August/September 2011 Issue

Civil Cases

Quia Corp. v. Mattel, Inc.,
2011 WL 2749576 (N.D. Cal. July 14, 2011)

ABSTRACT
Plaintiff offered an online mathematics education service using the mark IXL.  Defendant used the identical mark on its educational handheld device and plaintiff sued for trademark infringement.  The district court granted defendant’s motion for partial summary judgment against plaintiff’s forward-confusion claim and most remedies.  The court, however, denied defendant’s motion for summary judgment on plaintiff’s reverse-confusion claim.  In particular, the court held that defendant’s aggressive use of social-media advertising could show that the two products shared similar marketing channels, thus increasing the likelihood of consumer confusion.

CASE SUMMARY

FACTS
Plaintiff Quia Corp. (“Quia”) sold web-based study materials for students in prekindergarten to eighth grade under the federally registered mark IXL covering “educational services, namely, online instruction in the fields of math, science, English and foreign languages for use in the future.”  Defendant Mattel, Inc. (“Mattel”) developed an educational handheld device called the “IXL LEARNING SYSTEM.”  In January 2010, Mattel filed a trademark application for the mark iXL for “[c]hildren’s educational toys and devices, namely, handheld learning systems featuring interactive digital books, games, art activities, music players, writing tools, and photo albums.”  Learning of Mattel’s application, Quia sent a cease-and-desist letter to Mattel.  A few days later, Mattel abandoned its application and filed a new application for the mark IXL removing any reference to the “educational” aspect of its device.  This new application covered “handheld mobile computer incorporating a music player, camera, digital notebook and electronic photo album,” among other goods.  Mattel then engaged in an extensive social-media campaign to promote its product, including email blasts, Facebook applications, YouTube channels, and tie-ins with “mommy bloggers.”  Quia sued for trademark infringement under theories of both reverse and forward confusion, and Mattel moved for partial summary judgment.

ANALYSIS
First, the court addressed the issue of infringement by reverse confusion, i.e., when the larger junior user extensively promotes its mark such that consumers mistakenly believe that the senior user’s product comes from or is sponsored by the junior user.  Mattel sought a determination that the alleged impact of its social-media promotions on the way search engines displayed links to Quia’s website did not constitute consumer confusion and was not a legally cognizable harm.  The court noted that under the Ninth Circuit’s holding in Network Automation, Quia had to show a likelihood of confusion to prove trademark infringement, and that “mere diversion” was not sufficient.  Noting that although evidence of diversion was not evidence of consumer confusion, the court determined that such evidence may be relevant to the trademark-infringement analysis.

Quia originally claimed that Mattel’s use of its mark harmed Quia’s placement in search results, but later instead argued that Mattel’s “aggressive” social-media advertising showed that the parties used similar marketing channels, which increased the likelihood of confusion.  Although the court acknowledged that almost all retailers use online marketing and ubiquitous marketing channels like purchasing search-engine keywords or selling products on Amazon.com, social-media marketing “may be more akin to niche marketplaces such as specialty retail outlets or trade magazines.”  Accordingly, because the court could not say that Mattel’s social-media advertising was “irrelevant” to the likelihood-of-confusion issue, it thus denied summary judgment on Quia’s reverse-confusion claim.

The court, however, granted Mattel’s motion for summary judgment on Quia’s claim of forward confusion, i.e., when consumers exposed to the senior user’s mark believe that the junior user’s product comes from or is sponsored by the senior user.  Specifically, although Quia had the burden to provide evidence that its online service fostered consumer interest in Mattel’s product, it offered no evidence to support its claim that customers bought Mattel’s product mistakenly believing that it was affiliated with Quia or its web-based products.

Regarding remedies, the court granted Mattel’s motion for summary judgment on all monetary relief except Quia’s request for Mattel’s profits based on an unjust-enrichment theory.  First, it held that Quia was not entitled to actual damages in the form of corrective advertising, royalties, or Mattel’s profits.  Quia was not entitled to corrective advertising because it failed to offer a nonspeculative basis for its actual damages.  Quia’s claim that “every click-through to a site related to [Mattel’s] product results in measurable or otherwise compensable harm to Plaintiff [was] based entirely on conjecture.”  Quia was not entitled to reasonable royalty damages because it did not provide evidence of prior licensing negotiations with Mattel or with third parties for Quia’s mark.  Finally, Quia was not entitled to Mattel’s profits as a measure of its own lost profits because the parties were not in direct competition.

Finally, the court denied Mattel’s motion for summary judgment on Quia’s claim for Mattel’s profits based on a theory of unjust enrichment because Quia had offered “at least some” evidence that Mattel had “willfully” infringed the IXL mark, including evidence of Mattel’s prior awareness of Quia’s mark from a trademark search it conducted and from the graphic artist who designed Mattel’s logo, and Mattel’s receipt of Quia’s demand letter before Mattel released its product.

CONCLUSION
This decision is of interest because it appears to be the first instance of a court suggesting that “aggressive” social-media advertising can bring two marks into the same channels of trade and thus increase the likelihood of confusion.  Because the court’s ruling was in the context of denying a motion for summary judgment, however, the court simply stated that it could not determine that Quia’s theory was “irrelevant” at this early stage of the case.