IP Law Daily, TRADEMARK—D. Del.: Sophisticated purchasers of payment services/terminals unlikely to confuse similar marks , (Aug 15, 2016)

By Pamela C. Maloney, J.D.

A provider of retail payments systems and terminals used for credit card payments failed to prove that confusion was likely between its “Point” trademarks and the “Poynt” mark used by a company that made payment terminals, the federal district court in Delaware ruled, denying a request for a preliminary injunction against the terminal maker’s alleged trademark infringement. Given the totality of circumstances, which included the sophistication of both companies’ consumers and the fact that the systems provider offered payment services while the terminal maker provided hardware devices, the systems provider failed to prove a likelihood of success on the merits of its infringement claim (Verifone, Inc. v. Poynt Co., August 11, 2016, Robinson, S.).

Verifone, Inc. provides retail payment systems—terminals where payment cards are “swiped,” “dipped,” or “tapped” to collect payments. In 2011, Verifone acquired Point International AB, northern Europe’s largest provider of payment services for retailers. Point International used the name “Point” in northern Europe for 25 years and had achieved high brand awareness. Verifone adapted the European services model for the U.S. payment market, seeking to leverage the goodwill and strength of Point International. Two years later, using POINT. and VERIFONE POINT (the Point marks), Verifone introduced a secure commerce architecture, called Point services, that allowed merchants to continue using their existing cash register systems while complying with EMV chip technology.

Poynt Co. is the maker of a hardware device—known as the Poynt Smart Terminal—which was designed specifically for security and was certified as secure by the payment credit card industry. These terminals are sold through merchant acquirers (large banking institutions). Poynt does not provide payment services.

Knowing that Verifone had acquired Point International, Poynt searched the U.S. Patent and Trademark Offices database multiple times to discover whether Verifone had registered the POINT mark for use in the United States. After finding no such registration, Poynt filed a trademark application for POYNT in October 2015. At the end of December, 2015, Verifone filed trademark applications for POINT. and VERIFONE POINT. It filed an opposition to Poynt’s trademark application in September 2015 and in early 2016, Verifone filed a complaint alleging trademark infringement against Poynt and sought a preliminary injunction against Poynt for use of the POYNT mark.

Trademark rights. The court began its analysis by refusing to decide the trademark classification of the Point marks at the preliminary injunction stage. According to the court, any acceptance of Verifone’s “suggestive” designation for its Point marks required the court to conduct an analysis of the likelihood of confusion factors that were outlined in Interpace Corp. v. Lapp, Inc., 721 F.2d 460, 463 (3d Cr. 1983) (the Lapp factors).

Degree of similarity. Comparing the Point marks with the Poynt mark, it was obvious that the marks were similar in sight and sound. As for the meaning of the marks, Verifone argued that “Poynt” was a variation on the spelling of the “point” and should be given the same meaning, while Poynt argued that “point” was a shortened version of point of sale and was used to indicate that the Poynt Smart Terminal was an innovative point of sale device. Despite these arguments, and even though the fact that the “Point.” mark was displayed on the screen of a user’s terminal while the Poynt mark was displayed on the terminal, the overall impression of the marks was similar. Thus, this factor weighed in favor of Verifone.

Strength of mark. Although Verifone had argued that the Point marks were on the “arbitrary or suggestive” end of the trademark spectrum, the court found that these marks lacked commercial strength in the U.S. market and that the company’s website no longer featured the marks. In addition, Verifone’s sales and marketing evidence, when considered in light of customer survey results produced by Poynt, led to the conclusion that the Point marks were not commercially strong.

Verifone’s argument that this case presented elements of reverse confusion because merchants less familiar with the credit card payment industry could believe that Point services were affiliated with Poynt, making commercial strength less relevant in this case was rejected. Poynt was a new company and was not engaged in substantial promotion so as to “swamp” Verifone’s reputation in the market, as required under the reverse confusion factor. Thus, the strength of the mark factor was neutral in determining infringement.

Consumer care in purchase and intended customers. Both parties in this case sold to merchant customers that were replacing existing payment terminals with devices which were compliant with EMV chip technology. These customers were sophisticated purchased who exercised care in selecting terminals and corresponding services. Furthermore, Poynt sold a terminal, whereas Verifone sold Point services for use on a Verifone terminal that did not bear the disputed marks unless running Point services. Based on this information, confusion was unlikely and, thus, this factor weighed in favor of Poynt.

The court went on to explain that when the parties target their sales efforts to the same customers, there was a stronger likelihood of confusion. However, because the actual purchasers shared by the parties in this case were sophisticated merchants, the likelihood of confusion was reduced and thus, this factor was neutral.

Poynt’s intent. Weighing in favor of Poynt was the lack of evidence that Poynt intentionally, willfully, and admittedly adopted a mark that was closely similar to the existing Point marks. Nor did Verifone intentionally chose the Point mark to create confusion. Poynt knew that Verifone had acquired Point International and that the Point name was used in Europe and had checked the PTO trademark database multiple times before filing a trademark application—in advance of Verifone’s application.

Channels of trade and media. Explaining that the greater the similarity between the parties’ advertising and marketing campaigns, the greater the likelihood of confusion, the court noted that the parties participated in the same tradeshows and sold to the same merchant customers, with Poynt doing so exclusively. However, because Poynt did not provide payment services, confusion was less likely and, thus, this factor weighed in its favor.

Relationship of goods and services. Also weighing in as neutral was the relationship between goods and services offered by the parties. Although Verifone argued that both parties were arguably part of the same payment “eco-system,” from the point of view of the merchant purchasers, one offered a terminal and the other provided payment services and a terminal. Thus, there was less likelihood of confusion.

Conclusion. Although the marks used by these two companies were similar, an analysis of the Lapp factors, the totality of the circumstances, and the fact that Verifone sold its payment services and terminals solely to sophisticated purchases, led the court to conclude that confusion was not likely. Thus, Verifone failed to carry its burden of proving the likelihood of its success on the merit of its trademark infringement claim.

Grounds for preliminary injunction. The court went on to determine that because Verifone failed to prove irreparable harm, speculating only that confusion was inevitable as Poynt’s terminals were shipped to end customers and offering only a speculative proof of damage to its reputation and goodwill, there was no ground for a preliminary injunction.

However, in balancing the hardship that would result from the issuance of an injunction, Poynt had provided information to the court quantifying the damages that it would incur should an injunction be issued. This evidence militated against the issuance of the injunction.

The case is No. 16-105-SLR.

Attorneys: Jack B. Blumenfeld (Morris, Nichols, Arsht & Tunnell LLP) for VeriFone, Inc. Philip A. Rovner (Potter Anderson & Corroon, LLP) and Clement S. Roberts (Durie Tangri LLP) for Poynt Co.

Companies: VeriFone, Inc.; Poynt Co.

Cases: Trademark DelawareNews