Geographic Scope of Trademark Injunction and the Boundaries of Internet Sales

The Court of Appeals for the Second Circuit reversed the trial court’s decision which enjoined Defendant’s use of its marks in Plaintiff’s geographic territory area, but placed no restriction on Defendant’s use on the Internet or outside Plaintiff’s service area. Guthrie Healthcare System v. ContextMedia, Inc., 14-3343 (2nd Cir.  June 13, 2016) (Available Here).  The Second Circuit concluded that Defendant’s trademarks were infringing, but that the current limitations placed on Defendant by the district court in the injunction were based on an incorrect standard and failed to give Plaintiff and the public adequate protection from likely confusion, specifically on the internet.

Guthrie Healthcare System (herein “Guthrie”), a provider of healthcare services in New York and Pennsylvania, and ContextMedia, Inc. (herein “CMI”), a provider of digital health-related content nationwide, both appealed from the judgment of the United States District Court for the Southern District of New York which granted limited permanent injunctive relief on Plaintiff’s claim of trademark infringement. The injunction prohibited Defendant from using its marks within Plaintiff’s geographic service area, but placed no restriction on Defendant’s use of its marks on the Internet or outside Plaintiff’s service area.

The Second Circuit expanded the scope of the injunction to cover all the counties in which Plaintiff Guthrie operated, but remanded for a consideration of whether Defendant should be able to use its mark outside of these areas and/or on the Internet.  The Court found that the extraordinary similarity of the marks, the proximity of commerce both as to subject matter and geographic area, the strength of Plaintiff’s mark, and the absence among consumers of sufficient sophistication to protect against confusion, all work together to make a powerful showing of likelihood of confusion.

The Second Circuit explained that once the senior user has proven 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. Of course, if the junior user demonstrates that in a particular geographic area there is no likelihood of confusion, ordinarily no useful purpose would be served by extending the injunction into that area, potentially inflicting great harm on the junior user without meaningful justification. Dawn Donut Co. v. Hart’s Food Stores, Inc., 267 F.2d 358, 364-65 (2d Cir. 1959) is the leading case on the establishment of injunctive relief separating territories between two competing parties.

The Court noted several issues with the narrow injunction issued by the district court.  First, the court’s ruling leaves Defendant free to use the marks on the Internet, notwithstanding that Defendant’s webpages are accessible in Plaintiff’s Service Area, and are likely to cause confusion there. Second, the district court also expressly allowed Defendant unrestricted use of the marks in two counties (Tompkins and Schuyler) where Plaintiff maintained healthcare facilities.  Third, it leaves Defendant free to use what is essentially Plaintiff’s mark throughout the nation, beyond the counties where Plaintiff operates facilities, despite Plaintiff’s showing of some likelihood of confusion beyond its Service Area.  

The Second Circuit supported its opinion with facts produced by Plaintiff.  In addition to proving that Defendant was infringing Plaintiff’s mark, subjecting Plaintiff to a high probability of confusion in its main Service Area, Plaintiff had also shown that its activities and commercial relationships extended beyond that area, rendering it vulnerable to plausibly confusions and harms resulting from Defendant’s use of the marks outside the Guthrie Service Area. Specifically, Plaintiff recruits doctors, residents, and nursing students nationwide; it disseminates medical information over the Internet; it receives referrals from other physicians and medical professionals, who may be anywhere in the country; and, with respect to its medical research and clinical trials, it solicits funding beyond its Service Area.

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