## Facts

- Spartan Food Systems, Inc. (Spartan) operated “QUINCY’S” restaurants and first used the QUINCY’S service mark in interstate commerce in 1976.
- Spartan expanded to hundreds of restaurants across several southeastern states and advertised through newspapers, signs, and radio.
- Spartan obtained federal registration of the QUINCY’S service mark in 1984 based on first interstate use in 1976.
- HFS Corp. (HFS) operated two “QUINCY’S” restaurants in Arlington and McLean, Virginia beginning in 1979 and advertised locally through newspapers (including the Washington Post), signs, and radio.
- HFS obtained a Virginia state registration for QUINCY’S in 1982.
- Spartan knew HFS used the mark in northern Virginia but opened QUINCY’S restaurants in other Virginia locations (including Newport News, Hampton, and Martinsville) in late 1985.
- Spartan sought a declaratory judgment that, as federal registrant, it had superior rights in Virginia except for Arlington and McLean.
- HFS counterclaimed under Virginia statutory and common law and sought to stop Spartan from using the mark in Virginia.
- The district court dismissed Spartan’s complaint and enjoined Spartan from using QUINCY’S anywhere in Virginia.

## Issues

1. Whether a prior local user with a state registration may bar a federal registrant and senior interstate user from using the same service mark throughout the state.
2. Whether the enforceable geographic scope of a junior local user’s rights extends statewide or is limited to the territory of actual market penetration and likely expansion.

## Decision

- The Fourth Circuit reversed the dismissal of Spartan’s declaratory judgment action.
- The court dissolved the statewide injunction barring Spartan from using the QUINCY’S mark in Virginia.
- The court remanded for further proceedings to determine the parties’ respective territorial rights within Virginia.

## Legal Principles

- Trademark and service-mark rights are grounded in use and are geographically bounded by market penetration and goodwill.
- Federal registration and senior interstate use support broad priority, but do not automatically extinguish rights of a good-faith junior user established in a separate market before the registrant’s expansion there.
- State registration does not, by itself, confer statewide exclusivity when the registrant’s actual use and goodwill are confined to a limited area.
- Injunctive relief in concurrent-use disputes must reflect the proven territorial scope of each party’s protectable market, rather than imposing a blanket statewide prohibition absent supporting facts.

## Conclusion

The Fourth Circuit held that HFS could not exclude Spartan from all of Virginia based solely on HFS’s localized use and Virginia registration, vacated the statewide injunction, and required a fact-based delineation of each party’s territorial rights.


Spartan Food Sys., Inc. v. HFS Corp., 813 F.2d 1279 (4th Cir. 1987)