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IP and Tech Law Alert: Supreme Court Decision Likely to Increase Jury Trials in Trademark Infringement Cases

March 20, 2015

In its first substantive trademark decision in a decade, the United States Supreme Court recently issued a decision that increases the likelihood that more trademark infringement cases will be tried before a jury. While the case, Hana Financial, Inc. v. Hana Bank, 135 S. Ct. 907 (U.S. Jan. 21, 2015), involved the narrow issue of trademark “tacking,” it has broad implications for other issues in trademark infringement cases.

In general, when two businesses use the same trademarks, courts decide who holds the rights to the trademark by determining “priority,” that is, which business first used the trademark in commerce. When a business has used two or more trademarks that are “legal equivalents,” then the business can “tack” the later-adopted trademarks onto the earliest-adopted trademark to establish the earliest possible use. Whether two trademarks are legal equivalents depends upon whether they create the same continuing commercial impression so that consumers consider both to be the same trademark.

In Hana Financial, for example, the jury decided that the defendant, Hana Bank, had not infringed the plaintiff’s federally registered “Hana Financial” trademark even though the plaintiff started using its trademark before the defendant did because the defendant, Hana Bank, earlier used the legally equivalent Hana Overseas Korean Club trademark.

Most federal courts have held that the issue of tacking is a fact question that juries must decide. Two federal circuits, however, had held that tacking is a legal question for judges to decide, including the influential Federal Circuit, which hears appeals from the U.S. Patent & Trademark Office (“USPTO”). See Van Dyne-Crotty, Inc. v. Wear-Guard Corp., 926 F.2d 1156, 1159 (Fed. Cir. 1991).

In a decision that Justice Sonia Sotomayor authored, the Supreme Court held in Hana Financial that juries rather than judges should decide whether a business may tack a later trademark onto an earlier one to establish priority because juries are well-equipped to make decisions from the perspective of an ordinary purchaser of goods or services. Id. at 911.

The Hana Financial decision directly affects appeals in the Federal Circuit from the USPTO, mandating that juries instead of judges decide whether a business may tack a later trademark onto an earlier one to establish priority of use. The Hana Financial decision may have broader implications, however, because the Federal Circuit has held that the more common trademark infringement issue of “likelihood of confusion” also is a legal question that judges are to decide, not a factual question that juries must decide. StonCor, Inc. v. Specialty Coatings, Inc., 759 F.3d 1327, 1331 (Fed. Cir. 2014).

The issue of “likelihood of confusion” arises in a large number of trademark infringement cases because it is the test for determining whether one party’s trademark is similar enough to another party’s trademark to be likely to cause consumer confusion between the two trademarks. Given the Hana Financial decision, the Federal Circuit may feel obligated to hold as a matter of precedent in a future case that the issue of “likelihood of confusion” is a factual question that juries must decide, not a legal question for judges to decide.

Trademark counsel already often find it difficult to predict the outcome of infringement cases because they tend to be extraordinarily fact-specific in nature. For the same reason, disposing of a trademark infringement case on a motion for summary judgment can be unusually difficult. Increasing the number of issues in trademark infringement cases that juries rather than judges must decide will make it even harder to evaluate such cases and to prevail on motions for summary judgment.