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CHAPTER 15
Regulation and Licensing
CONTENTS
A. Chapter Competencies
B. Introduction
C. Regulation of the Marketplace
D. Franchising
E. Regulation of Hotel and
Restaurant Internal Affairs
F. Licensing and Zoning
G. Answers to Case Example
Questions
H. Answers to End-of-Chapter
Questions
Chapter Summary
The law regulates various aspects of the hotel and restaurant business. The Regulation in marketplace applies
to trademarks, copyrights, antitrust concerns, and franchising. Today, owns and cities look more and more
alike because they all have hotels, restaurants, and stores with the same names. This phenomenon is based in
significant part on franchising. A franchise is an arrangement in which the owner of a trademark, service mark,
or copyright licenses others to use the mark or copyright in the sale of goods or services. A franchisor is the
owner of the mark or copyright, and the franchisee is the party who receives the right to use it. Numerous
regulatory laws impact the operation of hospitality establishments. These laws apply to maintenance of guest
registers, posting of rates, and recycling. Licensing and zoning are the prerequisites to operating a hotel,
restaurant, or bar, which requires one to secure required licenses and permits and comply with relevant zon-
ing laws.
A. Chapter Competencies
After studying Chapter 15, the student should be able to
1. identify at least three applications of regulatory laws.
2. define “trademark.”
3. explain what is meant by trademark infringement.
4. distinguish between “trademark” and “service mark.”
5. describe the test to determine the right of use of a trademark.
6. explain the importance of trademark protection and how a business can obtain the protection.
7. describe the Lanham Act.
8. list the two things a plaintiff must show to prove trademark infringement.
9. list the penalties for infringing a trademark.
10. explain the concept of geographic proximity in terms of a likelihood-of-confusion test for
infringement.
11. explain the term “public domain” in the context of a trademark.
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12. list the requirements in the trademark registration process.
13. explain the term “copyright.”
14. list the three parts in a required notice for copyright.
15. name the two organizations from whom the required license for musical performance is acquired.
16. briefly describe the process for determining the licensing fees by American Society of Composers,
Authors, and Publishers (ASCAP) and Broadcast Music Incorporated (BMI).
17. list the four remedies of liability for performing music without a license.
18. list the circumstances under which a business may violate copyright laws for using radio music.
19. state the objective of antitrust laws.
20. name the two key federal antitrust laws.
21. identify the penalties for violation of antitrust laws.
22. explain the term “dissolution.”
23. explain the term “divestiture.”
24. explain the term “treble damages.”
25. name and define at least three activities of per se violations of the antitrust laws.
26. name and define at least three activities of application of the rule of reason.
27. explain the reasoning as to why some violations of the antitrust laws are subject to the rule of reason
while others are violations per se.
28. explain the term “franchise.”
29. explain the term “franchisor.”
30. explain the term “franchisee.”
31. describe the type of information a franchisor must disclose to a franchisee.
32. explain what rule applies to tying arrangements.
33. identify two key factors that the court will examine to determine whether a tying agreement is legal
or not.
34. explain what interest a city has in requiring a hotel to maintain a register containing guests’
information.
35. explain the purpose of posting the rates at a hotel.
36. explain when varying rates would constitute illegal discrimination.
37. state the objectives of recycling laws.
38. explain the term “police power.”
39. explain the purpose of licensing.
40. list five things in a restaurant that a health inspector will look at when inspecting the restaurant.
41. list at least three factors a licensing authority may take into account when granting or denying a license.
42. describe the administrative procedures for appealing administrative agency rulings.
43. identify the penalties imposed on a business that operates without the necessary license.
44. explain what rights a licensee has if the government wants to revoke a liquor license.
45. explain the term “due process.”
46. explain the purpose of zoning laws.
47. identify the remedy for the negative impact of the zoning laws.
48. explain the term “variance” in the context of zoning laws.
B. Introduction
❊The law regulates various aspects of the hotel and restaurant business, including the law of trade-
marks, copyrights, anticompetitive activities, franchising, registration of guests, rates charged for
rooms, recycling, licensing requirements, and zoning.
C. Regulation of the Marketplace
❊Numerous regulatory laws impact the marketplace in which hospitality establishments do business.
These laws apply to trademarks, copyrights, antitrust concerns, and franchising.
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172 ■Chapter 15
❊Trademarks and service marks.
■Various aspects of successful businesses are sometimes emulated by other companies desiring to
trade on the familiar name, style, and image portrayed to the public.
■Any word, name, symbol, or device used to identify a product is a trademark, which means the
owner has the exclusive right to its use.
■If you use any trademark without the owner’s permission, you will be illegally infringing on that
business’s trademark.
■A company can obtain a trademark or service mark in its name or logo simply by using it in con-
nection with its business.
■The company can also register the mark with the federal Patent and Trademark Office located
in Washington, D.C., which notifies other potential users that the name has been appropriated.
■When two companies are using the same name, the test to determine who has the rights to the
name is who used it first.
■Someone who uses another’s trademark or service mark in connection with a similar product or
service in the same market area without permission will be liable for trademark infringement.
■The law on trademarks and service marks is found in the Lanham Act.
■Proving infringement.
•The test for infringement is whether the second user’s adoption of the name is confusingly
similar to the original user’s; that is, will consumers be diverted from the first user and do busi-
ness with the second because they were misled by the trade name?
•The more similar the names and products being offered by the two companies, the more likely
a trademark infringement will exist.
■Likelihood of confusion.
•The required element of likelihood of confusion can be proven by showing actual confusion;
that is, customers who were misled.
•While actual confusion is not essential, it provides the court or jury with positive proof of the
required element of substantial likelihood of confusion.
■Penalties.
•Prior to adopting a trade name, a business can and should conduct a trademark search on a
registry maintained by the United States Copyright and Trademark Office.
•The registry, accessible by computer, will disclose whether the desired name is already in use.
■Geographic proximity.
•If the trademark owner and second user do not compete in the same markets, the public is un-
likely to confuse one for the other.
•In such circumstances the use of the mark by the newcomer may not be illegal.
•An exception to this rule is where it appears that the second adopter has selected the mark
to benefit from the reputation of the first user or to forestall the expansion of the first user’s
business.
■Descriptive terms.
•There is no infringement if a word is descriptive and in common use.
•Ordinarily a company cannot gain trademark rights for a word that is part of the English lan-
guage and commonly used.
•Such a word could achieve trademark protection only upon proof that it attained a secondary
meaning; that is, the public identifies the term or phrase with the company using it.
■Public domain.
•According to trademark law, a valuable trademark may be lost if the word becomes a part of
the language.
•How does the law determine that a trademark has gone into the public domain? While the
point in time is rarely clear, the main prerequisite is that the public has come to consider the
word as the generic name for the thing itself, rather than as an indication of a specific manu-
facturer or that manufacturer’s specific product.
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Regulation and Licensing ■173
■Trademark registration.
•Although registration is not necessary for trademark protection since rights accrue from mere
use of a name, registration helps to discourage unauthorized use and makes a trademark
infringement case easier to prove.
•Once a trademark is registered, the owner should include with the name, usually after the last
letter, the ® insignia (the capital letter “R” in a circle). This alerts the public that the word is
a registered trademark and cannot be used by others.
•Most states have registration procedures that protect a business’s name on a statewide basis.
The process is easier and less expensive than federal registration.
•The registration that is appropriate depends on the geographical area in which the business
anticipates using the name. If the business owners foresee opening other similar businesses
with the same name in more than one state, or if they anticipate franchising the operation,
federal registration should be pursued.
❊Copyright basics.
■Generally, the copyright is initially owned by the creator of the work.
■The rights associated with a copyright are separate from the work itself.
■The artist can sell the work but retain the copyright.
■Normally, the copyright owner will charge a fee for the permission, thereby enabling the owner
to benefit repeatedly from the creative talent utilized in the work.
■If, however, the artist sells the copyright, the purchaser becomes the copyright owner and can
reproduce the work without further authorization.
■Failure to include the notice (prior to 1989) resulted in loss of the copyright.
■The required notice consisted of three parts: (1) the letter “c” in a circle ©, (2) the name of the
copyright owner, and (3) the year of first publication.
❊Illegal satellite reception.
■An area of copyright law that has been the subject of litigation in the hospitality field is illegal
satellite reception.
■Companies in the business of selling pay-for-view rights regularly send investigators to bars and
restaurants at the time restricted programming is broadcast to determine if the business is ille-
gally exhibiting the limited-access show.
■A sports bar or like establishment seeking to attract customers by showing restricted events must
first obtain the necessary license and pay appropriate fees. Failure to do so will likely result in li-
ability leading to payment of damages, fines, attorney’s fees for the opposing party (in addition
to one’s own), and an injunction.
❊Music performances.
■Many restaurants and hotels offer musical entertainment.
■The music may be live, on a juke-box, or presented by a disc jockey. Live presentations may in-
volve a single performer on weekends only, a band that plays every night of the week, or any
combination thereof.
■The performer(s) may, during any performance, play the music of many different copyright owners.
■How does the restaurant or hotel know from whom permission must be obtained and how can
it manage the many different authorizations that may be required?
■While at first it may appear that obtaining permissions can be very complicated, a system has been
developed that streamlines the process.
■Hotels and restaurants need only deal with ASCAP and BMI and not with each composer indi-
vidually. Both license (grant for a fee), on a nonexclusive basis, the public performance rights of
its members’ copyrighted works.
■In most circumstances hotels or restaurants will need a license from both.
■ASCAP and BMI distribute the receipts from license fees, minus overhead, to their members as
royalties for the use of their compositions. The allocation of the money among members is based
on detailed, weighted formulas.
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174 ■Chapter 15
■ASCAP.
•The license fees charged to hotels and restaurants, bars, and clubs by ASCAP are not based on
the songs actually performed.
•To avoid ASCAP’s exercising of monopoly power, the law has imposed restrictions on its abil-
ity to dictate fees.
•The process for determining the license fee a user must pay is as follows.
– The hotel or restaurant submits a written application to ASCAP.
– ASCAP responds in writing, advising the business of the proposed fee.
– A 60-day negotiation period follows in which the restaurant or hotel can object to the fee;
the parties can then attempt to reach a mutually agreeable compromise.
– If they are unsuccessful, the hotel or restaurant can apply to a federal district court for a
determination of a reasonable license fee.
– The mandated negotiation period and the right of the music user to seek a court determi-
nation of a reasonable fee substantially lessens ASCAP’s ability to wield its potentially
controlling bargaining power.
■BMI.
•License fees charged by BMI are determined through negotiations between BMI officials and
established trade associations such as the National Restaurant Association.
■Consequence of performing music without a license.
•If a restaurant or hotel fails to obtain the necessary licenses for musical performances, it will
be liable for copyright infringement.
•Before bringing a lawsuit, ASCAP or BMI will inform the facility that a license is necessary
and encourage its purchase.
•If the owner refuses to pay and continues to provide musical entertainment, a lawsuit by
ASCAP or BMI against the hotel or restaurant is likely. Both organizations are zealous in
pursuing their members’ rights.
■Amplified radio music.
•Not infrequently, a restaurant will play the radio as background music for its diners’ enjoy-
ment. The music played on the radio is copyrighted.
•Radio stations customarily have a license with BMI and ASCAP to play protected songs.
❊Artwork.
■As previously discussed, copyright law also protects artwork.
■To merit copyright protection, the work must reflect the artistic creativity of the artist.
❊Antitrust problems.
■The economic system of the United States is based on free and open competition.
■It seeks to ensure new businesses can enter the market and all businesses can compete on a more
or less equal basis.
■The reason for promoting competition is the belief that it motivates producers both to make
better products and to sell them at lower prices, thereby benefiting consumers.
■The specific activities that restrain competition and are addressed by the antitrust laws are listed
below.
•Some are per se violations, which means they are always illegal.
•Others are subject to the rule of reason: they are not always illegal, but rather their benefits
(such as economic efficiency) are balanced against their anticompetitive effects in a particu-
lar case.
•If the benefits outweigh the drawbacks, the activity will be permitted. If the anticompetitive
impact is too great, the activity will be outlawed.
■Penalties.
•Penalties for violation of antitrust laws are significant and include the following.
•Dissolution, which means a business is ordered to terminate its operations.
•Divestiture, which means a business is required to terminate part of its operations.
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•Criminal penalties, including jail and substantial fines.
•Treble damages, or mandated payment of three times the loss suffered by an injured
plaintiff.
■Application of the per se rule.
•The following is a list of activities that restrain competition and are per se violations of
antitrust laws.
•Price-fixing agreements, in which competitors agree among themselves to sell goods at a
certain price and not lower.
•Vertical price-fixing, in which a manufacturer establishes minimum prices at which lower-level
dealers in a distribution system can sell a product.
•Territorial division agreements, in which competitors assign to each other a territory and
agree not to compete in the others’ territories, thereby each obtaining a territorial
monopoly.
•Group boycotts, in which two or more sellers refuse to do business with a particular person or
company, intending thereby to eliminate competition or block entry to a market.
•Resale price-maintenance agreements, in which a manufacturer determines the price at which
retailers must sell.
•Price discrimination, where a seller of goods charges different prices to different buyers for the
same product (not applicable to services).
•Exclusive dealing contracts, in which a seller (usually a wholesaler) forbids a buyer (usually a
retailer) from purchasing the products of the seller’s competitors.
■Application of the rule of reason.
•The following is a list of activities that may restrain competition and are judged according to
the rule of reason.
•Territorial restrictions, in which a manufacturer restricts the territory in which dealers can sell,
thereby preventing other dealers from competing in a given territory.
•Monopoly, in which one firm controls the market for a particular product with the intent of
excluding competitors.
•Tying arrangements, in which a seller conditions the sale of a product on the buyer’s agree-
ment to purchase some other product produced or distributed by the seller.
•Mergers, in which two businesses are combined into one, resulting in a reduction of competition.
D. Franchising
❊Towns and cities look more and more alike as each have hotels, restaurants, and stores with the
same names. This phenomenon is based in significant part on franchising.
❊Nature of the franchise relationship.
■The contract customarily requires the franchisee to maintain certain standards and the franchisor
to provide various kinds of technical assistance.
■The relationship is a contractual one and not an employment relationship or a principal/agent
relationship.
■If a fast-food franchisee negligently prepares a meal in such a way that a customer is injured, the
franchisor will generally not be liable; only the franchisee is legally responsible. The reason is that
the franchisee and not the franchisor is the owner and operator of the business.
■The franchisor would be liable only if the franchisor’s agents participated in the day-to-day
operations and management of the business or, where a patron is injured by a product, if the
franchisor made or sold the item that caused the injury.
❊Benefits to the franchisee.
■The franchisee stands to benefit from a franchise relationship in several ways.
•Each franchisee contributes a sum of money for promotions, and the franchisor prepares print
and broadcast advertisements. The individual franchisee thereby receives the benefit of an
expensive advertising campaign for a fraction of the cost.
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❊Benefits to the franchisor.
■The more the name is known and accepted by the public, the more valuable it is, and the greater
the franchise fee the franchisor can command from subsequent franchisees.
■The value of the name is preserved in part by contract provisions requiring the franchisee to
maintain certain standards, including specifications of products sold, size of building, interior
and exterior design, and cleanliness.
■Exclusive territory.
•An exclusive territory is very valuable to a franchisee because it protects the business from
competition from a nearby franchisee. If a franchisee receives an exclusive territory, it will be
stated in the contract.
•A franchisee is well-advised to attempt to negotiate a provision in the franchise agreement
granting an exclusive territory. Without it, the franchisee’s patronage may be invaded by a like
business, resulting in a considerable loss in income.
❊Fraud and breach of contract by the franchisor.
■If a franchisee pays the franchise fees and the franchisor fails to promote the name, provide tech-
nical assistance, or otherwise comply with its contractual obligations, the franchisee may be the
victim of fraud and/or breach of contract.
■Disclosure requirements for franchisors.
•When the concept of franchising first began, unscrupulous franchisors often took money from
unsuspecting franchisees and failed to provide the promised services.
•The document in which this information is presented is called a prospectus. A franchisor that
provides false information in a prospectus faces both civil and criminal penalties including
compensation for damages, jail, and fines.
•The required 10-day waiting period between disclosure and acceptance of money by the fran-
chisor is intended to give the franchisee an opportunity to review the information and discuss
it with advisors such as a lawyer and an accountant.
❊Tying arrangements in franchises as an antitrust issue.
■A franchisor often wants its franchisees to purchase supplies and equipment from the franchisor.
■This arrangement ensures the franchisor of both a market for its products and the uniformity
that is so important to franchise operations.
■If its trademark is sufficiently valuable, franchisees may be willing to agree to buy from the fran-
chisor exclusively in return for the right to use the name.
■From an antitrust point of view, this is a tying arrangement. As a result, the franchisor is spared
from competition by other suppliers and they in turn are denied access to franchisees as poten-
tial customers.
■In determining whether a particular tying arrangement is legal or not, the court will examine
several factors, including the amount of commerce affected and whether some special justifica-
tion exists for the tying arrangement.
❊Termination of a franchise.
■Many abuses have occurred surrounding franchise terminations.
■Once a franchisee has invested money, time, and energy in developing the franchise business,
courts are reluctant to allow the franchisor to terminate the franchise without good cause.
■Once a franchise agreement expires or is terminated, the franchisee’s right to use the franchisor’s
trademark terminates.
■Continued use of the name by the franchisee constitutes trademark infringement.
E. Regulation of Hotel and Restaurant Internal Affairs
❊Numerous regulatory laws impact the operation of hospitality establishments. These laws apply to
maintenance of guest registers, posting of rates, and recycling.
❊Guest register.
■Most cities and states have passed ordinances that require motels and similar businesses to main-
tain a register containing guests’ names and addresses.
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■Falsification of a guest’s name frustrates the use of the register as a law enforcement tool. The
innkeeper should not permit a guest to register under a name the innkeeper knows is not the
guest’s true name.
■Innkeepers should familiarize themselves with the laws concerning guest registers in their state.
■The statutes usually specify that the register can be kept using microfilm, electronic imaging, or
another like storage process. Again, innkeepers should familiarize themselves with locally appli-
cable laws.
❊Rates.
■Legislatures do not attempt to fix the price of any room in a hotel, nor do they require that a
hotel offer accommodations or services at any particular rate.
■When a law has been duly adopted requiring posting of rates, the hotel must post its room
charges and abide by the posted prices.
■A hotel can charge different guests different rates provided the different rates are not the result
of illegal discrimination.
■Varying rates would constitute illegal discrimination if based upon gender, race, color, religion,
national origin, marital status, or disability.
❊Mandatory recycling.
■The purpose of recycling is to save natural resources, reduce pollution, and decrease the amount
of waste that goes into landfills.
■Food service businesses are typically required to separate certain food and beverage containers,
such as wine bottles, metal and aluminum containers, and certain types of plastic containers.
■The law may require that the containers be cleaned, that the glass containers be separated from
other recyclables, that each color of glass containers be separated from other colors, and that tops
and caps be removed.
■All businesses are typically required to recycle office paper and corrugated cardboard.
Penalties for noncompliance are usually fines ranging in amount from $50 to $1,000 per
infraction.
■Restaurants and hotels have found a variety of additional ways to further protect the environ-
ment. These include installing water-saving shower heads in guest rooms, offering guests the
option of less-than-daily washing of sheets and towels, and donating used furniture and linens
to charitable organizations.
F. Licensing and Zoning
❊Prerequisites to operating a hotel, restaurant, or bar include securing required licenses and permits
and compliance with relevant zoning laws.
❊Licensing.
■The state or government may require that the owner of an inn, hotel, restaurant, or similar
establishment obtain various licenses and permits before opening for business.
■The goal of licensing requirements is to prevent hospitality establishments from becoming men-
aces to the public welfare by requiring licensed businesses to maintain proper operation, sanita-
tion, construction, and fire protection.
■The operation of hotels and restaurants is subject to legislative authority to regulate and license
because, like driving, those businesses affect the public welfare.
■A considerable body of law has been developed concerning the granting and revoking of licenses.
These laws seek to balance the concerns of the licensing body and the interests of the licensed
party or party seeking a license or permit.
❊Principles for granting licenses and permits.
■Determination of what licenses and permits are required and what prerequisites are necessary to
qualify for them usually requires considerable research and the aid of an attorney.
■Sample licensing experience.
•Every state and most countries have a health department whose mission is to ensure the health
of its residents.
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•These health departments engage in a multifaceted approach to eliminating food-borne disease.
•The various components include mandatory plan reviews for all new and remodeled food estab-
lishments, mandatory health permits for restaurants, inspections to ensure compliance with health
and sanitation rules, prompt investigations of consumer complaints, mandatory food manager
training, and litigation against repeat violators of the health code.
•Before a restaurant can operate it must obtain a permit from the health department (in addi-
tion to other licenses and permits).
■Compliance with laws.
•To qualify for a license, the applicant must prove that he will abide by all applicable laws.
■Fair application of the law Grounds for Denial of a License.
•To deny a license, the licensing body must have a reasonable basis; it cannot deny the license
on arbitrary, capricious, or unreasonable grounds.
•Residents in the vicinity of a proposed new restaurant, hotel, or bar may oppose the new
establishment for fear of noise, traffic, congestion, or crime.
•Organized community resistance to the granting of a license is a legitimate consideration when
a board is reviewing a license application.
•Past use of the property.
■Another factor the licensing body will consider is the prior use of the property.
•Administrative procedure.
•Licenses are often issued by a government agency; that is, a governmental subdivision man-
aged by directors appointed by elected officials responsible for administering particular laws.
•When a licensee fails to abide by the applicable rules, the agency is responsible for prosecut-
ing the violation.
•When a government agency is involved, the initial forum for the case is usually the agency
rather than a court. If the matter is appealed, the first appeal is often still within the agency. If
it is appealed again it will be heard by a court.
•Before a matter that is within the jurisdiction of a government agency can be heard in a court,
the administrative remedies must be exhausted. This means all appeals available within the
agency must have been utilized before the case is heard.
❊License fees.
■Licensees often complain that the cost of a license is high.
■A municipality can require a reasonable fee to be paid for a license intended to protect the
public.
■The municipality’s costs to administer the license include the following:
•The cost to prepare and distribute applications.
•The cost to inspect licensed and would-be licensed premises.
•The cost to pursue violators.
❊Consequences of operating without a license.
■Failure to obtain a required license can lead to unpleasant consequences, as can failure to obtain
a license renewal, which is customarily required at regular intervals, often annually.
■Penalties and fines.
•If a business fails to qualify for, or otherwise obtain, a necessary license, the government can
bar it from opening or, in the case of an existing business that fails to obtain a renewal, force
the business to close.
•In addition, fines may be imposed.
•In some states, including Florida, the innkeeper or restaurateur may be required to attend “at
personal expense, an educational program sponsored by the Hospitality Education Program.”
■Loss of protection of law.
•If the purpose of the license is to protect the public, as is the case of a license to operate a
restaurant, the absence of the license will in some states bar the restaurant from enforcing its
contracts in court.
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•Where, however, the purpose of the license is to raise revenue (income for the government)
and is unrelated to protection of the public, the ability of a business lacking the license to
enforce its contracts will not be affected.
❊Revocation or suspension of a license.
■As we have discussed, a license is a privilege, not a right. A licensee must establish it is worthy of
the license; there is no automatic entitlement to it.
■Cause for revocation or suspension.
■Due process.
•The licensee is entitled to due process, the right not to be deprived of property (including a
license) without a fair hearing.
•In the notice, the licensee is entitled to information identifying the specific conduct attribut-
able to him that allegedly violates the rules relating to the license. The reason for this
requirement is to provide sufficient information to enable the licensee to address the allega-
tions and prepare a defense. Clearly, a notice of revocation that does not state the grounds is
not sufficiently specific.
•To satisfy due process rights, not only the notice of the grounds for revocation, but also the
date of the hearing, must be given by the licensee far enough in advance to enable the licensee
to prepare a defense.
•Where a licensee receives a notice to appear before the licensing board and believes the notice
is inadequate, the licensee should request additional information concerning the charges or
additional time to prepare a defense, as the case may be. Failure to object may result in a waiver
of any due process defects in the notice.
■Decision based on record.
•Due process requires that decisions concerning a business’s license be made based exclusively
on evidence presented on the record at the hearing.
•Due process would be violated if members of a city council, while deciding whether to revoke
a restaurant license, considered information not presented at the hearing and made up their
minds before the hearing was completed. If these circumstances were proven, the due process
violations would require a new hearing on the issue of the license revocation.
❊Zoning.
■For example, a zoning ordinance may do the following.
•Limit the use of property to residential purposes and preclude commercial and industrial uses.
•Provide a maximum height for a building (for example, five stories).
•Restrict the size and type of sign a business can display on its property to advertise its service.
■Zoning laws may ban development of the business.
•Before any resources are committed to a new business, the owner should investigate the
applicable zoning restrictions.
G. Answers to Case Example Questions
15-1-1. Explain what the court meant when it said in the 16th paragraph, “Any doubts as to
confusion are to be decided against the newcomer. . . .”
Whoever used the name and trademark first has official claim to that name and trademark.
15-1-2. Explain what the court meant when it said in the 18th paragraph, “Although names
are not identical, similarity will deceive almost as much as precise identity. Nice and
careful discrimination between the names cannot be expected from a busy public.”
The required element of likelihood of confusion can be proven by showing actual confusion;
that is, customers who were misled.
While actual confusion is not essential, it provides the court or jury with positive proof of
the required element of substantial likelihood of confusion. In this case the court looked at
the total effect of the name rather than the comparisons of individual features.
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