In Westmont Living, Inc. v. Retirement Unlimited, Inc., the U.S. Court of Appeal for the Fourth Circuit vacated a judgment of the Federal District Court for the Eastern District of Virginia because the lower court did not address the parties’ competitive marketing, the locations from which they solicit and draw their customers, the scope of their reputations, or, for that matter, any of the 9 factors the Fourth Circuit has identified for determining the likelihood of confusion between competing trademarks in RXD Media, LLC v. IP Application Dev. LLC, 986 F.3d 361, 373 (4th Cir. 2021).
In reaching its decision, the Fourth Circuit concluded the District Court erred by relying solely on the fact the parties’ physical facilities were on opposite coasts – California and Virginia – without considering the many other factors that might bear on whether Westmont Living had shown a likelihood of confusion by consumers of its services. Accordingly, the Fourth Circuit remanded the case to the District Court for further consideration of the various factors that may be relevant to the issue of likelihood of confusion in light of the facts and circumstances presented by the case.
Location may not matter as much as you think in your trademark case.
Background
Westmont Living (“Westmont”) is a California corporation that operates several retirement communities and assisted living facilities on the West Coast. It sued Retirement Unlimited (“Retirement”), a Virginia corporation that operates retirement communities and assisted living facilities on the East Coast, for trademark infringement. Westmont, which operates and markets its facilities using the mark “Westmont Living,” alleged that Retirement opened a new facility using the name “The Westmont at Short Pump” for services identical to those provided by Westmont.
The Decision in the Federal District Court in Alexandria
The Federal District Court in Alexandria, Virginia entered summary judgment for the defendant, Retirement. The Court acknowledged that many factors are potentially relevant when determining whether likelihood of confusion between competing marks is threatened or actually exists, but concluded that because the parties’ facilities were located in entirely different geographic markets, as a matter of law, consumer confusion was basically impossible. The District Court based its holding on a 1959 decision of the U.S. Court of Appeal for the Second Circuit in New York in Dawn Donut v. Hart’s Food Stores. That case held that when parties use their trademarks in separate and distinct markets, there can be no likelihood of confusion. Westmont disagreed with the decision, so it appealed.
The Fourth Circuit in Richmond Reversed and Remanded for Further Proceedings
On appeal, Westmont argued the District Court erred in its ruling by relying on Dawn Donut, and by failing to apply the 9 factor test the Fourth Circuit established to determine a likelihood of confusion for trademark infringement. Instead, the District Court erroneously exalted geographic location of the parties’ senior living facilities as the only inquiry for determining likelihood of confusion. Retirement, on the other hand, argued the District Court correctly determined the Dawn Donut rules applies, and precludes likelihood of confusion or any remedy based on the undisputed evidence of geographic remoteness between the parties. It also argued the District Court was correct because of the lack of evidence showing Westmont had any plans to enter the Virginia market, where Retirement used the “Westmont” name.
The Fourth Circuit stated the core issue presented in the case was whether the District Court erred in holding the Dawn Donut rule was dispositive on the issue of likelihood of confusion given the facts and circumstances presented by the case. It ultimately concluded it was not, and then vacated and remanded the District Court’s decision. The Fourth Circuit found error because the District Court held it was “impossible” for Westmont to show a likelihood of confusion because the geographic separation between the parties’ trade territories precluded a finding of consumer confusion. That was incorrect.
The Fourth Circuit started its analyses by stating that a trademark identifies and distinguishes an owner’s goods and services, as well as their source, and thus it is valuable to the owner’s business. Jack Daniel’s Props., Inc. v. VIP Prods. LLC, 599 U.S. 140, 146–47 (2023). Confusion or even a likelihood of confusion created by an infringement of an owner’s trademark deprives the owner of the benefits of the mark, including hard earned goodwill. It also deprives the public of the ability to distinguish a company’s goods and services from those of a competitor. In short, trademark infringement involves the theft and appropriation of someone else’s goodwill and the deception of the public.
The Fourth Circuit explained that to prove trademark infringement under the Lanham Act a plaintiff must show both (1) that it owns a valid and protectable mark, and (2) the defendant’s use of a “reproduction, counterfeit, copy, or colorable imitation” of that mark creates a likelihood of confusion. Variety Stores Inc. v. Wal-Mart Stores Inc., 888 F.3d 651, 660 (4th Cir. 2018). The same showing is required to prove an unfair competition claim under the Lanham Act and common law claims under Virginia law. The Appeal Court found there is no dispute that Westmont owns a valid and protectable mark, as evidenced by its federal registrations, and so the only question left is whether Westmont presented evidence that Retirement’s use of “Westmont” is likely to cause confusion with Westmont’s mark.
The Fourth Circuit stated that trademark law protects trademarks from a likelihood of confusion caused by an infringing mark regardless of whether actual confusion was caused and regardless of whether those likely to be confused were actual customers or only potential customers. A trademark owner need not show that likelihood of confusion caused any actual loss of sales. The fact that neither geographically nor in size or cost of service are the parties directly in competition does not preclude the relief sought for a likelihood of confusion.
The Fourth Circuit noted its previously decisions had identified 9 factors to evaluate when considering whether an allegedly infringing mark is likely to cause confusion. The factors include (1) strength or distinctiveness of the plaintiff’s mark as actually used in the marketplace; (2) similarity of the two marks to consumers; (3) similarity of the goods or services the marks identify; (4) similarity of the facilities used by the mark holders; (5) similarity of the advertising used by the mark holders; (6) defendant’s intent; (7) actual confusion; (8) quality of defendant’s product; and (9) sophistication of the consuming public. RXD Media, LLC v. IP Application Dev. LLC, 986 F.3d 361, 373 (4th Cir. 2021). The Court explained the factors aren’t meant to be a rigid formula, but rather a catalog of various considerations that may be relevant to determine the ultimate statutory question of likelihood of confusion. The Court also explained that embedded in the factors is consideration of the similarity in scope of the parties’ geographic markets, and the area and manner of concurrent use of the marks. What-A-Burger of Virginia, Inc. v. Whataburger, Inc. of Corpus Christi, 357 F.3d 441, 450 (4th Cir. 2004). The Court stated that when considering geographic markets the legal analysis does not begin and end with geographic territories, particularly when the reputation of the senior user’s mark has been used in a trade area prior to the junior user’s adoption and use, which is not uncommon in cyberspace.
The Fourth Circuit ultimately found the District Court failed to address any of the 9 factors in the RDX Media test, and instead found geography dispositive. The District Court never considered anything but the location of the parties’ physical facilities where the parties provide their services. It simply mechanically applied the holding in Dawn Donut. In doing so, it failed to take into account all the relevant facts bearing on the territorial scope of a registered mark and the zones in which a likelihood of confusion can be caused, such as the areas from which customers are drawn, where advertising is conducted, and where reputation extends. The Fourth Circuit further noted that, unlike the District Court, it had never held that when there is no likelihood the senior federal registrant will expand its use, the geographic separation between the two uses renders consumer confusion impossible. In fact, the Appeal Court found it is almost universally established that it is not necessary for the infringer to be located in the same geographic market as the senior mark’s owner or even in competition with the mark’s owner to find likelihood of confusion and infringement.
The Fourth Circuit concluded the District Court’s reliance on only the geographical distance between the physical facilities of the two companies was simply too narrow an approach for the case. Were that approach appropriate, a developer could build a “Disney World” in Wheaton, Illinois, without infringing the marks of the real “Disney World” in Orlando, Florida. Such surely cannot be the case.
Take Aways
A court’s finding of likelihood of confusion is a fact intensive inquiry based on a detailed analyses of the parties evidence against the 9 factors set forth in the RDX Media test – or in the Ninth Circuit the Sleekcraft Factors – to determine if a junior mark holder is infringing on a senior mark holders trademarks.
Geographic location is just one factor, and given the increased reliance on the Internet, and the decreased influence of local television and radio, to market goods and services nationwide, such location may be of diminishing importance when evaluating the likelihood of confusion of an alleged infringing mark.
Even in the absence of the same or similar geographic locations, in a trademark case confusion between marks is more likely when the plaintiff and defendant compete by providing the identical service under the identical name. The fact the parties are not directly in competition either geographically or in size or cost of service does not preclude relief for a likelihood of confusion infringement.
A trademark owner does not have to show any actual loss of sales caused by a likelihood of confusion for such likelihood of confusion to be actionable in a federal civil action. A civil action for likelihood of confusion caused by an infringing trademark can relate to the source of the goods or services and to the affiliation, connection or sponsorship of those goods or services.
Finkel Law Group Can Help With Your Company’s Trademark Matters
Finkel Law Group, with offices in San Francisco and Oakland, has almost 30 years of experience representing plaintiffs and defendants in trademark infringement and unfair competition cases in federal and state courts throughout California. When your company needs intelligent, insightful, conscientious and cost-effective legal counsel to assist you with a lawsuit involving the defense or prosecution of your trademark rights, please contact us at (415) 252-9600, (510) 344-6601, or info@finkellawgroup.com to speak with one of our attorneys about your matter.