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Wolff & Samson PC
Counsellors At Law Intellectual Property Many businesses involved in securing trademark rights for their products are aware, at least in some fashion, of the 'likelihood of confusion' test the courts employ in trademark infringement litigation.1 In those actions, which are frequently called "forward confusion" cases, a well-established company is the first or senior user of a trademark and has commenced litigation against a secondary user of the mark, the junior user, who in using the mark, has created the impression that its product is really the product of the senior user, thus poaching on the goodwill or reputation of that senior user. 2 What is, perhaps, not as cognizable is how the courts vary this 'likelihood of confusion' test in trademark infringement cases where the senior user is a smaller, less-established entity, and the new or junior user is a powerhouse, thereby creating the impression that the senior user is owned by or otherwise controlled by the more established company.3 This type of claim is termed "reverse confusion," and is a cause of action available to the "little guys" to protect their priority interest in their trademarks.4 The plaintiff asserting a reverse confusion claim may be more or less likely to be successful depending on where the litigation is commenced because not all federal judicial circuits have tailored their analyses differently from forward confusion cases.5 Without such differentiation, certain elements of the 'likelihood of confusion' test stand to benefit a poaching junior user at the expense of the rightful trademark owner. This article explores the manner in which the different federal judicial circuits throughout the United States address reverse confusion, particularly noting any changes the courts have taken with respect to this cause of action within the past few years. In both forward and reverse confusion cases, the protectability of the mark is and should be of primary importance. In this respect, it is the inherent strength of the mark that is examined.6 Where there is a protectable mark, the 'likelihood of confusion' analysis follows. There is a strong rationale for varying approximately five of the frequently considered elements in the standard likelihood of confusion test, but in most jurisdictions, they remain the same.7 For example: (1) the commercial strength of the plaintiff's mark is a primary consideration in some jurisdictions, even though in a reverse confusion case, the junior user will always be commercially stronger by virtue of the fact that it is a reverse confusion case; (2) while the appearance and sound of the marks are appropriate to be analyzed in both forward and reverse confusion cases, the fact that consumers are likely to associate a senior user's marks with a junior user, even on unrelated products, should be considered as a factor in favor of the senior user not against it; (3) because the smaller senior user is not likely to enter the junior user's market by virtue of its weaker financial strength, whether the plaintiff will enter the defendant's business area should not be a factor in reverse confusion cases as it is in forward confusion cases; (4) actual confusion is an important factor for both types of cases but the question of whether consumers perceive that the senior user is sponsoring the junior user's products is not applicable in a reverse confusion situation, but rather, the test should be whether consumers believe the senior user's products are controlled by or owned by the larger junior user; (5) it is not as appropriate to evaluate the 'good faith' of the defendant in adopting the mark in a reverse confusion case, where courts examine whether the defendant intended to pass off its own product as that of the senior user since it is highly unlikely that a large powerhouse will ever intend to pass off its products as that of the smaller yet senior user; the more applicable test is whether the junior user demonstrated bad faith in adopting the mark, such as neglecting to perform a trademark search or proceeding to use the mark even after identifying its use by the smaller senior user.8 In the past few years, some of those circuits that have adapted the 'likelihood of confusion' test for reverse confusion cases have solidified their differentiations. Others continue to struggle with recognizing reverse confusion as a different type of claim. And, as such, may be less preferred jurisdictions for commencing reverse confusion litigation when a choice of forum is available. In the following paragraphs, we review the case law in federal courts by circuit, in numerical order beginning with the First Circuit and ending with the Tenth Circuit. In one of the most recent reverse confusion cases reported by the First Circuit Court of Appeals, the Court demonstrated the First Circuit's continued9 reticence to deviate from the analysis it has long used in forward confusion cases in reverse confusion cases. 10 In Attrezzi, LLC v. Maytag Corp., the plaintiff senior user opened a retail store and launched a website specializing in kitchen products, under the trademark Attrezzi.11 Defendant Maytag, with full knowledge of plaintiff's use of the Attrezzi mark, began promoting its new line of electric kitchen appliances as "Jenn-Air Attrezzi."12 The Court noted that had this been an appeal of a bench trial rather than a trial by jury, it may have come out in favor of the defendant because "this is not a clear-cut case as to confusion."13 The Court explained that a likelihood of confusion must be demonstrated in a reverse confusion case as it would in a forward confusion case, and listed the same series of factors it examines in forward confusion cases for the case at hand.14 These factors include:
The Court then proceeded to analyze the facts under these factors, finding that both sides had "points in their favor."16 Most interestingly however and perhaps signifying the possibility that in future reverse confusion cases courts within the First Circuit might be more willing to adapt their forward confusion test to the special circumstances of the reverse confusion claim, the Court noted two differences in reverse confusion cases.17 First, the Court highlighted the fact that because the junior user's mark, Jenn-Air, is a more recognized label than that of the senior user, Attrezzi, the combination of Jenn-Air with Attrezzi could "aggravate the threat" to the plaintiff senior user; and, second, the fact that Maytag demonstrated national expenditures on advertising could be a factor leaning against the stronger junior user in a reverse confusion case.18 Still, even recognizing that defendant knew of plaintiff's use of the mark before it began using it itself, and noting the fact that the jury must have concluded Maytag's willfulness demonstrated it was aware there was a risk of confusion, the Court explored defendant's intent in terms of a "good faith" analysis, rather than one of bad faith, and found that defendant's disregard of advice it received from in-house counsel was an "innocent explanation" and that "there is some distance in a case like this one between a company's knowing decision to risk a law suit and a factual inference that customer confusion is likely."19 Courts within the Second Circuit continue to recognize reverse confusion as an actionable claim, and continue to modify their likelihood of confusion analyses to accommodate the different circumstances involved in a reverse confusion cause of action.20 Courts within the Second Circuit, however, analyze the "bad faith" factor differently than, for instance, courts in the Third Circuit, infra.21 The Second Circuit Court of Appeals noted that while the Third Circuit held that failure to conduct a trademark search may prove bad faith as to the junior user, the Second Circuit will not find the junior user acted on bad faith simply because the junior user had not adequately conducted a trademark search; in the Second Circuit, there also must be evidence that failure to correct inadequacies in such a search was driven by "an intent to sow consumer confusion or to exploit the good will or reputation of the senior user."22 Bad faith may, however, be inferred from evidence demonstrating that the junior user had actual or constructive "knowledge of the senior user's mark."23 In January of 2006, the Second Circuit Court of Appeals also demonstrated how the Court will sometimes decide a reverse confusion case without even reaching a likelihood of confusion analysis.24 In Catamount Software v. Microsoft Corp., the Court affirmed the lower court's decision that because plaintiff Catamount was not entitled to relief, there was no infringement, and thus, the Court was not required to analyze of the relevant likelihood of confusion factors.25 Catamount had claimed that Microsoft infringed its trademark PocketMoney, which it used to market a personal financial software program designed for personal digital assistant devices ("PDAs").26 Microsoft had been marketing its personal financial software as 'Microsoft Money' and PDAs that used its Windows operating system were referred to as 'Pocket PCs'; thus, Microsoft decided to market its own personal financial management software to run on Pocket PCs as 'Microsoft Pocket Money'.27 After discussing its plans with Catamount, Microsoft decided to name its product 'Microsoft Money for Pocket PC'.28 Catamount then told Microsoft that its use of any combination of the words 'Pocket' and 'Money' would result in litigation.29 Even though the products competed against each other, Catamount produced evidence of some confusion in the marketplace and the trial court found that PocketMoney is a protectable mark, the trial court decided that Microsoft could not be held liable for infringement because while PocketMoney as a whole is a suggestive mark, it contains descriptive elements and an infringement action cannot be based "simply on a descriptive use of one of its elements."30 Finding 'Pocket PC' a generic term and 'for Pocket PC' a descriptive phrase, the trial court noted that Microsoft had simply combined its own pre-existing mark, 'Microsoft Money', with a descriptive phrase, which is not actionable.31 The Second Circuit Court of Appeals agreed, finding no need to analyze whether there existed a likelihood of confusion because "Microsoft is entitled to use its senior mark in combination with a descriptive phrase indicating the operating system with which its software is compatible."32 Courts within the Third Circuit have for many years recognized reverse confusion as a cause of action and typically vary the forward confusion test for those cases in two distinctive fashions: (1) unlike the forward confusion cases, in the reverse confusion case, these courts view the inherent strength or distinctiveness of the junior user's mark as more important than its commercial strength; and, (2) analyze the 'good faith' factor in a reverse confusion case more like it is a 'bad faith' factor, exploring whether the junior user had carelessly investigated use of the mark prior to adopting it and whether the junior user demonstrated an intent to take over the senior user's mark.33 The Third Circuit remains a forerunner in analyzing reverse confusion claims, recently noting that "economic reality and common sense require that some of the [factors used in a forward confusion likelihood of confusion test should] be analyzed differently when reverse [confusion] is at issue."34 In Freedom Card, Inc. v. JPMorgan Chase & Co., the Court reiterated its long held determination that the strength of the mark, the intent in adopting the mark and evidence of actual confusion are analyzed differentiy in a reverse confusion case than in a forward confusion case.35 The Court posited that in reverse confusion cases, the Court's focus should be on "the commercial impact of the stronger junior user's mark on the weaker mark of the senior but less dominant user," looking at, for instance, "any advertising or marketing campaign by the junior user that has resulted in a saturation in the public awareness of the junior user's mark."36 Further, the Court noted that while in a forward confusion case, the intent factor is measured in terms of the junior user's "intent to palm-off or ride" the senior user's goodwill, in a reverse confusion case, the defendant is typically exploiting confusion in the marketplace so as to push the less powerful senior user out of the market.37 Even where jurisdictions such as the Third Circuit have substantial case law demonstrating the proper way to advance a reverse confusion claim, some courts still neglect to follow suit, which becomes an issue on appeal. For example, in Freedom Card, plaintiff appealed the lower court's determination that there was no infringement, arguing that the lower court had not analyzed the likelihood of confusion factors differently than it would have for a forward confusion case. 38 Plaintiff argued that there is precedent in the Third Circuit for vacating a district court's judgment and remanding in such a case where the court neglected to follow the Circuit's reverse confusion test.39 The Freedom Card Court distinguished this "precedent," noting that the Third Circuit "did not create a bright-line rule requiring reversal and remand whenever a district court fails to properly apply [the likelihood of confusion test in a reverse confusion case]."40 Rather, the Court stated, that a two-step inquiry is involved: (1) the court must assess the disparity if the commercial strength of the mark in question reaches a "high threshold," and if it does, (2) the court should engage in a likelihood of confusion analysis, specific to reverse confusion cases.41 In Freedom Card, the plaintiff used the mark "Freedom Card" on credit and financial services products promoted to consumers with bad credit or those who had recently filed for bankruptcy.42. A year after plaintiff discontinued marketing or using its Freedom Card, defendant reissued a Chase Shell MasterCard under the name, Chase Freedom card.43 Chase eventually filed an action seeking a declaration that its mark did not infringe on Freedom Card's rights; Freedom Card filed a counterclaim, asserting trademark infringement and unfair competition.44 The district court granted Chase summary judgment on Freedom Card's claims.45 Noting that it may affirm a correct decision on different grounds, the Third Circuit Court of Appeals expressed doubt that Freedom Card had a viable reverse confusion claim because "the essence of reverse confusion is that the more powerful junior user saturates the market with a similar trademark and overwhelms the smaller senior user," but here, Chase introduced its product a year after plaintiff had discontinued promoting or marketing its Freedom Card.46 Nevertheless, the Court set out to determine whether the district court improperly applied the likelihood of confusion test.47 Finding the fact that Freedom Card was no longer in the marketpiace at the time Chase introduced its card dispositive, the Court could not take issue with the lower court's determinations as to the likelihood of confusion factors and affirmed the district court's summary judgment favoring Chase.48 The Fourth Circuit remains generally unsupportive of the reverse confusion doctrine.49 In the most recently reported Fourth Circuit Court of Appeals case, a 2001 decision, the Court held in favor of the large junior user, refusing to grant the injunction requested by the smaller computer software manufacturer, and not even addressing the reverse confusion doctrine in its analysis or opinion.50 Circuit Judge Niemeyer's dissent, however, stated that the case was a classic reverse confusion cause of action, and that defendant Motorola's "widespread use of the plaintiff's identical mark in a complementary market wili effectively and permanently destroy [plaintiff's] mark if an injunction is not entered," and plaintiff's customers are "inherently likely. . . to assume that [plaintiff's] products bearing the [same] slogan are associated with Motorola."51 The Fifth Circuit recognizes the reverse confusion doctrine but has not issued a reported opinion fully analyzing a case under that doctrine in more than two decades.52 In Capital Films Corp. v. Charles Fries Prods., Inc., the Fifth Circuit Court of Appeals recognized reverse confusion as a cause of action and adopted the analysis as posited from the leading case in the Tenth Circuit.53 There is no telling how the Fifth Circuit would conduct this analysis, however, because the Fifth Circuit Court of Appeals in Capital Films remanded to the district court to apply the reverse confusion analysis to the facts, and that court's opinion is not reported.54 Courts within the Sixth Circuit continue to demonstrate their reluctance to treat a reverse confusion claim differently than that of a forward confusion case.55 In 2005, in Current Communications Group, LLC v. Current Media, LLC, a district court within the Sixth Circuit expressly stated as such: It appears, however, that just labeling a case a "reverse confusion case" does not alter the analysis significantly. The ultimate issue is still whether likelihood of confusion will result. . . plaintiff still must establish a likelihood of confusion under the traditional analysis.56 The Seventh Circuit Court of Appeals has long held that reverse confusion is a viable cause of action.57 In Sands, Taylor & Wood Co. v. Quaker Oats Co., the Court established an analysis that varied the standard likelihood of confusion test for forward confusion cases in two important instances for reverse confusion cases: (1) the Court noted that the commercial strength of the junior user's mark is the important consideration, not the commercial strength of the senior user's mark; and (2) the "good faith" factor should be analyzed more as a "bad faith" test, specifically asking the question of whether the junior user had knowledge of the senior user's mark prior to adopting the mark itself.58 These variations are, of course, more similar to the analysis employed by the Third Circuit. A district court within the Seventh Circuit demonstrated in 2006 that courts within the circuit continue to vary these two factors in the likelihood of confusion test for reverse confusion cases.59 Critical to the court's decision denying plaintiff the relief sought in World Wrestling Association v. TNA Entertainment LLC was its determination that plaintiff's mark was a "relatively weak mark" with questionable distinctiveness since it was "mostly descriptive," and that plaintiff had merely provided "conclusory assertions of bad faith" but no evidence.60 Since 1994, courts within the Eighth Circuit have refined their approach to reverse confusion causes of action.61 While there are not many cases within the Eighth Circuit dealing with reverse confusion as a cause of action, those few cases note the importance of the commercial strength of the junior user, and tend to look to the 'bad faith' of that junior user in taking the mark for its own.62 In Dream Team Collectibles, Inc. v. NBA Properties, Inc., the court found important the fact that defendant used the "Dream Team" mark even though it knew plaintiff had trademark rights to that mark for a similar product.63 In the most recent district court case within the Eighth Circuit to address reverse confusion, albeit briefly, the court noted that plaintiff's concern was not only that consumers would confuse defendant's healthcare plan with plaintiff's company but also that consumers would believe plaintiff's offerings were part of the larger defendant's company.64 The court noted that even if it provided the defendant Aetna with a "level of good faith" and assumed the company did not hope to profit from any goodwill associated with plaintiff's trademark, "the public is still likely to be confused, and plaintiffs will be injured."65 The court also noted that any evidence demonstrating defendant intended to "pass off its services as plaintiff's" would not be essential to the cause of action but would be a factor to be considered.66 This case came to the court before defendant had the chance to use the trademark, and defendant argued that plaintiff could therefore not demonstrate actual confusion.67 The court corrected defendant, noting that the test was "likelihood of confusion," not actual confusion; thus "the absence of demonstrated confusion, especially when plaintiff has prudently attempted to forestall it, does not weigh for or against either party on the issue of confusion." 68 In 2003, the Ninth Circuit Court of Appeals seemingly used its forward confusion likelihood of confusion analysis in a reverse confusion case, but by 2005, the Circuit Court was clearly treating claims of reverse confusion differently.69 In 2005, the Court in M2 Software, Inc. v. Madacy Entertainment noted that jury instructions asking jurors to decide whether consumers who conducted business with plaintiff thought they were doing business with the defendant junior user were appropriate, as was a focus on the commercial strength of the junior user's mark.70 Plaintiff had argued that the district court's jury instructions suggested that its reverse confusion claim could not be sustained unless the junior user had saturated the market, and that the jury should have been instructed to consider potential customers, "affiliation, connection, and association".71 The Court found the arguments without merit because the jury instructions "mirrored the language used in" the Ninth Circuit's reverse confusion cases.72 The jury instructions used by the district court, included the foliowing:
Even though the district court had made saturation of the market appear to be a necessary component of this analysis when it is just one factor in the anaiysis, the Court found this to be a harmless error, stating that in a reverse confusion case, "the inquiry focuses on the [commercial] strength of a junior mark" and the "strength of the junior mark is closely related to how much the market is saturated by the junior mark. . . thus, the district court's use of 'has saturated the market' was harmless.74 Several months earlier, the Ninth Circuit Court of Appeals clarified some confusion in its courts, noting that even though it is important in a reverse confusion case to explore the commercial strength of the junior user's mark (insofar as whether it is so strong, it may overtake the senior user's mark), the court must still analyze the inherent strength of the senior user's mark as a separate analysis.75 The inherent strength of the senior user's mark is not irrelevant in a reverse confusion case; in fact, the strength of the senior user's mark is an initial inquiry that determined the scope of protection in which plaintiff is entitled.76 One of the earliest cases to address reverse confusion came out of the Tenth Circuit in the United States District Court of the District of Colorado.77 In subsequent cases within the Tenth Circuit, courts recognized reverse confusion as a cause of action but did not vary their analyses from forward confusion cases, except to note that the "good faith" factor should be treated differently in a reverse confusion case.78 Because of this, courts within the Tenth Circuit may not be as desirable of a forum for plaintiffs asserting reverse confusion; in fact, the last words on this issue noted by a court in this circuit were that not only is a defendant's knowledge of its mark prior to its use not considered enough to demonstrate a lack of good faith, but also that the commercial strength of a plaintiff's mark is significant even though such an assertion should be inapposite in a reverse confusion claim.79
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