Saturday, July 3, 2010

Slash It! Eleventh Circuit Reverses Summary Judgment in Trademark Case Involving Auto Dealer Promotions

 The Eleventh Circuit reversed summary judgment in a recent trademark infringement action involving service marks related to advertising promotions for car dealerships. Caliber Automotive Liquidators, Inc. v. Premier Chrysler, Jeep Dodge, LLC, 605 F. 3d 931 (11th Cir. 2010).

Caliber Automotive Liquidators, Inc. provides advertising promotions to car dealerships and owns service marks on "Slash-It! Sales Event" and "Slasher Sale." Its services are designed to quickly reduce a dealer's existing inventory at dealerships around the country.  Caliber swoops in to the market and starts two weeks before a sale assisting with a market saturation advertising campaign.  Days before the sale a team arrives to prepare the dealership, putting up marketing paraphernalia and motivating the staff.  During the sale prices are visibly "slashed" by the dealer.  Successful campaigns shrink dealer inventory over weekend "blow-outs." 

Premier Automotive Group uses its own marketing - an infomercial called the "Slasher Show" - to sell cars. The advertisements market drastically reduced prices.  Along with the Slasher theme the show included a Slasher Countdown, a Slasher Man, voices screaming "slash-it" and on camera use of the term "slash-it."  After the infomercials ran, the evidence showed that several Caliber customers were confused about the source of the show.  For example, Caliber had done exclusive campaigns for Bill Heard Dealerships and two dealership general managers saw the show and became angry thinking that Caliber had breached an exclusive use of slasher sales in Georgia.  One of them actually canceled a Caliber Slash-It! event.  Caliber sued Premier in the Northern District of Georgia under both federal and state law, claiming infringement.

The district court applied the familiar seven factor test for likelihood of confusion in the Eleventh Circuit.  The court decided that (1) similarity of marks and (2) "slight" actual confusion weighed in favor of likelihood of
 confusion, (3) similarity in advertising was neutral, and (4) strength of mark, (5) similarity of events (6) similarity of sales method and (7) intent, all weighed against likelihood of confusion.  According to the  appellate court, the district judge, after "tallying the score," found that no reasonable jury could find likelihood of confusion.  Persuaded that the district court erred in (1) its measure of confusion of Caliber's customers by Premier's advertising and (2) in the weight it gave an incontestible mark, the Eleventh Circuit reversed and remanded for trial. 

Regarding the measure of customer confusion, there were two groups considered:  (1) Caliber's car dealer customers and (2) retail car buying consumers.  The appellate court found that the district court had focused too much on the fact that the slasher show did not confuse Premier's retail customers, and not enough on the fact that there was evidence that the relevant customer population for Caliber, car dealerships, was actually confused.  Noting that of all the seven factors, actual confusion is the best evidence, the court stated that the mark holders customers "turn the key" in the confusion analysis.  In the court's eyes the people confused, Caliber customers, were precisely those whose confusion is most significant.  Thus it was erroneous to only find "slight" confusion. 

Second, the district court found that Caliber's marks were relatively weak, descriptive with no secondary meaning. Thus, it held that this factor weighed against likelihood of confusion.  First, there are four types of marks from weakest to strongest, generic, descriptive, suggestive and arbitrary.  Caliber's marks are basically descriptive, a weaker strength of mark.  A descriptive mark is protected only when secondary meaning is shown, in other words, when the public associates the services with a particular provider.  A descriptive mark must be shown to have secondary meaning to be registered as a trademark.  Once registered, however, after five years the holder can file an affidavit and have the mark declared incontestible.  In this case, Caliber's marks were incontestible.  Under Eleventh Circuit precedent, incontestible status is a factor to be considered in likelihood of confusion analysis, and an incontestible mark is presumed to be at least descriptive with secondary meaning.  Thus, it is automatically a relatively strong mark.  In failing to properly weigh the incontestible mark as having secondary meaning, the district court made an error.

Because the two elements that are the most important are the strength of the mark and actual confusion, the court found these two errors highly significant.  Nonetheless, taking a shot at the district court, the appellate court noted that the seven factor test entails more than the mechanistic summation of the number of factors on each side.  Given the earlier comment of the court that the district court had tallied the score of the factors on each side, this was clearly a rebuke directed at the district court against such a mechanical use of the factors.  Because of the sufficiency of the evidence of the strength of its marks and actual confusion, Caliber had done enough to avoid summary judgment.  The case was sent back for trial. 

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