On January 21, 2015, the Supreme Court of the United States issued a unanimous decision in Hana Financial, Inc. vs. Hana Bank, et. al., pertaining to a substantive trademark matter, namely, whether a judge or jury should determine if “tacking” is available to prove trademark priority in a given case.
Under U.S. law, rights in a trademark generally arise from actual use of a mark in commerce in connection with particular goods or services. Lower courts have consistently recognized that certain flexibility in trademark use is necessary, because otherwise a trademark owner’s priority in a mark would be reduced or eliminated each time the owner made even a minor change to its trademark in order to comport with consumer preferences, to update branding aesthetics, or to adapt to new technologies and marketing strategies. Therefore, various circuits have determined that a trademark owner may claim priority in a mark based on the first use date of a similar but technically distinct mark, if the previously used mark is the “legal equivalent” of the current version of the trademark, such that consumers would consider both versions of the trademark to be indistinguishable. Because this constructive use theory attempts to “tack” a trademark owner’s first use date and the goodwill associated with an earlier trademark to a later, modified version of the mark, it is known as “tacking.”
The dispute between Hana Financial and Hana Bank arose around whether a judge or jury should determine the availability of trademark tacking. Justice Sotomayor authored the Supreme Court’s opinion, which stated that “because the tacking inquiry operates from the perspective of the ordinary purchaser or consumer, we hold that a jury should make this determination.”
Background of the Case
In 2007, Hana Financial sued Hana Bank for trademark infringement in the Central District of California claiming that use of “Hana Bank” infringed on the HANA FINANCIAL trademark, for which Hana Financial owned a 1996 federal trademark registration that claimed first use of the trademark in interstate commerce since as early as 1995. In its answer to the complaint, Hana Bank claimed prior use of the HANA BANK trademark and invoked the tacking doctrine. Specifically, Hana Bank alleged that in 1994 it advertised its financial services in the United States to Korean expatriates under the trademark HANA OVERSEAS KOREAN CLUB, and those advertisements also included the name “Hana Bank.” In 2002, Hana Bank established a physical presence in the United States and continued use of the HANA BANK trademark. Based on its use of the HANA OVERSEAS KOREAN CLUB trademark in U.S. commerce in 1994, Hana Bank asserted that it could tack its later use of the HANA BANK trademark to its prior use of the 1994 version of the mark in order to establish priority over Hana Financial.
The district court initially granted summary judgment to Hana Bank on the issue of trademark infringement, but that decision was reversed by the U.S. Court of Appeals for the Ninth Circuit, which found that there were genuine issues of material fact as to the priority claim. On remand, the trademark infringement claim was put before a jury, and that jury received Hana Financial’s proposed jury instructions on the issue of trademark tacking. Finding the 2002 HANA BANK and the 1994 HANA OVERSEAS KOREAN CLUB trademarks to be “legal equivalents,” the jury returned a verdict of non-infringement for Hana Bank, and the Ninth Circuit affirmed, holding that the subject of tacking is a “fact-sensitive inquiry” that should be reserved for the jury.
The Supreme Court
The Supreme Court granted certiorari to resolve a divide among the courts of appeals with respect to whether the jury or a judge determines if the use of an older mark may be tacked to a new trademark. Discussing the general tacking rule, Sotomayor’s opinion explained that two marks may be tacked when they are “legal equivalents” creating the same, continuing commercial impression so that consumers would consider the original and the revised marks to be the same trademark. Therefore, because the applicable test is dependent upon an “ordinary consumer’s” impression of a trademark, the Supreme Court stated that the application of such a test “falls comfortably within the ken of a jury,” as is the case in other areas of law when the relevant question is how an ordinary person would make an assessment of a fact-intensive answer.
The Supreme Court then rejected all four of Hana Financial’s arguments as to why tacking is a question of law to be decided only by a judge. First, Hana Financial asserted that the “legal equivalents” test for comparing tacked trademarks involves the application of a legal standard, which is strictly within the purview of a judge. In response, the Supreme Court noted that the legal equivalents test is a mixed question of law and fact, which is typically resolved by juries. The Supreme Court then addressed Hana Financial’s concerns regarding the potential for a jury’s improper application of the relevant legal standard, noting that this concern can be eliminated with careful and clear jury instructions. Sotomayor also pointed out that it was Hana Financial’s jury instructions that guided the jury’s decision in the district court in the first place.
Hana Financial’s second and third arguments focused on legal precedent and consistency. In particular, Hana Financial claimed that jury determinations of tacking would improperly “create new law” that should be resolved by reliance on precedent instead. It then expanded this argument with claims that jury decisions on the issue of tacking would harm the predictability of the trademark system as a whole. The Supreme Court found that Hana Financial offered no support for these arguments and stated that the issue of trademark tacking should not be treated any differently from other areas of law, such as tort and contract, where juries are often required to apply legal standards to facts.
In its fourth and final argument as to why tacking is a question of law to be decided by a judge, Hana Financial claimed that, historically, judges have resolved trademark tacking disputes. This argument, the Supreme Court noted, relied only on cases resolved in bench trials or at summary judgment where a decision by a judge was procedurally appropriate. As such, the Supreme Court affirmed the Ninth Circuit and held that “when a jury trial has been requested and when the facts do not warrant entry of summary judgment or judgment as a matter of law, the question whether tacking is warranted must be decided by a jury.”
Practice Note: For certain cases, this decision will likely result in less forum shopping, as the tacking issue is now a jury question. Cases in which tacking is an issue also will likely be more expensive to litigate, since parties are more likely to rely on survey evidence. For the early post-Hana-Bank cases, parties are likely to bicker over jury instructions that address tacking.