Arrowpoint Capital Corp. v. Arrowpoint Asset Management LLC et al
Filing
94
MEMORANDUM AND ORDER DENYING 4 MOTION for Preliminary Injunction filed by Arrowpoint Capital Corp. Signed by Chief Judge Gregory M. Sleet on 5/20/2014. (mdb)
and permanent injunction to enjoin the defendants from using the AAM Logo, the "Arrowpoint"
element in their names, and any other name or logo similar to the plaintiffs trademarks 1 in
connection with investment related products and services. (D.I. 4.) For the reasons discussed
below, the plaintiff fails to establish a fundamental requirement for injunctive relief. Therefore,
the court denies the plaintiffs motion.
II.
BACKGROUND
The plaintiff is a holding corporation organized under the laws of Delaware. (D.I. 1,
~~
1, 2.) The plaintiffs subsidiaries Arrowood Indemnity Company and Arrowood Surplus Lines
Insurance Company (collectively, "Arrowood") "provide insurance and investment-related
financial services for customers throughout the United States" under the trade name "Arrowpoint
Capital." (!d.,
~
2.) In 2007, the plaintiff acquired the United States insurance operations of
Royal Sun Alliance and Storage Group plc ("Royal") and began managing the run-off of Royal's
United States policies.
(!d.,~
3.) As part ofthat business, the plaintiff asserts that it "manage[s]
assets derived from policy premiums." (!d.) The plaintiff claims that its "primary source of
income is the investment of its reserves in fixed-income securities," 2 which enables it "to pay its
operating costs and meet its financial obligations to policyholders." (D .I. 48 at 1.) The plaintiff
also purports to have "provided investment management services to an unaffiliated insurer from
March 4, 2007, until October 15, 2009," and marketed its investment management services to
1 More accurately, the plaintiff owns two federally registered service marks. The Lanham Act
provides nearly identical definitions for the two terms, except a trademark is used to "identifY and
distinguish ... goods," whereas a service mark performs the same function for "services." See 15 U.S.C.
§ 1127. The Lanham Act "generally applies the same principles concerning ... protection to both trade and
service marks." Country Floors, Inc. v. Gepner, 930 F.2d 1056, 1064 n.2 (3d Cir. 1991) (citing 15 U.S.C.
§ 1053). Although this is a service mark case, for ease of reference, the court will use the term
"trademark" or "mark" in its opinion.
2
According to the plaintiff, when "insurance operations are in run-off, [the insurance company]
no longer collects premiums from its policyholders." (D.I. 48 at 1 n.2.)
2
"investment management services." 5 (!d., ~ 23; D.l. 48 at 2.) AAM opposed that application,
and the proceedings before the Trademark Trial and Appeal Board are currently suspended
pending the conclusion of the present litigation. (D.I. 58 at 8.)
The defendants first used word marks containing the ARROWPOINT element in
December 2007 6 and adopted the AAM Log in January 2009. (!d. at 3.) The defendants state
that they "selected its marks after a clearance procedure that included counsel's review of a full
U.S. availability trademark search report." (!d.) In June 2008, the defendants filed a statement
of trade name with the Colorado Secretary of State, which indicated that they intended to transact
business under the trade name "Arrowpoint Partners." (D.I. 5 at 4.) In or about February 2008,
the defendants began promoting the recognition of their word mark through websites using
domain names that include the ARROWPOINT element. 7 (!d.)
III.
STANDARD OF REVIEW
"The decision to grant or deny ... injunctive relief is an act of equitable discretion by the
district court." eBay, Inc. v. MercExchange, L.L.C., 547 U.S. 388, 391 (2006). "Preliminary
injunctive relief is 'an extraordinary remedy' and 'should be granted only in limited
circumstances."' Kos Pharms., Inc. v. Andrx Corp., 369 F.3d 700, 708 (3d Cir. 2004) (quoting
AT&T Co. v. Winback & Conserve Program, Inc., 42 F.3d 1421, 1426-27 (3d Cir. 1994)). The
moving party seeking a preliminary injunction must establish (1) a likelihood of success on the
merits; (2) that it will suffer irreparable harm if the injunction is denied; (3) the balance of
equities tips in the moving party's favor; and (4) an injunction is in the public interest. Winter v.
5
The court notes that the plaintiffs intent-to-use application does not establish priority against
those already using the mark, nor does it reserve an enforceable right in a mark. See Lucent Information
Mgmt., Inc. v. Lucent Techs., Inc., 186 F.3d 311, 313-14 n. 3 (3d Cir. 1999).
6
E.g., Arrowpoint Asset Management and Arrowpoint Partners.
7
E.g., www.arrowpointassetmanagement.com and www.arrowpointpartners.com.
4
NDRC, Inc., 555 U.S. 7, 20 (2008). The issuance of a preliminary injunction is only appropriate
when the moving party produces sufficient evidence to establish every element in its favor. See
P.C. Yonkers, Inc. v. Celebrations, the Party and Seasonal Superstore, LLC, 428 F.3d 504, 508
(3d Cir. 2005). "If either or both of the fundamental requirements - likelihood of success on the
merits and probability of irreparable harm if relief is not granted - are absent, an injunction
cannot issue." Capriotti's Sandwich Shop, Inc. v. Taylor Family Holdings, Inc., 857 F. Supp. 2d
489, 499 (D. Del. 2012) (citing McKeesport Hasp. v. Accreditation Council for Graduate Med.
Educ., 24 F.3d 519, 523 (3d Cir. 1994)).
IV.
DISCUSSION
The plaintiff argues that it has established rights in its Arrowpoint Marks through valid
federal registrations and continuous use in interstate commerce dating back to March 2007, and
that its registrations for insurance-related services protects it from the defendants' infringement
because investment management is a "fundamental aspect of insurance." (D.I. 73 at 2-3.) As
such, it alleges the defendants' unauthorized use of the AAM Logo and Arrowpoint element in
connection with the same type of services has caused actual confusion and irreparable harm for
which there is no adequate remedy at law. (D.I 48 at 10.) Therefore, the plaintiff argues it is
entitled to a preliminary injunction based on: (1) its trademark infringement claims under the
Section 32 of the Lanham Act, 8 Delaware common law, and the DTPA; and (2) unfair
8
Section 32 of the Lanham Act provides:
Any person who shall, without consent of the registrant . . use in commerce any
reproduction, counterfeit, copy, or colorable imitation of a registered mark in connection
with the sale, offering for sale, distribution, or advertising of any goods or services on or
in connection with which such use is likely to cause confusion, or to cause mistake, or to
deceive . . . shall be liable in a civil action by the registrant ....
15 U.S.C. §1114(1)(a).
5
competition and false advertising claims under Section 43(a) of the Lanham Act9 and the DTPA.
(D.I. 5; D.I. 48.) In response, the defendants argue that the plaintiffs trademark registrations for
insurance-related services do not give it the right to block the defendants from using their marks
for the distinctly different business of investment management services. (D.I. 58 at 9.) In
addition, the defendants contend that the plaintiff does not provide investment management
services to any bona fide third parties, and only manages investments of insurance premiums and
other funds for itself and affiliated insurers. (!d. at 5-6.)
A.
Likelihood of Success on the Merits - Trademark infringement and unfair
competition under the Lanham Act
"The law of trademark protects trademark owners in the exclusive use of their marks
when use by another would be likely to cause confusion." Freedom Card, Inc. v. JP. Morgan
Chase & Co., 432 F.3d 463, 470 (3d Cir. 2005) (quoting Fisons Horticulture, Inc. v. Vigoro
Indus., Inc., 30 F.3d 466, 472 (3d Cir. 1994)). A plaintiff establishes trademark infringement
and unfair competition under the Lanham Act by proving that: "(1) the mark is valid and legally
protectable; (2) the mark is owned by the plaintiff; and (3) the defendant's use of the mark is
likely to create confusion concerning the origin of the goods or services." !d. (quoting A&H
9
While the plaintiff alleges both unfair competition and false advertising under section 43(a) of
the Lanham Act, it only briefed and referenced statutory language related to unfair competition. Under
section 43(a) of the Lanham Act, unfair competition is codified by 15 U.S.C. § 1125(a)(l)(A), while false
advertising is codified by 15 U.S.C. § 1125(a)(l)(B). Accordingly, the court will only address the unfair
competition part of section 43(a):
Any person who, on or in connection with any goods or services ... uses in commerce
any word, term, name, symbol, or device, or any combination thereof, or any false
designation of origin, false or misleading description of fact, or false or misleading
representation of fact, which ... is likely to cause confusion, or to cause mistake, or to
deceive as to the affiliation, connection, or association of such person with another
person, or as to the origin, sponsorship, or approval of his or her goods, services, or
commercial activities by another person ... shall be liable in a civil action by any person
who believes that he or she is likely to be damaged by such act.
15 U.S.C. § 1125(a)(1)(A).
6
Sportswear, Inc. v. Victoria's Secret Stores, Inc., 166 F.3d 197,202 (3d Cir. 1999)).
1.
Validity, protectability, and ownership
Federal registration of a mark is prima facie evidence of validity, protectability, and
ownership. See 15 U.S.C. §§ 1057(b). However, the presumption of validity only extends to
"the goods or services specified in the certificate, subject to any conditions or limitations stated
in the certificate." !d.; Natural Footwear Ltd v. Hart, Schaffner & Marx, 760 F.2d 1383, 1396
(3d Cir. 1985) (quoting Mushroom Makers, Inc. v. R. G. Barry Corp., 580 F .2d 44, 48 (2d Cir.
1978) ("[E]ven if a mark is registered, the presumptive right to use it extends only so far as the
goods or services noted in the registration certificate."). "If the [registered] mark ... has not
achieved incontestability, 10 then 'validity depends on proof of secondary meaning, unless the ...
contestable mark is inherently distinctive."' Commerce Nat'! Ins. Servs., Inc. v. Commerce Ins.
Agency, Inc., 214 F.Jd 432, 438 (3d Cir. 2000) (quoting Ford Motor Co. v. Summit Motor
Prods., 930 F.2d 277, 292 (3d Cir. 1991)). "A mark is inherently distinctive if it may be fairly
characterized as arbitrary, fanciful, or suggestive." !d. at 438 n.5.
Here, the defendants argue that the plaintiff cannot establish the first two elements for
trademark infringement under the Lanham Act because insurance and investment management
services are "two distinctly different businesses." (D.I. 58 at 9.) The court disagrees. The
plaintiffs Arrowpoint Marks were federally registered on August 12, 2008.
(D.I. 1, Ex. A.)
Both certificates of registration expressly state that the marks are "for: writing property casualty
10
"A trademark becomes incontestable after the owner files affidavits stating that the mark has
been registered, that it has been in continuous use for five consecutive years, and that there is no pending
proceeding and there has been no adverse decision concerning the registrant's ownership or right to
registration." Fisons, 30 F.3d at 472 n.7; 15 U.S.C. §§ 1058, 1065. Incontestability is not at issue in this
case. The Arrowpoint Marks were first used in commerce in March 2007 and the present litigation was
initiated less than three years later in February 2010.
7
msurance; underwriting in the fields of property and casualty insurance; insurance claims
processing; insurance claims servicing, namely, claims administration and premium rate
computing; actuarial services; and insurance consulting services." (D .I. 1, Ex. A.) As such, the
plaintiff's certificates of registration specify purely insurance-related services, and are devoid of
any indication that the Arrowpoint Marks are used for investment management services. Thus,
the plaintiff's Arrowpoint Marks do not carry a presumption of validity in the area of investment
management services. Nonetheless, the plaintiff argues, and the defendants do not dispute, that
the Arrowpoint Marks are inherently distinctive. (See D.I. 48 at 13 ("Arrowpoint Marks are
arbitrary"); D.I. 58 at 12 ("ARROWPOINT is suggestive").) Therefore, the court finds that the
plaintiff owns valid marks, which are legally protectable against the defendants' alleged
infringement if a likelihood of confusion exists between the parties' marks. See Interpace Cord
v. Lapp, Inc., 721 F .2d 460, 462 (3d Cir. 1983) (finding the use of mark "Lapp" on wire and
cable infringed on the plaintiff's rights to that mark as applied to ceramic insulators); Scott Paper
Co. v. Scott's Liquid Gold, Inc., 589 F.2d 1255, 1228 (3d Cir. 1978) (finding the use of name
"Scott" on household cleaners did not infringe the use of that mark on paper products).
2.
Likelihood of confusion
"To prove likelihood of confusion, plaintiffs must show that 'consumers viewing the
mark would probably assume the product or service it represents is associated with the source of
a different product or service identified by a similar mark."" Checkpoint Sys. v. Check Point
Software Tech., 269 F.3d 270, 279 (3d Cir. 2001) (quoting Scott Paper, 589 F.2d at 1229). The
Third Circuit has adopted a ten-factor test, known as the "Lapp test," to determine likelihood of
confusion in the market for both competing and noncompeting goods. Victoria's Secret, 23 7
F.3d at 215. The factors are:
8
(1) the degree of similarity between the owner's mark and the
alleged infringing mark;
(2) the strength of the owner's mark;
(3) the price of the goods and other factors indicative of the care
and attention expected of consumers when making a purchase;
(4) the length of time the defendant has used the mark without
evidence of actual confusion arising;
(5) the intent of the defendant in adopting the mark;
(6) the evidence of actual confusion;
(7) whether the goods, competing or not competing, are marketed
through the same channels of trade and advertised through the
same media;
(8) the extent to which the targets of the parties' sales efforts are
the same;
(9) the relationship of the goods in the minds of consumers,
whether because of the near-identity of the products, the similarity
of function, or other factors;
( 10) other facts suggesting that the consuming public might expect
the prior owner to manufacture both products, or expect the prior
owner to manufacture a product in the defendant's market, or
expect that the prior owner is likely to expand into the defendant's
market.
!d. No single factor is determinative in the likelihood of confusion analysis, and each factor
must be weighed and balanced against one another. Checkpoint, 269 F.3d at 280. Further, "the
Lapp test is a qualitative inquiry . . . [and] the different factors may properly be accorded
different weights depending on the particular factual setting." Victoria's Secret, 237 F.3d at 215.
Here, the plaintiff argues that the defendants' use of the "Arrowpoint" element in their
names "has caused repeated instances of actual confusion among even the most sophisticated
financial institutions and is likely to cause additional confusion among customers." (D.I. 48 at
10.)
In essence, the plaintiff contends that brokerage personnel who handle fixed-income
securities transactions "have been misled into mistaking one entity for the other or into believing
that the entities are in some way affiliated or related." (!d. at 14.) The defendants vehemently
dispute that any confusion exists and contend that "the high level of consumer sophistication [in
9
this case] obviates any link between the alleged supplier confusion and any potential or actual
effect on a consumer's purchasing decision." 11 (D.I. 58 at 15.)
The parties focus their likelihood of confusion arguments on the respective
ARROWPOINT word marks and do not put forth any significant arguments regarding the logos.
Nevertheless, the court will address logos in addition to the word marks. Additionally, because
the evidence of actual confusion is integral to many of the parties' arguments, the court will
address the Lapp factors in a modified sequence. 12
a.
Degree of similarity between the marks
Marks are confusingly similar "if ordinary consumers would likely conclude that [the
services] share a common source, affiliation, connection or sponsorship." Fisons, 30 F.3d at
477. The proper legal test for mark similarity is "whether the [marks] create the same overall
impression when viewed separately." Fisons, 30 F.3d at 477. "Overall impression is created by
the sight, sound, and meaning of the mark." Sabinsa Corp. v. Creative Compounds, LLC, 609
F.3d 175, 183 (3d Cir. 2010). When comparing the marks, each should be viewed in their
entirety, giving greater force and effect to the dominant feature. Country Floors, Inc. v. P 'ship
Composed ofGepner and Ford, 930 F.2d 1056, 1065 (3d Cir. 1991).
As a starting point, the parties' logos-- Arrowpolnt
CAPlTAt
and
are not confusingly similar because they do not create the same overall impression. Fisons, 30
11
The defendants argue that "[t]he primary focus of the Lanham Act is consumer confusion" and
"trademark laws protect only against confused purchasing decisions, not against confusion generally."
(D.I. 58 at 15.) The court disagrees. Under established Third Circuit law, the Act covers "the use of
trademarks which are likely to cause confusion, mistake, or deception of any kind, not merely of
purchasers nor simply as to source of origin." Kos Pharm., 369 F.3d at 711. Accordingly, the court must
analyze all incidents of confusion related to the parties' marks.
12
The parties agree Lapp factor I 0 - facts suggesting the public might expect the plaintiff to
expand and offer services in the defendants' market-- is neutral because it does not apply in this case.
10
F.3d at 477. Indeed, the similarity is negligible. Both logos contain a chevron reminiscent of an
arrowhead, and a horizontal line. However, the AC Logo chevron is small in relation to the
overall size of the mark, and its use in place of the letter "A" as part of the logo's dominant
feature -- the phrase "Arrowpoint Capital." In contrast, the AAM Logo uses a large chevron
surrounded by parallel lines to create its dominant feature, which is prominently placed in the
center of the mark. Further, the full-color versions of the logos are even more distinct. The AC
Logo is dominated by blue lettering and has a thin red accent line. On the other hand, the AAM
Logo contains four distinct colors, and its use of color draws the viewer's eye to the center of the
mark. In sum, the parties' logos are unlikely to be confused because they do not "create the
same overall impression when viewed separately." Fisons, 30 F.3d at 477.
However, the word marks are much more similar. "Arrowpoint" is the dominant feature
and it appears as the first word in all of the marks. 13 The defendants' additional terms "asset
management," "partners," "fundamental opportunity fund," and "structured opportunity fund" do
change the overall visual impact and sound of the marks, but convey a meaning somewhat
similar to "capital." See Checkpoint., 269 F.3d at 281-82 (finding Check Point Software "very
similar" to Checkpoint Systems because "Software" and "Systems" are "generic or descriptive
terms ... [that] would not lead the average consumer to disassociate the products."). 14 But
courts in this circuit have found that very similar marks are able to coexist in the financial
services market, where consumers take greater care than many others, when the parties use their
13
See Arrowpoint Capital as compared to Arrowpoint Asset Management, Arrowpoint Partners,
Arrowpoint Fundamental Opportunity Fund, and Arrowpoint Structured Opportunity Fund.
14
See also J. Thomas McCarthy, 3 McCarthy on Trademarks and Unfair Competition, § 23:50
(4th ed. 2000) ("The Trademark Board has said that the general rule is that a subsequent user may not
avoid likely confusion by appropriating another's entire mark and adding descriptive or non-distinctive
matter to it." An exception to that rule exists when "the marks in their entireties convey quite different
meanings.").
11
I
full names in "official" communications. See First Keystone Fed. Sav. Bank v. First Keystone
Mortg., Inc., 923 F. Supp. 693, 704 (E.D. Pa. 1996); Sav. Bank Life Ins. Co. of Mass. v. SBLI
USA Mut. Life Ins. Co., C.A. No. 00-3255, 2000 U.S. Dist. LEXIS 17178, at *49 (E.D. Pa., Nov.
29, 2000). 15 Accordingly, the court finds that the word marks are similar, but the dominant
"Arrowpoint" feature is tempered when the marks are viewed in their entirety.
Therefore, with
respect to the word marks, this factor slightly favors the plaintiff.
b.
Strength of the owner's mark
"To determine the strength of the mark, courts look to (1) the inherent features of the
mark contributing to its distinctiveness or conceptual strength and (2) the factual evidence of the
mark's commercial strength or of marketplace recognition of the mark." Sabinsa, 609 F.3d at
184-85 (citing Victoria's Secret, 23 7 F.3d at 221 ).
For conceptual strength, the court agrees with the defendants that the Arrowpoint Marks
are "suggestive, indicating direction and precision." 16 (D.I. 58 at 12.) However, the marks
conceptual strength is undermined by the lack of evidence demonstrating commercial strength.
The plaintiffs solitary support for commercial strength is that it has spent approximately
$390,000 promoting its marks. (D.I. 73 at 8.) The court is unable to gauge whether that sum
spent on promotional efforts is sufficient to establish marketplace recognition for investment
management services. By way of comparison, the defendants claim to have spent almost double
15
See also Omicron Capital, LLC. v. Omicron Capital, LLC, 433 F. Supp. 2d 382,391 (S.D.N.Y.
2006) (finding identical word marks for financial services unlikely to cause confusion because they are
not broadly marketed to the public, and "prospective purchasers are unlikely to perceive the marks before
becoming familiar with the parties' businesses.").
16
See Sabinsa, 609 F.3d at 185 (citation and internal quotation marks omitted) ("Arbitrary or
fanciful marks [like Kodak] use terms that neither describe nor suggest anything about the product.
Suggestive marks [like Coppertone] require consumer imagination, thought, or perception to determine
what the product is.").
12
that amount-- $736,000 -- for the same purpose. 17 (D.I. 58 at 5.) Accordingly, the court is not
convinced that the Arrowpoint Marks have obtained any significant commercial strength, which
weakens the overall strength of the mark. Therefore, the court finds that the factor is neutral.
c.
Evidence of actual confusion
"Evidence of actual confusion is . . . highly probative of a likelihood of confusion."
Sabinsa, 609 F.3d at 187. However, a court may discount evidence of actual confusion that is
"isolated and idiosyncratic." Victoria's Secret, 237 F.3d at 227. Further, "[c]onfusion is not
actionable where it is not shown . . . [to have] resulted from confusion between the two
companies as opposed to mere carelessness or accident." First Keystone, 923 F. Supp. at 706.
Here, the plaintiff produced no evidence of actual customer confusion. Instead, it argues
that "broker dealers at global financial institutions, including Bank of America, Barclays,
Citigroup, RBS, and Morgan Stanley, all have been misled into mistaking one entity for the other
or into believing that the entities are in some way affiliated orr elated."
(D.I. 48 at 14.)
Specifically, the plaintiff provides three categories of alleged actual confusion: 1) third-party
inquiries about the relationship between the parties; 18 2) misdirected trades; 19 and 3) incidents of
17
The court notes that the defendants' purported marketing expenditures may be "highly inflated"
and include the defendants founder's travel expenses "for any purpose." (See D.I. 73 at 8 n.14.)
18
For example, in April 2009, a Royal Bank of Scotland ("RBS") salesperson contacted the
plaintiff regarding a large security purchase that the defendants had made using a different broker, and
asked why the plaintiff had not engaged RBS for the transaction; in May 2009, an attorney for Barclays
Capital negotiating a security agreement for the plaintiff asked whether it was "a different entity from the
arrowpoint that is being represented by [a different law firm]"; and in April 2010, in connection with a
securities agreement, Citigroup sent a request for general information regarding the plaintiff, and asked it
to do the same exercise for two of the defendants entities - Arrowpoint Fundamental Opportunity Fund
and Arrowpoint Structured Opportunity Fund. (D.I. 48 at 6-8.)
19
On three occasions between April and July 2009, JPMorgan Chase & Co. ("JPMorgan")
misallocated the defendants' trades to the plaintiffs brokerage account. (D.I. 48 at 6-7.) However, the
plaintiff rejected each trade before settlement. In addition, the plaintiffs representative testified that
misallocated trades are not uncommon in the financial services industry. (D.I. 58 at 15 n.6.)
13
mistaken identity, which inhibited the plaintiffs ability to complete trades. 20 (D.I. 48 at 6-8.)
The court views many of the alleged inquiries about the affiliation between the parties
"with great skepticism, given the interested sources and the inability to cross-examine the
supposedly confused individuals." Victoria's Secret, 237 F.3d at 227. In addition, the court has
not been presented sufficient evidence to determine whether the misdirected trades were the
result of actual confusion between the parties as opposed to mere carelessness, mistake, or
clerical error on a broker's part. See First Keystone, 923 F. Supp. at 706. Indeed, it appears as if
JPMorgan was the only financial institution that misdirected trades. There is also no evidence to
establish that three misdirected trades are significant, especially since the record is devoid of the
number of trades that were executed without incident. See Note 19, supra; Victoria's Secret, 237
F.3d at 227 (finding a court may discount evidence of actual confusion that is "isolated and
idiosyncratic").
The remaining allegations do present some evidence of actual confusion
between the parties by broker-dealers. But, again, the record does not convince the court that the
few remaining alleged incidents translate to a more general likelihood of confusion as a matter of
law, especially since the record is devoid of any inference of customer confusion. Therefore, the
court finds that this factor slightly favors the plaintiff.
d.
Customer care and sophistication
20
The plaintiff alleges that in Summer 2009, Citigroup delayed its application to acquire certain
securities, in part, due to confusion between its account and another applicant, AAM, which inhibited the
review and submission of both applications; and in August 2009, the plaintiff attempted to participate in a
corporate bond offering through RBS, but was informed that it would not receive an allocation because it
was mistaken for a hedge fund operating out of Colorado. (0.1. 48 at 8.) In response, the defendants
argue that the alleged confusion at Citigroup did not prejudice the plaintiffs application because it
applied under the ARROWOOD name, and the plaintiffs applications were deferred because Citi gave
preference to large orders and the plaintiff was one of the smallest participants. (0.1. 58 and 16.)
Similarly, the defendants argue that the plaintiff was able to resolve whatever error occurred in the 2009
RBS bond offering and it did get an allocation. (/d. at 15 n.6.)
14
"When consumers exercise heightened care in evaluating the relevant products before
making purchasing decisions, courts have found there is not a strong likelihood of confusion.
Where the relevant products are expensive, or the buyer class consists of sophisticated or
professional purchasers, courts have generally not found Lanham Act violations." Checkpoint,
269 F.3d at 284.
Here, the plaintiff concedes that "(c]ustomers of [the parties'] investment services are
likely to be careful and sophisticated." (D.I. 48 at 13.) The defendants echo that premise and
argue that customers of both parties invest large sums, usually at least $1 million, and
investments in the defendants' hedge funds are "locked up" for 12 months, with penalties for
early withdrawal. (D.I. 58 at 13-14.) Further, the defendants' potential customers are "high net
worth individuals, institutional investors, or endowment funds" that often perform due diligence
on the defendants before investing, (id.) and the plaintiffs potential customers are "insurance
companies and pension funds," (D.I. 48 at 1). As such, the court finds that "the buyer class
consists of sophisticated or professional purchasers" that "exercise heightened care in evaluating
the relevant products before making purchasing decisions."
Checkpoint, 269 F.3d at 284.
Moreover, both parties acknowledge that they make individual, face-to-face presentations to
potential investors, (see id. at 13; D.l. 48 at 14), which militates against a likelihood of
confusion. Accordingly, this factor strongly favors the defendants due to the amount of money
involved and the high level of customer sophistication.
e.
Length of time the defendant has used the mark without evidence of
actual confusion arising
The defendants contend that they began using their mark in December 2007 and the
plaintiffs first alleged instance of actual confusion did not occur until more than a year later--
15
l
April 2009. (D.I. 58 at 14.) In contrast, the plaintiff asserts that the April 2009 confusion
occurred less than one month after the defendants began investing in earnest under its
Arrowpoint Opportunity Fund mark. (D.I. 48 at 13.) The court is unable to thoroughly assess
this factor given the nature of the alleged "actual confusion," and the lack of evidence regarding
the amount and type of trades the parties executed during the same timeframe. Therefore, this
factor is neutral.
f.
The defendants' intent in adopting the mark
"[E]vidence of intentional, willful and admitted adoption of a mark closely similar to the
existing marks weighs strongly in favor of finding the likelihood of confusion." Checkpoint, 269
F.3d at 286 (citation and internal quotation marks omitted). Here, the defendants assert that
"AAM selected its marks because arrowpoints had personal significance to [AAM' s founder]
and to suggest a connection between digging for arrowpoints and the thorough manner in which
AAM conducts the fundamental research on which it bases its investment management services."
(D.I. 58 at 3.) In addition they argue that AAM adopted its mark in good faith based on a
clearance procedures that included counsel's review of a full U.S. availability trademark search
report, which indicated that the plaintiff was engaged in property and casualty insurance, not
investment management or related services. (/d.) As such, "[t]here is no evidence or even
inference that [the] defendant[s] chose its name with [the] plaintiffs name or product in mind."
Checkpoint, 269 F.3d at 286. Therefore, this factor favors the defendants.
g.
Channels of trade and advertising media
"The greater the similarity in advertising and marketing campmgns, the greater the
likelihood of confusion." Checkpoint, 269 F.3d at 288-89 (citation omitted). Here, both parties
promote their services through industry meetings, events, and direct presentations to prospective
16
clients. (See D.I. 48 at 2; D.I. 58 at 17.) However, the defendants target events of interest to
hedge fund investors, family foundations, and endowments.
(D.I. 58 at 17.) The plaintiff
concedes that it does not attend such events "because it is not a hedge fund." 21 (D.I. 73 at 4.)
Attendance at different sets of industry events cuts against a likelihood of confusion.
Checkpoint, 269 F.3d at 289.
See
Further, the defendants rely on word-of-mouth referrals, (id. at 4),
which intuitively eliminate the possibility of confusion. Finally, it cannot be over stressed that
both parties use direct client presentations incorporating their respective logos, which are
visually distinct. Thus, this factor strongly favors the defendants.
h.
Similarity of target customers & The relationship of the goods in the
minds of customers
The parties generally seek distinct groups of customers that are sophisticated and unlikely
to view the parties' services as related or similar. The plaintiff targets customers "experiencing
some sort of financial distress," while the defendants pursue "high net worth individuals and
institutional investors," not distressed companies.
(D.I. 58 at 17-18.)
The defendants do
concede that insurance companies and pension funds are potential clients for both parties, 22 but
they argue that those clients would retain the parties for different purposes -- the plaintiffs
expertise is in fixed-income investments, while the defendants claim to "offer expertise across
the capital spectrum." (!d.) In response, the plaintiff argues that any distinctions between the
parties' services and clients are irrelevant given the overlap between their investment activity at
21
The plaintiff does argue that the parties have attended the same industry events, which have
resulted in "actual confusion. (D.I. 73 at 4.) The alleged "actual confusion" involved one of the
plaintiff's employees, who was wearing an Arrowpoint Capital name badge, being asked whether he was
associated with "Arrowpoint in Denver" by a person manning a trade booth. The court finds that such an
encounter at a trade show does not affect its analysis of this factor.
22
The plaintiff alleges that "the defendants have promoted their investment management services
to at least eight insurance companies, four public pension plans, and three corporate pension plans." (D.I.
48 at 5.)
17
various brokerage firms, which has led to actual confusion. (D.I. 73 at 9.) The court disagrees.
The distinctions between the parties' services and clients are the relevant inquiries under
these two factors. "[W]hen the parties target their sales efforts to the same group of consumers,
there is a greater likelihood of confusion between the two marks." Sabinsa, 609 F.3d at 188
(citation omitted). However, "[i]f the products fall under the same general product category but
operate in distinct niches, they will probably not be closely related." !d. at 189 (citation and
internal quotation marks omitted). The court finds that, while some potential customers may
overlap, there is little likelihood of customer confusion because the parties offer distinctly
different investment management strategies to generally different classes of investors.
Further, any purported actual confusion by the broker dealers is not due to the clients
targeted or the investment management services offered and should not be considered under
these factors. Rather, any broker-dealer confusion is attributable to the similarity of the marks
and the fungible nature of commonly traded securities. Stated differently, a particular fixedincome security is an identical "good" in the mind of a broker dealer regardless of what entity is
purchasing it for a particular client based on an individualized investment strategy. As such, any
weight attributable to broker-dealer confusion is properly assessed by the "actual confusion"
Lapp factor. Therefore, the court finds that these factors favor the defendants.
3.
Lanham Act claims summary
The above analysis demonstrates that the balance of Lapp factors tips in favor of the
defendants. Importantly, the parties promote their specialized investment services using direct
presentations to generally distinct groups of prospective customers, which include sophisticated
or professional purchasers that invest large sums of money. While similarities exist between the
parties' word marks, the respective logos are distinct, and the overall strength of plaintiffs marks
18
is weakened by a lack of commercial strength. Further, the limited incidents of broker-dealer
confusion are not dispositive of a likelihood of confusion in the marketplace, and do not
outweigh the factors in the defendants' favor. Accordingly, the plaintiff has not shown a
likelihood of confusion in the marketplace. Therefore, the plaintiff has not proven a likelihood of
success on the merits for its Lanham Act claims.
B.
Likelihood of success on the merits - common law infringement and DTPA
claims
Because the plaintiff failed to carry its burden for proving a likelihood of confusion, the
court does not need to address the plaintiffs state law trademark claims at length. The plaintiff
concedes in its opening brief that trademark infringement under the common law and DTPA are
subject to the Lanham Act standard for trademark infringement. (D.I. 48 at 11.) In addition, the
plaintiff relies upon its trademark infringement likelihood of confusion arguments to establish
unfair competition and false advertising under the DTP A. Therefore, the court finds that the
plaintiff has not proven a likelihood of success on the merits for its state law trademark claims.
V.
CONCLUSION
For the reasons stated above, the court will deny the plaintiffs motion for a preliminary
and permanent injunction.
Dated: May
1CJ, 2014
19
IN THE UNITED STATES DISTRJCT COURT
FOR THE DISTRICT OF DELAWARE
ARROWPOINT CAPITAL CORP.,
Plaintiff,
v.
ARROWPOINT ASSET MANAGEMENT,
LLC; ARROWPOINT PARTNERS GP, LLC;
ARROWPOINT PARTNERS GP2, LLC;
ARROWPOINT FUNDAMENTAL
OPPORTUNITY FUND, LP; and
ARROWPOINT STRUCTURED
OPPORTUNITY FUND, LP,
Defendants.
t,
At Wilmington, this
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Civil Action No. 10-161-GMS
ORDER
?.(f) day of May, 2014,
IT IS HEREBY ORDERED THAT Arrowpoint Capital Corp.'s Motion for a Preliminary and
Permanent Injunction (D.I. 4) is DENIED.
E
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