Wednesday, May 07, 2014

intent to abandon isn't enough for abandonment, 9th Circuit rules

Wells Fargo & Co. v. ABD Ins. & Financial Services, Inc., --- F.3d ---, 2014 WL 806385 (9th Cir. Mar. 3, 2014) (don't know how I missed this in March, but catching up now)

Opinion below denying a preliminary injunction on Wells Fargo’s trademark infringement claim on abandonment grounds, reversed here.  Wells Fargo sued ABD (New ABD) for trademark infringement and false advertising.  Wells Fargo bought Former ABD in 2007, leading hundreds of Former ABD employees to join Wells Fargo; Wells Fargo changed Former ABD’s name to Wells Fargo Insurance Services.  However, Wells Fargo continued to display the Former ABD mark on customer presentations and solicitations, to maintain the website and metatags, and to accept customer payments made to ABD. Members of Former ABD left Wells Fargo in 2009, then launched New ABD in 2012, using the same name, when they learned that Wells Fargo had not renewed the registration of the Former ABD mark.

The court of appeals held that the district court erred in its legal analysis and thus abused its discretion on likelihood of success on the merits.  First, the district court erred in failing to consider the false advertising claim separately, concluding that it was derivative of the trademark infringement claim.  But “the two claims are distinct and require the application of separate tests.”  There are five elements of a false advertising claim, but only two (ownership and likely confusion) for a trademark infringement claim. Though the court of appeals didn’t say more, one could tease out the idea that false advertising can deal with certain claims that should be channeled out of trademark law—not just comparative advertising, but also claims based on material confusion caused by someone picking up abandoned marks.

However, the court of appeals also found that the district court abused its discretion by misapplying the law in its abandonment analysis “when it considered evidence of prospective intent to abandon the mark to determine whether Wells Fargo’s uses were bona fide and in the ordinary course of business.”  Abandonment requires discontinuance plus intent not to resume use.  Even a single instance of use, made in good faith, defeats a claim of abandonment.  Unless the use is actually terminated, the intent not to resume use prong of abandonment is irrelevant—prospective intent to abandon is meaningless.

The district court therefore erred when it reasoned that Wells Fargo’s continued uses of the ABD mark were not bona fide and in the ordinary course of trade because such uses were “residual ... or in the context of a historical background” given Wells Fargo’s rebranding efforts.  The consideration of Wells Fargo’s intent to rebrand ABD wrongly relied on prospective intent to abandon.  Plus, the district court misconstrued what could count as a “bona fide use in the ordinary course of trade,” which depends on the totality of the circumstances.  Even a declining business can continue to benefit from goodwill until its use ends.  Uses in customer presentations and solicitations “demonstrate[d] Wells Fargo’s business calculation that it could continue to benefit from the goodwill and mark recognition associated with ABD.”  Thus, Wells Fargo continued bona fide use and did not abandon the mark.

The court of appeals continued by cautioning against weighing lack of evidence of actual confusion decisively against a plaintiff at the preliminary injunction stage.  “ [A]t that point parties rarely have amassed significant evidence of actual confusion.”  Further, Wells Fargo could raise a false affiliation claim on remand.  (What this means is unclear, but probably irrelevant given the abandonment holding.)

Finally, giving a pro-plaintiff spin to Herb Reed, the court of appeals directed the district court to revisit the issue of irreparable harm, quoting only that case’s statement that “[e]vidence of loss of control over business reputation and damage to goodwill could constitute irreparable harm.”

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