Walmart Inc. has escaped a $32 million fine in a long-running trademark case against it, but a federal appeals court is calling for further deliberation.
A three-judge panel of the Fourth Circuit Court of Appeals on Tuesday overturned a lower federal court order demanding that Walmart pay $32.5 million in profits realized from its branding of things like grills and related private-label products as “Backyard,” which a smaller retail chain claimed to have trademarked for its own use.
The case goes back to 2012, when Variety Stores Inc. became aware that Walmart had filed to trademark “Backyard Grill” and opposed the application. A civil suit, which is the subject of the appeal, followed in early 2014, with Variety accusing Walmart of infringement and unfair competition. During the proceedings, Variety showed that it had been since 1993 using variations of “Backyard” to promote garden and grill products in its stores, of which it had sold $56 million worth.
While Variety claimed to have spent millions on related advertising, the Fourth Circuit judges noted in their unanimous opinion that the retailer “did not quantify exactly how much it spent on promoting the mark on grills or grilling products” and said it “also did not provide any evidence of confusion among consumers.”
“Most notably, Walmart submitted two expert surveys conducted after the commencement of this suit to gauge the level of actual confusion among customers,” the judges added. “These surveys asserted that customers did not confuse the two marks.”
Given that, along with Walmart’s dispute of the lower court’s determination that nearly all factors surrounding a likelihood of consumer confusion favored Variety’s claims, the circuit judges found there are still “genuine disputes of material fact as to whether a likelihood of confusion exists,” meaning the lower court was wrong to side with Variety.
A Walmart spokesman said the company has “continually said our Backyard Grill products do not infringe on Variety’s brand, and our evidence showed that consumers were not confused between the two brands.”
“We are pleased the Fourth Circuit Court of Appeals agreed that the previous decisions for Variety were incorrect,” he added. “We will continue to defend the company against this litigation.”
The circuit judges also described Variety’s marks as “conceptually weak,” noting the hundreds of registered trademarks making use of “backyard” for similar products and the roughly dozen businesses in the U.S. using it for products and marketing, and remanded the issue to the lower court and a jury trial for further consideration. Other issues around confusion and intent to infringe were also remanded.
Although the judges found that the lower court was right to side with Variety in finding Walmart’s in-store “backyard” facilities were indeed too similar in the 17 southern and southeastern states that Variety operates in, the court still vacated the $32 million fine.
“The district court’s disgorgement order and costs and fees order were heavily dependent on its summary judgment findings and stipulations,” the circuit judges wrote. “Therefore, with the summary judgment order vacated, these orders cannot stand.”
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