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December 09, 2004

Supreme Court Overturns the 9th Circuit and INKS a Decision on the Fair Use of Dye Names

The U.S. Supreme Court has clarified a split in the circuit courts and limited to scope of protection a federally registered mark may have in a trademark infringement case. In Lasting Impressions, Inc. v. KP Permanent, the high court wrote, in its unanimous decision, that a defendant claiming fair use (based upon a descriptiveness defense) of a third party's registered trademark need not show a lack of consumer confusion in order to prevail. Indeed, even in cases where some confusion does exist, it will not be dispositive of trademark infringement by the junior user. Writing for the court, Justice Souter noted that "Some possibility of consumer confusion must be compatible with fair use," effectively shifting the burden of showing trademark infringement against a descriptiveness defense to the plaintiff.

The case involved two companies that make liquid pigments used in cosmetics. Lasting Impression, Inc. ("LI") had an incontestable registered trademark for the mark MICRO COLORS (stylized), under which it sells the permanent inks. The defendant, KP Permanent ("KP"), also makes cosmetic dyes. Beginning in 1999, KP started using the words "micro colors" on its products and printed matter. Shortly thereafter, KP received a cease and desist letter from LI, alleging trademark infringement and demanding that KP remove the words "micro colors" from its packaging and products. KP responded, filing a declaratory relief action alleging fair use of the words and asserting that the descriptive use of the words "micro colors" in the cosmetic industry predated LI's trademark registration.

A federal trial judge, no doubt following similar cases handed down in the Second Circuit, found in favor of KP and held that its use of the term "micro colors" was allowable as descriptive use. On appeal, the Ninth Circuit reversed the lower court, stating that a defendant was required to show that consumers were not confused by the use of the terms in a descriptive sense, effectively establishing a conflict between it and the Second Circuit. The Supreme Court appears to have sided with the Second Circuit in this matter, and found that no showing of lack of confusion is necessary to make a fair use defense.

Given the holding of the Supreme Court in this case, plaintiff's may have a more difficult time showing that a competitor's use of terms that are similar or identical to a registered trademark constitutes trademark infringement. One hopes, however, that common sense will prevail in the event there is actual and substantial confusion in the marketplace.

Posted by Tsan Abrahamson at 11:10 AM

Bad Faith Defendant Cannot Dodge Sixth Circuit Anti-Cybersquatting Ruling

The Sixth Circuit Court of Appeals affirmed a lower court decision that transferred ownership of the domain name foradodge.com to Daimler-Chrysler, finding that the original registrant of the domain had a bad faith intent to profit from the mark, which was confusingly similar to Dodge’s advertised phone number 1-800-4-A-DODGE.

The case, Daimler-Chrysler v. The Net, Inc. Case No. 03-1950, 04a0368 p.06 (6th Cir. Oct 28, 2004), was on appeal from the defendant who challenged the holding of the lower court that 1) plaintiffs had established trademark rights in FORADODGE, and 2) that defendant had acted in bad faith in registering the domain name in the first place.

As to the first point, the defendant argued that the plaintiff merely used the mark 4-a-dodge as a phone number, and not as a trademark, contrasting it with marks such as 1-800-flowers, which is the actual business name. The Sixth Circuit disagreed, finding that the test is not merely whether the mark is used as a trademark, but whether consumers would believe that the 4ADODGE website, which incorporated the DODGE trademark , was related to or sponsored by Daimler-Chrysler. The Court dismissed slight differences in the spelling of the domain as immaterial.

The Court also rejected the defendant’s second claim that he had not registered the domain in bad faith. The defendant claimed that he was planning to use the website to help consumers circumvent or //dodge// certain realities of life, such as paying taxes and parking tickets. The Court didn’t buy it, finding that the defendant qualified for all but one of the nine-factor test for a showing of bad faith.

Posted by Tsan Abrahamson at 11:06 AM

December 06, 2004

Kraft Foods Cheesy Advertising Claims Grate on Consumers

Recently, Kraft foods was asked to substantiate a claim that its grated parmesan and romano cheese products were 100% cheese and contained no fillers when in fact, the little yellow fluff in the green foil canister actually contains cellulose powder, an anti-caking agent, and sorbate or sodium benzoate, both of which are preservatives. The NAD determined, pursuant to a response submitted from Kraft, that its use of these agents is consistent with FDA regulations. Accordingly, Kraft may continue to use the 100% cheese proclamation.

Pursuant to 21 CFR 133.146 and 133.183, the addition of “safe and suitable” ingredients may be added to grated cheese products without compromising the claim that the product is 100% cheese. Moreover, the term fillers, Kraft explains, is designed to distinguish those cheese-like products that use non-dairy extenders.

Posted by Tsan Abrahamson at 11:06 AM

December 02, 2004

New York Settlement Gives Makers of Tylenol a Headache

This Fall, the New York Attorney General announced a settlement between it and McNeil-PPC, the makers of Tylenol, for advertising a sweepstakes promotion that appeared to require consumers to purchase a product in order to enter. Under the laws of all 50 states, consumers must be allowed to enter and win a sweepstakes without making a purchase.

The advertising for the promotion, which appeared on television and in print, implied that consumers must purchase Tylenol for a chance to win. Although the ad did note that there was no purchase necessary, it was written in tiny "mice-type" printing, while the words BUY TYLENOL were prominently displayed in the ad. The fact that 84% of the people who entered the sweepstakes had actually purchased a Tylenol product suggested that the alternative free entry provision was not significantly prominent to be effective. To insure that McNeil used a bigger font, it was required to amend their current and future advertising and to pay $52,000.00 in damages.

practice pointer: Advertisers should consider the type size and placement of the "no purchase necessary" provision, especially when promoting in New York.

Posted by Tsan Abrahamson at 11:04 AM

California Voters Limit Unfair Competition Claims

On November 2, 2004 California voters amended Section 17200 et seq of the California Business and Professions code. Prior to the amendment, plaintiffs' attorneys could sue for unfair competition on behalf of the general public. Proposition 64 modified the law such that an attorney may only sue on behalf of a client who has suffered a monetary or property loss as the result of advertising claims.

The amendment does not lower standards imposed upon advertisers to deliver consumer messages that are accurate and not misleading, but may make it easier for advertising to push the envelope for certain claims. That noted, the amendment does not apply to state actors, such as district attorneys, county counsels, or the state Attorney General. For any cases that are brought against an advertiser, the amended law provides that resultant penalties be used to enforce consumer protection laws.

Posted by Tsan Abrahamson at 11:03 AM