Alderman v. Iditarod Properties, Inc.

OPINION

I, INTRODUCTION

During the 1998 Anchorage tourist season, both Robert Gottstein's Iditarod Properties and Caleb and Barbara Alderman's Alaska Guestours operated separate trolley tours named "Fourth Avenue Theater Trolley Tours" from the front of the historic Fourth Avenue Theatre 1 owned by Iditarod. Iditar-od sued the Aldermans for trade name infringement. A jury found that the Alder-mans had infringed Iditarod's trade name "Fourth Avenue Theatre" 2 and had breached a lease agreement for the use of the theater's ticket booth. The Aldermans appeal numerous issues including the application of trade name law, the jury verdict, the interpretation of the business name registration statute, the amendment of the pleadings, and the award of attorney's fees. We affirm on all issues except the superior court's decision to allow amendment of the pleadings after the close of evidence.

II. FACTS AND PROCEEDINGS

Caleb and Barbara Alderman are the owners of Alaska Guestours, Inc. In 1994 the Aldermans started a trolley tour business in Anchorage. In 1996 they adopted the name "Anchorage Trolley Tours."

Robert Gottstein is the sole shareholder of Iditarod Properties In 1991 Iditarod acquired the Fourth Avenue Theatre, a historic building in downtown Anchorage. Iditarod spent approximately three and one half million dollars restoring the Fourth Avenue Theatre. Newspapers and historical preservation societies applauded the renovation of the theater. The newly renovated theater re-opened in 1992.

The theater contains a gift shop, cafe, television studio, movie and video theater, banquet room, and catering company. "Fourth Avenue Theatre" was used as the name for the gift shop and cafe. Iditarod advertised the theater on the radio and in tourist publications. The Fourth Avenue Theatre was listed among the largest banquet facilities in the state. At times, Iditarod received letters from customers addressed to the "Fourth Avenue Theatre," instead of to its corporate name.

In 1995 the Aldermans obtained a parking permit for their trolley in front of the Fourth Avenue Theatre. The Aldermans approached Gottstein to inquire about selling tickets for their trolley tour from the theater. Gottstein and the Aldermans made an oral agreement to rent the theater ticket booth as a location for the Aldermans to sell trolley *379 tickets, to rent office space in the theater basement, and to have Iditarod employees sell trolley tour tickets in the theater gift shop. The Aldermans claim the parties agreed that the rent was fifteen percent of ticket sales from the ticket booth and gift shop only. Iditarod claims the rent agreement was for fifteen percent of the gross revenues from the Aldermans' entire trolley tour business.

Despite the apparent misunderstanding, this arrangement survived until about October 1997. Other conflicts between Iditarod and the Aldermans culminated in a final confrontation, resulting in the Aldermans moving out of the theater and into an office next door. The Aldermans performed no accounting for 1997 rents owed to Iditarod.

Several months after the final disagreement, the Aldermans registered the business name "Fourth Avenue Theater Trolley Tours." They had previously registered the name "Fourth Avenue Trolley."

Gottstein investigated the possibility of Id-itarod operating a trolley tour business. Idi-tarod requested a parking permit in front of the theater that required moving the Alder-mans' trolley parking space. The city allowed the Aldermans to choose a different space farther down the street, but they selected a location that was still partially in front of the theater. By May 1998 Iditarod and the Aldermans were operating competing trolley tours in front of the Fourth Avenue Theatre. Both operated under the name "Fourth Avenue Theater Trolley Tours." Customers were confused over which trolley tour business they had bought tickets for.

In May 1998 Iditarod's counsel sent the Aldermans a cease and desist letter demanding that the Aldermans stop using the name "Fourth Avenue Theater." The Aldermans rejected Iditarod's demand, and Iditarod filed this lawsuit.

Iditarod alleged trade name infringement and requested an injunction and damages. The Aldermans' answer denied using the name "Fourth Avenue Theater Trolley Tours." They counterclaimed against Iditar-od for unfair competition, trade dress infringement, intentional interference with contractual relations, breach of the covenant of good faith and fair dealing, and punitive damages.

Both sides moved for partial summary judgment on various issues. Superior Court Judge Brian C. Shortell granted summary judgment, holding that the Aldermans did not have an exclusive right to use the name "Fourth Avenue Theater Trolley Tours" by virtue of its registration under AS 10.35.040; that evidence did not support the Aldermans' claim of intentional interference with contractual relations; and that Iditarod had the right to use the name "Fourth Avenue The-atre Trolley Tours." The superior court denied summary judgment on the Aldermans' claims that Iditarod engaged in unfair competition; that the Aldermans had an exclusive right to use the "Fourth Avenue Theater Trolley Tours" business name under AS 10.35.040; and that Iditarod did not infringe the Aldermans' trade dress.

Trial commenced in May 1999. The Alder-mans testified that they used the trade name "Fourth Avenue Theater Trolley Tours" in the fall of 1997. At the close of evidence, the trial court granted Iditarod's motion to amend its pleading to add a cause of action for breach of contract.

By special verdict, the jury found that: (1) "Fourth Avenue Theatre" was a trade name; (2) Iditarod owned the trade name; (8) the Aldermans used Iditarod's trade name in a way likely to cause confusion; (4) Iditarod did not engage in unfair competition; (5) Iditarod did not use trade dress belonging to the Aldermans; (6) the Aldermans violated the rent agreement by failing to pay fifteen percent of gross revenues from trolley tour tickets sold at the theater; and (7) the amount of the breach was $13,924.05. Based on the verdict, the trial judge entered a judgment on July 26, 1999.

On August 5 Iditarod moved for an award of attorney's fees. On August 19 the Alder-mans filed a notice of appeal. On August 27 the trial judge denied Iditarod's motion for attorney's fees without prejudice for failure to provide sufficient specificity of actual fees incurred. On November 4 Iditarod filed a corrected motion for attorney's fees. The trial court granted Iditarod an enhanced *380 award of $46,795, based on forty percent of actual fees under Alaska Civil Rule 82(b)(8).

The Aldermans appeal the jury findings of Iditarod's trade name and Aldermans' infringement of it, the summary judgment ruling that the Aldermans did not have exclusive right to the name "Fourth Avenue Theater Trolley Tours" under AS 10.85.040, the amendment of the pleadings at the close of evidence, and the award of attorney's fees.

III. STANDARDS OF REVIEW

Denial of summary judgment is reviewed de mnovo 3 Issues of statutory interpretation are questions of law that we review in our independent judgment. 4 On questions of law, our duty is to adopt the rule of law that is most persuasive in light of precedent, reason, and policy. 5

We review a trial court's decision to permit amendment of the pleadings for an abuse of discretion.' 6 Jury instructions that involve rules of law are reviewed de novo." 7 "The jury's factual findings, if supported by the evidence presented at trial, will not be disturbed where there is room for diversity of opinion among reasonable people." 8

We review the trial court's award of attorney's fees for an abuse of discretion. 9 We will find that a trial court abused its discretion when, after reviewing the whole record, we are left with a definite and firm conviction that the trial court erred in its ruling. 10 If the award of attorney's fees requires interpretation of Alaska Civil Rule 82, we perform an independent review. 11

IV. DISCUSSION

Trade name infringement is an issue of first impression for this court. Alaska Statute 45.50.471(a) states that "[uJnfair methods of competition and unfair or deceptive acts or practices in the conduct of trade or commerce are declared to be unlawful." AS 45.50.471(b) defines "unfair methods of competition" and "unfair or deceptive acts or practices" to include acts:

(3) causing a likelihood of confusion or misunderstanding as to the source, sponsorship, or approval, or another person's affiliation, connection, or association with or certification of goods or services. 12

Because the language of Alaska's unfair trade practices law echoes that of federal trademark law found in the Lanham Act 13 and because interpretation and application of the Lanham Act is well developed by existing case law in other jurisdictions, we look to decisions of other courts interpreting the Lanham Act and other states' trademark law where the text is similar to that of Alaska's unfair trade practices law. 14 We begin with *381 a brief overview of trade name and trademark law.

A. Trademark and Trade Name Low in General

1. Terminology: trade name v. trademark

In the modern legal vernacular, "trade name" means a symbol used to distinguish companies, partnerships, and businesses. 15 By contrast, "trademark" refers to symbols used to distinguish goods and services. 16 This distinction blurs somewhat when talking about a service company-does "Fourth Avenue Theatre" distinguish the business or the services provided? Because "Fourth Avenue Theatre" is more typical of a business name and the dispute here is over its use as a business name, we treat this as a case involving a trade name rather than a trademark.

The distinction between trade name and trademark, however, is generally not a critical distinction, 17 and we conclude that it is not in this case. The United States Supreme Court noted the identity of protection for trademarks and trade names:

Whether the name of a corporation is to be regarded as a trade-mark, a trade-name, or both, is not entirely clear under the decisions. To some extent the two terms overlap, but there is a difference, more or less definitely recognized, which is that, generally speaking, the former is applicable to the vendible commodity to which it is affixed, the latter to a business and its good will. A corporate name seems to fall more appropriately into the latter class. But the precise difference is not often material, since the law affords protection against its appropriation in either view, upon the same fundamental principles. 18

Protection of trade names and trademarks is the same because trade names and trademarks serve the same basic purposes. "Although trade names [and] trademarks are used differently, they [both] serve the same basic purposes, that is, to identify a business and its products or services, to create a consumer demand therefor, and to protect any goodwill which one may create as to his goods or services." 19

The same basic rules apply equally to trade names and trademarks. 20 Trademarks and trade names are classified in the same four categories. Analysis of infringement for both trademarks and trade names is done under a likelihood-of-confusion test. 21 Trade names, like trademarks and other types of trade symbols, are protected against use that is likely to cause confusion even if the related infringing use is noncompetitive. 22 The term "trademark infringement" covers the use of one party's *382 trade name as a trademark on another's goods or services 23 as well as the use of one party's trademark as part of another's corporate name. 24 Because the same basic rules and rationales apply equally to trade names and trademarks, we rely on trademark infringement case law in a trade name case such as this.

2. General concepts of trade name and trademark law

"Iwo elements must be proved to establish a prima facie case of unfair or deceptive acts or practices under the Alaska Act: (1) that the defendant is engaged in trade or commerce; and (2) that in the conduct of trade or commerce, an unfair act or practice has occurred." 25 Neither party contests that the Aldermans are engaged in trade or commerce. Thus, the focus is on establishing an unfair act or practice.

According to AS 45.50.471(a2)8), it is an unfair act or practice to "caus[e] a likelihood of confusion or misunderstanding as to the source, sponsorship, or approval, or another person's affiliation, connection, or association with or certification of goods or services" 26 -in other words, trademark or trade name infringement. In general, to establish an unfair act or practice like trade name infringement, "the law has traditionally required proof of two basic elements: (1) Validity-that the public recognizes plaintiffs symbol as identifying his [business] and distinguishing [it] from those of others, and (2) Infringement-that defendant's actions cause a likelihood of confusion among the relevant buyer class." 27 Validity could be shown in either of two ways: (a) that the symbol was inherently distinctive, or (b) that even if not inherently distinctive, the symbol has become distinctive through the acquisition of "see-ondary meaning," the mental association in buyers' minds between the trade name and a single business. Infringement is shown by analysis under a multi-factor likelihood-of-confusion test.

B. "Fourth Avenue Theatre" Is a Valid Trade Name.

1. General types of trade names

There are four types of trade names: (1) arbitrary or fanciful, (2) suggestive, (8) descriptive (including geographic or personal name), and (4) generic. 28 They differ in level of distinctiveness. Arbitrary, fanciful, and suggestive trade names are the most distinctive and qualify for protection under the Lanham Act or common law. Generic names are entirely non-distinetive and cannot receive such protection. In the middle are descriptive trade names, which may or may not receive protection depending on whether they have achieved a secondary meaning. 29

Arbitrary, fanciful, and suggestive trade names are inherently distinctive. 30 An arbitrary trade name is a common word or symbol that is applied in a manner not *383 suggestive or descriptive of the business. 31 Examples of arbitrary trade names and trademarks are Sun Microsystems, 32 Stork Club (as a night club), 33 and Nova (as a television series). 34 A fanciful trade name is a word coined expressly for use as a trade name or an obscure or archaic term not inherently familiar to buyers. 35 Examples of fanciful trade names and trademarks include Exxon, 36 Polaroid, 37 and Clorox. 38 Arbitrary and fanciful trade names are broadly protected as strong trade names because their novelty identifies them uniquely to consumers; 39 the recognition of an arbitrary or fanciful name is almost entirely a reflection of the reputation developed by the single user.

Suggestive terms "connote, rather than describe," some particular product or service; they require "use of the consumer's ingenuity to envisage the nature of the product or service." 40 Some examples of trade names and trademarks held to be suggestive rather than descriptive are Citibank, 41 Orange Crush, 42 and Tie Rak. 43 The concept of suggestive trademarks developed to avoid the draconian result of the 1905 Trademark Act's lack of protection for descriptive marks. 44 Courts could uphold the registration of trademarks that were only subtly "descriptive" by placing them in the inherently distinctive category of suggestive trademarks. 45

Generic names lie at the other end of the distinctiveness spectrum and are not protected. 46 Generic names are the actual names of the goods or services and, thus, cannot be distinctive of a unique source. 47 Some examples of terms held to be generic are Discount Mufflers, 48 Convenient Store, 49 and Lite Beer. 50 Generic names are not pro-tectable as trade names because doing so would effectively remove words of common usage from the commercial vernacular. To permit exclusive trade name rights in a generic name would grant the owner of the generic name a monopoly because a competitor could not describe his business by its common generic term. 51

*384 Descriptive terms fall between generic names and suggestive trade names in distinctiveness. 52 A term is descriptive if it describes the intended purpose, function, or use of the goods, the size of the goods, the class of the users of the goods, a desirable characteristic of the goods, the nature of goods, or the end effect upon the user. 53 Some examples of trade names and trademarks found to be descriptive are Beer Nuts, 54 Fashionknit, 55 and Raisin-Bran." 56

Descriptive terms are categorized as inherently non-distinetive and, as such, entitled to protection only upon a showing of "secondary meaning" or a mental connection between the trade name and a single business. 57 The United States Supreme Court has stated two reasons for this extra requirement for protection. 58 First, because de-sceriptive terms can be truthfully applied to a whole range of goods and services, a descriptive term cannot, per se, function to identify and distinguish the goods or services of only one seller in the marketplace. A descriptive term merely informs the buyer of an alleged quality of the product but does not help the consumer to distinguish between products of different sellers. 59 Second, descriptive terms are regarded as words in the "public domain" in the sense that all sellers should be free to truthfully use these terms to describe their merchandise. "[Olne competitor will not be permitted to impoverish the language of commerce by preventing his fellows from fairly describing their own goods. 60

A subcategory of descriptive terms is the geographically descriptive term. 61 Examples include ALASKA, 62 Bank of America, 63 and Boston. 64 Proof of secondary meaning is required for protection of geographically descriptive names for the same reasons that secondary meaning is required *385 for descriptive names. 65

-Personal names are another subcategory of descriptive names. Examples include Gueci 66 and Waterman. 67 They too are considered inherently non-distinetive for reasons similar to those for descriptive terms and gain protection only by secondary mean-mg. 68

2. Compostle trade names

Terms that are a combination of two or more types are called composite names. The proper analysis of a composite is to look at the name as a whole, not to dissect it into its component parts. 69 Thus, a composite generic-descriptive name may result in a protectable trade name. 70 The United States Supreme Court has stated the reason for this anti-dissection rule: "The commercial impression of a trade mark is derived from it as a whole, not from its elements separated and considered in detail. For this reason it should be considered in its entirety...." 71 The anti-dissection rule is not violated, however, by separately analyzing the component parts as a step in making the ultimate determination of probable customer reaction to the composite as a whole. 72

In Self-Realization Fellowship Church v. Ananda Church of Self-Realization, the Ninth Cireuit applied the anti-dissection rule. 73 The court held that "Self-Realization" was generic for "a class of organization dedicated to spiritual attainment in the manner taught by Yoga," and descriptive (without secondary meaning) of books and tapes sold by such an organization. 74 In addition, the court noted that "Church" and "Fellowship" were generic in connection with a spiritual organization's name. 75 Thus, "Self-Realization," "Fellowship," and "Church" were not protectable individually as trade names or trademarks. However, the composites of "Self-Realization Fellowship" and "Self-Realization Fellowship Church" were potentially protectable as composites. 76 The Ninth Circuit ruled that the district court erred in concluding that the composites were unpro-tectable based upon the analysis of the component parts and remanded for consideration *386 as composite names. 77

3. "Fourth Avenue Theatre" is a composite descriptive name.

The Aldermans argue that "Fourth Avenue Theatre" is not a distinctive name entitled to protection. They suggest that "Fourth Avenue Theatre" is a geographically descriptive name, and, without more, is not distinctive enough to warrant trade name protection. Iditarod does not dispute that "Fourth Avenue Theatre" is a descriptive name, arguing instead that the name has gained secondary meaning and is thus pro-tectable.

"Fourth Avenue Theatre" is a composite name. "Fourth Avenue" is geographically descriptive. "Theater" is generic of a type of business. Looking at the whole, "Fourth Avenue Theatre" is still a descriptive name. 78 As a composite descriptive trade name, "Fourth Avenue Theatre" must have acquired a secondary meaning in the minds of consuming public to be entitled to protection against infringement.

4. Secondary meaning generally

Marks which are merely descriptive of a product are not inherently distinctive. When used to describe a product, they do not inherently identify a particular source, and hence cannot be protected. However, descriptive marks may acquire the distinctiveness which will allow them to be protected under the Act. Section 2 of the Lanham Act provides that a descriptive mark that otherwise could not be registered under the Act may be registered if it "has become distinctive of the applicant's goods in commerce."

This acquired distinctiveness is generally called "secondary meaning." 79

The North Carolina Supreme Court elaborated on the acquired distinctiveness called "secondary meaning":

When a particular business has used words publict juris for so long or so exclusively or when it has promoted its product to such an extent that the words do not register their literal meaning on the public mind but are instantly associated with one enterprise, such words have attained a see-ondary meaning. This is to say, a secondary meaning exists when, in addition to their literal, or dictionary, meaning, words connote to the public a product from a unique source. 80

Thus, secondary meaning mainly concerns the mental association in buyers' minds between the trade name and a particular business. 81

Secondary meaning refers to the meaning developed second in time. 82 The primary or original meaning of a name is the general understanding of the words before the trade name gained distinction. In this case, the original meaning of the words "Fourth Avenue Theatre" is a movie house located on Fourth Avenue in some city. Over time, the name "Fourth Avenue Theatre" may attain secondary meaning when consumers identify the name with the one specific, historic land *387 mark theater on Fourth Avenue in Anchorage. 83

The more descriptive the term, the closer it is to a generic name, and the greater the evidentiary burden on the party attempting to prove secondary meaning. 84 Like all trade names, descriptive trade names fall on a spectrum of distinctiveness. Some terms are only slightly descriptive and need only a minimum quantum of evidence to prove see-ondary meaning. Other terms are highly descriptive and may need a substantial quantity of significant secondary-meaning evidence to be protectable as a trade name. 85

In this case, "Fourth Avenue Theatre" is highly descriptive because the words alone describe a business and its location in common terms. The words could refer to any theater on Fourth Avenue. Accordingly, a substantial amount of evidence would be needed to prove secondary meaning.

Factors that support finding secondary meaning include both direct and circumstantial evidence. Direct evidence factors are consumer testimony and consumer surveys. 86 Cireumstantial evidence factors include (1) exclusivity, length, and manner of use; (2) amount and manner of advertising; (3) amount of sales and number of customers; (4) established place in the market; and (5) proof of intentional copying. 87 Some courts add a sixth factor: unsolicited media coverage. 88 "[Nlo single factor is determinative, and every element need not be proved. 89

The party seeking to establish the trade name is not required to prove that the term is recognized as a trade name by all prospective purchasers in the relevant market nor even by a majority of them. Instead, secondary meaning exists if a "significant number of prospective purchasers" connect the term with a particular entity. 90 Many courts require only that a "substantial part" of the buying class makes such an association. 91

5. The jury finding that "Fourth Avenue Theatre" had acquired a secondary meaning was supported by the evidence.

The Aldermans contend that the superior court erred as a matter of law in determining that "Fourth Avenue Theatre" was a trade name. Whether or not a symbol has acquired secondary meaning is a question of fact. 92 In this case, Iditarod has provided sufficient evidence-both direct and cireumstantial-to support the jury finding of secondary meaning.

*388 Iditarod presented direct evidence of its trade name "Fourth Avenue Theatre" by the letters from its customers using that name. Evidence that buyers sent letters to a company with the trade name, rather than the corporate name, as the addressee tends to prove consumer association between the trade name and the corporate source. 93 In the instant case, Iditarod has presented three letters addressed to the "Fourth Avenue Theatre." This partially supports the jury's determination that "Fourth Avenue Theatre" has secondary meaning.

Three of the cireumstantial evidence factors (exclusivity, length, and manner of use; established place in the market; and amount and manner of advertising) also support the finding of secondary meaning. The factor of exclusivity, length, and manner of use strongly favors Iditarod. The Fourth Avenue Theatre first opened around 1947. Even the Aldermans considered it to be a historic landmark in Anchorage. When Iditarod purchased the Fourth Avenue Theatre in 1991, it restored the theater to its original appearance and continued to use its original name.

The Fourth Avenue Theatre's established place in the market is shown by its appearance in newspapers and trade journals. Dictionaries, trade journals, magazines, and newspapers using a trade name to identify a business show that the business is commonly associated with that trade name. If the business is recognized by its trade name in professional circles, the buyer class is also likely to recognize the business by the trade name. 94 Here, Iditarod has presented substantial evidence showing the use of the trade name "Fourth Avenue Theatre" in newspapers and trade journals.

Advertising also helps support a finding of secondary meaning. Iditarod has provided substantial evidence of its advertising for the Fourth Avenue Theatre.

In sum, Iditarod presented ample direct and circumstantial evidence of secondary meaning. 95 We conclude that the jury verdict finding that the name "Fourth Avenue Theatre" had acquired secondary meaning was supported by the evidence.

6. Iditarod's trade name gained its secondary meaning prior to use by the Aldernans.

The general rule of priority for inherently distinctive trade names is that the first or senior user is entitled to legal protection." 96 Priority for inherently non-distinctive trade names like "Fourth Avenue Theatre" is more complex. Because rights by secondary meanings are gained solely by public recognition and association, the issue of priority and ownership is not which party first used the name, but which party first achieved secondary meaning in the trade name. 97 This would logically require a rule awarding priority to the party who was the first in a race to acquire secondary meaning. Instead, the rule has evolved to "an easier-to-apply, but stricter, surrogate test: the senior user must prove the existence of secondary meaning in *389 its mark at the time and place that the junior user first began use of that mark." 98

Almost all of Iditarod's evidence of secondary meaning existed prior to the Al-dermans' alleged first use. The Aldermans claim that they used the name "Fourth Avenue Theater Trolley Tours" in the fall of 1997. Only Iditarod's marginally relevant supplier invoices post-date the fall of 1997; the remainder of Iditarod's evidence of see-ondary meaning pre-dates the Aldermans' first use. Thus, the same evidence that strongly supports the finding of secondary meaning also supports a finding that the secondary meaning had developed before the Aldermans' first alleged use. We conclude that the jury verdict finding that the trade name "Fourth Avenue Theatre" belonged to Iditarod was supported by the evidence.

C. The Aldermans' Use of the Name "Fourth Avenue Theater Trolley Tours" Infringed Iditarod's Trade Name.

1. Trade name infringement does not require direct competition.

The Aldermans argue that there can be rio likelihood of confusion unless there is competition. They correctly state that the trade name "Fourth Avenue Theatre" does

not automatically protect all conceivable goods or services emanating from that business. The Aldermans then suggest that the seope of protection for the trade name is limited to goods or services already in existence.

This is wrong. Despite the terminology "unfair competition," the vast majority of modern decisions have adopted the rule that competition is not necessary between the parties for there to be a likelinood of confusion. 99 "Confusion, or the likelihood of confusion, not competition, is the real test of trademark infringement." 100

There are four reasons for this broad protection of a trade name. First, protection from trade name use by non-competing businesses prevents placing the trade name holder's reputation in another's hands. 101 Second, it protects consumers from confusion. 102 Third, it allows a zone of natural expansion. 103 Fourth, it prevents unjust enrichment of the junior user-"reaping where one has not sown" and "riding the coat-tails" of the senior user. 104

The related goods doctrine is the modern rule. 105 This doctrine extends trade name protection beyond businesses in direct competition to businesses that are related." *390 106 The [Junior's] use need not be the same as, nor one in competition with, the original use in order to infringe." 107 Instead, the junior's use will infringe if it is likely to cause consumer confusion.

2. Likelihood of confusion generally

"Likelihood of confusion" is the basic test of both common-law trademark infringe ment 108 and federal statutory trademark infringement. 109 State statutes modeled after the Lanham Act also use the same likelihood-of-confusion test. 110

The test has been stated in these terms: An appreciable number of reasonable buyers must be likely to be confused by the names for trade name infringement or unfair trade practice liability. 111 "Appreciable number" escapes a numerical value, but most courts find that a majority of confused customers is not needed. Some courts have found survey evidence of even low percentages of actual confusion to be strong evidence of a likelihood of confusion. 112 "Likely" has been interpreted as synonymous with probable, but not merely possible, confusion. 113

"Confusion" is a broad concept. Many courts have recognized not only point-of-sale confusion, but also post-sale confusion, pre-sale confusion, and even reverse confusion (where the junior user's advertising swamps the market and consumers are likely to think that the senior user's goods or services are those of the junior). 114 Also, "confusion" is not limited to confusion as to the source of goods or services; "confusion" includes confusion as to "affiliation, connection, or association," 115

The relevant class of people is purchasers and potential customers. 116 Both the senior and junior users' customers should be considered. 117 "Brand indifferent" customers *391 are not relevant to the likelihood-of-confusion determination. 118

In determining infringement of a trade name, the court must take into account the goods and services of the contesting companies. Goods-related factors are important to consider in determining infringement of a trade name by another's use of a trade name. "The trade name interests that [the senior user] seeks to protect relate to the quality and reputation of the goods it produces [or the services it provides]. 119

There are at least three ways to prove a likelihood of confusion: (1) survey evidence; (2) evidence of actual confusion; or (3) argument based on a clear inference arising from a comparison of the conflicting marks and the context of their use. 120 While not required, actual confusion is a powerful indicator of a likelihood of confusion. 121 "There can be no more positive or substantial proof of the likelihood of confusion than proof of actual confusion." 122

The factors used to determine the likelihood of confusion vary from court to court, but most courts appear to have derived their tests from the factors listed in the Restatement of Torts. 123 The factors considered by the Ninth Circuit are:

1. strength of the mark;

proximity of the goods; po

similarity of the marks; &

evidence of actual confusion; s

marketing channels used; or

g type of goods and the degree of care likely to be exercised by the purchaser;

7. defendant's intent in selecting the mark; and

8. » likelihood of expansion of the product lines 124

In the instant case, the trial court used a six-factor test in its instructions to the jury:

Likelihood of confusion is also determined by evaluating the following factors:

(1) the degree of similarity of the names;

(2) the manner and method in which the plaintiff and defendant used the names;

(3) the strength of the name, "Ath Avenue Theatre";

(4) the length of time the parties used the names without evidence of actual confusion;

(5) the intent of a party in adopting the name, "Fourth Avenue Theater," that is, whether there was an intent to confuse; |

(6) other factors about the name, "Fourth Avenue Theater" that would tend to reduce any tendency to confuse the purchaser about the source or origin of the trolley service

This formulation is not erroneous. While the tests are similar, the Ninth Cireuit test is preferable because it is more comprehensive and well developed by case law.

3. The jury finding of a likelihood of confusion was supported by the evidence.

"The jury's finding on the likelihood of confusion issue is factual and must be affirmed if it was based on substantial evidence...." 125 The jury found that "Fourth *392 Avenue Theatre" would likely be confused with "Fourth Avenue Theater Trolley Tours." Substantial evidence supports this finding.) 126

Regarding the strength of the trade name, Iditarod presented substantial evidence of secondary meaning. 127 The stronger the evidence of secondary meaning, the stronger the mark, and the greater the scope of protection because confusion is more likely. 128 This evidence of secondary meaning supports the jury's finding.

Other evidence shows that both Iditarod and the Aldermans provided tourist attractions that operated side-by-side. The similarities between their businesses indicate the danger that consumers will mistakenly assume an association between related businesses. 129

The evidence also shows that the disputed trade names are similar in sight, sound, and meaning. 130 Here, "Fourth Avenue Theatre" is exactly the same as the first part of the name "Fourth Avenue Theater Trolley Tours." The addition of the descriptive "Trolley Tours" does not avoid a likelihood of confusion. 131

Evidence of actual confusion also strongly supports a finding of likely confusion. Both sides acknowledge that once Iditarod started its trolley service, there was actual consumer confusion.

Iditarod also presented evidence that the Aldermans intentionally infringed the trade name. The evidence shows that the Alder-mans registered the name "Fourth Avenue Theater Trolley Tours" soon after the falling out with Iditarod and selected a trolley parking spot partially in front of the theater. Because this evidence raises the inference that the Aldermans intentionally infringed Iditarod's trade name, it also supports the jury finding.

Finally, Iditarod proved a likelihood of expansion when it presented evidence that it launched its own trolley tour business in the spring of 1998. We conclude that the jury's finding of likely confusion was amply supported by the evidence.

D. The Trial Court Correctly Interpreted AS 10.85.040 to Require Prior Use for Valid Registration of a Business Name and Property Denied Summary Judgment That the Aldermans Had Made Prior Use of the Name "Fourth Avenue Theater Trolley Tours."

The Aldermans argue that the trial court erred by denying their motion for summary judgment that registration of the business name "Fourth Avenue Theater Trolley Tours" gave them exclusive right to use that name. The trial court concluded that AS 10.35.040 required prior use of the name for valid registration and found that the Alder-mans had admitted in their answer that they had made no prior use of the name at the time it was registered. First, the Aldermans contend that the trial court erred by denying summary judgment both legally by misinterpreting AS 10.85.040 and factually by finding on summary judgment that they had not used the name prior to registration. Second, they argue that the court erred when instructing the jury.

Alaska Statutes 10.35.010-5