In a short but unanimous decision that may have far-reaching consequences, the Supreme Court determined that trademark “tacking” is a factual issue that must be determined by a jury, not a judge. “Tacking” is a trademark doctrine that, in limited circumstances, allows a trademark owner who makes certain modifications to its mark over time to use the earliest use date of the first version of the mark to establish priority over later users of the same or similar marks. Courts have allowed tacking where the original and the revised marks are “legal equivalents,” creating the same, continuing commercial impression in the eyes of an ordinary consumer.
Hana Bank and Hana Financial both provided financial services to individuals in the U.S. Hana Bank began life in 1971 as a Korean entity called Korea Investment Finance Corporation. That entity changed its name to Hana Bank in 1991, using that name on Korea. In 1994, Hana Bank established Hana Overseas Korean Club to provide financial services to Korean expatriates in the U.S. Advertisements for that service used “Hana Overseas Korean Club” in English and Korea, the name “Hana Bank” in Korean, and a logo of a “dancing man.” In 2000, Hana Bank changed the club name to “Hana World Center.” In 2002, the Korean entity began operating a bank in the U.S. as “Hana Bank,” the entity’s first physical presence in the U.S.
Hana Financial was formed as a California corporation of that name in 1994. It began using the name Hana Financial and an associated trademark in commerce in 1995. In 1996, Hana Financial obtained a federal trademark registration for a pyramid logo with the words “Hana Financial.”
In 2007, Hana Financial sued Hana Bank for trademark infringement in the U.S. District Court for the Central District of California. Hana Bank defended by claiming that it had priority of use under the tacking doctrine. The infringement claim and tacking defense were both tried to a jury, under this jury instruction: “A party may claim priority in a mark based on the first use date of a similar but technically distinct mark 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. This is called ‘tacking.’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.” The jury found in favor of Hana Bank.
The U.S. Court of Appeals for the Ninth Circuit upheld the jury verdict, explaining that although tacking is only applied in “exceptionally narrow circumstances…it requires a highly fact-sensitive inquiry…reserved for the jury.” The Ninth Circuit noted that the Federal and Sixth Circuits consider tacking a question of law for the judge, not a question of fact for the jury.
The Supreme Court held that where a jury trial has been requested and the facts do not warrant entry of summary judgment or judgment as a matter of law, the tacking issue must be decided by a jury, in line with other types of law where an ordinary person is competent to make an assessment. Here, an ordinary consumer’s understanding of the impression made by a mark “falls comfortably within the ken of a jury.”
Hana Financial made four arguments why tacking is a question of law for the judge, not the jury. First, Hana Financial contended that the “legal equivalents” test must be decided by a judge because it involves the application of a legal standard. The Supreme Court concluded that applying a legal standard to a factual issue (a “mixed question of law and fact”) is typically decided by a jury, under carefully crafted jury instructions. Second, Hana Financial argued that judges must make tacking determinations because they must be resolved by comparing the marks in the case against marks addressed in prior cases. The Supreme Court found no reason why case precedent should resolve the matter, as jury verdicts in tort, contract, or criminal proceedings do not create new law that would guide future juries.
Hana Financial’s third contention was that allowing juries to decide tacking questions would destroy the predictability required for a functioning trademark system. The Supreme Court found no reason why the fact that another jury might reach the opposite conclusion on the same facts would make the system unpredictable, any more than it has stopped the use of juries for tort, contract, or criminal cases. The Supreme Court also rejected the argument that tacking must be decided by a judge because the interpretation of patent claims must be decided by a judge. Construction of written instruments, the Supreme Court observed, is “one of those things that judges often do and are likely to do better than jurors.” Tacking inquiries, on the other hand, involve factual judgments about whether two marks give consumers the same commercial impression, not something “judges often do” better than jurors.
Fourth, Hana Financial argued that judges have historically resolved tacking disputes. However, the Supreme Court noted that Hana Financial’s cited cases were tacking disputes in bench trials, summary judgment motions, and motions to dismiss, where it is undisputed that judges may resolve tacking disputes. Accordingly, the Ninth Circuit’s judgment was affirmed.
Although the issue of tacking rarely arises in trademark cases, many trademark practitioners believe that the same analysis is applicable to the pivotal issue in a trademark case, whether the accused infringer’s mark is likely to cause confusion with the prior owner’s mark. There is also a split in the Appeals Courts over this issue. Although a number of courts, including the Ninth, find likelihood of confusion to be a purely factual question to be decided by a jury, the Federal Circuit says it is a purely legal question to be decided by the judge, and the Second and Sixth Circuits say that it is a mixed question of fact and law. Although the justices did not raise this issue in the Hana Financial case, it appears that the Supreme Court’s analysis of why tacking is a jury issue applies equally to likelihood of confusion. It may also apply to whether a mark has acquired distinctiveness, or so-called “secondary meaning.”
Source: Hana Financial, Inc. v. Hana Bank, 574 U.S._____ (2015).