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The Ninth Circuit Writes the Script on Pleading and Proving Reverse Confusion Claims

The U.S. Court of Appeals for the Ninth Circuit clarified the requirements for pleading and establishing a trademark infringement claim under a “reverse confusion” theory in Marketquest Group v. BIC, Case No. 15-55755 (9th Cir. July 7, 2017). The court relieved plaintiffs from having to specifically plead reverse confusion if it is compatible with the theory of infringement alleged in the complaint, and supported a more malleable standard for proving intent in reverse confusion cases. The court also held that good faith is an element—not just a factor—of a fair use defense, and that the fair use defense may only be raised after a likelihood of confusion is established. Marketquest further reinforces courts’ reluctance to decide trademark cases on summary judgment, and makes it more difficult for defendants to dispose of reverse confusion claims through pretrial motions.

A Tale of Two Catalogues: Background on Marketquest’s Claims

A trademark owner can assert a claim for trademark infringement under the Lanham Act under two theories: forward confusion and reverse confusion. See Surfvivor Media v. Survivor Productions, 406 F.3d 625, 630 (9th Cir. 2005). Forward confusion occurs when consumers believe that goods bearing the junior mark came from, or were sponsored by, the senior mark holder. By contrast, reverse confusion occurs when consumers dealing with the senior mark holder believe that they are doing business with the junior mark holder.

In the Marketquest case, the plaintiff owned the trademarks “All-in-One” and “The Write Choice” for the production and sale of promotional products. In 2009, Defendants BIC Corp. and BIC USA, Inc., acquired Norwood, a promotional products company, and in 2010 Norwood published a promotional products catalogue for 2011 that featured the phrase “All-in-One” on both the cover and inside the catalogue. The year before, BIC had also used the phrase “The WRITE Pen Choice for 30 Years” in connection with a 30th anniversary promotion of its pens. Marketquest sued the defendants alleging infringement of its “All-in-One” and “The Write Choice” marks. Following discovery, the parties filed cross-motions for summary judgment, and the district court granted summary judgment for the defendants, holding that even though there was some likelihood of confusion, fair use provided a complete defense to the allegations of infringement of both the “All-in-One” and “The Write Choice” marks.

Reverse Confusion Claims: Easy to Write and Now Harder to Defend

The Ninth Circuit reversed the district court’s grant of summary judgment, noting repeatedly in its opinion that “summary judgment is generally disfavored in the trademark arena” due to “the intensely factual nature of trademark disputes.” See KP Permanent Make-Up v. Lasting Impression I, 408 F.3d 596, 602 (9th Cir. 2005) (citation omitted).

First, the court held that reverse confusion is not a separate claim that must be specifically pleaded, but instead is a theory of likely confusion that may be alleged by itself or in addition to forward confusion. The court held that Marketquest’s pleading was adequate to support a cause of action for trademark infringement under a reverse confusion theory of likely confusion, even though Marketquest had only specifically alleged forward confusion, alleged no examples of confusion or market saturation, and generally alleged that there was some confusion “as to whether some affiliation, connection, or association exist[ed]” among the parties.

Second, the court held that the intent factor in the likelihood of confusion analysis varies with the type of confusion being considered, and no specific type of evidence is required to establish intent. Because neither party typically wishes to siphon off the other’s goodwill in reverse confusion cases, the court noted, a defendant’s mere knowledge of the senior user’s mark may not be sufficient to establish intent. Knowledge, however, was one of the several potential signs of intent. Other facts potentially suggesting the intent to confuse included evidence that a defendant deliberately intended to push a plaintiff out of the market by flooding the market with advertising to create reverse confusion, evidence that the defendant should have known of the mark, a failure to conduct a reasonably adequate trademark search, or otherwise culpably disregarded the risk of reverse confusion.

Third, the court held that good faith is an element of the fair use defense and not merely a factor to consider. As with intent, the court noted there is no bright-line rule or required type of evidence to establish good or bad faith.

Finally, the court held that fair use is an affirmative defense that comes into play only after likelihood of confusion is established. Here, the district court erred in applying the fair use analysis to the defendants’ use of “The Write Choice” mark after determining that Marketquest had presented no evidence of likely confusion. If there is no likelihood of confusion, then a plaintiff’s claims fail and there is no need to consider the affirmative defense of fair use. But because likelihood of confusion is a fact-intensive question, it is difficult to resolve at the summary judgment stage. And a court cannot reach the merits of a fair use defense on summary judgment unless the defendant concedes (or loses) on the confusion claims. The effect of the court’s ruling is that it will be harder for defendants to rely on a fair use defense at the summary judgment stage.

Takeaways: The Story of Reverse Confusion Is Written Long Before the Lawsuit Begins

Marketquest makes it easier for plaintiffs to assert a reverse confusion theory of trademark infringement, as it is now sufficient for plaintiffs to allege that consumers were confused “as to whether some affiliation, connection, or association exist[ed]” between the parties to plead both forward and reverse confusion theories. The decision’s malleable intent standard also creates considerable uncertainty over what constitutes intent in reverse confusion cases. Given the court’s expansive view of evidence supporting intent and good faith, businesses that are often hit with reverse confusion claims—such as viral startups—should take care in selecting a trademark. The initial steps to select a mark can later form the basis for showing intent or bad faith.​​​​​