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Valador, Inc. v. HTC Corp.

United States District Court, E.D. Virginia, Alexandria Division

March 15, 2017

VALADOR, INC., Plaintiff,
HTC CORPORATION, et al., Defendants.


          T. S. Ellis, III United Stales District Judge.

         At issue in this trademark infringement case is whether plaintiff's expert on the question of likelihood of confusion should be excluded pursuant to Rule 702, Fed. R. Evid., and Daubert v. Merrell Dow Pharms., Inc., 509 U.S. 579 (1993). As the matter has been fully briefed, and because oral argument would not aid the decisional process, [1] this question is now ripe for resolution.


         This action arises from defendants' alleged trademark infringement on plaintiff's registered mark, “VIVE, ” which plaintiff claims to use in connection with the sale of its software. Plaintiff, Valador, Inc., is a small Virginia stock corporation headquartered in Herndon. The three defendants in this action are (1) HTC Corporation, a Taiwanese corporation, (2) HTC America, Inc., a Washington state corporation headquartered in Seattle, and (3) Valve Corporation, a Washington state corporation headquartered in Bellevue, Washington. Plaintiff alleges that each defendant has infringed on plaintiff's VIVE mark through defendants' marketing, advertising, and sale of a headset, the “HTC Vive, ” capable of running software that renders three-dimensional images. Yet, plaintiff does not label any of its end products or deliverables with its “VIVE” mark; rather, plaintiff inserts its “VIVE” mark in the text of its service contracts, the overwhelming majority of which are for government agencies. See Valador, Inc. v. HTC Corp., No. 1:16-cv-1162 (E.D. Va. Mar. 3, 2017) (Hr'g Tr.) at 32:2-16; 34:6-13.[2]

         To demonstrate trademark infringement, plaintiff must prove “that it ha[d] a valid, protectible trademark and that the defendant's use of a colorable imitation of the trademark is likely to cause confusion among consumers.” Synergistic Int'l, LLC v. Korman, 470 F.3d 162, 171 (4th Cir. 2006) (quotation marks omitted). Of course, the touchstone of a trademark infringement claim is whether “the defendant's actual practice is likely to produce confusion in the minds of consumers about the origin of the goods or services in question.” George & Co., LLC v. Imagination Entm't Ltd., 575 F.3d 383, 393 (4th Cir. 2009) (quoting CareFirst of Md., Inc. v. First Care, P.C., 434 F.3d 263, 267 (4th Cir. 2006)). Courts have recognized two forms of confusion in trademark infringement cases: “forward confusion” and “reverse confusion.” The traditional pattern of forward confusion occurs “when customers mistakenly think that the junior user's goods or services are from the same source as or connected with the senior user's goods or services.” 4 McCarthy on Trademarks and Unfair Competition § 23:10 (4th ed. 2017). Thus, a forward confusion case here would mean that consumers mistakenly think that the HTC Vive is connected with Valador. By contrast, in a reverse confusion case, [3] the junior user overwhelms the market such that “customers purchase the senior user's goods under the mistaken impression that they are getting the goods of the junior user.” Id.[4] Here, reverse confusion would occur if someone purchasing Valador's Vive software was under the mistaken impression that they were buying an HTC Vive. Thus, to prove likelihood of confusion under a reverse confusion theory, plaintiff must show “that because of the similar marks, [Valador]'s customers are likely [and mistakenly] to … think that [HTC] is the source of, or is sponsoring or backing, [Valador]'s goods or services.” Id. Although plaintiff has not unequivocally chosen a theory, plaintiff's counsel at the summary judgment hearing relied exclusively on reverse confusion.[5]

         To support its claim of likelihood of confusion, plaintiff hired Christopher Bonney, who purports to be an expert in marketing, marketing research, and conducting market surveys. At plaintiff's request, Bonney performed a survey ostensibly to determine whether there is or likely will be confusion regarding the source of the parties' products using the “Vive” marks.[6]Specifically, “[t]he purpose of this study was to determine whether there is or will be confusion between two companies using similar marks to promote similar products; namely, computer software applications for three dimensional (3D) presentation of information and event simulation[.]'” Bonney Report (“Report”) at 5. The universe for the survey comprised “men between the ages of 18 and 34 who enjoy virtual reality entertainment, ” which is, in Bonney's view, the target audience for the HTC Vive. Id. at 4. The survey defined “virtual reality” as “video games or computer generated simulation of a 3D image or environment that can be interacted with in a seemingly real or physical way.” Id. at 20. Although Bonney testified in his deposition that this definition of “virtual reality” is common, he could not remember where he obtained that definition.

         The survey asked four sets of questions:

(1) The first set of questions “addressed the extent to which the Valador and HTC VIVE products are perceived by members of the HTC target audience to be described by” the Patent and Trademark Office's category purportedly “in question” in the case, which Bonney defined as “computer software application for three dimensional (3D) presentation of information and event simulation.” Id. at 13.
a. Respondents were orally presented with one-sentence descriptions purportedly of plaintiff's and defendants' products, and asked whether they believed these products fit within the trademark category quoted above. Id. The survey described plaintiff's product, identified as “Product A, ” as “[a] software program that integrates gaming technology, 3D modeling and realworld or simulation information to give the user an interactive three-dimensional (3D) experience.” Id. The survey described the HTC Vive, identified as “Product B, ” as “[a] gaming system that uses a headset and software combined with gaming controllers to give the user a 3D virtual reality gaming experience.” Id.
(2) The second set of questions claimed to address “perceived similarities between Valador Vive and HTC Vive.” Id. at 14. The survey asked respondents to state whether the parties' products, as described above, were “very alike, ” “somewhat alike, ” “not very alike, ” “not at all alike.” A respondent could also answer “I don't know.” Id. at 21. The survey also asked, “How likely do you think it is that there will be confusion between the two products?” and offered the same answer choices. Id.
(3) The third set of questions sought to evaluate “perceived similarities between Valador and HTC VIVE names.” Id. at 14. The survey informed respondents that Product A “is called VIVE” and Product B “is also called VIVE.” Id. at 22. Thereafter, respondents were shown two seemingly identical, black-and-white images of the word “VIVE, ” without any other styling, words, symbols or images that typically accompany defendants' alleged use of the “VIVE” mark in the marketplace. The survey also placed the labels, “Product A” and “Product B, ” beneath these black-and-white images. Id. Importantly, the “VIVE” images respondents saw were not the actual images that plaintiff and defendants use with respect to their “VIVE” marks.[7]Nor did the survey provide the participants with the actual marks as used in commerce.
a. The respondents were then asked “How alike or different would you say these two names are?” and provided the answer choices, “Very alike, ” “Somewhat alike, ” “Not very alike, ” “Not at all alike, ” and “I don't know.” Id. at 22.
b. The survey offered the same answer choices to the question, “How likely do you think it is that there will be confusion between the two product names?” Id.
c. Next, the survey asked, “Do you think these two ways of showing the VIVE name look like they're coming from the same company, or do they look [like] they come from two different companies?” Id. The respondents could answer “The same company, ” “Different companies, ” or “I don't know.” Id.
d. The respondents were then asked, “How likely do you think it is that there will be confusion between the two VIVE names if they are used by different companies selling similar products?” The answer choices were “Very likely, ” “Somewhat likely, ” “Not very likely, ” “Not at all likely, ” and “I don't know.” Id.
(4) The last set of questions asked participants about their understanding of the ® and ™ symbols.

         Based on these questions and the survey responses, Bonney offered the following conclusions:

(1) “The persons interviewed in the Survey adequately represent the opinions of those consumers most likely to purchase virtual reality products, ” id. at 6;
(2) “The Defendants' use of the VIVE mark in commerce is likely to cause confusion among consumers as to the source of the parties' respective VIVE-branded products, ” id. at 7;
(3) “The Defendants' use of the VIVE mark in commerce is likely to cause confusion among consumers as to whether HTC and Valador are the same company, ” id.;
(4) “The Defendants' use of the VIVE mark in commerce has caused confusion among consumers as to the source of VIVE branded products; the Survey respondents believe that Valador's VIVE products and HTC's VIVE products come from the same company, ” id.;
(5) “There is likely to be confusion among consumers with Valador and HTC using the VIVE term as they sell similar products, ” id.; and
(6) “Consumers of virtual reality products believe Valador's and HTC's products are similar, ” id.

         Bonney also filed a rebuttal report challenging defendants' expert's use of the standard “Eveready” [8] methodology for analyzing likelihood of confusion in trademark cases.

         Defendants have moved pursuant to Rule 702, Fed. R. Evid., to exclude Bonney's report, rebuttal report, opinions, and testimony. Specifically, defendants contend (1) that Bonney is unqualified, and (2) that Bonney used unreliable principles and methods to reach his conclusions. In the alternative, defendants contend that Bonney's testimony must be excluded as unfairly prejudicial and misleading, pursuant to Rule 403, Fed. R. Evid.

         For the reasons that follow, Bonney's survey, findings, reports, and conclusions must be excluded pursuant to Rule 702, Fed. R. Evid.[9]


         Rule 702, Fed. R. Evid., contemplates a gatekeeping role for the district court. Specifically, “trial judges act as gatekeepers ‘to ensure that any and all scientific testimony … is not only relevant, but reliable.'” Cooper v. Smith & Nephew, Inc., 259 F.3d 194, 199 (4th Cir. 2001) (quoting Daubert, 509 U.S. at 588). This gatekeeping role is essential because juries are often unequipped to discern flaws in an expert's methods or findings. Even a rigorous cross-examination may be inadequate to ensure that a jury looks behind the veneer of expertise and affords the testimony what weight it deserves. See Id. (“[D]ue to the difficulty of evaluating their testimony, expert witnesses have the potential to be both powerful and quite misleading.” (quotation marks omitted)). Thus, “given the potential persuasiveness of expert testimony, proffered evidence that has a greater potential to mislead than to enlighten should be excluded.” Westberry v. Gislaved Gummi AB, 178 F.3d 257, 261 (4th Cir. 1999). The proponent of expert testimony therefore has the burden of establishing admissibility by a preponderance of proof. Cooper, 259 F.3d at 199.

         To begin with, Rule 702 requires that the putative expert be qualified by “knowledge, skill, experience, training, or education[.]” Rule 702, Fed.R.Evid. If qualified, the witness may offer an expert opinion only if “(a) the expert's scientific, technical, or other specialized knowledge will help the trier of fact to understand the evidence or to determine a fact in issue; (b) the testimony is based on sufficient facts or data; (c) the testimony is the product of reliable principles and methods; and (d) the expert has reliably applied the principles and methods to the facts of the case.” Id.

         In determining whether expert testimony is reliable, the trial court has “considerable leeway, ” Kumho Tire Co. v. Carmichael, 526 U.S. 137, 152 (1999), and a “great deal of discretion, ” United States v. Dorsey, 45 F.3d 809, 814 (4th Cir. 1995). Indeed, there are several factors that “bear on the inquiry” whether expert opinions are reliable, including:

(1) whether the particular scientific theory “can be (and has been) tested”; (2) whether the theory “has been subjected to peer review and publication”; (3) the “known or potential rate of error”; (4) the “existence and maintenance of standards controlling the technique's operation”; and (5) whether the technique has achieved “general acceptance” in the relevant scientific or expert community.

United States v. Crisp, 324 F.3d 261, 266 (4th Cir. 2003) (quoting Daubert, 509 U.S. at 593-94). Ultimately, “the objective of [the] gatekeeping requirement is to ‘make certain than an expert … employs in the courtroom the same level of intellectual rigor that characterizes the practice of an expert in the relevant field.” Cooper, 259 F.3d at 200 (quoting Kumho Tire, 526 U.S. at 152).

         Consumer surveys are generally admissible in trademark infringement cases. Indeed, “[u]sually, objections based on flaws in the survey's methodology are properly addressed by the trier of fact.” PBM Prods., LLC v. Mead Johnson & Co., 639 F.3d 111, 123 (4th Cir. 2011) (holding that the district court did not abuse its discretion in admitting flawed expert testimony). Thus, the Fourth Circuit has observed that although “there will be occasions when the proffered survey is so flawed as to be completely unhelpful to the trier of fact and therefore inadmissible, such situations will be rare.” Id. (quoting AHP Subsidiary Holding Co. v. Stuart Hale Co., 1 F.3d 611, 618 (7th Cir. 1993)). Importantly, however, an expert's survey and conclusions may be excluded under Rule 702 if the survey “was fundamentally flawed” and suffers from “fatal flaws, ” as opposed to “mere technical flaws.” Citizens Fin. Grp., Inc. v. Citizens Nat'l Bank of Evans City, 383 F.3d 110, 121 (3d Cir. 2004) (holding that the district court properly excluded a likelihood of confusion survey that (1) used vague and imprecise language and (2) surveyed consumers outside of the relevant customer base).[10] A likelihood of confusion survey is properly excluded if the witness does not qualify as an expert, or if the survey was not “conducted according to accepted principles” and in “a statistically correct manner.” M2 Software, Inc. v. Madacy Entm't, 421 F.3d 1073, 1087 (9th Cir. 2005) (upholding exclusion of proffered likelihood of confusion survey). In addition, in analyzing the reliability of consumer surveys in Lanham Act cases, the Fourth Circuit has relied on the well-known treatise, McCarthy on Trademarks. See PBM Prods., 639 F.3d at 121-23.

         These principles, applied here, point persuasively to the conclusion that ...

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