Select Page

Trademarks and Unfair Competition
University of Illinois School of Law
Maggs, Peter B.

Trademark, Maggs Fall 2011
I.              Right to Compete/Contractual Relationships
A.    Unfair competition is one area where intent to harm the existing participants in the market does not affect whether the newcomer is culpable.
B.     Harm from Competition is not actionable unless it is (Restatement):
1.      Deceptive Marketing
2.      Trademark Infringement
3.      Appropriation of Intangible Trade Values
4.      Illegal Actions
C.     Cases:
1.      The Schoolmaster’s Case – A competing schoolteacher opened shop in the area, eating into the profits of the first schoolteacher. The court held it was not actionable. Opening a business and charging a lower price is fair competition.
2.      Keeble v. Hickeringill – Plaintiff earned a living by taking ducks from his pond. Defendant intentionally frightened away the ducks. Malicious action, not for the purpose of competing is actionable.
3.      Tuttle v. Buck – The barber in town is suing another man who has set up a barber shop supposedly for the sole purpose of putting the plaintiff out of business. They court held for the defendant. If there is any competitive motive for profit at all, then the court will generally find in favor of free competition.
D.    Interference with Contractual Relationships
1.      Restatement § 766A – One who intentionally interferes with the performance of a contract by causing his performance to be more expensive or burdensome is liable.
2.      § 766 – People may not induce others to break their contracts
3.      Cases:
a.       Price v. Sorrell – Hospital hired plaintiff to collect a debt from defendant’s client. The defendant supposedly maligned the plaintiff to the hospital, and he wants to hold them accountable for the money spent to get back in the hospital’s good graces. The majority decided not to enact § 766A, so there was no cause.
b.      Lumley v. Guy & Lumley v. Wagner – Guy convinced opera star Wagner not to sing in Lumley’s performance, but to sing at Guy’s. Lumley and Wagner had a non-competition agreement for the duration of the contract. This led to § 766.
4.      Prospective Contracts:
a.       A competitor may “interfere” with another’s contractual expectancy by picking the deal off for himself, if, in advancing his own interest, he refrains from employing wrongful means.
b.      § 766C deals with negligent interference with a contract.
c.       Doliner v. Brown – Doliner was looking for financing for a condo project. He went to Brown, who then took the opportunity for himself. He was well known in the industry, so the court held he did nothing wrong.
II.           Trademark Registration
A.    Purposes of trademarks:
1.      It allows consumers to know that a product has a certain level of quality or has certain aspects about it.
2.      It encourages competition by allowing a customer to compare known qualities and prices when deciding what to buy.
3.      They serve to punish bad companies
4.      They lessen search costs for consumers
B.     Simultaneous Usage – When two companies decide to use an unregistered mark at the same time, independently, the first to actually use the mark in commerce gets the rights to it. § 1125(a) or § 43(a)
C.     Aunt Jemima Doctrine – the AJ mark was used on flour and another manufacturer tried to use it on syrup. The court decided this was illegal because it was likely to cause confusion.
D.    ITU – Lanham act revisions in 1988 allowed manufacturers to file an “intent to use”, which allowed people to reserve a mark until they can complete registration by actual good faith use.
1.      If another company registers the mark between filing the ITU and use in commerce, the company that filed the ITU’s registration will preempt the later one’s, provided they complete the registration process.
2.      Good Faith Use – “Use in Commerce” means bona fide use of a mark in the ordinary course of trade, and not made merely to reserve a right in a mark.
a.       Ordinary course of trade will vary from industry to industry
b.      Eg. In the fighter plane industry, the amount sold in ordinary business will be relatively low, but for inexpensive products, the amount will be greater.
c.       Use does not qualify under the token use system if it is comprised of “sporadic, casual or nominal shipments of goods bearing a mark.”
E.     Advantages of registration
1.      Supplemental Register
a.       Usually for trademarks that have not achieved the necessary public recognition. It could be used to indicate your intent, and also for registering trademarks with foreign countries.
b.      Allows you to use the symbol ®
c.       Provides protection against state restrictions on the use of the mark
d.      Gives priority rights in registering in foreign countries according to international treaties
2.      Principal Register
a.       Provides constructive notice to those who might want to adopt the mark
b.      Prima Facie evidence of the user’s exclusive right to use the mark
c.       The owner of the mark has the right to seizure of goods bearing a counterfeit mark
d.      The owner can get treble damages and attorney’s fees against intentional users of a counterfeit mark, in the absence of extenuating circumstances
e.       The owner has the benefit of the deterrent effect of severe criminal penalties for the use of counterfeit marks
F.      Any person who may be injured by the registration of a trademark may object to the registration of a trademark.
G.    Foreign firms exercising their treaty rights can register in the US, provided they have already registered in their home country.
H.    Cases:
1.      Blue Bell, Inc. v. Farah Manufacturing Co. – Two companies simultaneously decided to use the mark “time out” for pants. Farah sold the first shipment to consumers, so they got the mark.
2.      Zazu Designs v. L’Oreal, S.A. – L’Oreal’s subsidiary sold hair dye with the mark Zazu. A salon in Hinsdale by the same name wanted to use the mark on hair care products. The court held that L’Oreal used it first, so they won, but most commentators think this decision was wrong because of the Aunt Jemima doctrine.
3.      White v. Paramount Pictures Corp. – White’s band wanted to use the mark “romulans” for paper games. Paramount makes “star trek.” Because he didn’t always sell the games and he didn’t sell very many, the court held for Paramount.
4.      Warnervision Entertainment, Inc. v. Empire of Carolina, Inc. – Empire filed an ITU for “real wheels.” Warner then used the mark and got an injunction from the trial court preventing Empire from using it. In order for Empire to complete its ITU registration, it would have to disobey a court order. Warner can’t prevent them from using it.
5.      Commodore Electronics, Ltd. v. CBM Kabushiki Kaisha – CBM tried to register the marks CBM for a large range of products. Commodore used the CBM mark for “commodore business machines.” Commodore demonstrated bad faith (no actual intent to use) on the part of CBM, and thus won.
III.        Problem Trademarks
A.    Factually Informative Marks
1.      There are 4 types of marks (Abercrombie categories):
a.       Generic – something like “Beer” to denote a brand of beer
b.      Descriptive – Such as “Lite” when referring to beer
c.       Suggestive – The label “safari” referring to hats. Referring to a trip to Africa, it’s generic, but used to describe a line of clothing, it’s suggestive.
d.      Arbitrary or Fanciful – Fanciful is created, with no other meaning. Arbitrary is assigning a word to a product that has nothing to do with it, like “Shell” for gas.
2.      Cases:
a.       Abercrombie & Fitch Co. v. Hunting World, Inc. – Abercrombie trademarked the term “safari” to use on clothing items. HWI used it to advertise safari clothes. The court held it could not be trademarked because safari clothing has a general meaning that would prevent people from advertising what their product is.
B.     Generic Terms
1.      Types of potential consumer harm:
a.       Confusion over the fact that they may not know there are competing products if the later maker cannot use the well-known description of the product
b.      People may think they are getting one product when in fact they are getting another.
2.      To ensure the non-generification of your trademark, be sure to use it in conjunction with the product’s generic name, like “Kleenex brand tissues”
3.      If you are the only person who makes a product for some time due to a patent, it does not indicate secondary meaning that the public associates the name of that product with a certain producer.
4.      Foreign Words – Even a foreign generic word can be an invalid trademark in the U.S.
a.       Evidence of rejection by a foreign trademark board is not binding, but can be evidence to show that the term is, in fact, gen

generic name for the products they sold.
b.      Taylor Wine Co. v. Bully Hill Vineyards, Inc. – Owner of Bully Hill had the last name Taylor, which he used on his wines. The court issued an injunction that he must put a disclaimer disavowing connections with TWC if he wanted to use his name on the bottle.
F.      Geographic Descriptions
1.      Geographic descriptions are not valid trademarks
2.      Secondary Meaning may allow registration of a geographically descriptive mark.
3.      If there is more than one location with a particular name, the product may be more entitled to protection because it is not drawing an association with one particular place.
4.      The court must balance competing interests:
a.       The importance of indicating the place of manufacture and the discrediting effect of distinguishing words
b.      The importance of preventing the inferences that the public will draw from the defendant’s plates if they are unchanged.
5.      Cases:
a.       American Waltham Watch Co. v. United States Watch Co. – The latter started manufacturing a watch with “Waltham” featured on it. The court upheld an injunction against them because AWW had acquired secondary meaning.
b.      In re Eastern National – EN wants to register “independence park institute.” The examiner rejected it because this is the nickname for a park in Philadelphia and the company was in that city. The court granted them protection because there is more than one independence park and therefore it wasn’t descriptive of one place.
G.    Factually Inaccurate Marks
1.      Deceptive – § 2(a) of the Lanham Act bars registration of a mark which: “Consists of or comprises … deceptive … matter”
2.      Deceptively Misdescriptive – § 2(e)(1) – Unlike deceptive marks, these can be protected if they acquire secondary meaning.
3.      Deceptive marks cannot be redeemed by secondary meaning
4.      Reasoning:
a.       It deceives the public into buying something other than what they think it is
b.      Another company may be manufacturing a product that has the quality the deceptive mark is advertising and will be injured by their mistruth.
5.      Test for Deceptive (In re Budge):
a.       Is the term misdescriptive of the character, quality, function, composition or use of the goods?
b.      If so, are prospective purchasers likely to believe that the misdescription actually describes the goods?
c.       If so, is the misdescription likely to affect the decision to purchase?
6.      For Deceptively Misdescriptive marks, it is the same, but it need not be likely to affect the decision to purchase (Berman Bros.)
7.      Cases:
a.       In re Budge Manufacturing Co. – Budge wanted to register “Lovee Lamb” for synthetic sheepskin car seat covers. The court denied it as deceptive.
b.      In re Berman Bros. Harlem Furniture, Inc. – They wanted to use the mark “furniture makers” even though they don’t make furniture. The court refused to register it as deceptively misdescriptive.
H.    Geographically Deceptively Misdescriptive Marks
1.      These marks may not be redeemed by secondary meaning.
2.      § 2(e)(2) – No mark may be registered that is geographically deceptively misdescriptive of the goods advertised.
3.      Test – For a mark to be primarily geographically deceptively misdescriptive, the mark must:
a.       Have as its primary significance a generally known geographic place, and
b.      Identify products that purchasers are likely to believe mistakenly are connected with that location.