ST. LOUIS (CN) — When it comes to taxes, Block means H&R Block, an attorney for the tax giant argued Wednesday in a trademark injunction hearing before the Eighth Circuit.
That was the first point made by H&R Block attorney David H. Bernstein, of New York firm Debevoise & Plimpton, as he argued to keep in place a federal judge's ruling prohibiting Block Inc. from offering tax services through its Cash App.
“If I told you that Block was introducing a new service through a Cash App that will let you file your taxes online, who do you think that was from?” Bernstein said. “That question is at the heart of this case. The district court found that my client is widely known by the name Block a lot.”
Block Inc., previously known as Square Inc., rebranded in 2021 and at the same time began offering tax services through its Cash App product, which uses a green square logo. It also owns the digital payment platform Square, which lets retailers process credit card transactions using a device that attaches to a smartphone or tablet.
H&R Block filed a lawsuit seeking an injunction against Block, claiming the name and logo were confusingly similar to H&R’s green block logo that it has used for decades.
U.S. District Judge Nanette Laughrey, in a 67-page order issued in April, found in favor of H&R Block. Laughrey, a Bill Clinton appointee, ruled that Block’s marks would likely confuse consumers into thinking it was affiliated with H&R Block.
“This injunction is truly unprecedented in the intrusion it makes into an American company’s corporate governance structure,” Block attorney Kathleen M. Sullivan of Quinn Emanuel said during Wednesday's 35-minute hearing.
The three-judge panel questioned both attorneys over the balance of harms regarding the injunction.
Sullivan said the ruling gives her client several options: extract Cash App Taxes from Cash App, which is unfeasible; suspend or sell Cash App Taxes, which would violate an agreement with the New York attorney general; or reincorporate Cash App under a new name, which would cost millions of dollars and hurt the company’s goodwill.
“What the injunction is really driving us towards is an option that's highly intrusive, and is irreversible, and that's to change our name back to Square only in order to change it back to Block again, if we win,” Sullivan said.
Bernstein countered by stating that there is plenty of time with an expedited ruling to rebrand for the 2023 tax season.
“There is no reason that this company, one of the most powerful FinTech companies in the world, with a huge number of engineers and lawyers at their disposal, cannot by 2023 have a new app just like they did in 2021 for tax filing,” Bernstein said. “And it would not be nearly as difficult as they say to change the name. … The district court found that their concerns were overstated.”
Sullivan argued that social media posts linking the two companies are simply part of a computer algorithm and not the result of human confusion.
Bernstein countered that media articles linking the two companies created further confusion.
“They will say, ‘Oh, we didn't say that,’ but they're the ones who armed on media with that,” Bernstein said. “And it is common sense … that consumers will be influenced by that.”
Bernstein also pointed out that H&R Block is concerned that consumers will believe it is part of the Block Inc. family. He mentioned that Block Inc. signs responses to complaints “Block” creating confusion.
The appeals panel questioned Sullivan on the timing of the name change from Square to Block with the rollout of tax services acquired from the purchase of Credit Karma.
“It is clearly erroneous to say they were contemporaneous, because remember what happens is Credit Karma Tax stays embedded in Credit Karma from 2020 all the way for two more years, until we are ready to, at a great investment, to move Credit Karma Tax into Cash App as Cash App Taxes,” Sullivan said. “So, the acquisition preceded the name change by two years.”
In her rebuttal, Sullivan said there is no causal link for confusion between the two companies.
“You can't issue a preliminary injunction based on likelihood of success on a triple bank shot that maybe somebody would have heard that Block is Cash App,” she said.
The panel consisting of U.S. Circuit Judges Raymond W. Gruender and Michael J. Melloy, both George W. Bush appointees, and Ralph R. Erickson, a Donald Trump appointee, took the case under advisement.
H&R Block was founded in 1955 and has since become one of the world’s largest tax preparers, with more than 9,000 locations in the United States, according to its pre-hearing brief.
In addition to Cash App and Square, Block Inc. also owns music streaming service Tidal, according to its brief filed with the Eighth Circuit.
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