v.
Bacardi & Company Ltd.
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
LODESTAR ANSTALT, a Liechtenstein No. 19-55864
company,
Plaintiff/Counter-Defendant/ D.C. No.
Appellant, 2:16-cv-06411-
CAS-FFM
v.
BACARDI & COMPANY LIMITED, a OPINION
Liechtenstein company; BACARDI
U.S.A., INC., a Delaware
corporation; BACARDI LIMITED, a
Bermuda company,
Defendants/Counter-Claimants/
Appellees.
Appeal from the United States District Court
for the Central District of California
Christina A. Snyder, District Judge, Presiding
Argued and Submitted July 10, 2020
Pasadena, California
Filed April 21, 2022
2 LODESTAR ANSTALT V. BACARDI & CO.
Before: Bobby R. Baldock, * Marsha S. Berzon, and
Daniel P. Collins, Circuit Judges.
Opinion by Judge Collins
SUMMARY **
Trademark
The panel affirmed the district court’s summary
judgment in favor of Bacardi U.S.A., Inc., and two of its
affiliates in a trademark infringement action brought by
Lodestar Anstalt.
The Madrid Protocol, as implemented by amendments
contained in Title XII of the Lanham Act, provides that
applicants with trademark protection in other countries may
obtain an “extension of protection” in the United States, generally equivalent to a trademark registration, without first having used the mark in commerce in the United States. Instead, an extension of protection may be granted under Title XII based on the applicant’s declaration of a bona fide intent to use its foreign-registered mark in the United States.
In 2011, Lodestar obtained an extension of protection for
its Liechtenstein-registered trademark in the use of the word “Untamed” in connection with whiskey, rum, and other
*
The Honorable Bobby R. Baldock, United States Circuit Judge for the U.S. Court of Appeals for the Tenth Circuit, sitting by designation. ** This summary constitutes no part of the opinion of the court. It has been prepared by court staff for the convenience of the reader.
LODESTAR ANSTALT V. BACARDI & CO. 3
distilled spirits. After Bacardi began an advertising
campaign in November 2013 using the phrase “Bacardi
Untameable” to promote its rum products, Lodestar filed suit for trademark infringement and unfair competition.
The panel concluded that, even assuming that Lodestar’s
first use of its mark in United States commerce occurred
after Bacardi’s campaign began, under the distinctive regime established for the Madrid Protocol, Lodestar’s subsequent bona fide use of its registered mark on certain rum products gave rise to a priority of right that it could seek to enforce under the Lanham Act. Finding useful precedent and commentary addressing a similar issue under the comparable provision of § 44 of the Lanham Act, which addresses registration of foreign marks under the provisions of any applicable “convention or treaty relating to trademarks,” the panel concluded that, under the Madrid Protocol, as under § 44, a foreign applicant who obtains a registration without showing actual use in the United States has a right of priority, as of the relevant “constructive use” date, over another company who first uses the mark in the United States. And once that registrant begins actually using the mark in the United States (and does so even after the competing user has begun using the mark) the registrant may bring an infringement action (subject to any applicable defense) based on that superior right of priority.
Nonetheless, Lodestar failed to satisfy the basic elements
of an action for trademark infringement because it failed to
show that Bacardi’s campaign involved a likelihood of
confusion with Lodestar’s bona fide use of its registered
mark in commerce. Lodestar claimed “reverse confusion,”
in which a person who knows only of a well-known junior
user comes into contact with a lesser-known senior user, and
because of the similarity of the marks, mistakenly thinks that
4 LODESTAR ANSTALT V. BACARDI & CO.
the senior user is the same as or is affiliated with the junior user.
The panel concluded that, in deciding which of
Lodestar’s products should be considered, the district court erred in applying a categorical temporal rule excluding any consideration of a senior user’s post-infringement use of the mark on additional products. Nonetheless, the panel agreed that Lodestar’s Untamed Revolutionary Rum product should be excluded from the likelihood-of-confusion analysis because it did not reflect a bona fide use of the mark. A reasonable jury, however, could find that Lodestar’s use of the Untamed Work Mark on the back of its bottles of The Wild Geese Soldiers & Heroes rums constituted bona fide use in commerce.
Applying the Sleekcraft factors, the panel concluded that
Lodestar failed to carry its burden to show a likelihood of
confusion. The panel concluded that the district court erred
in certain respects in its consideration of the strength of the mark and Bacardi’s intent, but those errors did not alter the ultimate conclusion that no reasonable jury could find a likelihood of confusion.
COUNSEL
G. Warren Bleeker (argued), Gary J. Nelson, and Drew
Wilson, Lewis Roca Rothgerber Christie LLP, Glendale,
California, for Plaintiff/Counter-Defendant/Appellant.
Michael C. Lynch Jr. (argued) and Andrea L. Calvaruso,
Kelley Drye & Warren LLP, New York, New York, for
Defendants/Counter-Claimants/Appellees.
LODESTAR ANSTALT V. BACARDI & CO. 5
OPINION
COLLINS, Circuit Judge:
This trademark dispute requires us to consider the scope and priority of rights granted by an “extension of protection” for a trademark under the “Protocol Relating to the Madrid Agreement Concerning the International Registration of Marks,” June 27, 1989, T.I.A.S. No. 03-1102, commonly known as the “Madrid Protocol.” A key feature of the Madrid Protocol, as implemented by amendments contained in Title XII of the Lanham Act, is that applicants with trademark protection in other countries may obtain an “extension of protection” in the U.S.—which is generally equivalent to a trademark registration—without first having used the mark in commerce in the United States. Instead, an extension of protection may be granted under Title XII based on the applicant’s declaration of a bona fide intent to use its foreign-registered mark in the U.S.
In this case, Lodestar Anstalt (“Lodestar”) obtained in 2011 an extension of protection for its Liechtenstein- registered trademark in the use of the word “Untamed” in connection with whiskey, rum, and other distilled spirits. After Bacardi U.S.A., Inc. began an advertising campaign in November 2013 using the phrase “Bacardi Untameable” to promote its rum products, Lodestar brought this trademark- infringement suit against Bacardi U.S.A., Inc. and two of its affiliates (collectively, “Bacardi”). The district court entered summary judgment against Lodestar. On appeal in this court, the parties vigorously dispute whether Lodestar used its “Untamed” mark in commerce in the U.S. before Bacardi’s campaign, but we find it unnecessary to decide that issue. Even assuming that Lodestar’s first use of its mark in U.S. commerce occurred after Bacardi’s campaign began, we conclude that, under the distinctive regime
6 LODESTAR ANSTALT V. BACARDI & CO.
established for the Madrid Protocol, Lodestar’s subsequent bona fide use of its registered mark on certain rum products gave rise to a priority of right that it could seek to enforce in an action under the Lanham Act. But Lodestar is still required to satisfy the basic elements of an action for trademark infringement, including a showing that Bacardi’s campaign involved a likelihood of confusion with Lodestar’s bona fide use of its registered mark in commerce. Because Lodestar failed to make that showing, we affirm the district court’s grant of summary judgment.
I
Before turning to the facts of the parties’ dispute, we begin with a brief overview of how registration of trademarks under the Madrid Protocol differs from the ordinary process of trademark registration under the Lanham Act.
A
The basic principle underlying federal and state trademark law is “that distinctive marks—words, names, symbols, and the like—can help distinguish a particular artisan’s goods from those of others” and that the “[o]ne who first uses a distinct mark in commerce” thereby “acquires rights to that mark.” B&B Hardware, Inc. v. Hargis Indus., Inc., 575 U.S. 138, 142 (2015) (emphasis added); see also Hana Fin., Inc. v. Hana Bank, 574 U.S. 418, 419 (2015) (“Rights in a trademark are determined by the date of the mark’s first use in commerce.”); Brookfield Commc’ns, Inc. v. West Coast Ent. Corp., 174 F.3d 1036, 1047 (9th Cir. 1999) (“[A] fundamental tenet of trademark law is that ownership” of a trademark “is governed by priority of use.”). Although “federal law does not create trademarks,” B&B Hardware, 575 U.S. at 142, it does “provide a degree of
LODESTAR ANSTALT V. BACARDI & CO. 7
national uniformity,” Matal v. Tam, 137 S. Ct. 1744, 1751– 52 (2017). In particular, to “help[] to ensure that trademarks are fully protected and [to] support[] the free flow of commerce,” the federal Lanham Act establishes a system of national trademark registration, managed by the U.S. Patent and Trademark Office (“PTO”), to assist in establishing priority of trademark rights. Id. at 1752. “Registration does not create a mark or confer ownership,” however, because “only use in the marketplace can establish a mark.” Miller v. Glenn Miller Prods., Inc., 454 F.3d 975, 979 (9th Cir. 2006). Accordingly, the general rule remains that “[a]ll common law and registration rights” rest on the use-based rule of “first-in-time, first-in-right.” 2 MCCARTHY ON TRADEMARKS AND UNFAIR COMPETITION § 16:1 (5th ed. 2022 Update) (hereinafter “MCCARTHY ON TRADEMARKS”).
Because registration does not itself create trademarks, it is not mandatory and the “owner of an unregistered mark may still use [the mark] in commerce and enforce it against infringers.” Iancu v. Brunetti, 139 S. Ct. 2294, 2297 (2019). But trademark registration under the Lanham Act “confers ‘important legal rights and benefits’ on trademark owners who register their marks.” B&B Hardware, 575 U.S. at 142 (citation omitted). “[R]egistration constitutes ‘prima facie evidence’ of the mark’s validity,” Iancu, 139 S. Ct. at 2297 (quoting 15 U.S.C. § 1115(a)); it provides “‘constructive notice of the registrant’s claim of ownership,’ which forecloses some defenses in infringement actions,” id. at 2297–98 (quoting 15 U.S.C. § 1072); it “can make a mark ‘incontestable’ once a mark has been registered for five years,” Matal, 137 S. Ct. at 1753 (quoting 15 U.S.C. § 1065, 1115(b)) (further citations and internal quotation marks omitted); and it “enables the trademark holder ‘to stop the importation into the United States of articles bearing an infringing mark,’” id. (citation omitted). Obtaining
8 LODESTAR ANSTALT V. BACARDI & CO.
registration thus provides “significant” legal rights that assist in protecting one’s trademarks. B&B Hardware, 575 U.S. at 142.
Under the Lanham Act, the ability to secure registration for a trademark typically depends, as trademark rights generally do, upon actual use of the mark in commerce. Thus, § 1 of the Act has long made registration available to the “owner of a trademark used in commerce,” and it requires an application by any such owner to attest that “the mark is in use in commerce.” 15 U.S.C. § 1051(a)(1), (3) (emphasis added); see also 15 U.S.C. § 1051(a)(1) (1946) (similar). But in 1988, Congress amended § 1 to also allow an application for registration to be filed based on the applicant’s “bona fide intention . . . to use a trademark in commerce.” 15 U.S.C. § 1051(b)(1) (emphasis added). Such an intent-to-use application, however, cannot be granted unless and until the applicant subsequently files a “verified statement that the mark is in use in commerce.” Id. § 1051(d)(1). If that statement is filed within a specified timeframe, 1 then, when registration is granted, the initial date of the intent-to-use application becomes the applicant’s “constructive-use date,” which “gives the applicant priority- of-use over anyone who adopts the mark after [that] date.” Zobmondo Ent., LLC v. Falls Media, LLC, 602 F.3d 1108, 1111 n.3 (9th Cir. 2010). Specifically, § 7(c) of the Act states that, “[c]ontingent on the registration of a mark,” the “filing of the application to register”—which, in the case of an intent-to-use application, will not initially be accompanied by actual use—“shall constitute constructive use of the mark,” thereby conferring a general “right of
1 The verified statement must be filed within six months, absent extension, of the issuance by the PTO of a “notice of allowance” of the intent-to-use application. 15 U.S.C. §§ 1051(d)(1)–(2), 1063(b)(2).
LODESTAR ANSTALT V. BACARDI & CO. 9 priority, nationwide in effect,” as of the date of the application. 15 U.S.C. § 1057(c) (emphasis added).
By giving priority of right based on constructive use rather than actual use, the intent-to-use registration mechanism reflects, to that limited extent, a departure from trademark law’s traditional emphasis on priority of actual use. As the D.C. Circuit has explained, one purpose of the 1988 amendments allowing priority based on such constructive use was to avoid a situation in which a company undertakes potentially costly preparations to develop and use a mark, only to lose priority to others, including trademark “pirates,” who outpace the company in making actual commercial use of the mark. Aktieselskabet AF 21. Nov. 2001 v. Fame Jeans Inc., 525 F.3d 8, 19 (D.C. Cir. 2008) (citation omitted).
The Madrid Protocol, as implemented in the 2002 amendments to the Lanham Act, reflects an additional departure from the traditional emphasis on assigning priority of rights based on actual use. The Protocol establishes an international trademark registration system, and the United States’ participation in that system became operative upon the effective date of a new Title XII of the Lanham Act, which added §§ 60–74 to the statute. See 15 U.S.C. §§ 1141–1141n; see also Pub. L. No. 107-273, § 13403, 116 Stat. 1758, 1920 (2002), 15 U.S.C. § 1141 note (noting that Title XII took effect on Nov. [2], 2003). The Protocol allows holders of trademark rights in their respective countries to “secure protection” for their marks in other contracting parties by obtaining, through their home country’s trademark office, an “international registration” in the “register of the International Bureau of the World Intellectual Property Organization.” See Protocol Relating to the Madrid Agreement Concerning the International
10 LODESTAR ANSTALT V. BACARDI & CO.
Registration of Marks, art. 2, June 27, 1989, T.I.A.S. No. 03- 1102.
For foreign trademark owners who seek to extend protection, under the Protocol, into the United States, Title XII of the Lanham Act provides that any “request for extension of protection of an international registration to the United States that the International Bureau transmits” to the PTO “shall be examined as an application for registration on the Principal Register” under the Lanham Act. 15 U.S.C. §§ 1141f(a), 1141h(a). If “it appears that the applicant is entitled to extension of protection,” then the PTO “shall cause the mark to be published” in its Official Gazette. Id. § 1141h(a). If there is no successful opposition and no grounds for refusal of the request, then the PTO “shall issue a certificate of extension of protection,” which “shall have the same effect and validity as a registration on the Principal Register.” Id. § 1141i(a), (b)(1).
Notably, § 68(a)(3) of the Lanham Act specifically states that “[e]xtension of protection shall not be refused on the ground that the mark has not been used in commerce.” 15 U.S.C. § 1141h(a)(3) (emphasis added). Rather, the PTO may properly file, and subsequently grant, a request for extension of protection so long as the request received from the International Bureau shows that, when that Bureau received it, the request had “attached to it a declaration of bona fide intention to use the mark in commerce.” Id. § 1141f(a). The term “commerce,” as used in the Lanham Act, including this section, “means all commerce which may lawfully be regulated by Congress.” Id. § 1127. Thus, while a request for an extension of protection under the Madrid Protocol is similar to an intent-to-use application in that both may be filed based on a declaration of a bona fide intent to use the mark in U.S. commerce, a request under the Protocol
LODESTAR ANSTALT V. BACARDI & CO. 11
differs from an intent-to-use application in that it may also be granted without first showing actual use in commerce. However, under § 71(a) of the Act, a Madrid Protocol registrant’s failure to file a statement of use in commerce “[w]ithin the 1-year period immediately preceding the expiration of 6 years following the date of issuance of the certificate of extension of protection” will result in the cancellation of the extension of protection. 15 U.S.C. § 1141k(a)(1), (b)(1)(A). And a Madrid Protocol registrant remains subject to the general rule that “[n]onuse for 3 consecutive years shall be prima facie evidence of abandonment.” 15 U.S.C. § 1127. What protection flows from a grant of registration under the Madrid Protocol is one of the disputed issues in this case and is addressed further below.
B
Against this backdrop, we turn to the specific facts of this case.
[*1228]Lodestar is a Liechtenstein company founded in June 2000 by Andre Levy, who remains its chairman. Lodestar describes itself as a “small, independent developer of beverages,” whose business model is to “independently create and develop innovative and unique brands of premium products in areas of growth which can be monetized by selling or licensing to a larger entity.” In 2000–2001, Levy and his wife began developing a brand of Irish whiskey called “The Wild Geese.” Levy explained that the brand was intended to evoke the story of the “Wild Geese, the name given to the Irish Diaspora who were forced to leave Ireland in 1691.” However, when Lodestar sought to secure protection of the “Wild Geese” mark in the U.S. in 2003, its
12 LODESTAR ANSTALT V. BACARDI & CO.
application drew objection from the holder of existing marks for “Wild Turkey” liquor products. After Lodestar lost that dispute, the brand name in the U.S. was changed to “The Wild Geese Soldiers & Heroes” or “The Wild Geese Irish Soldiers & Heroes.” According to Levy, the dispute over the “Wild Geese” mark played out in “34 different countries around the world,” and Lodestar lost only in the U.S. As an outgrowth of that trademark dispute, in around 2008–2009, Lodestar developed the idea for the “Untamed” mark, which Levy said reflected Lodestar’s decision not to give its trademark opponent the “impression” that Lodestar was “in any way, shape, or form tamed by the fact that [it] had lost the one action that they had won.”
On August 19, 2009, the PTO accepted for filing two applications on behalf of Lodestar seeking extension of protection under the Madrid Protocol for internationally registered marks using the word “Untamed.” The two marks, which the parties respectively refer to as the “Untamed Design Mark” and the “Untamed Word Mark,” were depicted as follows in Lodestar’s applications:
The PTO published the marks for opposition in July 2011 and granted the requested extensions of protection on October 4, 2011. Because Lodestar’s applications rested on the Madrid Protocol, it was able to obtain these extensions LODESTAR ANSTALT V. BACARDI & CO. 13 of protection without having to demonstrate that it was using the marks in commerce. See 15 U.S.C. §§ 1141f(a), 1141h(a)(3); see supra at 10–11. Lodestar licensed the relevant trademarks for use by another Levy-controlled entity, which is currently organized under Panamanian law and is known as Avalon International Management, Inc. (“Avalon”). Avalon was assisted in promoting its products by Protégé International (“Protégé”), a Cyprus-based sales agency established by Levy. In April 2009, before Lodestar’s applications concerning the Untamed marks were filed under the Madrid Protocol, Avalon imported 1,529 cases of various varieties of The Wild Geese Irish Soldiers & Heroes whiskey into the U.S., listing itself as the buyer, “c/o MHW Ltd.” (its distributor). In early 2010, while those applications were pending with the PTO, Avalon imported into the U.S. another 1,848 such cases of whiskey, together with an additional 312 cases of smaller bottles of whiskey. As with the prior delivery, Avalon listed itself as the buyer, c/o MHW Ltd. Levy averred that these more than 3,600 cases of whiskey “have been continuously for sale in the U.S. ever since,” but the record does not disclose exactly how many bottles have been sold to U.S. end consumers. An internal Protégé report in July 2013 indicated that sales were “very small and disappointing.” An internal Protégé email to Levy in August 2013 reported that more than 2,200 cases of the larger bottles, which had been produced in 2008–2009, remained in stock and that Protégé had “stopped all active sales efforts for the whiskey.” The packaging of Avalon’s bottles of The Wild Geese Irish Soldiers & Heroes whiskey used the Untamed Design 14 LODESTAR ANSTALT V. BACARDI & CO. Mark, as illustrated by these examples in the district court record: Lodestar’s Untamed Word Mark was also used in advertising The Wild Geese Irish Soldiers & Heroes whiskey as early as 2011. For example, the word “Untamed” was used as a standalone mark in two YouTube advertisements for The Wild Geese Irish Soldiers & Heroes whiskey that were published in 2011. 2 Screenshots of these advertisements are depicted here: By early 2013, Avalon began developing rum products under The Wild Geese Soldiers & Heroes brand, naming them “Premium Rum” and “Golden Rum.” Avalon’s distributor, MHW Ltd., submitted proposed bottle labels for these products to the U.S. Department of the Treasury’s Alcohol and Tobacco Tax and Trade Bureau (“TTB”), in accordance with regulations requiring TTB issuance of a “certificate of label approval” prior to removing imported distilled spirits “from Customs custody for consumption.” See 27 C.F.R. § 5.51(a) (2013); see also 27 U.S.C. § 205(e). TTB issued the respective certificates for the Premium Rum and Golden Rum labels in February and March 2013.
[*1229]The labeling for these new rum products distinctively used Lodestar’s Untamed Word Mark. Specifically, on the Premium Rum’s back label, the word “Untamed” appears in larger text below 26 lines of brand-related smaller text. The Golden Rum’s back label displays the word “Untamed” Meanwhile, at some point in 2012, Bacardi began developing what ultimately became a new advertising campaign for its rum products that would use, in various forms, the phrase “Bacardi Untameable.” An employee at a London-based marketing firm stated that she came up with the concept after being struck by the comment, on Bacardi’s Wikipedia page, that the company had “‘tamed’ rum to be a clear liquid during the distilling process.”
[*1230]Prior to the launch of the campaign, Bacardi & Co. Ltd., the Liechtenstein-based Bacardi affiliate that holds the ultimate rights in Bacardi trademarks, ran a trademark clearance search in January 2013, and that search disclosed Lodestar’s “Untamed” trademarks. In July 2013, Bacardi &
18 LODESTAR ANSTALT V. BACARDI & CO.
Co. Ltd. sought extension of protection in the U.S., under the Madrid Protocol, for its Liechtenstein-registered trademark in the phrase “Bacardi Untameable.” After the PTO published this request for extension of protection in December 2013, Lodestar filed an opposition before the Trademark Trial and Appeal Board (“TTAB”) in April 2014, and Bacardi & Co. Ltd. filed counterclaims seeking cancellation of the Untamed Word and Untamed Design Marks. Further proceedings before the TTAB have been suspended pending the resolution of this suit.
Bacardi proceeded with the launch of the “Untameable” advertising campaign in November 2013. Bacardi never used the term “Untameable” on the labels of any of its products, but only in various forms of advertisements in a variety of media, including television, print publications, outdoor billboards and signs, and digital formats. In these advertisements, the phrase “Bacardi Untameable” was typically coupled with Bacardi’s longstanding “bat” logo and the words “Since 1862.” The following example in the record is illustrative: Shortly after the start of Bacardi’s “Untameable” campaign, Protégé announced on its website that “Untamed Revolutionary Rum” would be “coming soon.” Lodestar conceded below that no such product existed at the time the Bacardi campaign was launched in November 2013, and Levy admitted in a February 2014 email that Untamed Revolutionary Rum was conceived “to complement the Wild Geese Rum and also to combat Bacardi’s attempts to take over our Untamed mark.”
[*1231]Unlike The Wild Geese Soldiers & Heroes rum products, the new “Untamed Revolutionary Rum” included Lodestar’s Untamed Word Mark in the name of the product. MHW submitted labels to TTB for approval in January 2014, and a certificate approving the following labels was issued in March 2014:
20 LODESTAR ANSTALT V. BACARDI & CO.
For several reasons, the district court committed legal error by adopting a categorical temporal rule excluding any consideration of a senior user’s post-infringement use of the mark on additional products.
First, the district court’s bright-line rule is hard to square with the Madrid Protocol regime and the comparable intent- to-use framework on which that regime is partly modeled. As we have explained, Title XII of the Lanham Act grants registration, and rights of priority, to foreign registrants based on a bona fide intent to use the mark in the U.S., without the need to first show actual use in the U.S. See supra at 10–11. Although subsequent actual use of the mark is required before an infringement claim can be asserted, Title XII grants a right of priority to a Madrid Protocol foreign registrant even if that registrant does not actually begin using the mark in commerce until after an alleged infringer has already first begun to do so. A central purpose of the intent-to-use and Madrid Protocol frameworks is to ensure that a company planning to use a mark does not lose that right to a potential infringer who jumps ahead and actually uses the mark first. See supra at 9. It would be fundamentally inconsistent with that purpose to limit the registrant to only those particular uses that it contemplated at the time of its application. The district court’s categorical rule would potentially incentivize so-called “pirates” to make the first use of marks that they see in published intent- to-use or Madrid Protocol applications, because doing so
LODESTAR ANSTALT V. BACARDI & CO. 41
would allow them to box in the applicant by limiting the latter’s ability to reevaluate how it will actually use the mark in the marketplace.
Nothing in the text of Title XII, or any other provision of the Lanham Act, supports the district court’s per se rule. Section 66(a) requires that, in order for an extension-of- protection application to be properly filed with the PTO, it must have “attached to it a declaration of bona fide intention to use the mark in commerce that is verified by the applicant for, or holder of, the international registration.” 15 U.S.C. § 1141f(a). 8 But the Act nowhere states that, if such an application is subsequently granted, the registrant is then limited to only those particular bona fide uses that it contemplated at the time of the making or granting of the application or in its subsequent initial use in the U.S. Instead, the Act states only that, after publication of the mark and resolution of any resulting objections, the PTO “shall issue a certificate of extension of protection,” which then confers the “same rights and remedies as the owner of a registration on the Principal Register.” Id. § 1141i(a), (b)(2).
Second, the district court’s per se rule is difficult to reconcile with the long-understood notion—expressly incorporated into one of the eight Sleekcraft factors—that trademark owners can expand their use of a mark, even in the face of then-existing competing infringing uses. Specifically, the eighth Sleekcraft factor addresses whether there is a “[l]ikelihood of expansion” of competition between the parties. Sleekcraft, 599 F.2d at 354. Because “a trademark owner is afforded greater protection against
8 Bacardi has not contended on appeal that Lodestar did not satisfy this requirement in connection with its application for extension of protection.
42 LODESTAR ANSTALT V. BACARDI & CO.
competing goods, a ‘strong possibility’ that either party may expand his business to compete with the other will weigh in favor of finding that the present use is infringing.” Id. (citation omitted.) And “[w]hen goods are closely related, any expansion is likely to result in direct competition.” Id. (emphasis added). This factor thus takes into account both the possibility that the actions of the junior user may “hinder[]” the senior user’s “expansion plans,” Surfvivor, 406 F.3d at 634, and that trademark holders may properly choose to expand “both geographically and in the products and services that they offer,” Cohn, 281 F.3d at 843; see also Brookfield, 174 F.3d at 1047 (noting that a senior user “has the right to enjoin ‘junior’ users from using confusingly similar marks in the same industry and market or within the senior user’s natural zone of expansion”). It reflects the understanding that the senior user “possesses superior rights in the mark,” regardless of “whether or not [it] has actually expanded its use of its mark, after the commencement of the subsequent user’s use, to goods or services which are the same as or closely related to those of the subsequent user.” Mason Eng’g & Design Corp. v. Mateson Chem. Corp., 225 U.S.P.Q. 956, 1985 WL 72027, at *6 (T.T.A.B. 1985).
Our express acknowledgement that trademark holders may change and expand their uses of their marks—and that they need not be hindered by an infringer’s actions in doing so—further underscores that the district court erred in holding that a use of a mark that “was developed after a competitor’s alleged infringement” should be categorically excluded from the likelihood-of-confusion analysis. See also Carnival Brand Seafood Co. v. Carnival Brands, Inc., 187 F.3d 1307, 1312 (11th Cir. 1999) (noting that the “very existence of the ‘related goods’ or ‘natural expansion’ doctrine contemplates that . . . the senior user may reasonably expand into related goods”).
LODESTAR ANSTALT V. BACARDI & CO. 43 The fact that new, post-infringement uses are not categorically excluded from the likelihood-of-confusion analysis does not mean, however, that such post- infringement uses necessarily stand on the same footing as the senior user’s pre-infringement uses. For one thing, the particular circumstances surrounding each of the senior user’s uses of a mark may affect how the various Sleekcraft factors apply in any given case. But more fundamentally, the Lanham Act generally limits enforceable trademark rights to bona fide uses that reflect genuine commercial endeavors rather than merely efforts to retain rights in a mark. See 15 U.S.C. § 1127. Seizing on that point, Bacardi contends that the Untamed Revolutionary Rum product does not reflect a bona fide use of the mark and should be excluded from the likelihood-of-confusion analysis on that alternative basis. We agree.
Section 45 of the Lanham Act defines “use in commerce” to “mean[] the bona fide use of a mark in the ordinary course of trade, and not made merely to reserve a right in a mark.” 15 U.S.C. § 1127. That definition expressly describes the uses that are ordinarily needed to register a mark, see id. § 1051(a)(3)(C), and it analogously delimits the relevant uses that may give rise to enforceable trademark rights in the context of a regime, such as Title XII, in which registration may be granted in advance of any such use. The definition was amended by Congress in 1988 to overrule then-existing caselaw holding that “‘token use’ was sufficient to satisfy the use requirement and qualify a mark for registration.” Aycock Eng’g, Inc. v. Airflite, Inc., 560 F.3d 1350, 1357 (Fed. Cir. 2009) (citation omitted); see also Chance, 242 F.3d at 1157 (pre-1988 caselaw held that token use was sufficient “so long as it amounted to more than
44 LODESTAR ANSTALT V. BACARDI & CO. a mere sham attempt to conform with statutory requirements”) (citation omitted).
The text of the definition expressly distinguishes between use that is “merely to reserve a right in a mark” and a “bona fide use of a mark in the ordinary course of trade.” 15 U.S.C. § 1127. Several conclusions follow from this statutory language. First, by specifying that the use must be “in the ordinary course of trade,” the statute requires “commercial use of the type common to the particular industry in question.” Chance, 242 F.3d at 1156–57 (citation omitted). Second, the requirement that the use be “bona fide” means that it is done “for genuine commercial reasons” and not “merely to reserve its rights for a lawsuit.” Social Techs., 4 F.4th at 820–21 (emphasis added); see also id. at 817 n.8 (“bona fide” means “genuine, sincere and carried out in good faith”). The use of the word “merely” confirms that an otherwise genuine commercial use is “bona fide” even though one of the purposes of the use is to “reserve a right in a mark.” Every trademark holder presumably intends that its commercial use will operate to protect its rights in its marks, and the mere existence of such a purpose, without more, is not itself sufficient to show that the use of the mark is not “bona fide.” Third, and conversely, a purely ancillary commercial aspect to the use of the mark does not establish a “bona fide” use. Thus, for example, “token” or other insubstantial uses of a mark that are merely undertaken to reserve rights in a mark will not be “bona fide” even if they generate some non-zero amount of sales revenue. Instead, as noted, the use must involve activity of a scope and character that reflects “the ordinary course of trade.” 15 U.S.C. § 1127.
Here, there can be no dispute that at least one of the purposes for Lodestar’s sales of both The Wild Geese
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Soldiers & Heroes rums and Untamed Revolutionary Rum was to reserve Lodestar’s rights in the Untamed Word Mark. Although Lodestar had made substantial efforts towards developing and marketing The Wild Geese Soldiers & Heroes rums well before Bacardi began its “Untameable” campaign in November 2013, it had “decided to park th[at] USA rum project” in June 2013 and did not reactivate those efforts until after the Bacardi campaign started. See supra at 17,, 20–21. Moreover, Lodestar admits that the Untamed Revolutionary Rum product did not even exist in November 2013, and Levy acknowledged in a private email that the product was developed in part “to combat Bacardi’s attempts to take over our Untamed mark.” See supra at 19. The question, then, is whether the record contains sufficient evidence to allow a reasonable jury to find that Lodestar’s post-November 2013 sales activities extend beyond merely reserving rights in the mark and instead reflect ordinary commercial use that is “common to the particular industry in question.” Chance, 242 F.3d at 1157 (citation omitted).
In addressing this question, we note that § 45’s definition of “use in commerce” contains further language explaining when a mark “shall be deemed to be in use in commerce” in the context of the sale of goods and the rendering of services. 15 U.S.C. § 1127. With respect to sales of goods, the relevant language of § 45 states that a mark will be deemed to be used in commerce on goods when (1) “it is placed in any manner on the goods or their containers or the displays associated therewith or on the tags or labels affixed thereto”; and (2) “the goods are sold or transported in commerce.” Id. 9 Consistent with this language, we have stated that a “The purpose of examining the strength of the plaintiff’s mark is to determine the scope of trademark protection to which the mark is entitled. The more unique the mark, the greater the degree of protection.” Surfvivor, 406 F.3d at 631 (citation and footnote omitted). In reverse confusion cases, we compare “the conceptual strength of [the plaintiff’s] mark[] . . . to the commercial strength of [the defendant’s] mark.” JL Beverage Co. v. Jim Beam Brands Co., 828 F.3d 1098, 1107 (9th Cir. 2016). Here, Lodestar does not dispute the district court’s conclusion that the Bacardi Untameable campaign was “commercially robust,” but it challenges the court’s holding that Lodestar’s Untamed Word Mark was conceptually weak.
“To determine a mark’s conceptual strength, we classify a mark along a spectrum of five categories ranging from strongest to weakest: arbitrary, fanciful, suggestive, descriptive, and generic.” JL Beverage, 828 F.3d at 1107. We have described the categories as follows:
Arbitrary and fanciful marks, which employ words and phrases with no commonly understood connection to the product, are the two strongest categories, and “trigger the highest degree of trademark protection.” In the middle of the spectrum are suggestive marks, which suggest a product’s features and require consumers to exercise some imagination to associate the suggestive mark with the product. Descriptive and generic marks, at the other end of the spectrum, are the two weakest categories. Descriptive marks define a particular characteristic of the product in a way that does not require any
52 LODESTAR ANSTALT V. BACARDI & CO. imagination, while generic marks describe the product in its entirety and are not entitled to trademark protection.
Id. (citations omitted). Here, the district court concluded that the Untamed Word Mark was “more suggestive than arbitrary,” a finding it based primarily on evidence that third parties have often used “the word ‘untamed’ in connection with alcohol.” We agree with the district court’s conclusion that no reasonable jury could find that the Untamed Word Mark is arbitrary.
“An arbitrary mark . . . uses common words in a fictitious and arbitrary manner to create a distinctive mark which identifies the source of the product.” Dreamwerks, 142 F.3d at 1130 n.7. Because such a mark “neither describes nor suggests anything about the nature” of the goods, 2 MCCARTHY ON TRADEMARKS § 11:11, “the trademark holder must work hard to make consumers associate the trademark with the product,” Dreamwerks, 142 F.3d at 1130 n.7. As a result, an arbitrary mark “deserve[s] wide protection because the trademark holder can properly expect to run into very little confusion from honest competitors.” Id.; see also Stork Rest. v. Sahati, 166 F.2d 348, 355 (9th Cir. 1948) (holding that “The Stork Club” was an arbitrary trade name because a stork was “in no way descriptive of the appellant’s night club”). The expert opinion evidence presented by Lodestar does not support a finding that “Untamed” is an arbitrary mark under these standards.
Lodestar’s expert rested his conclusion that the mark was “arbitrary” on the fact that the term “Untamed” “clearly do[es] not describe the product—namely rum” and, in ordinary usage, is more commonly associated with the
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category of “nature,” including animals and lands. We agree that the Untamed Word Mark is not “descriptive,” but Lodestar’s expert provided no adequate, non-conclusory basis for concluding that the mark was arbitrary rather than suggestive. By contrast, Bacardi submitted evidence of what the district court described as “27 labels approved by the Alcohol and Tobacco Tax and Trade Bureau between December 2005 and January 2018 which feature the word ‘Untamed,’” as well as several pieces of promotional material in which the word “untamed” is used to describe alcohol. As the district court noted, the fact that numerous other alcoholic beverage sellers, on dozens of other occasions, chose to use a particular word in their marketing materials weighs heavily against the notion that the connection between that term and such products is “arbitrary.” See M2 Software, 421 F.3d at 1088 (“Use of similar marks by third-party companies in the relevant industry weakens the mark at issue.”). 11 Consumers must exercise some imagination (but not much) to associate the term “Untamed” with the image of a hard liquor—reflecting, perhaps, how its consumption might make one feel. We therefore agree with the district court that the Untamed Word “Similarity of the marks is tested on three levels: sight, sound, and meaning,” and “[e]ach must be considered as they are encountered in the marketplace.” Sleekcraft, 599 F.2d at 351; see also M2 Software, 421 F.3d at 1082 (stating that, in assessing this factor, the mark must be viewed “as a whole, as it appears in the marketplace”) (citation omitted). As the district court recognized, Lodestar’s expert failed properly to address how consumers would encounter the Untamed Word Mark in the marketplace, because the expert only considered the “Untamed Revolutionary Rum,” in which the mark appeared prominently in the name of the product. As to The Wild Geese Soldiers & Heroes rums, however, the “Untamed” mark appeared only on the back label, below a considerable
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amount of writing. See supra at 15–16. We have recognized that, when (as here), two parties use the same or similar marks “merely as a tagline to their distinctive business names,” the subordinate position of that tagline mark to their “housemarks” weighs against a likelihood of confusion. Cohn, 281 F.3d at 842. On this record, the district court properly concluded that “the manner in which consumers actually encountered [the] marks weighs against any likelihood of confusion.”
In a reverse confusion case such as this one, the “defendant’s intent in selecting the mark” may weigh in favor of confusion in a variety of different ways, depending upon the nature of the potential for confusion shown by the circumstances. Marketquest Grp. v. BIC Corp., 862 F.3d 927, 934 (9th Cir. 2017). A relevant intent may be shown “by evidence that, for example, the defendant knew of the mark, should have known of the mark, intended to copy the plaintiff, failed to conduct a reasonably adequate trademark search, or otherwise culpably disregarded the risk of reverse confusion.” Id. at 934–35; see also Surfvivor, 406 F.3d at 634 (“‘[W]here the alleged infringer adopted his mark with knowledge, actual or constructive, that it was another’s trademark,’ resolution of this factor favors [the plaintiff].”) (citation omitted).
Because it is undisputed that Bacardi knew about the Untamed Word Mark prior to its campaign, the district court erred in concluding that the intent factor did not weigh, on balance, in Lodestar’s favor. We recognize that, from the time that Bacardi learned of Lodestar’s mark to the time that Bacardi began its campaign, Lodestar had made little use (if any) of the Untamed Word Mark in U.S. commerce. See supra at 15–17. While that is a mitigating consideration to
56 LODESTAR ANSTALT V. BACARDI & CO.
be considered in the overall balance of the Sleekcraft factors, the district court erred in concluding that this factor did not weigh in favor of a likelihood of confusion. Ironhawk Techs., 2 F.4th at 1167–68; Marketquest, 862 F.3d at 934– 35; Surfvivor, 406 F.3d at 634.
Lodestar does not challenge on appeal the district court’s assessment of the other five Sleekcraft factors, which we briefly summarize:
• Given that Lodestar and Bacardi both used their respective marks in the marketing of rum, the factor addressing proximity of the goods weighed in favor of a likelihood of confusion.
• Because Lodestar’s The Wild Geese Soldiers & Heroes rums were a previously developed product line that would compete with Bacardi’s rum, there is no issue here concerning a likelihood of expansion of product lines.
• As to the evidence-of-confusion factor, the district court concluded that, because Lodestar was unable to identify “any U.S. consumers who were confused as to the source of its products”—despite Bacardi’s approximately three-and-a-half-year advertising campaign—this factor weighed “slightly against any likelihood of confusion.”
• Given that (1) Bacardi used the “Bacardi Untameable” mark only in advertisements that were displayed in a variety of media that Lodestar did not use; and (2) Lodestar used the “Untamed” mark predominantly on the back label of its The Wild
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Geese Soldiers & Heroes rums, the district court held that the marketing-channels factor also weighed “slightly against a likelihood of confusion.”
• In view of the parties’ failure to present a “consumer survey tailored to the products at issue in this case” or other relevant evidence, the district court held that the factor addressing the care with which consumers make purchases of the relevant product was neutral.
Considering all of the Sleekcraft factors together, we conclude that, despite the district court’s specific errors with respect to two of those factors, the record nonetheless confirms that no reasonable trier of fact could “find that confusion is ‘probable,’ not merely ‘possible.’” M2 Software, 421 F.3d at 1085 (citation omitted). Although the commercial strength of Bacardi’s campaign weighs in favor of a likelihood of confusion with respect to Lodestar’s competing rum, which bore a similar suggestive mark of which Bacardi was culpably aware, these factors are overwhelmingly offset by the fact that consumers would “encounter the trademarks differently in the marketplace,” the companies’ “marketing efforts [were] concentrated in different media,” and Lodestar “presented no evidence of actual confusion” among consumers of its products. Cohn, 281 F.3d at 842.
Accordingly, Lodestar’s claims under § 32 and § 43 of the Lanham Act fail as a matter of law. Because Lodestar has not contended that the non-monetary portion of its UCL claim could survive in the absence of a likelihood of confusion, that claim was properly dismissed as well. We
58 LODESTAR ANSTALT V. BACARDI & CO. affirm the district court’s grant of summary judgment to Bacardi. [12]
AFFIRMED.