Wrist-Rocket Mfg. Co., Inc. v. Saunders Archery Co., WRIST-ROCKET

• Decision Date: 06 July 1978
• Docket Number: Nos. 77-1588,77-1580,WRIST-ROCKET,s. 77-1588
• Citation: 578 F.2d 727,198 USPQ 257
• Parties: MANUFACTURING CO., INC., Appellant, Cross-Appellee, v. SAUNDERS ARCHERY COMPANY, Appellee, Cross-Appellant.
• Court: U.S. Court of Appeals — Eighth Circuit

Page 727

578 F.2d 727

198 U.S.P.Q. 257

WRIST-ROCKET MANUFACTURING CO., INC., Appellant, Cross-Appellee, v. SAUNDERS ARCHERY COMPANY, Appellee, Cross-Appellant.

Nos. 77-1588, 77-1580.

United States Court of Appeals Eighth Circuit.

Submitted Jan. 11, 1978.

Decided June 12, 1978.

Rehearing and Rehearing En Banc Denied July 6, 1978.

William E. Holland, of Kutak, Rock, Cohen, Campbell, Garfinkle & Woodward, Omaha, Neb., for appellant.

Esther O. Kegan, of Kegan, Kegan & Berkman, Chicago, Ill., for appellee; Glenn E. Klepac and Jane Shay Lynch, Chicago, Ill., on briefs.

Before GIBSON, Chief Judge, VAN OOSTERHOUT, Senior Circuit Judge, and ROSS, Circuit Judge.

GIBSON, Chief Judge.

This case is before the court for the second time and involves the right to use the trademark "Wrist-Rocket" on wrist-braced slingshots. The facts are adequately set forth in Wrist-Rocket Manufacturing Co., Inc. v. Saunders Archery Co., 516 F.2d 846 (8th Cir.), cert. denied, 423 U.S. 870, 96 S.Ct. 134, 46 L.Ed.2d 100 (1975) (hereinafter Wrist-Rocket I ), and in the published first memorandum opinion of the District Court. ¹ Wrist-Rocket Manufacturing Co., Inc. v. Saunders, 379 F.Supp. 902 (D.Neb.1974). They will not be restated here. We will again refer to appellant/cross-appellee Wrist-Rocket Manufacturing Co., Inc. as Ellenburg ² and appellee/cross-appellant Saunders Archery Company as Saunders.

The earlier appeal came at a time when the District Court retained jurisdiction to determine the amount of damages. A panel of this court concluded that it did not have jurisdiction under 28 U.S.C. § 1291 but did have jurisdiction under 28 U.S.C. § 1292(a)(1) "to examine the merits of that part of the order granting to the appellee a permanent injunction and ordering the cancellation of the appellant's registration." 516 F.2d at 849. The panel then proceeded to consider the injunctive claims and to express its views on some other portions of the case.

In Wrist-Rocket I this court held, inter alia, that Ellenburg's registered trademark was incontestable under 15 U.S.C. § 1065, that none of the defenses or defects listed in 15 U.S.C. § 1115(b) applied, but that Saunders was the common-law owner of the trademark. The panel concluded that in this situation Ellenburg's use of the trademark could not be challenged and Saunders had a non-exclusive right to use the mark in "market areas where he had established prior use before the publication of Ellenburg's registration," on May 4, 1965. The case was remanded for a determination of those areas and other matters, including approval of prefixes of origin to be used by Saunders and Ellenburg in conjunction with the mark. Among its conclusions on remand, the District Court decided that Saunders' common-law rights extend to all fifty states, that Saunders has not proved any recoverable damages for Ellenburg's allegedly false statements in securing trademark registration, and that Saunders is liable to Ellenburg in the amount of $18,592.52 for breach of fiduciary duty in failing to give reasonable notice of termination of its distributorship. Each party appeals. We affirm in part and reverse in part.

In large measure, trademark rights are determined by the common law and the statutes of the states. A major exception is the incontestability feature found in the Lanham Act, 15 U.S.C. §§ 1065 and 1115(b). ³ With exceptions, 15 U.S.C. § 1065 provides that if certain conditions are present, continuous use of a registered mark for five consecutive years results in the registrant having an incontestable right to use the mark in commerce in connection with the goods or services with which it had been used. 15 U.S.C. § 1115(b) provides that a registration which is incontestable under § 1065 is conclusive evidence of the registrant's exclusive right to use the mark except when one of seven enumerated defenses or defects is established.

It has been held that if two parties acquire common-law rights in a trademark in different areas and the prior user registers the mark, then the registered owner's rights can become incontestable but the other common-law owner retains exclusive rights to the mark in areas where his rights antedated registration. Old Dutch Foods, Inc. v. Dan Dee Pretzel & Potato Chip Co.,477 F.2d 150, 157 (6th Cir. 1973); Burger King of Florida, Inc. v. Hoots,403 F.2d 904 (7th Cir. 1968). Those cases rely heavily on 15 U.S.C. § 1115(b)(5), which states an exception to the rule of incontestability as conclusive evidence of right to exclusive use.

Turning to the instant case, we note that Wrist-Rocket I held that none of the defenses or defects of § 1115(b) applied. Saunders asserts that this was error and that exception (5) is present and thus Old Dutch Foods and Burger King govern the case. The prior panel's holding in this case is the " law of the case." It does not limit our power to correct error if it occurred. Messenger v. Anderson, 225 U.S. 436, 444, 32 S.Ct. 739, 56 L.Ed. 1152 (1912). However, this court follows the policy that matters decided on an earlier appeal will not be disturbed unless clearly erroneous and manifestly unjust. Otten v. Stonewall Insurance Co., 538 F.2d 210, 212 (8th Cir. 1976); Metzger v. Hossack, 165 F.2d 1, 2 (8th Cir. 1948); Kempe v. United States, 160 F.2d 406, 408 (8th Cir. 1947). Applying that standard here, we reaffirm Wrist-Rocket I except limited portions which are subject to interpretations at variance with this opinion.

15 U.S.C. § 1065 excludes certain situations from the operation of incontestability. Specifically, it excepts "the extent, if any, to which the use of a mark registered on the principal register infringes a valid right acquired under the law of any State or Territory by use of a mark or trade name continuing from a date prior to the date of the publication * * *." The plain meaning of this language is that if a party has acquired common-law trademark rights continuing since before the publication of the federal registration, then to that extent the registration will not be incontestable. 4 Callman, Unfair Competition, Trademarks and Monopolies § 97.3(c)(3) (3rd ed. 1970). Applying that section to the present case, it prevents Ellenburg's registration from being incontestable vis-a-vis Saunders in those areas where Saunders had acquired common-law rights before the publication date, May 4, 1965. ⁴

Under similar circumstances, the courts have held that a common-law owner whose use antedated the registration but post-dated the registrant's use in other areas has exclusive rights in the area preempted by the common-law owner. Old Dutch Foods, Inc. v. Dan Dee Pretzel & Potato Chip Co., 477 F.2d 150, 157 (6th Cir. 1973); Burger King of Florida, Inc. v. Hoots, 403 F.2d 904, 909 (7th Cir. 1968). See also 4 Callman, Unfair Competition, Trademarks and Monopolies § 97.3(c)(4)(c) (3rd ed. 1970). Those cases involved the application of 15 U.S.C. § 1115(b)(5). We can conceive of no reason to reach a different result in this case, where the common-law owner's use antedated the registrant's use. Therefore, geographically defined areas of exclusive use are required for each party in this situation to effectuate the will of Congress and meet the needs of business and the public. ⁵

In Wrist-Rocket I this court remanded the case to the District Court to determine the market areas where Saunders had acquired common-law rights before the publication of Ellenburg's registration. ⁶ Saunders now challenges the District Court's determination of those market areas as including all fifty states. ⁷ After a careful review of the record, we are convinced that the District Court's determination of this issue is erroneous.

Ellenburg contends that geographical market areas smaller than whole states should have been considered. He cites Safeway Stores, Inc. v. Safeway Quality Foods, Inc., 433 F.2d 99 (7th Cir. 1970); Burger King v. Hoots, 403 F.2d 904 (7th Cir. 1968); and Jerrico, Inc. v. Jerry's, Inc.,376 F.Supp. 1079 (S.D.Fla.1974). Each case involved the rights of a common-law owner of a trademark used as the name of retail establishments which had geographically small areas of market power. By contrast, Wrist-Rocket slingshots were sold by Saunders and Ellenburg in interstate commerce to jobbers and retail chains which placed them on countless store shelves across the country. Because of the nature of the product and the channels of distribution utilized, it was proper for the District Court to use whole states as market areas.

We agree with Ellenburg's contention that common-law trademark rights cannot be established by advertising alone. However, other evidence was admitted which was relevant to the extent of significant market penetration and Saunders' common-law rights. Despite the fact that the informal nature of the parties' relationship resulted in sales records being incomplete, Saunders' invoices established sales in forty-two states between January 1964 and May 4, 1965, the publication date. Many of these and earlier sales were to wholesale distributors, jobbers and retail chains, which in turn supplied retail outlets where the public shopped. Other sales were direct to consumers and were solicited through advertisements in national periodicals.

Despite this evidence and testimony that sales were nationwide and that Saunders had a national sales organization, Ellenburg claims Saunders has common-law rights in only a few states. Ellenburg points to our decision in Sweetarts v. Sunline, Inc., 380 F.2d 923 (8th Cir. 1967) and 436 F.2d 705 (8th Cir. 1971), for the proposition that the dollar volume of sales by Saunders was insufficient to establish common-law rights. Sweetarts involved varieties of candy competing in the marketplace under the trademark "SweeTarts." In remanding the case for a factual determination of "market area," we noted that the trial court should weigh all factors. 380 F.2d at 929. We noted certain factors that were significant...