Volkswagenwerk Aktiengesellschaft v. Wheeler

• Decision Date: 26 March 1987
• Docket Number: No. 86-1322,86-1322
• Citation: 814 F.2d 812
• Parties: VOLKSWAGENWERK AKTIENGESELLSCHAFT, Plaintiff, Appellee, v. Kenneth G. WHEELER, et al., Defendants, Appellants.
• Court: U.S. Court of Appeals — First Circuit

Page 812

814 F.2d 812

2 U.S.P.Q.2d 1264

VOLKSWAGENWERK AKTIENGESELLSCHAFT, Plaintiff, Appellee, v. Kenneth G. WHEELER, et al., Defendants, Appellants.

No. 86-1322.

United States Court of Appeals First Circuit.

Argued Nov. 5, 1986.

Decided March 26, 1987.

Edward J. Collins, Wayland, Mass., for appellants.

Henry C. Dinger with whom Sibley P. Reppert, Andrew A. Rainer and Goodwin, Procter & Hoar, Boston, Mass., were on brief, for appellee.

Before CAMPBELL, Chief Judge, TORRUELLA, Circuit Judge, and PIERAS, ^* District Judge.

PIERAS, District Judge.

This is a trademark and service mark infringement case in which the appellee, Volkswagenwerk Aktiengesellschaft ("VWAG") seeks to enjoin the appellants, Kenneth G. Wheeler, Linda Wheeler, and Brian Wheeler, individually and as owners and operators of "The Beetle Barn," an automobile repair service shop, from using the marks "Beetle," "VW," and "Volkswagen" in any phrase in their advertisements, business cards, or business forms. The United States District Court for the District of Massachusetts, granted summary judgment in favor of VWAG, holding that there was no genuine issue of material fact and that VWAG was entitled to a judgment as a matter of law. The district court also granted VWAG's petition for attorney's fees. For the following reasons, we affirm the injunctive decree and reverse the award of attorney's fees.

I. Background.

Beginning in the early 1950s, VWAG, the German manufacturer of Volkswagen automobiles, imported into the United States a small, distinctive, two-door sedan known as the Beetle. Since 1949, VWAG has sold more than seven million of its automobiles in the United States, including the Beetle. VWAG distributes its automobiles and auto parts only through Volkswagen of America, Inc. ("VWoA"), and licensed distributorships and retail dealers. VWAG is the sole and exclusive licensee of the registered trademarks and service marks owned by VWAG in connection with the sale, service, and repair of Volkswagen products. There are approximately thirty-eight retail dealerships of Volkswagen products located in Massachusetts. VWAG has invested considerable sums of money to advertise its products and services under the name Beetle. It has also invested substantial time, money, and effort in choosing its distributors and dealers in helping them maintain and improve the quality of services offered by them.

In 1972, Kenneth G. Wheeler and Linda Wheeler began an automobile sale, repair, and service business in Massachusetts under the name "The Beetle Barn." As well as advertising under the name the Beetle Barn, they used the phrases "Volkswagen Repair" and "VW Repair" on business cards, letterhead, and radio and newspaper advertising. The appellants were not then, and have never been affiliated with, VWAG, VWoA, or any dealer-distributor of VWoA. Kenneth Wheeler admitted he chose the name Beetle Barn because he believed the "general public" associated the word Beetle with Volkswagen, and because that name would indicate their intention to specialize in the service and repair of Volkswagen automobiles. Kenneth Wheeler owned and operated the Beetle Barn from 1972, until his death in 1981. Appellant Brian Wheeler, brother of deceased Kenneth Wheeler, in 1981 purchased the business from his brother's estate and has since owned and operated the Beetle Barn as an automobile sale, service, and repair business.

VWAG alleges trademark and service mark ¹ infringement with respect to appellants' use of the following: (1) the word "Volkswagen," (2) the letters "VW," and (3) the word "Beetle." "Volkswagen," "VW," and Beetle (as a design mark in the shape of the sedan) are registered as trademarks and service marks with the Patent and Trademark Office ("PTO") under the Lanham Act, 15 U.S.C.A. Sec. 1051 et seq. (West 1982 and Supp.1986). On June 24, 1975, VWAG sought but failed to register the word "Beetle" as a service mark for the repair of motor vehicles. During the processing of the application, the trademark examiner requested further specimens evidencing the use of the word Beetle identifying repair, reconditioning, and maintenance services. VWAG informed the examiner it believed that specimens already submitted adequately evidenced its use of the mark. VWAG's counsel advised that it was sufficiently protected by its registration of the design mark of the word Beetle, and withdrew its application for that service mark. However, in 1978, VWAG registered the word "Beetle" as a trademark for motor vehicles and as a service mark for motor vehicle retail sales.

The district court granted appellee's motion for summary judgment, and permanently enjoined appellants from further using in any phrase the marks Beetle, VW, and Volkswagen. The district court also granted plaintiff's claim for $20,979.00 in fees and $1,719.77 in expenses against all defendants, finding that they filed no response to plaintiff's request and that the request was reasonable and appropriate.

II. The Standard for Summary Judgment.

The issue here is whether the district court erred in granting VWAG's motion for summary judgment. The standard for granting a summary judgment motion in a trademark infringement case in this circuit is well settled. See Astra Pharmaceutical Products v. Beckman Instruments, 718 F.2d 1201, 1204 (1st Cir.1983); Pignons S.A. de Mecanique v. Polaroid Corp., 657 F.2d 482, 486 (1st Cir.1981). Summary judgment is proper only "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Astra, 718 F.2d at 1204; Pignons, 657 F.2d at 486; Fed.R.Civ.P. 56(c). A factual dispute is material if it "affects the outcome of the litigation," and genuine if manifested by "substantial" evidence "going beyond the allegations of the complaint." Astra, 718 F.2d at 1204 and Pignons, 657 F.2d at 486; quoting Hahn v. Sargent, 523 F.2d 461, 464 (1st Cir.1975), cert. denied, 425 U.S. 904, 96 S.Ct. 1495, 47 L.Ed.2d 754 (1976). In passing on a summary judgment motion, the court must view the record and draw inferences in the light most favorable to the opposing party. Astra, 718 F.2d at 1204; Pignons, 657 F.2d at 486; Hahn, 523 F.2d at 464.

III. Applicable Law

The right to trademark and service mark rights is based on prior use, or the one who first uses the marks in connection with a peculiar line of business. Blanchard Importing & Distrib. Co. v. Charles Gilman & Son, Inc., 353 F.2d 400, 401 (1st Cir.1965), cert. denied, 383 U.S. 968, 86 S.Ct. 1273, 16 L.Ed.2d 308 (1966). Trademark rights do not generally arise from registration. "[R]egistration does not create the underlying right in a trademark. That right which accrues from the use of a particular name or symbol, is essentially a common law property right." Keebler Co. v. Rovira Bisquit Corp., 624 F.2d 366, 372 (1st Cir.1980), citing Campbell Soup Co. v. Armour & Co., 175 F.2d 795, 796-97 (3rd Cir.), cert. denied, 338 U.S. 847, 70 S.Ct. 88, 94 L.Ed. 518 (1949). An essential element of a claim of trademark infringement is a likelihood of confusion among prospective purchasers of plaintiff's products and services caused by defendants' use of plaintiff's marks. See Baker v. Simmons Co., 307 F.2d 458, 461 (1st Cir.1962).

The district court first determined that under the secondary meaning doctrine, VWAG is entitled to trademark protection for the use of the word Beetle. The secondary meaning doctrine states that

[W]ords which have a primary meaning of their own, such as bug, may by long use in connection with a particular product, come to be known by the public as specifically designating that product.

Volkswagenwerk AG v. Rickard, 492 F.2d 474, 477 (5th Cir.1974) (citations omitted). Secondary meaning is generally the test for determining whether the plaintiff has created a property right in the mark. It can be developed as a result of extensive advertising of a product with the mark. Volkswagenwerk AG v. Hoffman, 489 F.Supp. 678, 681 (D.S.C.1980); Time, Inc. v. Life Television Corp., 123 F.Supp. 470, 474-75 (D.Minn.1954).

The establishment of secondary meaning in a word is an issue of fact. Rickard, 492 F.2d at 477-78. Accordingly, we must determine whether a genuine issue of fact lies regarding the establishment of a secondary meaning in the word Beetle.

"[I]t is appropriate to consider (1) the length and manner of its use, (2) the nature and extent of advertising and promotion of the mark and (3) the efforts made in the direction of promoting a conscious connection, in the public's mind, between that name or mark and a particular product or venture."

Rickard, 492 F.2d at 478, quoting 3 Callman, Unfair Competition, Trademarks, and Monopolies, Sec. 19.27 (4th ed. 1983). Kenneth Wheeler admitted that he chose the name Beetle Barn because he believed the general public associated the word Beetle with Volkswagen. VWAG referred to the sedan in promotional materials and in advertisements as the Beetle since 1960s, including its magazine, The Small World, published by VWoA for Volkswagen automobile owners in the United States, from 1962 to the present.

Appellants assert that this same promotional and advertising evidence was presented by VWAG to the PTO in the early 1970s. The PTO found the evidence sufficient to support a trade or service mark registration in the word "Beetle" for sales of the car, but the PTO asked for further evidence to support the granting of a service mark for the word "Beetle" in connection with the repair and servicing of Beetles. Thinking it had proven its case to the PTO, and that, in any event, it was sufficiently protected under its other trademarks, VWAG withdrew its PTO application for a service mark for "Beetle" with respect to repair and servicing. Appellants assert that because they service Beetles, and because...