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Kinbook, LLC v. Microsoft Corporation

January 24, 2012

KINBOOK, LLC, PLAINTIFF,
v.
MICROSOFT CORPORATION, DEFENDANT.



The opinion of the court was delivered by: Gene E.K. Pratter, J.

MEMORANDUM

I. INTRODUCTION

Kinbook, LLC ("Kinbook"), a small online social networking software company, filed this action against the Microsoft Corporation ("Microsoft") for unfair competition and reverse trademark infringement under the Lanham Act of 1946, 15 U.S.C. § 1125(a). Kinbook blames Microsoft's release of "Kinect" (a controller-free motion sensor for its XBOX 360 video gaming console) and "KIN" (a mobile smart telephone) for the largely unsuccessful start of its "Kinbox" Facebook application. Specifically, Kinbook claims that Microsoft's use of the word "Kin" in conjunction with Microsoft's XBOX 360 logo (i.e., "Kinect for XBOX") is confusingly similar to Kinbook's registered trademark "Kinbox." Because of Microsoft's superior marketing power and ability to saturate the market, Kinbook alleges Microsoft usurped its business identity and the value of its trademarks. As a result, Microsoft detrimentally affected the fortunes of Kinbook's business.

Microsoft filed the instant motion for summary judgment (Doc. No. 28), asserting that there is no likelihood of confusion between the marks of Kinbook and Microsoft. For the reasons set forth below, the Court grants Microsoft's motion for summary judgment.

II. FACTUAL BACKGROUND

A. Microsoft's Kinect for XBOX 360 and KIN Phone

Microsoft is a software and consumer technology company that has been in existence since 1975. MS Facts ¶ 1. Microsoft's most popular video game hardware device is its "XBOX 360" gaming console, the successor to its original "XBOX" console introduced in November 2001. As of June 2011, Microsoft has sold over fifty-five (55) million units of its XBOX 360 console. Id. at 2.

The XBOX 360 brand is much more than just the XBOX 360 console. Under the XBOX 360 umbrella, Microsoft markets the XBOX 360 console, XBOX Live, *fn1 and a variety of video games. Kinbook Facts ¶ 25. In June 2009, Microsoft announced it planned to add a new product to the XBOX 360 brand: an interactive controller-free gaming device named "Kinect." *fn2 MS Facts ¶ 3. Kinect is a hardware sensor that a user can attach to an XBOX 360 console enabling operation and interfacing with the XBOX 360 using gestures and spoken commands without the aid of a controller. Id. at 4. It is compatible only with the XBOX 360 console and other XBOX 360 products. Microsoft asserts that it named the gaming sensor "Kinect" because of its kinetic qualities. Id. at 5. However, various internal Microsoft documents note that the name carries connotations of staying connected with friends and family. Kinbook Facts ¶¶ 33-39.

In November 2010, Microsoft released the Kinect gaming sensor to the public to great fanfare, and within its first sixty (60) days on the market, Microsoft sold over eight (8) million Kinect units. MS Facts ¶ 7. The Kinect gaming sensor retails for approximately $150 by itself, and between $300 and $500 when bundled with the XBOX 360 console. Id. Consumers may purchase Kinect directly from Microsoft or at most electronics retailers, such as Best Buy or Amazon. Id. at 8.

Microsoft targets its sales of Kinect to consumers who already own an XBOX 360 console or who would be interested in purchasing an XBOX 360 console. Id. But, in public statements and internal documents, Microsoft personnel have expressed the hope that the Kinect sensor would broaden the appeal of XBOX 360, and transform it from merely a gaming console to a "family entertainment center." Kinbook Facts ¶ 23. Kinect is marketed almost exclusively with the well-known XBOX 360 mark, which is prominently displayed on the Kinect gaming sensor itself, on all packaging for the Kinect, and in all advertisements and marketing materials for the Kinect. MS Facts ¶ 6. As of September 2011, Microsoft had spent over $100 million on promotion, advertising, and marketing of Kinect. Id. at 8.

While Microsoft's Kinect product has been met with rave reviews, not all of its products have been unbridled successes. In April 2010, Microsoft developed and launched a new line of mobile smart phones exclusively for the Verizon Wireless mobile phone service known as the "KIN ONE" and the "KIN TWO" (collectively, "KIN"). Id. at 9. Microsoft chose the name KIN because it related to the concept of "next of kin" and those around the user with whom the user associates. Kinbook Facts ¶ 40. The KIN phones retailed for $199 or less, and required the purchase of a Verizon Wireless service plan. MS Facts ¶ 10. KIN phones did not connect with the public. Two months after the KIN phone's debut, Microsoft announced that it would cease production of the KIN phones due to a lackluster demand for the product. Id. at 11.

Other than the KIN phone and the Kinect gaming sensor's common use of the term "kin" in their names, they are in all other relevant respects completely different products. Id. at 12. Indeed, the products are made by two separate divisions of Microsoft. Moreover, Microsoft has no intention of using the KIN mark on any future products. Id. at 13.

B. Kinbook, LLC's "Kinbox" and "Munchkinbox"

Kinbook is a small company founded by Ms. Cassandra Toroian and Ms. Jacqueline Blue. Kinbook Facts ¶ 2; MS Facts ¶ 18. The mission of the company is to "provide a digital world for family memories and communications, for current and future generations so they won't forget." Kinbook Facts ¶ 5. Consistent with that mission, in May 2009, Ms. Toroian and Ms. Blue began development of a software application designed for the sharing of online messages, photos, and videos between and among friends and family members. Id. at 2.

Although Ms. Toroian and Ms. Blue initially sought to develop their own web site to serve as the platform for the Kinbook service, in July 2009, in an effort to conserve costs and attract a user base, they decided to launch the service as an application available on the social-networking web site, Facebook. *fn3 Id. at 3, 4. The Facebook application Kinbook developed is unique in that it allows people that are members of Facebook to form their own personal social networks and not "let everyone that they are friends with on Facebook in." Id. at 7. In other words, it allows users to create private sub-social networks for sharing information within Facebook. In addition, all data that users upload to the application does not reside on storage provided by Facebook, but rather is stored on Kinbook's own offsite storage to enable a later seamless transition to an independent web site. Id.

After consulting with counsel on the trademark application process, Ms. Toroian and Ms. Blue learned that over the past several years, Facebook, Inc. had opposed or threatened to oppose all trademark applications with a "____Book" mark for companies intending to launch applications for the Facebook service. Id. at 5. After confirming this fact with Facebook, Inc., Ms. Toroian and Ms. Blue decided to change the name of its Facebook application from "Kinbook" to "Kinbox" and "Munchkinbox." *fn4 Id. After conducting a trademark search in September 2009, Ms. Toroian and Ms. Blue sought registration of the marks "Kinbox" and "Munchkinbox" with the United States Patent and Trademark Office, and formally launched its application on Facebook in December 2009. Id. at 5, 13, 14. In September 2010, the Patent and Trademark Office accepted the Statement of Use for the Kinbox and Munchkinbox marks. Id. at 15.

In spite of their decision to launch a Facebook application instead of a web site, Ms. Toroian and Ms. Blue did not abandon their plans to launch an independent web site. Indeed, Kinbook purchased the web domain names, Kinboxx.com and Kinbox.org. Id. at 10. In addition to their intention to launch the service as a stand-alone web site, Ms. Toroian and Ms. Blue assert that they also intended to develop a mobile phone application at a later date. Id. at 3-4, 10.

Kinbook does not charge users a fee to use Kinbox. Instead, Kinbook's plan to remain financially solvent is to generate revenue from advertising, selling content (i.e., photo books, calendars), and selling additional storage to users. Id. at 11.

C. Kinect for XBOX 360's Effect on the KinboX

Despite Ms. Toroian's and Ms. Blue's inspiring aspirations, Kinbook has been largely unsuccessful to date and has been unable to generate any revenues from Kinbox. Id. at 11. Likewise, Kinbook markets Kinbox and Munchkinbox exclusively on the Facebook platform, and, although Ms. Toroian testified that she and Ms. Blue originally intended to spend a minimum of $250,000 marketing Kinbox, to date they have only spent a few thousand dollars on advertising and marketing. Id. at 16; MS Facts ¶¶ 15, 19. As of May 2011, Kinbox had only 16,685 active monthly users out of over 750 million regular Facebook users. *fn5 Kinbook Facts ¶ 11.

Kinbook credits the arrival of the Kinect for XBOX 360 and Microsoft's accompanying marketing blitz with the poor start of its "Kinbox" Facebook application. *fn6 Kinbook claims that Microsoft's use of the word "Kin" in conjunction with Microsoft's XBOX logo (i.e., "Kinect for XBOX") is confusingly similar to its registered trademark "Kinbox." *fn7 According to Ms. Toroian, Microsoft's "Kinect for XBOX" mark along with its overwhelming marketing dollars rendered Kinbook's first-in-time registration of its Kinbox and Munchkinbox marks useless, and effectively pushed them out of the market.

Accordingly, on September 17, 2010, Kinbook filed a Complaint against Microsoft alleging one count of unfair competition and trade dress infringement *fn8 in violation of the Lanham Act. 15 U.S.C. § 1125(a). Kinbook alleges that it incurred significant expense developing its "Kinbox" and "Munchkinbox" Facebook applications and that Microsoft has infringed the trademark and tradename rights of Kinbook by creating and marketing its Kinect and KIN products. Microsoft has filed a motion for summary judgment, which is now pending before the Court.

III. LEGAL STANDARD

Upon motion of a party, summary judgment is appropriate if, "citing to particular parts of materials in the record, including depositions, documents, electronically stored information, affidavits or declarations, stipulations, . . . admissions, interrogatory answers, or other materials," the moving party persuades the district court that "there exists no genuine issue of material fact that would permit a reasonable jury to find for the nonmoving party." F ED. R. C IV. P. 56(c); Miller v. Ind. Hosp., 843 F.2d 139, 143 (3d Cir. 1988). An issue is "genuine" if a reasonable jury could possibly hold in the non-movant's favor with regard to that issue. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A fact is "material" only if its resolution could affect the result of the suit under governing law. Id.

In evaluating a summary judgment motion, the court "must view the facts in the light most favorable to the non-moving party," and make every reasonable inference in that party's favor. Hugh v. Butler Cty. Family YMCA, 418 F.3d 265, 267 (3d Cir. 2005). If, after making all reasonable inferences in favor of the non-moving party, the court determines that there is no genuine issue of material fact, summary judgment is appropriate. Celotex Corp. v. Catrett, 477 U.S. 217, 322 (1986); Wisniewski v. Johns-Manville Corp., 812 F.2d 81, 83 (3d Cir. 1987).

The party opposing summary judgment must support each essential element of that party's opposition by "citing to particular parts of materials in the record." F ED. R. C IV. P. 56(c)(1). "The Court need consider only the cited materials" when determining whether there exists a genuine issue of material fact for trial. F ED. R. C IV. P. 56(c)(3). If the cited evidence is "merely colorable, or is not significantly probative, summary judgment may be granted." Anderson, 477 U.S. at 249-50 (citations omitted). This requirement upholds the "underlying purpose of summary judgment [which] is to avoid a pointless trial in cases where it is unnecessary and would only cause delay and expense." Walden v. Saint Gobain Corp., 323 F. Supp. 2d 637, 641 (E.D. Pa. 2004) (citing Goodman v. Mead Johnson & Co., 534 F.2d 566, 573 (3d Cir. 1976)).

IV. DISCUSSION

Kinbook alleges that Microsoft's use of the marks "Kinect" and "KIN" infringes on its registered trademark and constitute unfair competition under the Lanham Act. The elements for trademark infringement and unfair competition under the Lanham Act are the same. A & H Sportswear, Inc. v. Victoria's Secret Stores, Inc., 237 F.3d 198, 210 (3d Cir. 2000). To prevail on either claim, Kinbook must demonstrate that (1) it owns the "Kinbox" mark, (2) the mark is valid and legally protectable, and (3) Microsoft's use of its Kinect and/or KIN marks to identify its goods is likely to cause confusion with Kinbook's Kinbox mark. Id.; Commerce Nat'l Ins. Servs., Inc. v. Commerce Ins. Agency, Inc., 214 F.3d 432, 437 (3d Cir. 2000). Microsoft argues that Kinbook is unable as a matter of law to establish the second and third of these elements. Because the Court concludes that based on the record evidence a reasonable jury could not find that a likelihood of confusion exists between the parties' marks, the Court will analyze only that aspect of Microsoft's motion. *fn9

A defendant's use of a mark is likely to cause confusion where "an appreciable number of ordinarily prudent consumers" seeing the mark, Everett Labs., Inc. v. Vertical Pharm., Inc., 227 F. App'x 124, 127 (3d Cir. 2007) (emphasis removed), "would probably assume that the product or service it represents is associated with the source of a different product or service identified by a similar mark." Dranoff-Perlstein Assocs. v. Sklar, 967 F.2d 852, 862 (3d Cir. 1992) (quotation marks omitted). In Interpace Corp. v. Lapp, Inc., 721 F.2d 460 (3d Cir. 1983), the Third Circuit Court of Appeals developed a non-exhaustive list of factors to consider when determining whether there is a likelihood of confusion between two or more marks. These "Lapp factors" include:

(1) the degree of similarity between the owner's mark and the alleged infringing mark;

(2) the strength of the owner's mark;

(3) the price of the goods and other factors indicative of the care and attention expected of ...


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