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July 2012

Rearden LLC v. Rearden Commerce, Inc. ? Evidence of Consumer and Non-Consumer Confusion Precludes Summary Judgment

(June 27,2012) ____ F. 3d ____; 12 C.D.O.S. 7291

The Ninth Circuit vacated the order of the United States District Court for the Northern District of California granting summary judgment in favor of defendant Rearden Commerce, Inc. (“Rearden Commerce”) and remanded the matter for further proceedings, in part, on the grounds that a genuine issue of material fact existed as to both the “use in commerce” and “likelihood of confusion” issues in a trademark infringement and cybersquatting action. 

Plaintiffs Rearden LLC, Rearden Productions LLC, Rearden Studios LLC, Rearden, Inc. and Rearden Properties, LLC (the “Rearden Companies”) are several companies founded by Steve Pearlman as early as 1999 and named, in part, after “Hank Rearden” the main character in the novel Atlas Shrugged by Ayn Rand.  The Rearden Companies are technology incubators and artistic production companies that provide resources and support for the ground up development of start up ventures.  Some of the Rearden Companies also specialize in movie production and property management. 

On April 30, 2002, the Rearden Companies registered with the Patent and Trademark Office (“PTO”) the marks “Rearden Studios” and “Rearden Studios” with a blue and black logo featuring an Amazon warrior figure.  Registration of the marks was obtained on November 1, 2005.  The Rearden Companies also filed intent to use applications for several marks bearing the name “Rearden” on May 31, 2007.

Defendant Rearden Commerce is a business concierge company that links its clients to an on-line marketplace where they can search, compare, purchase and manage a variety of business and travel related services.  Rearden Commerce reserved its trade name in November 2004 and officially changed its name to Rearden Commerce in January 2005.  Rearden Commerce filed applications with the PTO for the mark “Rearden Commerce” and a red and black logo consisting of a stylized letter “R” next to the words “Rearden CommerceTM”.  On March 4, 2005, Rearden Commerce also obtained numerous domain names incorporating the word “Rearden” including “ReardenInc.”, “ReardenCo.” and “ReardenC”, and subsequently obtained domain names including “ReardenLLC”.   

On November 6, 2006, the Rearden Companies filed a lawsuit against Rearden Commerce alleging false designation of origin under the Lanham Act, common law trademark infringement, violation of California Business and Professions Code sections 17200 (unfair competition) and 17500 (false advertising), and subsequently added a claim for cyber-squatting.  The Rearden Companies filed a motion for a preliminary injunction which was granted, and the district court enjoined Rearden Commerce from directing traffic from the “ReardenLLC” domain names or from registering any other domain names containing the words “ReardenLLC”.

The parties filed cross-motions for summary judgment, and the district court granted Rearden Commerce’s motion and denied the Rearden Companies' motion finding that no reasonably jury could conclude that Rearden Commerce’s use of “Rearden” creates a strong likelihood of confusion in the minds of the relevant consuming public.  In reaching its conclusion, the district court analyzed the eight Sleekcraft factors of: 1) strength of the mark; 2) proximity of the goods; 3) similarity of the marks; 4) evidence of actual confusion; 5) marketing channels used; 6) type of goods and degree of care likely to be exercised by the purchaser, 7) defendant’s intent in selecting the mark; and 8) likelihood of expansion of product lines. 

The district court found that the Rearden mark was suggestive and entitled to some degree of protection and that there were some similarities between the marks which weighed somewhat in favor of a finding of likelihood of confusion.  However, the district court found that the remaining six factors weighed against a finding of likelihood of confusion.  First, the district court found there was no competitive proximity between the Rearden Companies’ start up incubation services and Rearden Commerce’s online personal assistant program.  The district court also found that there was no evidence of actual consumer confusion and rejected the argument that evidence of non-consumer confusion on the part of investors, vendors and suppliers could support a finding of infringement. 

The parties then filed further cross-motions for summary judgment on the cyber-squatting claims and the district court again granted Rearden Commerce’s motion and denied the Rearden Companies’ motion.  The district court held that the Rearden Companies could not establish a protectable interest in any mark prior to July 2005, and that no reasonable jury could find the existence of bad faith with respect to any of the domain names.  Judgment was entered in favor of Rearden Commerce and the Rearden Companies timely appealed.

The Ninth Circuit first addressed the Rearden Companies’ Lanham Act claim, stating that plaintiff must first meet the threshold requirement of showing “use in commerce.”  To establish “use in commerce” of a service mark the plaintiff must show both use or display of the mark in the sale or advertising of services and that the services are rendered in commerce.  The Ninth Circuit applies a “totality of circumstance” approach and looked to evidence in the record that the Rearden Companies had offered incubating related services to a variety of start up companies beginning in April 2001 as well as evidence of non-incubation services (such as participating in various movie projects beginning as early as 2001) and that the “Rearden” name was used in various agreements, and displayed in the credits of a movie and on a couple of DVD covers. The Ninth Circuit found the evidence in the record sufficient to create a genuine issue of material fact as to the “use in commerce” requirement.

The Ninth Circuit then considered whether there was evidence showing a “likelihood of confusion” under the eight Skleekcraft factors.  The Ninth Circuit first stated that the Sleekcraft analysis is “pliant” and fact intensive, and as a result summary judgment on “likelihood of confusion” grounds is generally disfavored.  The Ninth Circuit then considered each of the Sleekcraft factors.

The Ninth Circuit agreed with the district court that the “Rearden” marks were “suggestive” and that the marks were “similar” but found that a reasonable trier of fact could have given more weight to these factors than the district court.  The Ninth Circuit next addressed the “proximity of the goods” factor and stated it did not require a showing of direct competition, but only a showing that the services are sufficiently “complimentary” or “related” such that the public could be confused as to the source of the services.  The Ninth Circuit found that a genuine issue of material fact existed as to the “proximity of the goods” factor finding evidence that the parties offered similar technology platforms to their respective customers, attended the same trade shows, appeared in the same publications and relied on the same private investment funding form the same sources.  

The Ninth Circuit then addressed the “evidence of actual confusion” factor and held that the district court should have considered evidence of relevant non-consumer confusion in analyzing this factor. The Ninth Circuit specifically held that “non-consumer confusion” may be relevant to the “likelihood of confusion” analysis in three circumstances: 1) confusion of potential consumers; 2) confusion of non-consumers that could create an inference that consumers would be confused; and 3) confusion of non-consumers that could influence customers.  The Ninth Circuit then found that there was not only some evidence of “actual consumer confusion” in the record, but also evidence of confusion among trade journalists and trade show organizers that could influence the purchasing decision of consumers.  As a result, the Ninth Circuit concluded that a genuine issue of material fact existed as to the “evidence of actual confusion factor.”

The Ninth Circuit also stated that although the remaining Sleekcraft factors were of lesser importance, they also provided a limited degree of support for the Rearden Companies’ Lanham Act claim, and that the district court erred in granting summary judgment to Rearden Commerce.

Finally, the Ninth Circuit considered the Rearden Companies’ cybersquatting claim which requires a showing that: 1) defendant registered, trafficked in, or used a domain name; 2) the domain name is identical or confusingly similar to a protected mark owned by plaintiff; and 3) the defendant acted with bad faith intent to profit from that mark.  The Ninth Circuit stated the appeal was only as to whether plaintiff possesses a protected mark and whether the defendant acted in bad faith. 

The Ninth Circuit determined that there was a genuine issue of material fact as to whether the Rearden Companies possessed a protected mark, and referred to its earlier holding that the Rearden Companies had established a genuine issue of material fact as to the “use in commerce” requirement associated with their use of the “Rearden” marks.  The Ninth Circuit then held that there was a genuine issue of material fact as to whether defendant acted in bad faith based on evidence that defendants registered the domain name “ReardenLLC’ despite admitting they never used that name in business and this was the exact legal name adopted by one of the Rearden Companies.  In addition, the Ninth Circuit cited to evidence that Rearden Commerce purchased some of the domain names immediately after learning that the Rearden Companies might oppose its trademark applications.  Finally, the Ninth Circuit stated that there was evidence that Rearden Commerce attempted to sell the domain names to the Rearden Companies after litigation commenced, which a reasonable jury could conclude was evidence of the existence of bad or good faith by Rearden Commerce. 

Accordingly, the Ninth Circuit reversed the district court’s summary judgment orders and remanded the case back to the district court for further proceedings.         

Intellectual Property

Aaron P. Rudin

Intellectual Property