Collectively known as the "Tea Rose-Rectanus doctrine," these
principles continue to govern territorial rights in
unregistered trademarks. See, e.g., ACCU Personnel, 846 F. Supp.
at 1205. It follows from the doctrine that "the senior user of
a common law mark may not be able to obtain relief against the
junior user in an area where [the senior user] has no
established trade, and hence no reputation and good will."
Natural Footwear Ltd. v. Hart, Schaffner & Marx, 760 F.2d 1383,
1394 (3d Cir. 1985). In order to rely on the "good faith prior
user" defense, the junior user must prove two elements: (1)
that it adopted its mark in good faith; and (2) that it
employed the mark in a market remote from that of the senior
user. See GTE Corp. v. Williams, 904 F.2d 536, 541 (10th Cir.
ii. Statutory Exception
By comparison, the § 1115(b)(5) "limited area" exception is
one of nine enumerated statutory defenses. See
15 U.S.C. § 1115(b)(1)-(9). Courts have considered the limited area defense
as codifying the "essence" of the common law Tea Rose-Rectanus
doctrine. See, e.g., Thrifty Rent-A-Car System, Inc. v. Thrift
Cars, Inc., 831 F.2d 1177, 1181 (1st Cir. 1987). Courts have
not, however, addressed whether the statutory exception is as
broad as or merely carved from the common law doctrine.
Confusion on this issue can be traced to two sources: (1)
ambiguities regarding the proper application of the defense;
and (2) the language of the statutory defense or exception.
The statutory exception is listed under the subheading
"Incontestability; defenses." See 15 U.S.C. § 1115(b). Views on
the application of the § 1115(b) defenses to contestable marks,
however, have vacillated. Under the Lanham Act, a mark may only
becomes incontestable after it is continuously used in commerce
for five years after registration. See 15 U.S.C. § 1065.*fn18
As previously discussed, once a mark become incontestable, its
registration constitutes conclusive evidence of the mark's
validity, the registrant's ownership of the mark, and the
registrant's exclusive right to use the mark in commerce,
subject only to the § 1115(b) defenses. See id. § 1115(b). By
comparison, registration of a mark that has yet to become
incontestable comprises only prima facie evidence of the mark's
validity, the registrant's ownership of the mark, and the
registrant's exclusive right to use the mark, subject to all
common law defenses. See id. § 1115(a).*fn19
When asked to apply the § 1115(b)(5) exception to contestable
marks, prior to 1985, courts reasoned that a statutory defense
available against incontestable marks which enjoy greater
protection must, a fortiori, be equally available against
contestable marks. See, e.g., Value House v. Phillips
Mercantile Co., 523 F.2d 424, 429 (10th Cir. 1975); Matador
Motor Inns, Inc. v. Matador Motel, Inc., 376 F. Supp. 385, 387
(D.N.J. 1974); Avon Shoe Co. v. David Crystal, Inc.,
171 F. Supp. 293, 299 (S.D.N.Y. 1959), aff'd, 279 F.2d 607 (2d Cir.
1960), cert. denied, 364 U.S. 909, 81 S.Ct. 271, 5 L.Ed.2d 224
(1960). In 1985, however, the Supreme Court decided Park `N Fly
v. Dollar Park and Fly, Inc., in which it noted that the
§ 1115(b) defenses "are not substantive rules of law which go
to the validity or enforceability of an incontestable
mark." 469 U.S. 189, 199 n. 6, 105 S.Ct. 658, 83 L.Ed.2d 582
(1985). Relying on the legislative history of the Lanham Act,
the Court stated that the defenses operate to reduce the
evidentiary status of registration of the mark, from conclusive
to merely prima facie evidence of validity, ownership, and
exclusive rights to use the mark. See id.
In light of the Court's clarification of this point, lower
courts retreated from the position that § 1115(b)(5) is
applicable to incontestable and contestable marks alike. As §
1115(b)(5) was only a defense to the conclusiveness of the
evidentiary presumption arising from incontestability, courts
found that the statutory defense had no relevance to
contestable marks. See GTE Corp. v. Williams, 904 F.2d 536, 540
(10th Cir. 1990); Thrifty Rent-A-Car System v. Thrift Cars,
Inc., ("Thrifty I"), 639 F. Supp. 750, 755 (D.Mass. 1986),
aff'd, 831 F.2d 1177 (1st Cir. 1987); Dana Corp. v. Racal
Electronics Public Ltd. Co., No. 85 C 428, 1987 WL 18948, *4
(N.D.Ill. Oct. 22, 1987). Instead, courts applied the common law
Tea Rose-Rectanus doctrine to determine the rights of a good
faith prior user. See GTE Corp., 904 F.2d at 541; Thrifty I,
639 F. Supp. at 755; Dana Corp., 1987 WL 18948, at *5.
The issue, nevertheless, did not remain resolved. Effective
November 16, 1989, Congress amended § 1115(a) to make the §
1115(b) defenses equally available against contestable marks.
See Trademark Law Revision Act of 1988, Nov. 16, 1988, P.L. No.
100-667, § 128, 102 Stat. 3935. According to the Senate Report
on the legislation, the amendment "codifie[d] judicial
decisions holding that the enumerated defenses or defects to an
action for infringement of an incontestable registration, which
are set forth in [15 U.S.C. § 1115], are equally applicable in
actions for infringement of marks which are not incontestable."
S.Rep. No. 100-515, at 38 (1988) reprinted in 1988 U.S.C.A.A.N.
Courts have since consistently applied § 1115(b)(5) as a
substantive defense, rather than merely affecting the
evidentiary presumption. See, e.g, Champions Golf Club, Inc. v.
Champions Golf Club, Inc., 78 F.3d 1111, 1123-24 (6th Cir.
1996); Peaches Entertainment Corp. v. Entertainment Repertoire
Assocs., Inc., 62 F.3d 690, 692 (5th Cir. 1995); Century 21
Real Estate Corp. v. Century 21 Real Estate, Inc.,
929 F.2d 827, 829 (1st Cir. 1991); Proriver, Inc. v. Red River Grill,
27 F. Supp.2d 1, 4 (D.D.C. 1998); Four Seasons Hotels Ltd. v. Koury
Corp., 776 F. Supp. 240, 246 (E.D.N.C. 1991).*fn20 Furthermore,
courts have assumed without discussion that proving the §
1115(b)(5) defense also establishes the common law defense
under the Tea Rose-Rectanus doctrine. See J. Thomas McCarthy, 4
Trademarks and Unfair Competition § 26.48 (4th ed. 1996).*fn21
The assumption is unproblematic if the two defenses are,
indeed, identical. Even if the statutory defense were narrower
than the common law defense, satisfaction of the former could
be taken to establish the latter, but not vice versa. No court,
however, seems to have engaged in a comparison of the relative
breadths of the exceptions.
This court must squarely address the issue in this case,
where the junior user has raised only the statutory defense.
One obvious difference between the statutory and the common law
defenses is the terminology used in each. Whereas the Tea
Rose-Rectanus doctrine protects good faith and geographically
remote users of a mark, see ACCU Personnel, Inc. v. AccuStaff,
Inc., 846 F. Supp. 1191, 1209 (D.Del. 1994), the statutory
exception applies when the mark "was adopted without knowledge
of the registrant's prior use and has been continuously used by
such party" from, inter alia, a date prior to the date of
constructive use of the mark, or the date of filing of the
application for registration of the mark.
15 U.S.C. § 1115(b)(5). In ACCU Personnel, the United States District Court
for the District of Delaware addressed whether the defendant's
prior knowledge of the plaintiff's use of a mark precluded a
finding of good faith for the purposes of the common law
defense. 846 F. Supp. at 1209-1211. After noting that the texts
of Hanover and Rectanus supported both views, the court
concluded that "a junior user's prior knowledge of a senior
user's trademark use is probative of, but not dispositive of,
the question whether the junior user acted in bad faith." Id.
at 1211; accord GTE Corp., 904 F.2d at 541.
The ACCU Personvel court, nevertheless, was expounding the
common law, Tea Rose-Rectanus doctrine, not the statutory
exception. Although the Third Circuit has yet to address the
issue, every court of appeals to apply § 1115(b)(5) has
enumerated lack of knowledge as an element of the statutory
defense. See, e.g., Champions Golf Club. Inc. v. Champions Golf
Club, Inc., 78 F.3d 1111, 1123-24 (6th Cir. 1996); Brittingham
v. Jenkins, 914 F.2d 447, 453 (4th Cir. 1990); Thrifty
Rent-a-Car System, Inc. v. Thrifty Cars, Inc. ("Thrifty II"),
831 F.2d 1177, 1180 (1st Cir. 1987); Foxtrap, Inc. v. Foxtrap,
Inc., 671 F.2d 636, 640 (D.C. Cir. 1982) (per curiam). Given
that Members 1st pled only the statutory defense, not the
common law defense in the instant case, the court cannot ignore
the plain language of the statute which requires the lack of
knowledge, not merely good faith.
Furthermore, even if Members 1st had pled the common law
defense, the court is not persuaded that the defense is
sustainable in light of Members 1st's knowledge of Members
First's use of its mark. As previously noted, both
Hanover and Rectanus involved defendants who adopted the
infringing marks without knowledge of the plaintiff's use. The
Lanham Act, however, abolished the good faith defense by
allowing federal registration of a trademark to serve as
constructive notice of the registrant's claim of ownership. See
15 U.S.C. § 1072. Consequently, courts agree that subsequent
users of a registered mark cannot defend on the basis of lack
of knowledge or good faith. See, e.g., Dawn Donut Co. v. Hart's
Food Stores, Inc. 267 F.2d 358, 362 (2d Cir. 1959). In an
aside, the Third Circuit summarized the Tea Rose-Rectanus
doctrine as holding that:
"the senior user's use of a mark in one region
would not suffice to prevent a junior user from
using the same mark in a region where the senior
user's goods were unknown so long as the junior
user adopted the mark without knowledge and of the
senior user's mark and thus in good faith."
A.J. Canfield Co. v. Honickman, 808 F.2d 291, 295
n. 4 (3d Cir. 1986) (emphasis added).*fn22
In light of Members 1st's knowledge of Members First's use of
its mark, the court
concludes that its statutory defense under § 1115(b)(5) must
fail. Accordingly, the court will grant Members First's
supplemental motion for partial summary judgment.
In accordance with the foregoing discussion, the court will
deny Members 1st's motion for summary judgment and Members
First's motion for partial summary judgment and a permanent
injunction. The court will grant Members First's supplemental
motion for summary judgment. An appropriate order will follow.
In accordance with the accompanying memorandum of law,
IT IS HEREBY ORDERED THAT:
(1) Defendant Members 1st Federal Credit Union's motion for
summary judgment is DENIED.
(2) Plaintiff Members First Federal Credit Union's motion for
partial summary judgment and a permanent injunction is
(3) Plaintiff Members First Federal Credit Union's
supplemental motion for partial summary judgment is
(4) The Clerk of Court shall defer the entry of judgment
until the conclusion of this case.