July 2003
(Issue No. 1: Decisions published June 16–30)

Evidence Did Not Support Nationwide Scope of Injunction

Emergency One, Inc. v. American Fire Eagle Engine Company, Inc. 4th Cir. June 16, 2003), 2003 U.S. App. LEXIS 11806

Court Opinion

Case Snapshot:

Trademark Issue:	Geographic Scope of Injunction
Case Overview:	The district court ordered a nationwide injunction in favor of common law trademark owner. The appeal challenged the geographic scope of the injunction, and the court vacated the injunction and remanded.
Holding:	The owner of a common law trademark is entitled to injunctive relief only in the geographic area where its mark is used and known. Here, there was no evidence of nationwide use to support the nationwide geographic scope of the injunction. By objecting to the geographic scope of the injunction, party was not belatedly asserting the good faith remote user affirmative defense, and merely was challenging scope of relief.
The Dispute:	Confusingly similar marks for fire trucks and rescue vehicles: E-One, a manufacturer of fire trucks and rescue vehicles, sued American FireEagle, Ltd. ("AFE") for infringement of its unregistered, common law trademark. The dispute centered around priority, because the parties agreed that their respective marks were confusingly similar. AFE counterclaimed on the grounds that E-One had abandoned its mark, that AFE had then acquired ownership through use of the mark, and that E-One's subsequent renewed use of the mark infringed on AFE's common-law trademark rights. The hunter becomes the game: E-One won a jury trial and the district court entered an injunction against AFE that was unlimited in its geographical scope. AFE appealed based on incorrect jury instructions on the abandonment issue, and the Fourth Circuit reversed and remanded. On remand, there was a bifurcated jury trial limited to the abandonment issue. The jury found that E-One had abandoned its mark. Therefore, AFE was the senior user. The injunction: AFE requested that the district court impose an unlimited injunction against E-One's continued use of its mark, virtually identical to the one imposed against AFE after the first trial. The district court concluded that E-One had waived the right to challenge the geographical scope of the injunction, and that a nationwide injunction was appropriate. E-One appealed the district court's entry of the injunction.
Procedural Posture:	Appeal of district court's order entering injunction following jury trial on bifurcated abandonment issue.
Ruling:	Nationwide injunction vacated and case remanded.

Key Points:

Geographic Scope of Injunction

There was an insufficient factual basis to support the nationwide scope of the injunction.

• Any injunctive relief to which AFE was entitled was limited to the areas where AFE used its common law, unregistered mark.
• The common law trademark rights of AFE in its unregistered mark were restricted to the locality where AFE used the mark to the area of probable expansion.
• The owner of common law trademark rights in an unregistered mark is not entitled to injunctive relief in geographic areas where it has failed to establish actual use of the mark.
• AFE did not present evidence of nationwide use to support the nationwide geographic scope of the injunction.

E-One did not waive its right to object to the geographic scope of the injunction, because it was not asserting a remote good faith user defense but only challenging the scope of injunctive relief.

• By objecting to the nationwide scope of the injunction, E-One was not asserting a remote good faith user defense.
• The remote good faith user defense is an affirmative defense that must be affirmatively pled. E-One did not affirmatively plead the defense.
• But here, E-One was not asserting the remote good faith user defense and was not challenging AFE's priority and exclusive right to use the mark in those areas where AFE established actual use sufficient to confer common law trademark rights. E-One was simply challenging the scope of relief, not liability.

 We are satisfied that, viewed in its entirety, E-One's challenge to the extent of AFE's territorial rights is not an affirmative defense to liability but an objection to the extent of the remedy imposed by the district court. Unlike an affirmative defense, a mere challenge to the scope of injunctive relief need not be set forth affirmatively in the pleadings, and the failure to do so does not amount to a waiver of the argument.   [p. 24]

• For the same reasons, E-One did not waive its objection to the scope of the injunction by failing to include the issue in the pre-trial order.
• E-One did not admit in its Answer that AFE's use was nationwide. AFE alleged in its counterclaim that it used its mark in North Carolina and throughout the United States. E-One admitted only that AFE used the mark in North Carolina, but denied the remaining allegations based on lack of information and belief.

Analysis

The decision is a good review of common law principles of territoriality and the remote good faith user defense.

• The court provides an excellent review of the territoriality principles that apply to common law marks, including the remote good faith user defense.

 Thus, even though a junior user is, by definition, not the first to ever use a mark, it may assert the exclusive right to use a mark in a particular area (1) if the area was "geographically remote" from the senior user's market at the time that the junior user appropriated the mark and (2) if the junior user was acting [*19] in good faith at the time.   [p. 18-19]

The decision is important because it distinguishes the remote good faith user defense from challenges to the geographic scope of an injunction.

Lesson: Be careful what you admit in answering a complaint.

• By denying in its Answer that AFE used its mark outside of North Carolina throughout the U.S., E-One avoided waiving its challenge to the nationwide geographic scope of the injunction.
• These types of allegations are usually seen as unimportant boiler-plate, but they can be wolves in sheeps' clothing in cases where the scope of relief depends on the locations where the plaintiff is using its mark, and thereby has obtained trademark rights.

Lesson: Another boomerang trademark case.

• We've all seen it happen too often, right? The plaintiff charges into court against a competitor, only to find itself as the de facto defendant when its trademark rights are challenged by allegations of abandonment that allow the defendant to leap frog the plaintiff and obtain priority.
• This case is yet another example of the fact that one of the first things that is challenged in a trademark suit is not the defendant, but the plaintiff's rights.