Antitrust Law Daily Wrap Up, FRANCHISING & DISTRIBUTION—N.D. Ala.: Court dunks donut shop franchisor’s trademark infringement claims, (Apr 23, 2015)

By Thomas Long, J.D.

A Pelham, Alabama-based franchisor of donut and coffee shops under the name “Donut Joe’s” could not go forward with trademark infringement claims against a competitor—and once-potential franchisee—that operated under the name “Donut Chef,” the federal district court in Birmingham, Alabama has ruled. Donut Joe’s word mark and logo were merely descriptive and lacked secondary meaning. In addition, there was insufficient evidence of a likelihood of confusion (Donut Joe’s, Inc. v. Interveston Food Services, LLC, April 22, 2014, Hopkins, V.).

Asserted trademarks. Plaintiff Donut Joe’s, Inc., owned two federally registered trademarks: the Donut Joe’s name, registered with the USPTO in July 2011, and the Donut Joe’s logo, registered with the USPTO in July 2012. Donut Joe’s disclaimed the exclusive right to use the word “donut” apart from the Donut Joe’s mark in conjunction with the sale of donuts and restaurant services. The logo consisted of the stylized wording “DONUT JOE’S” and a design of a donut wearing a chef’s hat and holding a cup of coffee, on an oval shaped background carrier, above a smaller oval background carrier containing the words “Fresh Coffee & Donuts To Go!” According to Donut Joe’s, its corporate colors were orange, green, brown, and white, which were used in the décor of its store.

Initially, the parties had discussed the operation of several “DONUT JOE’S” franchises by defendant Interveston Food Services, LLC, and had even entered into a letter of understanding with respect to their plans. However, they could not agree on a final license arrangement and terminated their business relationship. Interveston then began operating competing donut and coffee shops under the name “Donut Chef.” Interveston registered its Donut Chef trademark with the Alabama Secretary of State on December 27, 2013. The mark consisted of a personified doughnut character, wearing a chef's hat along with the words “THE DONUT CHEF.” The Donut Chef’s main colors were red, yellow, and brown. The inside walls of The Donut Chef store were painted yellow and included a picture of its donut character.

Donut Joe’s filed suit against Interveston for trademark infringement. Interveston moved for summary judgment.

Validity of Donut Joe’s marks. The Donut Joe’s word mark and logo were descriptive, the court found. Donut Joe’s store sold donuts and coffee. “Joe” was a colloquial term for coffee, the court noted. It required no thought or imagination to draw a connection between the name “Donut Joe’s” and the fact that the store sold donuts and coffee. In the court’s view, the mark was not, however, generic because it conveyed the business of the company without being a plainly straightforward reference to the goods sold, such as “Donuts and Joe.”

The logo also was found to be descriptive. The words “DONUT JOE’S” dominated the logo, and its other elements did not make the connection between the mark and the store’s goods any less straightforward. If anything, adding those elements made the logo even more clearly descriptive.

The marks had not acquired the requisite secondary meaning to be protectable, the court determined. There was no survey evidence showing that they were distinctive in the minds of consumers. The marks were used for only about two years before Interveston started using its Donut Chef marks, which was not enough time for secondary meaning to develop. During that time, Donut Joe’s spent only about $5,400 on advertising. There was no evidence that Donut Joe’s took intentional efforts to promote a conscious connection among the public between its marks and its business. Donut Joe’s provided evidence that five customers had inquired about a relationship between the two companies after seeing The Donut Chef’s marks. This was not sufficient to raise a genuine issue of material fact as to secondary meaning, the court said.

Donut Joe’s contended that it was not required to present evidence of secondary meaning, and that its marks were entitled to a presumption of validity due to their federally registered status. However, the court noted, the presumption of validity was rebuttable and could be overcome by establishing the descriptive nature of the marks. The court held that, in this case, the presumption of validity had been rebutted by the lack of evidence that Donut Joe’s marks had acquired secondary meaning. Therefore, the marks were not protectable.

Likelihood of confusion. Even if the Donut Joe’s marks were valid and protectable, there was insufficient evidence of a likelihood of confusion between the parties’ marks to withstand summary judgment, the court held.

Several factors did weigh in favor of a finding a likelihood of consumer confusion. The goods sold by the two parties were highly similar. There was some similarity in the parties’ sales methods; both sold exclusively out of their own retail stores, to the same customer base.

The similarity of the parties’ marks weighed slightly in favor of Donut Joe’s, at most. In the court’s view, the protectable elements of the respective marks were not similar. For example, the marks were distinguished from one another by differing placements of the donut characters relative to the words, Donut Joe’s mark’s inclusion of the phrase “Fresh Coffee & Donuts To Go!” The Donut Joe’s logo had colored oval background shapes behind the words, whereas the Donut Chef’s logo lacked background shapes.

However, the court said, the weakness of the franchisor’s marks and the lack of actual confusion evidence provided decisive grounds for awarding summary judgment on the question of likelihood of consumer confusion. Both of Donut Joe’s marks were descriptive and lacked secondary meaning; they were entitled to less protection than arbitrary and suggestive marks. Furthermore, there was widespread use of elements of the marks by third parties, the court noted. The five instances of consumer confusion pointed to by Donut Joe’s were negligible and did not support a finding of likely confusion, the court said.

Weighing the factors, the court concluded that a reasonable jury could not find that there was a likelihood of consumer confusion resulting from Interveston’s use of its marks. This provided an additional basis for summary judgment to be granted in favor of Interveston on Donut Joe’s trademark infringement claims.

The case is No. 2:13-CV-1578-VEH.

Attorneys: Joseph E. Watson, III (The Watson Firm) for Donut Joe's, Inc. Jade E. Sipes (Cabaniss Johnston Gardner Dumas & O'Neal LLP) for Donut Chef and Interveston Food Services, LLC.

Companies: Donut Joe's, Inc.; Interveston Food Services, LLC; Donut Chef

Cases: FranchisingDistribution AlabamaNews