American International Group Inc. convinced a Missouri federal court that the doctrine of “laches” barred family-owned AIG Agency Inc. from suing it over trademark infringement. But the lower court improperly applied the doctrine and critical questions remained unanswered in the case, the US Court of Appeals for the Eighth Circuit said May 13 in reversing AIG’s win.
The case cuts to the heart of the purpose and machinations of laches, a general court-created defense that can be raised in trademark cases, as the Lanham Act lacks a statute of limitations.
It also shows how “progressive encroachment” can complicate the fact-intensive application of the doctrine, attorneys say. Changes in circumstances can alter the likelihood of consumer confusion—the critical issue in infringement cases—meaning a mark that doesn’t infringe today may infringe tomorrow.
“It’s not a slam dunk, get-out-of-jail-free card,” trademark attorney Julia Anne Matheson of Potomac Law Group LLC said.
Prohibiting unreasonable delay in trademark cases serves to block companies from letting damages pile up or causing a competitor to invest in a brand for years before a court strips its rights.
A question crucial to whether laches applies is when a prospective plaintiff learned—or should have learned—enough to know it has a case, Matheson said. The Eighth Circuit faulted the lower court for not analyzing whether there was actually infringement before 2012, when AIG Agency said AIG’s marketing changed significantly.
“Laches as a defense is extremely fact specific, and it’s not always going to be the panacea that just knocks out a case when there are a lot of mediating facts,” Matheson said.
AIG declined to comment. AIG Agency didn’t respond to a request for comment.
Decades of Coexistence
The St. Louis-area AIG Agency claims it began calling itself AIG in 1958. Meanwhile, American Asiatic Underwriters—founded in 1919 by an American in Shanghai—didn’t become AIG until 1967.
AIG sent cease-and-desist letters to AIG Agency in 1995 and 2008, and AIG Agency responded by asserting its rights to use the mark in Missouri and Illinois. After the 2008 exchange, AIG sent another letter saying it didn’t object to AIG Agency’s use of AIG in St. Charles and St. Louis counties in Missouri, but threatened legal action if it overstepped.
AIG Agency’s 2017 lawsuit argued that in 2012 AIG switched from selling its insurance products through brokers and agencies to aggressively marketing directly to consumers, leading to consumer confusion. The US District Court for the Eastern District of Missouri rejected that argument. It said uncontroverted evidence showed AIG sold directly to consumers for decades, and that both had long competed in business-to-business markets as well.
But the Eighth Circuit noted the district court didn’t apply the circuit’s six-factor likelihood of consumer confusion test to establish AIG Agency should have known it had a pre-2012 claim. It faulted the court for finding AIG met its burden of showing “inexcusable delay” under the laches doctrine without meaningfully analyzing several key factors.
All laches cases involve a judgment call as to when a party learned or should have learned it had a claim, trademark law professor Mark McKenna of UCLA said. That’s “even more true of a ‘progressive encroachment’ case,” he said, referencing a doctrine applied when circumstances change and confusion factors shift over time.
“Now you’re asking when did they get past the tipping point, and that requires some kind of legal judgment,” McKenna said. “The story they’re telling is ‘there wasn’t always a likelihood of confusion, but there is now.’ The question is when was that true.”
Failing to Weigh Factors
The Eighth Circuit noted that actual confusion in the marketplace is often considered the best evidence in the analysis.
AIG offered “little-to-no evidence of actual confusion in Missouri and Illinois” before 2012. Meanwhile AIG Agency presented several cases of actual confusion starting in 2013 and evidence of a lack of confusion before, the court said.
The appeals court also rejected the idea that AIG Agency had to take AIG’s word that confusion over the marks existed when the 1995 and 2008 cease-and-desist letters were sent. Matheson added AIG’s lack of follow-up after their letters and its 2008 response may help the AIG Agency’s point.
“The response was just ‘stay in your lane,’ which suggested they could continue to coexist,” Matheson said. “That would favor the agency’s argument that they really could coexist until 2012.”
The Eighth Circuit criticized the district court for not weighing any uncertainties in favor of AIG Agency, since it was AIG seeking the quick win.
The district court credited evidence that the companies competed, but failed to analyze what really mattered: the degree to which they did, the appeals court said. Meanwhile AIG Agency’s evidence—and testimony from AIG employees—called into question how much competition there was, including whether AIG’s consumer products were branded as AIG, the court said.
The battle to define the relevant consumers—specifying which consumers of what products would need to be confused—"can make or break a case completely,” trademark attorney Jennifer Lantz of Duane Morris LLP said.
“If the relevant consumers don’t overlap somewhere, all of the surveys in the world aren’t going to show a likelihood of confusion,” said Lantz, who said she was struck not necessarily by the appeals court’s conclusion, but by how it “was really giving the trial court a hard time, saying ‘you did not do your jobs.’”
The court will have to untangle these factual questions about “progressive encroachment” on remand, attorneys said. Identical marks can be used on different goods as long as consumers aren’t confused, so the question becomes when it became apparent there was a likelihood of consumer confusion. The appeals court said that requires analysis the district court failed to conduct.
“The basic rule is ‘whoever gets there first,’” McKenna said of trademark rights. “But what’s ‘there’?”