H&R Block became embroiled in a trademark battle of H&R Block v. Block in early 2022, weeks after Square, Inc. rebranded as Block, Inc. and contemporaneously moved into the insurance space by integrating Credit Karma Tax into its Cash App smart device application.  Beyond the overlap of Block, Inc. with H&R Block’s trade use of “Block”, Cash App’s logo shares color and shape similarities with H&R Block’s square green smart app logo.  The question raised under trademark law is whether the fact pattern presented above raises a likelihood of confusion in the marketplace.  In other words – did Square unfairly queue itself up to ride H&R Block’s significant reputational coattails in launching Cash App’s tax preparation offering?  Thus far, the district court says yes, the federal appeals court disagreed, and a petition for rehearing, filed on February 21, 2023, is pending.  The difference in opinions between the district court and the appeals court hinged on the impact of digital media information on consumer likelihood of confusion, a rapidly evolving area of retail commerce.  This conflict, further, is raised contemporaneously with the release of the first artificial intelligence (AI) powered search engine by Bing, introducing, potentially, a new category of consumer into the trademark infringement analysis.

 

The district court analyzed likelihood of confusion in view of the SquirtCo factors: “(1) the strength of the owner’s mark; (2) the similarity of the owner’s mark and the alleged infringer’s mark; (3) the degree to which the products compete with each other; (4) the alleged infringer’s intent to ‘pass off’ its goods as those of the trademark owner; (5) incidents of actual confusion; and (6) the type of product, its cost and conditions of purchase.” H&R Block Inc. v. Block Inc., W.D. Mo., No. 4:21-cv-00913 (citing SquirtCo v. Seven-Up Co., 628 F.2d 1086, 1091 (8th Cir. 1980)).  The district court further applied strengths of relative impact to the factors (e.g., strongly in favor, in favor, or neutral in relation to one of the parties).  The district court identified the similarities in both name and logo weighed strongly in the favor of H&R Block and overall decided in favor of an injunction against Block, Inc.

 

However, the appeals court disagreed that the Cash App offering will cause H&R Block irreparable harm by “undermin[ing] H&R Block’s ability to control its public image and perception and lead[ing] consumers to incorrectly believe Block, Inc’s tax service is connected to H&R Block or one of the “building blocks” in the Block, Inc. family of brands.” H&R Block, Inc. v. Block, Inc., No. 22-2075 (58 F.4th 939).  The appeals court instead highlighted H&R Block’s failure to submit any evidence identifying actual consumer confusion, despite demonstrating multiple online articles and social media posts pointing to likelihood of confusion in the marketplace. The appeals court described H&R Block’s online evidence as “dubious” and “insufficient.” Id.  Conversely, the district court highlighted the importance of social media marketing, stating that since “the consumer will undoubtedly be exposed to that reporting, the Court should consider how the media will exacerbate confusion caused by the Defendant’s usage of ‘Block.’”

 

Regarding social media marketing, the district court cited to Calvin Klein Cosmetics Corp. v. Lenox Laboratories, 815 F.2d 500, 504 (8th Cir. 1987), stating “[a] realistic evaluation of consumer confusion must attempt to recreate the conditions in which buying decisions are made.”  This concern is particularly relevant today in view of Bing’s release of its artificial intelligence powered search engine, designed to learn relevance of related information in responding to user search queries.  Regarding traditional search engines, metadata tags have been found to be highly relevant to trademark infringement questions, because “[u]sing another’s trademark in one’s metatags is much like posting a sign with another’s trademark in front of one’s store.” Brookfield Commc’ns, Inc. v. W. Coast Entm’t Corp., 174 F.3d 1036, 1064 (9th Cir. 1999).  Consider, in responding to H&R Block’s complaint, Block, Inc. downplayed the competitive use of the name in particular, stating that “Block, Inc.” is only listed in Cash App’s “fine print,” such as the Terms of Service, Consent to Disclosure, and other legal disclosures.  However, unlike human readers, artificial intelligence does not gloss over “fine print” in reviewing information.  Similar to conventional search engine use of meta data tags, the Bing AI will cull inferences from the fine print.  Further, Block, Inc. argued that industry news articles and other postings are not representative of likely confusion because this represents reporting rather than product marketing to consumers.  While this may be true regarding human researchers, in transitioning to reliance on the initial research efforts conducted by an AI search engine, the machine learning will gather any and all knowledge in conducting its research into gathering relevant results for the end human consumer.

 

This begs the question, based on the direction of analysis performed by the district court – are the trademark overlaps between H&R Block and Block, Inc. likely to cause machine learning engines to confuse Cash App as an H&R Block product?  Note, in particular, that initial interest confusion is an actionable trademark concern.  See Select Comfort Corp. v. Baxter, 996 F.3d 925 (8th Cir. 2021). An AI-powered search engine could drive this initial interest confusion by presenting misleading information for end user consumption.

 

Generally, as consumer research transfers from humans to machines, how, if at all, should this effect the SquirtCo trademark infringement analysis factors?  In relation to H&R Block v. Block, based on factor (6) of the type of product (digital application service) and its conditions of purchase (downloaded to a device and installed), the conditions in which buying decisions are made regarding Cash App will be impacted in the near future by the growing use of artificial intelligence.  For this reason, factor (2) of the similarity of the owner’s mark and the alleged infringer’s mark will be analyzed, in part, through a machine learning lens as the AI develops its understanding of relationships between products and product providers.  This could lead to factor (5) of incidents of actual confusion, since the consumer, rather than performing their own research, will now have the opportunity to obtain AI-curated information regarding Cash App.  Thus, it appears likely that courts will soon be considering the question of whether AI search engines should be viewed as a member of the consumer body, along with human purchasers, in performing trademark infringement analysis.