M2 Software, Inc. v. Madacy Entertainment

• Decision Date: 31 August 2005
• Docket Number: No. 03-55957.,03-55957.
• Citation: 421 F.3d 1073
• Parties: M2 SOFTWARE, INC., A DELAWARE CORPORATION, Plaintiff-Appellant, v. MADACY ENTERTAINMENT, A CORPORATION e/s/a Madacy Entertainment Group, Inc.; Handleman Company, a corporation; SFX Entertainment, a corporation, Defendants-Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

421 F.3d 1073

M2 SOFTWARE, INC., A DELAWARE CORPORATION, Plaintiff-Appellant, v. MADACY ENTERTAINMENT, A CORPORATION e/s/a Madacy Entertainment Group, Inc.; Handleman Company, a corporation; SFX Entertainment, a corporation, Defendants-Appellees.

No. 03-55957.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted February 7, 2005.

Filed August 31, 2005.

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Mark L. Pettinari, San Francisco, CA (argued), and Toula Arvanitis-Dalpe, Anahem Hills, CA (brief), for the plaintiff-appellant.

Robert H. Rotstein, McDermott, Will & Emery, Los Angeles, CA, for the defendants-appellees.

Appeal from the United States District Court for the Central District of California; A. Howard Matz, District Judge, Presiding. D.C. No.CV-00-02853-AHM.

Before PREGERSON, CANBY, JR., and BEEZER, Circuit Judges.

PREGERSON, Circuit Judge.

I. OVERVIEW

Plaintiff-Appellant M2 Software, Inc. ("M2 Software") is the owner of M2, a federally registered trademark that is used in conjunction with business management and interactive media application goods and services for the film and music industry. Defendants-Appellees Madacy Entertainment, Handleman Company, and SFX Entertainment (collectively, "Madacy") began using M2 Entertainment as a trademark for their new record label venture. Following failed licensing negotiations between the parties, M2 Software filed suit against Madacy in early 2000. A week after M2 Software filed its suit against Madacy, Madacy began phasing out the use of its M2 Entertainment mark.

M2 Software argued that Madacy's use of the M2 Entertainment mark infringed M2 Software's M2 trademark and would cause a likelihood of confusion. Specifically, M2 Software's complaint alleged Madacy had committed: (1) federal trademark infringement, false designation and description of origin, and trademark dilution; (2) state trademark dilution, injury to business reputation, and unfair trade practices; and (3) common law trademark infringement, passing off, and unfair competition.

On January 8, 2002, the district court granted partial summary judgment in favor of Madacy. The district court ruled that no rational trier of fact could find a likelihood of forward confusion among either general consumers or music industry members or a likelihood of reverse confusion among music industry members.

A jury trial commenced on May 13, 2003. The only issue that went to the jury was whether there was a likelihood of reverse confusion among general consumers, i.e., consumers who were not members of the music industry. In other words, the jury was asked to decide whether general consumers would mistakenly believe that they were purchasing Madacy's products when in fact, they were purchasing M2 Software's products.

Three days later, the jury returned a verdict in favor of Madacy, finding that it was not liable for reverse trademark confusion among general consumers. The district court entered judgment in favor of Madacy.

M2 Software timely filed its Amended Notice of Appeal. It now challenges: (1) the district court's grant of partial summary judgment in favor of Madacy; (2) the district court's denial of M2 Software's motion for reconsideration of partial summary judgment; (3) the district court's entry of judgment as a matter of law for SFX Entertainment; (4) the district court's evidentiary rulings on motions in limine; (5) the district court's jury instructions and special verdict form; and (6) the district court's decision to bifurcate the trial by first presenting the liability claim to the jury. M2 Software also asks for attorneys' fees under the Lanham Act. We have jurisdiction under 28 U.S.C. § 1291, and we affirm.

II. FACTS AND PROCEDURAL HISTORY

In 1991, Metabolic Music, Inc., adopted M2 as a brand and trade name. Metabolic Music later amended its corporate name to M2 Software, Inc. On August 30, 1994, Metabolic Music submitted a trademark application to the United States Patent and Trademark Office ("USPTO") for federal registration of its M2 word mark. Approximately fourteen months later, the USPTO granted Registration Number 1,931,182 for the M2 trademark and entered the mark on the Principal Register. The M2 mark is now deemed incontestable by the USPTO pursuant to 15 U.S.C. § 1065.¹

M2 Software's trademark application stated that the M2 mark would be used in conjunction with:

computer software featuring business management applications for the film and music industries; and interactive multimedia applications for entertainment, education and information, in the nature of artists' performances and biographical information from the film and music industries; and instructions and information playing musical instruments.

M2 Software primarily developed and licensed database software used for processing and managing data of major record companies' musical works. M2 Software's two database programs are called the "Record Label Management System" ("RLMS") and the "Music Publisher Management System" ("MPMS").² M2 Software licensed these databases to several record companies.

Using these database programs, M2 Software also provided music content administration services. These administration services include: (1) processing of record labels' album catalogs, song catalogs, artist and band rosters, and sales information; (2) briefing of recording artist and producer contracts; and (3) generating royalty statements and reports.

In addition to providing database products and music content administration services to major record companies, a small portion of M2 Software is devoted to music production. Particularly, M2 Software sells a small line of interactive music on CD-ROM, floppy media, and audio-only CDs. These interactive music products bear the M2, M2 Interactive, or M2 Music marks and are offered for sale on M2 Software's internet website and at the website "Amazon.com."

Madacy, the alleged infringer, is a recording and distribution company that specializes in low-price collections of recorded music. Generally, Madacy licenses the music it distributes from other companies, such as BMG Music.

In 1999, Madacy created a new division named M2 Entertainment. The new division would use M2 Entertainment as the trademark for its full-priced CDs featuring a line of sports-related music tied to local professional sports teams. Madacy filed an "intent-to-use" trademark application with the USPTO for its M2 Entertainment mark in August 1999.³

On December 30, 1999, M2 Software sent cease and desist letters to Madacy's chief executive officer and to SFX Entertainment's chairman, demanding that the companies stop using M2 Software's senior and federally registered M2 trademark.⁴ Following receipt of these letters, a representative from Madacy approached M2 Software with an offer to enter a licensing agreement for the M2 trademark.

While licensing negotiations were underway between Madacy and M2 Software, Madacy ran a multi-page advertising supplement in the February 28, 2000, edition of Billboard magazine. The supplement promoted Madacy's twentieth anniversary, and the launch of Madacy's new M2 Entertainment branded record label venture. A full-page of the supplement was devoted to an ad bearing Madacy's M2 Entertainment logo.

As a result of this multi-page advertising supplement, M2 Software commenced the present suit against Madacy on March 21, 2000. Nearly a week later, Madacy began phasing out its M2 Entertainment mark.

In its suit against Madacy, M2 Software alleged that Madacy's use of the M2 Entertainment mark infringed M2 Software's federally registered M2 trademark and would cause a likelihood of confusion. Specifically, M2 Software claimed in its complaint that by using the M2 Entertainment mark, Madacy had committed: (1) trademark infringement in violation of 15 U.S.C. § 1114; (2) false designation and description of origin in violation of 15 U.S.C. § 1125(a); (3) trademark dilution in violation of 15 U.S.C. § 1125(c); (4) state trademark dilution and injury to business reputation in violation of California Business and Professions Code section 14330; (5) state unfair trade practices in violation of California Business and Professions Code section 17200; and (6) common law trademark infringement, passing off, and unfair competition.

The case was assigned to Judge Lourdes Baird in the Central District of California. On January 8, 2002, Judge Baird granted partial summary judgment in favor of Madacy. Judge Baird ruled that there was no triable issue of likelihood of forward confusion among general consumers and music industry members, or of likelihood of reverse confusion among music industry members. The district court's ruling was based, in part, on M2 Software, Inc. v. Viacom, Inc., 119 F.Supp.2d 1061 (C.D.Cal.2000).

Approximately three weeks after the district court granted partial summary judgment against M2 Software, we reversed the Viacom decision by a memorandum disposition. See M2 Software, Inc. v. Viacom, Inc., 30 Fed.Appx. 710 (9th Cir. Jan.30, 2002) (mem.). Following our remand of Viacom on May 14, 2002, the case was randomly reassigned to Judge A Howard Matz. Because both the current case and the Viacom case involved the alleged infringement of the M2 mark, the current case was reassigned from Judge Baird to Judge Matz on May 29, 2002.

Nearly a year before the jury trial commenced, M2 Software filed with Judge Matz a motion for reconsideration of Judge Baird's January 8, 2002, partial summary judgment order. The basis of M2 Software's motion for reconsideration was that the Ninth Circuit's unpublished memorandum disposition in Viacom constituted new law that warranted reversal of Judge Baird's order. Judge Matz ruled that Viacom was not an intervening change in Ninth Circuit law and denied M2 Software's motion for reconsideration on July 29, 2002.

Judge Matz later ruled on numerous motions in limine, and a jury trial commenced on May 13,...