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In a battle over so-called “smart cards,” a federal judge in New York has found that there was no infringement of the trademark SMARTONE by one called ONESMART. Southern District Judge Denise Cote made the ruling after applying a traditional eight-prong examination in First National Bank of Omaha v. MasterCard International, 03 Civ. 707. The suit involved a type of plastic card containing a computer chip with special features. Cardholders can purchase goods, access financial information and perform other functions not found in typical credit cards. First National Bank of Omaha, in 2000 first applied for the trademark for its SMARTONE cards, which it markets to banks that ultimately sell them to end-users. MasterCard International’s card is called ONESMART. It reached the market first but was trademarked after SMARTONE. Neither company sold many of the cards, which are far more popular in Europe, before turning up in court to dispute First National’s request for an injunction of MasterCard’s mark. Judge Cote analyzed First National’s trademark infringement claim by looking at the likelihood of consumer confusion. If consumers would be confused, then MasterCard would be in violation of First National’s mark under the Lanham Act, the federal statute governing trademark infringement. The analysis involved the application of an eight-prong test first developed by the 2nd U.S. Circuit Court of Appeals in 1961. It is known as the Polaroid test, after the case it came from. No one factor is dispositive, said the court, instead “each factor must be evaluated in the context of how it bears on the ultimate question of likelihood of confusion.” Cote focused on the first prong — the strength of First National’s mark — and concluded that it was weak. She looked at the limited amount of advertising committed to marketing the mark and found the use of the SMARTONE name contributed little to the sales of First National’s smart cards. First National distributed its smart card through Visa, the international credit card maker, and individual banks. “The card that [First National] hopes that … banks will use will each carry that bank’s name and the Visa marks, but not [First National's] name or logo,” she wrote. “Amidst this jumble of better-known names and symbols, there is little reason to find that consumers will attach meaning to the SMARTONE name or view it as designating a single source of the smart cards or services provided by their financial institution.” The marks also seemed dissimilar to Cote despite having common words applied in a reverse order. The court saw First National’s distribution of its cards through Visa as an important factor in distinguishing it from Visa’s major competitor MasterCard. The use of names like SMARTONE and ONESMART played less of a role than the distinction between Visa and MasterCard. The judge applied the same reasoning in ruling that consumers were unlikely to confuse Visa and MasterCard brands of smart cards. Looking at an internal memo from MasterCard’s general counsel, Cote determined that MasterCard had not adopted its mark in bad faith. The memo had indicated that MasterCard’s ONESMART card could co-exist with First National’s SMARTONE version and pointed out the potential confusion to the federal trademark office. MasterCard’s disclosure prevented any conclusion that it had acted in bad faith in applying for its mark, the judge concluded. “In sum, the weakness of the SMARTONE mark in the commercial context and the presence of strong brand names minimizing any potential confusion caused by similarity between the SMARTONE and ONESMART marks weigh heavily against finding a likelihood of confusion between the marks,” she wrote. REVERSE CONFUSION First National’s alternative argument was based on the idea of reverse confusion. This occurs when a larger company “saturates the market with a similar trademark and overwhelms” the company that first entered the market with its trademark. The court found that MasterCard was unlikely to overwhelm First National’s mark. The limited amount of marketing and low consumer demand for smart cards obviated the need for further analysis, said Cote in rejecting First National’s request for an injunction. Russell Falconer, Steven Gustavson, and Paul Reilly of the New York office of Houston’s Baker Botts represented MasterCard. Bartholomew McLeay and Suzanne Shehan Kutak Rock in Omaha, Neb., represented First National.

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