PlayNation Play Systems, Inc. v. Velex Corporation

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[PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT
________________________
No. 17-15226
________________________
D.C. Docket No. 1:14-cv-01046-RWS
PLAYNATION PLAY SYSTEMS, INC.,
d.b.a. Gorilla Playsets,
Plaintiff - Appellee,
versus
VELEX CORPORATION,
d.b.a. Gorilla Gym,
Defendant - Appellant.
________________________
Appeal from the United States District Court
for the Northern District of Georgia
________________________
(May 21, 2019)
Before WILSON, BRANCH, and ANDERSON, Circuit Judges.
WILSON, Circuit Judge:
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The parties to this appeal both chose a gorilla as the face of their respective
brands. Litigation ensued. PlayNation Play Systems, Inc. sued Velex Corporation
for trademark infringement. The district court conducted a bench trial and entered
judgment for PlayNation. Velex now appeals, arguing that the district court erred
in finding trademark infringement, awarding damages to PlayNation, and
cancelling Velex’s trademark registration. After careful review and with the
benefit of oral argument, we affirm the district court’s decisions on Velex’s
liability for trademark infringement and cancellation of Velex’s trademark. We
vacate and remand, however, on the district court’s determination of damages
based on Velex’s willful infringement.
I. Factual Background
PlayNation has sold children’s outdoor playground equipment, including
swing sets and attachable swings, ropes, and rings, under its “Gorilla Playsets”
brand since 2002. PlayNation owns three registered trademarks for Gorilla
Playsets, two registered in 2004 and another in 2014. 1 Velex sells “Gorilla Gym”
doorway pull-up bars and various attachable accessories for children, including
1
PlayNation’s mark:
2
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swings, ropes, and rings, under its “Gorilla Gym” brand. Velex successfully
registered a trademark for Gorilla Gym in 2014. 2 Both PlayNation and Velex’s
trademarks are registered in Class 28, the broad class of goods for games and other
playthings.
II. Trademark Infringement
Velex first argues that the district court erred by concluding that consumers
would likely be confused by Velex’s use of the Gorilla Gym mark. In an appeal
from a bench trial, we review a district court’s conclusions of law de novo and its
factual findings for clear error. Tartell v. S. Fla. Sinus & Allergy Ctr., Inc., 790
F.3d 1253, 1257 (11th Cir. 2015). A factual finding is clearly erroneous if, after
viewing the totality of the evidence, the court is left with a definite and firm
conviction that a mistake was made. Id.
Under the Lanham Act, 15 U.S.C. § 1114(1), a defendant is liable for
trademark infringement if the plaintiff shows (1) that its mark has priority and (2)
that the defendant’s mark is likely to cause consumer confusion. Frehling Enter.,
Inc. v. Int’l Select Grp., Inc., 192 F.3d 1330, 1335 (11th Cir. 1999). Velex
2
Velex’s mark:
3
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stipulated to the priority of PlayNation’s mark. We thus need only consider
whether the district court clearly erred in finding that Velex’s mark was likely to
cause consumer confusion. In making that determination, we weigh seven factors:
(1) the strength of the plaintiff’s mark; (2) the similarity of the marks; (3) the
similarity of the products the marks represent; (4) the similarity of the parties’
retail outlets and customers; (5) the similarity of advertising media; (6) the
defendant’s intent; and (7) actual confusion. Lone Star Steakhouse & Saloon, Inc.
v. Longhorn Steaks, Inc., 122 F.3d 1379, 1382 (11th Cir. 1997).
We review for clear error both a district court’s ultimate decision on
likelihood of confusion and its findings on each factor. Frehling, 192 F.3d at
1335. Of these factors, the strength of the mark and actual confusion are the most
probative. Id. The district court held that each factor except the defendant’s intent
weighed in favor of confusion. Velex challenges the district court’s determination
on the other factors and argues that the district court should have adopted two new
factors.
A. Strength of PlayNation’s Mark
“Classifying the type of mark Plaintiff has determines whether it is strong or
weak. The stronger the mark, the greater the scope of protection accorded it, the
weaker the mark, the less trademark protection it receives. There are four
categories of marks: (1) generic, (2) descriptive, (3) suggestive, and (4) arbitrary.”
4
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Frehling, 192 F.3d at 1335 (internal citations omitted). Suggestive marks are
stronger and accordingly receive greater protection. Id. “Suggestive marks subtly
connote something about the service so that a customer could use his or her
imagination and determine the nature of the service.” Freedom Sav. Loan Ass’n v.
Way, 757 F.2d 1176, 1182 n.5 (11th Cir. 1985). The district court determined that
PlayNation’s Gorilla Playsets mark was “descriptive or suggestive.” The products
PlayNation sells under the mark are, of course, not designed for or used by gorillas.
At a minimum, the connection between the mark and the product requires some
imagination. See Caliber Auto. Liquidators, Inc. v. Premier Chrysler, Jeep,
Dodge, LLC, 605 F.3d 931, 938 (11th Cir. 2010) (“A suggestive mark refers to
some characteristic of the goods, but requires a leap of the imagination to get from
the mark to the product [e.g., Penguin Refrigerators].”) (quotation marks omitted).
The district court also reasoned that other factors increased the strength of
PlayNation’s mark. See Frehling, 192 F.3d at 1336. First, PlayNation has
extensively used the mark in commerce since 2002. PlayNation engaged in
significant nationwide advertising and promotion using its Gorilla Playsets mark.
The district court found that this widespread use indicated consumer recognition,
which enhances the strength of a mark. See John H. Harland Co. v. Clarke
Checks, Inc., 711 F.2d 966, 974 n.13 (11th Cir. 1983) (noting that a mark may, “by
reason of subsequent use and promotion, acquire such distinctiveness that it can
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function as a significant indication of a particular producer as source of the goods
with which it is used”). 3
Second, the parties agree that PlayNation’s mark has been registered with
the Patent and Trademark Office for at least five years and is thus incontestable.
Frehling, 192 F.3d at 1336. An incontestable mark “is presumed to be at least
descriptive with secondary meaning, and therefore a relatively strong mark.”
Dieter v. B & H Indus. of Southwest Fla., Inc., 880 F.3d 322, 329 (11th Cir. 1989);
see also Frehling, 192 F.3d at 1336.
Finally, the lack of extensive third-party use also strengthens PlayNation’s
mark. Frehling, 192 F.3d at 1336. Velex argues that the mark is weak because
roughly thirty other registered marks in Class 28 contain the word “gorilla.” But
none of those gorilla marks were used on play equipment. And similar marks used
by third parties in unrelated businesses or markets do not diminish the strength of a
mark in a particular market. See Safeway Stores, Inc. v. Safeway Disc. Drugs, Inc.,
3
We have held that “in isolation, evidence of promotion efforts is not sufficient to establish a
mark’s commercial strength because it tells us precious little about the efficacy of those efforts in
creating marketplace recognition . . . .” Fla. Int’l Univ. Bd. of Trustees v. Fla. Nat’l Univ., Inc.,
830 F.3d 1242, 1259 (11th Cir. 2016) (first emphasis added) (holding that “[t]here simply was
not sufficient evidence of commercial strength in the record to require the district court to ignore
the substantial third-party usage.”). But this “circumstantial evidence of advertising and
promotion,” id. (quotations omitted), is not the only evidence of the strength of PlayNation’s
mark. Accordingly, the district court did not err in finding PlayNation’s advertising and
promotion expenditures contributed to the strength of its mark.
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675 F.2d 1160, 1167 (11th Cir. 1982) (finding that twenty marks containing one of
the same words as the plaintiff’s mark did “not significantly diminish the strength
of the [plaintiff’s] mark” because the other marks were used by “businesses not
closely related” to the plaintiff’s business), abrogated on other grounds, Tobinick
v. Novella, 884 F.3d 1110 (11th Cir. 2018); cf. Sovereign Military Hospitaller
Order of Saint John of Jerusalem of Rhodes & of Malta v. Fla. Priory of the
Knights Hospitallers of the Sovereign Order of Saint John of Jerusalem, Knights of
Malta, The Ecumenical Order, 809 F.3d 1171, 1186 (11th Cir. 2015) (“That other
organizations use parts of the Sovereign Order’s word marks is not persuasive
evidence of third-party use.”).
The district court did not clearly err in determining that PlayNation’s Gorilla
Playsets mark was strong.
B. Actual Confusion
“It is undisputed that evidence of actual confusion is the best evidence of a
likelihood of confusion.” Frehling, 192 F.3d at 1340. The actual confusion
inquiry turns on both the number of instances of confusion and the type of person
confused. Caliber Auto., 605 F.3d at 936. While numerous instances of actual
confusion add greater weight in favor of confusion, “the quantum of evidence
needed to show actual confusion is relatively small.” Id. at 937 (quotation marks
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omitted). Evidence that ultimate consumers were actually confused deserves
“special attention.” Id. at 936–37.
The district court determined that the actual confusion factor weighed in
favor of a likelihood of confusion. PlayNation produced two ultimate purchasers
of PlayNation’s Gorilla Playsets swing sets who contacted Velex for customer
service. The consumers believed Velex manufactured both Gorilla Gym and
Gorilla Playsets products. Consumers also posted on retail websites selling Gorilla
Playsets swings and trapeze bars asking if those items work “with the Gorilla Gym
indoors.” Velex argues this evidence was insufficient to establish actual confusion
because the two consumers were careless and uninformed. 4 Velex points to
portions of the consumers’ testimony in which they confuse the names of the two
companies and misremember which name was on the packaging and website they
looked at before calling Velex. Velex asserts that a prudent consumer would have
4
Velex argues that the two consumers calling the wrong phone number amounts to “initial
interest confusion,” a doctrine we have not yet accepted as actionable under the Lanham Act.
See Suntree Tech., Inc. v. Ecosense Intern., Inc., 693 F.3d 1338, 1347 (11th Cir. 2012). But
Velex misunderstands initial interest confusion, which occurs when an alleged infringer pulls a
sort of bait and switch. The infringer uses another’s trademark (or an imitation of it) to capture
consumers’ initial interest, leading the consumers to the infringer’s website or call center, for
example. But then the consumers, aware they are not actually dealing with the trademark holder,
decide to purchase the infringer’s other good or service. See N. Am. Med. Corp. v. Axiom
Worldwide, Inc., 522 F.3d 1211, 1221 (11th Cir. 2008). That situation did not occur here. These
were instances of source confusion. The consumers testified that they believed Gorilla Gym and
Gorilla Playsets were produced by the same company. See id. at 1222 n.9 (“‘Source confusion’
exists because consumers are likely to be confused as to whether [the infringer’s] products have
the same source or sponsor as [the trademark holder’s] or whether there is some other affiliation
or relationship between the two.”).
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examined the packaging, read the product warranty, or researched the product on
the internet. Velex argues that had the consumers been so diligent, they would
have discovered that PlayNation—not Velex—manufactured the product they
purchased.
First, nothing in the actual confusion analysis requires the plaintiff to
produce the most careful consumer, who diligently researched and meticulously
examined the inner and outer packing to determine the provenance of the product
she purchased. It only requires that the consumers be reasonably prudent. The
district court found the consumers’ testimony probative. That the district court
made that determination even though the two witnesses confused the names of the
two brands or failed to examine the packing before mistakenly calling Velex for
help does not amount to clear error.
Second, the number of instances and the type of consumer also support the
district court’s actual confusion finding. The customers PlayNation identified are
ultimate consumers of the product, to which we give special weight. And the
number of instances need not be large to be probative of confusion. See Safeway
Stores, 675 F.2d at 1167 (finding one instance of actual customer confusion
sufficient and holding that “[a]lthough the number of instances is small, the people
confused are precisely those whose confusion is most significant”).
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The district court thus did not clearly err in holding that the actual confusion
factor weighed in favor of a likelihood of confusion.
C. Similarity of Marks
To determine if two marks are similar, the court “considers the overall
impressions that the marks create, including the sound, appearance, and manner in
which they are used.” Frehling, 192 F.3d at 1337. The dominant portion of both
marks is an image of a large gorilla and the word “gorilla.” The other words,
“playset” in one and “gym” in the other, are very similar and do not contribute to
distinctiveness. See id. (holding that “a mark may be surrounded by additional
words of lesser importance and not have its strength diluted”). The colors and
fonts are different, and the gorillas are in different areas and positions in the marks.
But even so, given the similarity in the type of gorilla, size of gorilla, and the
almost indistinguishable words used in the two marks, those differences do not
make the district court’s decision clearly erroneous.
D. Similarity of Products, Retail Outlets, and Advertising
The district court did not clearly err in finding that the products, retail
outlets, and advertising of PlayNation and Velex were sufficiently similar to weigh
in favor of confusion. First, the products are highly similar. The test for similar
products is “whether the products are the kind that the public attributes to a single
source, not whether or not the purchasing public can readily distinguish between
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the products of the respective parties.” Frehling, 192 F.3d at 1338. Velex argues
that it sells only outdoor products, while PlayNation sells only indoor products.
But the question is not whether there is a distinguishing characteristic, but whether
the goods are so related that a consumer would believe that a single producer made
both. See E. Remy Martin & Co., S.A. v. Shaw-Ross Int’l Imports, Inc., 756 F.2d
1525, 1530 (11th Cir. 1985) (holding that it was not unreasonable for consumers to
conclude that a maker of wine could also produce brandy). Both PlayNation and
Velex sold a core unit with separate attachable accessories for children, including
swings, ropes, and rings. These are sufficiently similar to support the district
court’s finding.
Second, the retail outlets are similar. “This factor takes into consideration
where, how, and to whom the parties’ products are sold.” Frehling, 192 F.3d at
1339. But “[d]irect competition between the parties is not required for this factor
to weigh in favor of likelihood of confusion.” Id. Both Playnation and Velex sold
their products through substantially similar retail outlets, including big box stores,
their own websites, and other online retailers like Amazon and Walmart. Velex
argues that because PlayNation also sells its products through dealers, their retail
outlets are dissimilar. But here again, exact parallels are not required, and one
distinct retail outlet does not amount to clear error.
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Third, PlayNation and Velex engaged in similar advertising. “This factor
looks to each party’s method of advertising.” Id. at 1339. “[T]he standard is
whether there is likely to be significant enough overlap in the readership of the
publications in which the parties advertise that a possibility of confusion could
result.” Id. at 1340. PlayNation and Velex both advertised using their own
websites, television, and the internet—including Google and Amazon keyword
advertising, Facebook, and YouTube.
While there may be some evidence to support dissimilar products, retail
outlets, and advertising, they are not enough to compel an alternative finding under
clear error review.
These factors are not exclusive. Courts do not have to consider every factor
in every case. Swatch Watch, S.A. v. Taxor, Inc., 785 F.2d 956, 958 (11th Cir.
1986). Courts may also consider other probative evidence that does not fit within
the factors. Id.
E. New Factors
Velex proposes two new factors the district court should have considered:
first, that Velex had a valid federal trademark registration that covered the
infringing products, and second, that PlayNation failed to produce survey evidence
suggesting consumer confusion.
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To support adoption of its first proposed factor, Velex argues that it ought to
have the right to rely on decisions of the government—here, the Patent and
Trademark Office (PTO). Velex relies on the Supreme Court’s decision in B&B
Hardware, Inc. v. Hargis Indus., Inc., 135 S. Ct. 1293 (2015). In B&B Hardware,
the Supreme Court held that the likelihood of confusion standard used by the PTO
for determining whether to register a new mark and the standard used by courts in
trademark infringement cases are “the same.” 135 S. Ct. at 1306–07. But the
Supreme Court made that conclusion in determining whether issue preclusion
applied. Id. The Court held that issue preclusion applied to a district court
deciding a Lanham Act trademark infringement claim when the Trademark Trial
and Appeal Board (TTAB) had previously decided the parties’ marks were not
confusingly similar for purposes of registration. Id. at 1307. There is no such
finding by the PTO or TTAB in this case because PlayNation did not object to
Velex’s registration or litigate the issue before the TTAB. Issue preclusion does
not bind PlayNation, because it was not a party to any prior proceeding. Cf.
Tampa Bay Water v. HDR Eng’g, Inc., 731 F.3d 1171, 1179 (11th Cir. 2013),
overruled on other grounds by CSX Transp., Inc. v. Gen. Mills, Inc., 846 F.3d
1333, 1340 (11th Cir. 2017).
B&B Hardware does not suggest that, absent a prior administrative finding,
a district court deciding a trademark infringement action is bound—or even ought
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to be persuaded—by the PTO’s registration of the defendant’s mark. Id.
(“[D]istrict courts can cancel registrations during infringement litigation, just as
they can adjudicate infringement in suits seeking judicial review of registration
decisions.”). To the contrary, the Lanham Act expressly gives district courts the
power to cancel federal trademarks issued by the PTO when they violate the
Lanham Act. See 15 U.S.C. § 1119. Absent issue preclusion, it was not clearly
erroneous for the district court not to consider the PTO’s decision to approve
Velex’s trademark as a factor.
It was similarly not clearly erroneous for the district court not to consider
Velex’s second proposed factor: lack of survey evidence. Lack of survey evidence
does not weigh against the plaintiff when determining likelihood of confusion. See
Frehling, 192 F.3d at 1341 n.5 (“This Circuit . . . has moved away from relying on
survey evidence” and “the failure to adduce such evidence is not damaging to [a
plaintiff’s] case.”). We are not persuaded by Velex’s reliance on Hickson Corp. v.
N. Crossarm Co., 357 F.3d 1256 (11th Cir. 2004). Hickson was a false advertising
case, not a trademark infringement case. Unlike in a trademark infringement
action, a plaintiff attempting to establish a misleading advertisement under the
Lanham Act “must present evidence of deception in the form of consumer surveys,
market research, expert testimony, or other evidence.” Hickson, 357 F.3d at 1261
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(internal quotation marks omitted). There is no similar requirement for trademark
infringement, and we decline to impose one here.
The district court did not clearly err in holding that Velex infringed on
PlayNation’s trademark.
III. Remedies
Velex argues that the district court erred in fashioning a remedy in this case
by first, awarding PlayNation damages based on an accounting of Velex’s profits,
and second, cancelling Velex’s trademark registration. We review a district court’s
decision to grant relief, including cancelling a party’s trademark registration, for
abuse of discretion. See Planetary Motion, Inc. v. Techsplosion, Inc., 261 F.3d
1188, 1203 (11th Cir. 2001).
A. Damages
The Lanham Act allows a successful plaintiff to recover the defendant’s
profits. 15 U.S.C. § 1117(a). “In assessing profits the plaintiff shall be required to
prove defendant’s sales only; defendant must prove all elements of cost or
deduction claimed.” Id. “The Act confers upon the district court a wide scope of
discretion to determine the proper relief due an injured party.” Burger King Corp.
v. Mason, 855 F.2d 779, 781 (11th Cir. 1988) (per curiam). An accounting of a
defendant’s profits is appropriate where: (1) the defendant’s conduct was willful
and deliberate, (2) the defendant was unjustly enriched, or (3) it is necessary to
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deter future conduct. Howard Johnson Co., Inc. v. Khimani, 892 F.2d 1512, 1521
(11th Cir. 1990). Conduct is willful if the infringer was “knowingly and
deliberately cashing in upon the good will of [the infringed].” Burger King, 855
F.3d at 781.
The district court concluded that Velex willfully infringed on PlayNation’s
trademark based solely on Velex’s continued sale of its Gorilla Gym products after
it was served with PlayNation’s complaint. The district court reasoned that
PlayNation’s complaint put Velex’s on notice that it was allegedly infringing on
PlayNation’s trademark. But when it received PlayNation’s complaint, Velex had
a valid registered trademark on Gorilla Gym. PlayNation did not obtain a
preliminary injunction, and at the time, no court had adjudicated whether Velex
was infringing on PlayNation’s trademark.
Under the district court’s construction of willfulness, a valid trademark
holder risks losing all of its profits if it does not immediately cease selling its
trademarked product upon receiving a complaint indicating it may be violating the
law. The district court determined that at the time Velex obtained its trademark,
Velex did not intend to infringe on PlayNation’s trademark. And from the time
Velex obtained its trademark to the time the district court made its final
determination, there was no further adjudication that Velex was infringing. This
continued sale under the color of a valid federal trademark cannot alone establish
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willfulness. See cf. Maltina Corp. v. Cawy Bottling Co., Inc., 613 F.2d 582, 587
(5th Cir. 1980) (finding willfulness that justified an accounting of profits where the
infringer used the infringing mark after the patent office refused to register it based
on the confusing similarity of the plaintiff’s registered mark).
There may have been other evidence of willfulness, but the district court did
not rely it in its decision. The district court also relied solely on the willfulness
theory to support its accounting of profits. The other two theories for supporting
an accounting of profits, deterrence and unjust enrichment, do not depend “upon a
higher showing of culpability on the part of defendant, who is purposely using the
trademark.” Burger King, 855 F.2d at 781. Remand is appropriate so that the
district court may consider whether other evidence of willfulness exists and
whether those alternative theories support an accounting of profits.
B. Cancelling Trademark Registration
District courts have discretion to order the cancelation of a federal trademark
registration in whole or in part. 15 U.S.C. § 1119. Cancelling a trademark
registration is appropriate where the plaintiff shows (1) that it had standing to
petition for cancellation because it was likely to be damaged by the infringer’s
continued use of the infringing mark, and (2) that there were valid grounds for
discontinuing registration. Coach House Rest., Inc. v. Coach & Six Rests., Inc.,
934 F.2d 1551, 1557 (11th Cir. 1991). PlayNation’s federal registration of its mark
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satisfies the first element. See id. at 1557–58. PlayNation must show only the
second element—a valid ground for cancelling registration.
If the “mark at issue has been on the federal Principal Register in registrant’s
name for less than five years, the mark may be cancelled if petitioner can prove
that the registration should have been barred in the first instance under Lanham Act
§ 2.” Id. at 1558. “In order to cancel a registration under Lanham Act Section
2(d) in this case, petitioner must prove . . . that the registered mark is likely to
cause confusion when used in connection with the services of registrant.” Id. at
1559. Establishing trademark infringement thus satisfies the second cancellation
requirement.
Having concluded that Velex infringed on PlayNation’s trademark, it was
not an abuse of discretion for the district court to cancel Velex’s trademark
registration.
IV. Conclusion
The district court did not clearly err in holding that Velex infringed on
PlayNation’s trademark. The district court similarly did not err in canceling
Velex’s trademark registration on that basis. But the district court did abuse its
discretion in holding that PlayNation was entitled to an accounting of Velex’s
profits due to willful infringement based solely on Velex’s continued lawful use of
its mark after Velex was served with the complaint in this action. As a result, we
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vacate the district court’s judgment on that issue, and remand for further
proceedings consistent with this opinion.
AFFIRMED IN PART, VACATED AND REMANDED IN PART.
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