“[A] trademark holder has no right to police ‘unnecessary’ use
of its mark. Whether necessary or not, a defendant's use of a mark must be confusing in the relevant statutory
sense for a plaintiff to raise a viable infringement claim.” It’s sad that this requires reiteration, but it’s nice to
have a clear statement.
OK, the shiny details: Swarovski brought a terrible lawsuit
because it didn’t like the idea that a downscale, off-price retailer like
Building # 19 was selling genuine Swarovski goods in its low-rent digs, and
convinced a district court that suppressing Building # 19’s truthful
advertising was somehow a legitimate use of trademark law. A year later, the First Circuit reversed.
Initially, Building # 19, which seems like a retailer with a
sense of humor about its position as a seller of salvage/overstock/discontinued
merchandise, lawfully obtained a number of Swarovski figurines and promoted
their sale with an ad using “Swarovski” in large print font. The figurines came from an insurer’s salvage
sale after a severe storm damaged the warehouse where they’d been stored; the
figurines themselves were apparently free from damage and came with Swarovski
Certificates of Authenticity. The salvor
placed no restrictions on Building # 19’s ability to use the Swarovski name or
label. After a hearing, the district
court orally granted a preliminary injunction limiting the use to a much
smaller font.
After Swarovski filed its lawsuit, Building # 19 agreed to
voluntarily refrain from further advertising or sale of its Swarovski crystal,
but then proposed to run an ad reading “ONE DAY EVENT 11AM to 8PM, Tornado Hits
Warehouse containing GENUINE SWAROVSKI(R) CRYSTAL Collectibles,” again with
“Swarovski” in extra-large, capitalized, bold and distinctive font. A smaller disclaimer read: “Disclaimer:
Building # 19 is selling GENUINE SWAROVSKI(R) CRYSTAL products BUT Building #
19 is NOT an authorized dealer, has no affiliation, connection or association
with SWAROVSKI(R) and the standard SWAROVSKI(R) limited warranty is not
available to our customers. (The lawyers told us we should add that big
‘but’....).”
Swarovski moved for a preliminary injunction, which the
court granted only to the extent that the capitalized word “Swarovski” at the
top of the proposed advertisement could be no larger than the font used for the
name “Swarovski” in the disclaimer at the bottom of the proposed advertisement.
(Bonus question: how good was Building #19's designing around the injunction?)
Building # 19 appealed on the ground that the district court
didn’t find that its use was likely to confuse consumers or that Swarovski
would suffer irreparable harm. The court of appeals agreed and remanded for
further findings.
This was a nominative use case: Building # 19 was using the
mark to refer to the product. (In a
footnote, the court stated that nominative use can also include “situations
where the defendant ultimately describes his own product, so long as his use of
the mark is in reference to the plaintiff's product,” such as a mechanic who
specializes in Volkswagens.) “The
potential for confusion in a nominative use case is not one of source—here, the
crystal really was manufactured by Swarovski—but rather one of endorsement or
affiliation. The fear is that a consumer glancing at Building # 19's proposed
advertisement might mistakenly believe that Swarovski had some official
association with the sale; perhaps that Swarovski sponsored the sale and so
stood behind the goods as a direct seller, or that it had partnered with
Building # 19 in a way that might detract from its luxury status.” NB: this is
why we need a materiality requirement.
Whose fear is this and why should we care?
In what I hope doesn’t create another epicycle in the
trademark universe, the court continued, “[b]ecause this kind of confusion does
not implicate the traditional ‘source-identification function’ of a trademark, other
circuits, most notably the Ninth and the Third, have developed a distinct ‘nominative
fair use’ analysis to identify unlawful infringement in cases like this one.” Details differ, but the factors are: (1)
whether the plaintiff's product was identifiable without use of the mark; (2)
whether the defendant used more of the mark than necessary; and (3) whether the
defendant accurately portrayed the relationship between itself and the
plaintiff. The First Circuit recognizes
the underlying principle, but has never endorsed any particular version of the
doctrine.
The district court didn’t make any finding
on likely confusion, and its reasoning didn’t allow the court of appeals to
infer such a finding. More was required:
“Swarovski may not charge infringement against all unauthorized uses of the ‘Swarovski’
name, but only those uses likely to cause consumer confusion, mistake or
deception.” The burden of such a showing
is “firmly” on the plaintiff. The
district court, however, first noted that the traditional multifactor confusion
test was a poor fit and then found that only three factors favored Swarovski
(Building #19 was using the Swarovski name, though not the logo; it was selling authentic
Swarovski products; and the mark was strong—how authenticity could favor
Swarovski is an exercise left for the reader, because G-d knows I have no
idea). It concluded that it was “not so
sure that Plaintiff met its burden under the Pignons test.” (Marketing
channels favored Building #19; there was only one piece of disputed, arguably
hearsay, confusion evidence; and in terms of intent to adopt the mark, Building
#19 had no such intent, since it was simply describing the items it was
selling.)
The district court then turned to nominative fair use, but
it didn’t explain “if it was using those factors to measure the likelihood of
consumer confusion.” It described the
factors as (1) whether the product was readily identifiable without use of the
mark, (2) whether the defendant used more of the mark than necessary, and (3)
whether the defendant falsely suggested sponsorship or endorsement. The first and third factors weighed in favor
of Building #19; as the court of appeals summarized, “the proposed ad made
clear the product's origin, how it came into the hands of Building # 19 and
that the sale was not sponsored by Swarovski.”
Thus, the decision against Building #19 turned on the second
factor. The district court thought the
font was too large: “the name Swarovski is larger than any other font in that
ad. It's larger than the name Building # 19. It's larger than the words
‘one-day event.’ It is clearly, I think, more use of the mark than is necessary
to make the point.”
This was insufficient:
This analysis does not mention
consumer confusion, but merely decided that Building # 19 used “more of the
mark than necessary” to effectively communicate its message. But as we have
explained, a trademark holder has no right to police “unnecessary” use of its
mark. Whether necessary or not, a defendant's use of a mark must be confusing
in the relevant statutory sense for a plaintiff to raise a viable infringement
claim.
Unfortunately, the court of appeals then proceeded to
speculate that the mere use of the word Swarovski might have created confusion:
“it might have made the ad look like one from Swarovski rather than Building #
19; it might have lead viewers to believe that Swarovski endorsed or sponsored
the sale; or it might have suggested some official affiliation between
Swarovski and Building # 19.” But the
district court didn’t suggest that any of those things had happened. It might have been led astray by the
different versions of nominative use applied by different circuits, given the
Ninth Circuit’s holding that the test “replaces” traditional likely confusion
analysis contrasted to the Third Circuit’s characterization of the test as an
affirmative defense. The district court
stated that Building # 19 “has some issues with its burden under the nominative
fair use test,” suggesting the Third Circuit approach, but that means nothing
if there’s not first a showing of likely confusion.
The court of appeals declined to pick an approach, but
reiterated that “a trademark defendant has no burden to prove anything until
the plaintiff has first met its responsibility to show infringement by
demonstrating that the defendant's use of its mark is likely to confuse
consumers.” Thus the entry of a
preliminary injunction was in error.
This problem was related to the absence of an irreparable
injury finding, which is required even if there’s likely success on the merits.
Swarovski pointed to evidence at the hearing “that its luxury brand reputation
would suffer as a result of its association with Building # 19.” But there was no formal finding of
irreparable harm, as you’d expect in the absence of a confusion finding. Swarovski argued that trademark plaintiffs
who demonstrate likely confusion get a presumption of irreparable harm. But eBay
“threaten[s] the continuing viability of this presumption.” The eBay
concurrences, joined by a total of seven Justices, suggested that such rules of
thumb could survive as “lesson [s] of ... historical practice” that might
inform the district courts' equitable discretion “when the circumstances of a
case bear substantial parallels to litigation the courts have confronted
before.” Still, there’s a bar on “general”
or “categorical” rules, and there’s a remaining question whether that applies
to a presumption of irreparable harm in trademark cases, as other circuits have
held with respect to patent and copyright cases.
The court of appeals declined to decide the question here. No matter what the general rule, it’s hard to
see irreparable harm without a finding of confusion. In further proceedings, the district court
might conclude “that Swarovski has presented sufficient evidence to establish
irreparable harm to its luxury reputation without the benefit of the
presumption, or that the facts of this case are so similar to past cases ‘that
a presumption of irreparable injury is an appropriate exercise of its
discretion in light of the historical traditions.’” (Ugh on the first, but that’s really a problem
descending from the ridiculous concept of confusion in play here.)
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