OBX-Stock, Inc. v. Bicast, Inc.

PUBLISHED

UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT

OBX-STOCK, INCORPORATED, 
Plaintiff-Appellant,
v.  No. 06-1769
BICAST, INCORPORATED,
Defendant-Appellee.


OBX-STOCK, INCORPORATED, 
Plaintiff-Appellee,
v.  No. 06-1887
BICAST, INCORPORATED,
Defendant-Appellant.

Appeals from the United States District Court
for the Eastern District of North Carolina, at Raleigh.
Terrence W. Boyle, District Judge.
(2:04-cv-00045-BO)

Argued: October 31, 2008

Decided: February 27, 2009

Before NIEMEYER and AGEE, Circuit Judges, and Liam
O’GRADY, United States District Judge for the Eastern
District of Virginia, sitting by designation.
2 OBX-STOCK v. BICAST
Affirmed by published opinion. Judge Niemeyer wrote the
opinion, in which Judge Agee and Judge O’Grady joined.

COUNSEL

ARGUED: Alice Carmichael Richey, K&L GATES, L.L.P.,
Charlotte, North Carolina, for Appellant/Cross-Appellee.
Pamela Anne Bresnahan, VORYS, SATER, SEYMOUR &
PEASE, Washington, D.C., for Appellee/Cross-Appellant.
ON BRIEF: Daniel V. Mumford, KENNEDY, COVING-
TON, LOBDELL & HICKMAN, L.L.P., Charlotte, North
Carolina, for Appellant/Cross-Appellee. Elizabeth Treubert
Simon, VORYS, SATER, SEYMOUR & PEASE, Washing-
ton, D.C.; Reid L. Phillips, David W. Sar, BROOKS,
PIERCE, MCLENDON, HUMPHREY & LEONARD,
L.L.P., Greensboro, North Carolina, for Appellee/Cross-
Appellant.

OPINION

NIEMEYER, Circuit Judge:

James Douglas, the founder of OBX-Stock, Inc., cleverly
invented "OBX" as an abbreviation for the "Outer Banks" of
North Carolina. OBX-Stock began using the letters OBX on
oval stickers for automobiles to indicate that the automobile
was from or had visited the Outer Banks. The letters were also
attached to souvenirs and other sundries to indicate that they
were sold at the Outer Banks.

OBX-Stock has been successful in making money selling
products with the OBX letters affixed to them, and it obtained
trademark registrations from the Patent and Trademark Office
for "OBX" for use in connection with a range of goods and
services. Nonetheless, today, virtually every kind of business
 OBX-STOCK v. BICAST 3
advertising at the Outer Banks identifies the Outer Banks geo-
graphical area with the "OBX" abbreviation.

When Bicast, Inc., began selling stickers with the text "OB
Xtreme," OBX-Stock commenced this trademark infringe-
ment action, requesting an injunction prohibiting the defen-
dant from using "OB Xtreme" and demanding damages. The
district court granted summary judgment in favor of Bicast,
finding that "OBX" was either generic or a descriptive mark
without secondary meaning and therefore was not a valid
trademark, but the court declined to order cancellation of the
trademark registrations. We affirm.

I

The Outer Banks of North Carolina is a geographical
region consisting of approximately 200 miles of barrier
islands off the coast of North Carolina. The Outer Banks,
which encompasses several counties and numerous towns, is
a major attraction for vacationers, windsurfers, paragliders,
hang gliders, as well as sunbathers and swimmers.

In 1994, James Douglas coined the abbreviation OBX as a
designation for the Outer Banks. His idea was prompted by a
similar abbreviated designation for Nantucket and the oval
automobile stickers used in Europe to identify countries.
Douglas began putting OBX in black letters on white oval
stickers to put on automobiles, and initially he gave these
OBX stickers away for free. While recipients were at first
confused, following some persistence, the stickers and the
abbreviation caught on beyond Douglas’ most ambitious
expectations. He not only placed the letters on oval stickers,
but formed a business corporation, OBX-Stock, and expanded
the use of OBX to affix the letters to a wide range of items
being sold from the Outer Banks. Over the period from 1997
to 2004, OBX-Stock spent a total of $173,000 on advertising,
promotion, and sponsorships, and the corporation has become
4 OBX-STOCK v. BICAST
financially successful, with an annual revenue in 2004
exceeding $1 million.

When questioned about the intended significance of the
OBX letters, Douglas testified that they were used by OBX-
Stock to "signify a geographic location." Thus when asked,
"[I]s it fair to say that you hope that consumers seeing your
OBX stickers would think of the geographic region Outer
Banks?" Douglas responded, "Yes." When asked what his
product was and, more particularly, whether it was the oval
logo including the letters OBX, Douglas stated that the com-
pany’s product "was actually the OBX in general since it had
not been used before." Explaining how his product was under-
stood, he testified:

Q. Did you have communications about what OBX
signified?

A. Yes.

Q. Thank you. Could you tell me about those com-
munications?

A. It stood for the Outer Banks.

As a result of OBX-Stock’s efforts in promoting OBX as
a designation for the Outer Banks, the businesses and resi-
dents of the Outer Banks have come to use the abbreviation
OBX on a daily basis to refer to the Outer Banks. Local head-
lines have read, "An OBX Institution Says Goodbye," and
"Contest winner fell under OBX spell." By 2005, thousands
of website domain names incorporated OBX into their name,
ranging from obxnews.com to obxnightclubs.com. Businesses
use OBX to describe their location such as, "Best Pizza in
OBX" or "Enjoy the OBX With Us." Those wishing to charter
a sailboat can call 1-866-SAIL-OBX, while a local business
directory says "Welcome to Obx On-Line, your source to the
Outer Banks Businesses." Individuals advertise vacation rent-
 OBX-STOCK v. BICAST 5
als with "OBX by Owner," while realtors "Welcome OBX
Homeowners." There is an OBX Swim Club, an OBX Nudist
Club, and an online forum discussing OBX fishing. The ini-
tials OBX are omnipresent in the Outer Banks and are univer-
sally understood as an abbreviation for "Outer Banks."

Beginning in 1998, OBX-Stock began efforts to register
"OBX" as a trademark on the Principal Register of the Patent
and Trademark Office ("PTO"). The PTO examiners, how-
ever, repeatedly rejected OBX-Stock’s applications, stating,
"At one time OBX may have been an obscure reference to the
Outer Banks of North Carolina, however those days are no
more." The examiner cited extensive evidence "wherein OBX
and OUTER BANKS are used interchangeably." After
repeated, unsuccessful efforts, OBX-Stock enlisted the assis-
tance of North Carolina’s congressional delegation, and the
PTO then granted OBX-Stock four registrations for "OBX"
on the Principal Register in connection with several classes of
products and services, including stickers, sports clothing,
tourist sundries, bottled drinking water, entertainment ser-
vices, ethnic festivals, and sporting events.*

After obtaining trademark registrations, OBX-Stock under-
took efforts to police its trademarks, sending out cease-and-
desist letters. But the evidence demonstrates that the extensive
use of OBX made these attempts futile.

Bicast, Inc., was the target of one of the OBX-Stock’s
cease and desist letters because it sold oval stickers bearing
"OB Xtreme" in pink cursive script. While Bicast had long

*The registrations on the Principal Register have the following Regis-
tration Numbers: No. 2,593,347 (covering "metal license plates" and
"sports clothing"); No. 2,837,794 ("stickers"); No. 2,939,252
("entertainment services in the nature of conducting and sponsoring music
festivals, chili cook-off contests, ethnic festivals, and sporting events,
namely, fishing contests and boat racing"); and No. 3,137,690 ("magnets
and computer mouse pads," "non-metal key rings," "beverage glassware,
bottle openers and bottle squeegees," and "bottled drinking water").
6 OBX-STOCK v. BICAST
sold products bearing "OB" for the Outer Banks, in 2003, it
began producing stickers that added the "Xtreme" language to
denote the wide variety of extreme sports available at the
Outer Banks. When Bicast refused OBX-Stock’s demand to
cease and desist, OBX-Stock commenced the present action.

On Bicast’s motion, the district court granted summary
judgment in favor of Bicast, concluding that the overwhelm-
ing evidence showed that OBX had become either generic or
geographically descriptive without secondary meaning. Under
either theory, it held, the mark was invalid and hence could
not be infringed. The district court, however, declined
Bicast’s request, under 15 U.S.C. § 1119, to cancel the OBX
trademarks from the Principal Register.

From the district court’s judgment dated June 11, 2006,
OBX-Stock filed this appeal, challenging the summary judg-
ment entered in favor of Bicast, and Bicast filed a cross-
appeal, challenging the district court’s refusal to cancel the
OBX registrations.

II

In finding for Bicast, the district court concluded that OBX-
Stock "ha[d] not established ownership in a valid trademark"
because it failed to present any evidence of secondary mean-
ing. The court noted that the evidence indicated overwhelm-
ingly that "OBX" is "a geographically descriptive or generic
term for the Outer Banks" and that no evidence was presented
to show that "any consumer associates OBX with Plaintiff’s
products or Plaintiff itself." It accordingly granted summary
judgment in favor of Bicast on all of OBX-Stock’s claims
because their success depended on ownership of a valid trade-
mark.

On appeal, OBX-Stock contends that the geographical
descriptiveness of OBX is not its fault:
 OBX-STOCK v. BICAST 7
If any geographic connotation to the OBX Mark has
developed over time, it is attributable to the efforts
of Douglas and OBX-Stock and the ensuing success
of the goods sold under the mark. Indeed, the Dis-
trict Court noted that "Plaintiff’s efforts to market
OBX car stickers and other products have been
largely responsible for the term’s ubiquity." A trade-
mark owner, whose "efforts (whether directly
through advertising or indirectly through publicity)"
develop commercial success for goods, should not be
punished because its mark has become associated
with a geographic location.

(Citations omitted). Yet OBX-Stock fails to address specifi-
cally the absence of evidence of secondary meaning. It sug-
gests that the universal recognition of OBX as an abbreviation
for Outer Banks through OBX-Stock’s promotions and use of
the term on a broad array of products provides evidence of
secondary meaning. It states:

The extensive media coverage of a relatively small
business indicates the success of marketing the OBX
Mark as an indicator of a single source for, among
other things, license plates, sports clothing and "that
famous sticker" bearing the mark. It is clear that the
public would understand the products to come from
a source which owns some form of rights to the
OBX Mark.

Trademark law, at a general level, protects the goodwill
represented by particular marks, enabling consumers readily
to recognize products and their source and to prevent con-
sumer confusion between products and between sources of
products. The marks enable consumers to make informed,
independent decisions about quality and other product charac-
teristics. But the law also protects the "linguistic commons"
by denying mark holders an exclusive interest in words that
do not identify goodwill attached to products or product
8 OBX-STOCK v. BICAST
sources but rather are used for their common meaning or
meanings not indicative of products and product sources. See
America Online, Inc. v. AT & T Corp., 243 F.3d 812, 821 (4th
Cir. 2001); see generally 1 J. Thomas McCarthy, McCarthy
on Trademarks and Unfair Competition § 1:27 (4th ed. 2008).

To balance these competing interests, trademark law has
developed a spectrum of the "distinctiveness of marks." See
generally 2 McCarthy, supra, §§ 11:1-2. In declining order of
distinctiveness, marks are referred to as (1) arbitrary or fanci-
ful, (2) suggestive, (3) descriptive, or (4) generic. Id. The
more distinctive a mark, the more protection it receives.

Thus, "arbitrary" marks are based on existing words used
in ways unconnected with their common meaning, such as
APPLE computer or SHELL gasoline. "Fanciful" marks are
made-up words that are invented to describe the product or
source, such as KODAK or EXXON. Arbitrary and fanciful
marks clearly do not threaten the linguistic commons, as they
are considered inherently distinctive and therefore valid with-
out the holder having to make any other showing. See Sara
Lee Corp. v. Kayser-Roth Corp., 81 F.3d 455, 464 (4th Cir.
1996).

"Suggestive marks connote, without describing, some qual-
ity, ingredient, or characteristic of the product," such as
L’EGGS pantyhose and GLASS DOCTOR window repair.
Sara Lee, 81 F.3d at 464-65; see also Synergistic Int’l, LLC
v. Korman, 470 F.3d 162, 172 (4th Cir. 2006). Suggestive
marks are also considered inherently distinctive and valid.

"Descriptive" marks "merely describe a function, use, char-
acteristic, size, or intended purpose of the product," such as
YELLOW PAGES telephone directories and 5 MINUTE
glue. Sara Lee, 81 F.3d at 464. And this class of marks
includes those that are geographically descriptive, such as
BOSTON beer produced by a Boston-based brewer, BANK
OF AMERICA, and MISS U.S.A. No descriptive mark can
 OBX-STOCK v. BICAST 9
serve as a valid trademark without evidence of secondary
meaning. Barcelona.com, Inc. v. Excelentisimo Ayuntamien-
tod de Barcelona, 330 F.3d 617, 629 (4th Cir. 2003). "Sec-
ondary meaning" in connection with geographically
descriptive marks means that the mark no longer causes the
public to associate the goods with the geographical location,
but to associate the goods with a particular product or source
of the product. See Resorts of Pinehurst, Inc. v. Pinehurst
Nat’l Corp., 148 F.3d 417, 421 (4th Cir. 1998); Boston Beer
Co. Ltd. P’ship v. Slesar Bros. Brewing Co., 9 F.3d 175, 181
(1st Cir. 1993); see generally 2 McCarthy, supra, §§ 15:1-5.
In this manner, KENTUCKY fried chicken and AMERICAN
airlines are geographically descriptive marks that have estab-
lished secondary meanings in consumers’ minds, causing con-
sumers to recognize a brand or source of fried chicken or air
travel, rather than the places, Kentucky and America.

"Generic" words, which are "the common name of a prod-
uct" or "the genus of which the particular product is a species"
can never be valid marks under any circumstances. Retail Ser-
vices, Inc. v. Freebies Publ’g, 364 F.3d 535, 538 (4th Cir.
2004) (quoting Park ‘N’ Fly, Inc. v. Dollar Park & Fly, Inc.,
469 U.S. 189, 194 (1985)). Thus LITE BEER for light beer,
CONVENIENT STORE for convenience stores, and POLO
shirts for polo shirts cannot serve as trademarks.

In this case, the letters OBX had the potential of becoming
a valid and enforceable trademark to identify an OBX brand
product and OBX-Stock as the source of the product. But
from the beginning, Douglas, the inventor of "OBX," never
intended that OBX become associated with a product as its
brand or source. Rather, Douglas intended solely that OBX
become associated with and descriptive of a geographical
location, the Outer Banks. He repeatedly stated this fact in his
deposition, and he continues to maintain it in arguments made
to us. As he states in his briefs, "OBX-Stock created a new
term that would suggest the Outer Banks"; "Douglas wanted
to print and sell white oval stickers like the ones used in
10 OBX-STOCK v. BICAST
Europe to display country of origin but with a mark that
would suggest the Outer Banks of North Carolina to custom-
ers"; "Although Douglas wanted to conjure images of the
Outer Banks, he did this through a fictional word without
prior meaning." (Citations omitted).

And just as important, OBX-Stock affixed the letters OBX
to stickers, souvenirs, and other sundries not to label an OBX
brand product produced by OBX-Stock, but to indicate an
association with the Outer Banks. Douglas testified that this
purpose had its effect—persons learning of the significance of
OBX did indeed associate OBX with the Outer Banks. Most
dramatically, OBX did, as intended, become a commonly
accepted abbreviation for "Outer Banks," and thus became a
geographically descriptive abbreviation. Bicast produced
overwhelming evidence in the district court demonstrating
that OBX entered the "linguistic commons" as an often-used,
everyday abbreviation of "Outer Banks." Indeed, many Outer
Banks businesses sell clothing, bottled water, and various
other goods and services bearing "OBX." When affixed to any
product or service, the evidence suggests that OBX merely
denoted the geographical origin, Outer Banks. Thus, at bot-
tom, when OBX-Stock affixes the letters "OBX" to stickers,
souvenirs, and other products, it is merely communicating the
fact that the sticker or product comes from the Outer Banks,
and that was Douglas’ intent all along.

But that is not the secondary meaning that allows a geo-
graphically descriptive word to indicate, by usage and promo-
tion, a product or source of product. A T-shirt with OBX on
it does not indicate that the consumer bought an OBX brand
T-shirt or that the T-shirt was a product of OBX-Stock.
Rather, the letters OBX indicate that the T-shirt was pur-
chased at the Outer Banks of North Carolina or is promoting
the Outer Banks.

In Resorts of Pinehurst, we pointed out that PINEHURST
had a clear secondary meaning in consumers’ minds, making
 OBX-STOCK v. BICAST 11
it an enforceable trademark even if it might have been geo-
graphically descriptive. Resorts of Pinehurst communicated
its name to the consuming public effectively to associate the
name with a private provider of golf courses and golf ser-
vices, and not the geographical location in North Carolina. As
we noted, "[S]econdary meaning has been established in a
geographically descriptive mark where the mark no longer
causes the public to associate the goods with a particular
place, but to associate the goods with a particular source." 148
F.3d at 421 (citation and quotation marks omitted) (alteration
in original).

In this case, the district court properly characterized the
record when it concluded that "[t]here is simply no evidence
in the record of this case that any consumer associates OBX
with Plaintiff’s products or Plaintiff itself." OBX-Stock never
attempted to associate the geographically descriptive abbrevi-
ation for Outer Banks with its products or itself, but rather
with the Outer Banks.

OBX-Stock argues that its four certificates of registration
on the Principal Register of the PTO provide evidence of sec-
ondary meaning. It is true that a certificate of registration
serves as prima facie evidence of the validity of the registered
mark. See 15 U.S.C. § 1057(b); America Online, 243 F.3d at
816-18. But entry on the Principal Register does not shift the
burden of persuasion on validity, merely the burden of pro-
duction. See Retail Servs., 364 F.3d at 542.

In this case, all of the evidence points to the conclusion that
the letters OBX were adopted, promoted, and received by the
public as an abbreviation for "Outer Banks" and that therefore
it can, at best, be only a geographically descriptive mark. But
for a descriptive mark to be a valid trademark, it must have
secondary meaning in the public’s eye that OBX does not
refer to the Outer Banks but rather to products of OBX-Stock.
Yet there is no evidence of this.
12 OBX-STOCK v. BICAST
Moreover, whatever support OBX-Stock might be able to
claim from the registrations is in this case undermined by the
fact that the PTO only grudgingly issued the registrations
after intervention by North Carolina’s congressional delega-
tion. As Douglas told the Outer Banks Sentinel, "Things really
started to happen after we contacted their offices. We are very
fortunate to have extremely efficient and powerful legislative
representatives." Before then, the PTO examiners rejected
OBX-Stock’s application five times because the letters OBX
had become nothing more than an alternative to Outer Banks
and the terms were used "interchangeably."

These observations about the prosecution before the PTO
are particularly poignant inasmuch as the examinations by the
PTO are mostly conducted ex parte, and applicants have the
luxury of repeated attempts. In the patent context, the courts
have taken into consideration analogous circumstances as
non-technical evidence of patent obviousness and hence inva-
lidity. See, e.g., Philips Elec. & Pharm. Indus. Corp. v. Ther-
mal & Elecs. Indus., Inc., 450 F.2d 1164, 1174-75 (3d Cir.
1971); see generally 2 Donald S. Chisum, Chisum on Patents
§ 5.05[6] (2008). Conversely, quick progress through the PTO
weighs in favor of validity. See United States v. Adams, 383
U.S. 39, 52 (1966). This reasoning also applies to the progress
of a trademark application for inclusion on the Principal Reg-
ister.

At bottom, we conclude that the district court did not err in
concluding that OBX is a geographically descriptive abbrevi-
ation that has no secondary meaning and therefore is not a
valid trademark.

III

In its cross-appeal, Bicast argues that the district court
abused its discretion in failing to order the PTO to cancel
OBX-Stock’s registrations under 15 U.S.C. § 1119. See Cen-
tral Mfg., Inc. v. Brett, 492 F.3d 876, 883 (7th Cir. 2007)
 OBX-STOCK v. BICAST 13
(reviewing decision to order cancellation under § 1119 for
abuse of discretion); Shakespeare Co. v. Silstar Corp. of Am.,
Inc., 9 F.3d 1091, 1098-99 (4th Cir. 1993) (noting that in can-
celling under § 1119, a "court is still required to exercise rea-
sonable judicial discretion" (citation and internal quotation
marks omitted)).

In its opinion, the district court concluded that Bicast’s "ev-
idence does not conclusively establish that every one of
[OBX-Stock’s] trademark registrations should be cancelled."
Moreover, the court noted, Bicast never filed a counterclaim
for cancellation, choosing simply to argue the point as part of
its motion for summary judgment on OBX-Stock’s claims. Cf.
37 C.F.R. §§ 2.106(b), 2.114(b) (making a cancellation claim
before the PTO a compulsory counterclaim); see generally 5
McCarthy, supra, § 30:109.

Bicast has received an adequate remedy through the district
court’s summary judgment in its favor, and the court’s final
adverse decision on trademark validity will preclude OBX-
Stock’s marks from becoming incontestable. See 15 U.S.C.
§ 1065(1). In the totality of the circumstances, therefore, we
do not find that the district court abused its discretion.

Accordingly, the judgment of the district court is

AFFIRMED.