Caseflicks

Court of Appeals for the First Circuit • 1987

Thrifty Rent-A-Car System, Inc. v. Thrift Cars, Inc., Thrifty Rent-A-Car System, Inc. v. Thrift Cars, Inc.

831 F.2d 1177 | 1987 U.S. App. LEXIS 14256

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Takeaway

In short, a good-faith local user can retain a continuously served market despite another party’s federal registration, but cannot use that exception to claim markets it entered later.

Background

Thrifty began renting cars under its name in 1958 and federally registered its service mark in July 1964. Thrift Cars independently began a small rental business in East Taunton, Massachusetts, in 1962. Before Thrifty’s registration, Thrift Cars advertised in several local and regional publications but made only a few rentals involving Nantucket. In 1970, it opened a rental counter at the Nantucket airport, bringing it into closer competition with Thrifty.

After a bench trial, the district court barred Thrift Cars from operating under its name outside Taunton but allowed it to keep advertising in publications it had used before July 1964. The court also barred Thrifty from establishing a business in East Taunton or advertising in media principally aimed at that community. Both parties appealed.

Issues

Issue #1

Whether Thrift Cars’ use of its name before Thrifty’s federal registration protected its continued use in East Taunton and its later expansion into Nantucket.

Holding

Thrift Cars could continue using its name in its established Taunton market, but its limited activity elsewhere before registration did not protect its later Nantucket operation. The court affirmed the injunction.

Reasoning

Federal registration generally gives the registrant nationwide rights. The Lanham Act makes a limited exception for a good-faith user that adopted a confusingly similar mark before registration and continuously used it in a particular area through trial. That user’s protected territory is confined to the market it had actually established when the other party registered.

Thrift Cars had established its business in East Taunton before July 1964. Even after moving most operations to Nantucket, it continued to advertise to the East Taunton area and maintained an address and telephone number there. The district court could therefore find continuous use. Because East Taunton is part of Taunton, framing the business restriction in terms of Taunton was permissible.

Thrift Cars had not established a Nantucket market by July 1964. A few rentals, regional advertising, and an unsuccessful effort to obtain an airport license did not show meaningful market penetration. Opening an airport rental counter in 1970 was an expansion into a different market, not a continuation of the protected East Taunton business.

The injunction confined where Thrift Cars could operate under its name; it did not prevent customers from other places from seeking out its Taunton business. Allowing Thrift Cars to keep using publications in which it had advertised before registration likewise preserved an existing practice. Some advertising overlap might cause confusion, but the Lanham Act did not require eliminating every possibility of it.