In the latest of the Supreme Court’s intellectual property law decisions, the Court today unanimously held that the question of whether two marks are similar enough in commercial impression so as to be “tacked” for purposes of determining priority, is one that falls “comfortably within the ken of the jury.”
Background and Procedural History
In May 1994, Respondent Hana Bank (“Bank”) – a Korean entity originally operating under the name “Korea Investment Finance Corporation” and later under the name “Hana Bank” – established Hana Overseas Korean Club (“the Club”) to provide financial services to Korean expatriates in the United States. In connection with these offerings, the name “Hana Bank” was used in conjunction with the Bank’s logo. On August 16, 1994, Petitioner Hana Financial, Inc. (“Financial”) was incorporated in California, and in 1996 obtained a federal service mark registration for its “Hana Financial” logo.
In 2001, Bank attempted to register its “Hana Bank” trademark but was unable to do so, at least in part because of Financial’s mark. Bank began operating in 2002 in New York under the name “Hana Bank” and when the parties were unable to resolve their trademark issues, Financial sued Bank for trademark infringement and related claims, asserting that Bank’s use of “Hana Bank” for financial services infringed the registered “Hana Financial” trademark. Bank denied infringement and counterclaimed seeking cancellation of the “Hana Financial” mark.
After preliminary rounds of summary judgment motions and subsequent appeals narrowed the issues, the parties proceeded to trial on the issue of infringement, with Bank relying on the doctrine of “trademark tacking” to establish priority. Essentially, Bank’s position was that the use of the name “Hana Bank” as part of the logo associated with the Club’s offering of financial services was sufficient to make it the senior user of the term “Hana” vis-à-vis Financial, and thus that Bank could not be an infringer since it technically came first. The basis for Bank’s position was that the logo used by the Club was similar enough to the “Hana Bank” name later adopted so as to create the same commercial impression, thereby permitting it to tack its current use to its prior use. Financial countered that tacking was inapplicable because the marks were not similar enough.
The District Court for the Central District of California presented the issue of tacking to a jury, which returned a verdict in favor of Bank, finding that Bank’s old and new marks were “legal equivalents,” and thus that tacking was appropriate. The Ninth Circuit affirmed, noting that although there is a split of authority amongst the circuits, the Ninth Circuit treats tacking as a question of fact and Financial could not show the jury’s decision was unreasonable. On June 23, 2014, the Supreme Court granted certiorari to resolve the circuit split and to decide whether a judge or a jury should determine whether tacking is available in a given case.
The Parties’ Positions
Petitioner Financial argued that trademark tacking should be a question of law and therefore decided by the court. According to Financial, tacking originates from the theory that if the marks are legally the same, no other party can be damaged by giving earlier priority to the later mark. As such, tacking must remain a narrow exception that applies only when the marks are “legal equivalents.” Although whether the marks convey the “same continuing commercial impression” is important to this inquiry, Financial argued the tacking test is satisfied only when the altered mark does not expand the monopoly rights conferred by the initial mark. Judges, with their knowledge of and ability to apply precedent, Financial argued, are best able to make this determination whereas jurors, who will look at the case in isolation, are ill-equipped for the inquiry and thus may inadvertently expand the tacking doctrine. Financial also argued that pragmatic considerations, such as predictability in trademark rights and judicial efficiency, are favored by the “legal equivalents” determination being a question of law. Financial also argued that tacking issues have historically been resolved by judges.
Respondent Bank relied on three main arguments in support of its position that trademark tacking is appropriately a jury issue. First, priority and ownership as issues of trademark infringement were submitted to a jury at common law at the time the Seventh Amendment was enacted. Second, historical jurisprudence has treated tacking and analogous issues (such as comparisons and public perception issues) as factual questions. Third, as a consumer perception inquiry, tacking is best suited for a jury. Bank argued the third point in the most detail, noting that “commercial impression” is the heart of the tacking inquiry, and that jurors are better equipped than judges to ascertain consumer perception. Addressing the term “legal equivalents,” Bank maintained that this is a conclusion for the test of whether two marks create the “same continuing commercial impression,” and not a “legal question” in and of itself.
The Supreme Court’s Ruling
Writing for a unanimous Court, Justice Sotomayor concluded that where a jury is employed as the fact finder, the tacking question is appropriately decided by the jury. The Court reiterated that the two marks may be tacked when they are “legal equivalents” and that this standard is met when those marks “create the same, continuing commercial impression.” When a test relies on an ordinary consumer’s understanding of the impression a mark conveys, application of that test “falls comfortably within the ken of the jury.” The Court pointed out that juries make these assessments from the point of view of the ordinary person or the community across a variety of contexts. Judges may still make a tacking determination on a motion for summary judgment or for judgment as a matter of law, or if the parties have chosen to try their case before a judge; but where a jury trial has been requested and when summary judgment or judgment as a matter of law is not warranted, the tacking question is properly reserved for the jury.
The Court dismissed Financial’s arguments that tacking should be viewed as a question of law and thus solely within the purview of the judge. First, while Financial is correct that the “legal equivalents” test involves the application of a legal standard, the Court explained that the tacking inquiry involves applying a legal standard to facts, and that such inquiries are commonly resolved by juries. Proper jury instructions should be utilized to avoid the jury’s improper application of a legal standard, as opposed to removing the issue from the jury altogether (in the present case, the jury instructions used by the District Court were, in substantial part, those proposed by Financial).
Second, the Court was unpersuaded by Financial’s argument that tacking questions should be reserved for judges because such decisions will “create new law that will guide future tacking disputes.” A jury is no more likely to create new law in a tacking situation than it would in tort cases, contract disputes, or criminal proceedings. Moreover, there was no support for Financial’s position that tacking cases had to be resolved based on precedent. Although Financial pointed to a number of cases where it argued courts had relied on precedent, the Court was quick to point out that those cases relied on precedent to define the legal standard, not for guidance in making the tacking determination.
Third, the Court rejected Financial’s argument that allowing juries to determine tacking will make for unpredictable results, reasoning that any decision-making in a fact-intensive dispute will require a “judgment call,” and explaining that some uncertainty will remain in such situations (as in tort, contract and criminal proceedings) regardless of whether a jury or judge makes the determination. “The fact that another jury, hearing the same case, might reach a different conclusion may make the system ‘unpredictable,’ but it has never stopped us from employing juries in . . . analogous contexts.” Finally, the Court rejected Financial’s argument that judges have historically resolved tacking disputes. The Court noted that the cases Financial relied upon were bench trials, summary judgment motions, or other similar circumstances, and that there is no dispute a judge may make a tacking determination in those contexts.
The Supreme Court’s decision is grounded in the fundamental precept that underlies trademark law generally, namely that consumers should be protected from confusion. As such, consumers arguably ought to be the focus and the ones to decide whether two marks create a similar enough commercial impression to be “tacked.” From the perspective of litigation strategy, the decision creates yet another factor that will need to be taken into account in deciding whether a trademark infringement case should be tried before a judge or a jury. In any event, given that the tacking decision is one for a jury, it seems likely to make surveys a more frequently used tool in litigating the tacking issue.