Opinion ID: 714826
Heading Depth: 3
Heading Rank: 8

Heading: the likelihood of expansion of the product lines.

Text: 24 Wynn Oil Co. v. Thomas, 839 F.2d 1183, 1186 (6th Cir.1988) (Wynn I ) (citing Frisch's Restaurants, Inc. v. Elby's Big Boy of Steubenville, Inc., 670 F.2d 642 (6th Cir.) (Frisch's I ), cert. denied, 459 U.S. 916, 103 S.Ct. 231, 74 L.Ed.2d 182 (1982)). The Wynn I court explained the proper approach to these factors as follows: 25 These factors are simply a guide to help determine whether confusion would be likely to result from simultaneous use of the two contested marks. They imply no mathematical precision, and a plaintiff need not show that all, or even most, of the factors listed are present in any particular case to be successful.... [T]he general concept underlying likelihood of confusion is that the public believe that 'the mark's owner sponsored or otherwise approved of the use of the trademark.'  26 Id. (citation omitted). To frame it another way, the ultimate question [is] whether relevant consumers are likely to believe that the products or services offered by the parties are affiliated in some way. Homeowners Group, Inc. v. Home Mktg. Specialists, Inc., 931 F.2d 1100, 1107 (6th Cir.1991). 27 Whether there is a likelihood of confusion is a mixed question of fact and law. Wynn I, 839 F.2d at 1186. We apply a clearly erroneous standard to the district court's findings of fact supporting the likelihood of confusion factors, but review de novo the legal question of whether those foundational facts constitute a likelihood of confusion. Id. (citing Frisch's Restaurant, Inc. v. Shoney's, Inc., 759 F.2d 1261, 1264 (6th Cir.1985) (Frisch's II )). This standard of review applies both to a mark infringement claim and an unfair competition claim. Wynn Oil Co. v. American Way Service Corp., 943 F.2d 595, 604 (6th Cir.1991) (Wynn II ). 1. Strength of Mark 28  'A term for which trademark protection is claimed will fit somewhere in [a] spectrum which ranges through (1) generic or common descriptive and (2) merely descriptive to (3) suggestive and (4) arbitrary or fanciful.'  Induct-O-Matic Corp. v. Inductotherm Corp., 747 F.2d 358, 362 (6th Cir.1984) (citation omitted). [W]hether a mark is regarded as 'strong' or 'weak,' 'original, arbitrary, fanciful' or 'generic, descriptive, geographic' is but one of the elements to be considered in determining whether confusion is likely to result. Id. at 364 (internal quotation marks and citation omitted). The stronger the mark, the more likely it is that encroachment on it will produce confusion. Little Caesar Enterprises, Inc. v. Pizza Caesar, Inc., 834 F.2d 568, 571 (6th Cir.1987). Accordingly, the strong mark enjoys greater protection while the weak mark is afforded little support. Hindu Incense v. Meadows, 692 F.2d 1048, 1050 (6th Cir.1982). The district court concluded that since Houston's mark is arbitrary, it is strong as a matter of law, but provided no explanation for its conclusion that the mark was arbitrary. 29 A generic term is the weakest type of mark; it is a term used to commonly describe the relevant type of goods or services, and  'cannot become a trademark under any circumstances.'  Induct-O-Matic, 747 F.2d at 362 (citation omitted). Examples of unprotectible generic names are aspirin, escalator, and light beer. J. THOMAS MCCARTHY, MCCARTHY'S DESK ENCYCLOPEDIA OF INTELLECTUAL PROPERTY 139 (1991). 30 Descriptive terms come next in the hierarchy:  'A merely descriptive term specifically describes a characteristic or ingredient of an article.'  Induct-O-Matic, 747 F.2d at 362 (citation omitted). Examples of descriptive marks are BEST, SUPERIOR, and PREFERRED. MCCARTHY, DESK ENCYCLOPEDIA, supra, at 93. A descriptive mark is entitled to protection only upon a showing of secondary meaning, Hindu Incense, 692 F.2d at 1050, that is, by becoming distinctive of the applicant's goods. Induct-O-Matic, 747 F.2d at 362 (internal quotation marks and citation omitted). 31 To acquire a secondary meaning in the minds of the buying public, an article of merchandise when shown to a prospective customer must prompt the affirmation, That is the article I want because I know its source, and not the negative inquiry as to Who makes that article? In other words, the article must proclaim its identification with its source, and not simply stimulate inquiry about it. 32 S.P.A. Esercizio v. Roberts, 944 F.2d 1235, 1239 (6th Cir.1991) (citation omitted), cert. denied, 505 U.S. 1219, 112 S.Ct. 3028, 120 L.Ed.2d 899 (1992). 33 The third type of term is suggestive, which, as the word implies,  'suggests rather than describes an ingredient or characteristic of the goods and requires the observer or listener to use imagination and perception to determine the nature of the goods.'  Induct-O-Matic, 747 F.2d at 362 (citation omitted). Examples are CITIBANK, which connotes an urban or modern bank, or GOLIATH, for wood pencils, connoting a large size. MCCARTHY, DESK ENCYCLOPEDIA, supra, at 322. A suggestive term is considered stronger than one that is merely descriptive, and does not require proof of secondary meaning. 34 Fanciful and arbitrary marks are the strongest. Little Caesar, 834 F.2d at 571. An 'arbitrary' mark has a significance recognized in everyday life, but the thing it normally signifies is unrelated to the product or service to which the mark is attached, such as CAMEL cigarettes or APPLE computers. Id. A 'fanciful' mark is a combination of letters or other symbols signifying nothing other than the product or service to which the mark has been assigned, such as EXXON or KODAK. Id. 35 On appeal, Houston argues that Nicholasville presented no evidence at trial to contradict the district court's finding that Houston's mark is arbitrary; Nicholasville, on the other hand, suggests that the district court's finding was clearly erroneous, and that CHAMPIONS is a merely descriptive term which has acquired no secondary meaning. 36 We think the district court erred in concluding that the CHAMPIONS mark was arbitrary. The term champions, while having a significance recognized in everyday life, is obviously not a term that is unrelated to golfing services, and unrelatedness is central to the definition of an arbitrary term. Instead, the term is quite closely related to sports in general, and to golf in particular. Thus, the sole question is whether CHAMPIONS is a descriptive or a suggestive mark; the other categories plainly do not apply. It will be necessary on remand for the district court to reconsider the issue of the strength of the mark, and to determine whether the mark is descriptive or suggestive. In making the determination as to which designation properly applies, the district court should recognize that the fact that a mark is registered on the principal register creates a presumption that the mark is not descriptive. Hindu Incense, 692 F.2d at 1050. The Lanham Act provides that a mark that is merely descriptive may only be registered on the secondary register, and then only upon a showing of secondary meaning. 15 U.S.C. § 1052(e). Thus, the fact that the U.S. Patent & Trademark Office registered CHAMPIONS on the principal register demonstrates its judgment that the mark was not merely descriptive. Nonetheless, that presumption is not conclusive; other courts have treated a mark of CHAMPION as weak, and entitled to but a very limited scope of protection. Cf. National Biscuit Co. v. Princeton Mining Co., 137 U.S.P.Q. (BNA) 250, 253 (Pat. Off. Trademark Trial & App. Bd.1963), aff'd, 52 C.C.P.A. 844, 338 F.2d 1022 (1964). If the district court determines that the mark is descriptive, it will be necessary for it to consider whether the mark has acquired secondary meaning, entitling it to protection under the Lanham Act. 2. Relatedness of Services 37 This factor admits of three possible scenarios: (1) cases in which the services of the parties are in direct competition, in which case confusion is likely if the marks are sufficiently similar; (2) cases in which the services are somewhat related but not competitive, so that likelihood of confusion may or may not result depending on other factors; and (3) cases in which the services are totally unrelated, in which case confusion is unlikely. Homeowners, 931 F.2d at 1108. Services are 'related' if the services are marketed and consumed such that buyers are likely to believe that the services, similarly marked, come from the same source, or are somehow connected with or sponsored by a common company. Id. at 1109. 38 The district court concluded simply that Houston and Nicholasville provide nearly identical services. Nicholasville disagrees. It contends that although each party operat[es] a private, members only golf club, their relatedness ends there, because the course layouts, buildings, climates, and geographical locations are different. We think, however, that the district court did not clearly err in concluding that Houston and Nicholasville provide nearly identical services. But that does not resolve the question of the relatedness of the services the two clubs offer. There remains for determination whether the services are directly competitive, or only somewhat related, as those relatedness concepts are discussed in Homeowners. The district court should revisit this factor on remand. 39 Among the factors the district court should consider in determining whether the two clubs are in direct competition are these: that both have members from states other than their home states, and even draw from many of the same states; that visiting golfers contribute significantly to the revenue of both clubs; that both clubs are in approximately the same price range; and that both clubs vie for the hosting of national and regional tournaments. 3. Similarity of Marks 40 In evaluating the similarity of the marks, a court must determine ... whether the mark will be confusing to the public when singly presented. Wynn II, 943 F.2d at 601 (internal quotation marks and citations omitted). A proper analysis of similarity includes examining the pronunciation, appearance, and verbal translation of conflicting marks. Wynn I, 839 F.2d at 1188. In Wynn I, the court noted that both parties use the exact term CLASSIC, which obviously is pronounced, and verbally translated in exactly the same way. Id.; see Thrifty Rent-A-Car Sys., Inc. v. Thrift Cars, Inc., 831 F.2d 1177, 1179 (1st Cir.1987). Here, the district court found that the marks used by both clubs are nearly identical. Obviously, this finding is entirely correct. It is perhaps worth noting that while similarity alone does not compel a determination that marks are likely to be confused, see, e.g., Electronic Design & Sales, Inc. v. Electronic Data Sys. Corp., 954 F.2d 713, 715 (Fed.Cir.1992), it is a factor entitled to considerable weight, see, e.g., McGregor-Doniger, Inc. v. Drizzle, Inc., 599 F.2d 1126, 1137 (2d Cir.1979). 4. Actual Confusion 41 Courts have consistently held that evidence of actual confusion is undoubtedly the best evidence of a likelihood of future confusion. Wynn II, 943 F.2d at 601. Nonetheless, actual confusion is only one of several factors. Id. Moreover, because such evidence is  'difficult to produce and frequently discounted as unclear or insubstantial,'  Wynn I, 839 F.2d at 1188 (citation omitted), the factor should be weighted heavily only when there is evidence of past confusion, or perhaps, when the particular circumstances indicate such evidence should have been available, id. (internal quotation marks and citation omitted). Thus, absence of such evidence, in the usual case, is not weighted heavily against a plaintiff. See id. 42 Houston produced evidence of four incidents of actual confusion, three of which involved confusion among suppliers. In early 1994, a design company sent a logo to Nicholasville that Houston had ordered. In 1993, the Dallas Athletic Club sent bills to Houston for charges incurred by Nicholasville members under a reciprocity agreement with the Dallas club. Several years before that, Wilson Sporting Goods sent a supply of golf balls emblazoned with the CHAMPIONS mark to Houston, although the balls had been ordered by Nicholasville. A fourth incident took place in 1993 at a U.S. Amateur qualifying tournament in Cincinnati. An out-of-state member of Houston was introduced as a member of Champions, in response to which the starter, mistakenly believing that the reference was to the Nicholasville club, asked the Houston member why he was attempting to qualify in Cincinnati instead of in Nicholasville. This misunderstanding was viewed by the Houston member as a serious affront. 43 The district court concluded that this evidence of actual confusion was weak and unpersuasive, because it consisted of just a few isolated instances of actual confusion ... by golfing products manufacturers and/or vendors. In the court's opinion, [o]nly confusion among consumers that actually use the parties' services is relevant. It disregarded evidence of the starter's confusion, saying that the undersigned is unaware of any authority supporting the proposition that injured pride would establish infringement of a service mark. 44 The district court was mistaken. There is no requirement that evidence of actual confusion, to be relevant, must be confusion at the point of sale--purchaser confusion--and not the confusion of nonpurchasing, casual observers. Esercizio, 944 F.2d at 1243. In Esercizio, this court explained why: 45 The Lanham Act ... was intended to do more than protect consumers at the point of sale. When the Lanham Act was enacted in 1946, its protection was limited to the use of marks likely to cause confusion or mistake or to deceive purchasers as to the source of origin of such goods or services. In 1967, Congress deleted this language and broadened the Act's protection to include the use of marks likely to cause confusion or mistake or to deceive. Thus, Congress intended to regulate commerce within [its control] by making actionable the deceptive and misleading use of marks in such commerce; [and] ... to protect persons engaged in such commerce against unfair competition.... 15 U.S.C. § 1127. 46 Id. at 1244; see also Ameritech, Inc. v. American Info. Technologies Corp., 811 F.2d 960, 964 (6th Cir.1987); Beer Nuts, Inc. v. King Nut Co., 477 F.2d 326, 328 (6th Cir.), cert. denied, 414 U.S. 858, 94 S.Ct. 66, 38 L.Ed.2d 108 (1973). Accordingly, the Esercizio court concluded that it was unimportant whether the actual purchaser of a knockoff of a Ferrari automobile or a Rolex watch was fully aware that he was purchasing a knockoff; the potential confusion among nonpurchasers was just as significant as that among purchasers. Esercizio, 944 F.2d at 1245. This interpretation is necessary to protect against the cheapening and dilution of the genuine product, and to protect the manufacturer's reputation. Id. at 1244. 47 On remand, then, the district court should reconsider Houston's evidence as to this factor, bearing in mind that it is not determinative of the matter that the four incidents of actual confusion did not relate to direct consumers of Houston's services. It is significant that in all four instances, the confused individuals were knowledgeable about golf clubs, and had an incentive to accurately identify the club in question, but nonetheless were unclear about which club was which. On the other hand, four incidents is not a considerable quantum of evidence of actual confusion, and minimal or isolated instances of actual confusion are, obviously, less probative than a showing of substantial actual confusion. 5. Marketing Channels Used 48 This factor ... consists of considerations of how and to whom the respective goods or services of the parties are sold. Homeowners, 931 F.2d at 1110. Thus, dissimilarities between the predominant customers of a plaintiff's and defendant's goods or services lessens the possibility of confusion, mistake, or deception. Id. The district court concluded that Houston's and Nicholasville's markets are by and large distinct, since the bulk of their revenue is derived from a local membership base, and they are located 1100 miles apart. It therefore dismissed the fact that both clubs occasionally host national level tournaments that effectively act as marketing devices, as meaning only that to a limited extent the clubs have overlapping markets. (Emphasis added.) It is not clear that the district court fully considered all of the evidence in the record relevant to this factor. 49 On remand, the district court should consider, for example, the fact that the two clubs have members from multiple states, and that both rely on visiting golfers for revenue, and thus do not draw exclusively on a local membership base. The district court should also consider that in seeking to host national tournaments as a marketing device, both clubs must solicit the same organizations for such tournaments, thus placing the clubs in direct competition for such tournaments. Relevant here is the risk of public confusion should Nicholasville, for example, host a tournament that is televised nationally. 6. Likely Degree of Purchaser Care 50 Generally, in assessing the likelihood of confusion to the public, the standard used by the courts is the typical buyer exercising ordinary caution. However, when a buyer has expertise or is otherwise more sophisticated with respect to the purchase of the services at issue, a higher standard is proper. Similarly, when services are expensive or unusual, the buyer can be expected to exercise greater care in her purchases. When services are sold to such buyers, other things being equal, there is less likelihood of confusion. 51 Homeowners, 931 F.2d at 1111. The district court appeared to rely heavily for its ultimate conclusion on its belief that the relevant consumers were sophisticated. It noted the great expense involved in joining the clubs--each has a $15,000 initiation fee--and concluded that the expense is one reason why relevant consumers are ... unlikely to be confused by Nicholasville's secondary use of the CHAMPIONS mark. It further opined that 52 Houston's own witnesses testified that golfers are unlikely to seek membership or plan a golfing vacation with the wrong club because of confusion over the name of a club. Some consumers conceivably might be momentarily confused as to whether Houston and Nicholasville are affiliated, but the expense of the parties' services combined with the sophistication of the relevant consumers makes it unlikely any consumer would actually choose Nicholasville's services over Houston's due to Nicholasville's secondary use of the mark. 53 (Emphasis added.) 54 The district court did not clearly err in concluding that the relevant customers are sophisticated about the services in question, and that the services are expensive, adding incentive for the sophisticated consumer to exercise care in his or her selection. The evidence uniformly supports this conclusion. Nonetheless, the court erred, we think, in according this one factor disproportionate significance. [T]he expertise of purchasers does not necessarily preclude a finding that confusion is likely, Homeowners, 931 F.2d at 1111, and where the products are identical and the marks are identical, the sophistication of buyers cannot be relied on to prevent confusion, McGregor-Doniger, 599 F.2d at 1137. The district court noted that despite their sophistication, golfers would likely be confused about whether the courses were affiliated, but appears not to have appreciated that this is the ultimate question to be answered in the likelihood of confusion inquiry. Homeowners, 931 F.2d at 1107. It is not particularly significant, as the district court seemed to think, that it is unlikely that any golfer would end up on the first tee at the Nicholasville course, thinking he or she was on the first tee at the Houston course, or vice versa. The relevant question is whether a golfer, albeit sophisticated, would likely be confused about affiliation between the two clubs. On remand, therefore, the district court should reevaluate the weight to be accorded to this factor in determining likelihood of confusion. 7. Defendant's Intent in Selecting the Mark 55 Although intentional infringement is not necessary for a finding of likely confusion, the presence of that factor strengthens the likelihood of confusion. Wynn II, 943 F.2d at 602. However, a defendant's good intentions do not in any way preclude a finding of likely confusion.... [A]bsent ... a showing [of intentional infringement], intentions are irrelevant. Wynn I, 839 F.2d at 1189. 56 The district court concluded that [t]he evidence suggests that Nicholasville did not act with the intent to trade on Houston's goodwill. It expressly declined, however, to make an explicit finding on this point. It noted that the subdivision in which Nicholasville is situated is also named Champions, and that there is no evidence that the course was a copycat of Houston. Moreover, the owner of Nicholasville articulated independent reasons for choosing the mark: the championship caliber of the University of Kentucky basketball team, and the championship caliber of the thoroughbred horses in the area. 57 Nonetheless, there was some evidence at trial, although not much, probative of intentional infringement. An intent to infringe can be shown by circumstantial evidence. Wynn II, 943 F.2d at 603. Thus, use of a mark with knowledge of another's prior use of the mark supports an inference of intentional infringement. Id. Larry Gilbert, a former golf pro at Nicholasville, testified that he told Heilbron, the owner of Nicholasville, of Houston's use of the mark in October 1987. If this testimony is found by the district court to be credible, it is some evidence pointing toward intentional infringement. 58 On remand, the district court is directed to make a specific finding with regard to this factor, and to give the weight to its finding that the case law suggests is appropriate. A finding of intentional infringement would be significant only in that it would show that Nicholasville intended to capitalize on the value of the mark that it did not own, and indeed, that Nicholasville believed confusion was likely. A finding that the infringement was not intentional, however, would have no significance for the ultimate inquiry of likelihood of confusion. We do not, of course, by these observations, suggest what conclusion the district court should reach. 8. Likelihood of Expansion of Product Lines 59 This inquiry is not limited simply to geographical expansion; rather, the inquiry 60 concerns expansion in the types of ... services offered by the parties. Inasmuch as a trademark owner is afforded greater protection against services that directly compete or are in the same channels of trade, a strong possibility that either party will expand his business to compete with the other or be marketed to the same consumers will weigh in favor of finding that the present use is infringing. 61 Homeowners, 931 F.2d at 1112. However, a finding that the parties probably will not expand significantly beyond their present positions does not address the question whether [the defendant's] use of the [mark] to market his ... service is likely to cause confusion. Wynn I, 839 F.2d at 1189. Thus, as with the seventh factor, an affirmative finding will provide a strong indication that the parties' simultaneous use of the marks is likely to lead to confusion, while a negative finding is not a strong indication to the contrary. 62 The district court concluded that this factor was not particularly important in this case, because [b]oth clubs are local entities that do not franchise. In making this conclusion, however, the district court appeared not to recognize the significance of its own findings that both clubs intended to continue trying to host national tournaments in order to enhance their prestige. There was no ambiguity in the evidence on this score; the district court simply concluded that it was not material because the majority of the parties' revenue was derived from their membership. This conclusion ignores that the national tournaments are used as marketing devices, and that to the extent one or the other club can attract such tournaments, that club is likely to also attract new members as a result. Thus, it is possible--we make no finding in the matter--that further attempts by Nicholasville to host national tournaments would constitute an expansion within the context of this factor, and that such expansion will lead to further actual confusion. On remand, the district court should take these matters into account in making a redetermination of its findings. 63 In sum, the district court is directed to reconsider its findings as to each of the individual factors that underlies a determination of likelihood of confusion. In so doing, and in reaching its ultimate legal conclusion, the district court should continue to bear in mind the purpose of the inquiry: to discern whether an observer would likely be confused about whether Houston, the mark's owner, was affiliated with or was the sponsor of the Nicholasville club. The eight factors are not an end in themselves, and all are not of equal significance. The factors serve only as guides on the analytical route to the ultimate determination of whether confusion is likely to result from Houston's and Nicholasville's simultaneous use of the CHAMPIONS mark.