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Trademarks and Unfair Competition
South Texas College of Law Houston
Page, Phillip E.

Trademarks & Unfair Competition

Spring 2014

Phillip Page

I. Introduction

A. Competition: Fair and Unfair

1. Copying and imitation are legal absent some specific common law or statutory exception

2. Branding serves as a guarantee of quality, more cost-effective than formal warranty

B. Constitutional Basis for Trademark Protection

1. Art. I §8 clause 8 only mentions patents and copyrights

2. Commerce Clause

3. The Trademark Cases (1879)

a. Trademark – a right to adopt and use a symbol or device to distinguish a good or service made or sold by the person whose mark it is, to exclusion of use by all other persons

b. Identifier purpose is an instrument of commerce

c. Concerns addressed by later federal statutes

4. The Trademark Act of 1946 (“Lanham Act”)

a. Modern notion is that Congress also may control intrastate commercial realm

b. Allows federal registration of trademarks used in commerce

c. 43(a) – Prohibition of infringement and false advertising

i. Umbrella for CL trademark infringement

ii. Ex. “Pineapple Computers” v. Apple Computers

C. Perspectives on Trademark Policy

1. Purposes of the Trademark Act identified by Congress:

a. Protect the public

b. Protect the owner’s investment

2. Competition is beneficial for consumers

a. Lower prices, higher quality, and greater variety

b. Minimizes consumer search costs

c. Informational role in advertising

i. Goods are available and in existence

ii. Vigorous advertising tends to indicate that a product is commercially successful

d. Assures a particular quality – whether good or bad

3. Trademark is a property right to exclude

a. Courts have moved towards favoring this justification

b. Belongs to the first user, not necessarily the creator

c. Not tied to a specific statutory time period – valid as long as it is used for commerce

II. Prerequisites for Trademark Protection: Use

A. The Traditional (“Common Law”) Use Requirement

1. Blue Bell Inc. v. Farah Mfg. Co. (1975)

a. Issue of first use of “Time Out” mark for men’s clothing established by first public sale, not first marketing efforts

b. Ownership of trademark accrues when goods bearing the mark are placed on the market

i. Cannot be an internal, “secret” sale

c. Use need not be widely recognized in public; single sale is sufficient

i. Sales to customers, may be wholesalers; need not be end consumer

d. Each mark must be used in a bona-fide manner

i. No bad faith attempts to reserve a mark by placing on older line of goods

2. Zazu Designs v. L’Oreal S.A. (1992)

a. Only active use serves the purpose of trademark law

b. Intent to use a mark does not establish any rights

i. Only priority date, if later actively used

c. At common law, use sufficient to support registration ≠ protection nationwide

i. Federal registration alone generates right to exclude nationwide

ii. Registration gives constructive notice

3. Use and Priority

a. Distinctive Marks

i. Priority established by FIRST USE

b. Descriptive Marks

i. Priority established by FIRST TO ACHIEVE “SECONDARY MEANING” (2M)

4. Ownership Issues by Advertising Agencies

a. Advertising agency that sells a slogan to a client is NOT the owner of the slogan

b. No reasonable basis for claiming ownership because no actual use by the agency

c. Generally, no copyright protection for slogans and short phrases

d. No licensing, because ad agency cannot control the quality of a client’s goods or services

i. However, may protect itself with a covenant not to sue

B. Analogous Use (“Presale Hustling”)

1. Introduction

a. Generally, neither conception of the mark nor advertising establishes trademark rights at CL

b. However, many industries precede actual sales of goods with extensive ad campaigns

c. Analogous Use – rights in the mark vest when:

i. The marketing/promotion of the product/service associated with the mark

ii. Rises to a level of communicating a bona-fide intention

iii. For continuous commercial utilization of the product

d. Bona-Fide Use

i. To establish the trademark rights

ii. No need to profit or charge money

e. Secondary Meaning

i. Consuming public no longer associates mark to what the descriptive word ordinarily describes, but instead to a particular business identified by the mark

f. Intentional copying raises a presumption of:

i. Likelihood of confusion (LOC)

ii. Secondary meaning (2M)

2. Maryland Stadium Authority v. Becker (1992)

a. To establish infringement of an unregistered mark, must show:

i. Adoption and use of mark and the entitlement to enforce it, and

ii. Adoption and use of the mark by a junior user that is likely to cause confusion

b. Advertising/promotion before the actual sale of products bearing the mark is sufficient IF:

i. Occurs within a commercially reasonable time prior to actual rendition of service

C. Federal Registration and Intent to Use Alternative

1. “Intent to Use” Scheme

a. Effectively replaces the Token Use Doctrine (and maybe even “Analogous Use”)

i. Previously, “Token Use” allowed token interstate shipments before registration

ii. Allowed federal registration before expensive marketing campaign

b. “Use” requirement is tightened up by the Lanham Act

i. Use must be “bona fide use in regular course of commerce”

c. “Intent to Use”

i. Must be in a position to manufacture or market within statutory time period (6 months)

ii

rs mark in Illinois only

i. No exclusive right to entire state of Illinois (unless only against another IL company)

ii. Priority is only for local purposes and preserved only by continuous use

1. Local restaurant kept using consistently here – no abandonment

2. Discontinuity alone is not an abandonment

a. Prima facie abandonment after 3 years

b. Junior user permitted to operate its single restaurant, even if LOC

i. Junior user was first in the market and had no constructive notice

ii. Maybe required to advertise disclaimers

c. New Territory – Establishing Priority

i. If 2 companies are using simultaneously but neither are registered, both may register – “concurrent registration”

ii. Priority in a virgin territory is established by the “more dynamic” registrant

iii. No priority given to parties who are not likely to expand

3. Junior Intermediate Users (CL)

a. Good faith or no knowledge

b. Separate and remote geographic area

4. Unregistered Senior User (CL)

a. Confined to a given territory once the junior user’s mark becomes incontestable

i. Note – not the date of junior user’s registration!

b. Advertising or occasional sales are not sufficient for establishing priority of senior user

5. Concurrent Registration

a. Alternative to confining a second registrant to its preexisting territory

b. Arises when two parties have valid rights to a trademark, but in different areas (prior to incontestability)

c. PTO considers several factors:

i. Previous business activity

ii. Previous expansion or lack thereof

iii. Dominance of contiguous areas

iv. Presently-planned expansion

v. Possible market penetration of products brought in from other areas

C. International Use and Domestic Rights

1. Foreign Use and Rights Within the United States

Person’s Co., Ltd. v. Christman (1990)

a. No bad faith when a U.S. party registers a mark with PTO that originated in a foreign country

i. BUT, different result if the original owner was also American

b. Split authority on whether there is bad faith if PTO registration occurs after the foreign mark has already become famous in U.S.

i. 2nd Circuit – No

ii. 9th Circuit – Yes