Court Opinion

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Opinions of the United
2000 Decisions                                                                                                             States Court of Appeals
                                                                                                                              for the Third Circuit

6-13-2000

Commerce Natl Ins v. Commerce Ins Agcy
Precedential or Non-Precedential:

Docket 99-5117

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Recommended Citation
"Commerce Natl Ins v. Commerce Ins Agcy" (2000). 2000 Decisions. Paper 129.
http://digitalcommons.law.villanova.edu/thirdcircuit_2000/129

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Filed 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, this
appeal raises unsurprising, although important, issues of
trademark confusion in the banking and insurance
industries. Commerce Insurance Agency, Inc. (CIA), a small
corporation engaged in the insurance business in Southern
New Jersey for over thirteen years, sought an injunction in
the United Sates District Court for the District of New
Jersey prohibiting Commerce National Insurance Services
(CNIS), a recently formed corporation, from using the
"Commerce" mark to promote its insurance business. CNIS
is a wholly owned subsidiary of Commerce Bancorp, Inc.
(CBI) which had used the "Commerce" mark in connection
with its banking services prior to CIA's adoption of the
mark. The District Court denied CIA relief on the ground
that CIA could not assert rights to the mark against either

                                  2
CBI 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 branches
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 nearly $3
billion in deposits. Since January of 1973, CBI has
promoted its banking services under the Commerce mark.

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 insurance
services under the "Commerce" mark.

From 1983 until 1996, CBI and CIA coexisted amicably
in Southern New Jersey despite their use of the same mark
to identify their respective services. CIA opened business
accounts in its name with CBI, secured lines of credit from
CBI, and rented a safe deposit box from it. CIA and CBI
also referred customers to each other during this span of
years. CIA's principal, Robert Loser, established a"good"
relationship with a CBI branch manager and a "personal"
relationship with CBI's regional vice president. This
_________________________________________________________________

1. We have appellate jurisdiction under 28 U.S.C. 1291 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 opportunity of the trial
judge to evaluate the credibility of witnesses and to weigh the evidence,
we are left with a definite and firm conviction that mistake has been
committed. See Versa Prods. Co. v. Bifold Co. , 50 F.3d 189, 209 (3d Cir.
1995).

                               3
relationship led to an invitation from CBI requesting CIA to
participate in CBI's 5th Annual Commerce Golf Classic. 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 thirteen
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 enter
into the general insurance services industry. Within one
month of that announcement, CIA began taking steps
designed to shore up its position for a potential trademark
dispute. On August 26, 1996, CIA filed a service mark
registration application with the United States Patent and
Trademark Office seeking federal registration of the
"Commerce" mark for insurance services. The application
was granted. On August 28, 1996, CIA filed a service mark
registration application with the New Jersey Secretary 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 established
CNIS. At this time, CNIS began promoting its services
under the names "Commerce National Insurance Services"
or "Commerce Insurance." In December of 1996, CBI
purchased two additional insurance agencies and added
them to CNIS. These additions made CNIS the 58th largest
insurance agency in the United States, having a customer
base of more than 38,000 individuals and businesses and
maintaining more than $150 million of insurance coverage.

Instances of confusion between CIA and CNIS began to
develop in 1997. In the early part of that year, CIA
contacted an insurance carrier to track down a missing
policy. On the assumption that CIA had been acquired by
CBI, the carrier asked what CIA's agency code number had
been prior to its purchase by CBI. Later, in May of that

                               4
year, CNIS and CIA began to receive each other's mail. CIA
also began to receive telephone calls intended for CNIS.
When CIA brought these instances of confusion to the
attention of CNIS in June of 1997, CNIS denied the
existence of any confusion.

B.

Shortly thereafter, however, CBI and CNIS filed a petition
for cancellation of CIA's federal registration of the
"Commerce" mark. CBI and CNIS also filed a complaint in
the United States District Court contending, inter alia, that
CIA's use of the Commerce mark infringed CBI's rights in
the mark. CIA responded to the actions of CBI and CNIS by
commencing an action of its own. In its complaint, CIA
alleged, inter alia, that CNIS's use of the Commerce mark
infringed CIA's rights in that mark.

The District Court consolidated the two actions, and the
parties filed applications for preliminary relief based solely
on the federal trademark issue.2 CBI and CNIS sought
preliminarily to enjoin CIA from using the Commerce mark
to promote its insurance services. CIA, in turn, sought a
preliminary injunction prohibiting CNIS from promoting its
insurance services under the Commerce mark. After
reviewing the parties' briefs and hearing oral argument, 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 were
senior to those of CIA. The District Court concluded that,
as of 1983, the time CIA began its use of the Commerce
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.
_________________________________________________________________

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

                               5
1998). Additionally, the Court found that CIA's use of the
Commerce mark in 1983 was likely to create confusion,
because reasonable consumers dealing with CIA "would
have assumed that they were dealing with CBI or some CBI
affiliate or offshoot." Id. at 499-501. Accordingly, the
District Court concluded that CBI's rights to the Commerce
mark were senior to those of CIA and that CBI's rights to
the mark "encompassed" both the banking and insurance
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 mark. In
addressing this issue, the Court reasoned that CBI's
fourteen year delay in enforcing its rights constituted
laches and that therefore CBI was not entitled to the
injunctive relief it sought. See id. at 503. Nevertheless, the
District Court recognized that although CBI was estopped
from invoking its right to prevent CIA from using the 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, CBI's
wholly owned subsidiary, CNIS, could not be preliminarily
enjoined from using the Commerce mark by CIA. See id.

C.

Approximately eleven months later, the parties returned
to the District Court seeking a final disposition of 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' cross
applications for preliminary relief; (2) their respective expert
reports (but without any testimony from either expert); and
(3) supplemental briefs directed to the admissibility 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.

                                6
II.

On appeal, CIA contends that the District Court erred in
concluding that CBI, by virtue of its use of the Commerce
mark within the banking industry, acquired rights in the
mark that extend to the insurance services industry. More
specifically, CIA argues that the District Court committed
clear error in finding that as of 1983 CBI had established:
(1) secondary meaning in the Commerce mark within the
insurance services industry; (2) ownership of the Commerce
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 remand
the case for consideration of its claim for injunctive relief
against CNIS.3

III.

"The law of trademark protects trademark owners in the
exclusive use of their marks when use by another would 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 proves that:
(1) its mark is valid and legally protectable; (2) it owns the
mark; and (3) the defendant's use of the mark to identify its
goods or services is likely to create confusion concerning
the origin of those goods or services. See Opticians 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 has
become incontestible, then validity, legal protectability, and
ownership are proved. See Ford Motor Co. v. Summit Motor
Prods., 930 F.2d 277, 292 (3d Cir. 1991). If the mark has
not been federally registered or, if registered, has not
achieved incontestability,4 then"validity depends on proof
_________________________________________________________________

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 sustained.

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

                               7
of secondary meaning, unless the unregistered or
contestable mark is inherently distinctive." 5 Id. A plaintiff
must establish secondary meaning in a mark at the time
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 on
Trademarks and Unfair Competition S 15:4 (4th ed. 1997)
[hereinafter "Trademarks"].

Secondary meaning exists when the mark "is interpreted
by the consuming public to be not only an identification 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 extensive
advertising which creates in the minds of consumers an
association between the mark and the provider of the
services advertised under the mark. See id. Under certain
circumstances, a mark "can develop secondary meaning as
to goods or services to which the mark has not been
applied." Id. The rationale for extending protection of a
mark into a noncompeting market are the potential dangers
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 developed
by the holder of the protected mark." Id.

Although there are numerous cases discussing secondary
meaning, there is not yet a consensus as to its specific
elements. See Ford Motor Co., 930 F.2d at 292. A non-
exclusive list of factors which may be considered includes:
(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
_________________________________________________________________

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. SS 1058, 1065; Fisons
Horticulture, Inc. v. Vigoro Indus., 30 F.3d 466, 472 n. 7 (3d Cir. 1994).

5. A mark is inherently distinctive if it may be fairly 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 Commerce mark is
inherently distinctive.

                               8
testimony; (7) the use of the mark in trade journals; (8) the
size of the company; (9) the number of sales; (10) the
number of customers; and, (11) actual confusion. See 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 Motor
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 the 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. Bassett
Company, 462 F.2d 567, 569 (C.C.P.A. 1972). This, in turn,
depends on whether the nature of the industries was such
that purchasers would reasonably expect the services
rendered by these industries to originate from a common
source. See id. at 569; see also McCarthy, Trademarks,
S 16:5; Volkswagenwerk Aktiengessellschaft v. Wheeler, 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 defendant's
mark would probably assume that the product or service it
represents is associated with the source of a different
product or service identified by a similar mark.' " Ford
Motor, 930 F.2d at 292 (quoting Scott Paper Co., 581 F.2d.
at 1229). The likelihood of confusion analysis requires the
evaluation of a number of factors including: (1) the degree
of similarity between the owner's mark and the alleged
infringing mark; (2) the strength of the owner's mark; (3)
the price of the goods and other factors indicative of the
care and attention expected of consumers when making 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) the
evidence of actual confusion; (7) whether the goods, though
not competing, are marketed through the same channels of
trade and advertised through the same media; (8) the
extent to which the targets of the parties' sales efforts are
the same; (9) the relationship of the goods in the minds of
the public because of the similarity of function; (10) other

                               9
facts suggesting that the consuming public might expect
the prior owner to expand into the defendant's market. See
Scott Paper, 589 F.2d at 275.

IV.

We now turn to the District Court's specific findings of
fact with respect to secondary meaning, ownership, and
likelihood of confusion.

A.

After concluding that CBI's use of the "Commerce" mark
"is not inherently distinctive and does not have great
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 continued:

       Consumers viewing the term "Commerce" in front of a
       bank, in connection with banking more generally, or in
       a headline or article in a newspaper business section
       may well assume they are dealing with CBI. Still, given
       the frequency with which consumers see the term
       "Commerce" -- and similar marks such as
       "Commercial" -- they likely have come to recognize that
       different goods and services identified by the term
       "Commerce" mark may have different origins. On
       balance, this Court concludes that the "Commerce"
       mark, by virtue of its marketplace recognition, was
       fairly strong in 1983 -- when CIA was founded-- and
       is stronger today. It will be protected in connection
       with banking and financial services. It also will be
       protected in connection with some products and
       services which are closely related to banking and
       financial services in the minds of consumers.

Id.

Although the Court never specifically labeled the above
rationale as its secondary meaning analysis, the parties
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

                                10
they 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 it had
promoted the "Commerce" mark by 1983. The only specific
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 promoting
the mark after 1983, however, is irrelevant. See Scott Paper
Co., 589 F.2d at 1231; McCarthy, Trademarks , S 15:4. CBI
attempts to divert attention from this irrelevant fact by
pointing to a sentence in the District Court's opinion 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. That
statement, however, does not demonstrate that CBI had
promoted the "Commerce" mark before 1983. Moreover,
even if it were so intended, it would be clearly erroneous
because there is no evidence of record to support such a
finding.

CBI's proof as to secondary meaning was deficient in
other respects as well. First, CBI was unable to produce a
single instance of actual confusion between it and CIA. The
only evidence of actual confusion in this case relates to the
dispute between CIA and CNIS. Although evidence of actual
confusion is but one factor in the secondary meaning
analysis, see Ford Motor Co., 930 F.2d at 292, CIA's and
CBI's harmonious coexistence in the same geographical
area for thirteen years most certainly cuts against CBI's
claim to secondary meaning within the insurance services
industry. Second, CBI offered no evidence to demonstrate
that trade journals or other publications referred to it as
"Commerce" in 1983. Instead, CBI offered two newspaper
articles published in 1996. Although those articles do refer

                               11
to CBI as "Commerce," they do not aid in determining
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 business
name), but there is no evidence that CIA intended to leach
off the goodwill of CBI by appropriating its mark. To the
contrary, CIA limited the mark's use to general insurance
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 variety
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 the
mark. At most, it is only minimally probative of whether
CBI established secondary meaning in the "Commerce"
mark in 1983.

CBI also points to a recent customer satisfaction survey
as evidence supportive of the District Court's finding that
the mark achieved secondary meaning. However, CBI's
reliance on that survey is misplaced because the survey is
wholly irrelevant to whether CBI established secondary
meaning in the "Commerce" mark as of 1983. First, based
on the recency of the survey, it follows that it is not
particularly probative of customer views in 1983. Second,
and more importantly, customer surveys and customer
testimony are relevant to the secondary meaning inquiry
only insofar as they are probative of the strength of the
"Commerce" mark in the collective consumer
consciousness. The satisfaction of customers with CBI's
services does little to demonstrate that when customers see
the word "Commerce" they associate it with CBI.

Finally, CBI also argues that the District Court did 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 use of the
mark was exclusive in the New Jersey service area with
respect to banking; and, CBI was a relatively large bank

                               12
controlling over $100 million in assets. Although this
evidence is probative of secondary meaning, it nevertheless
is insufficient to support a finding of secondary meaning.
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. In 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 descriptive the
term, the greater the evidentiary burden to establish
secondary meaning.")

CBI offered no evidence that trade journals or other
publications referred to it as "Commerce" in 1983. The
record likewise reveals not a single CBI customer who 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 absence of any
evidence on these matters, CBI's status as a relatively large
bank is insufficient to support the finding that CBI
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, it found
that CBI's rights in the Commerce mark were senior to
those of CIA because CIA's use of the mark, as of 1983,
created a likelihood of confusion. In so finding, it appears
that the District Court conjoined its analysis of ownership
with its analysis of likelihood of confusion. Although these
are distinct elements of a trademark infringement claim,
the District Court's choice not to separate them is of little
consequence because the findings turn on substantially the
same evidence. See McCarthy, Trademarks S 16:5 (noting
that when a senior user of a mark expands into a second
service industry and finds an intervening junior user of the
mark, ownership in the second industry is determined by
whether the expansion is "natural" in that customers would
have been confused as to source or affiliation at the time of

                               13
the intervening user's appearance). Nevertheless, because
we believe the evidence presented by CBI insufficient to
demonstrate a likelihood of confusion, we conclude that the
Court's finding as to both of these elements was clear error.

The District Court appears to have rested its finding 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 connection, the
District Court stated that because "[t]he composite phrase
`Banking and Insurance' probably has resonance in the
consumer mind" and because "[c]onsumers have long been
aware that banks seek to expand territorially and in terms
of the products and services they offer . . . many reasonable
consumers encountering `Commerce' in connection with
insurance and financial planning would have assumed they
were dealing with CBI or some offshoot." Commerce Nat'l
Ins. Servs., 995 F.Supp. at 501.

This speculative rationale amounts to little more than an
assumption of consumer behavior for which there is little
substantive proof of record. CBI's only evidence that a
reasonable consumer in 1983 would have expected banks
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 disability
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 banks
to sell insurance. This evidence is insufficient to support a
finding of likelihood of confusion for several reasons.

First, although the affidavit of CNIS's president and 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 reasonable
consumers in 1983 would have also expected CBI to be
selling insurance generally, including the huge variety of
liability and risk insurance. Likewise, CBI's expert'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 relevant

                               14
to this action. That survey, taken in October of 1978,
reflects that ". . . 94.2% of respondents replied they thought
credit insurance was a good thing, the large majority
without any qualifications." The survey does not, however,
aid in a determination that consumers in 1983 expected
banks to be engaged in the general insurance industry
because it simply reveals that some consumers believed
credit life insurance was "a good thing." It says nothing
about the extent to which the consumers believed banks to
be engaged in the insurance business. Moreover, even 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 severely
limited banks from engaging in the general insurance
industry at the time CIA was formed. By statute, see e.g.
N.J.S.A. SS 17:3C-1 and 17:19A-213.1 (West 1984), banks
could not sell general insurance services or products until
1996 when the United States Supreme Court decided
Barnett Bank of Marion County v. Nelson, 517 U.S. 25
(1996). This prior statutory bar eviscerates the possibility
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 industry
until the Barnett decision in 1996.

Furthermore, not only was CBI's evidence of a likelihood
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 actually
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, and
operated in their respective spheres of interest without any
_________________________________________________________________

6. As noted, CBI's expert did conclude in his report that a reasonable
consumer would have expected CBI to be engaged in the insurance
business; however, his report failed to set forth a sufficient basis from
which to reasonably draw that conclusion and therefore offers little
support of consumer confusion.

                               15
confusion. Confusion only developed early in 1997 after 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 Jersey
insurance market by arguing that the parties' investigation
into the matter was minimal. This argument, however,
ignores that the burden of proving likelihood of confusion
rested on CBI.

CBI also attempts to make much of the similarity
between the marks of the two companies. However, until
CBI decided to enter the insurance industry, neither party
challenged the other's use of the mark. Of course, the
Commerce mark is the same no matter who uses it, but
this evidence is not particularly probative of a likelihood of
confusion because Commerce is a commonplace mark used
by countless businesses in countless contexts. The District
Court conceded as much during its analysis of the mark
and noted that "given the frequency with which consumers
see the term `Commerce' . . . they likely have come to
recognize that different goods and services identified by the
term `Commerce' may have different origins." See Commerce
Nat'l Ins. Servs., 995 F.Supp. at 499.

Finally, as noted above, there is little evidence from
which one could conclude that CBI's Commerce mark was
particularly strong in 1983. CBI offered no customer
surveys or testimony tending to suggest that the consuming
public readily identified the Commerce mark with CBI. Nor
did CBI offer any evidence as to the extent to which it had
promoted the Commerce mark prior to CIA's entry into the
insurance market. Because the Commerce mark is not
inherently distinctive and because CBI adduced no evidence
to demonstrate that the mark had developed significant
marketplace recognition prior to 1983, it is difficult 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 could
have reasonably found that CIA's use of the Commerce
mark in 1983 resulted in a likelihood of confusion. CBI had
an opportunity to undertake discovery and to prepare for a
trial. Instead, it chose, along with CIA, to run the risk of
relying on the slender record presented with its request for

                               16
a preliminary injunction. That record supports neither the
findings of secondary meaning, ownership, nor likelihood of
confusion. As Judge Learned Hand observed in Federal
Telephone & Radio Corp. v. Federal Television Corp. , 180
F.2d 250 (2d Cir. 1950), which involved a suit by Federal
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 good-will it
has already acquired by its sales under its own name. It
started the use in entire good faith, the word is in 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 error to
conclude that CBI possessed rights to the exclusive use of
the Commerce mark in the insurance services industry.

V.

We now turn to the merits of CIA's claim against CNIS.
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 infringes
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 evidence
from which the District Court could reasonably conclude
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 that a
remand is unnecessary where evidence of record would 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

                               17
demonstrate that the Commerce mark is valid and legally
protectable, CIA must demonstrate that it had established
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 secondary
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 industry.

Unlike CBI, CIA is not attempting to establish secondary
meaning in the Commerce mark with respect to services
which it has yet to offer. Rather, CIA is simply asserting
that it has established secondary meaning in the Commerce
mark with respect to the insurance services it had offered
under that mark for thirteen years prior to the formation of
CNIS and continues to offer. We think it a reasonable
inference that during those thirteen years CIA was able to
build up substantial good-will for its general insurance
services under the Commerce mark.7 It not only sold
general insurance continuously during this period but also
expanded to larger offices. Moreover, we note that in the
context of a reverse confusion case, the evidentiary burden
upon a smaller, senior user to establish the existence of
secondary meaning is placed somewhat lower. See Elizabeth
Taylor Cosmetics Company, Inc. v. Annick Goutal, 673
F.Supp. 1238, 1248 (S.D.N.Y. 1987)("[A] minimal showing
of secondary meaning is required in a reverse confusion
case."). Otherwise, "a larger company could with impunity
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 secondary
meaning in the insurance industry.
_________________________________________________________________

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

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B.

Turning now to the question of ownership, there is
sufficient evidence in the record from which the District
Court may reach the conclusion that CIA owns the
Commerce mark within the insurance services industry of
southern New Jersey. CIA began using the mark in that
industry in 1983; CNIS did not commence its use until
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]everse
confusion occurs when a larger, more powerful company
uses the trademark of a smaller, less powerful senior owner
and thereby causes likely confusion as to the source of the
senior user's goods or services." Id. at 474. Quoting the
Sixth Circuit's decision in Ameritech, Inc. v. American
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. The public
       comes to assume the senior user's products are really
       the junior user's or that the former has become
       somehow connected to the latter. The result is that the
       senior user loses the value of the trademark -- its
       product identity, corporate identity, control over its
       goodwill and reputation, and ability to move into new
       markets.

Id. at 474-75.

After adopting the doctrine of reverse confusion, we
proceeded to assess the plaintiff 's reverse confusion claim
in light of the Scott Paper factors. In doing so, we
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 user's
mark is to be given less weight in the analysis because it is

                               19
the strength of the larger, junior user's mark which results
in reverse confusion. See id. at 479. Likewise, the intent
inquiry must also be altered to focus on whether the
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 light of
these modified Scott Paper factors reveals that there 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 is
identical. Although CNIS has added the words "National"
and "Services" to its mark, the record reveals that instances
of confusion between CIA and CNIS have already occurred
despite the addition of these terms.

CNIS's ability to promote its mark is also much greater
than that of CIA's. The formation of CNIS was immediately
followed by two newspaper articles providing accounts of
CBI's expansion into the insurance industry through the
formation of CNIS. In addition, CBI has boasted that it
spent $4 million to promote the "Commerce" mark in 1996.
Although these funds appear to have been spent promoting
the mark in connection with CBI's banking services, it is
likely that similar funds will be used in the future to
promote the mark in connection with CNIS's insurance
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 the 58th
largest insurance agency in the nation, serving more than
38,000 individuals and businesses. Although the exact size
of CIA is not known, it is obvious that CIA does not have
similar resources to develop a high-powered promotional
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 other
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 entered the

                               20
insurance industry. It is not entirely clear whether CBI's
motive was to push CIA out of the market or whether CBI
simply saw an opportunity to promote both its insurance
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 confusion.
CNIS by virtue of its superior size, resources, and economic
strength, as well as the support of its powerful and
aggressive parent, may be able to saturate the market 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 District
Court's order denying CIA's request for an injunction
against CNIS from using the Commerce mark will be
vacated and the case remanded for further proceedings 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 in the
insurance industry, (2) the ownership of the mark, and (3)
the likelihood of confusion in the use of the Commerce
mark by CNIS, either in its name as presently formed or
modified. As the concurrence observes, nothing in this
opinion precludes the District Court on remand, if the
evidence so warrants, from permitting CNIS to continue
doing business under the "Commerce National Insurance
Services" name. If, on the other hand, the Courts concludes
that CIA's evidence establishes the foregoing elements of
the trademark infringement claim, then it should grant CIA
appropriate equitable relief.

                                21
Costs taxed against Commerce National Insurance
Services, Inc. and Commerce Bancorp, Inc.

                               22
SLOVITER, Circuit Judge, concurring.

I write merely to make clear my understanding of what
the court's opinion will allow the District Court to do on
remand. In its judgment, the District Court enjoined CIA
from using the term "National" as part of its service mark
and/or business name. At the same time, the District Court
enjoined CNIS from using the abbreviated business name
and/or service mark "Commerce Insurance." Neither party
objected on appeal to those portions of the District Court's
order. I join the majority's opinion because I understand
that nothing therein would preclude the District Court, on
remand, from permitting CNIS to continue doing business
under the name "Commerce National Insurance Services."

A True Copy:
Teste:

       Clerk of the United States Court of Appeals
       for the Third Circuit

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