all confusion is actionable but some doesn't count

Yes, I know that's contradictory, but it's a result of expansive doctrine which courts then seek to cabin by finding reasons to disregard certain evidence--such as evidence here that people in a sophisticated business still made errors about which entitty they were dealing with.

Arrowpoint Capital Corp. v. Arrowpoint Asset Management, LLC, 2014 WL 2123572, No. 10–161 (D. Del. May 20, 2014)

Arrowpoint Capital sued AAM and a number of related Arrowpoint entities (using names like Arrowpoint Partners GP and Arrowpoint Fundamental Opportunity Fund), alleging trademark infringement through defendants’ use of the Arrowpoint name and logo. The court denied a preliminary injunction.

The plaintiff is a holding corporation; its subsidiaries Arrowood Indemnity Company and Arrowood Surplus Lines Insurance Company  provide insurance and related services under the trade name “Arrowpoint Capital.”  As part of its business, it manages assets derived from policy premiums, and alleged that its primary source of income is the investment of its reserves in fixed-income securities, enabling it to meet its financial obligations.  It also allegedly “provided investment management services to an unaffiliated insurer from March 4, 2007, until October 15, 2009,” and marketed its investment management services to other insurers and pension funds.  Plaintiff has registered ARROWPOINT CAPITAL and its design mark for insurance-related products and services.

Meanwhile, defendants provide investment-related services including individual investment management accounts and three separate private investment funds, commonly referred to as “hedge funds.” They manage over $1.5 billion in assets for “high net worth individuals, companies operating primarily for the benefit of wealthy individuals, family foundations, or trusts.”  Defendants allegedly selected their marks after doing a trademark search and having counsel review their availability.

Defendants' logo

After plaintiff learned about defendants, it applied to register ARROWPOINT CAPITAL for “investment management services”; AAM opposed; and TTAB proceedings are currently suspended because of the pending litigation.

Defendants argued that plaintiff had no rights in investment management services, only insurance. But that’s a question of confusion.  Plaintiff’s rights in insurance related areas were presumptively valid, given the registration, and the marks were inherently distinctive.

Plaintiff argued that there were repeated instances of actual confusion by brokage personnel who handle fixed-income securities transactions.  Defendants disagreed and argued that the high level of consumer sophistication prevented any problem, and also that the alleged confusion was among suppliers, not consumers.  Sadly, the court rejected the defendants’ argument that the Lanham Act is about consumer protection and that the law does not protect against confusion generally.  Instead, the Act covers “the use of trademarks which are likely to cause confusion, mistake, or deception of any kind, not merely of purchasers nor simply as to source of origin.”

The court first found the parties’ logos not confusingly similar; the similarity was negligible.  Both had a chevron and a horizontal line, but the AC logo chevron was small and uses the chevron as part of the dominant feature, which was the phrase “Arrowpoint Capital.” By contrast, the AAM logo usesd a large chevron surrounded by parallel lines to create its dominant feature, prominently placed in the center of the mark. The full-color versions of the logos were even more distinct: the former was dominated by blue lettering and had a thin red accent line. The AAM logo had four distinct colors, drawing the viewer’s eye to the center of the mark.  But, of course, the word marks were much more similar, with “Arrowpoint” the dominant feature and first world; additional terms “asset management,” “partners,” “fundamental opportunity fund,” and “structured opportunity fund” changed the overall visual impact and sound of the marks, but conveyed a meaning somewhat similar to “capital.”  “But courts in this circuit have found that very similar marks are able to coexist in the financial services market, where consumers take greater care than many others, when the parties use their full names in ‘official’ communications.”  For the word marks, similarity slightly favored the plaintiff.

Strength of the mark: inherently distinctive/suggestive, but low commercial strength.  The plaintiff’s only support for marketplace strength was a claim that it spent about $390,000 promoting its marks. The court couldn’t determine whether that was sufficient to establish marketplace recognition for investment management services. (Defendants claimed to have spent almost double that amount for the same purpose.)  This factor was neutral.

Actual confusion: While actual confusion is highly probative of likely confusion, “isolated and idiosyncratic” confusion can be discounted, as can confusion resulting from “mere carelessness or accident.” Plaintiff argued that broker dealers had been misled.  Its evidence came from third-party inquiries about the relationship between the parties; misdirected trades; and incidents of mistaken identity, which inhibited the plaintiff’s ability to complete trades. 

For example, a Royal Bank of Scotland salesperson contacted the plaintiff regarding a large security purchase that the defendants had made using a different broker, and asked why the plaintiff had not engaged RBS for the transaction.  A Barclays Capital lawyer negotiating a security agreement for the plaintiff asked whether it was “a different entity from the arrowpoint that is being represented by [a different law firm].”  In connection with a securities agreement, Citigroup sent a request for general information regarding the plaintiff, and asked it to do the same exercise for two of the defendants’ entities.  JP Morgan misallocated the defendants’ trades to the plaintiff’s brokerage account three times, though the plaintiff rejected each trade before settlement, and the plaintiff’s representative testified that misallocated trades are not uncommon in the financial services industry.  Also, the plaintiff alleged that it had trouble acquiring certain securities/participating in a corporate bond offering because of confusion, but defendants argued that confusion wasn’t the cause of these difficulties and that there was ultimately no problem.

The court was skeptical about many of the alleged inquiries about the parties’ affiliation, because the testimony came from interested sources instead of the allegedly confused people.  And the court didn’t have enough evidence to distinguish confusion from mere carelessness, mistake, or clerical error on a broker’s part. There was also no evidence that three misdirected trades were significant, absent evidence about the total number of trades. The remaining incidents also didn’t convince the court that confusion was likely. This factor slightly favored the plaintiff.

Consumer care and sophistication strongly favored the defendants. Along with the large sums at issue and sophisticated consumers, the parties make individual, face-to-face presentations to potential investors, “which militates against a likelihood of confusion.”

The court couldn’t evaluate the length of time the mark was used without actual confusion, as the parties had conflicting evidence about the scope of defendants’ activities.

Defendants’ intent:  Defendants argued that “AAM selected its marks because arrowpoints had personal significance to [AAM’s founder] and to suggest a connection between digging for arrowpoints and the thorough manner in which AAM conducts the fundamental research on which it bases its investment management services.” Plus, defendants’ clearance included counsel’s review of a full U.S. availability trademark search report, “which indicated that the plaintiff was engaged in property and casualty insurance, not investment management or related services.” This favored defendants.

Channels of trade and advertising media: both parties promote their services through industry meetings, events, and direct presentations to prospective clients. But defendants target events of interest to hedge fund investors, family foundations, and endowments. Plaintiff doesn’t “because it is not a hedge fund.” “Further, the defendants rely on word-of-mouth referrals, which intuitively eliminate the possibility of confusion.” And the parties use direct client presentations incorporating their respective distinct logos. This factor strongly favored the defendants.

Similarity of target customers and the relationship of the goods in the minds of customers: The parties sought distinct groups of customers.  Plaintiff targeted customers “experiencing some sort of financial distress,” while the defendants pursued “high net worth individuals and institutional investors,” not distressed companies.  While insurance companies and pension funds are potential clients for both parties, those clients would retain the parties for different purposes—the plaintiff’s expertise is in fixed-income investments, while the defendants claim to “offer expertise across the capital spectrum.”  While some potential customers might overlap, there was still little likelihood of confusion because the parties offer “distinctly different investment management strategies to generally different classes of investors.”

Moreover, “any broker-dealer confusion is attributable to the similarity of the marks and the fungible nature of commonly traded securities” and shouldn’t be weighed again under the similarity of customers factor.  Broker-dealers offering fixed-income securities were selling the same things, no matter who was buying them; any weight given to their confusion was properly addressed under the actual confusion factor.

The balance of the factors tipped (no pun intended) in defendants’ favor.