No nominative fair use or dilution dismissals if plaintiff pleads the elements?

Valley Forge Military Academy Found. v. Valley Forge Old Guard, Inc., No. 09–2373, 2014 WL 2476115 (E.D. Pa. Jun. 2, 2014)

Nominative fair use doesn’t have to work this badly, guys!

Valley Forge Military Academy Foundation operates the Valley Forge Military Academy, a college-prep boarding school and a two-year college. The Foundation and coplaintiff Valley Forge Military Academy and College Alumni Association alleged that they own/license various federally registered and common law marks, including “Valley Forge Military Academy,” “Valley Forge Military Academy & College Alumni Association,” and “Valley Forge Experience.” The Foundation also alleged goodwill in marks such as “Lieutenant General Milton G. Baker Founder’s Society,” “Baker Founder’s Society,” and “Founder’s Society.”

Valley Forge Old Guard is a nonprofit that has criticized plaintiffs over the past few years. Plaintiffs alleged that Old Guard used their marks to solicit funds from parents and alumni. Plaintiffs submitted two letters from parents of students at the Academy allegedly showing actual confusion about the distinction between the Old Guard and the Alumni Association. The Alumni Association’s mission statement reads: “[T]o enhance the quality of the ‘Valley Forge Experience’ and to contribute to the welfare and future of the finest institution of its kind in the world through leadership, recognition, contribution of resources, and the investment of time.” The Old Guard’s mission statement reads: “[T]o enhance the nature of the ‘Valley Forge Experience’ by contributing to the welfare, viability, and future of the Valley Forge Military Academy and College and its Corps of Cadets through leadership, the investment of time, the proper management of tangible resources ....”

After a C&D, the Old Guard changed its name from the Valley Forge Old Guard to the Founder’s Old Guard, and changed its website from www.valleyforgeoldguard.org to www.foundersoldguard.org, adding a disclaimer that disavowed any affiliation between the Old Guard and the Alumni Association. Plaintiffs were unsatisfied, and contested the use of “Founder’s” in the new name. They sued for trademark infringement, false advertising, and dilution.

The court rejected defendants’ arguments that their speech wasn’t commercial.  The court first quoted the general standard for commercial speech: basically, is it an ad for a product/service by someone with an economic motivation for the speech—is it speech proposing a commercial transaction? But it quickly pivoted to the more expansive definition used in Lanham Act cases.  (Cf. Riley v. Nat’l Fed’n of the Blind, finding fundraising speech for nonprofits to be noncommercial.)

Plaintiffs alleged that defendants competed with the Alumni Association for fundraising and alumni services, and that they used plaintiffs’ marks in an ad referring to a specific service: the Old Guard emailed 4000 people promoting the Old Guard’s alumni services, with an economic motivation—they solicited funds.  This plausibly alleged that the Old Guard proposed a commercial transaction, not another type of speech.  Thus, their “appropriation of Plaintiffs’ marks for commercial purposes” was not protected by the First Amendment.

Unsurprisingly, the court then rejected defendants’ arguments that they weren’t using plaintiffs’ marks to sell goods or services.  “Services” is a broad term that has been applied to lots of defendants providing noncommercial public/civic benefits.  United We Stand Am., Inc. v. United We Stand, Am. N.Y., Inc., 128 F.3d 86, 89 (2d Cir. 1997); Villanova Univ. v. Villanova Alumni Educ. Found., Inc., 123 F. Supp. 2d 293, 306 (E.D.Pa. 2000) (applying Lanham Act to alumni organization and finding that while “they are not commercial entities, the parties to this action are now in competition in that they offer similar services and engage in similar activities”); Am. Diabetes Ass’n, Inc. v. Nat. Diabetes Ass’n., 533 F. Supp. 16, 20 (E.D. Pa.1981) (applying Lanham Act to two organizations that solicit donations to find services for diabetics). The services here were provided to the Academy’s alumni.

Likely confusion: defendants argued that their messages criticized plaintiffs, and thus couldn’t be confusing.  But plaintiffs alleged that defendants were their competitors in the market for fundraising and alumni association services, and directed their activities towards the same customers (parents and alumni).  Note that this is clearly nonresponsive!  However, the court also gave weight to plaintiffs’ allegation that “much of the information that Defendants distribute is not, in fact, critical of Plaintiffs.”  Nor could defendants’ website disclaimer be ruled sufficient as a matter of law, given the other contents of the website, such as the similar mission statement, “text of the Academy’s alma mater, and pictures of the Academy’s campus.”  Plus, there was no showing that defendants used disclaimers in their other challenged activities, such as email and press releases. And plaintiffs alleged incidents of actual confusion.

Nominative fair use: defendants argued that they were only using the marks to identify the plaintiffs as the subject of their criticism.  (I don’t see how this works given the name of defendants’ organization.)  But “[t]he facts necessary to establish an affirmative defense generally come from outside of the complaint.” The three-part nominative fair use showing (the Third Circuit has its own special version) can only come after a plaintiff shows likely confusion.  Further factual development was required.

Dilution: Defendants correctly pointed out that the marks aren’t famous.  But the court, despite Twiqbal, accepted well-pleaded facts as true, and plaintiffs alleged that the marks “have been continuously used since 1928, have continuously been used to advertise and promote for Plaintiffs, have been used extensively by the press in connection with Plaintiffs, and are known throughout the nation and world as identifying Plaintiffs.” Comment: That’s not even close.  The court doesn’t mention whether plaintiffs pled that their marks were “widely recognized among the general consuming public,” and to contend that they are is entirely implausible. If a court accepts this weak tea at the pleading stage, I sure hope it makes fees available at the summary judgment stage. Hope springs eternal, I guess.

Defendants also argued that their uses were excepted from dilution liability by § 1125(c)(3).  But plaintiffs alleged that defendants offered competing alumni services and that there was source confusion, which defeated any exceptions. Note, however, that comparative advertising will generally be by someone in competition with the claimant and it is still categorically protected, and the statute also does not require that the comparative advertising be nonconfusing.  Still, to the extent that defendants were using the marks at issue as marks, dilution could apply in the counterfactual world in which the marks were famous, unless it’s a Chewy Vuiton situation in which the reference actually increases the connection between the plaintiff and the marks, which is plausible on these alleged facts (and isn't even inconsistent with the more persuasive confusion theory!).

False advertising: defendants argued that they weren’t engaged in commercial advertising or promotion, but the court already found that they were engaged in commercial speech.  (Note: the conventional test here has three more elements besides that, though one—the requirement of commercial competition—might not properly survive Lexmark.) Anyhow, §43(a)(1)(B) “is broad enough to support, in the context of non-profit fundraising, a claim of false and misleading statements about the services represented by a protected mark.” Birthright v. Birthright, Inc., 827 F.Supp. 1114, 1138 (D.N.J.1993). There’s liability for misrepresentations not only in commercial advertising but also in the “promotion” of services, which plaintiffs alleged.