Warnervision Entertainment Inc. v. Empire of Carolina, Inc.

101 F.3d 259, 1996 WL 682122
Court of Appeals for the Second Circuit·Decided November 27, 1996·No. No. 2003, Docket 96-7380·Published·Cited by 6 cases

Opinion

VAN GRAAFEILAND, Circuit Judge:

Empire of Carolina, Inc., Empire Industries, Inc. and Empire Manufacturing, Inc. (hereafter “Empire”) and Thomas Lowe Ventures, Inc. d/b/a Playing Mantis (hereafter “TLV”) appeal from orders of the United States District Court for the Southern District of New York (Baer, J.) preliminarily enjoining appellants from violating Warner-Vision Entertainment Inc.’s trademark, “REAL WHEELS,” and denying Empire’s cross-motion for injunctive relief. See 915 F.Supp. 639 and 919 F.Supp. 717. The appeal was argued on an emergency basis on May 31, 1996, and on June 12, 1996, we issued an order vacating the preliminary injunction with an opinion to follow. This is the opinion.

Appellants contend that the grant of preliminary relief in WarnerVision’s favor should be reversed on any of several grounds. We limit our holding to one — the district court’s misapplication of 15 U.S.C. § 1057(c), part of the intent-to-use (“ITU”) provisions of the Lanham Act, to the facts,of the instant case. This error constitutes án abuse of discretion. See Reuters Ltd. v. United Press Int'l, Inc., 903 F.2d 904, 907 (2d Cir.1990).

Prior to 1988, an applicant for trademark registration had to have used the mark in commerce before making the application. Following the enactment of the ITU provisions in that year, a person could seek registration of a mark not already in commercial use by alleging a bona fide intent to use it. See 15 U.S.C. § 1051(b). Registration may be granted only if, absent a grant of extension, the applicant files a statement of commercial use within six months of the date on which the Commissioner’s notice of allowance pursuant to 15 U.S.C. § 1063(b) is issued. See 15 U.S.C. § 1051(d); see also Eastman Kodak Co. v. Bell & Howell Document Management Prods. Co., 994 F.2d 1569, 1570 (Fed.Cir.1993). The ITU applicant is entitled to an extension of another six months, and may receive further extensions from the Commissioner for an additional twenty four months. 15 U.S.C. § 1051(d)(2). If, but only if, the mark completes the registration process and is registered, the ITU applicant is granted a constructive use date retroactive to the ITU filing date. 15 U.S.C. § 1057(c). This retroactive dating of constructive use permits a more orderly development of the mark without the risk that priority will be lost. The issue we now address is whether the creator of a mark who files an ITU application pursuant to 15 U.S.C. § 1051(b) can be preliminarily enjoined from engaging in the commercial use required for full registration by 15 U.S.C. § 1051(d) on motion of the holder of a similar mark who commenced commercial use of its mark subsequent to the creator’s ITU application but prior to the ITU applicant’s commercial use. A brief statement of the pertinent facts follows.

On September 9, 1994, TLV sent the Patent and Trademark Office (“PTO”) an ITU application for the mark “REAL WHEELS,” stating an intent-to-use the mark in commerce on or in connection with “the following goods/services: wheels affiliated with %4th and ferd scale toy vehicles.” The application was filed on September 23, 1994. Around the same time, two other companies, apparently acting in innocence and good faith, decided that the “REAL WHEELS” mark would fit the products they were preparing to market. One of them, Buddy L, a North Carolina manufacturer that had been marketing toy replicas of vehicles for many years, selected the name for its 1995 line of [261]*261vehicle replicas. The other, WarnerVision Entertainment Inc., found the name suitable for certain of its home videos which featured motorized vehicles. The videos and vehicles were shrink-wrapped together in a single package. Both companies ordered trademark searches for conflicts in the name, but, because TLV’s application had not yet reached the PTO database, no conflict was found.

' Both companies then filed for registration of their mark. However, because WarnerVision’s application was filed on January 3, 1995, three days before Buddy L’s, it was approved, and Buddy L’s was rejected. Buddy L nonetheless continued with its marketing efforts and entered into negotiations with TLV for a possible license based on TLV’s ITU application.

Unfortunately, Buddy L encountered financial problems, and on March 3, 1995, it filed for relief under Chapter 11 of the Bankruptcy Law as a debtor in possession. Thereafter, in an auction sale approved by the Bankruptcy Court, Buddy L sold substantially all of its assets to Empire. On October 20, 1995, Empire purchased from TLV all of TLV’s title and interest in and to the REAL WHEELS product line, trademarks and good will associated therewith, including the September 23, 1994 ITU application. At the same time, Empire licensed TLV to use the REAL WHEELS mark for toy automobiles. On November 13, 1995, WarnerVision brought the instant action.

In granting the preliminary injunction at issue, the district court quoted the Supreme Court’s admonition in Connecticut Nat’l Bank v. Germain, 503 U.S. 249, 253-54, 112 S.Ct. 1146, 1149-50, 117 L.Ed.2d 391 (1992), to the effect that when the words of a statute are unambiguous, judicial inquiry as to its meaning is complete. 919 F.Supp. at 719. We do not quarrel with this statement as a general proposition; however, we question its application in the instant case. Section 1057(c) of Title 15, the statute at issue, provides that, “[cjontingent on the registration of a mark ... the filing of the application to register such mark shall constitute constructive use of the mark, conferring a right of priority, nationwide in effect....” Empire is not claiming constructive use based on registration. Registration will not take place until after the section 1051(d) statement of use is filed and further Examination is had of the application for registration. See Eastman Kodak, supra, 994 F.2d at 1570. Empire contends that the district court erred in granting the preliminary injunction which bars it from completing the ITU process by filing a factually supported statement of use.

We agree. Empire does not contend that the filing of its ITU application empowered it to seek affirmative or offensive relief precluding WarnerVision’s use of the REAL WHEELS mark. It seeks instead to assert the ITU filing as a defense to WarnerVision’s efforts to prevent it from completing the ITU registration process. In substance, Empire requests that the normal principles of preliminary injunction law be applied in the instant ease.

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Warnervision Entertainment Inc. v. Empire of Carolina, Inc., 101 F.3d 259, 1996 WL 682122 (2d Cir. 1996).

101 F.3d 259 (Warnervision Entertainment Inc. v. Empire of Carolina, Inc.) — published by Counsel Stack Legal Research, free access to 12M+ legal documents.

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