The Ninth Circuit’s April opinion in exemplary suit Ironhawk Technologies Inc. v. Dropbox Inc., regarding Dropbox’s alleged infringement of the SmartSync trademark through its Smart Sync product illustrates how close trademark disputes often are. Pursuant to the appellate panel’s decision, the court reversed and vacated the district court’s granting of summary judgment in Dropbox’s favor and remanded the lawsuit to the lower court.
The Ninth Circuit noted the reverse confusion theory used in the lawsuit, finding that a reasonable jury would find that consumers would believe that Dropbox is the source or sponsor of Ironhawk’s Smart Sync. In particular, applying the Sleekcraft factors, the court found there to be a reasonable likelihood of confusion.
In a dissenting opinion, Circuit Judge Tashima claimed that he was not convinced that a reasonable jury would find a likelihood of consumer confusion because the majority erroneously did not consider that the potential customers were “large, sophisticated commercial enterprises, and any sale would be subject to a prolonged sales effort and careful customer decision making.”
Tim Getzoff, partner at Holland & Hart, discussed product confusion and reverse confusion theory as exemplified in Ironhawk Technologies Inc. v. Dropbox Inc with Law Street. He explained that reverse confusion theory occurs when a smaller company is the senior trademark user and a larger well-known company is the junior trademark user, but consumers associate the trademark with the junior user.
Taking on the Goliaths: When asked about the success of plaintiffs in reverse confusion theory cases, Getzoff said, “I would say that a reverse confusion case in and of itself is no more or less likely to be successful. There is no sort of trick or change in the law that is going to make a reverse confusion case harder to prove. Now, that said, whenever you’re going against a bigger defendant, sort of the 800-pound gorilla defendant, that obviously creates some issues in the case in terms of who can afford to outspend the other, as well as, when you’re going against a big defendant, you can sometimes use the David and Goliath theme. So, ‘we’re the smaller player, we built up this trademark and this huge company came along and stole our trademark and is now swamping us in the market because everybody thinks that we copied them.’ That David and Goliath theme, which can play very well, often comes up in reverse confusion cases because you are typically going against a much larger defendant.”
Customer Sophistication and its Impact on Confusion: When discussing the case more in-depth, Getzoff noted the 2-1 split in the appellate panel decision. Specifically, Getzoff stated, “In this case, for example, there was a dissent opinion in that circuit opinion, so it was a 2-1 split, and there was a factor that the majority opinion didn’t talk about, but the dissenting judge, the one judge, … he said ‘look to see how sophisticated the customers are and what type of product you’re selling.’ For example, if you’re selling a pack of gum that is at the checkout aisle at a grocery store, that’s considered an impulse buy – people just grabbing and buying without really thinking – and it’s easier to show a likelihood of confusion in those situations, but in this case, when you’re talking about very expensive products that are sold commercially – it’s not sold to the general public, this is the plaintiff’s product, but it’s sold on an enterprise level, to other companies that are very sophisticated and they go through a purchasing department, they know what they’re buying. They’re oftentimes back and forth between the buyer and the seller to negotiate the terms and so forth, that really cuts down on the likelihood of confusion because it’s not something that you just purchased without much thought, it’s something that you spend a lot of time on maybe researching or looking into before you buy it. In this case, the dissent said, ‘look, I think that factor overwhelms everything; this is really expensive software that’s marketed to other companies, these are sophisticated buyers, they know what they’re buying, the chances of one of these companies thinking by mistake that this is the Dropbox product is just so low that I would have granted summary judgment on that factor.’ That’s a case where that one judge thought that one factor was so strong for the defendant, he would have upheld the summary judgment. The two judges that were in the majority, they don’t even talk about that factor and they just said ‘all the other factors were close enough that a jury should be allowed to decide the ultimate question.”
The Ironhawk Split: Getzoff explained the importance of the 2-1 split in the Ironhawk suit, stating, “Whenever you’ve got a 2-1 split, that means that it was a really close call. Trademark cases are so fact-intensive – you go through these 5 or 6 different factors … and you’re supposed to figure out as a judge or jury which one carries the day. There can be very tough cases and very close cases, where both sides have good arguments and you just try to figure out which one ultimately is going to win when you take everything into account. … In this case, you have two really experienced Ninth Circuit judges that thought it should go one way and the third disagreed and I think that just speaks to how close of a case that is.”
Getzoff predicted the next steps for Dropbox, asserting, “Certainly, the defendant (Dropbox) is going to glob on to what the dissenting judge said. … They’re really going to emphasize the fact that this is expensive, sophisticated software that the plaintiff sells and none of the plaintiff’s customers or potential customers are going to mistakenly think that they’re affiliated with Dropbox because of the nature of their product. I do think that if I’m Dropbox I’m going to really hit hard and develop what the dissenting judge said when the case goes forward.”
Meanwhile, for Ironhawk, Getzoff remarked that “I think that the majority opinion, the two judges that agreed with Ironhawk … gives a pretty good roadmap for what Ironhawk needs to prove. They’ve got a near identical mark, they’ve got the strength of Dropbox that they can point to. Their mark isn’t very strong, but Dropbox’s mark is very strong and that plays into the reverse confusion where Dropbox is swamping the claim that Ironhawk would try to prove that Dropbox is swamping them in the market by using the trademark. The products are similar, so similarity of the products is one of the issues and they sort of do the same thing, generally, although when you get into the details, they sort of work differently and have different applications. There’s plenty to argue on both sides going forward if you’re the plaintiff, particularly focusing on the similarity of the marks. The marks are basically the same except one had a space between the words and one doesn’t. The products are in the same ballpark; you could argue that the plaintiff’s product is more sophisticated for a more limited type of customer or more special type of customer, but they’re generally doing the same thing. And then, if I’m the plaintiff, I’m really going to play up the David and Goliath theme and say ‘look, Dropbox didn’t have to use this mark, but they did and they obviously knew about us and their sales are going to just swamp us, so the value of our trademark just got crushed because now everybody thinks that that is Dropbox and not us.”
Furthermore, according to Getzoff, for “a defendant trying to get summary judgment this is not a good case because this is the Ninth Circuit saying ‘no, the lower court should not have granted summary judgment, let’s not be so quick to pull the trigger on summary judgment if it’s a close call.’ If you’re a defendant, if you’re an accused infringer, then this is a good case to cite because even when you’ve got factors that cut against you, if you can show enough factors that go your way then you can argue the summary judgment is not appropriate and it should go to a jury.”
Traditional Foes and the Subjectivity of Confusion: When asked about court tendencies, Getzoff said, “sympathy toward the plaintiff or the defendant often comes in when going back to the David and Goliath (theme) – if you can make a claim that you’re the David in the David and Goliath story, that’s where you want to be because David is sympathetic and … the fairness it just feels unfair to one side or the other. Both sides are trying to put the white hat on themselves and the black hat on the other side and I think the courts do a good job of being fairly unbiased and pretty neutral in how they assess these.”
Discussing trademark/reverse confusion cases in general, Getzoff noted that “each one is different because the underlying facts, what the product is, what the market is, is a whole new set of facts that you need to sink your teeth into and try to figure out, but ultimately, they’re all trying to prove the same thing – they’re all trying to apply that multifactor test and decide whether the use of the trademark is likely to cause confusion in the marketplace and if you can satisfy that then the trademark owner wins.”
As another example of reverse confusion theory, Getzoff pointed to Variety Stores Inc. v. Walmart Inc., which “just came out of the Fourth Circuit where Walmart is the defendant and a small, local company was selling backyard grills and they actually had a trademark for ‘Backyard Grill’ and Walmart came along and used that trademark and was accused of infringement. The plaintiffs won that case at trial, but was reversed by the Fourth Circuit; that was also a reverse confusion case. It is whenever the infringer is such a big company that their use of the mark is going to swamp the plaintiff or swamp the senior user’s trademark rights.”
Getzoff added “what (Ironhawk v. Dropbox) does show is that this was a really close case – you’ve got the district judge saying ‘that this case shouldn’t go to a jury it’s so one-sided’ and then you’ve got two Ninth Circuit judges who disagreed with him and said ‘no we think it’s close enough that a jury should decide.’ Then you’ve got the dissenting judge, who agreed with the district court judge saying ‘no I think it was one-sided enough that it shouldn’t go to a jury.’ So, I think it speaks to the fact that trademark cases can be very difficult to decide because you’ve got facts on both sides and it’s difficult to know which of them are close enough that it should go to a jury or is so one-sided that a court should grant summary judgment and get rid of the case, which is what happened in this case before it was appealed.”