Select Page

Trademarks and Unfair Competition
University of North Carolina School of Law
Gerhardt, Deborah R.

Spring 2008

Concepts of Trademarks and Unfair Competition
· Competition
1. Restatement of Law(3rd) Unfair Competition § 1. General Principals
(a) One who causes harm to the commercial relations of another by engaging in a business or trade is NOT subject to liability to the other for such harm unless:
i. The harm results from
o Deceptive Marketing
o Infringement of Trademarks and other indicia of identification
o Appropriation of intangible trade values or form other acts or practices of the actor determined to be actionable as an unfair method of competition, taking into account the nature of the conduct and its likely effect on both the person seeking relieve and the public or;
ii. The acts or practices of the actor are actionable by the other under federal or state statute, international agreements, or general principles of common law apart form those considered in this restatement.
2. Concepts to Consider
(a) Freedom to Compete is a fundamental premise of the free enterprise system
i. Sole act of participation/competition allowed regardless of harm
o There is a right to induce prospective customers to do business with a actor rather than with the actors competitor
ii. Public Domain
o Free to copy anything in the public domain unless you run afoul of a right that is articulated in the constitution, federal statute, or state statute
iii. Harm actionable only to direct competitors
o The restatement is applicable only to harm incurred by persons with whom the actor directly competes and to harm incurred by other persons affected by the actors decisions to enter or continue in business
o HOWEVER, other forms of protection are now available against non competitor
iv. General Principle of non-liability
o A person alleging injury through competition must therefore establish facts sufficient to subject the actor to liability
3. Actionable Harm
(a) Common Law Quasi Property Right
i. There is a common law property right against the “misappropriation” of commercial value such as when one takes another’s news story during its initial dissemination, even where there is no “passing off”
ii. Ins v. AP
o Supreme Court recognized a quasi property right in the dissemination of uncopyrightable information where defendant took the news feeds from the plaintiff but did not attempt to say it was theirs, aka palming off
o This case has come to stand for a general common law property right against misappropriation of commercial value
o Reaping where one does not sow
o NBA v. Motorola
1. NBA attempted to prevent Motorola from divulging the scores of on going basketball games
2. Ct limited INS by saying that holding only applicable when the following criteria is met
(a) Plaintiff generates or gathers info at a cost
(b) The info is time sensitive
(c) Defendants use of the info constitutes free riding on the plaintiffs efforts
(d) The defendant is in direct competition with a product or service offered by plaintiff
(e) The ability of other parties to free ride on the efforts of the plaintiff or others would so reduce the incentive to produce the product or service that its existence or quality would be substantially threatened
3. Ct held that there was no free-riding or a reduction in incentive
(b) Copying alone is not actionable harm
i. Cheney Bros. v. Doris Silk Corp.
o Defendant copied silk design of plaintiff.
o Ct held that a competitor is free to copy unless the design is protected by some other regime
o This decision limits INS to the facts of its case and asserts that the holding in that case does not assert a general principle
(c) Has to be more than copying
i. Deceit
o Sears Roebuck v. Stiffel Co.
1. SC was asked to interpret an Illinois statute for likelihood of confusion when one competitor copied the design of another competitor’s lamp.
2. Ct held there was no damage because the mere inability of the public to tell two identical articles apart is not enough to support an injunction against copying or an award of damages for copying that which the federal patent law permits copying
3. In order for the confusion to be enough there has to be some kind of deceit
4. The statute cant just say that it is enough to cause public confusion because people are free to sell designs in the public domain
ii. Protected by another regime
o Compco Corp. v. Day Brite Lighiting
1. A design that is not patented or under some other federal statutory protection can be copied at will
2. Thus, state power is limited to preventing deceit
iii. However, State statutes can not run afoul of federal
o Bonito Boats v. Thundercraft
1. States cannot create a patent like protection
2. There is a strong federal policy favoring free competition in ideas which do not merit patent protection
· Trademarks
1. Sources of Power
(a) Common Law
(b) Commerce Clause
i. This differs from Copyright and Patent
o Copyrights and Patents have roots in Art. I, Section 8, Clause 8
2. Reasons for Trademark Law
(a) Protect consumers against deception
(b) Encourage companies’ development of goodwill
i. This also benefits consumers
3. Obtaining Rights
(a) Use in commerce (with or without registration) gives rise to trademark rights
i. The right grows from use, not from adoption
4. Term of Rights
(a) Trademarks may last forever, so long as use in commerce is continual
i. BUT it is possible for a trademark to be invalidated (various reasons)
5. Scope of Rights
(a) May Prevent “Passing Off” – Misrepresentation
i. If the right to prevent others from passing off their goods as yours were not enforced, there would be no incentive to invest in development of such goodwill Hanover Star Milling Co. v. Metcalf (pp. 21-22)
(b) May Prevent “Taking Value” – Misappropriation
i. A vendor may prevent the use of his good will by another vendor, thereby devaluing his mark Stork Restaurant, Inc. v. Sahati et al. (pp. 22-27)
o Even where there is no direct competition between parties
o Even where there is a great disparity in size of business
o Even where there is a geographical difference between parties
o Even where there are obvious differences between the uses
1. Trademark law protects ignorant, gullible consumers
ii. Differs from Misrepresentation
o Misrepresentation requires more than a mere copying or taking of another’s good will; there must be deceit or intent to deceive
(c) BUT law only protects against use of name to sell another vendor’s goods
i. Where spark plugs are reconditioned by second vendor but are still the product of first vendor, continued use of the first vendor’s mark is not inappropriate Champion Spark Plug Co. v. Sanders (pp. 27-29)
o Similarly, you may advertise mark when you resell a car

A. Subject Matter of Trademark Protection
· Trademarks
1. Definition
(a) 15 U.S.C. § 1127 : Definition of a trademark
i. A trademark is a word, name, symbol, device or other designation, or a combination of such designations thereof –
o Used by a person, or
1. Which a person has a bona fide intention to use in commerce and applies to register on the principal register established by this act
o that is distinctive of a person’s goods or services and
o that is used in a manner that identifies those goods or services and
o Distinguishes them form the goods or services of others

Except in the case of certification marks when used so as to represent falsely that the owner or a user thereof makes or sells the goods or performs the service on or in connection with which such mark is used.
2. 15 USC 1127
(a) Collective marks
i. The term collective mark means a trademark or service mark –
o Used by the members of a cooperative, an association, or other collective group or organization, or
o Which such cooperative, association, or other collective group or organization has a bona fide intention to use in commerce and files an application to register on the principal register established by this Act, and includes marks indicating membership in a union, an association, or other organization
(b) Certification Mark
i. The term certification mark means any word, name, symbol, or device, or any combination thereof-
o Used by a person other than its owner, or
o Which its owner has a bona fide intention to permit a person other than the owner to use in commerce and files an application to register on the principal register established by this Act,
ii. To certify regional or other origin, material, mode of manufacture, quality, accuracy, or other characteristics of such person’s goods or services
iii. Or that the work or labor on the goods or services was performed by members of a union or other organizations
3. Geographic indications
(a) Trips, Article 22(1) 2 elements for geographic indications:
i. identify a good as originating in the territory of a Member, or a region or locality in that territory,
ii. where a given quality, reputation, or other characteristic of the good is essentially attributable to its geographic origin
o goods would be or would perceive to be qualitatively different if they came from some other place
iii. EX
o Champagne
o Cuban Cigars
(b) Obligations of Member states
i. Article 22(2) obliges member states to prevent
o The use of any means in the designation or presentation of a good that indicates or suggests that the good in question originates in a geographical area other than the true place of origin in a manner that misleads the public as to the geographic origin of the good
(c) Not all Geographic names violates agreement
i. If to the national public, the term is generic, its use cannot mislead as to the goods geographic origin
o i.e.
1. Swiss Cheese
2. Feta not recognized as geographic indications in all countries
(d) Tripps does not generally oblige one member State to adopt another’s geographic indication but rather SETS OUT A MORE IMPERIALISTIC STANDARD FOR WINES AND SPIRITS
1. Restatement of the law 3rd Unfair competition
(a) §16 Configurations of Packaging and Products: Trade dress and Product Design
i. The design of elements that constitute the appearance or image of goods or services as presented to prospective purchasers
o Including
1. design of packaging
2. labels
3. containers
4. displays
5. décor