In the past year, the Ninth Circuit Court of Appeals appears to have narrowed the application of the reverse confusion doctrine.  Many companies are familiar with the traditional trademark infringement known as “forward confusion.”  See Lanham Act, 15 U.S.C. §§ 1051 et seq.  Forward confusion occurs when the use of a trademark by a second party (a junior user) is likely to lead consumers to mistakenly believe the junior user’s goods emanate from or are associated with the first (or senior) user of the mark.  Such confusion allows the junior user to trade on and benefit from the reputation and goodwill of the senior user, whether intentional or not.  In launching new brands, companies also should keep in mind another form of trademark infringement recognized under the Lanham Act – “reverse confusion.”

The doctrine of reverse confusion was first applied in 1976 and has since been recognized by most courts.  See Big O Tire Dealers, Inc. v. Goodyear Tire & Rubber Co., 408 F. Supp. 1219 (D. Colo. 1976), aff’d and award modified, 561 F.2d 1365 (10th Cir. 1977), cert. dismissed, 454 U.S. 1052 (1978).  Reverse confusion occurs when a junior user engages in such extensive promotion of goods under a mark that the market is swamped, resulting in a likelihood that consumers will mistakenly believe the senior user’s goods are associated with the junior user.  "In a reverse confusion situation, rather than trying to profit from the senior user’s mark, the junior user saturates the market and ‘overwhelms the senior user.’"  3 J. Thomas McCarthy, McCarthy on Trademarks and Unfair Competition § 23:10 (2006).  Accordingly, reverse confusion occurs when a more powerful company uses the mark of a smaller, less powerful senior user.  By way of illustration:  Company J is a large shoe manufacturer and retailer that is well-known by consumers.  Company J adopts and begins to sell shoes under the mark "TIPTOE."  As part of the launch of its new "TIPTOE" line of shoes, Company J engages in a media blitz to promote the shoes.  Company S, a small and lesser known manufacturer of shoes, has been manufacturing and selling shoes under the mark "TIPTOES" for a number of years and long before Company J adopted its new brand.  As a result of Company J’s marketing campaign and the familiarity of consumers with Company J’s product, consumers are likely to mistakenly believe Company S’s "TIPTOES" shoes are associated with Company J.  This is the classic reverse confusion scenario.

The doctrine of reverse confusion is intended to enable small, senior users to protect their trademark rights against junior users whose marks have gained commercial strength through extensive marketing.  Accordingly, since a senior user may only learn of the junior use of the mark through the junior user’s advertising campaign, the application of the doctrine may result in the loss to the junior user of substantial sums already invested in the marketing and promotion of goods under the mark and, in some cases, loss of profits in the form of damages.  Reverse confusion, therefore, can be a powerful weapon in the arsenal of lesser known companies both in terms of protecting their trademark rights and as leverage against larger users.

Corporations should take heart, however, that the reverse confusion doctrine is not the windfall to small, unknown companies that it may first appear to be.  In practice, courts apply the theory of reverse confusion in relatively narrow circumstances.  This narrow application is the result, at least in part, of what appears to be three trends among courts entertaining claims of reverse confusion.  First, the central question in a case of reverse confusion is whether the junior user’s mark is sufficiently strong that it will overwhelm the senior user.  In the Ninth Circuit Court of Appeals, for example, the inquiry into the strength of the marks focuses on a comparison of the conceptual strength of the senior user’s mark with the commercial strength of the junior user’s mark.  Surfvivor Media, Inc. v. Survivor Productions, 406 F.3d 625, 631 n.3 (9th Cir. 2005); Dreamwerks Prod. Group, Inc. v. SKG Studio, 142 F.3d 1127, 1130-31 (9th Cir. 1998); Moose Creek, Inc. v. Abercrombie & Fitch Co., 331 F. Supp.2d 1214, 1224 (C.D. Ca. 2004).  Unless the senior user’s mark is conceptually strong – that is, fanciful or arbitrary – and the junior user’s mark is commercially strong – that is, widely known to consumers due to extensive marketing, promotion and advertising of goods under the mark – courts are unlikely to sustain a claim for reverse confusion.  Second, the application of reverse confusion by most courts is highly fact-specific.  Third, some plaintiffs have urged in reverse confusion cases that the likelihood of confusion analysis be limited to three factors (strength of the marks, similarity of the marks and similarity of the goods).  Nonetheless, courts have been reluctant to so limit their analyses and, instead, generally consider all of the likelihood of confusion factors in assessing whether reverse confusion exists.  Accordingly, plaintiffs have been unable to rely only on certain factors that weigh in their favor while ignoring other factors that weigh against a finding of a likelihood of confusion.

For example, in Glow Industries, Inc. v. Lopez, Glow Industries claimed that Jennifer Lopez and Coty infringed its trademark "GLOW," under which it sold bath and beauty products.  252 F. Supp.2d 962 (C.D. Ca. 2002).  Lopez and Coty launched a line of perfume and beauty products under the mark "GLOW BY J.LO" and accompanied the launch with extensive advertising and marketing of the "GLOW BY J.LO" products.  The Court determined that the "GLOW" mark was suggestive and, therefore, a relatively weak mark conceptually.  In addition, the term "glow" enjoys widespread trademark use by third parties in the beauty industry, further limiting its strength.  Although Lopez and Coty had swamped the market and the "GLOW BY J.LO" mark was commercially stronger than the plaintiff’s mark, the "GLOW" mark simply was not conceptually strong enough for a finding of reverse confusion.  Glow Industr., Inc., 252 F. Supp.2d at 1003.  By comparing the conceptual strength of the senior user’s mark with the commercial strength of the junior user’s mark, the Court noted that it "avoids the anomalous result against which defendants caution – i.e., that a small plaintiff with a weak mark will be able more easily to prove likelihood of confusion than a large company with a strong distinctive mark and high market penetration."  Id. at 987 n.12.  Moreover, the Court engaged in a full analysis of all of the likelihood of confusion factors in determining whether reverse confusion existed.

In a relatively recent case, the Ninth Circuit Court of Appeals appears to have narrowed the application of the reverse confusion doctrine even further.  In M2 Software, Inc. v. Madacy Entertainment, the Ninth Circuit upheld the District Court’s jury instruction that reverse confusion occurs when "consumers doing business with the senior user mistakenly believe that they are dealing with the larger user."  421 F.3d 1073, 1089 (9th Cir. 2005), cert. denied, 126 S. Ct. 1772, reh’g denied, 126 S. Ct. 2885 (2006).  The Court rejected the argument that the term "dealing with" is too narrow and that reverse confusion occurs in the broader context of when a consumer mistakenly believes there is an affiliation, connection or association between two trademark users.  Id.  Unless the Ninth Circuit further clarifies this ruling in a subsequent decision, the M2 Software decision may be yet another avenue through which trial courts may limit the application of the reverse confusion doctrine.

While any company launching a new brand should conduct due diligence to ensure the mark it wishes to adopt is not already in use, the potential that it could be stopped mid-launch from using its newly adopted brand is not as great as one might think.  Instead, the standard a smaller, senior user must meet to prevail on a claim of reverse confusion is relatively high and may make the reverse confusion "tool" one that is a little less attractive to employ.