Wednesday, December 29, 2010
Copying generic mark could be unfair competition
When can a plaintiff base an unfair competition claim on use of a generic term? In some circumstances, even a generic term can be part of a claim for passing off. Here, plaintiff PSK lost its claims for service mark/trade name infringement under state and federal law, as well as for dilution/injury to business reputation under state law, but still preserved a passing off claim.
Overhead Door Corp. makes garage doors and related products. It has registered trademarks in a red ribbon logo featuring the phrase OVERHEAD DOOR. Plaintiff, its authorized distributor in the Cedar Rapids/Iowa City area, does business as Overhead Door Company of Cedar Rapids and Iowa City. Plaintiff sells and services garage doors in the commercial and residential markets. It advertises extensively in local media.
Lots of other businesses use “overhead” in their trade names and marketing, most if not all of which sell garage door products and/or services. Several companies have “overhead”-including registered marks, including several who market garage door products and/or services. At least one other business in the parties’ market, "Dan's Overhead Doors & More," operates and advertises under a name that includes the term "overhead."
Defendants, the Hicklins, operate a residential garage door installation and repair business, under the names "Advanced Garage Door Repair" and "A-1 American Garage Door Repair." They entered the Cedar Rapids market, then the Johnson County market (including Iowa City), with one office in Sioux City where all service calls are answered for scheduling and a warehouse and local contractors in the Cedar Rapids area to respond to customer calls. During the first 12-18 months of operation, the Hicklins ran multiple Yellow Pages ads prominently featuring the term OVERHEAD and using a 319 (Cedar Rapids) area code, though resulting calls were routed to Sioux City. Several times the term OVERHEAD was in red, though other times it was not.
Randy Hicklin testified that he chose the term "OVERHEAD" as the most prominent term in the initial advertisements because "[i]t's the most descriptive word for consumers to know the type of work that I do and what they are looking for." However, not all their ads used the term OVERHEAD, and Hicklin testified that he thought those ads could be effective too.
Lemke, an installer hired by Advanced in 2007, testified that he encountered three to four customers each week who had actually intended to contact plaintiff, that when he found such customers he’d leave without doing the work, and that Randy Hicklin wanted him to stay and charge for a service call. Lemke further testified that he told Hicklin that the ads were confusing people because of the size of “overhead” in the ad, and that Hicklin responded that Advanced was right beside that term. Finally, he testified that, during his training, they were "going up the interstate, and [Randy Hicklin] passed one of Overhead's trucks, and he looked out and kind of laughed and said, we're going to get a lot of their business."
Hicklin acknowledged that there had been some confusion, but attributed it to his “advertising large in the [telephone] book in a descriptive way,” whereas plaintiff hadn’t been doing enough advertising. He also conceded that customers had called his business looking for plaintiff, but that his employees identified the business as Advanced. “We do overhead repair and if they ask, is this the Overhead Door Company, we tell them no, and if they ask if we have their phone number, which sometimes we are actually nice enough to look it up for them.” Three technicians reported incidents in which they arrived at a customer’s home and the customer thought they were having Overhead Door Company of Cedar Rapids and Iowa City do the repairs. Several of plaintiff’s customers testified to similar experiences (and that they associated the term “overhead” with plaintiff), though they generally also testified that they hadn’t paid much attention when they made their calls. One testified that he asked when he called, "is this Overhead Door of Cedar Rapids or Iowa City[?]" and that the woman who answered said "yes, yeah."
Plaintiff also commissioned a survey among general consumers and current customers, who were asked whether a company or companies come to mind when they hear the word "overhead." Sixty-eight percent of consumers said yes, while 81% of Plaintiff's customers said yes. Of the consumers, 60% associate the term "overhead" with plaintiff (41% overall) and 39% associate it with Dan's Overhead Doors & More. Of plaintiff's customers, 83% associate the term with plaintiff (68% overall) and 22% associate "overhead" with Dan's Overhead Doors & More.
Finally, the Hicklins represent that their technicians are certified. The certification is not independent, but based solely on a list created by Randy Hicklin. One technician testified that Randy Hicklin trained and certified him when he was hired. The Hicklins removed the word “certified” from their Yellow Pages ad when challenged.
The court first found that “overhead” is generic as a matter of law: it is the common name of the general category of goods or services. Competitors use the term to identify their products and services, including Dan’s Overhead Doors & More, which plaintiff never protested. The dictionary definition of “overhead” likewise supported a finding of genericness. Generic terms don’t get trademark protection even if they develop de facto secondary meaning.
Thus, plaintiff’s argument that its customers associated “overhead” with a company failed. Survey evidence may be relevant when a term was coined but is alleged to have become generic. However, when the term was commonly used prior to its association with the source at issue, then there’s no need to inquire whether it’s become generic through common use. Even instances of confusion are not evidence of non-genericness, since the Hicklins were using “overhead” in accordance with its accepted meaning.
Plaintiff argued that “overhead” is descriptive rather than generic because telephone directories don’t have a separate listing for “overhead” garage doors, but only doors and garage doors. This was not the law, as a case finding “brick oven” generic for pizza demonstrated. “The genericness of a term is not synonymous or co-extensive with that term's stature as a separate category in a telephone directory.” Basically, plaintiff was trying to expand the “genus” at issue from overhead doors to garage doors. To the extent that this was an argument that adjectives can’t be generic, it was wrong, as a case finding “honey brown” generic for beer showed. “[T]he existence of more general terms does not preclude a finding that ‘overhead’ is a generic term.” McCarthy’s examples of nouns plus modifiers producing similarly generic names that can’t be monopolized by a single seller: “red wine; dinner table; flat screen TV; laptop computer; woman's business suit.”
As a result, plaintiff can have no protectible interest in “overhead,” and its claims for service mark and trade name infringement failed.
However, plaintiff also alleged unfair competition under §43(a): that the use of “overhead” in the context of defendants’ advertising and other representations to consumers was unfair and/or a false designation of origin. This was essentially a claim of passing off, where the Hicklins allegedly deliberately styled their ads to palm off their services as coming from plaintiff.
The passing off claim was not barred by the finding that “overhead” is generic, which only means that it’s not protected against copying. If a generic term has de facto secondary meaning, relief may be appropriate to require the copier to take reasonable measures against confusion. Use of a generic term, without more, can’t give rise to a §43(a) claim, but a defendant’s failure to adequately identify itself as the source, or use of other confusion-generating practices, might do so. What’s required is a showing of (de facto) secondary meaning plus likely confusion; however, liability is inappropriate if defendants used every reasonable means to prevent confusion.
The court found a genuine issue of material fact as to whether “overhead” had secondary meaning. Among other things, the record contained sufficient evidence for a juror to conclude that the Hicklins intentionally used and emphasized the term "overhead" in their advertisements in an effort to confuse or deceive consumers, which can be circumstantial evidence of secondary meaning. However, plaintiff’s consumer survey conducted in February 2010 was irrelevant, because it was conducted approximately 3 years after defendants entered the market; even if it were relevant, it provided only marginal support for secondary meaning because it showed that consumers use “overhead” to identify both plaintiff and Dan's Overhead Doors and More, and associate the term "Garage Door" with the same sources.
Likewise, there was a factual issue about likely confusion (using the same test used for trademark infringement, for lack of a better way to go about it). The weakness of “overhead” weighed against likely confusion, but the parties’ emphasis on the term created similarity between their ads, especially since their goods and services were the same (though one would think that would have less weight when the term at issue is generic for the goods and services, and thus use of similar terms could be expected) and especially since consumers were unlikely to encounter the ads side by side. Likewise, a jury could conclude that defendants intended to deceive by, among other things, deliberately emphasizing “overhead” in ads rather than their own trade names. On actual confusion, there was customer testimony, though some of this was attributable to inattentiveness rather than actual confusion. To the extent that customers weren’t taking reasonable care, their mistakes don’t support a finding of likely confusion. But actual confusion evidence is not required.
In terms of consumers’ degree of care, there wasn’t really much evidence, except that several customers testified that they spent only a few minutes glancing at the phone book before calling defendants. But one could infer that buying a residential garage door is not a cheap, impulse buy, and customers are more likely to exercise a higher degree of care. But the parties also provide repair services, where customers may be more likely to be acting in haste. “In some instances, Plaintiff's customers did not even open the telephone book after noticing an advertisement or coupon on the cover or bottom of the directory. This may be the most likely response in the event of an unexpected garage door malfunction.” This degree of care might favor plaintiffs. “[T]he issue here is not what a perfectly attentive customer would do, but what amount of care can reasonably be expected of potential customers.”
False advertising: Plaintiff also claimed that defendants violated §43(a)(1)(B) by "claiming to have 'certified' technicians" and "misleading consumers that the Hicklins are based locally by using a phone number with a (319) area code that is answered in Sioux City." Though the only certification came from Randy Hicklin, not an independent third party, the court held that this was not literally false, because both Hicklin and a technician testified that he did in fact train and certify them. Without evidence of consumer perception, the defendants were entitled to summary judgment.
The same was true for the (319) area code claim. This wasn’t a literally false representation that calls were answered within that area code, and plaintiff had no evidence that anyone was fooled, or that it was material to consumers.
Finally, the court rejected plaintiffs’ state law dilution claim. Iowa law protects famous marks against dilution of their distinctive qualities. Apparently, no previous reported case applied the law. However, the court used the general law of trademark dilution, which occurs when consumers associate a famous mark with a new product, and is normally applied when similar marks are used on dissimilar goods. A dilution claim typically fails when the parties compete, and thus it did so here. Moreover, “overhead” isn’t famous. A mark too weak to be infringed is necessarily too weak to be diluted.