Emergency One, Inc. v. American Fireeagle, Ltd.

MICHAEL, Circuit Judge.
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I.

E-One is a fire and rescue truck manufacturer located in Ocala, Florida. In 1989 E-One bought American Eagle Fire Apparatus Co. (American Eagle), a Gainesville, Florida, fire truck manufacturer started by former E-One employees in 1985. The purchase price for American Eagle was $ 6.5 million, though only $ 1.6 million was attributed to the company's tangible assets. The balance was attributed to good will, including the value of the AMERICAN EAGLE trademark. Company officials at E-One believed that American Eagle's excellent reputation in rural markets, combined with the inherent patriotic appeal of its bald eagle and American flag trademark, would enable E-One to increase its sales to rural fire departments.

Shortly after the purchase, E-One's president, Ted Fries, spoke to American Eagle's employees in Gainesville, Florida. Among other things, Fries said that E-One intended to continue building American Eagle fire trucks to satisfy existing orders, but that the company ultimately intended to build E-One products in Gainesville. Fries also said that E-One "wouldn't be building American Eagle branded products forever out of Gainesville." Between 1989 and June 1992 E-One built about thirty-five to forty fire trucks to satisfy American Eagle's back orders as well as some new orders that E-One accepted after the purchase. Although the trucks were built according to American Eagle blueprints and in keeping with American Eagle style, some left the factory bearing the E-ONE trademark, while others bore the AMERICAN EAGLE logo and nameplate.

The Gainesville plant was closed shortly after June 1992, ending the manufacture of fire trucks at that facility. However, E-One continued to provide exclusive warranty and repair services on American Eagle trucks. In 1993 and 1994 E-One also refurbished or substantially rebuilt old and damaged American Eagle trucks in a process known as "recycling." E-One would remove the engine, rear axle, transmission, and water pump from a used fire truck. Those components (assuming they were serviceable) would be installed on a new or rebuilt chassis. E-One would then construct a new American Eagle style body for that chassis. As with the brand-new trucks, most left the factory with the E-ONE nameplate. However, one recycled American Eagle truck left the factory in 1994 bearing the AMERICAN EAGLE nameplate and logo. Regardless of what mark appeared on the truck itself, all invoices after the acquisition carried only E-One's name.

By mid-1992 E-One was no longer manufacturing any new fire trucks under the AMERICAN EAGLE brand. However, it promoted the mark in various ways: by selling T-shirts, hats, tote bags, and nameplates bearing the AMERICAN EAGLE logo in "The Fire Locker" (a gift store at the factory), by distributing that merchandise at trade shows, and by requiring that its security guards wear AMERICAN EAGLE badges on their uniforms.

Despite its professed enthusiasm for the AMERICAN EAGLE brand, E-One had no specific plans for use of the mark when it bought the American Eagle company in 1989. E-One first considered using the AMERICAN EAGLE brand on its rescue trucks, but decided that the rescue and fire trucks were already so similar that no advantage would be gained by developing a separate brand. Eventually, E-One decided that the AMERICAN EAGLE mark would best be used to represent a separate product line. It appears that E-One's caution in deciding how to use the AMERICAN EAGLE mark stemmed from a disastrous product launch several years earlier. The company was wary of introducing a new line of trucks and particularly wary of tarnishing a valuable name by associating it with an inferior product.

In 1991 E-One introduced a low cost, limited option fire truck under the E-ONE mark. Around mid-1993 the company considered using the name AMERICAN EAGLE on those trucks, but instead marketed them using the E-One name and descriptive slogans such as "Budget Busters" and "Value and More."

In 1994 Michael Carter founded the defendant corporation, AFE. Carter had worked for American Eagle as a draftsman but left a few months after the company was sold to E-One in 1989. Apparently believing that E-One had abandoned its rights to the AMERICAN EAGLE mark, Carter designed a highly similar mark for AFE, a bald eagle superimposed over an American flag. In February 1994 AFE began using the eagle and flag mark in pre-manufacturing marketing of its fire trucks. In the summer of that same year fire truck dealers began to call both E-One and AFE with questions about the new company, asking whether E-One had started a new company or distribution arm. E-One complained to AFE that its mark was confusingly similar to the AMERICAN EAGLE mark. When AFE continued to use the mark, E-One sent a letter accusing it of infringement. AFE responded through its lawyers, asserting its belief that E-One had long since abandoned any rights it had to the AMERICAN EAGLE name and to the eagle and flag logo. In September 1995 E-One announced that it would begin selling its low cost, limited option fire trucks under the AMERICAN EAGLE brand.

A year later E-One brought this suit for trademark infringement against AFE. AFE defended on the ground that E-One had abandoned its rights to the mark by discontinuing use with an intent not to resume use in the reasonably foreseeable future. AFE also counterclaimed, alleging that it had acquired the rights abandoned by E-One through adoption and use of its own mark. The parties stipulated that E-One obtained the AMERICAN EAGLE mark when it purchased that company and that the AMERICAN EAGLE and AMERICAN FIREEAGLE marks are confusingly similar. Thus, the only issue was whether E-One had abandoned the mark. After a five-day trial the jury found in favor of E-One, and the district court issued an injunction against AFE's further use of the AMERICAN FIREEAGLE mark. The district court denied AFE's renewed motion for judgment as a matter of law. AFE appeals.

II.

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A.

AFE begins by arguing that it was entitled to judgment as a matter of law on the issue of abandonment. AFE contends that E-One's own evidence proved that it had discontinued use of the AMERICAN EAGLE mark for at least three years before it introduced its own line of AMERICAN EAGLE trucks. According to AFE, three years of non-use results in a statutory presumption of abandonment, and E-One failed to rebut that presumption. The district court concluded that E-One only had to produce evidence of its continued use of the mark or its intent to resume such use in order to rebut the presumption. According to the district court, E-One rebutted the presumption by producing evidence that it had continued to use the mark on clothing and promotional merchandise, in the recycling and repairing of American Eagle fire trucks, and on the uniforms of its security personnel. We hold that promotional use of this type or incidental use in recycling and repair is not the "use" required to preserve trademark rights under the Lanham Act. Nonetheless, we conclude that E-One rebutted the statutory presumption by producing evidence that it intended to resume use of the mark on fire trucks. Consequently, AFE was not entitled to judgment as a matter of law.

Under the Lanham Act a trademark is abandoned when "its use has been discontinued with intent not to resume such use." Thus, a party claiming that a mark has been abandoned must show "non-use of the name by the legal owner and no intent by that person or entity to resume use in the reasonably foreseeable future." Non-use for three consecutive years alone, however, constitutes prima facie evidence of abandonment. Proof of three consecutive years of non-use thus creates a presumption -- a mandatory inference of intent not to resume use. …Once the presumption is triggered, the legal owner of the mark has the burden of producing evidence of either actual use during the relevant period or intent to resume use. . . . The ultimate burden of proof (by a preponderance of the evidence) remains always on the challenger. . . .

Here, the testimony of E-One's own witnesses at trial established that the company discontinued use of the AMERICAN EAGLE mark by mid-1992 when it ceased production of new AMERICAN EAGLE fire trucks. E-One's uses of the mark in the succeeding three-and-one-half years on products other than fire trucks failed to satisfy the statutory requirement of "bona fide use of [the] mark in the ordinary course of trade, and not made merely to reserve a right in [the] mark." Exclusive repair and recycling services like those offered by E-One might be sufficient commercial use of the mark to prevent abandonment, but only if E-One used the mark on the repaired or remanufactured goods or "on documents associated with the goods or their sale." The evidence at trial was that only one recycled American Eagle truck left the factory with an AMERICAN EAGLE mark attached, and invoices for all repair and recycling services bore only the E-ONE mark. One recycled American Eagle truck with an AMERICAN EAGLE nameplate over the course of three years is no more than a token use which, standing alone, is legally insufficient to disprove abandonment. . . .

We therefore conclude that AFE demonstrated that E-One had discontinued use of the AMERICAN EAGLE mark for three years and that E-One failed to rebut that presumption by producing any evidence of the use required by the Lanham Act. However, the case does not end there because E-One did produce evidence that it intended to resume use of the mark on fire trucks. E-One's continuous promotion of the brand by using it on hats, T-shirts, tote bags, and souvenir nameplates is evidence of some intent to resume use of the mark. In addition, E-One executives testified that they actively considered using the AMERICAN EAGLE mark on fire trucks between 1992 and 1995. That testimony was corroborated by an E-One business plan from 1993, which identified the AMERICAN EAGLE mark as one of four possible brand names for a new line of trucks. This evidence of intent to resume use was sufficient to satisfy E-One's burden of production. The evidence also created a triable issue of fact, precluding judgment as a matter of law.

AFE contends, however, that E-One's own representatives admitted that their plans to resume use of the mark were indeterminate. At the time of acquisition and at all times up until 1995, E-One had no specific plan to use the AMERICAN EAGLE mark. It is true that the owner of a trademark cannot defeat an abandonment claim, as well as the purposes of the Lanham Act, by simply asserting a vague, subjective intent to resume use of a mark at some unspecified future date. ... Once the challenger shows discontinued use, the owner must produce evidence of intent to resume use "within the reasonably foreseeable future." Requiring the owner to have an intent to use the mark in the reasonably foreseeable future ensures that valuable trademarks are in fact used in commerce as the Lanham Act intends, rather than simply hoarded or warehoused. . . .

Of course, what is meant by the "reasonably foreseeable future" will vary depending on the industry and the particular circumstances of the case. Because fire trucks have very long lives (often twenty to thirty years), the mark stays visible, and the good will value of the mark persists long after production of trucks with that mark has ceased. Thus, it might be reasonable for a fire truck manufacturer to spend five or six years considering the reintroduction of a brand, even though the same passage of time would be unreasonable for a maker of a more ephemeral product, say potato chips. E-One produced evidence that because American Eagle had made a product very similar to E-One's, it was necessary for E-One to develop a new product line to avoid duplication. E-One also produced evidence that its delay in reintroducing the mark was attributable to its skittishness after an embarrassing experience introducing another brand. Finally, E-One produced evidence that it had paid a substantial sum of money for the AMERICAN EAGLE mark only a few years earlier. Under these circumstances, we cannot say as a matter of law that E-One had no intent to reintroduce the mark within the reasonably foreseeable future. That question was a proper one for the jury. AFE thus was not entitled to judgment as a matter of law on the question of abandonment.

. . .

For the reasons stated above, we hold that AFE was not entitled to judgment as a matter of law on the issue of abandonment. Rather, E-One produced sufficient evidence of intent to resume use in the reasonably foreseeable future to satisfy its burden of production and create a disputed issue of material fact. However, the trial court's failure to instruct the jury correctly on the meanings of the terms "use" and "intent not to resume such use" in the Lanham Act requires that we vacate the judgment and injunction. The case is remanded for a new trial.

VACATED AND REMANDED.