Vitarroz v. Borden, Inc.

• Citation: 644 F.2d 960,209 USPQ 969
• Decision Date: 30 March 1981
• Docket Number: No. 436,D,436
• Parties: VITARROZ CORPORATION, Plaintiff-Appellant, v. BORDEN, INC., Defendant-Appellee. ocket 80-7689.
• Court: United States Courts of Appeals. United States Court of Appeals (2nd Circuit)

Page 960

644 F.2d 960

209 U.S.P.Q. 969

VITARROZ CORPORATION, Plaintiff-Appellant, v. BORDEN, INC., Defendant-Appellee.

No. 436, Docket 80-7689.

United States Court of Appeals Second Circuit.

Argued Feb. 2, 1981.

Decided March 30, 1981.

S. Stephen Baker, New York City (Stephen L. Baker, New York City, on the brief), for plaintiff-appellant.

Albert Robin, New York City, for defendant-appellee.

Before FEINBERG, Chief Judge, NEWMAN, Circuit Judge, and MISHLER, ^* District Judge.

NEWMAN, Circuit Judge:

This is an appeal from a judgment of the District Court for the Southern District of New York (Gerard L. Goettel, Judge), dismissing after a bench trial a suit for trademark infringement. The issue on the merits is whether the District Court properly denied the plaintiff's request for an injunction, even though the marks of the plaintiff and defendant are virtually identical and their products share at least some competing uses. We conclude that the District Court was entitled to deny injunctive relief upon its consideration of all the relevant factors, including the balance of equities.

Facts

Plaintiff-appellant Vitarroz Corporation sells food products primarily in the New York-New Jersey metropolitan area to approximately 4,000 retail stores, one-half of which are small bodegas catering to a Spanish-speaking clientele. Vitarroz conducts its advertising in Spanish, and its name is well known in the Hispanic market. Its present volume of sales is approximately $17 million per year, 70-75% of which derives from the sale of rice.

In July 1976, Vitarroz decided to add an "all purpose cracker" to its line of food products under the name BRAVO'S. After selecting this name, Vitarroz conducted a trademark search for the name BRAVO. The search disclosed reported uses of BRAVO for a wide variety of food products, including macaroni, olives, spaghetti sauces, corned beef, roast beef, and cheese; state registrations of BRAVO for food and food ingredients, vegetable oil, olive oil, olives, and alcoholic beverages; and federal registrations of BRAVO for canned meat, vegetables, fish, spaghetti sauce, alimentary paste, powders for making soft drinks, and wines. Vitarroz previously had registered eight marks for some of its other products, but it did not file an application to register BRAVO'S for its crackers.

Vitarroz introduced its BRAVO'S crackers in November 1976. The crackers look and taste like Ritz crackers. They may be eaten plain, topped with a variety of spreads, served with hors d'oeuvres, or used as a scoop for dips. The crackers are packaged in a box. The VITARROZ mark appears at the top of the face of the box in large letters. The BRAVO'S mark appears below the VITARROZ mark in smaller letters. The remainder of the face of the box is devoted to a realistic depiction of the crackers.

Vitarroz's expenses in introducing the crackers were approximately $13,000, a substantial part of which was spent on Spanish-language radio advertising during the period November 24, 1976, to February 27, 1977. Vitarroz has not advertised the product since February 1977. Its total sales of the product during the three and one-half years preceding the trial of this action were about $136,000.

Defendant-appellee Borden, Inc. is a New Jersey corporation having its principal places of business in Columbus, Ohio, and New York City. Borden's Snack Foods Group sells snack foods under the WISE trademark to independent distributors for resale to supermarkets and grocery stores throughout the Eastern United States. The Wise products usually are displayed in what was referred to as a store's "salty, crunchy snack food" section, often in a rack holding only Wise products.

Sometime in 1978, Borden decided to add a round tortilla chip to its line of Wise products under the name BRAVOS. Borden chose the name BRAVOS because of its suggestive meaning of approval and because it has a Mexican flavor, like the chips themselves. Before adopting the name, Borden conducted a trademark search, which disclosed essentially the same information turned up by Vitarroz, but did not disclose Vitarroz's unregistered BRAVO'S mark for crackers.

Borden introduced its BRAVOS tortilla chips in 1979. The tortilla chips resemble ordinary potato chips, though appearing to be slightly thicker. They may be eaten plain or used as a scoop for dips. The chips are packaged in a colorful cellophane bag through which they may be readily seen by the shopper. The bag is dominated by the name BRAVOS appearing at the top, with the BORDEN and WISE marks appearing less prominently, though still boldly, at the bottom. Like other Wise products, the chips usually are stocked in a store's "salty, crunchy snack food" section, often in the Wise rack. In some small stores, however, including some of the bodegas that carry Vitarroz's products, the chips may be found near Vitarroz's crackers.

Vitarroz became aware of the marketing of Borden's BRAVOS chips sometime prior to March 1979. In that month, it filed an application in the United States Patent and Trademark Office to register the BRAVO'S mark for crackers. This application and a similar application filed with New York State authorities were rejected due to federal and state registrations of BRAVO for a variety of other food products.

In May 1979, Vitarroz informed Borden of its use of the BRAVO'S mark on crackers, and proposed that Borden adopt a different mark. Borden replied that it already had spent in excess of $1.3 million in developing good will for its BRAVOS chips, without knowledge of Vitarroz's prior use of the BRAVO'S mark. Borden did not believe that the risk of consumer confusion was sufficiently grave to justify wasting this investment.

Since Borden's receipt of Vitarroz's objection, Borden has continuously advertised and promoted its BRAVOS chips. In 1979, its advertising and promotion costs exceeded.$2.5 million. In 1980, its marketing outlays rose to approximately $2.8 million. Borden's total sales of the product from the date of introduction to the time of trial were approximately $9 million.

Vitarroz commenced this suit in New York State Supreme Court for injunctive relief, claiming trademark infringement and unfair competition. The complaint did not specify whether these claims were based on state or federal law. The complaint also claimed trademark dilution, specifically referring to N.Y.General Business Law § 368-d (McKinney 1968). Borden removed the suit to the District Court under 28 U.S.C. § 1441(b) (1976), invoking 28 U.S.C. § 1338(a) (1976), which vests the district courts with jurisdiction over actions arising under any Act of Congress relating to trademarks. Vitarroz did not move to remand the suit to state court, nor otherwise contest the District Court's jurisdiction. A bench trial ensued.

The District Court first considered jurisdiction and concluded that jurisdiction existed because the suit could have been brought as an original action in federal court under § 43(a) of the Lanham Act, 15 U.S.C. § 1125(a) (1976). Proceeding to the merits, the Court recognized that the issue was whether Vitarroz had demonstrated a "likelihood" that, as a result of Borden's use of the name BRAVOS, "an appreciable number of ordinarily prudent purchasers are likely to be misled, or indeed simply confused, as to the source of the goods in question." Mushroom Makers, Inc. v. R. G. Barry Corp., 580 F.2d 44, 47 (2d Cir. 1979) (per curiam), cert. denied, 439 U.S. 1116, 99 S.Ct. 1022, 59 L.Ed.2d 75 (1979). Analyzing the likelihood of confusion in light of the factors enumerated in Polaroid Corporation v. Polarad Electronics Corp., 287 F.2d 492 (2d Cir.), cert. denied, 368 U.S. 820, 82 S.Ct. 36, 7 L.Ed.2d 25 (1961), the Court found that Vitarroz's BRAVO'S mark is suggestive and has acquired no secondary meaning; that the BRAVO'S and BRAVOS marks, though nearly identical, are presented in different contexts; that "there is some proximity of the goods," in that they share "some areas of competing use"; that "probably no more than 10,000 persons" have purchased Vitarroz's BRAVO'S crackers, and probably "only half of them" purchased the crackers in stores that also stock the defendant's product; and that no actual consumer confusion had been shown. The Court also found that Vitarroz has no interest in bridging the gap and selling its own chips; that Borden's chips are of a very high quality; that Borden adopted the name BRAVOS in good faith, failing, after reasonable effort, to discover Vitarroz's prior use of the BRAVO'S mark only because Vitarroz had failed to register it; and that a grant of the requested injunction would cause Borden to lose most of its multi-million dollar investment in developing good will for its product.

In light of these findings, the District Court concluded that there is no likelihood of confusion as to the source of the goods, and that Borden's use of the name BRAVOS would, if anything, redound to Vitarroz's benefit. ¹ Weighing, on the one hand, the slight risk of harm to Vitarroz, and, on the other, Borden's good faith and substantial investment, the Court decided that the balance of equities tipped decidedly in Borden's favor. It therefore declined to enjoin Borden from using the BRAVOS name and dismissed the complaint.

Discussion

1. The threshold issue concerns subject matter jurisdiction, which we are obliged to consider, even though it has not been questioned by the parties. Louisville & Nashville R. R. Co. v. Mottley, 211 U.S. 149, 29 S.Ct. 42, 53 L.Ed. 126 (1908); Mansfield, Coldwater & Lake Michigan Ry. Co. v. Swan, 111 U.S. 379, 4 S.Ct. 510, 28 L.Ed. 462 (1884). The complaint alleges facts to show trademark infringement, a claim that can be cast as a violation of either state law, N.Y.General Business Law § 368-b (McKinney 1968), or federal law, § 43(a) of the Lanham Act. When a trademark infringement claim is based on the Lanham Act federal jurisdiction is provided by both ...