Lexmark harm requirement reopens gap between registered and unregistered TM infringement

UHS of Delaware, Inc. v. United Health Services, Inc., 2016
WL 7474801, No. 12-CV-485 (M.D. Pa. Dec. 29, 2016)
If other courts follow this logic, this could be big.  Plaintiff UHS Delaware sued United Health Services, Inc., and
related defendants for trademark infringement under §32 and unfair competition
under §43(a), and related state claims. 
The parties cross-moved for summary judgment, and the court denied most
of the motions, with a significant exception. 
And there’s a bit about how (not) to admit evidence of consumer
confusion through hearsay exceptions.
UHS Delaware is the healthcare management company for
Universal Health Services, Inc., a for-profit company whose subsidiaries run more
than 235 acute care and behavior health facilities and surgery centers in a
number of states, though not New York. UHS Delaware doesn’t itself provide
healthcare services, but rather manages an affiliated network of healthcare
service providers. UHS Delaware owns incontestable federal registrations for
two trademarks: a UHS word mark and a UHS stylized mark, for use in connection
with hospital services and hospital management services.
 

UHS Delaware stylized mark
United Health Services is eight nonprofit corporations which
together comprise an integrated healthcare system headquartered in the southern
tier of New York.  Defendants began using
“UHS” around 1982.  In 1997, it adopted a
new system-wide brand:

In 2010, it rebranded again with a new logo, and adopted a
policy that, for all its entities, “UHS” would be followed by a specific
location or services identifier, such as “UHS Delaware Valley Hospital.” UHS
Delaware sued in 2012.
 

New United Health Services logo
“Claims for trademark infringement and unfair competition
share the same essential elements under both the Lanham Act and Pennsylvania
law.” Except: Lexmark applies to all
§43(a)(1) claims, given the clear language of the opinion and the statute.  To maintain a cause of action under §
1125(a), “a plaintiff must plead (and ultimately prove) an injury to a
commercial interest in sales or business reputation proximately caused by the
defendant’s misrepresentations.”
UHS Delaware submitted no evidence of injury to sales or
reputation.  It withdrew its claim for
actual damages, and argued that damage to its business and goodwill wouldn’t be
calculable without undue burden and expense. 
“This deficit of proof necessarily precludes any assessment of proximate
cause.”  Thus, defendants won summary
judgment on the §43(a) false association claim and state common law unfair
competition claims.
This conclusion, while it could shake up quite a lot of
§43(a) cases, wasn’t as important here because of UHS Delaware’s federal
registration.  Turning to §32: Likely
confusion is fact-intensive, and the court found this case was not one-sided
enough to justify summary judgment for UHS Delaware.  The marks were highly similar.  The Third Circuit has said that when “products
are directly competing, and the marks are clearly very similar, a district
judge should feel free to consider only the similarity of the marks
themselves.” However, there were genuine disputes about the overlap, if any,
between plaintiff’s and defendants’ respective target markets, so the court
didn’t stop there.
UHS Delaware maintained that its mark was inherently
distinctive (though not because of incontestability, which doesn’t bear on
strength); defendants didn’t disagree, presumably because of their own
interests, because an initialism like UHS is really just as descriptive as the
words for which they stand.  However,
defendants argued “that any conceptual strength the marks may have in isolation
is diluted by widespread third-party use of the ‘UHS’ logo in both medical
services markets and beyond,” and the court found they’d submitted a fair
amount of evidence to that effect. Similarly, there wasn’t strong evidence of
commercial strength, and general ad expenses don’t equate to promotion directed
specifically at the UHS marks. Nor did any consumer surveys or focus groups
establish actual market recognition.  Without
such evidence, “[t]he dilutive effect of third-party usage clearly undermines
the marks’ overall strength. Consequently, this factor is neutral.”
Though the consumers included ordinary patients, the
sophistication of that group could still be expected to use “a heightened
standard of care” in selecting medical services, favoring defendants.
Length of use/actual confusion: isolated and idiosyncratic
examples of confusion don’t count.  The
court discounted a pre-rebranding email in which one of defendant’s employees
observed to a colleague that “there are a few UHSs out there” and “we sometimes
get e-mails and inquiries meant for them.”
Other evidence was: a CNBC broadcast in November 2010 in
which defendants’ logo was displayed on screen while plaintiff’s chief
executive officer was speaking about Universal; testimony of three of
defendants’ officers that both UHS Delaware and United Health Services
employees received telephone calls and other communications meant for the other;
testimony about a subordinate’s 2013 report to her that a news report had run
in Binghamton, New York, referring to a United Health Services facility as a
Universal facility in both online and on-air stories; a 2015 tweet including
United Health Services’ Twitter handle when referencing Universal; testimony of
a Universal employee about a misdirected 2015 email received from Healthgrades about
a potential award to defendants’ Wilson hospital; and a 2016 billing dispute
letter addressed to “United Health Services” but mailed to both United Health
Services and to Universal.
Defendants argued that this evidence was both inadmissible
and irrelevant. Kos Pharmaceuticals, Inc. v. Andrx Corp., 369 F.3d 700 (3d Cir.
2000), held that the first level of hearsay—employees recounting customer
statements evincing confusion—aren’t excludable hearsay because they aren’t
submitted for their truth, but rather for their error.  “It is the second level of hearsay—statements
by employees to the deponent describing telephone calls—that must satisfy an
exception to the hearsay rule.”  UHS
Delaware failed to identify an exception justifying the admission of this
second-level hearsay. “Officers may permissibly testify to the fact that they
received reports of confusion from their employees, but the hearsay rule
prohibits any substantive recount of underlying conversations.”  Anyway, the excluded evidence wouldn’t change
the summary judgment ruling, because none of the conversations seemed to
establish actual confusion based on the marks, and “[a]necdotal evidence of
misdirected telephone calls or letters is usually insufficient to prove actual
confusion, particularly when the communications are relayed by interested
employees and do not concern the purchase of products or services.” 
The court also pointed out, as to the CNBC interview
associating defendants’ logo with Universal’s CEO, “that error may just as
likely have derived from the incredible irony that both companies’ CEOs shared
the name ‘Alan Miller.’” The other instances of alleged confusion were “few and
far between,” “negligible” compared to more than six years’ use of similar
marks.
Defendant’s intent: this requires intent to confuse, not
just intent to copy.  “[M]ere knowledge”
of a competing mark is insufficient to prove intent to confuse.  All UHS Delaware showed was “a potential
awareness of Universal’s presence in the general healthcare marketplace,” and
defendants’ stated objective was, at least in part, “to distinguish itself from
competitors such as United Healthcare and Universal Health System.”
The existence and degree of overlap among the parties’ trade
channels and target markets: the parties both advertised hospital and
healthcare services through print, online, and television media.  But there was a factual dispute about things
like how much UHS Delaware advertising NY consumers would be exposed to; UHS
Delaware runs ads in national publications, including the NYT and the WSJ, but
doesn’t target New Yorkers.  Some New
Yorkers receive services from Universal entities, but not many—only 1% of
clients were New Yorkers, except for one facility with a 4% New Yorker population.  “The court cannot ascertain from the record
whether the cited examples of overlap derive from UHS Delaware’s marketing
efforts and consumer brand recognition, or the sheer happenstance of New York
residents requiring hospital services on vacation.”
Relationship of the goods in the minds of consumers: the
services are very similar, favoring UHS Delaware.
Likely expansion: This isn’t actually a great shorthand,
because it’s supposed to encompass “other facts” “from which a consumer might
expect that the trademark owner, through expansion or otherwise, is affiliated
with the alleged infringer.” This was neutral, because there was no evidence
about consumers’ expectations about expansion; the fact that New York law bars for-profit
corporations like UHS Delaware and Universal from operating healthcare
facilities in the state wouldn’t necessarily be known to consumers.
The court also denied United Health Services’ motion for
summary judgment on its §33(b) senior user defense, given questions about
whether its rebranding in 1997 constituted an abandonment of “UHS.”  Most of the uses after that seemed residual,
which isn’t enough to avoid an abandonment finding.  Third-party uses of an abandoned mark in news
reports wouldn’t be enough, either.

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