'American Eagle' injunction extinguished in Fourth Circuit

In Emergency One v American Fire Eagle Engine Company, the Court of Appeals for the Fourth Circuit has overturned a district court decision to grant a nationwide and geographically unlimited injunction against infringement of American Fire Eagle Engine Company's (AFE) unregistered trademark. The Fourth Circuit held that in the absence of evidence that AFE had used the mark nationally, the lower court had abused its discretion in issuing such an injunction.

Emergency One manufactures fire trucks and rescue vehicles bearing the name 'American Eagle'. It brought an action against AFE, which also manufactures fire trucks, claiming that its use of the phrase 'American Fire Eagle' on its trucks infringed Emergency One's rights in the unregistered 'American Eagle' trademark. AFE counterclaimed, arguing that:

• Emergency One had abandoned its unregistered mark;
  
  
• AFE had established rights in the unregistered 'American Fire Eagle' mark during the period of abandonment; and
  
  
• Emergency One's renewed use of the name 'American Eagle' on its trucks infringed AFE's rights in its mark.

At district court level, a jury determined that Emergency One had discontinued use of the unregistered 'American Eagle' mark and had not intended to resume such use. AFE was, therefore, free to use the phrase 'American Fire Eagle' on its trucks. AFE then requested and the court granted an unlimited nationwide injunction against Emergency One's continued use of 'American Eagle'. The court denied Emergency One's request for an evidentiary hearing to establish the proper geographical scope of the injunction, ruling that it had waived its right to challenge.

On appeal, the Fourth Circuit overturned the district court's decision, holding that the lower court had abused its discretion in ordering a nationwide injunction. The appellate court reviewed the principles of trademark law governing geographical rights in both registered and unregistered trademarks and noted that a user claiming ownership of an unregistered mark under the principles of the common law bears the burden of establishing its exclusive right to the mark in a given territory. This contrasts with federal trademark registrations, which create a presumption of a nationwide exclusive right and shift the burden on to the defendant to introduce sufficient evidence to rebut this presumption. Accordingly, the court concluded that it was up to AFE to prove that it has an exclusive right to use the unregistered 'American Fire Eagle' mark on a nationwide basis, and that the lower court had issued the injunction without taking such evidence into account.

The Fourth Circuit also considered whether Emergency One had waived its right to contest the scope of the injunction. It concluded that although Emergency One had failed to make reference to this issue in its pleadings, it had not waived its right to object. It reasoned that Emergency One's opposition to the injunction did not include an affirmative defence, which it would have had to have raised in its pleadings, but was simply an objection to the extent of the remedy imposed.

Because there was no factual basis from which to conclude that AFE had used its unregistered mark nationally, the court remanded the case to the district court to determine the appropriate scope of the injunction.

Thomas M Small, Birch Stewart Kolasch & Birch LLP, Los Angeles