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Trademarks and Unfair Competition
Temple University School of Law
Casey, Kevin R.

 
TRADEMARK AND UNFAIR COMPETITION
CASEY, FALL 2014
 
UNFAIR COMPETITION
 
·         Lanham Act was adopted on July 5, 1946.
·         § 43(a) gives cause of action for all unfair competition claims (registration not required):
o   Any person who, on or in connection with any goods or services, or any container for goods, uses in commerce any word, term, name, symbol, or device, or any combination thereof, or any false designation of origin, false or misleading description of fact, or false or misleading representation of fact, which—
§  is likely to cause confusion, or to cause mistake, or to deceive as to the affiliation, connection, or association of such person with another person, or as to the origin, sponsorship, or approval of his or her goods, services, or commercial activities by another person, OR
§  in commercial advertising or promotion, misrepresents the nature, characteristics, qualities, or geographic origin of his or her or another person's goods, services, or commercial activities, shall be liable in a civil action by any person who believes that he or she is or is likely to be damaged by such act.
·         Because publicity rights, trade secret laws, and the general misappropriation doctrine are all creatures of state law, there is often a conflict between state and federal laws. The state law must give way to the superior federal doctrine.
·         Types of unfair competition: TM infringement, false advertising, trade libel, general misappropriation, misappropriation of trade secrets, infringement of right of publicity, trade name infringement, trade dress copying.
 
·        General Misappropriation
 
o   In a misappropriation claim, a D is accused of copying or appropriating a P’s creation that is not protected by trademark, copyright or patent law.
o   Elements of Misappropriation (McCarthy)
§  P has made a substantial investment of time, effort and money into creating the thing misappropriated such that the court can characterize the “thing” as a kind of property right
§  D has appropriated the “thing” at little or no cost, such that the court can characterize defendant’s actions as “reaping where it has not sewn,” and
§  D has injured P by the misappropriation
§  Note that the “thing” being misappropriated must have concrete elements and be more than a mere idea or way of doing something. For instance, if someone comes up with the idea of a restaurant where all the servers where roller skates, others are free to copy such an idea without incurring liability under misappropriation theory.         
o   INS v. AP (SCOTUS) [Misappropriating someone else’s work case/Holmes compromise] §  F&I: International News Service (INS) and the Associated Press (AP) were news organizations that wrote stories and sold them to newspapers. AP sued INS for getting pre-publication copies of AP's stories, and then repackaging and selling the stories to INS's client newspapers. This is not a copyright case because the news is not copyrightable, and D didn’t directly copy P’s words.
§  H: whether D may lawfully be restrained from appropriating news taken from bulletins issued by P or any of its members, or from newspapers published by them, for the purpose of selling it to D’s clients, thereby undercutting competition.
§  D:
·          This case is the genesis of unfair competition law.
·         Majority doesn’t worry about public interest here. Instead, it is more concerned with the work that AP performed and that they should be rewarded for their own labor. INS argued that when AP posted the news on its bulletin boards, it became public information. Again, majority wasn’t concerned with the public, but with INS actions. INS is reaping what it had not sown.
·         Brandeis dissented. Not very nice to do, but this is an issue for legislature, not courts. Not moral, but not a problem for court to decide. If the property is private, then it is a different story, but because the news is public “quasi property”, it does not have the same protections as private property.
·         Holmes dissented. “The Holmes Compromise” -> use a disclaimer! If INS publishes a story, it implies to the public that INS gathered the information. His compromise is that INS should have disclosed the fact that they got the news from AP. This is the winning decision in terms of trademark.
 
·        The Right of Publicity
o   The right to publicity is considered IP. It is a more expansive right than the other forms of IP b/c it does not require a showing of likelihood of confusion. The right of publicity is synonymous with the misappropriation of one’s name or likeness. Intended to protect the value of a celebrity’s notoriety or skill. The tort does not protect the use of the celebrity’s name per se, but rather the value associated with that name.
o   A person’s right of publicity may be violated when D employs an aspect of that person’s persona in a manner that symbolizes or identifies the person such as the use of a name, nickname, voice, picture, performing style, distinctive characteristics, or other indicia closely associated with a person.
o   Henley v Dillard Dep’t Stores [Don Henley publicity case] §   F&I: Don Henley sued Dillard’s because Dillard’s ran an ad for a “henley” shirt featuring a photo of a man wearing a Henley shirt with the words “This is Don” in large print, pointing at his head, and the words “This is Don’s henley” with an arrow pointing at the shirt. Did Don Henley have a right to enjoin the use of his persona?
§  H: Yes. 
§  Three Elements
1.      D appropriated the π’s name or likeness for the value associated with it, and not in an incidental manner or for a newsworthy purpose (must be purposeful),
§  Name and likeness doesn’t necessarily have to be a picture or the name listed verbatim. In this case, there was a pretty clear play on words. A nickname perhaps, or a pseudonym. Johnny Carson sued for misappropriation of “Here’s Johnny” by a toilet company. Must be intentional!! Incidental usage of someone’s name or likeness is usually forgivable, as it doesn’t meet the first element.
2.      P can be identified from the publication
§  This is really easy to prove. Must be more than de minimis. In this case, there was empirical data on how many people identified Don Henley (a lot). Also, look to the intent of the publisher of the ad.
3.      There was some discernable benefit to the D.
§  Is there a commercial advantage? D argued that they actually lost money using this ad, but the court held that because the intent was to increase sales, it was commercially advantageous
 
·        Trade Secrets and Other Confidential Information
o   Definition of trade secret (Rst Torts 757):
§  A trade secret may consist of any formula, pattern, device or compilation of information which is used in one’s business, and which gives him an opportunity obtain an advantage over competitors who do not know or use it. It may be a formula for a chemical compound, a process of manufacturing, treating or preserving materials, a pattern for a machine or other device, or a list of customers.”
§  A trade secret must be secret, and must not be of public knowledge or of a general knowledge in the trade/business. This necessary element is not lost, however, if the holder of the trade secret reveals the trade secret to another in confidence and under an implied or express obligation not to use or disclose it -> usually licensees.
o   Similar to patent because it incentivizes the public to create new methods to be created. The big worry is reverse engineering, which is completely legal. Trade secrets aren’t given monopoly protection like patents.
o   Novelty, in the patent law sense, is NOT required for a trade secret. However, some novelty will be required if merely because that which does not possess novelty is usually known. Secrecy in the context of trade secrets thus implies at least minimal novelty.
o   Protections accorded by trade secret law: against the disclosure or unauthorized use of the trade secret by those to whom the secret to whom the secret has been confided under the express or implied restriction of nondisclosure or nonuse. The law also protects the holder of a secret against disclosure or use when the knowledge is gained, not by the owner’s volition, but by some improper means i.e. theft, wiretapping, etc. On the other hand, trade secret law does not protect against discovery by fair and honest means i.e. independent invention, accidental disclosure, or reverse engineering.
o   Kewanee Oil Co. v. Bicron Corp (SCOTUS) [crystal growing trade secret case] §  F&I: Harshaw (owned by Kewanee) was a chemical company that grew crystals. As a condition of employment at Harshaw, employees, as a condition of employment, signed contracts forbidding them from disclosing confidential information or trade secrets obtained as employees. Later, some employees formed Bicron t

Amendment protects commercial speech.
·         H: No.
·         D: Commercial speech is not constitutionally protected under 1st Amendment. There is an in-between gray area where an advertisement is partially commercial, so it gets some protection. Here, the speech in question meets all three elements for commercial speech, so it does not warrant 1st Amendment protection.
o   Factors to consider whether speech is commercial:
§  Is it an advertisement?
§  Does it refer to a specific service or product?
§  Does the speaker have an economic motivation behind the speech?
TRADEMARK
 
·            Jurisdiction over TM Suits
o   If diversity factors exist, federal courts have jurisdiction to hear suits asserting both state TM law protections and federal protections, or both. However, there is rarely any real impact on using one or the other because the state and federal laws are often congruent. But still, there are distinct federal and state rights to trademark protection that can be asserted in federal court. Job’s Daughters v. Lindeburg
·         Obtaining and Protecting TMs at Common Law
o   Blue Bell v Farah Mfg
§  In order be to used in commerce, it must be more than intra-company use. Must be bona fide use in commerce. Here, internal sales to store managers by manufacturer was not a bona fide, public use.
§  This case was in 1975, prior to the 1988 adoption of the ITU applications.
 
·        Obtaining Federal TM Rights, and What Those Rights Provide
 
o   5 bases for TM application
§  Use-based system (§1): applicant uses the mark in commerce first, and then files for registration
§  Intent to Use (ITU) System (§1): applicant files first and then has 6 months to begin using the mark in actual sales and to file a verifies statement of use in commerce. This can be extended for another 6 months and for “good cause”
§  § 44(d): six months after foreign application
§  § 44(e): based on foreign registration
§  Madrid Protocol (§ 65(a)).
 
o   Levels of Rights:
§  Federal Registration (pg 41 for differences between registers)
·         Principal Register – eligible if a mark distinguishes an applicant’s goods/services
·         Supplemental Register – fewer protections but more lenient test: being “capable of distinguishing applicant’s goods/services.” Needs a modicum of distinctiveness. One year “period of incubation.” No opposition allowed.
§  Common Law Protection under § 43(a)
·         Protection against others who might cause likelihood of confusion
 
o   Trademark rights in the United States are created through use—not registration. Once a party begins using a mark in commerce, it begins to acquire common-law rights in the mark. These common-law rights are limited to the geographic area in which the mark has been used on products sold or in which the services it covers have been promoted. Although a federal registration is not required to establish or enforce rights in a mark, it is beneficial: the primary benefit is that it confers upon the owner presumptive nationwide rights in the mark regardless of the geographic areas where the owner is actually using the mark. § 7.
 
o   Federal registration of a mark gives right to nationwide use of the mark and constructive notice of that right, retroactive to the date of application – § 22. Registration is prima facie evidence (conclusive evidence if the mark is incontestable) of validity and exclusive use of the mark in commerce on those goods. However, in an infringement action, a D can assert a few defenses (i.e. abandonment, fair use)