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Trademarks and Unfair Competition
Wayne State University Law School
Rothchild, John A.

Rothchild Trademarks and Unfair Competition Fall 2016 Outline
 
Prelude, Concepts of trademarks and unfair competition, Preemption of state unfair competition law
Course is mostly about the Lanham Act
Lanham Act
aka Trademark Act of 1946
amended several times
referred to by U.S. Code section or statutory section
e.g., 15 U.S.C. § 1125 = Section 43
What the Lanham Act protects against
 
 
 
false advertising
The Main issues
The main issues in infringement, dilution, and cybersquatting claims:
Does the claimant have a protectable interest in a mark?
If so, has the defendant engaged in some act that violates a right that the statute grants to the claimant?
Protectable interest in a mark
Gaining a protectable interest in a mark:
 Use the mark in commerce, in connection with goods/services,
 before somebody else uses it with similar goods.
The mark must be distinctive, either inherently or through acquiring secondary meaning.
Trademark infringement
Proving trademark infringement:
Another person used a similar mark in connection with his own goods/services, without the trademark owner’s permission
That use resulted in a likelihood of confusion
Trademark dilution
Proving trademark dilution:
 The mark is famous
 Another person used a similar mark in connection with his own goods/services, without the trademark owner’s permission
 That use resulted in a likelihood of dilution by blurring or tarnishment
 
False advertising
Proving false advertising:
False statement of fact in a commercial advertisement
That is deceptive and material
And harms plaintiff
Why we protect trademarks
Benefits from protecting trademarks:
Helps consumers by conveying information about a product’s attributes
Helps producers by allowing them to benefit from investments in good reputation
Promotes competition [1] Modern View of Misappropriation (post-INS)
Restatement 3rd – rejects it
No longer federal cause of action (Erie got rid of Fed. CL)
Narrow View – limits misappropriation to “Hot News,” will not extend INS beyond its facts
Issue for States and they are in disagreement w/ regards to this doctrine (over 12 states have adopted it)
Illinois SC – recognized misappropriation beyond INS facts
2nd Circuit and 3d Circuit – emphasize direct competition b/w parties, reduce incentive, costs generated by D, and whether D free riding – as prerequisite to misappropriation relief
Cases
Top Tobacco, L.P.
Top sues ZZ for using “top” on packaging. Holding: No LoC because “next to impossible” that any consumer would confuse the products.
Dilution claim: Top isn’t famous enough. Needs to be a household name to be considered famous.
Stiffel pole lamp (Preemption of state unfair competition law)
Stiffel sued Sears for copying a famous lamp that it made. IL unfair competition law essentially gave Stiffel a monopoly on the lamp design. Holding: Unanimous court found that state law can’t interfere with federal patent law. However, state may require goods to be labeled to prevent consumers from being misled as to source.
Compco v. Day-Brite: State law can’t prohibit copying an unpatented article even if:
Copy can be made in some other way.
Design is nonfunctional
Article copied has secondary meaning
There may be confusion over indication of source.
Restatement Third
“Freedom to compete”
General princ: when there is a gap in a statute, cts will look to the common law.
Default rule: allowed to drive competition out of business unless
Deceptive marketing (false advertising).
TM infringement.
INS v. Associated Press (no longer applies because Fed cl doesn’t exist).
INS would send AP news to the WC from EC newspapers.
Copyright claim: No copyright claim for stealing facts.
No passing off but INS is freeriding
R 3rd doesn’t think this is wrong but Ct creates common law rule against freeriding.
NBA v Motorola
Motorola not stealing when reporting basketball scores.
Preemption of “hot news claims by the Copyright Act: Based on legislative history, “hot news” claims survive preemption – HR No 94-1476, @ 132 (1976).
Barclays v Flyonthewall.com
Similar to INS not NBA. Fly was reporting on the activities of various investment firms. Holding: Not freeriding because Barclays is creating the material and Fly is reporting, which is OK.
 
The purposes of TM protection
: TM as property
“Common-law trademarks, and the right to their exclusive use, are, of course, to be classed among property rights; but only in the sense that a man’s right to the continued enjoyment of his trade reputation and the good will that flows from it, free from unwarranted interference by others, is a property right . . . .”
Conversely, a trademark is not a property right “except as appurtenant to an established business or trade in connection with which the mark is used” [30] Stork Restaurant v Sahati (Diner in LA copied name of famous- and heavily promoted- club in NYC.
Harms from using the trademark of one who is not a competitor:
it can mislead the public into thinking there is a connection between the two
it can harm the trademark owner, because the copier’s reputation may be attributed to the trademark owner, to the detriment of the latter
it can unfairly benefit the copier, because the trademark owner’s reputation may be attributed to the copier
The reasonable consumer
“The law . . . protects not only the intelligent, the experienced, and the astute. It safeguards from deception also the ignorant, the inexperienced, and the gullible.” [34] :
“[T]he relevant consumer is a reasonably prudent consumer accustomed to shopping online . . . . Unreasonable, imprudent and inexperienced web-shoppers are not relevant.”; Toyota Motor Sales v. Tabari, 610 F.3d 1171 (9th Cir. 2010)
Subj

uality of the article” [Inwood]  
Functionality Traffix Devices, Inc. v MDI: Patent ran out on spring design in road sing. Holding: Spring is functional, therefore it’s not protected. Competitors do not need to seek an alternative design.
“A utility patent is strong evidence that the features therein claimed are functional. . . . Where the expired patent claimed the features in question, one who seeks to establish trade dress protection must carry the heavy burden of showing that the feature is not functional, for instance by showing that it is merely an ornamental, incidental, or arbitrary aspect of the device.” [79] Patents involved here:
“expired utility patents . . . is the dual-spring design”
the central advance claimed in the “the dual-spring design is the essential feature of the trade dress MDI now seeks to establish and to protect” [79-80] Views on relevance of existence of alt designs
:
“[T]he finder of fact should also be permitted to consider the existence or nonexistence of alternative designs as part of the total evidentiary matrix to be weighed in reaching the conclusion of whether this design is in fact ‘essential’ and whether it affects the ‘cost or quality of the article.’ ”
, 289 F.3d 351 (5th Cir. 2002):
“The availability of alternative designs is irrelevant.”
Summary for functionality:
Essential to sue
Feature affects cost and quality
Exclusive use puts competition at a disadvantage.
 
DISTINCTIVENESS: words, slogans, sounds, building designs and product design
DISTINCTIVENESS – ABERCROMBIE
Analysis
A mark must be distinctive (inherently or acquired thru secondary meaning) to be protectable
Abercrombie Spectrum
Fanciful (protected)– Coined/made up term (“Polaroid” camera)
Arbitrary (protected)– Arbitrary link to product (“Congress” spring water, “Sun” bank)
Suggestive (protected)– Link to product requires imagination (“Q-Tip” cotton swabs)
Descriptive – Requires secondary meaning for protection (“iPhone”)
Generic – Unprotectable (“Thermos,” “Aspirin”)
§ 14(c) – If a mark becomes common descriptive for an article, it is generic and no longer protectable
Note: Fanciful, Arbitrary, and Suggestive marks are Inherently Distinctive
Note: Descriptive marks can acquire distinctiveness through secondary meaning, generic marks cannot