Citibank, N.A. v. Citibanc Group, Inc.

Citations: 724 F.2d 1540; 222 U.S.P.Q. (BNA) 292; 1984 U.S. App. LEXIS 25416Docket: 82-7214

Court: Court of Appeals for the Eleventh Circuit; February 16, 1984; Federal Appellate Court

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Citibank, N.A. sued Citibanc Group, Inc. and its subsidiaries for trademark infringement regarding its federally-registered trademark and service mark "Citibank," seeking an injunction against the defendants' use of "Citibanc." The United States District Court for the Northern District of Alabama ruled in favor of Citibank, affirming the validity of its trademark and its superior rights over the defendants' use of the similar name. The court rejected the defendants' defenses of laches and estoppel, and determined that the defendants had indeed infringed Citibank's mark.

Citibank, a national banking association based in New York, has a long history, having operated under various names since its establishment in 1812, with "Citibank" being officially registered in 1960. In contrast, Citibanc Group and its subsidiaries, primarily operating in Alabama, began acquiring banks in the 1950s and adopted the "City Bank" term in their names during the 1960s, but none predating Citibank’s trademark registration. The appellate court found no errors in the district court's judgment and upheld the decision.

In 1972, Citibanc Group, Inc. was incorporated as a bank holding company and subsequently acquired majority interests in several banks, adopting a naming convention in 1977 that included "Citibanc" followed by the town name. The central legal issue involves the plaintiff's rights under the Lanham Act against the defendants, who assert that their common law rights to the name "City Bank" predate the plaintiff's 1960 trademark registration and the 1947 enactment of the Act. The defendants claim they can use "Citibanc" in Alabama by connecting their rights to earlier usage of "City Bank." The plaintiff contends that their rights were established prior to the defendants’ adoption of "Citibanc" and that the defendants abandoned any rights to "City Bank" by changing their name. The district court largely sided with the plaintiff. The court concluded that, regardless of any potential rights to "City Bank," the defendants could not have adopted "Citibanc" in 1967 due to its similarity to the plaintiff's registered mark. Citing a precedent involving "Holiday Inn," the court emphasized that the defendants’ name change to "Citibanc" is more similar to "Citibank" than "City Bank," thus infringing on the plaintiff's trademark rights. The case highlights the tension between common law rights and federally registered trademarks under the Lanham Act, particularly regarding the adoption of similar marks.

Defendants argue that the plaintiff's 1960 registration of the trademark "Citibank" is invalid due to alleged fraudulent misrepresentations made to the Patent and Trademark Office. They claim the plaintiff falsely stated that no other banks were using similar names and misrepresented the nature of its services as "banking services" rather than a "Ready-Credit loan plan." Additionally, they assert that the plaintiff fraudulently filed continuous use affidavits despite not using the mark for the required five years.

The district court found no evidence of fraud, applying the clearly erroneous standard under Federal Rule of Civil Procedure 52(a). For the defendants to prove fraud, they needed to demonstrate a false, material statement that would have led to denial of registration. The court noted that, at the time of application, there were no third-party uses of "Citibank," so the plaintiff was not obligated to disclose any such uses. Even assuming a duty to disclose, the evidence indicated that the plaintiff was the senior user of the term.

The court also dismissed the defendants' claims regarding the nature of the services provided under the mark, concluding that it is not fraudulent to categorize a loan plan as banking services. Furthermore, there was sufficient evidence to support the conclusion that the plaintiff had continuously used the "Citibank" mark for the requisite period, validating the affidavits.

Regarding the defendants' assertion that "Citibank" is generic or descriptive, the district court determined that the term is not descriptive of banking services, as "Citi" does not define a class of services or a characteristic thereof. The court affirmed that "Citibank" indicates a specific provider of services rather than a type of service.

Defendants argue that the plaintiff abandoned its rights to the mark "Citibank" by not using it, asserting that abandonment requires proof of both actual non-use and intent to abandon. Under the Lanham Act, a failure to use a mark for two years is considered "prima facie abandonment." However, the district court found that the defendants did not meet the burden of proof for abandonment claims. Although the plaintiff used the mark sporadically before 1976, it was deemed sufficiently continuous, indicating no intent to abandon.

Additionally, defendants claim that any right the plaintiff had to sue for infringement has been forfeited due to the Federal Reserve Board's (FRB) 1972 approval of "Citibanc Group, Inc." for the defendant holding company, despite the plaintiff’s objections. They argue that the FRB's decision is binding on the court. However, it is noted that while the FRB must consider anticompetitive effects when approving mergers, its actions do not necessarily dictate outcomes in trademark infringement cases. The cases cited by defendants do not support their position that the FRB's decision should have conclusive effect in this context.

Furthermore, referencing the case of Dawn Donut Co. v. Hart's Food Stores, the court emphasizes the importance of a present likelihood of trademark use in a market area for granting injunctions, suggesting that relying on the FRB's decision could undermine this principle. Thus, the court is hesitant to assign significant weight to the FRB's decision in determining trademark rights.

Defendants argue that the doctrine of laches should bar the plaintiff's suit due to their alleged delay in filing, as they were aware of the defendants' use of the name Citibanc since before 1960 but only initiated legal action in 1979. However, the court finds that the plaintiff is not barred by laches. The plaintiff first learned of the defendants' name change in 1972 and promptly sent letters expressing their concerns about potential trademark infringement. The defendants adopted the name Citibanc in 1977, yet the plaintiff continued to communicate their objections and formally filed suit in 1979. 

The court references the elements of laches, which require defendants to demonstrate a delay in asserting a claim, that the delay was inexcusable, and that it caused them undue prejudice. Additionally, in trademark cases, the plaintiff's rights must be protectable, which includes having established use in the infringer's market. The court notes that the test for laches is flexible, considering both delay and prejudice. Here, the plaintiff's notifications predated the defendants' name change, and the defendants expanded their use despite being aware of the plaintiff's objections. Therefore, the court agrees with the district court's conclusion that the plaintiff was not guilty of laches.

Regarding the likelihood of confusion between Citibank and Citibanc, the court supports the district court's findings, which analyzed multiple factors such as design similarity, product similarity, customer identity, advertising media, defendants' intent, and actual confusion. The presumption of validity of the plaintiff's mark under the Lanham Act is deemed irrelevant to this conclusion. Although the district court found that the plaintiff failed to prove actual confusion and determined that other factors only slightly favored the plaintiff, the court concludes that the district court reached correct results based on a careful consideration of the findings.

Defendants argue that the district court improperly valued the plaintiff's mark, Citibank, as "suggestive" and therefore comparatively weak, while asserting that it is stronger than City Bank but weaker than the mark involved in Sun Banks. They contend that since Sun Banks was determined to be fatally weak, Citibank must also be considered so. The court, however, clarifies that substantial third-party use distinguished the Sun Banks case, and Citibank is more similar to its competitor's mark than Sun Banks was to its defendant's mark. The district court noted multiple factors supporting Citibank's strength relative to City Bank, allowing it to uphold its decision.

Defendants further claim the district court erred by inferring an intent to capitalize on Citibank's mark from the timing of the defendants' adoption of Citibanc, though the court did not explicitly find such intent. Instead, it suggested that the similarity of names could lead to confusion, justifying a favorable inference for the plaintiff without direct evidence of intent.

Additionally, defendants dispute the finding that both parties offer similar services, but the district court correctly identified that direct competition is not necessary to establish confusion. Both being banks increases the likelihood of confusion, particularly since they compete in credit card sales and loans. The court's evaluation of these factors was deemed appropriate, leading to the conclusion that confusion was likely.

The judgment affirming the district court's findings is upheld, although Circuit Judge Vance dissents, arguing that Citibank's trademark claim lacks merit due to potential fraud in its registration process, the weakness of its mark, and the precedent set in Sun Banks, which he believes negates the likelihood of confusion in this case.

In 1959, Citibank applied for federal registration of the servicemark "Citibank," claiming first interstate use in that year and asserting no other entities had rights to similar marks. The Patent and Trademark Office approved the registration in 1960 without knowledge of third-party users of "City Bank." However, Citibank later initiated eleven trademark infringement lawsuits against various entities using similar marks and threatened additional suits against other banks, claiming senior rights based on its historical use of "City Bank" since 1812. The court suggested that Citibank's initial denial of similar marks was an attempt to obscure the mark's derivation to secure registration, which would otherwise face denial as generic or descriptive under the Lanham Act. Citibank benefitted from an incontestable registration, allowing it to assert stronger rights and bypass defenses related to descriptiveness. The majority view found no fraud since Citibank, as the senior user, had no obligation to disclose potential confusion; however, it failed to recognize that Citibank's concealment of the mark's generic nature was the critical issue in the alleged fraud.

When a registrant claims senior use with intent to deceive, it may lead to a finding of fraud, which can nullify trademark protection under the Lanham Act. In such cases, if Citibank were found to have committed fraud, its trademark registration could be canceled. Citibank has not challenged the strength of its mark against common law standards applicable to contestable marks, suggesting a lack of innocence. 

The disagreement arises from the classification of the terms "City Bank" and "Citibank" as suggestive marks. This classification is flawed, as trademark categories often overlap and are difficult to apply consistently. "City Bank" exemplifies this complexity, as it both suggests urban banking and describes a bank's location, making it challenging to categorize. 

Trademark law's purpose is to protect distinctive marks that identify a specific merchant's services while ensuring that descriptive terms remain in the public domain. "City Bank" is deemed a generic term, as it refers to a class of businesses rather than a unique entity, similar to terms like "town barber shop." With numerous banks historically using "City" and "Bank" in their names, it would be unreasonable to restrict their use to one entity. This reasoning aligns with previous rulings that deemed similar combinations of generic and geographic terms unprotectable.

The term "Citibank" is deemed too minor a variation from "City Bank" to merit trademark protection, as established by various precedents indicating that similar phrases often qualify as generic terms. Key cases cited include Surgicenters of America, Miller Brewing Co., Cummins Engine Co., Weiss Noodle Co., and American Druggists' Syndicate, which collectively affirm that generic terms do not receive protection under the Lanham Act or common law. 

Even if "Citibank" were classified as suggestive, a likelihood of confusion is not substantiated, paralleling findings in Sun Banks of Florida, where "Sun Bank" was considered a weak mark due to widespread use by competitors, outweighing potential confusion from similar services and advertising. The lower court found "Citibank" to be an even weaker mark than "Sun Bank," reinforcing the decision to reverse the ruling. 

The majority's argument that "Citibank" bears greater similarity to "Citibanc of Alabama" than "Sun Bank" does to "Sun Federal Savings" misapplies the analysis by overemphasizing similarity without properly balancing it against the strength of the mark. This error further extends to the district court's favorable ruling on Citibank's good faith, which lacked evidence of bad faith and was improperly based on name similarity.

Citibank's apparent fraud, the weakness of its mark, and the lack of confusion necessitate a reversal. All defendants will be referred to collectively as Citibanc. Actual fraud does not need to be proven to cancel a service mark under 15 U.S.C. Sec. 1120, thus its applicability in this case is not addressed. Citibank is not considered descriptive or generic, negating the need to evaluate the plaintiff's argument regarding section 33(b) of the Act. The case originated in New York but was dismissed due to lack of personal jurisdiction, leading the plaintiff to file in Alabama. The marks at issue are notably similar; the plaintiff initially applied under the name "The First National City Bank of New York," and will be referred to simply as "Citibank." The lower court noted that defendants did not disclose other users of "City Bank" in Alabama, although Citibank did not contest the defendants' lawsuits against these third parties. Citibank claims that its existing list of registration numbers provided notice of possible senior use, but this interpretation is deemed implausible, as mere registration numbers cannot constitute notice. The Patent Office's search did not uncover third-party users of "City Bank." Incontestability rights arise after five years of continuous use post-registration, granting the registrant the ability to preempt junior users nationally, provided they demonstrate an intention to expand. After this period, common-law defenses such as good faith or lack of knowledge are eliminated, with only specific defenses allowed against the registrant. The term "City Bank," similar to "Vision Center," is considered descriptive of the services provided, necessitating proof of secondary meaning, particularly under the restrictive rules for geographic names, which are likewise treated as descriptive marks.

A geographic term is considered generic if its historical use is closely associated with a type of service that it identifies. The purpose of this classification is to allow sellers to inform customers about the geographic origin of their products. "City Bank" is deemed a generic term as it describes the environment where banking services occur, and thus is not entitled to trademark protection. In contrast, "World," as used in "World Carpets," is not a geographical term under the Lanham Act as it does not indicate a specific origin or product nature. The Lanham Act's incontestability provisions do not prevent the argument that a mark is generic, and cancellation of such a mark is permissible. Additionally, the district court erred by not adequately considering the factor of "identity of service facilities and customers," which favored the defendant, Citibanc, since Citibank is not licensed to conduct banking in Alabama and serves different clientele, primarily large businesses and affluent individuals compared to Citibanc's rural and modest clientele.