## Facts

- Circuit City Stores, Inc. (Circuit City) obtained a federal registration for the “CARMAX” service mark for use with its car “super-store” business.
- Carmax, Inc., along with Philip Artz and Harold Artz (collectively, Carmax), operated a used-car business in northeast Ohio using the name “CarMax.”
- Circuit City sued Carmax in federal court under the Lanham Act for trademark infringement and unfair competition, and also asserted related Ohio-law claims.
- Carmax defended on the ground that it had used “CarMax” before Circuit City’s constructive use date tied to Circuit City’s federal registration and therefore held superior rights in its local market.
- Carmax also counterclaimed that Circuit City obtained the registration through fraud on the PTO.
- After trial, the district court found Carmax’s proof of earlier use insufficient, rejected the fraud counterclaim, entered judgment for Circuit City, and enjoined Carmax from using “CarMax.”
- Carmax appealed.

## Issues

1. Did the district court clearly err in finding Carmax failed to prove it was the senior user of “CarMax” in its market, defeating Circuit City’s registered rights?
2. Did the district court apply an incorrect legal test by requiring proof of secondary meaning for Carmax to establish common-law ownership?
3. Did the district court use the wrong standard for injunctive relief by presuming irreparable harm without requiring a specific showing that Circuit City was likely to enter Carmax’s geographic market?
4. Did the district court commit reversible error by admitting evidence bearing on Circuit City’s good-faith defense to Carmax’s fraud counterclaim?

## Decision

- The Sixth Circuit affirmed the district court’s judgment and injunction for Circuit City.
- The court held the district court did not clearly err in finding Carmax’s evidence did not show sufficient trademark use before Circuit City’s constructive use date to create rights superior to the federal registrant.
- The court rejected Carmax’s argument that any discussion of secondary meaning required reversal, concluding the judgment stood because Carmax failed to prove priority in any event.
- The court upheld the injunction, concluding the district court did not apply an improper legal standard when it treated trademark infringement and likely confusion as supporting injunctive relief without requiring additional proof that Circuit City was about to enter Carmax’s local market.
- The court found no reversible evidentiary error regarding proof related to Circuit City’s state of mind and affirmed rejection of the fraud counterclaim.

## Legal Principles

- Federal registration on the Principal Register provides nationwide priority dating from the registrant’s constructive use date, subject to a prior user’s ability to prove earlier, legally sufficient use in a limited geographic area.
- A party asserting senior common-law rights against a federal registrant bears the burden to prove earlier and sufficiently public use that was more than sporadic or preparatory.
- After a bench trial, appellate review of factual findings (including priority of use) is for clear error.
- In trademark cases, a showing of infringement and likely confusion can support injunctive relief; courts have treated such a showing as supporting a finding of irreparable injury for purposes of an injunction.
- Fraud on the PTO requires proof that the registrant made a material false statement with knowledge of its falsity and with intent to deceive; evidence of good-faith belief in the right to register can defeat a fraud claim.

## Conclusion

The Sixth Circuit affirmed an injunction protecting Circuit City’s registered CARMAX mark because Carmax did not carry its burden to prove earlier trademark use sufficient to overcome Circuit City’s constructive priority, and Carmax also failed to establish that Circuit City procured the registration through fraud or that the district court applied an improper standard for injunctive relief.


Circuit City Stores, Inc. v. Carmax, Inc., 165 F.3d 1047 (1999)