Opinion ID: 203606
Heading Depth: 1
Heading Rank: 2

Heading: .unisys' appeal from the verdict and from the damages award

Text: Unisys argues that the facts did not support the jury finding that Unisys had infringed VSC's marks. Importantly, there is no challenge to the jury instructions on infringement or to the jury findings of VSC's right to a trademark and of substantial similarity. Unisys contests only the finding of likelihood of confusion. Our review of the denial of Unisys' renewed motion for judgment as a matter of law under Fed. R.Civ.P. 50(b) is de novo. See Valentín-Almeyda, 447 F.3d at 95. The underlying standard for grant of a Rule 50(b) motion is much more deferential to the verdict. See id. at 95-96. A motion for judgment as a matter of law may be granted only if a reasonable person, on the evidence presented, could not reach the conclusion that the jury reached. See Attrezzi, LLC v. Maytag Corp., 436 F.3d 32, 37 (1st Cir. 2006). VSC chose to present this case to the jury as a reverse confusion case. Under the classic forward confusion theory, a trademark holder alleges customers will purchase goods from the infringing junior user (here, Unisys) under the mistaken belief that they are purchasing from the senior user (here, VSC). See 4 J. McCarthy, McCarthy on Trademarks and Unfair Competition § 23:10, at 23-46 (4th Ed.2006); see also Boston Duck Tours, LP v. Super Duck Tours, LLC, 531 F.3d 1, 12 (1st Cir.2008). By contrast, under a reverse confusion theory, customers purchase the senior user's goods under the misimpression that the junior user is the source of the senior user's goods. ... [C]onsumers may consider [the senior user] the unauthorized infringer, and [the junior user's] use of the mark may in that way injure [the senior user's] reputation and impair its goodwill. 4 McCarthy, supra, § 23:10, at 23-47 (alterations and omission in original) (quoting Banff, Ltd. v. Federated Dep't Stores, Inc., 841 F.2d 486, 490 (2d Cir.1988)) (internal quotation mark omitted); see also Attrezzi, 436 F.3d at 38-39; Pignons S.A. de Mecanique de Precision v. Polaroid Corp., 657 F.2d 482, 492 n. 4 (1st Cir.1981). Harm from the reverse confusion may occur because the junior user saturates the market and overwhelms the senior user, causing harm to the value of the trademark and the senior user's business. [2] Attrezzi, 436 F.3d at 39. A reverse confusion case is proven only if the evidence shows that the junior user was able to swamp the reputation of the senior user with a relatively much larger advertising campaign. 4 McCarthy, supra, § 23:10, at 23-47 to -48. There is no actionable reverse confusion in the absence of a showing of likely confusion as to source or sponsorship. See DeCosta v. Viacom Int'l, Inc., 981 F.2d 602, 609 (1st Cir.1992). A trademark holder must show a likelihood of confusion; it need not show actual confusion, but actual confusion will strengthen the holder's infringement claim. Borinquen Biscuit Corp. v. M.V. Trading Corp., 443 F.3d 112, 120 (1st Cir.2006). On the evidence, VSC's strongest case for likelihood of confusion was as follows. VSC was a small company, firmly entrenched in what was once, in 1985, the new field of enterprise modeling. Indeed, VSC became associated with the academic progenitor in the field, Clive Finkelstein, who founded a company which VSC acquired and who served as VSC's Chief Scientist. The term VISIBLE was VSC's mark, and it was used to denote VSC's various software products. For many years, VSC's competitors in the enterprise modeling field were other small companies. That changed, starting in about 2000, when VSC's small competitors were acquired by large companies such as IBM, Microsoft, CA, and Telelogic. Through the use by the large companies of the name and marks of the small acquired companies, the identities and distinctness of the acquired former competitors merged into that of the larger acquirers. Substantially all of the modeling tool names from the 1990s used by VSC's competitors were acquired and rebranded, or disappeared altogether. Thus, when Unisys started using a mark (3D VISIBLE ENTERPRISE) substantially similar to VSC's VISIBLE mark, that use posed the risk that potential customers of VSC would assume VSC had likewise been acquired by Unisys. This problem was exacerbated because both companies had extensive websites. A customer searching for Visible and enterprise modeling could be led to Unisys. Given Unisys' large online presence, the use of the term Visible by the junior user, Unisys, threatened to overwhelm the mark of the senior user, VSC. The risk was that VSC would be thought to have disappeared into Unisys, to the detriment of VSC's sales. The question is whether a rational jury could conclude that there was a likelihood of this sort of reverse confusion. Our caselaw has long had a non-exclusive list of factors against which a finding of a likelihood of confusion is assessed. See Beacon Mut. Ins. Co. v. OneBeacon Ins. Group, 376 F.3d 8, 15 (1st Cir.2004). In Attrezzi we described one such representative list, and applied the analysis to a reverse confusion case: In assessing confusion, this circuit has resorted to the consultation of a series of factors ... [that] includes: (1) the similarity of the marks; (2) the similarity of the goods (or, in a service mark case, the services); (3) the relationship between the parties' channels of trade; (4) the juxtaposition of their advertising; (5) the classes of prospective purchasers; (6) the evidence of actual confusion; (7) the defendant's intent in adopting its allegedly infringing mark; and (8) the strength of the plaintiff's mark. Attrezzi, 436 F.3d at 39 (quoting Int'l Ass'n of Machinists v. Winship Green Nursing Ctr., 103 F.3d 196, 201 (1st Cir. 1996)); see also Venture Tape Corp. v. McGills Glass Warehouse, 540 F.3d 56, 60-61 (1st Cir.2008). The district court expressly incorporated these factors [3] into its instructions to the jury. It cautioned the jury not to consider any one factor as conclusive. Using such a list as a check against jury irrationality, the application of these factors to the facts of record in this case rationally support a finding of likelihood of reverse confusion. The jury found the parties' marks were substantially similar. Unisys argues they were not so similar as to support a likelihood of reverse confusion. Both Unisys and VSC use the word Visible, even though Unisys used the word primarily as part of the phrase 3D Visible Enterprise. Unisys argues that the two marks have different typefaces, backgrounds, and visual cues. Even so, the dissimilarities are not so great as to render irrational the finding of likelihood of reverse confusion. Unisys argues that the two companies have dissimilar offerings and are in fundamentally different businesses. While VSC primarily sells goods, in the form of software, Unisys sells services, in the form of consulting. A rational finding of reverse confusion, was possible, even so. Dr. Malcolm Lane, an expert witness for the plaintiff, testified that Unisys' and VSC's offerings were very similar and have very similar outputs and results for clients. A jury could conclude that in the field of enterprise modeling through computer applications, there was a realistic likelihood of reverse confusion. This is not a case in which the two companies' offerings are so dissimilar as to make confusion highly unlikely. See Attrezzi, 436 F.3d at 39. Similarities between channels of trade, advertising, and prospective customers are related factors, are often considered together, see id. at 39-40, and support the jury verdict. Unisys argues that the two companies differ greatly: (1) while VSC's product sales occur primarily through downloads from its website, Unisys' consulting engagements result from longstanding client relationships; (2) VSC primarily markets through its website, while Unisys advertises in general business publications, though both companies market extensively on the internet. Still, the jury heard testimony that both parties targeted many of the same customers. In addition, there was evidence of overlap between the parties' channels of trade. For example, the jury heard testimony that VSC's clients, such as the Arizona court system, signed ongoing consulting contracts of the kind Unisys identifies as its own primary channel of trade. While VSC presented no evidence of actual confusion at trial, the jury could have inferred actual reverse confusion from the company's decline in revenues from the sales of its software products. And actual confusion is not a prerequisite to a finding of likelihood of confusion. See Borinquen Biscuit Corp., 443 F.3d at 120-21. In a reverse confusion case, the focus is on the relative strengths of the marks so as to gauge the ability of the junior user's mark to overcome the senior user's mark. [4] See 4 McCarthy, supra, § 23:10, at 23-54 to -55 (citing Checkpoint Sys., Inc. v. Check Point Software Techs., Inc., 269 F.3d 270, 303 (3d Cir.2001)). A jury could conclude the Unisys mark could overcome the VSC mark. Unisys had a national advertising campaign for 3D Visible Enterprise, promoted the 3D Visible Enterprise campaign on the internet, and built the 3D VISIBLE ENTERPRISE mark through partnerships with developers of modeling tools. The VISIBLE mark had been used by VSC for over twenty years, VSC had spent over $2 million to promote the mark since 1987, and VSC had acted in the past to protect its mark. A jury could reasonably find that these facts established the identity of VSC's mark, but did not prevent the mark from being overwhelmed by Unisys' mark. In sum, the jury could rationally have found a likelihood of reverse confusion.
Unisys argues that the evidence is insufficient to support the damages award, a challenge we review de novo to determine whether reasonable persons could not have reached the conclusion that the jury embraced. Attrezzi, 436 F.3d at 37 (quoting Sanchez v. P.R. Oil Co., 37 F.3d 712, 716 (1st Cir.1994)). The test for Unisys is a stringent one, requiring Unisys to demonstrate a total failure of evidence to prove plaintiff's case. Id. (quoting Vázquez-Valentín v. Santiago-Díaz, 385 F.3d 23, 29 (1st Cir.2004), vacated on other grounds, 546 U.S. 1163, 126 S.Ct. 1329, 164 L.Ed.2d 43 (2006)) (internal quotation marks omitted). Unisys argues that there was no proof of either actual harm or of causation, pointing to evidence that VSC's revenues had been in decline before Unisys' launch in 2004 of the 3D Visible Enterprise campaign. It argues that the decline in VSC's revenues immediately following the June 2004 publication of Unisys' advertisement in the Wall Street Journal represented one of a normal series of fluctuations in VSC's revenues and was not caused by the launch of Unisys' campaign. [5] Nonetheless, the jury heard testimony that VSC's revenues in the quarter immediately following the launch of Unisys' campaign were [p]robably the lowest in the history of the company. VSC introduced into evidence a chart of its quarterly revenues before and after the infringement as well as its financial statements from the relevant years. The jury could conclude that Unisys' infringement reduced VSC's average monthly revenue by approximately $28,000 in the period immediately following the infringement. Michael Cesino, VSC's President, testified that a later increase in revenues was due to VSC's re-hiring of an experienced salesman. The jury could have reasonably inferred that VSC's revenues would have been higher but for the infringement. Cesino's testimony provided a basis for the $250,000 figure. He testified the jury could determine VSC's lost profits by calculating a profit margin on operations (using VSC's revenues and operating expenses) and applying that margin to VSC's lost revenues. By using this method, the jury had a basis for determining that an award of approximately $250,000 was appropriate. In fact, VSC argued to the jury that an award of about $500,000 was appropriate. The award was neither excessive nor inadequate, itself a sign that the jury did not behave unreasonably. See Attrezzi, 436 F.3d at 40.