Supreme Court: in tacking, commercial impression is issue for jury

United States of America

In a rare decision on a fundamental trademark issue, Hana Financial Inc v Hana Bank (No 13-1211, January 21 2015), delivered for a unanimous court by Justice Sotomayor, the Supreme Court has resolved a circuit split on the issue of tacking, holding that the jury, rather than a court, determines whether the priority date of an older trademark may be tacked to a newer one.

A fundamental trademark principle is that the priority of trademark rights is determined by the date of the mark’s first use in commerce. The tacking doctrine provides that a trademark owner can modify its mark over time and retain the original mark’s priority date if the original mark and the new mark are not materially different and create the same, “continuing commercial impression”. In other words, the marks must be “legal equivalents”. Although the tacking doctrine is readily recognised by all courts, until now several circuits were split on whether the tacking inquiry is a question for the jury or the judge.

The dispute that put an end to this split arose between two financial service providers. Hana Bank is a Korean financial institution that has operated in Korea under that name since 1991. In 1994 it first started advertising its financial services to Korean expatriates in the United States. The advertising was primarily in Korean; the name Hana Bank appeared in Korean script, next to its 'dancing man' logo. That same year, Hana Financial, the petitioner, was established in California. It began using this name in commerce in 1995 and obtained a federal registration in 1996. The dispute was sparked in 2002, when Hana Bank first began operating a bank in the United States under the name Hana Bank. Its new mark was the 'dancing man' logo followed by the words 'Hana Bank' in English. When Hana Financial sued Hana Bank for infringement in 2007, Hana Bank invoked the tacking doctrine as a defence, alleging that it had priority of use.

After an unsuccessful attempt by Hana Financial to resolve the dispute on summary judgment, the case was tried to a jury. The jury instruction was proposed by Hana Financial itself: a party may claim priority based on the first use date of a previously used mark if it “is the legal equivalent of the [new] mark... such that consumers consider both as the same mark”. The jury returned a verdict in favour of Hana Bank, finding that the HANA BANK mark conveyed the same commercial impression as the marks in its 1994 advertisement and that, therefore, Hana Bank had priority in the mark over Hana Financial. 

After the Court of Appeals for the Ninth Circuit upheld the jury’s verdict, expressly creating a split with the Federal and Sixth Circuits as to who - the court or the jury - should decide this issue, Hana Financial successfully sought review by the Supreme Court.

Hana Financial argued that whether the marks are “legally equivalent” turns primarily on whether the marks are visually similar. This, it argued, is a question of law, appropriate for the court to decide to ensure predictability of outcomes required for a well-functioning trademark system. Hana Bank argued that “commercial impression” depends on the perspective of the relevant consumer, a perspective that is better evaluated by a jury of 12 laymen than a single judge.  

In an eight-page opinion, Justice Sotomayor swiftly put this issue to rest. Because “commercial impression” must be viewed through the eye of a consumer, she wrote - ie, how an ordinary person would view the marks - that the jury is the better qualified decision-maker:

"Application of a test that relies upon an ordinary con­sumer’s understanding of the impression that a mark conveys falls comfortably within the ken of a jury. Indeed, we have long recognised across a variety of doctrinal contexts that, when the relevant question is how an ordi­nary person or community would make an assessment, the jury is generally the decision-maker that ought to provide the fact-intensive answer."

The court then summarily disposed of Hana Financial’s arguments to the contrary. Justice Sotomayor noted that mixed questions of law and fact have typically been resolved by juries: “juries answer often-dispositive fac­tual questions or make dispositive applications of legal standards to facts” - in tort, in contract and in criminal justice systems. Trademark law is no different. Although precedent helps to define the relevant legal standards and provides guidance, there is no requirement for tacking cases to “have to be” resolved by reliance on it. That similar cases can result in dissimilar conclusions is a risk of uncertainty the justice system has long tolerated.

Although the circuit split on tacking has been settled, trademark professionals should keep in mind certain implications of this decision. First, it underscores the importance of trademark owners keeping documentary records of any changes in their marks, so that they can provide evidence of the first use of the legally equivalent trademark to establish priority for the purpose of tacking. Second, it encourages use of trademark surveys to help persuade the jury that the old and new marks are viewed by consumers as legal equivalents, creating the same, continuing commercial impression. To be sure, the judge can still decide the tacking question if a jury is not involved, or on motions for summary judgment or judgment as a matter of law. But even then, if a jury is involved, trial court judges may be reluctant to enter the jury’s sphere of decision-making, knowing the Supreme Court’s opinion on the subject. Finally, if a tacking issue is appealed, the appellate court would not review the trial court decision de novo, as it would for purely legal issues, but for substantial evidence supporting the trial court’s fact-based decision.  

This decision presages future rulings on related trademark issues. As Justice Kennedy asked during oral argument: “[W]hen we write this opinion, will we have to have in the back of our minds what effect it will have on… the likelihood of confusion issue?… Is it the elephant in the room or something like that?” We should indeed expect more Supreme Court decisions on trademark issues in the future, as Justice Sotomayor’s experience as a trademark litigator may continue to play a role in the court’s willingness to take on trademark cases.

James L Bikoff, David K Heasley and Valeriya Sherman, Smith Gambrell & Russell, Washington DC

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