On January 21, 2015, in its first substantive trademark case in over 10 years, the U. S. Supreme Court unanimously held that when a trademark owner attempts to establish priority based on an earlier use of a nearly-identical mark – a concept known as “tacking” – a jury must decide the issue. The decision resolves a split between the Sixth and Federal Circuits, which had held that tacking was a legal issue decided by the trial judge, and the Ninth Circuit. Hana Financial, Inc. v. Hana Bank, No. 13-1211 (Jan. 21, 2015). The slip opinion is available athttp://www.supremecourt.gov/opinions/14pdf/13-1211_1bn2.pdf.
Hana Financial, a California financial services company, has used the name Hana Financial since 1995. In 1996, it obtained a federal registration for its logo and trademark HANA FINANCIAL. In 2007, Hana Financial sued Hana Bank, a subsidiary of a separate entity, Hana Financial Group, for trademark infringement, alleging that the defendant’s use of the “Hana Bank” name infringed the HANA FINANCIAL mark. Hana Bank defended by alleging priority based on an earlier date of first use. Hana Bank first used that name in the United States in 2002, but had used its logo and the Hana Bank name in Korean in advertisements as early as 1994. Hana Bank argued that it could “tack” that earlier use to establish priority over Hana Financial’s first use.
The U.S. District Court for the Central District of California conducted a trial on Hana Financial’s infringement claim and submitted the tacking issue to the jury, which found for Hana Bank. Hana Financial then appealed to the U.S. Court of Appeals for the Ninth Circuit, arguing that tacking should have been decided by the district judge. Although it noted a circuit split on the issue, the Ninth Circuit held that tacking was an issue reserved for the jury. Hana Financial then appealed to the Supreme Court.
Supreme Court Decision
In a 9-0 decision written by Justice Sotomayor, the Supreme Court affirmed the Ninth Circuit and held that tacking is a jury issue. The parties did not dispute the legal requirements for tacking. The Court noted that tacking exists to recognize that brand owners may make minor modifications to their marks over time without losing the benefit of earlier versions of the mark in establishing priority. In order to tack the earlier mark, the marks must be “legal equivalents,” by creating the same, continuing commercial impression. Tacking is not available where the later mark is materially different from, or alters the character of, the earlier mark. Van Dyne-Crotty, Inc. v. Wear-Guard Corp., 926 F.2d 1156, 1159 (Fed. Cir. 1991). The parties agreed that the jury was properly instructed that marks are legal equivalents when “consumers consider both [marks] as the same mark” and the two marks “create the same continuing commercial impression[.]” Slip op. at 3.
The Supreme Court reasoned that the crux of the tacking issue is similarity of the earlier and later marks as viewed by an ordinary consumer. As a result, the issue was one especially suited for a jury:
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 recognized 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 decisionmaker that ought to provide the fact-intensive answer.
Slip op. at 4. The Court noted a variety of issues in other fields of law requiring juries to apply objective, “ordinary person” tests.
The Court held that a judge may decide tacking when the case is jury-waived, or when the court disposes of the issue on a motion for summary judgment or judgment as a matter of law. But otherwise, “tacking” is for the jury to decide:
We hold only that, when a jury trial has been requested and when the facts do not warrant entry of summary judgment or judgment as a matter of law, the question whether tacking is warranted must be decided by a jury.
Id., at 5.
The Court turned aside Hana Financial’s arguments that “tacking” should be an issue decided by a judge in all cases because it presented a mixed question of fact and law, was a developing doctrine, and was important to the orderly functioning of the trademark system. The Court noted that the potential disadvantages of relying of juries to decide tacking were no greater than for other jury issues in other areas of the law.
Potential Impact Of Decision
Although tacking admittedly is a technical issue, the Supreme Court’sHana Bank ruling could affect IP litigation in several ways. First, the Court’s increased activity in the trademark field (it has accepted certiorariin two trademark cases this term) may signal a heightened level of scrutiny in coming years, similar to the unprecedented recent Supreme Court activity in the patent area.
Second, the Court’s decision emphasizes the jury’s role as the preferred barometer of consumer perceptions in tacking and potentially any other issues involving consumer response to a marketplace communication. Litigants likely will cite the Hana Bank decision in cases involving a range of consumer-oriented issues, including likelihood of confusion, descriptiveness, acquired distinctiveness (or secondary meaning), genericness, and dilution, as well as infringement in design patent cases.Hana Bank’s strong endorsement of the jury as the factfinder for marketplace impression issues may make it more difficult to obtain summary judgment, and may encourage both plaintiffs and defendants to rely more extensively on survey evidence to buttress their trial presentations.