Thursday, December 31, 2020

Nominative fair use in the Seventh Circuit: a practical tool

Data Mgmt. Ass’n Int’l v. Enterprise Warehousing Solutions, Inc., 2020 WL 7698368, No. 20 C 04711 (N.D. Ill Dec. 28, 2020)

Without resolving burden of proof issues, the court uses nominative fair use to quickly resolve a case where fair competition requires some use of the mark, but not as much as the defendant made.

DAMA-I, which runs a standardized data management certification program whose exam is called the Data Management Fundamentals Exam, sued EWS, which offers prep courses for the exam, for trademark infringement. It sought an injunction against EWS’s use of any of its marks, including suspension of EWS’s website, The court granted a limited injunction against the use of the domain name and the use of “stylized trademarks and graphics that resemble those marks.” But EWS “may continue to use DAMA-I’s marks on a limited basis to describe its exam preparation course, consistent with nominative fair use.”

DAMA-I has incontestable registrations for “CERTIFIED DATA MANAGEMENT PROFESSIONAL”; “CDMP”; “DAMA”; “DAMA INTERNATIONAL”; and a stylized DAMA mark.

EWS’s allegedly infringing use includes referring to its prep course as the “DAMA CDMP® Data Management Fundamentals exam preparation course” and using DAMA-I’s marks, including its stylized mark, throughout the website.

Although the Seventh Circuit hasn’t formally adopted NFU, the district court thought it was the right approach here. As the court pointed out, the traditional multifactor test was ill-suited for this particular type of inquiry: “EWS must use DAMA-I’s marks to describe its product—a product that DAMA-I does not itself offer— making factors like the ‘similarity of the marks,’ the ‘strength of the plaintiff’s mark,’ the ‘relatedness of the products’ and the ‘defendant’s intent to “palm off” its product as the plaintiff’s’ meaningless.”

Is the product readily identifiable without the use of the mark? DAMA-I argued that EWS has “no need to use any of the Marks” because the official name of the test—the “Data Management Fundamentals Exam” —was not “trademarked.” But

DAMA-I does not contend that the official name of the exam is so widely known that use of the marks is redundant or gratuitous, just that such use is technically avoidable. That the name of the exam is not itself trademarked, however, suggests just the opposite—that the name of the exam itself is not widely recognized independent of a connection with DAMA-I’s registered marks. And if EWS were only allowed to use the exam’s official name, lack of consumer awareness about that name would significantly hinder EWS’s ability to reach its target audience. EWS’s prep course is exclusively tailored to DAMA-I’s test, which individuals take in the hopes of achieving DAMA-I’s CDMP certification, so using the marks at issue is the “most straightforward, obvious and truthful way” for EWS to describe its product.

However, “EWS’s admittedly ‘liberal’ use of the marks, and particularly its use of the domain name, go well beyond what could reasonably be considered necessary to identify the exam to which its prep course relates.” As the Ninth Circuit’s Tabari case indicates, unadorned use of a mark (here, two marks together) in a domain name is often going to suggest sponsorship or endorsement.  

And EWS’s use of the marks throughout its website “similarly goes well beyond what is needed to make its advertisements intelligible to its target audience and falsely creates the impression that DAMA-I officially sponsors its prep course.” The marks “DAMA” and “CDMP” were used over twenty times on the website’s landing page alone, and EWS also used a graphic that combines the globe-like background of DAMA-I’s stylized trademark with the term “Certified Data Management Professional” superimposed.

[W]hile EWS repeatedly warns customers that they are purchasing only a prep course, and not the actual exam, through disclaimers at the point of sale and throughout the website, it does not go to similar lengths to dispel the potential (and understandable) impression that DAMA-I sponsors the prep course offered at the URL. Weighed against the totality of the domain name and repeated references to DAMA-I, the logo at the top left and the confusingly worded disclaimer at the bottom left of the website are relatively easily overlooked and ineffective even if noticed.

The court applied a presumption of irreparable harm (now rebuttably presumed due to the recently signed COVID relief law, though not when the court was considering the issue). DAMA-I argued that, because it was not involved in the development of EWS’s prep course curriculum, it “cannot vouch for the quality or comprehensiveness of the course.” While “[i]t takes quite a leap to conclude that DAMA-I will inevitably be scapegoated for a hypothetical test taker’s disappointing performance,” the court was willing to make that leap because inability to control the nature and quality of defendant’s goods is inherently irreparable. [I have never seen why that is true if there is no evidence that the defendant’s goods are actually bad—a risk is not itself the materialization of that risk. But I guess that won’t matter much going forward.] The court was unimpressed by DAMA-I’s alleged delay in seeking relief, unwillingness to negotiate, or inability to approximate damages, which itself suggested irreparable harm. “To be sure, DAMA-I could approximate its monetary losses related to EWS’s unauthorized use of its marks using the licensing fees paid by the authorized users referenced at oral argument. But this type of calculation would only capture one facet of DAMA-I’s injury.” The value of lost control can’t be reduced to dollars.

Likewise, “the onus on avoiding trademark infringement falls on EWS, and DAMA-I has no obligation to negotiate with EWS about what constitutes an acceptable use of DAMA-I’s marks.” DAMA-I could well have avoided unnecessary litigation costs and months of alleged consumer confusion if it had been more receptive to EWS’s offers to modify its use of DAMA-I’s marks on its web site, but that isn’t the standard for irreparable harm, and EWS could have offered more to DAMA-I.

And the delay here didn’t lull EWS into a false sense of security. There were threat letters, and in light of the ongoing pandemic, “it is understandable that a lawsuit did not immediately follow; when DAMA-I did file its complaint, it also filed its motion for a preliminary injunction.”

But the scope of the resulting injunction was key, since a trademark injunction, “particularly one involving nominative fair use, can raise serious First Amendment concerns because it can interfere with truthful communication between buyers and sellers in the marketplace.” A blanket injunction like the one DAMA-I requested here “does not advance the Lanham Act’s purpose of protecting consumers and preventing unfair competition.”

The court instead ordered EWS to suspend operations “at” its current domain name [can it redirect? That seems like an important question]; prohibited its use of DAMA-I’s stylized marks or confusingly similar graphics; and ordered EWS to “reduce” its use of the other marks: it can’t use any of the text marks “more than five times on any web page or two times in any social media or print advertisement, such restrictions exclusive of the use of any of DAMA-I’s marks that may appear in quoted customer testimonials.” Though “the proper remedy for infringing use of a mark on a site generally falls short of entirely prohibiting use of the site’s domain name,” “EWS cannot legitimately claim nominative fair use of a URL that is comprised solely of two of DAMA-I’s incontestable marks, and it will not be disproportionately harmed by migrating its operations to a different URL.”

Of note: there's no real confusion analysis of the "five times/two times" rule; it seems to be what the court thinks is fair under the circumstances. 

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