Software Maker Awarded $250,000 in Reverse Confusion Case

by Thomas Long, Legal Editor, CCH Trademark Law Guide

A jury award of $250,000 in damages to a software manufacturer for an information technology consulting company's infringement of the manufacturer's registered VISIBLE mark for enterprise modeling software has been upheld by the U.S. Court of Appeals in Boston. The software maker presented sufficient evidence to the jury to support a conclusion that reverse confusion was likely to result from the much-larger consulting company's use of similar marks, including 3D VISIBLE ENTERPRISE and VISIBLE ADVANTAGE. Consumers encountering the consulting company's VISIBLE marks in commerce were likely to mistakenly believe that the consulting company had acquired the software maker, the court said.

Likelihood of Confusion

The marks were substantially similar. Both companies used the word "Visible," even though the consulting company used the word primarily as part of the phrase "3D Visible Enterprise." The parties' respective marks had different typefaces, backgrounds, and visual cues, but the dissimilarities were not so great as to render irrational the finding of likelihood of reverse confusion.

Although the software maker sold goods and the consulting company sold services, the jury rationally determined that the parties' businesses were related enough for reverse confusion to be likely. An expert witness for the software maker had testified that the parties' offerings were very similar and had very similar outputs and results for clients.

The parties' channels of trade, advertising, and prospective customers were similar enough for reverse confusion to be likely, in the court's view. The consulting company contended that the parties' respective businesses were greatly different because: (1) the software maker's sales occurred primarily through downloads from its website, whereas the consulting company's accounts resulted from longstanding client relationships and (2) the software maker primarily marketed through its website, whereas the consulting company advertised in general business publications, in addition to its Internet advertising. However, testimony indicated that both parties targeted many of the same customers. For example, the Arizona court system was a customer of both parties.

Because it was a reverse confusion case, the strength of the accused infringer's marks, in relation to that of the software manufacturer's mark, was a factor in the likelihood of confusion analysis, the court said. The consulting company had a national advertising campaign for its enterprise services, promoted the services on the Internet, and built the 3D VISIBLE ENTERPRISE mark through partnerships with developers of modeling tools.

The software maker had used the VISIBLE mark for over 20 years, had spent over $2 million to promote the mark since 1987, and had acted in the past to protect its mark. A jury could reasonably find that these facts established the identity of the software maker's VISIBLE mark, but did not prevent the mark from being overwhelmed by the consulting company's mark, the court reasoned.

Damages

The jury's damages award was neither excessive nor inadequate, the court held. The software maker's principal had testified that the company's revenues dropped substantially in the quarter after the consulting company adopted its VISIBLE marks. The principal testified that the jury could determine the software maker's lost profits by calculating a profit margin on operations and applying that margin to the software maker's lost revenues. By using this method, the jury had a basis for determining that an award of approximately $250,000 was appropriate.

Injunctive Relief

The software manufacturer was not entitled to broader injunctive relief than that granted by the district court, the appellate court said. The district court did not err by refusing to bar the consulting company's use of VISIBLE on its country-specific websites based outside of the United States and by allowing the consulting company to use "visible" in its ordinary descriptive sense. There was no evidence that the software maker maintained any overseas websites or that it had any substantial overseas sales, so the injunction as written was sufficient to protect the software maker's trademark rights.

Accounting of Profits

The software manufacturer was not entitled an accounting of the consulting company's profits, the court determined. An accounting of profits was an equitable remedy that was to be applied when an adequate remedy at law was not available. The software maker's harm had, in fact, been measured, and compensatory damages had been awarded.

There was no evidence that profits had accrued to the consulting company as a result of its infringement, so an accounting could not be awarded on an "unjust enrichment" basis. An accounting to serve a deterrent purpose was not justified because there was no showing of bad faith by the consulting company.

Attorney's Fees

An attorney's fee award under Sec. 35(a) of the Lanham Act was not warranted because the case was not "exceptional," in the court's view. The consulting company had a good faith belief that it was not in competition with the software maker. The evidence that the software maker suffered actual damage was indirect. The consulting company's behavior did not rise to the level of deliberate and willful conduct.

Visible Systems Corp., 1st Cir., ¶61,347

 (The above feature is selected from the newsletter published monthly along with full text documents and other materials provided to subscribers of the CCH Trademark Law Guide.)