This is an appeal by a trademark holder from a judgment in favor of the defendant in an action alleging trademark infringement, with a cross-appeal by the defendant seeking cancellation of the plaintiff’s registration of the trademark. The United States District Court for the Southern District of New York, Charles L. Brieant, Jr., Chief Judge, after a bench trial, held in an oral ruling that there was no infringement of the trademark “PaperCutter” by the defendant’s operation of its fourteen upstate New York stоres named The Paper Cutter, but upheld the registration of the mark, finding that
[wjhile there’s a strong [element] of description in the mark, and it may be a little bit weak, ... it has been shown to be associated by consumers with this source, or there was enough activity by these proprietors of the mark to lead one to infer that it must have been associated by at least some customers with a single source.
Taking this as finding that the mark was descriptive but nevertheless valid because it had acquired secondary meaning, we reverse on the cross-appeal, because the evidence is insufficiently strong under the authorities of this circuit to support a finding of secondary meaning. We agree with the district court, however, that there was no *560 infringement, even if this were a valid mark. Accordingly, we affirm on the main appeal.
Plaintiffs principals are Dora Schaefer Cassety and Harold Cassety, who have for some years run an interior design firm on West 39th Street in Manhattan called Schaefer Cassety Inc. (“SCI”). Several years ago Harold Cassety began designing paper ornaments or “paper cuts” to send as promotional pieces to SCI customers. These cuts consisted of folded paper that became three dimensional when unfolded and that basically could be used as Christmas tree ornaments, free-standing party decorations, greeting cards, and perhaps in other ways as well.
In 1983, the Cassetys decided that their papеr designs and cut-outs would make a good supplemental business, and they incorporated PaperCutter, Inc. PaperCutter made no sales in 1983, and in May 1984 the Cassetys exhibited prototypes of their paper cuts at a trade show in Manhattan. Among the displayed cuts were a static star, an art deco Santa, a small-starred fir tree, Santa’s tuba, triple bells, an oval ornament, a stream of stars, and a bundled snowman. PaperCutter distributed cat-alogues and price lists at the trаde show and took some orders at or after the show. The first shipment fulfilling the purchase orders was made on October 23, 1984, by which time PaperCutter had arranged to have an inventory manufactured by the use of a die-cutting machine. A large sign bearing the mark “Papercutter” with a logo showing a long pair of shears cutting paper was on display at the trade show.
The Cassetys’ own figures indicate that PaperCutter made retail sales of $145 and wholesale sales of $2,968 in 1984; retail sales of $143.75 and wholesale sales of $4,545 in 1985; retail sales of $92 and a sale to the Boston Museum of Fine Art of $21,208 in 1986. Also in 1986, PaperCutter received a commission of $1,252.39 on a piece it designed for the Museum of Modern Art (“MOMA”), but the item did not bear any PaperCutter mark or label. Pa-perCutter’s retail sales in 1987 were only $41, but it also received an additional $383 royalty from MOMA. Sales in 1988 were $110 on the eve of trial. PaperCutter never did any consumer advertising, and although the Cassetys claim that its lack of activity in 1986, 1987, аnd 1988 was due to defending against appellee’s opposition proceeding in the United States Patent and Trademark Office, much of the original 1984 inventory of paper cuts remains unsold.
Defendant Fay’s Drug Company, Inc., operates a chain of more than 150 “super drugstores” located in upstate New York, Pennsylvania, Connecticut, and Massachusetts, but none in the New York City metropolitan area. A trademark search conducted by defendant revealed, as of August 8, 1984, thаt there were books with the name Papercutting and Paper Cut-out Design, and that there were business titles including “Pappercutter, Inc.,” the plaintiff’s name, albeit misspelled, in Manhattan, “The Paper Cutter” in Newton, Massachusetts, and “Papercutters” in Greenville, South Carolina. A July 1985 update to the search report indicated that plaintiff had applied for a registered mark covering paper sculptures, paper ornaments, paper decorations, paper labels, paper tags, greeting cards, writing paper and envelopes, gift wrapping material and catalogues. Despite the findings of the initial search report, defendant went ahead with its plans to operate a chain of stores called The Paper Cutter, and opened its first store to the public in Albany on October 23, 1984, the same day that the plaintiff made its first shipment of paper cuts to a customer from the trade show. By the time of trial, defendant was operating fourteen The Papеr Cutter stores, all in upstate New York.
On signs, in its advertising, and on the price stickers affixed to its goods, defendant uses a logo showing a short pair of scissors, perhaps children’s scissors, about to cut a dollar sign, suggesting, as is the case, that The Paper Cutter stores sell at a discount their particular line of office supplies, party supplies, greeting cards, books, and novelties. As the district court found, in contrast to plaintiff’s “highly artistic up-scale item involving genuine artistic ef *561 fort, ... [which] is highly priced,” defendant's paper goods
are essentially items at the low end of the scale, [are] mass produced, fold-out type of things, such as center pieces for a graduation party; for a baby shower, one containing a stork; for graduation, containing a wise owl with an academic hat; and similar paper items all of which were sold with a brand name of the place of origin, which is not the defendant Paper Cutter or the plaintiff.
On May 13, 1985, plaintiff filed an apрlication to register its mark with the United States Patent and Trademark Office (“PTO”). On September 10, 1985, plaintiff’s attorney wrote to the defendant, warning that defendant’s use of the name The Paper Cutter constituted an infringement of plaintiff’s trademark rights. Defendant responded to the plaintiff’s letter that same month, denying that there was an infringement and suggesting that the parties execute a licensing agreement under which both would be allowed to use the name. Plaintiff never responded to defendаnt’s suggestion.
On or about September 20, 1985, the PTO issued a notice of publication stating that plaintiff’s proposed mark would be published on October 8, 1985, for purposes of opposition. The defendant filed a notice of opposition, and Trademark Opposition No. 73,750 was commenced on May 12, 1986. The opposition was later dismissed with prejudice by the PTO’s Trademark Trial and Appeal Board, by order dated March 23, 1988, after defendant failed to file a response to рlaintiff’s motion to dismiss asserting that Fay’s had no standing to maintain the opposition proceeding. Thereafter, on August 23, 1988, the United States Trademark and Service Mark Registration No. 1,501,275 was issued to Paper-Cutter.
Meanwhile, on December 18, 1987, plaintiff filed this action against defendant alleging common law trademark infringement and unfair competition under section 43(a) of the Lanham Act, 15 U.S.C. § 1125(a) (1988), and amended its complaint on November 7,1988, after the registration of the mark, to add a claim for infringеment of the registration. Defendant’s answer to the amended complaint asserted various affirmative defenses and sought cancellation of the registration on grounds that plaintiff had never used PaperCutter as a trademark on its goods, that plaintiff’s mark did not merit protection because it was descriptive and had not acquired secondary meaning, that plaintiff had made false statements and overstated the goods and services it offered in its application for registration of the mark, and that plaintiff had abandoned any rights to exclusive use of the mark under section 45 of the Lan-ham Act, 15 U.S.C. § 1127 (1988), which provides that nonuse for two consecutive years is prima facie evidence of abandonment. We concern ourselves only with the descriptiveness of the mark and the proof of secondary meaning, consideration of all other defenses being unnecessary to resolution of this case.
DISCUSSION
We start with a few fundamentals. Although tradеmarks are often referred to as a form of property, or more specifically as “intellectual property,” we recently reaffirmed that “ ‘[t]here is no such thing as property in a trade-mark except as a right appurtenant to an established business or trade in connection with which the mark is employed.’ ”
Pirone v. MacMillan, Inc.,
However difficult of definition, the courts, including ours, have basically maintained four different categories of terms with respect to trademark protection: (1) generic terms, which refer to the genus or class of which the product is a species, and are not entitled to protection even with
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proof of secondаry meaning, i.e., proof that the public has come to associate the term with a particular source; (2) descriptive terms, which convey an immediate idea of some characteristic or attribute of the product and are entitled to protection with proof of secondary meaning; (3) suggestive terms, which require some imagination on the part of the consumer to ascertain the nature of the product, and are thus distinctive enough to be entitled to рrotection even without proof of secondary meaning; and (4) arbitrary or fanciful terms, which are so distinctive and indicative of a product’s source, rather than its qualities or attributes, that they, unlike suggestive terms, enjoy trademark protection without the need of debating whether they are “merely descriptive.”
See Abercrombie & Fitch Co. v. Hunting World, Inc.,
Underlying the distinctions among the four categories of terms is an attempt to prevent consumer confusion concerning the source of goods and to encourage businesses to invest in quality goods by protecting their generated good will and customer loyalty from would-be imitators, but at the same time to avoid unduly impeding the free flow of information in the marketplace that results from exclusive appropriation of terms by particular businesses. Because terms unrelated to the characteristics or class of the product are less useful to competitors selling similar products and more likely to conjure up the source of the product, we grant trademark protection to arbitrary, fanciful, and suggestive terms, without further inquiry, but not to descriptive and generic terms.
As between descriptive and generic terms, conventional wisdom holds that generic terms, which refer to the general class or category of the product, are so useful to businesses selling the same product that no amount of money poured into promoting customers’ association of generic terms with a particular sourсe can justify “depriving] competing manufacturers of the product of the right to call an article by its name.”
Abercrombie & Fitch,
These concepts, as incorporated into the Lanham Act, by which we are governed, are to the effect that “[n]o trade-mark by which the goods of the applicant may be distinguished from the goods of others shall be refused registration on the principal register on account of its nature unless it ... [cjonsists of a mark which ... when used on or in connection with the goods of the applicant is merely descriptive ... of them.” 15 U.S.C. § 1052(e)(1) (1988). An exception to this, however, is when the mark used “has become distinctive of the applicant’s goods in commerce,” i.e., when the mark has acquired secondary meaning. See 15 U.S.C. § 1052(f) (1988).
Fay’s Drug Company argues on appeal that PaperCutter’s trademark registration is invalid because its mark is merely descriptive and has not acquired secondary meaning. Although a certificate of registration, once issued, is prima facie evidence that the registered mark is valid, such registration does not “preclude another person from proving any legal or equitable defense or defect ... which might have been
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asserted if such mark had not been registered.” 15 U.S.C. § 1115(a) (1988). Here, the Patent and Trademark Office issued PaperCutter’s trademark registration without rejecting the mark as merely descriptive and without requiring proof of secondary meaning. Concededly, “the dеcision of the Patent and Trademark Office to register a mark without requiring proof of secondary meaning affords a rebuttable presumption that the mark is more than merely descriptive.”
McGregor-Doniger Inc. v. Drizzle Inc.,
We have no doubt that “PaperCut-ter” is purely descriptive of the work done by the corporation formed by Cassety and Schaefer. There is no suggestion that the mark is generic, since “papercutter” is not the name of the product. To argue, however, that the term in reference to the goods is thereby made suggestive, thus entitling it to trademark protection, is to miss the boat. Even though one would not call the product or goods a papercutter, one would refer to them as paper cuts, and the evidence was strong that this is what they were considered to be.
Descriptive terms are distinguished from suggestive terms by evaluation of what prospective purchasers perceive in terms of an indication of source, as well as the potential impact on сompetitors of the appropriation of the term as a trademark by a particular seller. See Restatement, supra, § 14 comment b, at 62. We have noted a “useful standard” for distinguishing the terms:
“A term is suggestive if it requires imagination, thought and perception to reach a conclusion as to the nature of goods. A term is descriptive if it forthwith conveys an immediate idea of the ingredients, qualities or characteristics of the goods.”
Abercrombie & Fitch,
Marks that describe an aspect of a product are known as “descriptive.” Marks that do not describe the product but call to mind some attribute of it are called “suggestive.” Examples of descriptive marks are CUSTOM-BLENDED for gasoline or GAS-BADGE for a badge to monitor gaseous pollutants. A good example of a suggestive mark is GLEEM for toothpaste. The line between descriptive and suggestive marks is quite a difficult one to draw, and new entrants to product markets often stray quite close to it.
Carter, The Trouble With Trademark, 99 Yale L.J. 759, 771 (1990). Exаmples of descriptive terms are terms conveying “the characteristics of the goods, services, or business,” or indicating the purpose, functions, size, quantity, capacity, or merits of a product, the effects of its use, or the class of intended purchasers. See Restatement, supra, § 14 comment a, at 58.
It should be explained that the craft of papercutting, according to expert testimony adduced by defendant, is centuries old, coming from the Far East, and that a paper cut is simply a design cut out of pаper with scissors, a knife, or a die-cutting press. There is a Guild of American Papercutters *564 and a magazine called Papercutting World. The plaintiffs products are paper cuts, and Mr. Cassety and his company are commonly known as papercutters. In a very real sense, therefore, the term “Pa-perCutter” “directly conveys information about a product or business, other than information about its source or association with a particular entity.” Id. § 14 comment a, at 58. It also describes the charactеristics of the business and hence of the product. At best it is a variant or a corruption of the term “paper cut” and, as such, retains its descriptive character. See id. § 14 comment a, at 60.
The trial court, although its findings were not clear in this regard, held as much by saying that “there is a strong [element] of description in the mark, and it may be a little bit weak.” However, the district court then confused the issue somewhat by saying that it did not think the word “Pa-perCutter” is so generic as to prevent its use in the fashion as plaintiff sought to dо here. The real issue should have been for the district court, as it is for us, whether plaintiff proved “secondary meaning.”
On the issue of secondary meaning, we look to see whether the registrant’s appropriation of the mark conferred subsequent significance to the previous meaning of the term, and this depends on whether a significant number of prospective purchasers understand the term when used in connection with the particular kinds of goods involved in the registration сertificate as indicative of an association with a specific entity. In other words, if the term, although not inherently distinctive, comes through use to be uniquely associated with a single source, it is entitled to protection under the same principles applicable to inherently distinctive designations.
See id.
§ 13 comment e, at 43. “The crucial question in a case involving ‘secondary meaning’ always is whether the public is moved in any degree to buy an article because of its sourcе.”
American Footwear Corp. v. General Footwear Co.,
The existence of secondary meaning is a question of fact with the burden of proof on the party claiming exclusive rights in the designation.
See 815 Tonawanda Street Corp. v. Fay’s Drug Co.,
*565 To the extent the district court found that secondary meaning had been established, we think its findings were clearly erroneous, but we say “to the extent” advisedly becausе what the district court said was that it “believes that at least within the context of this particular type of product in this industry and this case, ... it has been shown to be associated by consumers with this source, or there was enough activity by these proprietors of the mark to lead one to infer that it must have been associated by at least some customers with a single source.” The court then referred to some of plaintiff’s repeat customers and to customers that came in solely to buy cards sold with the mark as well as the mark’s drawing “the attention of” the Museum of Modern Art.
That plaintiff’s product was liked, there can be no doubt; that consumers came to associate plaintiff’s product with its mark “PaperCutter” before Fay’s adopted use of the mark, however, seems very doubtful indeed. As mentioned above, Fay’s opened its first The Paper Cutter store on the same day that plaintiff shipped its first order of goods to a buyer from the trade show. Admittedly, plaintiff used its mаrk in its display at the trade show and in catalogues before Fay’s opened the first store. Nevertheless, given the very slight priority of use of the mark by the plaintiff over the defendant, it is hardly conceivable that customers could have come to associate plaintiff’s mark with the source so as to “prevent the use of that term by one whose use had begun before the secondary meaning was acquired.”
Saratoga Vichy Spring Co.,
Because plaintiff failed to meet the burden of establishing that its descriptive mark had acquired secondary meaning, we reverse on the cross-appeal, and grant cancellation of plaintiff’s registration of the “Papercutter” mark. This holding in and of itself disposes of the main appeal on plaintiff’s infringement claim, because a party who does not have exclusive right to use a descriptive term may not bring an action for trademark infringement arising out of a competitor’s use of the term. In any case, we note that plaintiff's mark, even if it were valid, has not been infringed by Fay’s. Here we believe that the district court’s conclusion that there is no likelihood of confusion arising out of Fay’s use of the mark is clearly supported by the evidence. PaperCutter’s sales were largely restricted to the wholesale market whereas Fay’s stores are exclusively retail paper goods stores. Plaintiff’s and defendant’s businesses deal in different goods; plaintiff produced artistic designs whereas the defendant sells products of other suppliers at the lower end of the picnic/novelty paper goods spectrum. Although each uses or used a little ornamentation in the form of a pair of scissors as a symbol of identification — in the cаse of plaintiff only on its catalogues and billheads — there is no suggestion that plaintiff’s scissors design functions independently as a trademark or creates a separate and distinctive impression on prospective purchasers, rather than simply being an ornamentation for the underlying mark. In any case, the parties’ scissors logos are strikingly different, the plaintiff’s being shown with a folded or cut paper that again suggests artistic elegance to the eye of the beholder, whereas the defendant’s logo shows quasi-children’s scissors cutting a dollar sign, signalling to the ordinary purchaser that goods are cheap or at a discount.
Judgment in accordance with opinion.