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Affiliated Companies and Likelihood of Confusion

Posted in Trademark Law

by Matt Massari

It may make business sense to put ownership of related trademarks in different subsidiaries. Under In re Wella A.G., 787 F.2d 1549, 229 USPQ 274 (Fed. Cir. 1986), one can generally register similar marks owned by affiliated companies, as long as it’s done properly under the requirements of the Trademark Act. 

Section 2(d) of the Trademark Act, 15 U.S.C. §1052(d), requires that the examining attorney refuse registration when an applicant’s mark, as applied to the specified goods or services, so resembles a registered mark as to be likely to cause confusion.  In general, registration of confusingly similar marks to separate legal entities is barred by §2(d). See, e.g., In re Citibank, N.A., 225 USPQ 612 (TTAB 1985); In re Champion Int’l Corp., 220 USPQ 478 (TTAB 1982); In re Air Products, Inc., 124 USPQ 81 (TTAB 1960). However, the Court of Appeals for the Federal Circuit has held that, where the applicant is related in ownership to a company that owns a registered mark that would otherwise give rise to a likelihood of confusion, the examining attorney must consider whether, in view of all the circumstances, use of the mark by the applicant is likely to confuse the public about the source of the applicant’s goods because of the resemblance of the applicant’s mark to the mark of the other company.

In Wella, the Examining Attorney refused registration of applicant Wella A.G.’s mark ‘WELLASTRATE’, under Section 2(d) of the Trademark Act, on the basis of four marks previously registered to Wella U.S. (‘WELLA,’ ‘WELLASOL,’ ‘WELLA STREAK’ and ‘WELLATONE’) for related hair care products.Relying on Trademark Trial and Appeal Board precedent, the Examining Attorney refused to accept applicant’s argument that the proscription of Section 2(d) should not apply in view of the parent-subsidiary relationship between applicant Wella A.G. and the record owner of the four cited registrations, Wella U.S.  When an appeal was taken from the final refusal to register under Section 2(d), the Board affirmed the refusal. The Board held that Section 2(d) unequivocally bars registration of a mark that so resembles a mark registered or used ‘by another’ as to be likely to cause confusion and that, because Wella U.S. was a legal entity separate and apart from Wella A.G., Wella U.S. was ‘another’ within the meaning of Section 2(d) and Wella A.G. was not entitled to a registration of the mark ‘WELLASTRATE.’

The Board’s decision was appealed to the U.S. Court of Appeals for the Federal Circuit and, in a decision dated April 1, 1986, the Court vacated the Board decision that had affirmed the Examining Attorney’s refusal to register under Section 2(d). The Court stated that:

The question is whether, despite the similarity of the marks and the goods on which they are used, the public is likely to be confused about the source of the hair straightening products carrying the trademark “WELLASTRATE.” In other words, is the public likely to believe that the source of the product is Wella U.S. rather than the German company or the Wella organization.

In re Wella A.G., 787 F.2d 1549, 1552, 229 USPQ 274, 276 (Fed. Cir. 1986). The Court remanded the case to the Board for consideration of the likelihood of confusion issue.

In ruling on that issue, the Board concluded that there was no likelihood of confusion, stating as follows:

[A] determination must be made as to whether there exists a likelihood of confusion as to source, that is, whether purchasers would believe that particular goods or services emanate from a single source, when in fact those goods or services emanate from more than a single source.  Clearly, the Court views the concept of “source” as encompassing more than “legal entity.”  Thus, in this case, we are required to determine whether Wella A.G. and Wella U.S. are the same source or different sources….

The existence of a related company relationship between Wella U.S. and Wella A.G. is not, in itself, a basis for finding that any “WELLA” product emanating from either of the two companies emanates from the same source.  Besides the existence of a legal relationship, there must also be a unity of control over the use of the trademarks. “Control” and “source” are inextricably linked. If, notwithstanding the legal relationship between entities, each entity exclusively controls the nature and quality of the goods to which it applies one or more of the various “WELLA” trademarks, the two entities are in fact separate sources. Wella A.G. has made of record a declaration of the executive vice president of Wella U.S., which declaration states that Wella A.G. owns substantially all the outstanding stock of Wella U.S. and “thus controls the activities and operations of Wella U.S., including the selection, adoption and use of the trademarks.” While the declaration contains no details of how this control is exercised, the declaration is sufficient, absent contradictory evidence in the record, to establish that control over the use of all the “WELLA” trademarks in the United States resides in a single source.

In re Wella A.G., 5 USPQ2d 1359, 1361 (TTAB 1987) (emphasis in original), rev’d on other grounds, 858 F.2d 725, 8 USPQ2d 1365 (Fed. Cir. 1988).

Therefore, in some limited circumstances, the close relationship between related companies will obviate any likelihood of confusion in the public mind because the related companies constitute a single source. See TMEP §§1201.07(b) et seq.   However, the analysis under Wella is not triggered until an applicant affirmatively asserts that a §2(d) refusal is inappropriate because the applicant and the registrant, though separate legal entities, constitute a single source, or the applicant raises an equivalent argument.

Once an applicant has made this assertion, the following guidelines may assist the examining attorney in resolving questions of likelihood of confusion when the marks are owned by related companies and the applicant asserts unity of control. (Of course, in many of these situations, the applicant may choose to attempt to overcome the §2(d) refusal by submitting a consent agreement or other conventional evidence to establish no likelihood of confusion. See In re Sumitomo Electric Industries, Ltd., 184 USPQ 365 (TTAB 1974). Another way to overcome a §2(d) refusal is to assign all relevant registrations to the same party.): (a) either the applicant or the registrant owns all of the other entity, (b) either the applicant or the registrant owns substantially all of the other entity, or (c) the examining attorney may also accept an applicant’s assertion of unity of control when the applicant is shown in USPTO records as a joint owner of the cited registration, or the owner of the registration is listed as a joint owner of the application, and the applicant submits a written statement asserting control over the use of the mark by virtue of joint ownership, if there is no contradictory evidence. TMEP §§1201.07(b) et seq.