Affiliated Hospital Products v. Merdel Game Manufacturing Co.

Affiliated Hospital Products, Inc. (Affiliated) (plaintiff) manufactured and marketed games, including the trademarked Carroms and Kik-it games, a tabletop pool and tabletop soccer game, respectively. Merdel Game Manufacturing Company (Merdel) (defendant) began marketing similar games, the 100 Play Game Board and Kick’er. The 100 Play Game Board included a carom board, as shown on its game carton, and a rule book for caroms. The rule book was based on Affiliated’s rule book but was revised for clarification. Kick’er was a tabletop soccer game. Affiliated sued Merdel on trademark-infringement grounds for using the words carom, caroms, Carrom, and Carroms. Merdel filed a counterclaim challenging the validity of Affiliated’s trademarks. The parties entered a settlement agreement. Merdel dropped its counterclaim and stipulated that Affiliated’s trademarks were valid. Merdel agreed not to expand its current use of the trademarked words beyond its current use and not to use the words to describe its game board for a period of three years. After three years, Affiliated agreed to lift all restrictions on Merdel’s use of the trademarked words. Merdel continued to use the word carom on pricelists and catalogues and even redesigned the 100 Play Game Board cartons to display the word when the cartons were stacked in retail stores. Affiliated sued, seeking damages for infringement of its Carroms trademark and Carroms rule-book copyright and rescission of the settlement agreement. The district court ruled in favor of Merdel, and Affiliated appealed to the Second Circuit. The appellate court found that Merdel’s Kick’er game did not violate Affiliated’s trademark because Affiliated could not claim rights over every variation or use of the word kick and because the record did not show any demonstrated likelihood of confusion between the two games. The court also refused to grant rescission because Merdel’s breaches were not substantial enough to warrant recession considering that Merdel also dropped its counterclaim and validated Affiliated’s trademark as part of the agreement. Additionally, Affiliated could have sought compensatory damage for Merdel’s breaches rather than seeking rescission of the entire agreement. The court then addressed the copyrighted rule book.