Nordstrom Rack Unable to Enjoin Flash-Seller's Use of ‘Beyond The Rack' Mark (Bloomberg BNA)

Reproduced with permission from Patent,Trademark & Copyright Law Daily, 10 PTD-Bul (Jan. 15, 2013). Copyright 2013 by The Bureau of National Affairs, Inc. (800-372-1033) http://www.bna.com

The failure to use in isolation the registered trademarks "The Rack" and "Rack," as opposed to in conjunction with the house mark, makes it unlikely that Nordstrom can succeed on the merits of its trademark infringement lawsuit against a company called Beyond the Rack, the U.S. District Court for the Western District of Washington ruled Dec. 27 (Nordstrom Inc. v. 7525419 Canada Inc. d/b/a Beyond the Rack, W.D. Wash., No. 2:12-cv-01387-TSZ, 12/27/12).

The court, denying Nordstrom's motion for a preliminary injunction, noted that the company always uses its marks in combination with the parent mark "Nordstrom." Moreover, given the strong association between the term "rack" and retail clothing, the court determined that the marks warranted only narrow protection. Consequently, the court found that the defendant's mark was not likely to result in confusion with Nordstrom's marks.

Flash-Sale Website Prompts Infringement Suit

Nordstrom Inc. owns and operates more than 100 retail stores in the United States, specializing in apparel and accessories.

Nordstrom also operates a chain of stores that sell sharply discounted items. These stores, called Nordstrom Rack, first appeared in 1973. There are 110 Nordstrom Rack stores in the United States.

Nordstrom Rack competes with other discount stores associated with high-end retailers. For instance, Saks Fifth Avenue's discounted store is called Off 5th, and Neiman Marcus sells discounted merchandise through its website, Lastcall by Neiman Marcus. Nordstrom Rack, too, sells apparel through its own website.

Nordstrom holds federal trademark registrations for the terms "Nordstrom Rack," "Nordstrom Rack NR," "Rack," and "The Rack." The last two marks were registered in 2010 and 2011.

7525419 Canada Inc. d/b/a Beyond the Rack is a Canadian company that in 2009 began selling apparel through "flash-sales."

Flash sales are sales that are available for a very limited time, apply to only particular items, and are marketed just towards members. For instance, Beyond the Rack may send its members an email telling them that a pair of designer shoes will be available for purchase at a steeply discounted price for the next 48 hours. Beyond the Rack does not operate brick-and-mortar stores and does not even have a traditional website. Rather, Beyond the Rack members that want to purchase the designer shoes during the sale would follow a link embedded in the Beyond the Rack email message, and would then be able only to choose the size and color of the shoes they wanted to purchase.

Beyond the Rack applied to register the term "Beyond the Rack." In 2009, Nordstrom sent a cease-and-desist letter, asserting that the "Beyond the Rack" mark infringed its "Rack" and "The Rack" marks. For two years the parties engaged in negotiations over the marks, but no agreement was reached.

In addition, Nordstrom began operating a flash-sales site in 2011 when it acquired HauteLook.

Nordstrom sued in April 2012, alleging federal and state law claims of trademark infringement, trademark dilution, and false designation of origin. The complaint also included a claim under the Anticybersquatting Consumer Protection Act of 1999, and a claim under Washington's Consumer Protection Act. Nordstrom also sought a preliminary injunction.

Sleekcraft Factors Control

"A preliminary injunction is ‘an extraordinary remedy' that is ‘never awarded as of right,' " the court said, quoting Winter v. Natural Resources Defense Council Inc., 555 U.S. 7 (2008).

In this case, in order to attain a preliminary injunction Nordstrom had to show that Beyond the Rack's trademark was likely to cause confusion with either "Rack" or "The Rack," Judge Thomas S. Zilly said.

The court noted that courts in the Ninth Circuit apply the eight-factor likelihood of confusion test set forth in AMF Inc. v. Sleekcraft Boats, 499 F.2d 341, 204 U.S.P.Q. 808 (9th Cir. 1979).

Marks are Weak, Occupy a Crowded Field

The first Sleekcraft factor assesses the strength of the registered trademarks. Beyond the Rack argued that the marks, though suggestive, were commercially weak.

Beyond the Rack first noted that neither of Nordstrom's two registered marks ever appeared without being accompanied by the Nordstrom house mark. On Nordstrom's website, in its advertisements, and in the media, the two registered marks are always used in connection with "Nordstrom," and in each instance "the dominant commercial identity" of both marks is "Nordstrom," Beyond the Rack argued. The court agreed.

"[T]he salient part of the commercial name is ‘NORDSTROM,' and not ‘RACK, " the court said. "The ‘RACK' marks have been registered for only about two years, whereas ‘NORDSTROM RACK' has been on the Principal Register since 1986, … and Nordstrom has provided no evidence of the commercial strength of ‘RACK' or ‘THE RACK' standing alone."

Beyond the Rack also argued that, because the word "rack" is so closely associated with retail apparel, numerous competitors use similar marks. Indeed, the word appears in more than 500 federally registered trademarks, and 70 of those are in the same class as the Nordstrom marks, the court noted.

Accordingly, "The Court is persuaded that Nordstrom's marks ‘RACK' and ‘THE RACK' occupy a crowded field of similar marks, with each member of the field enjoying a relatively weak ability to prevent use by others in the crowd," the court said.

Because the marks were relatively weak, Nordstrom could only succeed if the remaining Sleekcraft factors weighed heavily in favor of a finding of a likelihood of confusion, the court said.

Similarity Factor ‘Slightly' Favors Nordstrom

Before determining whether the marks themselves were similar, the court first assessed whether the goods sold under the marks were similar.

The court noted that Beyond the Rack did not operate brick-and-mortar stores that competed with Nordstrom, and that Nordstrom's own flash-sale website did not use the Rack marks.

Still, "Both [Beyond the Rack] and Nordstrom Rack offer retail services, albeit in significantly different ways, through which brand name or designer apparel and accessories are sold at substantial discounts," the court said. "These retail services appeal to a similar demographic, and a substantial number of individuals might be customers of both businesses."

Quoting Sleekcraft, the court said that because the services were similar it "must apply a ‘diminished standard of similarity' in comparing Nordstrom's and [Beyond the Rack]'s marks."

The first thing the court did it its similarity analysis was determine that the appropriate comparison was between "Nordstrom Rack" and "Beyond the Rack." The court reached this conclusion after it determined that Nordstrom had proffered no evidence that it ever used in isolation either "Rack" or "The Rack."

The court noted that the marks were slightly different in appearance given that Nordstrom capitalized all of the letters in its "Rack" and "The Rack" marks. Beyond the Rack, on the other hand, mixed capital letters with lower cases letters in its mark.

With respect to whether the marks were similar in meaning, "both marks at issue are susceptible to more than one interpretation," the court noted. The court said:

Historically, consumers probably attributed [a place-related] meaning to the mark, which was used to offer Nordstrom merchandise at clearance prices. … As Nordstrom Rack's business model has changed, its mark has proven versatile, conveying a sense that the goods for sale … will be ready-made, rather than tailored, perhaps suggesting that discounts will be offered.

With respect to the "Beyond the Rack" mark, the court, referencing the alleged inspiration for the mark, said:

Although "BEYOND THE RACK" can be construed as the founders intended, namely as providing goods in a manner that does not require shoppers to hunt through racks of clothing for bargains, the mark could also be understood to mean that the "flash sale" site goes beyond what is ordinarily available at "THE RACK," either in terms of pricing, purchasing method, or merchandise, and in that context, consumers could experience confusion concerning whether BTR is an extension of the "NORDSTROM" brand of retailers.

Because Beyond the Rack's mark could be understood to be alluding to Nordstrom, the court said it was "satisfied that the ‘similarity of marks' factor is either neutral or tips slightly in favor of Nordstrom." As a result, the court said that the next factor, which looks to whether there was any actual customer confusion, was "of particular interest in this case."

Lack of Actual Confusion Dooms Nordstrom

In order to demonstrate actual confusion, Nordstrom introduced evidence regarding internet users' search terms. According to Nordstrom, more than 100 people between January 2011 and June 2012 reached Nordstrom's website after typing in the words "beyond" and "rack" into an internet search engine.

"To the extent that this evidence shows actual confusion, which is debatable, it indicates that any confusion probably benefits Nordstrom," the court said. However, the court was skeptical of the mark holder's other evidence.

Nordstrom also proffered for the actual confusion factor messages posted to social media platforms such as Facebook and Twitter, for example. This evidence was "equivocal" and insufficient to demonstrate actual confusion, the court said.

Looking at the entire record, the court said Nordstrom had fallen well-short of demonstrating actual confusion. It said:

If, over the course of the past three years, consumers had purchased from [Beyond the Rack] under the mistaken belief they were dealing with Nordstrom, only to learn they could not take advantage of Nordstrom's generous return policy, or forming some other reason for dissatisfaction, Nordstrom would have presumably received at least one call, e-mail, or letter, or could have discovered at least one social media post or blog entry to that effect. The record, however, is silent in this regard. Thus, not only do Nordstrom's submissions fall short of establishing actual confusion, Nordstrom's failure to proffer more belies its assertion of past or ongoing confusion.

Nordstrom Can't Demonstrate Likelihood of Success

None of the remaining confusion factors tilted in Nordstrom's favor. With respect to customer care, the court said that it was convinced that customers "would exercise a higher degree of care" when buying from Beyond the Rack than when buying from Nordstrom Rack. This factor, then, weighed in favor of Beyond the Rack.

The court also accepted Beyond the Rack's founder's explanation for why he chose the "Beyond the Rack" mark. Moreover, Beyond the Rack's founder said that the mark was conceived long before Nordstrom Rack had a presence in Canada, and therefore "the Court cannot infer consumer confusion from [Beyond the Rack]'s intent," the court said.

On the balance, the court said that the Sleekcraft factors weighed in favor of Beyond the Rack. Accordingly, Nordstrom had not demonstrated that it was likely to succeed on the merits of its trademark infringement claim. The court thus declined to grant Nordstrom a preliminary injunction.

Nordstrom was represented by John Carlile Rawls III of Baker Williams Matthiesen, Houston. Beyond the Rack was represented by Brendan Hughes of the Cooley law firm, Washington, D.C.

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