Can a nightclub owner name her new club in San Francisco after a famous club in New York City?Probably not, according to the Court in the Stork nightclub case.
What was the Stork Club?
"The Stork Club" was located on 3 East 53d Street in New York City and it was the place to be in the late 1930s through the 40s. It was described as "the best and most publicized night club in the entire world." It provided "expensive food, beverages, music and dancing," employed over 240 people and had a gross annual income of one million dollars.
How did the Stork Club become so popular?
Becoming this well known was not cheap. The Stork spent 700 thousand dollars over eleven years on advertising - radio, newspaper, magazines, books, movies, and mailing lists. They also did extensive "cash advertising" - gifts to customers that included perfumes, radios by the hundreds, and even automobiles.
Another form of promotion was "house advertising" - food and liquor to "men in prominent and public life in the industrial world," such as newspaper people, radio, and stage and film celebrities. The club was associated with celebrities like Bing Crosby, Walter Winchell, Jack Benny, Jimmy Durante, Fred Allen, and Frank Sinatra.
The Stork Club was so popular that Paramount pictures released a movie entitled "The Stork Club" at a cost of 1.7 million dollars which starred Butty Hutton and Barry Fitzgerald. It was given 14,457 exhibitions throughout the US. George A. Smith, the western sales manager for Paramount, said the picture "had a very salable title, the popularity of the Stork Club was spread all over the United States."
What happened?
In 1945, a business owner began running a bar at 200 Hyde Street in San Francisco under the name Stork Club. This bar was nothing like the Stork Club in New York.
The bar had about 10 stools and could accommodate, at most, 50 people. It had four employees and served only enough food to "conform with the law regulating the operation of bars." The bar didn't even have dancing, although, as the court pointed out, the the club distributed match pads that depicted a couple dancing. Needless to say, this place was a dive.
The owners of the New York Stork Club sued for Trademark violations.
What is Trademark law?
Trademark law is designed to prevent "confusion of source." Trademarks tell customers where products come from. They stand for the goodwill of the company and the quality and reputation of their products.
For example, when you see the Pepsi trademark, you know that the product came from the Pepsi company. It has been approved by Pepsi's quality control. If you have had a Pepsi product in the past, you know what to expect when you purchase Pepsi and you can decide if you want to do business with them again.
Trademarks allow customers to rely on brands so that they do not need to research every single product every single time they make a purchase. Trademarks also allow businesses to develop a reputation and relationship with customers that extends beyond a single transaction.
So who did the Court side with in the Stork Club case?
The Court sided with the New York Stork Club. In doing so, they summarized general rules and policies about Trademark law:
1. You cannot reap where you do not sow. It is not fair to do so. When a business has spent money and time building a reputation, another business cannot come in and "ride the coat tails" of the original. "Equity frowns upon such business methods."
2. The difference in size between two businesses does not matter. The San Francisco Stork Club argued that they are so small in comparison to the New York Stork Club, that no consumer would ever confuse the San Francisco Stork Club with the one in New York.
The Court said the difference in size does not matter and is still a violation of Trademark law.
3. Geographical distance does not matter. The San Francisco Stork Club owners argued that the two clubs are separated by an entire continent and customers are unlikely to know of each others' business, let alone be confused.
The Court said no. Restaurants have chains all over the country, and in fact, it is not common for a branch location to be smaller than the "mother house."
4. The fact that there is no actual loss does not matter. The San Francisco Stork Club owners argued that the New York club has not lost any business or sales because of the San Francisco club. There is not a shred of evidence, according to the San Francisco owners, that suggests that the New York Stork Club has been hurt by the San Francisco Club by even the sale of one drink.
The Court says this does not matter. The law does not require a loss in order to find that there has been a violation of Trademark law.
5. It's obviously not the real Stork Club! The San Francisco Stork Club owners said, listen, anyone who drove by the Stork Club in San Francisco would know immediately that the bar is not in any way affiliated with the prestigious New York club. The San Francisco club is a dive in comparison to the New York club. Any intelligent person could see this.
The Court said this does not matter. While it may be true that "worldly-wise" people may know the two are unrelated, there are people that may be confused. As the Court put it: "the law protects not only the intelligent, the experienced, and the astute. It safeguards from deception also the ignorant, the inexperienced, and the gullible."
What does all this mean?
This case shows that trademarks, particularly those that have been around for a long time with lots of money behind them, are very powerful. The Court is adamant about this idea that trademarks protect a business's goodwill and prevent customers from confusion about the source of a product.
[*1] Stork Restaurant, Inc. v. Sahati et al., 166 F.2d 348 (9th Cir. 1948)
