Kinbook, LLC v. Microsoft Corp.

Citations: 866 F. Supp. 2d 453; 2012 WL 246291; 2012 U.S. Dist. LEXIS 8570Docket: Civil Action No. 10-4828

Court: District Court, E.D. Pennsylvania; January 24, 2012; Federal District Court

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Kinbook, LLC, a small online social networking software company, initiated legal action against Microsoft Corporation for unfair competition and reverse trademark infringement under the Lanham Act due to Microsoft's use of the term 'Kin' in its products 'Kinect' and 'KIN.' Kinbook contends that Microsoft's branding is confusingly similar to its registered trademark 'Kinbox,' particularly because of Microsoft's substantial marketing capabilities, which Kinbook argues have harmed its business and trademark value. Microsoft filed a motion for summary judgment, claiming there is no likelihood of confusion between the marks. The court granted Microsoft’s motion, concluding that Kinbook did not sufficiently demonstrate a likelihood of confusion.

The factual background includes details about Microsoft's establishment in 1975 and its successful XBOX 360 gaming console, which has sold over 55 million units. Microsoft introduced 'Kinect,' a controller-free gaming device, in June 2009, which sold over 8 million units within two months of its release in November 2010. Kinect is marketed alongside the XBOX 360 brand and has received significant investment for promotion. Additionally, Microsoft launched the 'KIN ONE' and 'KIN TWO' smartphones in April 2010, aimed at enhancing its mobile offerings, but these products did not achieve the same level of success as Kinect.

Microsoft's KIN brand was named to evoke the idea of 'next of kin,' aimed at connecting users with their close associates. The KIN phones were priced under $199 and required a Verizon Wireless service plan; however, they failed to gain traction in the market, leading Microsoft to halt production two months after launch. The KIN phones and the Kinect sensor share the term 'kin' in their names but are otherwise distinct products from different divisions within Microsoft, which has no plans to utilize the KIN mark for future products.

Kinbook, LLC, founded by Cassandra Toroian and Jacqueline Blue, aims to create a digital platform for family memories and communications. In 2009, they began developing a social application for sharing messages, photos, and videos among users on Facebook. The Kinbook application allows Facebook members to create private sub-networks, with user data stored on Kinbook's offsite servers rather than Facebook's. After discovering potential trademark opposition from Facebook against 'Book' marks, they rebranded the application to 'Kinbox' and 'Munchkinbox' and filed for trademark registration in September 2009, which was accepted in September 2010. Despite launching on Facebook, they plan to create an independent website and have acquired related domain names. Kinbook does not charge for the Kinbox service, intending to generate revenue through advertising, content sales, and additional user storage.

Kinbook has faced significant challenges in marketing its Kinbox and Munchkinbox applications, achieving no revenue and only 16,685 active monthly users as of May 2011, amidst over 750 million potential users on Facebook. Despite initial aspirations to invest $250,000 in marketing, only a few thousand dollars have been spent. Kinbook attributes its struggles to the launch of Microsoft's Kinect for XBOX 360, which they claim has created confusion with their registered trademark 'Kinbox.' Kinbook argues that Microsoft's marketing efforts have effectively sidelined their product, prompting them to file a complaint against Microsoft on September 17, 2010, for unfair competition and trade dress infringement under the Lanham Act. Microsoft has submitted a motion for summary judgment, which is pending. The legal standard for summary judgment requires the moving party to show no genuine issue of material fact, allowing the court to view evidence in the light most favorable to the non-moving party. The opposing party must provide specific evidence to support their claims, and if evidence is not significantly probative, summary judgment may be granted to avoid unnecessary trials.

Kinbook claims that Microsoft's use of the trademarks 'Kinect' and 'KIN' infringes on its registered trademark 'Kinbox,' constituting unfair competition under the Lanham Act. To succeed, Kinbook must prove ownership of the 'Kinbox' mark, its validity, and that Microsoft's use is likely to cause consumer confusion. Microsoft contests Kinbook's ability to establish the latter two elements. The Court focuses on the likelihood of confusion, which occurs when a significant number of consumers might mistakenly believe the products are associated. The Third Circuit's 'Lapp factors' for assessing confusion include the similarity of the marks, the strength of the owner's mark, consumer purchasing care, duration of use without confusion, intent behind the mark's adoption, evidence of actual confusion, marketing channels, target market similarities, relationship of goods, and consumer expectations. The analysis differentiates between 'direct confusion' (ordinary confusion) and 'reverse confusion' (when a larger entity causes confusion regarding a smaller owner's mark). Microsoft argues there is no likelihood of confusion, and the Court agrees, granting summary judgment in favor of Microsoft.

The determination of likelihood of confusion hinges primarily on the similarity of the marks, with the critical test being whether they create the same overall impression when viewed separately. Marks are considered confusingly similar if consumers are likely to believe they share a common source or affiliation. A side-by-side comparison is inappropriate if the products are not typically displayed together. The courts evaluate the appearance, sound, and meaning of the marks in question. 

Microsoft contends that its marks are visually and phonetically distinct from the Kinbox and Munchkinbox marks. The Kinbox mark features an orange bubble-like font with a thin royal blue outline and distinctive design elements, while the Munchkinbox mark is similar but incorporates the word "Munchkin" in royal blue. The Kinect mark, however, is characterized by a simple all-capital font and is often associated with the XBOX 360 mark, which is visually prominent with its lime green and silver color scheme. The KIN phone mark is also distinct, utilizing a vertically elongated black font that significantly differs from the Kinbox mark. 

The only commonality between the Munchkinbox and Kinbox marks, as well as the KIN and Kinect marks, is the use of the term "kin". However, the presence of a similar term does not automatically lead to the conclusion of confusion. Microsoft notes that many third-party trademarks also use "kin" for various products and services without causing confusion, and one witness acknowledged this lack of confusion regarding other uses of "kin". The court finds no basis to conclude that Microsoft's marks are more likely to confuse consumers than the referenced examples.

Kinbook's claim of trademark infringement against Microsoft is dismissed by the Court, which finds that Microsoft's mark is simply 'Kinect,' not 'Kinect for XBOX' as Kinbook asserts. Even if it were 'Kinect for XBOX,' the Court argues that a reasonable jury would not consider it similar to 'Kinbox' due to the distinctiveness of the 'XBOX' brand, which is arbitrary and well-recognized. The addition of '360' further differentiates Microsoft's mark. The Kinect sensor is consistently marketed with the 'XBOX 360' branding, reducing any potential for confusion with Kinbook’s marks. Consequently, the first Lapp factor indicates no likelihood of confusion in favor of Microsoft.

Regarding the strength of a trademark (Lapp Factor No. 2), the Court explains that 'strength' encompasses both 'conceptual strength' and 'commercial strength.' Conceptual strength assesses the mark's distinctiveness, classified from strongest to weakest as arbitrary or fanciful, suggestive, descriptive, or generic. Arbitrary or fanciful marks are inherently distinctive, while descriptive marks may achieve protection through secondary meaning. Generic marks are not protectable. Thus, the evaluation of a mark's strength is critical in determining the likelihood of confusion between competing trademarks.

Microsoft contends that Kinbook's trademarks are merely descriptive and lack secondary meaning, arguing that even if classified as suggestive, they remain weak due to their descriptive nature regarding Kinbook's online social-networking services. The terms "Kin" (relatives) and "Munchkin" (children) combined with "box" describe the functionality of the products. Microsoft asserts that the prevalence of similar marks incorporating "kin" further weakens Kinbook’s trademarks. Conversely, Kinbook argues that "Kinbox" and "Munchkinbox" are strong, suggestive marks requiring imagination to connect them to their products, which promote interaction among friends and family.

Despite the court not definitively classifying Kinbook's marks, it indicates that even if considered suggestive, they lack conceptual strength due to widespread use of "kin" in similar marks within the social networking field. The court notes that the strength of a mark is not solely determined by its classification, as suggestive or arbitrary marks can still be deemed weak if commonly used with various products. The term "kin" appears to be descriptive or highly suggestive, reducing the likelihood of confusion among consumers. Microsoft has provided substantial evidence of the extensive use of "kin" in competing services, further diminishing Kinbook’s trademark protection. While "Kinbox" may be suggestive, the saturation of similar marks in the market renders it weak. In reverse confusion cases, the commercial strength of the junior user’s mark is more pertinent than that of the senior user’s mark.

Analysis of the strength of the senior user's mark is pertinent in reverse confusion cases, as established in *Freedom Card*. Kinbook has not demonstrated any marketplace recognition for its marks Kinbox and Munchkinbox, admitting that Kinbox is not well-known and has only 16,752 active monthly users out of over 750 million Facebook users. Kinbook has also acknowledged a lack of significant investment in advertising or marketing, reducing its budget from $250,000 to a few thousand following Microsoft’s release of Kinect. The Third Circuit's ruling in *Freedom Card* indicated that a weak mark with no evidence of commercial strength weighed against the plaintiff, a situation mirrored here. Consequently, no reasonable jury could deem Kinbook’s marks strong, which favors Microsoft regarding the likelihood of confusion.

The price of goods and the sophistication of consumers are also relevant (Lapp Factor No. 3). Higher-priced products tend to attract more discerning buyers, reducing the likelihood of confusion. The Kinect sensor, priced between $150 and $500, and KIN mobile phones at approximately $199, require careful consideration from consumers. In contrast, Kinbox and Munchkinbox are free, suggesting a stark difference in consumer engagement. Kinbook's argument that lower-priced Xbox 360 products may confuse consumers is flawed, as the focus should be on the Kinect product itself. Additionally, Kinbook's claim about the least sophisticated consumer being a 5-year-old is undermined by the broader target demographic for Kinect users, which ranges from 5 to 80 years old. Thus, the distinct price points and consumer care levels further diminish the likelihood of confusion between the products.

Assigning a 5-year-old as 'the reasonably prudent purchaser' is deemed unreasonable, as such a child lacks the necessary faculties and financial means to make significant purchases, like a $150 gaming device. Even if a precocious child were to select items independently, they could differentiate between a free app and expensive hardware. The court argues that purchasers of the Kinect are already familiar with the XBOX 360 and would only buy a Kinect if they have or plan to acquire an XBOX 360 console. Therefore, no reasonable jury could find that this factor indicates a likelihood of confusion.

Actual confusion is not mandatory to demonstrate a likelihood of confusion, although it can bolster a plaintiff's case. If a product has been marketed without evidence of actual confusion for a considerable time, it suggests that future marketing will likely not confuse consumers. In this case, the Kinect sensor, KIN phone, and Kinbox application have not been on the market long, but Kinbook claims four instances of actual confusion. However, only one instance directly identified Kinbox. The other examples reflect speculative statements about potential name associations rather than actual purchasing confusion. The articles cited did not directly reference Kinbox, undermining the claim of actual confusion.

Regarding the intent behind adopting a mark, it is relevant in both direct and reverse confusion cases, with the nature of intent varying based on the type of confusion being examined.

Kinbook failed to provide sufficient evidence to support claims against Microsoft regarding its KIN and Kinect products. Specifically, Kinbook could not demonstrate that Microsoft was aware of Kinbook or its trademarks prior to naming its products, that Microsoft intended to displace Kinbook in the market, or that the naming was an attempt to exploit Kinbook’s reputation. The only evidence presented was that Microsoft conducted a trademark search in October 2009, two months before Kinbook filed its application in December 2009. This timeline suggests Microsoft's lack of intent to infringe, as it filed for Kinect in South Africa before Kinbook began using its marks. Kinbook's argument for a "carelessness" standard in assessing intent in reverse confusion cases is unsupported by precedent, as the Third Circuit has not adopted such a standard, emphasizing the necessity of proving deliberate intent to confuse. Therefore, the court concluded that no reasonable jury could find in favor of Kinbook regarding this Lapp factor.

Regarding the similarity of marketing channels, the court noted that Kinbook primarily advertises through Facebook and is only compatible with that platform, while Microsoft markets Kinect through various channels, including electronics stores and the internet, specifically for use with Xbox 360. The KIN phone was also marketed exclusively through Verizon. The marketing strategies of the two companies do not overlap, indicating that their channels of trade are distinct. Although both have a presence on Facebook, Kinbook's advertising is limited to that platform, further supporting the conclusion that their marketing approaches do not create a likelihood of confusion.

Microsoft asserts that internet advertising, particularly on Facebook, has become widespread, with nearly all businesses utilizing it for marketing. However, mere presence on the internet does not legally equate to overlapping marketing channels. The Sixth Circuit has indicated that a general reference to internet use is insufficient proof of shared marketing paths, analogous to being listed in a phone directory. Kinbook has not provided evidence demonstrating that Microsoft and Kinbook's marketing channels overlap beyond their joint use of Facebook, leading the court to assign minimal weight to this Lapp factor regarding the likelihood of confusion.

Regarding the similarity of targeted consumers (Lapp Factor No. 8), the parties do not share the same customer base or compete directly. Kinect targets those interested in the Xbox 360, while the KIN phone is aimed at phone buyers, and Kinbook focuses on Facebook users sharing information with family. Kinbook’s claim that Microsoft targets similar demographics, including Facebook users and families, is overly broad. The court concludes that Kinbook has not presented sufficient evidence to establish that this factor favors a likelihood of confusion.

For the similarity of product functions (Lapp Factor No. 9), the Kinect, KIN phone, and Kinbook application serve distinct purposes: the Kinect is a gaming device, the KIN is a phone, and Kinbook is a social networking app. Kinbook attempts to link the functions of Kinect to the Xbox 360 platform but fails to demonstrate that the products perform similar functions.

Kinbook's arguments are primarily based on the functions of the "XBOX 360 Platform," rather than the Kinect specifically. While there is some functional overlap between the "XBOX 360 Platform" and Kinbox—such as the ability to take and share pictures or videos through the Kinect sensor—Kinbook's claims fail to recognize that the Kinect is just a component of the larger platform, which is designed mainly for controller-less gaming. Despite Microsoft’s suggestion that Kinect enhances the XBOX 360's family entertainment capabilities, Kinbook does not hold exclusive rights to the term "kin" for family-oriented products. Therefore, the potential for consumer confusion between Kinect and Kinbox is not supported by evidence.

Additionally, Kinbook has no intention to expand into mobile phones or video gaming markets, despite vague assertions about future accessibility via mobile devices. The mobile phone market is distinct from the gaming sector, and Microsoft has ceased production of KIN-branded phones without plans for revival. The court finds that Kinbook has not demonstrated any likelihood of confusion based on these factors. Consequently, the court concludes that there are no material facts that could favor Kinbook, leading to the granting of Microsoft's summary judgment motion.

On January 24, 2012, the court granted Microsoft Corporation's Motion for Summary Judgment in a trademark dispute involving its "Kineet" gaming sensor and Kinbook's "Kinbox" service. XBOX Live is highlighted as Microsoft's online service for sharing content and gaming. Microsoft publicly revealed "Kineet" in June 2010, following a trademark search in October 2009 and a registration application filed in April 2010. Kinbook's service, Kinbox, was intended for children and had only 14 active users in May 2011, while Kinbook claimed 16,752 monthly active users by September 2011. Testimony indicated Microsoft could invest significantly in marketing, overshadowing Kinbook's efforts. The court found no likelihood of confusion between the parties' marks, thus avoiding the need to determine the validity of Kinbook's marks. Even if Kinbook's marks were valid, the evidence presented did not support a reasonable jury finding of confusion. Although Kinbook raised the issue of reverse confusion, the court acknowledged it as an alternative theory of liability under the Lanham Act rather than a distinct claim, emphasizing that Kinbook failed to demonstrate a genuine issue of material fact regarding confusion.

In Bechtel v. Robinson, the court clarified that under federal rules, a party does not need to specify the exact theory of relief to seek a remedy, provided the issue is adequately pled. Microsoft effectively addressed the concept of reverse confusion in its summary judgment motion, presenting various online services aimed at family connectivity, including Kin-cafe, Kin Valley, and Kinector, among others. The court noted that although Kinbook's counsel claimed Microsoft's motion was premature due to incomplete discovery, specifically regarding emails related to the naming of Kinect, the court found that this disputed fact was not materially relevant to the case. The overwhelming evidence favored Microsoft, leading the court to conclude that additional discovery would not significantly impact the determination of whether the marks were confusingly similar. The court dismissed the argument that the mere online marketing of both parties' goods implied a likelihood of consumer confusion, equating it to the outdated "under the same roof" theory. Additionally, the court did not find Kinbook's request to depose Microsoft CEO Steve Ballmer about his statements on the XBOX 360 relevant, as these statements were considered immaterial to the trademark infringement claim, emphasizing that no reasonable jury could conclude confusion existed between Kinect and Kinbook based on their overlapping functions.