More than half a century ago, the Court of Appeals for the Second Circuit issued an influential decision in Dawn Donut Co. v. Hart’s Food Stores, Inc., concerning the proper scope of injunctive relief in a trademark infringement case where the plaintiff owns a federal registration but is only doing business under its mark in a localized geographic area. Last week, in Guthrie Healthcare System v. ContextMedia, Inc., the Second Circuit had occasion to revisit the Dawn Donut ruling in an interesting case involving two companies in the health care field that were using VERY similar logo designs.

The plaintiff, Guthrie Healthcare System, operates hospitals, medical clinics and specialized care facilities and offers related health care services in the “Twin Tiers” region of Northern Pennsylvania and Southern New York.  Outside of the Twin Tiers service area, the evidence showed that Guthrie recruits doctors and residents nationwide, operates a nursing school that also recruits nationwide. Guthrie disseminates medical information over the internet via a Guthrie-branded website.  Further, its affiliated Guthrie Foundation conducts medical research and fundraising activities outside of the Twin Tiers area.  Guthrie owns a federal trademark registration for the mark GUTHRIE with an accompanying logo design of a stylized human figure.

Defendant ContextMedia (“CMI”) provides health-related digital content to physician practices in all 50 states. The content is delivered via digital screens in medical practice facilities and is supported by advertising placed by sponsors in between health education programming. CMI also operates two websites, one directed to participating physician members and the other to potential sponsors, prospective employees and the media. Eight of CMI’s marks were at issue in the case, all containing the same graphic element of a stylized human figure, accompanied by additional words, such as DIABETES HEALTH NETWORK.

The district court found a likelihood of confusion between the two marks and granted permanent injunctive relief prohibiting CMI from using its marks in the Twin Tiers region, but held that CMI could continue to use its marks everywhere else and without restriction on the Internet, on CMI’s websites and on social media. On appeal, the Second Circuit affirmed the liability determination based on a likelihood of confusion between the parties’ marks, but also held that the lower court had erred as a matter of law in framing the scope of injunctive relief.

The affirmance of liability for infringement was based on a fairly standard multi-factor “Polaroid” legal analysis of likelihood of confusion. Notably, the marks were found to be confusingly similar even though the plaintiff’s mark includes the distinguishing GUTHRIE name and CMI’s mark also includes additional wording. There was also no evidence of actual confusion. It did not help the defendant that the Court could not get over the similarity in the stylized human figure logos, described in various places in the opinion as “jaw-droppingly similar”, “extraordinarily similar”, “virtually identical”, having “an astonishing degree of similarity.” In addition, although CMI’s mark included words in addition to the logo design, some of the wording was highly descriptive and therefore non-distinguishing. And even forms of CMI’s mark that included the ContextMedia name did not alleviate the likelihood of confusion. As the Court found, “the appearance of Defendant’s company name alongside what appears to be Plaintiff’s logo would be likely to suggest to one familiar with the Guthrie trademark at least a mutually consenting or affiliated business relationship” between the parties.

Turning to the scope of the injunction, the Second Circuit held that the district court misinterpreted the law and thereby fashioned an injunction that was too narrow in scope.  The Court began it analysis by clarifying that it is not necessary for a trademark holder to show a probability of confusion or prove a new claim for infringement in each geographic area in which it seeks injunctive relief:

Once the senior user has proven an entitlement to an injunction, the scope of the injunction should be governed by a variety of equitable factors—the principal concern ordinarily being providing the injured senior user with reasonable protection from the junior user’s infringement.

Here, the Court found that the district court’s limited injunction did not in fact protect Guthrie because the evidence showed that confusion was foreseeable outside the Twin Tiers region, including in two other counties where Guthrie maintained patient treatment facilities and on the Internet.  The Court, however, made clear that it was not disturbing its longstanding Dawn Donut precedent. In that case, in light of the plaintiff’s inactivity for almost thirty years in exploiting its trademarks in defendant’s trading area, there was no reasonable expectation that plaintiff would expand its operations going forward and therefore injunctive relief was not granted in defendant’s area of operations. Under the Dawn Donut doctrine, a defendant is still free to prove the absence of a likelihood of confusion in a particular geographic area in an effort to limit the scope of an injunction.  In contrast to the facts in Dawn Donut, Guthrie showed that its activities and commercial relationships extended beyond the Twin Tiers region, “rendering it vulnerable to plausibly foreseeable confusions and harms resulting from Defendant’s use of the marks outside” of Guthrie’s service area.

The Court emphasized that district courts should consider the scope of the injunction after looking at all the equities.   In an important footnote, the Court stated that not every prevailing plaintiff operating within a narrow geographic area will be entitled to an injunction extending to the Internet merely because of the availability of the plaintiff’s materials on the web. Such a determination is highly fact specific. The Court found that based on the evidence presented, even if Guthrie had not established a probability of confusion outside of the Twin Tiers service area, it had made “a showing of plausibly foreseeable confusion and harm resulting from Defendant’s use of its marks beyond the area where confusion was probable.” In particular, the Court concluded that CMI’s use of the logo on the Internet would cause sufficient likelihood of confusion to justify barring CMI from Internet use.

The Court also looked at the intent of the junior user.  While CMI was not a bad faith infringer in the classic sense of trying to exploit the goodwill of the plaintiff, the Court noted that CMI was not entirely innocent either, because it could have easily avoided trademark infringement by conducting a trademark search.

In the end, the Second Circuit expanded the scope of the injunction to cover all the counties in which Guthrie operates, but remanded the case to the district court to consider if CMI should be entitled to some limited use of its mark outside of these areas and/or on the Internet.

It will be interesting to see how Judge Forrest of the Southern District of New York frames the scope of the injunction after the Second Circuit’s decision, especially with respect to use of CMI’s mark on the Internet.  We will keep you posted.