Scotch Whisky Ass'n v. Majestic Distilling Co., Inc.

• Decision Date: 04 March 1992
• Docket Number: 91-2359 and 91-2360,Nos. 91-2348,s. 91-2348
• Citation: 22 U.S.P.Q.2d 1050,958 F.2d 594
• Parties: , 22 U.S.P.Q.2d 1050 The SCOTCH WHISKY ASSOCIATION, Plaintiff-Appellant, and Andrew Linton Watson, as Colonel of the Regiment, and as Chairman of the Regimental Trustees of the Regimental Trust Fund of the Black Watch, The Royal Highland Regiment, Plaintiff, v. MAJESTIC DISTILLING COMPANY, INCORPORATED, d/b/a Monumental Distilling Company, Defendant-Appellee. (Two Cases) The SCOTCH WHISKY ASSOCIATION, Plaintiff-Appellee, and Andrew Linton Watson, as Colonel of the Regiment, and as Chairman of the Regimental Trustees of the Regimental Trust Fund of the Black Watch, The Royal Highland Regiment, Plaintiff, v. MAJESTIC DISTILLING COMPANY, INCORPORATED, d/b/a Monumental Distilling Company, Defendant-Appellant.
• Court: U.S. Court of Appeals — Fourth Circuit

Page 594

958 F.2d 594

60 USLW 2636, 22 U.S.P.Q.2d 1050

The SCOTCH WHISKY ASSOCIATION, Plaintiff-Appellant,

and

Andrew Linton Watson, as Colonel of the Regiment, and as

Chairman of the Regimental Trustees of the

Regimental Trust Fund of the Black

Watch, The Royal Highland

Regiment, Plaintiff, v. MAJESTIC DISTILLING COMPANY, INCORPORATED, d/b/a Monumental

Distilling Company, Defendant-Appellee. (Two Cases)

The SCOTCH WHISKY ASSOCIATION, Plaintiff-Appellee,

and

Andrew Linton Watson, as Colonel of the Regiment, and as

Chairman of the Regimental Trustees of the

Regimental Trust Fund of the Black

Watch, The Royal Highland

Regiment, Plaintiff, v. MAJESTIC DISTILLING COMPANY, INCORPORATED, d/b/a Monumental

Distilling Company, Defendant-Appellant.

Nos. 91-2348, 91-2359 and 91-2360.

United States Court of Appeals, Fourth Circuit.

Argued Dec. 4, 1991.

Decided March 4, 1992.

Charles R. Mandly, Jr., Pattishall, McAuliffe, Newbury, Hilliard & Geraldson, Chicago, Ill., argued (Beverly W. Pattishall, John Thompson Brown, Pattishall, McAuliffe, Newbury, Hilliard & Geraldson, Chicago, Ill., William R. Dorsey, III, Semmes, Bowen & Semmes, Baltimore, Md., on brief), for plaintiff-appellant.

William G. Pecau, Pennie & Edmonds, New York City, argued (Mercer L. Stockell, Catherine H. Stockell, Pennie & Edmonds, New York City, George Beall, Hogan & Hartson, Baltimore, Md., on brief), for defendant-appellee.

Before MURNAGHAN and SPROUSE, Circuit Judges, and BUTZNER, Senior Circuit Judge.

OPINION

SPROUSE, Circuit Judge:

The Scotch Whisky ¹ Association (SWA) ² sued the Majestic Distilling Company (Majestic) in district court alleging unfair competition. In the action, SWA also joined appeals from the Trademark Trial and Appeal Board decisions dismissing its opposition and cancellation proceedings against Majestic's use of the trademark BLACK WATCH. The district court granted summary judgment to Majestic. SWA appeals, claiming that there are genuine issues of material fact as to whether Majestic's trademark and trade dress would deceive customers into believing that Majestic's BLACK WATCH products originate in Scotland. Majestic cross-appeals the district court's denial of attorney fees under section 35(a) of the Lanham Act. ³ It claims that the district court erred in requiring that SWA acted in bad faith in order for Majestic to recover attorney fees. We affirm the district court's grant of summary judgment as to SWA's claims but remand for reconsideration of Majestic's request for attorney fees under section 35(a) of the Lanham Act.

I

In 1964, Majestic, a Maryland-based liquor bottler and distributor, began marketing a Scotch whisky under the name BLACK WATCH. The original label prominently displayed a sailing ship. In 1965, it designed a new label product comprised of a combination of the words BLACK WATCH, a military regimental badge which is substantially identical to the badge of the Black Watch Regiment of Scotland, a thistle, and the word "Highlander" which appears in the regimental badge decoration. In 1966, Majestic obtained federal registration of the mark BLACK WATCH for "whisky." It thereafter expanded its BLACK WATCH product line to include blended whiskey (1967), gin (1971), and vodka (1977). The labels on each of these bottles, like the Scotch whisky label, contains the words BLACK WATCH, the regimental badge, a thistle, and the word "Highlander". Since 1964, Majestic has continuously marketed the BLACK WATCH product line. In 1985, it sought to register its BLACK WATCH trademark for its gin and vodka products.

In 1986, SWA filed an opposition proceeding with the Trademark Trial and Appeal Board (the Board) against Majestic's application to register the mark BLACK WATCH for its gin and vodka products. SWA alleged that Majestic's use of the mark BLACK WATCH for gin and vodka violated sections 2(a) ⁴ and 2(e)(2) ⁵ of the Lanham Act because consumers are likely to be deceived into believing that those products originated in Scotland. Concurrently, SWA filed a cancellation proceeding under section 2(a) of the Lanham Act against Majestic's registered trademark BLACK WATCH for "whisky," which had been registered since 1966. ⁶ SWA alleged that consumers are likely to be deceived into believing that Majestic's blended whiskey originated in Scotland. The Board dismissed both SWA's opposition and cancellation claims, holding that because the term BLACK WATCH was not a geographic place name, it was legally incapable of being deceptive as to geographic origin under section 2(a) of the Lanham Act.

In 1987, SWA filed this civil action in the United States District Court for the Northern District of Illinois against Majestic and Valley Liquors (a Majestic distributor located in Illinois). SWA charged Majestic with unfair competition. SWA also appealed the Board's dismissal of its opposition and cancellation proceedings. Majestic, in turn, filed a counterclaim against SWA for malicious prosecution and maintenance.

The Illinois district court ruled that venue was improper in Illinois and ordered the action against Majestic transferred to the district court of Maryland. Scotch Whisky Ass'n v. Majestic Distilling Co., 681 F.Supp. 1297 (N.D.Ill.1988). The Maryland district court granted summary judgment to Majestic. The court reasoned that the legal test common to all deceptive as to origin claims under sections 2(a), 2(e)(2), and 43(a) of the Lanham Act is whether there is a likelihood of confusion. After reviewing the evidence, the court concluded that SWA had failed to raise a genuine issue of material fact concerning consumer confusion as to the national origin of Majestic's products. As to Majestic's counterclaim against SWA for malicious prosecution and maintenance, the court granted summary judgment in favor of SWA.

Majestic then moved for attorney fees, costs, and sanctions against SWA under Federal Rule 11 of Civil Procedure and section 35(a) of the Lanham Act. Although it stated that SWA's claims were not well grounded in law or in fact, the court denied Majestic's motion because it could not conclude that SWA's arguments were brought for an improper purpose.

On appeal, SWA claims that the district court erred in granting summary judgment because there are genuine issues of material fact as to whether Majestic's trademark and trade dress would deceive customers into believing Majestic's BLACK WATCH products originated in Scotland. ⁷ Majestic cross-appeals the district court's denial of attorney fees under section 35(a) of the Lanham Act, arguing that a finding of bad faith by the plaintiff, SWA, is not necessary.

II

SWA pursues its unfair competition claims against Majestic under the Maryland Consumer Protection Act, ⁸ section 43(a) of the Lanham Act, Articles 10 and 10bis of the Paris Union Convention (1883) via sections 44(b) and (h) of the Lanham Act, and the common law of Maryland. The district court, without discussing each of SWA's claims, stated that SWA, as a party asserting an unfair competition claim, must show a likelihood of confusion as to the product's origin.

We agree with the district court's application of the "likelihood of confusion" test not only to section 43(a) of the Lanham Act but to unfair competition actions under Maryland common law and Article 10 and 10bis of the Paris Union Convention as incorporated into the Lanham Act. ⁹

It is well established that the test for unfair competition claims under section 43(a) of the Lanham Act is whether there is a likelihood of confusion. See Pizzeria Uno Corp. v. Temple, 747 F.2d 1522, 1527 (4th Cir.1984). This test is also applied to unfair competition claims under Maryland common law. See Perini Corp. v. Perini Constr. Inc., 715 F.Supp. 719, 721 (D.Md.1989), rev'd on other grounds, 915 F.2d 121 (4th Cir.1990); Avalon Hill Co. v. Gebhardt, 224 Md. 52, 166 A.2d 740, 742 (1960); and Edmondson Village Theatre, Inc. v. Einbinder, 208 Md. 38, 116 A.2d 377, 379-80 (1955).

The Paris Union Convention prohibits, among other things, unfair competition. Specifically, it prohibits the indirect or direct false designation of origin, Article 10, and dishonest trade practices, Article 10bis. SWA argues that the rights conferred by the Paris Union Convention exceed those conferred by the Lanham Act. We disagree. Section 44(b) of the Lanham Act gives those persons whose country of origin is a party to a treaty relating to unfair competition only those benefits of section 44 necessary to give effect to the treaty. See 15 U.S.C. § 1126(b). Subsection 44(h) of the Lanham Act, among other things, provides international parties effective protection against unfair competition in general. See 15 U.S.C. § 1126(h). Subsections 44(b) and 44(h) thus work together to provide foreign nationals with rights under United States law which are coextensive with the substantive provisions of the treaty involved.

The language of section 43(a) of the Lanham Act is, of course, more specific than that used in the Paris Union Convention. ¹⁰ By its use of generalities, the Convention provisions relied on by SWA might well cover acts of unfair competition beyond those related to the unfair use of trademarks. However, it is the alleged unfair use of trademarks that is involved in this litigation, specifically the deceptive use of a description of a product's origin. The broad language of the Paris Union Convention in its application here cannot apply to a spectrum of unfair competition that is broader than that covering the use of trademarks which deceptively indicate a product's origin. We think then, as apparently did the district court, that vis-a-vis trademark protection under the Paris Union Convention gives no greater protection than that already provided by section 43(a) of the Lanham Act. Cf. Toho Co., LTD v. Sears, Roebuck and Co., 645 F.2d 788, 792 (9th Cir.1981) (construing the Treaty of Friendship, Commerce and Navigation and sections 44(b) and (h) of the Lanham Act). In...