Beacon Mutual Insurance v. Onebeacon Insurance Group
U.S. Court of Appeals7/12/2004
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Full Opinion
United States Court of Appeals
For the First Circuit
No. 03-2671
THE BEACON MUTUAL INSURANCE COMPANY,
Plaintiff, Appellant,
v.
ONEBEACON INSURANCE GROUP,
Defendant, Appellee.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF RHODE ISLAND
[Hon. William E. Smith, U.S. District Judge]
Before
Selya, Circuit Judge,
Porfilio,* Senior Circuit Judge, and
Lynch, Circuit Judge.
Steven E. Snow, with whom Michael A. Gamboli, Robert K.
Taylor, and Partridge Snow & Hahn LLP were on brief, for appellant.
Dalila Argaez Wendlandt, with whom Steven A. Kaufman and Ropes
& Gray were on brief, for appellee.
July 12, 2004
*
Of the United States Court of Appeals for the Tenth
Circuit, sitting by designation.
LYNCH, Circuit Judge. This is a case of first impression
for this circuit on several issues under the Lanham Act, 15 U.S.C.
§ 1051 et seq.
The plaintiff, formerly known as the State Compensation
Insurance Fund, was chartered in 1990 by the Rhode Island
legislature as the workers' compensation insurer of last resort in
the state. In 1992, it adopted the name The Beacon Mutual
Insurance Company ("Beacon Mutual") and, since then, has sold
workers' compensation insurance in Rhode Island under the marks
"The Beacon Mutual Insurance Company," "Beacon Insurance," and "The
Beacon," with an accompanying lighthouse logo. The name change was
brought about by increased competition following the resolution of
a crisis in the state workers' compensation market.
In June 2001, the defendant OneBeacon Insurance Group
("OneBeacon"), which sells various forms of commercial insurance
nationwide, switched to its current name and adopted a lighthouse
logo as well, albeit in a different font and arrangement. The name
change resulted from the sale of the company, then called CGU
Corporation, to another company; the terms of the sale required CGU
to change its name. OneBeacon is a direct competitor of Beacon
Mutual in the Rhode Island market for workers' compensation
insurance.
Beacon Mutual brought suit one month after OneBeacon's
name change, alleging violations of the Lanham Act, 15 U.S.C. §
-2-
1125(a), and state trademark laws. On November 14, 2003, the
district court granted summary judgment in favor of OneBeacon on
all counts on the ground that Beacon Mutual had not demonstrated a
substantial likelihood of confusion. Beacon Mut. Ins. Co. v.
OneBeacon Ins. Group, 290 F. Supp. 2d 241, 252 (D.R.I. 2003).
Beacon Mutual now appeals.
For likelihood of confusion to be actionable, the
"confusion has to exist in the mind of a relevant person." Astra
Pharm. Prods., Inc. v. Beckman Instruments, Inc., 718 F.2d 1201,
1207 (1st Cir. 1983). The primary issue in this appeal is the
relevance of evidence submitted by Beacon Mutual showing 249
instances of confusion between the two companies in the sixteen
months following OneBeacon's adoption of its current name. Most of
the confusion involved misdirected premium checks, claim forms,
medical records, and legal correspondence. OneBeacon argues that
those incidents do not demonstrate confusion among relevant persons
because the confused persons were not those who made purchasing
decisions and there was no evidence that their confusion caused
Beacon Mutual to lose sales. OneBeacon's argument impermissibly
narrows the scope of the court's inquiry into both the harm
suffered by the plaintiff and the persons among whom confusion
exists.
We hold that the type of commercial injury actionable
under § 43(a) of the Lanham Act, 15 U.S.C. § 1125(a), is not
-3-
restricted to the loss of sales to actual and prospective buyers of
the product in question. Confusion is relevant when it exists in
the minds of persons in a position to influence the purchasing
decision or persons whose confusion presents a significant risk to
the sales, goodwill, or reputation of the trademark owner. This
holding is consistent with our existing case law, under which post-
sale confusion is actionable. See I.P. Lund Trading, ApS v. Kohler
Co., 163 F.3d 27, 44 (1st Cir. 1998). We also hold that relevant
commercial injury includes not only loss of sales but also harm to
the trademark holder's goodwill and reputation. See 3 McCarthy on
Trademarks and Unfair Competition § 25:5 (4th ed. 1996)
[hereinafter, McCarthy].
On summary judgment, all reasonable inferences must be
drawn in favor of the non-moving party, Beacon Mutual. Here, a
factfinder could reasonably infer that the misdirected
communications (1) showed confusion among purchasing companies,
their covered employees, consulting physicians and other health
care providers, third-party insurers, attorneys for claimant
employees, and courts handling such claims, and (2) had caused
commercial injury to Beacon Mutual in the form of, inter alia,
delays in claims processing, mistaken cancellations of coverage for
failure to pay premiums, delayed reimbursements of health care
providers, improper disclosure of confidential medical records, and
risk of potential legal penalties for purchasers, covered workers,
-4-
and providers. Reasonable inferences could be drawn that these
problems had damaged Beacon Mutual's goodwill and reputation.
Reasonable inferences could also be drawn that these problems had
led or would lead to lost sales, although the drawing of such
inferences is not necessary to survive summary judgment in light of
the other forms of commercial injury present in this case. Because
inappropriate legal standards were employed both as to the
substantive application of trademark law and as to the drawing of
inferences on summary judgment, we reverse the grant of summary
judgment and remand for proceedings consistent with this opinion.
I.
The following facts are described in the light most
favorable to Beacon Mutual, the non-moving party. Zyla v.
Wadsworth, 360 F.3d 243, 246 (1st Cir. 2004).
Beacon Mutual is the largest writer of workers'
compensation insurance in Rhode Island, collecting over $118
million in premiums in 2001. It has used its marks and lighthouse
logo since June 24, 1992, but never registered them. Over the
years, Beacon Mutual has steadily increased its advertising and
promotional expenditures to build its brand, spending close to $1.4
million in 2001. Beacon Mutual says that these promotional
activities, most of which involve displaying its marks, are
necessary to maintain its position in an increasingly competitive
market. According to a consumer survey submitted by Beacon Mutual
-5-
on summary judgment, many Rhode Island consumers now associate the
mark "The Beacon" with Beacon Mutual. Beacon Mutual offers its
workers' compensation insurance through agents as well as through
direct sales.
OneBeacon, formerly known as CGU Insurance, began using
its current name and lighthouse logo nationally in early June 2001.
A Boston-based corporation that sells commercial insurance
nationwide, OneBeacon offers workers' compensation insurance in
Rhode Island on a much smaller scale than Beacon Mutual, collecting
around $1 million in workers' compensation premiums in 2001.
OneBeacon says that workers' compensation insurance is not a
profitable line of business for it in Rhode Island and that it
offers the product only as a convenience to its existing customers.
The workers' compensation coverage offered by OneBeacon is
comparable to that offered by Beacon Mutual and is sold at rates
that are the same or higher than Beacon Mutual's.
Beacon Mutual and OneBeacon share addresses that sound
similar. Beacon Mutual is located at One Beacon Center, Warwick,
Rhode Island, and OneBeacon is located at One Beacon Street,
Boston, Massachusetts. Counsel for OneBeacon informed us at oral
argument that Beacon Mutual was already located at its current
address when her client began using the name "OneBeacon" in June
2001.
-6-
On July 5, 2001, Beacon Mutual brought a four-count
trademark infringement action against OneBeacon in the Rhode Island
Superior Court. Count I alleged unfair competition under the
Lanham Act, 15 U.S.C. § 1125(a); Count II alleged unfair
competition under Rhode Island common law; Count III alleged
service mark infringement under Rhode Island common law; and Count
IV alleged trademark dilution under R.I. Gen. Laws § 6-2-12.
OneBeacon removed the case to federal court and then
moved for summary judgment, arguing that all four counts should be
dismissed because there was no likelihood of confusion.1 OneBeacon
relied principally on the fact that it sells workers' compensation
insurance exclusively through licensed independent insurance
agents. OneBeacon submitted a telephone survey showing that those
agents understand the difference between the two companies and that
those agents typically guide consumers, whom the agents said do not
ordinarily express a preference for a particular brand of workers'
compensation insurance, through the purchasing process. OneBeacon
argued that if its agents are not confused, purchasers guided by
those agents are unlikely to be confused either. Moreover,
1
OneBeacon also argued that all four counts should be
dismissed because Beacon Mutual's unregistered marks were not
sufficiently "distinctive" to warrant legal protection. The
district court correctly rejected that argument, stating that there
was a genuine issue of material fact as to whether the marks were
distinctive, Beacon Mutual Ins. Co. v. OneBeacon Ins. Group, 290 F.
Supp. 2d 241, 244 (D.R.I. 2003), and OneBeacon does not challenge
that holding on appeal.
-7-
OneBeacon argued that to the extent that confusion exists among
non-purchasers or potential purchasers before the point of sale,
such confusion is not actionable because "it cannot possibly cause
the harm that the trademark laws are meant to prevent: economic
harm to Beacon Mutual in the form of lost sales."
Beacon Mutual opposed summary judgment, arguing that,
contrary to OneBeacon's assertion, confusion need not be tied
specifically to lost sales or to the state of mind of purchasers at
the point of sale to be actionable. Confusion, Beacon Mutual
argued, is relevant where it adversely affects the trademark
owner's commercial interests. Here, Beacon Mutual argued, at a
minimum, the goodwill and reputation of Beacon Mutual were harmed
by actual confusion among Rhode Island employers, workers, health
care providers, third-party insurance companies, attorneys, and
courts.
Beacon Mutual submitted an affidavit by Michael Lynch,
vice president of legal services for Beacon Mutual, stating that
shortly after OneBeacon's name change, Beacon Mutual began
receiving misdirected e-mails, telephone calls, checks, and letters
intended for OneBeacon. Attorney Lynch attached to his affidavit
an exhibit, entitled the "Confusion Matrix," that detailed 249
instances of confusion between Beacon Mutual and OneBeacon between
June 2001 and November 2002, based on Lynch's own personal
knowledge and information in Beacon Mutual's business records. The
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Confusion Matrix documented, inter alia, confusion among four main
groups:
(1) Rhode Island employers (24 instances): mostly,
premium checks sent to Beacon Mutual instead of
OneBeacon or (in at least one instance) vice
versa.
(2) Health care providers (95 instances): mostly,
insurance claim forms or patient medical records
sent to Beacon Mutual instead of OneBeacon or
vice versa.
(3) Third-party insurance companies (18 instances):
mostly, Beacon Mutual was contacted to resolve
claims instead of OneBeacon or vice versa.
(4) Courts or attorneys (72 instances): mostly,
summonses, complaints, or legal correspondence
sent to Beacon Mutual instead of OneBeacon or
vice versa.
Lynch stated in his affidavit that these instances of confusion had
led to
claims processing being delayed or not accomplished, both
companies being potentially subjected to legal action for
breach of contract or individual's privacy rights,
injured workers not being timely compensated or notified
of court hearings, employers not being notified of court
proceedings, providers not being paid in a timely manner,
and insureds not being credited for premium payments (and
then having their coverage lapse or cancelled, resulting
in their being in violation of the state workers'
compensation laws).
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Lynch also attached to his affidavit an August 29, 2001
letter from the Chief Judge of the Rhode Island Workers'
Compensation Court to Beacon Mutual complaining about delays caused
by confusion between the two companies:
The Workers' Compensation Court is concerned as a result
of recent confusion arising from the similarity of names
between The Beacon Mutual Insurance Company and OneBeacon
Insurance Group (formerly CGU Insurance Group) . . . .
The court has been made aware that service of process and
notices that are intended for OneBeacon are
unintentionally being sent to The Beacon Mutual Insurance
Company's office in Warwick. This confusion impacts our
workers' compensation cases, in that notice to parties
may be delayed, affecting both the employees['] and
employers['] rights and benefits . . . .
An additional concern is regarding preferred provider
networks (PPN). The Beacon Mutual Insurance Carrier does
have an approved PPN, while OneBeacon does not. When an
injured worker telephones to determine if a PPN is in
effect for their employer, some confusion may exi[st] as
to the appropriate carrier on the part of the employee,
thereby possibly limiting the employee's choice of
physician inappropriately.
OneBeacon's response was that these many instances of confusion
were simply irrelevant because Beacon Mutual had not demonstrated
that they led to a loss of sales.
The district court granted summary judgment in favor of
OneBeacon on all counts. Beacon Mutual, 290 F. Supp. 2d at 242.
After first determining that there was a genuine issue of material
fact as to whether Beacon Mutual's marks were distinctive, the
court turned to the relevance of the Confusion Matrix. It
determined that while the Confusion Matrix showed that "the
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confusion Plaintiff complains of is real," the plaintiff "has not
established that the entities and persons identified in its Matrix
fall into the post-sale confusion category, for the simple reason
that the confused entities are not consumers of the product, nor
has Plaintiff shown any commercial relevance as to these entities."
Id. at 246.
The court acknowledged that even if the confusion of
actual purchasers is always corrected at the point of sale,
confusion among non-purchasers and potential purchasers can be
relevant where it affects the trademark owner's "commercial
interests." Id. at 247 (citing CMM Cable Rep., Inc. v. Ocean Coast
Properties, Inc., 888 F. Supp. 192, 200 (D. Me. 1995), aff'd, 97
F.3d 1504 (1st Cir. 1996)). At one point, the court described
those commercial interests as including goodwill, citing other
cases that recognize the confusion of third parties as relevant
when "their views are somehow related to the goodwill of the
aggrieved manufacturer." Id. (quoting Landscape Forms, Inc. v.
Columbia Cascade Co., 113 F.3d 373, 382-83 (2d Cir. 1997)).
In applying this standard, however, the court focused on
what it found to be Beacon Mutual's failure to connect the 249
instances of confusion described in the Confusion Matrix to lost
sales. It emphasized that "there is no indication that this type
of confusion has ever played any role in the purchasing calculus."
Id. at 248. The theme of the opinion was that "Plaintiff has put
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on no evidence that it has lost any business as a result of
confusion among its insured" or "proffered any evidence from which
this Court reasonably could infer that the confusion has affected
the decision of any insured to switch providers." Id. at 249. It
therefore concluded that there was an "absence of evidence" about
the "possible nocent effect of this confusion on Plaintiff's market
interests" and that it could not find any such effect without
engaging in speculation. Id. at 248.
Drawing on its analysis of the relevance of the Confusion
Matrix, the court applied the eight-factor test for likelihood of
confusion used by this court in Astra, 718 F.2d at 1205 (adopting
the test articulated in Pignons S.A. de Mecanique de Precision v.
Polaroid Corp., 657 F.2d 482, 487 (1st Cir. 1981)). See also I.P.
Lund, 163 F.3d at 43; Int'l Ass'n of Machinists & Aero. Workers v.
Winship Green Nursing Ctr., 103 F.3d 196, 201 (1st Cir. 1996). It
concluded that no reasonable factfinder could find in favor of
Beacon Mutual on the most important factors in the case: evidence
of actual confusion, similarity in the classes of prospective
purchasers, and similarity in the channels of trade. 290 F. Supp.
2d at 252. The court then held that although Beacon Mutual's
marks were strong and the two parties' marks were similar, those
factors could not overcome Beacon Mutual's "fatal failure to
demonstrate that the confusion it identifies is connected in any
way to its commercial interests." Id.
-12-
Having found no likelihood of confusion connected to
commercial interests, the court dismissed the Lanham Act and state
common law claims (Counts I-III). The court also dismissed the
Rhode Island statutory dilution claim (Count IV), reasoning that
"[b]ecause the Court has held that Plaintiff cannot survive summary
judgment on the likelihood of confusion prong of its Lanham Act
claim, so, too, does its dilution claim fail." Id.
Beacon Mutual timely appealed from the dismissal of all
four claims.
II.
Our review of the district court's grant of summary
judgment is de novo. Douglas v. York County, 360 F.3d 286, 290
(1st Cir. 2004). On a motion for summary judgment, all reasonable
inferences must be drawn in favor of the non-moving party (here,
Beacon Mutual), regardless of who bears the ultimate burden of
proof. Id.
Beacon Mutual acknowledges that it must demonstrate a
substantial likelihood of confusion to survive summary judgment on
the Lanham Act and state common law counts.2 Section 43 of the
Lanham Act, under which Count I is brought, provides that:
Any person who, on or in connection with any goods or
services . . . uses in commerce any word, term, name,
2
It does argue, though, that summary judgment is
inappropriate on the Rhode Island statutory dilution claim even if
there is no likelihood of confusion. We do not reach this
argument. See infra note 6.
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symbol, or device . . . which . . . is likely to cause
confusion, or to cause mistake, or to deceive as to the
affiliation, connection, or association of such person
with another person, or as to the origin, sponsorship, or
approval of his or her goods, services, or commercial
activities by another person . . . shall be liable in a
civil action by any person who believes that he or she is
or is likely to be damaged by such act.
15 U.S.C. § 1125(a)(1). The same likelihood of confusion
requirement applies to Beacon Mutual's claims under Rhode Island
common law for unfair competition and service mark infringement.
See DeCosta v. Viacom Int'l, Inc., 981 F.2d 602, 606-07 (1st Cir.
1992) (applying collateral estoppel to prevent relitigation of
likelihood of confusion issue under Lanham Act when that issue had
already been decided in earlier suit under Rhode Island common
law).
Eight factors, outlined most recently in I.P. Lund, are
typically used to assess the likelihood of confusion: (1) the
similarity of the marks; (2) the similarity of the goods; (3) the
relationship between the parties' channels of trade; (4) the
relationship between the parties' advertising; (5) the classes of
prospective purchasers; (6) evidence of actual confusion; (7) the
defendant's intent in adopting its mark; and (8) the strength of
the plaintiff's mark. 163 F.3d at 43. These factors are not to be
applied mechanically. Courts may consider other factors and may
accord little weight to factors that are not helpful on the
particular facts of a case. See id.
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A. Evidence of Actual Confusion
We turn first to the sixth factor, evidence of actual
confusion. On summary judgment, OneBeacon, for its part, has not
disputed the accuracy of the 249 instances of actual confusion
listed in the Confusion Matrix.
Instead, OneBeacon argued to the district court that
confusion is relevant only if it (1) involved actual or potential
purchasers and (2) caused the trademark holder to lose sales. The
extent to which the district court accepted these arguments is not
clear. The district court clearly rejected the notion that
confusion is relevant only if it involves actual or potential
purchasers. Beacon Mutual, 290 F. Supp. 2d at 247. But the
district court appears at some points to have required Beacon
Mutual to demonstrate that the confusion caused lost sales or lost
customers, while suggesting at other points that loss of goodwill
is a relevant harm. Compare id. (requiring only a showing of an
effect on "goodwill" (quoting Landscape Forms, 113 F.3d at 382-83)
or other "commercial interests"), with id. at 249 (faulting Beacon
Mutual for failing to offer evidence that it "lost any business" or
that "the confusion has affected the decision of any insured to
switch providers"). In any event, we need not determine what
standard the district court applied, as our review is de novo.
We join those courts holding that actual confusion is
commercially relevant if the alleged infringer's use of the mark
-15-
"could inflict commercial injury in the form of . . . a diversion
of sales, damage to goodwill, or loss of control over reputation"
on the trademark holder. The Sports Authority, Inc. v. Prime
Hospitality Corp., 89 F.3d 955, 963 (2d Cir. 1996) (internal
quotation marks omitted); see also Landscape Forms, 113 F.3d at
382-83 (confusion of general public is relevant if "related to the
goodwill of the aggrieved manufacturer"); Perini Corp. v. Perini
Constr., Inc., 915 F.2d 121, 128 (4th Cir. 1990) ("public
confusion" among non-purchasers is relevant if it "adversely
affect[s] the plaintiff's ability to control his reputation among
its laborers, lendors, investors, or other group with whom the
plaintiff interacts"); Int'l Kennel Club of Chicago, Inc. v. Mighty
Star, Inc., 846 F.2d 1079, 1091 (7th Cir. 1988) ("the owner of a
mark is damaged by a later use of a similar mark which place[s] the
owner's reputation beyond its control, though no loss in business
is shown" (emphasis and alteration in original) (internal quotation
marks omitted)); Balance Dynamics Corp. v. Schmitt Indus., Inc.,
204 F.3d 683, 693 (6th Cir. 2000) (damages may be awarded for
actual confusion that causes harm to goodwill under Lanham Act, 15
U.S.C.A. § 1125(a), even if no lost sales have been shown). The
fact that the injury is to a company's reputation or goodwill,
rather than directly to its sales, does not render the confusion
any less actionable. Meridian Mutual Ins. Co. v. Meridian Ins.
Group, Inc., 128 F.3d 1111, 1118 (7th Cir. 1997).
-16-
Our holding is reinforced by the position of the
Restatement of Unfair Competition, which treats confusion as
relevant where it presents "a significant risk to the sales or good
will of the trademark owner." Restatement (Third) of Unfair
Competition § 20 cmt. b (1995). The leading commentators also
agree that harm to goodwill and harm to reputation are actionable.
McCarthy states that the "post-sale confusion of a purchaser of an
insurance policy who mistakenly makes a claim to another company
with a similar name" is relevant and quotes Meridian, 128 F.3d at
1118, for the proposition that "the fact that a company's goodwill,
rather than its pocketbook, is injured by actual confusion does not
render the confusion meaningless." 3 McCarthy § 23:7 & n.12; see
also 3A Callman on Unfair Competition, Trademarks and Monopolies §
21:4 (4th ed. 1981) ("Even without 'passing off' and diversion of
trade, the injury [suffered by a trademark owner] may be grievous"
because of harm to reputation). Indeed, OneBeacon, backing off its
assertion to the district court that confusion must be linked to
lost sales, now admits on appeal that confusion is relevant if it
"threaten[s] the sales or goodwill of the trademark owner"
(emphasis added).
It is true that when a Lanham Act case involves directly
competing goods, as here, the usual harm from confusion is both the
potential purchase of the defendant's product rather than the
plaintiff's and the loss of goodwill and reputation occasioned when
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the defendant's product is inferior.3 But nothing in the statute
suggests that demonstrable harm to plaintiff's goodwill and
reputation resulting from confusion of marks is restricted to this
classic situation.
We also hold that the likelihood of confusion inquiry is
not limited to actual or potential purchasers, but also includes
others whose confusion threatens the trademark owner's commercial
interest in its mark.4 See Landscape Forms, 113 F.3d at 382-83;
Insty*Bit, Inc. v. Poly-Tech Indus., 95 F.3d 663, 672 (8th Cir.
1996) (confusion under § 43(a) of the Lanham Act, 15 U.S.C. §
1125(a), "include[s] confusion of nonpurchasers as well as direct
purchasers"); Champions Golf Club, Inc. v. The Champions Golf Club,
Inc., 78 F.3d 1111, 1119-20 (6th Cir. 1996) (confusion among
suppliers is relevant); Perini, 915 F.2d at 128 ("public confusion"
among non-purchasers is actionable if it "will adversely affect the
plaintiff's ability to control his reputation"); In re Artic Elecs.
Co., Ltd., 220 U.S.P.Q. 836, 838 (T.T.A.B. 1983) ("The notion that
likelihood of confusion is limited to purchaser confusion is simply
not correct."); Restatement (Third) of Unfair Competition § 20 cmt.
b (1995) ("To be actionable . . . confusion must threaten the
3
This case does not, as we understand it, raise a claim
that the defendant's product is inferior.
4
We note that Beacon Mutual does not claim that the
confusion here is of the "bait and switch," or "initial interest,"
variety. Dorr-Oliver, Inc. v. Fluid-Quip, Inc., 94 F.3d 376, 382
(7th Cir. 1996).
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commercial interests of the owner of the mark, but it is not
limited to the confusion of persons doing business directly with
the actor."). "Actual and potential customers of the trademark
owner are the most obvious 'relevant persons,' but other persons
might be relevant" if their confusion "threaten[s] the commercial
interests of the owner of the mark." CMM Cable, 888 F. Supp. at
200 (internal quotation marks omitted). Relevant confusion among
non-purchasers may well extend beyond the confusion of those
persons positioned to influence directly the decisions of
purchasers.
OneBeacon argues that summary judgment is appropriate
because Beacon Mutual has not produced evidence specifically
demonstrating that the confusion threatened its commercial
interests, including its goodwill. If OneBeacon means that, in
general, commercial injury may not ever be inferred on summary
judgment, that proposition is flatly wrong. On summary judgment,
all reasonable inferences must be drawn in favor of Beacon Mutual,
the non-moving party. Douglas, 360 F.3d at 290; Zyla, 360 F.3d at
247; see also Ferrara & DiMercurio, Inc. v. St. Paul Mercury Ins.
Co., 169 F.3d 43, 56 (1st Cir. 1999) (noting that reasonable
inferences must be drawn in favor of the non-moving party on
summary judgment and that "[i]nferences can, of course, properly be
drawn from circumstantial evidence").
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If OneBeacon means that as a matter of substantive
trademark law, only direct evidence (with no room for inference)
may establish harm to goodwill, that contention is wrong as well.
In the Title VII context, the Supreme Court has expressly rejected
a direct evidence requirement, instead applying the conventional
rule that a plaintiff may amass a preponderance of the evidence
through direct or circumstantial evidence. Desert Palace, Inc. v.
Costa, 539 U.S. 90, 99-100 (2003). We see no reason for applying
a different rule in the trademark context.
If OneBeacon means only that the evidence of record, even
drawing all inferences in Beacon Mutual's favor as required on
summary judgment, is insufficient to support a finding of harm to
goodwill or reputation, OneBeacon is wrong yet again. Here, a
factfinder taking all inferences in favor of Beacon Mutual could
reasonably infer that much of the actual confusion described in the
Confusion Matrix is commercially relevant.
Misdirected premium payments, one could reasonably infer,
cause delays in crediting those payments. One could infer that
those delays, in turn, cause the coverage of Beacon Mutual's
customers (i.e., employers) to lapse or to be cancelled if the
error is not corrected in time. That, in turn, one could further
infer, places those employers in violation of Rhode Island laws
requiring employers to maintain workers' compensation insurance.
R.I. Gen. Laws § 28-29-6. Indeed, according to Lynch's affidavit
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(which has not been controverted), at least one Beacon Mutual
customer has had its policy lapse because of such an error.
Moreover, even if the error is corrected before a lapse or
cancellation in coverage occurs, it is reasonable to infer that the
customer, in many instances, would be displeased by the error or by
being wrongly accused of missing a premium payment. Whether or not
a particular policy is actually cancelled, one could reasonably
infer that Beacon Mutual's goodwill and reputation for good service
has been harmed.
Similarly, a factfinder could infer that misdirected
claim forms from health care providers cause delays in payments to
those providers. As Chief Judge Arrigan of the Rhode Island
Workers' Compensation Court noted, Beacon Mutual maintains an
approved preferred provider network. Delayed payments, one could
infer, make providers less inclined to remain in that network.
When providers drop out of the network, injured workers covered by
Beacon Mutual's workers' compensation insurance have a smaller pool
of doctors and hospitals from which to choose, a result that one
could infer harms Beacon Mutual's goodwill and reputation for
providing good coverage.
A factfinder could further infer that injured workers
will be upset when their confidential medical records are sent to
the wrong insurer. Some health care providers, one could also
infer, will attempt to avoid such situations, which potentially
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give rise to liability under Rhode Island statutes prohibiting the
disclosure of such information without written consent, R.I. Gen.
Laws § 5-37.3-4, by refusing to accept patients insured by Beacon
Mutual. Either of those consequences could reasonably be viewed as
detracting from Beacon Mutual's goodwill and reputation.
Misdirected communications from third-party insurance
agencies, one could also infer, increase the costs of claims
processing, leading to lower profits (if premiums stay the same) or
lower sales (if premiums go up). Where disputes with third-party
insurers must be resolved before an injured worker is reimbursed,
one could also infer that such misdirected communications delay
reimbursement, again harming Beacon Mutual's goodwill and
reputation.
Further, a factfinder could infer, as Chief Judge
Arrigan did in his letter to Beacon Mutual, that employers and
injured workers will not receive timely notice of legal proceedings
if service of process and other legal notices are sent to the wrong
insurer and that those employers' and employees' rights could be
compromised as a result. It is no great leap to infer that such
problems would harm Beacon Mutual's goodwill and reputation.
Given that reasonable inferences must be drawn in Beacon
Mutual's favor on summary judgment, we find that Beacon Mutual has
presented sufficient evidence of actual confusion relevant to its
commercial interests for this factor to count in its favor on
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summary judgment. That leaves OneBeacon fighting an uphill battle
in arguing that no reasonable factfinder could find a substantial
likelihood of confusion. Evidence of actual confusion is often
considered the most persuasive evidence of likelihood of confusion
because past confusion is frequently a strong indicator of future
confusion. See 3 McCarthy § 23:13; see also Kos Pharms., Inc. v.
Andrx Corp., No. 03-3977, 2004 U.S. App. LEXIS 10165, at *54 (3d
Cir. May 24, 2004) ("even a few incidents" of actual confusion are
"highly probative of the likelihood of confusion" (internal
quotation marks omitted)); Thane Int'l, Inc. v. Trek Bicycle Corp.,
305 F.3d 894, 902 (9th Cir. 2002) ("Evidence of actual confusion
constitutes persuasive proof that future confusion is likely."
(internal quotation marks omitted)).
B. Application of the Remaining Seven Factors
Nonetheless, we also consider the other factors commonly
used in the eight-part test. The first factor, similarity of
marks, weighs in Beacon Mutual's favor. This factor is evaluated
based on the "the designation's total effect." Int'l Ass'n of
Machinists, 103 F.3d at 203. Here, the marks use different fonts
and colors, but a factfinder could reasonably find the total effect
to be similar. In both sets of marks, the most salient word is
"Beacon" and the only pictorial element is a lighthouse image.
See 3 McCarthy § 23:44 ("If the 'dominant' portion of both marks is
the same, then confusion may be likely, notwithstanding peripheral
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differences."). Moreover, OneBeacon's arguments that the marks are
not confusingly similar are belied by the evidence of actual
confusion.
The second factor, similarity of goods and services, also
favors Beacon Mutual. OneBeacon conceded this point in its summary
judgment papers before the district court and thus has abandoned
any argument to the contrary. Both parties sell the same basic
workers' compensation coverage in Rhode Island. Although
OneBeacon's business extends to other states and other forms of
insurance, a factfinder could reasonably conclude that those other
lines of business do not dispel the potential for confusion in the
Rhode Island market for workers' compensation insurance.
See Volkswagenwerk Aktiengesellschaft v. Wheeler, 814 F.2d 812, 818
(1st Cir. 1987) (finding similarity of goods and services between
a shop specializing in Volkswagen repair and distributors that both
sold and repaired Volkswagens).
Factors three (channels of trade), four (advertising),
and five (classes of prospective purchasers) are often considered
together because they tend to be interrelated. See Int'l Ass'n of
Machinists, 103 F.3d at 204. It is not clear whether these factors
favor either party. OneBeacon does not advertise its workers'
compensation insurance in Rhode Island. And although Beacon Mutual
and OneBeacon are selling to the same group of customers, i.e.,
employers in Rhode Island, it is uncontroverted, on summary
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judgment, that OneBeacon's customers are guided in their decisions
by independent insurance agents who understand the difference
between the two companies.
But the lack of confusion among OneBeacon agents does not
establish conclusively that employers purchasing the insurance are
not confused. Nor does it establish lack of confusion among the
users of the insurance, i.e., employees, who may influence future
purchases by employers. See 3 McCarthy § 23:7 (confusion of end-
users who may influence buying decisions is relevant). Indeed, the
record demonstrates that confusion does exist among employees. We
further note that the record does not compel the inference that the
customers -- the majority of whom Attorney Lynch described in his
affidavit as being small businesses with less than ten employees
and premiums under $5,000 per year -- are particularly
sophisticated.
The seventh factor, intent in adopting the mark, is
neutral. So far, there is no dispute that OneBeacon adopted its
mark in good faith: the name was chosen based, in part, on the
address of the company's corporate headquarters at One Beacon
Street in Boston, and although OneBeacon was aware of Beacon
Mutual's existence, it had a good-faith belief that the marks would
not be confused. Under this circuit's precedents, however, this
factor usually matters only where an alleged infringer copied a
mark in bad faith; a converse finding of good faith carries "little
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weight." I.P. Lund, 163 F.3d at 44; see Chrysler Corp. v. Silva,
118 F.3d 56, 59 n.3 (1st Cir. 1997).
The last factor, the strength of the marks, weighs in
Beacon Mutual's favor. We look to "the length of time the mark has
been used, its renown in the plaintiff's field of business, and the
plaintiff's actions to promote the mark." Star Fin. Servs. v.
Aastar Mortg. Corp., 89 F.3d 5, 11 (1st Cir. 1996). Here, Beacon
Mutual's marks were in use for nine years before OneBeacon adopted
its current name. Beacon Mutual's marks could reasonably be viewed
as having state-wide recognition based on the company's 65% market
share and the survey indicating that many Rhode Island consumers
associate the mark "The Beacon" with Beacon Mutual. Moreover,
Beacon Mutual invested over $1.3 million in promoting its marks in
both 2000 and 2001.5
The reasonable inferences, on summary judgment, work in
favor of Beacon Mutual on the most critical factors in this case:
evidence of actual confusion, similarity of marks, similarity of
goods and services, and strength of marks. A factfinder could
supportably conclude that there is a sufficient likelihood of
5
OneBeacon argues that the mark is weak because a yellow
pages search shows that the term "beacon" is used by other
financial services companies in the Northeast. But none of the
Rhode Island companies listed appear to be insurance companies and
there is no evidence that any of the other companies do business in
Rhode Island. Cf. Star Fin. Servs. v. Aastar Mortg. Corp., 89
F.3d 5, 11 (1st Cir. 1996) ("renown in the plaintiff's field of
business" is what matters in assessing the strength of a mark
(emphasis added)).
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confusion between the marks. The Lanham Act claim (Count I) and
state common law claims (Counts II and III) survive summary
judgment.
III.
That leaves Count IV, the Rhode Island trademark dilution
count. OneBeacon argued to the district court that even if a
substantial likelihood of confusion existed, this count should be
dismissed on the ground that no factfinder could reasonably infer
that such confusion would tarnish or dilute Beacon Mutual's
goodwill because OneBeacon offers the same coverage and quality of
insurance as Beacon Mutual. The district court did not reach this
argument, granting summary judgment on the alternative ground that
the dilution claim automatically failed because no likelihood of
confusion existed.6
Under R.I. Gen. Laws § 6-2-12,
Likelihood of injury to business reputation or of
dilution of the distinctive quality of . . . a mark valid
at common law . . . shall be a ground for injunctive
relief notwithstanding the absence of competition between
the parties or the absence of confusion as to the source
of goods or services. (emphasis added)
6
Beacon Mutual takes issue with the district court's
reasoning on this point. R.I. Gen. Laws § 6-2-12 states that it
applies "notwithstanding . . . the absence of confusion as to the
source of goods or services." Cf. I.P. Lund, 163 F.3d at 48-49
(under federal anti-dilution statute, 15 U.S.C. § 1125(c)(1),
"dilution can occur even in the absence of confusion"). We do not
reach the validity of the court's reasoning on this point because
we find a sufficient showing of likelihood of confusion here.
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Where, as here, a factfinder could reasonably infer that actual
confusion injured the trademark holder's goodwill and business
reputation, no further showing of injury is necessary to survive
summary judgment on a § 6-2-12 claim. Cf. Astra, 718 F.2d at 1209
(plaintiff may survive summary judgment under identically worded
Massachusetts trademark dilution statute by showing "injury to the
value of the mark caused by actual or potential confusion").
IV.
Beacon Mutual must still prove its case at trial; this
opinion holds only that it must be given the chance to do so. The
grant of summary judgment in favor of OneBeacon is reversed, and
the case is remanded for further proceedings consistent with this
opinion. Costs are awarded to Beacon Mutual.
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