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First Circuit: Don't expect to win on appeal if you admit 7 of 8 likelihood of confusion factors

September 02, 2008
Post by Blog Staff

In a decision Friday, the First Circuit affirmed a district court's summary judgment of trademark infringement and an associated award of the defendant's profits and attorney fees to the plaintiff. The defendant used the plaintiff's registered marks in both the metatags of its website as well as in white text on a white background in the body of the site in an effort to cause consumers searching for the plaintiff's marks on an internet search engine to be more likely to go to the defendant's website instead. Over the course of discovery, the defendant essentially admitted that seven of the eight Pignons factors weighed in favor of the plaintiff, and accordingly the district court granted summary judgment, awarding the plaintiff an equitable share of the defendant's profits and attorney fees.

The First Circuit affirmed, holding that even if the final factor, evidence of actual confusion, was neutral or favored the defendant, it was not error for the district court to grant summary judgment for the plaintiff given the admissions on the other seven factors. Further, the court held the award of profits was proper, as the plaintiff only had to prove the defendant's gross sales under 15 U.S.C. § 1117(a). Because the defendant did not offer evidence of its costs, the district court's award of profits was proper. Further, the award of attorney fees was not an abuse of discretion, given the defendant's admission that it intentionally used the plaintiff's marks in order to divert traffic to its website.

This is an instance where companies would do well to remember that while how search engines work is generally secret, it is widely believed that metatags have no effect on search engine ranking, although some search engines may use them for indexing purposes. However, if the point of their use is to increase the site's position in the search results (as it usually is, and was in this case), they are basically useless and, as shown here, a potential basis for liability.

Venture Tape sells various specialty tapes and foil used in the stained-glass industry. Venture also owns two trademark registrations relevant to the case, one for Venture Tape and one for Venture Tape with design, and uses the marks on products bearing the names "Venture Tape" and "Venture Foil." The defendant, McGills Glass Warehouse, sells competing products. Beginning in 2000, McGills used Venture's marks in both the metatags of its website as well as in white text on a white background in the body of its website, such that a viewer of the site would not see the marks. An example of such white-on-white usage is here: this is white text on a white background (highlight to see the text). Once Venture discovered this was occurring in 2003, it filed suit against McGills for trademark infringement.

After substantial discovery, the parties both submitted motions for summary judgment. The district court granted Venture's motion, holding McGills, through various deposition testimony, admitted that seven of the eight Pignons factors weighed in favor of the plaintiff, and requested the plaintiff submit a motion itemizing its damages, costs, and attorney fees attributable to the infringement. Venture submitted evidence that McGills's gross sales were $1.9 million, but only requested $230,330.17, an amount it estimated to McGills's net profits, along with $188,583.06 in attorney fees and $7,564.75 in costs. The district court awarded the full amount requested, and McGills appealed.

The First Circuit affirmed. Turning first to the issue of liability, the court listed the familiar Pignons factors which, in the First Circuit, are the fators courts look to when determining the issue of likelihood of confusion. These factors are:

(1) the similarity of Venture's and McGills' marks; (2) the similarity of their goods; (3) the relationship between their channels of trade (e.g., internet-based commerce); (4) the relationship between their advertising; (5) the classes of their prospective purchasers; (6) any evidence of actual confusion of internet consumers; (7) McGills' subjective intent in using Venture's marks; and (8) the overall strength of Venture's marks.

Here, the court observed "McGills effectively admitted seven of the eight elements of the Pignons analysis," including via admissions and deposition testimony. Based on these admissions, the only factor in dispute was whether there was evidence of actual confusion. On this point, the court noted that the absence of actual confusion is not dispositive on the issue of likelihood of confusion, and noted that here, where the other seven factors favor a finding of infringement, the absence of actual confusion, even if true, could not defeat summary judgment of liability.

Turning to the amount of damages and fees awarded, the court found no abuse of discretion. McGills argued that an award of profits cannot be supported without a finding that the infringement was willful, and that the evidence of the amount of damages was insufficient and overstated the actual harm to Venture. The court first noted that the First Circuit has never reached the question of whether willfulness is required to support an award of damages for trademark infringement. It did not do so in this case either, as it was undisputed that McGills intentionally used Venture's marks, so even if willfulness was required, it was present and the award could be supported on that basis. Regarding the amount of damages, the court looked to the statute, 15 U.S.C. § 1117(a), and noted that the plaintiff need only prove the defendant's gross sales, which it did in this case. It was up to McGills to prove any deductions, and it did not offer any evidence on the point. Further, even if the damages overstated Venture's harm, a damages award also serves the purpose of preventing the defendant from being unjustly enriched as a result of the infringement and deterring future infringement. Thus, the amount of damages was proper.

The court also had no trouble affirming the award of attorney fees, again noting that willfulness was admitted, and concluding that it was not an abuse of discretion for the district court to hold that this was an "exceptional case" sufficient to support an award of fees. Accordingly, the court affirmed the district court in all respects.

To read the full decision in Venture Tape Corp. v. McGills Glass Warehouse, click here.


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