Is the Dawn Donut rule still good trademark law? Yes, in most circuits.
Dawn Donut rule
The Dawn Donut rule was first announced in the 1959 case of Dawn Donut Co. v. Hart’s Food Stores, Inc., 267 F.2d 358 (2nd Cir. 1959). The court asked, if the mark owner is not in the area (by sales or at least reputation) how can there be confusion.
In Dawn Donut, the Second Circuit Court of Appeals stated that:
“If the use of two marks by the registrant and the unauthorized user are confined to geographically separate markets, with no likelihood that the registrant will expand his use into the defendant’s market . . . then the registrant is not entitled to enjoin the junior user’s use of the mark.”
This rule is triggered where a plaintiff has obtained a federal trademark registration, an unauthorized third party begins using the same or similar mark in good faith after the federal registration was obtained but the plaintiff does not operate and has no immediate plans to expand into the same geographic market as the Defendant. The practical effect of this doctrine establishes a per se rule against injunctions for trademark infringement where the plaintiff does not operate in defendant’s geographic market even after it has obtained a federal registration. The Second Circuit defended this doctrine by reasoning that there could be no likelihood of confusion for a court to enjoin until the plaintiff enters into the defendant’s geographic market.
Is the Dawn Donut rule still valid?
Although a majority of courts have adopted the rule set out in Dawn Donut’s, with the advent of the Internet, mass nationwide advertising and convenient methods of travel, many scholars and organizations have criticized this rule as outdated and impracticable. Despite such criticism, only one court has not applied the Dawn Donut Rule:
Circuit City Stores v. CarMax, 165 F.3d 1047 (6th Cir. 1999).
Thus, until Dawn Donut is overruled or rejected by a significant number of courts the Dawn Donut Rule should be considered before asserting federal trademark rights.
Why should a foreign company get better rights than a US company has under the Dawn Donut rule?
The Dawn Donut rule also comes up when a foreign trademark registers their mark in the USA based on treaty rights under section 44(e).
A registrant is usually unable to successfully show a likelihood of confusion because a court is unable to compare channels of trade, classes of consumers, the strength of the pleaded mark, and various other duPont-like factors in order to determine likelihood of confusion.
Professor McCarthy states, in his treatise called McCarthy on Trademarks at sections 19.27, 29.4, and 29.21:
- He promotes the theory that common law rights can exist for a mark that is well-known but not used in the U.S., stating in 29.4, “The famous mark rule could be viewed as not constituting an exception to the general rule at all, since it could be said that the foreign service business had already established priority in the United States through advertising and reputation prior to defendant’s opening.” (I realize cases in the 2nd, 9th, and Fed. Cir. (at least) have something to say about this)
- This paragraph from Fila Sport, S.p.A. v. Diadora Am., Inc., 141 F.R.D. 74, 80 (N.D. Ill. 1991), suggests that a 44(e) registration is sufficient to establish jurisdiction and assert a claim under Section 32 (regardless of whether it might be a loser b/c of inability to prove likelihood of confusion).
“However, this statute only affects the when, how and why of filing the application. It does not grant federal jurisdiction independent of that existing for applications based upon actual use or upon actual registration. So that the statute makes it easier and more convenient for a foreign trademark holder to file for trademark registration in the U.S., but it does not grant that foreign trademark holder any right to sue in federal court absent actual use in the U.S. or final actual registration in this country. It does not grant the same rights to applicants as exist for actual registrants. Fila is at this point only an applicant. Absent a valid actual registration of its mark, Fila must allege either diversity jurisdiction, or use in interstate commerce.”
Dawn Donut Rule References:
These points of authority do not necessarily reflect the views of the writer. This blog is not legal advice. These posts are just notes.