Acxiom Corp. v. Axiom, Inc.

27 F.Supp.2d 478

ACXIOM CORPORATION, a Delaware corporation, Plaintiff, v. AXIOM, INC., a Delaware corporation, Defendant.

No. CIV. A. 97-451-RRM.

United States District Court, D. Delaware.

November 16, 1998.

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

Joanne Ceballos, Potter, Anderson & Corroon, Wilmington, DE, Chris R. Ottenweller, Orrick, Herrington & Sutcliffe, Menlo Park, CA, Michael B. Carlinsky, Orrick, Herrington & Sutcliffe, New York City, for Plaintiff.

David J. Margules, Todd C. Schiltz, Wolf, Block, Schorr & Solis-Cohen, Wilmington, DE, for Defendant.

OPINION

McKELVIE, District Judge.

This is a trademark case. Plaintiff Acxiom Corporation is a Delaware corporation with its principal place of business in Conway, Arkansas. Defendant Axiom, Inc. is a Delaware corporation with its principal place of business in Moorestown, New Jersey.

On August 1, 1997, Plaintiff Acxiom filed a complaint, alleging that Defendant Axiom, by adopting the name, "Axiom, Inc.," is engaging in infringement of registered trademarks and service marks under § 32 of the Lanham Act, 15 U.S.C. § 1114; false designation of origin under § 43(a) of the Lanham Act, 15 U.S.C. § 1125(a); dilution under the Federal Trademark Dilution Act of 1995, § 43(c) of the Lanham Act, 15 U.S.C. § 1125(c); unfair competition under Delaware's Uniform Deceptive Trade Practices Act, 6 Del. C. §§ 2531 et seq. (the "Deceptive Trade Practices Act"); and common-law trademark, service mark and trade name infringement. Acxiom seeks to cancel Axiom's registered trademarks and trade names and requests injunctive relief, award of Axiom's profits, reasonable attorneys' fees and costs. Defendant Axiom answered the complaint, denying liability on all of Acxiom's claims. The parties tried this matter to the court on February 17, 18, 19, and 20, 1998. This is the court's post-trial decision.

I. FACTUAL BACKGROUND

The parties have fully briefed all issues before the court. The court draws the following facts from the parties' pleadings and evidence presented at trial.

A. Plaintiff Acxiom Corporation

1. General Background

Acxiom uses computer technology to provide information for business opportunities. Formerly known as CCX Network, Inc., Acxiom processes large-scale customer databases and provides information about consumers to businesses. The company traces it roots to the 1970s when several former IBM employees began processing and maintaining mailing lists for direct marketers. Acxiom became a public company in 1983 and has traded on the NASDAQ exchange under the ticker symbol "ACXM" since 1988. With offices in five countries and 3,000 full-time employees, Acxiom had revenues of $402 million in 1997.

Acxiom's data processing operation has grown to 16 mainframe computers processing up to 1.1 billion instructions per second and holding 350 terabytes of consumer data. This is a massive amount of data; one terabyte equals 1,000 gigabytes or the equivalent of 500 million pages of single-spaced text. In describing his company's work in his 1997 Chairman's Letter, Charles D. Morgan, Jr., Acxiom's chief executive, explained: "Simply put, [Acxiom] can take the massive amounts of information that a business collects about its customers, match names with lifestyles and demographic information from other sources, and give our client a clear picture of the people buying its products and services."

Acxiom began using "ACXIOM" as its business name and service mark on July 20, 1988. Rodger Kline, Acxiom's Chief Operating Officer, testified that the "C" in "ACXIOM" links its former name to the current name. Acxiom's Morgan testified in his deposition that setting the "CX" in a different color from the rest of the name gives it "a little bit of pizazz." The court notes that the company deliberately selected this unusual spelling for its new name. The company owns a number of trademarks and service marks incorporating "ACXIOM" which are registered with the Patent and Trademark Office ("PTO").

The PTO initially refused to register one of these marks, "ACXIOM MARKETGUIDE," in 1994 because it "so resemble[d]" another mark, "AXIOM." This "AXIOM" mark referred to a single product name registered by Axis Computer Systems Inc. for use with "computer programs for materials resource planning and inventory planning for use in manufacturing, order processing and delivery fields." Following a June 26, 1995 Amendment and Response brief filed with the PTO, Acxiom overcame the Examiner's objections to this registration. Acxiom's actions regarding registration of its mark with the PTO are examined in greater detail in the Discussion section below.

2. Acxiom's Business Interests

a) Primary Business

Kline testified that Acxiom's "primary business is collecting, compiling, managing and providing data for marketing applications." To carry out this business, Acxiom provides various products and services for marketing databases, data warehouses and decision support systems for its customers. Businesses turn to Acxiom to augment and improve their own in-house data resources because they want to learn more about their existing and potential customers.

By way of background, the court notes that direct marketers, large companies with many end users, such as Allstate Corp., Prudential Insurance Co. of America, Conde Nast Publications and Marriott Vacation Club International and others, use Acxiom's data. Trans Union Corp., one of the nation's largest consumer credit agencies, uses Acxiom for all its data processing. Seventeen of the nation's twenty-five largest credit card issuers use Acxiom's products and services.

According to Kline's testimony, a marketing database is a collection of marketing information on a company's customers, including transaction data and other internal data that a company collects about its customers. This data can be combined with other data and made into a database to drive marketing activities, such as direct mailing. In this way, a company can target its marketing to its most receptive audience. As Kline explained, "[w]e regard our services as taking the junk out of junk mail by more closely aligning interests of people with the advertising material that they are going to receive...."

A data warehouse is a more sophisticated database which includes information of greater breadth and greater depth than a standard marketing database. It typically includes information from more disparate sources and includes more transactional and historical information. A data warehouse can contain many millions of characters of information. Whether building a marketing database, data warehouse or a decision support system, Acxiom relies on its customer to collect data stored on its own internal systems, download the data and deliver it to Acxiom's Conway, Arkansas facility. There Acxiom uploads the data onto its computer mainframes, processes it and, in most cases adds its own data. Kline testified that the "key to most of the processes that [Acxiom] do[es] for customers [is] data integration," which refers to correlating and merging information from many disparate sources, eliminating duplicative and irrelevant data, correcting incomplete and inaccurate information, standardizing formats and, as appropriate, adding Acxiom data into a marketing database, data warehouse or decision support system.

For example, Acxiom's InfoBase is a "multi-sourced consumer data file" offering "demographic, socioeconomic and psychographic data on households and individuals." By way of background, a 1997 Forbes article claims InfoBase contains "some or all of the following information on 195 million Americans: age, estimated income, home ownership, cars owned, occupation, children, education, buying habits," among others. In 1996, Acxiom used InfoBase to enhance marketing lists totaling 3.7 billion names. Another example of Acxiom's services is its DataQuick List Services which, according to Acxiom's promotional literature, offers real property data for over 67 million properties. Mortgage lenders and insurance underwriters use DataQuick to assess business risks.

b) Telecommunications Business

i) Telecommunications Business Unit

James Drake, Acxiom's former Telecommunications Business Leader, testified that Acxiom formed its Telecommunications Business Unit in 1993 in anticipation of deregulation of the telephone industry. In fiscal year 1997, the unit had a staff of about thirty people and $7.0 million in revenues. Through this unit, Acxiom sells its products and services to customers within the telecommunications industry. Drake testified that the unit's sales representatives frequently cold call potential customers introduce themselves. According to Drake, Acxiom's current and potential customers within this industry include regional Bell operating companies; long distance providers; competitive local exchange companies; independent local exchange companies, like GTE; cellular companies; pager companies; cable television companies; and satellite companies. Acxiom has built marketing databases for telecommunications companies such as Ameritech, Bell Atlantic, Bell South and GTE. In building these marketing databases, Acxiom worked on external data as well as internal data such as data from the company's billing system, customer care department and other departments.

Billing system data is sourced from call detail records, or "CDRs." At trial, witnesses offered different technical definitions of CDRs. For example, Richard Kraus, Defendant Axiom's Vice President of National Sales, testified that a CDR is a Bell AMA format record that contains many fields of information pertaining to a telephone call. Bell AMA format refers to generic requirements established in 1994 for the Automatic Message Accounting Data Networking System. According to Kraus, the CDR includes the originating telephone number, the terminating telephone number, the time of day, the duration of the...