An educational technology company bringing trademark infringement claims against toy manufacturer Mattel, Inc. and its Fisher-Price subsidiary could seek equitable relief in the form of an award Fisher-Price's profits, on an unjust enrichment theory, the federal district court in San Jose has ruled. The technology company alleged that Fisher-Price's use of the mark "iXL" for a hand-held smart device learning toy infringed the company's registered "IXL" service mark, as used by the company for a web-based math learning software and subscription service. The company could go forward with an infringement claim based on a "reverse confusion" theory, although it failed to provide sufficient evidence to support a "forward confusion" claim, and it failed to establish the requisite actual harm to seek actual damages.

Likelihood of Confusion-Marketing Channels

The court denied a request by Fisher-Price for a determination that the impact Fisher-Price's marketing and promotional techniques had on the way Internet search engines displayed links to the complaining company's websites did not constitute consumer confusion and was not a legally cognizable harm. The company was not asserting an independent theory of harm based on search engine results. Rather, the company contended --and the court agreed --that Fisher-Price's use of online social media to market its "iXL" toy could be relevant to the issue of consumer confusion.

Fisher-Price's marketing strategy included such steps as reserving "tags" to improve search-engine results, monitoring blogs for use of the term "iXL," sending e-mail "blasts," creating Facebook applications, developing YouTube "channels," and fostering tie-ins with "mommy bloggers." Evidence regarding the effects on search-engine rankings from these practices could weigh in favor of a determination that the parties sold their respective products through convergent marketing channels, which was a factor in the likelihood of confusion analysis, in the court's view. The mere use of online advertising --including the purchase of search-engine keywords --was not particularly relevant because almost all retailers advertised online, but social media marketing could be considered akin to niche marketplaces, such as specialty retail outlets and trade magazines.

Damages-Actual Harm

The company could not seek compensatory damages without a showing of actual harm, the court said. The company acknowledged that it was unable to demonstrate lost profits resulting from Fisher-Price's conduct.

The alleged harm that resulted when Internet users performed a search on the keyword "ixl" and then clicked through to Fisher-Price's website was insufficient to support a damages award based on the cost of corrective advertising, in the court's view. The claim that every click-through to a site related to Fisher-Price's "iXL" product resulted in compensable harm to the company was based entirely on conjecture. Even if web traffic had been diverted from the company's site, the company did not show that any underlying or resulting confusion had damaged its goodwill.

The company could not seek damages based on reasonable royalties because it presented no evidence that it had licensed or had plans to license its "IXL" mark to third parties, the court said. In addition, it could not seek compensatory damages based on Fisher-Price's profits resulting from its alleged infringement because the parties were not in direct competition.

Award of Profits

Although compensatory damages were not warranted, the company could seek an equitable award of Fisher-Price's profits because there was evidence that Fisher-Price acted willfully by adopting its "iXL" service mark with knowledge of the company's existing rights in the mark "IXL." Fisher-Price admitted that it discovered the "IXL" mark in a trademark search. The company had sent a cease and desist letter to Fisher-Price prior to the release of its "iXL Learning System" product. This evidence was enough to raise a genuine issue of material fact for trial.

Forward Confusion

The company failed to present sufficient evidence to proceed to trial of its infringement claim based on "forward trademark confusion," the court determined. Forward confusion occurs when consumers believe that the goods bearing the junior mark came from or were sponsored by the senior mark holder. To establish forward confusion, the company would have to show that its "IXL" service was the source of consumer interest in Fisher-Price's "iXL Learning System" product. The company would have to show that such confusion was "probable," not merely "possible."

Although the company had presented survey evidence tending to show a likelihood of "reverse confusion," it failed to present enough evidence to permit a rational trier of fact to determine that forward confusion was probable. The evidence of actual confusion in the record involved people who contacted the company under the mistaken belief that the company was affiliated with the Fisher-Price product, the court said. This type of confusion would constitute reverse confusion, not forward confusion.

Quia Corp., ND Cal., ¶61,837.