Appeal From the United States District Court For the District of New Jersey - Newark
Gibbons and Hunter, Circuit Judges, and Mansmann,*fn* District Judge.
1. This case presents the difficult issue of trademark protection where two parties are using the same trademark on non-competing products. The Lapp Division of plaintiff Interpace Corporation ("Lapp-Interpace") manufactures and sells ceramic insulators under the "Lapp" trademark. The Lapp name was first applied to insulators in 1916, when John S. Lapp formed the Lapp Insulation Company. In 1953 the Lapp trademark, as applied to ceramic insulators, was entered in the principal trademark register. In 1969 Interpace Corporation acquired the Lapp Insulation Company, along with the Lapp trademark and accompanying goodwill.
2. Defendant, Lapp, Inc., is the United States marketing arm of Lapp, Stuttgart, Gmbh and U.I. Lapp, A.G. The parent companies were formed in 1957 by Oskar Lapp to manufacture and sell electrical wire and cable. Lapp, Inc. was formed in 1976 as a New Jersey corporation with its headquarters in Fairfield, New Jersey. Since 1977 it has distributed wire, cable and related electrical hardware in the United States under the "Lapp" and "Lapp Cable" trademarks. It has never applied for federal registration of this mark.
3. Lapp-Interpace brought suit to enjoin Lapp, Inc. from using the "Lapp" name on its products, alleging direct infringement of a registered mark, 15 U.S.C. § 1114 (1976), false designation of origin under section 43(a) of the Lanham Act, 15 U.S.C. § 1125(a) (1976), and infringement of New Jersey common law trademark rights. The district court issued a lengthy opinion following a bench trial. Although the district court's extensive findings of fact generally favored the plaintiff's claim, the court felt compelled by its reading of Scott Paper Co. v. Scott's Liquid Gold, Inc., 589 F.2d 1225 (3d Cir. 1978) to dismiss the complaint. Although we disagree with the district court's reading of Scott Paper, its findings of fact permit us to resolve this case as a matter of law. We will reverse and direct that judgment be entered in favor of the plaintiff, Lapp-Interpace.
4. The law of trademark protects trademark owners in the exclusive use of their marks when use by another would be likely to cause confusion. Where the trademark owner and the alleged infringer deal in competing goods or services, the court need rarely look beyond the mark itself. In those cases the court will generally examine the registered mark, determine whether it is inherently distinctive or has acquired sufficient secondary meaning to make it distinctive, and compare it against the challenged mark. To determine likelihood of confusion where the plaintiff and defendant deal in non-competing lines of goods or services, the court must look beyond the trademark to the nature of the products themselves, and to the context in which they are marketed and sold. The closer the relationship between the products, and the more similar their sales contexts, the greater the likelihood of confusion. Scarves by Vera, Inc. v. Todo Imports Ltd. (Inc.), 544 F.2d 1167 (2d Cir. 1976). Once a trademark owner demonstrates likelihood of confusion, it is entitled to injunctive relief. 15 U.S.C. § 1114(1) (1976).
5. This court in Scott Paper restated the test for injunctive relief in somewhat different terms. Rather than focusing on likelihood of confusion, we asked whether the plaintiff in a non-competing products case had developed "secondary meaning" in the defendant's market. Likelihood of confusion and secondary meaning are in theory distinct concepts. In practice, however, the evidence required to show either, and the legal consequences flowing from a finding of either, will be virtually indistinguishable. As McCarthy states in his well-known treatise, "secondary meaning and likelihood of buyer confusion, although two separate legal issues, will be difficult to distinguish in viewing the evidence." 1 J.T. McCarthy, Trademarks and Unfair Competition § 15:3 (1973). Secondary meaning exists when consumers seeing a trademark assume that the product it labels came from a particular source. If in fact the product did not come from that source, then there has been buyer confusion. The test we stated in Scott Paper is thus indistinguishable in practice from the more traditionally phrased likelihood of confusion test.
6. Over the years the courts have identified a number of factors to aid in determining likelihood of confusion in non-competing products cases. See Scarves by Vera, Inc. v. Todo Imports Ltd. (Inc.), 544 F.2d 1167, 1173 (2d Cir. 1976); Polaroid Corp. v. Polarad Electronics Corp., 287 F.2d 492, 495 (2d Cir.), cert. denied, 368 U.S. 820, 7 L. Ed. 2d 25, 82 S. Ct. 36 (1961); Sears, Roebuck & Co. v. Johnson, 219 F.2d 590, 593 (3d Cir. 1955). Those factors, as set forth in Scott Paper, are: (1) the degree of similarity between the owner's mark and the alleged infringing mark; (2) the strength of the owner's mark; (3) the price of the goods and other factors indicative of the care and attention expected of consumers when making a purchase; (4) the length of time the defendant has used the mark without evidence of actual confusion arising; (5) the intent of the defendant in adopting the mark; (6) the evidence of actual confusion; (7) whether the goods, though not competing, are marketed through the same channels of trade and advertised through the same media; ((8) the extent to which the targets of the parties' sales efforts are the same; (9) the relationship of the goods in the minds of consumers because of the similarity of function; (10) other facts suggesting that the consuming public might expect the prior owner to manufacture a product in the defendant's market, or that he is likely to expand into that market. 589 F.2d at 1229.
7. The trial court did not formally apply the Scott Paper factors, but it did make findings in every relevant area of inquiry. For purposes of clarity, we will review the district court's findings as applied to the Scott Paper factors.
8. The district court determined that the trademarks of plaintiff and defendant are for all practical purposes identical; even when the defendant markets its products under the "Lapp Cable" mark, the district court found that "the name Lapp stands out." See American Plan Corp. v. State Loan & Finance Corp., 365 F.2d 635, 639 (3d Cir. 1966), cert. denied, 385 U.S. 1011, 17 L. Ed. 2d 548, 87 S. Ct. 719 (1967) ("Where the names are identical . . . the names in themselves are evidence of likelihood of confusion."). The plaintiff's mark is a strong one. Lapp-Interpace and its predecessor, Lapp Insulation Company, have used the Lapp trademark on insulators for over fifty years, and the mark has become quite distinctive of the plaintiff's products.*fn1 It is true that defendant Lapp, Inc. adopted the Lapp name from its German parent companies. The district court found that Lapp, Inc., while it may have acted innocently, was careless in not conducting a thorough name search for American uses of the name. Lapp-Interpace introduced several examples of actual confusion in buyers. The district court found the next factor - whether the goods are ...