Hana Financial Inc. v. Hana Bank, No. 11-56678 (9th Cir. Nov. 22, 2013)

For the purposes of this blog, the facts are largely irrelevant, but to read the extended analysis of this case you can contact me by clicking the “contact” link at the top of the page and submit a request.  Here, I will only discuss the appellate implications.

A party claiming trademark ownership must establish that it has priority, meaning it was the first to use the mark in the sale of goods or services.  Under exceptionally narrow circumstances, a party may use the constructive use doctrine of tacking.  Brookfield Communications, Inc. v. West Coast Entertainment Corp., 174 F.3d 1036, 1047 (9th Cir. 1999).

The jury was instructed on “tacking” as follows:

A party may claim priority in a mark based on the first use date of a similar but technically distinct mark where the previously used mark is the legal equivalent of the mark in question or indistinguishable therefrom such that consumers consider both as the same mark.  This is called “tacking”  trademark rights.  In order to track trademark rights, the marks must create the same, continuing commercial impression, and the later mark should not materially differ from or alter the character of the mark attempted to be tacked.

The jury instructions were consistent with the Ninth Circuit’s exceedingly narrow interpretation of the standard for tacking.  Brookfield, 174 F.3d, 1048.  It returned a verdict in favor of the Bank finding that the Bank had “used its mark in commerce in the United States beginning prior to April 1, 1995, and continuously since that date.”  HFI moved for judgment as a matter of law and the district court denied it.

Standard of Review for Judgment as a matter of law

A district court’s decision to deny a motion for judgment as a matter of law is reviewed de novo and the evidence is viewed in the light most favorable to the party in whose favor the jury returned a verdict and draw all reasonable inferences in its favor.  First Nat’l Mortg. Co. v. Fed. Realty Inv. Trust, 631 F.3d 1058, 1067 (9th Cir. 2011). On review, the Ninth Circuit must uphold the verdict Standard if “it is supported by substantial evidence, even if it is also possible to draw a contrary conclusion.”  Id.  As the losing party in a jury trial, HFI had to show that its interpretation of the evidence was the only reasonable one. See Martin v. Cal Dep’t of Vet. Affairs, 560 F.3d 1042, 1046 (9th Cir. 2009).

In the 9th Circuit, whether consumers would consider the two marks as being essentially the same is a question of fact.  This is consistent with the 9th circuit’s view that the analogous trademark issue of likelihood of consumer confusion is also a question of fact.  See Quiksilver, Inc. v. Kymsta Corp., 466 F.3d 749, 759 (9th Cir. 2006).  The Federal and Sixth Circuits disagree.  They evaluate both tacking and likelihood of confusion as a question of law.  See Id.  Although the other circuits have not decided the issue yet, the district courts in circuits where the likelihood of confusion is a question of fact also treat tacking as a question of fact.  See e.g., Specht v. Google Inc., 758 F.Supp. 2d 570, 583 (N.D. III. 2010).

The court found that there was substantial evidence for the jury to apply the tacking doctrine because tacking requires a highly fact-sensitive inquiry, and the jury decided the issue after receiving an instruction that correctly conveyed the narrowness of the doctrine.

This is good and bad news for ninth circuit citizens.  It is good that potential consumers are the ones deciding whether a consumer would consider the mark the same.  It is bad that because this is a question of fact, it is an exceedingly high standard on appeal.  The losing party has to show their interpretation of the evidence is the only reasonable one.