Legal departments sometimes get a bad reputation for saying “no” too often. A “no” from legal is particularly hard to stomach when you think the potential legal risk is farfetched. In this dispute, Wal-Mart must have decided that there was no way a competitor could own the basic word BACKYARD for grills and grilling accessories. However, after some discovery and a motion for summary judgment, Wal-Mart was left holding a tab for $34 million in damages, costs, and attorney’s fees. Thankfully for Wal-Mart, the Fourth Circuit just issued a decision vacating the award and the grant of summary judgment.

The plaintiff is Variety Stores, Inc., a regional retail chain in the southeast that sells lawn, garden, and grilling products. The company owns a registration for THE BACKYARD for tail store services and has also used variations of the mark such as BACKYARD and BACKYARD BBQ for grilling products. One of their advertisements is included below.

 

About 20 years after Variety’s first use, Wal-Mart decided to develop an in-house line of grilling products. During the clearance search for potential names like BACKYARD BARBECUE and BACKYARD BBQ, Wal-Mart’s in-house legal group identified Variety’s prior registration and advised the business team that Variety’s registration could pose a problem. Wal-Mart decided to go with BACKYARD GRILL, filed an application to register the mark with the US Patent and Trademark Office, and began selling products, like the ones below.

At the district court, Variety prevailed on for summary judgment. In evaluating the likelihood of confusion factors, the district court concluded :

  • Wal-Mart intended to create confusion because Wal-Mart moved forward with the name despite the legal department’s concerns;
  • Variety’s mark was strong because of large numbers of sales and advertising expense, the court declined to give any weight to Wal-Mart’s evidence of dozens of third-parties using variations of BACKYARD with grilling products;
  • The grilling products were competitive;
  • The two marks – BACKYARD GRILL and BACKYARD (or BACKYARD BBQ) – were nearly identical; and
  • That Wal-Mart’s consumer surveys regarding the absence of confusion were faulty and should be given little weight.

The court concluded that the infringement was willful and awarded $32.5 million in profits and $1.5 million in attorney’s fees.

The Fourth Circuit viewed the evidence differently. Because Wal-Mart did not appeal the district court’s findings with respect to all of the likelihood of confusion factors, the court affirmed the decision with respect to some of the factors. Instead, Wal-Mart appealed the court’s findings on the most important factors: the strength of the plaintiff’s mark (often considered “paramount” by the Fourth Circuit); the similarity of the marks; the defendant’s intent; and the presence or absence of actual confusion.

In reviewing the strength of the mark, the Fourth Circuit concluded that Variety’s BACKYARD marks were “conceptually weak,” but that there was a material dispute as to whether the mark had commercial strength.  The court also concluded that a jury could conclude that the marks were dissimilar in light of the design features and the greater visual emphasis on GRILL. With respect to intent, the court noted that the jury could conclude that Wal-Mart intended to avoid confusion by not pursuing the specific names rejected by the legal department (“Backyard Barbecue” and “Backyard BBQ”) and instead choosing “Backyard Grill.” Finally, the court concluded that the district court improperly rejected Wal-Mart’s survey evidence, noting the district court improperly weighed the evidence at the summary judgment stage. As a result, the court vacated the grant of summary judgment and the monetary awards.

Will Wal-Mart prevail at trial? The Fourth Circuit’s analysis certainly suggests Wal-Mart may have the conceptual weakness of Variety’s BACKYARD marks. It seems like the case is ripe for settlement, but it Variety may have an unreasonably high demand, given the district court previously awarded $34 million. Given that us Minneapolitans are going to hit the 70s today (just weeks from a historic April blizzard), I’m comfortable waiting this one out in my own backyard. Let’s just hope we get an answer before the snow returns.

The RedBox brand continues to dominate the movie rental market. For the uninitiated, RedBox is a brand of movie and video game rental vending machines placed in convenient locations like grocery stores, gas stations, and fast food lobbies, like the one below:

redbox

However RedBox’s commercial success hasn’t stopped the brand from going to waste – literally, that is. On a recent walk through Minneapolis, I happened across this monstrosity:

RedBoxWaste

We’ll get the easy jokes out of the way first: No, this isn’t the RedBox for movies on LaserDiscs and VHS tapes; and no, this isn’t the RedBox where you go to rent box office bombs like Gigli, John Carter, The Lone Ranger, and whatever Alvin and the Chipmunks 4 through 7 will be called.

Instead this is a run-of-the-mill waste dumpster targeted primarily toward use at construction sites. There is one unique attribute though if you pay enough attention: the little attached box that includes space for a portable restroom. This combined service is allegedly a game-changer when it comes to efficiency according to the redbox+ website:

The redbox+ system gives you two services with one call. No more needing to use two different vendors for your roll-off and portable toilet needs, you don’t make two phone calls, you don’t get two invoices and best of all you keep your crew on site with a service that they need.

Normally the use of an identical mark with a plus sign would be cause for alarm. I don’t expect to see McDonalds+, Microsoft+, or similar marks used by others any time soon. However it seems unlikely that RedBox the rental service can take any action. The reasons why provide us with three quick tips regarding trademark infringement and adoption of strong, protectable trademarks:

  1. “They stole my name” doesn’t work if the goods or services are so unrelated that no consumer would likely be confused. It’s a stretch to think that a dumpster and toilet business would be connected to an entertainment vending machine, so an infringement claim would be an uphill battle.
  2. Starting with a commercially weak mark will entitle your brand to a narrower scope of protection. By the time the RedBox movie brand was registered, there were a number of other RED BOX marks already registered in connection with various goods and services, including toys and games, fiberglass pipes, tape, printed publications for business topics, and sound equipment. This widespread use in connection with other goods also makes a dilution claim less plausible.
  3. Notwithstanding the above, the best legal approach isn’t always the best marketing approach. Marketers and trademarks lawyers both understand the friction between beginning with a strong, unique, distinctive trademark – it is easier and less costly to protect and enforce and provides the owner with broader rights. However it takes longer to educate consumers about the product (what’s a Xerox, anyway?). But having a name that directly communicates something about a product has marketing appeal, either by telling the consumer about the product itself, or making it more memorable in the marketplace (“Look, it’s one of those RedBox things!”). Walking that line can be tough, but RedBox is an example of having a good product that can become a widespread commercial success, even if the mark isn’t the next Apple or Microsoft.