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Knowles Co. v. Northeast Harbor Insurers
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MAINE SUPREME JUDICIAL COURT					Reporter of Decisions
Decision:	2002 ME 6
Docket:	Han-01-119
Argued:	September 12, 2001
Decided:	January 8, 2002

Panel:		SAUFLEY, C.J., CLIFFORD, RUDMAN, DANA, ALEXANDER, and CALKINS, JJ.{*}



THE KNOWLES COMPANY v. NORTHEAST HARBOR INSURERS


RUDMAN, J.

	[¶1]  The Knowles Company appeals from a judgment entered in the
Superior Court (Hancock County, Marsano, J.) in favor of Northeast Harbor
Insurers.  The court found that Northeast Harbor Insurers did not
misappropriate the Knowles name when it registered to do business under
the assumed name "Knowles Company-Insurance."  Because the Superior
Court erroneously determined that the name "Knowles" was abandoned, we
vacate its judgment.
I. CASE HISTORY
	[¶2]  In 1902, L. Belle Smallidge Knowles started a real estate business
in Northeast Harbor.  Over time the business grew to include insurance and
real estate appraisal divisions and in 1949, it was incorporated under the
laws of Maine as "The Knowles Company."  In 1958, Robert Suminsby
married the granddaughter of Ms. Smallidge Knowles.  Shortly thereafter he
began work for The Knowles Company.  He would later become the last
managing owner of this family business.
	[¶3]  In 1988, Suminsby sold the insurance arm of the business to one
of his business associates, Jack Wright.  To complete this sale, Suminsby
transferred all of the capital stock of The Knowles Company to Wright and
repurchased from the corporation the assets of the corporation's real estate
and appraisal businesses.  Subsequent to this transaction, both Wright and
Suminsby used the word "Knowles" in the names of their respective
businesses.  Wright changed the name of the corporation to the "Knowles
Corporation" and continued in the insurance business.  Suminsby continued
to operate his real estate and appraisal sole proprietorship as "The Knowles
Company." 
	[¶4]  In 1989, Suminsby sought to reacquire the exclusive right to the
name.  Apparently Wright had started to construct a building which
encroached onto a small piece of Suminsby's land.  In exchange for this
land, Wright promised to phase the word "Knowles" out of his corporation's
name.  This agreement was intended to be binding on the parties and "their
heirs, legal representatives, successors and assigns."  Pursuant to this
agreement Wright changed the name of his corporation to "J. B. Wright Co." 
	[¶5]  Eventually the business of J. B. Wright Co. was acquired by one
Priscilla Granston.  Although the record is unclear as to its terms and
conditions, Ms. Granston's corporation, Northeast Harbor Insurers (NHI),
acquired the original Knowles insurance accounts.  The record is also
unclear as to the origins of NHI, specifically when it was formed and what
name it originally operated under. 
	[¶6]  On January 10, 1992, Suminsby rented space to NHI in the same
building that housed his real estate business.  The term of the lease was five
years with an option to renew for an additional five years.  The lease also
explicitly provided a section concerning use of the Knowles name;
17)  USE OF TRADE NAME:
	a)  During the term of this lease and any
renewal thereof, the Lessee may use the name "The
Knowles Company-Insurance" and its logo, as a trade
name, without any additional payment.
	b)  The Lessee has requested the option
to purchase from the Lessor the perpetual right to
use this name at a price of $5,000.00 per year for a
period of ten (10) years beginning at the expiration
of this lease.  The Lessor agrees to consider this
request and to notify the Lessee of his acceptance by
December 31, 1994.
 
	[¶7]  The lease provided for a common receptionist between the two
businesses.  Therefore, customers of both the real estate and insurance
businesses would dial the same phone number and the receptionist would
route the call accordingly.  The two businesses also shared the same mailing
address.
	[¶8]  Suminsby was unaware that on January 6, 1992, NHI registered
with the Secretary of State to do business under the name  "Knowles
Company-Insurance."{1}  At the time there was no other corporation
registered under the Knowles name, nor was there any insurance business
that used the Knowles name.
	[¶9]  In 1993, Suminsby engaged in negotiations to sell his real estate
sole proprietorship to three of his brokers, Maria Brown, Pepper Keating,
and Harriet Whittington.  The three brokers formed the corporation T.K.C.,
Inc. to acquire Suminsby's business.  The sale was finally concluded in
February 1994.  Suminsby transferred the assets of his business by two bills
of sale, the first for the personal property transferred, and the second for
the rights to the Knowles name.  Shortly after the purchase, T.K.C. Inc.
registered to do business under the name "The Knowles Company," and
eventually made that name its official corporate name.  
	[¶10]  In December 1996, due to a falling out between the parties,
NHI moved out of The Knowles Company building to a new location a few
blocks away.  Although it stopped using the Knowles logo, NHI continued to
do business under the name "Knowles Company-Insurance" without the
permission of The Knowles Company.  Furthermore, NHI ran advertisements
that stated it had one hundred years of experience.  NHI has admitted that it
continues to use the name because it wants to associate itself with the long
tradition of the Knowles family.  
	[¶11]  In February 1997, The Knowles Company brought suit against
NHI seeking, inter alia, to enjoin it from further use of the Knowles name. 
After a bench trial, the Superior Court entered judgment for NHI.  The court
found that "[s]omehow, Mr. Suminsby lost his legal right to 'Knowles
Insurance.'"  The court went on to state that NHI "determined that it could
approach the State of Maine and secure a right valuable to it which it could
do under Maine law.  It violated no law in so doing and used the Knowles
name as it had a right to do."  Thus, the court's opinion is based upon the
premise that Suminsby effectively abandoned the name "Knowles" and,
therefore, surrendered the exclusive right to use the Knowles family name. 
The Knowles Company filed this appeal.
II. DISCUSSION
	[¶12]  Whether Suminsby "lost control" of the Knowles name is a
factual determination which we review for clear error.  Standish Tel. Co. v.
Saco River Tel. & Tel. Co., 555 A.2d 478, 480 (Me. 1989).  We note at the
outset that there is no Maine precedent concerning the abandonment of
trade names.  Nevertheless, the Massachusetts Supreme Judicial Court has
stated that "[t]here is no doubt that an abandonment paves the way for future
possession and property in another person."  Russell v. Caroline-Becker,
Inc., 142 N.E.2d 899, 902 (Mass. 1957).  But "[t]o constitute abandonment
there must be satisfactory evidence of definite acts . . . which indicate an
actual intention permanently to give up the use of the trade-mark."  Neva
Wet Corp. v. Never Wet Processing Corp., 13 N.E.2d 755, 760 (N.Y. 1938). 
Furthermore, the Restatement of the Law of Unfair Competition states that a
trade name is abandoned if: 
(a)  the party asserting rights in the designation has
ceased to use the designation with an intent not to
resume use; or
(b)  the designation has lost its significance as a
trademark, trade name, collective mark, or
certification mark as a result of a cessation of use or
other acts or omissions by the party asserting rights
in the designation. 
Restatement (Third) of Unfair Competition § 30 (1995).
	[¶13]  Thus the issue becomes whether Suminsby actually intended to
abandon his rights to the name.  The facts clearly indicate that the answer to
this question is no.  Although Suminsby transferred the capital stock in the
original The Knowles Company to Wright, he continued to use the name and
sought to reacquire the exclusive right to it.  Furthermore, when NHI
entered into a licensing agreement for the right to use the Knowles name
NHI acknowledged that Suminsby controlled it.  Why would NHI enter into
such an arrangement and indeed even offer to buy the rights to the Knowles
name if they thought it was free for the taking?  Certainly Suminsby could
have taken additional precautions to protect the Knowles name.  The
record, however, does not support the conclusion that he "lost control" of
it.  The record is devoid of evidence that Suminsby intended to abandon the
name. Nor has the name lost its significance.  The current owners of NHI
have admitted that they use the name in order to associate themselves with
the long history and tradition of the original Knowles Company. 
	[¶14]  NHI argues, and the trial court concluded, that NHI gained the
right to use the Knowles name by virtue of its registration with the Secretary
of State.  Title 13-A of the Maine Revised Statutes explicitly states that the
use of an assumed name may be enjoined if "that name is deceptively similar
to a name in which the plaintiff has prior rights by virtue of the common law
or statutory law of unfair competition, unfair trade practices . . . ."  13-A
M.R.S.A. § 307(6)(B) (1981).  Suminsby had prior common law rights to the
name and thus NHI did not acquire any superseding rights when it
registered with the Secretary of State.  Whether NHI's use of the Knowles
name entitles The Knowles Company to redress depends upon whether NHI
has infringed upon those common law rights.  The Superior Court also
determined, inter alia, that The Knowles Company had no intention of ever
re-entering the insurance business and that NHI's use of the Knowles name
did not harm the business reputation of The Knowles Company.  The court
should have focused upon whether NHI attempted "to palm off [its] own
goods or products as the goods or products of another."  Lapointe Machine
Tool Co. v. J.N. Lapointe Co., 115 Me. 472, 478, 99 A. 348, 351 (1916).
		The entry is:
Judgment vacated.  Remanded to the
Superior Court for proceedings
consistent with this opinion.
  
Attorney for plaintiff: Peter R. Roy, Esq. (orally) Roy, Beardsley, Williams & Granger, LLC P O Box 723 Ellsworth, ME 04605-0723 Attorney for defendant: William N. Ferm, Esq. (orally) Ross & Ferm, LLC P O Box 1123 Ellsworth, ME 04605-1123
FOOTNOTES******************************** {*} Wathen, C.J., participated in the initial conference but resigned before this opinion was adopted. {1} . 13-A M.R.S.A. § 307(2) provides that "[u]pon complying with this section, any corporation authorized to do business in this State may transact its business in this State under one or more assumed names." Id.