Ninth Circuit amends HOT WHEELS decision

The US Court of Appeals for the Ninth Circuit has amended its August 2 2007 opinion in Jada Toys Inc v Mattel Inc, which reversed and remanded a district court decision granting summary judgment in favour of Jada Toys Inc (Case 05-55627, February 21 2008).

In April 2004 Jada filed a district court action against Mattel Inc alleging trademark infringement and unfair competition, among other things. Jada contended that Mattel's advertising and sale of toys under the OLD SCHOOL and NEW SCHOOL marks infringed Jada's federally registered OLD SKOOL mark. Mattel responded with affirmative defences and counterclaims for trademark infringement, dilution and copyright infringement based on Jada's use of the registered mark HOT RIGZ on a line of toy trucks. Mattel argued that Jada's HOT RIGZ mark infringed its HOT WHEELS mark, which was used on a popular line of miniature vehicles.

Both parties submitted motions for summary judgment. On Jada's claims, the court granted summary judgment in favour of Mattel. As to Mattel's counterclaims regarding HOT RIGZ, the district court, relying on the dissimilarity of the marks alone, granted summary judgment in Jada's favour.

Mattel appealed to the Ninth Circuit, which reversed and remanded the matter to the district court. In particular, with respect to Mattel's trademark infringement counterclaim, the court determined that the district court had too narrowly relied on the dissimilarity of the marks without considering other likelihood of confusion factors. On the dilution and copyright counterclaims, the Ninth Circuit held that general issues of material fact remained such that summary judgment was inappropriate (for further details please see "HOT WHEELS summary judgment spins out in Ninth").

On February 21 2008 the Ninth Circuit issued an amended opinion that altered the portions of the original opinion concerning Mattel's copyright and dilution counterclaims. With respect to the copyright counterclaim, the court clarified the evolution of its traditional extrinsic/intrinsic test to determine whether two works are substantially similar. The court explained that the extrinsic test now objectively considers (based on external criteria, such as analytical dissection and expert testimony) substantial similarities in expression and ideas (not just ideas), whereas the intrinsic test continues to measure expression alone subjectively (ie, whether an ordinary reasonable observer could find similarity.). The court sustained its reversal of the district court's summary judgment in Jada's favour on the copyright counterclaim.

Although both the original and amended opinions achieve the same result with respect to dilution, the more recent opinion applies the new standards of the Trademark Dilution Revision Act 2006, instead of the previous standards set forth in the Federal Trademark Dilution Act.

The Ninth Circuit's substitution of the Revision Act for the Federal Trademark Dilution Act changed the dilution analysis in the amended opinion in two respects. First, while the Dilution Act provided eight factors that a court may consider in determining the degree of fame that a mark has retained, the Revision Act provides a non-exclusive four-factor test, which includes:

  • the duration, extent and geographical reach of advertising and publicity of the mark, whether advertised or publicized by the owner or third parties;

  • the amount, volume and geographical extent of sales of goods or services offered under the mark;

  • the extent of actual recognition of the mark; and

  • whether the mark was registered under the Act of March 3 1981 or the Act of February 20 1905, or on the principal register.

Based on these factors, the Ninth Circuit held that a reasonable trier of fact could conclude that Mattel's mark was famous. The court emphasized that Mattel had used the HOT WHEELS mark for 37 years, spent $350 million in advertising connected to the mark and sold 3 billion HOT WHEELS toys worldwide.

Secondly, the Dilution Act required actual dilution, while the Revision Act requires only a likelihood of dilution. Accordingly, to succeed on a dilution by blurring claim, the Revision Act simply requires a showing that the association arising from the similarity between the defendant's mark and the plaintiff's famous mark impairs the distinctiveness of the latter. Although a court may weigh all relevant factors, the Revision Act specifies six non-exclusive factors that a court may consider:

  • the degree of similarity between the mark or trade name and the famous mark;

  • the degree of inherent or acquired distinctiveness of the famous mark;

  • the extent to which the owner of the famous mark is engaging in substantially exclusive use of the mark;

  • the degree of recognition of the famous mark;

  • whether the user of the mark or trade name intended to create an association with the famous mark; and

  • any actual association between the mark or trade name and the famous mark.

The Ninth Circuit, focusing on the first and last factors, first found that a reasonable trier of fact could conclude that the marks at issue were similar, noting that both marks contain the word 'hot', are accompanied by a flame design, are displayed in similar colours and have similar connotations. Moreover, based on the findings of two surveys submitted by Mattel, the court found that there was significant evidence of actual association between the HOT RIGZ mark and Mattel's HOT WHEELS mark.

Ultimately, the court maintained its reversal and remanded the case to the district court for further proceedings consistent with the amended opinion.

Ron N Dreben and Natalie A Ward, Morgan Lewis, Washington DC

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