Wells Fargo & Company v. Abd Insurance & Financial Services, Inc.

Opinion

FILED NOT FOR PUBLICATION DEC 20 2013

MOLLY C. DWYER, CLERK UNITED STATES COURT OF APPEALS U.S. COURT OF APPEALS

FOR THE NINTH CIRCUIT

WELLS FARGO & COMPANY; WELLS No. 13-15625 FARGO INSURANCE SERVICES USA, INC., D.C. No. 4:12-cv-03856-PJH

Plaintiffs - Appellants, MEMORANDUM* v.

ABD INSURANCE & FINANCIAL SERVICES, INC., FKA Insurance Leadership Network, Inc.; KURT DE GROSZ; BRIAN HETHERINGTON,

Defendants - Appellees.

Appeal from the United States District Court for the Northern District of California Phyllis J. Hamilton, District Judge, Presiding

Argued and Submitted December 2, 2013 San Francisco, California

Before: HAWKINS, GOULD, and PAEZ, Circuit Judges.

Appellants Wells Fargo & Co. et al. (“Wells Fargo”) bring this case against

Appellee ABD Insurance and Financial Services (“New ABD”) arguing that the

* This disposition is not appropriate for publication and is not precedent except as provided by Ninth Circuit Rule 36-3. district court abused its discretion when it denied Wells Fargo’s motion for

preliminary injunction. We have jurisdiction pursuant to 28 U.S.C. § 1291, and we

reverse the district court’s order and remand the case for reconsideration of the

motion for preliminary injunction consistent with this memorandum disposition.

Wells Fargo acquired the original ABD Insurance and Financial Services

(“Former ABD”) in 2007, at which point hundreds of Former ABD employees

joined Wells Fargo offices. In 2008, Wells Fargo changed the name of ABD to

“Wells Fargo Insurance Services,” but continued to display the Former ABD mark

on customer presentations and solicitations, and maintained the the abdi.com

website and metatags. However, members of the Former ABD left Wells Fargo in

2009 and created a new insurance and financial services company called Insurance

Leadership Network, Inc (“ILN”). Those members then used ILN to launch New

ABD in June or July 2012, using the exact same name as Former ABD, when they

learned that Wells Fargo had not renewed the registration of the Former ABD

mark. Wells Fargo filed suit against New ABD on July 24, 2012 asserting

trademark, false affiliation and advertisement, and unfair competition claims.

Wells Fargo filed a motion for a preliminary injunction on January 16, 2013. The

district court denied that motion by order of March 8, 2013.

2 The district court’s denial of preliminary injunctive relief is reviewed for an

abuse of discretion. Brookfield Comms., Inc. v. West Coast Entm’t Corp., 174 F.3d

1036, 1045–46 (9th Cir. 1999). “‘A district court would necessarily abuse its

discretion if it based its ruling on an erroneous view of the law,’ Cooter & Gell v.

Hartmarx Corp., 496 U.S. 384, 405 (1990), so we review the underlying legal

issues de novo.” Brookfield Comms., 174 F.3d at 1046 (citations omitted).

A plaintiff seeking a preliminary injunction must establish: (1) a likelihood

of success on the merits, (2) that the plaintiff will likely suffer irreparable harm in

the absence of preliminary relief, (3) that the balance of equities tip in its favor,

and (4) that the public interest favors an injunction. Winter v. N.R.D.C., Inc., 555

U.S. 7, 20 (2008). We agree with Wells Fargo that the district court erred in its

view of the applicable law and therefore abused its discretion in its analysis of the

first element, the likelihood of success on the merits.

First, the district court abused its discretion when it did not separately

consider the false advertisement claim. The district court included that claim in its

trademark infringement analysis because it found false advertisement to be

“derivative of Wells Fargo’s trademark infringement claim.” However, the two

claims are distinct and require the application of separate tests. To succeed on a

false advertisement claim under Lanham Act § 43(a), a plaintiff must prove:

3 (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.

Southland Sod Farms v. Stover Seed Co., 108 F.3d 1134, 1139 (9th Cir. 1997)

(citations omitted). The false advertisement test requires a plaintiff to show all five

elements. Id. By contrast, a claim for trademark infringement requires only two

elements: (1) ownership of a trademark, and (2) that the plaintiff show a likelihood

of confusion through the balancing of eight factors. Rearden LLC v. Rearden

Commerce, Inc., 683 F.3d 1190, 1202 (9th Cir. 2012). These tests are distinct, and

the district court abused its discretion when it did not separately consider the false

advertisement claim.

The district court also abused its discretion by misapplying the law in its

abandonment analysis when it considered evidence of prospective intent to

abandon the mark to determine whether Wells Fargo’s uses were bona fide and in

the ordinary course of business. To prove abandonment of a mark as a defense to a

claim of trademark infringement, a defendant must show that there was: “(1)

discontinuance of trademark use and (2) intent not to resume such use.” Electro

4 Source, LLC v. Brandess-Kalt-Aetna Grp., Inc., 458 F.3d 931, 935 (9th Cir. 2006).

The phrase “trademark use” means “the bona fide use of a mark in the ordinary

course of trade, and not merely to reserve a right in a mark.” Id. at 936 (quoting 15

U.S.C. §1127). Even a “single instance of use is sufficient against a claim of

abandonment of a mark if such use is made in good faith.” Carter-Wallace, Inc. v.

Procter & Gamble Co., 434 F.2d 794, 804 (9th Cir. 1970). All bona fide uses in

the ordinary course of business must cease before a mark is deemed abandoned.

We have said that “unless the trademark use is actually terminated, the intent

not to resume use prong of abandonment does not come into play.” Electro

Source, 458 F.3d at 937–38. “[A] prospective intent to abandon says nothing

about whether use of the mark has been discontinued.” Id. at 937.

The district court held that Wells Fargo abandoned the ABD mark,

reasoning that Wells Fargo’s continued uses of the ABD mark were not bona fide

and in the ordinary course of trade because such uses were “residual . . . or in the

context of a historical background” given Wells Fargo’s rebranding efforts. The

district court’s abandonment findings were flawed for two significant reasons.

First, prospective intent to abandon is not properly considered when examining

whether bona fide uses of the mark in the ordinary course of business have ceased,

and the district court erred when it considered Wells Fargo’s intent to rebrand

5 ABD in that context. Second, the district court misconstrued the breadth of uses

included within the scope of a “bona fide use in the ordinary course of trade.”

Courts must consider the totality of the circumstances surrounding the use, and

“even a declining business retains, may benefit from, or may continue to build its

goodwill until it shuts its doors or ceases use of its marks.” Id. at 938. In this case,

Wells Fargo continued to use the mark in several ways, most notably in customer

presentations and solicitations. Such uses demonstrate Wells Fargo’s business

calculation that it could continue to benefit from the goodwill and mark

recognition associated with ABD, and we conclude that Wells Fargo continued its

bona fide use of the mark in the ordinary course of business through these uses.

Thus, the district court erred by concluding that Wells Fargo abandoned the ABD

mark, contrary to the principles of Electro Source.

Finally, at the preliminary injunction stage, evidence of actual confusion is

of diminished importance when a court examines the likelihood of confusion for a

trademark infringement claim. Network Automation, Inc. v. Advanced Sys.

Concepts, 638 F.3d 1137, 1151 (9th Cir. 2011) (“[W]hile [actual confusion] is a

relevant factor for determining the likelihood of confusion . . . its importance is

diminished at the preliminary injunction stage of the proceedings.”). Because a

motion for preliminary injunction normally occurs early in litigation, at that point

6 parties rarely have amassed significant evidence of actual confusion. Id. For that

reason, while actual confusion is a critical factor in a full likelihood of confusion

analysis, it is less important at the preliminary injunction stage, and we caution

against resting a finding of the likelihood of success of a trademark infringement

claim on that factor.

We also note that although the district court did not abuse its discretion by

omitting consideration of the false affiliation claim because it was not properly

raised below, we see no reason why that claim cannot be raised on remand and

therefore hold that Wells Fargo can address any false affiliation claims it has in

further proceedings consistent with this memorandum disposition.

For the reasons stated above, we conclude that the district court abused its

discretion in its analysis of Wells Fargo’s likelihood of success on the merits of its

claims, and we reverse the district court’s order and remand for reconsideration

and further proceedings.

REVERSED and REMANDED.