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. e du/thir dc ir c uit_2000/129Filed June 13, 2000

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

No. 99-5117

COMMERCE NATIONAL INSURANCE SERVICES, INC.; COMMERCE BANCORP, INC.

v.

COMMERCE INSURANCE AGENCY, INC.; COMMERCE
INSURANCE AGENCY OF SOUTH JERSEY, INC.

(District of New Jersey (Camden) Civil 97-4600)

COMMERCE INSURANCE AGENCY, INC.

v.

COMMERCE NATIONAL INSURANCE SERVICES, INC.

(District of New Jersey (Camden) Civil 97-4750)

Commerce Insurance Agency, Inc., and Commerce Insurance Agency of South Jersey, Inc.,

Appellants

On Appeal From the United States District Court For the District of New Jersey District Judge: Honorable Joseph E. Irenas

Argued: December 8, 1999

Before: SLOVITER, NYGAARD, and ROSENN, Circuit Judges.

(Filed: June 13, 2000)John F. Ward (Argued)

Ward & Olivio

708 Third Avenue New York, New York 10017

Kenneth L. Winters John G. Gilfillan, III Carella, Byrne, Bain, Gilfillan, Cecchi, Stewart & Olstein

6 Becker Farm Road Roseland, NJ 07068 Counsel for Appellants

Laurence S. Shtasel (Argued)

Dennis P. McCooe Louis Charles Shapiro Blank, Rome, Comisky & McCauley

LLP One Logan Square Philadelphia, PA 19103 Counsel for Appellees

OPINION OF THE COURT

ROSENN, Circuit Judge.

In an era of aggressive commercial competition, thi s appeal raises unsurprising, although important, iss ues of trademark confusion in the banking and insurance industries. Commerce Insurance Agency, Inc. (CIA), a small corporation engaged in the insurance business in So uthern New Jersey for over thirteen years, sought an injun ction in

the United Sates District Court for the District of New Jersey prohibiting Commerce National Insurance Serv ices (CNIS), a recently formed corporation, from using t he "Commerce" mark to promote its insurance business. CNIS is a wholly owned subsidiary of Commerce Bancorp, I nc. (CBI) which had used the "Commerce" mark in connect ion with its banking services prior to CIA's adoption o f the mark. The District Court denied CIA relief on the g round that CIA could not assert rights to the mark agains t either

2CBI or CNIS because of CBI's prior use of the mark. CIA

timely appealed. We will reverse.1

I.

A.

Commerce Bancorp, Inc. commenced operations in 1973 with the opening of a single branch in Marlton, New Jersey. In December of 1974, it began offering credit life insurance and credit disability insurance in connection with its lending services. By 1983, CBI had opened six branc hes and controlled more than $100 million in assets. By the time this litigation was commenced, CBI had opened more than fifty branches and exercised control over near ly $3 billion in deposits. Since January of 1973, CBI has promoted its banking services under the Commerce ma rk.

Commerce Insurance Agency commenced its insurance business in April of 1983, with a single office in Cedar Brook, New Jersey. After five years of growth, CIA moved to larger offices in Sicklersville, New Jersey. Since its establishment in 1983, CIA has promoted its insuran ce services under the "Commerce" mark.

From 1983 until 1996, CBI and CIA coexisted amicabl y in Southern New Jersey despite their use of the sam e mark to identify their respective services. CIA opened b usiness accounts in its name with CBI, secured lines of cre dit from CBI, and rented a safe deposit box from it. CIA and CBI also referred customers to each other during this s pan of years. CIA's principal, Robert Loser, established a "good" relationship with a CBI branch manager and a "perso nal" relationship with CBI's regional vice president. Th is

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1. We have appellate jurisdiction under 28 U.S.C. 1 291 and review the District Court's factual findings for clear error. See American Home Prods. Corp. v. Barr Lab., Inc., 834 F.2d 368, 370 (3d Cir. 1987). Clear error exists when giving all due deference to the o pportunity of the trial judge to evaluate the credibility of witnesses and to weigh the evidence,

we are left with a definite and firm conviction tha t mistake has been committed. See Versa Prods. Co. v. Bifold Co. , 50 F.3d 189, 209 (3d Cir. 1995).

3relationship led to an invitation from CBI requesti ng CIA to

participate in CBI's 5th Annual Commerce Golf Class ic. CIA accepted the invitation, and CBI printed CIA's name as a contributor in CBI's annual program booklet as well as on a sign posted at the tournament. Throughout the thi rteen year period between 1983 and 1996, neither CIA nor CBI were aware that anyone believed that the companies were business affiliates of each other.

On July 25, 1996, CBI announced its intention to en ter into the general insurance services industry. Withi n one month of that announcement, CIA began taking steps designed to shore up its position for a potential t rademark dispute. On August 26, 1996, CIA filed a service ma rk registration application with the United States Pat ent and Trademark Office seeking federal registration of th e "Commerce" mark for insurance services. The applica tion was granted. On August 28, 1996, CIA filed a servic e mark registration application with the New Jersey Secret ary of State (the "Secretary") seeking state registration of the business name "Commerce Insurance Agency." The Secretary registered the name on September 3, 1996. On the same day, CIA filed a service mark registration application with the Secretary seeking registration of the business name "Commerce National Insurance Agency." The Secretary registered the name on September 11, 1996.

By November of 1996, CBI had acquired two existing insurance agencies from which CBI formally establis hed CNIS. At this time, CNIS began promoting its servic es under the names "Commerce National Insurance Servic es" or "Commerce Insurance." In December of 1996, CBI purchased two additional insurance agencies and add ed

them to CNIS. These additions made CNIS the 58th la rgest insurance agency in the United States, having a cus tomer base of more than 38,000 individuals and businesses and maintaining more than $150 million of insurance cov erage.

Instances of confusion between CIA and CNIS began t o develop in 1997. In the early part of that year, CI A

contacted an insurance carrier to track down a miss ing policy. On the assumption that CIA had been acquire d by CBI, the carrier asked what CIA's agency code numbe r had been prior to its purchase by CBI. Later, in May of that

4year, CNIS and CIA began to receive each other's ma il. CIA

also began to receive telephone calls intended for CNIS. When CIA brought these instances of confusion to th e attention of CNIS in June of 1997, CNIS denied the existence of any confusion.

B.

Shortly thereafter, however, CBI and CNIS filed a p etition for cancellation of CIA's federal registration of t he "Commerce" mark. CBI and CNIS also filed a complain t in the United States District Court contending, inter alia, that CIA's use of the Commerce mark infringed CBI's righ ts in the mark. CIA responded to the actions of CBI and C NIS by commencing an action of its own. In its complaint, CIA alleged, inter alia, that CNIS's use of the Commerc e mark infringed CIA's rights in that mark.

The District Court consolidated the two actions, an d the parties filed applications for preliminary relief b ased solely on the federal trademark issue.2 CBI and CNIS sough t preliminarily to enjoin CIA from using the Commerce mark to promote its insurance services. CIA, in turn, so ught a preliminary injunction prohibiting CNIS from promot ing its

insurance services under the Commerce mark. After reviewing the parties' briefs and hearing oral argu ment, the District Court issued an opinion and order in which it declined to grant either CBI's and CNIS's request preliminarily to enjoin CIA from using the Commerce mark or CIA's request preliminarily to enjoin CNIS from using the

Commerce mark.

In reaching its decision, the District Court first determined that CBI's rights in the Commerce mark w ere senior to those of CIA. The District Court conclude d that, as of 1983, the time CIA began its use of the Comme rce mark, CBI had established secondary meaning in the

Commerce mark. See Commerce Nat'l Ins. Servs. v. Commerce Ins. Agency, 995 F. Supp. 490, 499 (D.N.J.

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2. Although the parties do not clearly identify the statute on which they base their claims, it appears that they charge a vi olation of the Lanham Act, 15 U.S.C. S 1125.

51998). Additionally, the Court found that CIA's use of the

Commerce mark in 1983 was likely to create confusio n, because reasonable consumers dealing with CIA "woul d have assumed that they were dealing with CBI or som e CBI affiliate or offshoot." Id. at 499-501. Accordingly , the District Court concluded that CBI's rights to the C ommerce mark were senior to those of CIA and that CBI's rig hts to the mark "encompassed" both the banking and insuran ce services industries. See id. at 501.

After reaching this conclusion, the District Court proceeded to determine whether CBI was entitled to preliminarily enjoin CIA from using the Commerce ma rk. In addressing this issue, the Court reasoned that CBI' s fourteen year delay in enforcing its rights constit uted

laches and that therefore CBI was not entitled to t he injunctive relief it sought. See id. at 503. Nevert heless, the District Court recognized that although CBI was est opped from invoking its right to prevent CIA from using t he mark, it had not lost its rights in the mark altogether. See id. at 505. Accordingly, the Court held that although CBI was not entitled to a preliminary injunction against CIA, C BI's wholly owned subsidiary, CNIS, could not be prelimi narily enjoined from using the Commerce mark by CIA. See i d.

C.

Approximately eleven months later, the parties retu rned to the District Court seeking a final disposition o f their claims. They entered into a stipulation requesting the District Court to enter a final judgment based on: (1) the record created in connection with the parties' cros s applications for preliminary relief; (2) their resp ective expert reports (but without any testimony from either expe rt); and (3) supplemental briefs directed to the admissibili ty of those reports. The District Court obliged, and on January 20, 1999, it issued a final judgment in which it again declined to grant any party's request for injunctive relief with respect

to the Commerce mark.

6II.

On appeal, CIA contends that the District Court err ed in concluding that CBI, by virtue of its use of the Co mmerce mark within the banking industry, acquired rights i n the mark that extend to the insurance services industry . More specifically, CIA argues that the District Court co mmitted clear error in finding that as of 1983 CBI had esta blished: (1) secondary meaning in the Commerce mark within t he insurance services industry; (2) ownership of the C ommerce mark within the insurance services industry; and (3 ) that CIA's use of the Commerce mark was likely to create

confusion in the minds of reasonable consumers. CIA requests this Court to reverse these findings and r emand the case for consideration of its claim for injunct ive relief against CNIS.3

III.

"The law of trademark protects trademark owners in the exclusive use of their marks when use by another wo uld be likely to cause confusion." Interpace Corp. v. Lapp , Inc., 721 F.2d 460, 462 (3d Cir. 1983). A claim of trademark infringement is established when the plaintiff prov es that: (1) its mark is valid and legally protectable; (2) it owns the mark; and (3) the defendant's use of the mark to id entify its goods or services is likely to create confusion con cerning the origin of those goods or services. See Optician s Ass'n of Am. v. Independent Opticians of Am., 920 F.2d 187, 192 (3d Cir. 1990).

If the mark at issue is federally registered and ha s become incontestible, then validity, legal protecta bility, and ownership are proved. See Ford Motor Co. v. Summit Motor Prods., 930 F.2d 277, 292 (3d Cir. 1991). If the ma rk has not been federally registered or, if registered, ha s not achieved incontestability,4 then"validity depends o n proof

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3. CIA also requests that the case be remanded for consideration of its claim for damages. However, on the record before us , there seems to be no evidence as to the amount of damages CIA sustain ed.

4. A mark becomes incontestible after the ownerfile s affidavits stating that the mark has been registered, that it has been in continuous use for

7of secondary meaning, unless the unregistered or

contestable mark is inherently distinctive." 5 Id. A plaintiff must establish secondary meaning in a mark at the t ime and place that the defendant began use of the mark. See Scott Paper Co. v. Scott's Liquid Gold, Inc., 589 F .2d 1225, 1231 (3d Cir. 1978); J. Thomas McCarthy, McCarthy o n Trademarks and Unfair Competition S 15:4 (4th ed. 1 997) [hereinafter "Trademarks"].

Secondary meaning exists when the mark "is interpre ted by the consuming public to be not only an identific ation of the product or services, but also a representation of the origin of those products or services." Scott Paper Co. at 1228. In general, it is established through extensi ve advertising which creates in the minds of consumers an association between the mark and the provider of th e services advertised under the mark. See id. Under c ertain circumstances, a mark "can develop secondary meanin g as to goods or services to which the mark has not been applied." Id. The rationale for extending protectio n of a mark into a noncompeting market are the potential d angers that: "(1) the reputation of the holder of the mark may be tarnished or (2) the user of an infringing mark may be attempting to benefit from the general goodwill dev eloped by the holder of the protected mark." Id.

Although there are numerous cases discussing second ary meaning, there is not yet a consensus as to its spe cific elements. See Ford Motor Co., 930 F.2d at 292. A no nexclusive list of factors which may be considered i ncludes: (1) the extent of sales and advertising leading to buyer association; (2) length of use; (3) exclusivity of use; (4) the fact of copying; (5) customer surveys; (6) customer

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five consecutive years subsequent to registration, that there is no pending proceeding contesting the owner's rights to registration, and that there has been no adverse decision concerning the registrant's ownership or right to registration. See 15 U.S.C. S S 1058, 1065; Fisons Horticulture, Inc. v. Vigoro Indus., 30 F.3d 466, 4 72 n. 7 (3d Cir. 1994).

5. A mark is inherently distinctive if it may be fa irly characterized as arbitrary, fanciful, or suggestive. See Ford Motor Co., 930 F.2d at 292 n. 18. Neither CBI, CNIS, nor CIA contends that the Co mmerce mark is inherently distinctive.

8testimony; (7) the use of the mark in trade journal s; (8) the

size of the company; (9) the number of sales; (10) the number of customers; and, (11) actual confusion. Se e id.

"With respect to ownership of an unregistered mark, the first party to adopt a mark can assert ownership so long as it continuously uses the mark in commerce." Ford Mo tor Co., 930 F.2d at 292. However, where a senior user of a mark later expands into another industry and finds an intervening junior user, priority in the mark in th e second industry depends on whether the senior user would normally or reasonably have been expected to expand into that industry. See J. Wise and Sons Co. v. W. E. Ba ssett Company, 462 F.2d 567, 569 (C.C.P.A. 1972). This, i n turn, depends on whether the nature of the industries was such that purchasers would reasonably expect the service s rendered by these industries to originate from a co mmon source. See id. at 569; see also McCarthy, Trademar ks, S 16:5; Volkswagenwerk Aktiengessellschaft v. Wheel er, 814 F.2d 812, 815 (1st Cir. 1987).

In addition to establishing validity and ownership, "a plaintiff must also prove likelihood of confusion, which is said to exist `when the consumers viewing the defen dant's mark would probably assume that the product or serv ice it represents is associated with the source of a diffe rent product or service identified by a similar mark.' " Ford Motor, 930 F.2d at 292 (quoting Scott Paper Co., 58 1 F.2d. at 1229). The likelihood of confusion analysis requ ires the evaluation of a number of factors including: (1) th e degree of similarity between the owner's mark and the alle ged infringing mark; (2) the strength of the owner's ma rk; (3) the price of the goods and other factors indicative of the care and attention expected of consumers when makin g a purchase; (4) the length of time defendant has used the mark without evidence of actual confusion arising; (5) the intent of the defendant in adopting the mark; (6) t he evidence of actual confusion; (7) whether the goods , though not competing, are marketed through the same channe ls of trade and advertised through the same media; (8) th e extent to which the targets of the parties' sales e fforts are the same; (9) the relationship of the goods in the minds of the public because of the similarity of function; ( 10) other

9facts suggesting that the consuming public might ex pect

the prior owner to expand into the defendant's mark et. See Scott Paper, 589 F.2d at 275.

IV.

We now turn to the District Court's specific findin gs of fact with respect to secondary meaning, ownership, and

likelihood of confusion.

A.

After concluding that CBI's use of the "Commerce" m ark "is not inherently distinctive and does not have gr eat conceptual strength," the District Court found that the mark "does have substantial marketplace recognition value in New Jersey." Commerce Nat'l Ins. Servs. , 995 F. Supp. at 499. In elaborating on this point, the Court contin ued:

Consumers viewing the term "Commerce" in fro nt of a bank, in connection with banking more genera lly, or in a headline or article in a newspaper busines s section may well assume they are dealing with CBI. S till, given the frequency with which consumers see the t erm "Commerce" -- and similar marks such as "Commercial" -- they likely have come to rec ognize that different goods and services identified by t he term "Commerce" mark may have different origins. On balance, this Court concludes that the "Comm erce" mark, by virtue of its marketplace recogniti on, was fairly strong in 1983 -- when CIA was founde d-- and is stronger today. It will be protected in c onnection with banking and financial services. It also will be protected in connection with some products a nd services which are closely related to bankin g and

financial services in the minds of consumers

.

Id.

Although the Court never specifically labeled the a bove rationale as its secondary meaning analysis, the pa rties agree that the language reflects the District Court 's findings in this regard. The parties disagree, however, over the soundness of those findings. Naturally, CBI argues that

10they are firmly supported by the evidence of record ; CIA

argues to the contrary.

We believe that CIA has the more credible position. In our view, CBI failed to produce a sufficient quantum of evidence from which the Court could reasonably conclude that CBI had established secondary meaning in the "Commerce" mark within the general insurance services industry as of 1983, the year in which CIA was established.

CBI offered no evidence as to the extent to which i t had promoted the "Commerce" mark by 1983. The only spec ific figure provided in the record involves the year of 1996, thirteen years later, when CBI claims to have spent more than $4 million to promote its services under the "Commerce" mark. The amount of money spent promotin g the mark after 1983, however, is irrelevant. See Sc ott Paper Co., 589 F.2d at 1231; McCarthy, Trademarks , S 15: 4. CBI attempts to divert attention from this irrelevant f act by pointing to a sentence in the District Court's opin ion which states: "CBI has promoted the `Commerce' mark . . . widely through customer services, promotional materials, advertisements, and community service activities." Commerce Nat'l. Ins. Servs., 995 F. Supp. at 494. T hat statement, however, does not demonstrate that CBI h ad promoted the "Commerce" mark before 1983. Moreover, even if it were so intended, it would be clearly er roneous because there is no evidence of record to support s uch a finding.

CBI's proof as to secondary meaning was deficient i n other respects as well. First, CBI was unable to pr oduce a single instance of actual confusion between it and CIA. The only evidence of actual confusion in this case rela tes to the dispute between CIA and CNIS. Although evidence of actual confusion is but one factor in the secondary meanin g analysis, see Ford Motor Co., 930 F.2d at 292, CIA' s and CBI's harmonious coexistence in the same geographic al area for thirteen years most certainly cuts against CBI's claim to secondary meaning within the insurance ser vices industry. Second, CBI offered no evidence to demons trate that trade journals or other publications referred to it as "Commerce" in 1983. Instead, CBI offered two newspa per articles published in 1996. Although those articles do refer

11to CBI as "Commerce," they do not aid in determinin g

whether CBI was commonly identified by consumers as "Commerce" during the time period relevant to these

actions.

CBI also makes much of the "fact of copying" (i.e. the fact

that CIA also uses the "Commerce" mark in its busin ess name), but there is no evidence that CIA intended t o leach off the goodwill of CBI by appropriating its mark. To the contrary, CIA limited the mark's use to general ins urance services, a use to which CBI consciously acquiesced for thirteen years. Moreover, as noted by the District Court, the "Commerce" mark is not particularly distinctive. It is a common term used nationally in connection with a va riety of businesses, and is even prominently embedded in our federal constitution. CIA's election to use such a commonplace term in naming its insurance agency is no more evidence of copying than was CBI's choice of t he mark. At most, it is only minimally probative of wh ether CBI established secondary meaning in the "Commerce"

mark in 1983.

CBI also points to a recent customer satisfaction s urvey as evidence supportive of the District Court's find ing that the mark achieved secondary meaning. However, CBI's reliance on that survey is misplaced because the su rvey is wholly irrelevant to whether CBI established second ary meaning in the "Commerce" mark as of 1983. First, b ased on the recency of the survey, it follows that it is not particularly probative of customer views in 1983. S econd, and more importantly, customer surveys and customer testimony are relevant to the secondary meaning inq uiry only insofar as they are probative of the strength of the

"Commerce" mark in the collective consumer

consciousness. The satisfaction of customers with C BI's

services does little to demonstrate that when custo mers see the word "Commerce" they associate it with CBI.

Finally, CBI also argues that the District Court di d not clearly err in finding secondary meaning because at the time CIA began using the "Commerce" mark, CBI had already been using the mark for ten years; CBI's us e of the mark was exclusive in the New Jersey service area w ith respect to banking; and, CBI was a relatively large bank

12controlling over $100 million in assets. Although t his

evidence is probative of secondary meaning, it neve rtheless is insufficient to support a finding of secondary m eaning. CBI is attempting to establish secondary meaning in the non-competing insurance services industry, not the banking industry. Moreover, CBI is also attempting to establish rights to a commonplace, descriptive term used by a variety of businesses in a variety of contexts. I n these circumstances, the evidentiary bar must be placed somewhat higher. See McCarthy, Trademarks, S 15:28. ( "[A]s a general rule of thumb, the more descripti ve the term, the greater the evidentiary burden to establi sh secondary meaning.")

CBI offered no evidence that trade journals or othe r publications referred to it as "Commerce" in 1983. The record likewise reveals not a single CBI customer w ho ever

confused CIA with CBI. Nor does the record contain any evidence as to the extent of CBI's promotional and advertising activities prior to 1983. In the absenc e of any evidence on these matters, CBI's status as a relati vely large bank is insufficient to support the finding that CB I established secondary meaning in the Commerce mark with respect to the general insurance services industry.

B.

Turning now to the District Court's determinations with respect to ownership and likelihood of confusion, i t found that CBI's rights in the Commerce mark were senior to those of CIA because CIA's use of the mark, as of 1 983, created a likelihood of confusion. In so finding, i t appears that the District Court conjoined its analysis of o wnership with its analysis of likelihood of confusion. Altho ugh these are distinct elements of a trademark infringement c laim, the District Court's choice not to separate them is of little consequence because the findings turn on substantia lly the same evidence. See McCarthy, Trademarks S 16:5 (no ting that when a senior user of a mark expands into a se cond service industry and finds an intervening junior us er of the mark, ownership in the second industry is determine d by whether the expansion is "natural" in that customer s would

have been confused as to source or affiliation at t he time of

13the intervening user's appearance). Nevertheless, b ecause

we believe the evidence presented by CBI insufficie nt to demonstrate a likelihood of confusion, we conclude that the Court's finding as to both of these elements was cl ear error.

The District Court appears to have rested its findi ng of a likelihood of confusion primarily on the assumption that banking and insurance are similar industries in the minds of consumers and that consumers would expect banks to expand into the insurance industry. In this connect ion, the District Court stated that because "[t]he composite phrase `Banking and Insurance' probably has resonance in t he consumer mind" and because "[c]onsumers have long b een aware that banks seek to expand territorially and i n terms of the products and services they offer . . . many reasonable consumers encountering `Commerce' in connection wit h insurance and financial planning would have assumed they were dealing with CBI or some offshoot." Commerce N at'l Ins. Servs., 995 F.Supp. at 501.

This speculative rationale amounts to little more t han an assumption of consumer behavior for which there is little substantive proof of record. CBI's only evidence th at a reasonable consumer in 1983 would have expected ban ks to expand into the insurance industry consisted of (1) a single affidavit in which CNIS's president and CEO stated

that CBI offered credit life insurance and credit d isability insurance beginning in December of 1974 and (2) an unpersuasive report from CBI's expert who concluded that reasonable consumers in 1983 would have expected ba nks

to sell insurance. This evidence is insufficient to support a finding of likelihood of confusion for several reas ons.

First, although the affidavit of CNIS's president a nd CEO

establishes that CBI offered credit life insurance and credit disability insurance in support of its loans to its banking customers, it does little to demonstrate that reaso nable consumers in 1983 would have also expected CBI to b e selling insurance generally, including the huge var iety of liability and risk insurance. Likewise, CBI's exper t's report does little to aid the inquiry. Although the report does list several surveys reflecting consumer attitudes and expectations with respect to the banking industry, only one of those surveys was taken during the time period r elevant

14to this action. That survey, taken in October of 19 78,

reflects that ". . . 94.2% of respondents replied t hey thought credit insurance was a good thing, the large majori ty without any qualifications." The survey does not, h owever, aid in a determination that consumers in 1983 expec ted banks to be engaged in the general insurance indust ry because it simply reveals that some consumers belie ved credit life insurance was "a good thing." It says n othing

about the extent to which the consumers believed ba nks to be engaged in the insurance business. Moreover, eve n if it did, it is not at all clear that the impressions of the respondents in that survey reflected how New Jersey consumers viewed the banking industry.6

It is also important to note that New Jersey law se verely limited banks from engaging in the general insuranc e industry at the time CIA was formed. By statute, se e e.g. N.J.S.A. SS 17:3C-1 and 17:19A-213.1 (West 1984), b anks could not sell general insurance services or produc ts until 1996 when the United States Supreme Court decided Barnett Bank of Marion County v. Nelson, 517 U.S. 2 5 (1996). This prior statutory bar eviscerates the po ssibility that prior to 1996 southern New Jersey consumers reasonably expected CBI to engage in the insurance industry. Moreover, it is apparent that CBI had no expectation of engaging in the general insurance in dustry

until the Barnett decision in 1996.

Furthermore, not only was CBI's evidence of a likel ihood of confusion insufficient, but there was also other evidence tending to suggest there was no danger of confusion

between CIA and CBI in 1983. A review of the record reveals not a single instance in which a consumer a ctually confused CIA with CBI. To the contrary, the record reveals that, from 1983 through 1996, CBI and CIA coexisted amicably, even referred customers to one another, a nd operated in their respective spheres of interest wi thout any

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6. As noted, CBI's expert did conclude in his repor t that a reasonable consumer would have expected CBI to be engaged in t he insurance business; however, his report failed to set forth a sufficient basis from which to reasonably draw that conclusion and theref ore offers little support of consumer confusion.

15confusion. Confusion only developed early in 1997 a fter CBI

elected to enter the insurance business by forming CNIS. CBI attempts to undercut the impact of the lack of evidence of confusion prior to CNIS's entry into the New Jer sey insurance market by arguing that the parties' inves tigation into the matter was minimal. This argument, however

, ignores that the burden of proving likelihood of co nfusion

rested on CBI.

CBI also attempts to make much of the similarity between the marks of the two companies. However, un til CBI decided to enter the insurance industry, neithe r party challenged the other's use of the mark. Of course, the Commerce mark is the same no matter who uses it, bu t this evidence is not particularly probative of a li kelihood of confusion because Commerce is a commonplace mark us ed by countless businesses in countless contexts. The District Court conceded as much during its analysis of the m ark and noted that "given the frequency with which cons umers see the term `Commerce' . . . they likely have come to recognize that different goods and services identif ied by the term `Commerce' may have different origins." See Co mmerce Nat'l Ins. Servs., 995 F.Supp. at 499.

Finally, as noted above, there is little evidence f rom which one could conclude that CBI's Commerce mark w as particularly strong in 1983. CBI offered no custome r surveys or testimony tending to suggest that the co nsuming public readily identified the Commerce mark with CB I. Nor did CBI offer any evidence as to the extent to whic h it had promoted the Commerce mark prior to CIA's entry int o the

insurance market. Because the Commerce mark is not inherently distinctive and because CBI adduced no e vidence to demonstrate that the mark had developed signific ant marketplace recognition prior to 1983, it is diffic ult to conclude that the mark was particularly strong.

In sum, the record is critically deficient of that minimum quantum of evidence from which the District Court c ould have reasonably found that CIA's use of the Commerc e mark in 1983 resulted in a likelihood of confusion. CBI had an opportunity to undertake discovery and to prepar e for a trial. Instead, it chose, along with CIA, to run th e risk of relying on the slender record presented with its re quest for

16a preliminary injunction. That record supports neit her the

findings of secondary meaning, ownership, nor likel ihood of confusion. As Judge Learned Hand observed in Federa l Telephone & Radio Corp. v. Federal Television Corp. , 180 F.2d 250 (2d Cir. 1950), which involved a suit by F ederal Telephone & Radio Corp. to enjoin the defendant as the junior user of the name "Federal:" "we should have no warrant for depriving the defendant of whatever goo d-will it has already acquired by its sales under its own nam e. It started the use in entire good faith, the word is i n general use for all sorts of purposes, and the plaintiff 's pretension to monopolize it is without any present basis that we can discover." Id. at 251-151. Accordingly, it was erro r to conclude that CBI possessed rights to the exclusive use of

the Commerce mark in the insurance services industr y.

V.

We now turn to the merits of CIA's claim against CN IS. The non-existent rights of CBI can no longer serve to shield its wholly-owned subsidiary, CNIS, from liability. CIA

contends that CNIS's use of the Commerce mark infri nges CIA's rights in the mark because CNIS's use of the mark

results in reverse confusion. CIA is entitled to a remand on this claim only if the record contains sufficient e vidence from which the District Court could reasonably conc lude that: (1) CIA's Commerce mark is valid and legally protectable; (2) CIA owns the Commerce mark; and (3 )

CNIS's use of the Commerce mark results in reverse confusion. See Fisons Horticulture, Inc. v. Vigoro Industries, Inc., 30 F.3d 466, 474 (3d Cir. 1994) (adopting the doctrine of reverse confusion); Sun Shipbuilding & Dry Dock Co. v. McCabe, 593 F.2d 234, 239 (3d Cir. 1979) (noting th at a remand is unnecessary where evidence of record woul d not support a finding in favor of party seeking remand) . We

address each of these issues in turn.

A.

Although CIA has registered the Commerce mark with the United States Patent and Trademark Office, the mark has yet to achieve incontestability. Therefore, to

17demonstrate that the Commerce mark is valid and leg ally

protectable, CIA must demonstrate that it had estab lished secondary meaning in the Commerce mark as of 1996, the year in which CNIS began use of the mark. See Ford Motor Co., 930 F.2d at 292. Although CIA's evidence of se condary meaning suffers from some of the same weaknesses as CBI's proof, we think CIA's evidence sufficient to permit a finding that CIA has established secondary meaning in the

Commerce mark within the insurance services industr y.

Unlike CBI, CIA is not attempting to establish seco ndary meaning in the Commerce mark with respect to servic es which it has yet to offer. Rather, CIA is simply as serting that it has established secondary meaning in the Co mmerce mark with respect to the insurance services it had offered under that mark for thirteen years prior to the for mation of

CNIS and continues to offer. We think it a reasonab le inference that during those thirteen years CIA was able to build up substantial good-will for its general insu rance services under the Commerce mark.7 It not only sold general insurance continuously during this period b ut also expanded to larger offices. Moreover, we note that in the context of a reverse confusion case, the evidentiar y burden upon a smaller, senior user to establish the existe nce of secondary meaning is placed somewhat lower. See Eli zabeth Taylor Cosmetics Company, Inc. v. Annick Goutal, 67 3 F.Supp. 1238, 1248 (S.D.N.Y. 1987)("[A] minimal sho wing of secondary meaning is required in a reverse confu sion case."). Otherwise, "a larger company could with im punity infringe the senior mark of a smaller one." Banff, Ltd. v. Federated Dep't Stores, Inc., 841 F.2d 486, 491 (2d Cir. 1988).

For these reasons, we conclude that CIA's proffered evidence is sufficient to support a finding of seco ndary meaning in the insurance industry.

___________________________________________________ ______________

7. Although that good-will may be limited geographi cally to an area no greater than southern New Jersey, the fact remains that, within that area, CIA has offered sufficient evidence from whic h a finding of secondary meaning can be made.

18B.

Turning now to the question of ownership, there is

sufficient evidence in the record from which the Di strict Court may reach the conclusion that CIA owns the

Commerce mark within the insurance services industr y of southern New Jersey. CIA began using the mark in th at industry in 1983; CNIS did not commence its use unt il

1996.

C.

Finally, we turn to the issue of reverse confusion. This Court adopted the doctrine of reverse confusion in Fisons Horticulture, Inc. v. Vigoro Industries, Inc., 30 F .3d 466 (3d Cir. 1994). In so doing, we explained that "[r]ever se confusion occurs when a larger, more powerful compa ny uses the trademark of a smaller, less powerful seni or owner and thereby causes likely confusion as to the sourc e of the senior user's goods or services." Id. at 474. Quoti ng the Sixth Circuit's decision in Ameritech, Inc. v. Amer ican Information Technologies Corp., 811 F.2d 960, 964 ( 1987),

we elaborated:

the junior user saturates the market with a similar

trademark and overwhelms the senior user. Th e public comes to assume the senior user's products a re really the junior user's or that the former has bec ome somehow connected to the latter. The result is that the

senior user loses the value of the trademark -- its product identity, corporate identity, contro l over its goodwill and reputation, and ability to move into new

markets.

Id. at 474-75.

After adopting the doctrine of reverse confusion, w e proceeded to assess the plaintiff 's reverse confus ion claim in light of the Scott Paper factors. In doing so, w e acknowledged that certain of these factors must be

reworked in the context of a reverse confusion case . For example, when applying the strength of mark factor, the lack of commercial strength of the smaller senior u ser's mark is to be given less weight in the analysis bec ause it is

19the strength of the larger, junior user's mark whic h results

in reverse confusion. See id. at 479. Likewise, the intent inquiry must also be altered to focus on whether th e defendant was aware of the senior user's use of the mark in question, or whether the defendant conducted an adequate name search for other companies marketing similar goods or services under that mark. See id. at 480.

Consideration of CIA's reverse confusion claim in l ight of these modified Scott Paper factors reveals that the re is a significant likelihood of reverse confusion in this case. CIA and CNIS are engaged in the same line of business. In addition, the "Commerce" mark used by the parties i s identical. Although CNIS has added the words "Natio nal" and "Services" to its mark, the record reveals that instances of confusion between CIA and CNIS have already occu rred despite the addition of these terms.

CNIS's ability to promote its mark is also much gre ater

than that of CIA's. The formation of CNIS was immed iately followed by two newspaper articles providing accoun ts of CBI's expansion into the insurance industry through the formation of CNIS. In addition, CBI has boasted tha t it spent $4 million to promote the "Commerce" mark in 1996. Although these funds appear to have been spent prom oting the mark in connection with CBI's banking services, it is likely that similar funds will be used in the futur e to promote the mark in connection with CNIS's insuranc e activities. Moreover, it is also possible that CNIS will have a substantial advertising budget of its own. In the short period of its existence, CNIS already has become th e 58th largest insurance agency in the nation, serving mor e than 38,000 individuals and businesses. Although the exa ct size of CIA is not known, it is obvious that CIA does no t have similar resources to develop a high-powered promoti onal campaign.

Furthermore, CBI was well aware of CIA and its mark when it decided to form CNIS and enter the general

insurance services market. The two had known each o ther for years; they had done business with each other; they had

referred individuals and businesses to each other. CBI

made a conscious decision to track the CIA name for its subsidiary, merely adding "National" when it entere d the

20insurance industry. It is not entirely clear whethe r CBI's

motive was to push CIA out of the market or whether CBI simply saw an opportunity to promote both its insur ance and banking activities under a common mark. Nevertheless, the doctrine of reverse confusion is designed to prevent the calamitous situation we have here-- a larger, more powerful company usurping the business identity of a smaller senior user. See Fisons , 30 F.3d at 474 ("Without recognition of reverse confusion, smaller senior users would have little protection against, larger more powerful companies who want to use identical or confusingly similar trademarks.").

In sum, there is ample evidence of record that CNIS 's use

of the "Commerce" mark will result in reverse confu sion. CNIS by virtue of its superior size, resources, and economic strength, as well as the support of its powerful an d aggressive parent, may be able to saturate the mark et with advertising so that the public will likely believe that CIA is an affiliate of CNIS or possibly an interloper.

VI.

Accordingly, for the reasons set forth above, the D istrict Court's order denying CIA's request for an injuncti on against CNIS from using the Commerce mark will be vacated and the case remanded for further proceedin gs as are consistent with this opinion.

Upon remand, the District Court should make appropriate findings of fact as to whether (1) CIA has sufficient secondary meaning in the Commerce mark i n the insurance industry, (2) the ownership of the mark, and (3)

the likelihood of confusion in the use of the Comme rce mark by CNIS, either in its name as presently forme d or modified. As the concurrence observes, nothing in t his opinion precludes the District Court on remand, if the evidence so warrants, from permitting CNIS to conti nue doing business under the "Commerce National Insuran ce Services" name. If, on the other hand, the Courts c oncludes that CIA's evidence establishes the foregoing eleme nts of the trademark infringement claim, then it should gr ant CIA appropriate equitable relief.

21Costs taxed against Commerce National Insurance

Services, Inc. and Commerce Bancorp, Inc.

22SLOVITER, Circuit Judge, concurring.

I write merely to make clear my understanding of wh at the court's opinion will allow the District Court t o do on remand. In its judgment, the District Court enjoine d CIA from using the term "National" as part of its servi ce mark and/or business name. At the same time, the Distric t Court enjoined CNIS from using the abbreviated business n ame and/or service mark "Commerce Insurance." Neither p arty objected on appeal to those portions of the Distric t Court's order. I join the majority's opinion because I unde rstand that nothing therein would preclude the District Co urt, on remand, from permitting CNIS to continue doing busi ness under the name "Commerce National Insurance Service s."

A True Copy:

Teste:

Clerk of the United States Court of Appeals

for the Third Circuit

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