Furniture sold in Illinois through Bon-Ton Stores was the subject of a recent trademark infringement case before the Ninth Circuit Court of Appeals (Stone Creek, Inc. v. Omnia Italian Design, Inc., No. 15-17418 (9th Cir. 2017)).
Phoenix-area furniture maker and retailer Stone Creek, Inc., obtained state and federal trademark protection for the signature red oval encircling the words “Stone Creek” imprinted on its furniture. In 2003, the company entered an agreement with leather furniture maker Omnia Italian Design to sell Omnia furniture branded with the Stone Creek label in Stone Creek stores.
Stone Creek later learned that Omnia was using its brand mark without authorization on competing products, specifically furniture sold through Bon-Ton Stores in the Midwest. Omnia digitally copied the mark from Stone Creek products and used it in marketing and warranty materials displayed at Bon-Ton galleries. Stone Creek was tipped off when, among other things, consumers began contacting them about warranties for furniture purchased at Bon-Ton.
Stone Creek sued Omnia for federal and common-law trademark infringement and unfair competition. The district court found for Omnia on the ground that consumers were not likely to be confused by the mark as defined under the Lanham Act.
A “likelihood of confusion” under trademark law turns on whether a “reasonably prudent” marketplace consumer is “likely to be confused as to the origin of the good or service bearing one of the marks.” Determining factors include the similarity of the marks and the proximity of the goods, the recognition and distinctiveness of the protected mark, evidence of actual confusion, and common marketing channels.
In reversing the district court’s finding, the Ninth Circuit concluded that Omnia’s mark was an “exact replica” of Stone Creek’s logo that Omnia knowingly copied from Stone Creek materials. “Placing an identical mark on identical goods creates a strong likelihood of confusion, especially when the mark is fanciful. [ ] Stone Creek also sells in overlapping marketing channels and … other factors heighten the likelihood that consumers will be confused as to the origin of the furniture,” the court wrote. It cited examples of Bon-Ton customers contacting Stone Creek as evidence of actual confusion.
The panel faulted the lower court’s “myopic focus” on the geographic distance between Stone Creek’s Arizona showrooms and Bon-Ton’s in the Midwest, noting that Stone Creek uses its website as a “substantial channel” to market its furniture beyond Arizona. “Both [Stone Creek and Bon-Ton] are retail furniture stores, and their products are identical pieces of leather furniture manufactured by Omnia. …[They] share the same general class of customers. That Stone Creek does most of its business in the Phoenix area does not foreclose overlapping marketing channels with Omnia.”
The district court’s finding that Stone Creek’s print and online advertising reached the Midwest, resulting in more than $600,000 in sales there during the time that Bon-Ton was selling the Stone Creek–labeled furniture from Omnia, created a potential likelihood of confusion that gave Stone Creek a right to attempt to enforce its mark in the area.
The panel rejected Omnia’s invocation of the common-law defense known as the Tea Rose-Rectanus doctrine, which protects good-faith use of a mark in a “remote geographic area,” holding that Omnia’s admitted knowledge of Stone Creek’s prior use defeated any such claim. The doctrine holds that common-law trademark rights extend only to the territory where a mark is recognized and requires a showing of “good faith” use in an area geographically remote from the original user’s. U.S. Supreme Court dicta has interpreted good faith as having no knowledge of prior use of the mark (K Mart Corp. v. Cartier, Inc., 486 U.S. 281 (1988)), and this interpretation has been adopted by the Seventh Circuit Court of Appeals, which the Ninth Circuit panel cited in its opinion (Money Store v. Harriscorp Fin., Inc., 689 F.2d 666 (7th Cir. 1982)).
Finally, the panel held that under the amended Lanham Act, Stone Creek must still show intentional infringement on the part of Omnia before it could be awarded profits as damages, and remanded that determination to the district court.
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