8th Circuit Holds One Block Does Not Infringe Another

likelihood of confusion section 2(d) trademark

On January 24, 2023, the Court of Appeals for the Eighth Circuit held in H&R Block, Inc. v. Block, Inc.,[1] that defendant Block’s trademark was not likely to confuse consumers as to source of the registered service mark of plaintiff H&R Block.  This was not a unanimous decision, and one dissent was lodged, noting that strength and similarity of the marks militated for likelihood of confusion.  The facts are as follows.

Green Square Logo – H&R Block/HRB Innovation, Inc., U.S. Reg. No. 3656593

Tax preparer plaintiff H&R Block, Inc. sued to enjoin payment app defendant Block, Inc. from using the mark BLOCK or the green square design in conjunction with Block, Inc.’s Cash App subsidiary business.  H&R Block has long been known as the tax preparation and filing service, beginning service in 1955.  Block, Inc. started its business in 2009, originally as Square, Inc., then after Cash App was created as a subsidiary business.  After Square acquired Credit Karma Tax in 2020, it was renamed as Cash App Taxes.  Square, Inc. changed its name to Block, Inc. in 2021.  H&R Block has several registered trademarks, including H&R BLOCK Design, Reg. No. 2,533,014, H&R BLOCK, Reg. No. 3,338,962, in standard character words, and the Green Square design, Reg. No. 3,656,593.  This last mark is registered for goods and services in International Classes 9, 35, 36, 41, and 42, primarily directed to its tax preparation services. Block has registered trademarks for $ CASH APP Design, Reg. Nos. 6,262,273 and 6,014,182, in International Classes 9 and 36.  An additional pending trademark application for $ CASH APP as standard character mark for goods and services in International Classes 9, 25, 35, 36, and 42 is currently being prosecuted with a pending office action.

$ CASH APP Design mark, Block, Inc./U.S. Reg. No. 6262273

The district court in Missouri granted H&R Block’s preliminary injunction and enjoined Block, Inc. from using the BLOCK mark, finding that there was a likelihood of confusion with H&R Block’s registered marks.  Block, Inc. appealed.

The majority opinion was written by Judge Erickson.  Judge Erickson applied the SquirtCo factors in finding that there was no likelihood of confusion between the H&R Block and Block, Inc. marks.[2]  The SquirtCo factors include 1) strength of mark, 2) similarity of the marks, 3) good’s competition, 4) the infringer’s passing off of the goods of plaintiff’s mark, or intent to confuse consumers, 5) evidence of actual confusion, and 6) consumer sophistication.

BLOCK ADVISOR design, U.S. Trademark Reg. No. 5179142, to HRB Innovation, Inc. (L), compared to BLOCK & design, U.S. Trademark App. Ser. No. 97433191, to Block, Inc. (R) – likelihood of confusion?

Strength of Mark

The circuit panel found that there was adequate support for the district court’s finding that H&R Block had met its burden to demonstrate that its registered marks were strong, even though H&R Block never had registered the BLOCK mark; it only owned it as a common law right.  This found in favor of H&R Block.

Similarity of Marks

As for the similarity of the two Block’s marks, Judge Erickson disagreed with the district court’s finding heavily in favor of H&R Block.  He found that there was dissimilarity between how consumers access the goods and services of both companies.  Namely, for H&R Block, consumers access its services through in-person or separate software, and the Block name is readily visible at every step of the transaction.  On the other hand, Block’s Cash App is accessible to consumers through a downloadable app on a smartphone, and that the Block name is not featured prominently in the Cash App app, except in the Terms of Service.  For this reason, Judge Erickson found it was clear error for finding heavily in favor of H&R Block, and rather it should only be slightly in favor.

Relatedness of Goods/Services Competition

Judge Erickson noted there was overlap between both H&R Block and Block, Inc.’s products, namely, the tax preparation services, and found no clear error that it favored H&R Block.

Intent to Confuse

Because the district court’s record was based on an injunction which usually is limited, Judge Erickson found this factor was neutral.

Evidence of Actual Confusion

While there was evidence presented at trial by H&R Block of articles demonstrating confusion between H&R Block and Cash App, and Block, Inc.’s social media evidence pointing to no confusion, Judge Erickson focused on H&R Block’s concession at oral arguments that it did not have evidence of any Cash App consumer who was confused if he or she were using an H&R Block product.  He found the district clearly erred when finding this factor in favor of H&R Block.

Consumer Sophistication

Judge Erickson agreed with the district court that there could confusion even among careful consumers of tax preparation software intertwining the products of H&R Block and Block, Inc.  He found this factor to be neutral.

Weighing of Factors

To succeed on the merits of its trademark infringement claim, H&R Block must show that Block, Inc.’s use of a protected mark “creates a likelihood of confusion, deception, or mistake on the part of an appreciable number of ordinary” consumers.

He observed that the circuit panel’s analysis found two factors strongly favoring H&R Block – strength of marks and goods competition.  Similarity of mark only slightly favored H&R Block, while the remaining three factors were neutral.  However, Judge Erickson noted that actual confusion is often the best evidence of likelihood of confusion.[3]  He focused on shortcomings of the evidence presented by H&R Block in demonstrating this actual confusion.

The record shows several incidents of potential confusion occurring shortly after Block, Inc.’s name change. These incidents include social media posts – some of which reflect consumer confusion and others that do not – and several news articles published within a couple months of Block, Inc.’s name change that can be read to reflect confusion about whether Cash App services are being offered by H&R Block. This dubious evidence is insufficient for H&R Block to satisfy its burden of showing a substantial likelihood of confusion about whether Cash App Taxes is affiliated with H&R Block by an appreciable number of ordinary consumers. Second, in the context of this case, we think that the actual confusion and similarity factors carry significant weight because an appreciable number of ordinary consumers must be likely to be confused. Yet here, at most H&R Block has shown that the marks are slightly similar, its own marks are strong, and there is competitive proximity. [I]t is clearly erroneous for the district court to conclude there is a likelihood of confusion.

Judge Erickson, majority op.

Judge Melloy dissented.  He seized upon the strength of the H&R Block’s marks and noted:

H&R Block has ten thousand storefronts, two million small business clients, and a website with over fifty million logins. It is one of the most well-known tax service companies in the country, serving millions of customers each year. Not only has H&R Block used “Block” in connection with tax services for decades, it has also invested billions of dollars into the mark. The success of this investment is confirmed by consumer surveys which show consumers associate “Block” with H&R Block in the tax space. the long-term and widespread use shows the strength of H&R Block’s mark.

Judge Melloy, dissenting op.

As for competitive proximity of both marks, he wrote:

Both H&R Block and Block, Inc. . . target the “underbanked.” Using the name Cash App Taxes does not mean Block, Inc. is not competing with H&R Block. Cash App Taxes is not a separate entity, therefore, Block, Inc. is a directly competing against H&R Block in this market. Both use “Block” in the same market to target the same consumers.

Judge Melloy, dissenting op.

Judge Melloy found no factor favoring Block, Inc. and three strongly favor and one slightly favors H&R Block, with two neutral.  Therefore, Judge Melloy found no clear error with the district court decision.  He noted that now that we are currently in tax season (spring 2023), which is the second full year with both “Blocks” competing directly with each other, when the case is remanded to the district court, there should be ample evidence demonstrating actual confusion to present to the court.

The dissent is correct here, as the majority appears to have muddled the SprintCo factors.  While deference to a pending USPTO application is not necessarily required for disposition of a case, the fact in this case there is a pending Block, Inc. application for BLOCK, which is directly related to the underlying marks in question.  The USPTO will focus on two considerations of the likelihood of confusion analysis: (1) the similarities between the compared marks and (2) the relatedness of the subject goods and/or services.[4]  This is a similar view held by other circuits, including the 9th Circuit, one of the two largest troves of trademark circuit case law.  In the Ninth Circuit, involving Internet-related uses, the three most important factors are similarity of the subject goods/services, related competitiveness of the goods/services, and simultaneous use of the Internet as a marketing channel.[5]  The majority seems to disregard the importance of the similar competitive tax filing markets of both the H&R Block and Block, Inc. marks.

For more information about trademark infringement, likelihood of confusion, and trademark prosecution, please contact Yonaxis I.P. Law Group.

[1] ___F.4th___ (8th Cir. 2023), rev’g and vacating, H&R Block, Inc. v. Block, Inc., Case No. 21-cv-0913-NKL (W.D. Mo. Apr. 28, 2022).

[2] Many readers may be familiar with the 9th Circuit’s Sleekcraft factors (see, AMF, Inc. v. Sleekcraft Boats, 599 F.2d 341, 348-49 (9th Cir. 1979)), or the 2nd Circuit’s Polaroid factors (see, Polaroid Corp. v. Polaroid Elecs. Corp., 287 F.2d 492 (2d Cir. 1961)), or even the Federal Circuit’s DuPont factors (see, In re E.I. DuPont DeNemours & Co., 476 F.2d 1357, 1361 (C.C.P.A. 1973)), the 8th Circuit utilizes SquirtCo factors for likelihood of confusion; see SquirtCo v. Seven-Up Co., 628 F.2d 1086, 1091 (8th Cir. 1980).

[3] See Safeway Transit LLC v. Discount Party Bus., Inc., 954 F.3d 1171, 1179 (8th Cir. 2020).

[4] See In re i.am.symbolic, llc, 866 F.3d 1315, 1322 (Fed. Cir. 2017); Herbko Int’l, Inc. v. Kappa Books, Inc., 308 F.3d 1156, 1164-65 (Fed. Cir. 2002); Federated Foods, Inc. v. Fort Howard Paper Co., 544 F.2d 1098, 1103 (C.C.P.A. 1976) (“The fundamental inquiry mandated by [Section] 2(d) goes to the cumulative effect of differences in the essential characteristics of the goods [or services] and differences in the marks.”).

[5] Internet Specialties West, Inc. v. Milon-Digiorgio Enters., Inc., 559 F.3d 985, 989 (9th Cir. 2009).