IP Law Daily Injunction limited to geographic service area of healthcare provider too narrow
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Tuesday, June 14, 2016

Injunction limited to geographic service area of healthcare provider too narrow

By Mark Engstrom, J.D.

A federal district court correctly ruled that ContextMedia was liable for infringing the registered mark GUTHRIE, with design, and correctly issued a permanent injunction to Guthrie Healthcare, but erred in restricting the scope of the injunction to Guthrie’s geographic service area, the U.S. Court of Appeals in New York City has ruled (Guthrie Healthcare System v. ContextMedia, Inc., June 13, 2016, Leval, P.). Because the district court misapplied the law and failed to adequately protect Guthrie’s interests—and the interest of the public—from a likelihood of consumer confusion, the circuit court affirmed the judgment of the district court in part, vacated it in part, expanded the scope of the injunction against ContextMedia, and remanded the case for further consideration of the injunction’s scope.

Lawsuit. Guthrie, a provider of healthcare services in New York and Pennsylvania, sued ContextMedia Inc. (CMI), a nationwide provider of health-related information for physicians, for trademark infringement, unfair competition, and related claims. According to Guthrie, CMI’s logo was confusingly similar to Guthrie’s registered trademark—GUTHRIE, with design.

Trademarks. Guthrie’s mark had two elements: a logo on the left side and the GUTHRIE, in bold capital letters, on the right. The litigation primarily addressed the logo portion, which included a multi-colored shield surrounding a stylized human figure that was fashioned from a white oval and four white crescents. CMI’s eight trademarks used the same graphic elements, but its multi-colored shield used different colors.

Injunction. After a bench trial, the district court found that CMI’s marks created a likelihood of confusion within Guthrie’s geographic service area, which covered the "Twin Tiers" region of northern Pennsylvania and southern New York. The court ruled that CMI had infringed the GUTHRIE mark, and it granted Guthrie a limited injunction that prohibited CMI from using the mark within Guthrie’s service area. Significantly, the injunction allowed CMI to use the challenged marks outside of that limited service area, and that allowance included, without restriction, use in Internet transmissions, on the defendant’s websites, and in social media.

Appeal. The parties cross-appealed. CMI challenged the finding of infringement and Guthrie challenged the scope of the injunction. The circuit court conducted a likelihood of confusion analysis that focused on the four confusion factors that were most pertinent in this case: the similarity of the parties’ marks, the proximity of the parties’ areas of commerce; the strength of Guthrie’s mark, and the sophistication of the relevant consumers.

Proximity of areas of commerce. The circuit court noted that the plaintiff and the defendant operated in closely related fields. Guthrie operated hospitals, clinics, and other healthcare facilities in a service area that spanned two states, and CMI distributed information about health and healthcare—on screens that it placed in the offices of physicians—using marks that were "extraordinarily similar" to the plaintiff’s marks.

Given the clear subject-matter relationship of CMI’s healthcare communications and Guthrie’s healthcare services, the circuit court had "every reason to believe" that those who were familiar with Guthrie’s mark—and who viewed CMI’s mark—were likely to assume that Guthrie and CMI were related entities.

In addition, proximity in geography supported a likelihood of confusion because CMI’s communications reached into Guthrie’s service area. According to the circuit court, those who saw CMI’s trademark-identified communications in Guthrie’s geographic service area had "every reason to believe" that the parties were affiliated.

Furthermore, although the instances of confusion that occurred outside of Guthrie’s service area was likely to be smaller than those that occurred within Guthrie’s service area, reasonable consumers outside of Guthrie’s service area would encounter the parties’ marks in connection with medicine-related commerce, and thus would predictably but mistakenly conclude that a relationship existed.

Ultimately, the circuit court found that the proximity factor favored Guthrie with respect to CMI’s activity within Guthrie’s area of commerce.

Similarity of marks. The parties’ logos were nearly identical, both in conception and in the great majority of the fine details of execution, and thus were "jaw-droppingly similar," according to the court. Given that similarity, and in light of the distinctiveness of the parties’ logos and the proximity of their areas of commerce, ordinary viewers who were familiar with Guthrie’s mark would likely draw the mistaken inference—on seeing CMI’s trademark and corresponding messages—that CMI’s messages came from Guthrie or a Guthrie affiliate. Confusion resulting from the similarity of the parties’ marks was not just likely, the court concluded; it was "highly probable" and "virtually unavoidable."

Strength of GUTHRIE mark. The Second Circuit found that the subject matter of Guthrie’s logo weakened the inherent strength of the GUTHRIE mark, but the manner in which the logo was executed strengthened it. Guthrie’s logo was not a conventional, ordinary representation of the human figure, the court explained, because the logo was executed with "considerable" fanciful and arbitrary features, such as the abstracted depiction of a human figure, which was fashioned from an oval and four crescents. In the court’s view, those abstract and geometric features made the GUTHRIE logo "considerably more distinctive."

In the court’s view, the design features of Guthrie’s mark were sufficiently fanciful, arbitrary, and distinctive to create a reasonably strong mark. In addition, the distinctiveness of the mark’s design strongly supported the conclusion that CMI’s use of a very similar a mark would likely cause consumer confusion.

For those reasons, the circuit court concluded that Guthrie’s design possessed a sufficient degree of originality and distinctiveness to: (1) increase the likelihood of confusion in the marketplace and (2) avoid the circumstance in which injunctive relief would "unfairly reserve to one party adjectival terms to which all entities working in the area of commerce ought to have access."

Buyer sophistication. In the circuit court’s view, the "buyer sophistication" factor favored Guthrie. Even to the extent that Guthrie’s prospective customers exercised care in choosing physicians or hospitals, the court had no reason to believe that those customers would know that the defendant’s communications, which were identified by a trademark that looked deceptively like Guthrie’s, were in fact not Guthrie’s.

Remaining factors. Because the remaining confusion factors—the relative quality of CMI’s product, CMI’s intent, actual consumer confusion, and "bridging the gap"—had little bearing on the ultimate disposition of the case, the circuit court addressed them in a summary fashion.

Conclusion. The Second Circuit concluded that Guthrie had adequately proved CMI’s liability, given the likelihood of confusion that would result from CMI’s use of marks that were confusingly similar to the GUTHRIE mark. Because CMI’s liability was "amply shown," the finding of liability was affirmed.

The ultimate inquiry regarding liability—the "balancing test"—was not conducted because the circuit court found that the confusion factors did not need balancing. According to the court, the "extraordinary similarity" of the parties’ marks, the strength of Guthrie’s mark, the absence of sufficient buyer sophistication to protect against confusion, and the proximity of commerce (with respect to subject matter and geographic area), all worked together to make a powerful showing regarding the likelihood of consumer confusion.

Scope of injunction. The district court found that Guthrie had proved a probability of consumer confusion in Guthrie’s service area. It thus awarded an injunction that covered that area. For additional areas, however, the district court found that Guthrie failed to satisfy the probability standard, and therefore concluded that Guthrie was not entitled to an injunction that was applicable beyond that service area.

The circuit court acknowledged that, to receive an injunction, the senior user of a trademark had to prove a probability of confusion. However, it also found that an injunction did not have to be limited to the areas in which a probability of confusion was shown. According to the circuit court, once the senior user proved that an injunction was proper, the scope of the injunction was governed by a variety of equitable factors.

Ordinarily, the principal concern was providing the injured senior user with a reasonable protection from the junior user’s infringement. If the junior user showed that a likelihood of confusion was not present in a particular geographic area, no useful purpose would typically be served by extending the injunction into that area, the court explained, potentially inflicting great harm on the junior user without meaningful justification.

In this case, the district court’s limited injunction had multiple problems. First, the injunction allowed CMI to make substantial use of the challenged marks on the Internet, even though CMI’s website was accessible in Guthrie’s service area and was likely to cause confusion there.

Second, the district court allowed CMI unrestricted use of the challenged marks in the counties of Tompkins and Schuyler, where Guthrie maintained healthcare facilities. The court’s reason for excluding those counties from the scope of the injunction—i.e., because Guthrie failed to present any evidence regarding the setup of those locations, "in particular the patient waiting room experience," and thus failed to prove that patient exposure to the defendant’s content, in waiting rooms in those counties, would actually occur (or would be similar to the exposure that had occurred in the 11 counties that were discussed at trial)—was, in the court’s view, unpersuasive.

Third, the district court should not have allowed CMI to continue to use the challenged marks throughout the nation. The district court had relied primarily on the proposition that: (1) a permanent injunction should be narrowly tailored to fit specific legal violations and (2) a court should not impose unnecessary burdens on lawful activity. Although that proposition was a correct statement of the law, it did not follow that a senior user who was entitled to an injunction in one geographic area, based on the junior user’s infringement, had to show the same probability of harm in every other area of the injunction, thus allowing the infringer free use of the infringing mark in all areas as to which the senior user failed to show a substantial probability of confusion, the court explained.

In this case, Guthrie showed that CMI had infringed its mark—and thus had subjected Guthrie to a high probability of confusion in its main service area—but Guthrie also showed that its activities and commercial relationships extended beyond that service area, a condition that made Guthrie vulnerable to "plausibly foreseeable confusions and harms" from CMI’s use of the challenged marks outside of that area, according to the circuit court.

Guthrie, for example, recruited doctors, residents, and nursing students nationwide, disseminated medical information over the Internet, and received referrals from other physicians and medical professionals, individuals who could be located anywhere in the country. In addition, Guthrie solicited funds for research and clinical trials, and those solicitations extended beyond its service area. In all of those activities, the court explained, Guthrie was exposed to the risk of confusion and harm from CMI’s use of the challenged marks outside of Guthrie’s service area.

The circuit court acknowledged that an injured senior user had to proffer evidence of "plausibly foreseeable confusion" beyond its main area of injury before an injunction could be extended to additional areas. Guthrie, however, had "easily satisfied" that requirement in this case. Although competing equities could complicate that extension, the circuit court found that multiple equitable considerations favored Guthrie in this case.

The circuit court noted that CMI had not acted with bad faith by deliberately sowing trademark confusion. Nevertheless, CMI could easily have avoided a lawsuit by running a trademark search before it used the challenged marks. According to the court, CMI did not conduct a trademark search before the PTO had informed it that its applied-for marks were "striking[ly] similar" to Guthrie’s registered mark. Although CMI was not a "bad faith" infringer, it was also not an entirely innocent infringer.

Furthermore, an injunction would not have catastrophic effects on CMI’s business. Significantly, CMI had only recently begun to use the challenged logo, and CMI would not need to relinquish the name of its business. Only the use of a decorative logo was at stake, the court explained, and CMI could change that logo without suffering a major harm to its business. In addition, Guthrie was the injured party and was without fault. Finally, the district court’s injunction harmed the public interest, which would "undoubtedly be better served" by the elimination of the confusion that would arise from the district court’s limited injunction.

For those reasons, the circuit affirmed CMI’s liability to the extent that the district court had found that CMI infringed Guthrie’s mark. However, to the extent the district court had ruled that CMI did not infringe the GUTHRIE mark (i.e., by using the challenged marks outside of Guthrie’s main service area), the judgment was vacated and the scope of the injunction was expanded to include the counties of Tompkins and Schuyler.

The circuit court remanded the case with instructions to determine whether the injunction could be tailored to allow CMI limited use of the challenged marks outside of the expanded service area, which included Tompkins and Schuyler counties, and on the Internet, giving due weight to: (1) Guthrie’s interest in protecting its mark from the risk of confusion in the marketplace and (2) all other equitable considerations that were appropriate.

The case is Nos. 14-3343-cv(L) and 14-3728-cv(con).

Attorneys: Elliott J. Stein, Bradley L. Mitchell, and Neil C. Schur (Stevens & Lee) for Guthrie Healthcare System. Eamon P. Joyce and Joshua J. Fougere (Sidley Austin LLP) for ContextMedia, Inc.

Companies: Guthrie Healthcare System; ContextMedia, Inc.

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