Liability for trademark infringement exists under both State and Federal law. Federal liability for Trademark Infringement can occur under either the (Lanham Act), or under the FTC (Federal Trade Commission) Act. Under Federal law, liability can occur for trademark infringement or trademark dilution.
If a party owns the rights to a particular trademark, that party can sue any persons or entities infringing upon those rights for trademark infringement. The standard is “likelihood of confusion.” The use of a trademark in connection with the sale of goods/services constitutes infringement if it is likely to cause consumer confusion as to the source of those goods/services or as to the sponsorship or affiliation. In deciding whether consumers are likely to be confused, the courts will typically look to a number of factors, including: (1) the strength of the mark; (2) the proximity of the goods; (3) the similarity of the marks; (4) evidence of actual confusion; (5) the similarity of marketing channels used; (6) the degree of caution exercised by the typical purchaser; (7) the defendant’s intent. (Polaroid Corp. v. Polarad Elect. Corp. (1961)). These are also known as the “Polaroid Factors.”
So, for example, the use of an identical mark on the same product would clearly constitute infringement. If you manufacture and sell shoes using the mark “New Balance,” your use of that mark will likely cause confusion among consumers, since they may be misled into thinking that the shoes are made by New Balance, Inc. Using a very similar mark on the same product may also give rise to a claim of infringement, if the marks are close enough in sound, appearance, or meaning so as to cause confusion. So, for example, using the name “NewBal” shoes would cause just as much confusion. On the other hand, using the same term on a completely unrelated product will not likely give rise to an infringement claim. This is why you see different goods or services identified by the same, or very similar, trademark of an unrelated good.
Confusion of sponsorship of affiliation can cause liability also. As an example, suppose a business providing tools to help enhance business credit displays the logo of some financial service institution on its website without permission. The credit building business would incur liability if its customers are confused as to any affiliation or sponsorship with that financial institution. There are obvious cases of consumer confusion and cases where it truly is a grey area. But, the courts have typically applied the same or very similar factors stated above to attempt to determine the likelihood of consumer confusion.
Always avoid Intentional Infringement. You should be aware that if you or your business commit willful trademark infringement, you will be liable for special or treble damages. These amounts can be much higher than the normal amounts usually awarded to the prevailing trademark owner. In certain instances of deliberate infringement, treble damages can be awarded which triples the amount of normal damages awarded to a trademark owner. Willful or deliberate trademark infringement means “to do an act voluntarily and intentionally with the specific intent to cause the likelihood of consumer confusion.” Quick Technologies, Inc. v. Sage Group, (2002). This is one of the reasons why you should use a proper trademark website disclaimer if your reference other trademarks or trade names on your website (discussed more below).
In addition to bringing an action for infringement, owners of trademarks can also bring an action for trademark dilution under either federal or state law. Under federal law, a dilution claim can be brought only if the mark is “famous.” In deciding whether a mark is famous, the courts will look to the following factors: (1) the degree of inherent or acquired distinctiveness; (2) the duration and extent of use; (3) the amount of advertising and publicity; (4) the geographic extent of the market; (5) the channels of trade; (6) the degree of recognition in trading areas; (7) any use of similar marks by third parties; (8) whether the mark is registered. “Kodak”, “Exxon”, and “Xerox” are all examples of famous marks. The Federal Trademark Dilution Revision Act of 2006 provides owners of famous marks with protection against dilution by blurring and dilution due to tarnishment. The plaintiff only needs to show the defendant’s mark is likely to cause dilution.
Under state law, a mark does not have to be famous in order to give rise to a dilution claim. Instead, dilution is typically available if: (1) the mark has “selling power” or, in other words, has some distinctive quality; and (2) the marks are substantially similar.
Once the prerequisites for a dilution claim are satisfied, the owner of a mark can bring an action against any use of that mark that dilutes the distinctive quality of the mark, either through “blurring” or “tarnishment” of that mark. Unlike an infringement claim, likelihood of confusion is not necessary. Blurring occurs when the power of the mark is weakened through its identification with dissimilar goods. For example, New Balance brand tires or Dell brand sofas. Although neither example is likely to cause confusion among consumers, each dilutes the distinctive quality of the mark. Tarnishment occurs when the mark is cast in an unflattering light, typically through its association with inferior or unseemly products or services. In one prominent case, Toys “R” Us v. Akkaoui (1996), ToysRUs successfully brought a tarnishment claim against adultsrus.com, a pornographic web-site.
FTC Act Liability
Federal liability is also found under the FTC Act. Unfair competition, or passing off the products or services of another as your own, or using marks which confuse as to source, sponsorship or affiliation, constitutes an unfair or deceptive act or practice under the Act. You should also keep in mind that the FTC does not require anyone committing an act of deception to have the intent to deceive and does not require that deception actually occur. The FTC merely requires that a party have the capacity to deceive or commit an unfair trade practice. If a business or individual has this capacity or a tendency to deceive, the FTC may order the business to stop the practice. Most State statutes similarly do not require that an individual or entity specifically intend to deceive.
Even if you successfully register a federal trademark, you may be not the only one with rights to the trademark. Trademark rights may also be earned through registration with any of the 50 states or through use of the trademark in commerce (otherwise known as “common law” rights). This means that if another party has a State trademark registration or “common law” use of a trademark which is before your federal trademark application, you may be liable to that party for trademark infringement under state laws.
State liability also occurs under state consumer protection statutes, such as the Uniform Deceptive Trade Practices Act. Deceptive trade practices statutes include broad restrictions on “deceptive” or “unfair” trade practices. These practices include trademark or trade name infringement. The UDTPA which defines “unfair competition” as a deceptive practice is similar to the FTC Act. Other States’ have their own statutes, such as the Illinois Consumer Fraud Act, Texas State Deceptive Practices Act and the California Unfair Competition Law.
There are also state common law claims of unfair competition, namely “passing-off” the goods or services of another. Reverser passing off, contributory passing off and misappropriation are also potential avenues of liability.
Defenses to Claims of Infringement: Fair Use & Parody
Defendants in a trademark infringement or dilution claim can assert basically two types of defenses: fair use or parody. Fair use occurs when a descriptive mark is used by a third-party to identify the primary meaning of that mark and no consumer confusion is likely to result. These uses are privileged because they use the terms only in the descriptive sense.
Some courts have recognized a slightly different fair-use defense called nominative use. Nominative use occurs when use of a protected term is necessary for purposes of identifying another business’s product, not the user of the mark’s own product. In the most famous example, the band The New Kids on the Block sued USA Today for trademark infringement for using their name in a poll the paper was conducting. (New Kids on the Block v. News America Publishing, Inc., 971 F.2d 302 (9th Cir. 1992)). The court held that the use of the trademark “New Kids on the Block” was a privileged nominative use because: (1) the group was not readily identifiable without using the mark; (2) USA Today used only so much of the mark as reasonably necessary to identify it; and (3) there was no suggestion of endorsement or sponsorship by the group. The basic idea is that use of a trademark is sometimes necessary to identify and reference another party’s goods or services. If the conditions stated above are met, the use will be privileged.
Finally, certain parodies of trademarks may be permissible if they are not substantially and directly tied to commercial use. Artistic and editorial parodies of trademarks are entitled to some degree of First Amendment protection. Non-commercial parodies are generally permissible.
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