Freedom Card, Inc. v. JPMorgan Chase & Co.

United States Court of Appeals, Third Circuit
432 F.3d 463 (2005)

ELI5:

Rule of Law:

A claim for reverse trademark confusion fails where the totality of the circumstances shows no likelihood of confusion. A junior user's minimal advertising, the commercial weakness of the shared term, and significant differences in the parties' target markets can prevent a likelihood of confusion, even if the junior user is a much larger company.

Facts:

In December 2000, Urban Television Network, Inc. (UTN) began offering its 'FREEDOM CARD' in conjunction with CompuCredit Corporation, targeting the sub-prime credit market.
UTN contracted with entertainer Queen Latifah to promote the card, which peaked at approximately 28,193 accounts.
After December 2001, CompuCredit stopped marketing and issuing new accounts for UTN's FREEDOM CARD.
In March 2002, Shell Oil ended its co-branded credit card with JPMorgan Chase & Co. (Chase), prompting Chase to develop a new card to retain those accounts.
Chase developed the 'CHASE FREEDOM card' to replace the Shell card for its existing prime-credit customers, launching it with a single advertisement in the Wall Street Journal on January 27, 2003.
Upon being contacted by UTN's CEO that same day about potential trademark infringement, Chase immediately halted all advertising and marketing for its CHASE FREEDOM card.
Prior to the dispute, when registering its mark, UTN had represented to the U.S. Patent and Trademark Office that the word 'FREEDOM' was widely used by third parties and that 'no one has the exclusive right to use the word `FREEDOM` alone.'
The parties met to discuss the issue, but negotiations broke down.

Procedural Posture:

JPMorgan Chase & Co. (Chase) filed a declaratory judgment action against Urban Television Network, Inc. (UTN) in the U.S. District Court for the District of Delaware.
UTN filed counterclaims against Chase for trademark infringement and unfair competition under the Lanham Act, asserting a theory of reverse confusion.
After discovery, Chase moved for summary judgment on UTN's counterclaims.
The district court granted Chase's motion for summary judgment, finding no likelihood of confusion between the two marks.
UTN, as appellant, appealed the district court's grant of summary judgment to the U.S. Court of Appeals for the Third Circuit, with Chase as appellee.

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Issue:

Does a large, junior user's brief use of a mark that incorporates a common term from a senior user's mark create a likelihood of reverse confusion under the Lanham Act when the senior user's product was not being marketed at the time and the two products targeted different consumer demographics?

Opinions:

Majority - McKee, Circuit Judge

No. A large, junior user's brief use of a mark does not create a likelihood of reverse confusion under these circumstances. The essence of a reverse confusion claim is that a larger junior user 'saturates the market' and 'overwhelms' the smaller senior user, which did not happen here. Chase's marketing consisted of a single advertisement on a single day, after which it immediately ceased all promotion upon UTN's complaint. This minimal activity could not have overwhelmed UTN's mark, especially since UTN had not been marketing its own card for over a year. Applying the Lapp factors, the court found several weighed heavily against a likelihood of confusion: (1) The marks were dissimilar due to Chase's prominent housemark and the weakness of the term 'FREEDOM,' a weakness UTN itself had previously asserted to the USPTO; (2) UTN's mark had no commercial strength at the time of Chase's launch; (3) The parties targeted vastly different markets (sub-prime vs. prime); (4) There was no competent evidence of actual confusion; and (5) There was no evidence Chase intended to push UTN out of the market. The district court's grant of summary judgment in favor of Chase was therefore correct.

Analysis:

This decision clarifies the application of the reverse confusion doctrine, establishing that the junior user's larger corporate size and resources are not dispositive. The court emphasized that the 'hallmark' of a reverse confusion claim is market saturation by the junior user, a standard not met by minimal or short-lived advertising. This precedent makes it more difficult for a non-practicing or dormant senior mark holder to succeed against a junior user whose infringing use was brief and quickly halted. It also reinforces that a party's prior representations to the USPTO about a mark's weakness can be used against it as a powerful admission in subsequent infringement litigation.

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