Up stone creek without a paddle: Dawn Donut precludes relief for distant plaintiff

Stone Creek Inc. v. Omnia Italian Design Inc., 2015 WL
6865704, No. CV-13-00688 (D. Az. Nov. 9, 2015)
Stone Creek makes and sells furniture in Arizona, operating
only out of Phoenix, except for a short-lived 2004-2008 expansion to Dallas,
Texas.  Its mark, as of 1990, was a “red
oval- shape circle around the words ‘Stone Creek.’ ”  It has a registration (filing date 2011) for
furniture for STONE CREEK in standard character form as well as for its logo.  The defendant copied its logo exactly and
used it for furniture sold in the upper Midwest; the court denies all relief, reaffirming
Dawn Donut’s applicability in the
internet age, and reinforcing that the “exclusive nationwide rights” granted by
a federal registration are only as exclusive as courts allow.

The court found that household furniture “is typically sold
locally to customers living within a drivable radius from the furniture outlet
retail store,” given the size, weight, and shipping costs of furniture, as well
the customers’ preference to see and sit on the furniture.  Stone Creek had a website, but didn’t sell
furniture directly through its site or otherwise sell via the internet.  Stone Creek would have liked to expand, but
there were no actual plans to do so after the closing of the Dallas operations.
Meanwhile, defendant Bon-Ton was a large retailer that
operates furniture galleries in Illinois, Wisconsin, Pennsylvania, Ohio, and
Michigan.  Defendant Omnia’s products were
sold to purchasers living within 200 miles of a Bon-Ton Furniture gallery, including
portions of Iowa, Indiana, Ohio, Wisconsin, Pennsylvania, Illinois, and
Michigan, aka the Bon Ton trading territory (BTTT).  The parties’ territories were separated by
over 1000 miles at the closest.
In 1993-1998, Stone Creek advertised in Southwest Airlines Spirit
magazine and America West’s in-flight magazine, whose airlines travelled
throughout the BTTT.  Still, the airline
magazines and Stone Creek’s other advertising venues didn’t have a significant
presence in the BTTT, and the court found that none of them created awareness
of Stone Creek in the BTTT.
Stone Creek put its mark on its website, stonecreekfurniture.com,
as early as 2000, and hired a SEO firm, which enabled consumers to find Stone
Creek’s website by going to stonecreekfurniture.com or by searching for “stone
creek” and “leather,” “furniture” or “sofa.” 
Nonetheless, the court found that the website didn’t create awareness of
Stone Creek in the BTTT, and that the “vast majority” of Google searches for
Stone Creek Furniture originated in Arizona; only a negligible number were from
the BTTT.  Many non-furniture businesses
in the BTTT used the name “Stone Creek.” 
In defendants’ survey, 99.75% of BTTT respondents were not familiar with
Stone Creek in Arizona.
Stone Creek’s sales were over $200 million since inception,
but only approximately 0.3% of its total sales occurred in the BTTT.  The largest sales were in Illinois, with
about $350,000 in sales from 1996-2009 and 2011-2013, representing more than
half of the total BTTT sales.  The total
came from approximately 150 customers, out of 65,000 transactions total since
Stone Creek’s inception. These numbers were “trivial,” the court said, and
there was no evidence about how these 150 customers discovered Stone Creek.
In 2003, Stone Creek met Omnia, a California-based
manufacturer of leather furniture, at a trade show in San Francisco. They
entered into an agreement that Omnia would make leather branded with Stone
Creek’s mark for Stone Creek, an agreement that lasted until 2012. 
Bon-Ton had been one of Omnia’s significant customers since
2008, and it wanted a private label brand to avoid competition with Omnia’s
other customers, ideally a label with an “American made name.” Omnia’s
president offered several suggestions, including STONE CREEK, which Bon Ton
liked; Omnia offered it because it “sounded American” and because marketing
materials and a logo were already prepared. Omnia copied the mark from Stone
Creek-provided materials, including the identical logo. However, the court
found that Omnia didn’t intend to trade off Stone Creek’s goodwill. Omnia never
consulted an attorney about this. Omnia’s president understood that Stone Creek
sold in the Phoenix area, but he never researched where Stone Creek sold its
From 2008-2013, Omnia sold leather furniture to Bon-Ton
branded with the STONE CREEK mark. That year, after inquiries from individuals
in the BTTT, Stone Creek asked Omnia if it sold products under the STONE CREEK
mark to other companies. Stone Creek’s president also fielded a telephone call about
a customer concerned about a warranty issue on a leather sofa. The customer indicated
that he purchased the sofa from a Bon-Ton store in Chicago and that he had a
warranty document with the STONE CREEK mark on it, from which he ended up at
Stone Creek’s website.
Omnia’s VP of sales confirmed to Stone Creek: “Ron, yes, we
do sell our products to those stores under their marketing name ‘Stone Creek
Leather.’ … In this day of internet shopping and surfing, it is unfortunate and
probably a nuisance for you that your stores are receiving inquiries regarding
these products due to the similar name…” 
After Stone Creek complained, Omnia changed Stone Creek to
Red Canyon. The court found that Stone Creek’s mark had no goodwill,
reputation, or consumer recognition in the BTTT, and that there was no actual
confusion by a consumer who bought Omnia Stone Creek furniture in the BTTT.
Stone Creek failed to meet its burden of showing likely, not
merely possible, confusion.  Even if
Stone Creek had shown that a trivial number of purchasers had been actually
confused, a trivial number wasn’t enough.
Although the Stone Creek mark was strong in Arizona, it wasn’t
recognized in the BTTT for its relationship to Stone Creek; the goods and marks
were the same, but the parties had distinct marketing channels “with no
opportunity for crossover” because of the local nature of the furniture
industry.  Because furniture is
expensive, consumers are supposed to exercise greater care.  Bon-Ton selected the mark because it had an
American sound to it, and because the marketing material and logo already
existed and were in the possession of Omnia, without intent to trade off of Stone
Creek’s goodwill.  And Stone Creek had no
plans to expand.  Thus the factors
favored Bon-Ton.

Under Dawn Donut, “Even where the Sleekcraft factors weigh in favor of the
[plaintiff],…territorial divisions may prevent confusion. An unauthorized
junior mark user…can contest likelihood of confusion by arguing that, since
‘the registrant and the unauthorized user are confined to two sufficiently
distinct and geographically separate markets,’ there is no likelihood of
confusion.” Also, though the court doesn’t discuss this, because of the timing
of the registration application, it appears that Bon-Ton was a §33(b) local
user, protected against liability because it began use before the application
date.  (Though no longer protected, because its use has now ceased.)  Thus, even likely confusion wouldn’t
have entitled Stone Creek to prevail … but if I were Bon-Ton, I’d be pretty mad
at Omnia for getting us into this.

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