Turner v. HMH Publishing Company

• Decision Date: 10 July 1967
• Docket Number: No. 24039.,24039.
• Citation: 380 F.2d 224
• Parties: Othal L. TURNER and On-The-Town, Inc., d/b/a Atlanta's Playboy Club, Appellants, v. H M H PUBLISHING COMPANY, Inc., et al., Appellees.
• Court: U.S. Court of Appeals — Fifth Circuit

380 F.2d 224 (1967)

Othal L. TURNER and On-The-Town, Inc., d/b/a Atlanta's Playboy Club, Appellants, v. H M H PUBLISHING COMPANY, Inc., et al., Appellees.

No. 24039.

United States Court of Appeals Fifth Circuit.

July 10, 1967.

Henry M. Hatcher, Jr., Hatcher, Meyerson, Oxford & Irvin, Atlanta, Ga., for appellants.

David J. Krupp, Chicago, Ill., Hoke Smith, Atlanta, Ga., Devoe, Shadur, Mikva & Plotkin, Chicago, Ill., Smith, Cohen, Ringel, Kohler, Martin & Lowe, Atlanta, Ga., for appellees. Dressler, Goldsmith, Clement & Gordon, Chicago, Ill., of counsel.

Before COLEMAN and AINSWORTH, Circuit Judges, and CARSWELL, District Judge.

AINSWORTH, Circuit Judge:

HMH Publishing Company, Inc. (H MH) and Playboy Clubs International, Inc. (International), Delaware corporations, both with principal place of business in Chicago, Illinois, as plaintiffs, brought this suit against Othal L. Turner and On-The-Town, Inc., d/b/a Atlanta's Playboy Club, Georgia citizens, defendants, to enjoin the use of plaintiffs' trade and service marks by defendants in their operation of a night club and restaurant known as "Atlanta's Playboy Club."

The suit is based on diversity of citizenship (28 U.S.C. § 1332), on 28 U.S.C. § 1338 relating to actions involving trademarks, and on the Lanham Act (15 U.S.C. § 1121). It is alleged that defendants wilfully infringed on trade and service marks of plaintiff HMH, especially in the use of the trademark and service mark "Atlanta's Playboy Club" and in the use of the marks "Playboy" and "Playmate" in the conducting of a night club and restaurant. From a judgment in favor of plaintiffs, granting a permanent injunction against the use of these marks, defendants have appealed.

HMH began the publication of "Playboy" Magazine in November 1953 and registered the trademark "Playboy" for a monthly magazine on December 28, 1954 with the United States Patent Office. When defendants began the alleged unauthorized use of the name "Atlanta's Playboy Club," in April 1962, the monthly circulation of Playboy Magazine was 1,310,069 copies and when this case was tried it had reached a monthly circulation of 3,366,000. More than 170,000,000 copies have been sold. Its circulation is both nationwide and international.

Hugh M. Hefner was the organizer of HMH and is the owner of 80 per cent of its stock. He has been its president and one of its directors from the beginning. In 1957, HMH announced the intention to use its trademarks directly in the night club business. In 1959, Hefner and two associates organized Chicago Playboy Club, Inc., which later opened the first club in Chicago. In 1960, the same persons organized plaintiff Playboy Clubs International, Inc. and by agreement with HMH, International was granted an exclusive license, as master licensee, to use the HMH marks, alone or in combination, for the operation of key clubs with standards established and to be established by HMH for quality and conduct to be identified with the key clubs and the HMH marks. International was granted the right to grant sublicenses to others for the purpose of operating such clubs using the marks and subject to the approval of HMH. On February 29, 1960, Chicago Playboy Club, Inc. opened a key club named Playboy Club of Chicago under the licensing agreement described, and on May 6, 1961, a similar licensed club was opened in Florida known as Miami Playboy Club. Subsequently a license was granted to Playboy Club of Louisiana which opened the New Orleans Playboy Club on October 5, 1961. Therefore, in April 1962, when defendants opened their club in Atlanta under the name of "Atlanta's Playboy Club," the Chicago, Miami and New Orleans clubs licensed by plaintiffs were already in operation. Subsequently additional clubs have been licensed and opened in New York City, Phoenix, St. Louis, Detroit, Kansas City, Baltimore, Cincinnati, Los Angeles, Atlanta and Jamaica.

The gross receipts of International and the clubs have increased spectacularly from 1960 to 1965. International has promoted the clubs through magazine, newspaper and radio advertising, use of public relations firms, etc., and has spent a total of $5,158,088 in promotion expenses during that period. In addition to holding a registered trademark for Playboy Magazine, HMH also holds service marks for "The Playboy Club" for "operating private social clubs which feature food, drinks and entertainment" registered March 5, 1963; another mark entitled "Playboy" for "operation of establishments which feature food, drink and entertainment" registered May 12, 1964. It likewise has registered trademarks for "Playboy's Playmate of the Month," featured in the magazine "Playboy," registered May 6, 1958 and "Playmate" for calendars registered September 26, 1961, for perfume registered May 7, 1963, and for bracelets, ankle bracelets, earrings, etc. registered September 29, 1964. There are more than 440,000 members of these clubs residing in all of the states, including Georgia, who hold keys to these clubs for which they have paid $25 to $50 each. The key allows access to any of the clubs in the chain.

Defendant Turner purchased the night club known as "The Anchorage" in Atlanta in 1958, and operated it through the corporate defendant. In April 1962, the corporate defendant registered the trade names "Atlanta's Playboy Club" and "Playmate" in the Clerk's Office of the Superior Court of Fulton County (Atlanta), Georgia. At the time Turner knew of the existence of Playboy Magazine and of the Chicago and Miami Playboy Clubs which had been licensed by International. The name of "The Anchorage" was changed by defendants to "Atlanta's Playboy Club" and defendants began to advertise the club in Atlanta newspapers with a picture of a girl dressed in a costume closely resembling the famous bunny costume featured by HMH. The advertisement stated "No membership required." It was not a key club. One of the rooms in defendants' establishment at another location was called "The Playmate Lounge."

We are called upon to decide whether plaintiffs have established that the terms "Playboy" and "Playmate" have attained a secondary meaning in connection with their operation of night clubs and restaurants as to justify enjoining defendants' club from using the trade and service marks, where such use adversely affects plaintiffs' activities in interstate commerce. Also, we must decide whether under the Lanham Act (15 U.S.C. §§ 1055 and 1127) the use of the registered marks by plaintiffs' licensees inures to plaintiffs' benefit because such licensees are "related companies" within the meaning of the Act, by virtue of the fact that the nature and quality of their goods or services are controlled by plaintiffs.

The district judge, sitting without a jury, rendered his written decision in well-reasoned, detailed findings of fact and conclusions of law. He held that Playboy Magazine had for many years enjoyed wide circulation throughout the United States (including Atlanta and the State of Georgia); that HMH had extensively advertised its trademark "Playboy" throughout the United States; had advertised and sold in interstate commerce under its trade and service marks "Playboy" services and consumer items; and that the wide publicizing of the name "Playboy" through the magazine and through the sale of these items had caused the trademark to be identified by the general public with HMH and its products. He found that in December 1959, HMH began to solicit membership applications for its Chicago Playboy Club which featured food, drink and entertainment; that a controlled license had been granted to International for the exclusive right to use and sublicense the trade and service marks of HMH to identify clubs operated in Chicago and other principal cities in the United States; that great care had been exercised in the selection of the licensees; and that HMH controlled the nature and quality of the services of the clubs so that the services would be compatible with the nature and quality of the magazine and products of HMH. The district judge held that HMH had taken an active part in promoting the clubs and that the consuming public recognized the clubs and the services of the licensee under the trade and service marks as having been approved and licensed by HMH. He also found that the mark "Playmate" had been widely publicized by HMH and International. He held that defendant changed the name of "The Anchorage" to "Atlanta's Playboy Club" with full knowledge of the existence of the use of the trademark "Playboy" by HMH, including its use in Playboy Magazine, and with the knowledge of the existence of the Chicago and Miami Playboy Clubs franchised by International. He referred to the newspaper advertisements of defendants with the picture of a girl dressed in a costume closely resembling the bunny costume of HMH. He found that the use of the name "Atlanta's Playboy Club" was confusingly similar to the names of International's franchisees, Chicago Playboy Club and Miami Playboy Club; that telephone calls had been received by Turner and correspondence by plaintiffs which showed actual confusion by the public as to an affiliation between defendants' operation and those franchised by plaintiffs. The district court concluded that the defendants had wilfully adopted and infringed the trade and service marks of HMH with the...