Eighth Circuit issues split decision in trademark case: district court was wrong to cancel marks but right to find no actual confusion

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by John Chapman

The Lanham Act grants the “owner of a trademark used in commerce” the right to apply for registration of its trademark on the Principal Register. 15 U.S.C. § 1051. The Lanham Act prohibits, however, the registration of marks on the Principal Register that are merely descriptive, unless the mark has become distinctive of the registrant’s goods in commerce. 15 U.S.C. §§ 1052(e)- (f). In determining whether a mark has acquired distinctiveness, i.e., secondary meaning, “the chief inquiry is whether in the consumer’s mind the mark has become associated with a particular source.” Co–Rect Prods., Inc. v. Marvy! Advertising Photography, Inc., 780 F.2d 1324, 1332–33 (8th Cir.1985).

Under § 2(f), “[t]he Director may accept as prima facie evidence that the mark has become distinctive, as used on or in connection with the applicant’s goods in commerce, proof of substantially exclusive and continuous use thereof as a mark by the applicant in commerce for five years before the date on which the claim of distinctiveness is made.” 15 U.S.C. § 1052(f). A mark registered on the Principal Register is presumed to be valid, 15 U.S.C. § 1057(b), and “the presumption of validity is a strong one,” Zobmondo Entm’t, LLC v. Falls Media, LLC, 602 F.3d 1108, 1115 (9th Cir.2010). The presumption of validity that attaches to a § 2(f) registration includes a presumption that the registered mark has acquired distinctiveness, or secondary meaning, at the time of its registration. Aromatique, Inc. v. Gold Seal, Inc., 28 F.3d 863, 870 (8th Cir.1994).

The Lanham Act provides that a registration issued under the Act “shall be prima facie evidence of … [a] registrant’s exclusive right to use the registered mark in commerce.” 15 U.S.C. § 1115(a). However, the Act provides two avenues of affirmative defense to a party charged with infringement of a registered mark. First, the alleged infringer may prove “any legal or equitable defense or defect … which might have been asserted if such mark had not been registered.” 15 U.S.C. § 1115(a). Second, the alleged infringer may seek cancellation of the registrant’s trademark registration either as a counterclaim in the infringement suit or as a separate and independent action. Keebler Co. v. Rovira Biscuit Corp., 624 F.2d 366 (1st Cir .1980); see also 15 U.S.C. § 1064. If the cancellation action is filed within five years of the registration of the mark sought to be canceled, as it was here, “[a]ny ground that would have prevented registration in the first place qualifies as a valid ground for cancellation.” Cunningham v. Laser Golf Corp., 222 F.3d 943, 946 (Fed.Cir.2000); see also 15 U.S.C. § 1064. When a mark is registered under § 2(f), lack of acquired distinctiveness at the time of registration is a valid ground for cancellation. Neapco, Inc. v. Dana Corp., 12 U.S.P.Q.2d 1746, 1989 WL 274388, at *1 (T.T.A.B. Aug. 30, 1989).

The party seeking to cancel a registration has the burden of persuasion to rebut the trademark’s presumption of validity by a preponderance of the evidence. Cold War Museum, Inc. v. Cold War Air Museum, Inc., 586 F.3d 1352, 1356 (Fed.Cir.2009); Yamaha Int’l Corp. v. Hoshino Gakki Co., 840 F.2d 1572, 1579 n. 9 (Fed.Cir.1988)). In a § 2(f) case, this means that the party seeking cancellation must establish a prima facie case of no acquired distinctiveness. Id. If the party seeking cancellation establishes a prima facie showing of invalidity, “[t]he burden of producing additional evidence or argument in defense of registration … shifts to the registrant.” Id. The court then must “decide whether the party seeking cancellation has satisfied its ultimate burden of persuasion, based on all the evidence made of record during prosecution and any additional evidence introduced in the cancellation proceeding.” Id.

Lovely Skin, Inc. sells cosmeceutical skin care products, which are cosmetics with pharmaceutical benefits. Lovely Skin carries both dermatologist-recommended, third-party skin care products and its own products under the brand name “Lovely Skin.”

In 1999, the company filed applications to register its marks, LOVELYSKIN and LOVELYSKIN.COM. The PTO refused to register either of the marks on the Principal Register because it determined that both marks were “merely descriptive.” The marks were then placed on the Supplemental Register. In 2004, Lovely Skin applied to register the mark LOVELYSKIN on the Principal Register pursuant to § 2(f) of the Lanham Act, which permits merely descriptive marks to be registered if they have acquired distinctiveness. See 15 U.S.C. § 1052(f). The PTO registered the trademark LOVELYSKIN and placed it on the Principal Register on September 20, 2005. In 2006, Lovely Skin applied to register LOVELYSKIN.COM, and in January 2007, an amendment was made to that application to add a claim that LOVELYSKIN.COM had acquired distinctiveness based on Lovely Skin’s ownership of the registration for LOVELYSKIN. The PTO also registered LOVELYSKIN.COM and placed it on the Principal Register on June 19, 2007.

In March 2006, Lovely Skin became aware of the website registered www.livelyskin.com, run by Ishtar Skin Care Products, LLC, which sells many of the same products that Lovely Skin sells through its website. Lovely Skin ultimately filed a four-count lawsuit against Ishtar, alleging trademark infringement and false designation of origin under the Lanham Act, and common law unfair competition and injury to business reputation in violation of Nebraska law. Ishtar counterclaimed, seeking cancellation of the registrations of Lovely Skin’s two trademarks. After a bench trial, the district court canceled the registrations and entered judgment for Ishtar on all four counts of Lovely Skin’s complaint. Lovely Skin appeals. The Eighth Circuit has now reversed the district court’s judgment canceling Lovely Skin’s trademark registrations but otherwise affirmed the judgment in favor of Ishtar. Lovely Skin, Inc. v. Ishtar Skin Care Products, LLC, — F.3d —-, 2014 WL 960991

(8th Cir. March 13, 2014).

The district court canceled Lovely Skin’s trademark registrations because it found that Ishtar had demonstrated that they lacked acquired distinctiveness at the time they were registered. The court of appeals began by noting that Lovely Skin’s trademarks LOVELYSKIN and LOVELYSKIN.COM were registered pursuant to § 2(f), and the PTO accepted Lovely Skin’s declarations as prima facie evidence of acquired distinctiveness and registered the marks. See 15 U.S.C. § 1052(f). Thus, Lovely Skin’s trademarks are entitled to a strong presumption of validity that includes a presumption that its trademarks had secondary meaning at the time of their registrations. Ishtar, as the party seeking cancellation, had both the initial burden to establish a prima facie case that Lovely Skin’s trademarks had not acquired distinctiveness at the time of their registrations and the ultimate burden of persuasion to prove that Lovely Skin’s trademarks were invalid by a preponderance of the evidence.

In concluding that Ishtar had established a prima facie case that Lovely Skin’s trademarks had not acquired distinctiveness at the time of their registrations, the district court relied on evidence of federal trademark registrations and state business entity registrations of third parties whose marks or business names contained the terms “lovely” or “love” in combination with “skin.” However, Ishtar did not present any evidence regarding how these third parties had used the marks, if at all, in the five years before Lovely Skin’s trademarks were registered. Nor did it offer evidence of how, or even if, the third parties promoted or advertised these marks during those years or whether the public recognized these third party marks. Therefore, the court of appeals concluded that the evidence of three third parties that registered either trademarks or business names similar to Lovely Skin’s trademarks was not enough to overcome the strong presumption of validity and establish a prima facie case that Lovely Skin’s marks had not acquired distinctiveness at the time of their registrations through substantially exclusive use for the five preceding years.

The Eighth Circuit also found that evidence regarding Lovely Skin’s failure to determine whether the marks were indeed “distinctive” at the time of registration could not be used to meet Ishtar’s own burden of proof to show that the marks were not distinctive. Thus, Ishtar did not demonstrate that Lovely Skin’s trademarks were not registrable because they lacked acquired distinctiveness at the time of their registrations. Accordingly, the court of appeals reversed the district court’s judgment canceling the registrations of LOVELYSKIN and LOVELYSKIN.COM.

However, the court of appeals affirmed the judgment in favor of Ishtar on Lovely Skin’s claims of trademark infringement, false designation of origin, unfair competition, and deceptive trade practices. In order to succeed on each of these four claims, Lovely Skin was required to demonstrate, among other things, that a likelihood of confusion exists between Lovely Skin’s trademarks and livelyskin.com.

To show a likelihood of confusion, Lovely Skin was required to show a probability of confusion, not merely a possibility. Determining whether a likelihood of confusion exists requires consideration of six factors: (1) the strength of the owner’s mark; (2) the similarity between the owner’s mark and the alleged infringer’s mark; (3) the degree to which the products compete with each other; (4) the alleged infringer’s intent to pass off its goods as those of the trademark owner; (5) incidents of actual confusion; and (6) the type of product, its costs and conditions of purchase. The relative weight of the factors depends on the facts of the individual case

The only evidence admitted at trial of actual confusion was an exhibit in which a consumer addressed an email to cathy@livelyskin.com, rather than cathy @lovelyskin.com, and an unsubstantiated statement by Lovely Skin’s owner that since 2009 Lovely Skin was “seeing quite a bit of instances both orally and a couple written instances of confusion” between LovelySkin.com and Ishtar’s website. In contrast, Ishtar presented testimony that it had never experienced a single instance of confusion. The district court concluded that the email did not demonstrate actual confusion because the customer clearly knew that she was contacting Lovely Skin and merely made a typographical error. The court of appeals found that the exhibit supports the district court’s conclusion; the customer was replying to a confirmation email that Lovely Skin sent her regarding her order and merely made an error in the email address of the person she was copying. Thus, the Eighth Circuit found that the district court did not commit clear error by finding that there was minimal evidence of actual confusion.

The court of appeals concluded that the district court properly considered all of the relevant factors in determining that no likelihood of confusion exists between Lovely Skin’s trademarks and Ishtar’s website. The Eighth Circuit held the district court’s determination was a permissible view of the evidence and therefore not “clear error.” Because all four counts of Lovely Skin’s complaint required a finding of a likelihood of confusion to succeed, the court of appeals affirmed the district court’s judgment for Ishtar on all of Lovely Skin’s claims.

Intellectual Property Law and Our Law Firm

At Heygood, Orr & Pearson, our attorneys have handled hundreds of commercial litigation cases ranging in value from tens of thousands of dollars to tens of millions. We have successfully represented businesses of all sizes, from small “mom and pop” businesses to some of the largest corporations in the world.

Whether we are representing a huge, multi-national corporation or a small local business, we understand that clients want their legal representation to be not only excellent but cost-effective and efficient. For that reason, we will often offer our clients flexible fee structures such as contingent fees, flat fees, reduced hourly fees with a bonus payment contingent on success and reverse contingent fees.

At Heygood, Orr & Pearson, our attorneys have handled numerous patent matters including prosecuting claims for infringement, as well as for interfered-with patent rights. We have handled claims brought by a large local company for infringement of its rail car patent, claims by a local inventor for infringement of her patent for a childcare product and claims by an Israeli company against a Fortune 500 company for infringement of its wireless technology patent. Our firm has also represented a client suing a large American pharmaceutical company for interfering with its patent rights to liposome technology. Right now, our attorneys are representing an international businessman in a trademark infringement lawsuit relating to the diamond and jewelry business.

Our attorneys are capable of litigating patent infringement claims throughout the country. In addition, firm attorney John “Jay” Pate is licensed to prosecute patents before the U.S. Patent and Trademark Office.

Beyond our specific experience in the field of intellectual property, our ability to prosecute patent infringement action is aided by our extensive trial experience in general. While technical knowledge and familiarity with patent rules is a must for attorneys handling patent infringement claims, there is no substitute for courtroom experience. At Heygood, Orr & Pearson, our seasoned litigators have the experience to take even the most complex patent case and explain it in terms a jury can understand. We have a track record of proven success representing businesses large and small. Several of our trial lawyers are board certified* and many of them have been selected as Super Lawyers in the State of Texas for several consecutive years.** Our firm is AV rated, the highest legal and ethical ranking available from the leasing law firm ranking service, Martindale-Hubbell.

If you or your company is in need of representation in an intellectual property matter, contact us for a free consultation by calling toll-free at 1-877-446-9001, or by completing the free case evaluation form located on this website.

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Michael Heygood, James Craig Orr, Jr. and Eric Pearson are all Board Certified in Personal Injury Trial Law — Texas Board of Legal Specialization.

** Michael Heygood, James Craig Orr, Jr. and Eric Pearson were selected to the Super Lawyers List, a Thomson Reuters publication, for the years 2003 through 2014.