Stone Creek, Inc. v. Omnia Italian Design, Inc.
875 F.3d 426 (2017)
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Rule of Law:
Placing an identical trademark on identical goods creates a strong likelihood of confusion, and a junior user’s knowledge of a senior user's prior use defeats the common-law Tea Rose-Rectanus defense. To recover an infringer's profits in the Ninth Circuit, a plaintiff must prove the infringement was willful.
Facts:
- Around 1990, Stone Creek, Inc., a furniture manufacturer and retailer, adopted and began using the 'STONE CREEK' mark for its business, which operated five showrooms in the Phoenix, Arizona area.
- In 2003, Stone Creek entered into an agreement with Omnia Italian Design, Inc., a leather furniture manufacturer, for Omnia to produce furniture branded with the STONE CREEK mark.
- In 2008, without Stone Creek's knowledge or permission, Omnia began using an exact copy of the STONE CREEK mark on leather furniture it manufactured and sold to a different retailer, Bon-Ton Stores, Inc.
- Omnia's use of the mark was at Bon-Ton's request for an 'American' sounding name, and Omnia's team digitally recreated Stone Creek's logo for this purpose.
- From 2008 to 2013, Omnia sold this STONE CREEK-branded furniture to Bon-Ton, which then retailed it to customers in the Midwest.
- In 2012, while Omnia's unauthorized use was ongoing, Stone Creek obtained a federal trademark registration for its mark.
- In 2013, Stone Creek discovered Omnia's unauthorized use after customers who had purchased the furniture from Bon-Ton contacted Stone Creek regarding product warranties and store locations.
Procedural Posture:
- Stone Creek, Inc. sued Omnia Italian Design, Inc. in the U.S. District Court for the District of Arizona for trademark infringement and unfair competition.
- The district court rejected Omnia’s Tea Rose-Rectanus affirmative defense, finding that Omnia lacked good faith.
- The district court ruled at summary judgment that an award of Omnia's profits would require a showing of willful infringement.
- Following a bench trial, the district court entered judgment for Omnia, finding no trademark infringement because Stone Creek had failed to establish a likelihood of confusion.
- Stone Creek, the plaintiff-appellant, appealed the judgment of no infringement to the U.S. Court of Appeals for the Ninth Circuit.
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Issue:
Does a manufacturer's knowing use of an identical trademark on identical goods create a likelihood of confusion sufficient for trademark infringement, even when the goods are primarily sold in a geographically separate market from the senior trademark owner?
Opinions:
Majority - McKeown, Circuit Judge
Yes, a manufacturer's use of an identical trademark on identical goods creates a strong likelihood of confusion that is not overcome by geographic separation in this case. The district court committed legal error by improperly weighing the Sleekcraft factors for determining likelihood of confusion. The court emphasized that the identity of the marks and goods is a 'slam-dunk' case for confusion. The district court also erred by focusing only on the mark's commercial strength while ignoring its conceptual strength as a fanciful mark, and by misapprehending the scope of actual confusion and the convergence of marketing channels in the internet age. Furthermore, Omnia’s full knowledge of Stone Creek's senior use and its deliberate copying of the mark established a presumption of intent to deceive, which Omnia failed to rebut. Therefore, the finding of no likelihood of confusion must be reversed.
Analysis:
This decision solidifies several key trademark principles in the Ninth Circuit. First, it powerfully affirms that using an identical mark on identical goods is almost case-dispositive for finding a likelihood of confusion, diminishing the weight of other factors like geographic separation. Second, it resolves a circuit split for the Ninth Circuit regarding the 'Tea Rose-Rectanus' defense, holding that a junior user's mere knowledge of a senior user's mark defeats the good faith requirement. Finally, the decision confirms that the 1999 amendments to the Lanham Act did not abrogate the circuit's precedent requiring a showing of willfulness for an award of the infringer's profits, thus deepening an existing circuit split on that issue.
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