Circumstantial evidence at the heart of infringement cases

In Heartland Bank v Heartland Home Finance, the US Court of Appeals for the Eighth Circuit has reiterated established guidelines for the collection and assessment of evidence in trademark infringement cases.

Heartland Bank started providing banking and related financial services to residents of the state of Missouri under the name Economy Federal in 1887. In 1987 it changed its name to Heartland Bank. It obtained Missouri state registrations in 1994 for, among other things, its HEARTLAND word and wheat design marks.

Heartland Home Finance was established in 1987 in the neighbouring state of Illinois and began offering its services in Missouri in 1998. Heartland Home conducts its financing business and promotion almost exclusively by telephone. Heartland Home's HEARTLAND mark, used in Missouri since 1998, also features a wheat design.

After it received a series of telephone calls from consumers complaining about the rude telemarketing conduct of Heartland Home employees, Heartland Bank brought a claim against Heartland Home for federal and common law unfair competition, common law and Missouri state trademark infringement, and Missouri state trademark dilution.

To support its case, Heartland Bank began to log all calls it received from consumers complaining about Heartland Home's conduct. In its discovery requests, Heartland Home asked for "all documents and things evidencing or reflecting any actual confusion, deception, or mistake arising out of the use of any mark by any party". However, Heartland Bank sent log summaries instead of copies of the telephone logs. It only sent documents allegedly supporting the material set forth in the telephone log summaries after a year and a half of stalling tactics. When Heartland Home compared the information in the summaries to the information from the actual logs, it concluded that Heartland Bank had misled it and committed fraud on the court, because the underlying documents did not support the summaries. In fact, the information disclosed that in several instances the "confused customers" were not associating Heartland Home with Heartland Bank but with a third party operating in the same area.

The US District Court for the Eastern District of Missouri, assessing four of the 27 log entries, concluded that they were "clearly misleading". It excluded the logs, the summaries and all related testimony from evidence, and allowed the trial to proceed. It subsequently entered judgment in Heartland Home's favour on the basis that Heartland Bank had failed to establish secondary meaning for its marks or a likelihood of confusion. Heartland Bank appealed.

The Eighth Circuit agreed that Heartland Bank's discovery documents were not timely submitted, but felt that the district court had not reviewed enough of the log entries to determine that all of the entries were misleading. Although the appellate court was "loath to reverse a district court's sanction" in the face of Heartland Bank's obstructionist conduct, it believed that the sanctions excluding testimony were harsher than necessary, because eliminating Heartland Bank's testimony was "tantamount to a dismissal of its claims". It remanded the case to the lower court so that it could:

• review all alleged discovery abuses;
  
  
• revisit its decision to strike all relevant testimony; and
  
  
• determine if Heartland Bank's late discovery disclosures prejudiced Heartland Home.

In a concurring opinion, two of the Eighth Circuit judges clarified the type of evidence that can be used in a trademark case. They stressed that both direct and circumstantial evidence can be used to assess a likelihood of confusion, and concluded that the district court had relied solely on evidence of actual confusion (direct evidence) to the exclusion of the equally appropriate circumstantial evidence.

This case strikes a note of caution for attorneys collecting and submitting documents and other materials responsive to discovery requests, and reiterates the need for accurate responses. It also reminds trademark owners and practitioners alike that the touchstone of trademark infringement under US law is a likelihood of confusion, not actual confusion.

Christine James, Kilpatrick Stockton LLP, Atlanta