Bay State Savings Bank v. Baystate Financial Services, LLC

Citations: 484 F. Supp. 2d 205; 2007 WL 6064455; 2007 U.S. Dist. LEXIS 27148Docket: Civil Action 03-40273-FDS

Court: District Court, D. Massachusetts; March 23, 2007; Federal District Court

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In the trademark infringement case Bay State Savings Bank v. Baystate Financial Services, LLC, the plaintiff, Bay State Savings Bank, alleges that the defendant is violating federal and state trademark laws by using the mark "Bay State" for banking, insurance, and investment services. The plaintiff, a Massachusetts-chartered mutual savings bank with a history dating back to 1895, primarily serves Worcester and surrounding areas, offering traditional banking products, as well as some insurance and investment products following legal changes in the late 1990s. In its counterclaim, the defendant raises similar allegations, includes a claim of common-law unfair competition, and contends that the plaintiff fraudulently procured its trademark registrations. 

The central issue is whether the mark "Bay State" has acquired secondary meaning in the fields of insurance and investment services. The court finds that the plaintiff's use of the mark did not establish secondary meaning before the defendant began using it. As a result, the court grants the defendant's motion for summary judgment and partially grants the plaintiff's motion for summary judgment, denying it in part. The factual background highlights the plaintiff's banking operations, including its long-term use of the "Bay State" name and its business arrangements with third-party vendors for investment services, which were kept separate from the bank's operations due to regulatory requirements.

The relationship between the plaintiff and FISCO concluded in 1998, with FISCO services contributing less than 0.1% to the plaintiff's total income from 1994 to 1998. In 1998, changes in banking regulations allowed Massachusetts-chartered banks to sell insurance and act as broker-dealers. In February 2000, the plaintiff entered into a contract with Infinex to offer non-deposit investment and insurance services to its customers, explicitly stating it had no intention of initiating its own insurance sales but would rely on Infinex as a third-party provider. The plaintiff did not seek regulatory approval for insurance sales until March 15, 2001, obtaining it on July 19, 2001. Infinex operated under the name "Minuteman Investment Services" until February 2002, after which it was renamed "Bay State Investment Services." The arrangement involved "mutual employees" selling products in the plaintiff’s branches, while Infinex was clearly identified as the broker/dealer. The lease mandated strict separation of business operations and records between the plaintiff and Infinex. By 2004, less than 2% of the plaintiff's revenue came from this arrangement.

Additionally, on July 16, 1999, the plaintiff applied to the PTO for trademarks "Bay State" and "Bay State Savings Bank," claiming use in banking and financial services since at least May 16, 1895. The PTO initially rejected these applications as geographically descriptive and insufficiently specific. Following amendments to the application detailing the nature of financial services, along with declarations asserting the distinctiveness of the marks through exclusive use from 1994 to 1999, the PTO approved the registrations on May 15, 2001, and May 22, 2001, respectively. On November 22, 1999, the plaintiff filed an intent-to-use application for "Bay State Investment Services," which was also initially rejected for geographic descriptiveness. The plaintiff reiterated the distinctiveness of the "Bay State" mark through exclusive use in investment services for five years, leading to further consideration by the PTO.

Plaintiff secured a federal registration for the mark "Bay State Online" on October 10, 2002, following an earlier registration by the PTO on July 30, 2002. Defendant, Baystate Financial Services, LLC, is a Massachusetts limited liability company based in Boston, with additional offices in Worcester and four other locations in the state. It offers a range of financial services, including insurance and investment products for both businesses and individuals. The company began operating under the "Baystate" name in January 1982 and has continuously used it since 1983. It obtained a Massachusetts service mark registration for "Baystate Financial Services" on April 10, 1990, with a first use date of January 1, 1983. Following a series of ownership transfers, including a sale to New England Life Insurance Company and then to David C. Porter, the business continued under the "Baystate" name, eventually re-registering the mark in Massachusetts as Baystate Financial Services, LLC, on May 19, 1997, with a claimed first use date of May 1, 1997. The company announced a merger with the Patriot Group on November 23, 2003.

On December 4, 2003, the plaintiff filed a lawsuit seeking injunctive, declaratory, and monetary relief, alleging service mark infringement, dilution of a famous mark, cybersquatting, violations of Massachusetts trademark laws, and unfair trade practices. The defendant counterclaimed with similar allegations and additional claims of common-law unfair competition and fraud related to the plaintiff's trademark registrations. A request for preliminary injunctive relief to prohibit the use of the "Baystate" name was denied by the court on June 25, 2004.

On May 8, 2006, the defendant filed a motion for summary judgment regarding all claims made by the plaintiff, while the plaintiff simultaneously cross-moved for summary judgment on the cybersquatting counterclaim and requested the Court to resolve six specific issues to streamline the trial process.

The standard for summary judgment requires the moving party to demonstrate, through pleadings, discovery, and affidavits, that there are no genuine issues of material fact and that they are entitled to judgment as a matter of law. The court must consider the entire record favorably to the non-moving party and make reasonable inferences in their favor.

In addressing the trademark infringement claim under Section 43(a) of the Lanham Act, the plaintiff must prove three elements: ownership of a distinctive mark, use of the mark in interstate commerce, and the defendant's use of the mark that is likely to cause confusion regarding the origin of the goods or services. Distinctiveness is a key factor, with marks classified into five categories: generic, descriptive, suggestive, arbitrary, and fanciful. Generic marks cannot be distinctive, while suggestive, arbitrary, and fanciful marks are inherently distinctive. The mark "Bay State," being geographically descriptive, is initially non-distinctive but can achieve distinctiveness through secondary meaning.

Trademark rights are based on prior use rather than registration. A registered mark provides prima facie evidence of validity and distinctiveness, though this presumption can be challenged by proof of mere descriptiveness, shifting the burden back to the holder to demonstrate secondary meaning. The PTO’s registration processes influence these presumptions; marks registered without proof of secondary meaning are presumed inherently distinctive, while those requiring such proof are presumed valid due to acquired distinctiveness.

In this case, the plaintiff's trademark applications were initially rejected as geographically descriptive, but later submitted evidence of distinctiveness through continuous use, resulting in a presumption of acquired distinctiveness effective only from the registration date of May 15, 2001. Since the alleged infringement occurred prior to this date, the presumption of secondary meaning does not apply to the claims dating back to at least 1997.

The plaintiff bears the burden of proof to demonstrate that its marks acquired secondary meaning before the defendant began using a similar mark, specifically prior to 1997. Given that the plaintiff seeks rights to a common, descriptive term utilized by various businesses, the standard of evidence required is elevated. Courts typically evaluate several factors to ascertain secondary meaning, including the duration and exclusivity of mark use, the prominence of the plaintiff's business, advertising efforts, market position of the product, and evidence of intentional copying.

The plaintiff presents five categories of evidence to support its claim of secondary meaning:

1. **Size and Prominence**: The plaintiff highlights its longstanding use of the "Bay State" mark since 1895 and its size as a banking institution. However, this evidence pertains only to banking and does not extend to the insurance and investment services sectors.

2. **Advertising and Promotion**: The plaintiff cites significant advertising expenditures and unsolicited publicity over the years, but all related to banking activities, with relevant promotions for insurance and investment services beginning only in 2002, after the defendant entered the market.

3. **Third-Party Vendor Relationships**: The plaintiff references its collaboration with third-party vendors for insurance and investment services. However, these services were not marketed under the "Bay State" name, and disclaimers indicated that the products were not offered by the plaintiff. The name "Bay State Investment Services" was adopted in February 2002, too late to support its claim against the defendant.

4. **Direct Offering of Insurance and Investment Products**: While the plaintiff contends that it directly offered these services before the defendant's market entry, its investment offerings were mainly limited to deposit accounts by 1997, and legal restrictions hindered its ability to sell insurance prior to 1998. 

Overall, the plaintiff's evidence does not sufficiently establish that its marks gained secondary meaning in the investment and insurance sectors before the defendant's entry into the market.

SBLI insurance, marketed as a "savings bank" product rather than a "Bay State" product, was sold by numerous savings banks in the state. The plaintiff's limited insurance and investment offerings prior to 1997 do not demonstrate that its marks had acquired secondary meaning in those sectors. Three consumer surveys are presented as evidence of secondary meaning. The 1999 and 2001 surveys, conducted by Kelly Myers, showed that 12% and 18% of respondents, respectively, could name the plaintiff when prompted about banks, with 70% and 76% recognizing the plaintiff when asked directly. However, these surveys did not assess the public's association of the "Bay State" mark with the plaintiff's insurance and investment services, indicating only modest familiarity with the bank.

A 2005-06 survey by Robert Klein aimed to measure the secondary meaning of "Bay State" in Worcester. It found that 38.6% of respondents associated "Bay State" with "Bay State Savings Bank." Despite asking about financial products, the survey did not connect these products with either the plaintiff or defendant. Klein concluded that a significant portion of respondents associated "Bay State" with the bank, but this survey is criticized for being irrelevant to the 1997 timeframe and not addressing associations with investment or insurance services. Courts typically require over 50% recognition to establish secondary meaning, and the plaintiff's evidence falls short, failing to prove secondary meaning in the insurance and investment fields despite longstanding use of its marks in banking since 1895.

Plaintiff's claim for protection of the "Bay State" mark under the "natural expansion doctrine" fails because the expansion into new product lines was not "natural." At the time the defendant began using the mark in 1997, the plaintiff was largely prohibited from selling insurance and investment products, leading to no reasonable consumer expectation that the plaintiff would enter those markets. Consequently, the mark did not acquire secondary meaning in those fields prior to the defendant's use, resulting in summary judgment for the defendant on Count I.

In Count II, the plaintiff's claim under the federal anti-dilution statute, 15 U.S.C. § 1125(c), also fails. The mark must be "famous" to qualify for protection, which requires a higher standard than merely showing secondary meaning. The plaintiff cannot demonstrate that its mark is distinctive or has achieved fame, thus failing to meet the necessary criteria for anti-dilution protection.

Count III addresses a cybersquatting claim under 15 U.S.C. § 1125(d). To succeed, the plaintiff must prove that the defendant had a "bad faith intent to profit" from the mark. The court considers nine factors to determine bad faith, including the defendant's rights to the domain name, prior use in offering goods or services, intent to divert consumers, and any misleading information provided during registration. The outcome of this claim hinges on the assessment of these factors.

Defendant registered "Baystate Financial Services" in Massachusetts and began using the name by May 19, 1997. At that time, the plaintiff's marks lacked secondary meaning in the insurance and investment sectors, rendering them non-distinctive. The domain name "Baystate Financial" is a shortened version of the defendant's legal name. Key factors indicate a lack of bad faith on the defendant's part, while the plaintiff provided no evidence regarding additional factors relevant to a bad faith claim. Consequently, the plaintiff's cybersquatting claim fails. 

Under Massachusetts state trademark law (Mass. Gen. Laws ch. 110B), claims for infringement and anti-dilution are similar to federal law. To succeed on an anti-dilution claim, the plaintiff must demonstrate that its marks are distinctive and that the defendant's use has likely caused dilution. Since the plaintiff's "Bay State" marks are geographically descriptive and lack inherent distinctiveness, the anti-dilution claim cannot succeed.

Regarding the Chapter 93A claim, the plaintiff alleges that the defendant engaged in unfair competition and deceptive practices. However, as the defendant had the legal right to use the "Baystate Financial" mark and acted without bad faith, the plaintiff cannot prove that the defendant's actions were unethical or unscrupulous under Chapter 93A.

As a result, the court grants the defendant summary judgment on all counts of the complaint. In a motion for partial summary judgment, the plaintiff seeks to resolve six specific issues related to the defendant's counterclaims and defenses, arguing that the defendant cannot establish certain claims and that their use of the "Baystate" name is likely to cause confusion with the "Bay State" marks. The court, now considering the plaintiff as the moving party, must view disputed facts in favor of the defendant, including the assumption that the defendant first used the mark "Baystate Financial" in 1983, not 1997.

Plaintiff argues that defendant cannot prove the invalidity of its Bay State registrations due to fraud. Defendant's counterclaims include allegations of fraudulent registration under 15 U.S.C. § 1120 and a claim for cancellation of plaintiff's federal registrations. To establish fraud, the plaintiff must demonstrate by clear and convincing evidence that the defendant made false representations to the PTO, knew the representations were false, intended to induce reliance on them, and that the PTO was deceived into registering the mark. The "knowledge" requirement can be satisfied if the applicant knew or should have known the statements were false. Defendant claims that plaintiff fraudulently stated it had used the marks for financial services continuously for five years prior to registration, despite evidence suggesting otherwise. Given a disputed material fact regarding the continuous offering of investment and insurance services, the motion for summary judgment on fraudulent registration claims is denied.

Regarding defendant's state registration, plaintiff contends it owns the mark "Bay State" and that defendant's use is likely to cause confusion. The plaintiff's argument merges the use of "Bay State" for banking with its use for investment and insurance services, failing to establish secondary meaning for the latter. As defendant began using the mark in 1983, summary judgment on the cancellation claim is also denied.

Lastly, plaintiff seeks summary judgment against defendant's "limited area" defense, which allows a junior user to continue using an infringing mark in a remote area if that use predated federal registration. This defense is based on Section 33(b)(5) of the Lanham Act.

The senior user's federal registration of a trademark freezes the junior user's market area, limiting the defense to the area of continuous prior use before registration, as stipulated in 15 U.S.C. 1115(b)(5). It is unclear if the defendant is asserting a limited area defense or if the prerequisites for such a defense, including the plaintiff's mark being "incontestable" under 15 U.S.C. 1065, have been met. The defendant claims to have used the "Baystate" mark for insurance and investment services since 1983, positioning itself as the senior user and making summary judgment inappropriate on this issue.

Regarding the cybersquatting counterclaim under 15 U.S.C. 1125(d), the plaintiff seeks summary judgment, asserting that its domain names are not confusingly similar to the defendant's domain name "baystatefinancial.com." The anti-cybersquatting statute aims to combat individuals who register multiple domain names tied to established trademarks for ransom. To establish a cybersquatting claim, the proponent must show: (1) their marks are distinctive or registered; (2) the plaintiff's domain names are identical or confusingly similar; and (3) the plaintiff registered the names with bad faith intent to profit. The plaintiff argues there is no evidence of bad faith intent. The determination of bad faith can involve nine non-exhaustive factors, but the defendant claims it only needs to show the plaintiff was aware it was not the superior user of "Baystate" regarding investment and insurance services. The defendant fails to provide supporting evidence for this assertion. Given that the plaintiff's domain name is a variation of its legal name and is used legitimately for its banking business, mere awareness of the defendant's earlier use in a different context does not suffice to demonstrate bad faith. Hence, the court will grant summary judgment in favor of the plaintiff on the cybersquatting claim.

Lastly, the plaintiff requests the court to find that the defendant cannot prove continuous use of the "Baystate Financial" name since before May 1, 1997, or establish privity with any prior user. This request is moot concerning the plaintiff's claims or the defendant's affirmative defenses, and the court will only consider it in relation to the defendant's counterclaims.

Defendant's application for its second registration claims a first use date of May 1, 1997, but Plaintiff argues there is no documentation showing the first registration was transferred to the defendant. In response, defendant provides an affidavit from David Porter asserting that: 1) a predecessor first used the mark in 1983, 2) NELCO transferred rights to him, and he used the mark from August 1996 to January 1997, 3) he transferred the rights to the defendant in January 1997, and 4) the May 1, 1997 date was an inadvertent error. Additionally, the defendant produced a 2003 confirmatory assignment regarding the 1996 transfer. This evidence raises a factual dispute over the mark's continuous use, making summary judgment inappropriate on this issue. 

Regarding the likelihood of confusion with the "Baystate" name, the plaintiff requests a legal determination of confusion concerning its "Bay State" marks, which appears to relate to its trademark infringement claim. However, since summary judgment has been granted in favor of the defendant on that claim, the request is moot.

In conclusion, the court grants the defendant's motion for summary judgment on all counts of the complaint while granting the plaintiff's motion for partial summary judgment only on Count IV of the counterclaim, denying it in all other respects. The plaintiff has established a long history of advertising and promoting its business, with significant financial investment in marketing since 1960, and a historical context involving the establishment of low-cost life insurance in Massachusetts. There are also references to various investment accounts and products offered by the plaintiff, though the evidence of marketing certain products under the "Bay State" name appears lacking.

The Court collectively refers to the involved parties as "Infinex." Between 1998 and 2001, the plaintiff exclusively offered SBLI life insurance and annuities, with no other non-deposit investment or insurance products available, either directly or through third-party vendors. The lease agreement for Infinex Investments designated "mutual employees" as "Infinex Representatives," who had an employment agreement with Infinex that retained exclusive control over their business conduct, with the plaintiff having no involvement in their services. The plaintiff registered the trademarks "Bay State Savings Bank" on July 20, 1999, and "Bay State" on October 14, 1999, but did not obtain regulatory approval to sell insurance until July 19, 2001. Additional registrations included "Bay State Investment Services" on June 3, 2002, and "Bay State Online" on November 14, 2004. The domain name "Baystate Financial" is registered to the plaintiff. 

There is a dispute regarding the first use of the "Bay State" name, with the plaintiff asserting it began in 1997 and the defendant claiming 1983; for summary judgment considerations, the Court will adopt the plaintiff's 1997 date for one motion and the defendant's 1983 date for another. The plaintiff argues that NELCO did not transfer rights to the name, claiming the original registration expired in 2000 due to non-renewal, while the defendant maintains a new registration was filed in 1997. An assignment executed on December 8, 2006, transferred rights related to "Baystate Financial" marks to Porter, which the defendant describes as confirmatory. The defendant mistakenly listed May 1, 1997, as the first use date, yet contends the actual first use was in 1983. The plaintiff also initially claimed unlawful use of a trade name under Massachusetts law but later withdrew this claim. 

The presumption of a registered mark’s "incontestable" status is conclusive under certain conditions. For the defendant's summary judgment motion, the Court assumes the mark was first used in 1997. The plaintiff's deposit products could be offered in tax-preferred forms, including IRAs and SEPs. A survey indicated a low level of awareness of the plaintiff's business, raising concerns, and it was noted that survey participants were not specifically asked if they associated "Bay State Bank" with "Bay State Savings Bank." The defendant argues that only 18.3% of respondents connected "Bay State" to "Bay State Savings Bank" when disaggregating responses, while the plaintiff contends the terms are interchangeable, a dispute deemed unnecessary for the summary judgment resolution.

Plaintiff operates under the name Bay State Investment Services, distinct from Bay State Savings Bank, a fact Klein was unaware of during his survey, which yielded no respondents identifying "Bay State Investment Services" as a financial institution. In its summary judgment motion, the plaintiff seeks resolution of specific issues related to defendant's counterclaims but does not address all counterclaims, leading the Court to limit its review to the six issues outlined in the plaintiff's memorandum. The Court emphasizes the moving party's obligation to clarify the basis for its motion and demonstrate the absence of material fact disputes. Additionally, a lack of genuine intent to use a trademark can lead to a finding of fraud, as established in case law. Massachusetts law prohibits registering a mark that closely resembles an existing mark in a way that could cause confusion or deception. The plaintiff registered the trademark "Bay State Online" in Massachusetts on June 3, 2002, and with the PTO on October 1, 2002; other related domain names were not registered.