Trademark law: Ninth Circuit addresses when trademark claimants may rely on ‘tacking’ to establish ‘priority’

by John Chapman

To establish ownership of a trademark, it is not enough to have invented the mark first or even to have registered it first. Rather, a party claiming ownership of a trademark must have been the first to actually use the mark in the sale of goods or services. This concept is known as trademark “priority.”

One of the ways to establish priority is through the doctrine known as “tacking.” Tacking allows a party to “tack” the date of the user’s first use of one mark onto its use of a subsequent mark in order to establish priority where the two marks are so similar that consumers would generally regard them as being the same.

Tacking is permitted because without tacking, a trademark owner’s priority in his mark would be reduced each time he made the slightest alteration to the mark, which would discourage him from altering the mark in response to changing consumer preferences, evolving aesthetic developments, or new advertising and marketing styles. Moreover, giving the trademark owner the same rights in the new mark as he has in the old helps to protect source-identifying trademarks from appropriation by competitors and thus furthers the trademark law’s objective of reducing the costs that customers incur in shopping and making purchasing decisions.

However, tacking applies only in “exceptionally narrow” circumstances. For example the Ninth Circuit Court of Appeals has explained:

The standard for tacking … is exceedingly strict: The 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. In other words, the previously used mark must be the legal equivalent of the mark in question or indistinguishable therefrom, and the consumer should consider both as the same mark. This standard is considerably higher than the standard for likelihood of confusion.

The Ninth Circuit recently provided illustrations of when tacking is and is not allowed. First, in KeyCorp v. Key Bank & Trust, 99 F.Supp.2d 814, 820 (N.D.Ohio 2000), the court determined that “KEY FEDERAL SAVINGS & LOAN ASSOCIATION,” “KEY FEDERAL SAVINGS BANK,” and “KEY BANK & TRUST” were “substantially different” and that the defendant could not rely on tacking to establish priority. The court observed that the defendant had changed its name in order to disassociate itself from the savings and loan scandals of the 1980s and indicate changes in its legal status. Accordingly, the court found the defendant’s “claim that its name changes were not noticeable to customers [to be] somewhat disingenuous given that at least its first name change was made in the hope that its customers would distinguish its former name from its new one.”

On the other hand, Hess’s of Allentown, Inc. v. National Bellas Hess, Inc., 169 U.S.P.Q. 673 (T.T.A.B.1971), was cited by the Ninth Circuit as an example of a case where tacking was appropriate. In Hess’s, the petitioner had originally incorporated and conducted business as “Hess Brothers,” but later changed its name to “Hess’s of Allentown, Inc.,” while emphasizing and promoting itself as “Hess” or “Hess’s.” In that case, it was determined that there could be “no question but that ‘HESS’ is the most significant portion of the trade name ‘HESS BROTHERS’ and that it is this portion which petitioner has emphasized throughout the years and that portion by which it has been recognized and referred to within and without its corporate structure.” Thus, there could be “no distinction for legal or practical purposes” between “Hess” and “Hess’s,” particularly given that the record indicated that the petitioner changed the name “to reflect the manner in which the purchasing public had come to refer to and identify its store and operations.”

The Ninth Circuit recently considered the circumstances under which a trademark claimant may rely on tacking to establish priority. Hana Financial, Inc. v. Hana Bank, NO. 11-56678 (9th Cir. November 22, 2013). The case involved two entities that used the English word “Hana” in their names and offered financial services in the United States. The Korean word pronounced as “hana” means “number one,” “first,” “top,” or “unity.”

Hana Bank (the “Bank”) is a Korean entity established in 1971 as Korea Investment Finance Corporation. It is the fourth largest bank in Korea. The Bank adopted its current name, Hana Bank, in 1991. In May of 1994, the Bank extended its services to the United States by establishing the “Hana Overseas Korean Club” (the “Club”) to provide financial services to Korean expatriates. The Club’s target customer base consisted of Korean Americans living in the United States. That July, the Bank published advertisements for the Club in several Korean-language newspapers in major cities throughout the United States, including the Los Angeles edition of the Korea Times. The advertisements included the name “HANA Overseas Korean Club” in English. The names “Hana Overseas Korean Club” and “Hana Bank” also appeared in Korean, along with the Hana Bank logo, which is sometimes called the “dancing man.” The dancing man logo has not changed since then. The Bank subsequently received a number of applications for the Club from customers in the United States. The application materials included the name “Hana Overseas Korean Club” in English and “Hana Bank” in Korean next to the dancing man logo.

Meanwhile, Hana Financial, Inc. (“HFI”) was incorporated in California on August 15, 1994 (months after the Bank initiated the Club in the U.S.). HFI did not begin using its trademark in commerce until the following year, on April 1, 1995. Then, in 1996, HFI obtained a federal trademark registration for its logo with the words “Hana Financial” for use in connection with factoring and certain other financial services. HFI advertised in Korean-language newspapers (including the Los Angeles edition of the Korea Times), other major newspapers, and on television. Its customers were primarily Korean Americans, but its customer base eventually expanded to include non-Korean Americans, who may have even constituted a majority of its customers at the time of trial. When Hana Bank later sought to register its trademark in the U.S., the Bank was unable to do so at least in part due to HFI’s 1996-registered mark. The Bank contacted HFI about the issue, but the parties were unable to resolve it.

HFI eventually filed suit against the Bank alleging trademark infringement and related claims. HFI contended that the Bank’s use of its “Hana Bank” mark infringed HFI’s “Hana Financial” mark because its use of the word “Hana” in connection with financial services would likely cause confusion. In response, the Bank sought cancellation of HFI’s trademark based primarily on HFI’s alleged awareness of the Bank’s superior rights.

The primary question at trial was whether the Bank was the first to use the disputed mark. The priority issue turned largely on whether it was permissible for the Bank to “tack” its use of its present “Hana Bank” mark to its use of the Club mark in the U.S. beginning in 1994.

The jury found that the Bank had “used its mark in commerce in the United States beginning prior to April 1, 1995, and continuously since that date.” As a result of the jury’s finding that the Bank was the senior user of its mark, the district court entered judgment in favor of the Bank as to all of the claims asserted by HFI.

The court of appeals found that reasonable minds could disagree on whether the Bank’s marks were materially different. In isolation, the words “Hana Overseas Korean Club,” “Hana World Center,” and “Hana Bank” seem aurally and visually distinguishable. However, the mere fact that jury might have sided with HFI was not enough for HFI to prevail on appeal. As the losing party in a jury trial, HFI was required to show that its interpretation of the evidence was the only reasonable one. The court of appeals held that HFI did not satisfy that standard. The court of appeals emphasized that tacking requires a highly fact-sensitive inquiry, and the jury had decided the issue after receiving an instruction that correctly conveyed the narrowness of the doctrine.

The evidence showed that the Bank offered financial services to Korean-speaking American consumers. It advertised in Korean-language newspapers, including the name “Hana Overseas Korean Club” in English next to its “Hana Bank” mark in Korean. Its distinctive dancing man logo—which has not changed—appeared in all of the advertisements. The application forms contained similar information. The ordinary purchasers of the Bank’s services were likely aware of the Bank and its services from their experiences in Korea, given that by 1994, it had been known as “Hana Bank” for several years.

The court of appeals found that the jury could have reasonably concluded that the ordinary purchasers of the financial services at issue likely had a consistent, continuous commercial impression of the services the Bank offered and their origin. The ordinary purchasers of these services were Korean-speaking consumers (consisting of Korean expatriates and Korean Americans) that likely had a preexisting awareness of the Bank due to its ongoing business presence in Korea. The jury could have reasonably concluded that these purchasers associated “Hana Bank” with the “Hana Overseas Korean Club” when “Hana Overseas Korean Club” appeared, in English, next to “Hana Bank,” in Korean, and the dancing man logo in the advertisements. In that context, “Hana” was arguably the most significant portion of the trade name, as the ordinary purchasers would have then made the association between the English word “Hana” and the Bank’s Korean name. Thus, they would have regarded the Bank’s name as “Hana Bank” in English rather than some other possible translation, such as “One Bank.”

In short, there was sufficient evidence to support the jury’s verdict on trademark priority. Thus the court of appeals affirmed the judgment entered by the district court in favor of the Bank.

Intellectual Property Law and Our Law Firm

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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 2013.

by John Chapman

John Chapman is a licensed attorney with experience in complex commercial litigation (including securities fraud, RICO, shareholder oppression, and derivative actions) and personal injury litigation.