Non-consumer confusion may factor into 'likelihood of confusion' analysis

United States of America

In Rearden LLC v Rearden Commerce Inc (Case 10-16665, June 27 2012), the US Court of Appeals for the Ninth Circuit has vacated summary judgment of claims under the Lanham Act, the Anti-cybersquatting Consumer Protection Act and California state claims of trademark infringement and unfair competition, ruling that non-sales activities may be considered “use in commerce” and that non-consumer confusion may be a proxy for evidence of consumer confusion.

This dispute centred around the use of 'Rearden' in the names, marks and domain names of both parties. Hank Rearden is a character in Ayn Rand’s novel "Atlas Shrugged". Rearden LLC is a technology incubator that provides resources for start-up companies. Rearden Commerce is a business concierge company providing a web-based personal assistant service that links clients with vendors of a variety of services.

The Ninth Circuit stated that not only is summary judgment disfavoured in trademark actions because of the factual nature of trademark disputes, a grant of summary judgment based on the 'likelihood of confusion' analysis is particularly disfavoured. The Ninth Circuit found several genuine issues of material fact that precluded summary judgment in the evaluation of both the 'use in commerce' threshold requirement and the Sleekcraft factors used to determine the likelihood of confusion.

The court considered the totality of circumstances to determine if the 'use in commerce' element was satisfied. The court acknowledged the potential relevance of non-sales activities such as solicitation of potential customers.  Though Rearden Commerce presented evidence that the only services Rearden LLC provided was to other Rearden entities, the court remarked that there existed genuine issues of material fact as to whether Rearden LLC had provided services to at least one outside entity. Further, Rearden LLC provided evidence of enough non-incubation services, such as inclusion in movie credits for furnishing motion capture services, to preclude summary judgment on 'use in commerce' grounds.

In determining the likelihood of confusion, the court noted that the Sleekcraft factors should be applied in a flexible fashion, as the factors are a proxy for consumer confusion, not a checklist. The court noted two incidents of actual confusion:

  • emails sent to Rearden LLC by Rearden Commerce customers that were intended to be sent to Rearden Commerce; and
  • a customer who received a subpoena in connection with this action expressed confusion as to which Rearden company had conducted business.

The court rejected Rearden LLC’s theory that confusion of “non-purchasing consumers” can support a finding of likelihood of confusion. The court instead consolidated reasoning from prior decisions and ruled that confusion on the part of potential consumers, non-consumers whose confusion could create an inference that consumers are likely to be confused and non-consumers whose confusion would influence consumers, are relevant in the analysis to determine likelihood of confusion.

Brand owners should consider evidence of non-sales activities to assist in proving “use in commerce”. Additionally, evidence of non-consumer confusion can support a finding of likelihood of confusion.

Sara Sunderland, McDermott Will & Emery LLP, Silicon Valley 

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