I am very interested in the use of non-survey expert evidence in trademark and false advertising cases; I think it has a lot of potential to improve the analysis, especially given how manipulable surveys are—reasoning from what we know about human communication and understanding generally may well be more reliable than a claim-specific survey. But it’s not often done, and the judge’s careful dissection of a proffered expert opinion in this case shows that anyone attempting to do it needs to be attentive to the Daubert standards, probably more so than with a conventional survey. I still think a good expert in practical linguistics is worth the investment in an appropriate case. Partially this is because an expert will often be so much cheaper than a survey plus a survey expert, especially given that you can often expect a big, expensive admissibility battle with a survey even if it will probably survive to be admitted. But it’s not just about expense: I really believe that the addition of expert knowledge about how consumers make meaning would improve the quality of adjudication beyond claim-specific surveys.
The underlying dispute: Flagstar is a Michigan-based bank with 175 “banking centers” in Michigan, Indiana, and Georgia, offering checking and savings accounts, home mortgages, and money market accounts. It also operates 104 home loan centers, including 5 within Illinois. They involve mortgage origination only, not deposits or withdrawals, and the loan centers independently decide how to use Flagstar marketing materials in local ads. Prospective customers must undergo a credit check before opening a Flagstar account. It has several registered trademarks and spent $12.3 million on advertising in 2008.
Freestar is a small community bank offering traditional banking services, including checking and savings accounts and home mortgage loans. It has 13 branches, all located within a three-county area of Central Illinois: Champaign, Livingston, and McLean, where Flagstar has no operations. Freestar, which advertises only in that area, adopted the Freestar Bank name in 2006 as a rebranding.
The court ruled on a Daubert motion to exclude proffered expert witnesses. “Dr. Edward Lee Lamoureux holds a Ph.D. from the University of Oregon in Rhetoric and Communication with an emphasis on conversation analysis, rhetoric, qualitative research methods, general speech, and interpersonal communication.” The court accepted him as an expert on “social” linguistics, as distinguished from “formal” linguistics. His report claimed that “flag,” “free,” and “star” are each “strongly associated with some of the most broadly shared values in American culture: Patriotism, loyalty, national identity, and individual rights.” Given the “significant and overlapping metaphorical associations,” he concluded that substantial consumer confusion was likely.
Freestar argued that Dr. Lamoureux failed to employ any identifiable methodology, though he said he consulted “classic texts” in the field of metaphorical association. Except that association is not confusion. He would have been better served to consult the word studies in which people tend to make mistakes about what words they’ve seen on a list when they’re later presented with words semantically related to the words that really were on the list (e.g., put “bone” on the list and people are more likely to mistakenly think that “dog” was on there as well than they are to think that “cat” was there). That would be the missing link in the claim here, which is a variation on the trademark rule—which does not generally require the submission of specific evidence—that similarity in meaning increases the likelihood of confusion. Courts have found infringement based on similar meaning: Lollipops and Jellybeans for roller skating rinks were found confusing. That’s context-dependent; with respect to desserts, lollipops and jellybeans have very different meanings. But precisely because they’re arbitrary for roller rinks, the consumer might easily encode “sweet treat” but not remember which sweet treat served as the name of the business she’d encountered before. Likewise, one could argue—though I am far from convinced on the facts as stated in this case, and I think the descriptiveness/laudatory nature of the terms is important—that the patriotic associations of “flag” and “free” combined with “star” are so similar that, in context, consumers might not remember which they’d seen before.
This is beside the point, because the court noted that, if the expert can’t specify methodology, it’s impossible to evaluate the propriety of that methodology. Here, Dr. Lamoureux didn’t offer any “proposal, theory, or technique” justifying the conclusion of likely confusion. He didn’t footnote or attach supplements explaining the theories on which he relied, or discuss the “classic texts” in his report. The court wouldn’t speculate on what those might be or how they related to his ultimate conclusion. Dr. Lamoureux proposed no theory explaining “how one particular metaphor shared by three words becomes so dominant in customer[s’] minds that it overcomes the many other metaphorical associations attributable to the words.” Moreover, he did not rely on any polls or qualitative research supporting his claim that patriotic metaphorical associations are particularly important post-Sept. 11, 2001, nor—more importantly—did he connect increased patriotic fervor with likely confusion.
The absence of a reliable theory was highlighted by Dr. Lamoureux’s inability to explain how he’d evaluate whether other terms such as “freedom,” “America,” “liberty,” and “patriot” fall under the same metaphorical umbrella. This concern, I think, is related to the descriptiveness/laudatory caution I offered above. There are good reasons to be hesitant to give Flagstar rights over the patriotic metaphor as applied to banks, while monopoly rights over sweet dessert names applied to roller rinks are much less troublesome. To the court, his methodology appeared result-driven.
Aside from reliability concerns, there were also relevancy issues. Expert testimony may be excluded if the primary facts can be accurately and intelligibly described for the jury and if the jury is just as competent as drawing conclusions from the facts as are expert witnesses. Dr. Lamoureux’s two-page report wasn’t particularly helpful because the trier of fact can also evaluate the meanings of the words comprising the parties’ marks. “When presented with the parties’ marks, the average person is capable of concluding that all three words share a patriotic connotation.” A juror could also recognize differences in meaning. Expert testimony would be helpful in explaining how similarities lead to confusion, or how differences negate likely confusion, but that’s not what was on offer here. Thus, Freestar’s motion to exclude was granted.
On to infringement: the court swiftly disposed of Freestar’s argument that Flagstar lacked constitutional standing for failure to suffer injury in fact. But Flagstar clearly alleged an invasion of a legally protected interest, that protected by its federal registrations; this was sufficient.
On likely confusion, however, Flagstar’s evidence fell short. (Here let me praise the court for including multiple images in the opinion, allowing readers to follow along.) 
“Flag” and “free” were distinctly different elements of the mark, contributing to distinct overall impressions, especially given that Flagstar’s formatted mark used mostly lower-case letters, included a slogan (“The new wave in banking”), and was accompanied by a black graphic suggesting the waves of a flag. Freestar’s mark had italicized capital letters and a very different slogan (“Life keeps getting better!”), along with a green A and a star-shaped graphic, invoking shooting star imagery. 
The slogans were important differentiators—Flagstar’s describes its services, and Freestar’s focuses on the reader.
In the marketplace, Flagstar’s mark prominently features the color red, while Freestar’s pending registration uses black, green, and white. 
Based on these dissimilarities, a reasonable consumer would not be confused. There was greater similarity with Flagstar’s “Legacy mark,” a mark it still uses on occasion—both marks featured italicized capital lettering, the work “Bank” at the lower right, and a star graphic in the midle of the letter A in “Star.” 
But the wave graphic, the slogan, the “shooting” appearance of Freestar’s star, and the colors actually used in the marketplace still left the marks readily distinguishable.
“A customer is not likely to be confused between the origin of marks with different names and completely different colors and slogans,” especially when one graphic invokes a waving flag and the other a shooting star.
Intent: there was no evidence of intent to pass off, but Flagstar argued that Freestar failed to exercise due diligence in rebranding, given that its registrations provide constructive notice. However, even actual knowledge is not enough to prove bad intent. Bad intent can only be inferred based on similarity where the senior mark has attained great notoriety and is nearly ubiquitous in the area where the junior mark competes. This wasn’t true here.
There was no evidence of actual confusion. Moreover, because of the lack of geographic overlap, Flagstar and Freestar’s services aren’t used concurrently in any area or manner. “An Illinois consumer seeking to open a bank account would need to drive across state lines before encountering a Flagstar banking center. A person seeking a home loan cannot ‘cruise down the street’ and become confused by the presence of a Flagstar home loan center and a Freestar banking center because he or she will not encounter both of these entities within the same county, let alone city.” Customers couldn’t be confused by marks they don’t encounter during their everyday lives.
Nor did Flagstar show that it was reasonable to think that it might expand into Freestar’s counties. Its SEC filings announced an intent to focus on expanding in Michigan and Georgia. Unsurprisingly, there was also no evidence of overlapping marketing channels, given Freestar’s limited local advertising and Flagstar’s failure to show it advertised in those counties. Indeed, Flagstar was unable to confirm that the home loan centers it operates actually use Flagstar advertising materials within Illinois. Though both parties use the internet, the court found no precedent to hold that the maintenance of two independent websites, not linked in any way (such as via metatags), could count as an overlapping marketing channel.
In addition, the court thought that, though banking services are ubiquitous, consumers are likely to exercise a higher degree of care than they do when buying cooking spray or oil changes. Flagstar customers must submit to credit checks; Freestar requires customers to speak with a bank loan officer before obtaining a home loan. Customers wouldn’t carelessly sign themselves up for such “invasive and prolonged inquiries.”
Flagstar also argued that even if banking consumers are sophisticated, they’re still vulnerable to initial interest confusion and reverse confusion. However, there was no evidence that Freestar “lured” consumers, the way the defendant in Promatek Industries, Ltd. v. Equitrac Corp., 300 F.3d 808 (7th Cir. 2002), did by using confusing keywords. (Yes, I know, but let’s just be grateful the court didn’t buy the IIC argument.) And there was no other evidence that anyone would patronize a Freestar bank because of a perceived link with Flagstar.
Nor did the facts support a reverse confusion claim, where a large junior user saturates the market and creates a strong association between its product and the senior user’s mark. Freestar is a small bank, not saturating the market, and there was no evidence that its use, and subsequent goodwill, would hamper Flagstar’s expansion into Central Illinois.
Turning at last to strength of the mark, the court found Flagstar’s mark not particularly strong from an economic/marketing perspective. 175 banking centers and $12.3 million in ads in 2008 is not enormous, and Flagstar failed to provide any evidence about Illinois because it didn’t submit (or apparently even seek) any evidence about how the home loan centers advertise. “A mark cannot bear economic and marketing strength in a place where it does not do business and does not advertise.” The court didn’t even address conceptual strength (which also would have been relevant to reverse confusion.)
Similarity of the products was the only factor really favoring Flagstar: they were identical.
Overall, the court weighed the lack of concurrent use particularly heavily: “Consumers cannot become confused by a mark they will never encounter in the marketplace.” Further, despite the similarities between the marks, as a whole those similarities wouldn’t lead to confusion—and even if there were a material issue on that point, the record was extremely lopsided on the other confusion factors. Thus, Freestar was entitled to summary judgment.
Posts
No comments:
Post a Comment