Sure shot to confusion in battle of the energy shot makers
In Innovation Ventures LLC v NVE Inc (Case No 10-2353/2355), in a titanic battle of energy shot makers (the '5-hour ENERGY' energy shot versus the '6 Hour POWER' energy shot), the US Court of Appeals for the Sixth Circuit has ruled that the makers’ respective claims of trademark infringement and false advertising survived cross-motions for summary judgment. The battle continues.
The plaintiff, Innovation Ventures LLC, doing business as Living Essentials, applied to register 5-HOUR ENERGY as a trademark, but its application was refused in 2004 by the US Patent and Trademark Office on the ground of descriptiveness. It has nonetheless marketed its '5-hour ENERGY' energy shots extensively in the country for the last seven years, beginning in 2005.
In 2006, a year after Living Essentials began its marketing push, NVE Inc began to market its competing product, the '6 Hour POWER' energy shot. Its competitive incursion into the energy shot market posed a classic trademark issue: would the '6 Hour POWER' product be viewed by consumers as a natural market expansion emanating from the same source as the '5-hour ENERGY' product, or as a competitor’s product descriptively touting a longer-lasting jolt?
Living Essentials brought suit for trademark infringement and unfair competition. NVE defended on the ground that Living Essential’s 5-HOUR ENERGY mark was merely descriptive and had not acquired secondary meaning before NVE’s first use of its 6 HOUR POWER mark in 2006.
Siding with Living Essentials, the Circuit Court found that the term '5-hour energy' was in fact suggestive because it required the consumer to make an inferential leap from the promise of five hours of energy to the specific nature of the product as a consumable energy shot. As the court reasoned:
“The first question one would ask is how would the energy be transferred? Through food? Through drink? Through injections?… Also one would ask what kind of energy is the mark referring to? Food energy (measured in calories)? Electrical energy? Nuclear energy?… With some thought, one could arrive at the conclusion that the mark refers to an energy shot. But it is not as straightforward as NVE suggests. Such cognitive inferences are indicative of ‘suggestive’, rather than descriptive, marks.”
Since suggestive marks are inherently distinctive, 5-HOUR ENERGY was entitled to protection without proof of acquired secondary meaning. The finding of suggestiveness established that Living Essentials owned a protectable trademark senior to NVE’s 6 HOUR POWER mark.
Even though Living Essentials owns a protectable mark, according to the court, the jury must decide whether there is a likelihood of confusion between its mark and NVE’s 6 HOUR POWER mark. According to the Circuit Court, the evidence showed, at best, that NVE wanted to compete with Living Essentials, rather than copy its image. There was, on balance, a “close call” in relevant likelihood of confusion factors. This left the issue so evenly balanced, in the court’s opinion, that summary judgment was inappropriate, and the question was best left for jury consideration.
Making matters more interesting, NVE is not the only competitor vying for a piece of the energy shot market. Before bringing this lawsuit, Living Essentials prevailed in a lawsuit against another competitor, N2G Distributing Inc, enjoining the sale of its '6 Hour Energy Shot' on the basis of trade dress infringement. Victorious, Living Essentials then distributed a recall notice to 110,000 convenience stores and truck stops, as well as retailer magazines, stating:
"[W]e won a decision against a ‘6 Hour’ energy shot that closely mimicked 5-HOUR ENERGY®… If you have any of the ‘6 Hour’ energy shots in your store(s) or warehouses, contact the product’s manufacturer or your distributor to return the product immediately.”
When retailers began returning defendant NVE’s energy shots, NVE counterclaimed, alleging that Living Essential’s overbroad recall notice - implying that all '6 Hour' energy shots had been enjoined - constituted false advertising in violation of the Lanham Act, as well as anti-competitive conduct in violation of the Sherman Antitrust Act, among other claims.
The controversy on appeal centred on whether the language of the notice was literally false or misleading. To succeed in a claim of false advertising under 15 USC § 1125(a)(1)(B), a plaintiff must demonstrate one of two alternatives: either the message is literally false (in which case it is presumed to be deceptive) or the message is ambiguous but has a tendency to deceive (in which case the plaintiff can establish liability if it proves actual deception). Here, the Circuit Court noted that the language of the notice, which failed to specify which of the many '6 Hour' products was the subject of the recall, "teeters on the cusp between ambiguity and literal falsity". On one hand, it is unclear who was included. On the other, only "a '6 Hour' energy shot" was recalled, rather than all '6 Hour' shots. Ultimately, the Circuit Court ruled that the meaning of "a '6 Hour' energy shot" turns on context, and as such, a claim of literal falsity was not supported.
The Circuit Court ruled, however, that NVE could adduce evidence of actual deception, including numerous calls from retailers attempting to return NVE’s product, which the district court had excluded as inadmissible hearsay. The Circuit Court did not feel inclined to apply the rules of evidence strictly to a claim that depends on a showing of consumer confusion because that would place “too heavy a burden on NVE”. Furthermore, the court noted that this evidence was not offered to prove the truth of the matter asserted, but rather was offered to demonstrate the influx of such calls and the state of mind of the declarants, which is admissible under Federal Rule of Evidence 803(3). This evidence was sufficient to preserve NVE’s claim of false advertising for trial.
NVE’s antitrust claims under Section 2 of the Sherman Act, 15 USC § 2, were less successful. The court rejected NVE’s claim that the recall notice was “part of a broader anticompetitive scheme”. In considering only the anti-competitive effects of the recall notice, the court reiterated that “the Sherman Act protects competition, not competitors”, and noted that “isolated business torts, such as falsely disparaging another’s product, do not typically rise to the level of a Section 2 violation”. Since NVE was able, and did in fact counter Living Essentials’ notice with a correction notice, there was insufficient showing of harm to competition, prompting the Circuit Court to uphold the district court’s entry of summary judgment against NVE’s antitrust claim.
Although this is a complex case, it underscores an essential truth for trademark litigants. Where the facts straddle the line between suggestiveness and descriptiveness, and split the 'likelihood of confusion' factors, the parties should expect the issues to survive summary judgment motions and go to trial.
James L Bikoff, David K Heasley and Valeriya Sherman, Silverberg Goldman & Bikoff LLP, Washington DC
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