Intellectual Property

Misappropriation

Prima Facie Misappropriation:

1) Π made substantial investment of time, money or intellectual effort

2) Δ has appropriated product of Π’s investment

3) Π injured by Δ’s appropriation

4) Good must be a public good (0 MC)

5) Infeasible private enforcement (no way to prevent free-riding)

Defenses:

1) Federal Preemption

2) First amendment freedom of commercial speech

INS v. AP

Classic trade-off between incentives and access cost

Δ (INS) legally copies news AP posts on east coast and prints it on west coast

Majority: Liability for reverse palming-off (misappropriation)

Misappropriation = reaping what one hasn’t sown; Tort of conversion applied to intangible property

Holmes: Wrong, but congress and AP could fix it. No liability if INS disclaims source

Brandeis: No rights to news once released

Modern Importance:

Decision mostly voided by Erie as it was brought on diversity grounds, still exists where it established state doctrine which has not since been

Doctrine still applied to:

Unauthorized broadcast of music group’s phonographic records (Waring – 1937)

Unauthorized recording of opera company’s radio broadcast (Metropolitan Opera Assoc. – 1950)

Unauthorized copying of dress designs (Dior – 1956)

Privacy (ironically first championed by Brandeis), though right to publicity falls more in line with misappropriation than privacy.

Limitations on INS:

1) Admin costs must be able to identify originator and injurious parties

2) Brandeis limit cases to where means are unlawful (but this would basically kill the doctrine)

3) Hand limit to facts of “hot news” cases

• Hand also disfavored INS as it would provide a common law copyright

4) First mover advantage: protection not needed where significant first mover advantages already exist.

• Hand also rejected INS type cases for this reason (ex: Cheney Bro,, Fashion Originates)

5) Cost/Benefit analysis of incentives and access; examples:

• Significant freeriding (ex: following journalistic tips aren’t nearly as freeriding as INS’s copying)

• Standards (see Hubble v. GE) – Access costs are very high here

• Hubble could also be about not giving GE a windfall (wrong incentives)

• However, we still do want to encourage firms to invent a standard

6) Direct competition in primary market requirement

• Ex: NBA v. Motorola. Pager scores, even if misapp won’t threaten NBA’s viability – no undermining of NBA’s primary market

• Further, total consumer satisfaction would be harmed if service not allowed

• NBA also lost because Motorola wasn’t freeriding – it gathered the scores themselves and the NBA didn’t have a property right in the scores

Common Law False Advertising

Advertising

Traditional view: barrier to entry and a waste; tells consumers what to buy instead of letting them decide. Allows firms selling the same thing to differentiate product, gain monopoly, and jack up price.

Errors of view:

Not useful (doesn’t indicate which industries will advertise or do so falsely)

Too Powerful because no evidence of how it changes taste

Empirical evidence indicates lower prices and better entry potential where advertising exists – opposite of what traditional view claimed (ex: eye glasses, drugs, liquor)

Modern Econ view: provides info which makes market more efficient (consumers better off because of)

Includes notations that people are uninformed and there are costs of gaining information

But info only conveyed if it will help a business

While truth helps the public, false advertising harms social welfare

Stigler/Nelson model:

Search characteristics: Much info on what is valuable about good is available pre-purchase (squeeze the

tomato)

But note that not all discernable (ie which chemicals used on tomato)

Experience characteristics: post-experience learning (ex: must watch a movie to really know if you like)

Here advertising (as with recommendations and personal experience) helps gather info you couldn’t otherwise

Credence: Attributes never revealed (or over long time) by actual experience (ex: vitamins, car repair)

Point: Little incentive to give false claim for 1) or 2); high incentive for 3)

Basics

• Common Law UC requires:

1) Injury to Π by Δ conduct

2) Injury caused by something unlawful (not just pure competition)

• Types of False Claims:

• Quality/Nature

• Source or Manufacturer (classic palming off)

• Origin (typically geographic)

• Product Disparagement (false claim about competitor’s product)

• Maybe also allow for non-competitors

• Allow Competitor to sue?

• Yes:

• Often harm to consumers too little for them to care (class action problem); sometimes injunction is the only relief.

• Competitors often have best access to info

• No:

• Consumer (harmed) doesn’t get anything (but still deterrence which justifies)

• Overdeterrence: many suits brought for grey-area advertising where consumers differ in vulnerability

• Suits often used to harass competitor (especially smaller firms)

• FTC would better present suit

Ely-Norris Safe Co. v. Mosler Safe Co.

Originally, common law only allowed action where 1) Palming Off, 2) Defamation, or 3) Disparagement

American Washboard v. Saginaw: Though wrong to sell public spurious goods, NO action unless property rights of Π are involved. These wrongs can only be righted by a public prosecutor or legislature.

Single Source Exception: Action allowed where Δ sells spurious good which only the Π could have sold + evidence that consumer

would have bought from Π had truth been known.

Note: SCOTUS reverses decision on ground that other competitors existed, but exception still stands – this overrules

Washboard where Π was the only seller

Pillsbury Washburn Flour

Single Source Exception applies to geographic locale famous for some quality product

Here court allows injunction where Π flour sellers from famous Minnesota region, Δ from Chicago claims to be from Minn. region

Note: More rationale to allow suit here because consumers would never know of fraud and so no one would/could bring suit

Note: Rule only applies where geographic locale has reputation.

Thus no action allowed against NY based “California Apparel” as no consumer association of Cal with quality

Disparagement (AKA Trade Libel)

Analogous to defamation:

• Defamation: Communication which would harm the reputation of person/business or deter third parties from doing business with it

• Based on:

• Libel Written defamation which is actionable w/o evidence of special damages

• Slander Oral defamation which in only actionable w/ evidence of special damages

• Harm: Consumers buy wrong product due to false information. Thus competitor has to cut prices or spend $ to counter mistruth.

Point: Defamation puts BOP on Δ to show truthfulness, Disparagement puts BOP on Π to show falsity

Also, Defamation allows Strict Liability, Disparagement requires intent or at least some negligence

These distinctions make since considering who has control of information

Requirements:

1) Show falsity of statement

2) Common-law “Actual Malice” by Δ

• Actual Malice = desire to cause injury or knowing or reckless disregard of falsity of statement

3) Special damages resulting from disparagement

Note: Πs usually lose here

Hurlburt v. Gulf Altantic Life Ins Co.

• NO Action where Δ made false/malicious statements to State AG about Π’s product, but where no evidence of lost profits or other harm to company. Only harm was imprisonment of officers which was harm to persons, not the company.

National Refining Co. v. Benzo Motor Fuel Co.

• No Action where Δ made false statements to public about Π’s product, but no evidence of special damages

Lanham Act False Advertising (§43(a))

Activities barred found under

(a)(1)(A) Passing Off - Cause confusion, mistake, deceive, disparage, etc.

(a)(1)(B) False Ads - Misrepresentation as to quality, origin, etc.

Standing to sue limited to competitors

• See LA §45 on Trademark

• Note: Non-direct competitors can also sue, though state does specifically state so

• This includes trade associations, but not licensees of product or employees of harmed company

• Colligan: Parents of students who were sold bum ski deal denied standing as they are not competitors

• Rationale: Courts often use intent of act, but stronger argument is there would be too may suits

• Note: Non-registered TMs can also be protected under section

Standard of Liability is Strict Liability

• More justifiable for facially false statements than inadvertent or negligent ones – but still same standard for all

• Possible disincentive for consumers to take precautions – but NO because consumers usually don’t recover, just the competitor

§43 False Advertising Requirements:

1) Comment Must be ad or promotion

Courts often look at methods by which ads are used in particular businesses to see if applicable

Theatrical Case: Comment at cocktail party found to be an ad since typical in that business to advertise at such parties

2) Comment Must be False and Misleading

3) Materiality

False and misleading to “not insubstantial # of customers”

Who “rely on these claims in their purchasing decision”

Note: This can be presumed, especially where claim is facially false

Injury

Likelihood of injury for Injunction (LA §34)

Actual injury for Damages (LA §35)

False and Misleading Comment

Categories:

1) Facially false

• Claim solid mahogany, but it’s veneer. 100% cotton but not

2) Literally false but NOT misleading

• Hertz, “We have more brand new cars than Avis has cars”. Literally false - Avis owns some cars that are for sale (and

literally you have to count them). But the ad applies to those for rent and so this is probably not misleading. However, your probability of getting a new car still might be lower, but Π didn’t argue this below.

• Old Crow Whiskey (unlikely people will think it’s made from old crows)

3) Literally True, but misleading

• Windows, save up to 50% on energy costs - really only applies to broken windows people, so the real savings aren’t this much.

• Old Jimmi Hendrix band - He was only a small part, later sell with huge picture of him on the cover.

• Kraft American cheese slice contains 5 oz of milk v 2 oz in competitor. Though occasionally a slice has 4.5 oz of milk. Literally true, but is it really misleading (it does have more milk).

Point: If ad classified as literal (2 or 3) then expensive Consumer Survey evidence required (unless Δ behavior is aggregious)

If ad classified as facially false (1) then no Consumer Survey needed (see Uhaul)

J&J Merck (Mylanta v. Tums)

• Δ Ad I: Π is Unsafe Δ is Safe and Healthy

• Δ Ad II: Π is Neutral Δ is Healthy

• Literally True but Misleading: Both ads play off of public misconception that aluminum is unhealthy (Πs product contains Al)

• Note: if ad had added to the misconception then harm

• Consumer survey required. Since survey done poorly (no control group) – no evidence of injury

• Consumer Survey:

• Must be done correctly (control group, not misleading questions, etc.)

• May be possible to show harm by showing % of public with misconception and relation to buying patterns

Ads Claiming Support of Product Tests

• Castrol: Test proves oil moves faster than competitors, but doesn’t substantiate claim in ad that it thereby protects engines better

Liability found

• BASF: Ad claims product “met specifications”, but no industry specifications to meet

Liability found because public would assume standards requirements

Injury (Injunction)

Likelihood of injury Factors

1) Degree of Competition Fewer competitors = Increased likelihood of injury

Higher Market Share = Increased likelihood of injury

Future competition = less likelihood of injury than for Current competition (Ortho)

2) Logical Causal Connection More similar the markets/products = Greater likelihood of injury

Requirement met if direct competition

3) Comparative Ads Ad comparing products = Strong likelihood of injury

Many suits brought here because of easier tie of harm to Π and no free-rider problem

4) Actual Injury Consumer Surveys and Testimony (if allowed by court)

J&J vs. Carter Wallace (Nair) (1980)

Parties compete in shaving market. Δ promotes “Nair w/ Baby Oil”. Π claims purpose of baby oil (moisturize) only effective if applied separately. Δ disagrees. Lower court finds no injury

Appeals Court says nothing about requirements 1-3; Reverses on ground that likelihood of injury (low standard) was met

Likelihood of injury found because of:

Evidence of affect to sales (consumer survey), though NAIR isn’t only competitor

Logical Causal Connection, which is met were competition is direct (as it is here)

Note: Court justifies low injury requirement on public policy ground. This is weak, though because good is an experience good and

consumers will not long be deceived

Ortho (JJ) v. Cosprophar (1994)

Parties are potential competitors (Π product is pending approval).

Court disallows standing because Π isn’t yet in market – thus NO likelihood of injury

Injury (Damages)

Common Law: Project lost sales from Πs previous sales

Lanham Act §35 Cost of Δs ads + Cost of Πs response ads (where reasonable)

Lanham Act §35

• Applies to TMs (registered and unregistered) and False Ads (since 1986)

• Requirements:

1) Causation (though not specifically mentioned in LA)

•  

• Recoveries allowed:

(a)(1) Δ profits

• Π BOP to show Δ profits. Δ BOP to deduct costs of production

• Gross vs. Net profits: FA costs are not deductible as they are unjust.

• Point: FA = lower bound. Even if Δ makes no profit, still assess the cost of the ads

(a)(2) Π damages

• Typically the cost of response ads

(a)(3) Costs of court action

(a)(4) Any other remedy court fashions

Point: Damages here are compensation, not penalty or specific deterrence

Uhaul

• Liability found for mislead ad (note: no survey needed where AGGREGIOUS Δ behavior)

• LA Damages method: Δ profits + Π damages from cost of response ads

Ralston I

Liability found for mislead ad (note: no survey need as TEST was claimed in Δ ads)

Profit ratio Damages method:

Δ has 7:1 sales to ad ratio; 3.5:1 profits to ad ratio

Damages = [ ($ spent on FA) * 3.5] * [Π share of market]

Note: Assumption here that consumers misled would by others products in accordance with market share

Note: Ration method does NOT address causation issue

Ralston II (Appeal of I)

• Only Π damages allowed (NOT Δ profits)

• Rationale: Δ conduct was not willful (basically N standard applied) and so no deterrence needed – just compensate Π

• Point: Δ profits only obtained for willful misconduct

Costs of False Ads:

If ads are “mixed” truth and false, courts tend to label 100% false

Cost of FA measured as:

1) change in sales

2) change in Ad$/Sale$ ratio

3) potential for other good ads

State Statutes

FTC

Fools Standard

Charles of the Ritz v. FTC (2d Cir. 1994)

• The FTC was not "made for the protection of experts, but for the public - that vast multitude which includes the ignorant, the unthinking and the credulous," . . . and the "fact that a false statement may be obviously false to those who are trained and experienced does not change its character, nor take away its power to deceive others less experienced."

F.T.C. v. Colgate Palmolive Co. (1965)

• Court finds against Δ who advertises via television that its shaving cream could shave sandpaper. Instead of using real sandpaper, the ads used a piece of Plexiglas with sand applied to it.

F.T.C. v. Mary Carter Paint Co. (1965)

• Δ sells paint for [$15.00 per can + 1 can free] in belief that consumers would view its paint as “cheap” if sold for $7.50 per can.

• Court upholds FTC’s cease and desist order on the belief that courts should defer to FTC’s expertise in deciding what is deceptive.

Reasonable Consumer Standard

Heinz W. Kirchner (1963)

• A representation does not become "false and deceptive" merely because it will be unreasonably misunderstood by an insignificant and unrepresentative segment of the class of persons to whom the representation is addressed

Warner-Lambert (1975)

FTC evaluates Listerine claim’s from perspective of the “average listener”

Horizon Corp. (1981)

FTC evaluates oral and written claims “in light of the sophistication and understanding of the persons to whom they were directed.”

1983 Statement on Standard applied in FTC §§ 5, 12

To be deceptive the representation, omission or practice must be likely to mislead reasonable consumers

Representations targeted to a specific audience are judged by the effect on a reasonable member of that group

Commission considers the totality of the practice in determining how reasonable consumers are likely to respond

An interpretation will be presumed reasonable if it is the one the respondent intended to convey

Trademarks Basics

Definitions:

Trademark: word, symbol, name or signifier to distinguish goods of firm from those of other firms

• Modern law expands to include basically any distinguishing characteristic (sounds, dress, etc.)

Service mark: TM for service

Trade name: TM used to identify the business instead of the product.

• Same name, etc can serve as both trade name and trade mark

• Cannot be registered under LA, but can be protected by 1) State statutes (Com. Law), or 2) §43(a) unregistered mark protection

Acquisition Theory

Spectrum range: à ---- A) Thinking it up -----B) Register mark ------ C) Token use ------D) Use mark in commerce--- à

A) No system uses

B) Many Foreign Systems

• Potential for Banking

C) Pre-1988 Lanham Act

D) Common Law

Lanham Act Acquisition / Term

1(a) Principle Registry requires Use In Commerce (D)

Notice to other firms (constructive notice)

Incontestability: mark can become incontestable over time, thus no defenses available to infringer

Prohibit importation of goods with similar marks

1(b) Secondary Registry requires bona fide intent to use in next 6 month (up to 2 year extension possible)

Used for marks capable of distinguishing applicants goods, but not able to be registered on primary registry

Often used for descriptive marks trying to acquire secondary meaning

Key: Allows protection of TM rights internationally where marks must be registered

Class: Must also specify which class of goods TM applies to (Cars, Potato Chips, etc)

Note: Selection of class is not exhaustive – courts cay still expand coverage under common law to include similar products (ie – golf balls and golf clubs)

Factors for Inclusion:

1) Closeness of products (golf clubs and balls)

2) Complementary goods (hammers and screwdrivers)

3) A’s Unreasonable delay (laches) in protesting B’s use

4) B’s good/bad faith (whether he knew of or was trying to copy A’s mark)

Term: Indefinitely Renewable with continuance filing every 10 years ($300 + Form)

Purpose of TM protection

Classical response: Identifies or provides info on manufacturer of good (origin or source identification)

Modern (Information) response: TMs reduce information/search costs and allows producers to advertise/improve quality

• Producer benefits:

• 1) Can reap profits of a) advertising and b) improvements in quality of good over other goods

• This is because consumers willing to pay a little more $ in exchange for reduced search costs

• Note: these benefits only go to “good” producers. Makers of shoddy goods would like world with no TMs (or no TM protection)

• Consumer benefits:

• 1) Fixes responsibility: Allows consumer to go after producer for defective goods

• 2) Economize information and search costs:

• Quality assurance based on prior good experiences

• Wariness based on prior bad experiences

• This benefit is based on product consistency

• 3) Provides society with information on worth of different people based on products they own

• Ex: expensive watch of same quality as cheap watch, but serves as a status symbol

• 4) Allows consumers to identify themselves with a product (such as a sports team, etc.)

Alternative response: As with advertising, TMs allow firm to differentiate identical goods and reap monopoly prices

Trademark doctrines based on information theory:

Key: IP rights, though rights in property, are less protected than traditional property rights

1) Mark must be distinctive, not descriptive:

LA §§2; 2(e), 2(f)

Otherwise no reduction in search costs and enforcement resources would be spent where there is no corresponding benefit to society

2) Mark must be attached to good:

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Otherwise no aid to search costs; society no better off than w/o TMs.

Note: This is true even in cases where consumers interested in TM itself (sports, etc), because owner/assignee of TM only has rights within bound of using TM on hats, shirts, other products.

3) Not necessary for consumer to know who is the actual owner/manufacturer behind TM

§ 45 – definition of Trademark: counts, even if “source is unknown”

Ex: Not necessary to know P&G makes Crest

4) TM violation only if likelihood of consumer confusion

Rationale: TM law is a branch of Unfair Competition. “Passing off” is attempt to deceive consumers. Originally only confusion as to manufacturer was actionable – now almost all confusion covered.

5) TM law has expanded greatly

Ex: TM dilution laws - wherein TM holder damaged, even though no confusion. Though no one would assume TM holder made, sanctioned, approved of, etc the use of the TM in that way, the use still damages the holder.

Categories of Trademarks (applicable to trade dress, etc)

1) Fanciful Coined words invented to serve as TM or to identify a product

Ex: Kodak, Jeep, Xerox

2) Arbitrary Common linguistic words, but neither suggest nor describe qualities when used as product TM

Ex: MS Windows, Apple Computer, Crest Toothpaste, Camel Cigarettes

3) Suggestive Doesn’t directly describe good, but suggests purpose of TMed good

Ex: Wall Street Journal, Business Week, Head and Shoulders Shampoo, Coppertone, People Magazine, Mr. Clean

4) Descriptive Describes purpose, function, quality, attribute, etc (ADDITONAL INFO) of TMed good

Ex: Car freshener brand auto deodorizer, vision center eyewear, All-Bran cereal, Paperback books, TV Guide

Point: Provides 2 informations:

1) standard info benefits from TM

2) important characteristics of good (especially helpful with first time users)

Point: Firms chose to use Descriptive marks because of 2) and because often unclear at start

whether mark will be descriptive – once descriptiveness evident it is too costly to change

Test of Deceptively Misdescriptive

1) Mark is misdescriptive of the goods

2) Likelihood of confusion

3) Misdescription is likely to affect a decision to purchase

5) Generic Primarily reference to category instead of a brand name

Ex: golf balls (instead of Nike golf balls)

Note: (1-4) can become generic (and thus lose TM protection) if they gain sufficient dominance

Some who have: Trampoline, Brazier, Escalator, Thermos, Yo-Yo, Aspirin

Some who came close: Kleenex, Velcro, Roller-Blades, Xerox

Note: Generics can sometimes become descriptive (ex: Singer – though here TM lost, then regained descriptiveness)

Range of protection:

• (1-3) Always – though strongest for Fanciful and gets weaker towards Suggestive

• (4) NO initial protection, but possible to acquire protection (though weak) if secondary meaning created.

• Requires cost/benefit analysis – if “secondary meaning” becomes the primary association consumers make then TM protection attaches.

• Deceptively Misdescriptive marks NOT protected even with secondary meaning (§ 2(e)(1))

• Ex: “George Washington Ate Here Restaurant” not protected

• Fair Use Defense: Though initial firm may acquire exclusive TM, other firms may use mark to describe type of good or

service - though NOT in a TM manner (LA § 33(b)(4) and Common Law)

• 5) No TM protection

• Traditional Rationale: granting protection would “impoverish the words of commerce”

• LA rationale:

• §2 – Generic can never be distinctive (as §2 requires)

• §14 – Cancellation of TM for becoming generic

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Point: Balance between 1) Incentives and 2) Barrier to Entry

Landes Model

Defenses to TM infringing cont.

1) Used Fairly defense

2) Comparative Advertising (Coke vs. Pepsi ad)

Descriptive Marks

§2(e)(1) NO registration for marks which are:

• Merely descriptive Registration allowed once secondary meaning showed (§2(f))

• Deceptively mis-descriptive NO registration, even if secondary meaning showed

Kellogg v. National Biscuit (Shredded Wheat)

• Patent expires on NB’s “Shredded Wheat brand” Wheat Biscuit

• Court rejects NB claims rights to:

1) “Shredded Wheat” TM because term is generic, even though NB had spent $17M in ads to create secondary meaning. Even if descriptive, though court would deny protection under the Brandeis Test (Dicta).

• Brandeis Descriptive Test: Protection ONLY if primary TM significance for consumers is the producer, not the product.

• Key: Protection if primary relationship is between [M1 / B1], NOT between [B1, B2, B3,] (M=manufacturer, and B=brand)

• Though good in abstract, Test inadequate in following cases:

A) TM brings different thoughts to different consumers

B) Where Patent expires. Prior to expiration no need for consumers to differentiate brand from manufacturer, but need exists with entry of competitors afterwards. Thus modern manufacturers must spend extra $ in ads to distinguish M from B (loss to society) and may still lose their mark if consumers chose not to distinguish. (as occurred in Thermos)

C) Marketing which promotes a unique product attribute. (See Genesee Brewing Co.)

• Note: At time of decision the expiration of a patent created irrebuttable presumption of a generic term.

LA § 14(3) changes this so that no per se denial of protection where same mark for good and brand

2) Pillow-shape because:

1) Hostitility to patents – patent was to make biscuit in pillow form and since it expired, others can do so now

• Weak argument because often possible to produce many shapes for equal costs and shape can convey information

2) Analytical – form was functional

• Stronger argument in that if different forms cost different amounts (or there are few forms which would function) then competitors at disadvantage and consumers hurt

Shaw v. Time-Life Records

Π produces “Artie Shaw band” record. Δ produces independent recreation of same record (OK under copyright) but doesn’t disclaim that work is not BY Artie Shaw.

Π Alleges passing off

Issue is whether consumers confused as to origin. Yes, Δ needs to use words “Artie Shaw” so consumers know what they’re getting, but they must also indicate that recordings are not original “Artie Shaw”s – must use in a descriptive sense.

Reasonable Persons Test: “Whether persons exercising ‘reasonable intelligence and discrimination’ would be taken in by the similarity”

Alt Test: Look at intent of Δ. If intent was to “palm off” then liability or at least BOP on Δ to show no confusion

Note: Trade dress does NOT provide same independent recreation allowance

Car Freshner v. S.C. Johnson

Π makes little tree car freshners w/ pine scent. Δ makes tree-shaped pine freshener for houses. Δ wins under Fair Use Doctrine

Fair Use Doctrine (same as in copyright)

Rule: Others can use TM so long as used to describe aspects of its goods, provided use was not in bad faith and not as a mark.

Bad faith = intent to violate the law, not just intent to use the IP of another

Court additions:

Fair Use only applies if TM is descriptive

Look at Fair Use solely from Δs perspective

Generic Marks

Genesee Brewing Co. v. Stroh Brewing Co.

• Π adds non-patent good (brown honey) to lager and sells as “Brand X Brown Honey Lager” – wants TM protection

• Incentives v. Access Costs

Benefit for first moving firm is that they can get description in their TM to highlight unique aspect of new product. There is no real way to describe the product w/o saying “Brown Honey”, but if successful, fear that other will profit off of niche Π created.

Risk to competitors is that other firms can’t use same description if they make similar product

Court Rule: party can incorporate description in TM, but may loose TM right if term becomes a competitive necessity

• Note: Rule balances considerations in that first-mover can have protection (especially with requirement that subsequent competitors use distinguishing labels – see Shredded Wheat) and competitor’s hands are not tied

• Note: No need for rule where first-mover is only one in the market (patent, natural monopoly, etc)

Initials as TMs

• Initials must go through same categories as other trademarks. Often term will start of descriptive or generic, but can then take on secondary meaning. Same tradeoffs between info costs and entry barriers as above

Geographic Marks

Definition: Word or symbol which designates a geographic location (city, state, lake, etc)

Common law allowed for:

1) Arbitrary/fictitious/suggestive

• These OK because all consumers associate good w/ producer and not the location (and yet no misinformation)

• Examples: Mars candy bars, Alaska bananas, European health clubs

2) Descriptive, but with secondary meaning

• These OK because descriptive function becomes subordinate in consumers minds to the association of the good with a particular firm

• Examples: American Waltham Watches

Treatment under LA

• Arbitrary/fictitious/suggestive registerable

• §2(e)(2) descriptive geographic marks registerable under §2(f) – secondary meaning

• §2(e)(3) deceptively misdescriptive not registerable under §2(f) – secondary meaning

• Note: Deception only where geographic area has a meaning in consumer’s minds. Thus “Made in Paris” perfume actionable, but not “Maid in Texas” perfume.

• Subsequent entrants:

• Unlike traditional TMs, allowing geographic TMs has the potential cost that subsequent market enterers may have a rational desire to use a TMed geographic term but would be prohibited from doing so; whereas prohibiting firms from using normal arbitrary marks (ie Kodak) doesn’t have such a cost

• General rule: subsequent firms can use the geographic term to inform consumers of their connection with the local, but must also include info to distinguish themselves from firm with TM so as not to confuse consumers. Just look at Δs use here

Nantucket

TTAB Rule: Protection if 1) term not a geographic area w/ commercial activity, OR 2) secondary meaning

Effect: Expensive rule for most applicants because 1) nearly impossible and 2) difficult to show

Flow: Is mark recognized as geographic area with commercial activity?

N) Registerable

Y) Is the firm located in the geographic area?

N) No registration because primarily geographic misdescriptive

Y) Any secondary meaning

N) No registration because primarily geographic descriptive

Y) Registerable

Appeals court additional considerations:

1) Do consumers associate good with the local?

2) Do consumers care about geography for this particular good?

Point: If either question answered no – then mark is not primarily geographic and so it is registerable

Certification Marks

Definition: Term which any firm can use so long as it meets the standards of the owner (often a trade association) or comes from the geographic local set by the owner (See LA §45 Definition)

Cancellation grounds found in LA § 14(5)

1) Owner losses control

2) Owner engages in business with mark

3) Owner permits mark to be used for other uses than to certify

4) Owner discriminately refuses to certify users

5) Term becomes GENERIC

Rational for allowing: Same benefits in these marks as for TMs (info, etc)

Note: Not the same as Group membership (NBA, United Machinists Union, etc)

Roquefort Cheese

• Geographic Certification mark upheld

• Court Rule: Where cert mark becomes descriptive of the goods (generification), TM rights LOST

Black Hills Gold

No common law cert mark where suit brought be manufacturers, not a trade association

Note: Δ enjoined for false ads, however (§43(a))

Personal Names

LA §2(e)(4): Surnames are descriptive and can only serve as marks on finding of secondary meaning

• Exception: Rule doesn’t apply to surnames which are also common words (Ex: King)

• Rationale: Same surname can apply to many persons and so no information benefit w/o secondary meaning

Taylor Wine

• Δ claims no infringement because, though both firms use Taylor mark on wine, his wines are higher quality and thus no competition between the two firms and no confusion for consumers

• LA § 32 requires that use of mark be “likely to cause confusion” in order for action to lie

• Δ Claim wrong because:

1) Some consumers will buy in both markets

2) Π may want to enter higher end market and can’t now

3) Dilution potential – more difficult because Δ is the “higher quality” brand. But possible that lower end consumers will on one occasion buy the higher end, be disappointed, and then stop buying lower end brand assumes the firms are affiliated somehow

Point: though Δ claim may make since, it would be great burden on courts to determine product qualities in these cases

Levitt Corp.

• Point: Case stronger for disallowing surname use by new firm where firm had previous reputation, sold its goodwill, and now is trying to reenter and reap from what it sold. Especially true where (as is the case here) sale had a “non-compete” agreement whereby seller agrees to not use his name in future competition

• Why TM instead of breach of K suit?

• 1) Maybe get into federal court

• 2) Maybe Π wants injunction in addition to damages

• 3) Courts sometimes throw out “non-compete” agreements as restraints of trade or for being overbroad

• Taylor remedy (use can continue, but firm has to distinguish self from competitor) does work here because firm which purchased Levitt’s goodwill doesn’t want public to know of sale. Thus possible false advertising counter-claim against firm, case would depend on whether customers associate good with Mr. Levitt or Mr. Levitt’s firm.

Trade Dress and Functionality

Traditional TM reserved for appearance, but not design of product

Appearance = labels, colors, decorations; basically the product’s image

Design = physical attributes and even the overall design of the product

Modern law allows protection for design

Allowance not contrary to working of LA (see §45)

Point: concern still over limiting entry by competitors because of feel that # of possible designs are much fewer than # of possible labels, words, symbols, etc.

* Courts wise to allow design protection where it doesn’t hurt competition, but must draw new lines for where design protection hampers entry (because firms need to use the same element)

* Competitors used to be able to produce the SAME product. Now they can only produce EQUIVALENT products.

* Perhaps this extension is unnecessary as copyright, patent, trade secret laws exist to product designs. Or maybe extension is unconstitutional extension of copyright and patent law.

Requirements for TD protection:

1) Design must function as identifier, as a TM (consumer associates design with producer)

Point: TD Design protection only if secondary meaning found

Note: Two Pesos says not required, but Wal-mart overrules and says it is

2) Items not functional in sense that competitors would have be put at disadvantage of:

a) increased cost per quality unit, (or)

b) decreased quality per unit at same price

Key: Burden on Π §43(a)(5) to show that mark is non-functional

Note: almost all trade dress protection filed under common-law (not registered)

Functional limitations (1998 Act)

§2(e)(5) any matter that as a whole is functional cannot be registered

• Note that, unlike other elements in 2(e), you can’t be saved by secondary meaning here

§14(3) functionality is grounds for cancellation of a TM

§33(b)(8) defense that mark is functional can always be raised (even for incontestable marks)

§43(a) presumption is that designs can’t be registered whereas presumption is other way for names, etc.

(a)(3) BOP on Π in infringement suit to show that mark is not functional

• Key: Registration and Litigation more costly for designs

Types of Functionality Evidence

• Look at market and see if competitors are viable who don’t use the design

• Note that this isn’t dispositive in that 1) firms may exist, but are getting smaller returns or 2) market can only support one/few producer(s)

• Also note that not sufficient that one/few other designs work, but that enough other designs to fill all possible producers exist

• Look at whether design was a previous patent (especially utility)

• Implication that if patent granted (had to be new and non-obvious) then some competitive advantage

• Note that some patents, such as design, would have less implication

• Look at whether firms advertise the features

• But ads must be showing “usefulness”, not just saying “buy the purple pill”

• Look at direct engineering evidence concerning cost/quality

Morton-Norwich

TTAB function design definition rejected as being over exclusive

• TTAB definition: Function if design dictated by functional considerations

Court Rule: Design functional if it “performs a useful function”

• Point: So long as design not requisite for good to perform, design is protectable

• Example: Stitching of pockets on LEVIs is functional, but not the curly-Q stitch design

Qualitex v. Jacobson

• Court allows registration of green/gold color despite traditional rejection of all TMs of a color

• Note: nothing in LA specifically denies

• Analysis:

• Nothing inherent in color should deny. Color can serve as info (especially to non-English speakers as was the case here)

• But of course must acquire secondary meaning

• Also, sometimes colors are functional (camouflage, tennis balls, sunglasses) or functional in cost/quality sense (peanut butter, apples) or would deny competition were consumers want that color for the color’s sake (brown and black shoes, roof shingles, even John Deere law equipment)

• Also, worry over color depletion theory (but this only comes where large numbers of producers)

Drugs example:

• Color protection for prescription, but not for non-prescription

• This makes since because there is other packaging which can be used to identify non-prescription drugs to consumers, but not available for prescription drugs – where you only get the pills in an orangeish bottle

• Also, color helps keep pharmacists honest

Wallace International Silversmiths

Wallace (high end seller) seeks injunction under 43(a) for Baroque Silverware designs

• Concern over dilution (see Ferrari)

Lower court holds that 1) Not distinctive and 2) Functional

• Market definition: court held that market was in “Baroque” design, not just silverware

Appeals Court rejects lower court’s use of Pagliero (AF),but uphold denial of injunction because design was functional

• Key: Wallace didn’t invent the Baroque design

• Me: One cost of upholding denial is that firms won’t invest to market previously popular designs which are now defunct. They will only invest in “totally new” designs – and thus potential designs to “build up” will endlessly decrease.

Pagliero: No protection where good gains Aesthetic Functionality

• Aesthetic functionality = non-essential attribute of product gains desire in itself, thus disallowing competition to those who can’t use the attribute

• Basically, by being successful in establishing demand for a mark or dress, you lose protection for the mark or dress. This decreases incentives to establish good marks/dress.

• Key: Rejection of AF doctrine only injures competitors to the degree that they are poor competitors

TM protection for artist’s style

Dilution potential

Will buyers be deterred from purchase if less unique, or will abundance of knock-offs act as ads and drive up price

Further, much of the value will come from future artists copying and thereby increasing the influence of the style

Point: Little rationale for TM protection in original works, but better rationale for secondary (mass) reproduction market

But maybe no protection even for ancillary (secondary) market because consumers don’t care about the artist, they just care that piece looks nice – and thus a mark would have not benefit to them

Two Pesos v. Taco Cabana

Rule: TM protection allowed for Décor which is: 1) NOT functional, 2) Distinctive, and 3) had NOT acquired a secondary meaning

Rationale:

1) As with McDonalds, allows you associate prior good/bad experience with a chain restaurant. Also encourages franchisor to maintain consistent product quality

But this could be accomplished by just protecting brand name

2) Main rationale: To avoid consumer confusion that two unrelated chains are related

Ex: firm copies “Friday’s” décor and calls itself “Tuesdays”

Jury finds décor to be “inherently distinctive”

Not inconsistent with finding of no secondary meaning

As time increases, how do devices change as to indication of sources:

Brand names: immediately highly identifier and may increase a little over time

Décor: little immediate identification, but potential increase over time

Access v. Incentives:

Incentives : Décor does function as identifier at the outset, but has to potential to. To disallow protection until secondary meaning established, other firms could free-ride, and thus incentive to innovate is decreased

Access: Danger of inadvertent infringement

If TD is unregistered, it is difficult for other firms to know what can be borrowed and what can’t. Cautious firms will not utilize good designs on the margin and will be put at disadvantage.

Me: risk would be lessened by only allowing injunctions, not damages, for these actions

Wal-mart v. Samara

TD protection for packaging, décor, ornamental features (Two Pesos), but not for actual attributes of the product (Wal-mart)

Rule: Some marks never inherently distinctive

Color (Qualitex)

Design (Walmart)

Rationale:

• Same reasoning as in Two Pesos, but Court concludes here that costs (access, etc) outweigh the incentives

• Further, cost of court getting it wrong here is greater than in Two Pesos because firms would have much more difficult time competing when design TMed then where only packaging given protection

Ferrari

Beginning of Dilution. Δ created replicas of Ferrari car bodies, labeled so no purchaser confusion – Ferrari still sues

3 Issues of trade design (§43 and §32)

1) Have to show design functions as a trademark. This requires secondary meaning

When you see this item you positively identify it with a single source or manufacturer (acquired meaning)

Courts says you can presume this since Roberts intended to copy. Landes says this is mixed up, Roberts could just be copying the idea of the car. Δ may have only “intended” to copy the unprotected design. So this is not tautological, there are permissive choices.

2) If acquired secondary meaning, Õ still has the burden to show the design is not functional

It’s clearly functional in the de facto sense. It is aesthetically functional, but not in our TM sense because there are other designs that work roughly as well without significantly increasing the costs.

Wallace distinguished in that Π there did NOT “invent” the mark

3) Π must also show likelihood of confusion

Roberts (Δ) argues must have presale confusion. Ferrari argues general consumer confusion

Note : Δ could have also argued that parties were not in competition as §45 requires

Direct purchasers rather than potential purchasers. Potential, cheapening of the public image. The sold good provide an advertising function, and that fake one might do this badly.

Case says congress intended to protect the reputation of manufacturers as well as to protect purchasers. It’s all an information issue. Plus, the people who actually drive the car are also advertisements for it, they might not be of the class you are. Though usually we deal with this by clearly labeling. Here this is more difficult to make it work, people who work in the garage will just remove it.

Point: The real issue is not a TM issue, but dilution (exclusivity is watered) Copyright could cover ornamental figures (TM and copyrightable), but doubtful for a whole car.

• Dissent argues, correctly, what is beign protected is ferrari’s reputation or goodwill.

• Note: Dilution only applies to FAMOUS marks, though statute doesn’t define

Traffix v. Marketing Displays

• Rule: No TM protection for functional product aspect which had been utility patent protected and possibly acquired secondary meaning

• Point: Rule doesn’t require denial of TM protection when patent expires (apply above functionality test), though a utility patent does give strong evidence for design being functional

• Note: Patent filers may now narrow their patent claims, to keep attributes going (tradeoff between Patent and TM protection)

Preemption

Point: Unlike copyright, patents, LA manifest overall intent to supplement state TM law, subject to following exceptions:

• Purely local (non-interstate) brands

•  

Sears-Compco:

States may not prohibit copying of article which is unpatentable and uncopyrightable

Many lower courts disfavor and hold that states can legislate where congress could have but has chosen not to. Though patent clause in constitution indicates exhaustive list, copyright clause does not.

SCOTUS adopts this latter view in Goldstein (1973)

Copyright act of 1976 § 301(a) preempted much state law, but house notes indicate that INS case still retained by states

Note: States can require greater level of info to consumers, honest labeling on packaging, etc.

Bonito Boat

Florida passes law disallowing reverse engineering of boat hulls

Court find unconstitutional as it CONFLICTS with Federal Patent Law (Preemption ensues)

Rights of TM Holders

§14 – Cancellation

• Actions can be brought by any person (including corporations) who believes he is or will be damaged (including dilution) by registration of mark (Same as in §43(a))

• Note: no requirement of competition between parties (dilution, potential of confusion, other areas exist outside competition)

• §14(1) cancellation within 5 years of registration

• Can attack on ALL §2 ground

• §14(3) cancellation after 5 years of registration

• Limited attacks – ALL §2, excepting for distinctive, descriptive, no secondary meaning (see Park N. Fly)

• Can also attack on abandonment grounds (see §45(?))

• Use discontinued w/o intent to reuse, or

• Certain conduct (ex: allowing mark to become generic when it at one time was not)

• Can also attack certification marks for misuse

§15 – Incontestability

• Requires 5 years of continuous use after registration (Common law marks can’t be inconstable)

• Note: no definition under §45

• LA does not define geographic limitations of incontestability

§33 – Defenses

• 33(a) Any defense can be raised unless mark is incontestable

• Registration is prima facie evidence of validity, ownership, and exclusive right to TM

• 33(b) Defenses allowed for incontestable marks:

• Registration is now CONCLUSIVE evidence of above, not just evidence

1) Incontestability obtained fraudulently

2) Abandonment

3) Permission

4) Functional

5) Non-TM use (ex: comparative ads)

6) Other (9 total)

Note: Generic aspect of marks must be raised under cancellation, not as a defense

§32: Defense of “no likelihood of confusion” can ALWAYS be raised except for Dilution

Park N’ Fly

• Rule: Lack of secondary meaning is NO defense to an incontestable mark

• Point: Court and LA do NOT distinguish between:

• Defense use of incontestability: where another party is challenging your use of mark

• Offense use of incontestability: where you are challenging another’s use of a mark

Blue Bell v. Farah

Both firms planned cross-country sales and came up with same TM independently

Decided under Common Law (Texas)

Point: Farah wins because uses mark first in commerce

WarnerVision v. Empire of Carolina

• Intent filed by Δ

• Π does search, but intent not in database yet

• Π starts sales

• Δ starts sales

• Δ wins – Point: system flawed to degree of filing/posting lag.

Tea Rose

• Interaction of LA with common law doctrine which allowed simultaneous use of mark if in different geographic areas:

• A and B use same TM on similar products (A in Area A, B in Area B, neither in Area C). A registers and B only uses in commerce (common law protection)

Determining the Similarity of Marks

1) Side-by-side comparison

• Good to quickly dismiss litigation if no similarity

• Not useful if products different in 1) product type or 2) geographic or other market

• Point: Necessary, but not sufficient

2) Consumer survey

3) Evidence of disclaimer

• If disclaimer sufficient then tough to show consumer confusion

Libman Company v. Vining Ind. (1995)

• Π had TM on design, not color, for two tone brooms

• Posner draws conclusion that consumers bought Libman because they liked two tone, not because the broom was superior and the color scheme served as a mark.

• Side by side comparison not helpful here because stores only carry one (or maybe two) types and coloration can’t be seen easily through package

• Point: TM protection for attributes, even when registered, are weak because products also have packaging which can distinguish them in the minds of consumers – this is similar to “adequacy of disclaimer” discussion

Non-Competing Good

Registration requires indication of which goods TM will be used on

15,000 choices

Confusion standards

§32 – reproduction, counterfeit, copy, or colorable imitation

§43(a) – confusion, mistake, deceive as to affiliation, connection, etc (stronger than §32)

Note: previous to 1962, confusion was with regard to “product-origin” link. Post-1962, confusion not defined (meaning no need for origin confusion). 1988 amendment specified confusions already recognized in the law for §43(a)

Potential Harms where similar marks for non-competing goods

1) Consumer confusion - Lose benefit of reduced search costs

• True for actual, potential purchasers

• Lowers incentives to develop TM (and quality of product)

2) Entry of producer in product X to product Y where mark used by another and so producer has to develop another mark

• Test: must look at closeness of two products

• Less confusion: Delta Air starts to produce faucets and wants to call them Delta (which is already used)

• More confusion: Taylor golf clubs wants to produce golf balls too (Complementary goods)

• Note: Not so big a problem with geographic issue because registration is nationwide

3) Misappropriation – we shouldn’t allow non-competing firms to appropriate the “fame” built up by first firm

Polaroid vs. Polarad Electronics

J. Friendly factors for similar marks in non-competing goods:

1) Strength of Π mark

2) Degree of similarity between marks

3) Context in which goods are marketed

4) Proximity of the products (golf balls to clubs vs. Airlines to faucets)

5) Likelihood that prior owner will enter market

6) Actual confusion (surveys, etc)

7) Δ good faith in adopting mark

8) Quality of Δ product (See Taylor wines case)

9) Sophistication of buyers (more sophisticate are less likely to be confused)

International Order of Job’s Daughters

Key: TM itself is the product here. TM not just used as an identifier

Traditional harms of using another’s TM don’t apply (w/ exception of misappropriation)

Further, firm can’t compete in market without using mark (the mark is the market)

Look at difference in price of broaches where mark used and not

Possible harm: consumers assume sponsorship by TM initiator

But this can be solved with disclaimer and/or “officially licensed” stamp

Possible harm: consumers assumer that TM initiator has approved of quality of underlying product (broach, hat, etc)

TM as product Rules today (RS3)

TM rights upheld if purchaser believe organization has authority or approved sale

But rights lost if purchasers don’t believe approval

Point: TM holders (NFL, etc) will vigorously go after knock-offs so public doesn’t lose belief that authority is needed for merchandise to hold mark

Dilution

LA §43(c)

Definition: Protect the distinctive qualities of famous marks against someone who:

1) uses substantially similar mark

2) in context where there is no confusion

Point: Misappropriation, not confusion, is the harm

RS definition of famous – mark so well known that when used outside context of products, consumers recall the association of the mark to product

Relief: Damages allowed for willful misconduct, but typically only injunction sought

Requirements for action:

Famous and distinct mark

8 non-exhaustive factors

Typical grey area is whether enough that mark is famous in niche market

Rule: Famousness found in niche market if other firm is operating in that market (Sporting News)

Marks must be substantially similar

Harm (though disagreement over level)

Some require actual economic (4^th and 5^th circuits)

Fewer suits, but they cost more

Though remainder of LA only requires likelihood, since not specified here we should assume they meant actual harm

Some only require likelihood to cause economic harm (2^nd, 6^th and 7^th circuits)

More suits, but they are less costly

Since most (all) suits brought to enjoin behavior, less chance that actual harm will have occurred

Remainder of LA requires only likelihood of harm

Very difficult to show actual harm to large firm by very small firm (situation in most cases)

Me: further, by not allowing injunction, small firm could grow and then have higher costs to change TM once damages could be shown

Defenses:

Comparative ads (when used fairly)

Non-commercial use (including parody)

News commentary/reporting

Ringling Bros v. Utah Division of Travel

RB TM registered in 1961 (Greatest Show on Earth)

Utah starts slogan in 1962 and registers in 1997 (Greatest Snow on Earth)

RB lost on its §13 opposition to Utah’s registration (possibly w/o consideration of dilution claim)

Note: §13 does cover dilution today

Blurring

Lowers TM value because mark less distinctive – takes more time for consumer to associate correct goods with mark in front of them

Ex: Hear the word “Lexis”, but takes more time (3 or 4 secs) to understand if Lexis autos or Lexis database meant

Point: consumers know meaning, but takes longer to comprehend

But this is weak concern because most conversations, ads, etc are in a context

Key: Nearly impossible to prove a claim of blurring if harm required was actual harm

Tarnishment

Lowers TM value because part of junior mark “rubs off” on the image of senior mark

Note: typically cases involve junior marks for questionable activities, products

Ex: Sporting News tarnished by gambling part of junior mark

Key: More possible to prove tarnishment claim if actual harm required

Sporting News

• Niche market in which senior mark well known to the junior mark

• Tarnishment found because junior mark’s paper including gambling data

John Deere

Though comparative ads and parody are both exceptions to dilution, liability found here where a comparative ads includes parody of competitor’s mark/product – combination of exceptions goes too far

Point: parody of another’s mark/product in a comparative ad is actionable

Harm is tarnishment to image

Hormel v. Jim Henson

New muppet movie to contain “Spa’am” character. Hormel sues for harm to SPAM

Noncommercial use defense fails because muppets aren’t just TV show or Movie, but toys, puzzles, other ancillary commercial products

Commercial test: If parodied item itself will be sold (thus maybe SNL videos violate? – though they are allowed)

Fair Use defense fails

Fair use allowed when A uses B’s mark to describe what A is selling, not what B is selling

Ex: “my chicken is the rolls Royce of chicken” not actionable under 33(b)(4), but is actionable under 43(c)(4) because of potential to dilute.

Point: Fair use defense is harder to claim under 43 (dilution) than under 33

L.L Bean v. Drake

Δ wins under Maine anti-dilution statute where Δ includes in erotic publication a ”L.L Bean parody” article

Court differs from “Debbie Does Dallas” (where dilution found) because “linking found in “Debbie”, but not here. In Debbie, the Cowboy uniforms were on the cassette covers, but the Drake parody was inside, not on the cover, of the magazine.

Point: Parody or Fair Use defense denied where “link” created between two products

Target vs. Weapon in Parody

Target (OK) attack on parodied work

Weapon (Not OK) use parodied work to go after something else (particularly the sale of goods)

Champion Spark Plug

• Collateral Use: Δ repairs used Champion spark plugs, labels then as repaired and resells as Champion plugs repaired by Δ

• Potential confusion

• First hand market: Confusion between New and Used plugs yields increased info costs to make sure you’re getting a New one now

• Second hand market: Confusion between Champion repaired and Independent repaired Champion plugs

• Benefits:

• Consumers can have info as to what type of plugs repaired

Rule: Can use TM of another (info benefit) so long as sufficient disclaimer (no confusion) and not huge discrepancy between quality of original and repaired good.

Note: Champion may have been trying to shut down “used market”, but:

• 1) other used plugs would still exist, and

• 2) initial price Champion can charge is increased if consumers think they can resell later

Smith v. Chanel

• Smith legally reverse-engineers Chanel’s perfume and doesn’t deceive consumers as to origin

• Court disallows injunction because Smith entitled to sell the perfume and can’t describe product w/o saying “it smells like Chanel”

• Note: may be different if product wasn’t sold through mail, in that consumers could tell scent by other means than reference to Chanel

• Note: Chanel could bring dilution claim today (Ferrari)

Playboy v. Terri Welles

• Δ, former playmate, runs website in which she makes reference to her previous position as a playmate but disclaims any current affiliation

• Possible defenses under §33(b)

• (4) Term is characteristic of produce: Term is descriptive and used only to describe the goods or services of Δ

• Note: Even if no defense under 33b, Δ wins because her disclaimer is sufficient to kill any likelihood of confusion

• Possible defenses under §43(c)(4) (dilution)

• Clearly B and C fail

• (4)(a)Fair use exception: But not really comparative ad. TM used here to describe Δ, not the Π

Point: Fair use of another’s mark must describe other’s product or services, NOT your own

• Court allows additional defense of Nominative Use for Dilution and TM actions

• Nominative Use requirements:

1) Δ’s product/service must be one not readily identifiable w/o use of the TM

2) Only so much of TM can be used as is necessary to identify product/service

3) Δ can do nothing in conjunction with TM to suggest sponsorship or endorsement by TM holder

Note: This defense applies to both §33 and §43

Point: Court here holds that Nominative uses do NOT dilute a TM

Domain Names

ICANN:

Registrant affirms it is not infringing any registered TM

Mandatory arbitration requirement for disputes (where arbitration heavily favors TM owner)

Fundamental difference between TM and Domain Names:

• TM can be sliced up over products, geography, etc (Delta Air and Delta Faucets)

• Domain names only allow one owner – no slicing

• Point: Have to chose which TM owner gets address

• Me: Physical TMs also include color and other distinguishing elements which aren’t possible on the domain name alone

Original Pure registration system:

• Led to banking – even more severe banking because banker knows TM holders will want to sign on to internet

• No TM challenge to a generic domain (ex: stamps.com)

Requirements to dislodge:

1) Likely consumer confusion or dilution

• Note: dilution only applies to famous marks (so Dell computers is stuck)

2) Use in Commerce

• Note: Panavision court counted purchase solely to resell to “rightrul owner” as a “use in commerce”

Anti-cybersquatting Act

• Above dislodging requirements removed:

• No use in Commerce requirement

• TM only has to be distinctive, not famous

• Bad faith indicators (see pg 168)

• No intent to profit except from sale of domain

• Large numbers of registrations with no perceivable purpose

• Intent to keep competitor from using domain (see Sporty’s)

• Allows In Rem Jurisdiction for domain name itself

• Point: allows suits to be brought regardless of where domain owner is

Sporty’s Farm

• Π (Sporty’s) mail order catelog sells aviation equipment and is famous in niche market

• Another mail order catelog also sells aviation equipment. It registers Sporty’s.com and assigns to Δ tree farm so that Π can’t get it

• Point: no relief for Π under traditional TM law (pre-anti-squat act), unless Π could so bad faith

• Note: If mark was world-wide famous (American Airlines) then relief would be granted

• Court here allows relief upon finding bad faith intent to raise competitor’s costs

Jimi Hendrix

• Names of celebrities function as TM also

• NO damages under arbitration system, just reassigning of domain name

Playboy v. Netscape

Δ search engine makes money from advertisers. Advertiser banners change depending on terms entered.

Π claims dilution of its mark (initial interest equation) because when “playboy” entered, other porn advertisers banners show up

Point: search engine can make more money by tailoring ads to search terms

Note: Playboy doesn’t challenge the list of other sites which come up when “playboy” entered. It couldn’t win this because Netscape is just relaying information

Initial interest equation: Theory that customer trying to get to A, misinformation leads to B. consumer realizes, but is content with B so doesn’t go through effort to go to A.

Courts say terms “Playboy, etc” are not TMed on internet because internet domains aren’t capped

Weak – because this could be a colorable imitation under §45 (mark doesn’t have to be identical)

Trademark Remedies

REASONS for giving Δ’s profits:

1) Unjust enrichment: Δ profits attributable to infringing use

2) Π damage: Π lost sales

Note: Π damages does NOT include dilution. Therefore “Roles Royce” may be able to get 1), but not 2) for Δ’s selling “Roles Royce” Handbags.

3) Willful misconduct Deterrence (Double damages – profits and damages – possible here, but not for 1 or 2)

George Basch

Court disallows Π profits as damages where no willful deception on part of Δ

Sands, Taylor (Gatorade)

• Court uses a Royalty rate as approximation of profits where no profits were achieved by Π

• Problems with Royalities:

• Often undercompensates because Δ loses only what was wrongly gained

• Basically allows unrestricted license (no quality requirements) for infringer who only has to give up royalties if he is caught – not compensate for bad quality products which consumers now associate w/ TM. Thus royalty rate would have been higher if Π had granted such an unrestricted license

• Point: often courts will allow royalties as the minimum damages

• Judge wants to give all Δ profits to Π on mistaken belief that all profits derived from the false advertising

• Could look at difference in market position, etc before and after advertisements

Co-infringement

A is related to B

B is infringer

C is TM holder who sues A for contributing to B’s infringement

Coca-Cola

• Δ here manufactures Polar Cola, which bars are selling as Coke

• Requirements:

1) Δ has knowledge or constructive knowledge

2) Δ has reasonable ability to stop infringement

Ways to stop: 1) Monitor, 2) Stop Production, 3) Alter Product so only lawful uses possible

• Point: Courts will only require 2) where no lawful uses of product exist

• Ex: Producer of counterfeit $ machines can be required to stop production

Nike

• Nike has Ks with athletes that they will only wear “Swoosh” TM shoes. Athletes wear other brands, but doctor them so they appear as Nikes

• Court allows action against Nike here because they were aware of misrepresentation and were not vigilant in cracking down

Abandonment

Non-use:

Requirements

1) TM not used

Non-use must be nationwide (Dawn Donut)

Note: Common Law TM can be lost for only a specific region

2) Intent to Abandon

3 year non-use is presumption of abandonment

Point: Original TM holder can fairly easily prohibit subsequent use of what appears to be an abandoned mark. Original holder only has to 1) still exist, 2) still operate commercially (though not with old TM)

Misuse:

Substantial Changes made to product, service

Certification marks lost for 1) loss of control, 2) engage in production or sales, 3) permit improper use, or 4) discrimination

Attempt to transfer mark “in gross”

Indianapolis Colts

• NFL did NOT abandoned TM rights to “Baltimore Colts” by moving team to Indianapolis

• Same organization and service existed, just in different local

• Further, even if abandonment, Δs would have to deal with likelihood of confusion between “Baltimore CFL Colts” and “Baltimore Colts”

Assignment / Licensing

PepsiCo

No transfer of TM in gross

Test: Whether assignee succeeds in producing/distributing a product/service substantially of the same characteristics as the original

J Atkins: Transfer of TM OK where no separation of TM from goods upon which reputation based

Licenses:

Originally illegal under notion that TMS only served to designate origin of goo

Acceptable today so long as licensor has control over quality

Point: No “naked” license for same reason as no transfer in gross

Rights of Publicity

Tort of Misappropriation rather than invasion of privacy

Rights granted in following:

Hirsch Δ used Π’s nickname “crazylegs” is shaving cream commercial

Carson Toilets Δ used phrase “Here’s Johnny” for portable toilets

White Δ used robot with white wig in imitation of Vanna White

Rights disallowed in following:

Cardtoons Even though NO fair use exception to rights of publicity, 1^st amendment protectable speech allows Δ parody baseball cards where

caricatures – not photos are used

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