When It’s All In the Family: Reverse Confusion Not a Basis for Broad Trademark Remedies

By on January 8, 2020
Posted In Trademarks

Addressing reverse confusion and scope of available remedies, the US Court of Appeals for the Seventh Circuit upheld a district court’s refusal to award infringing profits and a broad permanent injunction after a jury found infringement. Fabick, Inc. v. JFTCO, Inc., Case Nos. 19-1760; -0072 (7th Cir. Dec. 9, 2019) (Flaum, J.)

This trademark dispute originates with a family feud. John Fabick, founder of the John Fabick Tractor Company, purchased two Caterpillar equipment dealerships intending for his son, Joe, to operate the dealerships. At the time, the John Fabick Tractor Company had used the mark FABICK in connection with its business. Joe later founded FABCO, which sold Caterpillar equipment and related goods. Eventually, one of Joe’s sons, Jeré, took over FABCO.

Plaintiff Fabick, Inc. (FI) began as a subsidiary of FABCO, and its primary business was spray-on sealants for trucks and other vehicles. While still a subsidiary of FABCO, FI applied for and secured registration of the mark FABICK for its sealants. Another of Joe’s sons, Jay, worked at FI. Due to mounting family tensions, Jeré terminated Jay’s employment, but Jay became the sole, independent owner of FI as part of his severance package.

In 2015, FABCO was sold to a newly formed subsidiary of the John Fabick Tractor Company, Defendant JFTCO. JFTCO began operating Caterpillar dealerships under the name “Fabick CAT.” FI complained that it was being overwhelmed by JFTCO’s extensive advertising.

FI sued JFTCO for trademark infringement under federal and common law based on a theory of reverse trademark confusion—where a larger junior threatens the market of the lesser known, smaller senior user. On summary judgment, the district court ruled that FI could not seek JFTCO’s profits as damages. The case proceeded to trial, where the jury found JFTCO liable for federal trademark infringement. JFTCO filed a motion for judgment as a matter of law concerning the jury’s infringement verdict, which the district court denied.

After trial, FI sought a permanent injunction prohibiting JFTCO from using the name “Fabick” in any way. The district court declined to enter FI’s requested injunction and instead ordered JFTCO to use a disclaimer for five years stating that it was not affiliated with FI. JFTCO appealed the district court’s denial of its motion for judgment as a matter of law; FI cross-appealed the district court’s refusal to allow FI to recover JFTCO’s profits and to impose a broad permanent injunction. The remainder of this note focuses on FI’s cross-appeal.

FI argued that the district court erred in refusing to award JFTCO’s profits. Because FI’s trademark infringement rested on a reverse confusion theory, the district court stated it was “hard-pressed to understand how [JFTCO was] unjustly enriched by customers assuming that [FI’s] sealants and coatings business is the same or related to JFTCO’s business.” The Seventh Circuit agreed, noting that reverse confusion is a “meager justification” for an award of defendant’s profits and there was no evidence of bad faith or unjust enrichment to support such an award.

FI also appealed the district court’s limited injunction. The district court reasoned that limited injunctive relief was warranted because (1) FI knew of the John Fabick Tractor Company’s prior use of the FABICK mark at the time FI applied to register FABICK for its business, and (2) FI’s failure to present evidence of harm to its reputation, lost sales or similar damages. While FI presented substantial evidence of actual confusion, the district court noted that FI failed to show how this caused it harm.

In arguing that the district court erred in failing to enter a full permanent injunction, FI argued that it had lost the ability to control its FABICK mark and was thus being irreparably harmed. The Seventh Circuit stated that district courts have discretion to evaluate the type and degree of harm in determining the appropriate scope of injunctive relief. The Court explained that the district court did not abuse its discretion in issuing limited injunctive relief because the parties do not compete and dispute the use of a shared family name. Banning FI’s use of Fabick would have been “overkill,” and the Seventh Circuit found the disclaimers ordered by the district court to be reasonably tailored to remedy JFTCO’s infringement.

Mary Hallerman
Mary Hallerman focuses her practice on trademark, trade dress, false advertising, and copyright litigation and counseling. Mary represents clients in high-stakes cases in federal courts throughout the United States and before the Trademark Trial and Appeal Board. An emerging leader in the Firm’s respected trademark and copyright practice, Mary plays a significant role in case strategy and management. She has prepared numerous complaints, motions for preliminary injunction and ex parte temporary restraining orders, discovery motions and dispositive motions. She works frequently with expert witnesses, supervises discovery, and leads trial and evidentiary hearing preparation. Mary regularly works with clients in managing domain name portfolios, taking down infringing domains and fraudulent websites through UDRP proceedings or other enforcement methods, assessing litigation risks, reviewing advertising copy, and performing due diligence concerning trademark, copyright, false advertising, and unfair competition matters in corporate transactions. Read Mary Hallerman's full bio.