Concurrent Trademark Use – Is the Dawn Donut Rule Still Viable

Is the Dawn Donut Rule Still Viable?
meh
Overview
• General Principles of Concurrent
Trademark Use
• The Tea-Rose Doctrine
• The Dawn Donut Rule
• Is Dawn Donut Still Viable?
• Practice Tips
Trademark Use
• A trademark is any word, name, symbol
or device that identifies and
distinguishes the goods of one party
from those of another.
– “First to Use” vs “First to Register”
• the first party to use a trademark has superior
rights and priority over all others in that
marketplace.
Trademark Use
• Main Purpose:
• Tells consumers who is making the product or
providing the service.
• Suggests a consistent level of quality.
• Helps consumers discriminate between desirable
and undesirable products or imitators.
Trademark Use
• Trademarks are protected under both
common and federal law.
– Initially trademark rights were protected
solely by common law and the level of
protection granted varied from state to
state.
– The Lanham Act was passed in 1946.
– Now state law and federal trademark laws
operate mostly in parallel.
Trademark Use
• Scope of protection
– Common law:
• Receive protection only in the geographic
locations where you actually use the trademark
– Federal law:
• Receive **nationwide** protection once you
have used the mark “in commerce” and receive
a federal registration.
Trademark Use
• Caveats
– Tea Rose-Rectanus Doctrine
– Dawn Donut Rule
• Both defenses to trademark infringement
Tea Rose-Rectanus Doctrine
• “Remote Good Faith User”
– Common law rule based on two Supreme
Court cases:
• Hanover Star Milling Co. v. Metcalf, 240 U.S.
403 (1916) (the "Tea Rose" case)
– "a trademark . . . extends to every market where the
trader's goods have become known and identified by
his use of the mark. But the mark, of itself, cannot
travel to markets where there is no article to wear the
badge and no trader to offer the article."
• United Drug Co. v. Theodore Rectanus Co.,
248 U.S. 90 (1918).
Tea Rose-Rectanus Doctrine
• Rule: the first user of a mark cannot
prohibit a subsequent user from using
the same or similar mark, where use
takes place in an area of the country
"remote" from the first user's area.
• For this doctrine to apply, the junior user
must use the mark in good faith.
Tea Rose-Rectanus Doctrine
• Practical Effect: one user may have
priority in one area, while another user
has priority over the very same mark in
a different area.
• Applicable: where the senior user is
relying on common law trademark rights
or has a federal registration that postdates the junior user's first use.
Tea Rose-Rectanus Doctrine
Dawn Donut Rule
• Dawn Donut Co. v. Hart’s Food Stores, Inc.,
267 F.2d 358 (2nd Cir. 1959)
– Facts:
• Plaintiff, wholesale distributor of
doughnuts and other baked goods owned federal
registrations for DAWN and DAWN DONUT.
• Defendant used the common law mark DAWN for
retail sale of doughnuts and baked goods in and
around Rochester, New York.
• Plaintiff sued for trademark infringement and sought
to enjoin Defendant from further use of DAWN.
Dawn Donut Rule
– Facts continued:
• At the time of the lawsuit Plaintiff was not using
either DAWN or DAWN DONUT in Defendant’s
trade area.
• Defendant began using DAWN only after
Plaintiff began use of its marks.
• Defendant claimed that it had no knowledge of
Plaintiff or its marks when it adopted DAWN.
– Recap
» Good faith
» Remote
» Junior user
Dawn Donut Rule
• Instead of telling Defendant to take a
hike . . .
– Created a new and narrower rule based off
of Tea Rose.
Dawn Donut Rule
“If the use of the marks by the registrant and the
unauthorized user are confined to
geographically separate markets, with no
likelihood that the registrant will expand his
use into the defendant’s market . . . then the
registrant is not entitled to enjoin the junior
user’s use of the mark.”
Dawn Donut Rule
• Applies where:
– Federal registration by Plaintiff
– Subsequent common law use by
Defendant
– Plaintiff does not operate in Defendant’s
geographic market and has no immediate
plans to expand into said market
– Defendant adopted the common law mark
in good faith
Dawn Donut Rule
– Practical Effect: establishes a per se rule
against injunctions for trademark
infringement where plaintiff does not
operate in defendant’s geographic market.
– Why? because there is no likelihood of
confusion for a court to enjoin until the
plaintiff enters into the defendant’s
geographic market.
Dawn Donut Rule
– What good is a federal registration?
• Presumptive priority nationwide
• Junior user in a state of peril
Dawn Donut Rule
• Since Dawn Donut a majority of Circuit
Courts have adopted its ruling.
• Still a prevailing rule as no Court has
explicitly overruled Dawn Donut.
Viability?
• But is Dawn Donut still viable?
– In 1959
• the Internet was a nonfactor
• A company’s physical presence and
geographic trade area was paramount
– Present day
• Most companies have an internet presence and
goods and services may be researched and
purchased without regard to geographic
location
• Growth of national TV and radio marketing has
dramatically increased
Viability?
• Trending away from Dawn Donut
• Circuit City Stores v. CarMax, 165 F.3d
1047 (6th Cir. 1999)
– First case to consider the effect of the
Internet on the Dawn Donut Rule.
– Plaintiff owned a federal registration for the
mark CARMAX for used in connection
used-car superstores.
– Defendant was a single dealership selling
new and used cars under the same mark.
Viability?
– District court finding infringement and
enters an injunction.
– On appeal, the defendant argued that the
district court erred when it failed to apply
the Dawn Donut Rule.
– The Sixth Circuit affirmed and held that
geographic remoteness was not the sole
factor but was only one of several factors
to be considered for likelihood of
confusion.
Viability?
– Concurring opinion, Judge Nathaniel Jones
“The Dawn Donut Rule was enunciated in
1959. Entering the new millennium, our society
is far more mobile than it was four decades
ago. For this reason and given that recent
technological innovations such as the Internet
are increasingly deconstructing geographical
barriers for marketing purposes, it appears to
me that a reexamination of precedents would
be timely to determine whether the Dawn
Donut Rule has outlived its usefulness.”
Practice Tips
• Practice Tips:
– With questionable viability and courts
trending away from a per se application . . .
– How do we advise clients seeking to enjoin
a remote geographic user from using their
registration?
Practice Tips
– The 2nd and 8th Circuits still appear to
rigidly apply Dawn Donut.
– The 5th, 6th and 11th Circuits and Districts of
Massachusetts and North and South
Carolina have rejected per se application
of Dawn Donut but apply market expansion
as one of the consumer confusion factors.
Practice Tips
– The 10th Circuit relied on Dawn Donut to
deny injunctive relief in Value House v.
Phillips Mercantile Co., 523 F,2d 424 (1975).
– No Utah case substantively discussing Dawn Donut
– Several courts have not applied Dawn
Donut where a famous mark was involved.
– Most courts have also found that laches is
not applicable under Dawn Donut.