Moore Business Forms, Inc. v. Ryu

Decision Date12 May 1992
Docket NumberNo. 90-2054,90-2054
Parties, 22 U.S.P.Q.2d 1773 MOORE BUSINESS FORMS, INC., Plaintiff-Appellee, v. Seh M. RYU, d/b/a CompuRite, Inc., Defendant-Appellant.
CourtU.S. Court of Appeals — Fifth Circuit

Nick A. Nichols, Jr., Donald Gunn, Peter K. Hahn, Gunn, Lee & Miller, Houston, Tex., for defendant-appellant.

Robert A. Rowan, Jim Hosmer, Nixon & Vanderhye, Arlington, Va., for plaintiff-appellee.

Appeal from the United States District Court For the Southern District of Texas.

Before POLITZ, Chief Judge, HIGGINBOTHAM, Circuit Judge, and PRADO, * District Judge.

POLITZ, Chief Judge:

Seh M. Ryu, d/b/a CompuRite, and CompuRite, Inc. (collectively "Ryu") appeal an adverse judgment declaring that they infringed the trademark and common law service mark, and otherwise unfairly competed with Moore Business Forms, Inc. Ryu also appeals an award of attorney's fees. We affirm the judgment on the merits and reverse the award of attorney's fees.

Background

Moore is a national paper goods firm with sales in excess of $1 billion. In 1972 Moore began using the word "Compurite" as a trademark for its product--computer-generated business forms characterized by the simultaneous printing of fixed and variable information. These forms are typically used for promotional or informational mailings and W-2 tax forms. Moore provides, under the Compurite cognomen, related services such as word and data processing, graphic design and layout, mailing, sorting and receiving services, and response analysis. Compurite was federally registered in 1973 for "paper business forms." 1

In 1983 Ryu opened a retail store in Houston for the marketing of computer hardware, software, accessories, and related supplies. A search was made of the assumed name records in Harris County, Texas but apparently no check was made of federal registration. Ryu selected the trade name "CompuRite" and recorded it as an assumed name in Harris County. Except for the capitalization of the "R," Moore's trademark and Ryu's trade name are identical.

Moore learned of Ryu's use of CompuRite about 18 months later, at which point it informed Ryu of its prior use of the trademark. There was no response to Moore's first two communications. After receiving a letter in August 1985 from Moore's outside legal counsel, Ryu sought legal advice but did not get a formal legal opinion of non-infringement. Reciprocal attempts at settling the dispute were unsuccessful and the instant action was filed.

The district court found that Ryu infringed Moore's trademark, in violation of 15 U.S.C. § 1114, as well as Moore's common law service mark. The court also found statutory, 15 U.S.C. § 1125(a), and common law unfair competition. Injunctive relief was granted. No damages were awarded but the court ordered Ryu to pay attorney's fees and expenses, 15 U.S.C. § 1117(a). Ryu timely appealed.

Analysis

Ryu maintains on appeal that the trial court erred in its findings that: (1) Moore's relationship with the Compu-Rite Corporation in California was a limited consent-to-use and not a naked license as Ryu contended; (2) there was a likelihood of confusion caused by Ryu's use; and (3) Moore had established a common law service mark.

1. Naked License Theory

Ryu concedes use of the name CompuRite for its computer business but maintains that Moore orally licensed the use of the trademark "Compurite" to a California company--Compu-Rite Corporation--without establishing any provision for quality control or supervision. Ryu asserts that because of the extension of this type of naked license, Moore is now barred from enforcing its trademark.

Compu-Rite Corporation is engaged in the sale of computer printer ribbons. It was incorporated in 1974, less than a year after Moore registered its trademark. Moore promptly objected to Compu-Rite Corporation's use of the Compurite name, but eventually reached an oral agreement allowing Compu-Rite Corporation to use the name, but only in connection with the sale of computer printer ribbons. Moore has never had any ongoing supervision or control over the production or sale of these ribbons.

A trademark owner may grant a license and remain protected provided quality control of the goods and services sold under the trademark by the licensee is maintained. Taco Cabana Int'l, Inc. v. Two Pesos, Inc., 932 F.2d 1113 (5th Cir.1991), cert. granted in part, --- U.S. ----, 112 S.Ct. 964, 117 L.Ed.2d 130 (1992); Denison Mattress Factory v. Spring-Air Co., 308 F.2d 403 (5th Cir.1962). Without adequate control of the licensee, a court may find that the trademark owner has abandoned the trademark, in which case the owner would be estopped from asserting rights to the trademark. Kentucky Fried Chicken Corp. v. Diversified Packaging Corp., 549 F.2d 368 (5th Cir.1977); Sheila's Shine Products, Inc. v. Sheila Shine, Inc., 486 F.2d 114 (5th Cir.1973). Because a finding of insufficient control essentially signals involuntary trademark abandonment and works a forfeiture, however, the proponent of a naked license theory "faces a stringent standard" of proof. Taco Cabana, 932 F.2d at 1113 (citing American Foods, Inc. v. Golden Flake, Inc., 312 F.2d 619 (5th Cir.1963)). See also Sheila's Shine, 486 F.2d at 124 (failure to supervise a licensee for over ten years was not construed as an abandonment of the entire trademark). It must be noted that there need not be formal quality control where "the particular circumstances of the licensing arrangement [indicate] that the public will not be deceived." Taco Cabana, 932 F.2d at 1121. On the other hand, there is no control requirement when a trademark owner consents to another party's defined usage of the trademark.

Ryu contends that the oral agreement between Moore and Compu-Rite Corporation constituted a license as a matter of law because computer ribbons are within the category of business forms to which Moore's trademark applies, thus constituting infringing uses. Even if computer ribbons are business forms, such limited use is not necessarily infringing. Ryu blurs the distinction between the likelihood-of-confusion standard and the mere overlap of product lines. The district court found a consent-to-use, and not a naked license, as the proper categorization of the relationship between Moore and Compu-Rite Corporation. This finding is adequately supported by the record and is not clearly erroneous. Ryu has not carried its burden of proof that a naked license existed.

2. Likelihood of Confusion

Likelihood of confusion is also a finding of fact reviewable under the clearly erroneous standard. Marathon Mfg. Co. v. Enerlite Products Corp., 767 F.2d 214 (5th Cir.1985). We have enumerated several specific factors to be considered when determining likelihood of confusion: the type of trademark at issue, that is, the strength of the trademark; degree of similarity between the two marks; similarity of products; identity of retail outlets and purchasers; identity of advertising media utilized; defendant's intent; and actual confusion. Roto-Rooter Corp. v. O'Neal, 513 F.2d 44 (5th Cir.1975); Fuji Photo Film Co. v. Shinohara Shoji Kabushiki Kaisha, 754 F.2d 591 (5th Cir.1985).

The district court carefully applied the Roto-Rooter factors seriatim, detailing the relevant evidence. Ryu insists that in doing so the district court erred. Our review of the record compels the conclusion that the trial court's finding of the likelihood of confusion is not clearly erroneous. In affirming this finding we are mindful of the premise that "none of these factors by itself is dispositive of the likelihood-of-confusion question, and different factors will weigh more heavily from case to case depending on the particular facts and circumstances involved." Marathon Mfg., 767 F.2d at 218.

a. Type of Trademark

Moore's trademark is sufficiently strong, particularly among potential customers of the parties' goods and services. Compurite is a suggestive mark that has been in use now for nearly 20 years. Sun Banks of Fla., Inc. v. Sun Fed. Sav. & Loan Ass'n, 651 F.2d 311 (5th Cir.1981) (suggestive marks which subtly connote something about the service or product are protected without proof of secondary meaning). The trademark has been advertised nationally through a variety of media. The single instance of third-party use in California does not detract from the relative strength of Moore's trademark.

b. Degree of Similarity

The two marks in question are identical in spelling and pronunciation. Ryu insists that the marks are dissimilar because of the use of a capital "R" and its stylization. While it is true that "similarity of appearance is determined on the basis of the total effect of the designation, rather than on a comparison of individual features," the two marks in question visually are very similar, Sun Banks of Fla., 651 F.2d at 317-318, and audibly are identical, Fuji Photo, 754 F.2d at 597 (auditory similarity is an important factor when determining likelihood of confusion).

c. Similarity of Products

"The greater the similarity between the products and services, the greater the likelihood of confusion." Exxon Corp. v. Texas Motor Exchange, Inc., 628 F.2d 500, 505 (5th Cir.1980). The district court determined that Ryu's products were "similar or at least related to Moore's goods." This finding was based on the two aspects in which the businesses overlap, Ryu sells paper products and forms which fit the categorization of business forms, and advertised the ability to produce business forms of the type which Moore produces. In essence, Ryu offered a do-it-yourself version of Moore's product.

d. Identity of Retail Outlets and Purchasers

Dissimilarities between the retail outlets "lessen the possibility of confusion, mistake, or deception." Id. at 505 (quoting Amstar Corp. v. Domino's Pizza, Inc., 615 F.2d 252, 262 (5th Cir.), cert. denied, 449 U.S. 899, 101 S.Ct. 268, 66 L.Ed.2d...

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