Reverse Confusion in Trademark

Reverse Confusion in Trademark

By Suwarn Rajan, Advocate, Managing Partner CARE INTELLECT,NEW DELHI,email:careintellect66@yahoo.com

I. Genesis

Trademark protection is a valuable right a business. This is because trademark rights are gained through mere use, and they last indefinitely. Remember:the key to trademark law is use in connection with a good or service. A strong trademark is one that is “arbitrary” (i.e., it does not describe the goods or services, such as how “Greyhound” does not describe

a bus service) and is used in connection with a good or service in such a way that it identifies the source of good or service. Trademark rights begin the moment such use begins. The strength of those rights is determined by the extensiveness of the use and arbitrariness of the mark.

A trademark registration will give the user stronger rights nationally, but an unregistered mark can be just as strong if it is supported by strong customer recognition, advertising and national use. For litigation purposes, the claim for infringement of the registered mark is brought under 15 U.S.C. section 1114, and the claim for the use of the unregistered mark is brought under 15 U.S.C. section 1125(a)(also known as a “section 43(a) claim” under the Lanham Act, or “federal unfair competition”).But, practically, claims for infringement of registered or unregistered marks are nearly identical. (GoTo.com, supra,202 F.3d at 1205 fn. 3.) Infringement of atrademark does not require actual confusion between the marks but only a “likelihood of confusion.” In the Ninth Circuit , likelihood of confusion is assessed under the so-called “Sleekcraft factors.”1 The Sleekcraft case requires that, when assessing likelihood of confusion, the following factors be considered:

1. strength of the mark;

2. proximity of the goods;

3. similarity of the marks;

4. evidence of actual confusion;

5. marketing channels used;

6. type of goods and the degree of care

likely to be exercised by the purchaser;

7. defendant’s intent in selecting the

mark; and

8. likelihood of expansion of the product

lines.

(AMF Inc. v. Sleekcraft Boats (9th Cir.1979) 599 F.2d 341, 348 -349.)

As a final bit of terminology, the first person or company to use the mark in connection with the good or service is

called the “senior user.” The second user of an arguably similar mark in connection with an arguably similar good or service is the “junior user.”In many trademark cases, the senior user is a large company pursuing its rights(e.g., Mattel’s use of BARBIE in connection with a toy fashion doll) against a smaller company that the large company alleges is using a similar mark in connection with similar goods (e.g., BARBRA in connection with a doll). However, if trademark infringement were limited to.

Basically  trademarks serve two primary functions. First, trademarks exist to protect consumer expectations about products and services. A trademark should help consumers to accurately predict the quality of the product they are purchasing regardless of the actual source. Second, trademarks allow owners of businesses to accumulate goodwill in their products.  Trademarks can accumulate value for their owner, and are often sold, licensed, and assigned for millions of rupees.  In many trademark claims, therefore, courts are forced to balance the owner’s rights in the mark and the consumer’s interests in the mark.In traditional trademark infringement, or forward confusion, a junior user attempts to use a well-known senior user’s mark to sell its product. In this context, enforcement of the trademark is beneficial to the consuming public, because it prevents marketplace confusion which would increase search costs and harm the trademark owner because of his ownership interest in the mark. However, in reverse confusion, the interests of trademark owners and consumers are often at loggerheads.

The doctrine of reverse confusion is intended to enable small, senior users to protect their trademark rights against junior users whose marks have gained commercial strength through extensive marketing.  Accordingly, since a senior user may only learn of the junior use of the mark through the junior user's advertising campaign, the application of the doctrine may result in the loss to the junior user of substantial sums already invested in the marketing and promotion of goods under the mark and, in some cases, loss of profits in the form of damages.  Reverse confusion, therefore, can be a powerful weapon in the arsenal of lesser known companies both in terms of protecting their trademark rights and as leverage against larger users.

The doctrine of reverse confusion was first applied in 1976 and has since been recognized by most courts.  See Big O Tire Dealers, Inc. v. Goodyear Tire & Rubber Co., 408 F. Supp. 1219 (D. Colo. 1976), aff'd and award modified, 561 F.2d 1365 (10th Cir. 1977), cert. dismissed, 454 U.S. 1052 (1978).  Reverse confusion occurs when a junior user engages in such extensive promotion of goods under a mark that the market is swamped, resulting in a likelihood that consumers will mistakenly believe the senior user’s goods are associated with the junior user.  "In a reverse confusion situation, rather than trying to profit from the senior user's mark, the junior user saturates the market and 'overwhelms the senior user.'"  3 J. Thomas McCarthy, McCarthy on Trademarks and Unfair Competition § 23:10 (2006).  Accordingly, reverse confusion occurs when a more powerful company uses the mark of a smaller, less powerful senior user. . In reverse confusion cases, a junior user (defendant) adopts a mark already in use by the senior user (plaintiff). However, the junior user dwarfs the senior user through advertising and other expenditures used to promote the mark. While the senior user has a “property” interest in protecting the mark, the public may benefit more from the junior user’s adoption of the mark because they only identify the mark with the junior user and are not confused by the dual uses of the mark. That conflict is the focus of this Note. This Note argues that the doctrine of reverse confusion should be limited to cases in which society does not benefit from the junior user’s use of the mark enough to outweigh the harm to the senior user’s property rights.

II. Reverse Confusion and Trademark Infringement

Reverse confusion was first recognized in 1974 in the Tenth Circuit. Prior to Big O Tire Dealers, Inc. v. Goodyear Tire & Rubber Co., (561 F.2d 1365 (10th Cir. 1977) courts were hesitant to recognize trademark rights for small senior users. In Westward Coach Mfg. Co. v. Ford Motor Co., (388 F.2d 627 (7th Cir. 1968) the Seventh Circuit refused to recognize the doctrine of reverse confusion when Ford adopted the mark [p165] “Mustang” for its experimental cars in 1962, subsequent to Westward’s use and registration of the mark for use on its trailers and campers.  Ford, ignoring a request by Westward to cease use of the mark, began mass-production of the Mustang in April 1964.  By October 1965, Ford had spent over $16 million dollars in advertising the Mustang, typical of the expenditures in reverse confusion cases. The circuit court employed a traditional trademark infringement analysis and found that Westward did not own a strong mark, and therefore found no infringement.

As critics pointed out, “failure to distinguish between direct and indirect confusion often led to seemingly inequitable results.”  Ford adopted Westward’s mark with full knowledge that Westward had federal registration rights to the mark.  Because of the disparity between the two users of the mark, it was likely that a purchaser of Westward’s product would think that Ford, the junior user, was the source of the product. Therefore, “taken by itself, this case would allow powerful junior users to undermine the trademark protection accorded smaller businesses through sheer economic strength.”  That is why a different analysis, a reverse confusion analysis, is necessary to protect smaller senior users who properly use their marks. The Tenth Circuit originated this stronger analysis in Big O. [p166]

Reverse confusion began to take shape in 1974, in Big O Tire Dealers, Inc. v. Goodyear Tire & Rubber Co., 561 F.2d 1365 (10th Cir. 1977). In Big O, Goodyear Tires adopted the mark “BIG FOOT” for use on its tires, when Big O had already established common law rights to the mark.Goodyear representatives met with Big O representatives and Big O rejected Goodyear’s offer of money in exchange for permission to use the Big Foot mark.Goodyear continued its use of the mark and by August 31, 1975, had spent nearly ten million dollars on its “massive, saturation campaign.”  Big O commenced a trademark infringement suit against Goodyear.At issue was whether Big O had an actionable trademark infringement claim when “Big O does not claim nor was any evidence presented showing Goodyear intended to trade on the goodwill of Big O or to palm off Goodyear products as being those of Big O.”  The circuit court held that reverse confusion was an actionable claim under the trademark laws of Colorado.  The Tenth Circuit reasoned that Colorado’s “‘policy of protecting trade names and preventing public confusion’ as well as having ‘the tendency (of widening) the scope of that protection’” called for protection against reverse confusion.Also persuasive was evidence of actual confusion presented by witnesses showing they thought that Goodyear was the source of Big O’s tires after seeing the Goodyear commercials. Therefore, for the first time, a circuit court recognized and enforced the doctrine of reverse confusion in trademarks. [p167]

III. Recent Trend

Guichard v. Universal City Studios, LLLP

2007 U.S. Dist. LEXIS 45867 (N.D. Cal., June 15, 2007), aff’d, 261 Fed. Appx. 15 (9th Cir. 2007)

Plaintiff Richard Guichard was a small independent film producer, who, in February 2006, launched a website at “www.whisperoftheblue.com” to promote his unproduced screenplay “Whisper of the Blue.”  The website contained the full text of his screenplay about an ex-Navy SEAL who battles the modern-day pirate Blackbeard Junior for the treasure of the sunken ship “Yorke,” as well as information about his proposed film project and submersible equipment that could be used for underwater filming.  Guichard, proceeding pro se, sought to preliminarily enjoin Universal City Studios (“Universal”) from using “Whisper” as the title of an upcoming motion picture, which had been in production since November 2004.  Universal’s film was a supernatural thriller about the kidnapping of a young, quiet boy who turned out to have extraordinary powers such that the boy’s whisper “may be the last thing that [his captors] hear.”  Guichard claimed that he had gained “exclusive control” over the term “Whisper” because he acquired a service mark in the domain name “whisperoftheblue.com” for “providing information, via the internet, in the field of entertainment, namely, the development, production and distribution of motion picture films.”  The court denied Guichard’s motion, holding that he failed to show both a likelihood of success on his claims that Universal’s use of the “Whisper” title would cause reverse confusion, i.e., that consumers would believe that Universal was the source of Guichard’s website at “www.whisperoftheblue.com,” or any irreparable injury.  It initially noted that the registration of a domain name by itself does not create trademark rights.  Moreover, Universal had already begun producing its movie and invested more than $12 million in its film as of February 2006, so Guichard could not establish priority use as of that date.  Further, even after February 2006, Guichard’s minimal use of the WHISPER OF THE BLUE mark, which consisted solely of “multiple visits” of Internet users without any sale or advertising of services, did not satisfy the “use in commerce” element necessary to establish priority of use under the Lanham Act.  Nonetheless, the court examined the Sleekcraft factors to determine whether there was a likelihood of confusion.  Regarding the similarity of the marks, although the first words in the disputed marks were similar, this factor weighed in favor of Universal because Guichard’s mark had not gained “prominence or distinction by its first word.”  Moreover, consumers in the motion picture industry expected movie titles to communicate a message about the movie, not the identity of the producer.  Under these circumstances, sophisticated consumers of motion pictures were not likely to confuse the title of Universal’s psychological horror film named WHISPER with a “multi-word website identifying a proposed and unproduced screenplay about an underwater pirate adventure.”  As to the strength of the mark, the court found that although Universal had the ability to overpower Guichard’s mark, Guichard’s mark was too weak to support a likelihood of consumer confusion due to its use for only a short period of time and due to third-party uses of “Whisper” in literary titles.  Moreover, because Guichard was attempting to protect his website and not the title of his screenplay, and Universal had not established the same type of “web-presence” as Guichard’s website, the parties’ goods and services and marketing channels were not closely related.  Lastly, Guichard failed to provide any evidence of actual confusion.  The court rejected his offering of GOOGLE search results showing both his website and references to Universal’s movie based on various queries including the word “whisper” (e.g., “whisper underwater production,” “whisper underwater actors,” and “whisper underwater feature film”), finding that “the search is not probative as the search function calls up any internet listing with the search terms, including any motion picture with the search words in the same listing.  The searches are far too broad and not probative as to likelihood of confusion.”  Finding that these Sleekcraft factors all favored Universal, the court did not consider the remaining factors.  Regarding irreparable harm, Guichard had not yet started production on his own film so his claimed harms were speculative.  Moreover, Guichard identified “no lost customers, talent, financing, or goodwill” as a result of Universal’s release of its movie.
Plaintiff appealed the denial of his motion for a preliminary injunction.  In a one-page opinion, the Ninth Circuit summarily affirmed, finding that plaintiff’s “presence” at his website was not a sufficient use in commerce to create a protectable trademark interest.  Thus, plaintiff could not show a likelihood of success on the merits if his infringement claim. Accordingly, the district court did not abuse its discretion in denying the injunction.

Strange Music, Inc. v. Strange Music, Inc.

326 F. Supp. 2d 481 (S.D.N.Y 2004)

Plaintiff and defendant both operated record labels but served different niches in the music industry.  Plaintiff used the mark “sTRANGEmUSIC” and produced “new music”—a type of “contemporary concert music” combining electronic elements with classical forms.  Plaintiff created sTRANGEmUsic in 1998 and registered the domain name “strangemusic.com” later that year.  Defendant used “Strange Music” for a label producing rap and hip-hop music.  Defendant did not know about plaintiff until May 2003 when it attempted to register the domain “strangemusic.com,” which plaintiff already owned.  Defendant instead registered “strangemusicinc.com.”  Defendant was significantly more commercially successful than plaintiff, with $5,590,000 in sales versus plaintiff’s $15,000.  When plaintiff learned of defendant in August 2003, plaintiff demanded that defendant cease use of its mark but defendant refused.  The court denied plaintiff’s motion for a preliminary injunction on its claims for infringement and state dilution.  Plaintiff based its infringement claim on reverse confusion, i.e., plaintiff asserted that consumers would believe that the better-known defendant was the source of plaintiff’s music so that the public would also consider plaintiff a hip-hop artist, presumably tarnishing its image.  The court first found that plaintiff’s common-law mark was suggestive and thus inherently protectable because consumers could not “immediately discern to which genre of music it belonged.”  Turning to likelihood of confusion, however, the court found that plaintiff’s mark was weak in the marketplace based on its sales of only 1,319 CDs for only $15,000 and limited advertising over a five-year period.  Although plaintiff may have had some strength in the “new music” community, that was only a “miniscule” part of the entire music market for which it sought an injunction.  In contrast, defendant’s mark was stronger than the plaintiff’s based on defendant’s sales of $5,590,000 and advertising expenditures of $3,350,000, thus weighing in favor of reverse confusion.  Regarding similarity of the marks, although both marks were spoken identically, the court stated that they differed greatly in font, color, and design such that they did not create the same overall commercial impression and their “appearance in the marketplace is unlikely to confuse consumers.”  The parties’ products were not competitive, which favored defendant.  The only basis for confusion due to the “proximity” of the parties’ products was that searches on Internet search engines like Yahoo! or Google revealed hits for one or both of the parties.  Any initial-interest confusion resulting from such hits, however, was not actionable.  According to the court, “[c]ommon sense dictates that upon arrival at each site, a consumer looking to purchase a CD by other party would immediately know if they had reached the wrong web-site” and even a “cursory glance” at defendant’s website “would be sufficient to inform a new music aficionado that [plaintiff’s] compositions are not available for sale through that site.”  Moreover, plaintiff was unlikely to bridge the gap to enter defendant’s market.  Indeed, plaintiff’s claim that defendant’s use of its mark for hip-hop and rap music would tarnish his image was inconsistent with his stated intent to bridge the gap.  As to the actual-confusion factor, plaintiff’s evidence of a few anecdotal misdirected phone calls and e-mails failed to establish reverse confusion.  Plaintiff offered no evidence that actual consumers had been confused or that their purchasing decisions had been influenced.  Nor was there any evidence that defendant adopted its mark to benefit from plaintiff’s reputation.  And the court fond that Internet shoppers were “relatively sophisticated” when they searched for a particular artist’s works.  Plaintiff thus failed to show a likelihood of success on the merits of its infringement claim.  Based on the court’s finding that plaintiff’s mark was weak for purposes of the likelihood-of-confusion analysis, it found that plaintiff’s mark was not sufficiently distinctive to warrant protection under the New York antidilution statute.

IV U Turn

Corporations should take heart, however, that the reverse confusion doctrine is not the windfall to small, unknown companies that it may first appear to be.  In practice, courts apply the theory of reverse confusion in relatively narrow circumstances.  This narrow application is the result, at least in part, of what appears to be three trends among courts entertaining claims of reverse confusion.  First, the central question in a case of reverse confusion is whether the junior user's mark is sufficiently strong that it will overwhelm the senior user.  In the Ninth Circuit Court of Appeals, for example, the inquiry into the strength of the marks focuses on a comparison of the conceptual strength of the senior user's mark with the commercial strength of the junior user's mark.  Surfvivor Media, Inc. v. Survivor Productions, 406 F.3d 625, 631 n.3 (9th Cir. 2005); Dreamwerks Prod. Group, Inc. v. SKG Studio, 142 F.3d 1127, 1130-31 (9th Cir. 1998); Moose Creek, Inc. v. Abercrombie & Fitch Co., 331 F. Supp.2d 1214, 1224 (C.D. Ca. 2004).  Unless the senior user's mark is conceptually strong – that is, fanciful or arbitrary – and the junior user's mark is commercially strong – that is, widely known to consumers due to extensive marketing, promotion and advertising of goods under the mark – courts are unlikely to sustain a claim for reverse confusion.  Second, the application of reverse confusion by most courts is highly fact-specific.  Third, some plaintiffs have urged in reverse confusion cases that the likelihood of confusion analysis be limited to three factors (strength of the marks, similarity of the marks and similarity of the goods).  Nonetheless, courts have been reluctant to so limit their analyses and, instead, generally consider all of the likelihood of confusion factors in assessing whether reverse confusion exists.  Accordingly, plaintiffs have been unable to rely only on certain factors that weigh in their favor while ignoring other factors that weigh against a finding of a likelihood of confusion.

For example, in Glow Industries, Inc. v. Lopez, Glow Industries claimed that Jennifer Lopez and Coty infringed its trademark "GLOW," under which it sold bath and beauty products.  252 F. Supp.2d 962 (C.D. Ca. 2002).  Lopez and Coty launched a line of perfume and beauty products under the mark "GLOW BY J.LO" and accompanied the launch with extensive advertising and marketing of the "GLOW BY J.LO" products.  The Court determined that the "GLOW" mark was suggestive and, therefore, a relatively weak mark conceptually.  In addition, the term "glow" enjoys widespread trademark use by third parties in the beauty industry, further limiting its strength.  Although Lopez and Coty had swamped the market and the "GLOW BY J.LO" mark was commercially stronger than the plaintiff's mark, the "GLOW" mark simply was not conceptually strong enough for a finding of reverse confusion.  Glow Industr., Inc., 252 F. Supp.2d at 1003.  By comparing the conceptual strength of the senior user's mark with the commercial strength of the junior user's mark, the Court noted that it "avoids the anomalous result against which defendants caution – i.e., that a small plaintiff with a weak mark will be able more easily to prove likelihood of confusion than a large company with a strong distinctive mark and high market penetration."  Id. at 987 n.12.  Moreover, the Court engaged in a full analysis of all of the likelihood of confusion factors in determining whether reverse confusion existed.

The 9th Circuit recently decided a reverse confusion case. M2 Software, Inc. v. Madacy Entertainment, No. 03-55957 (9th Cir. Aug. 31, 2005) concerned an appeal from a jury verdict of no reverse confusion. The trial court instructed the jury that reverse confusion occurs when the "consumers doing business with the [small] senior user mistakenly believe that they are dealing with the larger junior user. The plaintiff argued that "dealing with" is too narrow; that reverse confusion also occurs if the consumers believe there is an affiliation, connection, or association between the parties. But the court said that the instruction was correct.

 The Ninth Circuit Court of Appeals appears to have narrowed the application of the reverse confusion doctrine even further.  The Ninth Circuit upheld the District Court's jury instruction that reverse confusion occurs when "consumers doing business with the senior user mistakenly believe that they are dealing with the larger user."  421 F.3d 1073, 1089 (9th Cir. 2005), cert. denied, 126 S. Ct. 1772, reh'g denied, 126 S. Ct. 2885 (2006).  The Court rejected the argument that the term "dealing with" is too narrow and that reverse confusion occurs in the broader context of when a consumer mistakenly believes there is an affiliation, connection or association between two trademark users.  Id.  Unless the Ninth Circuit further clarifies this ruling in a subsequent decision, the M2 Software decision may be yet another avenue through which trial courts may limit the application of the reverse confusion doctrine.

While any company launching a new brand should conduct due diligence to ensure the mark it wishes to adopt is not already in use, the potential that it could be stopped mid-launch from using its newly adopted brand is not as great as one might think.  Instead, the standard a smaller, senior user must meet to prevail on a claim of reverse confusion is relatively high and may make the reverse confusion "tool" one that is a little less attractive to employ

V. Conclusion

In any trademark case, there are three parties to consider: the trademark owner, the infringer, and the public. Trademarks are a distinctive form of intellectual property because they lack many of the property rights that copyrights, patents, and trade secrets have. Therefore, the primary consideration for the application of trademark law should take account of the benefits to the consuming public.

De facto, most consumers will benefit more from the junior user’s use of the mark than the senior user’s use. This is because consumers are either unaware of the senior user’s use or are not confused by the concurrent uses. Disallowing the junior user to continue use will harm the consuming public, as they must reorient themselves to the various sources of products, and as it is not likely that DreamWorks would stop making movies simply because they lose rights to the name. Rather, consumers would need to be educated as to the new name of DreamWorks. In addition to increased search costs, the cost of education would obviously fall on the junior user, who would pass along the cost to consumers. Therefore, whenever a reverse confusion case arises, someone must lose something o