The Supreme Court's Recent Decision on Trademark and Fair Use:
By JULIE HILDEN
Tuesday, Jan. 04, 2004
In December, a unanimous Supreme Court issued an important trademark ruling. In K-P Permanent Make-Up Inc. v. Lasting Impression I, Inc., the Court, in effect, made it easier for certain parties who are sued for trademark infringement to win their case. In an eloquent opinion by Justice Souter, the Court made clear that the burden those parties must carry at trial is not as demanding as some trademark holders had argued it must be.
Technically, the Court was simply interpreting the federal trademark statute, which is known as the Lanham Act. But every case about trademark inevitably has some First Amendment aspect - since a trademark infringement case is essentially an attempt to silence the defendant, or at least to make the defendant pay for speech that otherwise would be free.
Granted, trademark cases usually concern commercial - not political - speech. But even commercial speech is protected by the First Amendment, as I discussed in a prior column.
Thus, it is probably not coincidental that Justice Souter - a dedicated First Amendment defender - wrote an opinion making trademark infringement actions harder to win. The effect of such a holding is to vindicate First Amendments interests.
The logic of the Court's opinion is strong, and the Justices were unanimous in their judgment.
Important Background: How a Trademark Plaintiff Can Win Its Case
To understand the specific ruling the Court reached, a bit of background is necessary. At first blush, the case had to do with two cosmetics companies fighting over the right to use the term "micro color" in their marketing and sales of products. But ultimately, the legal principle it established is far broader - relating to a whole category of trademark cases.
A registered trademark holder, by statute, has the right to sue other users of the same trademarked word or phrase for trademark infringement - but only when the other users' "use is likely to cause confusion, or to cause mistake, or to deceive."
Specifically, the trademark holder must show - according to the Court in K-P Permanent Make-Up Inc. - "that the [other user's] actual practice is likely to produce confusion in the minds of customers about the origin of the goods or services in question."
How a Trademark Plaintiff Can Prove "Likelihood of Confusion"
How can the trademark holder show likelihood of confusion? Basically, the answer is: Any way a trial judge will let you, consistent with the Federal Rules of Evidence. But here are a few examples:
First, the trademark holder - if it's been smart enough to keep track - can show the court evidence that particular customers and suppliers actually did confuse its product or service with the other user's. Smart trademark holders will instruct their representatives or suppliers to keep specific records of any instances of confusion, after they find out that someone else is using their trademark.
Indeed, many trademark cases are actually triggered by confusion: trademark holders will hear about possible infringement from people who were confused. That confusion might consist of wondering if the other user is the same as the trademark holder, or is somehow affiliated with the trademark holder, or has no relationship to the trademark holder at all.
Similarly, the confused customer may wonder: Should I transfer the positive associations I have about this trademark to this other user of the trademarked phrase? For instance, if I see "Hamburglar hamburgers" at my grocery store, should I assume they are of McDonald's-level quality?
Businesses that do many of their dealings over the phone or online -- such as hotels or catalogs-- may be especially peeved by confusion. Suppose Directory Assistance or a Google Search tends to mix up two companies' names, and they start getting calls (or site visits) for each other, or getting each other's website visitors. If that happens, then the company that holds the trademark on the name is bound to be upset. After all, that business might lose its customers to a competitor with the same, or a similar, name. Or its customers may just give up in frustration and stop shopping.
Worst of all, from the perspective of the trademark holder's reputation, frustrated customers may transfer their resentment for the difficulty they went through, or their low opinion of the competitor's product, to the original trademark holder.
What if a trademark holder hasn't kept good records of instances of when people were genuinely confused? Or what if the trademark holder wants to sue as soon as it realizes confusion may occur - pre-empting the damage confusion may cause?
In that event, the trademark holder still can present evidence at trial - for, as the Court explained, what needs to be proven is "likelihood" of confusion. Proof of a few instances of actual confusion in the past can be strong proof of likelihood of confusion in the future. But even if the trademark holder can't point to instances of actual confusion in the past, it still may be able to show a likelihood of confusion for the future.
To show likelihood of confusion, the trademark holder might, for instance, use focus groups or surveys to see if consumers are, or would tend to be, confused about the two uses of the trademark. If the surveys are sufficiently well-done, a court may admit them into evidence, thus allowing trademark holder to use them in proving its case of infringement.
Proof that markets overlap, and that the uses of the trademark are very similar, may also amount to proof of likelihood of confusion. Hamburglar locks may not lead to the same level of confusion as Hamburglar supermarket hamburgers - for few consumers will assume that McDonald's has suddenly gone into the home security business. Conversely, overlapping markets - such as the restaurant and supermarket hamburger markets - are likely to spawn confusion.
Advertising, too, can be cited to show likelihood of confusion. Suppose, for instance, that both companies' advertising not only uses the same phrase, but otherwise looks very similar, and makes very similar claims for the relevant products. (To continue our example, Hamburglar supermarket hamburgers claims on its label that it has served millions.) A likelihood of confusion might be inferred.
The Trademark Defendant's Best Strategy: Claim "Fair Use"
With all these means of proof available to the trademark holder, how can the alleged trademark infringer defend itself?
Assuming the facts are not in dispute, the trademark user can prove that the use the trademark holder is complaining about is nevertheless a "fair use." But how, specifically, is fair use proven?
According to the federal trademark statute, the use must be "descriptive of and used fairly and in good faith only to describe the goods or services of such party, or their geographic origin."
So what does this mean, exactly? Suppose my company has a registered trademark for "State of Maine Maple Syrup." And suppose another company uses that term in an advertisement selling maple syrup that actually does come from Maine, with the tagline "no artificial flavors, only genuine State of Maine maple syrup." And suppose I sue that company for trademark infringement, and the company raises a "fair use" defense. In court, I may very well lose.
That's because their use of the "State of Maine Maple Syrup" trademark may be a "fair use": the phrase "is descriptive of" the other company's product, and also of its geographic origin. Put another way, that company is actually selling maple syrup from Maine, so it ought to be able to say so.
If the other company can convince the court that its use is a "fair use," I'm out of luck: They can keep using the trademarked phrase without paying me a cent. And if they are really lucky, they may be able to establish fair use before trial - at what is called the summary judgment stage - by showing that, based on all the undisputed facts, the use is fair.
That is exactly what happened in the Supreme Court case between the cosmetics companies: The allegedly infringing company got a grant of summary judgment, because a judge said there was no factual question: its use of "micro color" was plainly a "fair use."
What the Court Decided In K-P Permanent Make-Up, Inc.
In that case, the trademark holder, however, said that the summary judgment grant was wrong, because the alleged trademark infringer, it claimed, had presented too little evidence to conclusively establish its fair use defense. It said the alleged infringer, to show "fair use," had to also, in effect, prove there would be no likelihood of consumer confusion.
The Supreme Court didn't buy that argument at all, however. Justice Souter pointed out that the statute mentions "likelihood of confusion" in describing what the plaintiff and trademark holder must prove to win its case - not what the defendant and alleged trademark infringer must prove to show fair use.
Justice Souter also sketched the absurdity of interpreting the statute otherwise. He began by noting, on behalf of the Court, that "[I]t is only when a plaintiff [trademark holder] has shown likely confusion by a preponderance of the evidence that a defendant could have need of an affirmative defense" such as fair use. (Proof by a "preponderance" of the evidence means, roughly, that, based on the evidence presented in court, one side's version of events is more likely than not to be true; an "affirmative defense" is a defense that the defendant has the burden to establish with facts.)
But suppose that a plaintiff trademark holder has indeed shown confusion is likely. Under the trademark holder's argument--as made to the Supreme Court--once that confusion is shown, there's now no way that the defendant can show there is no likelihood of confusion. After all, the plaintiff's showing is now "res judicata" (that is, an already-decided fact that the court will not reconsider). And if it's been decided that there is a likelihood of confusion, and the court must stick with that decision, there's no way the court can then find there is no likelihood of confusion; if it did, it would certainly be reversed on appeal.
Justice Souter showed, then, that, if the alleged infringer had to prove there was no likelihood of confusion, its defense would be useless in the only instance when it would be needed. But, he added, Congress would not have wanted to give a defendant a useless defense. That would be like giving the defendant a gun, only after the plaintiff has already hoarded all the ammunition for it.
Consider how the defense would prove useless in our "State of Maine maple syrup" case. My company has carried its burden of showing likelihood of confusion, as the statute says we must; several of our suppliers thought our competitors' ads, which used the phrase we trademarked, were actually our ads. But now the defendant company says, "Hold on. We still have a defense. We're going to show we get to use this term, under the statute because, acting in good faith, we used it in a way that simply describes our product and its origin." I then respond, "Too bad, you can't win unless you can show there is no likelihood of confusion." They say, "But you just proved there was." I say, "Exactly. You lose."
And the Supreme Court says, "Not so fast, buddy." It's true that I've carried my burden. But the alleged infringer's burden is not an impossible one, as I've claimed. To show fair use, it need not negate likelihood of confusion. Instead, it need only show descriptive use. If it can do that, I lose.
The result is that sometimes, trademark holders will have to live with a little bit of confusion, as long as the confusing use is descriptive. In my case, I'll have to live with the fact that a few of my customers think that my "State of Maine maple syrup" is the same as - or at least, connected with - my competitor's.
But the alternative would be worse: If I had my way, my competitor would be barred from accurately describing its product. Under the First Amendment, that can't be right: True information ought to be able to communicated.
This common sense ruling by the Court, then, was obviously the right one. Trademark holders were simply trying to leverage the federal trademark statute to destroy the strongest defense it offers, and to put those who use trademarked terms at their mercy. The Court rightly told them to go back, re-read the statute, and abide by what it says.