Wednesday, August 26, 2009

Ninth Circuit Tackles Trademark Tacking in “O'” Trademark Dispute

The Ninth Circuit addressed the unique issue of trademark tacking in affirming a lower court’s decision on a trademark lawsuit between two companies that produce clothing aimed towards participants of motor cross racing. See One Industries, LLC v. Jim O’Neal Distributing, Inc., No 08-55316, 2009 U.S. App. LEXIS 18967 (9th Cir. August 24, 2009).

On the one side is Jim O’Neal Distributing, Inc. (“O’Neal”), an apparent leader in the industry with 17.5% of the market for motocross apparel and helmets in 1998. Since 1991, O’Neal has used a stylized “O” followed by an apostrophe (the “O’ mark”) on its products. However, over the years, O’Neal used several different version of this O’ mark.

For purposes of this case, the relevant marks were the 1997 version – a thicker, boxier O’ mark with rounded corners (the “Rounded O’ mark”) – and the 2003 version – which abandoned the rounded corners of the 1997 mark in favor of an angular approach (the “Angular O’ mark”).

One Industries, LLC (“One Industries”) was originally founded in 1997 and began by selling stickers and decals; however, by 2003, One Industries had added helmets and clothing to its product lines which made it a competitor with O’Neal.

In 1999, One Industries developed the “One Icon” mark, which it describes as two interlacing number ones (pictured above), and also developed an angular version of the word “One” in its name (the “One Angular” mark) (pictured below). One Industries uses both of these marks on motorcycle-related apparel and headgear.

In 2006, O’Neal accused One Industries of infringing the 2003 Angular O’ mark as well as the O’NEAL mark. One Industries believed that O’Neal was misrepresenting the length of time that it had been using its O’ mark and that the One Icon and One Angular marks, which were created and registered in 1999, were actually senior to the Angular O’ mark created in 2003. One Industries filed a declaratory judgment action that its One Icon and One Angular marks did not infringe O’Neal’s trademarks. O’Neal in turn asserted counterclaims for trademark infringement.

Before discovery commenced, One Industries moved for a more definite statement under Federal Rule of Civil Procedure 12(e), arguing that O’Neal’s complaint did not identify the particular O’ mark that it claimed was allegedly infringed. O’Neal claimed that the O’ mark, with some slight changes over the years, was always the same mark.

The district court granted One Industries’ motion for a more definite statement reasoning that the two of the marks appear to be more than slightly different. O’Neal then amended its counterclaims to assert infringement of the 1997 Rounded O’ mark (in order to get around One Industries’ 1999 priority date for its own marks). The district court subsequently granted summary judgment to One Industries on all claims and O’Neal appealed.

O’Neal maintained that the district court erred by refusing to “tack” the different versions of the O’ mark dating back to 1991 since, according to O’Neal, each iteration of the O’ mark constituted a continuation of the same mark rather than a creation of a new mark.

As the Court of Appeals explains,

Tacking matters because One Industries first used the One Icon in 1999 -- after O’Neal developed the 1997 Rounded O’ mark but before O’Neal created the 2003 Angular O’ mark. It is a cardinal principle of federal trademark law that the party who uses the mark first gets priority. See Brookfield Commc’ns, Inc. v. West Coast Entm’t Corp., 174 F.3d 1036, 1047 (9th Cir. 1999) (“It is axiomatic . . . that the standard test of ownership is priority of use . . . [T]he party claiming ownership must have been the first to actually use the mark in the sale of goods or services.” (internal quotation marks omitted)). Thus, if the Rounded and Angular O’ marks are the same mark, then the district court should have compared the One Icon with the 2003 Angular O’ mark; if the marks are different, however, then the district court correctly compared the One Icon with the 1997 Rounded O’ mark.

One issue raised by O’Neal was the fact that the district court resolved the issue on a Rule 12(e) motion for a more definite statement rather than in the context of a summary judgment motion. O’Neal felt that summary judgment was premature because discovery had not yet been completed and O’Neal had been deprived of the opportunity to demonstrate that evolving versions of the O’ mark created the same, continuing commercial impression to consumers. While the Ninth Circuit acknowledged that “tacking requires a highly fact-sensitive inquiry” and that the “better practice is to resolve it on summary judgment, after full discovery,” in this case, the court was persuaded that there was no reversible error because O’Neal failed to ask the district court to postpone ruling until after discovery and did not move for reconsideration. “Having acquiesced in the resolution of the issue in the disposition of the Rule 12(e) motion, O’Neal cannot now complain that the district court should have acted differently.”

As for the merits of O’Neal’s tacking claim, the court laid out the legal standard as follows:

A trademark owner may “claim priority in a mark based on the first use date of a similar, but technically distinct, mark--but only in the exceptionally narrow instance where the previously used mark is the legal equivalent of the mark in question or indistinguishable therefrom such that consumers consider both as the same mark.” Brookfield, 174 F.3d at 1047-48 (internal quotation marks omitted). Tacking is a question of fact. See Quiksilver, Inc. v. Kymsta Corp., 466 F.3d 749, 759 (9th Cir. 2006). “A question of fact may be resolved as a matter of law if reasonable minds cannot differ and the evidence permits only one conclusion.” Id.

“The standard for ‘tacking’ . . . is exceedingly strict: [t]he marks must create the same, continuing commercial impression, and the later mark should not materially differ from or alter the character of the mark attempted to be tacked.” Brookfield, 174 F.3d at 1048 (internal quotation marks omitted). Our precedent demonstrates that tacking is allowed only in narrow circumstances. In Brookfield, we concluded that “” cannot be tacked onto “The Movie Buff’s Movie Store.” Id. at 1049. There, we reasoned that “ ‘The Movie Buff’s Movie Store’ and ‘’ are very different, in that the latter contains three fewer words, drops the possessive, omits a space, and adds ‘.com’ to the end.” Id. Similarly, in Quiksilver, we held that the district court erred in tacking “QUIKSILVER ROXY” onto “ROXY.” Quiksilver, 466 F.3d at 760. We reasoned that “a reasonable jury could easily conclude that ‘QUIKSILVER ROXY’ and ‘ROXY’ did not create the ‘same, continuing commercial impression’ at the time the ‘ROXY’ brand was introduced.” Id.

Because the district court decided the tacking issue as a matter of law, the court was faced with deciding whether O’Neal’s Rounded O’ mark, developed in 1997, and the Angular O’ mark, developed in 2003, differ to such a degree that no reasonable jury could conclude that they create the “same, continuing commercial impression.”

In affirming the lower court’s decision, the Ninth Circuit panel stated the following regarding O’Neal’s two marks:

We recognize that this is a close case, but we agree with One Industries and with the district court that O’Neal cannot meet the “exceedingly strict” standard for tacking. Although both marks consist of a styled O followed by an apostrophe, the similarities largely end there. The apostrophes are markedly different: in the Rounded O’ mark it is entirely separated from the O and appears to be a standard apostrophe. In contrast, the Angular O’ mark’s apostrophe is connected to the main image and looks like a triangle. The lower and upper horizontal lines on the Rounded O’ mark are thinner than the corresponding lines on the Angular O’ mark. While the Rounded O’ mark is boxy, the Angular O’ mark looks like the outline of a lemon. These differences, in our view, establish that the two marks are not “indistinguishable.” Brookfield, 174 F.3d at 1047. Like the marks at issue in Brookfield and Quiksilver, the Rounded O’ mark and the Angular O’ mark differ in several material respects.

The court also noted that cases from other circuits and from the Trademark Trial and Appeal Board have only allowed tacking when the marks are “virtually identical.” As such, the court concluded that the district court properly granted One Industries’ motion for a more definite statement because the differences between O’Neal’s Rounded O’ mark and Angular O’ mark are so material that they do not meet the “exceptional” instances where tacking should be allowed.

The remainder of the court’s decision addresses the district court’s decision finding no likelihood of confusion with O’Neal’s marks. The court, reviewing the lower court’s summary judgment decision de novo and applying the eight factor test used by the Ninth Circuit for determining “likelihood of confusion” set forth in AMF Inc. v. Sleekcraft Boats, 599 F.2d 341, 348-49 (9th Cir. 1979), concluded that there was no likelihood of confusion in this case – primarily based on the dissimilarity of the marks, the lack of evidence of actual confusion, and the weakness of the mark given the presence of other similar O marks in the marketplace. “In the absence of evidence of actual confusion or intent to deceive, we decline to grant O’Neal a virtual monopoly on the use of the letter “O” on motorcycle helmets. The mere fact that the two companies are direct competitors and happen to use the same letter on their products is not sufficient to show infringement.” The same was true for the claims that One Industries’ marks infringed on O’Neal’s O’NEAL mark (marks were entirely different). And such lack of confusion also refuted O’Neal’s claims of trade dress infringement (which were based on the position of the O’NEAL on a helmet).

Accordingly, the Court of Appeals affirmed the district court’s granting of the motion for more definite statement and motion for summary judgment in favor of One Industries.

Judge Graber, concurring in part and dissenting in part, believed that the district court erred in resolving the tacking question as a matter of law in a motion for a more definite statement:

In my view, it was inappropriate for the court to decide that O’Neal was not permitted to tack its 2003 mark to its older marks as a matter of law in a pre-discovery Federal Rule of Civil Procedure 12(e) order. At that stage in the litigation, it would have been impossible for the district court to conclude that reasonable minds could not differ and that the evidence permitted only one conclusion regarding tacking. Indeed, the court made no such finding, and the majority itself concedes that this is a “close case.” Maj. op. at 11609. The order granting the motion states only that the “Court is unpersuaded by O’Neal’s claim that it uses only one mark that has been slightly altered over the years.” That conclusory statement, unsupported by any evidence in the record at that time, is not enough to decide the highly fact-dependent question of tacking as a matter of law. I would therefore reverse and remand.

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