M2 Software, Inc. v. Madacy Entertainment

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT

M2 SOFTWARE, INC., a Delaware 
corporation,
Plaintiff-Appellant,
v. No. 03-55957
MADACY ENTERTAINMENT, a
corporation e/s/a Madacy  D.C. No.
CV-00-02853-AHM
Entertainment Group, Inc.;
OPINION
HANDLEMAN COMPANY, a
corporation; SFX ENTERTAINMENT,
a corporation,
Defendants-Appellees.

Appeal from the United States District Court
for the Central District of California
A. Howard Matz, District Judge, Presiding

Argued and Submitted
February 7, 2005—Pasadena, California

Filed August 31, 2005

Before: Harry Pregerson, William C. Canby, Jr., and
Robert R. Beezer, Circuit Judges.

Opinion by Judge Pregerson

11893
 M2 SOFTWARE, INC. v. MADACY ENTERTAINMENT 11897
COUNSEL

Mark L. Pettinari, San Francisco, California (argued), and
Toula Arvanitis-Dalpe, Anahem Hills, California (brief), for
the plaintiff-appellant.

Robert H. Rotstein, McDermott, Will & Emery, Los Angeles,
California, for the defendants-appellees.

OPINION

PREGERSON, Circuit Judge:

I. OVERVIEW

Plaintiff-Appellant M2 Software, Inc. (“M2 Software”) is
the owner of M2, a federally registered trademark that is used
in conjunction with business management and interactive
media application goods and services for the film and music
industry. Defendants-Appellees Madacy Entertainment,
Handleman Company, and SFX Entertainment (collectively,
“Madacy”) began using M2 Entertainment as a trademark
for their new record label venture. Following failed licensing
negotiations between the parties, M2 Software filed suit
against Madacy in early 2000. A week after M2 Software
filed its suit against Madacy, Madacy began phasing out the
use of its M2 Entertainment mark.

M2 Software argued that Madacy’s use of the M2 Enter-
tainment mark infringed M2 Software’s M2 trademark and
would cause a likelihood of confusion. Specifically, M2 Soft-
ware’s complaint alleged Madacy had committed: (1) federal
trademark infringement, false designation and description of
origin, and trademark dilution; (2) state trademark dilution,
injury to business reputation, and unfair trade practices; and
(3) common law trademark infringement, passing off, and
unfair competition.
11898 M2 SOFTWARE, INC. v. MADACY ENTERTAINMENT
On January 8, 2002, the district court granted partial sum-
mary judgment in favor of Madacy. The district court ruled
that no rational trier of fact could find a likelihood of forward
confusion among either general consumers or music industry
members or a likelihood of reverse confusion among music
industry members.

A jury trial commenced on May 13, 2003. The only issue
that went to the jury was whether there was a likelihood of
reverse confusion among general consumers, i.e., consumers
who were not members of the music industry. In other words,
the jury was asked to decide whether general consumers
would mistakenly believe that they were purchasing Mada-
cy’s products when in fact, they were purchasing M2 Soft-
ware’s products.

Three days later, the jury returned a verdict in favor of
Madacy, finding that it was not liable for reverse trademark
confusion among general consumers. The district court
entered judgment in favor of Madacy.

M2 Software timely filed its Amended Notice of Appeal.
It now challenges: (1) the district court’s grant of partial sum-
mary judgment in favor of Madacy; (2) the district court’s
denial of M2 Software’s motion for reconsideration of partial
summary judgment; (3) the district court’s entry of judgment
as a matter of law for SFX Entertainment; (4) the district
court’s evidentiary rulings on motions in limine; (5) the dis-
trict court’s jury instructions and special verdict form; and (6)
the district court’s decision to bifurcate the trial by first pre-
senting the liability claim to the jury. M2 Software also asks
for attorneys’ fees under the Lanham Act. We have jurisdic-
tion under 28 U.S.C. § 1291, and we affirm.

II. FACTS AND PROCEDURAL HISTORY

In 1991, Metabolic Music, Inc., adopted M2 as a brand and
trade name. Metabolic Music later amended its corporate
 M2 SOFTWARE, INC. v. MADACY ENTERTAINMENT 11899
name to M2 Software, Inc. On August 30, 1994, Metabolic
Music submitted a trademark application to the United States
Patent and Trademark Office (“USPTO”) for federal registra-
tion of its M2 word mark. Approximately fourteen months
later, the USPTO granted Registration Number 1,931,182 for
the M2 trademark and entered the mark on the Principal Reg-
ister. The M2 mark is now deemed incontestable by the
USPTO pursuant to 15 U.S.C. § 1065.1

M2 Software’s trademark application stated that the M2
mark would be used in conjunction with:

computer software featuring business management
applications for the film and music industries; and
interactive multimedia applications for entertain-
ment, education and information, in the nature of art-
ists’ performances and biographical information
from the film and music industries; and instructions
and information playing musical instruments.

M2 Software primarily developed and licensed database soft-
ware used for processing and managing data of major record
companies’ musical works. M2 Software’s two database pro-
grams are called the “Record Label Management System”
(“RLMS”) and the “Music Publisher Management System”
(“MPMS”).2 M2 Software licensed these databases to several
record companies.
1
If the registered trademark-holder satisfies additional conditions,
including continuous use of the registered mark for five consecutive years,
absent certain listed exceptions, the registration of the mark becomes “in-
contestable.” 15 U.S.C. § 1065. Once a mark is deemed “incontestable,”
the trademark-holder is entitled to an exclusive right to use the mark that
can be defeated only on specifically enumerated grounds. Casual Corner
Assocs., Inc. v. Casual Stores of Nev., Inc., 493 F.2d 709, 711-12 (9th Cir.
1974).
2
The RLMS system is a software database system that contains music-
related information about songs, albums, artists, and music publishers. M2
Software sells the RLMS only to record companies, and not to the general
public. The MPMS is a similar database for use by music publishers.
11900 M2 SOFTWARE, INC. v. MADACY ENTERTAINMENT
Using these database programs, M2 Software also provided
music content administration services. These administration
services include: (1) processing of record labels’ album cata-
logs, song catalogs, artist and band rosters, and sales informa-
tion; (2) briefing of recording artist and producer contracts;
and (3) generating royalty statements and reports.

In addition to providing database products and music con-
tent administration services to major record companies, a
small portion of M2 Software is devoted to music production.
Particularly, M2 Software sells a small line of interactive
music on CD-ROM, floppy media, and audio-only CDs.
These interactive music products bear the M2, M2 Interac-
tive, or M2 Music marks and are offered for sale on M2 Soft-
ware’s internet website and at the website “Amazon.com.”

Madacy, the alleged infringer, is a recording and distribu-
tion company that specializes in low-price collections of
recorded music. Generally, Madacy licenses the music it dis-
tributes from other companies, such as BMG Music.

In 1999, Madacy created a new division named M2 Enter-
tainment. The new division would use M2 Entertainment as
the trademark for its full-priced CDs featuring a line of sports-
related music tied to local professional sports teams. Madacy
filed an “intent-to-use” trademark application with the
USPTO for its M2 Entertainment mark in August 1999.3

On December 30, 1999, M2 Software sent cease and desist
letters to Madacy’s chief executive officer and to SFX Enter-
tainment’s chairman, demanding that the companies stop
using M2 Software’s senior and federally registered M2 trade-
3
The trademark application stated that the M2 Entertainment mark was
to be used in connection with “sound recording featuring music, namely
phonographic records, audio tapes, and compact discs featuring music;
and entertainment services, namely the marketing, production and distri-
bution of phonographic records, audio tapes, and compact discs.”
 M2 SOFTWARE, INC. v. MADACY ENTERTAINMENT 11901
mark.4 Following receipt of these letters, a representative from
Madacy approached M2 Software with an offer to enter a
licensing agreement for the M2 trademark.

While licensing negotiations were underway between
Madacy and M2 Software, Madacy ran a multi-page advertis-
ing supplement in the February 28, 2000, edition of Billboard
magazine. The supplement promoted Madacy’s twentieth
anniversary, and the launch of Madacy’s new M2 Entertain-
ment branded record label venture. A full-page of the supple-
ment was devoted to an ad bearing Madacy’s M2
Entertainment logo.

As a result of this multi-page advertising supplement, M2
Software commenced the present suit against Madacy on
March 21, 2000. Nearly a week later, Madacy began phasing
out its M2 Entertainment mark.

In its suit against Madacy, M2 Software alleged that Mada-
cy’s use of the M2 Entertainment mark infringed M2 Soft-
ware’s federally registered M2 trademark and would cause a
likelihood of confusion. Specifically, M2 Software claimed in
its complaint that by using the M2 Entertainment mark,
Madacy had committed: (1) trademark infringement in viola-
tion of 15 U.S.C. § 1114; (2) false designation and description
of origin in violation of 15 U.S.C. § 1125(a); (3) trademark
dilution in violation of 15 U.S.C. § 1125(c); (4) state trade-
mark dilution and injury to business reputation in violation of
California Business and Professions Code section 14330; (5)
state unfair trade practices in violation of California Business
and Professions Code section 17200; and (6) common law
trademark infringement, passing off, and unfair competition.
4
“The first to use a mark is deemed the ‘senior’ user and has the right
to enjoin ‘junior’ users from using confusingly similar marks in the same
industry and market or within the senior user’s natural zone of expansion.”
Brookfield Communications, Inc. v. W. Coast Entm’t Corp., 174 F.3d
1036, 1047 (9th Cir. 1999).
11902 M2 SOFTWARE, INC. v. MADACY ENTERTAINMENT
The case was assigned to Judge Lourdes Baird in the Cen-
tral District of California. On January 8, 2002, Judge Baird
granted partial summary judgment in favor of Madacy. Judge
Baird ruled that there was no triable issue of likelihood of for-
ward confusion among general consumers and music industry
members, or of likelihood of reverse confusion among music
industry members. The district court’s ruling was based, in
part, on M2 Software, Inc. v. Viacom, Inc., 119 F. Supp. 2d
1061 (C.D. Cal. 2000).

Approximately three weeks after the district court granted
partial summary judgment against M2 Software, we reversed
the Viacom decision by a memorandum disposition. See M2
Software, Inc. v. Viacom, Inc., 2002 WL 123571 (9th Cir. Jan.
30, 2002) (mem.). Following our remand of Viacom on May
14, 2002, the case was randomly reassigned to Judge A. How-
ard Matz. Because both the current case and the Viacom case
involved the alleged infringement of the M2 mark, the current
case was reassigned from Judge Baird to Judge Matz on May
29, 2002.

Nearly a year before the jury trial commenced, M2 Soft-
ware filed with Judge Matz a motion for reconsideration of
Judge Baird’s January 8, 2002, partial summary judgment
order. The basis of M2 Software’s motion for reconsideration
was that the Ninth Circuit’s unpublished memorandum dispo-
sition in Viacom constituted new law that warranted reversal
of Judge Baird’s order. Judge Matz ruled that Viacom was not
an intervening change in Ninth Circuit law and denied M2
Software’s motion for reconsideration on July 29, 2002.

Judge Matz later ruled on numerous motions in limine, and
a jury trial commenced on May 13, 2003. The trial was
restricted to the remaining issue of reverse confusion: whether
general consumers who were not music industry members
would mistakenly believe that they were purchasing Mada-
cy’s products while in fact they were purchasing M2 Soft-
ware’s products.
 M2 SOFTWARE, INC. v. MADACY ENTERTAINMENT 11903
Before the case was submitted to the jury, SFX Entertain-
ment (one of Madacy’s co-defendants) moved for judgment as
a matter of law, arguing that SFX Entertainment was not
directly involved with the alleged trademark infringement.
The district court agreed and granted SFX Entertainment
judgment as a matter of law on May 15, 2003.

A day later, the jury returned a special verdict finding
Madacy not liable. The district court entered judgment against
M2 Software on May 30, 2003, and M2 Software timely filed
its Amended Notice of Appeal on June 2, 2003.

III. ANALYSIS

M2 Software now appeals: (1) the district court’s grant of
partial summary judgment in favor of Madacy; (2) the district
court’s denial of M2 Software’s motion for reconsideration of
partial summary judgment; (3) the district court’s entry of
judgment as a matter of law for SFX Entertainment; (4) the
district court’s evidentiary rulings on certain motions in
limine; (5) the district court’s decision to bifurcate the trial;
and (6) the district court’s jury instructions and special verdict
form. Furthermore, M2 Software seeks attorneys’ fees under
the Lanham Act, 15 U.S.C. § 1117. As discussed below, we
affirm because the district court did not err in determining
there was no likelihood of confusion between the marks. In
addition, the district court acted within its discretion in man-
aging the trial and any errors were harmless.

A. The District Court’s Grant of Partial Summary
Judgment

[1] This case deals with “two distinct claims in the trade-
mark infringement context: forward confusion and reverse
confusion.” Surfvivor Media, Inc. v. Survivor Prods., 406
F.3d 625, 630 (9th Cir. 2005). Forward confusion occurs
when consumers mistakenly associate a junior user’s mark
with that of a “well-known senior mark.” Dreamwerks Prod.
11904 M2 SOFTWARE, INC. v. MADACY ENTERTAINMENT
Group, Inc. v. SKG Studio, 142 F.3d 1127, 1130 n.5 (9th Cir.
1998). Reverse confusion cases, however, involve consumers
dealing with a senior trademark-holder believing all the while
that they are doing business with a junior user. See Surfvivor
Media, Inc., 406 F.3d at 630.

[2] Both reverse and forward confusion cases require the
plaintiff to demonstrate a likelihood of confusion among con-
sumers. Therefore, to survive summary judgment on its for-
ward confusion claim in this case, M2 Software must raise a
material question of fact whether the general public and the
music industry members thought that M2 Software was the
source of Madacy’s CDs. Furthermore, to withstand summary
judgment on its reverse confusion claim, M2 Software must
demonstrate that a question of material fact remains whether
music industry members believed that Madacy was the source
of M2 Software’s goods.

[3] The test of trademark infringement under state, federal,
and common law is whether there will be a likelihood of confu-
sion.5 See Cleary v. News Corp., 30 F.3d 1255, 1262-63 (9th
Cir. 1994). To determine whether there is a likelihood of con-
fusion between the parties’ allegedly related goods and ser-
vices, we consider the following eight Sleekcraft factors: (1)
strength of the mark; (2) proximity of the goods; (3) similarity
of the marks; (4) evidence of actual confusion; (5) marketing
channels used; (6) type of goods and the degree of care likely
to be exercised by the purchaser; (7) defendant’s intent in
selecting the mark; and (8) likelihood of expansion of the
product lines. See AMF Inc. v. Sleekcraft Boats, 599 F.2d 341,
348-49 (9th Cir. 1979).
5
Furthermore, for M2 Software to succeed on each of its other federal,
state, and common-law based claims, it must establish a likelihood of con-
fusion. See Walter v. Mattel, Inc., 210 F.3d 1108, 1111 (9th Cir. 2000)
(“The test for false designation under the Lanham Act, as well as the
common-law and statutory unfair competition claims, is whether there was
a ‘likelihood of confusion.’ ”).
 M2 SOFTWARE, INC. v. MADACY ENTERTAINMENT 11905
Some Sleekcraft factors “are much more important than
others, and the relative importance of each individual factor
will be case specific.” Brookfield, 174 F.3d at 1054. In
essence, “[t]he test for likelihood of confusion is whether a
‘reasonably prudent consumer’ in the marketplace is likely to
be confused as to the origin of the good or service bearing one
of the marks.” Dreamwerks Prod. Group, Inc., 142 F.3d at
1129.

The district court did not analyze each Sleekcraft factor
separately. Instead, the district court discussed each factor “in
the context of the facts that are marshaled by each side.” The
district court granted partial summary judgment in favor of
Madacy. The court ruled as a matter of law (1) that there was
no likelihood of forward confusion among either general con-
sumers or music industry members, and (2) that there was no
likelihood of reverse confusion among music industry mem-
bers.

We review summary judgments de novo. See Clicks Bil-
liards, Inc. v. Sixshooters, Inc., 251 F.3d 1252, 1257 (9th Cir.
2001). As we now explain, an analysis of the Sleekcraft fac-
tors supports the conclusion of the district court that there was
no triable issue of the likelihood of confusion.

i. Strength of Mark

Trademarks are categorized as generic, descriptive, sugges-
tive, and arbitrary or fanciful. See Two Pesos, Inc. v. Taco
Cabana, Inc., 505 U.S. 763, 768 (1992). A generic mark is the
least distinctive, and an arbitrary or fanciful mark is the most
distinctive. See GoTo.com, Inc. v. Walt Disney Co., 202 F.3d
1199, 1207 (9th Cir. 2000). The more distinctive a mark, the
greater its conceptual strength; in other words, a mark’s con-
ceptual strength is proportional to the mark’s distinctiveness.

In analyzing the first Sleekcraft factor, the district court was
presented with evidence that M2 Software first used the M2
11906 M2 SOFTWARE, INC. v. MADACY ENTERTAINMENT
mark in commerce in January 1992, registered the mark with
the USPTO in 1994, and devoted resources to maintaining the
mark. And up to late 1999, M2 Software had scant sales of its
CD products and devoted a meager investment of $14,500 in
direct advertising for these products.

The district court, when it conducted its Sleekcraft analysis,
relied heavily on M2 Software’s scant sales of, at most, 215
CDs, and its meager advertising expenditures for its CD prod-
ucts. On the basis of M2 Software’s scant sales and meager
advertising expenditures, the court concluded that even
though the fanciful M2 mark was conceptually strong, no rea-
sonable trier of fact could find for M2 Software on the issue
of likelihood of forward confusion as to the general public.
M2 Software argues that, by considering its scant sales and
meager advertising expenditures, the district court errone-
ously required that M2 Software’s fanciful mark acquire a
secondary meaning. We disagree.

[4] A mark’s overall strength is relative and cannot be
determined by mechanistically assessing its conceptual or
commercial strengths. Our court has previously recognized
that a suggestive or descriptive mark, which is conceptually
weak, can have its overall strength as a mark bolstered by its
commercial success. See, e.g., Entrepreneur Media, Inc. v.
Smith, 279 F.3d 1135, 1144 (9th Cir. 2002) (recognizing that
an otherwise inherently weak mark “may be strengthened by
such factors as extensive advertising, length of exclusive use,
public recognition” (citation and internal quotation marks
omitted)); GoTo.com, 202 F.3d at 1208 (stating that GoTo’s
“tremendous success” strengthened its otherwise suggestive
mark); Brookfield, 174 F.3d at 1058 (noting that “placement
within the conceptual distinctiveness spectrum is not the only
determinant of a mark’s strength, as advertising expenditures
can transform a suggestive mark into a strong mark where, for
example, that mark has achieved actual marketplace recogni-
tion” (internal citation omitted)); Sleekcraft, 599 F.2d at 350
(stating that a suggestive mark may be strengthened by adver-
 M2 SOFTWARE, INC. v. MADACY ENTERTAINMENT 11907
tising; otherwise the weak mark is “entitled to a restricted
range of protection”). But we have never held that an arbitrary
or fanciful mark (i.e., a conceptually strong mark) can have
its overall strength diminished by feeble commercial success.
We decline to do so today. Rather, we hold that a lack of
commercial strength cannot diminish the overall strength of a
conceptually strong mark so as to render it undeserving of
protection. Otherwise, a mark which is conceptually strong
may never have the opportunity to blossom into its full com-
mercial potential through effective marketing.

[5] That being said, we conclude that the first Sleekcraft
factor weighs in M2 Software’s favor, and that the district
court properly considered the overall strength of the M2
mark. Indeed, the district court acknowledged that M2 Soft-
ware’s M2 mark was fanciful, federally-registered, and incon-
testable.6 The district court then weighed the remaining
Sleekcraft factors based on the overall strength of the M2
mark, and the court focused on the ultimate question posed by
the Sleekcraft analysis: the likelihood of confusion as to the
source of the product.

ii. Proximity of Goods

[6] When dealing with the second Sleekcraft factor, the
courts assess whether the goods are related or complementary.
Sleekcraft, 599 F.2d at 350. Where the goods are related or
complementary, the danger of confusion is heightened. See id.
It is undisputed that M2 Software distributes a line of prod-
ucts that includes audio CDs and has a website that provides
audio content for downloading. At a minimum, both M2 Soft-
ware and Madacy distributed music and CDs. Therefore this
Sleekcraft factor weighs in M2 Software’s favor, but only
6
“[The] burden of proving likelihood of confusion (that is, infringe-
ment) [remains] on the party charging infringement even when relying on
an incontestable registration.” KP Permanent Make-Up, Inc., v. Lasting
Impression I, Inc., 125 S. Ct. 542, 548 (2004).
11908 M2 SOFTWARE, INC. v. MADACY ENTERTAINMENT
slightly because the genres of the music CDs are very signifi-
cantly different.7 See Sleekcraft, 599 F.2d at 350 (noting that
goods are proximate if “the goods are similar in use and func-
tion”). Thus, the district court did not err in ruling that this
factor, “if it can support plaintiff’s case at all, does so very
slightly.”

iii. Similarity of Marks

The similarity of marks “has always been considered a crit-
ical question in the likelihood-of-confusion analysis.” See
GoTo.com, 202 F.3d at 1205. Similarity of marks is assessed
“in terms of their sight, sound, and meaning.” Official Airline
Guides, Inc. v. Goss, 6 F.3d 1385, 1392 (9th Cir. 1993) (cita-
tions omitted). Moreover, the trademark is not judged by an
examination of its parts, but rather “the validity and distinc-
tiveness of a composite trademark is determined by viewing
the trademark as a whole, as it appears in the marketplace.”
Id.

M2 Software stresses that Madacy’s M2 Entertainment
mark was identical to its M2 mark in both sight and sound.
Madacy, on the other hand, argues that the two marks are not
sufficiently similar because the “M2” in Madacy’s M2 Enter-
tainment mark is highly stylized and conjoined with the “En-
tertainment,” lacks the oval which appears around M2
Software’s M2 mark, and is used in connection with other
more distinctive marks like the Lakers or the NBA.

[7] The district court compared the marks and took into
account the similarity of the sight, sound, and meaning of the
two marks. After considering (1) the addition of “Entertain-
ment” by Madacy, (2) the use of the mark “interactive” in
addition to M2 on M2 Software’s CDs, (3) the use of other
marks in addition to M2 Entertainment on Madacy’s CDs,
7
M2 Software distributed acid jazz music while Madacy distributed
sports-related music.
 M2 SOFTWARE, INC. v. MADACY ENTERTAINMENT 11909
and (4) the fanciful nature of M2 Software’s M2 mark, the
district court ruled that the third Sleekcraft factor weighed
only very slightly in M2 Software’s favor. This ruling was not
erroneous. The district court considered the marks “in their
entirety and as they appear[ed] in the marketplace.” Alpha
Indus., Inc. v. Alpha Steel Tube & Shapes, Inc., 616 F.2d 440,
444 (9th Cir. 1980); see also Lindy Pen Co. Inc. v. Bic Pen
Corp., 725 F.2d 1240, 1245 (9th Cir. 1984) (“The two marks
viewed in isolation are indeed identical, but their similarity
must be considered in light of the way the marks are encoun-
tered in the marketplace and the circumstances surrounding
the purchase of the [products].”).

iv. Evidence of Actual Confusion

“Evidence that use of the two marks has already led to con-
fusion is persuasive proof that future confusion is likely.”
Sleekcraft, 599 F.2d at 352. As evidence of actual confusion,
M2 Software attempted to offer a likelihood of confusion sur-
vey in its opposition to Madacy’s summary judgment motion.
The district court, as discussed below, properly excluded M2
Software’s survey.

M2 Software now attempts to offer evidence of actual con-
fusion among one of its previous customers allegedly caused
by Madacy’s use of the M2 mark. Specifically, M2 Software
contends that Ms. Patricia Weymss, a record label executive
formerly employed by an M2 Software licensee, informed M2
Software that she saw an ad in which Madacy was using the
M2 Entertainment mark.

In the lower court proceedings, however, M2 Software did
not discuss Ms. Weymss’s deposition testimony. The deposi-
tion transcripts were merely attached as an exhibit to Mada-
cy’s summary judgment motion and as an exhibit to a
declaration filed by M2 Software in opposition to Madacy’s
summary judgment motion. In its opposition to Madacy’s
summary judgment motion, M2 Software failed to raise the
11910 M2 SOFTWARE, INC. v. MADACY ENTERTAINMENT
issue or argue that Ms. Weymss was confused by Madacy’s
use of the M2 Entertainment mark. Thus, M2 Software can-
not offer this evidence on appeal. See Harkins Amusement
Enters., Inc. v. Gen. Cinema Corp., 850 F.2d 477, 482 (9th
Cir. 1988) (stating that only those items referred to in parties’
partial summary judgment memoranda in trial court could be
considered on appeal and that the panel’s analysis was limited
to the factual assertions raised in the district court papers).

[8] Even if we consider Ms. Weymss’s testimony, the evi-
dence fails to show actual confusion.8 See Sleekcraft, 599 F.2d
at 352 (noting that “courts have often discounted such evi-
dence because it was unclear or insubstantial”). At best, the
evidence demonstrates that Ms. Weymss was reminded of M2
Software when she saw Madacy’s advertisement bearing the
M2 Entertainment mark. For example, Ms. Weymss testified:
“I saw the advertisement. I saw M2. I remembered [M2 Soft-
ware’s President]. I hadn’t spoken to him in months. I said,
oh, I should give him a call and say hi.” Absent additional
evidence, Ms. Weymss’s testimony was not enough to dem-
onstrate actual confusion. See Cohn v. Petsmart, Inc., 281
F.3d 837, 843 n.7 (9th Cir. 2002) (noting that “while enquiry
evidence is admissible and relevant, standing alone with no
other evidence it is insufficient proof of actual confusion.”
(citation omitted)). Therefore, the fourth Sleekcraft factor
weighs in Madacy’s favor.

v. Marketing Channels Used

“Convergent marketing channels increase the likelihood of
confusion.” Nutri/System, Inc. v. Con-Stan Indus., Inc., 809
F.2d 601, 606 (9th Cir. 1987). The district court ruled that the
fifth Sleekcraft factor weighed, at best, only very slightly in
M2 Software’s favor. The district court determined that there
was no significant overlap in advertising markets. The court
concluded that the only overlap between Madacy’s and M2
8
Accordingly, Madacy’s tedious motion to strike is denied as moot.
 M2 SOFTWARE, INC. v. MADACY ENTERTAINMENT 11911
Software’s goods occurred on the website “Amazon.com,”
where the music CDs of both companies could potentially
have been purchased.

M2 Software takes issue with the district court’s conclusion
and argues that Madacy uses the same marketing channels
because Madacy also launched its M2 Entertainment
branded record label during a music industry trade show;
because both M2 Software’s M2 mark and Madacy’s M2
Entertainment mark had been advertised in similar maga-
zines; and because both M2 Software and Madacy had estab-
lished a music industry presence in Los Angeles, New York,
Miami, and Nashville. M2 Software, however, fails to discuss
important distinctions in the marketing channels used. M2
Software promoted its M2 products in specialty music indus-
try publications, whereas Madacy did not promote its M2
Entertainment CDs in these publications. Furthermore, M2
Software argues that both marks were launched at the same
trade show. However, even though Madacy launched its M2
Entertainment record label at the same trade show, it did so
nearly a decade after M2 Software launched its M2 products.

[9] Next, even though both M2 Software and Madacy
offered their CDs for sale over the internet in general, and on
“Amazon.com” in particular, M2 Software failed to provide
evidence of sales attributable to M2 Software’s website.
Finally, unlike Madacy’s music albums, M2 Software’s prod-
ucts were not sold in retail outlets. In light of these differ-
ences, we conclude that the district court erred, although
harmlessly, in ruling that this factor slightly favored M2 Soft-
ware. Our weighing of the factor tilts strongly toward
Madacy, and weighs heavily in the ultimate assessment that
there was no triable issue of the likelihood of confusion.

vi. Type of Goods and the Degree of Care Likely to
Be Exercised by the Purchaser

The type of goods and the degree of care likely to be exer-
cised by the consumer is the sixth Sleekcraft factor to be con-
11912 M2 SOFTWARE, INC. v. MADACY ENTERTAINMENT
sidered. In this case, M2 Software offers two discrete types of
products, each with a distinct group of purchasers.

The first type includes record label and music management
administration database programs (including the RLMS and
MPMS programs). The primary audience for the record label
and music management administration database software
products comprises music industry professionals.

The purchasers of the record label and music management
databases (and associated services) are highly sophisticated
members of the music industry. Regardless of any trademark,
they would be well informed about the nature of a database
program and its producer before making a purchasing deci-
sion. Thus, the possibility that these members of the music
industry would be confused about the record label and music
management products and services is almost nil.

The second type includes musical works (offered on audio
CDs and interactive CD-ROMs, for example). Of the 880
copies of the musical works distributed by M2 Software, 215
CDs at most were purchased by consumers at large. The
remaining copies were distributed to various people and not
directly sold by M2 Software.

In contrast to those purchasing the record label and music
management databases, the purchasers of the musical works
(audio CDs, for example) are less sophisticated. Even though
more than half of the 880 copies of M2 Software’s musical
works were distributed to people in the music industry, copies
of the musical works were sold to consumers at large.
“[E]quity will protect even the uncommonly naive against
deception from unfair competition.” Stork Rest., Inc. v.
Sahati, 166 F.2d 348, 358 (9th Cir. 1948). Thus, likelihood of
confusion of the casual consumer and the “discerning buyer”
must be considered. Oriental Foods, Inc. v. Chun King Sales,
Inc., 244 F.2d 909, 915 (9th Cir. 1957).
 M2 SOFTWARE, INC. v. MADACY ENTERTAINMENT 11913
[10] The district court, in performing its Sleekcraft analysis,
properly considered both the general consumers and the music
industry members. The district court concluded that the sixth
Sleekcraft factor weighed in Madacy’s favor. This conclusion
was not erroneous because M2 Software failed to demonstrate
that a reasonable jury could find for M2 Software on the pos-
sibility of confusion among the casual consumer; confusion
would be even less likely among the discerning music indus-
try members.

vii. Defendant’s Intent in Selecting the Mark

It is settled that “[a] party claiming trademark infringement
need not demonstrate that the alleged infringer intended to
deceive consumers.” E. & J. Gallo Winery v. Gallo Cattle
Co., 967 F.2d 1280, 1293 (9th Cir. 1992). When the alleged
infringer knowingly adopts a mark similar to another’s, we
must presume that the public will be deceived. See Sleekcraft,
599 F.2d at 354.

M2 Software presented evidence that Madacy was aware of
M2 Software’s M2 mark. Specifically, M2 Software demon-
strated that Madacy conducted a trademark search for “record
label” uses prior to the launch of its M2 Entertainment mark
which uncovered M2 Software’s M2 mark. M2 Software
claims that this is proof of Madacy’s wrongful intent. M2
Software overstates Madacy’s ill intentions. In fact, as a result
of the search, Madacy’s attorney believed that Madacy could
“carve out” a non-infringing mark, even with the existence of
M2 Software’s M2 mark.

[11] The district court ruled that even though Madacy exer-
cised questionable judgment in proceeding with the M2
Entertainment mark in the face of the M2 mark, M2 Soft-
ware failed to present evidence “that would justify a trier of
fact in concluding that [Madacy], with 20 years of experience
in the music industry and the ability to produce almost 40,000
CDs in less time than M2 Software could sell 200 CDs, had
11914 M2 SOFTWARE, INC. v. MADACY ENTERTAINMENT
any intention of capitalizing on M2 Software’s trademark.”
We agree and hold that the district court did not err in con-
cluding that the seventh Sleekcraft “intent” factor also leans
towards Madacy’s favor.

viii. Likelihood of Expansion of the Product Lines

[12] M2 Software claims that because it began to broaden
marketing of its “interactive content” on the internet, the
eighth Sleekcraft factor should weigh in its favor. However,
there is a need for “a strong possibility of expansion into
competing markets” for this factor to “weigh[ ] in favor of a
finding of infringement.” E. & J. Gallo, 967 F.2d at 1293
(emphasis added). M2 Software sold no more than 215 CDs
over a ten-year period. This undermines M2 Software’s
claims that there was a strong possibility of it expanding into
competing markets — it was doubtful that M2 Software
would expand into general retail distribution of audio CDs.
Thus, this Sleekcraft factor also favors Madacy.

***

[13] To prevail on the ultimate question toward which the
Sleekcraft analysis is directed — the likelihood of confusion
of consumers — M2 Software must show sufficient evidence
to permit a rational trier of fact to find that confusion is “prob-
able,” not merely “possible.” Murray v. CNBC, 86 F.3d 858,
861 (9th Cir. 1996). M2 Software failed to make such a show-
ing. In sum, Madacy’s use of the M2 mark was not “likely to
confuse an appreciable number of people as to the source of
the product.” Entrepreneur Media, Inc., 279 F.3d at 1151
(emphasis added). Therefore, we hold that the district court
did not err in its weighing of the Sleekcraft factors and in
reaching the overall conclusion that M2 Software had failed
to raise a triable issue as to a likelihood of confusion.9
9
We deny Madacy’s request for judicial notice.
 M2 SOFTWARE, INC. v. MADACY ENTERTAINMENT 11915
B. The District Court’s Denial of M2 Software’s
Motion for Reconsideration

We review a district court’s denial of a motion for recon-
sideration for an abuse of discretion. See Kona Enters., Inc.
v. Estate of Bishop, 229 F.3d 877, 883 (9th Cir. 2000).

M2 Software contends that Judge Matz erred in denying its
motion for reconsideration of Judge Baird’s order granting
partial summary judgment in favor of Madacy. According to
M2 Software, Judge Baird’s order was based on M2 Software,
Inc. v. Viacom, Inc., which was subsequently reversed in an
unpublished decision. M2 Software argues that because our
unpublished memorandum disposition reversing Viacom con-
stituted new law, Judge Matz should have reconsidered Judge
Baird’s order granting partial summary judgment in favor of
Madacy.

Contrary to M2 Software’s contentions, the order granting
partial summary judgment against M2 Software relied on the
Viacom decision only for the narrow proposition that the rec-
ognition of M2 Software’s trademark in the software field
was not likely “to spill over into the musical CD field.” More-
over, Judge Baird accepted that there was some theoretical
relationship between the two fields. M2 Software, however,
failed to present evidence to create the inference that there
was “an actual marketing relationship, one that might be
reflected in sales, business opportunities, or recognition.”
(emphasis in original).

[14] Because Judge Baird’s reasoning and legal conclu-
sions for granting partial summary judgment in favor of
Madacy were supported by other case law, her minimal reli-
ance on the later reversed Viacom decision was irrelevant.
Thus, Judge Matz properly ruled that the unpublished memo-
randum disposition for Viacom was not binding precedent, see
Ninth Circuit Rule 36-3(a) (stating that unpublished disposi-
tions of the circuit are not binding precedent except under rel-
11916 M2 SOFTWARE, INC. v. MADACY ENTERTAINMENT
evant exceptions), and did not err in denying M2 Software’s
motion for reconsideration.

C. Judgment as a Matter of Law for SFX
Entertainment

A district court’s grant of a motion for judgment as a matter
of law is reviewed de novo. See Horphag Research Ltd. v.
Pellegrini, 337 F.3d 1036, 1040 (9th Cir. 2003). “In review-
ing a judgment as a matter of law, the evidence must be
viewed in the light most favorable to the nonmoving party,
and all reasonable inferences must be drawn in favor of that
party.” Id.

Before the case was submitted to the jury, co-defendant
SFX Entertainment alleged that it was not directly involved
with the trademark infringement. The district court agreed and
granted judgment as a matter of law in SFX Entertainment’s
favor.

[15] This ruling was proper. M2 Software did not present
any evidence that SFX Entertainment was involved in the pro-
duction, manufacturing, marketing, sale, or distribution of M2
Entertainment products. There was no evidence that SFX
Entertainment, the parent company, was liable for the actions
of Alphabet City, its subsidiary. The district court therefore
did not err in granting SFX Entertainment judgment as a mat-
ter of law because a reasonable jury would not find any liabil-
ity for SFX Entertainment.

D. The District Court’s Evidentiary Rulings

M2 Software also challenges many of the district court’s
evidentiary rulings. M2 Software contends that the district
court erred by: (1) excluding a likelihood of confusion survey
conducted on behalf of M2 Software; (2) excluding evidence
of Madacy’s common manufacture of allegedly related prod-
ucts; (3) excluding evidence of M2 Software’s successful
 M2 SOFTWARE, INC. v. MADACY ENTERTAINMENT 11917
enforcement of its trademark; and (4) admitting evidence of
potential third-party infringers of the M2 mark.

A district court’s evidentiary rulings are reviewed for an
abuse of discretion. See City of Long Beach v. Standard Oil
Co., 46 F.3d 929, 936 (9th Cir. 1995). Prejudice must be
shown to warrant a reversal. See id. As explained below, the
district court did not abuse its discretion in any of the eviden-
tiary rulings of which M2 Software presently complains.

i. Exclusion of M2 Software’s “Likelihood of
Confusion” Survey

Admissibility of a survey is a threshold question that must
be resolved by a judge. See Clicks Billiards, 251 F.3d at 1263
(“Treatment of surveys is a two-step process. First, is the sur-
vey admissible? That is, is there a proper foundation for
admissibility, and is it relevant and conducted according to
accepted principles? This threshold question may be deter-
mined by the judge.” (internal citations omitted)). Surveys in
trademark cases are to be admitted as long as they are “con-
ducted according to accepted principles.” Prudential Ins. Co.
v. Gibraltar Fin. Corp., 694 F.2d 1150, 1156 (9th Cir. 1982).

M2 Software’s survey was twice excluded by the district
court because it was not created or conducted in a manner that
complied with appropriate standards. The survey was
excluded for the first time by Judge Baird when the court
granted partial summary judgment against M2 Software. The
survey was excluded a second time by Judge Matz when the
court ruled on evidentiary matters.

[16] Both district judges properly rejected the M2 Soft-
ware’s survey because the survey’s creator “did not qualify as
an expert on designing or analyzing consumer surveys.”
Moreover, M2 Software failed to “show that the survey was
conducted in accordance with generally accepted survey prin-
ciples and that the results were used in a statistically correct
11918 M2 SOFTWARE, INC. v. MADACY ENTERTAINMENT
manner.” Keith v. Volpe, 858 F.2d 467, 480 (9th Cir. 1988).
M2 Software’s arguments regarding the weight of the survey
are misplaced because M2 Software first failed to provide a
proper foundation for admissibility of its survey. See Clicks
Billiards, 251 F.3d at 1263 (“Once the survey is admitted,
however, follow-on issues of methodology, survey design,
reliability, the experience and reputation of the expert, cri-
tique of conclusions, and the like go to the weight of the sur-
vey rather than its admissibility.”). Thus, the district court did
not abuse its discretion in rejecting M2 Software’s survey evi-
dence.

ii. Exclusion of Evidence of M2 Software’s
Successful Enforcement of Its M2 Trademark

[17] The district court excluded evidence of M2 Software’s
legal fees in defending its mark against other alleged infring-
ers because such evidence was irrelevant to the case at hand.
Moreover, notwithstanding the district court’s ruling, M2
Software was still able to elicit some testimony regarding its
enforcement efforts at trial. Accordingly, the district court did
not abuse its discretion in excluding this evidence, and error,
if any, was harmless.

iii. Admission of Evidence of Similar Marks Other
Than Madacy’s and Exclusion of Allegedly
Related Products

The district court permitted Madacy to present limited evi-
dence of existing third-party marks in the relevant field which
were similar to M2 Software’s to demonstrate that it was less
likely that M2 Software’s customers would associate M2
Software’s products with those of Madacy’s, as opposed to
other third parties. The district court, however, did not permit
Madacy to introduce non-probative evidence of third-party
marks in unrelated fields or of music albums that merely con-
tained an “M2” in the title.
 M2 SOFTWARE, INC. v. MADACY ENTERTAINMENT 11919
[18] Use of similar marks by third-party companies in the
relevant industry weakens the mark at issue. See Miss World
(UK) Ltd. v. Mrs. America Pageants, Inc., 856 F.2d 1445,
1449 (9th Cir. 1988); see also Eclipse Assocs. Ltd. v. Data
Gen. Corp., 894 F.2d 1114, 1119 (9th Cir. 1990) (“Evidence
of other unrelated potential infringers is irrelevant to claims
of trademark infringement and unfair competition under fed-
eral law.” (emphasis added)). Therefore, the district court did
not abuse its discretion by its evidentiary rulings that related
to similar third-party marks.

The district court also restricted M2 Software from intro-
ducing evidence of Madacy products that did not bear the M2
mark because such evidence was not relevant to the Sleekcraft
likelihood of expansion factor. M2 Software argues that the
district court erred because this was evidence of common
manufacture of related products which demonstrated a likeli-
hood of expansion. We disagree. The evidence did not have
a tendency to show that a likelihood of expansion was more
probable than not. See Fed. R. Evid. 401 (“ ‘Relevant evi-
dence’ means evidence having any tendency to make the exis-
tence of any fact that is of consequence to the determination
of the action more probable or less probable than it would be
without the evidence.”). In sum, the district court did not
abuse its discretion, and error, if any, in excluding the irrele-
vant evidence was harmless.

E. Bifurcation of the Trial on Liability and Damages

The district court’s decision to bifurcate a trial is reviewed
for an abuse of discretion. See Danjaq LLC v. Sony Corp.,
263 F.3d 942, 961 (9th Cir. 2001).

[19] In this case, the district court informed the parties and
the jury of the possibility that the trial would be bifurcated.
The parties did not object. In addition, the district court
admonished the jury not to let the trial schedule affect its ver-
dict. The district court bifurcated the proceedings for judicial
11920 M2 SOFTWARE, INC. v. MADACY ENTERTAINMENT
economy and to avoid prejudice and confusion. The district
court had broad discretion to try the liability phase first and
did not abuse its discretion in bifurcating the trial. See Fed. R.
Civ. P. 42(b) (“The court, in furtherance of convenience or to
avoid prejudice, or when separate trials will be conducive to
expedition and economy, may order a separate trial of any
claim, . . . or of any separate issue . . . , always preserving
inviolate the right of trial by jury . . . .”).

F. Jury Instructions and Special Verdict Form

A district court’s formulation of civil jury instructions is
reviewed for an abuse of discretion. See Monroe v. City of
Phoenix, 248 F.3d 851, 857 (9th Cir. 2001). An error in
instructing the jury in a civil case does not require reversal if
it is harmless. See id. at 860.

It is sad to say that this case “set an all-time record of 276
pages for disputed jury instructions.” Even though the parties
were of minimal assistance, the district court’s jury instruc-
tions and special verdict form “fairly and adequately cover-
[ed] the issues presented, correctly state[d] the law, and
[were] not misleading.” Fikes v. Cleghorn, 47 F.3d 1011,
1013 (9th Cir. 1995). As discussed below, the district court
did not abuse its discretion in formulating jury instructions
and the special verdict form.

i. Jury Instructions Regarding Likelihood of
Reverse Confusion

M2 Software complains that the district court’s jury
instructions and special verdict form erroneously suggested
that a reverse confusion infringement suit could not be initi-
ated against a junior trademark-holder unless the junior trade-
mark had already saturated the market. M2 Software, in its
opening brief, also contends that the district court should have
instructed the jury about “potential customers” and “affilia-
 M2 SOFTWARE, INC. v. MADACY ENTERTAINMENT 11921
tion, connection, and association.” These arguments lack
merit.

The district court, in jury instruction number 14, defined
reverse confusion as occurring when:

(1) a senior user of a mark seeks to protect its busi-
ness identity from being overwhelmed by a
larger junior user that has saturated the market
with publicity and/or advertising and

(2) consumers doing business with the senior user
mistakenly believe that they are dealing with
the larger junior user.

This jury instruction mirrored the language used in our cir-
cuit’s reverse confusion cases. See, e.g., Playmakers LLC v.
ESPN, Inc., 376 F.3d 894, 897 (9th Cir. 2004) (“The ultimate
question in a reverse confusion case is whether consumers
doing business with the senior user might mistakenly believe
that they are dealing with the junior user.” (internal quotation
marks omitted) (emphasis added)); Dreamwerks, 142 F.3d at
1130 (using same “dealing with” language). Moreover, M2
Software’s proposed jury instruction included the same lan-
guage of, and cited to, the Dreamwerks case. There was no
need for the district court to use the “affiliation, connection,
and association” language advanced by M2 Software.

Furthermore, in reverse confusion cases, the inquiry
focuses on the strength of a junior mark. The strength of the
junior mark is closely related to how much the market is satu-
rated by the junior mark. See Dreamwerks, 142 F.3d at 1130
n.5 (stating that because reverse confusion occurs when a
senior user loses its goodwill as a result of saturation by a big-
ger, more powerful junior user’s mark, the inquiry focuses on
the strength of the junior mark). Thus, the district court’s use
of “has saturated the market” was harmless.
11922 M2 SOFTWARE, INC. v. MADACY ENTERTAINMENT
As to the potential customers to be considered by the jury
in determining whether a likelihood of confusion existed, the
district court properly and adequately instructed the jury to
consider likelihood of confusion among “general consumers.”
The district court’s instructions also properly and explicitly
directed the jury to consider the degree of care of “potential
buyers.”

[20] The district court’s instructions clearly covered the
reverse confusion issues to be decided by the jury. Therefore,
the district court did not abuse its discretion in formulating the
jury instructions regarding reverse confusion and any errors
were harmless and do not warrant reversal.

ii. Jury Instructions Regarding M2 Software’s
Other Federal, State, and Common-Law Based
Claims

To succeed on its other claims, M2 Software must prove a
likelihood of confusion. See Cleary, 30 F.3d at 1262-63 (stat-
ing claims under California Business and Professions Code
§ 17200 are “ ‘substantially congruent’ to claims made under
the Lanham Act”); Walter, 210 F.3d at 1111 (stating that false
designation under the Lanham Act, as well as the common-
law and statutory unfair competition claims, require a show-
ing of likelihood of confusion). The district court properly
instructed the jury regarding the elements of likelihood of
confusion in a succinct manner. With these instructions, the
jury returned a defense verdict finding Madacy not liable. In
short, the district court did not abuse its discretion in formu-
lating the jury instructions.

G. M2 Software’s Request for Attorneys’ Fees

[21] Finally, M2 Software argues that attorneys’ fees are
warranted under the Lanham Act, 15 U.S.C. § 1117. Because
M2 Software did not succeed in establishing a violation of its
trademark, it is not entitled to attorneys’ fees.
 M2 SOFTWARE, INC. v. MADACY ENTERTAINMENT 11923
IV. CONCLUSION

For the foregoing reasons, we AFFIRM the district court’s
orders granting partial summary judgment in favor of
Madacy, granting judgment as a matter of law in favor of SFX
Entertainment, and entering final judgment following a jury
trial against M2 Software.