NFB v. Loompanics Enterprises

• Citation: 936 F. Supp. 1232
• Decision Date: 20 August 1996
• Docket Number: Civil Action No. CCB 95-2633.
• Parties: NATIONAL FEDERATION OF THE BLIND, INC. v. LOOMPANICS ENTERPRISES, INC., d/b/a Loompanics Unlimited, et al.
• Court: U.S. District Court — District of Maryland

936 F. Supp. 1232

NATIONAL FEDERATION OF THE BLIND, INC. v. LOOMPANICS ENTERPRISES, INC., d/b/a Loompanics Unlimited, et al.

Civil Action No. CCB 95-2633.

United States District Court, D. Maryland.

August 20, 1996.

COPYRIGHT MATERIAL OMITTED

Daniel F. Goldstein, Brown, Goldstein & Levy, Baltimore, MD, for Plaintiff.

Cynthia L. Leppert, Baltimore, MD, for Defendant.

MEMORANDUM OPINION

BLAKE, District Judge.

On October 23, 1995, the plaintiff, the National Federation of the Blind ("NFB"), filed a fourteen-count amended complaint against Loompanics Enterprises, Inc. ("Loompanics") and Bruce Evans a/k/a/ Bruce Easley ("Evans"). The amended complaint seeks damages and equitable relief for a variety of alleged violations of the trademark and copyright laws. These claims arise out of a book, written by Evans and published by Loompanics, which reproduces three of the NFB's registered marks. After filing a counterclaim seeking to cancel the NFB's trademark registration and a cross-claim seeking indemnification or contribution from Evans, Loompanics filed a motion to dismiss, or, in the alternative, for summary judgment on the trademark claims, Counts one through twelve of the NFB's amended complaint. No motions have been filed with respect to the two copyright claims. For the reasons that follow, Loompanics's motion will be GRANTED in part, and DENIED in part.

I.

The NFB was organized in 1940 as a charitable organization devoted to educating the public on matters relating to the social and economic welfare of the blind. In 1949, the NFB was incorporated under the laws of the District of Columbia. Currently, its principal place of business is in Baltimore, Maryland. It is the oldest and largest organization of blind persons in the United States, with affiliates in all fifty states. Loompanics is a Washington State corporation engaged in the publishing and distribution of books. Evans, the author of the book, was a Washington State resident, however his current residence is unknown. He failed to answer the NFB's complaint, and, consequently, on April 24, 1996, this court entered an order of default against Evans in favor of the NFB for want of an answer or other defense.

The NFB's allegations of trademark and copyright violations arise out of Evans's book, Biz-op: How to Get Rich with "Business Opportunity" Frauds and Scams ("the book" or "Biz-op"). The book contains several references to the NFB and includes reproductions of its emblem in the context of the author's descriptions of a variety of fraudulent schemes. One of the schemes in the book involves a method of defrauding individuals through sham charity vendor arrangements. Under this "charity system," a person advertises bogus charity vendor positions in the newspaper while posing as a representative of a charity. Those responding to the ad are told they can make significant sums of money with little investment by agreeing to collect change from "honor boxes," counter top vending machines, and a charity game called "Jackpot." The perpetrator of the fraud tells the person seeking the position the charities require only that the vendor sign a contract with them, and that the vendor send the charity two dollars each month.¹ The book states the charities "are happy" if the vendor merely executes the contract and pays the monthly fees. According to the book, the vendor will make insignificant amounts of money for the efforts expended, despite the promises of large weekly returns. However, the book promises the perpetrator of the fraud may net over $4,500 by charging the vendor a fee for the money-collecting devices and also a locator fee for having identified businesses willing to house the devices. To complete the scheme, the book describes inexpensive ways for the perpetrator of the fraud to make authentic-looking devices which appear to be provided by the charity.

The NFB is mentioned several times in connection with these schemes. In the book, Evans asserts he uses the NFB's name in connection with ninety percent of the frauds he perpetrates. He describes using the NFB's name when he is attempting to convince a store manager to allow a temporary installation of the contribution collection devices, and he also discusses the placement of the NFB's name and emblem on the devices themselves. A copy of an authentic NFB vendor contract and a Location Acquisition Agreement, ("LAA") both of which include the NFB emblem, are included in the appendix to the book. The LAA is a simple consent form to be filled out and signed by a responsible person at the premises where the contribution collection device is placed. In addition to the terms of the agreement, the LAA bears the emblem of the NFB and the designation: "Vending Outreach Program."

The NFB has registered three marks relevant to this lawsuit. On January 10, 1978, it registered its trademark² "National Federation of the Blind" with the United States Patent Office. On January 5, 1982, the NFB registered its emblem as a trademark. The emblem is a circle, overlain by a triangle containing the letters "NFB," and encircled by the words "Security," "Equality," and "Opportunity." Finally, on July 7, 1992, the NFB registered another mark, "Vending Outreach Program," a term used to identify certain fund-raising services.

The NFB alleges Loompanics is liable for trademark violations associated with each of their three marks. The service mark "National Federation of the Blind" is the subject of Counts one through four. The trademark emblem is the subject of Counts five through eight and the service mark "Vending Outreach Program" is the subject of Counts nine through twelve. For each mark, the NFB has alleged four theories of recovery. Counts one, five, and nine allege violations of § 32 of the Trademark Act of 1946 ("the Lanham Act" or "the Act").³ See 15 U.S.C. § 1114(1). Counts two, six, and ten allege unfair competition and false designation of origin under § 43(a) of the Act. See 15 U.S.C. § 1125(a). Counts three, seven, and eleven allege a claim of tarnishment of trademark, however the NFB does not indicate under which State's law it is suing. Finally, Counts four, eight, and twelve allege trademark infringement under Maryland common law.

Loompanics has moved for summary judgment or dismissal of all of the NFB's trademark claims. It first argues generally its use of NFB's marks is a "fair use" which is not actionable under the trademark laws. The fair use argument takes two somewhat different forms. First, Loompanics cites a statutory fair use defense under the Lanham Act. See 15 U.S.C. § 1115(b)(4). Second, it argues it's use is "merely descriptive" of the NFB and its services, and therefore, the use is outside the scope of the trademark laws. Although it is not explicit on this point, Loompanics apparently intends its fair use defense to apply to the NFB's Lanham Act and Maryland common law infringement claims. It states, by reason of its fair use alone, "none of the trademark claims state a claim upon which relief can be granted."⁴ Second, Loompanics has asserted two defenses to a claim the NFB raised with specificity for the first time in its opposition. Without any reference to the theory in its complaint, the NFB now argues Loompanics is liable for contributory trademark infringement. With respect to this claim, Loompanics argues first the NFB has not brought an action for contributory infringement because this theory was not presented in the amended complaint, and second, it argues the NFB has failed to allege the essential elements of this cause of action. Third, Loompanics challenges the validity of the NFB's marks. Loompanics argues the marks "National Federation of the Blind" and "Vending Outreach Program" are generic terms and are not entitled to trademark protection. Finally, Loompanics maintains it is entitled to dismissal on the tarnishment counts because neither Maryland nor federal law recognize a cause of action under that theory and the NFB has not indicated under what body of law it intends to bring this claim.

II.

Because the NFB's trademark claims are somewhat novel, it may be helpful to lay out its theories for recovery and the authority supporting those theories in some detail. I will evaluate Loompanics's defenses in the context of these claims.

A.

The NFB makes three arguments in support of its infringement claims under the Lanham Act and Maryland common law. First, it argues a reasonable person reading the book would believe "`sponsorship, association, affiliation, connection or endorsement' exists between" the NFB and Loompanics. NFB's Mem. in Opp. at 6 (quoting Quality Inns Intern., Inc. v. McDonald's Corp., 695 F.Supp. 198, 209 (D.Md.1988). The second argument urged by the NFB is that potential contributors, who are aware of the book, might confuse the legitimate fund raising activities of the NFB with the fraudulent schemes in the book. At the heart of the first argument is the notion that the NFB agreed to the use of the marks in the book and at least condones, if not endorses the use of the marks in this manner. The second argument does not rely on any implied assent by the NFB, but instead suggests those who are aware of the contents of the book and who would otherwise contribute to the NFB, will no longer contribute because they will have no way of knowing whether their contribution will be used for a legitimate or fraudulent purpose. As noted above, the NFB's third theory of liability, contributory infringement, was raised in its opposition to Loompanics' dispositive motion. Under its contributory infringement theory, the NFB argues Loompanics is liable for infringement because the book allegedly encourages readers to use the NFB's marks in fraudulent activities.

In support of its Lanham Act infringement claim, the NFB uses the following virtually identical language in Counts one, five and nine of its amended complaint:

The use of the NFB's marks by Loompanics

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