Opinion ID: 791756
Heading Depth: 2
Heading Rank: 1

Heading: The District Court's Grant of Partial Summary Judgment

Text: 27 This case deals with two distinct claims in the trademark infringement context: forward confusion and reverse confusion. Surfvivor Media, Inc. v. Survivor Prods., 406 F.3d 625, 630 (9th Cir.2005). Forward confusion occurs when consumers mistakenly associate a junior user's mark with that of a well-known senior mark. Dreamwerks Prod. Group, Inc. v. SKG Studio, 142 F.3d 1127, 1130 n. 5 (9th Cir.1998). Reverse confusion cases, however, involve consumers dealing with a senior trademark-holder believing all the while that they are doing business with a junior user. See Surfvivor Media, Inc., 406 F.3d at 630. 28 Both reverse and forward confusion cases require the plaintiff to demonstrate a likelihood of confusion among consumers. Therefore, to survive summary judgment on its forward confusion claim in this case, M2 Software must raise a material question of fact whether the general public and the music industry members thought that M2 Software was the source of Madacy's CDs. Furthermore, to withstand summary judgment on its reverse confusion claim, M2 Software must demonstrate that a question of material fact remains whether music industry members believed that Madacy was the source of M2 Software's goods. 29 The test of trademark infringement under state, federal, and common law is whether there will be a likelihood of confusion. 5 See Cleary v. News Corp., 30 F.3d 1255, 1262-63 (9th Cir.1994). To determine whether there is a likelihood of confusion between the parties' allegedly related goods and services, we consider the following eight Sleekcraft factors: (1) strength of the mark; (2) proximity of the goods; (3) similarity of the marks; (4) evidence of actual confusion; (5) marketing channels used; (6) type of goods and the degree of care likely to be exercised by the purchaser; (7) defendant's intent in selecting the mark; and (8) likelihood of expansion of the product lines. See AMF Inc. v. Sleekcraft Boats, 599 F.2d 341, 348-49 (9th Cir.1979). 30 Some Sleekcraft factors are much more important than others, and the relative importance of each individual factor will be case specific. Brookfield, 174 F.3d at 1054. In essence, [t]he test for likelihood of confusion is whether a `reasonably prudent consumer' in the marketplace is likely to be confused as to the origin of the good or service bearing one of the marks. Dreamwerks Prod. Group, Inc., 142 F.3d at 1129. 31 The district court did not analyze each Sleekcraft factor separately. Instead, the district court discussed each factor in the context of the facts that are marshaled by each side. The district court granted partial summary judgment in favor of Madacy. The court ruled as a matter of law (1) that there was no likelihood of forward confusion among either general consumers or music industry members, and (2) that there was no likelihood of reverse confusion among music industry members. 32 We review summary judgments de novo. See Clicks Billiards, Inc. v. Sixshooters, Inc., 251 F.3d 1252, 1257 (9th Cir.2001). As we now explain, an analysis of the Sleekcraft factors supports the conclusion of the district court that there was no triable issue of the likelihood of confusion. 33
34 Trademarks are categorized as generic, descriptive, suggestive, and arbitrary or fanciful. See Two Pesos, Inc. v. Taco Cabana, Inc., 505 U.S. 763, 768, 112 S.Ct. 2753, 120 L.Ed.2d 615 (1992). A generic mark is the least distinctive, and an arbitrary or fanciful mark is the most distinctive. See GoTo.com, Inc. v. Walt Disney Co., 202 F.3d 1199, 1207 (9th Cir.2000). The more distinctive a mark, the greater its conceptual strength; in other words, a mark's conceptual strength is proportional to the mark's distinctiveness. 35 In analyzing the first Sleekcraft factor, the district court was presented with evidence that M2 Software first used the M2 mark in commerce in January 1992, registered the mark with the USPTO in 1994, and devoted resources to maintaining the mark. And up to late 1999, M2 Software had scant sales of its CD products and devoted a meager investment of $14,500 in direct advertising for these products. 36 The district court, when it conducted its Sleekcraft analysis, relied heavily on M2 Software's scant sales of, at most, 215 CDs, and its meager advertising expenditures for its CD products. On the basis of M2 Software's scant sales and meager advertising expenditures, the court concluded that even though the fanciful M2 mark was conceptually strong, no reasonable trier of fact could find for M2 Software on the issue of likelihood of forward confusion as to the general public. M2 Software argues that, by considering its scant sales and meager advertising expenditures, the district court erroneously required that M2 Software's fanciful mark acquire a secondary meaning. We disagree. 37 A mark's overall strength is relative and cannot be determined by mechanistically assessing its conceptual or commercial strengths. Our court has previously recognized that a suggestive or descriptive mark, which is conceptually weak, can have its overall strength as a mark bolstered by its commercial success. See, e.g., Entrepreneur Media, Inc. v. Smith, 279 F.3d 1135, 1144 (9th Cir.2002) (recognizing that an otherwise inherently weak mark may be strengthened by such factors as extensive advertising, length of exclusive use, public recognition (citation and internal quotation marks omitted)); GoTo.com, 202 F.3d at 1208 (stating that GoTo's tremendous success strengthened its otherwise suggestive mark); Brookfield, 174 F.3d at 1058 (noting that placement within the conceptual distinctiveness spectrum is not the only determinant of a mark's strength, as advertising expenditures can transform a suggestive mark into a strong mark where, for example, that mark has achieved actual marketplace recognition (internal citation omitted)); Sleekcraft, 599 F.2d at 350 (stating that a suggestive mark may be strengthened by advertising; otherwise the weak mark is entitled to a restricted range of protection). But we have never held that an arbitrary or fanciful mark (i.e., a conceptually strong mark) can have its overall strength diminished by feeble commercial success. We decline to do so today. Rather, we hold that a lack of commercial strength cannot diminish the overall strength of a conceptually strong mark so as to render it undeserving of protection. Otherwise, a mark which is conceptually strong may never have the opportunity to blossom into its full commercial potential through effective marketing. 38 That being said, we conclude that the first Sleekcraft factor weighs in M2 Software's favor, and that the district court properly considered the overall strength of the M2 mark. Indeed, the district court acknowledged that M2 Software's M2 mark was fanciful, federally-registered, and incontestable. 6 The district court then weighed the remaining Sleekcraft factors based on the overall strength of the M2 mark, and the court focused on the ultimate question posed by the Sleekcraft analysis: the likelihood of confusion as to the source of the product. 39
40 When dealing with the second Sleekcraft factor, the courts assess whether the goods are related or complementary. Sleekcraft, 599 F.2d at 350. Where the goods are related or complementary, the danger of confusion is heightened. See id. It is undisputed that M2 Software distributes a line of products that includes audio CDs and has a website that provides audio content for downloading. At a minimum, both M2 Software and Madacy distributed music and CDs. Therefore this Sleekcraft factor weighs in M2 Software's favor, but only slightly because the genres of the music CDs are very significantly different. 7 See Sleekcraft, 599 F.2d at 350 (noting that goods are proximate if the goods are similar in use and function). Thus, the district court did not err in ruling that this factor, if it can support plaintiff's case at all, does so very slightly. 41
42 The similarity of marks has always been considered a critical question in the likelihood-of-confusion analysis. See GoTo.com, 202 F.3d at 1205. Similarity of marks is assessed in terms of their sight, sound, and meaning. Official Airline Guides, Inc. v. Goss, 6 F.3d 1385, 1392 (9th Cir.1993) (citations omitted). Moreover, the trademark is not judged by an examination of its parts, but rather the validity and distinctiveness of a composite trademark is determined by viewing the trademark as a whole, as it appears in the marketplace. Id. 43 M2 Software stresses that Madacy's M2 Entertainment mark was identical to its M2 mark in both sight and sound. Madacy, on the other hand, argues that the two marks are not sufficiently similar because the M2 in Madacy's M2 Entertainment mark is highly stylized and conjoined with the Entertainment, lacks the oval which appears around M2 Software's M2 mark, and is used in connection with other more distinctive marks like the Lakers or the NBA. 44 The district court compared the marks and took into account the similarity of the sight, sound, and meaning of the two marks. After considering (1) the addition of Entertainment by Madacy, (2) the use of the mark interactive in addition to M2 on M2 Software's CDs, (3) the use of other marks in addition to M2 Entertainment on Madacy's CDs, and (4) the fanciful nature of M2 Software's M2 mark, the district court ruled that the third Sleekcraft factor weighed only very slightly in M2 Software's favor. This ruling was not erroneous. The district court considered the marks in their entirety and as they appear[ed] in the marketplace. Alpha Indus., Inc. v. Alpha Steel Tube & Shapes, Inc., 616 F.2d 440, 444 (9th Cir.1980); see also Lindy Pen Co. Inc. v. Bic Pen Corp., 725 F.2d 1240, 1245 (9th Cir.1984) (The two marks viewed in isolation are indeed identical, but their similarity must be considered in light of the way the marks are encountered in the marketplace and the circumstances surrounding the purchase of the [products].). 45
46 Evidence that use of the two marks has already led to confusion is persuasive proof that future confusion is likely. Sleekcraft, 599 F.2d at 352. As evidence of actual confusion, M2 Software attempted to offer a likelihood of confusion survey in its opposition to Madacy's summary judgment motion. The district court, as discussed below, properly excluded M2 Software's survey. 47 M2 Software now attempts to offer evidence of actual confusion among one of its previous customers allegedly caused by Madacy's use of the M2 mark. Specifically, M2 Software contends that Ms. Patricia Weymss, a record label executive formerly employed by an M2 Software licensee, informed M2 Software that she saw an ad in which Madacy was using the M2 Entertainment mark. 48 In the lower court proceedings, however, M2 Software did not discuss Ms. Weymss's deposition testimony. The deposition transcripts were merely attached as an exhibit to Madacy's summary judgment motion and as an exhibit to a declaration filed by M2 Software in opposition to Madacy's summary judgment motion. In its opposition to Madacy's summary judgment motion, M2 Software failed to raise the issue or argue that Ms. Weymss was confused by Madacy's use of the M2 Entertainment mark. Thus, M2 Software cannot offer this evidence on appeal. See Harkins Amusement Enters., Inc. v. Gen. Cinema Corp., 850 F.2d 477, 482(9th Cir.1988) (stating that only those items referred to in parties' partial summary judgment memoranda in trial court could be considered on appeal and that the panel's analysis was limited to the factual assertions raised in the district court papers). 49 Even if we consider Ms. Weymss's testimony, the evidence fails to show actual confusion. 8 See Sleekcraft, 599 F.2d at 352(noting that courts have often discounted such evidence because it was unclear or insubstantial). At best, the evidence demonstrates that Ms. Weymss was reminded of M2 Software when she saw Madacy's advertisement bearing the M2 Entertainment mark. For example, Ms. Weymss testified: I saw the advertisement. I saw M2. I remembered [M2 Software's President]. I hadn't spoken to him in months. I said, oh, I should give him a call and say hi. Absent additional evidence, Ms. Weymss's testimony was not enough to demonstrate actual confusion. See Cohn v. Petsmart, Inc., 281 F.3d 837, 843 n. 7 (9th Cir.2002) (noting that while enquiry evidence is admissible and relevant, standing alone with no other evidence it is insufficient proof of actual confusion. (citation omitted)). Therefore, the fourth Sleekcraft factor weighs in Madacy's favor. 50
51 Convergent marketing channels increase the likelihood of confusion. Nutri/System, Inc. v. Con-Stan Indus., Inc., 809 F.2d 601, 606 (9th Cir.1987). The district court ruled that the fifth Sleekcraft factor weighed, at best, only very slightly in M2 Software's favor. The district court determined that there was no significant overlap in advertising markets. The court concluded that the only overlap between Madacy's and M2 Software's goods occurred on the website Amazon.com, where the music CDs of both companies could potentially have been purchased. 52 M2 Software takes issue with the district court's conclusion and argues that Madacy uses the same marketing channels because Madacy also launched its M2 Entertainment branded record label during a music industry trade show; because both M2 Software's M2 mark and Madacy's M2 Entertainment mark had been advertised in similar magazines; and because both M2 Software and Madacy had established a music industry presence in Los Angeles, New York, Miami, and Nashville. M2 Software, however, fails to discuss important distinctions in the marketing channels used. M2 Software promoted its M2 products in specialty music industry publications, whereas Madacy did not promote its M2 Entertainment CDs in these publications. Furthermore, M2 Software argues that both marks were launched at the same trade show. However, even though Madacy launched its M2 Entertainment record label at the same trade show, it did so nearly a decade after M2 Software launched its M2 products. 53 Next, even though both M2 Software and Madacy offered their CDs for sale over the internet in general, and on Amazon.com in particular, M2 Software failed to provide evidence of sales attributable to M2 Software's website. Finally, unlike Madacy's music albums, M2 Software's products were not sold in retail outlets. In light of these differences, we conclude that the district court erred, although harmlessly, in ruling that this factor slightly favored M2 Software. Our weighing of the factor tilts strongly toward Madacy, and weighs heavily in the ultimate assessment that there was no triable issue of the likelihood of confusion. 54 vi. Type of Goods and the Degree of Care Likely to Be Exercised by the Purchaser 55 The type of goods and the degree of care likely to be exercised by the consumer is the sixth Sleekcraft factor to be considered. In this case, M2 Software offers two discrete types of products, each with a distinct group of purchasers. 56 The first type includes record label and music management administration database programs (including the RLMS and MPMS programs). The primary audience for the record label and music management administration database software products comprises music industry professionals. 57 The purchasers of the record label and music management databases (and associated services) are highly sophisticated members of the music industry. Regardless of any trademark, they would be well informed about the nature of a database program and its producer before making a purchasing decision. Thus, the possibility that these members of the music industry would be confused about the record label and music management products and services is almost nil. 58 The second type includes musical works (offered on audio CDs and interactive CD-ROMs, for example). Of the 880 copies of the musical works distributed by M2 Software, 215 CDs at most were purchased by consumers at large. The remaining copies were distributed to various people and not directly sold by M2 Software. 59 In contrast to those purchasing the record label and music management databases, the purchasers of the musical works (audio CDs, for example) are less sophisticated. Even though more than half of the 880 copies of M2 Software's musical works were distributed to people in the music industry, copies of the musical works were sold to consumers at large. [E]quity will protect even the uncommonly naive against deception from unfair competition. Stork Rest., Inc. v. Sahati, 166 F.2d 348, 358 (9th Cir.1948). Thus, likelihood of confusion of the casual consumer and the discerning buyer must be considered. Oriental Foods, Inc. v. Chun King Sales, Inc., 244 F.2d 909, 915 (9th Cir.1957). 60 The district court, in performing its Sleekcraft analysis, properly considered both the general consumers and the music industry members. The district court concluded that the sixth Sleekcraft factor weighed in Madacy's favor. This conclusion was not erroneous because M2 Software failed to demonstrate that a reasonable jury could find for M2 Software on the possibility of confusion among the casual consumer; confusion would be even less likely among the discerning music industry members. 61 vii. Defendant's Intent in Selecting the Mark 62 It is settled that [a] party claiming trademark infringement need not demonstrate that the alleged infringer intended to deceive consumers. E. & J. Gallo Winery v. Gallo Cattle Co., 967 F.2d 1280, 1293 (9th Cir.1992). When the alleged infringer knowingly adopts a mark similar to another's, we must presume that the public will be deceived. See Sleekcraft, 599 F.2d at 354. 63 M2 Software presented evidence that Madacy was aware of M2 Software's M2 mark. Specifically, M2 Software demonstrated that Madacy conducted a trademark search for record label uses prior to the launch of its M2 Entertainment mark which uncovered M2 Software's M2 mark. M2 Software claims that this is proof of Madacy's wrongful intent. M2 Software overstates Madacy's ill intentions. In fact, as a result of the search, Madacy's attorney believed that Madacy could carve out a non-infringing mark, even with the existence of M2 Software's M2 mark. 64 The district court ruled that even though Madacy exercised questionable judgment in proceeding with the M2 Entertainment mark in the face of the M2 mark, M2 Software failed to present evidence that would justify a trier of fact in concluding that [Madacy], with 20 years of experience in the music industry and the ability to produce almost 40,000 CDs in less time than M2 Software could sell 200 CDs, had any intention of capitalizing on M2 Software's trademark. We agree and hold that the district court did not err in concluding that the seventh Sleekcraft intent factor also leans towards Madacy's favor. 65 viii. Likelihood of Expansion of the Product Lines 66 M2 Software claims that because it began to broaden marketing of its interactive content on the internet, the eighth Sleekcraft factor should weigh in its favor. However, there is a need for a strong possibility of expansion into competing markets for this factor to weigh[ ] in favor of a finding of infringement. E. & J. Gallo, 967 F.2d at 1293 (emphasis added). M2 Software sold no more than 215 CDs over a ten-year period. This undermines M2 Software's claims that there was a strong possibility of it expanding into competing markets — it was doubtful that M2 Software would expand into general retail distribution of audio CDs. Thus, this Sleekcraft factor also favors Madacy. 67