Star Financial Services, Inc. v. AASTAR Mortg. Corp.

• Decision Date: 10 May 1996
• Docket Number: Nos. 95-2289,96-1323,s. 95-2289
• Citation: 89 F.3d 5
• Parties: STAR FINANCIAL SERVICES, INC., d/b/a Star Mortgage, Plaintiff, Appellee, v. AASTAR MORTGAGE CORP., a/k/a Astar Mortgage Corp., Defendant, Appellant. STAR FINANCIAL SERVICES, INC., d/b/a Star Mortgage, Plaintiff, Appellant, v. AASTAR MORTGAGE CORP., a/k/a Astar Mortgage Corp., Defendant, Appellee. . Heard
• Court: U.S. Court of Appeals — First Circuit

Page 5

89 F.3d 5

39 U.S.P.Q.2d 1556

STAR FINANCIAL SERVICES, INC., d/b/a Star Mortgage, Plaintiff, Appellee, v. AASTAR MORTGAGE CORP., a/k/a Astar Mortgage Corp.,

Defendant, Appellant.

STAR FINANCIAL SERVICES, INC., d/b/a Star Mortgage, Plaintiff, Appellant, v. AASTAR MORTGAGE CORP., a/k/a Astar Mortgage Corp.,

Defendant, Appellee.

Nos. 95-2289, 96-1323.

United States Court of Appeals First Circuit.

Heard May 10, 1996.

Decided July 16, 1996.

Philip X. Murray with whom Lorusso & Loud, was on brief, Boston, MA, for Aastar Mortgage Corp.

Gary E. Lambert with whom Lambert & Ricci, P.C., was on brief, Boston, MA, for Star Financial Services, Inc.

Before TORRUELLA, Chief Judge, STAHL and LYNCH, Circuit Judges.

STAHL, Circuit Judge.

Star Financial Services, d/b/a Star Mortgage ("STAR") brought an action against Aastar Mortgage Corporation ("AASTAR") alleging, inter alia, service mark infringement and unfair trade practices. A jury agreed that AASTAR had unlawfully infringed on STAR's service mark under both federal and Massachusetts law. Nonetheless, it awarded no damages on the infringement claims. Based upon the finding of infringement, the jury also returned a verdict in favor of STAR on the unfair practices claim, Mass. Gen. L. ch. 93A §§ 2 and 11.

Following trial, the court permanently enjoined AASTAR from any future reference to itself as "AASTAR" and ordered certain additional remedial action. Pursuant to Mass. Gen. L. ch. 93A § 11, the court also awarded fees to STAR's attorneys. Shortly thereafter, the court found AASTAR to be in civil contempt for violating the injunction and awarded attorneys' fees and costs to STAR stemming from the contempt proceedings.

Both parties appeal. AASTAR contends that the district court erred in denying its motion for judgment as a matter of law, denying its request for a trial continuance, holding AASTAR in civil contempt and awarding attorneys' fees. STAR appeals the court's reduction in the requested amount of attorneys' fees. Addressing these contentions in turn (providing facts as necessary), we affirm the district court in all respects.

I. Denial of Motion for Judgment As a Matter of Law

A. Standard of Review

AASTAR argues that STAR failed to produce evidence sufficient to establish service mark infringement ¹ by a preponderance of the evidence and, thus, the court should have granted its motion for judgment as a matter of law pursuant to Fed.R.Civ.P. 50(a) & (b). ² We review the court's denial of the Rule 50 motion de novo, examining the evidence in the light most favorable to the nonmovant, STAR. Golden Rule Ins. Co. v. Atallah, 45 F.3d 512, 516 (1st Cir.1995). "[W]e may not consider the credibility of witnesses, resolve conflicts in testimony, or evaluate the weight of the evidence." Wagenmann v. Adams, 829 F.2d 196, 200 (1st Cir.1987). Reversal of the denial of the motion is warranted "only if the facts and inferences 'point so strongly and overwhelmingly in favor of the movant' that a reasonable jury could not have reached a verdict against that party." Atallah, 45 F.3d at 516 (quoting Acevedo-Diaz v. Aponte, 1 F.3d 62, 66 (1st Cir.1993)). Thus, we present the facts in the light most favorable to STAR as the jury could have found them.

B. Facts

STAR is in the business of "mortgage originating"; it receives information from individuals seeking real estate mortgage loans, completes applications with that information, and then searches the secondary market for a lender willing to offer the mortgage sought. STAR has operated throughout Massachusetts since its incorporation in 1993.

In January 1994, STAR registered its service mark (which it had used since the time of its incorporation) with the Massachusetts Secretary of State. At that time, STAR also applied for, and eventually received, a federal registration of the mark. The mark consisted of the word "STAR" in bold, capital letters with a five-point star symbol in the upper portion of the letter "R" and the word "MORTGAGE" in smaller capital letters beneath the word "STAR."

STAR used the mark in all of its advertising. It spent about $2,000 per month (of its $5,000 monthly advertising budget) for advertisements in the Suburban Real Estate News ("The Suburban "), a free publication about real estate issued in several regional editions (e.g., north, west, south) and distributed throughout Massachusetts. STAR's advertisements in The Suburban typically touted, inter alia, access to various mortgage programs, favorable interest rates, low closing costs, timely credit approval and low down payments.

In May 1994, AASTAR commenced offering mortgage originating services in the Massachusetts area. It also placed advertisements in The Suburban that, like STAR's advertisements, promised a variety of mortgage programs, favorable interest rates, low closing costs and timely approvals. These advertisements typically would include a "closing cost certificate" to be clipped out, entitling the bearer to a $500.00 credit toward closing costs.

AASTAR's advertisements contained the business name "AASTAR MORTGAGE CORP." in bold, capital letters. Its first advertisement in The Suburban depicted a five-point star symbol superimposed over the first "A" in "AASTAR." At one time, AASTAR's business cards also depicted the star symbol in that same letter, but eventually the symbol was moved to the third and last "A" in "AASTAR."

STAR's president, Jay Austin, noticed AASTAR's advertisement in a May 1994 edition of The Suburban. He then wrote various letters to AASTAR's officers, informing them of his registered mark, requesting them to cease business operations under the "AASTAR" name and advising them to take various remedial actions. AASTAR did not respond.

Actual customers confused the two mortgage originating companies. In November 1995, a STAR customer who had already completed an application walked into the STAR office with a copy of The Suburban and asked why she was not offered the rate advertised. Austin explained that AASTAR, not STAR, was advertising that rate. On another occasion, a customer who had completed an application at STAR returned to its office with AASTAR's closing-cost coupon and, believing the advertisement was for STAR's services, asked for the $500 credit. On yet a different occasion in July 1994, a customer had almost completed an application when she presented the STAR loan originator with AASTAR's $500 coupon. The loan originator explained that the customer had confused the two companies, and after conferring with a supervisor, credited the customer the $500.

Potential customers also confused the two companies. Austin would call individuals who had placed an initial call to STAR to inquire into its services; several times during these follow-up calls, the individual would indicate that he or she had "already" completed an application with STAR. When the person's name did not appear in STAR's records, Austin would call again to inquire if the person was "sure" the application was with STAR; the response would be affirmative. Austin would then inquire if it was with "AASTAR" or "STAR"; at this point the person would indicate, "oh, it was AASTAR."

C. Discussion

The purpose of trademark laws is to prevent the use of the same or similar marks in a way that confuses the public about the actual source of the goods or service. DeCosta v. Viacom Int'l, Inc., 981 F.2d 602, 605 (1st Cir.1992), cert. denied, 509 U.S. 923, 113 S.Ct. 3039, 125 L.Ed.2d 725 (1993). Confusion about source exists when a buyer is likely to purchase one product in the belief she was buying another and is thus potentially prevented from obtaining the product she actually wants. Id.

To prevail in an action for trademark (or service mark) infringement, the plaintiff must establish: "1) that he uses, and thereby 'owns,' a mark, 2) that the defendant is using that same or a similar mark, and 3) that the defendant's use is likely to confuse the public, thereby harming the plaintiff." Id. at 605. The harm caused by the confusion may be attributable the defendant's appropriation of the plaintiff's goodwill (perhaps leading to sales diversion), or the reduction in the value of the mark by virtue of the association of the plaintiff with the defendant's own "bad" name (so-called "reverse confusion"). See id. at 608.

AASTAR contends that STAR has failed to prove "likelihood of confusion," an essential element of a trademark infringement claim under both Massachusetts and federal law. See Astra Pharmaceutical Prods., Inc. v. Beckman Instruments, Inc., 718 F.2d 1201, 1205 (1st Cir.1983); Pignons S.A. de Mecanique de Precision v. Polaroid Corp., 657 F.2d 482, 486-87 (1st Cir.1981). We require evidence of a "substantial" likelihood of confusion--not a mere possibility--and typically refer to eight factors in making the assessment:

(1) the similarity of the marks; (2) the similarity of the goods [or services]; (3) the relationship between the parties' channels of trade; (4) the relationship between the parties' advertising; (5) the classes of prospective purchasers; (6) evidence of actual confusion; (7) the defendant's intent in adopting the mark; (8) the strength of the plaintiff's mark.

Astra, 718 F.2d at 1205. None of these factors is necessarily controlling, but all of them must be considered. Id.; Pignons S.A., 657 F.2d at 487-92. AASTAR attacks the evidence as to each factor.

1. Similarity of the marks

A jury plainly could infer from the evidence that the designations "STAR MORTGAGE" and "AASTAR MORTGAGE" (including the star symbols) were sufficiently similar such that prospective purchasers might be confused about the source of the services desired. While AASTAR emphasizes the dissimilarity of some individual features of the designations, a jury could supportably find that the total effect of the two--including similarity in pronunciation--was to create a probability of confusion.

2. Similarity of the services

AASTAR admits that...