In an interesting twist, the Ninth Circuit granted summary judgment to a defendant in a trademark infringement case in Lodestar v. Bacardi on April 21, 2022. Given the Ninth Circuit’s common refrain that “summary judgment is generally disfavored in the trademark arena” because of “the intensely factual nature of trademark disputes,” defendants have often faced a higher bar with summary judgment. Entrepreneur Media, Inc. v. Smith, 279 F.3d 1135, 1140 (9th Cir. 2002); see also, Ironhawk Tech’s. Inc. v. Dropbox Inc., 994 F.3d 1107, 1116 (9th Cir. 2021). But in Lodestar, the Ninth Circuit affirmed the grant of summary judgment to the defendant even where the likelihood of confusion factors split both ways. This case will surely stir up a spirted debate within the Ninth Circuit.
Priority Under the Madrid Protocol
Lodestar, a Liechtenstein-based distilled spirits company, asserted trademark infringement claims against Bacardi for its use of the BACARDI UNTAMEABLE mark in its advertising campaign for rum. Lodestar claimed prior rights in its UNTAMED mark through the Madrid Protocol, which, for a certain amount of time, extends protection in the United States to trademarks protected in other countries without first requiring use of the mark in U.S. commerce. Lodestar received trademark protection in the U.S. via the Madrid Protocol in 2011 for its mark in connection with its sale of whiskey, rum and other distilled spirits. Then, in 2013, Bacardi began an advertising campaign using the phrase BACARDI UNTAMEABLE to promote its rum products.
The Ninth Circuit first faced questions of who has prior trademark rights: the party who used its mark in U.S. commerce first, or the party who applied for extended protection through the Madrid Protocol first but had not yet used its mark in U.S. commerce. The Ninth Circuit found that, under the Madrid Protocol, even if Lodestar had not used its UNTAMED mark in U.S. commerce before Bacardi’s allegedly infringing behavior, Lodestar still had a right of priority and was the senior user based on Lodestar’s application under the Madrid Protocol and its prior use of the mark in its home country.
Bona Fide Use in Commerce
The Court then analyzed whether Lodestar’s use of the UNTAMED mark was a “bona fide” use. The Lanham Act limits enforceable trademark rights to “bona fide” uses of the mark “in the ordinary course of trade.” The Court looked at two of Lodestar’s distinct uses of the mark. The first use, which Lodestar had paused prior to Bacardi’s campaign, consisted of Lodestar printing the UNTAMED mark on the back of certain spirits bottles below the description of the drink. The second use concerned Lodestar’s creation of its UNTAMED REVOLUTIONARY RUM products displaying the mark on the front label more prominently. It was undisputed that Lodestar’s second use was developed to “combat Bacardi’s attempts to take over” Lodestar’s UNTAMED mark. The Court found that while Lodestar’s first use was bona fide, the second use was “merely to reserve its rights for a lawsuit.” As a result, the Court did not include Lodestar’s second use in the infringement analysis. Parties should be wary of merely using a mark or changing their use of a mark to preserve or prepare for an affirmative lawsuit because a court may not apply that use in the trademark infringement analysis.
Likelihood of Confusion
The Court then applied the Ninth Circuit’s Sleekcraft factors to determine whether there was a likelihood of confusion between Lodestar and Bacardi’s marks. The Court found that the strength of the mark, and Bacardi’s intent in selecting the mark, weighed in favor of confusion, while the similarity of the marks, based on the “manner in which consumers actually encountered the marks,” weighed against any likelihood of confusion. The remaining Sleekcraft factors were not challenged on appeal.
In analyzing “the strength-of-the-mark factor,” the Court clarified that in reverse confusion cases (which occur when “a person who knows only of a well-known junior user comes into contact with a lesser-known senior user, and, because of the similarity of the marks, mistakenly thinks that the senior is the same as or is affiliated with the junior user”), the analysis is different because the question is whether the junior mark “is so commercially strong as to overtake the senior mark.” Applying this standard, the Court determined that, “[g]iven the overwhelming commercial strength of Bacardi’s UNTAMEABLE mark, this factor weighs in favor of a likelihood of confusion.”
In analyzing Bacardi’s intent in selecting the mark, the Court applied a relatively low threshold for finding intent in reverse confusion cases: “A relevant intent may be shown ‘by evidence that, for example, the defendant knew of the mark, should have known of the mark, intended to copy the plaintiff, failed to conduct a reasonably adequate trademark search, or otherwise culpably disregarded the risk of reverse confusion.’” Here, it was undisputed that Bacardi knew about Lodestar’s UNTAMED mark. Nevertheless, despite finding knowledge and intent, and that this weighed in favor of confusion, the Ninth Circuit still affirmed summary judgment in favor of Bacardi. This reaffirms the growing trend that mere knowledge alone does not necessarily lead to a verdict against the defendant.
Finally, the district court and Ninth Circuit highlighted that context matters when analyzing the similarity of the parties’ marks and channels of trade. Given that Lodestar’s UNTAMED mark only appeared on the back label of the bottles, below a considerable amount of writing, the Court agreed with the district court that “the manner in which consumers actually encountered the marks weighs against any likelihood of confusion.” Notably, the Court also stated that where two parties “use the same or similar marks ‘merely as a tagline to their distinctive business names,’ the subordinate position of that tagline mark to their ‘housemarks’ weighs against a likelihood of confusion.”
In the end, despite factors weighing in favor of a likelihood of confusion, the court concluded that: “Although the commercial strength of Bacardi’s campaign weighs in favor of a likelihood of confusion with respect to Lodestar’s competing rum, which bore a similar suggestive mark of which Bacardi was culpably aware, these factors are overwhelmingly offset by the fact that consumers would ‘encounter the trademarks differently in the marketplace,’ the companies’ ‘marketing efforts [were] concentrated in different media,’ and Lodestar ‘presented no evidence of actual confusion’ among consumers of its products.”
The key takeaway from this case is that defendants may now have a stronger chance of throwing out a trademark infringement case at the summary judgment stage even where the Sleekcraft factors weigh on different sides. This case is a stark example of the Court’s willingness to do so, even in light of the “disfavored” nature of summary judgment in this context.
In recent cases, such as in Ironhawk v. Dropbox, the Court has put greater stock in the mere possibility of confusion, overlapping marketing channels, or the expansion of one’s business. In Ironhawk, the Court refused to grant summary judgment of non-infringement when there was virtually no overlap between the parties’ marketing channels, in part based on the possibility that Ironhawk might attempt to market to other customers in the future. Thus, Ironhawk and Bacardi can act as two guideposts showing that the Court can come to very different results based on unique facts.