Patent and Trademark Office Trademark Trial and Appeal Board

6-05 Pneutek

Pneutek, Inc. v. Scherr

Decided July 30, 1981

*825 Trademark opposition No. 62,138, by Pneutek, Inc., against George H. Scherr, application, Serial No. 147,930, filed Nov. 9, 1977. Opposition dismissed.

Before Lefkowitz, Kera, and Fruge, Members.

Kera, Member.

An application has been filed by George H. Scherr to register the mark shown below *826 for journals and monographs in the scientific and medical fields. [FN1]

Registration of the mark has been opposed by Pneutek, Inc., which alleged prior use of the mark displayed below for fasteners and pneumatic fastening tools:

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for fasteners -- namely, nails and for pneumatic fastening tools; [FN2] a substantial and valuable goodwill associated with opposer's trademark; and that applicant's mark, as applied to his goods, so nearly resembles opposer's mark that there is a likelihood of confusion, mistake or deception resulting in damage to opposer. Applicant admitted the pendency and publication for opposition of opposer's application and denied the rest of the allegations in the complaint.

The record consists of the application file; the deposition of Mr. Harry M. Haytayan, opposer's president and founder, with exhibits, as opposer's testimony-in-chief; the deposition of Dr. George H. Scherr, the applicant, with exhibits, as applicant's testimony; and the testimony of Dr. Scherr, with one exhibit, taken by opposer as rebuttal testimony.

The issues argued by the parties in their briefs and at the oral hearing are: (1) is applicant's use of his mark on his goods likely to cause confusion, mistake, or deception because of resemblance to opposer's mark as used on opposer's goods and for the goods identified in opposer's registration?; and (2) is Dr. Scherr, personally, the owner of the mark for which registration is sought and is he the proper applicant?

[1] The second issue was never pleaded by opposer. However, evidence thereon was introduced by the implied consent of the parties (indeed, Dr. Scherr testified on that point and the rebuttal deposition taken of applicant by opposer was on the issue of applicant's ownership and right to register the mark), and therefore we consider the pleadings as amended to conform to the evidence. See: Rule 15(b), FRCP. The briefs of both parties specifically present this issue for determination.

We shall first relate the facts on opposer's use of its mark. The facts pertaining to the question of applicant's ownership of the mark he seeks to register will be described in connection with the facts bearing on the use of applicant's mark.

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Opposer, Pneutek, Inc., was founded by Mr. Haytayan in April 1974. Its only business is, and has been, the manufacturing and sale of pneumatically operated tools which drive fasteners of various designs, also made by opposer, to hold two objects together. The tool uses compressed air to drive a piston, which drives a metal fastener through wood or steel into concrete or steel.

[2] Opposer's "PT" (opposer's characterization) design mark was first used on the original model of the tool and on the heads of the nails sold for use therewith in sales made in February 1976 to Hartman Independent Company, of Pittsburgh, Sta-Set, of Farmingdale, New York, and Field Machinery, of Watertown, Massachusetts, all of which customers picked up the tools and fasteners at Mr. Haytayan's home, which presumably then, as at the time he testified, was in Lincoln, Massachusetts. [FN3] The model of the tool, *827 designated PT-100, has been continuously sold from February 1976. Over the years, opposer has introduced additional models of its pneumatic fastening tool, designated as models PT-200, PT-300, PT-500, PT-800, PT-1000 and PT-75, which all operate in the same way but with different amounts of power for different uses.

While there is no direct evidence on the number of fastening tools that opposer has sold, there is testimony that, at least since 1977, every tool has been packed in a box on which the "PT" design appears five times, three times in association with the trademark "PNEUTEK" and twice in association with the "PNEUTEK" mark plus the trade name "Pneutek, Inc." The "PT" design is the most striking visual feature of the box and, in our opinion, projects its own commercial impression separate from "PNEUTEK" or "Pneutek, Inc." About 150,000 to 175,000 of these boxes were used by opposer through the end of November 1979, which provides an approximation of the sales volume of the tools. Each of the tools has been marked with the "PT" design mark in association with "PNEUTEK", but, as on the boxes, "PT" dominates the combination.

In addition, opposer has sold in excess of 100 million fasteners, each of which had the "PT" design stamped on its head. The fasteners are sold in strips of ten in a plastic clip.

For the years 1974 through 1979, the dollar value of opposer's sales were about $5,000,000.

Opposer sells its tools and fasteners through forty or fifty distributors throughout the

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United States. Most of these distributors sell primarily to the construction industry. Users of the tools and fasteners include construction companies, steel mills, power plants, hospitals, and schools. Sales have been made to a steel company for use in attaching identification tags to steel ingots and insulation to molds, to manufacturers of cargo containers, to shipyards, to the chemical industry for use in securing gratings, and to a major manufacturer for use in building warehouses. In addition, Mr. Haytayan testified that the tool is used in the meat packing industry to stun cattle before they are slaughtered.

Opposer has attempted to bring its business activities as close as possible to applicant's business by testifying that opposer's tool has been sold to hospitals, that the "PT" design mark remains visible after the fastener is driven into the workpiece, and that the tool could be adopted for use as a pneumatic hypodermic syringe.

The only specific use in a hospital about which Mr. Haytayan testified was the construction of an addition to the Waltham Hospital, in Waltham, Massachusetts, in 1978. While the "PT" mark may remain visible after a fastening job is completed, there is no evidence that the mark remains visible after a construction job is done, that is, after the finishing paneling, wallpaper, or painting is applied to the walls. Given the appearance of the fasteners, we have our doubts. The testimony about the possible redesigning of opposer's tool for use as a hypodermic syringe was pure speculation unsupported by any testimony or evidence to show research or development in that direction or any showing that any other manufacturer of a competitive tool or even a similar construction tool has ever adapted the device to medical uses. A final note on this score is Mr. Haytayan's response to "What is the present business of Pneutek?" He answered, "Pneutek manufactures pneumatic tools and fasteners for a variety of industries."

We also note an absence of any indication that opposer's tools and fasteners have ever been promoted or sold for household use. There is no indication that the tool and *828 fasteners have ever been offered, by sale or rental, to home craftsmen.

Opposer has promoted the sale of its pneumatic tools and fasteners by the distribution of product brochures and leaflets, of which over 100,000 have been distributed, by cooperative advertising with its distributors (one advertisement, published in 1976 in Florida Contractor and Builder is in evidence), and by arranging for the publication of new product releases in trade journals (the record contains copies of the November 1979

Seg. 6, item 5 (2007) 4 6-05 Pneutek issue of Professional Building and of the June 1977 issue of Concrete Products).

The "PT" design mark is also displayed on the instruction leaflet, the troubleshooting chart, the warranty card and the replacement parts list packed with each tool and on opposer's stationery, such as letterheads, invoices, purchase orders, and business cards.

Since February 1976, opposer has had a contract manufacturer make portable air compressors for sale to customers. These compressors are a source of compressed air to power the fastening tools. The compressors are made to opposer's specifications and bear the "PT" design mark. Approximately 750 of these air compressors have been sold.

George H. Scherr, the applicant in this proceeding, has a Bachelor's degree from Queens College, in New York City, and Master's and Doctor of Philosophy degrees from the University of Kentucky. He has done research for the New York City Board of Health, American Cyanamid Company, and the Federal government, was an assistant professor of microbiology at Creighton University School of Medicine, in Omaha, and associate professor of microbiology at the University of Illinois School of Medicine, in Chicago, was head and research director of Colab Laboratories (developing medical diagnostic products), and is now the president of Technam, Inc., a research laboratory, and also of Pathotox Publishers, Inc., which publishes medical and technical journals and monographs.

Pathotox Publishers, Inc. was incorporated in the State of Illinois on August 30, 1976. The shareholders, from the time of incorporation, have been Dr. Scherr and Dr. Myron A. Mehlman, each of whom owns fifty percent of the shares. Dr. Scherr is the president of Pathotox Publishers, Inc., and Rita Y. Scherr, Dr. Scherr's wife, is the vice president.

On September 10, 1976, Dr. Scherr and Pathotox Publishers, Inc. entered into a written agreement. The agreement is short, and since its terms and the implementation thereof are critical to the second issue to be decided (whether Dr. Scherr owns the trademark for which he has applied for registration), we quote it in full:

This agreement is between George H. Scherr, residing at 50 Monee Road, Park Forest IL 60466, hereinafter referred to as Scherr, and Pathotox Publishers, Inc., a corporation in the state of Illinois, whose principal offices are situated at 2405 Bond Street, Park Forest South IL 60466, hereinafter referred to as Pathotox. Whereas

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Scherr has conceived of a trademark for Pathotox, which trademark is appended hereto, and whereas Pathotox desires to utilize said trademark in commerce and in the conduct of its business, the two parties have agreed as follows:

(1) Scherr does herewith license Pathotox to utilize subject trademark for aperiod of seven (7) years following the effective date of this agreement at a cost to Pathotox of $1.00 per year.

(2) Pathotox may not transfer the rights of said trademark to any second partywithout the written permission of Scherr.

(3) Pathotox agrees to submit all copy, promotional literature, monographs, journals, and all other material or literature upon which said trademark is to be affixed for approval, to Scherr prior to its release.

(4) During the effective period of this agreement, Scherr agrees not to usesaid trademark, or license said trademark to any other party without written consent of Pathotox.

(5) This agreement may be renewed by mutual consent of both parties following the expiration of this agreement, and under terms and conditions equal to or altered from those stipulated herein, when mutually agreed to by both parties.

9/10/76 GEORGE H. SCHERR date (George H. Scherr, PhD)

9/1076 RITA Y. SCHERR date (for and on behalf of

Pathotox Publishers, Inc.)

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[6] Opposer has attacked applicant's claim of ownership, in his own name, of the "P" design mark on two grounds. First, opposer argues that a person cannot acquire rights in a mark solely through use by a licensee, that "No trademark actually existed until October 31, 1977 when Pathotox first published its Journal of Environmental Pathology and Toxicology [the record does not establish that this Journal was the vehicle for the first use of the "P" design by *831 Pathotox on behalf of applicant, but that does not change the effect of opposer's argument]. That first use did not and could not inure to the benefit of Applicant for the purpose of establishing his ownership of the mark since (as determined by Ex parte Alexander and Smith et al. v. Coahoma Chemical Co. Inc., and In re C. B. Donald Co.) Section 5 cannot operate to create any right of ownership which did not previously exist".

*** an entirely valid licensing arrangement could exist when the licensor's trademark was used in conjunction with the licensee's trade name but not with the licensor's trade name.

Section 5 of the Trademark Act of 1946 provides:

"Where a registered mark or a mark sought to be registered is or may be used legitimately by related companies, such use shall inure to the benefit of the registrant or applicant for registration, and such use shall not affect the validity of such mark or of its registration, provided such mark is not used in such manner as to deceive the public."

Section 45 of the Act provides:

"The term 'related company' means any person who legitimately controls or is controlled by the registrant or applicant for registration in respect to the nature and quality of the goods or services in connection with which the mark is used". "The term 'person' and any other word or term used to designate the applicant or other entitled to a benefit or privilege or rendered liable under the provisions of this Act includes a juristic person as well as a natural person".

[8] By reading these statutory definitions together, it becomes apparent that either a natural person or a juristic person may be a "related company" and may be a party to a valid licensing agreement entitled to the benefits of § 5 of the Act.

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Trademark Rule 2.38(a) and (b) [37 CFR 2.38(a) and (b)] provide:

"If the first use, the date of which is required by paragraph (a)(1)(vii) or (viii) of rule 2.33, was by a predecessor in title, or by a related company (sections 5 and 45 of the act), and such use inures to the benefit of the applicant, the date of such first use may be asserted with a statement that such first use was by the predecessor in title or by the related company as the case may be."

"If the mark is not in fact being used by the applicant but is being used by one or more related companies whose use inures to the benefit of the applicant under section 5 of the act, such facts must be indicated in the application."

[9] The same rules, in the identical language (with one insignificant difference) may be found in the October 1956 edition of the Trademark Rules of Practice, and so far as we know, they have existed in precisely the same form for at least twenty-five years. We may judicially notice that the Patent and Trademark Office has consistently, through the years, accepted and issued registrations on applications which, in compliance with Rule 2.38(a) and (b) recite that the first use of a mark, the first use of a mark in commerce, and continuing use of a mark *833 have been by a related company, i.e., by a person, firm, corporation, or association whose use of the mark was controlled by the person, firm, corporation, or association claiming ownership of the mark. Paragraphs 806.06(a) and 806.07 and Section 1201 of the Trademark Manual of Examining Procedure (1979) provide detailed instructions for the examination of applications where use by a related company is the basis for an applicant's claim of ownership of a mark.

[10] There is, as noted, a longstanding administrative practice, based upon a rule adopted pursuant to Section 41 of the Act, of accepting applications by persons who claim to be the owners of the marks through use by controlled licensees, whether that control results from a corporate relationship or from a contract or agreement.

[11] Accordingly, we hold that rights to a mark may be acquired and maintained through the use of that mark by a controlled licensee even when the only use of the mark has been, and is being, made by the licensee. ***

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The one remaining question, opposer's second ground, is whether applicant has sufficiently controlled the activities of Pathotox Publishers, Inc. so that the use of the "P" design mark by Pathotox has inured to the benefit of Dr. Scherr.

[12] The rule has been stated in The National Lampoon, Inc. v. American Broadcasting Companies, Inc., 182 USPQ 24, 26 (S.D. N.Y. 1974), affirmed per curriam, 182 USPQ 6 (2nd. Cir. 1974):

"A formal agreement is not a necessity, nor is its mere existence sufficient.

'The critical question is whether the plaintiff sufficiently policed and inspected its licensees' operations to guarantee the quality of the products they sold under its trademarks to the public'. Dawn Donut Company v. Hart's Food Stores, Inc., 267 F.2d 358, 367, 121 USPQ 430, 437 (2d Cir. 1959)."

Dr. Scherr is the president of Pathotox Publishers, Inc. and devotes about eighty percent of his time to its activities. Insofar as advertising is concerned, he testified without contradiction that "All the correspondence crosses my desk, in any event". He is himself a research scientist and has earned the degree of Doctor of Philosophy. His testimony that the procedure for selecting manuscripts for publication by Pathotox is the accepted practice around the world is unchallenged. In view of the highly advanced technical character of the articles in the copies of the journals in evidence, we cannot imagine that one person, alone, either acting for himself or as an employee of a publishing company, could hope to be sufficiently well-informed to make an unaided individual judgment on the merits of papers submitted for publication. The quality of the printing, binding and typography of the journals in the record appear to be of uniform excellence. Dr. Scherr's name appears in each of the issues as the managing director of Pathotox Publishers, Inc.

The control that is exercised by Dr. Scherr over the use of the "P" design mark by Pathotox Publishers, Inc. is, under the facts of this case, as rigorous as could be reasonably required. The physical quality of the publications is under his direct surveillance and the quality of the contents is assured by the numerous editors and advisors whose names are published. Accordingly, we conclude that the license is valid and that the use of the "P" design mark pursuant to the agreement and the conduct of

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*834 the parties has vested ownership of the mark, for which a registration should issue, in Dr. Scherr, the applicant.

Decision The opposition is dismissed.

FN1 Ser. No. 147,930, filed Nov. 9, 1977, alleging first use through a related company on Oct. 31, 1977.

FN2 Ser. No. 134,462, filed July 18, 1977, which issued into Registration No. 1,112,602, dated Feb. 6, 1979, of which a copy was introduced through opposer's witness at his deposition.

FN3 At least one of the customers, Sta-Set, was located outside Massachusetts. Since the customers could be expected to use the tools and fasteners in their own business, or resell them to other businesses, but not to use the tools at Mr. Haytayan's home, the fact that the first customers took delivery at his home does not destroy the interstate character of the sale. This contrasts with the facts of In re The Bagel Factory, Inc., 183 USPQ 553 (TTAB 1974), where customers crossed a state line to purchase bagels, which could have been consumed where they were bought or on the other side of the state line and the incidental crossing by particular customers with bagels from one state into another was wholly outside of The Bagel Factory's control or even knowledge. In opposer's situation, at least one sale was made to a customer located in a different state and it was contemplated by opposer and the customer that the tool and fasteners would be moved from one state to another before they would or could be used. The transportation of the goods was something for the seller (opposer) and the buyer to arrange at their convenience. We may judicially notice that sales of goods frequently are made f.o.b. the sellers' factories or warehouses. By itself, this would not affect the interstate nature of a transaction. In the Bagel Factory situation, by contrast, the seller did not know or care where the food was consumed by its retail customers and any carrying of the goods across the state line before they were eaten was

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accidental.

P.T.O. T.T.A.B.

211 U.S.P.Q. 824

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