what does this mean?(minimum legal mumbo-jumbo)

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Lanham Act Section 7(c), 15 U.S.C.A §1057, gives Small a right of priority as of Sept. 9, 2004, nationwide in effect, in connection with its tax and legal services in the nature of determining choice of entity questions, including tax document preparation and the formation of corporate entities, against any other person, except for whatever rights are possessed by a person who has used the mark and whose mark has not been abandoned.

Big concentrates its defense upon the fact, always admitted, that Big used TaxHQ as the name of a newsletter on three issues in 1997 and 1998 which was similar to the service mark Small first used in March, 1999 in newspaper advertising. Big cannot successfully argue that this limited use (Big's president called it "our house organ with its tiny circulation") falls within the prior use exception in Lanham Act Section 7(c).

1. Big's use was not a prior use under Lanham Act §7(c).

The question is whether that use as the name of a newsletter is the type of prior use contemplated by Lanham Act Section 7(c), and the clear answer is no. Prior use clearly means a use where there is a likelihood of confusion with the use of the federal registrant, for without confusion the prior "user" has not (in the words of the statute) "used the mark" (emphasis added). Confusion is determined simply in this case. The consumer class involved with the newsletter is "corporate-legal practitioners, corporate-accounting practitioners, corporate, accounting and law firms across the country and also the in-house counsel and in house accountants of corporations." The second question is whether that consumer class would be likely to be confused when confronted with the Big newsletters and Small's predecessor's newspaper advertising.

Small submits that "corporate-legal practitioners, corporate-accounting practitioners, corporate accounting and law firms across the country and also the in-house counsel and in-house accountants of corporations" would not be confused. There is thus no prior use.

2. Big cannot create a prior use by invading the federal registrant's (Small's) area of use after September 9, 2004.

A use which did not rise to the status of prior use in the first place cannot become such a use thereafter, by arguing "zone of natural expansion permitting tacking", "famous mark", "change in usage permitting tacking''or otherwise. Taking the "zone" theory, for example, the Restatement notes that "the doctrine of natural expansion has rarely been decisive in determining priority... When raised against a subsequent good faith user, the doctrine typically has been rejected on the facts. Some recent decisions even go further, explicitly repudiating the doctrine as an independent basis of priority. The policy justification for the ... doctrine as developed at common law has also been eroded by the statutory doctrines of constructive notice and constructive use [Lanham Act Section 7(c )] available to federally registered marks. In any event, as McCarthy notes (at 24: 20 of his treatise), the "natural expansion" theory "has been limited by recognition that a senior user cannot by expansion prevail where the result would be a likelihood of confusion in derogation of established rights of the intervening user. What is or is not a 'natural expansion' in fact is apparently determined by the perception of customers at the time of the junior users first use of mark on product line Z". This is what we did in the previous paragraph -whether or not the accountant and lawyer consumer class would be confused when faced with the March, 1999 newspaper advertisement, in light of the three issues of the newsletter produced in 1997 and 1998.

If there is no likelihood of confusion between the mark used on the two categories of goods (let alone where the comparison is between the name of a newsletter and a service mark), then a later expansion by the senior user into the market occupied by the intervening user is an infringement. At that point any confusion is caused by the senior user's entry, not by the intervening user. DeCosta v. Viacom, 981 F.2d 602, 25 US.P.Q. 1187 (1st Cir. 1992), cert. denied, 509 U.S. 923, 125 L. Ed. 725, 113 S.Ct. 3039 (1993); Physicians Formula Cosmetics, Inc. v. West Cabot Cosmetics. Inc., 660 F.Supp. 1222,3 U.S.P.Q.2d 1344 (E.D.NY 1987), rev'd on other grounds, 857 F.2d 80 n.1, 8 U.S.P.Q.2d 1136(2d Cir.1988) (containing a comprehensive review of prior authority on the question). There is thus a second determination of likelihood of confusion at that point in time when the earlier user (of two marks which were non-confusing initially) invades the market of the intervening user (the later in time of those non-confusing marks). Since Big's target clientele remains "corporate-legal practitioners, corporate-accounting practitioners, corporate accounting and law firms across the country and also the in-house counsel and in-house accountants of corporations", Big has no alternative (after reviewing the many pages produced in response to the motion to compel bearing on the target clientele of Small) but to admit that that Small's target clientele is composed of entrepreneurs. If it were not for NewBiz Company ("NB"), the second point in time previously referred to (the point where the earlier user of two non-conflicting marks invades the market of the later user of those two non-conflicting marks) would not have occurred, certainly not before September 9, 2004, when Small's nationwide rights were set by Lanham Act, Section 7(c). Even as of this date Big "...worked very hard to make that distinction between the two areas of our business [entrepreneurs who come in without any relationship to an accountant or a lawyer on the one hand, and business which comes in from accountants and lawyers on the other]. A "distinction" distinguishes and is the antithesis of confusion. Big was not confused and worked hard to prevent any such confusion, Smalls predecessor was not confused, the USPTO was not confused, and Big's accounting and lawyer clientele was not confused.

3. Big has invaded the federal registrant's (Small's) use by attracting entrepreneurs with its "Big TaxHQ" mark and diverting them (after September 9, 2004) to NB

The market for Small is entrepreneurs, the market for Big is accountants and lawyers, and the market for NB is entrepreneurs. Big "worked very hard to make that distinction between the two areas of our business" and Big obscures the relationship betwen itself and NB. There is no indication to Big's accountant/lawyer clientele of the relationship, and NB does not use either of Big's "TaxHQ" marks. Small was totally unaware of the relationship prior to this lawsuit, and had to pry the information out of Big. Big has serviced its accountant and lawyer clientele through its Web site at www.TaxHQ.com and referred the entrepreneurs who come to that site to NB. Parenthetically, the "TaxHQ" newsletter was never available to entrepreneurs.

A prime purpose of trademark law is to protect the public from confusion. The use of "BigTaxHQ" to divert entrepreneurs from Big to NB is an infringement and it introduces not only confusion, but deception. This is not innocent infringement.

An entrepreneur goes to Big, presumably expecting to get the same kind of service supplied to "major corporations" or "accountants" or "law firms", is told that he does not qualify for Big's service, and is sent to NB. Evidence will show that those who use NB are charged less than the major accounting and law firm and major corporation clients of Big, and this means one of two things: either the NB entrepreneurs are charged less for the same service, or the NB entrepreneurs get less service for less cost (while expecting to get "major corporation" or "major accounting firm" or "major law firm" service). In either event, someone is being short changed in the process of obscuring the relationship between Big and NB.

In any event, the entrepreneurs are being deceived by NB's claim that it has been around since 1950 (and is presumably a better service because of that antiquity). Big and NB were working together, even after the filing of this lawsuit, to increase the traffic funneled by Big to NB by Big's use of the "Big TaxHQ" mark (Big and NB reserved the domain name abouttax.net, and put the TaxHQ.com website, containing the "Big TaxHQ" mark, on that domain name, knowing that Small's main site is abouttax.com).

4. The parties and the USPTO, by their actions, confirm that there was no prior use under Lanham Act §7(c).

While the final test is likelihood of confusion, it helps to see how the litigants and the USPTO viewed the situation at the time, not only to help determine likelihood of confusion, but to see the equities as well. Big used "TaxHQ" as the name of the newsletter then (until early 2005 when it abandoned that use), and nothing more. It did not use it as a service mark. A service mark must be used "to identify and distinguish the services of one person...from the services of others and to indicate the source of the services." Lanham Act, 15 U.S.C.A. §1127. "Big TaxHQ" was used in conjunction with, and to identify and distinguish, the services of Big. It was not used to identify the services of NB.

Big never claimed that "TaxHQ" was its name or its trade name. Big never claimed that "TaxHQ" was a service mark prior to this lawsuit, despite numerous opportunities to do so.

As to switching entrepreneurs to NB, there is no justification for permitting Big to use the "Big TaxHQ" mark for that purpose. It now argues that it sells services, that the newsletter it used to call "TaxHQ" was helpful in that regard, and that it used "TaxHQ" as a service mark as a result. Carried to its logical conclusion, this argument means that there are literally thousands of word combinations appearing in the newsletter it used to call "TaxHQ" and in the newsletter it now calls "Big News", and the myriad of other promotional materials it uses for which it might seek service mark status on a common law basis.

When Big abandoned "TaxHQ" as the name of its newsletter in late 2004 or early 2005, it purportedly did so to avoid "confusion" with its new Web site. No one could be "confused" by use of "TaxHQ" on both the newsletter and the Web site if "TaxHQ" was really a service mark. Marketing teaches that you use your service mark everywhere. If there was confusion sufficient to cause debate within Big, then the question is about confusing the name of the newsletter with the name of the Web site, and nothing more.

These facts are indicative of what Big believed then, and since the USPTO relied upon what Big said then, and Small relied on what Big said then, they are indicative of what everybody close to the situation thought then. And, as evidenced by the fact that there weren't any lawsuits (or even demands), and by the fact that the USPTO processed Big's applications, everybody close to the situation concluded that there was no likelihood of confusion then. The result, in any case, is the same whether it is viewed from the perspective of consumers considering the likelihood of confusion, from the standpoint of behavior of the litigants, or from the USPTO filings.

5. Big did abandon "TaxHQ" as the name of its newsletter.

A conscious decision ("we debated that issue at length") was made to abandon the use of "TaxHQ" as the name of the newsletter.

Big could have blunted a cease and desist letter sent to it by Tax magazine by claiming service mark status to contrast its use of TaxHQ from Tax magazine's use of the word "Tax" for its publication. Instead, Big called the TaxHQ newsletter "our publication" which "is a house organ sent only to customers". The November, 2004 trademark application could have been filed as a service mark if Big really believed that to be the case. Their best interests would so dictate if they had any justification. Instead, Big filed the "Big TaxHQ" separate service mark application (first used in 2005) four months later (March, 2005). Big not only did not apply for service mark registration of the term "TaxHQ", but added the initials "Big" and design features in an apparent attempt to differentiate it from Small's existing service mark application for "TaxHQ".

Several conclusions follow. First, there is no way anyone could be confused by the continuing use of "TaxHQ" on both the newsletter and Web site if "TaxHQ" was really used as a service mark. You use your service mark, if you really have one, everywhere.

Second, Big cannot claim that the November, 2005 amendment of the "TaxHQ" application for registration with the USPTO was simply an oversight, or that its consequences were unappreciated at the time. The "TaxHQ" application for registration would have been abandoned in the absence of amendment, and rather than have that occur, Mr. Person swore that "TaxHQ" was being used as a trademark for a newsletter six months after Big changed the newsletter name. The simple fact is that the USPTO was entitled to be told the truth, and had Big told the USPTO the truth, the "TaxHQ" registration would not have been granted.

Nowhere is the futility of Big's attempt to whitewash this act more apparent than in its characterization of the Web site as the "electronic equivalent of the newsletter" as compared to its characterization of the Web site as carrying forward the "newsletter's function", but "also to deliver many of its services directly online", especially considering how Mr. Person characterized those services.The clear, obvious and inescapable fact is that it was the "Big TaxHQ" application which dealt with the service mark for the Web site, and the "TaxHQ" application which dealt with the trademark for the newsletter. This Court should cancel the "TaxHQ" registration.

6. Big's "changes in usage" do not change a nonconflicting use (the initial determination) into a prior use under Lanham Act. Section 7(c).

While it cannot be said, even academically, that you can abandon an old mark for goods, create a new mark for services, radically change the services so that what is being offered as a service is night and day different from what was being offered as a product, sell that new and different service under a new and different mark, and still tack on the use of the abandoned product trademark. The key point is that you cannot turn a non confusing use into a prior use under Lanham Act, § 7(c).

A preliminary injunction is not available to either party, because of laches, with respect to what Small knew about Big's business and what Big knew about Small's business. A preliminary injunction should be granted in Small's favor, however, because Small did not know, and could not know. that Big was invading Small's use (as a federal registrant) by feeding entrepreneurs to NewBiz.

Cpaatty looked into Big's existence, trademark status and actual use of TaxHQ on several occasions over the last three years. Conversely, Big denied any knowledge of Small or Cpaatty other than the fact that Cpaatty had called Mr. Big Official in the fall of 2004 to ask about TaxHQ.com and that Official had sent copies of some of the newsletters to Cpaatty. Thus, Big claims, it has not been guilty of laches over the last three years. One party is careful and open, the other plays dumb and stonewalls. Both are guilty of laches with respect to what they knew about the other's business or, in the Ninth Circuit, what they should have known. E-Systems Inc v. Monitek Inc., 720 F.2d 604 (9th Cir. 1983).

The difference is that Big stonewalled about the relationship of Big and NewBiz, even though it worked very hard, internally, to distinguish the two firms' clientele. Big doesn't deal with entrepreneurs, like Small does, nor does Small market to accountants and lawyers, like Big does. All that Cpaatty could learn about Big's business is based upon what Big permitted to be known. It is also fact, though previously unknown, that NewBiz does deal with entrepreneurs, and that it is the policy of Big to turn away entrepreneur business itself and refer it to NewBiz. These facts were difficult enough to learn using discovery techniques in this court, as previously set forth so they could hardly have been apparent to the public..

There is clearly laches -on both sides -with respect to what the litigants knew or should have known about each other (Small versus Big), the bottom line of which is that they simply did not compete. And while the likelihood of confusion is what determines these cases, it is the existence of competition (except in the famous marks cases) which gets the case before the court in the first place. Neither party, on what it knew then thought it had the right to oust the other. Big has demonstrated now, with the ferocity of its attack, that it knows how to conduct trademark/service mark litigation. It knew everything then that it knows now about Small's business, and has confirmation now of what was apparent from the outset: Small serves entrepreneurs. Waiting three years to act is laches. Small, on the other hand, did not know until August, 2007 that Big was feeding entrepreneur business to NewBiz, or that a relationship existed, or that the relationship was so close that Big and NB would cooperate to spirit entrepreneurs away from Small's abouttax.com Web site. Waiting two months is not laches.

8. The Sleekcraft factors (side trip to see them) favor a preliminary injunction against Big and do not favor a preliminary injunction against Small.

The Sleekcraft factors, together with whether or not they support a preliminary injunction against Big (the column entitled "Enjoin Big") ("NB" means because of NewBiz) and whether or not they support an injunction against Small (the column entitled "Enjoin Small"), are as follows:

Sleekcraft Factors Enjoin Big Enjoin Small
I. Strength of mark: maybe strong enough, but not a famous mark
2. Proximity of goods/target clientele Yes (NB) No
3. Similarity of marks: the marks are similar
4. Actual confusion: No No
5. Marketing channels used: Yes (NB) No
6. Type of goods/care by purchasers Yes (NB) No
7. Intent: Yes (NB) No
8. Expansion: Yes (NB) No

 

With respect to item 5, Big, NB and Small all use the internet, but so does everyone else, for everything. Small's and NB's services can be accessed immediately, and an order placed directly from their respective websites. Big, on the other hand, screens those who seek access to the commercially meaningful portions of its site, and will not serve surfers without prequalification by a Big representative. No prospect who comes from a source other than from an accounting or law firm or major corporate client can gain access to the part of Big's site reserved for existing clients.

With respect to item 6, the degree of care exercised by accountants and lawyers is high, and the degree of care exercised by entrepreneurs is lower.

With respect to item 7, both Big and Small acted independently in selecting their marks, but Big's secret intent of using the mark to benefit NB tips this factor against Big.

With respect to item 8, Big has made it clear that it does not intend to blur the distinction and slip into the entrepreneur market itself, and Small does not intend to expand into the market for ancillary services to accountants and lawyers.

Since there is no laches with respect to the knowledge acquired by Small in August, 2007 about Big's use of the "Big TaxHQ" mark to feed entrepreneurs to NB, Big's arguments that injunctive relief should be barred do not apply.

Big argues (in its Response) that it has been harmed by Small's "delay" and "laches". It then says that Small's failure to complain encouraged it to believe that it could spend "millions of dollars" (no substantiation is provided whatsoever) in developing its website. It then cites the Ninth Circuit's "six factor" test of whether laches will bar injunctive relief. Small would have to concede that point if it were not for NB because it is undeniably true that each of the parties is guilty of laches with respect to what they knew about each other. The problem, as previously stated, is that Small did not know (and Big took every step to obscure) the relationship between Big and NB, the feeding of entrepreneurs to NB by Big, and the fact that Big was thus using the "TaxHQ" mark to divert entrepreneurs from Small to NB.

 

Big has shown no substantiated financial hardship in any event, and it has certainly failed to show any hardship of any kind associated with the period when Small first learned of the Big-NB connection and the time (of the filing of the Cross Application for Preliminary Injunction) that Small did something about it.

Dated this 12th day of November, 2007.

 

what does this mean? (minimum legal mumbo-jumbo)