IP Law Daily SEGWAY scooter mark infringed by SWAGWAY-branded imports,(May 9, 2019)
Thursday, May 9, 2019

SEGWAY scooter mark infringed by SWAGWAY-branded imports,(May 9, 2019)

By Peter Reap, J.D., LL.M.

The International Trade Commission did not err in applying and weighing the likelihood of confusion factors and finding infringement, and because the Commission's trademark decisions have no preclusive effect, its procedural ruling denying a consent order motion did not need to be reviewed.

In determining that Swagway, a manufacturer and importer of self-balancing hoverboard products, infringed two SEGWAY marks owned by scooter manufacturer Segway, the International Trade Commission did not err, the U.S. Court of Appeals for the Federal Circuit has decided. The Commission's application and weighing of six of the relevant likelihood of confusion factors was proper. In addition, because the Commission's trademark decisions, like its patent rulings, have no preclusive effect, the court did not need to reach Swagway's contention that the Commission committed a procedural error by failing to provide a basis for denying a motion by Swagway based on a consent order stipulation. Thus, the decision by the Commission was affirmed (Swagway, LLC v. ITC, May 9, 2019, Clevenger, R.).

Segway, Inc., DEKA Products Limited Partnership, and Ninebot (Tianjin) Technology Co., Ltd. (collectively, Segway) filed a complaint with the Commission on May 18, 2016, alleging violations of 19 U.S.C. § 1337 based on alleged patent infringement (not relevant to this appeal), and infringement of two trademarks: U.S. Trademark Registration Nos. 2,727,948 (the '948 mark) and 2,769,942 (the '942 mark). Segway owns both marks. The '948 mark is the non-stylized SEGWAY mark, which covers "motorized, self-propelled, wheeled personal mobility de-vices, namely, wheelchairs, scooters, utility carts, and chariots." The '942 mark is the stylized version of the SEGWAY mark covering the same goods as its non-stylized counterpart. The complaint alleged that Swagway's self-balancing hoverboard products, marketed under the names SWAGWAY X1 and X2, as well as SWAGTRON T1 and T3, infringed Segway's marks.

On March 21, 2017, Swagway moved for partial termination of the investigation regarding the trademark infringement allegations on the basis of a consent order stipulation. After a hearing, the Administrative Law Judge (ALJ) issued an Initial Determination (ID). The ID found that Swagway's use of the SWAGWAY designation, but not the SWAGTRON designation, in-fringed the '942 and '948 trademarks. The ALJ's trademark infringement determination was based on its analysis of six likelihood of confusion factors. The ALJ's ID did not mention Swagway's motion for termination based on its consent order stipulation. The ALJ stated in a footnote to its ID that "[a]ny pending motion that has not been adjudicated is denied, unless other-wise noted."

The Commission determined not to review the ALJ's denial of Swagway's consent order motion and issued an opinion reversing the ALJ's determination on the existence of actual confusion because the incidents of actual confusion were small as compared to the volume of sales of SWAGWAY-branded products, and Segway failed to rebut Swagway's argument and sup-porting evidence that at least some of the proffered actual confusion evidence was unreliable. The Commission agreed with the ALJ's likelihood-of-confusion determination and its trade-mark infringement determination because the "[e]vidence supporting the other factors considered by the ID, including the degree of similarity between the two marks in appearance, the pronunciation of the words, and the strength of the SEGWAY marks strongly support[ed] the ID's finding of infringement." Swagway appealed.

Trademark infringement. On appeal, Swagway argued that the Commission accorded the wrong weight to the actual confusion factor. According to Swagway, lack of actual confusion evidence is especially probative in cases such as this where the products bearing the registered trademarked and the allegedly infringing products are sold concurrently over a substantial period of time. Swagway contended that the Commission should have found the lack of actual confusion essentially dispositive.

The Federal Circuit has never indicated that the concurrent use factor always bars a likelihood-of-confusion finding, the court noted. Instead, the court has found that "[s]uch evidence weighs against a likelihood of confusion, but must then be balanced against the other evidence of record." Further, the Commission never determined that the lack of actual confusion evidence cannot in any circumstance weigh against a likelihood-of-confusion finding. Swagway did not argue on appeal that its evidence presented below warranted a finding of long-term, concurrent use in the same channels of trade. Thus, it failed to establish that the absence of actual confusion evidence should even weigh against, let alone strongly against, a likelihood-of-confusion, the court reasoned.

Swagway also argued that, after reversing the ALJ's determination with regard to actual confusion, the Commission failed to "properly re-weigh the likelihood-of-confusion factors." The Commission did, however, reweigh the factors and to the extent that Swagway argued that the Commission erred in its determination because "only two of the six factors considered . . . favor a likelihood-of-confusion finding," while "three factors . . . weigh against such a finding," that argument was unpersuasive as a matter of both fact and law, the court held.

The ALJ and the Commission never stated that the "intent of the actor" factor weighed in favor of or against a likelihood-of-confusion finding. There was, therefore, only one factor, "relation in use and manner of marketing," that the Commission found to weigh against a likelihood of con-fusion between the asserted trademarks and the SWAGWAY designation, according to the Federal Circuit. Federal Circuit precedent supported the Commission's finding that the strength of the asserted trademark, along with the comparable similarity of the asserted and allegedly infringing marks, can weigh strongly in favor of a likelihood of confusion. Swagway also took issue with the Commission's failure to weigh Segway's lack of survey evidence against a likelihood-of-confusion finding, the court observed. But the adverse inference Swagway suggested was contrary to Federal Circuit precedent that consumer survey evidence is not required to show a likelihood of confusion. The Commission therefore did not err in according no weight to Segway's lack of survey evidence.

Consent order motion. Lastly, Swagway argued that the Commission erred procedurally by failing to provide any basis for its denial of Swagway's consent order motion. Swagway's proposed consent order stipulated and agreed that Swagway would not sell for importation, import, or sell after importation into the United States products sold under the SWAGWAY mark. There was no difference, practically speaking, between the orders entered by the Commission and Swagway's proposed consent order, the court noted.

Swagway contended at oral argument that the difference between its proposed consent order and the orders issued by the Commission was the preclusive effect it believed would be afforded to the Commission's final decision and its resulting orders. However, the Federal Circuit previously determined that Congress did not intend decisions of the International Trade Commission on patent issues to have preclusive effect. There was no reason to differentiate between the effect of the Commission's patent-based decisions and the Commission's decisions regarding trademarks, the court held. Because the Commission's trademark decisions, like its patent decisions, do not have preclusive effect, the court did not need to reach Swagway's procedural arguments regarding its consent order motion.

This case is No. 2018-1672.

Attorneys: Laurence M. Sandell (Mei & Mark LLP) for Swagway, LLC. Michael Liberman for the ITC.

Companies: Swagway, LLC

MainStory: TopStory Trademark FedCirNews

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