Interstate Brands Corp. v. Way Baking Co.

403 Mich. 479 (1978)

270 N.W.2d 103

INTERSTATE BRANDS CORPORATION v. WAY BAKING COMPANY

Docket No. 60905.

Supreme Court of Michigan.

Decided October 2, 1978.

Susskind & Hedstrom, P.C., for plaintiff.

Dykema, Gossett, Spencer, Goodnow & Trigg (by John H. Schomer and Alan R. Dominick) for defendant.

PER CURIAM:

This is a trademark infringement case. The issue is whether the plaintiff or its predecessor abandoned the "Holsum" trademark it used for selling bread in the Lansing area.

The Roskam Baking Company began to use the trademark Holsum in the Grand Rapids area in 1945 and entered the Lansing market area in 1960, selling baked goods under several names, including Holsum. Plaintiff Interstate Brands Corporation purchased the Roskam's assets in September 1973. At that time Roskam assigned the trademark Holsum to Interstate.

In 1964 defendant Way Baking Company began to use the Holsum trademark in Lansing but withdrew the product on demand of Roskam. Approximately five months after Interstate had acquired the right to the Holsum trademark Way once more commenced selling its Holsum bread in the Lansing market area.

Interstate filed suit in April of 1974 contending *481 that Way was infringing on its right to use the Holsum trademark in the Lansing area. Way responded that Interstate had abandoned the trademark in the Lansing area. Following a non-jury trial in September of 1976, the court issued an opinion favorable to Way. The court perceived the question as: "Is the plaintiff now using the tradename Holsum in the Lansing market area in a good faith commercial endeavor, or is it using the name merely as a competitive defensive measure to prevent its use there by defendant?" The trial court found that there had been "months at a time" when Interstate's Holsum products had remained off the shelves and that "there is no evidence that the plaintiff intends in the future to increase its use of the tradename Holsum, and the plaintiff offered no evidence of legitimate business reasons tending to show a lack of intent to abandon the name". The court concluded that "the use by plaintiff of the tradename Holsum in the Lansing market area was a defensive competitive measure in order to stifle competition from the defendant".

The Court of Appeals agreed with the trial court and ruled that "the use of a trademark solely for a defensive, negative purpose is insufficient to maintain enforceable rights in that trademark. The trial judge found that plaintiff's use of the `Holsum' trademark was for defensive purposes to stifle competition. We cannot say his finding was clearly erroneous." 79 Mich App 551, 558; 261 NW2d 84 (1977).

The right to a trademark grows out of its use, and covers the area in which it is used. United Drug Co v Theodore Rectanus Co, 248 US 90, 97; 39 S Ct 48; 63 L Ed 141 (1918); Hanover Star Milling Co v Metcalf, 240 US 403; 36 S Ct 357; 60 L Ed 713 (1916).

*482 Trademarks may be lost by abandonment. Abandonment is the concurrence of an intention to abandon and an act or omission by which such intention is carried into effect. Saunders v Stringer, 265 Mich 301, 305; 251 NW 342 (1933); Saxlehner v Eisner & Mendelson Co, 179 US 19; 21 S Ct 7; 45 L Ed 60 (1900).

Both the trial court and the Court of Appeals relied on La Societe Anonyme des Parfums Le Galion v Jean Patou, Inc, 495 F2d 1265 (CA 2, 1974), for the proposition that a purely defensive use of a trademark is insufficient to retain enforceable rights in the mark, but in that case the court recognized that abandonment was not in issue:

"Appellee's related argument that it has not legally abandoned the SNOB trademark does not merit much attention. The issue of abandonment arises only if the defendant has previously acquired rights in the trademark. Essentially plaintiff's challenge here is that Patou has never established any enforceable rights in the SNOB mark and thus has nothing to abandon." 495 F2d 1273, fn 9.[1]

There is no question in this case that the name of Roskam and later Interstate was associated with the trademark Holsum, that good will had attached to those companies by the use of the trademark, and that Interstate had acquired the right to use the trademark in the Lansing area.

The question remains whether there was an abandonment. To prove abandonment Way had to show by clear and convincing evidence that Interstate or its predecessor had ceased to use the Holsum trademark with the intent not to resume *483 its use. See 3 Restatement Torts, § 752; MCL 429.31; MSA 18.638(21); McCarthy, Trademarks and Unfair Competition, §§ 17:3-4; Anno: Trademark or Tradename Abandonment, 3 ALR2d 1226. The record indicates that Way failed to sustain its burden of proof and that the trial court's decision was clearly erroneous.

Three witnesses testified at trial. Milton Roskam and Marvin Van Dyke testified for Interstate. William Coan, a former employee of Roskam and Interstate who commenced working for Way as district manager in Lansing, testified for Way.

Coan testified that Roskam had been phasing out the Holsum mark from 1970 to 1973 and that Holsum bread constituted less than 5% of Roskam's sales. Between 1974 and 1976 there would be periods of two to three months when Coan saw no Interstate Holsum bread in Lansing. At the time of the trial, the use of the Holsum trademark by Interstate was reduced to two retail outlets; the action was commenced in April, 1974 and trial was in the fall of 1976.

Van Dyke testified that he was the supervisor in the Lansing area from 1973 through July of 1975 for Interstate and that Holsum products were sold in the Lansing area by Interstate during that period. Roskam, the president of Roskam Baking Company, testified that during the period between 1970 and 1973, approximately 1200 units per week of Holsum products were sold in the Lansing area and that considerable sums were expended in advertising the Holsum product.

It is evident that there was no actual abandonment by Interstate. Intermittent periods of nonuse or reduced use do not constitute abandonment. Interstate sells bakery products under various trademarks. Many it acquired from Roskam. The *484 fact that the Holsum trademark constitutes less than 5% of the business does not signify that the trademark is nonexistent or abandoned.

Although the volume of business done under a trademark or tradename is reduced, as compared with prior sales or activity, or even as compared to the infringer's sales, that is not abandonment. The reduced continued use is evidence of an intention not to abandon. 87 CJS, Trademarks, § 182, p 519; 74 Am Jur 2d, Trademarks and Tradenames, § 31, p 723; Anno, supra, p 1255.

It appears that Way may be correct that Interstate was considering substituting the Butternut label for the Holsum label. Interstate, nevertheless, was still selling Holsum products, had not disassociated itself from that mark, and although it may have been selling fewer Holsum products in the Lansing area than previously, that is not sufficient to constitute abandonment.

Way did not satisfy its burden by testimony from one of Interstate's former employees, hired by Way for the express purpose of taking over its Holsum business, that Interstate was "phasing out" the Holsum mark, without any concrete evidence that it in fact had phased it out to the point of abandonment. His further testimony that at the time of trial the use was minimal, even if true, would not show that, before this action was commenced by Interstate, the mark had been abandoned by Interstate. Interstate's reduced sales of Holsum bread after the commencement of the action would not constitute abandonment; it may only reflect the competition of Way's infringing use.

In lieu of granting leave to appeal, pursuant to GCR 1963, 853.2(4), we reverse the judgments of the lower courts and remand the case to the *485 Jackson Circuit Court for entry of a judgment in conformity with this opinion.

KAVANAGH, C.J., and WILLIAMS, LEVIN, COLEMAN, FITZGERALD, RYAN, and BLAIR MOODY, JR., JJ., concurred.

[1] La Societe involved a situation where defendant profited about $100 on the sale of 89 bottles of perfume during a 20-year period. The Court determined that the defendant was not using the trademark and had never used or acquired rights in the trademark.

ORDER ENTERED MAY 2, 1979

On order of the Court, the motion by plaintiff-appellant for reconsideration of this Court's opinion at 403 Mich 479 (1978) is considered and the motion is denied, because it does not appear that said opinion was entered erroneously.

The Jackson Circuit Court is directed to enter judgment in favor of the plaintiff, including, among other things, an order enjoining the defendant from using the trademark in dispute.