What-A-Burger of Virginia, Incorporated Jack Branch What-A-Burger of Newport News, Incorporated Paul Branch v. Whataburger, Incorporated of Corpus Christi, Texas
Docket: 03-1517
Court: Court of Appeals for the Fourth Circuit; February 10, 2004; Federal Appellate Court
A legal dispute arises between two hamburger restaurant chains, both using variations of the name "WHATABURGER," a federally-registered trademark owned by Whataburger, Inc. of Corpus Christi, Texas (Texas WAB). Texas WAB holds the exclusive rights to the WHATABURGER® mark, having obtained it through a licensing agreement in 1999. In contrast, What-A-Burger of Virginia, Inc. (Virginia W-A-B) operates solely in Virginia and claims to have opened its first restaurant using the name prior to the trademark registration date in 1957.
Texas WAB appealed a district court's ruling that denied its motion for summary judgment while granting summary judgment to Virginia W-A-B based on the doctrines of laches and acquiescence, which barred Texas WAB from enforcing its trademark rights in Virginia. The appellate court affirmed the district court's conclusion that Texas WAB is the rightful owner of the WHATABURGER mark in Virginia but reversed the judgment favoring Virginia W-A-B. Virginia W-A-B's founder, Jack Branch, opened his first "What-A-Burger" restaurant in Newport News before the trademark was registered, and he later expanded to other locations in Virginia. Virginia W-A-B was incorporated in 1997, but prior to that, it operated as a sole proprietorship.
In 1970, Texas WAB and Virginia W-A-B first interacted when a Texas WAB representative suggested a franchise opportunity to Virginia's Branch brothers after noticing a What-A-Burger sign. A subsequent letter from Texas WAB indicated that the WHATABURGER® name was a registered trademark and expressed intent to license Virginia W-A-B, contingent on adherence to Texas WAB's standards. Texas WAB expected Virginia W-A-B to change its name unless a licensing agreement was reached. No communication occurred between the two until 2002, when Texas WAB, having grown to over 500 locations, alleged that Virginia W-A-B's use of the name constituted trademark infringement. However, the letter acknowledged the possibility of a prior agreement allowing the Branch brothers to use the name. Texas WAB requested documentation of any rights granted by its founder regarding the name.
To resolve the trademark ownership issue, Virginia W-A-B filed a declaratory judgment action, claiming rightful ownership of the What-A-Burger name in Virginia and asserting its right to exclusive use in specific areas, including Richmond and Newport News. Virginia W-A-B argued that it used the mark before Texas WAB's registration, was unaware of any superior rights, and contended that Texas WAB had waived its claims due to Virginia W-A-B's long-standing use of the name.
Texas WAB filed a counterclaim for a declaration of its exclusive ownership of the WHATABURGER trademark in Virginia, based on its licensing agreement with WhataPartnership, despite having no prior business operations in the state. Texas WAB did not allege any infringement by Virginia W-A-B, nor did it seek to prevent its use of the trademark or pursue damages. Both parties sought a declaration regarding ownership, prompting Texas WAB to move for summary judgment on the complaint and counterclaim, while Virginia W-A-B did not file a cross-motion.
The district court assumed Texas WAB's registered mark had incontestable status under the Lanham Act, which serves as conclusive evidence of ownership and exclusive rights to use the mark in commerce. Although Virginia W-A-B acknowledged the incontestable status, it did not resolve priority in Virginia due to available statutory defenses. The court examined the "limited area" defense under 15 U.S.C.A. 1115(b)(5), which allows prior users of a mark to claim rights within a specific geographic area if they adopted the mark before registration, did so without knowledge of the registrant, and have used it continuously since then.
The district court found that Virginia W-A-B did not provide sufficient evidence of prior use before Texas WAB's September 24, 1957 registration date, rejecting the limited-area defense. Consequently, the court ruled that Texas WAB is the rightful owner of the WHATABURGER trademark in Virginia, a decision that Virginia W-A-B did not appeal, thereby confirming Texas WAB's exclusive rights in the state.
The district court evaluated whether Texas WAB could assert its ownership rights of the trademark "What-A-Burger" against Virginia W-A-B in Virginia. It determined that Texas WAB was barred by laches, as it had known about Virginia W-A-B's use of the name since 1970 but failed to act for over 30 years. The court reasoned that allowing enforcement after such a delay would unjustly harm Virginia W-A-B, which had built goodwill and a customer base under the name. Additionally, the court found that the doctrine of acquiescence applied because a Texas WAB representative had engaged with Virginia W-A-B without insisting on a name change. Consequently, while recognizing Texas WAB as the rightful owner of the trademark, the court denied its motion for summary judgment and granted summary judgment to Virginia W-A-B. Texas WAB appealed, arguing that the doctrines of laches and acquiescence should not apply since there had been no infringing use by Virginia W-A-B. The appeal contended that the court was required to grant summary judgment based on its acknowledgment of Texas WAB's ownership, which Virginia W-A-B did not contest. The appeal identified that laches requires evidence of an infringing use, and that no such use existed, emphasizing that the owner must have knowledge of infringement, an unreasonable delay in response, and that the delay must unduly prejudice the infringer.
The Lanham Act lacks a specified limitations period, prompting courts to apply the doctrine of laches to prevent inequities arising from trademark owners who delay pursuing claims despite having a valid infringement assertion. This doctrine acknowledges that a trademark owner who allows a competitor to develop products based on the mark may hinder their own case by waiting before taking legal action. The case of Hot Wax, Inc. v. Turtle Wax, Inc. illustrates this, where the plaintiff failed to address a competitor's use of a mark over time. Laches serves as a defense when a plaintiff's inaction leads to detrimental reliance by the defendant, who has built a business around the mark.
In the context of Texas WAB and Virginia W-A-B, the court found that Texas WAB was aware of the infringement as early as 1970, constituting a significant delay in asserting rights. Texas WAB contended that it could not have unreasonably delayed a claim that it never had the ability to make. The principle of laches hinges on the notion of an inexcusable delay; therefore, the determination of "unreasonable delay" does not apply until a trademark owner's right to protection has fully matured. The court emphasized that the focus should be on when the use of a similar mark became infringing and when the owner should have recognized it as such.
The plaintiff's prior knowledge of a potential infringement does not trigger the laches period; rather, it is the knowledge of an actual infringement that marks the start of unreasonable delay. The underlying assumption in laches is that a valid infringement claim existed at the onset of the delay, rather than merely a speculative claim that might arise in the future.
A plaintiff's obligation to initiate a lawsuit for trademark infringement arises only when they have a concrete and provable claim. The district court erred by starting the delay timeline from Texas WAB's awareness of Virginia W-A-B's use of a similar mark without assessing whether that use constituted infringement. Trademark infringement hinges on the likelihood of confusion, not simply on mark similarity, as established by case law. Courts must evaluate various factors beyond direct comparisons of marks, particularly considering the marketplace context and geographic scope. The separate markets of Texas WAB and Virginia W-A-B, along with Texas WAB's lack of plans to enter Virginia, suggest that Virginia W-A-B's use of the mark is unlikely to cause confusion, thus undermining an infringement claim. The concept of "progressive encroachment" is relevant when determining when a trademark owner's obligation to sue is triggered. An early obligation to sue could lead to unnecessary litigation without clear evidence of confusion or commercial harm.
In this case, the registered owner, Texas WAB, is expanding its operations, not the junior user, Virginia W-A-B. The controlling principles from Sara Lee dictate that delay is assessed from when the trademark owner became aware of an infringing use, and legal action is only necessary when there is a likelihood of confusion. Texas WAB cannot enjoin Virginia W-A-B from operating under the name What-A-Burger based on the current record, as there is no evidence of likely confusion or intention to enter the Virginia market, which Texas WAB explicitly disavows. The injunctive remedy requires a showing of likely entry into the territory, and no such likelihood exists here.
Additionally, the district court's finding of acquiescence—suggesting Texas WAB consented to Virginia W-A-B's use of the mark—is also flawed. Acquiescence implies active consent to an existing infringement, but there is no evidence of such infringement by Virginia W-A-B that Texas WAB consented to. Consequently, the court affirms that Texas WAB is the rightful owner of the WHATABURGER trademark, reverses the summary judgment for Virginia W-A-B, and remands for judgment in favor of Texas WAB on its declaratory judgment claim. Furthermore, it acknowledges that Virginia W-A-B has not infringed Texas WAB's trademark.
The court affirmed in part, reversed in part, and remanded the case. Between 1951 and 1956, Branch operated several "What-A-Burger" restaurants owned by his cousin in South Carolina, but the Virginia W-A-B does not claim a relationship between its use of the name and these restaurants. The plaintiffs-appellees include What-A-Burger of Virginia, Inc., What-A-Burger of Newport News, Inc., and Jack and Paul Branch, collectively referred to as Virginia W-A-B. Incontestable trademark status requires continuous use for five years per 15 U.S.C.A. § 1065. Texas WAB sought confirmation of its ownership and exclusive right to the mark in Virginia, emphasizing that ownership rights differ from the remedies available, such as injunctions, which require proof of likely confusion. Texas WAB's additional claims argue that laches or acquiescence do not apply without a trademark infringement claim. Texas WAB stated it only sought a declaratory judgment to maintain its rights in case of future expansion in Virginia. The court found that laches and acquiescence were inappropriate in this case, noting that a junior user like Virginia W-A-B could use declaratory judgment to clarify its rights against potential infringement claims. The court acknowledged that while laches could potentially be raised in a declaratory judgment context, it cannot be ruled out entirely.
The court declined to address Texas WAB's claim that the district court erred by issuing a judgment in favor of Virginia W-A-B without prior notice or a chance to respond. It emphasized that the similarity in names does not automatically constitute infringing use. The likelihood of confusion is not solely determined by geographical factors; the reputation of the senior user's mark in a trade area is also critical, especially in cyberspace. However, the nature of the product plays a significant role in consumer confusion. In this case, there is no evidence that consumers would confuse the burgers from Virginia W-A-B with those from Texas WAB. The court noted that confusion could arise if a replica of a well-known establishment like McDonald's was established in a distant location, serving similar food.
