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Better late than never - When tardiness bars trademark infringement claims

October / November 2022 IP Newsletter

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A lack of haste can make waste when it comes to filing a lawsuit. But some delays are excusable. A dispute over the use of a trademark by two players in the insurance industry provides useful insight into when a trademark holder’s delay will — or won’t — bar its claims.

The claim filing

A.I.G. Agency, the plaintiff, is a family-owned insurance broker in Missouri that began calling itself AIG around 1958. American International Insurance Group, the defendant, is an insurer that incorporated in 1965 and first used the “AIG” mark between 1968 and 1970. The defendant obtained a federal trademark registration for the mark in 1981.

In 1995, the defendant sent a cease-and-desist letter to the plaintiff. The letter notified the plaintiff of the registration and demanded the plaintiff stop using the mark because it was likely to confuse consumers. In a response letter, the plaintiff’s attorney claimed it had a right to use the name in Missouri and Illinois because it used the mark in those states before the defendant registered its trademark.

The defendant sent the plaintiff another cease-and-desist letter in 2008; the plaintiff provided a similar response regarding Missouri and Illinois. The defendant said it didn’t object to the plaintiff’s use of the mark in two Missouri counties but threatened legal action if the plaintiff expanded its use farther. In 2009, the defendant renamed its property and casualty business “Chartis.” However, in 2012, it returned to using AIG for its property and casualty business.

Around 2012, the defendant shifted its marketing strategy and began to sell to consumers through direct advertisements. According to the plaintiff, over the course of the next few years, it began experiencing significant incidences of consumers confusing the companies. It sued the defendant for trademark infringement in 2017.

The trial court dismissed the case without a trial based on the doctrine of laches. This doctrine penalizes a party for negligent or willful failure to timely assert its rights by blocking its claim.

The lash of laches — or not

On review, the U.S. Court of Appeals for the Eighth Circuit explained that a party raising a laches defense must prove that:

When determining the question of inexcusable delay, courts consider the doctrine of progressive encroachment.

According to the doctrine, the time of delay is measured not from when a party first learned of the potentially infringing mark, but from when such infringement became actionable and provable. For example, this can occur when the infringer’s use of the mark becomes likely to confuse consumers as to the source of the goods or services. The doctrine protects trademark holders from having to choose between 1) suing immediately and losing because the alleged infringer isn’t yet sufficiently competitive to create a likelihood of confusion, or 2) waiting and being dismissed for unreasonable delay.

The exclusion analysis

The appellate court found the trial court failed to conduct a meaningful analysis of when the defendant’s alleged infringement became actionable. The trial court, it said, should have performed the requisite six-factor analysis for evaluating likelihood of confusion. Instead, that court largely based its finding of laches on the fact that both parties had used the mark in the same markets for decades, with full knowledge of the other’s activities.

According to the appellate court, one of the six factors — actual confusion in the marketplace — is often considered the best evidence of likelihood of confusion. The defendant presented little to no evidence of actual confusion in Missouri and Illinois before 2012. The plaintiff, however, submitted evidence of minimal actual confusion before the defendant’s change in marketing strategy that year.

Thus, the appellate court found that this evidence supported the inference that little or no actual confusion existed until after 2013. This inference, it said, could tilt the balance of the progressive encroachment analysis and, therefore, represented a genuine dispute of material fact that demanded a trial.

Dismissal denied

When viewed through the lens of the proper six-factor analysis, summary judgment was inappropriate according to the appellate court. It reversed the trial court and sent the case back for further proceedings. The upshot? To ensure your rights are protected, don’t wait to assert your intellectual property rights.

Sidebar: Cease-and-desist doesn’t establish laches

The appellate court in A.I.G. Agency, Inc. v. American Int’l Group, Inc. (see main article) also rejected the trial court’s reliance on a cease-and-desist letter to show how long the plaintiff was aware of the risk of consumer confusion between the trademarks at issue. The test for laches isn’t being “cognizant of the risk of consumer confusion,” the court said. Rather, it’s whether the likelihood of confusion was sufficiently clear to establish the plaintiff had an actionable and provable infringement claim.

The court found that the plaintiff wasn’t obligated to accept the defendant’s statement in a cease-and-desist letter that there was a likelihood of confusion. In fact, the plaintiff’s response — which referred to “allegations of likelihood of confusion” –— indicated it wasn’t sold on the defendant’s conclusion about the likelihood of confusion. The letter established an awareness of the defendant’s claim and allegations but not that the plaintiff had an actionable and provable claim against the defendant.