"the ordinary customer's perception of possible expansion. 3 McCarthy § 24:19. In addition, "the law must take into account that [the reasonably prudent] buyer knows that modern corporations have control over widely diversified products."). Id. § 24:54
It is true that in 1983, when CIA was founded, CBI by law could not have sold insurance, but the instant inquiry concerns consumer psychology, not consumers' knowledge of the law. The lines between banking and finance, insurance, annuities, investing, financial planning, etc., probably never have been certain ones in the minds of consumers. The composite phrase "Banking and Insurance" probably has resonance in the consumer mind. Consumers long have been aware that banks seek to expand territorially and in terms of the products and services they offer. These considerations taken together support the conclusion that, in 1983, many reasonable consumers encountering "Commerce" in connection with insurance and financial planning would have assumed they were dealing with CBI or some CBI affiliate or offshoot.
Other factors demonstrate the close relationship of banking and insurance in the public mind. For example, at various times, including today, New Jersey has had a Department of Banking and Insurance. In addition, New Jersey is very close to New York, and it is well-known that New York banks sell life insurance. Moreover, it is beyond question that insurance -- especially life insurance -- is an important factor in any estate or financial planning venture. The result has been that banks and insurance companies always have been competitors insofar as they both have been offering estate and financial planning services.
(11) Likelihood of Confusion: Conclusion
The balance of the Scott Paper factors tips in CNIS/CBI's favor. CIA's use of the "Commerce" mark in 1983 was likely to create confusion. Therefore, the zone of protection for CBI's mark in 1983 encompassed the financial planning and insurance areas. Thus, CBI's rights in the mark in these areas are senior to CIA's, and CIA's use of the "Commerce" mark was an infringing use in 1983.
The problem CNIS/CBI faces now is that it did not file suit until 1997, and CIA contends that CNIS/CBI should be barred by laches from receiving the preliminary relief it seeks because "during approximately twelve years of knowing co-existence, [CBI] never once complained to [CIA] about its name." (CIA's Brief in Opposition to CNIS/CBI's Motion for Preliminary Injunction and In Support of CIA's Motion for Preliminary Injunction at 13).
Laches "is the obvious rebuttal to a tardy assertion of rights" in situations involving intervening junior users such as CIA. 3 McCarthy § 24:20. "Laches consists of two essential elements: (1) inexcusable delay in instituting suit, and (2) prejudice resulting to the defendant from such delay." University of Pittsburgh v. Champion Prods. Inc., 686 F.2d 1040, 1044 (3d Cir.), cert. denied, 459 U.S. 1087, 74 L. Ed. 2d 933, 103 S. Ct. 571 (1982); see Central Pa. Teamsters Pens. Fund v. McCormick Dray Line, Inc., 85 F.3d 1098, 1108 (3d Cir. 1996). Laches works an equitable estoppel barring relief. University of Pittsburgh, 686 F.2d at 1044.
"The defense of laches is recognized as a valid defense to an action for trademark infringement." Tonka Corp. v. Rose Art Indus., Inc., 836 F. Supp. 200, 219 (D.N.J. 1993) (citing cases). "If proven, laches generally will bar a claim for an accounting of past infringement but not a claim for prospective injunctive relief." Birthright v. Birthright, Inc., 827 F. Supp. 1114, 1140 (D.N.J. 1993) (citing University of Pittsburgh, 686 F.2d at 1044). This general principle notwithstanding, laches will bar injunctive relief in appropriate cases. See, e.g., Ocean Garden, Inc. v. Marktrade Co., Inc., 953 F.2d 500, 508 (9th Cir. 1991); Guardian Life Ins. Co. of America v. American Guardian Life Assur. Co., 943 F. Supp. 509, 518 (E.D. Pa. 1996).
Moreover, although it "usually requires the kind of record only created by full trial on the merits," Country Floors v. Partnership of Gepner and Ford, 930 F.2d 1056, 1066 (3d Cir. 1991), a laches defense may be used to prevent a preliminary injunction from issuing, see generally 4 McCarthy § 31:31. Indeed, one leading commentator notes that "a lesser quantum of laches will suffice as a defense to a preliminary injunction than for a final injunction." Id.; see My-T Fine Corp. v. Samuels, 69 F.2d 76, 78 (2d Cir. 1934) (L. Hand, J.) ("No doubt less is necessary to defeat a preliminary injunction; delay alone may be enough, at least if the original use was innocent.").
"Before any 'delay' of plaintiff in suing can be said to constitute laches, it is clear that plaintiff must have been actually or constructively on notice of defendant's activities." 4 McCarthy § 31:38. CNIS/CBI argues that knowledge on the part of CBI employees with whom CIA had contact cannot be imputed to the corporation. It is not clear whether CNIS/CBI is denying having known about CIA's use of "Commerce" prior to 1997. Assuming that CNIS/CBI is denying such knowledge, this Court nevertheless is persuaded that knowledge of the alleged infringement should be imputed to CBI.
On one view, "[a] corporation is not charged with notice [of an infringing use] if business dealings with defendant were conducted by lower echelon employees who had no duty to report instances of trademark infringement." Id. § 31:39; accord Official Airline Guides, Inc. v. Churchfield Pubs., Inc., 756 F. Supp. 1393, 1404 (D. Or. 1990), aff'd, 6 F.3d 1385 (9th Cir. 1993). "In order to impute an agent's knowledge to a principal, it must be shown that the agent had duties with respect to trademark matters . . . ." 4 McCarthy § 31:39. Other authorities suggest that knowledge will be imputed where the agents sell and promote the principal's products or services. See Georgia-Pacific Corp. v. Great Plains Bag Co., 614 F.2d 757, 762 (C.C.P.A. 1980) (citing Dawn Donut v. Hart's Food Stores, 267 F.2d 358, 363 (2d Cir. 1959)).
CIA began banking with CBI in 1986. It obtained lines of credit from CBI and entered into a contract with CBI to rent a safe deposit box. Communications from CBI to CIA were signed by a regional vice-president, the Chairman and President
and a CBI branch manager. CIA co-sponsored a CBI charity event; in turn, CBI held CIA out to the public by name as an event sponsor. CIA apparently had a good working relationship with CBI managerial personnel. The parties referred customers to each other. Actual knowledge of CIA's use of the "Commerce" mark properly is imputed to the corporation here.
Moreover, CBI can be said to have had constructive knowledge of CIA's use of "Commerce." CIA used the mark openly and notoriously. CIA dealt frequently with CBI. CBI had a duty to police the marketplace for infringing uses of its mark, especially in view of the fact that the mark's strength comes precisely from marketplace recognition and not from any inherent distinctiveness. Thus, the facts and circumstances of this case compel the conclusion that CBI could have known about CIA's use of "Commerce" and should have known about that use. CBI therefore is charged with constructive knowledge. See Johnston v. Standard Mining Co., 148 U.S. 360, 370, 13 S. Ct. 585, 37 L. Ed. 480 (1893) ("Plaintiff is chargeable with such knowledge as he might have obtained upon inquiry provided the facts already known by him were such as to put upon a man of ordinary intelligence the duty of inquiry."); Armco, Inc. v. Armco Burglar Alarm Co., 693 F.2d 1155, 1161 (5th Cir. 1982) (adopting "knew or should have known" standard as "a logical implementation of the duty to police one's mark"); Chandon Champagne Corp. v. San Marino Wine Corp., 335 F.2d 531, 535 (2d Cir. 1964) ("[A] plaintiff may be barred when the defendant's conduct has been open and no adequate justification for ignorance is offered."); see generally 4 McCarthy § 31:38.
In sum, CBI's fourteen-year delay in protesting CIA's use of the "Commerce" mark is inexcusable.
Laches requires next a showing of prejudice to CIA from CBI's inexcusable delay. CIA's apparent position is that while CBI sat on its hands, CIA in good faith reliance on CBI's silence built up a business which at all times has used the "Commerce" mark.
"Laches is a good defense if plaintiff's long failure to exercise its legal rights has caused defendant to rely to its detriment by building up a valuable business around its trademark." 4 McCarthy § 31:12 (citing cases). Laches becomes relevant precisely "where the senior [user of the mark] delays in asserting its rights for so long that the junior [user] has developed sufficient demand and goodwill through its own efforts that it would be inequitable to enforce the senior's rights." University of Pittsburgh, 686 F.2d at 1047; see Tonka Corp., 836 F. Supp. at 219.
CIA has been lulled by CBI into a sense of security regarding its use of the "Commerce" mark. Since 1986, CIA has had good reason to believe CBI knew of, and did not object to, CIA's use of the "Commerce" mark. For the more than fourteen years CIA has existed it has operated under that mark. Promoting itself and its services with the "Commerce" mark, CIA has built up demand and good will sufficient to sustain and grow its business. Therefore, there is prejudice to CIA resulting from CBI's inexcusable fourteen year delay.
Ultimately, as "laches is an equitable doctrine[,] its existence depends on the particular equitable circumstance of each case. It is a question left to the sound discretion of the district judge whose determination will not be disturbed on appeal absent an abuse of that discretion." Guardian Life Ins. Co. of America, 943 F. Supp. at 518; see University of Pittsburgh, 686 F.2d at 1045. "Equity does not seek for general principles, but weighs the opposed interests in the scales of conscience and fair dealing." Dwinell-Wright v. White House Milk Co., 132 F.2d 822, 825 (2d Cir. 1943) (L. Hand, J.).
There are several relevant considerations here. See generally Ocean Garden, Inc., 953 F.2d at 508 (factors include strength and value of trademark rights, plaintiff's diligence in enforcing mark, harm to plaintiff if relief denied, competition between parties, defendant's good faith, and harm suffered by defendant because of plaintiff's delay); 4 McCarthy § 31:22 (same). First, though CIA recently has taken imprudent actions (e.g., using and registering "National"), there is no evidence that from 1983 until at least August, 1996, CIA was other than a good faith user of the "Commerce" mark.
Second, as recently as June, 1997, when CIA complained to CBI about client confusion, CNIS was taking the position that there was no such confusion. (Aff. of Loser P 19). Third, CBI clearly has not been diligent in protecting its mark. Again, as the "Commerce" mark's strength derives primarily from its marketplace recognition, it was incumbent upon CBI to try to keep the marketplace free of other users of the mark.
Fourth, since at least 1985, in reliance upon CBI's inaction, CIA has conducted and promoted its business, and established good will, under the name "Commerce Insurance Agency." Customer word of mouth about "Commerce Insurance Agency" has helped CIA grow. Prohibiting CIA from using the mark will inflict a substantial hardship upon CIA. Fifth, although CNIS/CBI made a prayer for preliminary injunctive relief in its September 12, 1997, complaint, it did not actually file an application for preliminary relief until October 29, 1997. This delay suggests that CIA's use of the "Commerce" mark by itself in the insurance area has continued to be a use to which CBI has no strong objection. Finally, this Court is mindful that CNIS/CBI's lawsuit follows curiously close on the heels of both CBI's decision to become a major player in the New Jersey insurance industry and CIA's complaints to CBI about customer confusion.
The balance of the equities weighs in CIA's favor. Accordingly, CNIS/CBI is barred by laches from invoking its ownership rights to prevent CIA from using the "Commerce" mark. As will be explained more fully below, this Court is satisfied that laches should not be trumped here by the public interest in avoiding consumer confusion.
E. CIA's Application for a Preliminary Injunction Prohibiting CNIS from Using the "Commerce" Mark
CIA seeks a preliminary injunction prohibiting CNIS from using the "Commerce" mark in connection with the sale of insurance. As was established above, CBI owns the "Commerce" mark. Since at least 1983, CBI has had the right to exclusive use of the "Commerce" mark in connection with insurance in New Jersey. Thus, CIA cannot assert ownership rights as against CBI or its subsidiary. That CNIS/CBI is barred by laches from (preliminarily) enjoining CIA's use of the "Commerce" mark does not change the result. CBI has been estopped from invoking its right to prevent CIA's use of the mark, but it has not lost its own rights in the mark. TMT North America, Inc. v. Magic Touch, 124 F.3d 876, 885 (7th Cir. 1997) ("Trademark law is unmistakably clear that '[a] laches or acquiescence defense does not divest the trademark owner of the right to use the mark but may deprive him or her of any remedy for infringing uses by others.'") (quoting Dial-A-Mattress Operating Corp. v. Mattress Madness, Inc., 841 F. Supp. 1339, 1355-56 (E.D.N.Y. 1994)). Therefore, this Court will deny CIA's application for a preliminary injunction prohibiting CNIS from using the "Commerce" mark in the insurance area.
F. Concurrent Use of the "Commerce" Mark
Since both parties' applications for injunctions against the other's use of the "Commerce" mark are being denied, the parties will be permitted, pendente lite, to continue using the "Commerce" mark in their competing businesses. Wary "of putting a judicial stamp of approval on conduct which will confuse consumers," 4 McCarthy § 31:10, this Court will discuss briefly an argument not raised by either party: that the public interest in avoiding confusion should trump CIA's laches defense.
Laches may be trumped by the public interest in avoiding substantial consumer confusion. See generally id. For example, some courts of appeals have held that when dual use of a mark in competition results from estoppel by acquiescence -- an equitable doctrine distinct from, but very similar to, laches
-- the senior user's claim may be revived from estoppel upon a showing of "inevitable confusion" arising from continued dual use. See TMT North America, Inc., 124 F.3d at 886; SunAmerica Corp. v. Sun Life Assur. Co. of Canada, 77 F.3d 1325, 1334 (11th Cir.), cert. denied, U.S. , 117 S. Ct. 79, 136 L. Ed. 2d 37 (1996); see also Iodent Chem. Co. v. Dart Drug Corp., 207 U.S.P.Q. 602 (T.T.A.B. 1980). Other courts have said that laches should not apply where the likelihood of confusion is not debatable or is not reasonably in doubt. 4 McCarthy § 31:10 (discussing cases).
However the necessary showing for trumping laches is styled, it has not been made here. While there clearly has been some showing of a likelihood of confusion, there is doubt as to whether it would be significant. Moreover, any confusion here is unlikely to be of a type which will work substantial harm to the public interest. A few consumers may experience some confusion, but it is highly unlikely that they actually will purchase a policy through CIA in the belief they are dealing with CNIS, purchase a policy through CNIS in the belief they are dealing with CIA, or be saddled with inferior insurance coverage because of confusion as to origin. Therefore, laches is not trumped by the public interest in avoiding consumer confusion.
Both parties' use of the "Commerce" mark now "stand in parity;" each party must treat the other's marks with equal dignity. See SunAmerica, 77 F.3d at 1334. In particular, CNIS/CBI must respect CIA's name and avoid creating confusion with it. Id. Accordingly, consistent with CIA's application, this Court will order CNIS pendente lite to stop using the abbreviated name "Commerce Insurance." This relief will help to prevent reverse confusion
and will not impose a hardship on CNIS.
G. CNIS/CBI's Application for a Preliminary Injunction Prohibiting CIA from Using the CIA Logo
CNIS/CBI seeks an injunction preventing CIA from using the CIA logo. Disposition of this application is similar to the disposition of CNIS/CBI's application for an injunction prohibiting CIA from using the "Commerce" mark. The relevant inquiry is whether CIA's use of the CIA logo was likely to cause confusion in 1985 -- when CIA began using its confusingly similar logo. The weight of the Scott Paper factors favors a finding that in 1985 there was a substantial likelihood of confusion. Indeed, the case for CNIS/CBI's preliminary injunction here is stronger because CIA is using an identical mark and a confusingly similar logo. Though CBI was not competing with CIA in the insurance business in 1985, it could have prevented CIA from using the CIA logo at that time because of the likelihood of confusion.
Today, since CBI has begun offering insurance services to the public, there is an even greater likelihood of confusion.
Irreparable harm flows from potential harm to, and loss of control of, CNIS/CBI's reputation, and deprivation of goodwill. See id. at 195-96. The balance of hardships favors preliminary injunctive relief, as there is no substantial hardship to CIA. All CIA will have to do is change its letterhead and promotional materials, including any signs. CIA may continue to use "Commerce." The public interest is served by removing the risk of consumer confusion. Id. at 197-98. For these reasons, this Court will issue a preliminary injunction prohibiting CIA from using the CIA logo in physical proximity to the "Commerce" mark.
H. CIA's Use of "National"
CNIS/CBI seeks a preliminary injunction prohibiting CIA from using the term "National." CIA's use of the term "National" is basically a non-issue at this stage in the case. Neither party has established rights to the term "National." It is clear that CIA never has been seriously interested in using the term "National." As CIA's use of the term promises to do nothing other than foster increased confusion, and as being prohibited from using "National" will work no hardship on CIA, this Court will enjoin CIA from using "National" as part of its service mark or business name.
This Court will not preliminarily enjoin either party's use of the "Commerce" mark. CIA will be enjoined from using the CIA logo in physical proximity to the "Commerce" mark, and will be enjoined from using the term "National." CNIS will be enjoined from abbreviating its name as "Commerce Insurance." This Court will enter an appropriate order.
JOSEPH E. IRENAS, U.S.D.J.
DATED: February 18, 1998