In a scathing opinion, the U.S. Court of Appeals for the Third Circuit reversed the district court, finding that there was a likelihood of confusion between the marks at issue and that the undisputed facts were sufficient to find trademark infringement as a matter of law. The court also imposed its own likelihood-of-confusion holding (in the first instance). Sabinsa Corp. v. Creative Compounds, LLC, Case No. 08-3255 (3d Cir., July 9, 2010) (Roth, J.) (Ambro, J., concurring).

Sabinsa alleged infringement of the “ForsLean” mark by Creative Compounds, which marketed a product using the mark “Forsthin.” Both products are weight management supplements in the “nutraceuticals” (nutritional supplements) field derived from the plant Coleus forskohlii. Sabinsa entered the market as an ingredient supplier for nutraceutical manufacturers with ForsLean in 2000, along with marketing ForsLean directly to the public through pamphlets.

Creative Compounds, which also supplied forskohli to manufacturers, adopted “Forsthin” as a mark in 2004. After Sabinsa sent a cease-and-desist letter, Creative Compounds responded by filing a declaratory judgment action. Creative Compounds conceded that Sabinsa owned the ForsLean mark and that the mark is valid and legally protectable, leaving the likelihood of confusion with its Forsthin mark as the only issue. After the district court ruled for in Creative Compounds favor, Sabinsa appealed.

On appeal, the Third Circuit held that the district court erred in its findings on the Third Circuit Lapp factors, a 10-factor likelihood-of-confusion test in use in the Third Circuit since 1983. The Third Circuit noted that the district court failed to properly set forth and weigh the Lapp factors by analyzing only three of the factors and neglecting much of the evidence presented by Sabinsa. Conceding that a district court may find that certain Lapp factors are inapplicable, the court cautioned that the district court must nevertheless explain that in its decision.

The court noted that although a case in the present circumstances would typically be remanded to reweigh the factors, here the facts were largely undisputed and that application of the correct standard could support only one conclusion.

Applying the factors, the court held that the district court committed clear error when considering the similarity of the marks, the first Lapp factor, by focusing on minute differences rather than the “overall impression.” On the second Lapp factor, the strength of the marks, the court held that the district court clearly erred in finding the mark to be highly suggestive. As for the third Lapp factor, purchasers’ sophistication, the court held that the district court committed legal error by over-emphasizing the sophistication of the manufacturers purchasing the product, discounting Sabinsa’s pamphlets for the public. While some remaining factors weighed in favor of Creative Compounds, the court held that the overall weight of the analysis pointed to likelihood of confusion.

Judge Ambro filed a concurrence, joining the opinion in full, but noting that Sabinsa submitted no survey evidence of actual consumer confusion, the sixth Lapp factor. He further disagreed with the majority’s assessment of Sabinsa’s target consumer. However, Judge Ambro still believed that the Lapp factors weighed heavily in favor of a finding of likelihood of confusion.