The issue here was whether a Plaintiff located in Winston-Salem which held a state trademark registration was entitled to an injunction against a competing store with a similar name located in Charlotte.
Judge Diaz applied federal Lanham Act principles in deciding whether the Plaintiff had a sufficient market presence in the Charlotte area to warrant injunctive relief. He said that "North Carolina’s common law is no different" from federal law in determining the rights of a senior user. Op. n.7.
The established tests for injunctive relief when a senior user sues a junior user are "(1) the market penetration test, which applies where the senior user actually uses its mark in the market in which it seeks an injunction; or (2) the ‘zone of natural expansion’ test, which applies where the senior user has not actually penetrated the market, but may be likely to do so." Op. ¶70.
The Plaintiff failed the market penetration test. Although it had averaged annual sales in Mecklenburg County of $66,024 over a fifteen year period, the level of sales had fluctuated over that time and the sales were inconsequential when measured against the total sales of jewelry in that area. Mecklenburg County jewelery stores had sold $138,578,260 of jewelry in 2006, for example, much of it undoubtedly available for much less now in area pawnshops.
Further leading to the Plaintiff’s lack of success was that it had completed only 88 transactions in Mecklenburg County in 2006, but the average jewelry store there completed 1,718 transactions. Plaintiff also hadn’t done any advertising targeted at the Charlotte market.
The Plaintiff also couldn’t meet the zone of natural expansion test. Although it presented evidence that it had "considered" opening a Charlotte store, Judge Diaz found that Plaintiff had not taken any concrete steps to enter the Charlotte market.