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April 25, 1996


The opinion of the court was delivered by: JOYNER


 APRIL 25, 1996

 This action is one by First Keystone Federal Savings Bank against First Keystone Mortgage, Inc. for federal trademark infringement and false designation of origin claims under the Lanham Trademark Act of 1946, as amended, 15 U.S.C. §§ 1051-1127 (1963, 1982 & Supp. 1995) and common law claims of unfair competition, trademark misappropriation and common law trademark infringement. Earlier in this litigation's history we denied cross-motions for summary judgment, finding that the parties had established questions of fact as to material issues. We then proceeded to a bench trial and now, after three days of testimony, the entrance of many documents into the record and the submission of proposed findings of fact and conclusions of law, we are prepared to proceed to a final disposition of this action.



 1. Plaintiff is a publicly held full service savings bank with its main office in Media, Pennsylvania and branch offices elsewhere in Delaware County, Pennsylvania. Otto Dep., pp. 29-31; Tr., 9/11/95, p. 159.

 2. One of Plaintiff's bank services is the provision and servicing of first mortgage residential loans. These loans are made primarily in the Delaware and Chester County regions of Pennsylvania, with some loans made in Bucks and Montgomery Counties, Pennsylvania, Southern New Jersey and New Castle County, Delaware. Tr., 9/11/95, pp. 15, 19, 160-63.

 3. Mortgage loans account for 90 to 95% of Plaintiff's business. Tr., 9/11/95, p. 16.

 4. Plaintiff spends approximately $ 200,000 per year on advertising. Tr., 9/11/95, p. 20.


 5. Defendant's primary business is provision of first mortgage residential loans. Tr., 9/12/95, p. 22.

 6. Defendant's main office is in Paoli, Pennsylvania and it has branch offices in Chester and Delaware Counties, Pennsylvania, Clark's Summit, Pennsylvania, as well as in Voorhees, New Jersey and Greenville, Delaware. Tr., 9/12/95, pp. 45, 58; Pl.'s Ex. 1.

 7. Defendant's West Chester branch is known as Franklin Mortgage Co. Tr., 9/12/95, p. 197.

 8. Defendant spent approximately $ 10,000 to $ 11,000 a year on advertising between 1987 and 1988 and approximately $ 18,000 to $ 20,000 in 1992. Tr., 9/13/95, p. 37.


 9. Plaintiff owns a registration for FIRST KEYSTONE FEDERAL, Registration No. 1,324,996, dated March, 12, 1985. Pl's Ex. 202.

 10. Defendant incorporated its business in March, 1985 with the Pennsylvania Secretary of State under the name First Keystone Mortgage, Inc. Tr., 9/12/95, p. 57; Tr., 9/13/95, p. 4.

 11. Defendant first tried to incorporate under the name Keystone Mortgage. A search with Pennsylvania's Secretary of State revealed, however, that that name was in use, but it was advised that First Keystone Mortgage was available. Tr., 9/12/95, p. 83.

 12. At the time Defendant incorporated, neither its founder nor its attorney was aware of Plaintiff's existence. Tr., 9/12/95, pp. 60-61, 85; Tr., 9/13/95, p. 5.

 13. At the time Defendant incorporated, there was no attempt to associate with Plaintiff or copy its name. Tr., 9/12/95, p. 85.

 14. Defendant advertised the name of the corporation and its articles of incorporation in two Chester County newspapers in April, 1995 and there was no objection or communication by anyone to Defendant's name. Tr., 9/13/95, pp. 6-7; Tr., 9/12/95, p. 83; Def.'s Exs. 24, 25.


 16. The residential mortgage application process is heavily regulated by federal regulations and the process is largely standardized by the Federal National Mortgage Association's (Fannie Mae) requirements. Tr., 9/11/95, pp. 29-31; Tr., 9/12/95, p. 194.

 17. The mortgage procurement process is anxiety filled and delays that hinder the process negatively impact the relationships among buyer, realtor and mortgage lender. Tr., 9/11/95, p. 67; Tr., 9/13/95, p. 91.

 18. The most important consideration for a borrower is the rate, with service, convenience and lender reputation following. Tr., 9/12/95, pp. 51, 78; Tr., 9/13/95, p. 90.

 19. Defendant's first office opened in Wayne, Pennsylvania, in Delaware County in 1987, but was moved shortly thereafter to Paoli, Pennsylvania, in Chester County. Tr., 9/12/95, p. 58.

 20. Defendant has no loan originators operating in Delaware County and Plaintiff has never had an office outside of Delaware County. Tr., 9/11/95, p. 159; Tr., 9/13/95, p. 86.

 21. Defendant has used commissioned solicitors to generate business since it began operations in 1987. Tr., 9/11/95, p. 138. Plaintiff began using commissioned solicitors for the first time in 1992. Id. at 17, 138.

 22. Defendant has no specific intent to increase business in Delaware and Chester Counties as opposed to its intent to increase its business, in general, everywhere. Tr., 9/13/95, pp. 85-86.

 23. Plaintiff's loans, by far, have been made in Delaware and Chester Counties with only a small fraction made outside that area. Tr., 9/11/95, pp. 162-63.

 24. Plaintiff's advertising reaches some locales in which Defendant is active outside of Delaware and Chester Counties, but Plaintiff's advertising is not specifically directed to those areas. Tr., 9/11/95, pp. 161-62.

 25. Defendant's business grew steadily between 1988 and 1993. Pl.'s Ex. 226.

 26. Since 1989, Defendant's closed loan volume has always exceeded Plaintiff's. Def.'s Exs. 38, 39. 27. The following chart compares the parties' relative annual loan amounts for residential first mortgages, in millions of dollars. Pl's Exs. 226, 228. Year Plaintiff Defendant 1988 44 48.5 1989 23.1 45.4 1990 14.8 124.9 1991 55.2 198.8 1992 71 354.5 1993 46.2 285.4 1994 -- 120

 28. Defendant's greatest percentage increase in loan closings occurred between 1989 and 1991. Pl.'s Ex. 226.

 29. Plaintiff's closed loans declined between 1988 and 1991. Tr., 9/11/95, pp. 112-13; Pl's Ex. 227.

 30. Both parties, as well as other mortgage lenders in the market, experienced large increases in refinancing and other loan business in 1992 because of dropping interest rates. Tr., 9/11/95, p. 139; Tr., 9/12/95, pp. 169, 218.

 31. Defendant currently employs approximately 23 people. In 1993, it employed as many as 160 people. Tr., 9/12/95, p. 15. Since 1992, more than half its offices have closed and its gross asset value has shrunk in half from 14 million. Id. at 14-15, 175; Tr., 9/13/95, p. 87. The decline in Defendant's business since 1994 is largely attributable to the decline in mortgage loan demand in that time. Id. at 15-16.

 32. For approximately one year, Defendant sub-contracted out servicing of the loans it made, but never personally serviced its own loans. Tr., 9/12/95, pp. 41, 156, 175, 204-05.

 33. Adding servicing to Defendant's product brought it into closer competition with Plaintiff. Tr., 9/12/95, p. 157.

 35. Plaintiff does not offer government-backed mortgage loans, which is 30% of Defendant's business. Tr., 9/11/95, p. 23; Tr., 9/12/95, p. 43.

 36. Defendant does not offer construction loans, which Plaintiff does. Tr., 9/13/95, pp. 14-15.

 37. The parties do not compete in Scranton or Voorhees, N.J., Clark's Summit, Pa., or Greenville, De. Tr., 9/12/95, p. 47.


 38. Plaintiff's lending Senior Vice-President, Stephen Henderson, became aware of Defendant and its business in early 1988. Tr., 9/11/95, pp. 41, 120.

 39. In early 1988, Henderson decided that there was a serious problem between the two parties' names. Tr., 9/11/95, p. 120.

 40. In early 1988, Henderson told Plaintiff's President, Donald Purdy, that he thought Defendant's name was confusingly similar to Plaintiff's name. Tr., 9/11/95, p. 117.

 41. Purdy instructed Henderson to create and maintain a file of evidence showing confusion between the two companies' names. Tr., 9/11/95, pp. 117-18. In 1988, Plaintiff developed a formal system for tracking and collecting evidence of confusion. Id. at 42.

 42. By mid-1988, Henderson viewed Defendant as a direct competitor of Plaintiff's. Tr., 9/11/95, p. 120.

 43. Purdy also instructed Henderson to telephone Thomas Toole, then the President of Defendant, to express Plaintiff's concern over the similarity of the two companies' names. Tr., 9/11/95, pp. 45, 120; Tr., 9/12/95, pp. 72, 79; Henderson Dep., pp. 18-19.

 44. During that conversation, Toole asked Henderson if he had the authority to discuss this matter with Toole. Henderson conceded that he did not and Toole asked Henderson to have someone with authority contact him if Plaintiff wished to further discuss the matter. Henderson indicated that he would have his superiors contact Toole. Tr., 9/11/95, pp. 45, 121.

 45. During that call, Toole indicated that his was just a start-up business and that he might consider changing Defendant's name if Plaintiff covered the costs associated with doing so. Tr., 9/12/95, p. 79.

 46. When a business changes its name, it is harmed in that there is a financial cost involved, but also in that there is often a negative perception that the business has not been successful or ...

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