Value House v. Phillips Mercantile Co.

• Decision Date: 19 September 1975
• Docket Number: No. 74-1275,74-1275
• Parties: The VALUE HOUSE, a corporation, Plaintiff-Appellant, v. PHILLIPS MERCANTILE COMPANY, d/b/a Value House, Defendant-Appellee.
• Court: U.S. Court of Appeals — Tenth Circuit

Page 424

523 F.2d 424

187 U.S.P.Q. 657

The VALUE HOUSE, a corporation, Plaintiff-Appellant, v. PHILLIPS MERCANTILE COMPANY, d/b/a Value House, Defendant-Appellee.

No. 74-1275.

United States Court of Appeals, Tenth Circuit.

Argued Oct. 24, 1974.

Decided Sept. 19, 1975.

Michael L. Danoff, Albuquerque, N. M. (Ahern, Montgomery & Danoff, Albuquerque, N. M., on the brief), for plaintiff-appellant.

Norman S. Thayer, Albuquerque, N. M. (Sutin, Thayer & Browne, Albuquerque, N. M., on the brief), for defendant-appellee.

Before SETH, HOLLOWAY and DOYLE, Circuit Judge.

HOLLOWAY, Circuit Judge.

This is an action for service mark infringement under the Lanham Trade Mark Act, ¹ and for common law trade name infringement and unfair competition. ² Plaintiff, The Value House, appeals from a judgment holding, Inter alia, that defendant, Phillips Mercantile Company d/b/a Value House, is not guilty of any trade name infringement or unfair competition and enjoining plaintiff from conducting or soliciting for retail general merchandise business under the name "Value House" and the representation of a house within the State of New Mexico and Montezuma and La Plata counties in Colorado.

Plaintiff's suit was brought for alleged service mark infringement under the Lanham Act and common law trade name infringement and unfair competition. Plaintiff's claim was that, by virtue of its filing and the registration under the Lanham Act, it had the right to the exclusive use of the name "Value House" and the representation of a house in the general merchandise store field throughout all 50 states, including New Mexico and Southwest Colorado (See App. 8, 36, 38). Defendant counterclaimed, seeking an injunction restraining plaintiff from using the words "Value House" as a part of any trademark or trade name in connection with plaintiff's general merchandise business within the State of New Mexico, the western portion of the State of Texas and the southern portion of Colorado, the trade area wherein it claimed the name "Value House" had become associated with its business. (App. 18).

Pursuant to findings discussed below, the trial court dismissed plaintiff's complaint and granted defendant's counterclaim to the extent of enjoining plaintiff from opening or operating a retail soliciting business under said name and representation of a house, or from advertising or otherwise soliciting business under said name and representation within the State of New Mexico and Montezuma and La Plata counties in Colorado, other than catalogue mailing and sales at the solicitation of a customer for a catalogue or a purchase. The court concluded that defendant's use of the name "Value House" and the representation of a house did not infringe on plaintiff's registered trade name, and that neither party was guilty of common law trade name infringement or unfair competition. The court concluded that defendant had the exclusive right to the use of the name "Value House" and the representation of a house in the conduct of a retail general merchandise business within the State of New Mexico and Montezuma and La Plata counties in Colorado, and that the name and representation had acquired a secondary meaning in that area in that it was associated in the public mind with defendant's business.

On appeal plaintiff advances five principal contentions: (1) that the trial court erred in concluding that defendant's use of the trade name "Value House" and the representation of a house was not an infringement on appellant's trade name, and not unfair competition; (2) that the court erred in ruling that plaintiff had no common law trade name right to utilize the trade name "Value House" and the representation of a house; (3) that even if plaintiff had no presently enforceable remedy against defendant, the judgment of the trial court should be modified to make clear the rights of the plaintiff at such time as the plaintiff does begin to conduct substantial business in New Mexico and Southwestern Colorado; (4) that the court erred in ruling that plaintiff's claim for damages incurred prior to November 28, 1968, was barred by limitations, N.M.S.A. § 23-1-4; and (5) that the court erred in granting defendant's counterclaim since defendant did not make a prima facie case or state a valid counterclaim.

We cannot agree with the plaintiff's contentions, and affirm. We sustain the trial court's findings and conclusions, which outline the factual background.

I

The trial court's findings, which we sustain, are as follows.

Plaintiff is a Maine corporation that began using the name "The Value House" and a representation of a peaked roof house in Maine in 1961 in connection with a general merchandise business. On May 24, 1968, plaintiff applied for federal registration of the name "The Value House" and a representation of a house. On October 7, 1969, registration was granted for the name and representation by the United States Patent Office. Plaintiff has since used the name and representation continuously for the conduct of a general merchandise business.

The court found further that defendant is a New Mexico corporation which has engaged in the wholesale merchandising business since 1937 and which adopted the name "Value House" and the representation of a peaked roof house for use in connection with a retail general merchandise business on or about May 1, 1968. Defendant registered the name "Value House" and the representation of a house as the trade name of its general merchandise business with the Secretary of State of New Mexico under the New Mexico Trade-Mark Act, 1953 N.M.S.A., § 49-4-6 Et seq., and was issued a trademark under that Act on August 5, 1968. Retail sales began to the general public under the name "Value House" and the representation of a house on August 6, 1968, and the business has continued under the name and representation to date.

It was found that at the time defendant adopted the name "Value House" and commenced business under it, plaintiff had no business location outside the State of Maine. Plaintiff opened its first business location outside of Maine in 1969, and now has business locations in Maine, New Hampshire, Massachusetts, New York, New Jersey, Vermont and Connecticut. Plaintiff had no plans to expand its business area until after the time it was taken over in 1971 by a larger and more diversified corporation.

The court found that at the time that defendant adopted the name "Value House" and the representation of a house, and at the time it commenced its general merchandise business under the name, defendant had no specific knowledge of the existence of plaintiff's business or the use by plaintiff of the name "The Value House." (See App. 279-80, 297, 312-13). ³ Defendant did not learn of the plaintiff's use of the name "Value House" until 1971. Defendant, it was found, prior to adopting the name "Value House," did have actual knowledge that another general merchandise business was then in operation under the name "Value House" in Indiana. In adopting the name "Value House" and the representation of a house, defendant relied on the fact that the business in Indiana used the name without apparent claim by anyone to the exclusive ownership of the name.

Defendant presently operates two retail outlets in Albuquerque, New Mexico. It was found that defendant has spent large sums of money in advertising the name "Value House" and the representation of a house throughout New Mexico and in Montezuma and La Plata counties in Colorado. Defendant has a catalogue mailing list of more than 40,000 customers, with 99% Of them residing in New Mexico and Southwest Colorado. Defendant's sales volume under the name "Value House" now exceeds $3,000,000 per year, 99% Of which consists of sales at its retail outlets in Albuquerque, with the balance being mail order sales to its catalogue subscribers.

The court found that defendant does not advertise or transact any business outside New Mexico and Southwest Colorado with the exception of the mailing of a small number of catalogues to some 20 states. Defendant mails its catalogues only to persons who call at or write to one of its retail stores in Albuquerque to request a catalogue. Except for the mailing of catalogues and the filling of mail orders, defendant does not intend to expand its business beyond New Mexico and Montezuma and La Plata counties in Colorado and does not claim the right to do so.

It was further found that during 1968 plaintiff did not advertise in New Mexico, made no sales in New Mexico and transacted no business there. At the present time plaintiff mails about 20 catalogues annually into New Mexico out of a total mailing of 750,000 catalogues. It does not otherwise advertise in New Mexico in any way. The only business that plaintiff presently transacts in New Mexico is in filling a few mail orders. There were about five or six such orders during the Christmas season of 1972. Plaintiff has recently conducted an advertising campaign by a mass mailing of 2,000,000 circulars, some of which were mailed into New Mexico and Southwest Colorado. However, plaintiff has no present plans to expand its business by opening an actual location within New Mexico or Southwest Colorado, and has no plans to do so within the reasonably foreseeable future.

Defendant's use of the name "Value House" and a representation of a house in connection with a retail general merchandise business in New Mexico and Southwest Colorado, and in connection with catalogue sales, has been continuous from a date prior to plaintiff's registration and prior to the date of publication of plaintiff's registration of the name and representation, according to the findings.

It was found that defendant did not select the name "Value House" and the representation of a house for the purpose of benefiting from plaintiff's reputation and good will, and defendant has not so benefited. Defendant has not passed off any of its goods as...