SMARTONE outsmarted by ONESMART

In Mastercard International Inc v First National Bank of Omaha Inc (Case 2004 WL 1575396 (SDNY)), the US District Court for the Southern District of New York has ruled that there was no likelihood of confusion between the marks SMARTONE and ONESMART, even though both are used in connection with smart cards.

In 2000 First National Bank of Omaha Inc (FNBO) adopted and applied to register the mark SMARTONE for smart cards for banking services. Between 2001 and 2002, Mastercard International Inc filed several applications for ONESMART marks for banking, smart card and other financial services. After FNBO objected to Mastercard's use and registration of the ONESMART marks, Mastercard filed a complaint seeking a declaratory judgment that its use of the ONESMART marks did not infringe FNBO's mark SMARTONE. FNBO counterclaimed for trademark infringement.

Both parties moved for partial summary judgment on a number of issues but the US District Court for the Southern District of New York stated that a jury trial was necessary (See Failure to follow advice in availability opinion may constitute bad faith).

The trial was conducted on a single issue, namely whether Mastercard's use of ONESMART would cause reverse confusion among agent banks. The jury found in favour of Mastercard. Subsequently, FNBO filed a motion seeking to enjoin Mastercard from using ONESMART. However, the court denied FNBO's motion on the grounds that no confusion was likely between the two marks.

The court explained that in order to prevail in a trademark infringement action, a plaintiff must show that (i) it has a valid mark, and (ii) the defendant's use of its mark is likely to cause consumer confusion. In assessing the existence of a likelihood of confusion between the SMARTONE and ONESMART marks, the court applied the Second Circuit's Polaroid test and examined the following factors:

• strength of the plaintiff's mark;
  
  
• degree of similarity between the two marks;
  
  
• competitive proximity of the products;
  
  
• likelihood that the plaintiff will bridge the gap;
  
  
• evidence of actual confusion;
  
  
• defendant's good faith in adopting its mark;
  
  
• quality of the defendant's products; and
  
  
• sophistication of the purchasers.

The court held that the first two factors in the Polaroid test conclusively weighed against a finding of likelihood of confusion. It found that although FNBO's mark SMARTONE was inherently distinctive, it was weak as applied to banking, credit card and smart card services. It based its finding on evidence of significant third-party use of the words 'smart' and 'one' in connection with the same or closely related services, and on extremely limited evidence of consumer recognition achieved by FNBO's mark.

The court also noted that both SMARTONE and ONESMART consist of a combination of the words 'smart' and 'one'. However, the court held that when evaluating the similarity between marks, the overall context in which the marks appear to consumers in the marketplace must be taken into account. The court observed that SMARTONE and ONESMART were always displayed with the very well-known marks VISA and MASTERCARD, and trademarks identifying the banks issuing the smart cards. VISA and MASTERCARD are widely recognized as fierce competitors in the credit card industry. The court found that any likelihood of confusion was minimized by the fact that consumers were more likely to consider the marks VISA and MASTERCARD and the familiar marks identifying the issuing banks as source identifiers for the smart card services than the weak marks SMARTONE and ONESMART alone.

Chiara Giuliani, Arent Fox PLLC, Washington DC