Anticompetitive copyright claim survives; anticompetitive trademark claim does not

Designer Skin, LLC v. S & L Vitamins, Inc., No. CV 05-3699-PHX-JAT (D. Ariz.)

The court’s order does an admirable job making short work of the ridiculous claim that using keywords to truthfully indicate that one has a trademark owner’s product for sale causes initial interest confusion. The court emphasizes that confusion requires deception, and even if consumers who search using plaintiff’s trademark for indoor tanning products go to the defendant’s resale site first instead of the plaintiff’s, once there they are offered exactly what they were looking for, along with alternatives; there’s nothing confusing there. Plaintiff’s alternate argument that there was initial interest confusion as to source or sponsorship failed for lack of any evidence, which is the right result because plaintiffs can always claim that consumers perceive that any use of a mark must be authorized; this theory swallows up every exception and limitation on trademark law, and they exist for good reasons. The court wisely rejected Australian Gold, Inc. v. Hatfield, 436 F.3d 1228 (10th Cir. 2006), which had found initial interest confusion on nearly identical facts.

Unfortunately, the court’s wisdom deserted it when it came to the copyright infringement claims, similarly anticompetitive in that they were plainly asserted to interfere with defendant’s lawful resale of plaintiff’s products. Since plaintiff had only registered the “dimensional artwork” related to its products, the court refused to consider any claim unrelated to the “electronic renderings that appear on [plaintiff’s] website and in its marketing materials.” (As an initial matter, it’s not clear to me that “dimensional artwork” is the same thing as “electronic renderings”—if the plaintiff registered the label, the creative elements of a photo or drawing of the label wouldn’t be covered by the registration, and §113(c) would allow defendant to reproduce images of the label.)

Defendant argued that it didn’t copy, just took photos of the underlying products, but the court found that was a genuine issue of material fact, so it turned to the fair use defense. The court found: (1) defendant’s use was indirectly commercial and “minimally transformative at best,” weighing slightly against fair use; (2) the “electronic renderings” created by plaintiff’s graphic designer, were creative, though they were produced for functional, advertising purposes and were published on the internet, with the net result that this factor also weighed slightly against fair use; (3) the use involved copying of the entire image, which weighed against fair use; and (4) the most important factor weighed heavily in favor of fair use, because there was no market for images of the tanning products, only a market for the tanning products themselves—the defendant’s use “has not caused any market harm, and nor could it, regardless of how widespread its use might be.”

Barton Beebe has found that courts rarely engage in a mechanical tallying of the fair use factors, but this case is an exception: “with three factors weighing against fair use (although two only slightly) and only one weighing in favor of it (albeit the most important one),” the court rejected the fair use doctrine—not even leaving it as a matter for the jury, which I find quite surprising. Instead, the jury would only be asked to consider whether there was actual copying. (If plaintiff isn’t entitled to statutory damages, query what the appropriate measure of damages might be—a reasonable licensing fee? In a world without a market for the images, the reasonable licensing fee is a phantom. I suppose the cost of having new photos taken would represent defendant’s gain from copying, so that’s what I’d go with.)

Matthew Sag discusses a better analysis in another case by the same plaintiff here.

Compounding the error, the court allowed plaintiff’s unfair competition claim to proceed. Though it had dismissed the trademark claims, because plaintiff’s unfair competition count was “based on the alleged infringements of its intellectual property rights,” and because the copyright claim survived, the court also preserved the unfair competition claim. But this is plain error; a state-law cause of action based on copyright infringement is exactly what §301 preempts.