Monday, November 16, 2015

Up stone creek without a paddle: Dawn Donut precludes relief for distant plaintiff

Stone Creek Inc. v. Omnia Italian Design Inc., 2015 WL 6865704, No. CV-13-00688 (D. Az. Nov. 9, 2015)
Stone Creek makes and sells furniture in Arizona, operating only out of Phoenix, except for a short-lived 2004-2008 expansion to Dallas, Texas.  Its mark, as of 1990, was a “red oval- shape circle around the words ‘Stone Creek.’ ”  It has a registration (filing date 2011) for furniture for STONE CREEK in standard character form as well as for its logo.  The defendant copied its logo exactly and used it for furniture sold in the upper Midwest; the court denies all relief, reaffirming Dawn Donut’s applicability in the internet age, and reinforcing that the “exclusive nationwide rights” granted by a federal registration are only as exclusive as courts allow.

The court found that household furniture “is typically sold locally to customers living within a drivable radius from the furniture outlet retail store,” given the size, weight, and shipping costs of furniture, as well the customers’ preference to see and sit on the furniture.  Stone Creek had a website, but didn’t sell furniture directly through its site or otherwise sell via the internet.  Stone Creek would have liked to expand, but there were no actual plans to do so after the closing of the Dallas operations.
Meanwhile, defendant Bon-Ton was a large retailer that operates furniture galleries in Illinois, Wisconsin, Pennsylvania, Ohio, and Michigan.  Defendant Omnia’s products were sold to purchasers living within 200 miles of a Bon-Ton Furniture gallery, including portions of Iowa, Indiana, Ohio, Wisconsin, Pennsylvania, Illinois, and Michigan, aka the Bon Ton trading territory (BTTT).  The parties’ territories were separated by over 1000 miles at the closest.
In 1993-1998, Stone Creek advertised in Southwest Airlines Spirit magazine and America West’s in-flight magazine, whose airlines travelled throughout the BTTT.  Still, the airline magazines and Stone Creek’s other advertising venues didn’t have a significant presence in the BTTT, and the court found that none of them created awareness of Stone Creek in the BTTT.
Stone Creek put its mark on its website,, as early as 2000, and hired a SEO firm, which enabled consumers to find Stone Creek’s website by going to or by searching for “stone creek” and “leather,” “furniture” or “sofa.”  Nonetheless, the court found that the website didn’t create awareness of Stone Creek in the BTTT, and that the “vast majority” of Google searches for Stone Creek Furniture originated in Arizona; only a negligible number were from the BTTT.  Many non-furniture businesses in the BTTT used the name “Stone Creek.”  In defendants’ survey, 99.75% of BTTT respondents were not familiar with Stone Creek in Arizona.
Stone Creek’s sales were over $200 million since inception, but only approximately 0.3% of its total sales occurred in the BTTT.  The largest sales were in Illinois, with about $350,000 in sales from 1996-2009 and 2011-2013, representing more than half of the total BTTT sales.  The total came from approximately 150 customers, out of 65,000 transactions total since Stone Creek’s inception. These numbers were “trivial,” the court said, and there was no evidence about how these 150 customers discovered Stone Creek.
In 2003, Stone Creek met Omnia, a California-based manufacturer of leather furniture, at a trade show in San Francisco. They entered into an agreement that Omnia would make leather branded with Stone Creek’s mark for Stone Creek, an agreement that lasted until 2012. 
Bon-Ton had been one of Omnia’s significant customers since 2008, and it wanted a private label brand to avoid competition with Omnia’s other customers, ideally a label with an “American made name.” Omnia’s president offered several suggestions, including STONE CREEK, which Bon Ton liked; Omnia offered it because it “sounded American” and because marketing materials and a logo were already prepared. Omnia copied the mark from Stone Creek-provided materials, including the identical logo. However, the court found that Omnia didn’t intend to trade off Stone Creek’s goodwill. Omnia never consulted an attorney about this. Omnia’s president understood that Stone Creek sold in the Phoenix area, but he never researched where Stone Creek sold its furniture.
From 2008-2013, Omnia sold leather furniture to Bon-Ton branded with the STONE CREEK mark. That year, after inquiries from individuals in the BTTT, Stone Creek asked Omnia if it sold products under the STONE CREEK mark to other companies. Stone Creek’s president also fielded a telephone call about a customer concerned about a warranty issue on a leather sofa. The customer indicated that he purchased the sofa from a Bon-Ton store in Chicago and that he had a warranty document with the STONE CREEK mark on it, from which he ended up at Stone Creek’s website.
Omnia’s VP of sales confirmed to Stone Creek: “Ron, yes, we do sell our products to those stores under their marketing name ‘Stone Creek Leather.’ … In this day of internet shopping and surfing, it is unfortunate and probably a nuisance for you that your stores are receiving inquiries regarding these products due to the similar name…” 
After Stone Creek complained, Omnia changed Stone Creek to Red Canyon. The court found that Stone Creek’s mark had no goodwill, reputation, or consumer recognition in the BTTT, and that there was no actual confusion by a consumer who bought Omnia Stone Creek furniture in the BTTT.
Stone Creek failed to meet its burden of showing likely, not merely possible, confusion.  Even if Stone Creek had shown that a trivial number of purchasers had been actually confused, a trivial number wasn’t enough.
Although the Stone Creek mark was strong in Arizona, it wasn’t recognized in the BTTT for its relationship to Stone Creek; the goods and marks were the same, but the parties had distinct marketing channels “with no opportunity for crossover” because of the local nature of the furniture industry.  Because furniture is expensive, consumers are supposed to exercise greater care.  Bon-Ton selected the mark because it had an American sound to it, and because the marketing material and logo already existed and were in the possession of Omnia, without intent to trade off of Stone Creek’s goodwill.  And Stone Creek had no plans to expand.  Thus the factors favored Bon-Ton.

Under Dawn Donut, “Even where the Sleekcraft factors weigh in favor of the [plaintiff],...territorial divisions may prevent confusion. An unauthorized junior mark user...can contest likelihood of confusion by arguing that, since ‘the registrant and the unauthorized user are confined to two sufficiently distinct and geographically separate markets,’ there is no likelihood of confusion.” Also, though the court doesn’t discuss this, because of the timing of the registration application, it appears that Bon-Ton was a §33(b) local user, protected against liability because it began use before the application date.  (Though no longer protected, because its use has now ceased.)  Thus, even likely confusion wouldn’t have entitled Stone Creek to prevail … but if I were Bon-Ton, I’d be pretty mad at Omnia for getting us into this.

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