Readers of articles in this space may recall my having spent time recently discussing the doctrine of laches in a trademark infringement case, specifically in Ava Ruha Corp. d/b/a Mother's Market & Kitchen v. Mother's Nutritional Center, Inc. (There were two pieces: one on laches, and one on the concept of progressive encroachment.)
Laches is an affirmative defense available to parties who have been sued for trademark infringement: a defendant must prove both that the plaintiff has unreasonably delayed in bringing suit and that said delay has hurt the defendant. If it proves both, the plaintiff's claim is barred—no matter how strong the latter's case. Laches can thus be a valuable defense for a defendant facing an infringement lawsuit.
In May, in a non-precedential ruling in Carfax, Inc. v. American Automobile Association, Inc., Cancellation No. 92056568 (May 7, 2015), the Trademark Trial and Appeal Board (TTAB) at the United States Patent and Trademark Office (USPTO) granted a petition for cancellation of the American Automobile Association's registration for the mark AAA CarFacts for vehicle history reports, agreeing with plaintiff Carfax, Inc. that the venerable automobile association's mark was likely to cause confusion with various Carfax-formative marks registered to Carfax for highly similar services.
In its ruling, the TTAB seemed rather harshly to dismiss AAA's laches and estoppel defenses. Instead, the board latched on to the idea that AAA had simply added its well-known AAA house mark to the phonetic equivalent of Carfax's mark.
In asserting laches as its defense, AAA had argued that Carfax had waited nearly 20 months from the publication date of AAA's AAA CarFacts application to its filing of the cancellation action. Rejecting this defense, the board explained that 20 months is generally not considered an unreasonable delay, especially because the Lanham Act provides that a petition for cancellation can be brought up to five years after issuance of a problematic registration. However, the board added that both elements for proving laches — unreasonable delay and resulting harm — had to be considered together before it could reject AAA's defense.
AAA claimed that when it decided to begin using the mark AAA CarFacts in commerce, it had relied on Carfax's failure to oppose the application, and that if the board cancelled AAA's trademark, the resulting loss of goodwill would be prejudicial to AAA. However, the board pointed out that AAA had produced no evidence of record regarding any investments in or expenditures connected with the AAA CarFacts mark; in view of the lack of proof of prejudice to AAA, the board declined to find laches.
Why didn't AAA provide such proof? Did it really invest a lot of money in this mark? One can be forgiven for thinking that had AAA done so, such evidence would be easy to produce.
As a fallback defense, AAA also claimed that it had a valid estoppel defense to Carfax's actions. The estoppel defense requires misleading conduct by the other party that leads the first party to reasonably infer that rights will not be asserted against it. In the case of the AAA CarFacts mark, however, Carfax had voiced concerns beginning shortly after publication of AAA's application and had continued to pursue the matter. In short, the board did not believe that AAA could reasonably have believed that Carfax would consent to AAA's use of the AAA CarFacts mark.
After the board had rejected AAA's laches and estoppel defenses, the rest of the case was a done deal. The board conducted a likelihood of confusion analysis, focusing on the Carfax mark — the stylized word Carfax that had been registered for providing online vehicle history information — most similar to AAA's mark. AAA admitted that the parties' services were highly related, but argued that they differed in that AAA did not provide information regarding specific vehicles, but only more general information by make, model, and year. However, the services identified in AAA's challenged registration made no such distinction, and in any case AAA had already conceded the relatedness of the involved services.
Because the parties' services are in part identical, the board presumed that these services were offered through the same channels of trade to the same classes of consumers. AAA tried to argue that its services were rendered only to AAA members, but again the board noted that there was no such limitation in AAA's registration. The evidence instead showed that AAA and Carfax have a long history of working together, which in the board's opinion only increased the likelihood of confusion, because consumers might have been used to seeing Carfax's services offered on AAA's website.
AAA also admitted that the Carfax mark was well known, and was arbitrary and distinctive of the registered services. Nevertheless, AAA tried to argue that when spoken, Carfax sounds like "car facts" and is therefore entitled to a narrower scope of protection. The board responded that Carfax was more than just a misspelling of car and facts but was also the combination of car and fax, which in the TTAB's view made it incongruous or arbitrary. (One has to question how incongruous and arbitrary the neologism Carfax really is; but that type of analysis could accrue to many thousands of registered trademarks. If that question is to arise in this case, it will be on another day.)
AAA also failed to introduce into evidence any third-party use of the term car facts, while Carfax produced evidence of thirty years of use and convinced the board of its position as a market leader in its field. The board was therefore confident in holding that Carfax was at least a fairly strong mark and therefore was entitled to a relatively broad scope of protection.
Turning to the similarity of the parties' marks, AAA contended that its mark was dominated by its famous AAA mark because that is the first term in its mark. The board disagreed and held that AAA had simply added its house mark to the phonetic equivalent of Carfax's mark. The board held that the addition of AAA to CarFacts did not change the connotation or commercial impression of the term. Instead, the board opined, AAA's mark merely suggests to consumers that the CarFacts service is offered by AAA. And despite AAA's disclaimer of CarFacts, and even assuming that "car facts" is descriptive of facts about cars, the board held that it did not follow that Carfax is not entitled to protection from phonetically similar marks for legally identical services.
Finally, the board held that the similarities between the parties' marks outweighed their differences, and that AAA's mark was substantially similar to Carfax's own. Balancing the relevant factors from the touchstone likelihood of confusion case In re E. I. du Pont de Nemours & Co., 476 F.2d 1357, 177 USPQ 563 (C.C.P.A. 1973), the Board found confusion likely and granted the petition for cancellation.
Far more recent a case than DuPont, however, is the Supreme Court's 7-2 ruling for B&B Hardware in B&B Hardware, Inc. v. Hargis Industries, Inc., in which the court upheld the principle that the TTAB's rulings have preclusive effect in likelihood of confusion cases in trademark infringement cases in Federal district courts.
Because Carfax, Inc. had petitioned for cancellation, and in light of the ruling in Hargis, it will be interesting to see if Carfax decides to sue AAA for infringement in district court. If it does, it will be further interesting to see if the district court finds AAA collaterally estopped from arguing the issue of likelihood of confusion again.
This case also brings up an argument that clients like to make quite often: namely, "If I add my house mark to a mark that is similar to my competitor's mark, wouldn't I avoid a likelihood of confusion?"
Typically, courts have held that adding your house mark to a distinctive mark of your competitor's actually enhances the likelihood of confusion, whereas adding your house mark to a descriptive mark of your competitor's may lessen it. The question here whether Carfax is distinctive or descriptive. The board clearly felt it was the former; AAA clearly felt it was the latter. Finding the right answer probably meant the difference.
Originally published in InsideCounsel.
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