On January 21, 2015, the U.S. Supreme Court, in a unanimous decision written by Justice Sonya Sotomayor, issued its first trademark ruling in more than a decade. The Court held that “trademark tacking” is a factual issue properly determined by a jury, rather than a judge, because the determination relies upon the perspective of the ordinary consumer. Hana Financial, Inc. v. Hana Bank, 135 S. Ct. 907 (2015). This may impact litigants’ decisions to demand jury trials because of the higher standard of review on appeal. It may also encourage forum shopping following decisions of the Trademark Trial and Appeal Board (TTAB).
Trademark tacking occurs when a party modifies an existing mark, yet retains priority based on the first use date of the preceding mark because the marks are so similar that consumers would generally regard them as being the same. Marks may be tacked when they are considered “legal equivalents,” meaning that the marks must be indistinguishable from one another or create the same, continuing commercial impression.1
Hana resolves a circuit split between the Sixth and Federal Circuits, on the one hand, which have traditionally treated tacking as a question of law for the court to decide, and many other circuits, including the Ninth where Hana originated, on the other hand, which have addressed tacking as a question of fact that should be submitted to a jury.
Hana Financial, Inc. (“Financial”), a Korean firm incorporated in California and the petitioner before the Supreme Court, sued Hana Bank (“HB”), the respondent, alleging trademark infringement. Financial was established as a California-based company in August 1994 and began using the HANA FINANCIAL mark in U.S. commerce in 1995. It obtained a federal trademark registration in 1996 for the following mark:
(U.S. Registration No. 1,987,227)
Founded in Korea in 1971 under the name Korea Investment Finance Corporation, HB changed to its current name in 1991, and in 1994 extended aspects of its financial services to Korean expatriates in the United States, establishing the “Hana Overseas Korean Club.” In July 1994, HB began advertising its services in several Korean-language newspapers in major cities throughout the United States. The advertisements included the name “Hana Overseas Korean Club” in English, and “Hana Overseas Korean Club” and “Hana Bank” in Korean, along with the Hana Bank logo,
which is referred to as the “dancing man.” In 2001, HB sought to register its trademark for HANA BANK and the logo in the United States (Application No. 76216454), but was unable to do so, at least in part due to Financial’s registration. Finally, in 2002, HB began operating an agency in New York under the name Hana Bank, which was the first time it established a physical presence in the United States.
In 2007, Financial sued HB for trademark infringement alleging that HB’s use of the term “Hana” for financial services caused confusion. HB denied this claim by invoking the tacking doctrine and arguing that it had priority based on its use beginning in 1994, and raising the defense of laches due to Financial’s delay in bringing suit. The District Court initially granted summary judgment in favor of HB, but the Court of Appeals for the Ninth Circuit reversed and remanded, finding genuine issues of material fact as to whether HB had priority.
In particular, the Appeals Court found that HB’s evidence of its 1994 advertisements, customer applications, and newsletters bearing the Hana mark, though relevant, was subject to competing inferences and/or was improperly entered into evidence, and thus was insufficient to establish use of the mark in the United States prior to that of Financial. In the United States, the general rule is that the first party to use a mark in commerce has senior rights in the mark. Analysis of whether a mark is in “use” can become tricky when there may not be a clear physical location where the services are rendered. Where services are promoted to U.S. residents, but primarily performed outside the United States, as in the case of HB in 1994, the court weighs a number of factors, including the extent of advertising in the United States, whether such advertising is targeted at U.S. residents, whether at least a part of the services are U.S. based, and whether the mark is famous abroad, among others.
On remand, the jury again found in favor of HB, finding that HB’s activities in the United States under the mark constituted “use in commerce” prior to Financial’s use of its mark in 1995 and that HB had used its mark continuously thereafter.
In its instructions to the jury, the District Court explained:
A party may claim priority in a mark based on the first use date of a similar but technically distinct mark where the previously used mark is the legal equivalent of the mark in question or indistinguishable therefrom such that consumers consider both as the same mark. This is called “tacking.” The marks must create the same, continuing commercial impression, and the later mark should not materially differ from or alter the character of the mark attempted to be tacked.
The jury presumably applied the tacking doctrine in order to find that “Hana Overseas Korean Club” and “Hana Bank” in Korean created the same, continuing commercial impression as “Hana Bank.” How the jury weighed all of the relevant evidence, including HB’s consistent use of the dancing man logo with each version of the mark, the similarity of the commercial impression of the terms “Overseas Korean Club” and “Bank,” and the relevant consumers and their awareness of the bank’s services before the 1994 U.S. advertisements, is open to speculation.
Financial challenged the verdict and appealed to the Court of Appeals for the Ninth Circuit. The court affirmed finding that the jury decided the issue after receiving an instruction that correctly conveyed the narrowness of the tacking doctrine. As the Ninth Circuit treated tacking as a question of fact, it applied the standard of “clear error” in considering whether to reverse the decision. The court explained that while the evidence could have been construed to support Financial’s position, it was permissible for the jury to find that HB has priority because the decision was supported by substantial evidence and Financial did not meet its burden of showing that Financial’s interpretation of the evidence was the only reasonable one.
Financial then appealed to the U.S. Supreme Court, which granted certiorari on the issue of whether a jury or judge should decide if tacking is applicable in a particular priority dispute.
During oral arguments, Financial argued that juries were not equipped to answer the question of whether two separate marks are similar enough to be deemed legal equivalents of each other. The Court, in turn, rejected each argument set forth by Financial. First, it held that “mixed questions of law and fact” have typically been resolved by juries and that any concern raised by the jury’s ability to apply the proper and relevant legal standards could be addressed by crafting careful jury instructions. The Court also rejected Financial’s argument that inconsistencies would arise in the trademark system if the jury was allowed to determine tacking. In reply, the Court explained that juries make determinations in all areas of law and the fact that one jury may have reached a different conclusion than another has never stopped the court from employing juries. Accordingly, there is no reason why trademark tacking should be treated differently. Finally, the Court found that the petitioner, in arguing that judges have historically resolved tacking disputes, offered evidence of decisions that arose in the contexts of bench trials and summary judgments. The Court explained that it is undisputed that judges may make tacking determinations in such situations; however, where a jury is to be empaneled and where the facts do not warrant summary judgment or judgment as a matter of law, tacking is a question for the jury.
- Practical Implications
Trademark tacking is a relatively obscure doctrine, and courts, including the Supreme Court in Hana, have emphasized that it should only be applied in “exceptionally narrow circumstances.” The purpose of the doctrine is to allow slight flexibility for businesses to make changes in the appearance of a mark over time without losing their valuable rights in the date of first use. After Hana, litigants will have to be more mindful in their determination of whether to request a jury trial where a party has raised a tacking issue. Unlike the European Union and most international jurisdictions where civil claims are decided by judges, the U.S. system allows the parties in federal civil cases and most state court civil cases to demand a jury trial. Generally, litigants weigh a number of considerations when deciding whether it will be more favorable to have their case decided by a judge or jury. Many issues in trademark cases are fact-intensive and the final determination requires subjectivity. While the Court in Hana expressed its opinion that such fact-sensitive determinations are particularly appropriate for a jury to decide, litigants must also be aware that a jury decision is more difficult to reverse on appeal. If a jury is empaneled and determines that tacking applies in the defendant’s case, this will almost automatically lead to a determination of non-infringement.2 Furthermore, on appeal, the decision will be difficult to reverse.
Prior to this decision, even where a jury trial was requested, a judge decided the tacking issue in the Federal and Sixth Circuits before the jury made the overall infringement determination. Accordingly, in these jurisdictions, it was easier to win an appeal on a tacking issue, as the judge’s decision was reviewed de novo (looking at all of the relevant evidence and facts to make the decision anew) rather than under the “clearly erroneous” standard of a jury determination.
It is possible that Hana will have the greatest impact (albeit limited due to the narrow applicability of the doctrine) in relation to review of decisions by the TTAB where tacking has been or could be invoked. The Federal Circuit, which reviews TTAB decisions, was a notable outlier prior to Hana, treating tacking as an issue purely reserved for the bench. In both ex parte and inter partes cases, TTAB decisions are appealable to either a federal district court or the Federal Circuit as of right. In an ex parte case, a trademark applicant is challenging a refusal to register by the Trademark Office, while an inter partes proceeding involves two adverse parties, such as where one is opposing another’s trademark application or seeking cancellation of another’s registration. When a decision is appealed to a federal district court, the litigants may produce additional evidence and the TTAB record is reviewed with de novo scrutiny. The appealing party can also raise new issues which were not before the TTAB. While some district courts have said that there is no right to a trial by jury in a review of a TTAB decision, others, most notably the District of Columbia Circuit, have held that the parties are entitled to a jury trial on all factual issues underlying the challenge to the TTAB’s decision. This raises the issue of whether, as a result of Hana, district courts will now be required to allow litigants to demand jury review of TTAB decisions where tacking is an issue.
On the other hand, an appeal to the Federal Circuit proceeds as an appeal on a closed record and no new evidence is permitted; however, such an appeal can only be made if the responding party does not object. If there is an objection, the responding party can instead demand that the appeal be heard in a district court.
In light of Hana, the losing party in a TTAB decision may prefer to appeal to a district court, rather than the Federal Circuit, where tacking was not raised as a defense during TTAB proceedings and where they wish to now raise the defense. Additionally, either party may elect to appeal to a district court that allows a jury trial, rather than the Federal Circuit, where they have reason to believe that a jury would be more likely to rule in their favor on the issue of tacking than would a Federal Circuit judge.
While the Court’s holding is limited to the narrow doctrine of tacking, the opinion provides some insight into its view on the pivotal role of the jury and the role it plays as the fact-finder in a trial. The Court explained, “[W]hen the relevant question is how an ordinary person or community would make an assessment, the jury is generally the decisionmaker that ought to provide the fact-intensive answer.”
However, the Court did not attempt to extend this decision to other fact-intensive trademark doctrines where there is a circuit split as to whether issues are properly determined by a judge or jury. In particular, the Court did not make a broader statement regarding the legal standard for appellate review of a likelihood of confusion determination. Justice Kennedy touched upon this at oral arguments when he inquired, “[W]hen we write this opinion, will we have to have in the back of our minds what effect it will have on likelihood of confusion, the likelihood of confusion issue? Is — is there some way that we should treat this as quite — quite discrete from that?” Nonetheless, one can’t help but speculate that Hana may suggest that courts will be more likely to reserve such determinations for the jury, especially those that turn on the perspective of consumers. Thus, moving forward, courts may be less willing to make summary judgment determinations on issues such as distinctiveness, secondary meaning, and likelihood of confusion.
This decision also emphasizes the importance of ensuring that jury instructions be carefully crafted and that any objections to jury instructions be timely made so they are preserved for appeal. As the jury continues to play a central role in U.S. trademark cases involving consumer perception, these considerations are an essential part of the lawyer’s litigation strategy and in formulating or pursuing an appeal on behalf of his or her client.
The authors wish to thank José Landivar for his contributions to the research and editing of this article.
1 The term “tacking” is also sometimes applied in other situations where, as a result of a valid trademark assignment, the assignee is permitted to “tack” its date of first use onto the date of the assignor’s first use.
2 Note that tacking may be used offensively or defensively depending on the situation.