Wells Fargo & Company, Plaintiff-appellant, v. Stagecoach Properties, Inc., Defendant-appellee, 685 F.2d 302 (9th Cir. 1982)

We decide that the district court's affirmance of the Trademark Trial and Appeal Board's denial of appellant's registration was proper.

FACTS

In 1974, Wells Fargo & Company (hereinafter WF), sought registration of the following two symbols used to promote its employee restaurant services:

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Stagecoach Properties, Inc. (hereinafter SP), opposed these applications, claiming prior use of the stagecoach symbol, from October 1960, for motel and restaurant services. The mark consisted of the words "Stagecoach Inn, Salado, Texas" and a picture of a Western style stagecoach pulled by a team of four horses. The words "Wells Fargo Lines" appeared in small print on the side of the stagecoach.

The Patent and Trademark Office granted SP a service mark registration for "STAGECOACH INN" in 1968.

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WF in response claimed first use of the stagecoach symbol in 1918 to promote its employee lunchrooms.¹ 

With an extensive recital of the history underlying both parties' claims to the mark, the Trademark Trial and Appeal Board (hereinafter Board) denied the registration. See Stagecoach Properties, Inc. v. Wells Fargo & Co., 199 U.S.P.Q. 341 (TTAB 1978)

Dissatisfied with this result, WF sued SP in district court. Count I of its complaint sought a declaratory judgment that SP's service mark registration of "STAGECOACH INN" for restaurant and motel services was invalid, Count II requested review of the Board's rulings on SP's opposition, and Count III sought, in the alternative, declaratory judgment that WF was entitled to concurrent registration of its marks.

The district court reviewed the Board's findings and specifically found that they had not been overcome at trial. Thus, in response to Count II and in its capacity to review the Board's decision, the district court affirmed. It remanded to the Board Counts I and III (invalidity of SP's registration and concurrent registration).

DISCUSSION

Section 2(d) of the Lanham Act, 15 U.S.C. § 1052(d), provides that a trademark will be refused registration if, when connected to the applicant's goods or services, it is likely to cause confusion with goods or services bearing (1) a mark already registered in the Patent and Trademark Office, or (2) a mark that previously has been used somewhere in the United States.² 

In an opposition proceeding, the opposer therefore contends that the applicant's mark so resembles his own registered mark or his prior common law mark that it will likely cause confusion. If, as an initial matter, the opposer fails to prove likelihood of confusion, and no other bar to registration appears, the Board's inquiry ends and registration may be granted. Once likelihood of confusion is established, the opposer still must prove his superior right to the mark, either by presenting proof of prior registration or of prior use in the United States. See generally 1 J. McCarthy, Trademarks and Unfair Competition §§ 20:4-20:8.

In the present proceeding, the Board and the district court held on alternative grounds that registration should be denied. These grounds were: (1) WF's marks are confusingly similar to SP's previously used, unregistered marks, and (2) they are confusingly similar to SP's registered "STAGECOACH INN" service mark. WF on appeal has argued against both holdings. Because we affirm on the first ground, which is sufficient to deny registration, we do not reach arguments relating to the second.

Standard of Review

Section 21 of the Lanham Act, 15 U.S.C. § 1071, provides for two avenues of appeal from a Board decision. A dissatisfied party may appeal to the United States Court of Customs and Patent Appeals or may bring a civil action in district court. When the latter is pursued, the record of the Board is admitted by motion before the district court and has the same effect as if originally produced there.³ 

The relation between the Patent Office and the district court concerning patent decisions was defined in Morgan v. Daniels, 153 U.S. 120, 14 S. Ct. 772, 38 L. Ed. 657 (1894). There the Supreme Court said that the Patent Office decision of priority of invention must be accepted as controlling by the district court unless the contrary is "established by testimony which in character and amount carries thorough conviction." Id. at 125, 14 S. Ct. at 773.

We have ruled that the Morgan rule is applicable to the likelihood of confusion issue in trademark cases. Safeway Stores, Inc. v. Dunnell, 172 F.2d 649 (9th Cir.), cert. denied, 337 U.S. 907, 69 S. Ct. 1049, 93 L. Ed. 1719 (1949). We have also ruled that the civil action permitted by 15 U.S.C. § 1071 is to be a trial de novo, but that the decision of the Board must be accepted as controlling on fact issues unless overcome under the Morgan standard. Redken Laboratories, Inc. v. Clairol, Inc., 501 F.2d 1403, 1404 (9th Cir. 1974). The trial is de novo to the extent that the parties are permitted to introduce additional evidence relevant to the issues raised before the Board. Id.

Appellate review of the district court's factual conclusions has traditionally been under the clearly erroneous standard.⁴  Fed. R. Civ. P. 52(a); Sarah Coventry, Inc. v. T. Sardelli & Sons, Inc., 526 F.2d 20 (1st Cir. 1975), cert. denied, 426 U.S. 920, 96 S. Ct. 2626, 49 L. Ed. 2d 374 (1976); Aloe Creme Laboratories, Inc. v. Texas Pharmacal Co., 335 F.2d 72 (5th Cir. 1964); Teter, Inc. v. Rheem Manufacturing Co., 334 F.2d 784 (7th Cir. 1964); 2 J. McCarthy, supra § 21:6 at 13-14 (1973).

Constrained by this analysis, we look to the district court's record (including the Board's record introduced by joint motion, and the new evidence presented at trial) to determine whether its findings are clearly erroneous. Generally, the district court found that the Board's conclusions were not overcome at trial by evidence carrying thorough conviction.

Likelihood of Confusion

The test of likelihood of confusion is the same as that applied in infringement actions. But the Board considers only the use shown in the application, not actual use, because opposition proceedings do not determine the common law rights of the applicant. They determine only whether the applicant has the exclusive right to use of the mark and so qualifies for registration. 2 J. McCarthy, supra § 20:4 at 765.

WF presented no persuasive evidence at trial to overcome the Board's finding of likelihood of confusion between its symbols and SP's unregistered stagecoach symbols.⁵ 

WF has instead focussed on the district court's affirmance of the Board's application of the so called "word picture equivalency rule." We do not reach this issue for the reason stated above.

Priority of Use

WF first argues in support of its priority of use. It argues that the Board's and the district court's findings that it failed to establish use of the stagecoach symbol in connection with employee restaurant facilities were based upon the incorrect assumption that in-house use is not sufficient to establish trademark rights.

Such an assumption would be contrary to American International Reinsurance Co. v. Airco, Inc., 570 F.2d 941 (CCPA), cert. denied, 439 U.S. 866, 99 S. Ct. 190, 58 L. Ed. 2d 175 (1978), which held that use of a mark to identify services exclusively available to employees of the user does not preclude the mark from being a protectible trademark. Id. at 944.

WF's argument, however, is based upon a misreading of the Board's and the district court's decisions. The Board rested its decision on this issue on the lack of evidence of actual use of the mark to promote restaurant services, not on the lunchrooms' limited patronage.⁶ 

At trial, WF presented testimony of present use of a stagecoach symbol on frames used for posting employee cafeteria menus and a bronze sculpture of a stagecoach in the executive dining room. Yet no evidence showed that these symbols were used to promote these facilities prior to SP's use. E.R. 6. The district court could conclude that the Board's finding (that WF failed to show promotion with the symbol) was correct.

WF then attacks SP's priority in its unregistered marks by arguing that SP copied WF's banking marks. To make this argument it asserts: (1) that SP adopted a stagecoach design that included "Wells Fargo Lines" in small lettering, (2) that Dion Van Bibber (SP's predecessor) was generally aware of Wells Fargo history, and (3) that Exhibits J and 356 are similar.

It is not clear what argument WF now makes with these facts. Before the Board, it argued that the use of "Wells Fargo Lines" was evidence of unclean hands. Before us it argues that these facts demonstrate copying by SP and that its use cannot therefore be prior to WF's.

We reject the copying/no priority argument because it assumes that the WF's use of the stagecoach symbol for banking services establishes priority for this proceeding. The issue is not whether WF enjoys priority for the mark as used to promote banking services, it is whether it enjoys priority for its use to promote restaurant services.

The unclean hands argument is more difficult. If SP has deliberately attempted to exploit the commercial good will of WF's banking marks, it cannot enjoy enforcement of rights by the Board or by the federal courts. Precision Co. v. Automotive Co., 324 U.S. 806, 814-15, 65 S. Ct. 993, 997-98, 89 L. Ed. 1381 (1945).

Unclean Hands

The Board found that the words "Wells Fargo Lines" in SP's mark adopted in 1960 were derived from the general history of the American West and were not an attempt to appropriate the commercial good will of WF's banking services. In light of this finding, Mr. Van Bibber's purported knowledge of Wells Fargo history is unconvincing evidence that the SP's stagecoach design was a result of copying.

The only evidence suggesting that SP's use of "Wells Fargo Lines" was a deliberate attempt to exploit Wells Fargo good will was James Love's trial testimony. As a market researcher for WF, he asserted that the use of the words "Wells Fargo Lines" on a stagecoach design to promote restaurant services would be associated by the public with WF's banking services. But this testimony was self-serving and is irrelevant to whether SP intentionally adopted the words to create such an association. Even if the words created confusion, the confusion alone does not evidence intentional appropriation.

WF argues that intent is immaterial, citing Coca-Cola Co. v. Gemini Rising, Inc., 346 F. Supp. 1183 (E.D.N.Y. 1972). That case held that an infringer's intent to associate with plaintiff's product was immaterial where his blatant, bastardized rendition of plaintiff's mark expressed a meaning so contrary to that mark's secondary meaning that it diluted its advertisement value in the marketplace. The defendant in that case produced a poster that recreated the famous "Enjoy Coca-Cola" sign with variation only in the "Cola" (changed to "ine" so that the sign read "Enjoy Cocaine").

We are not compelled by the reasoning of that case to conclude that SP's intent is irrelevant to an unclean hands inquiry. Bad intent is the essence of the defense. In Gemini Rising, intent was not an issue because the damaging effect of the defendant's use of the mark was obvious. 346 F. Supp. at 1183. Though the case may have relevance if this were an action brought by WF for infringement of its banking service marks, it has none here.

Exhibits J and 356, however, present a different problem. Love testified that these were nearly identical and that their similarity could cause confusion:

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NOTE: OPINION CONTAINS TABLE OR OTHER DATA THAT IS NOT VIEWABLEIt may not as easily be said that SP's use of Exhibit J derives from history or that it does not imply copying of WF's marks. SP's Exhibit J mark is strikingly similar to WF's Exhibit 356 mark used for banking services.

However, our review of the trial record convinces us that the district court could conclude that the Board's finding of no unclean hands was not overcome by this evidence. Though the symbols are similar, WF presented no evidence of when its symbol was adopted. In the absence of such evidence and to support affirmance, the inference may be drawn that it was adopted after SP's oval symbol, or that both are derived from a similar, common format.

Moreover, both symbols were before the Board and the district court could conclude that it too noted the striking similarity but still held that there had been no attempt to associate with WF.⁷ 

Invalidity of SP's Registration

WF argues that SP's registration of "STAGECOACH INN" is invalid because SP's president falsely swore in application for its registration that he did not know of rights of others to its use. We do not reach this issue because we affirm denial of registration based on SP's unregistered marks.⁸ 

AFFIRMED.