Obx-Stock, Inc. v. Bicast, Inc.

• Decision Date: 27 February 2009
• Docket Number: No. 06-1887.,No. 06-1769.,06-1769.,06-1887.
• Citation: 558 F.3d 334
• Parties: OBX-STOCK, INCORPORATED, Plaintiff-Appellant, v. BICAST, INCORPORATED, Defendant-Appellee. OBX-Stock, Incorporated, Plaintiff-Appellee, v. Bicast, Incorporated, Defendant-Appellant.
• Court: U.S. Court of Appeals — Fourth Circuit

558 F.3d 334

OBX-STOCK, INCORPORATED, Plaintiff-Appellant, v. BICAST, INCORPORATED, Defendant-Appellee.

OBX-Stock, Incorporated, Plaintiff-Appellee, v. Bicast, Incorporated, Defendant-Appellant.

No. 06-1769.

No. 06-1887.

United States Court of Appeals, Fourth Circuit.

Argued: October 31, 2008.

Decided: February 27, 2009.

ARGUED: Alice Carmichael Richey, K & L Gates, L.L.P., Charlotte, North Carolina, for Appellant/Cross-Appellee. Pamela Anne Bresnahan, Vorys, Sater, Seymour & Pease, Washington, D.C., for Appellee/Cross-Appellant. ON BRIEF: Daniel V. Mumford, Kennedy, Covington, Lobdell & Hickman, L.L.P., Charlotte, North Carolina, for Appellant/Cross-Appellee. Elizabeth Treubert Simon, Vorys, Sater, Seymour & Pease, Washington, D.C.; Reid L. Phillips, David W. Sar, Brooks, Pierce, McLendon, Humphrey &

Leonard, L.L.P., Greensboro, North Carolina, for Appellee/Cross-Appellant.

Before NIEMEYER and AGEE, Circuit Judges, and LIAM O'GRADY, United States District Judge for the Eastern District of Virginia, sitting by designation.

Affirmed by published opinion. Judge NIEMEYER wrote the opinion, in which Judge AGEE and Judge O'GRADY joined.

OPINION

NIEMEYER, Circuit Judge:

James Douglas, the founder of OBX-Stock, Inc., cleverly invented "OBX" as an abbreviation for the "Outer Banks" of North Carolina. OBX-Stock began using the letters OBX on oval stickers for automobiles to indicate that the automobile was from or had visited the Outer Banks. The letters were also attached to souvenirs and other sundries to indicate that they were sold at the Outer Banks.

OBX-Stock has been successful in making money selling products with the OBX letters affixed to them, and it obtained trademark registrations from the Patent and Trademark Office for "OBX" for use in connection with a range of goods and services. Nonetheless, today, virtually every kind of business advertising at the Outer Banks identifies the Outer Banks geographical area with the "OBX" abbreviation.

When Bicast, Inc., began selling stickers with the text "OB Xtreme," OBX-Stock commenced this trademark infringement action, requesting an injunction prohibiting the defendant from using "OB Xtreme" and demanding damages. The district court granted summary judgment in favor of Bicast, finding that "OBX" was either generic or a descriptive mark without secondary meaning and therefore was not a valid trademark, but the court declined to order cancellation of the trademark registrations. We affirm.

I

The Outer Banks of North Carolina is a geographical region consisting of approximately 200 miles of barrier islands off the coast of North Carolina. The Outer Banks, which encompasses several counties and numerous towns, is a major attraction for vacationers, windsurfers, paragliders, hang gliders, as well as sunbathers and swimmers.

In 1994, James Douglas coined the abbreviation OBX as a designation for the Outer Banks. His idea was prompted by a similar abbreviated designation for Nantucket and the oval automobile stickers used in Europe to identify countries. Douglas began putting OBX in black letters on white oval stickers to put on automobiles, and initially he gave these OBX stickers away for free. While recipients were at first confused, following some persistence, the stickers and the abbreviation caught on beyond Douglas' most ambitious expectations. He not only placed the letters on oval stickers, but formed a business corporation, OBX-Stock, and expanded the use of OBX to affix the letters to a wide range of items being sold from the Outer Banks. Over the period from 1997 to 2004, OBX-Stock spent a total of $173,000 on advertising, promotion, and sponsorships, and the corporation has become financially successful, with an annual revenue in 2004 exceeding $1 million.

When questioned about the intended significance of the OBX letters, Douglas testified that they were used by OBX-Stock to "signify a geographic location." Thus when asked, "[I]s it fair to say that you hope that consumers seeing your OBX stickers would think of the geographic region Outer Banks?" Douglas responded, "Yes." When asked what his product was and, more particularly, whether it was the oval logo including the letters OBX, Douglas stated that the company's product "was actually the OBX in general since it had not been used before." Explaining how his product was understood, he testified:

Q. Did you have communications about what OBX signified?

A. Yes.

Q. Thank you. Could you tell me about those communications?

A. It stood for the Outer Banks.

As a result of OBX-Stock's efforts in promoting OBX as a designation for the Outer Banks, the businesses and residents of the Outer Banks have come to use the abbreviation OBX on a daily basis to refer to the Outer Banks. Local headlines have read, "An OBX Institution Says Goodbye," and "Contest winner fell under OBX spell." By 2005, thousands of website domain names incorporated OBX into their name, ranging from obxnews.com to obxnightclubs.com. Businesses use OBX to describe their location such as, "Best Pizza in OBX" or "Enjoy the OBX With Us." Those wishing to charter a sailboat can call 1-866-SAIL-OBX, while a local business directory says "Welcome to Obx On-Line, your source to the Outer Banks Businesses." Individuals advertise vacation rentals with "OBX by Owner," while realtors "Welcome OBX Homeowners." There is an OBX Swim Club, an OBX Nudist Club, and an online forum discussing OBX fishing. The initials OBX are omnipresent in the Outer Banks and are universally understood as an abbreviation for "Outer Banks."

Beginning in 1998, OBX-Stock began efforts to register "OBX" as a trademark on the Principal Register of the Patent and Trademark Office ("PTO"). The PTO examiners, however, repeatedly rejected OBX-Stock's applications, stating, "At one time OBX may have been an obscure reference to the Outer Banks of North Carolina, however those days are no more." The examiner cited extensive evidence "wherein OBX and OUTER BANKS are used interchangeably." After repeated, unsuccessful efforts, OBX-Stock enlisted the assistance of North Carolina's congressional delegation, and the PTO then granted OBX-Stock four registrations for "OBX" on the Principal Register in connection with several classes of products and services, including stickers, sports clothing, tourist sundries, bottled drinking water, entertainment services, ethnic festivals, and sporting events.^*

After obtaining trademark registrations, OBX-Stock undertook efforts to police its trademarks, sending out cease-and-desist letters. But the evidence demonstrates that the extensive use of OBX made these attempts futile.

Bicast, Inc., was the target of one of the OBX-Stock's cease and desist letters because it sold oval stickers bearing "OB Xtreme" in pink cursive script. While Bicast had long sold products bearing "OB" for the Outer Banks, in 2003, it began producing stickers that added the "Xtreme" language to denote the wide variety of extreme sports available at the Outer Banks. When Bicast refused OBX-Stock's demand to cease and desist, OBX-Stock commenced the present action.

On Bicast's motion, the district court granted summary judgment in favor of Bicast, concluding that the overwhelming evidence showed that OBX had become either generic or geographically descriptive without secondary meaning. Under either theory, it held, the mark was invalid and hence could not be infringed. The district court, however, declined Bicast's request, under 15 U.S.C. § 1119, to cancel the OBX trademarks from the Principal Register.

From the district court's judgment dated June 11, 2006, OBX-Stock filed this appeal, challenging the summary judgment entered in favor of Bicast, and Bicast filed a cross-appeal, challenging the district court's refusal to cancel the OBX registrations.

II

In finding for Bicast, the district court concluded that OBX-Stock "ha[d] not established ownership in a valid trademark" because it failed to present any evidence of secondary meaning. The court noted that the evidence indicated overwhelmingly that "OBX" is "a geographically descriptive or generic term for the Outer Banks" and that no evidence was presented to show that "any consumer associates OBX with Plaintiff's products or Plaintiff itself." It accordingly granted summary judgment in favor of Bicast on all of OBX-Stock's claims because their success depended on ownership of a valid trademark.

On appeal, OBX-Stock contends that the geographical descriptiveness of OBX is not its fault:

If any geographic connotation to the OBX Mark has developed over time, it is attributable to the efforts of Douglas and OBX-Stock and the ensuing success of the goods sold under the mark. Indeed, the District Court noted that "Plaintiff's efforts to market OBX car stickers and other products have been largely responsible for the term's ubiquity." A trademark owner, whose "efforts (whether directly through advertising or indirectly through publicity)" develop commercial success for goods, should not be punished because its mark has become associated with a geographic location.

(Citations omitted). Yet OBX-Stock fails to address specifically the absence of evidence of secondary meaning. It suggests that the universal recognition of OBX as an abbreviation for Outer Banks through OBX-Stock's promotions and use of the term on a broad array of products provides evidence of secondary meaning. It states:

The extensive media coverage of a relatively small business indicates the success of marketing the OBX Mark as an indicator of a single source for, among other things, license plates, sports clothing and "that famous sticker" bearing the mark. It is clear that the public would understand the products to come from a source which owns some form of rights to the OBX Mark.

Trademark law, at a general level, protects the goodwill represented by particular marks, enabling consumers readily to recognize products and their source and...