argued Jan. 10, 1996.

Decided Feb. 2, 1996.

Michael B. Apfeld (argued), Michael Ash, Nicholas A. Kees, Godfrey & Kahn, Milwaukee, WI, for Mil-Mar Shoe Company, Incorporated dba Warehouse Shoes.

Michael E. Husmann, Jonathan H. Margolies, Dyann L. Bumpke (argued), Kimberly Cash Tate, Michael, Best & Friedrich, Milwaukee, WI, for Shonac Corporation.

Before BAUER, FLAUM, and RIPPLE, Circuit Judges.

FLAUM, Circuit Judge.

Mil-Mar Shoe Company, Inc., ("Mil-Mar") brought this action against the Shonac Corporation ("Shonac"), in Wisconsin state court, alleging common law trade name infringement, statutory trademark infringement under Wis.Stat. § 132.033, and unfair competition. Mil-Mar, owner of a chain of stores under the name "Warehouse Shoes," sought a temporary restraining order and a preliminary injunction to prevent Shonac from using the name "DSW Shoe Warehouse" (or any similar construction) to designate the retail shoe store that Shonac announced would be opened in the Greater Milwaukee area. The temporary restraining order was granted pending a hearing on the preliminary injunction. Shonac removed the case to federal court on the basis of diversity. 28 U.S.C. § 1332(a)(1). After a hearing on the matter, the district court granted the preliminary injunction, enjoining Shonac from using "DSW Shoe Warehouse," "Shoe Warehouse," or any other name confusingly similar to "Warehouse Shoes" in the Greater Milwaukee area. We reverse.

I.

Mil-Mar is a Wisconsin corporation that operates seventeen stores in the Greater Milwaukee area under the name "Warehouse Shoes" (four of which are called "Super Warehouse Shoes"). At least since 1970, Mil-Mar has continuously used and advertised the "Warehouse Shoes" name in the area. Mil-Mar has registered trademarks for "Warehouse Shoes" and "Super Warehouse Shoes" with the Wisconsin Secretary of State. Mil-Mar currently spends over a million dollars a year advertising its stores under these names, and it has captured a significant share of the Greater Milwaukee shoe market. The "Warehouse Shoes" name is well-known in the area.

Shonac is an Ohio corporation founded in 1969 to operate retail shoe stores throughout the country. Shonac first began operating warehouse-type shoe stores in 1991, when it opened a store in Ohio under the name "Designer Shoe Warehouse." In 1994 the name was changed to "DSW Shoe Warehouse." Shonac has United States trademark registrations for its DSW logo and the name "DSW Shoe Warehouse," though the United States Patent & Trademark Office required Shonac to disclaim any right to exclusive use of "Shoe Warehouse" by itself. Shonac currently operates twenty stores, located throughout the United States, under the name "DSW Shoe Warehouse." Shonac spends millions of dollars advertising these stores each year.

In May 1995, Mil-Mar learned that Shonac planned to open a "DSW Shoe Warehouse" store in Wauwatosa, Wisconsin (i.e., within the Greater Milwaukee area) in October 1995. Mil-Mar promptly contacted Shonac requesting that it not use the "Shoe Warehouse" portion of the name. When Shonac refused to give up the name, Mil-Mar brought this action.

In addition to the above information, the district court considering Mil-Mar's preliminary injunction request had the following facts before it. The shoe stores run by Mil-Mar and Shonac are virtually identical in form, concept, and target customer. Both corporations run large, high-volume retail stores that carry a great variety of name brand shoes at discount prices. ¹ The Wisconsin location chosen by Shonac is in a high traffic area, near a mall, and approximately three blocks from one of Mil-Mar's "Warehouse Shoes" stores. Hence Mil-Mar and Shonac would be in direct competition for area business. Shonac also put on evidence that, nationwide, 1) over 20,000 businesses use "warehouse" in their name, 2) over 8000 of which are retail stores, and 3) that hundreds of retail shoe stores use either "Warehouse Shoes" or "Shoe Warehouse" in their names. ²

The district court treated Mil-Mar's three claims as follows. First, the court determined that the common law trade name infringement claim and the statutory trademark infringement claim under Wis.Stat. § 132.033 were subject to the same legal analysis. Mil-Mar conceded that registration of a trade name or mark in Wisconsin does not confer specific rights to the holder. Hence the only question was whether "Warehouse Shoes" could be protected as a de facto trademark by temporarily enjoining use of the name "DSW Shoe Warehouse." ³ Second, the court found that an unfair competition claim requires evidence that the defendant intended to mislead or deceive the public into believing that its product was associated with that of the plaintiff. Since Mil-Mar presented no evidence that Shonac intended to "palm off" its stores as belonging to Mil-Mar's chain, the court rejected the unfair competition claim. ⁴

As for the trademark and trade name infringement claims (hereinafter treated as a single trademark infringement claim), the court first considered whether Mil-Mar was likely to prevail on the merits. The court found that "Warehouse Shoes" was capable of protection as a trademark. The court rejected Shonac's argument that the name was generic, as well as Mil-Mar's claim that the name was suggestive (or arbitrary or fanciful). Instead, the court found the name descriptive, thus entitling it to protection only if Mil-Mar could establish its secondary meaning in the Greater Milwaukee area. The court concluded that Mil-Mar had shown a reasonable likelihood of success on its claim that "Warehouse Shoes" had acquired secondary meaning and also that there was a likelihood of consumer confusion between "Warehouse Shoes" and "DSW Shoe Warehouse." As for Shonac's affirmative defense that "DSW Shoe Warehouse" was a legally permissible "fair use" of the trademark "Shoe Warehouse," the district court determined, as a matter of law, that fair use could not exist where there was likelihood of confusion. After then finding that Mil-Mar had demonstrated no adequate remedy at law and that Mil-Mar would suffer irreparable harm if the preliminary injunction was denied, and also that balancing the equities favored Mil-Mar, the district court granted Mil-Mar's request for a preliminary injunction. ⁵ The injunction prohibited Shonac's use of the name "DSW Shoe Warehouse," "Shoe Warehouse," and any other name confusingly similar to "Warehouse Shoes" in the Greater Milwaukee area. ⁶

II.

Whether a preliminary injunction should be granted by a district court generally involves a four-part analysis. The district court begins by considering whether the moving party has demonstrated: 1) a reasonable likelihood of success on the merits, and 2) no adequate remedy at law and irreparable harm if preliminary relief is denied. If the moving party clears these hurdles, the court must then consider: 3) the irreparable harm the non-moving party will suffer if the injunction is granted balanced against the irreparable harm the moving party will suffer if the injunction is denied, and 4) the public interest, i.e., the effect that granting or denying the injunction will have on non-parties. Erickson v. Trinity Theatre, Inc., 13 F.3d 1061, 1067 (7th Cir.1994); Wisconsin Music Network v. Muzak Ltd., 5 F.3d 218, 221 (7th Cir.1993); Abbott Lab. v. Mead Johnson & Co., 971 F.2d 6, 11-12 (7th Cir.1992); Lawson Products, Inc. v. Avnet, Inc., 782 F.2d 1429, 1433 (7th Cir.1986); Roland Machinery Co. v. Dresser Indus., Inc., 749 F.2d 380, 386-87 (7th Cir.1984). The district court properly noted that, "[i]f it is plain that the party seeking the preliminary injunction has no case on the merits, the injunction should be refused regardless of the balance of harms." Green River Bottling Co. v. Green River Corp., 997 F.2d 359, 361 (7th Cir.1993).

We begin by reviewing the district court's determination that "Warehouse Shoes" is not generic for trademark purposes. Marks are classified into five categories of increasing distinctiveness: 1) generic, 2) descriptive, 3) suggestive, 4) arbitrary, and 5) fanciful. Two Pesos, Inc. v. Taco Cabana, Inc., 505 U.S. 763, 767-68, 112 S.Ct. 2753, 2757, 120 L.Ed.2d 615 (1992); Dunn v. Gull, 990 F.2d 348, 351 (7th Cir.1993). In general, the level of trademark protection available accords with the distinctiveness of the mark. Consequently, generic terms receive no trademark protection; descriptive marks are protected only if the mark has achieved "secondary meaning" in the relevant community; and suggestive, arbitrary, and fanciful marks are deemed inherently distinctive, and thus entitled to full protection. Two Pesos, 505 U.S. at 767-68, 112 S.Ct. at 2757; Henri's Food Products Co. v. Tasty Snacks, Inc., 817 F.2d 1303, 1305 (7th Cir.1987). When the mark claimed as a trademark is not federally registered--"Warehouse Shoes" is not--the burden is on the claimant to establish that it is not an unprotectable generic mark. Technical Publishing Co. v. Lebhar-Friedman, Inc., 729 F.2d 1136, 1139 (7th Cir.1984); National Conference of Bar Examiners v. Multistate Legal Studies, Inc., 692 F.2d 478, 488 (7th Cir.1982), cert. denied, 464 U.S. 814, 104 S.Ct. 69, 78 L.Ed.2d 83 (1983).

We have held that placement of a mark in a particular category is subject to review for clear error, and thus may be set aside only if, after considering all the evidence, we are "left with the definite and firm conviction that a mistake has been committed." Forum Corp. of North America v. Forum, Ltd., 903 F.2d 434, 438 (7th Cir.1990) (quoting Walt-West Enters. v. Gannett Co., 695 F.2d 1050, 1058 (7th Cir.1982)). Since Mil-Mar does not dispute the district court's finding that "Warehouse Shoes" was not...