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

Trademarks and Unfair Competition: Outline – Professor Maggs Spring 2011
 
Introduction:
A.     Competition: Fair and Unfair
a.      General Rule: Copying and imitation are legal (fair), unless there is a specific common law or statutory exception (e.g. trademark, patent, copyright)
b.      “Misappropriation” doctrine of unfair competition (incentives based) – cause of action described as “reaping where one has not sown”
                                                              i.      INS v. The Associate Press – created “misappropriation” fed. CL, to prevent the threat that INS’s actions pose to the incentives for AP to engage in news gathering
1.      Holding: Broad view – is where someone reaps the benefits of another’s investment, that’s unfair competition. Created new cause of action to prevent INS from bodily appropriating AP’s stories
2.      Dissents: Brandeis à either you qualify for a traditional form of IP or you don’t get protection – legislature, only, can extend IP rights. à View Followed
3.      NOTE: No longer binding in federal or states since Eire
                                                            ii.      Modern View of Misappropriation
1.      Restatement 3rd – rejects it
2.      No longer federal cause of action (Erie got rid of Fed. CL)
a.      Narrow View – limits misappropriation to “Hot News,” will not extend INS beyond its facts
3.      Issue for States and they are in disagreement w/ regards to this doctrine (over 12 states have adopted it)
a.      Illinois SC – recognized missapropriation beyond INS facts
b.      2nd Circuit and 3d Circuit – emphasize direct competition b/w parties, reduce incentive, costs generated by ∆, and whether ∆ free riding – as  prerequisite to missapropriation relief
                                                                                                                                      i.      NBA v. Motorola, Inc. – refused to enjoin, because Motorola did not compete with NBA’s primary business of producing BB games
                                                                                                                                    ii.      US Golf Ass’n – Court refused to enjoin D from using the handicap because the D’s use of formula did not destroy P’s incentive to create it  
c.       “Misrepresentation” More Traditional View of Unfair Competition (deception based justification)
                                                              i.      Unfair Competition protects an individual π from an individual ∆, and relies on the “character and custom” of the business (INS, Brandeis dissenting) –
                                                            ii.      “Traditional Passing Off” – occurs when a party sells his own goods under a confusingly similar mark of another (as if the goods and services belonged the other company)
1.      wrong lies in the deceiving consumers into buying goods or services from B thinking they are from company A
                                                          iii.      “Reverse Passing Off” – occurs when a party sells someone else’s goods under his own trademark
1.      injury – manufacturer is deprived of value of its name and goodwill that stems from public knowledge of true source being satisfactory; consumer is deprived of knowing the true source of product and may even be deceived into believing that it comes from another source
d.      Unfair competition cannot substitute for effectively perpetuate copyright – which are available only for creativity/discovery/inventions – would have the practical effect of extending expired copyright protection (Dastar Corp)
                                                              i.      Dastar Corp. v. Twentieth Century Fox (reverse passing off)
1.      Holding: Section 43(a) of the Lanham Act does not prevent the unaccredited copying of an uncopyrighted work. Court held not false designation of origin was shown since the phrase “origin of goods,” did not connote the person or entity that originated the ideas contained in the video, but instead referred only to the producer’s tangible video product. Thus Dastar was the “origin” of the products it sold as its own, without acknowledging the series, because it marketed a video that copied a public domain series.  
2.      Rule: Although the Lanham Act forbids a reverse passing off, this rule regarding the misuse of TMs is trumped by the fact that once a copyrighted work (or patented invention) passes into the public domain, anyone in the public may do anything they want with the work, with or without attribution to the author
3.      Analysis: Court found that Fox’s argument would imply that the Lanham Act gave copyright holders an interest in their work that lasted forever – this violates the Constitutional provision that copyrights and patents could only be for a limited time. Dastar could have credited the authors, but this may have brought about another issue – could have implied their sponsorship or approval (see below)
e.       False Attribution – Unfair competition
                                                              i.      3 types of False Attribution:
1.      Attributing work to an author that was not in fact the author’s work
2.      Failing to credit an author for her work
3.      Distortion, where a ∆ held out “the artist as author of a version which substantially departs from the original
B.     Constitutional Basis of Federal Trademark Protection
a.       General: Congress gets is various powers from the Constitution (i.e. commerce clause – power to regulate interstate commerce among states, foreign nations, and Indian tribes)
                                                              i.      Congress gets its powers to regulate patents and copyrights from Art. 8, clause 8
1.      This does not give Congress power to regulate trademark
2.      Congress gets its power to reglate trademark law through the Commerce Clause
b.      The Trade-Mark Cases
                                                              i.      Rule: Congress does not have the power to enforce trademarks under the patent/copyright clause
1.      Reasoning: Creative focus (patents/copyright) B/c trademarks do not have the necessary creative element required for patent and copyright protection (trademarks do not necessarily have to have a creative component)
2.      Property focus (trademarks) – Common Law idea of trademark is much like the common law idea of property and wild animals, you must actually come into possession before you could have the right to it (by capture you can take a phrase or symbol out of the public domain and convert it into private property)
a.       No creative element required here
c.       Today: It is not clear how broad the commerce power it
                                                              i.      One thing is true – our economy has become more interstate and globalized, so great likelihood that almost everything will fall under the commerce clause power trademark issues.
                                                            ii.      However, wholely intrastate commerce is not under the power, but this is very rare
C.     Perspectives on Trademark Policy
a.       General Rule: Trademark protection arises not from creating something new, but from using a word or symbol in a manner that leads consumers to associate that word or symbol with the products or services of a particular individual
b.      Trademark Act: 2 purposes
                                                              i.      Protect the public so its confident its getting the product it asks for and wants to get
                                                            ii.      Protect the owner of the trademark – owner has spent energy, time, and money in presenting to the public the product, he is protected in his investment from its misappropriation by pirates and cheats
c.       Inherent conflict: Deception-based vs. Property-based
                                                              i.      Consumers want competition to drive down prices
                                                            ii.      TM owners do not like competition because they want to drive up prices
d.      Unfair Trade Practices Law and the Competitive Market System
                                                              i.      The problem is inherent to a free market economu, which encourages copetition (because of its benefits), is that competitors may try to eliminate rivalry (price fixing, byouts, etc.), and also overzealousness causing unfair competition by misappropiration, passing off, false advertising, or product dispargement
1.      Note: we want competition to be fair, but that may not be easy to define
                                                            ii.      BOTTOM LINE – with unfair competition laws is the purpose to protect the consumer
 
Acquiring TM Rights Introduction
1.      Introduction: the use of another’s TM is unfair competition because it takes the owner’s good will, and it deceives the public. TMs are an indicator of product quality. TM rights exist under both state common law, and under the Federal Lanham Act 15 USC 1051. Federal TM registration is not mandatory to receive federal protection.
a.       Note: reason for the 2 systems (state and federal) is because of interstate commerce
2.      Claim for TM infringement is a sanction against one who trades by confusion on the goodwill or reputation of another, whether by intention or not
Jurisdiction Over Trademark Suits
Almost all registered TM infringement suits are brought in federal court under §32 of the Lanham Act [15 U.S.C. § 1114]. 
An infringement of an unregistered mark may be brought in Federal court under § 43(a) [15 U.S.C. § 1125(a)], which forbids use of a false designation of origin. 
Any TM owner may sue in state court.  There is concurrent state and federal jurisdiction in federal TM cases.  The trouble is in ascertaining state law.
State or Federal Law: a π in federal ct may invoke either federal or state protections, or both.  There are distinct federal and state rights. 
Where state law conflicts with federal law, state law is preempted by federal law
 
Trademark Infringement:
1.      Is the mark registered? If yes, then prima facie evidence that presumed valid
a.      Section 32 – owner has a cause of action against: Any person who shall, without consent of the registrant –
                                                              i.      Use in commerce;
                                                            ii.      Any reproduction, counterfeit, copy, or colorable imitation of the registered mark;
                                                          iii.      In connection with the sale, offering fo

cation in the PTO. This constructive use date is subject to pre-existing common law rights of another who has used the mark prior to the applicant’s filling date.
                                                              i.      Junior intermediate users who used before the senior user’s registration are preserved by §33(b)(5)
                                                            ii.      Senior users, common law rights are preserved under §15
F.      Intent to Use Alternative
a.      General – an ITU application allows a tm applicant to file an application for registration on the principal register before the date on which the mark s first used in trade. If the ITU application eventually ripens into a valid tm registration, the effective date of that regisration will be the date on which the ITU application was filed.
                                                              i.      Intent to Use: permits a pre-use application by any person who has a bona fide intention to use a TM in commerce (a.k.a. the “intent to use” – ITU provision).  If the ITU is in order, the PTO will issue a “notice of allowance” which gives 6 months to start using the TM in actual sales.  Once proper use is made, TM protection goes back to the time of filing the ITU application.  The filing of an application reserves the mark and warns competitors to avoid using the mark.  Federal registration still always requires use.
Use in Commerce: use in commerce means the bona fide use of a mark in the ordinary course of trade, and not made merely to reserve a right in a mark. 15 U.S.C. § 1127. Abolishes token use (the old system), comprised of sporadic, casual, or nominal shipments of goods bearing a mark.  Added the ITU application 15 USC 1051
Equitable Principles Prevent Injunctions on the ITU Process: Lanham act governed by equitable principles.  As long as an intent to use (ITU) applicant’s privilege has not expired (usually 6 months to use in commerce), a court may not enjoin it from making the use necessary for registration on the grounds that another party has used the mark subsequent to the filing of the ITU application.  (Warnervision v. Empire of Carolina)
ITU Requires Proof: the absence of any documentary evidence on the part of an applicant regarding such intent is sufficient to prove that the applicant lacks a bona fide intention to use its mark in commerce as required by Section 1(b).  An allegation of ITU is not a mere formality; one who files an ITU should be prepared to prove that such intent actually existed.  (Commodore Electronics v. CBM)
Foreign firms: are entitled to registration even if they have never made use of the mark anywhere in the world.
f.        Warnervision Entertainment, Inc. v. Empire of Carolina, Inc.
                                                              i.      Rule: As long as an ITU applicant’s privilege has not expired, a court may not enjoin it from making the use necessary for registration on the grounds that another party has used the mark subsequent to the filing of the ITU application
1.      If the other party can demonstrated that it used the mark before the holder filed ITU or the filing was for some reason invalid, then it may  be entitled to injunction
g.      Contractual Solutions? Can parties contract around problems that may arise?
                                                              i.      Assignment in gross doctrine – prohibits the sale of a mark in gross, separate from “the goodwill of the business in which the mark is used.” §1060(a). FOR ITU application where use has not begun, Congress prohibits assignment altogether, EXCEPT to a successor to the business of the applicant – as in Warnervision
                                                            ii.      Naked license doctrine – prohibits TM owner from licensing a mark UNLESS the TM owner controls “the nature and quality of the goods or services on or in connection with which the mark is used.” §1127
h.      ITU applications for Descriptive Marks:
                                                              i.      Cannot file an ITU application for a descriptive mark and allow time to develop secondary meaning. If a mark is descriptive, the PTO should reject the application UNLESS the applicant can show secondary meaning, w/o regard to whether the application is a use or an ITU