IP Law Daily, TRADEMARK—E.D.N.C.: No likelihood of confusion between “AI” marks where plaintiff’s mark was weak, barely used, (Apr 1, 2025)

By Justin Marcus Smith, J.D.

The “AI” identifier was probably already generic, and appending two conceptually weak identifiers did not create a mark stronger than the sum of its parts.

On cross-motions for summary judgment, presumed suggestiveness could not save a Canadian software company’s trademark infringement claim where it maintained only a weak mark, in limited use, facing sophisticated buyers, held the federal district court in Elizabeth City, North Carolina. The court found there was no likelihood of confusion, so it granted summary judgment to the defendant on that question. The court also mostly denied the plaintiff’s motion for summary judgment on the issue of common law priority. The court held it could not judicially determine the scope of the plaintiff’s rights, before USPTO disposition of the defendant’s pending trademark application, as stayed during pendency of this litigation, at least not in locations where the defendant had not disclaimed such rights. However, the court did grant the Canadian plaintiff a narrow summary judgment ruling on the question of common law priority in seventeen “conceded” states where the defendant did not contest having disclaimed common law priority (Forma AI Inc. v. Twic, Inc., No. 4:23-cv-00077-BO-BM (E.D.N.C. Mar. 31, 2025)).

Background. Plaintiff Forma AI Inc. (Forma AI), an Ontario company founded in 2016, developed a software platform for managing sales force compensation and benefits. Forma AI said it used the mark “FORMA.AI” only to a limited extent in the United States. The mark was said to consist of capitalized text and a stylized letter “F” created in the negative space between three purple lines.

Defendant Twic, Inc., founded in 2017, provided a software platform for managing employee benefits, like health insurance. In 2022, Twic re-branded to “Forma” and filed an intent-to-use application with the USPTO on February 15, 2022.

Forma AI alleged Twic was using an infringing mark consisting of the lowercase text “forma” and a stylized graphic consisting of blue, red, pink, and yellow dots (the infringing mark). After becoming aware of Twic’s alleged use of the infringing mark, Forma AI filed a trademark application with USPTO claiming a first-use date of September 2018 for the FORMA.AI mark. USPTO approved and registered Forma AI’s mark on May 9, 2023, without requiring proof of secondary meaning. USPTO stayed Twic’s application pending the conclusion of this litigation.

Forma AI sent several cease-and-desist letters to Twic, but it ultimately sued for trademark infringement under the Lanham Act, unfair competition, and false designation of origin. Forma AI also asserted common law and state law claims of unfair competition. After discovery, the parties cross- moved for summary judgment. Twic moved for summary judgment on likelihood of confusion. Forma AI moved for summary judgment on the issue of common law priority.

Likelihood of confusion. Taken together, the court held its application of the nine-factor Grayson test showed there was no meaningful likelihood of confusion. See Grayson O Co. v. Agadir Int'! LLC, 856 F.3d 307, 314 (4th Cir. 2017).

First, even though the Forma AI mark was entitled to a presumption of suggestiveness, other factors weighed against it being a strong mark. The court said it was not unique or distinctive because Twic showed that numerous other companies in the software space use marks with similar components. The court deemed it unlikely that so many other software companies would independently think of using similar variants of the character string FORMA if it were a truly distinctive mark on the whole. The AI identifier was also probably already generic, and appending two conceptually weak identifiers would not create a mark stronger than the sum of its parts. The mark was also not in widespread or meaningful commercial use. Most relevant, Forma AI said it had only 23 customers in the United States.

As for the similarity of the Twic mark, the court concluded the two marks bore “at most a passing resemblance.” The court said the character string “forma” was not dominant. The Twic mark was lowercase, and it used a grid of multicolored dots, not sharp purple lines.

As for similarity of the parties’ goods or services offered, Twic sought to draw a line between Forma AI’s incentive software and Twic’s benefits management software. The court said it did not need to resolve that dispute because Twic conceded that the similarity of business types weighed in favor of a likelihood of confusion.

Both parties sold their products or services through the use of third-party benefits brokers, but the bulk of Forma AI’s business came through online sales. Both parties admitted some channel overlap, but neither party showed how much of their business came through other channels. The court therefore found this factor neutral.

As for the similarity of advertising, both parties largely advertised in cyberspace, so the court found this factor weighed slightly in favor of likelihood of confusion.

The record did not show that Twic intented to infringe or to capture Forma AI goodwill. Twic engaged an outside consultant for its re-branding, and when Twic filed to register its mark, Forma AI did not have a registration or pending application. This factor weighed against a finding of likelihood of confusion.

In support of its claim of actual confusion, Forma AI identified 29 purported instances of mistaken identity emails, but the court found these circumstances not as strong as Forma AI claimed. None of the emails were from actual Forma AI buyers. Most were intended for Twic. The court noted the Fourth Circuit has not adopted the “initial interest confusion theory.” Court analysis is to focus on whether there is likelihood of confusion from the viewpoint of the ordinary consumer. In this case, the ordinary consumer was a sophisticated entity with C-suite executives making complicated purchasing decisions after multiple vendor meetings and much deliberation. Forma AI did not show any evidence of even de minimis confusion in the context of thousands of emails. Accordingly, the actual confusion factor and the customer sophistication factors both weighed against finding likelihood of confusion.

As for the quality of the Twic product, neither party contended the other was offering a lower-quality or inferior product or service, so this factor was neutral.

In conclusion here, the court found the weakness of the Forma AI mark outweighed those Grayson factors that favored Forma AI. The court accordingly granted Twic summary judgment that there was no likelihood of confusion as a matter of law.

Common law priority. Twic submitted its trademark application on February 15, 2022. If approved, Twic would have nationwide priority as of that date. It would also continue to have common law trademark rights in localities where it used the mark. Forma AI contended that Twic could not show use of its pending “forma” mark before the date Forma AI registered its mark, but the court said Forma AI overlooked the critical fact that Twic’s application was still pending. The court held it could not judicially determine the scope of Forma AI’s rights before disposition of Twic’s pending application. Twic was not trying to stop Forma AI from using its mark in the U.S. Instead, Twic was only seeking to lawfully prosecute its own application. With this, the court concluded genuine issues of material fact pertained to summary judgment on the thirty-three “alleged priority” states.

As for summary judgment on Twic’s affirmative defense of priority in seventeen “conceded” states, states where Forma AI said Twic had disclaimed priority, the court found Twic did not contest or qualify. The eventual outcome of the pending Twic trademark application would not change Twic’s disclaimers. Accordingly, the court found summary judgment appropriate in the narrow context of the states Twic disclaimed. However, this very limited summary judgment ruling did not determine that Forma AI had any common law trademark rights in any state. Rather, it determined merely that Twic conceded it did not have common law trademark priority in the seventeen “conceded states.”

The Case is No. 4:23-cv-00077-BO-BM.

Judge: Boyle, T.

Attorneys: Erica B. E. Rogers (Ward and Smith, P.A.) for Forma AI Inc. Emily M. Haas (Michael Best & Friedrich LLP) for Twic, Inc.

Companies: Forma AI Inc.; Twic, Inc.

Cases: Trademark NorthCarolinaNews