23-12-cv Jackpocket, Inc. v. Lottomatrix NY LLC

UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT SUMMARY ORDER RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A SUMMARY ORDER FILED ON OR AFTER JANUARY 1, 2007, IS PERMITTED AND IS GOVERNED BY FEDERAL RULE OF APPELLATE PROCEDURE 32.1 AND THIS COURT’S LOCAL RULE 32.1.1. WHEN CITING A SUMMARY ORDER IN A DOCUMENT FILED WITH THIS COURT, A PARTY MUST CITE EITHER THE FEDERAL APPENDIX OR AN ELECTRONIC DATABASE (WITH THE NOTATION “SUMMARY ORDER”). A PARTY CITING A SUMMARY ORDER MUST SERVE A COPY OF IT ON ANY PARTY NOT REPRESENTED BY COUNSEL.

At a stated term of the United States Court of Appeals for the Second Circuit, held at the Thurgood Marshall United States Courthouse, 40 Foley Square, in the City of New York, on the 18th day of March, two thousand twenty-four. Present: JOHN M. WALKER, JR., WILLIAM J. NARDINI, STEVEN J. MENASHI, Circuit Judges. _____________________________________ JACKPOCKET, INC., Plaintiff-Appellant, v. 23-12-cv LOTTOMATRIX NY LLC, LOTTOMATRIX CORPORATION, LOTTOMATRIX OPERATIONS LIMITED, AKA JACKPOT.COM, LOTTOMATRIX MALTA LIMITED, 99DYNAMICS LIMITED, Defendants-Appellees. ∗ _____________________________________

For Plaintiff-Appellant: DOUGLAS A. RETTEW (Patrick J. Rodgers, Troy Viger, on the brief), Finnegan, Henderson, Farabow, Garrett & Dunner, LLP, Washington, DC

For Defendants-Appellees: WILLIAM B. ADAMS (Todd Anten, Rachel E. Epstein,

∗ The Clerk of Court is respectfully directed to amend the caption as set forth above.

1 Dylan I. Scher, on the brief), Quinn Emanuel Urquhart & Sullivan LLP, New York, NY

Appeal from a judgment of the United States District Court for the Southern District of

New York (Lewis J. Liman, District Judge).

UPON DUE CONSIDERATION, IT IS HEREBY ORDERED, ADJUDGED, AND

DECREED that the judgment of the district court is AFFIRMED.

Plaintiff-Appellant Jackpocket, Inc. (“Jackpocket”) appeals from a judgment of the United

States District Court for the Southern District of New York (Lewis J. Liman, District Judge),

entered on December 29, 2022. Following a bench trial, the district court ruled in favor of

Defendants-Appellees Lottomatrix NY LLC, Lottomatrix Corporation, Lottomatrix Operations

Limited, Lottomatrix Malta Limited, and 99 Dynamics Limited (together, “Jackpot.com”) with

respect to all of Jackpocket’s claims. Jackpocket, an incumbent in the U.S. lottery courier services

market, filed a lawsuit against Jackpot.com, a planned entrant into that market, in July 2022. That

lawsuit claimed, inter alia, that Jackpot.com’s use of its mark constitutes federal trademark

infringement, in violation of Section 32(1) of the Lanham Act,

(1); trademark

infringement, false designation or origin, and unfair competition, in violation of Section

43(a)(1)(A) of the Lanham Act,

(a)(1)(A); and common law trademark

infringement and unfair competition, in violation of New York common law and New York

General Business Law § 360(o). The district court held a bench trial on the merits in November

2022, pursuant to Federal Rule of Civil Procedure 65, and returned a verdict for Jackpot.com on

all counts. Jackpocket now appeals the district court’s judgment as to its state and federal

trademark infringement and unfair competition claims. We assume the parties’ familiarity with

the case.

2 “In reviewing the decision of a district court following a bench trial, we review findings of

fact for clear error and conclusions of law de novo.” Hamilton Int’l Ltd. v. Vortic LLC,

(2d Cir. 2021). 1 “[W]here there are two permissible views of the evidence, the

factfinder’s choice between them cannot be clearly erroneous.”

“To prevail on a trademark infringement claim under the Lanham Act, the plaintiff must

show that: (1) plaintiff owns a valid protectable mark; and (2) defendant’s use of a similar mark is

likely to cause consumer confusion as to the origin or association of the goods or services.” Vans,

Inc. v. MSCHF Prod. Studio, Inc.,

, 135–36 (2d Cir. 2023). “[I]n either a claim of

trademark infringement under § 32 or a claim of unfair competition under § 43, a prima facie case

is made out by showing the use of one’s trademark by another in a way that is likely to confuse

consumers as to the source of the product.” Lois Sportswear, U.S.A., Inc. v. Levi Strauss & Co.,

(2d Cir. 1986); see Brennan’s, Inc. v. Brennan’s Rest., L.L.C.,

(2d Cir. 2004). Similarly, “[u]nder New York law, proof of likelihood of confusion as to

source is essential to prevail on either [a trademark infringement or unfair competition claim].”

Sally Gee, Inc. v. Myra Hogan, Inc.,

(2d Cir. 1983).

Thus, the common inquiry governing all of Jackpocket’s claims on appeal is whether it has

established that Jackpot.com’s use of its mark in U.S. commerce is likely to cause consumer

confusion about the source of Jackpot.com’s product offering.

“This Court applies the eight-factor test identified in Polaroid to assess the likelihood that

an allegedly infringing product will create consumer confusion.” Vans,

.

The eight factors are: (1) strength of the trademark; (2) similarity between the two marks; (3) proximity of the products and their competitiveness with one another;

1 Unless otherwise indicated, in quoting cases, all internal quotation marks, alteration marks, emphases, footnotes, and citations are omitted.

3 (4) likelihood the prior owner may ‘bridge the gap’ in the markets for their products; (5) evidence of actual consumer confusion; (6) the defendant’s good faith in adopting its imitative mark; (7) quality of the defendant’s product compared with the plaintiff’s product; and (8) sophistication of the buyers.

(citing Polaroid Corp. v. Polarad Elecs. Corp.,

(2d Cir. 1961)). “[T]he mere

possibility of confusion is not enough. . . . [A] plaintiff must prove a probability of confusion

affecting numerous ordinary prudent purchasers.” Tiffany & Co. v. Costco Wholesale Corp.,

, 84 (2d Cir. 2020). “[A] trial court’s findings as to each Polaroid factor are typically

reviewed for clear error, with the court’s weighing of those factors reviewed de novo.” Hamilton,

(emphasis added). However, “insofar as the determination of whether one of the

Polaroid factors favors one party or another involves a legal judgment—which it often does—we

must review that determination de novo.” Souza v. Exotic Island Enters., Inc.,

(2d Cir. 2023). Particularly, “determinations as to whether the senior user’s mark is sufficiently

fanciful or arbitrary in relation to the senior user’s area of commerce to be deemed a strong mark,

or in contrast, merely identifies or describes the senior user’s commerce so as to be unenforceable

or weak,” “may involve issues of law” and thus are reviewed de novo to the extent that they do.

Guthrie Healthcare Sys. v. ContextMedia, Inc.,

(2d Cir. 2016); see RiseandShine

Corp. v. PepsiCo, Inc.,

(2d Cir. 2022).

The district court concluded that, of the Polaroid factors, the strength of Jackpocket’s

trademark, the similarity between the two trademarks, evidence of actual consumer confusion,

Jackpot.com’s good faith in adopting its mark, and the sophistication of consumers favored

Jackpot.com; the proximity of the products favored Jackpocket; and the likelihood of “bridging

the gap” and the products’ respective quality were neutral. The district court concluded that the

factors balanced in Jackpot.com’s favor and accordingly held that Jackpot.com’s use of its mark

was not likely to cause consumer confusion. Jackpocket challenges the district court’s conclusion

4 only as to the strength of the mark, the similarity of the marks, and actual consumer confusion.

Upon review of the record and the applicable law, we affirm the district court’s judgment for

substantially the same reasons as those set forth in its thorough and well-reasoned opinion.

I. Strength of the Mark

“The strength of a mark depends ultimately on its distinctiveness, or its origin-indicating

quality, in the eyes of the purchasing public. The strength of a trademark is assessed based on

either or both of two components: (1) the degree to which it is inherently distinctive; and (2) the

degree to which it has achieved public recognition in the marketplace, sometimes called acquired

strength.” RiseandShine,

; see Souza,

. The strength-of-mark factor

is “often the most important.” RiseandShine,

.

A. Inherent Strength

“This inquiry distinguishes between, on the one hand, inherently distinctive marks—marks

that are arbitrary or fanciful in relation to the products (or services) on which they are used—and,

on the other hand, marks that are generic, descriptive or suggestive as to those goods. The former

are the strong marks.” Virgin Ents. Ltd. v. Nawab,

, 147 (2d Cir. 2003); see also

RiseandShine,

(“[S]trong marks command a wider scope of protection than weak

marks. . . . In contrast, trademark law offers a much narrower scope of protection to marketers

who seek to bar others from using words that describe or suggest the products or the virtues of

their products.”). “To describe different degrees of inherent distinctiveness, the trademark law

utilizes four categories. In order of ascending strength, they are: (1) generic, (2) descriptive,

(3) suggestive, and (4) arbitrary or fanciful.” RiseandShine,

. “When a mark so

clearly evokes the claimed virtues of the product it references, that mark, although perhaps

muscular as a marketing tool, is weak under the trademark law.”

. That the mark is

5 suggestive does not end the inquiry: “[i]f the suggestion conveyed by a suggestive mark conjures

up an essential or important aspect of the product, while the description conveyed by a descriptive

mark refers to a relatively trivial or insignificant aspect of the product, the particular suggestive

mark could be deemed weaker than the descriptive [mark].”

The district court did not err by concluding that despite Jackpocket’s mark

(JACKPOCKET) being suggestive, it is inherently weak. JACKPOCKET incorporates a generic

term commonly used in the lottery and gaming industry—“jackpot”—in a rather conspicuous

manner; indeed, Jackpocket’s advertising focuses more heavily on the “jackpot” component of its

mark than on the “pocket” component. See Jackpocket, Inc. v. Lottomatrix NY LLC,

, 221 (S.D.N.Y. 2022) (“When an individual first opens Jackpocket’s application,

the word ‘jackpot’ first appears before expanding into Jackpocket’s mark.”). There is a tight

logical association between “jackpot” and the reason one plays the lottery—to win the top prize,

the jackpot—requiring few mental deductions to arrive at lottery courier services, a mode by which

one acquires lottery tickets, from JACKPOCKET. JACKPOCKET, which is barely distinct from

“jackpot” in appearance or sound, thus “clearly evokes the claimed virtues of the product it

references.” RiseandShine,

. Moreover, that the term “jackpot” is so frequently

used in the lottery and internet gaming industry “further underlines the weakness of the mark.”

At bottom, “[t]rademark law does not offer robust protection to those who demand the exclusive

right to use words that describe or suggest a product or its virtues.”

.

Jackpocket’s criticisms of the district court’s opinion on this score are not persuasive. First,

the district court did not err by focusing on “jackpot”—the main component of Jackpocket’s

mark—because a mark may be broken down into its generic components to measure the composite

mark’s inherent strength. See Car-Freshner Corp. v. Am. Covers, LLC,

(2d Cir.

6 2020) (reasoning that the mark BAYSIDE BREEZE was weaker because the word “Breeze” is

used in many third-party marks); Streetwise Maps, Inc. v. VanDam, Inc.,

(2d

Cir. 1998) (concluding that the mark STREETWISE was “not particularly distinctive in the

marketplace” because “[o]ther map manufacturers have used the word ‘street’ in their product’s

names”). In any event, its focus on “jackpot” was not at the expense of the composite mark: “By

joining ‘jackpot’ with ‘pocket,’ the mark conjures up in an immediate sense the essential part of

the product offered by Jackpocket—entryway into the opportunity to win the top prize in a lottery.”

Jackpocket, 645 F. Supp. 3d at 241. Second, contrary to Jackpocket’s assertion, the district court

did measure the strength of JACKPOCKET in relation to lottery courier services instead of the

broader lottery and gaming market. See id. at 240–41 (reasoning that “JACKPOT does not

immediately describe what a [lottery] courier service does” in finding the mark suggestive, but

that the mark is nevertheless weak due to the immediacy of association between “jackpot” and the

relevant product market—lottery tickets “for sale either physically (through the piece of paper) or

virtually (through a lottery courier service)”). And Jackpocket’s argument that the district court

failed to appreciate that “jackpot” can also be associated with gambling endeavors aside from the

lottery lacks merit. In RiseandShine Corp. v. PepsiCo, Inc., this Court acknowledged that the mark

RISE for a coffee beverage could be also associated with “tea, bottled beverages, energy drinks,

soft drinks, drinkable health supplements, cafes, yogurts, and granolas,”

, but

nevertheless focused its strength analysis on the connection between RISE and coffee beverages.

Here, the set of products with which JACKPOCKET could be associated (gambling-related

products) is even more narrow than those with which RISE could be associated (beverages, food,

supplements, and many other products).

7 Finally, to the extent Jackpocket contends that the district court erred by either

underappreciating the way in which JACKPOCKET transcends “jackpot” by creating a

portmanteau with another common word (“pocket”), or by homing in too much on the relevant

product as lottery tickets as opposed to lottery courier services, any such error would be harmless

because the immediacy between JACKPOCKET and lottery courier services, while weaker than

between “jackpot” and lottery tickets, is still strong enough to render the mark weak under

trademark law. In RiseandShine, we held that the connection between RISE and a coffee beverage

was too obvious to accord the suggestive mark strength, see

, which is arguably a

more attenuated association than in this case, where there is a more immediate association based

on auditory and visual cues between JACKPOCKET and lottery courier services than between

RISE and a coffee beverage.

B. Acquired Commercial Strength

An inherently weak mark may nevertheless acquire strength through “public recognition

in the marketplace” or “longevity of use.” RiseandShine,

; see Guthrie

Healthcare Sys.,

n.4. Courts look to six factors to determine whether a mark has

acquired commercial strength: “[1] advertising expenditures, [2] consumer studies linking the

mark to a source, [3] unsolicited media coverage of the product, [4] sales success, [5] attempts to

plagiarize the mark, and [6] the length and exclusivity of the mark’s use.” Car-Freshner,

. Jackpocket does not challenge the court’s findings that its consumer study lacked probative

value (factor two), it did not establish unsolicited media coverage (factor three), there were no

attempts to plagiarize its mark (factor five), and the length and exclusivity of use weighed against

acquired strength (factor six), but rather challenges only its findings as to its sales success (factor

four) and advertising expenditure (factor one).

8 The district court did not err by concluding that although Jackpocket had spent substantial

sums on advertising and achieved significant sales success, these measures, without more, are

insufficient indicia of acquired commercial strength. The district court appropriately accorded

Jackpocket’s evidence of significant revenue and advertising spend little weight due to its recency.

This makes sense because the more recent the commercial success and the advertising spend, the

weaker they are as proxies for commercial strength, as there has been comparatively little time to

establish brand recognition. While some marks may be able to attain fame over a short period of

time, the record did not compel that conclusion here.

The district court also appropriately discounted Jackpocket’s evidence of significant

advertising expenditures based on an expert report explaining that the predominant type of

advertising used—traffic-steering—is “used to direct Internet traffic to a web site or application

without relying on or building upon the brand’s unique features.” Jackpocket, 645 F. Supp. 3d at

247. It also appropriately noted that Jackpocket’s sales peaks coincided with the peaks of lotteries’

prize pots, undermining the notion that increased revenue is due to strong brand recognition rather

than the product offering increasing in value.

In sum, the relevant inquiry is not whether the incumbent spent significant sums on

marketing or earned significant sales revenue; it is instead whether those “[marketing] efforts were

effective in causing the relevant group of consumers to associate [the mark with the product

offering],” Centaur Commc’ns, Ltd. v. A/S/M Commc’ns, Inc.,

(2d Cir. 1987),

or whether the circumstances of that sales success were independently probative of increased brand

recognition. Jackpocket’s evidence fails to meet those requirements.

II. Similarity of the Marks

In determining the similarity of the marks, “courts must analyze the mark’s overall

9 impression on a consumer, considering the context in which the marks are displayed and the

totality of factors that could cause confusion among prospective purchasers.” Louis Vuitton

Malletier v. Dooney & Bourke, Inc.,

(2d Cir. 2006). It is error to

“inappropriately focus[] on the similarity of the marks in a side-by-side comparison instead of

when viewed sequentially” if the marks would not appear side by side “in the context of the

marketplace.”

But “[u]tilizing a side-by-side comparison can be a useful heuristic means of

investigating similarities and differences in respective designs, so long as a court maintains a focus

on the ultimate issue of the likelihood of consumer confusion.”

“The fact that the two marks

appear similar is not dispositive. Rather, the question is whether such similarity is more likely

than not to cause consumer confusion.” Brennan’s,

.

The district court did not err by concluding that Jackpocket and Jackpot.com’s marks are

not so similar as to be likely to cause consumer confusion. The marks use different fonts and

different colors; Jackpocket’s uses a combination of uppercase and lowercase letters, while

Jackpot.com’s includes only one uppercase letter; and Jackpocket’s appears in a straight line on a

single plane, while Jackpot.com’s is arced and appears on two planes. The primary similarity

between the marks is the shared word “jackpot,” which, for the reasons discussed above, is a

feature that undermines rather than strengthens the trademark protection JACKPOCKET merits.

Moreover, comparing the marks in the context of their respective websites does not increase their

similarity—if anything, it further distinguishes them, as the parties’ website designs are completely

different.

Jackpocket criticizes the district court for relying too heavily on a side-by-side comparison

of the marks because they would not appear next to each other in the marketplace and, relatedly,

for failing to compare the marks in all of the contexts in which a consumer could confront them in

10 the marketplace. Neither criticism is persuasive. First, the district court did not solely compare

the marks side by side—it also compared them in the context of their websites. And while it is

true that the district court did not consider every possible presentation of Jackpocket’s mark in the

marketplace, Jackpocket does not explain why considering the marks in that way would have

revealed such a heightened degree of similarity between the marks that the district court would

have reached a different result. 2

III. Actual Confusion

“When two marks have existed side by side in commerce, the evidence of actual confusion

among consumers, or of absence of confusion, can be very helpful in determining whether a

likelihood of confusion results from the junior’s use of a mark similar to the senior mark.” TCPIP

Holding Co. v. Haar Commc’ns, Inc.,

(2d Cir. 2001). “[T]he relevant confusion

is that which affects the purchasing and selling of the goods or services in question.” Lang v. Ret.

Living Publ’g Co.,

(2d Cir. 1991); see also

(“[T]rademark infringement

protects only against mistaken purchasing decisions and not against confusion generally.”).

Accordingly, evidence of actual confusion must “link[] the confusion . . . to any potential or actual

effect on consumers’ purchasing decisions.”

(emphasis added).

The district court did not err in concluding that Jackpocket failed to establish actual

confusion. Jackpocket does not challenge the district court’s decision to discount its consumer

survey, which is often the most powerful evidence of actual confusion, see Star Indus., Inc. v.

Bacardi & Co.,

, 387–88 (2d Cir. 2005), due to methodological flaws. Without a

2 Jackpocket does argue that it advertises over the radio and that the two marks bear a striking auditory similarity. But, as mentioned above, this similarity is based on the common word “jackpot,” which does not entitle JACKPOCKET to greater trademark protection.

11 consumer survey, all that remains is a handful of anecdotes of journalists, potential investors,

customers, and other non-customers mixing up Jackpocket and Jackpot.com in various contexts,

including several inquiries directed to Jackpocket’s support department from Jackpot.com

customers. Jackpocket argues that the district court erred in excluding anecdotes that occurred

before Jackpot.com announced plans to enter the U.S. market, contending that such evidence may

be especially probative precisely because Jackpot.com had not entered the U.S. market yet,

meaning that confusion would likely only worsen if its mark was actually in commerce. But even

if the district court so erred, this evidence is de minimis, and the district court did not clearly err

by finding such evidence insufficient to establish actual confusion. See Star Indus., 412 F.3d at

387–88 (finding evidence that “consisted entirely of testimony by several interested witnesses

recounting a handful of anecdotes, including a number of hearsay statements by unidentified and

unidentifiable declarants,” insufficient to establish consumer confusion where plaintiff “fail[ed] to

present its own consumer survey”). And, again, the confusion may have well been a result of the

shared word “jackpot,” which does not weigh in Jackpocket’s favor.

In any event, even if the district court erred and should have concluded that the actual

consumer factor weakly favors Jackpocket, given that all of the other factors but one are either

neutral or favor Jackpot.com, this determination would not have altered the ultimate balancing of

the Polaroid factors.

* * *

Accordingly, we AFFIRM the judgment of the district court.

FOR THE COURT:

Catherine O’Hagan Wolfe, Clerk

12