## Facts

- Sengoku Works Ltd., a Japanese manufacturer, produced portable kerosene heaters sold in the United States under the “Keroheat” mark.
- From 1985 to 1994, RMC International, Ltd. served as Sengoku’s exclusive U.S. distributor under a series of one-year agreements that required RMC to distribute only Sengoku-manufactured heaters.
- Sengoku sold heaters to an independent trading company, which then sold them to RMC for U.S. distribution.
- RMC handled U.S. marketing and advertising, arranged retailer purchases, and managed consumer complaints and returns; only RMC’s name appeared on product packaging.
- In 1992, RMC obtained a federal registration for the “Keroheat” trademark.
- Citing product-quality issues, RMC later arranged for a Korean manufacturer (Wooshin) to supply heaters and began selling Wooshin-made heaters using the “Keroheat” mark, competing with Sengoku’s heaters.
- Sengoku sued under the Lanham Act and California contract law; the district court enjoined RMC’s use of the mark, the jury found for Sengoku on the trademark claim (awarding nominal damages), and the court cancelled RMC’s registration and permanently enjoined RMC’s use of “Keroheat.”
- On appeal, the published disposition addressed only trademark ownership of “Keroheat” in the United States.

## Issues

1. Whether Sengoku (manufacturer) or RMC (exclusive distributor and federal registrant) owned the “Keroheat” trademark in the United States.
2. Whether RMC’s federal registration established ownership notwithstanding Sengoku’s asserted prior common-law rights.
3. Whether the manufacturer–distributor relationship altered presumptive ownership based on which party controlled product quality and the goodwill associated with the mark.

## Decision

- The Ninth Circuit affirmed the district court’s determination that Sengoku owned the “Keroheat” trademark.
- The court held that RMC’s federal registration created only a rebuttable presumption of ownership, which Sengoku overcame by showing prior use of the mark in connection with Sengoku-manufactured heaters.
- Applying the manufacturer–distributor presumption, the court concluded RMC did not rebut the presumption that the manufacturer owned the mark because the goodwill tied to “Keroheat” resided primarily in Sengoku’s control over product design and quality.
- The court upheld relief resting on the ownership determination, including cancellation of RMC’s federal registration and a permanent injunction barring RMC’s use of the mark.

## Legal Principles

- Trademark ownership is established by first actual use of the mark in commerce for the relevant goods or services; invention or registration alone is insufficient.
- Federal registration on the Principal Register is prima facie evidence of validity and exclusive right to use, but it does not create rights against a prior user and may be rebutted by evidence of earlier use.
- As between a manufacturer and its exclusive distributor, the manufacturer is presumed to own the trademark; the distributor may rebut only with evidence that it, not the manufacturer, controlled the nature and quality of the goods and the goodwill associated with the mark.
- Use of a mark on goods from a different source risks consumer confusion and reflects misappropriation of goodwill when the mark’s reputation is tied to the original manufacturer’s product quality.

## Conclusion

The Ninth Circuit held that Sengoku, as the manufacturer and prior user whose product quality generated the goodwill associated with “Keroheat,” owned the trademark despite RMC’s federal registration, and it affirmed cancellation of the registration and injunctive relief barring RMC’s continued use of the mark on non-Sengoku heaters.


Sengoku Works Ltd. v. RMC Int’l, Ltd., 96 F.3d 1217 (9th Cir. 1996)