IP Law Daily Trademark infringement suit revived because ‘Engineered Tax Services’ could be suggestive
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Friday, May 15, 2020

Trademark infringement suit revived because ‘Engineered Tax Services’ could be suggestive

By Robert B. Barnett Jr., J.D.

The lower court erred when it failed to see the double meaning (verb or adjective) of the word "engineered" in "Engineered Tax Services."

In a suit in which Engineered Tax Services (ETS) sued Scarpello Consulting for infringing its copyright by buying Google ads using the search term "engineered tax services," the U.S. Court of Appeals in Atlanta has reversed the federal district court in Miami’s grant of summary judgment to Scarpello for non-infringement, ruling that the lower court erred when it concluded that ETS’s mark was merely descriptive rather than suggestive. The lower court failed to consider the double meaning in the word "engineered" in the mark "Engineered Tax Services," which suggests tax services that may be performed both "skillfully and scientifically" and by actual engineers. A reasonable jury could have concluded that the imaginative leap necessary to grasp both meanings rendered the term inherently suggestive rather than distinctive (Engineered Tax Services, Inc. v. Scarpello Consulting, Inc., May 14, 2020, Newsom, K.).

Background. ETS provides specialized tax services to real property owners. ETS entered into discussions with Scarpello, which is in the same business, to possibly hire Scarpello as a subcontractor, but the negotiations went nowhere. Shortly thereafter, Scarpello began a Google AdWords marketing campaign using "engineered tax services" as a keyword. The result was that not only would Scarpello’s name come up first when a user typed in "engineered tax services," but the result would produce two listings for ETS, one of which would link to Scarpello. When ETS learned of this ad campaign, it registered the mark "Engineered Tax Services" and sued Scarpello for copyright infringement under the Lanham Act. The district court granted summary judgment to Scarpello on the ground that the ETS mark was not distinctive and was thus invalid. ETS appealed.

Valid trademark. The appeal’s focus was on whether ETS established a valid trademark. To be valid, the trademark must identify the source of the goods or services and not just the goods and services themselves. A mark can be either inherently distinctive or it can acquire the distinctiveness over time. The Eleventh Circuit focused its review on whether ETS’s mark was inherently distinctive.

This particular mark, the Eleventh Circuit said, "arises at the hazy border between suggestive and descriptive marks." The appellate court concluded that it had the right to presume that the mark was inherently distinctive and thus at least suggestive because the USPTO granted the registration without requiring that ETS provide any evidence of any acquired secondary meaning. As a result, the burden was on Scarpello to prove that the mark was not inherently distinctive.

Imagination test. One of the two tests for distinguishing suggestive marks from descriptive marks is called the imagination test. Under this test, a mark is merely descriptive if the customer can tell the nature of the services without having to exercise any imagination. When the district court applied the imagination test, it concluded that the mark was merely descriptive because the mark described the services by a licensed engineer as an approach to cost segregation and tax energy studies. This conclusion was wrong, the Eleventh Circuit said, for two reasons. First, the lower court focused too narrowly on the individual meaning without looking at the term holistically. Second, the court considered only one sense of the word "engineered." The lower court erred when it focused on the term "engineered" to the exclusion of "tax services." There was more to the mark than tax services performed by engineers. The court should have considered that the word "engineered" has two meanings and should have been read as an adjective and not just as a verb. With two meanings—with precision and technical skill or the actual involvement of engineers—a user is required to make an imaginative leap. A jury could have concluded that the leap in imagination rendered the mark imaginative rather than descriptive and was thus inherently distinctive.

Third-party test. The other test is the third-party test, which looks at whether competitors would need to use the trademark in describing their products. The only evidence of any use of the term anywhere was two examples, neither of which really applied to these facts. The Eleventh Circuit concluded, therefore, that the limited descriptive use of the mark failed to demonstrate that competitors would need to use the term to describe their products. By far the most common term used to describe similar services was "cost segregation." Not one example existed of the services being described as "engineered tax services." As a result, the third-party test failed to establish that the mark was merely descriptive.

The Eleventh Circuit, therefore, reversed and remanded on the ground that the lower court erred when it concluded as a matter of law that the ETC mark was descriptive rather than suggestive.

This case is No. 18-13690.

Attorneys: Dawn Marie Alba (Alba Law Office, PA) for Engineered Tax Services, Inc. Daniel J. Fischer (Koley Jessen PC) for Scarpello Consulting, Inc.

Companies: Engineered Tax Services, Inc.; Scarpello Consulting, Inc.

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