MEMORANDUM TO KARIN MIKA FROM DATE NOVEMBER 29 2010

2 GENERAL SECRETARIAT ADMINISTRATIVE MEMORANDUM NO 54
3 MEMORANDUM DATE OCTOBER 3 1980 SG10180
3 MODEL OF A MEMORANDUM OF ASSOCIATION

4 MODEL OF MEMORANDUM OF ASSOCIATION FOR
7 TEMPLATE FOR THE MEMORANDUM OF ASSOCIATION
MAY 2 2000 MEMORANDUM FOR DEPUTY ASSISTANT SECRETARY

MEMORANDUM

TO: Karin Mika

FROM:

DATE: November 29, 2010

RE: Trademark infringement of company logo

ISSUE

WHETHER A WORLD-RENOWNED COMPANY IS LIKELY TO SUCCEED IN A TRADEMARK INFRINGEMENT LAWSUIT UNDER 15 U.S.C. § 1114 AGAINST A SMALLER COMPETITOR WHEN THE COMPETITOR USES A LOGO SIMILAR IN DESIGN TO THAT OF THE COMPANY AND IS AWARE OF THE WORLD-RENOWNED COMPANY.

STATEMENT OF FACTS

ADIDAQ is a company that was founded in 1966 in San Francisco by two running enthusiasts. Over the years, ADIDAQ has grown into a global company renowned for their exceptional running equipment and apparel. ADIDAQ’s logo, a black stylized silhouette of the popular running destination Stone Mountain, has become a famous, worldwide trademark that people associate with the company’s quality goods. The logo is a registered trademark.

QADIDA is a smaller company, established in 2009, that similarly specializes in the sale of running equipment and apparel. QADIDA’s sales are primarily in Ohio, Indiana, and Michigan. QADIDA’s logo also appears to be of Stone Mountain, but their logo is red and contains long, skinny rectangles on the left and bottom side of the logo. QADIDA’s logo appears on all of its goods. QADIDA has attempted twice, unsuccessfully, to obtain a U.S. trademark registration for their logo. They currently have a third attempt for trademark registration pending.

After ADIDAQ became knowledgeable of QADIDA, they requested that QADIDA withdraw its pending trademark application and stop selling their products. The owner and CEO of QADIDA responded by offering to sell his business to ADIDAQ for $1 million, but has since withdrawn that offer due to increased publicity and sales. QADIDA now plans on expanding their business nationwide.

ADIDAQ would like to bring a lawsuit under the Trademark Act of 1946, 15 U.S.C. § 1114, against QADIDA to protect their brand and trademark.

DISCUSSION

As stated in 15 U.S.C.A. § 1114 (West 2010) trademark infringement occurs when:

(1) Any person who shall, without the consent of the registrant -

(a) use in commerce any reproduction, counterfeit, copy, or colorable imitation of a registered mark in connection with the sale . . . or advertising of any goods or services on or in connection with which such use is likely to cause confusion, or to cause mistake, or to deceive; . . .

shall be liable in a civil action by the registrant . . . .

The key issue of liability under § 1114 is whether a reasonably prudent customer is likely to be confused as to the origin of the product bearing one of the marks due to the similarities between the two marks. See, e.g., Adidas Am., Inc. v. Payless Shoesource, Inc., 546 F. Supp. 2d 1029, 1051 (D. Or. 2008). Likelihood of confusion exists when the consumers viewing the mark would probably assume that the product or service it represents is associated with the source of a different product or service identified by a similar mark. Sunquest Info. Sys., Inc. v. Park City Solutions, Inc., 130 F. Supp. 2d 680, 690 (W.D. Pa. 2000). Courts consider a variety of factors in determining whether there is a likelihood of confusion, the most important being: (1) the similarity of the marks; (2) the relatedness of the parties’ goods; (3) the defendant’s intent; and (4) evidence of actual confusion. See, e.g., Daddy's Junky Music Stores, Inc. v. Big Daddy's Family Music Ctr., 109 F.3d 275, 280 (6th Cir. 1997); accord Adidas, 546 F. Supp. 2d at 1052.

The trademark infringer is liable to the registrant once a likelihood of confusion has been established. Sunquest, 130 F. Supp. 2d at 697. When these four elements are applied to this situation, it appears that there is a likelihood of confusion between ADIDAQ’s and QADIDA’s logos. Thus, ADIDAQ will likely be successful in their trademark infringement lawsuit.

One of the most important factors courts consider in determining if confusion is likely is the similarity between the two disputed marks. The greater the similarity between the disputed marks, the greater the likelihood of confusion. Adidas, 546 F. Supp. 2d at 1052. The degree of similarity of the marks is determined by considering the overall impressions created by the marks as a whole rather than simply comparing the individual features. See, e.g., Daddy’s, 109 F.3d at 283. Courts consider appearance and meaning of the mark when looking at the overall impression. Adidas, 546 F. Supp. 2d at 1052. Furthermore, when the dominant portion of the two marks appears the same, confusion is likely. Sunquest, 130 F. Supp. 2d at 692.

This comparison test was used in a similar case to ADIDAQ’s. In Sunquest v. Park City, Sunquest’s square logo, which featured a stylized sun rising over two mountains, symbolized their quest for success in the medical software industry. Id. at 684. Sunquest sued their competitor Park City for trademark infringement, because Park City’s triangular logo contained a sphere behind some mountains and had the same meaning. Id. at 686. The court, in granting Sunquest’s motion for a preliminary injunction, held that consumers were likely to be confused and conclude that the two companies were associated. Id. at 694. The court reasoned that this was because the overall message that the two logos conveyed was the same due to the similarity of the images. Id. at 692. Thus, when consumers are likely to believe that two companies are related because the design and meaning of both logos are similar, there is a likelihood of confusion. See Adidas, 546 F. Supp. 2d at 1054.

Here, similarity of marks easily favors ADIDAQ. The court will probably find that confusion is likely, because the dominant portion of each logo, Stone Mountain, and the meaning of the logo (popular running destination for runners) is the exact same. Because the overall impression of the marks is the same, the marks will be considered similar.

QADIDA will likely argue that their logo is not similar to ADIDAQ’s, because their logo is red instead of black and features two rectangles. However, similarities of the marks are weighed more heavily than differences. Id. at 1052; see also Marathon Mfg. Co. v. Enerlite Products Corp., 767 F.2d 214, 219 (5th Cir. 1985) (holding that notable design differences in battery logos did not eliminate likelihood of confusion when the same word appeared in both logos). For example, the court in Sunquest held that the different color schemes and overall shape used by the parties in their logos did not change the overall impression of the logos. 130 F. Supp. 2d at 694. Here, the different colors of the disputed marks and the additional rectangles in QADIDA’s mark do not change the overall impression of the logos, because the meaning of the logos and dominant portions are still similar. Thus, the court will likely conclude that the marks are similar and likelihood of confusion exists.

The second factor that courts consider in determining likelihood of confusion is the relatedness of the goods of the feuding parties. In determining the degree of relatedness of goods, courts must examine whether the goods are complementary, the goods are sold to the same class of purchasers, or the goods are similar in use and function. See, e.g., Daddy’s, 109 F.3d at 283; Adidas, 546 F. Supp. 2d at 1054. For example, in Entrepreneur Media, Inc. v. Smith, 279 F.3d 1135, 1147 (9th Cir. 2002), the court held that the party’s goods were related and thus, confusion was likely since both parties printed publications featuring small businesses that were used by the same class of people. This factor is important because related goods are more likely than unrelated goods to confuse the public as to who produced the goods. Adidas, 546 F. Supp. 2d at 1054. Thus, less similarity between the marks will be sufficient to establish likelihood of confusion when the goods are related. Id. For example, in Adidas, the court found that confusion was likely despite the fact that each shoe design had a different number of stripes, because both companies produced shoes that had similar functions. Id.

Here, it is likely the court will find that the goods are related, because both companies directly compete in the same market and specialize in the same goods. Thus, when viewing the logos, consumers are likely to be confused as to the source of the goods since both company’s products are similar in function and are sold to the same class of purchasers. Additionally, the goods of both companies are interchangeable since buyers could use the goods from either company to meet their running needs. QADIDA might attempt to assert that their goods are not related to ADIDAQ’s since their goods are of inferior quality. However, courts have held that differences in quality is insignificant when the goods are “reasonable interchangeable by buyers for the same purposes.” Id.; see also Zino Davidoff SA v. CVS Corp., 571 F.3d 238, 246 (2d Cir. 2009) (holding quality of goods irrelevant in trademark infringement cases). Thus, a court will likely to conclude that ADIDAQ has satisfied this element to show that confusion is likely.

Another factor the courts consider in trademark infringement lawsuits is the defendant’s intent in selecting the mark. Intent is relevant because purposeful copying indicates that the alleged infringer believes that his copying of the mark may divert some business from the owner of the mark to his own business. Daddy’s, 109 F.3d at 286. Purposeful copying can be inferred if the alleged infringer is aware of the registered trademark and company. Id. at 287. For example, in Sunquest, the court ruled in favor of Sunquest after determining that their competitor Park City intended to steal business from them by exploiting consumer’s conscious association with Sunquest’s well-known name and logo. 130 F. Supp. 2d at 696. Thus, if a party chooses a mark with the intent to increase one’s own sales through association with another company, this may be sufficient to justify an inference of intent to cause confusion. Daddy’s, 109 F.3d at 286.

ADIDAQ should be able to succeed in showing that QADIDA intended to cause confusion. It is highly probable that QADIDA was aware of ADIDAQ and their registered logo, because ADIDAQ was a world-renowned company. Furthermore, ADIDAQ demanded that QADIDA stop sales of their product. Thus, QADIDA has used their logo while having knowledge of ADIDAQ’s logo for at least the period of time that has passed since that demand. Because QADIDA was aware of ADIDAQ and their logo, purposeful copying can be inferred. Additionally, it can be inferred that QADIDA copied the logo with the intent to cause confusion and increase their sales, because the logos are similar and QADIDA has experienced increased sales as a result of the publicity with ADIDAQ. Thus, this factor favors ADIDAQ.

The final factor that courts consider is whether there is any evidence of actual confusion between the two marks. “Evidence of actual confusion is the best evidence of likelihood of confusion.” Maker's Mark Distillery, Inc. v. Diageo N. Am., Inc., 703 F. Supp. 2d 671, 693 (W.D. Ky. 2010) In Maker’s, the plaintiff alleged that defendant committed trademark infringement by capping their tequila bottles with a red dripping wax seal similar to the one plaintiff had registered. Id. at 680. However, there was no actual evidence of any confusion among consumers. Id. at 693. In holding for the plaintiff, the court explained that since it is difficult to show actual confusion, “a lack of such evidence is rarely significant.” Id.

In this case, there is no information on whether evidence of actual confusion exists. QADIDA may argue that a lack of evidence of actual confusion demonstrates that consumers are not confused between their products and ADIDAQ’s, because ADIDAQ’s products are world-renowned while their products are of inferior quality and only sold to a small, geographical segment. To rebut this argument, ADIDAQ need merely point to the several trademark infringement cases where the courts state that evidence of actual confusion is not necessary. Id.; see also Wynn Oil Co. v. Am. Way Serv. Corp., 943 F.2d 595, 601 (6th Cir. 1991) (upholding finding that absence of actual confusion deserved little weight). Thus, while the fact that there is no evidence of actual confusion favors QADIDA, it is not likely to overcome all the other factors that favor ADIDAQ in establishing that likelihood of confusion exists, because the factor is given very little weight. Thus, ADIDAQ will likely succeed in their trademark infringement lawsuit.

CONCLUSION

The general rule concerning trademark infringement is that a party may be liable for using a copy of a registered trademark, without permission from the owner, in connection with the sale of goods if ordinary consumers are likely to be confused. In determining whether a likelihood of confusion exists, courts weigh several factors, including the similarity of the marks, the relation between the parties’ goods, the intention of the alleged infringer in selecting the disputed mark, and any evidence of actual confusion. The first three factors favor ADIDAQ as the overall impression of the two disputed logos is the same, the parties are in the same industry, and QADIDA has benefited from association with ADIDAQ. There is no evidence of actual confusion, which favors QADIDA. However, while courts have stated that this factor is the best evidence of whether likelihood of confusion exists, it is not a factor that is given much weight since it is difficult to prove. Thus, ADIDAQ is likely to succeed on their trademark infringement claim against QADIDA.

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