Thrifty Rent-A-Car System v. Thrift Cars, Inc.

• Decision Date: 15 July 1986
• Docket Number: Civ. A. No. 83-1979-Y.
• Citation: 639 F. Supp. 750
• Parties: THRIFTY RENT-A-CAR SYSTEM, INC., Plaintiff, v. THRIFT CARS, INC., Defendant.
• Court: U.S. District Court — District of Massachusetts

639 F. Supp. 750

THRIFTY RENT-A-CAR SYSTEM, INC., Plaintiff, v. THRIFT CARS, INC., Defendant.

Civ. A. No. 83-1979-Y.

United States District Court, D. Massachusetts.

July 15, 1986.

Paul H. Johnson, esq., Mead, Johnson & Stevenson, Tulsa, Okl., and William Looney, Looney & Grossman, Boston, Mass., for plaintiffs.

William J. Brennan, III, Smith, Stratton, Wise & Heher, Princeton, N.J. and William S. Dorman, Tulsa and Richard F. McCarthy, Willcox, Pirozzolo and McCarthy, Boston, Mass., for defendants.

MEMORANDUM OF DECISION

YOUNG, District Judge.

This is an action for trademark infringement and false designation of origin brought pursuant to the Lanham Act, 15 U.S.C. § 1051 et seq., and for unfair competition at common law. The plaintiff, Thrifty Rent-a-Car System, Inc. ("Thrifty Rent-a-Car") seeks a permanent injunction, damages, costs, and attorneys' fees against the defendant, Thrift Cars, Inc. ("Thrift Cars").

In large measure, the facts are undisputed. On March 3, 1958, one L.C. Crow, an individual doing business as Thrifty Rent-a-Car System, commenced renting cars under the trade name "Thrifty" from his place of business on Route 66, Tulsa, Oklahoma. Early in 1962, Stemmons, Inc., an Oklahoma corporation in the business of re-selling used cars, purchased Crow's business and began to expand it. On March 15, 1962, the first rental using the "Thrifty" trade name occurred outside the state of Oklahoma in Houston, Texas. Recognizing the possibilities for expansion of the car rental business, Stemmons, Inc. commenced opening other car rental outlets in Wichita, Kansas, Dallas, Texas, and St. Louis, Missouri. Stemmons, Inc. also changed its name to The Thrifty Rent-a-Car System, Inc., the present plaintiff Thrifty Rent-a-Car. On July 30, 1962, Thrifty Rent-a-Car made application to the United States Patent Office to register the service mark "Thrifty Rent-a-Car System."

In October, 1962, Peter A. Conlon began to operate a car rental business with two cars out of his home in East Taunton, Massachusetts. Conlon was completely unaware of the existence and operations of Thrifty Rent-a-Car in the Southwest and Midwest. On October 24, 1962, Conlon incorporated his business as Thrift Cars, Inc., the defendant Thrift Cars. Thrift Cars' business in East Taunton operated somewhat differently than the standard car rental business. Since East Taunton, Massachusetts is not a major commercial center, Thrift Cars did not operate a retail car rental outlet there where one could walk in off the street and select a rental car from a waiting fleet. Rather, Thrift Cars provided a more customized service wherein the rentor would arrange for his or her rental car in advance and Thrift Cars would then deliver the car which had been rented or leased to the customer's location and would pick it up thereafter at that or another pre-arranged location at the end of the rental term. Thus, in the years immediately following 1962 Thrift Cars, on occasion, delivered rental vehicles to customers at Logan International Airport in Boston, at Provincetown, the Falmouth Marina, Hyannis, and Nantucket. Thrift Cars advertised its custom car rental service in the Taunton area yellow pages phone directory, in the Taunton Daily Gazette, in the Cape Cod Times — a newspaper of general circulation serving the Cape Cod area as well as the islands of Martha's Vineyard and Nantucket — and in The Anchor — the newspaper of the Roman Catholic Diocese of Fall River. For a time during 1963 Thrift Cars advertised in The Inquirer and Mirror, a Nantucket newspaper with, at that time, a circulation of approximately eight thousand. After 1963, however, Thrift Cars dropped its advertisements in The Inquirer and Mirror since business gleaned from the yellow pages was sufficient for its needs.

On July 26, 1964, the United States patent office granted service mark No. 774,288 "Thrifty Rent-a-Car" to the plaintiff Thrifty Rent-a-Car. This official confirmation of Thrifty Rent-a-Car's service mark was but one indicator of its business success. Indeed, Thrifty Rent-a-Car had, during the years following 1962, continued an aggressive and successful system of expansion through franchises and directly owned rental agencies. Thrifty Rent-a-Car's first Massachusetts outlet opened on December 5, 1967.

Thrift Cars, meanwhile, had not been idle. For some time it had desired to operate a traditional car rental facility at the Nantucket Airport and on May 30, 1970, this dream was realized when the proper licensing authorities permitted Thrift Cars to establish a car rental facility at that site. This facility advertises its existence by calling itself "Thrift Cars" through both onsite signs and off-site newspaper and yellow pages advertising. Thrift Cars' chief executive officer Peter Conlon having removed to Nantucket, Thrift Car's operations are primarily located there and the original East Taunton site is largely dormant.

Collision with Thrifty Rent-a-Car was now inevitable. When Thrift Cars operated its customized service delivering cars from East Taunton, its market impact was felt primarily in what the car rental industry considers the tertiary market, i.e. the market which serves those individuals having need of replacement cars for periods which bridge the short term car rental and the longer term automobile lease. When Thrift Cars opened its traditional Nantucket outlet, however, it entered what is known as the resort market, a fiercely competitive market in which Thrifty Rent-a-Car had enjoyed considerable success.¹ By the time of trial, Thrifty Rent-a-Car had franchises in twenty three different locations in Massachusetts² and, with five hundred rental car outlets world wide, it is fifth in car rental locations after Hertz, Avis, National, and Budget car rental services (in that order). There is no doubt that, given the mobility of society, confusion exists between the car rental services provided by Thrifty Rent-a-Car and Thrift Cars, at least within the County of Nantucket. The parties stipulate as much.

1. Common Law Background

To understand the issues before the Court, it is helpful to review briefly a few salient principles of the common law of trademarks.

In Hanover Star Milling Co. v. Metcalf, 240 U.S. 403, 36 S.Ct. 357, 60 L.Ed. 713 (1916), the Supreme Court determined that the senior user of a trademark cannot monopolize markets that neither its trade nor reputation has reached.

Since it is the trade, and not the mark, that is to be protected, a trade-mark acknowledges no territorial boundaries of municipalities or states or nations, but extends to every market where the trader's goods have become known and identified by his use of the mark. But the mark, of itself, cannot travel to markets where there is no article to wear the badge and no trader to offer the article.

240 U.S. 403, 416, 36 S.Ct. 357, 361, 60 L.Ed 713. In Hanover, the court declined to enjoin Allen & Wheeler Co. from selling Tea Rose flour in four southern states, even though Hanover Star had first marketed Tea Rose flour in New England. Allen & Wheeler had adopted the mark Tea Rose in good faith, without knowledge of Hanover Star's prior use. The companies' markets were "remote," meaning that neither had sold or advertised in territory served by the other.

In United Drug Co. v. Theodore Rectanus Co., 248 U.S. 90, 39 S.Ct. 48, 63 L.Ed. 141 (1918), the court extended Hanover, holding that a senior user enters a junior user's territory subject to whatever rights the junior has acquired. In United Drug, United Drug Co. was the original distributor of Rex drugs and first marketed them in New England. Upon expanding into Louisville, Kentucky, it encountered competition from Rectanus Co., a local producer and vendor of Rex blood purifier. Like Allen & Wheeler in Hanover, Rectanus had adopted the contested mark in good faith, though after United's use in a remote market. The Court refused to enjoin Rectanus and summarized its reasons:

The general rule is that as between conflicting claimants to the right to use the same mark, priority of appropriation determines the question.... But the reason is that purchasers have come to understand the mark as indicating the origin of the wares, so that its use by a second producer amounts to an attempt to sell his goods as those of his competitor. The reason for the rule does not extend to a case where the same trademark happens to be employed simultaneously by two manufacturers in different markets separate and remote from each other, so that the mark means one thing in one market, and an entirely different thing in another. It would be a perversion of the rule if an innocent party who had in good faith employed a trade-mark in one State, and by the use of it had built up a trade there, being the first appropriator in that jurisdiction, might afterwards be prevented from using it, with consequent injury to his trade and good-will, at the instance of one who theretofore had employed the same mark but only in other and remote jurisdictions, upon the ground that its first employment happened to antedate that of the first-mentioned trader.

248 U.S. 90, 100, 39 S.Ct. 48, 51, 63 L.Ed. 141.

Subsequent cases have further developed the principles articulated in Hanover and United Drug. A senior user who tries to enter a good-faith junior user's remote market can be enjoined from doing so. Food Fair Stores, Inc. v. Square Deal Market Co., 206 F.2d 482 (D.C.Cir.1953); Sweetarts v. Sunline, Inc., 380 F.2d 923 (8th Cir.1967). Similarly, a junior user may not enter markets where the senior user has acquired exclusive rights. Id.

The essence of the common law doctrine found in Hanover and United Drug, then, is that two parties who innocently adopt similar trademarks and use them in separate markets carve out territories for themselves. Within its territory, each party can use its mark free from interference by the other. See generally 2 McCarthy, Trademarks...