TM Scholars' roundtable, part 3

Session 2:  The Policy and Doctrine of Unfair Competition Claims

Introduction:  Jake Linford: Hoping for a sharper line b/t UC and TM, much as we have a relatively sharp statutory line b/t TM infringement and dilution to the extent we can define dilution.  Can you sensibly plead all 3 causes of action. If you think Kellogg/Blinded Veterans is the right kind of UC w/a limited remedy (ct said unnecessary in Kellogg—Ginsburg points out in BV that the dct should consider whether that’s necessary). A release valve for the hydraulic pressure where there is confusion, and remedies are then cabined. We don’t have that world.

Belmora seems ok from a consumer protection perspective, though it pushes hard on territoriality.  [The existence of a false advertising claim, with its stronger limits on what is actionable in the form of commercial advertising/promotion and materiality, is also important here.]  Checking judges’ work and Beebe on factors: not every multifactor test does balancing for us, and LOC test doesn’t.  On the Q of release valves: Belmora opens some room for arguments that haven’t succeeded and some that have, e.g. DC Comics v. Daily Planet—an unfair competition/free riding claim.  Limited remedy against a bike lock manufacturer or a TV program.  [But the remedy granted these days isn’t limited.]

Belmora’s subsequent use: restatement that 43 claims are supposed to look like 32 claims, but appears to help people get past the motion to dismiss stage.

Jessica Litman: Lanham Act drafters assumed unreflectively that unregistered TMs would continue to be actionable as they had been before the Act, rather than changing what they meant; that’s why they included nationwide priority and incontestability, as a bribe, b/c registration wasn’t required.  Unfair competition crept in late, in 44(h), b/c Congress believed we’d signed a treaty requiring it.  44(i) extended that protection to US citizens at the last minute b/c it was unfair to protect only foreigners. When Congress was passing the statute, it didn’t think of 43(a) as the source of protection for unregistered marks or unfair competition. Envisioned as early as 1920 as a distinct provision about intentionally deceptive marketing rather than as a home for unregistered mark infringement. Less about passing off and more about marking cotton as wool.

We are all vulnerable to the delusion that the law we first learned makes more sense than the law as it has later developed.  Litman was in law school b/t Inwood and Two Pesos.  In the 1980s, the legal system was the system McKenna suggested was sensible: 32 was registered marks w/presumptions of validity and ownership; had started to recognize common law TM infringement under 43(a), but then you had to prove ownership, distinctiveness, secondary meaning (even for inherently distinctive marks), geographic and temporal priority. Before false advertising got complicated (literal falsity/implicit falsity) it was just independently actionable deceptive marketing. The standing requirements were loose—if you could plausibly allege damage from the false marketing, lack of direct competition wasn’t a standing problem.  Two Pesos mucked it all up.  Then false advertising developed epicycles and complications.  But if you look at 43(a) through that lens—2 distinctly different things actionable—then Belmora is surely wrong as a matter of common law TM infringement but it is really understandable as false advertising, intentional deception of consumers.  More useful to understand Belmora as a species of false representation law than a massive expansion of common law TM infringement law destroying territoriality.  Which raises questions about the appropriate remedy: remedy based on the word Flanax would be a TM remedy.

McKenna: but if the remedy against the word comes from (and against) someone who owns TM rights in the word, then it’s a TM back door.

Litman: intentional deceptive marketing. [Though intent is currently not a requirement for Lanham Act false advertising liability.]

Discussant:                  Barton Beebe 

Belmora was shocking at first, then got used to it, then became shocking again primarily b/c of its rejection of simple territoriality.  A global Tea Rose/Rectanus doctrine in which rights extend as far as reputation does, even without use? Important footnote 8; impression is that it was added later.  Plaintiffs who rely only on foreign activity may have proof difficulties. A few isolated consumers who are confused isn’t enough; a case w/o other misleading conduct would face difficulty. It’s different where the cornerstone of the D’s business model is passing off.

If Belmora catches on, is there any reason to hold onto well-known marks/Grupo Gigante?  The latter has a heightened secondary meaning requirement, whereas Belmora apparently gives you a path to success if there’s more than a few isolated consumers.  A few follow-up cases: DC dct suggests Belmora, even if applicable, wouldn’t matter b/c no proximately caused harm; Md. case saying that there are two elements to a claim, proximate cause + injury—the case that motivates the worry that courts will lose track of the details, history becoming legend/myth.  All of the contextual cues could be loss. Another NJ case finding Belmora plausible, though obstacles of proof may exist.  DSC: domestic dispute, no foreign mark—treat false designation the same as infringement, but see Belmora: though not directly relevant here, UC claims don’t always require ownership of a valid mark b/c 43(a) goes beyond TM, citing Belmora/Blinded Veterans.  Already we’re starting to see the details wearing away. What will be left could be bad black-letter law. Optimistic version: Following the European example, appellate courts might treat the distinction w/more sensitivity.

Bone: Nothing much turns on calling Belmora a TM case.  ITC v. Punchgini: not a lost sales case, so it would have to be a reputation case, which then turns on how broadly reputation harms are conceived.  Bad literalism, invoking Lexmark: interpreting the Lanham Act w/o recognizing that it was enacted against a backdrop of common law principles that should be read into the statute, but aren’t.

Ramsey: not as troubled by Belmora b/c has taught well-known marks. It’s an exception to territoriality for the TM owner, but not for the consumers who are confused. 

Sheff: the US registrant in Belmora is using their US property in ways that harm someone else over the border.  Maybe a way to think about it. 

Two Pesos: held that inherent distinctiveness as a question for the jury (where as Litman points out the jury was instructed that a mark is inherently distinctive if it’s not descriptive) and that might not be right. The fact/law distinction might do some work here.

McKenna: Likes Litman’s description of Belmora until the end.  Need a body of law in which the claim is recognizable. Hard to tell in 4^th Circuit’s description whether this is a TM case or a false advertising case. Extraordinarily likely that the details will be lost w/o vocabulary to articulate it as a distinct form.  Saying that remedy can cover the mark itself invites everything to be sucked into Belmora.  Reminds me of early version of the Rogers test where TM owners would say “it’s explicitly misleading because it causes confusion”—only in the last 10 years did courts explicitly reject that argument. [As they have meanwhile created that same problem with nominative fair use, turning factor three “do nothing else” into factor three “isn’t confusing.”]  If the evidence that it’s false advertising is the use of the mark itself, then plaintiffs will argue that nothing else mattered (intent, other deceptive acts, nature of the packaging).  If the court made clear that it’s hands off the word, that risk would diminish.

Litman: cancellation is available for marks used to mislead about source.

McKenna: Q is whether use of the mark alone, w/nothing else, ought to be able to satisfy that standard. 

RT: [Others’ approval of Belmora makes more sense for me as a story about source confusion but when I think about IIC and other extensions of confusion theory I get very nervous: another version of Mark’s concern.  What if it had been “if you like Flanax, you’ll love our Forex”?]

I want to talk about 43(a)’s non-exclusion of functional matter: 43(a)(3) says “In a civil action for trade dress infringement under this chapter for trade dress not registered on the principal register, the person who asserts trade dress protection has the burden of proving that the matter sought to be protected is not functional.”  But it doesn’t say what happens if the claimant fails to meet that burden.  Blinded Veterans/Kellogg remedy still available?  And yet everyone has generally assumed that the result is no protection at all, for pretty good reasons from a TM perspective.  First, should we provide limited remedies for functional matter under 43(a)?  Second, could we infer from the opposite conclusion, the availability of limited relief under 43(a) for functional matter, that relief under 43(a) should be presumptively limited?  If not, and if all of 43(a) is just unfair competition, what function does the language in 43(a)(3) serve?

Dinwoodie: language was inserted at a time when 43(a) was understood to be more limited [though I haven’t decided which way I think that cuts]. Notion of use has expanded internationally in the US.

Doesn’t think that using Lexmark will compress the factors in confusion when it’s actually on remand.

Litman: Thinks Tam rejects Two Pesos: registration is substantive, it makes a difference; unregistered marks are not the same as registered marks. Tam doesn’t fill out what it means by that, but if it’s true it’s not the case that unregistered and registered marks are the same, as Two Pesos said.

Sheff: could be substantive in some ways and not in others. 

Dinwoodie: Two Pesos on distinctiveness could be the same, while other aspects could be different.

Litman: but cf. Beebe’s argument about how details get washed away. She’s predicting.

McGeveran: FTC also uses “unfair” and that helps you think about it.  Would Belmora’s acts have been enforceable by FTC/AGs as deceptive/unfair trade practices harmful to consumers? Obviously yes: they were misrepresenting their heritage to bodegas/Latino customers. Unfairness has a three part test: practices that cause substantial consumer harm not outweighed by benefits to consumers and competition, and consumers can’t avoid the injury by themselves. A different approach to understanding marketplace behavior. Remedy will often be remedial, not penalty.  What bothers us about Belmora is why Bayer gets to be the enforcer.  Unjust leg up b/c Bayer sells Aleve—but that’s not the court’s primary theory [of false designation; it is the theory of false advertising]; it’s instead that Mexican customers won’t buy in Mexico and will for some reason wait to buy in the US, because that’s totally plausible as how people buy headache relief medicine.  We’re offering up unfair competition if TM theory doesn’t reach consumer harm, but he thinks that false advertising/non-TM sources of consumer protection law can take care of that w/o needing free floating UC.

Linford: Zechariah Chafee writes in 1940 about what unfair competition might be—looks at Keeble, also at FTC.  Sorts out ways of thinking about UC.  Holmesian/Wigmore tort about harm, harm causation, excuse/justification.  Most of the work occurs at the last part.  There’s a presumption in that presentation that P is entitled to something (if you think about TM as property).  Be careful: if I don’t have rights in the US, I don’t have property.  I haven’t secured rights in the space against metaphorical infringement.  Perhaps, Chafee says, we’re trying to figure out how to weight individual and social interests—perhaps what looks unfair is actually beneficial to consumers.  Belmora: not so much b/c there are plenty of sources for this drug.

Bone: Chafee’s restatement of Wigmore is that competition is presumptively harmful & tortious, but it’s allowed b/c it’s privileged.  First Restatement of Unfair Competition therefore speaks of a privilege to compete, not a right, b/c it requires a policy justification.

Ramsey: Analogous to Rogers, you can’t find UC based solely on the use of the TM-unprotectable matter.

Bone: Elegant distinction that doesn’t hold up. Why draw this distinction? Just describes a doctrinal pattern.

Ramsey: competition, free speech.

RT: my problem is the realist objection/nominative fair use problem—an action/inaction distinction is unsustainable when P’s lawyers are routinely so creative.  True, Belmora did a number of things, but it’s hard to imagine Bayer being cool with an orange box; it is plausible that putting Flanax on headache medicine is the core of the confusing conduct and that nothing more is required.

Dinwoodie: institutional Q re FTC: is the existence of another institution to deal w/ conduct evidence that we should leave them alone to do so, or is it evidence that the conduct is nasty enough that we should suppress the conduct at the behest of someone else?  Can argue it either way.

Grynberg: is it really a slam dunk?  Having a new brand in the US, where there is no US owner/the mark is up for grabs, is a consumer benefit.