Dec. 23 --A federal district court abused its discretion by determining that Wells Fargo had abandoned the “ABD” trademark after buying out ABD and changing the name to “Wells Fargo,” the U.S. Court of Appeals for the Ninth Circuit ruled Dec. 20 in an opinion designated as not for publication (Wells Fargo & Co. v. ABD Ins. & Fin. Servs., Inc., 9th Cir., No. 13-15625, unpublished opinion12/20/13). Reversing denial of a plaintiff's motion for a preliminary injunction, the court also criticized the lower court for failing to separately analyze Wells Fargo's false advertisement claim for the purposes of showing a likelihood of success on the merits of its claims.
In 2007, Wells Fargo acquired the assets of ABD Insurance and Financial Inc. and continued to operate as a division of its subsidiary Wells Fargo Insurance Services USA Inc. of Redwood City, Calif.
In 2008, the name of ABD was changed to Wells Fargo Insurance Services. However, it continued to use the “ABD” trademark in some ways and continued to operate a website associated with the domain name abdi.com.
In 2009, Kurt de Grosz of San Francisco--a relative of one of the founders of ABD and vice president of ABD for five years--founded Insurance Leadership Networks Inc. of San Mateo, Calif. Insurance Leadership Networks hired more than 50 Wells Fargo employees, including Brian Hetherington of San Francisco--who was employed by Wells Fargo from 2007 to 2012--as its chief executive officer.
In 2012, after determining that Wells Fargo had not filed renewal of its “ABD” trademark registrations, Insurance Leadership Networks began operating as ABD Insurance & Financial Services Inc. and filed an intent to use application with the PTO to register its own ABD trademark and filed other corporate papers indicating its intent to operate as “ABD.”
In 2012, Wells Fargo sued ABD, De Grosz and Hetherington, alleging trademark infringement, false advertising and other claims pursuant to the Lanham Act as well as claims under California state law. ABD argued that Wells Fargo had abandoned the “ABD” trademark.
In March 2013, Judge Phyllis J. Hamilton of the U.S. District Court for the Northern District of California denied Wells Fargo's motion for a preliminary injunction after finding that Wells Fargo had failed to establish a likelihood of success on the merits of its claims. Wells Fargo appealed.
The court noted that the district court combined the false advertising claim with the trademark infringement claim in setting forth its analysis, on the basis that the false advertising claim had been “derivative of Wells Fargo's trademark infringement claim.”
On the contrary, the appeals court said, the two claims “are distinct and require the application of separate tests.” For example, false advertising requires the making of five separate showings; whereas, trademark infringement claims have only two elements, namely, ownership of a valid trademark and a likelihood of confusion.
Turning to the district court's abandonment analysis, the court noted that abandonment has two elements: discontinuance of use and intent not to resume use.
However, in addressing discontinuance of use, the district court had found a prospective intent to abandon, which the court said, was irrelevant to the issue of whether Wells Fargo had actually discontinued use.
Furthermore, the district court had too narrowly interpreted the phrase “bona fide use in the ordinary course of trade.”
“In this case, Wells Fargo continued to use the mark in several ways, most notably in customer presentations and solicitations,” the court said. “Such uses demonstrate Wells Fargo's business calculation that it could continue to benefit from the goodwill and mark recognition associated with ABD.”
The court concluded that Wells Fargo had indeed continued to make bona fide uses of the trademark.
To the extent that the district court had penalized Wells Fargo for failing to present evidence of actual confusion, the appeals court said that the preliminary injunction stage was not the appropriate time at which to require such evidence, because it was early in the litigation process before significant evidentiary proceedings.
Finally, the appeals court gave leave to Wells Fargo to assert a claim of false affiliation, which it had not properly raised at the time of appeal.
The appellate panel comprised Judge Michael Daly Hawkins, Judge Ronald M. Gould, and Judge Richard A. Paez.
Wells Fargo was represented by Felicia Boyd of Barnes & Thornburg LLP, Minneapolis. ABD was represented by Kerry Lynn Duffy of Bartko Zankel Bunzel & Miller, San Francisco.
Copyright 2013, The Bureau of National Affairs, Inc.
To view additional stories from Bloomberg Law® request a demo now