Eighth Circuit picks a path for appellate review in Everest Case

In Everest Capital Limited v Everest Funds Management LLC, the US Court of Appeals for the Eighth Circuit has ruled that likelihood of confusion is a finding of fact not subject to de novo review at the appellate level.

The case arose from a trademark infringement action brought before the US District Court for the District of Nebraska concerning the trademark EVEREST CAPITAL. The case was submitted to a jury without objection as to the jury instructions, which framed the six non-exclusive likelihood of confusion factors set out in SquirtCo v Seven Up Co (628 F2d 1086, 1091 (8th Cir 1980)), namely:

  • the strength of the owner's mark;

  • the similarity between the owner's mark and the alleged infringer's mark;

  • the degree to which the products compete with each other;

  • the alleged infringer's intent to pass off its goods as those of the trademark owner;

  • incidents of actual confusion; and

  • the type of product, its costs and conditions of purchase.

The jury found that no infringement had occurred.

On appeal, the Eighth Circuit ruled that likelihood of confusion is a finding of fact not subject to de novo review at the appellate level. It held that this pivotal trademark issue is particularly amenable to resolution by a jury - a cross-section of customers well suited to evaluating whether an ordinary customer would likely be confused. Thus, the standard of appellate review in the Eighth Circuit is an assessment of whether, when the record is viewed as a whole, there is sufficient evidence to support the jury's verdict. In analyzing the underlying facts of the case at hand, the Eighth Circuit reasoned that there was sufficient evidence to support the verdict.

In announcing its standard of review, the Eighth Circuit distinguished itself from the Second Circuit, which considers likelihood of confusion to be an issue of law reviewed on appeal de novo (Plus Prods v Plus Discount Foods Inc (722 F2d 999 (2nd Cir 1983))).

It is interesting to compare various standards of review. In Plus Prods, the Second Circuit held that a district court's determination of each of the Second Circuit's Polaroid factors (comparable to the Eighth Circuit's SquirtCo factors) is a finding of fact that can be examined to assess whether it is clearly erroneous. The lower court's use of those factors requires a balancing of the relative weight given to each of the findings, and hence its determination of likelihood of confusion is a legal conclusion that is reviewable de novo as a matter of law. The Second Circuit concluded in Plus Prods that while (i) the district court had comprehensively applied the Polaroid factors, and (ii) the appellate court had found that none of the factual findings was clearly erroneous, it nevertheless reversed the district court's decision because it found that the lower court's balancing of the Polaroid factors was incorrect. The Second Circuit proceeded to analyze and evaluate the weight of each of the Polaroid factors.

In the Everest Case, the Eighth Circuit did nothing of the sort but merely looked at some of the factors and determined that there was some evidence to support the jury's verdict.

This may be contrasted with the Ninth Circuit standard of review set out in AMF Inc v Sleekcraft Boats (599 F2d 341 (9th Cir 1979)). Put simply, the Ninth Circuit's rule is: where the conclusion of the trial court is based solely upon disputed findings of fact, the appellate court need not follow the conclusion of the trial court if it believes the underlying factual conclusions to be clearly erroneous. If the facts are not in dispute, the appellate court is in as good a position as the trial judge to determine the likelihood of confusion.

To the cynical mind, and as observed by one well-known commentator, all of this "analysis" could be considered a cover up for a 'seat-of-the-pants' test, in which appellate review will switch "from one test to the other, apparently depending upon the court's initial proclivity to reverse or affirm".

Robert Lyon, Holland & Knight LLP, Los Angeles

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