Antitrust Law Daily Wrap Up, ADVERTISING—9th Cir.: False advertising, trademark infringement claims should have been considered separately, (Dec 27, 2013)

By Edward L. Puzzo, J.D.

A federal district court improperly denied Wells Fargo’s motion for a preliminary injunction, against a firm using the former name of its insurance company, when the court failed to analyze plaintiff’s false advertisement claim separately from its analysis of plaintiff’s trademark infringement claim, the U.S. Court of Appeals fin San Francisco has ruled (Wells Fargo v. ABD Insurance & Financial Services, December 20, 2013, Per Curiam).

Background. Wells Fargo purchased ABD Insurance & Financial Services (the former ABD) in 2007 and soon thereafter changed the name of the entity to Wells Fargo Insurance Services.

In 2011, Kurt DeGrosz of Insurance Leadership Network, Inc. filed an “intent to use” the “ABD” mark, after Wells Fargo failed to maintain its trademark registration for the mark, and his firm began doing business as ABD Insurance & Financial Services (the new ABD). After making a demand that the pending trademark application for ABD be abandoned, Wells Fargo filed a lawsuit alleging trademark infringement and false advertising, and sought a preliminary injunction prohibiting the defendants from continuing to use the “ABD” mark. On March 8, 2013, the federal district court ruled that Wells Fargo was unlikely to succeed on the merits regarding alleged trademark infringement for use of the “ABD” mark, and denied their motion for a preliminary injunction. Wells Fargo appealed, arguing that the district court had abused its discretion in denying the preliminary injunction. The appellate court agreed.

False advertising. The appellate court held that the district court had abused its discretion by not considering Wells Fargo’s false advertisement claim separately from the trademark infringement claim. The lower court had ruled that the former was derivative of the latter, but the appellate court stated that the two claims were distinct and required separate tests.

A false advertisement claim under Section 43(a) of the Lanham Act, the appellate court explained, requires five elements: (1) a false statement of fact by the defendant in a commercial advertisement about its own or another’s product; (2) the statement actually deceived or has the tendency to deceive a substantial segment of its audience; (3) the deception is material, in that it is likely to influence the purchasing decision; (4) the defendant caused its false statement to enter interstate commerce; and (5) the plaintiff has been or is likely to be injured as a result of the false statement, either by direct diversion of sales from itself to defendant or by lessening of the goodwill associated with its products.

This five-part analysis differs from the two-part analysis required for trademark infringement: (1) ownership of a trademark, and (2) a showing of a likelihood of confusion through the balancing of eight factors. Since the two tests are different, the lower court erred in not considering the false advertisement and trademark infringement claims separately, the appellate court ruled.

Trademark infringement. The appellate court also criticized the lower court’s analysis of the trademark infringement claim. Regarding the issue of whether Wells Fargo had abandoned the “ABD” mark, the appellate court stated that the district court erred by considering Wells Fargo’s intent to rebrand ABD, and also misconstrued the scope of bona fide use. The district court also overemphasized the lack of actual confusion evidence, the appellate court stated, because parties rarely have gathered such evidence at the preliminary injunction stage.

The appellate court concluded that the district court abused its discretion in its analysis of Wells Fargo’s likelihood of success on the merits of its claims, reversed the district court’s order and remanded for reconsideration of Wells Fargo’s motion for preliminary injunction.

The case is No. 13-15625.

Attorneys: Felicia Boyd (Barnes & Thornburg LLP) for Wells Fargo & Company. Kerry Lynn Duffy (Bartko, Zankel, Bunzel & Miller) for ABD Insurance & Financial Services, Inc.

Companies: Wells Fargo & Company; ABD Insurance & Financial Services, Inc.

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