Page:Quality Inns v. McDonald's.pdf/8

, had been pursuing various diseussions with McDonald’s and Kroh Brothers, a real estate developer, for possible participation in McStop plazas. Prior to a trade show in September of 1986, Mr. Nelms had numerous conversations to this end, and at the trade show he introduced the McDonald’s representatives to Mr. Hazard. Following that brief meeting, a representative of Kroh Brothers wrote to Mr. Hazard:

"As you recall, Kroh Brothers Development Company is working with McDonald’s on the McStop concept. I have enclosed a flier that provides you with more information about what a McStop should be."

This letter was received by Mr. Hazard on October 2, 1986, and he referred it to Mr. Frederick W. Mosser, Quality International’s vice president in charge of franchising.

Quality International and McDonald’s pursued the McStop concept further, with discussions continuing into the Spring of 1987 but without reaching any agreement. It was after Mr. Hazard received the letter about McStop, however, when he selected the name McSleep for his new, budget-market product.

The final factor contributing to the Court’s belief that Mr. Hazard had McDonald’s in mind when he selected the name McSleep is the evidence that Mr. Hazard’s thinking was not limited to the one word McSleep, but rather a family of words, all created by using the prefix “Mc” with a generic word. In the Spring of 1987 when he instructed his attorneys to register and protect the name McSleep, he also directed registration of the names “McSuite” (which he intended to use for two rooms at McSleep Inn connected by a door) and “McBudget.” At trial, Quality International indicated its abandonment of the “McSuite” name and concept, and no evidence was received about the role or intended use of McBudget.

Following selection of the name McSleep, and prior to presentation of the concept to the Board of Directors of Quality International in June, 1987, a trademark search was conducted of “McSleep” in which the report revealed to Quality International management numerous uses of “Mc” formatives owned by McDonald’s. Mr. Frederick W. Mosser, the vice president in charge of franchising, said that he was surprised at how many marks McDonald’s owned. He indicated that while he perceived some risk in proceeding with the name McSleep, he felt that these reservations were overcome in his mind by the facts that McDonald’s was in the food business and Quality International was in the lodging business, and that the names would be displayed in a distinctive manner.

Following approyal by the Board in June of 1987, Mr. Hazard directed Susan B. Dynerman, his director of public relations, to make preparations for the public announcement of McSleep Inn at the trade show in Chicago in September 1987. When Mr. Hazard advised Ms. Dynerman of the new product, she raised questions “whether we could use the name. … I associated it with McDonald’s.”

A similar concern was expressed by Quality International’s advertising agency. The account representative, Mr. Barry Smith, anticipated that McDonald’s “would be overjoyed” with the McSleep Inn announcement, and he promptly proceeded to obtain an indemnity agreement from Quality International, protecting the agency against litigation by McDonald’s. He had never before asked for an indemnity agreement from Quality International during the ten years that the agency had been representing Quality International.

Several weeks before the public announcement, Mr. Hazard engaged a market research firm to conduct a survey to determine which of several mock up versions of a McSleep Inn room had the most consumer appeal. The survey was conducted of 120 people outside of Quality International and a slightly larger number of employees. Each participant was given a questionnaire inquiring about specific aspects of the rooms under consideration. There was one question, however, inserted at Mr. Hazard’s request, that read as follows: “What is your overall impression of the name ‘McSleep Inn’ for the type of hotel/motel