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M.D. ON-LINE, INC. v. WebMD CORPORATION

October 6, 2005.

M.D. ON-LINE, INC., Plaintiff,
v.
WebMD CORPORATION, t/a EMDEON CORPORATION, EMDEON BUSINESS SERVICES, and EMDEON PRACTICE SERVICES, Defendants.



The opinion of the court was delivered by: WILLIAM MARTINI, District Judge

OPINION

This matter comes before the Court on plaintiff M.D. On-Line, Inc.'s ("M.D. On-Line's") motion for a preliminary injunction to enjoin defendants from using the service mark "emdeon." Plaintiff's mark "M.D. ON-LINE" is a federally registered service mark for the field of "electronic data submission services required for electronic processing of claims in the healthcare industry." (Compl. Ex. A). Plaintiff alleges that defendants use of the "emdeon" mark in the healthcare industry violates federal and state trademark law, constitutes unfair competition under federal and state law, and is causing it irreparable harm. For the reasons set forth below, plaintiff's motion for preliminary injunction is DENIED.

  BACKGROUND

  Plaintiff provides software solutions for healthcare providers. Its three software packages, WebLINK, WinLINK and ClaimLink 1500, allow healthcare providers to "electronically submit claims to insurance companies for payment." (Compl. ¶ 1). Its software also allows healthcare providers to verify electronically in real-time the "eligibility of insurance coverage when patients seek healthcare services from providers." (Compl. ¶ 17).

  Defendants, formerly known as WebMD, now trading as some variation of Emdeon, perform many services and provide many products to the healthcare industry. Emdeon Corporation ("Emdeon") is the parent company; it is composed of four business units: Emdeon Business Services, Emdeon Practice Services, WebMD Health, and Porex. Emdeon's core businesses are dedicated to electronically connecting "healthcare providers, payers, employers, physicians, and patients, to simplify the healthcare business process, to provide needed information at the right time and place, and to improve healthcare quality." (Defs.' Opp'n Br. at 2). Emdeon provides the "largest single electronic clearinghouse for healthcare claims in the U.S." (Compl. ¶ 3). Emdeon processes the electronic claims submitted by providers and from intermediaries such as M.D. On-Line. (Id.). Currently, plaintiff and Emdeon have a contractual relationship whereby plaintiff processes claims through Emdeon's clearinghouse and Emdeon provides plaintiff with rebates for those transactions based on volume. (Id. at ¶ 30). This relationship accounted for approximately 40% of plaintiff's revenue in 2004. (Defs.' Opp'n Br. at 5).

  Emdeon Business Services ("EBS") is the business entity that competes directly with plaintiff. (Id. at 5). EBS "offers healthcare providers reimbursement services, allowing them to interact electronically with healthcare payers." (Id. at 3). EBS sells only one product that competes with plaintiff's products — WebMD Office. (Id. at 5). It is the marketing and advertising of that product under the emdeon mark that lead plaintiff to file suit and seek an injunction.

  ANALYSIS

  A preliminary injunction is an extraordinary form of relief that should be granted in limited circumstances. NutraSweet Co. v. Vit-Mar Enters., Inc., 176 F.3d 151, 153 (3d Cir. 1999). A preliminary injunction should issue only when the moving party establishes each of the following four factors: (1) that the moving party has a reasonable probability of success on the merits; (2) that the moving party will be irreparably harmed if denied relief; (3) that the non-moving party will not be harmed to a greater extent if relief is granted; and (4) granting preliminary relief will be in the public interest. Id. If the moving party is unable to show any of those factors, preliminary relief should be denied. Id.

  I. Likelihood of Success on the Merits

  In order to show a reasonable probability of success on the merits, "the burden is on the party seeking relief to make a prima facie case showing a reasonable probability that it will prevail on the merits" of the claim. Oburn v. Shapp, 521 F.2d 142, 148 (3d Cir. 1975). "To prevail on a claim for trademark infringement or unfair competition under the Lanham Act, the owner of a valid and legally protectable mark . . . must show that a defendant's use of a similar mark for its goods `causes a likelihood of confusion.'" Kos Pharms., Inc. v. Andrx Corp., 369 F.3d 700, 708-09 (3d Cir. 2004).

  The Third Circuit has devised a nonexclusive list of factors, referred to as the Lapp factors,*fn1 that the Court must consider when analyzing likelihood of confusion. These factors are:
(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 consumers when making a purchase;
(4) the length of time the defendant has used the mark without evidence of actual confusion arising; (5) the intent of the defendant in adopting the mark;
(6) the evidence of actual confusion;
(7) whether the goods, competing or not competing, are marketed through the same channels of trade and advertised through the same media;
(8) the extent to which the targets of the parties' sales efforts are the same;
(9) the relationship of the goods in the minds of consumers, whether because of the near-identity of the products, the similarity of function, or other factors;
(10) other facts suggesting that the consuming public might expect the prior owner to manufacture both products, or expect the prior owner to manufacture a product in the defendant's market, or expect that the prior owner is likely to expand into the defendant's market.
Kos Pharms., 369 F.3d at 709 (quoting A & H Sportswear, Inc. v. Victoria's Secret Stores, Inc., 237 F.3d 198, 215 (3d Cir. 2000)). None of these factors alone determines whether there is a likelihood of confusion. Rather, the Court must consider all of these factors and give them the weight appropriate under the particular circumstances before the Court. Id.

  Plaintiff argues that it is likely to succeed at trial because its M.D. ON-LINE mark is valid and legally enforceable, and defendant's use of the emdeon mark is likely to cause confusion. Defendants respond by arguing that plaintiff's mark is not enforceable, and even if it is, there is no likelihood of confusion between the marks M.D. ON-LINE and emdeon. The fact that M.D. ON-LINE is a federally registered mark, see Fed. Reg. No. 2,274,698, constitutes prima facie evidence of the mark's validity. See 15 U.S.C. § 1115(a). Thus, for purposes of this motion, the Court will assume plaintiff's mark is valid and enforceable. As a result, in order to resolve this dispute, the Court must weigh and balance the Lapp factors.

  1. Degree of Similarity Between the Marks

  "The single most important factor in determining likelihood of confusion is mark similarity." A & H, 237 F.3d at 216. Marks "are confusingly similar if ordinary consumers would likely conclude that [the two products] share a common source, affiliation, connection or sponsorship." Fisons Horticulture, Inc. v. Vigoro Indus., Inc., 30 F.3d 466, 477 (3d Cir. 1994). The proper test is "not side-by-side comparison" but "whether the labels create the `same overall impression' when viewed separately." Id. (quoting Banff, Ltd. v. Federated Dep't Stores, Inc., 841 F.2d 486, 492 (2d Cir. 1988)). Courts should "compare the appearance, sound, and meaning of the marks" in assessing their similarity. Kos Pharms., 369 F.3d at 713.

  The Court finds there is no similarity in appearance between "M.D. ON-LINE" and "emdeon". Indeed, they are visually distinct. Plaintiff's mark is two words, including two periods and one hyphen; defendant's mark is one word without punctuation. They are spelled differently. They differ in length (six versus eight letters). They begin and end with different letters. M.D. ON-LINE consists of all uppercase letters, emdeon contains none. Further, M.D. ON-LINE often appears on two separate lines, M.D. over ON-LINE, whereas emdeon does not.

  The Court finds that the two marks do not have a similar meaning. M.D. ON-LINE describes a service involving doctors on the internet. Emdeon is a fanciful term that has no apparent meaning. Plaintiff argues that emdeon has a similar meaning, relying in part on a script that was generated for WebMD Business Services. In that script, Emdeon states that its new name "suggests a grounding in e-healthcare." (O'Sullivan Cert. at Ex. A). However, that script is inapposite. First, the script details a branding effort by Emdeon in which it seeks to imbue a certain meaning into the otherwise meaningless term "Emdeon." Second, plaintiff takes the quote out of context in order to establish some small degree of similarity. When the meaning suggested by the script is looked at as a whole, there could be no confusion between the two marks:
Our new name, Emdeon, references our history as WebMD and formerly, Healtheon. It also suggests a grounding in e-healthcare and denotes a solid organization focused on improving healthcare and exceeding the expectations of its business partners.
(Id.).

  Plaintiff essentially argues that any differences in appearance and meaning should be trumped by the marks' phonetic similarity. Plaintiff bases this argument on the fact that the allegedly most significant form of marketing performed by the parties is telemarketing. Plaintiff also argues that word-of-mouth is critical to its products' success. However, in making these arguments, plaintiff appears to ignore the commercial reality of how these software products are marketed. There is no dispute that plaintiff's LINK products, as well as defendant's WebMD Office, are used only over the internet, no physical documentation is involved. Therefore, in order to market these products, the parties would need to provide the website address from which customers could read about, and potentially register to use their products.*fn2 Thus, the appearance of the marks plays a role in the commercial setting, thereby greatly diminishing the affect that sound alone may have on consumers.

  Furthermore, the Court disagrees with plaintiff's underlying premise that the marks are confusingly similar. Although plaintiff is correct that the first three syllables of each mark are pronounced similarly, by focusing on only the first three syllables, plaintiff takes its whole mark out of context. See Kos Pharms., 369 F.3d at 713 ("But the proper legal test is not whether there is some confusing similarity between sub-parts of the marks; the overarching question is whether the marks, `viewed in their entirety,' are confusingly similar.") (emphasis in original) (quoting A & H, 237 F.3d at 216). Its mark is M.D. ON-LINE, not "M.D. ON". When the marks are heard in their entirety, they are not confusingly similar. Plaintiff's mark contains four syllables, emdeon contains only three. M.D. ON-LINE is spoken as two separate letters and a two syllable word, whereas emdeon is ...


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