Second Circuit Finds No Infringement By Bacardi Against Senior Regional User
Case: Star Industries, Inc. v. Bacardi & Company Ltd., 2005 U.S. App. LEXIS 11967 (2nd. Cir. 6/22/05).
The One Sentence Summary: On June 22, 2005, the Second Circuit affirmed the decision of the district court holding that there was no likelihood of confusion between the labels for Bacardi’s orange flavored rum, launched in 2000; and the design of a regional vodka manufacturer (Star Industries), for orange flavored vodka launched in 1996.
Second Circuit Holdings: Star did not apply for a trademark in the design of its stylized “O” until the commencement of litigation, and the PTO did not register the mark until after the district court’s order was entered. The district court refused to reconsider its decision or modify its findings of fact, and Star appealed. The Second Circuit disagreed with the district court’s finding that Star’s “O” design was not distinctive. Instead, the Second Circuit held that Star’s stylized design letter “O” (connoting orange-flavor) was a protectable mark because it was inherently distinctive, albeit a very “thin”/ weak mark. The Second Circuit also affirmed the district court’s finding that there was no likelihood of confusion using the eight factor test as follows:
1. The Suggestive Design Mark Was Not Strong: The Court held that the mark was suggestive, but weak.
2. Similarity of the Design Marks Used on Both Labels Was Tempered By Distinctive Label Designs: The Second Circuit held that the similarity of the “O” design was tempered by the fact that the design was presented on very different labels. The Bacardi label displayed the “O” against a clear background whereas Star’s “O” was displayed alongside a number of other elements. Moreover, the labels each contained the name of the brand logo, i.e., Bacardi and Star’s Georgi label respectively so there was less likelihood that consumers would be confused.
3. The Products Were in Close Proximity and Competitive: Even though one of the defendants, Anheuser-Bush’s malt liquor product was sold only in grocery stores (and not liquor stores) pursuant to New York state law, and the Bacardi rum products were often sold in different sections of liquor stores than Star’s Georgi Vodka products, the Second circuit determined that the products were still in close proximity and competitive because the alcoholic beverages were designed to “appeal to the same consumers”. The court also held that the geographic locations of the grocery stores and liquor stores were relatively close.
4. Because The Products Were Competitive, The “Bridging the Gap” Inquiry Was Irrelevant: The court held that a senior user might “bridge the gap” by developing a product for sale in the market of the alleged infringer’s product, however this prong of the confusion test was not a factor because of the court’s finding that the products were already in competitive proximity.
5. There Was Insufficient Evidence of Actual Customer Confusion Because Star Did not Introduce a Consumer Survey, and the Defendants Did: The Second Circuit found little evidence of customer confusion where Star’s evidence was based upon four witnesses (none of which were actually customers of Star or Bacardi), and no consumer survey, and the defendants, Bacardi and Anheuser-Bush submitted separate surveys showing no confusion. The Court noted that Star’s failure to present its own consumer survey “weighs against” a finding of consumer confusion. This finding underscores the importance of presenting a consumer survey as a plaintiff in trademark infringement cases in the absence of evidence of actual customer confusion.
6. No Evidence That the Imitative Mark Was Adopted in Bad Faith: The Court held that there was no evidence that Bacardi and Anheuser-Bush’s “O” design was adopted in bad faith where: (a) Bacardi’s counsel conducted a trademark search and no mark was found; (b) Bacardi hired a third party design firm; and (c) the design firm testified that it was unaware of Star’s “O” design. There was evidence in the record that Bacardi’s northeast regional vice presidents had been exposed to Star’s “O” design, however in light of the other evidence, the Second Circuit did not find this fact to be dispositive of bad faith. In footnote 3 the court noted its heavy reliance on the trademark search that was conducted. In rejecting Star’s authority that the search was inadequate, the Second Circuit stated that Star’s authority from the Third Circuit was “at odds with this circuit’s precedents, which preclude finding bad faith on the basis of an inadequate trademark search...”The court also noted the “implausibility of the notion that a premier international rum manufacturer [i.e., Bacardi and Anheuser-Bush] would seek to conflate its products with those of a regional discount vodka manufacturer.”
7. Respective Quality of the Products: Despite its finding of “implausibility” referenced above, the Second Circuit held that there was insufficient evidence to determine the quality of products, therefore this prong was not a factor in its analysis.
8. The Sophistication of Consumers Was Presumed Where the Products Had a Significant Price Differential: The Court relied upon the fact that Star’s product cost approximately $12 per liter and Bacardi’s product was $24 per liter. Under these circumstances, the Court reasoned that “Consumers may be expected to educate themselves sufficiently to recognize the respective brand names, to understand the respective stature of the two companies, and thus to understand how fanciful the notion is that Bacardi would seek the benefit of Star’s reputation and good will...”
On balance the Second Circuit concluded there was no likelihood of confusion because 5 factors favored defendants Bacardi and Anheuser-Bush, two factors were neutral, and only one slightly favored Star.
The One Sentence Summary: On June 22, 2005, the Second Circuit affirmed the decision of the district court holding that there was no likelihood of confusion between the labels for Bacardi’s orange flavored rum, launched in 2000; and the design of a regional vodka manufacturer (Star Industries), for orange flavored vodka launched in 1996.
Second Circuit Holdings: Star did not apply for a trademark in the design of its stylized “O” until the commencement of litigation, and the PTO did not register the mark until after the district court’s order was entered. The district court refused to reconsider its decision or modify its findings of fact, and Star appealed. The Second Circuit disagreed with the district court’s finding that Star’s “O” design was not distinctive. Instead, the Second Circuit held that Star’s stylized design letter “O” (connoting orange-flavor) was a protectable mark because it was inherently distinctive, albeit a very “thin”/ weak mark. The Second Circuit also affirmed the district court’s finding that there was no likelihood of confusion using the eight factor test as follows:
1. The Suggestive Design Mark Was Not Strong: The Court held that the mark was suggestive, but weak.
2. Similarity of the Design Marks Used on Both Labels Was Tempered By Distinctive Label Designs: The Second Circuit held that the similarity of the “O” design was tempered by the fact that the design was presented on very different labels. The Bacardi label displayed the “O” against a clear background whereas Star’s “O” was displayed alongside a number of other elements. Moreover, the labels each contained the name of the brand logo, i.e., Bacardi and Star’s Georgi label respectively so there was less likelihood that consumers would be confused.
3. The Products Were in Close Proximity and Competitive: Even though one of the defendants, Anheuser-Bush’s malt liquor product was sold only in grocery stores (and not liquor stores) pursuant to New York state law, and the Bacardi rum products were often sold in different sections of liquor stores than Star’s Georgi Vodka products, the Second circuit determined that the products were still in close proximity and competitive because the alcoholic beverages were designed to “appeal to the same consumers”. The court also held that the geographic locations of the grocery stores and liquor stores were relatively close.
4. Because The Products Were Competitive, The “Bridging the Gap” Inquiry Was Irrelevant: The court held that a senior user might “bridge the gap” by developing a product for sale in the market of the alleged infringer’s product, however this prong of the confusion test was not a factor because of the court’s finding that the products were already in competitive proximity.
5. There Was Insufficient Evidence of Actual Customer Confusion Because Star Did not Introduce a Consumer Survey, and the Defendants Did: The Second Circuit found little evidence of customer confusion where Star’s evidence was based upon four witnesses (none of which were actually customers of Star or Bacardi), and no consumer survey, and the defendants, Bacardi and Anheuser-Bush submitted separate surveys showing no confusion. The Court noted that Star’s failure to present its own consumer survey “weighs against” a finding of consumer confusion. This finding underscores the importance of presenting a consumer survey as a plaintiff in trademark infringement cases in the absence of evidence of actual customer confusion.
6. No Evidence That the Imitative Mark Was Adopted in Bad Faith: The Court held that there was no evidence that Bacardi and Anheuser-Bush’s “O” design was adopted in bad faith where: (a) Bacardi’s counsel conducted a trademark search and no mark was found; (b) Bacardi hired a third party design firm; and (c) the design firm testified that it was unaware of Star’s “O” design. There was evidence in the record that Bacardi’s northeast regional vice presidents had been exposed to Star’s “O” design, however in light of the other evidence, the Second Circuit did not find this fact to be dispositive of bad faith. In footnote 3 the court noted its heavy reliance on the trademark search that was conducted. In rejecting Star’s authority that the search was inadequate, the Second Circuit stated that Star’s authority from the Third Circuit was “at odds with this circuit’s precedents, which preclude finding bad faith on the basis of an inadequate trademark search...”The court also noted the “implausibility of the notion that a premier international rum manufacturer [i.e., Bacardi and Anheuser-Bush] would seek to conflate its products with those of a regional discount vodka manufacturer.”
7. Respective Quality of the Products: Despite its finding of “implausibility” referenced above, the Second Circuit held that there was insufficient evidence to determine the quality of products, therefore this prong was not a factor in its analysis.
8. The Sophistication of Consumers Was Presumed Where the Products Had a Significant Price Differential: The Court relied upon the fact that Star’s product cost approximately $12 per liter and Bacardi’s product was $24 per liter. Under these circumstances, the Court reasoned that “Consumers may be expected to educate themselves sufficiently to recognize the respective brand names, to understand the respective stature of the two companies, and thus to understand how fanciful the notion is that Bacardi would seek the benefit of Star’s reputation and good will...”
On balance the Second Circuit concluded there was no likelihood of confusion because 5 factors favored defendants Bacardi and Anheuser-Bush, two factors were neutral, and only one slightly favored Star.
posted by at 6/28/2005 05:45:00 PM
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