Trademark Trial and Appeal Board
Patent and Trademark Office (P.T.O.)
*1 REFLANGE, INC.
Cancellation No. 16,423
August 15, 1990
Michael O. Sutton of Arnold, White & Durkee for Reflange, Inc.
M. Ralph Shaffer for R-Con International
Before Rooney, Simms and Seeherman
Opinion by Seeherman
Reflange, Inc. has petitioned to cancel a registration originally issued to Rocky Mountain Nuclear Manufacturing and Engineering Inc. (hereafter ROCKY) and now owned by R-Con International (hereafter INTERNATIONAL or RESPONDENT) for the trademark R-CON for metal clamp-type connectors for connecting conduit end-to-end. [FN1] Reflange named Rocky as the owner of the registration in its petition for cancellation, so the references to registrant in the petition have been construed as referring to International or its predecessor in interest, Rocky. As grounds for cancellation petitioner alleges that it adopted and began using the mark R-CON for metal clamp-type connectors for connecting conduit end-to-end before registrant's use of its mark in commerce, and that petitioner continues to use the mark; that registrant knew of petitioner's prior use and rights in the mark when registrant filed its application, and therefore the registration was procured by fraud; and that registrant has known since the issuance of its registration that petitioner was using the mark R-CON for metal connectors, and that by failing to police petitioner's use of the mark R-CON, registrant has abandoned its rights in the mark.
International, as record owner of the registration, filed an answer in which it denied the essential allegations of the petition, admitting only that petitioner has used R-CON in some form but alleging that such use was wrongful. International has also pleaded the affirmative defenses of laches, acquiescence, estoppel and unclean hands.
After trial International moved to amend its answer to add an additional affirmative defense, and petitioner opposed the motion. A ruling on the motion was deferred until final hearing, and will be discussed infra.
The record includes the pleadings; the file of the registration sought to be cancelled; respondent's responses to certain of petitioner's interrogatories and requests for admissions, relied on by petitioner; petitioner's responses to respondent's interrogatories, and certain records of the Patent and Trademark Office, relied on by respondent; and the depositions, with exhibits, of Jack L. Poe, [FN2] Raymond E. Latham, Jerry R. Allen and Charles Mynhier, [FN3] Joseph W. Carroll, James T. Anderson, Jr., Billy Don McDuffie, G. Dean Snarr, Deanna J. Hoyt, L. Wayne Robinson, Eugene D. Clapps, Philip M. Hoyt, W. David Edwards, Rea J. Betenson, Lorin Carroll, N. Wayne Hansen, and Donald A. MacKinnon. [FN4] The parties have fully briefed the case, and both were represented at an oral hearing before the Board. [FN5]
To summarize the inordinate amount of testimony, Ray Latham, the president and founder of Reflange, and Jack Poe, the president and founder of Rocky, respondent's predecessor in interest, had known each other from prior work experiences. The two became involved in discussions in about 1976 regarding a clamp-type pipe connector. Mr. Poe had customers who wanted him to make "Grayloc equipment", but he could not do so because it was patented by the Gray Tool Company. It transpired during the course of those discussions that Latham had devised a seal ring and seat for such a connector, and that Poe and his company were working on designs for the clamp. At that time, Rocky was providing its product primarily to the nuclear power field, and Reflange was concerned with other applications, such as the oil field and petrochemical areas. While the pipe connections and their component parts were used for all applications, the quality and strength of the materials, and the quality assurance standards required, resulted in the parts for the nuclear field's being much more expensive than those for nonnuclear application. Thus, even though the parties contemplated selling the same parts, they did not view themselves as competitors.
*2 During 1976, Latham and Poe had various telephone conversations about the new pipe connectors. In one, Poe told Latham that his company had chosen the trademark R-CON for its connector. Latham liked the name and thought it would also work well for the product his company was going to produce. According to Poe's testimony, Latham asked if Poe would mind if Reflange used it too. Poe testified that he responded, "No, as long as we're going into this thing jointly, I think it would be a better thing for both of us to use it, because it makes a larger splash on the market, so to speak, and there would be more name recognition."
On September 15 and 16, 1976, Poe met personally with Latham, and on September 15, 1976 they entered into a confidentiality agreement on behalf of their companies. Under the terms of the agreement, Reflange agreed to disclose to Rocky certain proprietary confidential information and know-how relating to flanges and seals or gaskets therefor. Reflange also agreed to protect any confidential information revealed to it by Rocky under the agreement and, in the same manner, Rocky was required to protect information revealed to it by Reflange. Thereafter, on November 1, 1976, Rocky sent Latham a letter referenced "Joint Venture between Reflange Inc. and Rocky Mountain Nuclear." The body of the letter is as follows:
The purpose of this letter is to confirm our discussion of September 16, 1976 concerning the subject agreement. This letter, if approved by Reflange, should serve as a temporary agreement until formal papers can be drawn up.
The primary purpose of this agreement is to provide Rocky Mountain Nuclear a metal modified cone ring seal as designed by Reflange and to provide Reflange with a clamp type pipe connector and greater marketing exposure for the seal design.
It is our intent that both Rocky Mountain Nuclear and Reflange will freely share designs with each other to provide the greatest capabilities for marketing by each individual company.
For the purposes of this agreement the responsibility for the design of the seal ring will rest with Reflange and the responsibility for design of the clamp type connector known as the R-Con [FN6] will rest with Rocky Mountain Nuclear. The costs of these designs shall be born by the company with the responsibility for that area of work. In the case of a development contract however, design costs of any specialty items shall be by mutual agreement between Rocky Mountain Nuclear and Reflange.
For the purposes of marketing, Reflange shall have exclusive rights to manufacture and market the R-Con connector and the Reflange cone seal for all oil field and petro chemical services. Rocky Mountain Nuclear shall have exclusive rights for manufacturing and marketing of the R-Con connector and the Reflange cone seal in the nuclear and power industries. Other major industry groups will be added to the marketing field by mutual agreement between Rocky Mountain Nuclear and Reflange. To reduce costs of manufacture Rocky Mountain Nuclear will also make available a source for the forged clamps required for the R-Con connector.
*3 It is the intent of Rocky Mountain to develop a line of specialty high alloy pipe connectors for the nuclear power industry and not to engage in the manufacture of connectors for general industrial purposes.
We are working on a formal agreement and should have a rough draft copy ready in the next two ro (sic) three weeks. We will send you a draft as soon as it is completed. If you have any questions or require further discussion concerning the context of this letter, please contact me at your convience (sic). I have enclosed a copy of the add (sic) that will appear in the November issue of Nuclear News.
Mr. Latham never responded to this letter, nor did Mr. Poe ever provide the draft agreement which was promised. However, both prior to and subsequent to the letter, the parties engaged in activities with regard to the pipe connector, with both eventually manufacturing and selling connectors under the trademark R-CON.
In 1980 and 1981 Reflange engaged in discussions to purchase Rocky, but the negotiations were unsuccessful and Reflange withdrew its offer on March 30, 1981. This apparently marked a turning point in the good relations which the two companies had previously enjoyed. In approximately April 1981, Reflange sent Rocky a proposed license agreement which was to be effective as of April 1, 1981. By the terms of the license, Rocky was now required to pay a royalty to use the seal ring design which had been the subject of the confidentiality agreement, and on which Latham had obtained a patent on July 29, 1980. Poe testified that because of pending orders for the R-CON connector Rocky was forced to agree to the license arrangement.
Thereafter, on July 24, 1981, Rocky filed an application for R-CON which matured on September 14, 1982 into the registration which is the subject of this proceeding. On July 12, 1983, Rocky terminated the patent license with Reflange, and this effectively terminated their relationship. Subsequently, on December 12, 1983, and in connection with the termination, Rocky's attorney advised Reflange of Rocky's ownership of the registration for R-CON, and that Reflange should cease using the mark on products and in advertising. Another cease and desist demand was made by Rocky's attorney on Reflange on February 28, 1985.
In 1984, Rocky underwent a change in management, and began extending its activities under the R-CON mark into the nonnuclear area. Ultimately the corporation was involuntarily dissolved on September 1, 1987. Many of the assets, including the trademark R-CON, had previously been purchased in April 1986 by R-Con International, the respondent in this action.
We turn first to the question of whether the parties were engaged in a joint venture. As noted above, after trial respondent made a motion, opposed by petitioner, to amend its answer to add as an affirmative defense that the parties had engaged in a joint venture which began in 1976 and terminated around 1981, at which point respondent alleges that any claims Reflange had in the mark were nullified. Respondent's motion to amend its answer is granted. We are not persuaded by petitioner's arguments that we should reverse our long-standing policy that Fed.R.Civ.P. 15(b) is applicable to proceedings before the Board. Further, we find that the extensive references by various witnesses, as well as the attorneys representing the parties, to the subject of a joint venture, demonstrate that this issue was in fact tried.
*4 Having said that, we find that respondent has failed to show that Reflange's and Rocky's efforts constitute a joint venture as that term is understood at law. In a recent decision, Hoyle Knitting Mills, Inc. v. T.J. Manalo, Inc., 12 USPQ2d 1720 (TTAB 1989), the Board reviewed the definitions of joint venture, as follows:
A legal entity in the nature of a partnership engaged in the joint prosecution of a particular transaction for mutual profit. An association of persons jointly undertaking some commercial enterprise. It requires a community of interest in the performance of the subject matter, a right to direct and govern the policy in connection therewith, and duty, which may be altered by agreement, to share both in profit and losses. Black's Law Dictionary (Fifth Edition 1979).
As a general rule, a joint adventure (a term which is said to be synonymous with the term "joint venture") requires "a community of interest in the performance of a common purpose, a joint proprietary interest in the subject matter, a mutual right to control, a right to share in the profits, and a duty to share in any losses which may be sustained." 48 Corpus Juris Secundum
A joint venture is an association of individuals or companies who agree to engage in a common enterprise for their mutual profit. Its essential elements are: (a) a joint proprietary interest in, and a right to mutual control over, the common enterprise; (b) a contribution by the respective ventures of capital, materials, services or knowledge; and (c) the right to share the anticipated profits.
Williston on Contracts, SS318, 318A (3d. ed.)
A further definition of "joint venture" is found in In re Hercofina, 207 USPQ 777, 779 (TTAB 1980):
A joint venture is an association of persons with intent, by way of contract, express or implied, to engage in and carry out a single business venture for joint profit, for which purpose they combine their efforts, property, money, skill, and knowledge, without creating a partnership or a corporation, pursuant to an agreement that there shall be a community of interest among them as to the purpose of the undertaking and that each joint venturer shall stand in the relation of principal as well as agent, as to each other coventurer, with an equal right of control of the means employed to carry out the common purpose of the venture.
While both Reflange and Rocky were interested in taking business away from Gray Tool Company, and to this end both used the trademark R-CON to make more of an impression in the market, we cannot find that this goal rises to the level of a common business purpose contemplated by the legal concept of "joint venture." As Mr. Poe described the venture, the companies had entered into an agreement to exchange information to make some in roads on Gray Tool's market. Each used the mark, not to increase sales of R-CON products jointly, but to foster the sales of the particular products that each manufactured. The record is clear that the parties did not act as agents for each other, nor did either share in the other's profits or losses in any way. In fact, Mr. Poe testified that the arrangement was for the exchange of technical information only, and that the reason no formal agreement was drafted following his November 1, 1976 "temporary agreement" letter was that "we did not feel that there was any way where we could get into a situation where we could adequately address the problems of profits, losses and operating costs."
*5 Aside from the material exchanged pursuant to the confidentiality agreement, the "cooperative" contacts between the companies in connection with R-CON were very limited. For example, they provided each other with at least some of the advertising material each produced, and one or both companies may have used drawings or photographs created by the other in its advertising literature, or used it on the other's literature, having first substituted its own name. However, the record does not support that these were joint advertising efforts. Rather, it appears that each company simply decided to appropriate the materials, although the principals indicated that if permission had been requested there would have been no objection. The only evidence of a joint advertising initiative occurred in 1982. Reflange was preparing an advertising brochure, and it contacted Rocky about sharing printing costs to produce an identical brochure, differing only as to the company names on the cover. As a result of this effort, both companies collaborated on the information to be put into the brochure, which apparently was completed in September 1982, the date of Reflange's invoice to Rocky.
Aside from the advertising area, the other contacts include a business luncheon which Reflange's sales agent had with Mr. Poe in September 1976 to discuss marketing prospects generally, and an inquiry by Rocky for suggestions about a new adaptation for the seal ring. Even when the parties made purchases from each other (Rocky might purchase R-CON parts from Reflange when parts made from the lower cost material Reflange worked with were all that were necessary for a particular job), each paid the other for the products purchased.
While the companies cooperated in sharing technical designs, even in this area there is very little that can be said to be a contribution to a joint venture. Mr. Latham certainly did not treat his seal ring as joint property: He filed a patent for it in his own name, and then assigned his rights to Reflange. And, while Rocky felt that the imposition of patent royalties was in contravention of the parties' agreement, Rocky and Mr. Poe never disputed Latham's or Reflange's rights in the patent. Moreover, on July 3, 1979 Rocky filed a U.K. patent application for a pipe connector, based on its U.S. patent application which had been filed one year previously. Again, these actions belie respondent's argument that it was engaged in a joint venture.
We recognize that Mr. Poe thought of the arrangement as a joint venture, and that, in an affidavit made by Mr. Latham in connection with an opposition filed by International to Reflange's Canadian application to register R-CON, Mr. Latham described as a "joint venture" an arrangement in which Reflange provided to Rocky a ring seal designed by Reflange and in which Reflange would have the exclusive right to manufacture and market its products identified by the trademark R-CON in the oil field and petrochemical business. Despite the fact that the parties have used the term "joint venture," this does not mean that a joint venture was created in the legal sense of that term, and for the reasons discussed, we find that it was not.
*6 In view of this finding, we turn to a consideration of which of the parties has priority of use. While there is no question that Rocky coined the term R-CON, it is not the act of inventing a trademark which creates prior rights. Hydro-Dynamics Inc. v. George Putnam & Co., 811 F.2d 1470, 1 USPQ2d 1772 (Fed.Cir.1987). It is the commercial usage of a trademark which creates such rights. In re Cedar Point, Inc., 220 USPQ 533 (TTAB 1983). [FN7] Such usage can consist of use analogous to trademark use and need not be technical trademark use. Id. Respondent asserts that its first use on this basis is the advertisement which Rocky placed in "Nuclear News" magazine in November 1976, and we agree that the evidence of record supports this claim. Reflange, however, asserts use of the mark R-CON in advertising materials prior to that date and, here too, we agree that such use is established by the record. Specifically, James Anderson, who during that period worked on a commission arrangement with Reflange, testified that he began distributing brochures advertising the R-CON connector no later than August 1976 and stopped doing so no earlier than November 1976, and that prior to November he distributed these brochures to potential customers located in Texas, Oklahoma and Louisiana. Respondent argues that this evidence is contradicted by the testimony of Messrs. Poe and Snarr that the mark R-CON was not chosen until some time between September 1 and September 15, 1976.
We do not think that the evidence is as contradictory as respondent asserts. According to the affidavit of Dean Snarr, respondent's own witness, he originated the trademark R CON in the summer or early fall of 1976. During his testimony he stated that he worked on creating names for the product for a period of several months, in a process where he wrote down names or told them to Mr. Poe, and the names were then discussed over a period of time. While he thought that the name R-CON was finally chosen in the summer of 1976, because he did not make the final decision and was unaware when it was actually made, he continued to develop names even afterwards. In view of Mr. Snarr's testimony, we think it likely that the name R-CON was created in the summer of 1976 or even earlier, and that Mr. Poe mentioned it to Mr. Latham, perhaps even before Rocky made a definite decision to adopt it as its mark. As a result, we see no reason why Reflange could not have printed advertising literature containing the mark during the summer of 1976. The additional testimony by Mr. Snarr that he did not make R-CON drawings until Rocky moved to a new building after September 1, 1976 again does not mandate a finding that Reflange could not have printed its advertising literature earlier, since the term had been coined prior to September, even if the drawings of the actual device had not been made at that time. In view of the testimony of Messrs. Latham, Anderson and Snarr that they were aware of the term R-CON in the summer of 1976, we must assume that Mr. Poe's testimony that the mark was devised in September suffers the understandable vagaries of memory which occur after twelve years. Our assumption is buttressed by the fact that at one point Mr. Poe testified that the mark was not created until after the September 15, 1976 meeting with Latham, while in another deposition he stated that Rocky decided on the name in the first week of September, 1976. [FN8]
*7 We are mindful of the apparent harshness of result in our finding that Reflange has priority in the mark despite the fact that Rocky coined the mark and disclosed it to Reflange as a proposed mark for Rocky. However, the disclosures were not made in confidence nor in the course of a fiduciary relationship. As the Court of Customs and Patent Appeals said in Selfway, Inc. v. Travelers Petroleum, Inc., 579 F.2d 75, 198 USPQ 271, 274 (CCPA 1978), the law pertaining to registration of trademarks does not regulate all aspects of business morality, and adoption of a mark with knowledge of another's intent to use does not give rise to cognizable equities. [FN9]
In view of Reflange's priority of usage of the mark R-CON in connection with pipe connectors, respondent's registration must be cancelled pursuant to the provisions of Section 2(d) of the Act. The marks are identical, and both parties use the marks for the same goods, i.e., clamp-type pipe connectors. While the record shows that at the time of filing its application and at the time the registration issued, Rocky's connectors were produced primarily for the nuclear power field, the identification in the registration is not so limited. Moreover, the record establishes that respondent now markets to nonnuclear industries, including those in which Reflange's pipe connectors are sold. Further, at least some of the companies which purchase nuclear pipe connectors also purchase pipe connectors which are used for nonnuclear purposes. Accordingly, the use by respondent of the trademark R-CON, whether for pipe connectors sold in nuclear or nonnuclear channels of trade, is likely to cause confusion with Reflange's use of R-CON for pipe connectors sold in nonnuclear channels of trade. [FN10]
Respondent has argued, as an affirmative defense, that Reflange is estopped from challenging its registration because it did not do so until almost five years after the registration issued. It is respondent's position that respondent and its principal owners would not have purchased the trademark R- CON from Rocky, nor incorporated under that name if they had known of Reflange's objections. It is not necessary to discuss this theory because it is well established that equitable defenses such as laches and estoppel will not be considered and applied where, as here, the marks of the parties are identical and the goods are the same or essentially the same. See, Coach House Restaurant v. Coach and Six Restaurants, 223 USPQ 176, 178 (TTAB 1984) and cases cited therein. Even a well-taken defense of acquiescence would not preclude a judgment for plaintiff if it is determined that confusion is inevitable, and confusion between identical marks used for identical goods is inevitable. See, Coach House v. Coach and Six, 9 USPQ2d 1484 (TTAB 1988).
In view of our finding that Reflange is the prior user and owner of the mark the petition for cancellation is granted, and the registration will be cancelled in due course. However, in order to render a complete opinion, we will turn briefly to the remaining grounds.
*8 Assuming, arguendo, that a joint venture did exist, we find that Rocky was not guilty of fraud in filing the application for R-CON without informing the Patent and Trademark Office of Reflange's use. That is, because Rocky coined the term, and because at the time it filed the application it considered that the joint venture had been terminated, failing to advise the Office of Reflange's use cannot be considered the kind of intentional deceitful practice which rises to the level of fraud. See, First Int'l Services Corp. v. Chuckles Inc., 5 USPQ2d 1628, 1634 (TTAB 1988).
However, again assuming, arguendo, that respondent is correct and that a joint venture existed which was terminated in April 1981, we are left with the fact, based on respondent's own position, that for a substantial period after such termination, i.e., at least until December 1983, Reflange continued to use the mark R-CON without objection or control by Rocky. During this period Rocky knew that Reflange was selling products under the trademark R-CON, and even cooperated with Reflange in producing an R-CON brochure in September 1982. Further, respondent has admitted that neither International nor Rocky ever controlled or attempted to control the nature or quality of any goods produced by Reflange. Thus, we find that the registration was abandoned for failure to control its use by Reflange.
Decision: The petition to cancel is granted.
L. E. Rooney
R. L. Simms
E. J. Seeherman
Members, Trademark Trial and Appeal Board
FN1. Registration No. 1,207,852, issued September 14, 1982. The assignment was recorded in the Patent and Trademark Office on June 9, 1986.
FN2. The parties stipulated that the discovery deposition of Mr. Poe could be relied on as trial testimony by either party, and the discovery deposition was relied on in its entirety. A second deposition of Mr. Poe was submitted by defendant as part of its trial testimony.
FN3. The parties stipulated that the discovery depositions of Messrs. Latham, Allen and Mynhier could be submitted by respondent as trial testimony. In addition, petitioner submitted a deposition of Mr. Latham as part of its trial testimony, and depositions of both Mr. Latham and Mr. Allen as part of its rebuttal testimony.
FN4. During the course of the various depositions both parties raised a number of objections to particular testimony and to certain exhibits. Respondent also filed a list of certain objections rather than bringing them up during one of the depositions because of the lateness of the hour at which that deposition was concluding. However, in the briefs themselves, neither party raised any objections to specific evidence, and we therefore have considered such earlier objections to be waived. (We take respondent's comment in its trial brief that it objects to petitioner's flyers to be not an evidentiary objection but an argument that flyers are not adequate to demonstrate analogous trademark use.) In any case, many of the objections go to the value of the evidence, rather than its admissibility, and even if we were to exclude evidence to which an objection has been made it would not affect our decision herein.
FN5. At oral argument respondent's attorney provided the Board with a "Text of Oral Argument by Respondent." While the Board will in general allow certain material, such as graphs or schedules, to be used at oral hearing either for clarification or to eliminate the need for extended description, a party may not use this practice as a means to, in effect, submit a second brief. Accordingly, the Board has not considered respondent's text of oral argument beyond allowing its use at the hearing, nor have we considered petitioner's subsequent letter disagreeing with the statements made in the "text" or respondent's comments defending it.
FN6. The record shows that the entire connector, as well as the individual components, were sold under the mark R-CON by both parties, and that the ring seal developed by Reflange was used as part of the connector as a whole.
FN7. We are aware that the 1989 amendments to the Trademark Act provide certain benefits to applicants filing with an intent to use a mark, but those provisions do not pertain to the case before us.
FN8. Reflange has also produced other advertising material featuring the mark R-CON, with evidence to demonstrate that it, too, was created and distributed prior to respondent's November 1976 advertisement in "Nuclear News." Respondent has raised a number of arguments questioning the creation and effect of these materials. In the interests of brevity, and in view of our finding that at least one brochure bearing the mark was in fact distributed prior to respondent's first analogous trademark use, we have chosen not to discuss the additional advertising materials or respondent's arguments regarding them.
FN9. Of course, this statement was made prior to the 1989 amendments to the Trademark Act which, in limited circumstances, do recognize certain rights arising from an application based on an intent to use a mark.
FN10. At the end of its rebuttal period and in its trial brief Reflange indicated that, as alternative relief, respondent's registration should be restricted pursuant to Section 18 to limit the goods to the nuclear channel of trade. Respondent opposed this suggestion. We reject such alternative relief because respondent was not adequately put on notice that the restriction of its registration was in issue. Moreover, in view of the evidence of respondent's expansion to the nonnuclear industry, the restriction would not truly reflect respondent's use.