Polo Fashions, Inc. v. Craftex, Inc.

• Citation: 816 F.2d 145,2 USPQ2d 1444
• Decision Date: 09 April 1987
• Docket Number: 85-2303,Nos. 85-2302,s. 85-2302
• Parties: , 2 U.S.P.Q.2d 1444 POLO FASHIONS, INC., Appellee, v. CRAFTEX, INC., Appellant, and Bobby O'Neal and Keith O'Neal, Defendants. POLO FASHIONS, INC., Appellant, v. CRAFTEX, INC.; Bobby O'Neal and Keith O'Neal, Appellees.
• Court: U.S. Court of Appeals — Fourth Circuit

Page 145

816 F.2d 145

55 USLW 2616, 2 U.S.P.Q.2d 1444

POLO FASHIONS, INC., Appellee, v. CRAFTEX, INC., Appellant, and Bobby O'Neal and Keith O'Neal, Defendants.

POLO FASHIONS, INC., Appellant, v. CRAFTEX, INC.; Bobby O'Neal and Keith O'Neal, Appellees.

Nos. 85-2302, 85-2303.

United States Court of Appeals,

Fourth Circuit.

Argued July 14, 1986.

Decided April 9, 1987.

Larry L. Coats (David E. Bennett, Mills and Coats, Raleigh, N.C., on brief), for appellant.

Milton Springut (Morton Amster, Susan R. Reiss, Amster, Rothstein & Ebenstein, New York City, Charles C. Meeker, Sanford, Adams, McCullough & Beard, Raleigh, N.C., on brief), for appellee.

Before WIDENER and ERVIN, Circuit Judges, and HAYNSWORTH, Senior Circuit Judge.

HAYNSWORTH, Senior Circuit Judge:

This is an action for trademark infringement under the Lanham Act and for unfair competition in pendent state law claims. The district court awarded summary judgment to the plaintiff on the question of liability and, after a bench trial, determined plaintiff's damages to be Craftex's profits in making and selling the offending goods, and that amount was trebled under state law.

On the defendant's appeal we affirm the judgment; on the plaintiff's cross-appeal we reverse the judgment insofar as it exonerated the individual defendants.

I.

Polo Fashions is a well-known fashion house selling clothing for men and women designed by Ralph Lauren. On its labels, the company uses its trademarks and tradenames POLO, RALPH LAUREN and POLO BY RALPH LAUREN. It also uses extensively a fanciful embroidered representation of a polo player mounted on a horse. On knitted sport shirts, such as those with which we are concerned, the polo player symbol typically appears on the breast of the shirt.

The plaintiff's merchandise enjoys a reputation for quality. It appears to have been imitated with some frequency, and the plaintiff has successfully defended its trademarks and symbols against alleged infringers. It has done so in this court, Polo Fashions, Inc. v. J & W Enterprises, 786 F.2d 1156 (4th Cir.1986) (table), and elsewhere. See Polo Fashions, Inc. v. Dick Bruhn, Inc., 793 F.2d 1132 (9th Cir.1986); Polo Fashions, Inc. v. Gordon Group, 627 F.Supp. 878 (M.D.N.C.1985); Polo Fashions, Inc. v. Branded Apparel Merchandising, Inc., 592 F.Supp. 648 (D.Mass.1984); Polo Fashions, Inc. v. Extra Special Products, Inc., 451 F.Supp. 555 (S.D.N.Y.1978).

Defendant, Craftex, Inc., is a manufacturer of knit shirts. Defendant, Bobby O'Neal, is president and principal stockholder of Craftex, and his son, Keith O'Neal, was involved in the sale of Craftex products until 1983 when he became its plant manager.

In 1982 and 1983, Craftex manufactured and the O'Neals sold 1,388 dozen knit sport shirts bearing an embroidered emblem substantially identical to the plaintiff's polo player symbol.

The plaintiff filed this action alleging four causes of action: one, trademark infringement under the Lanham Act, 15 U.S.C.A. Sec. 1114(1) (1963); two, false designation and representation of origin under the Lanham Act, 15 U.S.C.A. Sec. 1125(a) (1982); three, common law trademark infringement and unfair competition and four, unfair trade practices under North Carolina's Unfair Trade Practices Act, N.C.Gen.Stat. Sec. 75-1.1 (1985).

Summary judgment went for the plaintiff as to liability on all four causes of action.

After a bench trial, the district court found that the defendants made a profit of $14,837.72 in the manufacture and sale of the accused shirts. It found the plaintiff had suffered damages in that amount, and it then trebled the damages under North Carolina's Unfair Trade Practices Act.

II.

Under 15 U.S.C.A. Sec. 1114(1), the test for trademark infringement is whether there is a likelihood of confusion of the counterfeit with the genuine goods. Pizzeria Uno Corp. v. Temple, 747 F.2d 1522, 1527 (4th Cir.1984); Marcon, Ltd. v. Helena Rubenstein, Inc., 694 F.2d 953, 955-56 (4th Cir.1982). Under 15 U.S.C.A. Sec. 1125(a), the test is substantially the same, whether there is a confusing similarity between the two marks. One retailer testified that customers questioned him about the origin of the Craftex shirts. The trademark owner need not show actual confusion in the marketplace. It is enough that it shows a likelihood of such confusion. Pizzeria Uno, 747 F.2d at 1527.

The plaintiff's symbol, standing alone, is a strong mark of the identity of the source. See, e.g., Gordon Group, 627 F.Supp. at 887. It has been widely used by the plaintiff and, as indicated above, has not infrequently been imitated. The strength of the mark is the "first and paramount factor" in assessing the likelihood of confusion. Pizzeria Uno, 747 F.2d at 1527. In this case, the two symbols are substantially identical. They are used in the same manner on the breast of the same product, knitted sport shirts. Where, as here, one produces counterfeit goods in an apparent attempt to capitalize upon the popularity of, and demand for, another's product, there is a presumption of a likelihood of confusion. See AMP, Inc. v. Foy, 540 F.2d 1181, 1186 (4th Cir.1976).

The North Carolina common law of unfair competition in the context of trademarks and tradenames is similar to the federal law of trademark infringement. Unfair acts of a defendant are actionable when they damage a plaintiff's legitimate business. Gordon Group, 627 F.Supp. at 891. Such damages are suffered when a rival adopts for his own goods a sign or symbol in an apparent imitation of another's that would likely mislead prospective purchasers and the public as to the identity of the goods. Yellow Cab Co. v. Creasman, 185 N.C. 551, 117 S.E. 787, 788 (1923). Such damage was suffered by the plaintiff in this case when the defendants placed on the market demonstrably inferior goods bearing the polo player symbol.

The North Carolina unfair trade practices statute prohibits unfair methods of competition and unfair or deceptive acts or practices. N.C.Gen.Stat. Sec. 75-1.1 (1985). As used in the statute, the words "unfair methods of competition," have not been precisely defined by the North Carolina courts, although it has been suggested that they encompass any conduct that a court of equity would consider unfair. Harrington Manufacturing Co. v. Powell Manufacturing Co., 38 N.C.App. 393, 248 S.E.2d 739, 744, 746 (1978), disc. rev. and cert. denied, 296 N.C. 411, 251 S.E.2d 469 (1979). A practice is unfair if it is unethical or unscrupulous, and it is deceptive if it has a tendency to deceive. Marshall v. Miller, 302 N.C. 539, 276 S.E.2d 397, 403 (1981); Overstreet v. Brookland, Inc., 52 N.C.App. 444, 279 S.E.2d 1, 7 (1981).

The defendants contend, however, that there was no likelihood of confusion because of a label affixed inside the back of the neck of each shirt bearing the words Knight of Armor. The plaintiff never used such a mark as Knight of Armor, but even the most sophisticated purchaser, seeing the polo player symbol on the front of the shirt, might suppose the plaintiff had adopted another trademark in addition to POLO, RALPH LAUREN, and POLO BY RALPH LAUREN. Moreover, in the after sale context, one seeing the shirt being worn by its owner, would not see the label on the back of the neck. Seeing the polo player symbol, it is likely that the observer would identify the shirt with the plaintiff, and the plaintiff's reputation would suffer damage if the shirt appeared to be of poor quality. See Lois Sportswear U.S.A., Inc. v. Levi Strauss & Co., 799 F.2d 867 (2d Cir.1986).

On the facts of this case, we think that the likelihood of confusion was so unassailably established as to warrant the district court's entry of summary judgment for the plaintiff as to liability.

III.

The defendants challenge the award of damages, pointing to 15 U.S.C.A. Sec. 1111, which provides that the owner of a registered trademark may not recover damages...