267 F.2d 358 (2d Cir. 1959)
Dawn Donut Co., Inc., a Michigan corporation based in Jackson, has continuously used the trademark “Dawn” on 25- to 100-pound bags of doughnut mix sold to bakers in states including New York since June 1, 1922.1
It has marketed sweet dough mixes under the same mark since 1935 and cake mixes since 1950.2
The company ships mixes directly from its Michigan plant or local warehouses to customers in states including New York.3
It furnishes buyers—primarily those operating as exclusive Dawn Donut Shops—with advertising and packaging materials bearing the mark so they may sell retail goods made from the mixes under that name.4
Plaintiff’s federal registrations for the marks date from 1927 and were renewed in 1947.5 With the single exception of one Dawn Donut Shop operated in Rochester, New York, from 1926 to 1927, plaintiff’s licensing of the mark for retail sales of doughnuts and baked goods in New York has been confined to locations at least sixty miles from the Rochester area.6
For the eighteen years preceding the 1954 lawsuit, plaintiff’s New York sales representative made regular calls on bakers in Rochester and neighboring towns, and shipments of mixes continued to arrive from Michigan, yet none of those bakers used the mark in retail sales.7
Defendant Hart’s Food Stores, Inc., owns and operates a chain of retail grocery stores in the six New York counties of Monroe, Wayne, Livingston, Genesee, Ontario, and Wyoming.8
Its wholly owned subsidiary, Starhart Bakeries, Inc., produces doughnuts and other baked goods that are distributed exclusively through those stores within a forty-five-mile radius of Rochester; all of defendant’s advertising is likewise limited to that area.9
Defendant’s bakery corporation was formed on April 13, 1951, and first used the imprint “Dawn” on packaging on August 30, 1951, selecting the mark largely because of a slogan originated by its president in the 1930s.10
Plaintiff commenced this action in 1954 in the United States District Court for the Western District of New York, alleging trademark infringement and seeking an injunction.11
Defendant answered and counterclaimed for cancellation of plaintiff’s federal registrations on the ground that plaintiff had failed to exercise the control over licensees required by the Lanham Act.12
The district court dismissed both the complaint and the counterclaim, and both parties appealed to the United States Court of Appeals for the Second Circuit.13
Plaintiff’s New York sales representative, Jesse Cohn, who also represented other companies, made monthly visits to defendant’s bakery manager but did not report any use of the “Dawn” mark on baked goods to plaintiff.14
Defendant adopted the mark without actual knowledge of plaintiff’s registrations, although the Lanham Act’s constructive-notice provision had been in effect since July 5, 1947.15
Whether the plaintiff is entitled to enjoin the defendant’s use of the mark under the Lanham Act in a geographically separate trading area?16
Under the Lanham Act, 15 U.S.C.A. § 1114, a registrant may enjoin only concurrent use that creates a likelihood of public confusion as to the origin of the products.17
No. The established facts demonstrate that with the single exception of one Dawn Donut Shop operated in Rochester from 1926 to 1927, plaintiff’s licensing of the mark for retail sales in New York has been confined to areas at least sixty miles from defendant’s trading area.18 For the eighteen years preceding the 1954 lawsuit, plaintiff’s New York sales representative made regular calls on bakers in Rochester and neighboring towns with shipments arriving from Michigan, yet none of those bakers used the mark in retail sales.19 The district court found no reasonable expectation that plaintiff would extend its retail operations into defendant’s trading area.20 This finding is supported by the decline in active licensees from seventy-five to eighty nationwide in the 1920s to only sixteen at trial with none in New York.21
Defendant confines its distribution and advertising to a forty-five-mile radius of Rochester.22 Because the parties’ retail uses remain in distinct markets and expansion is not probable, no likelihood of confusion arises.23
Plaintiff is not entitled to injunctive relief under the Lanham Act at present, though it may obtain such relief upon a proper showing of intent to expand retail use into the area.24
Whether the plaintiff abandoned its federal registration rights in the defendant’s trading area by failing to exploit the mark at the retail level there since the 1920s?25
Under 15 U.S.C.A. § 1127, abandonment occurs when use has been discontinued with intent not to resume or when any course of conduct causes the mark to lose its significance as an indication of origin.26
No. Plaintiff has continuously used the trademark on mixes sold to bakers in states including New York since 1922, with shipments continuing into Rochester, so its failure to license at retail in defendant’s area for thirty years does not work an abandonment.27 Section 1127 applies only when the registrant fails to use the mark anywhere in the nation.28 The constructive notice provision prevents local preemption, and no precedent supports partial-state abandonment even under pre-Lanham law.29
Plaintiff has not abandoned its federal registration rights in defendant’s trading area.30
Whether the plaintiff is barred by laches from obtaining relief against the defendant’s use of the mark?31
Laches bars relief when the plaintiff or its responsible officers knew or should have known of the defendant’s use and forbore from acting, allowing the defendant to expand in a false atmosphere of security.32
No. Jesse Cohn, plaintiff’s New York sales representative who also represented other companies, made monthly visits to defendant’s bakery manager and may have seen packaging.33 Cohn had no duty to investigate unauthorized users of the mark on behalf of plaintiff.34 Because Cohn’s contacts were on behalf of other companies, his knowledge cannot be imputed to plaintiff.35 Plaintiff therefore is not estopped by laches from enforcing its exclusive rights.36
Plaintiff is not barred by laches from obtaining relief.37
Whether the plaintiff’s method of licensing its trademarks to bakers satisfies the control requirements of the Lanham Act?38
The Lanham Act places an affirmative duty on a licensor to take reasonable measures to detect and prevent misleading uses by licensees or suffer cancellation under 15 U.S.C.A. § 1064 and § 1127.39
Yes. Plaintiff furnishes advertising and packaging materials to buyers, primarily those operating as exclusive Dawn Donut Shops.40 The district court found that by reason of its contacts with licensees plaintiff exercised legitimate control over the nature and quality of the food products.41 The majority holds this finding not clearly erroneous.42 This conclusion follows particularly given defendant’s burden of proof on the counterclaim.43
Plaintiff’s method of licensing satisfies the control requirements of the Lanham Act, and the counterclaim for cancellation was properly dismissed.44
Related opinions on this issue
Judge Lumbard dissents from the majority conclusion that the district court’s findings are not clearly erroneous.45 The findings of the district judge regarding supervision are in such general and conclusory terms as to be meaningless.46 The record does not indicate the extent of supervision actually exercised by the plaintiff.47
The only evidence in the record relating to the actual supervision of licensees consists of the testimony of two of plaintiff’s local sales representatives that they regularly visited their particular customers.48 One representative testified that in many cases he did have an opportunity to inspect and observe the operations of his customers.49 The nature and frequency of any inspection remain unclear.50
The representatives may lack technical knowledge in the use of plaintiff’s mix to make an adequate inspection of a licensee’s operations.51 He would remand for more extensive findings on the kind of supervision actually performed rather than hazard a determination on the incomplete record.52
Whether the plaintiff is entitled to injunctive relief against the defendant under New York state law independent of its federal trademark claims?53
No. Plaintiff introduced no evidence that the use of its mark in connection with retail sales had come to mean to retail purchasers in the Rochester area or anywhere in New York that the goods were made from its mixes.56 Without proof of secondary meaning, no basis exists for injunctive relief under state law.57
Plaintiff is not entitled to injunctive relief under New York state law.58