by Robert C. Scheinfeld, Parker H. Bagley and David W. Whealan
Introduction
The United States Court of Appeals for the Second Circuit recently issued two noteworthy decisions related to trademark infringement law. In one of these decisions, the Second Circuit held that a United States Patent and Trademark Office ("PTO") determination that a trademark would cause a likelihood of confusion should not have collateral estoppel effect in a subsequent Lanham Act trademark infringement suit involving the same mark and the same parties. In the other decision, the Second Circuit held that an "Intent-to-Use" ("ITU") trademark applicant cannot be preliminarily enjoined despite another's prior commercial use of a similar mark, provided the filing of the ITU application occurred first.
Levy v. Kosher Overseers Ass'n. of Am., Inc.[1]
In Levy v. Kosher Overseers Ass'n. of Am., Inc., plaintiffs Rabbi Don Yoel Levy et al., d.b.a. Organized Kashruth Laboratories ("O.K. Labs"), and defendant Kosher Overseers of America ("KOA") are competing Kosher certification agencies which each use their own certification marks, also known as hechshers, to designate food products that comply with Judaism's strict dietary laws.[2] Because each Kosher certification agency has its own standards consistent with that agency's interpretation of Judaism's dietary requirements, it is important that consumers be able to recognize and distinguish between the marks of the various Kosher certification agencies.
Plaintiffs O.K. Labs use a certification mark known as the "Circle-K," which has been registered with the PTO since 1965. Defendant KOA uses a visually similar mark known as the "circle-crescent K." In 1989, defendant KOA attempted to register its mark with the PTO. Plaintiffs O.K. Labs opposed KOA's application for trademark registration, asserting to the PTO that KOA's mark was too similar to O.K. Labs' mark, and would therefore be likely to cause confusion among consumers. The PTO sustained O.K. Labs' opposition and refused KOA's application for trademark registration; the PTO based its decision on a finding that the similar visual appearances of O.K. Labs' and KOA's marks would create a likelihood that consumers would be confused as to the source of the marks.[3] KOA did not appeal the PTO's decision.
KOA continued to use its Kosher certification mark. As a result, O.K. Labs sued KOA under the Lanham Act for trademark infringement in the United States District Court for the Southern District of New York. The district court granted summary judgment in favor of plaintiffs O.K. Labs on the issue of trademark infringement, and permanently enjoined KOA from using its mark. The district court based its decision on the ground that the PTO's earlier finding that KOA's mark would cause a likelihood of confusion should have collateral estoppel effect on the question of likelihood of confusion in the context of the Lanham Act trademark infringement action.
Defendant KOA appealed. The Second Circuit vacated the district court's summary judgment order and permanent injunction, and remanded the case. The Second Circuit found that the standard applied by the PTO in finding likelihood of confusion was not identical to the standard for determining likelihood of confusion in the context of a Lanham Act trademark infringement suit, and that accordingly, the district court had incorrectly applied the doctrine of collateral estoppel.
The doctrine of collateral estoppel, also known as issue preclusion, can be applied to bar litigation of an issue only if (1) the issues in both proceedings in question are identical; (2) the issue in the prior proceeding was actually litigated and decided; (3) there was a full and fair opportunity for litigation in the prior proceeding; and (4) the issue previously litigated was necessary to support a valid and final judgment on the merits.[4] The Second Circuit found that because the standard which the PTO applied in finding likelihood of confusion was not identical to the standard for determining likelihood of confusion in the context of a Lanham Act trademark infringement suit, the district court should not have applied the doctrine of collateral estoppel.
More specifically, the Second Circuit found that likelihood of confusion in a Lanham Act trademark infringement suit must be determined in the context of the entire marketplace, and according to the eight so-called Polaroid factors for determining likelihood of confusion.[5] The Second Circuit determined that the PTO found likelihood of confusion based solely on a visual examination of the two marks at issue, and without considering the context of the entire marketplace according to the eight Polaroid factors. Accordingly, the PTO had addressed only the second of the eight Polaroid factors: the "degree of similarity between" the marks in question.[6]
The Second Circuit left open, however, the possibility that a PTO finding regarding likelihood of confusion could, in certain cases, have collateral estoppel effect in a subsequent Lanham Act trademark infringement suit.[7] For this to happen, the PTO must have considered the marks at issue in the context of the entire marketplace, and the PTO's findings must have comported with the standard for determining likelihood of confusion in the context of a Lanham Act trademark infringement suit.
WarnerVision Entertainment Inc. v. Empire of Carolina, Inc.[8]
In WarnerVision Entertainment Inc. v. Empire of Carolina, Inc., defendant Empire of Carolina, Inc. ("Empire") was assigned an ITU trademark application for "REAL WHEELS" by an applicant who had filed the ITU application with the PTO on September 23, 1994. At the time of application, the ITU applicant stated an intent to use the mark in commerce, on or in connection with wheels associated with toy vehicles. Neither Empire nor the ITU applicant, however, ever actually used the "REAL WHEELS" mark in commerce.
Following the filing of the ITU application, plaintiff WarnerVision Entertainment Inc. ("WarnerVision") began using the "REAL WHEELS" mark in connection with home videos being sold together with motorized toy vehicles. Based on this use, on January 3, 1995, plaintiff WarnerVision filed an application for registration of the "REAL WHEELS" mark.[9]
WarnerVision then brought suit against Empire in the United States District Court for the Southern District of New York, seeking preliminary injunctive relief. Upon WarnerVision's motion, the district court preliminarily enjoined Empire from using the "REAL WHEELS" mark. The district court concluded that the trademark statute unambiguously conveyed the rights in the "REAL WHEELS" mark to WarnerVision, because WarnerVision had used and applied to register the mark.[10]
Defendant Empire appealed. The Second Circuit concluded that the district court had misapplied the trademark statute, and had abused its discretion in preliminarily enjoining Empire from using the "REAL WHEELS" mark.[11] Accordingly, the Second Circuit vacated the district court's preliminary injunction order, and remanded the case. The Second Circuit concluded that the very purpose of the ITU statutory provisions would be undermined if Empire were preliminarily enjoined from actually using its mark, which use was required for Empire to complete the ITU application process and to obtain a registration for its mark. Specifically, the Second Circuit stated that "a court may not enjoin [an ITU applicant] from making the use necessary for [trademark] registration on the grounds that another party has used the mark subsequent to the filing of the ITU application. To permit such an injunction would eviscerate the ITU provisions and defeat their very purpose."[12]
Under the statutory provisions for ITU applications, which took effect in 1988, a person can seek registration of a mark not yet in actual use if that person asserts a bona fide intent to use the mark in commerce.[13] Prior to 1988, actual use was a prerequisite to applying for a trademark registration.[14] Now, however, a person can file an ITU application based on a bona fide intent to use a mark, and then may subsequently obtain a registration for the mark if, but only if, the person files a statement of commercial use with the PTO within a statutorily specified time from the filing date of the ITU application.[15] If the ITU applicant timely files this statement of commercial use, and the mark completes the registration process and ultimately is registered, the ITU applicant is granted a trademark registration with a constructive use date retroactive back to the filing date of the ITU application.[16] If, on the other hand, the ITU applicant does not timely file this statement of commercial use, the ITU applicant cannot obtain a trademark registration.
Thus, under the trademark statute, the only way for an ITU applicant ever to complete the ITU application process and obtain a registration for its mark is for the ITU applicant actually to use its mark in commerce, and then to file a statement of this use with the PTO. The Second Circuit found that, therefore, if Empire were preliminarily enjoined from using its mark, Empire would "effectively be prevented from undertaking the use required to obtain registration," and would therefore effectively have its rights as the holder of the ITU application "permanently terminate[d]."[17] The Second Circuit further found that preliminary injunctions are not intended "to give the plaintiff the ultimate result it seeks," but rather, "'to prevent irreparable injury so as to preserve the court's ability to render a meaningful decision on the merits.'"[18] The Second Circuit held that the district court's order was an inappropriate application of a preliminary injunction because the order effectively constituted a "final adjudication on the merits."[19]
The Second Circuit further found that to preliminarily enjoin an ITU applicant such as Empire from using its mark would encourage a type of unscrupulous activity which the ITU statutory provisions were designed to eliminate: where parties monitor the ITU applications of large companies, then use the same mark in commerce, and then bring suit against the ITU applicant seeking a settlement in order to permit the ITU applicant to proceed with its ITU application and its plans to use the mark.[20]
The Second Circuit left open, however, the possibility that an ITU applicant could, in certain cases, properly be enjoined from using its mark. The court stated that a party might be entitled to have an ITU applicant enjoined from using its mark if that party could demonstrate that it used the mark before the ITU application was filed, or that the filing of the ITU application was for some reason invalid.[21]
Endnotes
[1] 104 F.3d 38 (2d Cir. 1997). The court issued its decision on January 9, 1997.
[2] "Certification marks are generally treated the same as trademarks for purposes of trademark law." Id. at 39 (citing 15 U.S.C. SSSS 1054, 1127).
[3] Id. at 40.
[4] Id. at 41.
[5] The eight Polaroid factors are:
1) the strength of the plaintiff's mark, 2) the degree of similarity between the plaintiff's and the defendant's marks, 3) the proximity of the products, 4) the likelihood that the plaintiff will "bridge the gap" between the two products, 5) actual confusion between the two marks, 6) the defendant's good faith in adopting its mark, 7) the quality of the defendant's product(s), and 8) the sophistication of buyers of the plaintiff's and defendant's goods or services.
Id. at 42 (quoting The Sports Authority, Inc. v. Prime Hospitality Corp., 89 F.3d 955, 960 (2d Cir. 1996)); see Polaroid Corp. v. Polaroid Elecs. Corp., 287 F.2d 492 (2d Cir.), cert. denied, 368 U.S. 820 (1961).
[6] Levy 104 F.3d at 43.
[7] Id. at 42.
[8] 101 F.3d 259 (2d Cir. 1996). The court issued its decision on November 27, 1996.
[9] Although WarnerVision conducted a trademark search prior to filing its application for registration, no conflict was discovered because the ITU application had not yet appeared in the PTO's trademark database. Id. at 261.
[10] The district court relied on the language of 15 U.S.C. SS 1057(c) which provides, in relevant part:
Contingent on the registration of a mark on the principal register provided by this Act, the filing of the application to register such mark shall constitute constructive use of the mark, conferring a right of priority, nationwide in effect, on or in connection with the goods or services specified in the registration . . . .
15 U.S.C. SS 1057(c). See WarnerVision, 101 F.3d at 261; WarnerVision Entertainment Inc. v. Empire of Carolina Inc., 919 F. Supp. 717, 719 (S.D.N.Y. 1996).
[11] WarnerVision, 101 F.3d at 260; see 15 U.S.C. SS 1057(c).
[12] WarnerVision, 101 F.3d at 262.
[13] Id. at 260; see 15 U.S.C. SS 1051(b).
[14]. WarnerVision, 101 F.3d at 260.
[15] Id.; see 15 U.S.C. SS 1051(d).
[16] WarnerVision, 101 F.3d at 260; see 15 U.S.C. SS 1057(c).
[17] WarnerVision, 101 F.3d at 262.
[18] Id. at 261 (quoting Meis v. Sanitas Serv. Corp., 511 F.2d 655, 656 (5th Cir. 1975)).
[19] Id. at 262.
[20] Id.
[21] Id.