## Facts

- Thrifty Rent-a-Car System, Inc. obtained federal registration in July 1964 for the service mark “Thrifty Rent-a-Car System” after applying in July 1962, and later expanded nationally through franchises and company-owned outlets, including locations in Massachusetts.
- Thrift Cars, Inc., a Massachusetts business founded in October 1962, used “Thrift Cars” in good faith for car rental and leasing from East Taunton/Taunton before Thrifty’s federal registration issued.
- Thrift Cars’ operations and advertising remained locally confined to the Taunton area, with no meaningful market penetration beyond that locality before July 1964.
- Thrifty sued in federal court for Lanham Act trademark infringement and false designation of origin, plus common-law unfair competition.
- After a bench trial, the district court entered a reciprocal injunction limiting Thrift Cars’ use to Taunton and restricting its advertising to pre-registration media, while also barring Thrifty from operating in or targeting East Taunton.

## Issues

1. How to reconcile a federal registrant’s constructive nationwide priority with a good-faith prior user’s rights in a limited geographic area established before registration.
2. Whether the local prior user’s continued use may expand beyond its pre-registration market through new locations or advertising channels.
3. Whether a geographically and media-specific reciprocal injunction was an appropriate equitable remedy to reduce likely consumer confusion between similar marks used for identical services.

## Decision

- The First Circuit affirmed the judgment and injunction in all material respects.
- The court upheld limiting Thrift Cars to the geographic market it had actually penetrated before the registrant’s priority date and restricting its advertising to prevent de facto expansion.
- The court also upheld barring Thrifty from establishing locations in East Taunton and from advertising aimed principally at that community.
- The court accepted the trial court’s fact findings on market penetration and the need for tailored relief to avoid confusion in overlapping territories.

## Legal Principles

- Federal registration provides constructive notice and confers strong nationwide priority, but it does not extinguish a prior user’s good-faith rights in the territory actually penetrated before the registration date.
- A prior local user’s protected territory is limited to the area of proven market penetration as of the registrant’s priority date; the local user’s market may be “frozen” at that point.
- Courts may fashion equitable relief that divides markets by geography and advertising channels to minimize likely confusion while preserving concurrent, asymmetrical rights.

## Conclusion

The First Circuit affirmed a reciprocal, geographically carved injunction that preserved the federal registrant’s nationwide rights while protecting a good-faith local senior user within its pre-registration market, freezing the local user’s territory and advertising to prevent expansion that would conflict with the registrant’s post-registration priority.


Thrifty Rent-a-Car Sys., Inc. v. Thrift Cars, Inc., 831 F.2d 1177 (1st Cir. 1987)