Monday, March 18, 2013

Wells Fargo receives an education in abandonment

Wells Fargo & Co. v. ABD Ins. & Financial Services, 2013 WL 898140 (N.D. Cal.)

Wells Fargo sued ABD for trademark infringement (under various names; the court concluded that the heart of its false advertising claim was that ABD’s name was a misrepresentation of affiliation, and thus was the same as the trademark claim).  The ABD mark was first used by Alburger Basso de Grosz Insurance Services, founded in 1990, which changed its name to ABD Insurance and Financial Services in 1997. In 2007, Wells Fargo bought the company and all its assets, including its mark. In 2008, Wells Fargo changed its name to Wells Fargo Insurance Services. Wells Fargo didn’t renew its ABD trademark registrations.

Defendant de Grosz, the son of one of the original founders of ABD, worked at ABD between 1994 and 1999. In 2011, he learned that the ABD mark had been cancelled and filed an ITU for the mark.  He called another defendant, Hetherington, who was then working for Wells Fargo, about his intent to use the mark.  “The parties do not agree as to Wells Fargo's response to this call …. Hetherington, having left Wells Fargo in January 2012, joined the new ABD company.”  In mid-2012, between 60 and 75 former Wells Fargo Insurance Services employees joined ABD, allegedly soliciting Wells Fargo customers and using Wells Fargo proprietary information.  (There’s a related state suit alleging claims for breach of the duty of loyalty, intentional interference with economic relationships, intentional interference with potential economic relationships, unfair competition, conspiracy, and breach of contract.)

Wells Fargo moved for a preliminary injunction against the use of the ABD mark.  It argued that, in 2009, it “chose to focus its use of the ABD brand as secondary to the famous Wells Fargo brand” and changed any business material (such as business cards, letterhead, etc.) that used ABD “as the primary or sole entity name.” However, Wells Fargo alleged that the “ABD brand did not disappear,” noting that its business cards, customer presentations, voicemail systems, and business faxes still reflected a (secondary) “tie” between Wells Fargo and ABD.  It maintained the ABD email domain and redirected traffic from the ABD website to the Wells Fargo website.

Wells Fargo identified evidence of confusion: “four customer emails from July 2012, all containing questions regarding the link (if any) between Wells Fargo and the new ABD company”; an instance in August 2012 in which an insurer was confused about whether Wells Fargo or ABD was the broker of record for one of its customers; and a January 2013 subpoena from a law firm served on ABD in connection with a state lawsuit, in response to which ABD returned a Certificate of No Records and explained that it “picked up the [ABD] name but that Wells Fargo had the records.”

Wells Fargo further argued that “even in an industry where consumers may be sophisticated and careful decision-makers,” no amount of consumer care can prevent confusion between two companies with identical names.

In opposing a preliminary injunction, defendants mostly argued abandonment, which requires a discontinuation of use with intent not to resume. Even a single use can avoid abandoment, but that use has to be bona fide use of a mark in the ordinary course of trade, not merely token or sporadic usage. The evidence of abandoment:

(1) Wells Fargo formally merged ABD into Wells Fargo Insurance Services as of January 1, 2009, thereby ending the separate existence of ABD; (2) Wells Fargo emails and other internal documents show that it intended to “retire” the ABD name as of January 1, 2009, and Wells Fargo instructed its employees that “the ABD name can no longer be used,” that any “stationery, brochures, and other sales materials” bearing the ABD name should be recycled, and that the ABD name should be removed from voicemail messages and email signatures; (3) Wells Fargo did not renew the federal trademark registration for the “ABD” mark; and (4) Wells Fargo did not maintain the “ABD” trade name with the California Department of Insurance, and was therefore prevented from offering insurance services in California under the name “ABD.”

The court noted that the formalities of registration and maintenance weren’t as important as actual use. And while the internal documents showed a clear intent to stop using ABD, abandonment requires actual cessation of use, not just an intent to cease use.  Wells Fargo argued that, even after January 2009, it continued to use the ABD name on “business cards, customer presentations, ‘broker of record’ letters, payment processing, voicemail messaging systems, and even business faxes.”

But a closer look at these materials wasn’t very helpful to Wells Fargo.  While “ABD Insurance and Financial Services–A Wells Fargo Company” appeared as a footer on some presentations, it was accompanied by ABD’s expired California license number.  This suggested that the footer was a mere remnant from before 2009; at that point, Wells Fargo had no right to offer insurance services using that license. Another presentation mentioned ABD only as part of customer testimonials; the presentation was from March 2010, but there was no evidence about when the testimonials were given. ABD was likewise mentioned “in an historical context” in other presentations, e.g., “Wells Fargo Insurance Services USA, Inc. (formerly ABD Insurance & Financial Services) is now ranked ...”  Similarly, the business card Wells Fargo submitted contained an outdated license number, address, phone number, and email address, and the solicitation emails sent by its employees mentioned ABD in the context of the Wells Fargo acquisition.

Wells Fargo also maintained domain name registrations containing ABD, and used ABD and related terms as keywords in its metatags. It also submitted correspondence and checks from customers using the ABD name; Wells Fargo continued accepting such checks into 2012.  (I’d be surprised if Wells Fargo turned many checks away.)  Declarations from employees also (identically) stated that “[m]any clients and the marketplace continue to associate Wells Fargo's Bay Area insurance brokerage business with the ABD name and the ABD business.”

The key issue was whether these post-2009 uses were “bona fide” use in trade.  The court concluded that, at least for purposes of meeting the heavy burden required for a preliminary injunction, Wells Fargo hadn’t shown it was likely to succeed on this argument. The court was persuaded by Cascade Financial Corp. v. Issaquah Community Bank, 2007 WL 2871981 (W.D.Wash. Sept. 27, 2007), involving a bank that rebranded from Issaquah to Cascade but continued to process Issaquah withdrawal slips and checks, maintained Issaquah domain names, and advertised using Issaquah.  In Cascade, the court found that defendants were likely to succeed on their abandonment defense, particularly given that Cascade had “taken affirmative steps to encourage its customers to stop using the Issaquah Bank name.” 

There were striking similarities to this case, in which Wells Fargo tried to rebrand ABD.  “Like Wells Fargo, Cascade did not maintain the corporate status of the company that it acquired, instead choosing to operate its business under one name. Like Wells Fargo, Cascade maintained the domain names of its acquired company, but redirected website traffic to its own website. And like Wells Fargo, Cascade continued to accept documents bearing the acquired company's name from its customers.”  Wells Fargo’s post-2009 users were either residual or in the context of historical background, not uses in the ordinary course of trade.

The court also analyzed the evidence of actual confusion. The customer emails were immediately after the launch of the new ABD website, not evidence of continuing confusion. As for the subpoena, that doesn’t show ordinary consumer confusion, but rather a mistake about the possession of certain corporate records.  “While this may be some evidence of confusion, it is certainly not evidence of consumer confusion.” 

This also bore on the degree of care exercised by purchasers.  Defendants argued that their business was relationship-driven and offered declarations from two customers stating that they chose ABD based on their relationships with brokers who left Wells Fargo for ABD and weren’t confused.  “Insurance brokerage is not an industry where customers make purchases on a whim, and can be easily fooled by the name of a company.”  One unsolicited email, for example, came from a customer to one of the Wells Fargo-to-ABD employees.  The customer learned that the broker had left Wells Fargo and sent an email to his personal email address, expressing a desire to “explore what to do and determine what's in the best interest of our plans.” The customer noted that “Wells Fargo is anxious to keep our business,” but made clear that he “value[d]” the ABD people “much more as individuals than as Wells Fargo employees.”  It might well be true that Wells Fargo lost many customers to ABD.  But that wasn’t evidence of losses due to confusion.

As for intent, which Wells Fargo contended was strongly in its favor, the court noted that “it does seem clear that defendants chose the mark to signal some sort of link with the original ABD company, and not merely as a way to ‘honor their fathers and their legacies.’” But Wells Fargo put too much weight on this factor and on its employees’ alleged betrayal. Its allegations were far more relevant to its state court lawsuit.  Because Wells Fargo didn’t show any examples of consumer confusion after mid-2012 (I believe the court made a typo here and have corrected it to be consistent with the rest of the opinion), and because customers were likely to exercise a high degree of care, the Sleekcraft factors weren’t decisively in its favor despite ABD’s bad intent.  (An outlier, per Barton Beebe, whose empirical research found a bad intent finding highly correlated with a plaintiff victory.)

Confusion and degree of care was also directly relevant to the (un)likelihood of irreparable harm. “The fact that all cited examples of consumer confusion occurred in the weeks immediately following ABD's launch further supports a finding of no irreparable harm. To the extent that Wells Fargo was harmed by any confusion that occurred in those weeks, such harm can be remedied by monetary damages.”  Injunction denied.

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