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Financial Systems Software Ltd. has lost its trademark suit against Financial Software Systems Inc. now that a federal appeals court has upheld a ruling that said both companies’ names are “generic” and therefore entitled to no protection. The unanimous three-judge panel also agreed with the lower court’s decision that only one company — Financial Software Systems, which has used the mark continuously since 1992 — can use the alphanym FSS in its logo. The 14-page opinion in Financial Systems Software Ltd. v. Financial Software Systems Inc. upholds a December 1999 decision by Senior U.S. District Judge Norma L. Shapiro that said the three words that appear in both companies’ names are each generic and that neither company’s ordering of the words achieved any higher level of protection. “The purpose of trademark protection is to protect the public from confusion and enable the buyer to distinguish the goods of one producer from the goods of others. Generic marks are not protected because competitors must use these words to describe the product; to hold otherwise would stifle competition,” Shapiro wrote. Now the 3rd U.S. Circuit Court of Appeals has agreed. Writing for the court, U.S. Circuit Judge Richard L. Nygaard said Shapiro properly applied the “primary significance” test. The “primary significance” test was first announced in 1938 in Kellogg Co. v. National Biscuit Co. when the U.S. Supreme Court held that the term “shredded wheat” is a generic term even though it was primarily associated with Nabisco. The test requires that a court determine whether the primary significance of the disputed term in the minds of the consuming public is not the product but the producer. Nygaard said the court must first decide whether the alleged trademark refers to a product category or “genus,” rather than a brand or “species.” “If the alleged mark refers to a product genus, it is usually generic, even if consumers tend to associate the alleged mark primarily with the producer,” Nygaard wrote. The 3rd Circuit expanded on the primary significance test in 1986 with A.J. Canfield Co. v. Honickman by creating a test for differentiating between product brand and product genus. The A.J. Canfield test says: “If a producer introduces a product that differs from an established product class in a particular characteristic, and uses a common descriptive term of that characteristic as the name of the product, then the product should be considered its ‘own genus.’” Under the test, Nygaard said, a product genus is generic if “a competitor needs to use the term to describe its product” and “no commonly used alternative effectively communicates the same functional information.” Nygaard said the inquiry can get complicated but that in Financial Systems Software’s case, “the answer is fairly simple.” Common sense, he said, shows that “financial systems software describes a broad category of products” and that each of the three words is a “common descriptive term.” And because the alleged trademark is generic, Nygaard said, “any evidence of secondary meaning is irrelevant.” Financial Systems was represented by Frederick A. Teece of McShea & Teece. Financial Software was represented by Richard L. McMonigle and Stephan Matanovic of Post & Schell.

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