Ninth Circuit Reiterates Role of Online Commerce in Likelihood of Confusion AnalysisJuly 14, 2017

The Ninth Circuit issued a ruling on Tuesday clarifying the role of marketing channels in trademark infringement lawsuits.

The case at issue involved two furniture manufacturers—Stone Creek Inc. and Omnia Italian Design Inc.  Stone Creek manufactures furniture it sells directly to customers.  In doing so, it uses a trademark consisting of the words “Stone Creek” circled by a red oval.  Problematically, Omnia decided to use this very mark in supplying its own furniture to retailer Bon-Ton Stores, Inc., as it sounded more “American.”  Omnia copied the Stone Creek mark and used it on in-store displays and materials, warranty cards, and even the furniture itself.  This Stone Creek-labeled furniture manufactured by Omnia was sold at Bon-Ton stores in the Midwest and reached customers in Illinois, Indiana, Iowa, Michigan, Ohio, Pennsylvania, and Wisconsin.

Unsurprisingly, Stone Creek filed a trademark infringement lawsuit against Omnia when it became aware of Omnia’s conduct.  However, the U.S. District Court for the District of Arizona ruled that Omnia did not infringe Stone Creek’s trademark because there was no likelihood of confusion.

In assessing likelihood of confusion, courts look at a variety of factors, including the similarity of the marks, the proximity of the goods being sold, the strength of the protected mark, any evidence of actual confusion, the marketing channels, defendant’s intent in using its mark, and the degree of consumer care.  Notably, most of these factors appear to weigh in favor of Stone Creek.  As the Ninth Circuit put it, “[t]he indistinguishable marks and goods, coupled with a fanciful mark, evidence of actual confusion, convergent marketing channels, and blatant copying, tell the real story.”

A key aspect of the lower court’s decision, and the Ninth Circuit’s reversal thereof, was the element of marketing channels.  The lower court noted that most of Stone Creek’s business was in the Phoenix, Arizona area (where it has five physical showrooms) and that the marketing channels thus did not overlap (as the furniture sold through Bon-Ton was only in the Midwest).  However, the Ninth Circuit emphasized that differing geographical areas does not foreclose the possibility of convergent marketing channels.

Looking to the facts of the case before it, the Ninth Circuit ruled that Stone Creek and Omnia/Bon-Ton’s marketing channels overlapped.  This was largely due to the fact that Stone Creek used its mark in selling furniture online and advertised in nationwide magazines.  Notably, Stone Creek had over half a million dollars in sales throughout the Midwest.  The Ninth Circuit questioned the lower court’s “myopic focus on the considerable distance between Stone Creek’s physical showrooms in Arizona and Bon-Ton’s in the Midwest,” explaining that simultaneous sales and advertising in the Midwest was the ultimate issue.

This finding makes clear that parties may not avoid liability for trademark infringement based on the fact that they operate in different parts of the country.  With the continual growth of online commerce, geographical borders between companies are reduced—making it more likely for consumers to confuse competitors using similar (or in this case, identical) marks.

Nicholas Krob is an Intellectual Property Attorney in the Litigation Practice Group at McKee, Voorhees & Sease, PLC. For additional information please visit www.ipmvs.com or contact Nick directly via email at nicholas.krob@ipmvs.com.