Safeway Stores, Inc. v. Safeway Discount Drugs, Inc.

• Decision Date: 10 May 1982
• Docket Number: No. 80-5823,80-5823
• Citation: 675 F.2d 1160,216 U.S.P.Q. 599
• Parties: SAFEWAY STORES, INCORPORATED, Plaintiff-Appellant, Cross-Appellee, v. SAFEWAY DISCOUNT DRUGS, INC., Defendant-Appellee, Cross-Appellant.
• Court: U.S. Court of Appeals — Eleventh Circuit

Page 1160

675 F.2d 1160

216 U.S.P.Q. 599

SAFEWAY STORES, INCORPORATED, Plaintiff-Appellant, Cross-Appellee, v. SAFEWAY DISCOUNT DRUGS, INC., Defendant-Appellee, Cross-Appellant.

No. 80-5823.

United States Court of Appeals Eleventh Circuit.

May 10, 1982.

Smathers & Thompson, David S. Batcheller, Robert Willise Wells, Miami, Fla., for plaintiff-appellant, cross-appellee.

Scherman & Zelonker, P. A., Regina F. Zelonker, Paul I. Scherman, Hialeah, Fla., for defendant-appellee, cross-appellant.

Appeals from the United States District Court for the Southern District of Florida.

Before TUTTLE, KRAVITCH and JOHNSON, Circuit Judges.

JOHNSON, Circuit Judge:

Safeway Stores, Inc. appeals the district court's denial of an injunction preventing Safeway Discount Drugs, Inc. (Discount) from any use of the word Safeway. Discount cross appeals, urging that this Court overturn the district court injunction limiting the manner in which Discount may use the word. We reverse and rule in favor of Safeway Stores.

I.

Safeway Stores sued Discount after it had received a dunning letter from one of Discount's creditors and after Discount stated that it would not stop using the Safeway name until Safeway Stores opened supermarkets in Florida. Safeway Stores is a large grocery chain with more than 2400 stores worldwide. Most of its stores are west of the Mississippi. None are in the southeastern United States. It has, however, been qualified to do business in Florida since 1947, has been purchasing Florida farm and grove products in state since that year, and presently has two purchasing offices in state that buy $50 million in products each year. Safeway Stores has a large advertising budget but does not advertise in the southeastern United States. It registered the name "Safeway" with the United States Patent Office in 1961 as a service mark and with the State of Florida in May 1968, also as a service mark.

Discount was incorporated in late 1967. It has two small stores in Miami Beach that sell drug sundries, general household goods, and certain food items. Discount advertises locally only, although there is some out-of-state distribution of the newspapers in which it advertises. ¹

The trial court, sitting without a jury, found that the two companies operate in distinct, non-overlapping markets; that Safeway Stores had made no advertising penetration into Discount's market area; that Discount did not intend to take the benefit of Safeway Stores' name and reputation; that Safeway Stores had not acquired a secondary interest in the word Safeway that would protect it from Discount's use of the word in an independent market; and that there was no likelihood of public confusion of the two companies. It concluded that Discount had violated neither federal nor state trademark laws. Noting, however, that Discount could not use the word Safeway deceptively, the court ordered Discount to use only signs saying "Safeway Discount Center" in type of uniform size, on a single line, and in a style and color not confusingly similar to the type used by Safeway Stores. The court denied Discount's request for attorneys' fees. Safeway Stores disputes the ruling that there was no violation of federal or state trademark laws. Discount advocates dissolution of the injunction limiting the design of its signs and seeks an award of attorneys' fees.

II.

Before we analyze the parties' claims under federal and state law, we believe it would be useful to distinguish various uses of the word Safeway. Throughout this litigation, the parties have indiscriminately referred to the word as a trademark, service mark, and trade name. Each category indicates a different use of a word: a trademark identifies and distinguishes a product, a service mark a service, and a trade name a business. See In re Lyndale Farm, 186 F.2d 723, 726 (Cust. & Pat.App. 1951); 15 U.S.C.A. § 1127. Use of a word may fall within more than one category; indeed, as a practical matter distinctions between use in one category and use in another may be difficult to make. See American Steel Foundries v. Robertson, 269 U.S. 372, 381, 46 S.Ct. 160, 162, 70 L.Ed. 317 (1926); 4 R. Callman, The Law of Unfair Competition, Trademarks and Monopolies § 98.4(e) (1981). The category in which use of a word falls may, however, at times determine the protection accorded the use. Trade names, for example, though protected at common law, cannot be registered under and are not protected by the Lanham Act. In re Pennsylvania Fashion Factory, Inc., 588 F.2d 1343 (Cust. & Pat.App. 1978); In re Walker Process Equip., 233 F.2d 329 (C.C.P.A. 1956); Lyndale Farm, supra. In this case, Discount does not dispute that Safeway Stores is protecting a valid registered service mark, not a mere trade name, so there is no question about the applicability of the Lanham Act. The distinctions among the categories do, however, become critical in our discussion of Florida law, under which we hold that Safeway as a trade name, but not as a trademark or service mark, is protected.

A. Lanham Act

The Lanham Act, 15 U.S.C.A. § 1051 et seq., provides that no person shall, without consent of the registrant, use in commerce any service mark if "such use is likely to cause confusion, or to cause mistake, or to deceive". Id. at § 1114(1)(a). A determination of likelihood of confusion, mistake, or deception is a matter of fact that we may overturn only if clearly erroneous. E.g., Sun Banks of Florida v. Sun Fed. Sav. & Loan, 651 F.2d 311, 314 (5th Cir. 1981); Exxon Corp. v. Texas Motor Exchange Corp., 628 F.2d 500, 504 (5th Cir. 1981); Amstar Corp. v. Domino's Pizza, Inc., 615 F.2d 252, 258 (5th Cir.), cert. denied, 449 U.S. 899, 101 S.Ct. 268 (1980). ² In this case, however, the district court labored under a theory that limited the factors relevant to a finding of likelihood of confusion. ³ Quoting a statement in John R. Thompson v. Holloway, 366 F.2d 108, 114 (5th Cir. 1966), that "(w)here the unauthorized use of a conflicting mark is confined to a distinct and geographically separate market, there may be no present likelihood of public confusion", the court ruled that, because Safeway had no stores in Florida and no advertising penetration in the state, there was no likelihood of confusion. More recent cases have followed a more complex, multifactor analysis that includes "the type of trademark at issue; similarity of design; similarity of product; identity of retail outlets and purchasers; identity of advertising media utilized; defendant's intent; and actual confusion." ⁴ Roto-Rooter Corp. v. O'Neal, 513 F.2d 44, 45 (5th Cir. 1975) (footnotes omitted); see also Sun Banks, supra, 651 F.2d at 314-19; Exxon Corp., supra, 628 F.2d at 504; Amstar, supra, 615 F.2d at 259. ⁵ Considering these factors, we are left with "the definite and firm conviction that a mistake has been committed" by the district court, see United States v. United States Gypsum Co., 333 U.S. 364, 395, 68 S.Ct. 525, 541-42, 92 L.Ed. 746 (1948), and hold that the district court was clearly erroneous in finding no likelihood of confusion between the marks of Safeway Stores and Discount. We proceed to consider the Roto-Rooter factors.

In considering the type of mark involved, we must determine the strength of the mark, by which we mean its distinctiveness. A useful manner of categorizing marks, in ascending order of strength, involves determining whether the words of the trademark are (1) descriptive or generic, (2) suggestive of a product or service, (3) arbitrarily applied to a product, or (4) coined words. See Tisch Hotels, Inc. v. American Inn, Inc., 350 F.2d 609, 611 n.2 (7th Cir. 1965). The words of a mark are not, however, the sole factors determining its strength. Also important is the extent of third-party use of the words of the mark. See Sun Banks, supra, 651 F.2d at 316.

The district court made no finding on the strength of the Safeway mark. One court has found the word to be a coinage. Safeway Stores v. Dunnell, 172 F.2d 649, 654 (9th Cir.), cert. denied, 337 U.S. 907, 69 S.Ct. 1049, 93 L.Ed. 1719 (1949). ⁶ Other than in its use as a mark, the word Safeway does indeed have no meaning, but we do not credit it with the full strength of a coinage since the word merely is a combination of two other common words. Although not descriptive of the retail grocery services Safeway Stores provides, the word is suggestive of the reliability of the services. Cf. 3 R. Callman, supra, at § 71.2 (discussing suggestive trademarks).

Discount has provided the names of a score of businesses that use the word Safeway in their names. ⁷ That number is, however, substantially less than in other cases in which we have found significant third-party use. See Sun Banks, supra, 651 F.2d at 316 (4400 users); Amstar, supra, 615 F.2d at 259 (72 users); Armstrong Cork Co. v. World Carpets, Inc., 597 F.2d 496, 505 (5th Cir.) (85 users), cert. denied, 444 U.S. 932, 100 S.Ct. 277, 62 L.Ed.2d 190 (1979). Moreover, we believe a further consideration relevant in determining the significance of third-party use is the entire name a third party uses, as well as the kind of business in which the user is engaged. Third-party users that incorporate the word Safeway along with distinctive additional words, or engage in a business different from that of Safeway Stores, may not diminish the strength of the Safeway mark. The businesses that Discount points out here generally use the word Safeway along with some relatively precise description of the goods or service the business provides, such as "carpet and cleaning" or "hurricane awnings." All also seem involved in relatively specialized businesses not closely related to the fairly general retail trade of Safeway Stores. ⁸ The third-party users mentioned in this case do not significantly diminish the strength of the Safeway mark. We conclude that the mark is a relatively strong one with at least the qualities of a suggestive mark and that it is...