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Adverse Inference for Failure to Conduct Likelihood of Confusion Survey





September 22, 2008

Sponsoring Committee: Proof of Confusion Subcommittee of the Enforcement Committee


Resolution

WHEREAS, consumer surveys are accepted by courts in many jurisdictions as evidence of actual or likely consumer confusion;

WHEREAS, the Restatement (Third) of Unfair Competition published by the American Law Institute, states that no adverse inference should be drawn by a court or tribunal based on the mere failure of a party in a trademark infringement action to introduce a consumer survey as evidence of the likelihood of confusion;

WHEREAS, courts have held that the absence of a consumer survey permits an inference that, had a survey been conducted, the results would not have been favorable;

WHEREAS, courts have drawn a negative inference from a lack of survey evidence based on assumptions that certain trademark owners had the ability to fund such a survey but failed to conduct one;

WHEREAS, the costs of conducting a consumer survey can be prohibitive for many trademark owners;

BE IT RESOLVED, that it is the position of the International Trademark Association that no adverse inference should be drawn from the mere failure of a trademark owner to offer survey evidence on the issue of likelihood of confusion whether in a court proceeding or at the administrative level in any jurisdiction throughout the world.


Background

The Proof of Confusion Subcommittee of the Enforcement Committee proposes that INTA adopt a Resolution that reflects the position of the Restatement (Third) of Unfair Competition, which states: “[a]lthough surveys can be helpful in resolving the issue of infringement, they can also add significantly to the cost of trademark litigation. While some courts have drawn adverse inferences against parties who fail to introduce a consumer survey, such an approach attributes too much importance to survey evidence. Surveys are useful but not indispensable evidence of the likelihood of confusion, and no inference on that issue should be drawn from a mere failure to offer survey evidence.” Restatement (Third) of Unfair Competition § 23 cmt. (c).

Research by the Subcommittee has identified the factors used by each of the U.S. federal Circuits in determining likelihood of confusion. The Third Circuit has noted that consumer survey evidence is “the most direct method of demonstrating secondary meaning and likelihood of confusion.” Charles Jacquin Et Cie, Inc. v. Destileria Serralles, Inc., 921 F.2d 467 (3d Cir. 1990). While likelihood of confusion factors may differ from one Circuit to the next, all include “actual confusion” as one of the factors. Survey evidence is often treated by courts as a proxy for evidence of “actual confusion” by individual consumers.

Courts have held that, where the parties have engaged in a significant period of competition during which the defendant has used the allegedly-infringing mark, the absence of evidence of “actual” consumer confusion, i.e., evidence that specific, individual consumers have been confused, is a factor weighing against a finding of a likelihood of confusion. See, e.g., Plus Prods. v. Plus Disc. Foods, Inc., 722 F.2d 999, 1005 (2nd Cir. 1983) (“[N]o evidence of confusion for over a three-year period, during which substantial sales occurred, is a strong indicator that the likelihood of confusion is minimal.”); M&G Elecs. Sales Corp. v.Sonly Kabushiki Kaisha, 250 F.Supp.2d 91, 104 (E.D.N.Y. 2003) (“A plaintiff need not show actual confusion. However, the complete absence of confusion after a lengthy period of time creates an inference that future consumers will not be confused.”); cf. Lois Sportswear, U.S.A., Inc. v. Levi Strauss & Co., 799 F.2d 867, 875 (2nd Cir. 1986) (no negative inference drawn from lack of evidence of actual confusion where, inter alia, defendant’s sales in the U.S. using the allegedly infringing mark had been “minimal”).

In an oft-cited case, the District Court for the Southern District of New York held that the absence of evidence of actual confusion among individual consumers weighed against a finding of a likelihood of confusion because the parties had sold a large volume of products under their respective marks during the time they co-existed in the market. See Mushroom Makers, Inc. v. R.G. Barry Corp., 441 F.Supp. 1220, 1230-1 (S.D.N.Y. 1980) (“During the period the parties have used their marks, their sales volume has expanded and hundreds of thousands of units of their respective commodities have been sold, often in the same department stores and specialty shops. It is therefore significant that the defendant failed to offer evidence that a single purchaser was confused, misled or deceived as to the source or origin of the product he or she was buying.”) In dicta, the court noted that the absence of actual confusion evidence was “underscored by the fact that defendant is a substantial corporation with the means to have undertaken a survey or an investigation to establish instances of actual consumer confusion.” Id. at 1231.

Although the court in Mushroom Makers did not draw a negative inference from the absence of a survey per se, later decisions appear to have adopted the dicta in Mushroom Makers to justify such a negative inference. See, e.g., Pharmacia Corp. v. Alcon Labs, Inc., 201 F.Supp. 2d 335, 373 (D.N.J. 2002) (“The Court is aware that Pharmacia is not legally required to conduct a confusion survey. But under the circumstances of this case, Pharmacia’s failure to conduct any confusion survey weighs against its request for a preliminary injunction. Such a failure, particularly when the trademark owner is financially able, justifies an inference that the plaintiff believes the results of the survey will be unfavorable.”) (internal quotations omitted); Information Clearing House, Inc. v. Find Magazine, 492 F.Supp. 147 (S.D.N.Y. 1980) (Finding it “significant that plaintiff, though possessed of the financial means, did not undertake a survey of public consumer reaction to the products under actual marketing conditions” where parties made concurrent use of marks for two months) (citing Mushroom Makers); Eagle Snacks, Inc. v. Nabisco Brands, Inc., 625 F.Supp. 571, 583 (D.N.J. 1985) (“Failure of a trademark owner to run a survey to support its claims of brand significance and/or likelihood of confusion, where it has the financial means of doing so, may give rise to the inference that the contents of the survey would be unfavorable, and may result in the court denying relief.”) (citing Mushroom Makers); King-Size, Inc. v. Frank’s King-Size Clothes, Inc., 547 F.Supp. 1138, 1162 (S.D. Tex. 1982) (“Plaintiffs did not present to the Court a survey or any other direct evidence of actual confusion. The Court views these omissions as both suspect and significant.”) (citing Mushroom Makers). See also Sandra Edelman, “Failure to Conduct a Survey in Trademark Infringement Cases: A Critique of the Adverse Inference,” 90 TMR 746, 752 (September-October 2000) (surveying case law applying adverse inference and noting that the Second Circuit “is not treating the absence of survey evidence neutrally, but is instead considering it to be a negative against the plaintiff’s case.”); see also Nikon, Inc. v. Ikon Corp., 803 F.Supp. 910, 922 (S.D.N.Y. 1992) (stating that plaintiff’s “failure to undertake a consumer survey to demonstrate actual confusion” favored defendant); GMA Accessories, Inc. v. Croscill, Inc., No. 06 Civ. 6236, 2008 WL 591803 at *8 (S.D.N.Y. March 3, 2008) (citing Nikon). Cf. Planet Hollywood v. Hollywood Casino Corp., 80 F.Supp. 2d 815, 884 (N.D. Ill. 1999) (“This Court does not go so far, as have some courts, as to draw the negative inference that the trademark holder failed to offer survey evidence because such evidence would have been unfavorable to its claim.”).

Surveys on the issue of likelihood of confusion have become quite common in trademark infringement actions. Commentators have attributed this to, at least in part, the tendency of judges to comment negatively on the absence of a survey. See, e.g., Edelman at 754. The cost of such surveys, however, can create a significant problem for trademark owners—including trademark owners that courts may be inclined to assume have the resources to conduct such a survey—and effectively prevent them from protecting their marks. The cost of attorney and expert fees incurred in expert discovery, and in motion practice challenging and defending a survey expert’s qualifications and/or seeking to strike allegedly unreliable surveys, could increase the cost many times over. Moreover, there are significant hidden costs associated with conducting consumer surveys. These include the expenditure of judicial resources on adjudicating the all-too-common “battle of the experts,” the increased focus in litigation on survey results at the expense of other evidence, and the risk that survey results will be misinterpreted by the judge or jury, leading to unjust results.