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BLUMENFELD DEV. CORP. v. CARNIVAL CRUISE LINES

September 25, 1987

Blumenfeld Development Corporation
v.
Carnival Cruise Lines, Inc.



The opinion of the court was delivered by: GILES

 GILES, J.

 I. INTRODUCTION

 On August 1, 1986, Blumenfeld Development Corporation (hereinafter BDC) filed a single count Complaint seeking a declaratory judgment that BDC's use of "Carnival Club and Design" does not infringe the trademark rights of Carnival Cruise Lines, Inc. (hereinafter Carnival). Complaint para. 30.

 On September 9, 1986, Carnival filed its Answer and Counterclaim, together with a motion for a preliminary injunction.

 On September 9, 1986, the parties appeared before this court and the court decided that the preliminary injunction hearing should be combined with the trial on the merits, after expedited discovery.

 After the preliminary injunction hearing, this court rendered a Bench Opinion in favor of defendant, also the counterclaim plaintiff, which opinion is incorporated herein by reference. The following amplifies the reasons already given to the parties.

 II. FINDINGS OF FACT

 A. Complaint

 1. Blumenfeld Development Corporation (BDC) alleged in its Complaint that it was engaged in the business of providing "real estate development services" under the mark "Carnival Club and Design." Complaint para. 6.

 2. It is clear that the gravamen of BDC's claim was its use of the word "carnival" in connection with a proposed hotel to be called Carnival Club Hotel and Casino.

 3. Review of BDC's use of its alleged mark "Carnival Club and Design" shows that the word "Club" is de minimis in comparison to the word "carnival" and that the word "carnival" is dominant.

 B. Witnesses

 4. Jack Blumenfeld (Blumenfeld) is a principal of all of the named plaintiffs in this action and is directly and primarily responsible for their respective corporate and business actions.

 5. Allan Feingold is a principal of all of the named plaintiffs in this action.

 6. Andrew Sutor is the general manager of BDC's proposed hotel casino.

 7. Phyllis Kaufmann is an attorney and professional consultant who consulted with Jack Blumenfeld on the choice of a name for the proposed hotel casino.

 8. Clark Doran is the project manager for the development of the proposed hotel casino.

 9. Marc Orlow, Esquire is an attorney who worked for the law firm that represented BDC, Blumenfeld and Feingold personally, and the companies and partnerships with respect to the corporate matters such as the formation and dissolution of companies.

 10. Joseph Fusco, Esquire is an Atlantic City attorney who represents Blumenfeld, his companies and partnerships including BDC with respect to license applications before the New Jersey Casino Control Commission.

 11. Karl Spivak, Esquire is a trademark attorney who conducted trademark searches and prepared papers for filing in the United States Patent and Trademark Office for BDC.

 12. Lawrence Polillo is the architect employed by BDC with respect to the proposed hotel casino.

 13. Daniel O'Leary who designed a number of signs for the proposed casino, is an officer of Ad-Art, a company that designs and builds signs.

 14. Thomas Falkowski works in Jack Blumenfeld's offices on tasks assigned by Blumenfeld. These have included editing the publication "Newswire" and preparing financial packages.

 15. Noel Mayo, an exterior graphics and aesthetics consultant, is employed by BDC and/or Blumenfeld with respect to the proposed hotel casino.

 16. Stanley Faye, a consultant with respect to interior design, is employed by Blumenfeld and/or BDC with respect to the proposed hotel casino.

 17. Thomas Powderly, a professor at Brandywine College in Delaware, teaches travel and tourism and has previously worked as a travel agent. He was permitted to give opinion testimony.

 18. Lynn Stelle is a travel agent, whose principal experience has been with "affinity groups." He has had limited experience as a retail travel agent. He was permitted to give opinion testimony.

 19. Robert W. Burchell, a Professor at the Rutgers Center for Urban Policy Research, was retained by BDC for the preparation and analysis of a survey. He has had no training with respect to consumer behavior, marketing, and/or marketing research. He was permitted to testify about the survey.

 20. Steven Salmore, who has a doctorate in Political Science, was retained by BDC for the preparation and analysis of a survey. He has had no training with respect to consumer behavior, marketing, and/or marketing research. He was permitted to testify about the survey.

 21. Ted Arison is the Chairman of the Board of Directors and founder of Carnival.

 22. Micky Arison is the President of Carnival.

 23. Robert Dickinson is the Senior Vice President for Carnival who has been principally responsible for Carnival's marketing and advertising since the early 1970's.

 24. Lawrence Winson is the General Counsel of Carnival.

 25. Ellen Levenson is a paralegal employed by Carnival.

 26. David Carey is a Professor of Marketing at the Wharton School of Business, University of Pennsylvania, who previously was a Vice President at the Scott Paper Company where he had responsibility for acquisitions, marketing and other such matters for more than 15 years. He testified on marketing, confusion regarding the subject marks, Carnival's nationwide reputation, and the business risk to Carnival resulting from the use by BDC and Messrs. Blumenfeld and Feingold of their proposed marks.

 27. Donna Thomas, President of Will Travel, Inc., a travel agency which has three offices in the Philadelphia suburbs which employ more than 30 people, of which a minimum of 16 are full time travel agents. She is also the owner-operator of the Will Travel School, Richboro, Pennsylvania. She testified as both a fact witness and expert witness for Carnival.

 28. Ivan Ross is a Professor at the University of Minnesota who specializes in consumer psychology and who testified as an expert with respect to surveys and consumer psychology for Carnival.

 III. CARNIVAL CRUISE LINES

 A. Background and Corporate History

 29. Carnival Cruise Lines began its operations in March, 1972 (predecessor Carnival), as a wholly-owned subsidiary of AITS, Inc. (AITS), a publicly held corporation that packaged group and individual tours.

 30. Ted Arison was President of the predecessor Carnival.

 31. The name "Carnival" was chosen because "Carnival" was used by AITS in conjunction with other AITS travel and entertainment offerings.

 32. The predecessor Carnival chartered its ship, the "Mardi Gras," from another subsidiary of AITS.

 33. The predecessor Carnival's very first brochures prominently displayed the mark and tradename "Carnival" and "Carnival Cruise Lines" on the front page of the brochures.

 34. On the first sailing of the "Mardi Gras" in 1972, there were slot machines on board.

 35. Ted Arison, then President of predecessor Carnival, incorporated Carnival under the laws of Panama in November 1974.

 36. On December 14, 1974, Carnival purchased the ship "Mardi Gras" from an AITS related organization. AITS ceased use of the name "Carnival Cruise Lines," and Carnival became the only authorized user of that name.

 37. Carnival continued the operations of the predecessor Carnival without interruption and the employees of the predecessor Carnival became employees of Carnival.

 38. In January, 1975, Carnival opened a full casino on board the "Mardi Gras."

 39. Ted Arison, Chairman of the Board of Carnival and Robert Dickinson, Senior Vice President of Carnival, testified without contradiction that Carnival was the first cruise ship in the United States to offer full casinos on seven-day cruises.

 40. The ship board casino featured slot machines, blackjack, roulette, crap tables, and a wheel of fortune.

 41. The casino on board the "Mardi Gras" was a casino which was similar to land-based casinos such as those found in and offered at the hotel-casinos in Atlantic City and Las Vegas.

 42. On February 7, 1976, "The Empress of Britain," a sister ship of the "Mardi Gras," was chartered by Carnival on an exclusive basis and commenced service as the "Carnivale," the second ship in Carnival's fleet.

 43. The "Carnivale" featured a full range of services, including a casino.

 44. When the ships "Festivale," "Tropicale," "Holiday," "Jubilee" and "Celebration" subsequently joined Carnival's fleet and commenced service, in the years 1976 through 1987, they each featured a casino.

 45. In the year ending November 30, 1976, Carnival carried more than 73,000 passengers, which represented substantial annual growth over the prior year, and Carnival's ships had a passenger occupancy rate of "more than 100%."

 46. "More than 100%" occupancy is achieved when customers use additional upper or roll away beds in their cabins, resulting in more than two persons occupying a single room.

 47. Carnival has continued to exceed 100% passenger occupancy in every year since 1976, notwithstanding the addition of five ships to Carnival's fleet since 1976, each of which has a greater passenger capacity than Carnival's initial two ships, the "Mardi Gras" and the "Carnivale."

 48. In 1977, the ship "S.A. Vaal" was chartered by Carnival on an exclusive basis and the ship was refitted under the supervision of Carnival.

 49. In 1978, this ship began service as the third ship in Carnival's fleet under its new name "Festivale."

 50. Carnival's President, Ted Arison, in 1978 ordered the construction of a new cruise ship for Carnival for delivery in 1982 to be named the "Tropicale."

 51. In 1983 Carnival ordered three new ships with a projected cost of almost one half billion dollars for delivery in 1985, 1986 and 1987. The names selected for these ships are "Holiday," "Jubilee," and "Celebration."

 52. In an effort to continue the growth and expansion of Carnival's business, on May 26, 1984, Carnival commenced a program of three- and four-day cruises in addition to its seven-day cruises.

 53. In July, 1985, the ship "Holiday" was delivered and commenced service.

 54. In July, 1986, the ship "Jubilee" was delivered and commenced service.

 55. In March, 1987, the seventh ship in the Carnival fleet, the "Celebration," was delivered and commenced service.

 56. Carnival has announced its order for a new eighth ship which is to be delivered in 1989.

 57. Carnival has entered into an arrangement, in conjunction with The Continental Cos., an operator of over 50 hotels in the United States, whereby Carnival and Continental will manage and operate the new Sardi's Broadway Hotel & Casino which is to be built in Atlantic City.

 58. Carnival was asked to join in the operation of the new Sardi's Broadway Hotel & Casino because of Carnival's extensive experience in the travel and entertainment market, and in developing, structuring and operating its cruise ships, which feature amenities and services which parallel those of hotel casinos in Atlantic City.

 B. Carnival's Marketing and Promotional Efforts

 59. In June, 1974, the predecessor Carnival adopted its "Fun Ship" marketing concept.

 60. As early as June 1, 1974, promotional brochures began to market Carnival Cruise Lines as the owner of the "Fun Ship" Mardi Gras. Again, the trade names "Carnival" and "Carnival Cruise Lines" were prominent in public and trade advertising.

 61. In 1974, these brochures were distributed to travel agents throughout the United States.

 62. Carnival continued to develop and expand Carnival's "Fun Ship" marketing concept through the distribution of promotional brochures to travel agents nationwide which prominently displayed "Carnival" and advertised and promoted Carnival's fun, resort, entertainment and travel activities which included ranging from the full casino, and night club shows.

 64. Carnival Tours, Inc., a Florida corporation (hereinafter Carnival Tours), was formed to qualify with the Air Traffic Conference of America (ATC) and the International Air Traffic Association (IATA) to issue airline tickets for Carnival's combined packages.

 65. Carnival, in conjunction with arrangements through Carnival Tours, expanded its special "Fly Aweigh" program and has annually increased its passengers and revenues.

 66. Since the formation of Carnival Tours, advertising and promotional programs were managed by Carnival and the costs thereof were shared by Carnival and Carnival Tours.

 67. These "Fly Aweigh" brochures have prominently displayed "Carnival."

 68. Carnival's "Fly Aweigh" program has grown from more than 90 cities in 1981 including the northeastern cities of Philadelphia, Allentown/Bethlehem/Easton and Wilkes Barre/Scranton, Pennsylvania; Newark, New Jersey; New York City; Hartford, Connecticut; Baltimore, Maryland; and Washington, DC, to more than 165 cities today.

 69. Carnival does not feature the names of the various rooms on its ships as part of and marketing of its travel, entertainment and vacation services and packages.

 70. Carnival has devoted enormous amounts of resources including millions of dollars to the advertising, marketing and promotion of its operations, entertainment packages and services. 71. Carnival's advertising expenditures are summarized in the chart below for the fiscal years starting December 1, 1977: Actual Advertising Year Expenditures Exceeded 1978 $ 1,255,000 1979 1,780,000 1980 2,380,000 1981 4,600,000 1982 7,715,000 1983 9,095,000 1984 14,240,000 1985 18,420,000 1986 25,075,000 $ 84,560,000

 The 1987 budget for advertising is $ 33 million.

 72. In each of the last five years, Carnival's actual expenditures have exceeded its advertising budget.

 73. These expenditures provide overwhelming evidence of Carnival's substantial and increasing commitment to the growth, enhancement, and maintenance of its goodwill and reputation.

 74. The advertising budget does not include the following additional promotional items: public relations expenses, marketing department employee salaries, presentations and seminars for travel agents, promotional travel and entertainment, telephone expenses, shipping and postage expenses.

 75. Carnival commenced its marketing campaign with the distribution of brochures advertising its first cruise in March 1972, and with the retention of advertising agencies at that time.

 76. The 1972 brochures prominently displayed the mark and tradename "Carnival" and "Carnival Cruise Lines."

 77. In 1974, Carnival's brochures were distributed to travel agents throughout the United States.

 78. Throughout the 1970s, Carnival continued to distribute its brochure on a nationwide basis.

  79. Since 1974, Carnival has placed advertisements in the Travel Agent and Travel Weekly, which are two of the major weekly trade publications received by travel agents. Advertisements in these publications emphasize the gambling facilities on Carnival's ships.

  81. Carnival has advertised and continues to advertise in a large number of newspapers from Pennsylvania, New York, New Jersey, Delaware, Maryland, Washington DC, and Connecticut, including the Albany Times Union, the Allentown Call Chronicle, the Asbury Park Press, the Baltimore Sun, the Bergen County Record, the Bethlehem Globe-Times, the Binghamton Sun, the Easton Express, the Erie Times/News, the Fairfield County Dailies, the Harrisburg Patriot, Long Island Newsday, the New Haven Register, the New York Daily News, the New York Post, the New York Times, the Philadelphia Inquirer, the Pittsburgh Press, the Rochester Post, the Rochester Democrat, the Scranton Times, the Stamford Advocate, the Star Ledger (Newark), the Syracuse Herald, the Washington Post, and the Wilkes Barre Times.

  82. Since 1977, Carnival has augmented its marketing by distributing a monthly publication entitled "Carnival Capers" to travel agents throughout the United States and currently distributes more than 29,000 copies on a monthly basis.

  83. Carnival's "Carnival Capers" contains, inter alia, updated information as to Carnival's entertainment packages and services, information as to new ships, information on free promotional cruises for travel agents and complimentary letters from travel agents.

  84. For example, the June 1977 "Carnival Capers" issue contains an article entitled "I'm a Little Bit Country," the August 1977 issue contains an article entitled "The Nifty Fifties Go to Sea," the April 1977 issue contains an article entitled "It's a Girl," and the November 1977 issue contains an article entitled "Free Cruise to Nowhere for Travel Agents."

  85. The distribution of "Carnival Capers" is further evidence of the widespread distribution of advertising and promotional materials by Carnival since 1977.

  86. Carnival has also printed specialty brochures to market particular aspects of its services, such as the "Your Honeymoon Cruise" brochure.

  87. In early 1984, Carnival committed itself to a major expansion of its advertising by accepting a proposal from McFarland & Drier, a Miami-based advertising agency, for a nationwide television advertising campaign.

  88. Kathie Lee Johnson (now Kathie Lee Gifford), who was a backup co-host for ABC's "Good Morning America" television program, was retained to be the Carnival spokesperson in the spring of 1984. The filming of the new television commercial began in June 1984.

  89. The mark "Carnival" is prominently featured in these nationwide television commercials, which first aired in July 1984.

  90. Initially, the advertising aired on the nationwide network newscasts of ABC, NBC and CBS in the morning, and the nationwide network newscasts of ABC and CBS in the evening.

  91. The list of cities in which Carnival's television commercials have appeared covers all of the major cities and television markets in the United States.

  92. Commercials appeared during nationwide television broadcasts including broadcasts from television stations in Philadelphia, Wilmington, Baltimore, Washington, New York, Hartford and Boston.

  93. Television advertising also aired on episodes of the "Love Boat" program on the ABC network.

  94. Since July 1984, additional commercials have been prepared and distributed and Carnival continues to use nationwide network television advertisements.

  95. Carnival reinforces its advertising and marketing efforts through personal visits to travel agents by Carnival sales representatives which efforts commenced at least as early as 1973.

  96. These representatives, who are full time employees of Carnival, distribute promotional materials, answer questions, talk to groups of potential customers organized by the travel agents, and show promotional films in an effort to further increase Carnival's business and promote the goodwill and reputation of Carnival.

  97. These efforts, which continue to date, have contributed to Carnival's increase in sales and the number of consumers who choose Carnival's vacation or entertainment packages and services.

  98. Today, Carnival has more than fifty such representatives who cover the entire United States. Each of these representatives promotes Carnival and visits as many of the travel agencies and agents as is possible in their respective territories.

  99. There are currently two representatives responsible for New Jersey, two for Pennsylvania, two for Delaware, Maryland and Washington DC, and five for New York.

  100. In addition, there is a staff in Miami that supports the representatives by answering phone calls directed to the representatives and providing information to the travel agents who call these representatives.

  101. Carnival does a substantial business in group sales. For example, church and civic organizations working through travel agents reserve blocks of rooms on Carnival's ships and then sell the space to their members.

  102. Carnival provides specific materials to travel agents to help them in arranging for the booking group sales.

  103. These groups provide their own mailings to their members which promote Carnival's cruises and which provide articles regarding Carnival, thus augmenting Carnival's own marketing and advertising.

  104. Sales and marketing organizations reserve group block space as an incentive or reward to sales people and publicize Carnival to their organization in advertising the incentive program.

  105. Starting in the late 1970s and continuing through 1985, Carnival entered into agreements to have one of its ships sail on one or more occasions from one or more of the following ports during the spring and summer: Boston, Philadelphia, Baltimore, and Norfolk, VA.

  106. These cruises are referred to as "Outport" cruises because they leave from ports other than the Florida ports used for Carnival's other cruises.

  107. The Outport sailings are generally arranged in conjunction with an organization that commits its own funds to the advertising of the Outport sailing. For example, Cruise International, an organization involved in providing travel, entertainment and vacations, promoted the cruises from Philadelphia in 1984 and 1985.

  108. These Outport sailings have further increased public awareness of Carnival in the mid-Atlantic states.

  109. Carnival has augmented its advertising budget by engaging in cooperative advertising with airlines and travel agencies since 1975.

  110. Carnival has engaged in cooperative advertising and marketing with most of the major airlines in the United States.

  111. In 1986, Carnival shared the cost of printing a brochure with Eastern Airlines that promoted Eastern as the airline for Carnival's Fly Aweigh cruise.

  112. Carnival also co-hosts receptions and informational meetings for travel agents with airlines.

  113. Carnival has also entered into cooperative advertising with major travel agencies such as American Express and Liberty Travel.

  114. Carnival enters into trade agreements with travel agencies, radio stations and television stations in which it offers a discount on a cruise in return for advertising exposure.

  115. From 1984 through today, Carnival entered into a trade agreement with AT&T for its "opportunity calling" program, a special program which provides AT&T customers with the opportunity to purchase various goods and services at a discount, based upon the customer's use of AT&T's long distance services.

  116. As a result, information about Carnival's cruises has been distributed nationwide as part of AT&T's opportunity calling catalogues to all of AT&T's customers.

  117. In 1986, other Carnival trade agreements resulted in publicity on "Post Raisin Bran" boxes and on ...


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