Hana Financial v. Hana Bank

LII note: The U.S. Supreme Court has now decided Hana Financial v. Hana Bank.

Issues 

Is trademark tacking an issue of law or fact?

Oral argument: 
December 3, 2014

The Supreme Court will have the opportunity to address the issue of whether trademark tacking is a question of law or fact. In this case, Hana Bank argues that its use of “Hana Overseas Korean Club” should be tacked to its use of “Hana World Center”—as the district court jury seemingly allowed. Hana Financial counters, argues that a judge, not a jury, should decide the tacking issue; and, Hana Bank’s tacking claim fails as a matter of law. The outcome of this case may touch on judicial efficiency, predictability of trademark law, and consumer protection.

Questions as Framed for the Court by the Parties 

To own a trademark, one must be the first to use it; the first to use a mark has “priority.” The trademark “tacking” doctrine permits a party to “tack” the use of an older mark onto a new mark for purposes of determining priority, allowing one to make slight modifications to a mark over time without losing priority. Trademark tacking is available where the two marks are “legal equivalents.” The question presented, which has divided the courts of appeals and determined the outcome in this case, is:

Whether the jury or the court determines whether use of an older trademark may be tacked to a newer one is a question of fact?

Facts 

In the mid-1990s two companies began providing financial services in the United States. In July 1994, Respondents Hana Bank (“HB”), which was established in Korea since 1971, expanded to the United States under the name “Hana Overseas Korean Club.” HB’s advertisements and application materials said “HANA Overseas Korean Club” in English and “Hana Bank” in Korean, and also included the “dancing man” Hana Bank logo. Petitioner Hana Financial (“HF”) was incorporated in California in August 1994 and began performing wire transfers and other interstate financial services in 1995. In 1996, the Patent and Trademark Office issued HF a federal trademark for “Hana Financial” with a pyramid logo. HB changed from “Hana Overseas Korean Club” to “Hana World Center” in 2000.

In 2001, HB attempted to obtain a trademark. Partly due to HF’s existing trademark, however, HB was unable to register its mark. Although HB contacted HF to discuss the matter, the parties did not come to an agreement. Then, in 2002, HB began operating using the “Hana Bank” in the United States.

In 2007, HF sued HB in the U.S. District Court for the Central District of California (“district court”) for infringing on HF’s trademark due to HB’s use of “Hana” in the financial services industry. HB denied HF’s allegations and also claimed that the district court should cancel HF’s trademark because HF knew of HB’s “superior rights” when HF filed for HF’s trademark.

In 2008, the district court granted a motion for summary judgment in favor of HB, finding that HB had established priority in time. The Court of Appeals for the Ninth Circuit (“Ninth Circuit”), however, reversed the district court’s judgment and remanded the issue back to the district court. Thus, in 2011, the parties proceeded to trial in the district court. The jury returned a verdict for in favor of HB, determining as a matter of fact that HB’s trademark had priority in time. The jury found that HB had used the “Hana” trademark “continuously” since HB established its operations in 1995. Seeking to overturn this decision, HF subsequently moved for a judgment as a matter of law, but the district court denied HF’s request.

HF appealed the district court’s denial of a judgment as a matter of law to the Ninth Circuit. The Ninth Circuit rejected HF’s arguments, reasoning that a determination on tacking involves “a highly fact-sensitive inquiry,” and is a question of fact, not law. The Ninth Circuit maintained that since tacking was a question of fact and the jury had a sufficient evidentiary basis to tack HB’s previous trademark to establish HB’s priority, the Ninth Circuit could not overturn the jury’s decision.

Analysis 

In this case, the Supreme Court will decide whether a judge or a jury is responsible for deciding when use of an older trademark may be tacked to a newer one. Tacking allows a trademark owner to make alterations to a trademark, without sacrificing ownership of the original trademark. To tack a mark, the two trademarks must generate the “same, continuing commercial impression.” HF argues that judges should decide whether tacking is permissible in a case because determining whether marks are “legal equivalents” is a question of law. HB disagrees, contending that tacking involves a subjective analysis of the trademark’s effect on consumers—a factual inquiry intended for a jury.

IS TRADEMARK TACKING A QUESTION OF LAW OR FACT?

JUDGE OR JURY?

HF argues that trademark tacking is a question of law that judges, not juries, should address. HF asserts that the tacking inquiry involves interpreting a legal standard and applying it to the case at hand. HF maintains that the tacking has future binding effect. Therefore, according to HF, tacking is a rule governed by legal precedent. HF argues that tacking cases rarely implicate disputed questions of historical fact; rather they are cases concerned with legal standards and precedent. HF states that judges are more acquainted with prior case law, and are thus better able to compare the two marks to other marks in case law. According to HF, juries lack the precedential knowledge required to conduct the tacking assessment. Finally, HF maintains that even if a tacking case does, however, implicate a “subsidiary factual dispute,” courts can still resolve the issue.

In contrast, HB argues that juries should determine whether a mark is subject to tacking because is a “fact-sensitive inquiry” requiring comparative analysis. HB states that the analysis is inherently factual because it depends on the “unique facts and circumstances of each case.” HB contends that “[t]he tacking analysis is (1) a comparison; (2) of trademarks’ respective impressions; (3) conveyed upon average consumers of the goods in question.” HB maintains that the jury is best equipped to analyze each element. HB states that trademark law investigates a consumer’s state of mind; hence, it involves the public’s perception. HB contends that public perception is typically viewed as a factual inquiry in other areas of law; therefore, trademark tacking analysis should also be treated as a factual question. HB emphasizes that “men of ordinary intelligence” should evaluate the tacking analysis because tacking is measured from the viewpoint of the average consumer and “men of ordinary intelligence” are the principal buyers of trademarked items.

EQUITABLE DOCTRINE

HF asserts that the origins of trademark law derived from English courts of equity, and thus judges should determine trademark tacking questions. HF further maintains that tacking is categorized as an equitable doctrine when applied to areas beyond the scope of trademark law. HF references mortgages on estates and adverse possession to demonstrate instances where tacking is identified as an equitable principle.

HB, however, argues that the origins of trademark law did not derive from courts of equity. HB maintains that historically, trademark suits for damages were regularly brought in courts of law, not just courts of equity. HB contends that HF’s reliance on adverse possession and mortgages cases is erroneous because those cases do not demonstrate a “substantive relation to trademark tacking.” HB also claims that historically, juries often determined adverse possession tacking issues. Furthermore, HB states that mortgage tacking did not receive overwhelming acceptance or authorization the United States; therefore, its application in English courts of equity bears little significance. HB asserts that the doctrine of equity cannot govern trademark tacking because it was never widely supported in the United States.

HISTORICAL TREATMENT

HF states that historically, judges were viewed as possessing the adequate training necessary to resolve tacking issues. HF relies on an examination of several cases to demonstrate that only judges determined tacking cases. HF states that judges determined tacking cases for over a century without juries; therefore, the jury is unnecessary when determining tacking issues today.

HB argues that the cases HF cites to are unpersuasive. HB states that before courts of equity and law were merged, trademark cases where injunctive relief was sought were often brought in courts of equity. However, HB contends, Congress merged the system of law and equity in 1938. Additionally, HB maintains that because the Supreme Court eradicated the “practice of deciding legal issues as merely ‘incidental’ to equitable issues” in 1962, pre-1962 cases does not reflect a preference for judges. Similarly, HB notes cases decided by the Trademark Trial and Appeal Board (“TTAB”)—an administrative tribunal where judges only may decide issues—does not show a preference for judges because for the TTAB, juries are not an option.

DO THE MARKS IN QUESTION PASS THE STANDARD?

HF argues that tacking is impermissible in this case. HF maintains that HB’s use of “Hana Bank” was not the legal equivalent of “Hana Overseas Korean Club.” HF maintains that the marks in case law where tacking was found are more analogous to one another than the marks at issue here. Therefore, HB contends that in this case, the marks cannot be tacked. HF argues that the marks in this case do not create an identical consumer impression because “Hana Overseas Korean Club” is directed at “Koreans expatriates” whereas “Hana World Center” is ambiguous. HF also notes that “Hana World Center” implies a financial entity, while “Hana Overseas Korean Club” does not. HF maintains that under a tacking inquiry, marks are viewed in their totality. Therefore, HF states that these marks cannot be separated to only view the “Hana” portion of each mark.

In opposition, HB states that tacking is permissible in this case. HB maintains that the Korean and English version of the mark Hana Bank establish the “same, continuing commercial impression.” HB contends that bilingual customers who speak English and Korean will not identify the marks as “materially different.” HB maintains that “translation of marks, which are referred to as foreign equivalents, are routinely treated as legal equivalents.” HB contends that the American patrons of Hana Bank’s services in 1994 had to speak Korean because “Overseas Korean Club” members had to be bilingual in English and Korean. Thus, HB argues that patrons knew that HB’s mark derived from Hana Bank. Finally, HB asserts that “Hana,” which is the dominant feature of the marks, “creates a continuing impression within altered marks,” and therefore tacking is permitted.

Discussion 

In this case, the Supreme Court will clarify whether tacking of previously used trademarks is an issue of law or fact. If, as HF argues, tacking is an issue of law, then appellate courts can decide the issue de novo (without deference to jury determinations). Conversely, if—as HB asserts—tacking is a question of fact, then appellate courts must give deference to the jury findings. Determining whether tacking is an issue of fact or law has important implications for judicial efficiency, predictability of trademark law, and consumer protection.

JUDICIAL EFFICIENCY

HF argues that deciding tacking as a matter of law may enhance judicial efficiency. Specifically, HF contends that “[t]rademark tacking is often dispositive of an infringement claim.” Consequently, HF asserts, if a court can rule on the issue of tacking upfront, the case will conclude much quicker than if it had to wait for a jury determination.

The United States, as an amicus supporting HB, counters that, even if deciding trademark tacking is “dispositive” a case, this is not an unusual situation. The United States argues that in other situations, even where resolving a “subsidiary issue” would lead to a quick resolution of the case, “[t]hat prospect has never been viewed as a sufficient ground for judicial resolution of factual issues that are otherwise within the jury’s purview.”

PREDICTABILITY OF TRADEMARK LAW

HF maintains that predictability for trademark owners regarding whether their current mark will be “tacked” to an altered mark is an important concern. If the question of tacking is a matter of law, HF argues, then trademark owners can simply look to past tacking cases to determine whether their own marks will be considered sufficiently similar to qualify for tacking. On the other hand, HF notes, factual findings by juries do not produce law that can shape cases in the future. Rather, HF notes that only legal determinations by judges are capable of creating law.

The United States argues in opposition, contending that allowing juries to decide whether trademark tacking applies in a case does not preclude judicial intervention where necessary. A court, the United States maintains, may still intervene “if [a court] determines that the evidence compels a particular conclusion.” This, the United States urges, will allow the courts to regulate “the outer boundaries of permissible tacking,” which in turn would give guidance to trademark owners.

CONSUMER PROTECTION OR COMMERCIAL MONOPOLIZATION?

The United States argues that trademark law’s vital purpose is “to protect consumers from being deceived or confused by competing sellers.” The United States maintains that the question of tacking comes down to “whether two marks create the same, continuing commercial impression or are materially different.” The “continuing commercial impression,” the United States argues, should be determined by “ordinary” consumers themselves—juries.

Though HF agrees that “commercial impression” is part of the test for trademark tacking, HF stresses the rationale behind trademark tacking: “prevent[ing] trademark owners from obtaining an unfair, retroactive expansion of the monopoly protections afforded by trademark.” Thus, HF argues that the rationale for the “commercial impression” test is to ensure that a trademark owner will not retroactively broaden their trademark monopoly.

Conclusion 

In this case, the Supreme Court will decide whether judges or juries should decide if similar trademarks can be tacked. HB believes the jury’s structure makes it a better arbiter of consumer impressions. HF counters that the decision of tacking similar trademarks should be a question of law, determined by judges. Ultimately, the Court’s decision in this case may have implications for judicial efficiency, predictability of trademark law, and consumer protection.

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