U.S. Supreme Court Rules on Tacking Doctrine Applicable to Trademarks

A trademark serves to identify and distinguish one party’s goods or services from the goods and services of others.  A trademark may be a word, phrase, symbol or design, or any combination of those.  Trademark rights arise from either (1) actual use of the mark, or (2) the filing of an application to register a mark in the United States Patent and Trademark Office (USPTO) stating that the applicant has bona fide intention to use the mark in interstate commerce.

While federal registration is not required to establish rights in a mark or before beginning to use a mark, federal registration may provide benefits beyond the rights acquired by the mere use of a mark.  These benefits include that the owner of a federal registration is presumed to be the mark owner for the goods and services identified in the registration, as well as rights to use the mark nationwide.  Generally, the party who either first uses a mark in commerce or files an application in the USPTO has the ultimate right to register that mark.  The right to use a mark, however, can be a more difficult determination.  This may be particularly true when two parties use the same or similar marks without knowledge of each another and neither possesses a federal registration.  In such cases, a court ultimately determines which party is the appropriate rightful user of the mark.

In addition to first use of the mark, use of a mark over time may factor into trademark disputes.  Realizing that use of a mark may not stay exactly the same over the years, courts have allowed a mark user to have “first in time” priority even if the mark changes, as long as the newer version of the mark is the “legal equivalent” of the older version. This doctrine is called “tacking.” The user of an updated mark may tack such use to the use of prior versions to determine priority in trademark disputes, if the updated mark is the legal equivalent of the prior version.

Not surprisingly, parties often dispute whether a mark is the legal equivalent of a previous mark.  If the trademark dispute goes before a jury, who determines whether a mark is the legal equivalent of a prior mark–should it be the judge or the jury?  Recently, the Supreme Court by unanimous decision answered that question in Hana Financial, Inc. v. Hana Bank, et al., 574 U.S. __ (January 21, 2015).

The Hana case involves a dispute between two financial services companies. Starting in 1994, a Korean entity, Hana Overseas Korean Club, advertised financial services in the United States. The advertisements included the name “Hana Overseas Korean Club” in both English and Korean and “Hana Bank” in Korean only, along with a “dancing man” logo. In 2002, the company opened its first physical location in the U.S., calling itself “Hana Bank” (in English). The other party–Hana Financial, the petitioner before the Supreme Court–was established in 1994 as a California corporation.  In 1996, Hana Financial registered a trademark for its pyramid logo and the name Hana Financial with the USPTO.

In 2007, Hana Financial sued Hana Bank for trademark infringement. Hana Bank’s defense was that its use of “Hana Bank” in Korean in its promotional materials in 1994 should tack to its later use of “Hana Bank” in English, and therefore Hana Bank had priority over Hana Financial. At trial, the judge instructed the jury on tacking and Hana Bank prevailed. Hana Financial appealed to the Ninth Circuit, which upheld the trial court’s decision.   The Supreme Court likewise affirmed the Ninth Circuit’s decision. As noted, a mark is the legal equivalent of a prior mark if the newer and older marks create the same, continuous commercial impression. Because trademarks are widely used and recognized in commerce, whether two of them create a continuous commercial impression is viewed from the perspective of an ordinary purchaser or consumer. Therefore, whether a mark’s use tacks to a previous mark’s use is a mixed question of law and fact. Ordinarily, in a jury trial, a judge decides the law and a jury decides the facts. In Hana, the Supreme Court ruled that the mixed question of trademark tacking is a question that can properly be answered by the jury, holding that there is nothing particularly unique as a matter of judicial expertise to keep the jury from determining whether the tacking doctrine applies.  (Of course, in deciding motions for summary judgment, and in bench trials, judges may still decide questions involving the tacking doctrine.)

Whether decided by a judge or a jury, trademark disputes can be costly as well as disruptive and distracting to businesses. Whether a company is being formed or has been operating for years, protection of the company’s brand should be a key consideration as part of the company’s overall strategy.  Given the potentially high stakes, companies should engage experienced intellectual property attorneys at every stage of a company’s growth cycle to help evaluate, protect, and monetize their important trademark and other intellectual property assets.