Juries to Tackle Tacking Questions

In the U.S., priority in trademark rights is awarded to the company that first uses its mark in commerce. Under certain limited circumstances, a trademark owner can make certain modifications to its mark over time without losing priority. That is, the user of a new mark may be clothed with the position of priority in an older mark when the original and revised marks are “legal equivalents” of one another, because they create the same, continuing commercial impression. This is called “tacking.”

Who should tackle this question of tacking and whether it applies in a given case, the judge or a jury? With limited exceptions, the Supreme Court, in Hana Financial, Inc. v. Hana Bank, Case No. 13-1211 (January 21, 2015), handed the issue to the jury. Judges can decide tacking questions in some situations, such as on summary judgment, on a motion for judgment as a matter of law, or when the parties stipulate to a bench trial. However, when a jury has been empaneled, the factual question of tacking is for them to decide.

Plaintiff, Hana Financial, is a California corporation that was established in 1994. Hana Financial began using its name in commerce in 1995, and obtained a federal registration for its name with an accompanying logo in 1996. Defendant, Hana Bank, was established under the name Korea Investment Finance Corporation (“Korea Investment”), and under laws of Korea, in 1971. Korea Investment changed its name to Hana Bank in 1991 and at that time began using this name in Korea. Hana Bank began advertising its services in the U.S. to Korean expatriates in 1994. It was not until 2002 that Hana Bank began operating a bank branch in the U.S. under its name.

Hana Financial sued Hana Bank for trademark infringement in 2007. Summary judgment in Hana Bank’s favor was overturned by the Ninth Circuit Court of Appeals, based upon unresolved issues of fact. On remand, Hana Financial’s infringement claim was tried before a jury, who rendered a verdict in Hana Bank’s favor. The district court denied Hana Financial’s motion for judgment as a matter of law, which was affirmed by the Ninth Circuit.

Affirming the Ninth Circuit, the Supreme Court held that, when a jury has been requested and the facts do not warrant the entry of summary judgment or judgment as a matter of law, the question whether tacking is warranted must be decided by a jury. This is because tacking – that is, whether a party’s “old” and “new” marks are so-called “legal equivalents” – is a determination which relies upon an ordinary consumer’s understanding of the impression that the marks convey. This is a factual question that falls comfortably within the ken of a jury.

Justice Sotomayor, speaking for a unanimous court, was unpersuaded by the arguments of Hana Financial that tacking is a legal question which should be decided by a judge. Even though tacking may be a mixed question of law and fact, this does not prevent the jury from deciding the issue. Careful jury instructions will ensure that juries apply the correct legal standard. Since Hana Financial’s proposed tacking instruction was read to the jury before it deliberated, Hana Financial was in no position to argue over the propriety of the instruction.

Following correct legal precedent is necessary to define the relevant legal standard on tacking questions. However, no support was offered for the argument that tacking questions must be resolved by strict judicial reliance on precedent.

Even though juries decide often-dispositive factual questions, this does not make tacking questions decided by a jury any more or less predictable than in contract, tort or criminal cases. Judgment calls, whether made by judges or juries, necessarily involve some degree of uncertainty. Finally, the mere fact that judges historically have resolved tacking disputes does not mean that judges must do so in all cases.

The lesson learned from Hana Financial is that tacking is a factual question normally decided by a jury, and resolved by a judge as a matter of law only under certain limited circumstances. This should inform the trademark litigator’s case strategy if a tacking question is involved. Whether a party’s so-called “old” and “new” marks are legal equivalents, being deemed a factual question, will not often result in the question being decided on summary judgment. That tacking is a factual question will also govern the standard of review on appeal (i.e., factual matters being decided under the “substantial evidence” standard, and legal questions being decided under the de novo standard). This raises the importance of: 1) vigilant factual development and presentation of the facts underlying the tacking issue to the jury at trial, and 2) the offer and reading of carefully written instructions before the jury deliberates.