Trademark Infringement Victor H. Bouganim WCL, American University

Victor H. Bouganim, WCL, American University, Spring 2001 Infringement Likelihood of Consumer Confusion F When goods produced by an alleged infringer compete for sales with those of a TM owner, infringement usually will be found if the marks are sufficiently similar to cause consumer confusion. F When the goods are related, but not competitive, several other factors are added to the analysis. F When the goods are totally unrelated, there can be no infringement because confusion is unlikely.

Victor H. Bouganim, WCL, American University, Spring 2001 Likelihood of Confusion Analysis F similarity of the marks F proximity of the goods F evidence of actual confusion F strength of the mark F type of goods and degree of care used by consumer F intent in selecting mark F likelihood of expansion of product lines

Victor H. Bouganim, WCL, American University, Spring 2001 Counterfeiting F Counterfeit –an imitation intended to pass for an original and is therefore false F Counterfeit Mark –A mark which is identical or substantially identical to the registered trademark

Victor H. Bouganim, WCL, American University, Spring 2001 Combating Counterfeiting F Trademark Counterfeiting Act 1984 –Established counterfeiting as a crime –Damages and/or profits and attorney’s fees may be recovered in a civil action –Ex parte seizure orders may be issued by federal courts –Gray market goods, parallel goods are expressly excluded from coverage F The Anti-counterfeiting Consumer Protection Act 1996 –Trafficking in counterfeit goods is an offense under the Act –Importers must disclose the identity of any trademark on imported merchandise –Ex parte seizure of counterfeit goods are largely authorized –Damages and penalties were increased –Custom’s officials no longer have the authority to return goods to their source

Victor H. Bouganim, WCL, American University, Spring 2001 Trademark Act - Lanham Act 15 U.S.C. §1124 F Importation of goods bearing infringing marks or names is forbidden. F “… no article of imported merchandise which shall copy or simulate the name of any domestic manufacture … or which shall copy or simulate a trademark registered in accordance with the provisions of this Act … shall be admitted to entry at any customhouse of the United States…”

Victor H. Bouganim, WCL, American University, Spring 2001 Parallel Import - Gray Market F Parallel Import F Where products manufactured by the trademark owner or his licensees for sale in other countries are imported into the U.S. F Gray Market F Goods lawfully bearing trademarks which originate abroad and which compete without permission in domestic markets

Victor H. Bouganim, WCL, American University, Spring 2001 Tariff Act 1930, Sec. 526 F Prohibit the importation of any merchandise bearing valid US trademarks, unless written consent of such marks is produced at the time of making entry. F Prohibited merchandise shall be subject to seizure and forfeiture. F Civil actions may be brought by the trademark owners for injunctions and damages. F Exemption: Articles accompanying any person arriving in the US, when such articles are u for personal use and u not for sale and u are within set limits.

Victor H. Bouganim, WCL, American University, Spring 2001 Sec Customs Regulations 19 C.F.R. § (c) F The restrictions set forth … do not apply to imported articles when: –(1) Both the foreign and the US trademark or trade name are owned by the same person or business entity; –(2) The foreign and domestic trademark or trade name are parent and subsidiary companies or are otherwise subject to common ownership or control… –(3) The articles of foreign manufacture bear a recorded trademark or trade name applied under the authorization of the U.S. owner...

Victor H. Bouganim, WCL, American University, Spring 2001 K Mart Corp. v Cartier, Inc. S. Ct F Case involves the court’s analysis of the typical parallel import scenarios and whether gray market goods are legal. F Review the validity of the Customs regulations. F Court concludes that the exceptions set forth in clauses (1) & (2) are reasonable and valid, whereas clause (3) is invalid. F Result: importation of gray market goods is allowed subject to the Affiliation Test.

Victor H. Bouganim, WCL, American University, Spring 2001 Gray Market Scenarios F (1) A domestic firm purchases from an independent foreign firm the rights to register and use the foreign TM as a U.S. TM and to sell its foreign-manufactured products here. F (2) A domestic firm registers a U.S. TM for goods that are manufactured abroad by an affiliated manufacturer. F (3) The domestic holder of a U.S. TM authorizes an independent foreign manufacturer to use it F In all of the above, third-parties import genuinely trademarked product, which compete with the authorized products.

Victor H. Bouganim, WCL, American University, Spring 2001 K-Mart Decision Results Independent licenseeNot allowed to import gray market goods even if they are genuine. 3. Licensor to independent licensee Commonly controlledAllowed to import gray market goods. 2c. Commonly controlled ParentAllowed to import gray market goods. 2b. Parent of foreign subsidiary SubsidiaryAllowed to import gray market goods. 2a. Subsidiary of foreign parent Seller of US trademarkNot allowed to import gray market goods even if they are genuine. 1. Independent Buyer of U.S. trademark Foreign Manufacturer 526 Tariff ActUnited States

Victor H. Bouganim, WCL, American University, Spring 2001 Gray Market Controversies F Parallel importers ‘free-ride’ on the investment in building domestic reputation of the trademark. F Gray market products may erode that reputation. F Universal versus territorial nature of the trademark. F Exhaustion of rights versus control by the TM owners. F Using TM laws to preserve market segmentation and price discrimination.

Victor H. Bouganim, WCL, American University, Spring 2001 Lever Bros. Co. v United States DC Cir F This case involves the unauthorized import of British goods by a British subsidiary bearing a trademark identical to a valid U.S. trademark F U.S. company claims that the imports create consumer confusion F Court held that –Section 42 of the Lanham Act, 15 U.S.C. § 1124 bars the importation of physically different foreign goods bearing a trademark identical to a valid U.S. trademark –It is so regardless of the trademark’s genuine character abroad or affiliation between the producing firms

Victor H. Bouganim, WCL, American University, Spring 2001 The Materiality Test F Parallel importation is prohibited when the gray market goods are physically and materially different from their U.S. counterparts. F However, importation of the suspect goods will still be possible as long as the gray market products bear a label stating “This product is not a product authorized by the United States Trademark owner for importation and is physically and materially different from the authorized product.” F Following the Lever Case ruling as implemented in new Customs regulation (1999).

Victor H. Bouganim, WCL, American University, Spring 2001 Reverse Confusion F Sometimes a larger company will adopt the mark of a smaller TM owner. F The risk is that the public will come to associate the mark not with its true owner, but with the infringer (the larger company). F Reverse confusion does constitute trademark infringement. F An analysis similar to that for regular confusion is conducted to determine reverse confusion.

Victor H. Bouganim, WCL, American University, Spring 2001 False Advertising Lanham Act Sec. 43(a) F Any person who, on or in connection with any goods or services, … used in commerce any word, term, name, symbol,... or any false designation of origin, false or misleading description of fact, or false or misleading representation of fact, which… F … in commercial advertising or promotion, misrepresents the nature, …of his or her or another person’s goods, …. F shall be liable in a civil action by any person who believes that he or she is or is likely to be damaged by such act.

Victor H. Bouganim, WCL, American University, Spring 2001 Contributory Infringement F A party may be found liable for trademark infringement done by others. Examples - F Inducing infringement –intentionally suggesting either directly or impliedly that the other party infringe the TM and the other does infringe. F Knowingly aiding or not preventing infringement –A landlord who knew that a commercial tenant was engaging in selling counterfeit goods F Relevant in the context of Cyberspace

Victor H. Bouganim, WCL, American University, Spring 2001 TrafFix Devices v. Marketing Displays U.S. Supreme Court, 2001 F Marketing Displays holds expired utility patents for a dual- spring design used to keep temporary road signs upright in windy conditions. F After the patents expired, TrafFix sold similar stands. F The Court reversed the Sixth Circuit, and held that respondent’s dual-spring road sign design, the subject of an expired utility patent, was not eligible for trade dress protection under the Lanham Act due to its functional feature. F The Court thus resolved the issue of how much weight an expired utility patent should be given in determining the functionality of a claimed trade dress in a product’s design.

Victor H. Bouganim, WCL, American University, Spring 2001 Defenses F Genericness F Functionality F Abandonment F Parody F Fair Use

Victor H. Bouganim, WCL, American University, Spring 2001 Remedies F Damages F Injunction (complete or in certain geographical area) F Corrective Advertising F Recall of Infringing Goods F Destruction of Infringing Goods F Disclaimer F Labels on Infringing Goods to Cure Infringement