Therma-Scan, Inc. v. Thermoscan, Inc.

Citations: 295 F.3d 623; 63 U.S.P.Q. 2d (BNA) 1659; 2002 U.S. App. LEXIS 13816; 2002 WL 1466238Docket: 00-2408

Court: Court of Appeals for the Sixth Circuit; July 10, 2002; Federal Appellate Court

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Therma-Scan, Inc. (TSI) filed a lawsuit against Thermoscan, Inc. for trademark infringement and unfair competition, seeking monetary damages, injunctive relief, and cancellation of Thermoscan's trademark. The district court initially enforced a settlement reached during oral argument but was reversed by the appeals court due to a dispute over whether a meeting of the minds had occurred. The case was remanded for a ruling on Thermoscan's motion for summary judgment. After supplemental briefs were submitted, the district court granted summary judgment in favor of Thermoscan, which the appeals court affirmed.

TSI, a Michigan corporation, provides infrared thermal-imaging examinations and has held the "THERMA-SCAN" trademark since November 1, 1988. TSI mainly serves clients from the greater Detroit area and promotes its services through physician referrals rather than traditional advertising. In contrast, Thermoscan, a Georgia corporation that began operations in March 1989, manufactures electronic ear thermometers and achieved significant sales growth, alongside substantial advertising expenditures. Thermoscan registered its "THERMOSCAN" trademark on September 24, 1991, after using it since 1990. TSI's attorney had previously advised taking legal action against Thermoscan for infringement, but TSI's president opted not to pursue it, believing it would not affect TSI's business.

In December 1993, Hoekstra contacted TSI's attorney regarding concerns about Thermoscan's use of the THERMOSCAN trademark, fearing potential confusion with TSI's services due to Thermoscan’s advertising and sales in drugstores. The Gillette Company acquired Thermoscan in 1995, and Braun, Inc. began marketing the thermometers in 1996, featuring the "BRAUN" trademark on packaging. TSI, aware of Thermoscan's trademark, did not act until August 1996, when it sent a protest letter and later initiated a trademark cancellation proceeding that was suspended pending the outcome of the lawsuit.

The lawsuit was filed on January 26, 1998, alleging trademark infringement and unfair competition under 15 U.S.C. §§ 1114 and 1125(a), and sought cancellation of Thermoscan's trademark registration. In October 1998, Thermoscan moved for summary judgment, and a purported settlement was discussed during a hearing, but the parties could not agree on specific terms. Ultimately, Thermoscan sought to enforce its version of the settlement, which the district court granted, dismissing the case with prejudice on April 20, 1999. TSI appealed, and the appellate court reversed the dismissal, stating it was an abuse of discretion to impose Thermoscan's settlement terms upon TSI.

After remand, the court allowed supplemental briefs on the summary judgment motion, granting Thermoscan's motion on October 25, 2000, which led to the current appeal. The standard of review for summary judgment is de novo, affirming that summary judgment is appropriate when no genuine issue of material fact exists, with all evidence viewed in favor of the nonmoving party. The court assesses whether sufficient disagreement exists to warrant jury submission or if the evidence overwhelmingly favors one party.

To establish trademark infringement and unfair competition claims, TSI must demonstrate that Thermoscan's trademark creates a likelihood of confusion regarding the origin of goods or services. Under 15 U.S.C. 1114, the key issue is whether consumers are likely to confuse the sources of the respective goods. A party contesting a summary judgment in such cases must show genuine factual disputes related to the likelihood of confusion based on eight relevant factors: 1) strength of the plaintiff's mark, 2) relatedness of goods/services, 3) similarity of marks, 4) evidence of actual confusion, 5) marketing channels used, 6) degree of purchaser care, 7) defendant's intent in mark selection, and 8) likelihood of product line expansion. The relevance of these factors varies by case, with the central question being whether consumers may believe the parties' products/services are affiliated. 

Trademark infringement can manifest in three forms: 1) palming off, where similar marks on competing goods confuse consumers about their origin; 2) confusion of sponsorship, where non-competing goods bear similar marks leading to mistaken associations; and 3) reverse confusion, where a junior user saturates the market with a similar trademark, causing the public to mistakenly believe that the senior user's products are associated with the junior user. TSI's allegations involve both palming off and reverse confusion.

Determining the likelihood of confusion in trademark cases involves both factual and legal assessments. Disputes regarding evidence related to the eight confusion factors are factual issues, requiring factual findings for each factor, as established in Data Concepts, Inc. v. Digital Consulting, Inc. In contrast, the overall conclusion about whether those facts indicate a likelihood of confusion is a legal determination. When reviewing a district court's grant of summary judgment, the appellate court first evaluates if there are genuine issues of material fact regarding these factors and then assesses the legal question of whether the established facts indicate a likelihood of confusion, applying a de novo standard at both stages.

The strength of TSI's trademark is evaluated based on its distinctiveness and public recognition. A mark is considered strong if it is highly distinctive, meaning the public readily identifies it with a particular source. The strength of a trademark can arise from its unique characteristics or effective advertising. Trademark distinctiveness is categorized into four types: generic, descriptive, suggestive, and fanciful or arbitrary. Descriptive marks explicitly describe a product's characteristics, while arbitrary marks have common meanings unrelated to their products, such as CAMEL for cigarettes. The court noted that even arbitrary marks may lack strength if they do not achieve widespread public recognition. The district court found TSI's trademark to be descriptive, a conclusion supported by TSI's president, who acknowledged that the name succinctly describes the services provided by TSI.

TSI engages in limited advertising, focusing on building relationships within the medical community and promoting its services through radio discussions. This lack of traditional advertising does not inherently weaken its trademark, but it may reduce public familiarity with the mark unless there is evidence of widespread recognition. TSI asserts that its registered, uncontested trademark is presumed strong after five years, but this reliance is deemed misplaced. The strength of a trademark, even if incontestable, must be evaluated based on public recognition. TSI's mark is described as not particularly strong due to its descriptive nature and lack of broad recognition, which diminishes its significance in assessing the likelihood of consumer confusion.

In terms of relatedness of goods and services, the court categorizes relationships into three types: direct competition, somewhat related but not competitive, and totally unrelated. TSI and Thermoscan operate within the same broad medical field but offer dissimilar goods and services, targeting different market segments. Consequently, the district court concluded, and the court agrees, that confusion is unlikely due to the lack of direct competition and significant differences in how both entities market their respective offerings.

TSI argues that the district court prematurely assessed the likelihood of confusion regarding their trademark relative to Thermoscan's products, suggesting a focus on other factors was warranted. TSI maintains that their services relate to Thermoscan's thermometers under the second category of related goods, although the court finds any connection insufficient to establish relatedness for confusion assessment. The court cites precedent indicating that companies operating at different levels in an industry are not similar enough to cause confusion, supporting a conclusion that confusion is unlikely.

Regarding the similarity of the marks, the court emphasizes that trademark evaluation should not rely solely on side-by-side comparisons but should consider how the marks might confuse consumers when viewed individually. The district court acknowledges a high degree of similarity between "THERMA-SCAN" and "THERMOSCAN," noting minor differences in spelling and design do not diminish this similarity.

Thermoscan argues that the prominent BRAUN name on its products reduces confusion likelihood, supported by case law stating that similar marks presented with company names can diminish confusion. However, while the BRAUN label lessens the confusion risk, it does not negate the similarities between the trademarks. Consequently, the court concludes that an average consumer might struggle to distinguish between TSI's services and Thermoscan's thermometers, leading to an increased likelihood of confusion, despite the mitigating presence of the BRAUN name.

Evidence of actual confusion is considered the strongest indicator of likelihood of confusion in trademark cases. The significance of such evidence varies based on the type and quantity of confusion observed. A few instances of actual confusion over a prolonged period or during significant concurrent sales may imply a lack of likelihood of confusion. Confusion that is transient or from individuals unfamiliar with the products carries less weight than persistent confusion among knowledgeable consumers.

In this case, TSI submitted 18 e-mails from consumers mistakenly believing TSI manufactured ear thermometers, with six e-mails indicating a direct belief that TSI sells these products. Specific inquiries included requests for rebates for Thermoscan thermometers, a catalog, repair information, and compliance details. The remaining 12 e-mails originated internationally and were primarily inquiries about thermography equipment rather than thermometers. The district court ruled that only the six e-mails directly related to Thermoscan’s thermometers could suggest actual confusion, as the other e-mails did not mention thermometers and instead pertained to TSI's thermography services. This conclusion is supported as the latter inquiries do not demonstrate confusion about TSI's association with Thermoscan.

The district court determined that six e-mail messages referencing thermometers did not create a genuine issue of material fact regarding actual confusion. It misinterpreted the relevance of TSI's evidence, as any indication of confusion, however minimal, should benefit TSI in a summary judgment context. According to relevant case law, a plaintiff under the Lanham Act need only demonstrate potential confusion, not actual confusion, and even a single instance of confusion could favor the plaintiff.

The six e-mails indicating uncertainty about TSI's product offerings could suggest actual confusion; however, their legal significance is diminished when compared to the volume of Thermoscan's sales and customer inquiries—3.2 million thermometers sold and an average of 11,000 monthly calls. Such a small number of confused customers is deemed legally insignificant relative to Thermoscan's operations.

Additionally, the nature of the confusion in e-mail messages may indicate consumer carelessness rather than genuine confusion, as trademark owners are not protected against mistakes made by inattentive consumers. The likelihood that consumers mistakenly contacted TSI instead of Thermoscan due to inattentiveness is heightened by TSI's lack of advertising, further suggesting that the e-mails reflect carelessness rather than actual confusion about the source of the thermometers.

Instances of alleged actual confusion between TSI and Thermoscan occurred only between November 20, 1998, and July 26, 2000, with no evidence of confusion prior to this period, despite the coexistence of their goods and services since 1990. This suggests that consumers are not confused about any affiliation between TSI and Thermoscan. The limited number of confusion instances during the specified timeframe weakens the argument for a likelihood of confusion, as established in Homeowners Group, which states that few instances of confusion after a long period of concurrent sales can imply no likelihood of confusion. The absence of confusion evidence prior to November 1998 further indicates that the e-mail messages received were likely due to carelessness rather than actual confusion.

The analysis of marketing channels and customer bases reveals significant differences between TSI and Thermoscan. TSI contends that both companies target healthcare professionals and utilize the Internet for marketing, but the district court found substantial distinctions in their customer demographics. Thermoscan sells approximately 80% of its thermometers directly to consumers, while TSI primarily relies on physician referrals. This divergence in customer bases significantly diminishes the likelihood of confusion. Additionally, TSI failed to provide evidence of shared marketing channels, as it does not engage in formal advertising but instead depends on physician relationships and potential media endorsements.

The availability of information about the parties' goods and services online does not automatically imply the use of common marketing channels. The Ninth Circuit Court of Appeals has clarified that mere Internet marketing does not equate to overlapping marketing channels. Relevant factors to consider include: the extent to which both parties utilize the Internet for marketing, whether their trademarks are associated with Web-based products, and any other potential overlap in marketing strategies. In this case, TSI does not assert that it markets its services online or that the Internet plays a significant role in its relationship with physicians. Neither party's offerings are connected to the Internet, and TSI has not claimed any additional overlap in marketing channels with Thermoscan. Consequently, this analysis suggests a low likelihood of confusion between the two parties.

Regarding the likely degree of purchaser care, ordinary buyers typically exercise basic caution in distinguishing products with similar trademarks, while more sophisticated buyers may exhibit greater discernment, particularly for expensive or specialized purchases. The district court noted that clients seeking diagnostic services and physicians referring patients would likely be careful, thus reducing the chance of confusion. However, this conclusion is flawed due to the high similarity of TSI’s and Thermoscan’s trademarks, which can lead even careful buyers to mistakenly assume an affiliation. Additionally, the district court did not consider that Thermoscan's customers might confuse its thermometers with TSI’s services.

An analysis of the "likely degree of purchaser care" indicates that courts must consider if consumers of inexpensive products might mistakenly believe they are affiliated with a company offering expensive services, particularly in trademark infringement cases. In this context, it is noted that Thermoscan's customers are generally cautious, TSI does not market to the public, and there is no direct competition between TSI and Thermoscan, leading to a low potential for consumer confusion. Despite the presumption that TSI's customers exercise a high degree of care, this factor does not strongly support TSI's position, as its significance is minimal compared to other factors.

Additionally, Thermoscan's intent in choosing its trademark is important. A party's intention to cause confusion can imply similarity, and circumstantial evidence of copying can suggest intentional infringement if direct evidence is lacking. It is highlighted that knowledge of a protected mark can be presumed from extensive advertising and long-term use. TSI claims that Thermoscan had constructive knowledge of the "THERMA-SCAN" trademark due to its prior registration and that Thermoscan did not seek legal counsel before its trademark registration. However, TSI fails to provide supporting evidence for these claims, and the mere existence of a prior registered mark does not imply intentional copying. The court concluded that TSI did not demonstrate a genuine issue regarding Thermoscan's intent, though it criticized the district court for incorrectly asserting that the lack of evidence for intentional copying suggested minimal likelihood of confusion between the trademarks.

The absence of evidence of intentional infringement does not significantly influence the likelihood of consumer confusion regarding source. The district court's conclusion that TSI's lack of plans for service expansion reduces confusion likelihood is deemed erroneous. A finding of no expansion does not directly address consumer confusion. The similarity between TSI's and Thermoscan's trademarks is strongly supportive of TSI's position; however, it alone does not guarantee confusion. The presence of the BRAUN name alongside Thermoscan's trademark mitigates potential confusion. 

Two additional factors provide minimal support for TSI's likelihood of confusion claim. First, TSI’s trademark, while presumed strong due to its registration and five years of uncontested use, lacks evidence of broad public recognition. Second, evidence of actual confusion is scant, providing weak support for TSI's case. The potential for Thermoscan's advertising to mislead customers slightly favors TSI but remains weak. 

Conversely, the relatedness of goods and services and their marketing channels strongly counter the likelihood of confusion. TSI's diagnostic services and Thermoscan’s thermometers do not compete or relate closely, indicating consumers are unlikely to confuse their origins. Additionally, the distinct customer bases and differing marketing strategies, particularly online, further support the finding that confusion is unlikely.

Thermoscan's choice of trademark and potential for product line expansion are irrelevant to determining the likelihood of confusion in this case. The analysis favors a conclusion that confusion is unlikely, with minimal support for TSI's claims. A reverse-confusion claim does not affect this assessment, as illustrated by the Ninth Circuit's ruling in Cohn v. Petsmart, which found no likelihood of confusion despite overlapping goods. In that case, distinctive business names, differing marketing strategies, and a lack of actual confusion over six years were key factors. Similarly, although Thermoscan's advertising could overshadow TSI's trademark, their products are only loosely related, encountered in different settings, and marketed through different channels. The court emphasized that the crux of the dispute lies in the legal determination of confusion rather than the underlying facts, ultimately affirming the district court's summary judgment in favor of Thermoscan.