“Pay Attention, Because Attention Pays”- Steve Jelley

Ideology behind Trademark

With the key purpose of trade mark to successfully differentiate between the goods and services of one brand from another, this quote can most accurately be applied in the law of trade mark. While determining the rightful owner of a trade mark, it is essential to identify the first user of the trade mark for the very claimed goods/services.

In order to meet the drastic increase of demand, the companies have flooded the markets with countless options of commodities and services. The resultant increase in competition has led to surfacing of counterfeited goods and trade mark misappropriation. Such misdemeanor is caused with an aim to cause confusion in the minds of consumers. The vital role of a trademark is to prevent such consumer confusion.

Determination of trade mark infringement centers on whether a likelihood of confusion exists as to the source or affiliation of a good or service. A company or individual establishes a trademark right by using it first in a given market. That company or individual, by virtue of being the first user of the trademark, is deemed as the Senior User. A company or individual who subsequently adopts a similar mark is termed as the Junior User.

Forward Confusion theory: A Common Case Scenario

The confusion caused amongst the consumers, which is also termed as the consumer confusion theory is divided into forward confusion theory and reverse confusion theory.

The forward confusion theory is the most common case scenario where the Junior User is a small entity, which wrongfully takes advantage of the established reputation of a big entity (the Senior User) by misrepresenting their trade mark. A deliberate confusion is created about the ownership of the trade mark by small player in the market so that the general public is tricked into believing that the trade mark belongs to the bigger entity and therein under deception invests into counterfeited goods.

The aim behind creation of such confusion is to capitalize the reputation that has been established by the big entity, in the market.

Nonetheless, such is not always the case. On many occasions, the facts are contrary to the forward confusion theory, leading to a concept that has even confused the Courts, i.e., Reverse Confusion Theory.

Reverse Confusion Theory: Infrequent Instances 

Contrary to forward confusion, reverse confusion results when a consumer mistakenly believes that both products are manufactured by or associated with the Junior User- which, in this case is a big entity. Such Junior User, with its robust marketing resources, saturates the market with its product and swamps the reputation of the senior user.

A result of such large scale marketing by the Junior User, the Senior User's trade mark fails to serve its essential functions, such as designating the source, distinguishing the product, or encapsulating the originator's goodwill.

The Reverse Confusion theory was formally recognized in Big O Tire Dealers, Inc. vs. Goodyear Tire & Rubber Co., wherein it was held that ‘the second use of a trademark is actionable if it simply creates a likelihood of confusion about the source of the first user’s products.

Since in general parlance, the small entity rides freely  upon the commercial popularity and goodwill of the big entity the Courts, even though seldom, do not decide the case in favor of smaller entity; despite there being reverse confusion.

The main reason, behind the Courts not deciding the case in favour of small entitities is that presence or popularity of the smaller entity’s mark (which is the Senior User) will be relatively less when compared to Junior User’s i.e., larger entity’s mark.  The prominence of the larger entity’s mark established by large scale marketing leads to the consumer becoming prone to viewing the smaller entity’s product as either stemming from the larger entity or infringing upon the larger entity’s trademark rights.

It was observed in A H Sportswear, Inc. vs. Victoria's Secret Stores, Inc., 237 F.3d 198, 231 (3d Cir. 2000), ". . . in the paradigmatic reverse confusion case, the senior user has a commercially weak mark when compared with the junior user's commercially strong mark. When it comes to conceptual strength, however, we believe that, just as in direct confusion cases, a strong mark should weigh in favor of a senior user. Our decision is supported by the fact that those courts that have clearly distinguished conceptual from commercial strength in the reverse confusion context have weighed a conceptually strong mark in the senior user's favor, in the same manner as they would in direct confusion cases".

Since there is no particularly accepted test for reverse confusion, Courts have developed a case- based, modified multi-factor test, for this particular scenario. Some of the factors considered in cases of reverse confusion are:

  • mark strength;
  • mark similarity;
  • possibility of actual confusion; and
  • intent of the infringer

While the above factors are generally used, it is important to note that no specific type of evidence is mandatorily needed for the rule, and the onus differs based on the Court in which the case is heard and decided.

In terms of conceptual strength, Courts evaluate the inherent ability of a trade mark to identify the source or the sponsor of a product/ service. Conceptual strength involves assessing the extent to which the mark is suggestive, arbitrary or fanciful, depending on which the robustness of protection to be granted is decided.

For instance, the “IBook” name was first used by an online book store, but it gained popularity later through the adoption of the name by Apple Computers. Seeing as Apple has a line of products starting with the “I” prefix, the products sold by the two companies are not similar, and there is no mala fide intention of adoption of the trademarked prefix, hence the case was decided in Apple’s favor.

Recently, in the case of Ironhawk Technologies, Inc. v. Dropbox Inc. it was observed by the 9th Circuit that a reasonable jury would find a likelihood of consumer confusion. However, the dissenting opinion highlighted that the majority opinion did not consider that the potential consumers were “large, sophisticated, commercial enterprises, and any sale would be subject to a prolonged sales effort and careful customer decision making”, and therefore owing to this, customer confusion is unlikely. For instance, if a person is buying gum, it is likely an impulse purchase at the checkout aisle of a grocery store. However, when the offering is an expensive product that is sold after several rounds of negotiation, the likelihood of confusion is really cut down because a lot of time has been spent by the buyer in terms of research into the product.

Conclusion: A Careful and Calculated Approach by Courts

In cases of infringement, most oftenly, the Courts may pronounce any of the following reliefs to the Senior User:

  1. Injunction;
  2. Account for Profits
  3. Payment of Damages
  4. Payment of Attorney’s Fees

Whilst an assessment of profits in reverse confusion cases reflects the selling power of the Junior User, not the gain to the infringer or the loss to the infringed, an assessment of damages would set the bar of burden of proof for the Senior User,too high. Eventhough the primary remedy in cases of infringement is injunction, its failure to address the harm caused in past, makes the remedy inadequate.

The focal point of relief should be addressing unjust enrichment caused due to willful defaultof the Junior User.  A properly justified award would deter willful infringement. If courts fail to appropriately award SeniorUser, companies with enough resources would readily adopt any desirable trademark as their own with little consequence.

However, the Courts should also stay away from granting overly generous reverse confusion awards as well. If such reliefs mask themselves as bonuses, or windfall gains, instead of just compensation, Junior Users looking to extend their own mark may stay out of new markets because of a chilling effect from such reliefs.

The reliefs pronounced by the Courts should reflect the need to compensate the wronged, and not the desire to debar by means of chilling penalty.