Page:Quality Inns v. McDonald's.pdf/5

 claims attorneys’ fees under 15 U.S.C. § 1117.

Quality International’s defenses may be summarized under four points, as follows:

1) No likelihood of confusion: McDonald’s cannot claim ownership over every formative of “Mc” plus a generic word, and the formative “McSleep” is not a name or, when used in its logo form, is not a logo that is likely to cause confusion.

2) Noncompeting uses: McDonald’s marks have been developed in the fast-food business and do not preclude the use of “McSleep Inn” in the lodging business.

3) Extensive third-party uses: By allowing or acquiescing in the use by third parties of a proliferation of the use of words formulated by combining “Mc” with a generic word, McDonald’s should be denied the right to preclude the use of “McSleep Inn.”

4) “Mc” is generic: The use of “Mc” as a prefix has become generic and has entered into the English language with a recognized meaning of its own.

Quality International is a Delaware corporation with its principal offices in Silver Spring, Maryland. It is engaged in the lodging business, particularly in inns, hotels, suites, and resorts. Since 1981 it has been the fastest growing hotel franchise chain in the United States and is now the third largest franchiser of hotels both in terms of hotels and rooms available. Its sales for 1987 were over $56 million.

After Robert C. Hazard, Jr. became the chief executive officer of Quality International in 1980, the company adopted a long range plan that began with an analysis segmenting the lodging market into five sections: economy, luxury budget, mid-priced, luxury, and super luxury. Mr. Hazard then aimed various products of Quality International at these market segments. Clarion Hotels and Resorts became the luxury product of Quality International; Quality Inns, the mid-priced; and Comfort Inns, the luxury budget.

Having no product to compete in the economy segment, Quality International designed a concept for a hotel with a smaller basic room which would rent for between $20 and $29 per night. Each room would have a queen size bed, plush carpeting, color TV, and a contiguous bathroom. There would be no conference rooms, food or other amenities on the premises, except a swimming pool in certain geographical areas. These economy hotels would all be of new construction and a consistent architecture. The name selected by Mr. Hazard for this product was “McSleep Inn.” The first McSleep Inn is scheduled to open in December, 1988.

To improve its marketing of all products, Quality International adopted a “three chain logo” which consists of the three individualized but compatible logos for each of the products offered (Clarion, Quality Inn, and Comfort Inn), arranged horizontally under the caption “Quality International.” Each logo, though different, clearly belongs to a family. The outside shape of all three is square with rounded corners and all three include within the square a stylized sun and the applicable name “Comfort,” “Quality,” or “Clarion.”

This three chain logo will be expanded into a four chain logo when the McSleep Inns join the family of Quality International hotels and motels. As the new corporate signature of Quality International, the four chain logo will be featured in all corporate advertising.

While it is the policy of Quality International to advertise with a consistent corporate identification, at the present time, inns and motels franchised by Quality International advertise their individual facilities without reference to the corporate signature. Moreover, limited access highway signs which announce lodging at exits only depict the logo of the particular motels available at the exit; government regulations do not permit inclusion of the three chain or four chain logo. Examples of telephone directory advertising and even franchising offering materials received at trial did not include the Quality International corporate signature.