Survey evidence saves Nike's dilution claim against NIKEPAL

In Nike Inc v Nikepal International Inc (Case 2:05-cv-1468-GEB-JFM, September 17 2007), the US District Court for the Eastern District of California has reversed a decision by the US Patent and Trademark Office's Trademark Trial and Appeal Board (TTAB) dismissing Nike Inc's opposition to the registration of the mark NIKEPAL for various products and services for laboratories.

Nike owns multiple federal registrations for the mark NIKE for shoes, athletic apparel and sporting goods. Nike opposed the registration of the designation NIKEPAL filed by Nikepal International Inc based on likelihood of confusion and trademark dilution. The TTAB rejected Nike's opposition (Nike Inc v Nikepal International Inc, Opposition 91124869, April 25 2005).

Nike appealed the TTAB's adverse decision to the federal district court in Sacramento, where Nikepal is located. Reversing the TTAB, the District Court for the Eastern District of California sided with Nike, permanently enjoining Nikepal from using the term 'Nike' (or any term confusingly similar thereto) as part of any trademark, domain name or business name. In reaching its decision, the district court expressly held that the NIKEPAL designation diluted the NIKE mark.

Both the TTAB and the district court had no difficulty in determining that the NIKE mark was famous. However, the TTAB found that NIKE was not substantially similar to NIKEPAL, as required for a federal dilution claim, while the district court found a substantial similarity between NIKE and NIKEPAL. Relying particularly on survey evidence that was presented to the district court but not to the TTAB, Nike established that an association between the famous NIKE mark and the NIKEPAL designation existed.

The survey expert on behalf of Nike testified about a telephone survey that allegedly replicated the circumstances in which consumers typically encountered the NIKEPAL designation. The survey posited the following question: "What, if anything, came to your mind when I first said the word 'Nikepal'?". Based on the survey responses, the survey expert concluded that 87% of the respondents associated Nikepal with Nike, even if the respondent was not confused about the source of the Nikepal website. Based on this overwhelming association, the district court concluded that consumers perceived the two designations "as essentially the same".

Moreover, the district court found actual association of the NIKEPAL designation with the NIKE mark based on pages posted at various inactive domain names, such as 'nikepal.biz', 'nikepal.us' and 'nikepal.net'. The Network Solutions holding pages promoted links to product and service offerings of Nike only, which, according to the court, further substantiated an actual association.

After considering the remaining factors of distinctiveness in essentially summary fashion (substantially exclusive use, degree of recognition and intent to create an association), the district court concluded that Nike would suffer dilution if Nikepal was allowed to continue its use of the NIKEPAL designation. Accordingly, the district court overturned the TTAB decision allowing the NIKEPAL designation to proceed to registration and issued a permanent injunction against Nikepal's further use of the NIKEPAL mark, domain name and business name.

By determining to seek review in the district court rather than in the Federal Circuit, Nike allowed for critical survey evidence in support of its claims to be presented to the district court. The court relied on the survey evidence to establish both fame and association in Nike's favour. The survey formed an essential foundation for the court's issuance of an injunction against Nikepal. Based on this decision, surveys may become a key piece of evidence to support a federal dilution claim in federal court, or even before the TTAB.

Rochelle D Alpert, Morgan Lewis & Bockius LLP, San Francisco