Opticians Ass'n of America v. Independent Opticians of America, No. 90-5429

• Court: United States Courts of Appeals. United States Court of Appeals (3rd Circuit)
• Writing for the Court: Before MANSMANN, COWEN and ALITO; COWEN
• Citation: 920 F.2d 187
• Parties: OPTICIANS ASSOCIATION OF AMERICA, a Pennsylvania Corporation, Appellant, v. INDEPENDENT OPTICIANS OF AMERICA, a non-profit corporation of New Jersey; Robert C. Troast, an individual; Alfred Villavecchia, an individual; A. Villavecchia & Sons; Walter H. Neubert, Inc.; B.D. Kovacs, Optician; H.C. Laird, Optician; Optical Illusion; Robert C. Troast, Guild Opticians; Gibba Guild Opticians; Arthur L. Wells, Rx Optician; Kubick & Kubick Eye & Ear; Carl H. Bergelt, Guild Optician; In Sight Optics; William H. Ackerman, Optician; Douglas R. Manhire, Opticians; Gerald A. York, Optician; Saft Guild Opticians; Lawrenceville Optician; M. Wood, Guild Optician; Lynch-Wood Optician; F. Meserall & Co., Opticians.
• Docket Number: No. 90-5429
• Decision Date: 27 December 1990

Page 187

920 F.2d 187 17 U.S.P.Q.2d 1117 OPTICIANS ASSOCIATION OF AMERICA, a Pennsylvania
Corporation, Appellant,
v.
INDEPENDENT OPTICIANS OF AMERICA, a non-profit corporation
of New Jersey; Robert C. Troast, an individual; Alfred
Villavecchia, an individual; A. Villavecchia & Sons;
Walter H. Neubert, Inc.; B.D. Kovacs, Optician; H.C.
Laird, Optician; Optical Illusion; Robert C. Troast, Guild
Opticians; Gibba Guild Opticians; Arthur L. Wells, Rx
Optician; Kubick & Kubick Eye & Ear; Carl H. Bergelt,
Guild Optician; In Sight Optics; William H. Ackerman,
Optician; Douglas R. Manhire, Opticians; Gerald A. York,
Optician; Saft Guild Opticians; Lawrenceville Optician;
M. Wood, Guild Optician; Lynch-Wood Optician; F. Meserall
& Co., Opticians. No. 90-5429. United States Court of Appeals,
Third Circuit. Argued Oct. 11, 1990.
Decided Nov. 29, 1990.
As Amended Dec. 27, 1990.

Page 190

Joan L. Dillon (argued), Saidman, Sterne, Kessler & Goldstein, Washington, D.C., for appellant.

Steven B. Pokotilow (argued), Blum & Kaplan, New York City, for appellees.

Before MANSMANN, COWEN and ALITO, Circuit Judges.

OPINION OF THE COURT

COWEN, Circuit Judge.

Opticians Association of America ("OAA") appeals from an order of the district court denying its request for a preliminary injunction prohibiting the Independent Opticians of America ("IOA") from using certain marks registered by the OAA. 734 F.Supp. 1171. We have jurisdiction over the appeal pursuant to 28 U.S.C. Sec. 1292(a)(1) (Supp.1990). Because the marks at issue were statutorily incontestable, and because the IOA failed to present a suitable defense for its infringement, we will reverse the district court and remand with directions to grant the OAA's motion for preliminary injunction.

I.

In 1925, the Guild of Prescription Opticians of America ("GPOA") was formed as a Pennsylvania corporation. The GPOA's purposes were to represent the interests of its national membership of opticians, and to set optical service standards. A distinguishing feature of the GPOA was the requirement that none of its members be affiliated with refractionists. ¹ GPOA members were entitled to use a number of federally registered trademarks ("Guild marks") which came to signify both workmanship of the highest quality and independence from refractionists. ² Three important changes occurred in 1972 as a result of an organizational restructuring. First, the GPOA changed its name to the OAA. Second, the new OAA dropped the membership prerequisite of non-affiliation in order to broaden its membership base. Lastly, a Guild division ("Guild") was created within the OAA. The Guild was limited to OAA members who were not affiliated with refractionists, as was the original GPOA. Guild members continued to use the Guild marks, while new marks were developed for the OAA's general membership.

The Guild marks are federally registered in the collective membership mark, collective trademark, and trademark classifications established by the Trademark Act of 1946, as amended, 15 U.S.C. Secs. 1051-1127 (1976 & Supp.1990) (hereafter "the Lanham Act"). ³ They have been used continuously since the registration, and according to the OAA, have served as both collective membership marks and collective trademarks. As required by the Lanham Act, 15 U.S.C. 1065, the OAA filed affidavits of use for each Guild mark between the mark's fifth and sixth years of registered existence. The effect of these filings under the Lanham Act is to make the Guild marks incontestable. 15 U.S.C. 1115(b). ⁴

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To enforce the non-affiliation requirement for membership in the Guild, the OAA mandates that each Guild member sign an affidavit averring absence of an association with refractionists. That affidavit, coupled with timely dues payments, allows an optician to obtain or maintain Guild membership. An investigation and inspection policy was apparently discontinued.

A number of Guild members became disenchanted with the enforcement policies of the OAA, thinking them too lax. ⁵ Worried that many Guild members were, in fact, affiliated with refractionists, and concerned that the quality and independence symbolized by the Guild marks were being compromised as a result of such affiliation, a splinter group broke away from the OAA under the aegis of the New Jersey Guild, an affiliate of the OAA's Guild division. The splinter group continued to use the Guild marks.

Faced with this defection, the OAA terminated the affiliation of the New Jersey Guild and the memberships of the opticians and optical firms constituting the splinter group, and ordered them to cease use of the marks by July 3, 1989. The defectors responded by forming the IOA, a non-profit corporation of New Jersey. One of the IOA's first acts was to institute a proceeding before the Trademark Trial and Appeals Board (TTAB) seeking cancellation of the OAA's Guild marks. The IOA also filed an application with the Patent and Trademark Office to register a number of the Guild Marks as certification marks. IOA use of the Guild marks continued past the July 3 deadline.

Subsequently, the OAA moved the district court for a preliminary injunction prohibiting the IOA and its individual members from using the Guild marks in the advertising, distribution, or sale of the IOA's goods or services; prohibiting the IOA from tortiously interfering with the OAA; and staying the proceeding for cancellation of the OAA's federal guild mark registrations. The district court denied the motion in its entirety, holding that the Guild marks' federal registrations were invalid. Although the Guild marks were registered as collective marks the district court found that they were in fact used as certification marks by the OAA. This mischaracterization, reasoned the district court, invalidated the registrations, and without valid registrations, the OAA could not demonstrate that injunctive relief was appropriate. This appeal followed. ⁶

II.

Whether the district court properly denied the OAA's motion for a preliminary injunction is the issue we decide today. When ruling on such a motion, the district court must consider four factors: "[A] the

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likelihood that the applicant will prevail on the merits at final hearing; [B] the extent to which the plaintiffs are being irreparably harmed by the conduct complained of; [C] the extent to which the defendants will suffer irreparable harm if the preliminary injunction is issued; and [D] the public interest." Bill Blass, Ltd. v. Saz Corp., 751 F.2d 152, 154 (3d Cir.1984). Only if the movant produces evidence sufficient to convince the trial judge that all four factors favor preliminary relief should the injunction issue. ECRI v. McGraw-Hill, Inc., 809 F.2d 223, 226 (3d Cir.1987). The district court held that because the Guild marks were invalid, there was no reasonable probability that the OAA could succeed on the merits of its claim.

In reviewing the district court's denial of the request for injunctive relief, we "cannot reverse unless the trial court has committed an obvious error in applying the law or a serious mistake in considering the proof." Freixenet, S.A. v. Admiral Wine & Liquor Co., 731 F.2d 148, 150 (3d Cir.1984). Reversal is warranted in the present case because the district court committed an obvious error in applying the law of trademarks.

III.

A. Probability of Success

The first prong of the test for preliminary injunctions requires the OAA to show that it will probably prevail at the ultimate trial on the merits. Generally, to win a trademark claim, a plaintiff must establish that (1) the marks are valid and legally protectable; (2) the marks are owned by the plaintiff; and (3) the defendant's use of the marks to identify goods or services is likely to create confusion concerning the origin of the goods or services. Pedi-Care, Inc. v. Pedi-A-Care Nursing Inc., 656 F.Supp. 449, 453 (D.N.J.1987); Holiday Inns, Inc. v. Trump, 617 F.Supp. 1443, 1464 (D.N.J.1985).

Although the district court held that the Guild marks were invalid, the Lanham Act dictates a different conclusion. Under the Lanham Act, a registered mark becomes "incontestable" upon the filing of an affidavit of use between the fifth and sixth years of that mark's registration. 15 U.S.C. Secs. 1058, 1065. The infringement of an incontestable mark can only be defended on grounds enumerated in the Lanham Act. ⁷ The importance of incontestability was recently emphasized by the United States Supreme Court. In Park N' Fly, Inc. v. Dollar Park and Fly, Inc., 469 U.S. 189, 105 S.Ct. 658, 83 L.Ed.2d 582 (1985), the Supreme Court held that a "holder of a registered mark may rely on incontestability to enjoin infringement and that such an action may not be defended on ... grounds" not provided for in the Lanham Act. Id. at 205, 105 S.Ct. at 667. Thus, the Supreme Court limited "the power of the courts to cancel registrations and 'to otherwise rectify the register' ... to the specific provisions concerning incontestability." Id. at 203, 105 S.Ct. at 666 (quoting 15 U.S.C. Sec. 1119). Reasoning that the "function of the incontestability provisions would be utterly frustrated if the holder of an incontestable mark could not enjoin infringement by others so long as they established that the mark would not be registrable but for its inconstestable status," the Supreme Court noted that the goals of the Lanham Act are promoted by "a conclusion that incontestable status can provide the basis for enforcement of the registrant's exclusive right to use a trade or service mark...." Id. at 198-99, 105 S.Ct. at 663. Accord United States Jaycees v. Philadelphia Jaycees, 639 F.2d 134, 137 (3d Cir.1981) (cited with approval in Park N' Fly,

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469 U.S. at 205, 105 S.Ct. at 667, for the conclusion that a plaintiff may rely on the incontestable status of a trade or service mark in an infringement action).

In this case, the OAA filed an affidavit of use between the fifth and sixth...