In a 46-page opinion issued this week, U.S. District Court Judge Christina A. Snyder of the Central District of California denied a motion for summary judgment by Hyperkin Inc. Hyperkin manufactures a videogame joystick controller modeled after joysticks created by Atari Inc. In 2019, the successor company of Atari Inc., Atari Interactive, Inc. ("Atari"), sued Hyperkin for both trademark infringement and trademark dilution under the Lanham Act and common law unfair competition. Atari argued it held trademark rights in the product design of the Atari 2600 console and 2600 joystick.
Specifically, Atari alleged that Hyperkin's CirKa A77 joystick and Retron77 console, which plays old Atari 2600 cartridges rather than pre-loaded Atari games, infringed or diluted Atari's 2600 console and joystick trade dress. Opposing those claims, Hyperkin argued on summary judgment that it had no liability under Atari's claims or was entitled to partial summary judgment on likelihood of confusion, functionality, and fame of the trade dress. Judge Snyder found these issues suited for a jury, however, not the court.
The Court began with the principle that, due to the "factual nature" of trademark disputes, summary judgment is "disfavored" in trademark cases. Levi Strauss & Co. v. GTFM, Inc., 196 F. Supp. 2d 971, 974 (N.D. Cal. 2002). Accordingly, Hyperkin already had a high bar to show no "genuine dispute as to any material fact" and that it was "entitled to judgment as a matter of law" under Federal Rule of Civil Procedure 56(a).
Although Atari does not have a registered mark in the 2600 console and joystick, the Lanham Act extends to unregistered marks under certain circumstances. To prove trademark infringement, Atari has to establish "(1) that its claimed dress is nonfunctional; (2) that its claimed dress serves a source-identifying role [ ] because it . . . has acquired secondary meaning; and (3) that [Hyperkin's] product or service creates a likelihood of consumer confusion." Clicks Billiards. Inc. v. Sixshooters, Inc., 251 F.3d 1252, 1258 (9th Cir. 2001). Hyperkin argued that Atari could not prove any of these elements as a matter of law.
First, Hyperkin asserted that Atari could not meet its burden of proof on nonfunctionality because its predecessor had obtained a utility patent in 1982 (which had since expired). While the trademark statutes do not define "functionality", the U.S. Supreme Court has detailed two types of functionality with unique tests. Hyperkin raised the utilitarian functionality test, which is based on how well the product works and in the Ninth Circuit is decided under four factors set forth by Disc Golf Ass'n, Inc. v. Champion Discs, Inc., 158 F.3d 1002, 1006 (9th Cir. 1998): (1) whether the design yields a utilitarian advantage; (2) availability of alternative designs; (3) advertising touting utilitarian advantages of the design; and (4) whether the design results from a comparatively simple or inexpensive method of manufacture.
Under the first factor, the Court found that the expired utility patent did not, by itself, require summary judgment in favor of Hyperkin. Not only did Disc Golf counsel that "the existence of an expired utility patent . . . is not dispositive," but also two design patents were previously issued to Atari's predecessor which covered the 2600 joystick's design. Id. Thus, the design patents served as evidence of nonfunctionality. Moreover, the opinion dismissed Hyperkin's arguments that the 2600 joystick was functional as a whole because some individual elements were functional. Judge Snyder clarified that the proper inquiry was whether the product's overall appearance is functional, not merely if anything about it is functional. She then held that this inquiry was suited for the fact-finder and not by the court as a matter of law.
As for the remaining factors, the Court did not make any specific findings. It recognized that Atari introduced evidence showing alternative controller designs available to its competitors, there was no evidence Atari advertised the 2600 joystick's ornamental features rather than its utilitarian aspects, and neither party argued manufacturing costs. Rather than weighing these factors explicitly, the Court simply held that summary judgment was inappropriate because "[t]he issue of functionality has been consistently treated as a question of fact." Vuitton Et Fils S.A. v. J. Young Enters., Inc., 644 F.2d 769, 775 (9th Cir. 1981).
To succeed on trade dress infringement based on product design, a plaintiff must show its design is distinctive because it has attained a secondary meaning. In other words, "in the minds of the public, the primary significance of a product feature or term is to identify the source of the product rather than the product itself." Inwood Labs., Inc. v. Ives Labs., Inc., 456 U.S. 844, 851 n.11 (1982). Here, Hyperkin argued that the 2600 joystick had become "generic" because Atari allegedly failed to protect its trade dress, leading to third-party sales of imitation products.
Judge Snyder pushed back on Hyperkin's claim of "genericide," which the Court noted has been applied to trademark rights in word marks and not overall product design. And even assuming genericide could apply for product design, the opinion noted that whether a mark is generic is a factual question.
The Court further rejected Hyperkin's argument that the 2600 products never acquired a secondary meaning because Atari had provided no consumer surveys or declarations, as they are not necessary (although strong) evidence of secondary meaning. Judge Snyder found Atari pointed to sufficient evidence raising a dispute about secondary meaning, such as testimony that customers began asking whether Hyperkin carried replacement joystick controllers for Atari 2600 systems and that the CirKa A77 packaging labeled it an "Atari Style" controller. Accordingly, the Court ruled that distinctiveness was another decision for the fact-finder.
C. Likelihood of Confusion
To determine whether a likelihood of confusion exists regarding the source of Hyperkin's products, the Court utilized the eight factors set forth by AMF Inc. v. Sleekcraft Boats, 599 F.2d 341 (9th Cir. 1979): (1) similarity of the marks or trade dress, (2) strength of the marks or trade dress, (3) evidence of actual confusion, (4) proximity or relatedness of the goods, (5) degree to which the marketing channels used for the goods converge, (6) type of goods and degree of care likely to be exercised by the purchasers, (7) defendant's intent in selecting the mark or trade dress, and (8) likelihood of expansion of the product lines. In line with its earlier pronouncements, the Court began by stressing summary judgment on likelihood of confusion is generally disfavored given the fact-intensive nature of the Sleekcraft inquiry.
1. Strength of Trade Dress
When assessing the strength of a mark, courts typically evaluate the trademark in terms of its conceptual strength (from no protection for generic marks to maximum protection for arbitrary ones) and commercial strength. However, Judge Snyder cited to some courts and commentators indicating that the spectrum from generic to arbitrary is "inapt" in the trade dress context. But even if that spectrum applied, Judge Snyder determined that a mark's category is, of course, another question of fact. And even if she examined secondary meaning to determine strength of trade dress like some other courts, Judge Snyder recognized she previously held summary judgement improper on that issue. Thus, the opinion concluded that the strength of Atari's claimed trade dress could not be determined on summary judgment.
2. Proximity of Goods
In determining proximity of the goods, the opinion considered primarily whether the controllers and consoles were related or complementary to each other. On that issue, the Court dismissed Hyperkin's assertions that because the Retron77 console plays Atari cartridges, the Atari 2600 console with pre-loaded Atari games was unrelated to it. Judge Snyder specified that if the products are not completely interchangeable, that does not mean they are unrelated. Rather, the question is whether the goods are so related they are likely to be connected in the minds of prospective purchasers. Moreover, the Court held that a fact-finder could conclude Hyperkin's joystick was related to the 2600 controller because Hyperkin's console was compatible with the Atari's 2600 console and modern Flashback 2. Thus, the Court held that it could not determine whether the products were so related to cause consumer confusion at this juncture.
3. Similarity of Trade Dress and Hyperkin's Intent
Upon visual inspection of the products, while finding many features similar, the Court could not determine as a matter of law that the products were not similar in their entirety. The similarity of the goods also played a role in Judge Snyder's analysis of Hyperkin's intent, as the Court recognized that the obvious similarity between the products would permit an inference of intent to deceive the public as to the origin of Hyperkin's goods. Accordingly, although Hyperkin had placed disclaimers and its federally-registered trademarks on product packaging which could show good faith, the conflicting evidence prohibited summary judgment in its favor.
4. Marketing Channels and Expansion of Product Lines
The Court also noted that a fact-finder could find likelihood of confusion because evidence revealed both products were sold in the same marketing channels—Walmart, Target, and Amazon. Because of this factor, however, the Court determined that whether Atari or Hyperkin would expand its business to compete with the other was unimportant because they already competed significantly.
5. Actual Confusion and Degree of Consumer Care
On the other hand, the Court recognized that Atari's failure to point to any instances of actual confusion weighed slightly against finding trademark infringement. It also found that the degree of consumer care factor weighed in favor of Hyperkin because in order to use Hyperkin's console, consumers needed to buy or possess Atari cartridges. Therefore, these customers could be considered "highly specialized" consumers who are "expected to exercise a high degree of care in making their purchase decisions" and know the origin of Hyperkin's products. Accuride Int'l, Inc. v. Accuride Corp., 871 F.2d 1531, 1537 (9th Cir. 1989).
Despite finding that actual confusion and degree of consumer care weighed against likelihood of confusion, the Court declined to grant partial summary judgment as to confusion and therefore summary judgment on trademark infringement. In doing so, Judge Snyder cited the open-ended nature of the confusion inquiry and the proposition that summary judgment on this issue is generally disfavored. And because the Court found that trademark infringement is a species of common law unfair competition, it denied summary judgment for that cause of action as well.
Likewise, Hyperkin did not find success on trademark dilution, which although does not require likelihood of confusion, poses its own set of problems. Similar to trademark infringement, dilution "is a factual question generally not appropriate for decision on summary judgment." Visa Int'l Serv. Ass'n v. JSL Corp., 610 F.3d 1088, 1090 (9th Cir. 2010). In order to prove a violation, Atari has to show that "(1) the mark is famous and distinctive; (2) the defendant is making use of the mark in commerce; (3) the defendant's use began after the mark became famous; and (4) the defendant's use of the mark is likely to cause dilution by blurring or dilution by tarnishment." Jada Toys, Inc. v. Mattel, Inc., 518 F.3d 628, 634 (9th Cir. 2008).
Pursuant to the Trademark Dilution Revision Act of 2006, "a mark is famous if it is widely recognized by the general consuming public of the United States as a designation of source of the goods or services of the mark's owner." 15 U.S.C. § 1125(c)(2). Beyond that, Judge Snyder stated that the Ninth Circuit has recognized that fame requires a "high standard of consumer awareness beyond the trademark owner's specific market" such as a "household name" or "party of the collective national consciousness." Pinterest, Inc. v. Pintrips, Inc., 140 F. Supp. 3d 997, 1033 (N.D. Cal. 2015). Under this standard, the Court cited examples such as "Kodak" and "Polaroid" for famous marks, but also noted that the Ninth Circuit has also found marks insufficiently famous despite decades-long use and billions of annual sales.
For fame, Hyperkin primarily argued that Atari failed to produce any surveys or consumer declarations and pointed to Atari's 80,000 Twitter followers compared to millions for its competitors. However, the opinion noted that Atari had evidence of millions of licensing fees for products incorporating the 2600 products' trade dress, the original Atari 2600 sold 30 million units over its lifespan, and articles referred to the 2600 products' popularity. In the end, the Court relied on the notion that whether a mark is famous is a factual matter and denied partial summary judgment on that basis.
B. Dilution by Tarnishment and Blurring
Because the Court could not decide the famousness of Atari's trade dress as a matter of law, it addressed Hyperkin's claims that Atari could not prove dilution by tarnishment. Tarnishment occurs when a plaintiff's trademark is linked to products of shoddy quality, diminishing the value of the mark because the public associates that lack of quality with the plaintiff's unrelated goods. Here, Hyperkin argued tarnishment was impossible because Atari's brand had already suffered a "negative image," particularly through financial failures leading to changes in ownership and cessation of sales between the 1990s and early 2000s. On the other hand, Judge Snyder observed that Amazon reviews labeled Hyperkin's A77 Joystick as subpar quality, so a fact finder could determine that the quality of Hyperkin's products tarnished Atari's goodwill.
The opinion then turned to tarnishment by blurring, or when a defendant uses a plaintiff's trademark to identify the defendant's goods or services, creating the possibility that the mark will lose its ability to identify the plaintiff's product. In particular, the Court cited several factors similar to the likelihood of confusion analysis such as the similarity of the marks, intent, and degree of distinctiveness of the famous mark. Accordingly, for the same reasons it denied partial summary judgment for likelihood of confusion, the Court denied summary judgment for dilution by blurring.
At first glance, the 46-page, painstakingly detailed opinion appears to leave no stone unturned as it lists the all the evidence in determining that nothing can be determined as a matter of law in this case. However, there are a few spots where the Court seemingly punts the question of whether there are "genuine" or "material" conflicts in the evidence by relying on basic propositions that a certain legal inquiry (i.e., famousness) is a question for the trier of fact—even though there are instances when courts have ruled on such questions a matter of law.
Hyperkin may nevertheless find some consolation that the Court explicitly found that actual confusion and degree of consumer care weighed against a finding of likelihood of confusion. What a jury may think is, of course, another question.
Originally published by Frankfurt Kurnit, July 2020
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