Century 21 v. LendingTree Inc

Opinions of the United
2005 Decisions States Court of Appeals
for the Third Circuit
10-11-2005
Century 21 v. LendingTree Inc
Precedential or Non-Precedential: Precedential
Docket No. 03-4700
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PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
No. 03-4700
CENTURY 21 REAL ESTATE CORPORATION;
COLDWELL BANKER REAL ESTATE CORPORATION;
ERA FRANCHISE SYSTEMS, INC.
v.
LENDINGTREE, INC.,
Appellant
Appeal from the United States District Court
for the District of New Jersey
(D.C. Civil No. 03-cv-02810)
District Judge: Honorable Joseph A. Greenaway, Jr.
Argued December 6, 2004
Before: RENDELL, FISHER, Circuit Judges,
and YOHN *, District Judge.
(Filed October 11, 2005)
Bruce I. Goldstein
Saiber, Schlesinger, Satz & Goldstein
One Gateway Center, Suite 1300
Newark, NJ 07102-5311
Jeffrey A. Conciatori [ARGUED]
Quinn, Emanuel, Urquhart, Oliver & Hedges
335 Madison Avenue, 17th Floor
New York, NY 10017
Counsel for Appellant
LendingTree, Inc.
______________________________
* Hon. William H. Yohn, Jr., Judge of the United States
District Court for the Eastern District of Pennsylvania,
sitting by designation.
2
Stephen W. Feingold [ARGUED]
Pitney Hardin
7 Times Square
New York, NY 10036
Counsel for Appellees
Century 21 Real Estate Corporation;
Coldwell Banker Real Estate Corporation;
Era Franchise Systems, Inc.
OPINION OF THE COURT
RENDELL, Circuit Judge.
This case presents an opportunity for us to consider the
contours of the traditional test for trademark infringement where
the defendant asserts the defense of “nominative fair use.”
More specifically, we must determine what role likelihood of
confusion plays in a trademark infringement case where the
defendant claims that its use was nominative and fair.
Appellees, Century 21, Coldwell Banker and ERA
(“CCE”) complain that Appellant Lending Tree (“LT”), in the
3
process of marketing its mortgage services, improperly
referenced CCE’s trademarked services. LT contends that its
use was nominative and fair, and permitted as a matter of law.
“Nominative” fair use is said to occur “when the alleged
infringer uses the [trademark holder’s] product, even if the
alleged infringer’s ultimate goal is to describe his own product.
Nominative fair use also occurs if the only practical way to refer
to something is to use the trademarked term.” KP Permanent
Make-Up, Inc. v. Lasting Impression I, Inc., 328 F.3d 1061,
1072 (9th Cir. 2003) (rev’d. on other grounds) (quotations
omitted). By contrast, “classic” fair use occurs where the
defendant uses the plaintiff’s mark to describe the defendant’s
own product. New Kids on the Block v. News America Pub.,
Inc., 971 F.2d 302, 308 (9th Cir. 1992).
The use of the term “Volkswagen” by a car mechanic in
an ad describing the types of cars he repairs has been held to
constitute a nominative fair use. See id. at 307 (citing
Volkswagenwerk Aktiengesellschaft v. Church, 411 F.2d 350(1969)). Clearly, the mechanic is referring to another’s product,
but does so in order to describe what he does. On the other
hand, the use of the term “micro-colors,” a registered trademark
of one make-up company, referring to the pigments of the
product of a different and competing make-up company that it
used in its own product, was classified as a classic fair use. See
KP Permanent Make-Up, Inc., 328 F.2d at 1072. There, the
4
reference to the mark of another was made in describing its own
product and its attributes.
Traditionally, we have looked to whether a trademark is
likely to cause confusion in order to determine whether a
violation of the Lanham Act has occurred and, thus, whether the
use should be enjoined and prohibited. However, it is unclear
what role “likelihood of confusion” plays in the analysis when
“fair use” is asserted as a defense. Recently, the United States
Supreme Court provided guidance to the courts regarding the
test for classic fair use in KP Permanent Make-Up, Inc. v.
Lasting Impression I, Inc., 125 S. Ct. 542 (2004). The issue
before us is the extent to which its reasoning applies to the
nominative fair use analysis as well.
I. Factual and Procedural Background
Appellees Century 21 and ERA have each been in
business for over 30 years. Coldwell Banker has been in
business for almost 100 years. Each of these real estate
companies oversees a system of franchisees who operate by
reference to the franchisor’s trademark (e.g., Century 21 Smith
Realty). Franchise agreements permit those brokerage
companies to provide realty services under trademarks held by
Cendant Corporation. Every franchisee is granted a license to
use its franchisor’s trademark only in connection with its “d/b/a”
name. (Thus, a franchisee could only refer to itself as
5
Century 21 Smith Realty and not just Century 21). There are
over 8,200 franchisees in CCE’s collective systems in the U.S.
Appellant LendingTree describes itself as a diversified
consumer-oriented Internet business that helps consumers
identify and select qualified lenders, real estate brokers, auto
insurers, and other financial service companies. It has a real
estate referral service that consumers can access by visiting its
website and inputting the location and characteristics of the
house they are seeking to buy or sell. LT then selects and
transmits information about up to four real estate companies
participating in LT’s referral network that service that
community. If consumers ultimately use an LT referred broker,
they receive rewards, such as airline frequent flier miles and gift
cards. LT also has an established mortgage referral program
based on contractual relationships with participating financial
institutions identified on its website.
At the time of this action, LT’s real estate referral
network consisted of more than 650 real estate broker member
companies in the U.S., which collectively operated more than
2,500 offices. More than 9,000 real estate agents in those
offices were registered participants in LT’s network. At least
257 of the approximately 650 real estate broker member
companies participating in the LT network operated a
Century 21, Coldwell Banker, or ERA franchise.
6
LT’s real estate referral network was formed in 1998 by
HomeSpace, a company from which LT acquired certain assets
in August 2000. As early as 1999, HomeSpace publicly
advertised its real estate referral network in printed materials as
“including brokers representing the nation’s leading franchises,
such as Coldwell Banker, Century 21 ... and ERA.”
The alleged infringement here is based on the following
uses of CCE’s marks:
(1) A Coldwell Banker “For Sale” sign with a
woman, purporting to be a real estate agent, next to it, on which
the blue and white Coldwell Banker logo was somewhat
obscured by the word “SOLD.” LT’s phone number was at the
bottom. This scene was depicted at the bottom of LT’s
homepage on its website.
(2) A statement by LT on its “Find a Realtor”
homepage stating that LT will “give you access to a national
network of brokers representing the country’s leading real estate
companies, including Coldwell Banker, ERA and Century 21.”
These three names headed a bullet-pointed list of all such
realtors to whom LT promised access. The marks on those
pages were in block letter format.
(3) LT’s statement on its website’s Help Center
that LT is “[r]epresented by large independent real estate
companies and members of major franchises - Coldwell Banker,
7
Century 21, Prudential, ERA, ReMAX, GMAC (formerly Better
Homes & Gardens), and Realty Executives.”
(4) LT’s use of printed marketing materials that
stated that “LT is affiliated with more than 700 certified brokers
such as Coldwell Banker, Century 21, Prudential, ERA and
RE/MAX.”
In January 2003, Kathryn Geib, in-house counsel for
CCE’s parent company responsible for the enforcement of its
trademarks, wrote to LT to demand that it stop using CCE’s
“marks” on its website in any manner in the operation of its
business. At that time, LT was using CCE’s logos on its
website. After receipt of the letter, LT stopped using the logos
(or any other of CCE’s marks) on that webpage, but continued
to use CCE’s marks in block letter form on other webpages. In
March 2003, Geib learned that LT was using a marketing
coupon containing the “affiliated language” described above.
Geib sent a letter asking LT to stop such use. In May 2003,
CCE discovered that LT was using CCE’s marks, but in block
letters, on its webpage. Geib again wrote, asking LT to stop
such use.
Not satisfied with the response from LT, CCE
commenced this action and applied for a preliminary injunction
against LT’s use of its marks, claiming unfair competition and
trademark infringement in violation of §§ 32 and 43(a) of the
Lanham Act, 15 U.S.C. §§ 1114(1) and 1125(a). At issue in the
8
case before the District Court was the use of CCE’s marks in
block form in bullet points on LT’s webpage, marketing
materials using the “affiliated with” language described above,
and the Coldwell Banker “For Sale” sign.
After oral argument before the District Court, LT
voluntarily implemented certain modifications to its website. It
changed the background color of the “For Sale” sign from blue
to red and removed the phone number at the bottom of the sign,
moved the position of the bullet points with plaintiffs’ names on
them from first to last in its “Find a Realtor” list, and added a
disclaimer to its real estate homepage that “LT is not sponsored
by or affiliated with the parent franchisor companies of any of
the participating members of its network.” LT also added a note
to a pop-up screen saying that “A particular franchisee in your
geographic area may not be available to you through the
LendingTree network if that franchisee is not a participating
member of the network. In addition, it is possible that the
network may not include any franchisee of a particular national
company in a given area.” (Text from www.LendingTree.com
at JA689.) LT notified the District Court of these changes and
represented that all of the language allegedly giving rise to
CCE’s motion had been permanently removed from LT’s
website and would not be used in the future.
The District Court issued its ruling with respect to the
language used by LT at the time the complaint was filed, as well
as the modified language. The District Court determined that
9
LT’s use of Appellees’ names was likely to cause consumer
confusion, that the nominative use defense did not shield LT in
this instance, and thus, granted CCE’s motion for a preliminary
injunction as to the use of CCE’s marks and the “affiliation”
language, but not the “For Sale” sign. The District Court’s
analysis did not separate out the original language from the later
modified language, as the District Court seemed to conclude that
the revisions did not alleviate the problem. LT now appeals this
issuance of the preliminary injunction.
On appeal, we must first decide whether the case was
moot when the District Court issued its ruling, given the fact
that LT had made several changes to the allegedly infringing
language and the picture on its website. If the case was not
moot, we must then determine the proper test to apply in the
situation where a defendant is asserting a nominative fair use
defense to claims of unfair competition and trademark
infringement under the Lanham Act.
II. Jurisdiction
The District Court had jurisdiction to hear this case
pursuant to 28 U.S.C. §§ 1331 and 1338. We have jurisdiction
over this interlocutory appeal of a preliminary injunction under
28 U.S.C. § 1292(a)(1).
10
III. Mootness
Although a case may become moot “if the defendant can
demonstrate that there is no reasonable expectation that the
wrong will be repeated, this burden is a heavy one ...” and has
not been met here. United States v. W. T. Grant Co., 345 U.S.
629, 633 (1953) (quotation omitted). The modified language
that LT employed still referenced CCE’s marks and, thus, is
potentially infringing and it cannot be said that LT’s voluntary
discontinued use of certain language completely obviates the
need for injunctive relief. See Lyons Partnership v. Morris
Costumes, Inc., 243 F.3d 789, 800 (4th Cir. 2001) (citation
omitted). For instance, the use of CCE’s marks in block letter
format could constitute trademark infringement in certain
circumstances. Whether these circumstances are present in this
case is still a question that needs to be resolved.
Furthermore, were we to hold that LT’s voluntary
cessation of the alleged infringing activities rendered the case
moot, this would potentially mean that LT would “simply be
free to return to [its] old ways after the threat of a lawsuit had
passed.” Iron Arrow Honor Soc. v. Heckler, 464 U.S. 67, 72
(1983) (quotation omitted). Therefore, the case is not moot and
we will proceed to analyze the substantive claims of trademark
infringement and unfair competition.
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IV. Fair Use
It must be recognized at the outset that “fair use” presents
a fact pattern different from that of a normal infringement suit.
The typical situation in a trademark case involves the
defendant’s having passed off another’s mark as its own or
having used a similar name, confusing the public as to precisely
whose goods are being sold. Likelihood of confusion is the sole
issue. But the fair use defense, by reason of the circumstances
giving rise to its applicability, alters the premise somewhat. The
defendant is not purporting to be selling goods or services that
the plaintiff has trademarked, but, rather, is using plaintiff’s
mark in order to refer to defendant’s own goods or to the goods
of the trademark owner in a way that might confuse the public
as to the relationship between the two. See Cairns v. Franklin
Mint Co., 292 F.3d 1139, 1151 (9th Cir. 2002). Accordingly,
the legal framework still involves a showing that A’s reference
to B’s mark will likely confuse the public, but the analysis does
not end there, for the use may nonetheless be permissible if it is
“fair.”
In KP Permanent Make-Up, Inc. v. Lasting Impression
I, Inc., 125 S. Ct. 542, 545-46 (2004), the Supreme Court
rejected the notion that, in the context of classic fair use, the
party asserting the fair use defense to a claim of trademark
infringement had any burden to negate the likelihood that the
practice complained of will confuse consumers about the origin
of the services or goods affected. Instead, plaintiff has the
12
exclusive burden to demonstrate likelihood of confusion, and
then defendant’s burden is only to show the affirmative defense
of fair use. The Supreme Court stated, “[s]ince the burden of
proving likelihood of confusion rests with the plaintiff, and the
fair use defendant has no free-standing need to show confusion
unlikely ... it follows that some possibility of consumer
confusion must be compatible with fair use ....” Id. at 550.
Thus, consumer confusion and fair use are not mutually
exclusive. The latter will in essence rebut or excuse the former
so that the use is permissible.
Before the Supreme Court spoke on the issue of classic
fair use, the Court of Appeals for the Ninth Circuit had charted
a path through a different fair use analysis – nominative fair use.
In New Kids on the Block, 971 F.2d at 308, the Court of
Appeals for the Ninth Circuit adopted its own test governing the
nominative fair use analysis where the marks are used, as they
are here and in the case of the mechanic’s ad described above
that referenced Volkswagen, to refer to the plaintiff trademark
owner’s product in order to help better describe the defendant’s
product or service. Thereafter, it refined the test and clarified its
application. See, e.g., Playboy Enterprises, Inc. v. Welles, 279
F.3d 796 (9th Cir. 2002) (holding that the use of the terms
“Playboy,” “Playmate,” and “Playmate of the Year 1981" on the
website masthead and banner ads and in the metatags of the
website of a former Playmate of the Year were nominative fair
uses because they served to identify the defendant and did not
imply current sponsorship or endorsement); Cairns v. Franklin
13
Mint Co., 292 F.3d 1139 (9th Cir. 2002) (holding that the sale
of collectibles bearing the name and likeness of Princess Diana
was a nominative fair use).
Few other courts have spoken on the precise issue of how
nominative fair use is successfully invoked. Indeed, it seems
that only the Second, Fifth, and Sixth Circuits have referenced
the nominative fair use defense by name and even on these
occasions have done so only to refer to what district courts had
done with the issue or to decline to adopt the Ninth Circuit’s test
as a whole. See Chambers v. Time Warner, Inc., 282 F.3d 147,
156 (2d Cir. 2002) (noting that the district court had applied the
standard for nominative fair use as articulated by the Ninth
Circuit, but finding that the court had erred in its application);
see also Pebble Beach Co. v. Tour 18 I Ltd., 155 F.3d 526, 546
n. 13 (5th Cir. 1998) (adopting the Ninth Circuit’s nominative
fair use test in part); Interactive Products Corp. v. Azz Mobile
Office Solutions, Inc., 326 F.3d 687, 698 n.6 (6th Cir. 2003)
(footnoting why a district court case involving the nominative
fair use defense was distinguishable from the case before it);
PACAAR Inc. v. TeleScan Technologies, L.L.C., 319 F.3d 245,
256 (6th Cir. 2003) (declining to follow the Ninth Circuit’s
analysis (formulated prior to the Supreme Court’s holding in KP
Permanent Make-Up) and applying the likelihood of confusion
test instead).
Furthermore, this issue is one of first impression in our
Court. See Basic Fun, Inc. v. X-Concepts, 157 F. Supp. 2d 449,
14
456 (E.D. Pa. 2001) (stating that “the Third Circuit does not
recognize the ‘nominative’ fair use defense, which is utilized as
a defense solely in the Ninth Circuit”). The United States
District Court for the District of New Jersey did venture into the
area of nominative fair use defense in Liquid Glass Enterprises,
Inc. v. Dr. ING h.c.f. Porsche AG and Porsche Cars North
America, Inc., 8 F. Supp. 2d 398 (D.N.J. 1998). That case
involved the use of Porsche’s trademarks by Liquid Glass, a
corporation that sold car care products. Liquid Glass used
Porsche’s trademarks in its advertisements for car polish – in
particular, an ad involving a provocatively dressed woman
polishing a Porsche 911 with the trademark “PORSCHE”
plainly visible. The court initially analyzed the case under the
nominative fair use defense articulated by the Ninth Circuit
Court of Appeals in New Kids On The Block, however, it
conflated the test with the plaintiff’s burden of proving
likelihood of confusion. See Liquid Glass, 8 F. Supp. 2d at 403(finding that Liquid Glass’ fair use defense was defeated, in
part, because Porsche would “likely prevail in demonstrating
that the use of Porsche’s trademarks ... in Liquid Glass’s
advertisements would likely confuse consumers as to Porsche’s
connection with Liquid Glass”). The Court reviewed each of
the traditional factors used to determine the likelihood of
confusion, though this analysis is not even a part of the New
Kids On The Block test. This court’s difficulty in applying the
traditional test for likelihood of confusion together with the
nominative fair use defense highlights the need to clarify the
proper analysis in this area of the law. Given the paucity of the
15
case law on this subject from every court other than the Court of
Appeals for the Ninth Circuit, and that Court’s extensive study
of this issue, we will consider the opinions of that Court.
In New Kids On The Block, the Court of Appeals for the
Ninth Circuit considered whether two separate newspapers that
had conducted polls asking readers to vote for their favorite
New Kid On the Block, and charging money for each telephone
vote cast, had employed the “New Kids” trademark in such a
way as to violate the Lanham Act. The trademarked name was
very valuable to the New Kids, as it had been used to sell over
500 different products, the profits of which partially inured to
the benefit of the New Kids. New Kids alleged that the use of
the name in conducting the polls implied that the New Kids
were sponsoring the polls.
The Court began with a discussion of the history of
trademark law, noting that:
[a] trademark is a limited property
right in a particular word, phrase or
symbol. And although the English
language is a language rich in
imagery, we need not belabor the
point that some words, phrases or
symbols better convey their
intended meanings than others...
Thus, trademark law recognizes a
16
defense where the mark is used
only to describe the goods or
services of [a] party, or their
geographic origin. 15 U.S.C.
§ 1115(b)(4). The ‘fair-use’
defense, in essence, forbids a
trademark registrant to appropriate
a descriptive term for his exclusive
use and so prevent others from
accurately describing a
characteristic of their goods.
New Kids On The Block, 971 F.2d at 306 (quoting Soweco, Inc.
v. Shell Oil Co., 617 F.2d 1178, 1185 (5th Cir. 1980)).
The court reasoned that nominative fair use cases – “the
class of cases where the use of the trademark does not attempt
to capitalize on consumer confusion or to appropriate the cachet
of one product for a different one” – are not the typical fair use
cases. It described the Volkswagen use as an example of this
atypical type of fair use:
A good example of this is
V o l k s w a g e n w e r k
Akriengesellschaft v. Church, 411
F.2d 350 (9th Cir. 1969), where we
held that Volkswagen could not
prevent an automobile repair shop
17
from using its mark. We
recognized that in “advertising [the
repair of Volkswagens, it] would be
difficult, if not impossible, for
[Church] to avoid altogether the use
of the word ‘Volkswagen’ or its
abbreviation ‘VW,’ which are the
normal terms which, to the public
at large, signify appellant’s cars.”
Id. at 352. Church did not suggest
to customers that he was part of the
Volkswagen organization or that
his repair shop was sponsored or
authorized by VW; he merely used
the words “Volkswagen” and
“VW” to convey information about
the types of cars he repaired.
Therefore, his use of the
Volkswagen trademark was not an
infringing use.
New Kids On The Block, 971 F.2d at 307.
The Court then reasoned that such a situation should be
viewed as “involving a non-trademark use of a mark . . .”:
Such nominative use of a mark –
where the only word reasonably
18
available to describe a particular
thing is pressed into service – lies
outside the strictures of trademark
law: Because it does not implicate
the source-identification function
that is the purpose of trademark, it
d o e s n ot con stitute un f a ir
competition; such use is fair
because it does not imply
sponsorship or endorsement by the
trademark holder.
Id. at 308.
The Court distinguished “nominative” fair use from
“classic” fair use, noting that if defendant’s use of the trademark
referred to something other than the plaintiff’s product,
traditional fair use inquiry would continue to govern.
The court then articulated its own test for nominative fair
use:
[W]here the defendant uses a
trademark to describe the plaintiff’s
product, rather than its own, we
hold that a commercial user is
entitled to a nominative fair use
defense provided he meets the
19
following three requirements:
First, the product or service in
question must be one not readily
identifiable without use of the
trademark; second, only so much of
the mark or marks may be used as
is reasonably necessary to identify
the product or service; and third,
the user must do nothing that
would, in conjunction with the
mark, suggest sponsorship or
endorsement by the trademark
holder.
Id.In announcing this new test, New Kids On The Block
rejected traditional trademark infringement analysis. It held that
this test replaces the “likelihood of confusion” test for trademark
cases where nominative fair use is asserted. See Cairns v.
Franklin Mint Co., 292 F.3d 1139, 1151 (9th Cir. 2002). In a
more recent case, the Ninth Circuit Court of Appeals has
elaborated on its reasoning for this shift. Application of the
likelihood of confusion test, which focuses on the similarity of
the mark used by the plaintiff and defendant, “would lead to the
incorrect conclusion that virtually all nominative uses are
confusing” because “[w]hen a defendant uses a trademark
nominally, the trademark will be identical to the plaintiff’s
20
mark, at least in terms of the words in question.” Playboy
Enters., 279 F.3d at 801. Thus, the likelihood of confusion test
as applied in nominative fair use cases would disadvantage the
defendant by making confusion an all but foregone conclusion.
While we agree with the Ninth Circuit Court of Appeals
that a distinct analysis is needed for nominative fair use cases,
we do not accept the legal basis or advisability of supplanting
the likelihood of confusion test entirely. First, we do not see
nominative fair use as so different from classic fair use as to
warrant such different treatment. The Ninth Circuit Court of
Appeals believed that the two types of fair use could be
distinguished on the basis that nominative fair use makes it clear
to consumers that the plaintiff, not the defendant, is the source
of the trademarked product or service, while classic fair use
does not. Thus, the Ninth Circuit Court of Appeals believed that
a different analysis was appropriate for nominative fair use and
that it could abandon the need for proof of confusion in these
circumstances. New Kids On The Block, 971 F.2d at 307-08.1
1
Interestingly, the thinking of the Ninth Circuit Court of
Appeals appears to have evolved in this regard. The court
reasoned in New Kids On The Block that nominative use does
not risk consumer confusion and is “outside the strictures of
trademark law.” 971 F.2d at 308. Ten years later, however, it
justified replacing the likelihood of confusion test by arguing
that the test would be inaccurate in the nominative use context.
Playboy Enters., 279 F.3d at 801. As explained below, we
21
Yet, it is clear to us that even a defendant’s nominative use has
the potential of confusing consumers with respect to its products
or services. Since the defendant ultimately uses the plaintiff’s
mark in a nominative case in order to describe its own product
or services, Cairns, 292 F.3d at 1151 & n.8, even an accurate
nominative use could potentially confuse consumers about the
plaintiff’s endorsement or sponsorship of the defendant’s
products or services. Thus, we disagree with the fundamental
distinction the Ninth Circuit Court of Appeals drew between
classic and nominative fair use.
In addition, the approach of the Court of Appeals for the
Ninth Circuit would relieve the plaintiff of the burden of
proving the key element of a trademark infringement case –
likelihood of confusion – as a precondition to a defendant’s even
having to assert and demonstrate its entitlement to a nominative
fair use defense. The Supreme Court in KP Permanent Make-
Up clearly established that it was plaintiff’s burden in a classic
fair use case to prove likelihood of confusion. There, the Court
noted the difference between fair use and other trademark
infringement claims, opining, as we stated above, that likelihood
of confusion and fair use can coexist. This does not mean that
we should remove the need for finding confusion in the first
believe that neither rationale requires us to abandon the
likelihood of confusion test in the nominative use context, and
particularly not since the Supreme Court’s decision in KP
Permanent Make-Up.
22
instance. Instead, once the plaintiff proves likelihood of
confusion, defendant only had to show that defendant’s use,
even if confusing, was “fair.” 2
This view finds support not only in the Supreme Court’s
recent opinion, but also in the relevant statutory framework.
The very language of the Lanham Act leads us to conclude that
likelihood of confusion is an essential indicator of whether or
not trademark infringement has occurred. Both §§ 32 and 43(a)
of the Lanham Act, allegedly violated in this case, forbid use of
words or marks in a way which is likely to cause confusion as to
the origin, sponsorship, or approval of goods or services. Surely
the plaintiff’s success in its claim must rely on a finding in this
regard. Given this, we decline to read this requirement out of a
case alleging trademark infringement.
2
As described above, the Ninth Circuit Court of Appeals
stated its view in New Kids On The Block that the use of
another’s mark to describe plaintiff’s own product is one step
removed from the true scope of the trademark laws and the very
concept of trademark infringement. But this thinking provides
all the more reason that a plaintiff in that situation should be
required to prove that confusion exists before putting the
defendant to its proof. If such cases are truly outside of the
scope of the trademark laws then a plaintiff would simply fail to
show confusion and the court’s inquiry would end.
23
We are thus left with the firm conviction that the burden
of proving likelihood of confusion should remain with the
plaintiff in a trademark infringement case – including one where
the defendant claims nominative fair use. As detailed below, we
will devise a modified likelihood of confusion test to be
employed in nominative fair use cases that takes into account the
concerns expressed by the Court of Appeals for the
Ninth Circuit. Then, we will determine the extent to which we
would adopt the test for nominative fair use that the Ninth
Circuit Court of Appeals established in light of our
disagreement with that court’s view that nominative fair use is
fundamentally different from classic fair use.
V. The Proper Analytical Approach
for Nominative Fair Use Cases
A. Overview
Today we adopt a two-step approach in nominative fair
use cases. The plaintiff must first prove that confusion is likely
due to the defendant’s use of plaintiff’s mark. As we discuss
more fully below, because our traditional likelihood of
confusion test does not apply neatly to nominative fair use cases,
we suggest eliminating those factors used to establish confusion
in other trademark infringement cases that do not “fit” in the
nominative use context. Once plaintiff has met its burden of
proving that confusion is likely, the burden then shifts to
defendant to show that its nominative use of plaintiff’s mark is
24
nonetheless fair. To demonstrate fairness, the defendant must
satisfy a three-pronged nominative fair use test, derived to a
great extent from the one articulated by the Court of Appeals for
the Ninth Circuit. Under our fairness test, a defendant must
show: (1) that the use of plaintiff’s mark is necessary to
describe both the plaintiff’s product or service and the
defendant’s product or service; (2) that the defendant uses only
so much of the plaintiff’s mark as is necessary to describe
plaintiff’s product; and (3) that the defendant’s conduct or
language reflect the true and accurate relationship between
plaintiff and defendant’s products or services.
As an initial matter, we recognize that our concurring
colleague rejects the bifurcated approach that we now adopt. He
argues instead that the factors we consider under the fairness test
should be incorporated into the likelihood of confusion analysis.
In his view, our bifurcated approach places a heavy burden on
the defendant to negate confusion and is judicially
unmanageable. However, our approach does nothing of the
kind.
We conclude that the broad based likelihood of confusion
test our concurring colleague proposes is misplaced for several
reasons. First, it is largely out of sync with the existing
jurisprudence on fair use. The concurrence’s test allows no real
possibility of the co-existence of fair use with some likelihood
of confusion, yet this is precisely what the Supreme Court’s
holding in KP Permanent Make-Up specifically contemplates.
25
See KP Permanent Make-Up, 125 S. Ct. at 550 (“[S]ome
possibility of consumer confusion must be compatible with fair
use . . . .”). In addition, our concurring colleague rejects the
notion that nominative fair use could be used as an affirmative
defense, viewing it instead as a confusion substitute. Yet, the
Supreme Court clearly views fair use (albeit classic fair use) as
an affirmative defense. Id. at 548-49 (referring to the
affirmative defense of fair use). The concurrence fails to
explain why KP Permanent Make-Up should neither control nor
inform our analysis here, choosing instead to ignore the Court’s
dictates in that case as they apply to nominative fair use.3 After
3
The concurrence relies heavily on a mix of case law that
was, in our view, largely undermined by the Supreme Court’s
holding in KP Permanent Make-Up. Before the Supreme
Court’s opinion in that case, a finding of likelihood of confusion
sounded the death knell for a classic fair use defense in some
circuits. See KP Permanent Make-Up, Inc. v. Lasting
Impression I, Inc., 328 F.3d 1061, 1072 (9th Cir. 2003)
(“[T]here can be no fair use if there is a likelihood of confusion
. . . .”); PACAAR, 319 F.3d at 256 (“A finding of likelihood of
confusion forecloses a [classic] fair use defense.”). Likewise,
the Courts of Appeals for the Fifth and Ninth Circuits stated,
prior to KP Permanent Make-Up, that nominative fair use is not
an infringement so long as there is no likelihood of confusion.
Cairns, 292 F.3d at 1151; Pebble Beach, 155 F.3d at 546. These
courts have not considered the viability of their approach since
KP Permanent Make-Up was decided. See Ty, Inc. v. Publ’ns
Int’l, Ltd., infra, at *7. We rely on the Ninth Circuit precedent
26
that decision, it seems to us that neither classic or nominative
fair use should rise and fall based on a finding of likelihood of
confusion. Classic fair use and nominative fair use are different
in certain respects, but it is unclear to us why we should ask
radically different questions when analyzing a defendant’s
ability to refer to a plaintiff’s mark in the two contexts. As we
have already stated, in both nominative and classic fair use cases
the defendant uses the plaintiff’s mark descriptively in a way
that potentially confuses consumers about the relationship
between the plaintiff and the defendant’s product or services. In
the classic fair use context, the defendant uses the mark to
describe its own product, and in the nominative context, the
defendant references plaintiff’s product in order to describe its
own. The key first inquiry in both situations should be whether
there is a likelihood of confusion.4 The only other court to
insofar as it identifies the need for a separate test for nominative
fair use, but we reject its view that this test should be a
substitute for likelihood of confusion. A nominative use
defendant need only prove fairness and is not required to negate
confusion.
4
Judge Fisher points to Prestonettes, Inc. v. Coty, 264
U.S. 359 (1924), and G.D. Searle & Co. v. Hudson
Pharmaceutical Corp., 715 F.2d 837 (3d Cir. 1983), as authority
for limiting our inquiry to likelihood of confusion. However,
even a cursory review of those opinions–dating back 80 and 20
years, respectively–reveals little in the way of guidance for an
analysis of nominative fair use. Indeed, no reference to “fair
27
consider the application of nominative fair use doctrine since
KP Permanent Make-Up has embraced this logic. Ty, Inc. v.
Publ’ns Int’l, Ltd., No. 99 C 5565, 2005 WL 464688, at * 6-8
(N.D. Ill. Feb. 25, 2005).
Second, while the concurrence worries that a nominative
use defendant will be overly burdened under our bifurcated
approach, we believe that his approach is actually more
burdensome to such a defendant. If the factors for determining
fairness were incorporated into the likelihood of confusion test,
use,” let alone “nominative fair use,” can be found in either
opinion. Both cases seem, instead, to stand for the proposition
that clear and truthful references to the products of others are
permitted. Thus, the underlying theme of those opinions seems
to support, rather than undercut, an analysis that specifically
examines whether the use is clear and truthful, as does the
affirmative defense we posit, and that the Supreme Court has
embraced.
Moreover, our analysis does not disturb the holding of
either Prestonettes or Searle. After our decision today, courts
will continue to inquire into confusion, as they did in both of
those cases. Since KP Permanent Make-Up has altered the
landscape, however, we believe it is clear that likelihood of
confusion need not, and should not, be solely determinative of
nominative fair use. Fairness is a distinct concept from
confusion, and it should be measured through a distinct inquiry.
28
a plaintiff’s showing of confusion might well overwhelm a
defendant’s showing of fair use. This would essentially force a
defendant asserting nominative fair use to negate all likelihood
of confusion to succeed, a proposition that the Supreme Court
rejected in KP Permanent Make-Up. Under our approach, the
defendant has no duty to negate confusion as such, but rather
must merely show that its use of the plaintiff’s mark is fair, a
burden which, by contrast, is not cumbersome. Thus, it is our
view that the bifurcated approach is ultimately less burdensome
to a nominative use defendant than the analysis the concurrence
proposes.
Finally, we believe that the bifurcated approach that we
adopt today is more workable than a unified confusion/fairness
test. We leave the now familiar test for likelihood of confusion
largely intact and in the form in which district courts are
accustomed to applying it. Our test for nominative fair use
considers distinct factors that are readily susceptible to judicial
inquiry. By contrast, the concurrence would incorporate several
new considerations into the already lengthy ten-part test for
confusion and ask district courts to balance a plaintiff’s showing
of confusion against a defendant’s showing of fair use. Because
confusion and fairness are separate and distinct concepts that
can co-exist, blending them together into one test is, to our
mind, a much less manageable approach.
29
B. The Proper Test For Likelihood of Confusion
As we have noted, and as the Ninth Circuit in New Kids
on the Block also stated, the “likelihood of confusion” test does
not lend itself nicely to a nominative fair use fact pattern. The
traditional likelihood of confusion test has been set forth in our
case law, specifically in Scott Paper Co. v. Scott’s Liquid Gold,
Inc., 589 F.2d 1225 (3d Cir. 1978) and Interspace Corp. v. Lapp,
Inc., 721 F.2d 460, 463 (3d Cir. 1983). It is a multi-factor test
that assesses the following:
(1) degree of similarity between the owner’s
mark and the alleged infringing mark;
(2) strength of the owner’s mark;
(3) price of the goods and other factors
indicative of the care and attention
expected of consumers when making a
purchase;
(4) length of time the defendant has used the
mark without evidence of actual
confusion;
30
(5) intent of the defendant in adopting the
mark;
(6) evidence of actual confusion;
(7) whether the goods, though not competing,
are marketed through the same channels of
trade and advertised through the same
media;
(8) the extent to which the targets of the
parties’ sales efforts are the same;
(9) the relationship of the goods in the minds
of consumers because of the similarity of
function; and
(10) other facts suggesting that the consuming
public might expect the prior owner to
manufacture a product in the defendant's
market or that he is likely to expand into
that market.
589 F.2d at 1229.
We have come to call these factors the “Lapp” factors.
Although they are often helpful in determining whether a certain
use of a mark is likely to confuse consumers, we have
31
recognized that “the Lanham Act does not require that they be
followed precisely so long as the relevant comparisons
suggested by the test are made.” A&H Sportswear II, 237 F.3d
198, 207 (3d Cir. 2000). In the context of a nominative use of
a mark, such as the one we are presented with here, certain Lapp
factors are either unworkable or not suited or helpful as
indicators of confusion in this context. That is because, by
definition, nominative use involves the use of another’s
trademark in order to describe the trademark owner’s own
product. Further, certain of the Lapp factors applied
mechanically would inevitably point towards likelihood of
confusion where no likelihood of confusion may actually exist.
Thus, we must tailor the test and measure only those factors that
are meaningful and probative in the context of nominative fair
use.
Specifically, the first two Lapp factors would indicate a
likelihood of confusion in a case such as this one simply
because the mark is being employed in a nominative manner.
By way of example, looking at the similarity of the mark would
automatically lead to the conclusion that the use is likely to
confuse simply because the mark is not merely similar, it is
identical. The first Lapp factor does not leave any room for the
consideration of the context of the use – i.e., that the mark is
being used to describe the plaintiff’s own product. Therefore,
it is not appropriate for analysis in a nominative use case.
32
Looking at the strength of CCE’s marks in this case, and
in most nominative use cases, would also weigh in favor of a
finding that the use is likely to confuse. However, defendants
in nominative use cases, like LT in this case, feel they need to
use the actual mark to describe the plaintiff’s product because
of its very strength and what it has come to represent. In reality,
in many such cases, the use of the name may be the only way for
defendant to easily and precisely refer to plaintiff’s product in
a way that will be understood by consumers. Accordingly, the
marks’ strength is not really probative of confusion here,
whereas it would be if defendant were passing off its goods
under a similar mark.
We find that all of the other Lapp factors, while perhaps
not appropriate for analysis in this particular case, could be
analyzed in future nominative use cases, depending on the
factual situation. For example, in this case, looking at whether
the goods are marketed through the same channels or advertised
in the same media would be a misleading indicator in
determining the true likelihood of confusion. It would be of
little relevance in this case whether LT marketed its services
through the same channels as CCE because LT is not attempting
to use CCE’s marks to refer to LT’s own services, but rather is
using the marks to refer to CCE’s services. Therefore, it would
almost be expected that LT and most other defendants in a
nominative use case would market themselves through a media
in which the marks to which they are referring would be easily
recognized and have meaning or relevance, namely channels
similar to those used by plaintiff. However, there may be certain
situations, such as that encountered in New Kids (where
newspapers used the New Kids’ mark to inquire of readers, for
a price, their feelings about the group), where the channels of
33
marketing are so dissimilar that evidence as to this factor could
mitigate against a finding of likelihood of confusion. Similarly,
in looking at whether the targets of the parties’ marketing efforts
are the same, one could expect a fair use defendant to be
reaching out to a group of consumers who are likely to
recognize the mark. The fact that LT markets its services to real
estate consumers makes sense. These are the very people who
are likely to recognize and appreciate CCE’s marks and be able
to evaluate the benefit that CCE’s purported association with LT
could bring to them in the search for a home. This is not likely
to confuse in the same way as would be the case if the defendant
is passing off plaintiff’s goods as its own or using a similar mark
to that of the plaintiff, but this factor should not be completely
eliminated from a district court’s arsenal in evaluating
likelihood of confusion in a nominative use case.
In the context of the facts of the case before us, we will
turn our focus to those Lapp factors that appear most relevant in
assessing likely confusion. These include:
(1) the price of the goods and other factors indicative
of the care and attention expected of consumers
when making a purchase;
(2) the length of time the defendant has used the mark
without evidence of actual confusion;
(3) the intent of the defendant in adopting the mark;
and
(4) the evidence of actual confusion.
34
In focusing on these factors, the court will be better able to
assess whether consumers are likely to be confused by the use
not because of its nominative nature, but rather because of the
manner in which the mark is being nominatively employed. Of
course the determination of which factors are relevant and
probative in a given factual setting should be made in the first
instance by the District Court, but here we provide our view on
this issue as guidance, lest this matter again should come before
a panel of this Court on the issue of whether the District Court
examined the appropriate factors.
Viewed in the context of the present case, it is apparent
why these factors are appropriate: they analyze the likelihood
that a consumer will be confused as to the relationship or
affiliation between LT and CCE, the heart of the nominative fair
use situation. Focusing on the care and attention expected of
consumers when making a purchase or using a service allows
the court to understand the true risk that consumers may be
confused merely because of their own inattention. Moreover,
focusing on evidence of actual confusion (factors 2 and 4) will
allow the District Court to truly understand whether this is
merely a theoretical or hypothetical fear of the plaintiff or
whether there is real danger that consumers are likely to be
confused.
Lastly, analyzing the intent of the defendant in using the
mark will allow the court to understand the defendant’s reason
for utilizing the mark in the manner that it did. That is, if the
court finds that the defendant made use of the plaintiff’s mark
with the very purpose of causing consumers to think the plaintiff
endorses or sponsors plaintiff’s good or service, then the
likelihood that consumers will be confused as to
35
endorsement/affiliation is greater. Whereas the traditional
“intent” prong looks at intent to adopt a similar mark, here the
key inquiry is whether the mark is being used so as to convey a
connection between the parties that may not exist.
We hold today that the burden of proving likelihood of
confusion, even in a nominative use case, should remain with
the plaintiff and that these four factors are the essence of the
inquiry, although others may prove useful in certain contexts.
Here, the District Court did place this burden on CCE, but the
District Court also analyzed certain Lapp factors that we have
concluded are inappropriate in the context of this nominative
fair use case. Further, its application of certain of the four
relevant factors was somewhat imprecise.
We will remand for the District Court to inquire as to
whether confusion was likely in light of our clarification of
which factors are applicable in this case and the following
discussion of the way in which the four relevant factors should
be applied.5
Factor 1: The Price of the Goods and Other
Factors Indicative of the Care and Attention
Expected of Consumers When Making a
Purchase
The District Court noted that “we are talking about real
estate purchases which in reference to most consumers is the
5
We review a district court’s conclusion as to likelihood
of confusion for clear error. A&H Sportswear II, 237 F.3d 198,
237 (3d Cir. 2000).
36
most important purchase both at the time and, in most people’s
instances, in their entire lives.” (Trans. of Oral Opinion at
JA735.) The District Court was correct to acknowledge and
consider the importance of a real estate purchase to the average
consumer. One would expect that consumers going to LT
website’s “Find a Realtor” section would be very careful in
learning about the various realtors in LT’s network. The degree
of care weighs against a finding of likely confusion.
Factor 2: The Length of Time the Defendant
has used the Mark without Evidence of Actual
Confusion
The District Court conflated this factor with the
defendant’s laches defense and, therefore, failed to weigh in
LT’s favor the fact that, according to the record, CCE’s marks
had been used for at least five years with little evidence of actual
consumer confusion.
Factor 3: The Intent of the Defendant in
Adopting the Mark
The District Court appears to have inferred improper
intent on the part of LT from its very use of CCE’s marks. This
finding was erroneous without further evidentiary support. The
relevant question in this context is not whether the defendant
intended to use the plaintiff’s mark, which it always has in a fair
use case, but whether it used the mark with the intent to confuse
the public as to the relationship between the defendant and the
plaintiff. Use of the mark alone is not sufficiently probative of
37
such intent.6 The plaintiff must show that the defendant
intended the public to believe that the plaintiff endorsed or
somehow supported its products or services.
There are myriad factors to which a plaintiff may point
to demonstrate that a defendant intended to confuse the public
as to its relationship with the plaintiff. For example, courts in
traditional trademark infringement cases have considered a
defendant’s persistence in adopting a mark despite being warned
of potential confusion, Kos Pharms., Inc. v. Andrx Corp., 369
F.3d 700, 721 (3d Cir. 2004), and evidence of a defendant’s bad
faith, A&H Sportswear II, 237 F.3d at 226. On remand, the
District Court should inquire as to whether any analogous facts
or evidence of record are present here. If so, the Court may
weigh this in favor of a finding of likely confusion.7
6
This principle emerges from our analogous holdings in
traditional trademark infringement cases, in which we have
noted that “a defendant’s mere intent to copy, without more, is
not sufficiently probative of the defendant’s success in causing
confusion to weigh such a finding in the plaintiff’s favor.”
A&H Sportswear II, 237 F.3d at 225-26. Rather, the plaintiff
should make some showing that the defendant adopted its mark
with the intent to confuse or deceive the public. Id.; see also
Checkpoint Sys. Inc. v. Check Point Software Techs., Inc., 269
F.3d 270, 286 (3d Cir. 2001) (noting that “a party’s intentional
use of another party’s mark to cause confusion” weighs in favor
of finding likelihood of confusion) (emphasis added).
7
The concurrence argues that our nominative fair use
defense is merely this same intent inquiry dressed in different
clothing. The tests for confusion and fairness are not
duplicative, however, because a plaintiff can also establish
38
Factor 4: The Evidence of Actual Confusion.
In this case, CCE presented no evidence of actual
confusion before the District Court. In fact, as the District Court
noted, from the Court’s first meeting with the parties, they had
agreed that they would offer no evidence of actual confusion to
the Court. Therefore, this factor should clearly weigh in favor
of LT.
We will remand the case to the District Court for proper
application of these factors. In determining whether confusion
is likely, as we noted in A&H Sportswear II, 237 F.3d 198, 215
(3d Cir. 2000), “different factors may be accorded different
weights depending on the particular factual setting.” If CCE is
able to meet its burden of showing likelihood of confusion on
remand, the burden of proof will then shift to LT to show that
the use is a nominative fair use.
C. The Affirmative Defense of Nominative Fair Use
Under the nominative fair use test adopted by the Court
of Appeals for the Ninth Circuit, a defendant must prove: (1)
that the product or service in question is one not readily
identifiable without use of the trademark; (2) that only so much
of the mark or marks is used as is reasonably necessary to
likelihood of confusion through seven other Lapp factors
besides intent. It is the circumstance in which a court does not
find bad intent but does find confusion that a nominative fair use
defense will be most useful.
39
identify the product or service; and (3) that the user did nothing
that would, in conjunction with the mark, suggest sponsorship
or endorsement by the trademark holder. New Kids on the
Block, 971 F.2d at 308. In the Ninth Circuit, if these elements
are proven, the use is “fair” and defendant will prevail. Further,
this nominative fair use test, as discussed above, replaces the
likelihood of confusion test in the Court of Appeals for the
Ninth Circuit. We must decide the extent to which we should
adopt this test as our own, mindful that we will employ it as an
affirmative defense to be proven by defendant after likelihood
of confusion has been demonstrated by the plaintiff.
We are tempted to use the three-pronged Ninth Circuit
test outright, as it has withstood the test of time, has been
tinkered with in no less than seven opinions.8 Moreover, the
Ninth Circuit Court of Appeals is the only Court of Appeals to
have specifically crafted its own test for nominative fair use.
Indeed, the Supreme Court decision in KP Permanent Make-Up
involved a reversal of the most recent Ninth Circuit opinion on
the issue of “fair use.” As prolific as the jurisprudence of the
Ninth Circuit Court of Appeals has been in this area, the
Supreme Court’s rejection of its view of how the fair use
defense works in a classic fair use case emboldens us to examine
8
See, The New Kids on the Block v. Gannett Satellite
Information Network, Inc., 971 F.2d 302 (9th Cir. 1992);
Kareem Abdul-Jabar v. General Motors Corp., 85 F.3d 407 (9th
Cir. 1996); Cairns v. Franklin Mint Co., 292 F.3d 1139 (9th Cir.
2002); Playboy Enterprises, Inc. v. Welles, 279 F.3d 796 (9th
Cir. 2002); Brother Records, Inc. v. Jardine, 318 F.3d 900 (9th
Cir. 2002); Horphag Research Ltd. v. Pellegrini, 337 F.3d 1036(9th Cir. 2003); Playboy Enterprises, Inc. v. Netscape
Communications Corp., 354 F.3d 1020 (9th Cir. 2004).
40
the elements of the Ninth Circuit Court of Appeals’ nominative
fair use test a bit more closely.
In so doing, we conclude that the test as written suffers
from a lack of clarity. This is evident in the contortions that the
Ninth Circuit Court of Appeals itself has gone through in
applying it, the confusion that the District Court here
encountered in its application, and in our conviction that a
modified inquiry would aid in reaching the right result. We will
adjust the test to include a slightly different set of
considerations:
1. Is the use of plaintiff’s mark necessary to describe
(1) plaintiff’s product or service and (2) defendant’s product or
service?
2. Is only so much of the plaintiff’s mark used as is
necessary to describe plaintiff’s products or services?
3. Does the defendant’s conduct or language reflect the
true and accurate relationship between plaintiff and defendant’s
products or services?
The following discussion explains how these factors
should be applied.
1. First Prong
The first element of the Ninth Circuit Court of Appeals’
test involved an inquiry only into the necessity of using
plaintiff’s trademark to describe plaintiff’s product. Here, the
District Court instead – probably mistakenly – examined the
41
necessity of the use of plaintiff’s trademark in order to describe
defendant’s product. See Cairns v. Franklin Mint Co., 292 F.3d
1139, 1153 (9th Cir. 2002). The first prong of New Kids On
The Block is at best confusing and at worst incomplete. While
it should be asked whether plaintiff’s product needs to be
described by reference to its mark, should it not also be
examined whether defendant’s use of it, at all, is necessary to
accurately describe what defendant does or sells, or whether its
reference to plaintiff’s mark is actually gratuitous? The District
Court’s inquiry into the latter aspect was not called for under the
New Kids On The Block test, but it actually seems entirely
appropriate.
The focus on the necessity of the mark in order for
defendant to describe plaintiff’s product makes sense in the
context of nominative fair use, where the plaintiff’s mark is
being used because it identifies the plaintiff’s product. We
further note that the court need not find that the use of the mark
is indispensable in order to find this factor fulfilled. For, as we
have stated before, “[t]he Lanham Act does not compel a
competitor to resort to second-best communication.” G.D.
Searle & Co., 715 F.2d 837 at 842. Furthermore, as the
Ninth Circuit has observed:
it is often virtually impossible to
refer to a particular product for
purposes of comparison, criticism,
point of reference or any other such
purpose without using the mark.
For example, reference to a large
automobile manufacturer based in
Michigan would not differentiate
42
among the Big Three; reference to
a large Japanese manufacturer of
home electronics would narrow the
field to a dozen or more companies.
Much useful social and commercial
discourse would be all but
impossible if speakers were under
threat of an infringement lawsuit
every time they made reference to a
person, company or product by
using its trademark.
New Kids on the Block, 971 F.2d 302 at 307. Therefore, the
court need only be satisfied that the identification by the
defendant of plaintiff’s product or service would be rendered
significantly more difficult without use of the mark.
Additionally, we believe that it is important for a court to
understand how necessary the use of the mark is to the
identification of defendant’s product. That is, the more
dependent the ready identification of defendant’s product is on
the description of plaintiff’s product through the employment of
plaintiff’s mark, the more likely it is that the use is a fair one.9
9
Although the test crafted by the Ninth Circuit Court of
Appeals did not include this aspect under the first prong, as
such, nonetheless, it does allude to it as part of the second
prong, as we discuss below.
43
In this case, the District Court looked at this test only in
regard to defendant’s product. On remand the Court should
additionally focus on whether requiring LT to describe plaintiff
CCE’s services without using its mark is a forced reversion to
second-best communications. Considerations such as the
simplicity of description and the likelihood that consumers will
understand a given reference to plaintiff’s services without use
of the mark are appropriate to this analysis. See Cairns, 292
F.3d at 1153.
2. Second Prong
Here again, the New Kids On The Block test focuses on
the “amount” of plaintiff’s mark that is used, asking whether
only so much is used as is necessary to describe plaintiff’s
product. That focus on limiting the quantum use of the
attributes of plaintiff’s marks’ is appropriate, for it is the use of
plaintiff’s marks that concerns us. Yet, the case law of the
Ninth Circuit Court of Appeals has expanded on this prong to
inquire, at this stage, about the defendant’s need to use of the
mark, stating:
[W]hat is ‘reasonably necessary to identify the plaintiff’s
product differs from case to case .... Where, as in the present
case, the description of the defendant’s product depends on the
description of the plaintiff’s product, more use of the plaintiff’s
trademark is ‘reasonably necessary to identify the plaintiff’s
product’ than in cases where the description of the defendant’s
product does not depend on the description of the plaintiff’s
product.
44
Cairns, 292 F.3d at 1154. Since we have positioned the
assessment of the defendant’s need to use plaintiff’s mark as
part of the first inquiry, we eliminate the confusion inherent in
inquiring into “need” at the second step. Thus, under our
approach, the second prong tests only whether the quantum of
the plaintiff’s mark used by the defendant was appropriate.
In analyzing this factor, the District Court essentially
predetermined the outcome of the second prong by its finding as
to the first prong. The District Court found that because the use
of CCE’s marks was not necessary to identify LT’s services as
a whole under the first prong, the use could not possibly be only
so much as was necessary. But the proper focus under this
prong is on whether only so much of plaintiff’s mark as is
reasonably necessary to identify plaintiff’s product or service
has been used by defendant. Consideration should be given at
this stage to the manner in which the mark is portrayed. For
example, did the defendant use plaintiff’s distinctive lettering
when using the plaintiff’s mark or did the defendant, as in this
case, simply use block letters to spell out plaintiffs’ names?
In his concurring opinion, Judge Fisher posits that both
Prongs One and Two of our modified nominative fair use test
are, and should be, subsumed in the likelihood of confusion
analysis. He suggests that the necessity of using the mark
(Prong 1) and the reasonableness of that use (Prong 2) are just
another way of examining the defendant’s intent in using the
mark. This is a mischaracterization of both the intent factor
under Lapp, as described above, and the first two prongs of the
nominative use defense we espouse. Even if it is found that a
defendant’s intent is improper and its use of a mark could cause
confusion, the defendant could conceivably prove that even its
45
potentially confusing use is fair because it is reasonably limited
and necessary under the first two prongs of our nominative fair
use test. These contours of fairness are not recognized by our
concurring colleague, but they are fundamental to the concept of
fair use according to the Supreme Court’s recent decision in KP
Permanent Make-Up.
3. Third Prong
The New Kids test at this stage asks whether the user did
anything that would, in conjunction with the mark, suggest
sponsorship or endorsement by the trademark holder. However,
we believe the appropriate question should be a bit broader:
does the defendant’s conduct or language reflect the true and
accurate relationship between plaintiff and defendant’s products
or services? We believe that the Ninth Circuit Court of
Appeals’ focus on whether the user’s conduct implies
endorsement may not truly reflect whether the use is fair
because sometimes the plaintiff’s relationship with defendant
may be one of endorsement, but the nature of the endorsement
as reflected by defendant’s employment of plaintiff’s marks may
not be accurate. A defendant’s purposeful portrayal of
plaintiff’s endorsement of its product through defendant’s
conduct or language does not necessarily render the use unfair,
as long as the depiction of the endorsement is accurate. In
addition, our version suggests that we can consider the
defendant’s failure to state or explain some aspect of the
relationship, whereas the New Kids version focuses on
affirmative acts, i.e., what the defendant did to suggest
sponsorship.
46
In this case, the District Court concluded that an ordinary
consumer would look at LT’s website and conclude that there
was some affiliation between LT and the enumerated
companies. Further, the Court inferred from the mere presence
of the marks an intent on the part of LT to convey endorsement
or affiliation. On remand, the District Court should specifically
determine in analyzing this prong whether the portrayal of the
relationship was accurate, and what more the defendant could
have done to prevent an improper inference regarding the
relationship. The mere presence or use of the mark does not
suggest unfairness under this prong. Here, LT added a
disclaimer, the significance of which the District Court
downplayed, stating that “LendingTree is not sponsored by or
affiliated with the parent franchisor companies of any of the
participating members of its network.” (Text from
www.LendingTree.com at JA687.) Far from unimportant, such
a disclaimer must be considered in determining whether the
alleged infringer accurately portrayed the relationship that
existed between plaintiff and defendant. See Playboy Enters.,
279 F.3d at 803 (finding that the fact that defendant’s website
included a clear disclaimer of any connection to plaintiff
satisfied this prong of the Ninth Circuit Court of Appeals’ test
for nominative fair use). Therefore, the District Court on
remand should look at the precise way in which what the
defendant said, or did not say, other than the mere presence of
the mark on the website, may have inaccurately implied
endorsement or sponsorship by CCE. The District Court should
consider whether the disclaimer was an affirmative action by LT
that effectively negated an inaccurate implication of sponsorship
or endorsement by CCE.
47
The Ninth Circuit’s test for nominative fair use does not
explicitly include accuracy within the analysis, but the Supreme
Court has recognized that “[a]ccuracy of course has to be a
consideration in assessing fair use.” KP Permanent Make-Up,
Inc., 125 S. Ct. at 551. In examining the conduct of the
defendant to determine whether the defendant has done anything
to affirmatively cause consumer confusion, it is only reasonable
to consider the precision with which the defendant has described
its relationship with plaintiff. In this case, the evaluation of
accuracy would necessarily include consideration of LT’s
characterization of the nature and extent of its relationship
with CCE and its agents. This would include the District
Court’s consideration of LT’s reference to its affiliation
with CCE brokers in general, rather than referencing each more
accurately by their “d/b/a/” title and whether this rendered the
use inaccurate or was somehow misleading as to any
endorsement or relationship.
V. Conclusion
In sum, we hold today that the Lapp test for likelihood of
confusion still has an important place in a trademark
infringement case in which the defendant asserts the nominative
fair use defense. In this case, the test should focus on the four
relevant factors: (1) the price of the goods and other factors
indicative of the care and attention expected of consumers when
making a purchase; (2) the length of time the defendant has used
the mark without evidence of actual confusion; (3) the intent of
the defendant in adopting the mark; and (4) the evidence of
actual confusion.
48
Once plaintiff has met its burden of proving that
confusion is likely, the burden then shifts to defendant to show
that its nominative use of plaintiff’s marks is nonetheless fair.
In this Circuit, we have today adopted a test for nominative fair
use in which a court will pose three questions: (1) Is the use of
the plaintiff’s mark necessary to describe both plaintiff’s
product or service and defendant’s product or service? (2) Is
only so much of the plaintiff’s mark used as is necessary to
describe plaintiff’s products or services? (3) Does the
defendant’s conduct or language reflect the true and accurate
relationship between plaintiff and defendant’s products or
services? If each of these questions can be answered in the
affirmative, the use will be considered a fair one, regardless of
whether likelihood of confusion exists.
We adopt a bifurcated approach that tests for confusion
and fairness in separate inquiries in order to distribute the
burden of proof appropriately between the parties at each stage
of the analysis. The defendant has no burden to show fairness
until the plaintiff first shows confusion. Furthermore, by
properly treating nominative fair use as an affirmative defense,
our approach allows for the possibility that a district court could
find a certain level of confusion, but still ultimately determine
the use to be fair. By contrast, a unified likelihood of confusion
test would require a defendant to negate likelihood of confusion
by undercutting the Lapp factors. Because the Supreme Court
explicitly rejected such a proposition in KP Permanent Make-
Up, we decline to adopt it.
We will therefore REVERSE the order of the District
Court and REMAND for further proceedings consistent with
this opinion.
49
Century 21 Real Estate Corporation, et al. v. LendingTree, Inc.
No. 03-4700
FISHER, Circuit Judge, concurring in part and dissenting in
part.
As the majority correctly concludes, proper nominative
use is permissible use, leaving the critical question of how to
frame the nominative use analysis. I concur with the majority’s
“firm conviction that the burden of proving likelihood of
confusion should remain with the plaintiff in a trademark
infringement case.” Maj. Op. at 24. I also concur in its
conclusion that this Court’s Lapp factors,10 where relevant, must
be used in the analysis. I therefore join in the majority’s
judgment remanding the case for further proceedings.
I depart from majority, however, in its adoption of a
bifurcated analysis that looks first to a truncated Lapp-factor
test, followed by an affirmative defense of “nominative fair
use.” Despite professing a “firm conviction” that the burden of
proving likely confusion remains on plaintiffs, the majority
formulates an affirmative defense that shifts to defendant the
burden of negating confusion. In so doing, the majority flouts
binding caselaw holding that proper nominative use is use that
is not likely to confuse, and that a plaintiff alone bears the
burden of establishing likely confusion. Morever, to the extent
the majority places any burden on plaintiffs at all, it is so
watered-down that plaintiffs might prove likely confusion on
one Lapp factor alone. The majority’s bifurcated test is also
10
Interpace Corp. v. Lapp, Inc., 721 F.2d 460 (3d Cir.
1983).
50
judicially unmanageable because it requires courts to address
identical factors on both sides of the equation.
Accordingly, I dissent. I first review nominative use
cases and conclude that precedent, binding and otherwise, shows
that the question of nominative use is a question of likely
confusion and not an affirmative defense. Second, I address the
majority’s bifurcated analysis, and conclude that it runs afoul of
the Lanham Act and binding precedent because it places on
defendant the burden of negating likely confusion. I also
conclude that the test is judicially unmanageable because it
requires courts to examine identical likelihood of confusion
factors on both sides of the analysis. Finally, I propose that in
nominative use cases, courts apply a modified likelihood of
confusion inquiry based on Lapp factors two through ten, with
the burden resting where it must, on plaintiffs. Because proper
nominative use is use that is not likely to confuse, it is the
majority’s “nominative fair use” test that is unfair, because it
places the burden where it should never be, on the defendant.
I.
Despite the majority’s desire to “clarify the proper
analysis,” Maj. Op. at 15, its approach significantly increases the
uncertainty and – to use a term appropriate to the present context
– confusion in this important area of the law. In light of this
uncertainty, and in light of the Supreme Court’s holding in KP
Permanent Make-Up, Inc. v. Lasting Impression I, Inc., 125 S.
Ct. 542 (2004), that a defendant bears no burden to negate
confusion, it is vital to examine the nature of nominative use to
determine whether it is an affirmative defense, or instead an
established way to test for likelihood of confusion. Because it
51
is the latter, the burden lies with plaintiffs and a bifurcated
analysis is improper.
The majority, stating that the Ninth Circuit is the only
Court of Appeals to craft a test for nominative use, mildly
rewords that test and recasts it as an affirmative defense. As
discussed in the subsections below, this approach is
unprecedented, unwise, and impermissible. First, it is
unprecedented. The Ninth Circuit’s decisions make it clear that
the test is nothing more than a likelihood of confusion
substitute, making it an inappropriate foundation for an
affirmative defense. Second, it is unwise. Other Courts of
Appeals have exercised great skepticism towards the Ninth
Circuit’s test and none have adopted it outright, calling into
serious question the wisdom of using it as a analytic model.
Finally, the majority’s approach is impermissible. Binding
precedent from the Supreme Court and this Court requires that
nominative use be addressed through a likelihood of confusion
analysis and that the burden remain on plaintiffs.
A.
The erroneous major premise underlying the majority’s
conclusion is the assumption that nominative use must be
analyzed through an affirmative defense. This assumption
begins with the majority’s misuse of the test enunciated by the
Ninth Circuit in New Kids on the Block v. News America
Publishing, Inc., 971 F.2d 302 (9th Cir. 1992). As stated by the
majority: “We must decide the extent to which we should adopt
[the Ninth Circuit’s] test as our own, mindful that we will
employ it as an affirmative defense to be proven by defendant
after likelihood of confusion has been demonstrated by the
52
plaintiff.” Maj. Op. at 40 (emphasis added). However, the
Ninth Circuit has made it crystal-clear that its test is a substitute
for its normal multi-factor likelihood of confusion test, to be
used in cases involving purported nominative use.11 The Ninth
Circuit has also made it clear that this test places on the
defendant the burden of proving no likelihood of confusion.
Because KP Permanent makes it clear that it is improper to place
a burden of proving nonconfusion on the defendant, the majority
grievously errs by treating the Ninth Circuit test as an
affirmative defense.
As noted by New Kids, classic statutory fair use applies
“where the defendant has used the plaintiff’s mark to describe
the defendant’s own product.” 971 F.2d at 308 (emphasis in
original). Thus, if BEST PRICE were used as a mark, third
parties might still fairly use “best price” in its original
descriptive sense to refer to their own goods or services, such as
“We offer the best price on breakfast cereal.” In contrast,
nominative use arises “where the defendant uses a trademark to
describe the plaintiff’s product, rather than its own.” New Kids,
971 F.2d at 308. In New Kids, one of the defendants, a
newspaper, had printed a poll saying “New Kids on the Block
are pop’s hottest group. Which of the five is your fave? Or are
they a turn off?” Id. at 304. Another defendant newspaper,
under a picture of one of the New Kids, asked, “Which of the
11
Like our Court and other Courts of Appeals, the Ninth
Circuit uses a multi-factor test for likelihood of confusion that
looks to, inter alia, the similarity of the marks, strength of the
plaintiff’s mark, and other factors. See AMF Inc. v. Sleekcraft
Boats, 599 F.2d 341 (9th Cir. 1979).
53
New Kids on the Block would you most like to move next
door?” Id. The Court held:
a commercial user is entitled to a nominative fair
use defense provided he meets the following three
requirements: First, the product or service in
question must be one not readily identifiable
without use of the trademark; second, only so
much of the mark or marks may be used as is
reasonably necessary to identify the product or
service; and third, the user must do nothing that
would, in conjunction with the mark, suggest
sponsorship or endorsement by the trademark
holder.
Id. at 308 (note omitted). The first requirement was met because
“[i]t is no more reasonably possible, however, to refer to the
New Kids as an entity than it is to refer to the Chicago Bulls,
Volkswagens or the Boston Marathon without using the
trademark.” Id. The second requirement was met because
defendants “do not use the New Kids’ distinctive logo or
anything else that isn’t needed to make the announcements
intelligible to readers.” Id. The third element was met as well
because “nothing in the announcements suggests joint
sponsorship or endorsement by the New Kids.” Id. In
particular, one of the ads asked “whether the New Kids might be
‘a turn off.’” Id. at 309.
In subsequent cases, the Ninth Circuit has emphasized
that the test is a substitute for the normal multi-factor likelihood
of confusion analysis – “nominative fair use analysis . . .
replaces the likelihood of customer confusion analysis.” Cairns
54
v. Franklin Mint Co., 292 F.3d 1139, 1151 (9th Cir. 2002)
(emphasis in original); see also KP Permanent Make-Up, Inc. v.
Lasting Impression I, Inc., 328 F.3d 1061, 1072 (9th Cir. 2003)
(“When analyzing nominative fair use, it is not necessary to
address likelihood of confusion because the nominative fair use
analysis replaces the likelihood of confusion analysis.”
(emphasis added)), rev’d on other gds., 125 S. Ct. 542 (2004).
Fueling the majority’s mistaken use of the Ninth Circuit’s
test as an affirmative defense is the fact that the Ninth Circuit
confusingly refers to its own test at times as a defense, such as
in New Kids where the Court called the test “a nominative fair
use defense.” 971 F.2d at 308. But it is clear that the Ninth
Circuit’s test is not an affirmative defense in the sense the
majority envisions, as a defense to be asserted once a plaintiff
has established a likelihood of confusion. This is because the
Ninth Circuit’s so-called “defense” is itself a likelihood of
confusion test. In Brother Records, Inc. v. Jardine, the Court
acknowledged charges of “‘confusion in the case law’” as to
whether “nominative fair use” was really a distinct defense or
instead “‘merely one type of use which is not likely to cause
confusion.’” 318 F.3d 900, 908-09 n.5 (9th Cir.) (quoting 2 J.
Thomas McCarthy, McCarthy on Trademarks and Unfair
Competition § 11:47 (4th ed. 2001)), cert. denied, 540 U.S. 824(2003). In response, the Court admitted that its test replaced the
normal multi-factor likelihood-of-confusion analysis, with one
significant difference: it “shifts to the defendant the burden of
proving no likelihood of confusion.” Id. at 909 n.5.
Thus, it is clear that the Ninth Circuit treats its “defense”
as a substitute for testing likelihood of confusion. It is also clear
that it places the burden of negating confusion on the defendant,
55
which under KP Permanent, is now impermissible. In KP
Permanent, the Court held that a defendant at no time possesses
the burden of negating confusion, noting, inter alia, “the
incoherence of placing a burden to show nonconfusion on a
defendant,” 125 S. Ct. at 549, and that “it takes a long stretch to
claim that a defense of fair use entails any burden to negate
confusion.” Id. at 548. As the Supreme Court has made it clear
that the burden of showing likely confusion belongs to plaintiffs
alone, it is improper to twist the nominative use inquiry into an
affirmative defense.
B.
The majority suggests that refusing to adopt its approach
would be “largely out of sync with the existing jurisprudence on
fair use.” Maj. Op. at 25. But considering the majority’s
concessions that the Ninth Circuit “is the only Court of Appeals
to have specifically crafted its own test for nominative fair use,”
id. at 40, that “[f]ew other courts have spoken on the precise
issue,” id. at 14, and that there is a “paucity of the case law on
this subject from every [other] court” on nominative use, id. at
15-16, the majority cannot point to a set of existing
jurisprudence from which to stray.
If anything, to the extent there is discernable
jurisprudence regarding the Ninth Circuit’s approach, the trend
is heavily against adopting its test. The Sixth Circuit, faced with
the option of adopting the Ninth Circuit’s test, held “[t]his
circuit has never followed the nominative fair use analysis,
always having applied [our own multi-factor likelihood of
confusion] test. We are not inclined to adopt the Ninth Circuit’s
analysis here.” PACCAR Inc. v. TeleScan Technologies,
56
L.L.C., 319 F.3d 243, 256 (6th Cir. 2003). The Fifth Circuit
applied the test only in part, declining to impose the first
element of the test. See Pebble Beach Co. v. Tour 18 I Ltd., 155
F.3d 526, 546 n.13 (5th Cir. 1998) (refusing to adopt the first
element because it would always be satisfied in disputes like the
comparative advertising case before the Court, and declining to
opine on whether the requirement should be imposed outside the
comparative advertising context). Pebble Beach expressly
recognized the Ninth Circuit’s “defense” for what it was, a
likelihood of confusion test, stating that “[w]hile a claim that the
use was to identify the markholder’s goods or services is
analogous to the statutory fair-use defense, it is in actuality a
claim that the use is noninfringing and thus creates no
likelihood of confusion.” Id. at 545 (emphasis added).12
Other authorities have noted the deficiencies of the Ninth
Circuit’s approach. A District Court in Maryland has criticized
all three elements, noting that the first and third prongs are
nothing more than “a restatement of two basic principles of
trademark law,” first, that use of a mark “is not prohibited if the
use is intended merely to refer to the holder of the mark,” and
second, that such reference “is permissible provided it is not
likely to cause confusion.” Nat’l Federation of the Blind, Inc.
v. Loompanics Enterp., Inc., 936 F. Supp. 1232, 1241 (D. Md.
1996). Similarly, the second prong “appear[ed] to derive from
12
Even the majority admits “it seems that only the
Second, Fifth, and Sixth Circuits have referenced the nominative
fair use defense by name and even on these occasions have done
so only to refer to what district courts had done with the issue or
to decline to adopt the Ninth Circuit’s test as a whole.” Maj.
Op. at 14.
57
a concern that confusion as to affiliation may result if the
defendant’s use of the plaintiff’s mark exceeds its legitimate
referential purpose.” Id. The test has been additionally and
properly criticized as “cloud[ing] the issue of who carries the
burden to prove likelihood of confusion.” Derek J. Westberg,
Note, New Kids on the Block v. News America Publishing, Inc.:
New Nominative Use Defense Increases the Likelihood of
Confusion Surrounding the Fair Use Defense to Trademark
Infringement, 24 Golden Gate U. L. Rev. 685, 709 (1994). The
author notes that the third element requires “that the user must
do nothing that would, in conjunction with the mark, suggest
sponsorship or endorsement of the trademark holder,” but wryly
notes that this inquiry “must be satisfied as part of the plaintiff’s
prima facie case of infringement.” Id. at 705. I agree, and more
importantly, so does the Supreme Court.13
C.
The irony of the majority’s well-intended but erroneous
“nominative fair use” defense is that the majority felt the need
to craft a defense in the first place. Binding caselaw from the
Supreme Court and this Court have analyzed nominative use
cases without resorting to a separate test and without placing the
burden of negating confusion on defendants. I do not see how
the majority’s approach can be reconciled with these cases.
13
I recognize that the majority does not adopt the Ninth
Circuit test verbatim. However, the majority nevertheless errs
in treating its test as an affirmative defense because that defense,
even as modified, analyzes nothing more than core issues of
likelihood of confusion, issues that are within the purview of
plaintiffs’ case.
58
In Prestonettes, Inc. v. Coty, the Supreme Court
addressed a case involving what we would today refer to as
nominative use. 264 U.S. 359 (1924). The plaintiff, owner of
the marks COTY and L’ORIGAN, sold perfume and powder.
The defendant bought genuine COTY and L’ORIGAN products
and repackaged them. The plaintiff sought an injunction to
prevent the defendant from any use of the plaintiff’s marks on
the repackaged goods. The District Court had permitted the
defendant to sell the plaintiff’s repackaged goods, with a
disclaimer saying that defendant was not connected with
plaintiff and that the perfume and powder were respectively
“independently rebottled” and “independently compounded,”
with every word in “letters of the same size, color, type, and
general distinctiveness.” Id. at 367. Writing for the Court,
Justice Holmes held that “[w]hen the mark is used in a way that
does not deceive the public we see no such sanctity in the word
as to prevent its being used to tell the truth. It is not taboo.” Id.
at 368. Prestonettes is clearly a nominative use case, and the
Supreme Court did not treat the use as one that had to be
justified by the defendant.
The majority seems to dismiss Prestonettes on the basis
that it is not a new case. See Maj. Op. at 27 n.4. I am not aware
of any rule permitting us to disregard Supreme Court precedent
simply because it is not as fresh as the Sunday paper. The
majority fails to persuade that Prestonettes is anything other than
a paradigm nominative use case. Indeed, even the Ninth Circuit,
when formulating its nominative use test in New Kids, cited,
quoted, and relied on Prestonettes when defining the nature of
nominative use:
59
[W]e may generalize a class of cases where the
use of the trademark does not attempt to capitalize
on consumer confusion or to appropriate the
cachet of one product for a different one. Such
nominative use of a mark—where the only word
reasonably available to describe a particular thing
is pressed into service—lies outside the strictures
of trademark law: Because it does not implicate
the source-identification function that is the
purpose of trademark, it does not constitute unfair
competition; such use is fair because it does not
imply sponsorship or endorsement by the
trademark holder. “When the mark is used in a
way that does not deceive the public we see no
such sanctity in the word as to prevent its being
used to tell the truth.” Prestonettes, Inc. v. Coty,
264 U.S. 359, 368, 44 S. Ct. 350, 351, 68 L.Ed.
731 (1924) (Holmes, J.).
971 F.2d at 307-08 (emphasis in original).
In any case, we need not turn to the Ninth Circuit, nor
rely solely on older precedent, to find more recent binding
nominative use cases. This Court faced a nominative use
dispute in G.D. Searle & Co. v. Hudson Pharmaceutical Corp.,
715 F.2d 837 (3d Cir. 1983). In that case, the defendant used
the plaintiff’s METAMUCIL mark to truthfully state that its
product was “Equivalent to METAMUCIL.” Id. at 838. The
District Court enjoined the defendant from making conspicuous
use of the mark but otherwise permitted truthful use of the mark.
On appeal, we affirmed that defendant could truthfully use the
mark. Relying on Prestonettes, we concluded that “whether one
60
is entitled to refer to a competitor’s trademark depends not on
where the reference appears, but on whether the reference is
truthful.” Id. at 843 (discussing and quoting Prestonettes, 264
U.S. at 368). We further held that such use was permissible “so
long as it does not contain misrepresentations or create a
reasonable likelihood that purchasers will be confused as to the
source, identity, or sponsorship of the advertiser’s product.” Id.
at 841 (quotes omitted, emphasis added).14
Three things are obvious in Searle. First, we had no
doubt that Prestonettes was the controlling case for the disputed
use, a use that modern parlance deems “nominative use.” See
id. at 843 & n.13 (quoting Prestonettes, 264 U.S. at 368).
Second, we treated the question before us solely as whether the
use was likely to confuse. “‘[C]ollateral and truthful references
to the trademark of another are permissible as long as the
“unauthorized” reference does not cause confusion as to the
source of the product advertised.’” Id. at 841 n.9 (quoting
Delaware and Hudson Canal Co. v. Clark, 80 U.S. (13 Wall)
311, 327 (1872)) (emphasis added). Third, notably missing
from Searle was any suggestion that the defendant bore any
burden of satisfying an affirmative defense. Instead, the
question was whether the conduct would “create a reasonable
likelihood that purchasers will be confused as to the source,
14
In addition, we affirmed the limited injunction, which
enjoined defendant from setting the mark apart in larger or
differently colored type, and required it to use “®” and use the
disclaimer “a product of G.D. Searle, not a Hudson product.”
Id. at 839, 843.
61
identity, or sponsorship of the advertiser’s product.” Id. at 841
(emphasis added, internal quotes omitted).15
Like Prestonettes, Searle is a paradigm nominative use
case. The mere fact that these decisions did not use the term
“nominative use” when they were decided does not make them
any less binding. Both cases make it clear that nominative use
is nothing more than a likelihood of confusion inquiry, and
neither places upon a defendant the burden of negating
confusion or of putting forth an affirmative defense.16
15
Notably, in Pebble Beach, where the Fifth Circuit
declined to adopt the Ninth Circuit’s test verbatim, the Court
cited Searle as support for the proposition that “[t]his right to
use a mark to identify the markholder’s products--a nominative
use--however, is limited in that the use cannot be one that
creates a likelihood of confusion as to source, sponsorship,
affiliation, or approval.” 155 F.3d at 546 (citing, inter alia,
Searle, 715 F.2d at 842) (emphasis added). Unlike the majority,
the Fifth Circuit clearly understood Searle to be a nominative
use case and that the issue was whether the use created a
likelihood of confusion.
16
The majority strangely complains that neither
Prestonettes nor Searle contain any “reference to ‘fair use,’ let
alone nominative fair use.’” Maj. Op. at 27-28 n.4. Of course
they don’t, because both cases treat the analysis as one of likely
confusion, not as an affirmative defense. And to state the
obvious, neither case was decided before the Ninth Circuit
coined the phrase “nominative use.” The majority’s approach
has the impermissible effect of attempting to overrule Searle,
which can only be done by the en banc Court.
62
II.
This section examines the inner workings of the
majority’s bifurcated test. Subsection II.A shows that the
majority’s approach permits plaintiffs to establish likely
confusion on as little as on Lapp factor, and improperly shifts to
defendant the burden of negating confusion. Subsection II.B
shows that the majority’s approach is judicially unmanageable
because it requires courts to consider identical likelihood of
confusion factors on both sides of the analysis. Subsection II.C
shows that the majority’s approach stems from a mistaken
conflation of the statutory defense of descriptive fair use, which
asks whether a defendant has used a mark in its primary
descriptive sense, with nominative use, which simply asks if a
defendant has created a likelihood of confusion.
A.
The majority’s approach whittles down this Court’s ten-
factor Lapp test beyond recognition, permitting plaintiffs to
show likely confusion on as little as one factor. The effect of
this is to shift to defendant the burden of negating confusion. I
will start by outlining the majority’s proposed order of analysis.
Although the majority concedes that eight of the ten Lapp
factors can be relevant in nominative use cases, it limits
extended discussion to these four factors:
1. the price of the goods and other factors
indicative of the care and attention
expected of consumers when making a
purchase;
63
2. the length of time the defendant has used
the mark without evidence of actual
confusion;
3. the intent of the defendant in adopting the
mark;17 and
4. the evidence of actual confusion.
Maj. Op. at 34.18
17
Because nominative use defendants use a plaintiff’s
mark rather than adopt it, the more accurate phrasing would be
“the intent of the defendant in using the mark.” I have followed
this approach in Section III, infra.
18
To be clear, the panel is unanimous in holding that in an
appropriate case, all but the first two Lapp factors may be
relevant to the nominative use analysis. See Maj. Op. at 33-35.
Moreover, although the majority focuses on only four of the
factors, id. at 34, 48, it at no point suggests that those factors
constitute the sole set of factors for nominative use analysis;
instead, it notes that the analysis will “include” those four
factors. See Maj. Op. at 34. Though the majority expresses
doubt regarding the weight of the last four Lapp factors to this
particular dispute, id. at 33, at no point does it hold that the
District Court is prohibited from considering them. As it states:
“We find that all of the other Lapp factors, while perhaps not
appropriate for analysis in this particular case, could be analyzed
in future nominative use cases, depending on the factual
situation.” Id. at 33 (emphasis added). Apparently concluding
that the parties are actual or close competitors, the majority
appears to suggest that the last four factors will be of little
relevance in this case. Perhaps, but as the majority implicitly
64
If likely confusion is shown by plaintiffs – which as
discussed below, might be shown on one Lapp factor alone –
then the majority would require defendant to satisfy its
“nominative fair use” defense. As mildly reworded from the
recognizes, the determination of the degree of dissimilarity and
its weight is for the District Court to determine in the first
instance.
Section III, infra, outlines how the eight relevant Lapp
factors, including the final four, should be analyzed in a
nominative use case, including this case. If the District Court
finds that the parties’ services, customers, advertising, and
markets are highly similar or identical – i.e., the more the parties
are competitors – such findings have no bearing under the last
four Lapp factors in establishing a likelihood of confusion.
Competitors often make nominative use for purposes of
“comparison, criticism, [or a] point of reference.” New Kids,
971 F.2d at 306; see also Searle, 715 F.2d at 841 (competitor
selling laxatives described as “Equivalent to METAMUCIL”).
In nominative use cases, focusing on the parties’ status as
competitors would lead to false findings that all nominative uses
are confusing; accordingly, the parties’ possible status as
competitors has little to no bearing on establishing a likelihood
of confusion, and other factors must be addressed to analyze
likelihood of confusion.
But when the parties are not competitors, the last four
Lapp factors may become relevant in cutting against a
likelihood of confusion in the nominative use context. The more
the parties’ services, customers, advertising, or markets diverge,
the more they reduce the likelihood of confusion. This is
because differently targeted consumers may see the marks in
different contexts, through different advertising, and in relation
to different goods or services. These differences may counsel
against a likelihood of confusion.
65
Ninth Circuit’s test, the majority would require defendant to
show:
1. Is the use of plaintiff’s mark necessary to
describe (1) plaintiff’s product or service
and (2) defendant’s product or service?
2. Is only so much of the plaintiff’s mark
used as is necessary to describe plaintiff’s
products or services?
3. Does the defendant’s conduct or language
reflect the true and accurate relationship
between plaintiff and defendant’s products
or services?
Maj. Op. at 41.
I will first consider the majority’s bare-bones Lapp test.
Regarding the first factor – the price of the goods and other
factors indicative of the care and attention expected of
consumers when making a purchase – the District Court had
little to say, noting that the issue was “a little difficult” and
concluding that real estate purchases are the most important
purchases at the time and perhaps in people’s lives. Although
the District Court’s opinion is not clear, it appears that the Court
either found that the factor was neutral or pointed somewhat
towards defendant.
The second and fourth factors – looking to the absence or
presence of actual confusion – do not assist plaintiffs in this case
because they stipulated that they would not rely on evidence of
66
actual confusion for these proceedings. This is unsurprising
because actual confusion evidence is in many cases unavailable
and is not required to find likely confusion.19
This leaves only one factor, intent. In this regard, the
majority holds that “if the court finds that the defendant made
use of the plaintiff’s mark with the very purpose of causing
consumers to think the plaintiff endorses or sponsors plaintiff’s
good or service, then the likelihood that consumers will be
confused as to endorsement/affiliation is greater.” Maj. Op. at
35-36. Accordingly, holds the majority, “the key inquiry is
whether the mark is being used so as to convey a connection
between the parties that may not exist.” Id. at 36. I agree with
the majority that the intent inquiry is important in nominative
use cases. Indeed, if the plaintiffs in this appeal are to show
likely confusion at all, they will have to prove it through this
factor. And considering the parties’ serious dispute over the
veracity and context of the defendant’s use of the plaintiffs’
marks, I have no doubt that on remand that the intent factor will
be the locus of contention.
19
Although proof of actual confusion is not required, the
more such evidence there is, the greater the likelihood of
confusion. Versa Products Co., Inc. v. Bifold Co. (Mfg.) Ltd.,
50 F.3d 189, 205 (3d Cir. 1995). Conversely, a lack of actual
confusion evidence does not raise an inference of nonconfusion
“when the particular circumstances [do not] indicate such
evidence should have been available.” Id. (alteration in original,
quote marks deleted). But “[i]f a defendant’s product has been
sold for an appreciable period of time without evidence of actual
confusion, one can infer that continued marketing will not lead
to consumer confusion in the future.” Id.67
But the majority is unclear as to what factors the District
Court might look in proving intent. It correctly notes that mere
“[u]se of the mark alone is not sufficiently probative of such
intent.” Maj. Op. at 37-38. This makes sense because the mere
existence of nominative use, without more, lacks probative
value as to whether the use was made with the intent to confuse.
But the majority provides little guidance on what might serve as
affirmative proof of intent in a nominative use case, noting
unhelpfully that the District Court should consider whether
defendant “used the mark with the intent to confuse the public
as to the relationship between the defendant and the plaintiff.”
Id. at 37 (emphasis in original). But that admonition merely
restates the original inquiry, i.e., what evidence proves bad
intent?
The majority’s terse discussion of the intent factor begs
clarification of the kind of proof that would show intent to
confuse in a nominative use case. Fortunately, such clarification
is not difficult to find in the majority’s opinion, although its
location is troubling. One might look to the purpose of a
defendant’s use, which would be probative of whether the use
was made in good faith or instead with the intent to confuse.
One might look to the prominence of the use; if defendant used
the mark in too-large or stylized form, that may show an intent
to use more than is necessary, and again show an intent to
confuse. One might also look to the truthfulness of the use: if
the use was truthful, that would suggest a lack of intent to
confuse; conversely, misleading or untruthful uses of plaintiffs’
marks may be probative of an intent to confuse.
If the above characterization sounds familiar, it should.
Each and every one of the majority’s “nominative fair use”
68
prongs is nothing more than an inquiry into the likelihood of
confusion, specifically, whether the use is with the intent to
confuse due to a presence or lack of good-faith purpose,
prominence, and truthfulness. The majority’s first “nominative
fair use” prong looks to purpose and asks: “Is the use of
plaintiff’s mark necessary to describe (1) plaintiff’s product or
service and (2) defendant’s product or service?” This prong
asks why defendant is using the mark, i.e., its purpose in using
it. By the majority’s formulation, if it is necessary for defendant
to use the mark to describe both the plaintiffs’ and its own
services, then such use may be fair.20 But the reason for any
20
I further object to the first prong of the “nominative fair
use” defense because of its conjunctive requirement that a
plaintiff’s mark be used to describe both plaintiff and defendant.
Although “nominative” use requires that the mark be used at a
minimum to refer to plaintiff, proper nominative use may or may
not also use a plaintiff’s mark to refer to the defendant’s goods
or services. Nominative use may occur “where the defendant
uses a trademark to describe the plaintiff’s product, rather than
its own.” New Kids, 971 F.2d at 308. Sometimes the use of the
mark may be, as noted in New Kids, merely for “comparison,
criticism, [or a] point of reference.” Id. at 306. In any case, I
would note that even under the majority’s phrasing, “necessary”
under the first prong does not mean “indispensable” – “the court
need not find that the use of the mark is indispensable in order
to find this factor fulfilled.” Maj. Op. at 42.
Another troubling problem that may arise from the first
prong’s conjunctive phrasing is that the majority may have
unintentionally foreordained the outcome of these proceedings
through its passing statement that “[defendant] is not attempting
to use [plaintiffs’] marks to refer to [defendant’s] own services,
but rather is using the marks to refer to [plaintiffs’] services.”
Maj. Op. at 33. The majority appears to suggest that defendant
69
“fairness” would be because the use was made with good intent,
a paradigm likelihood of confusion inquiry, and one that falls
within the normal Lapp analysis.
The second inquiry suffers the same infirmity. It asks,
“Is only so much of the plaintiff’s mark used as is necessary to
describe plaintiff’s products or services?” This inquiry looks to
the prominence of the use, asking if the defendant “took too
much,” i.e., whether it used bigger, bolder type or a logo when
plain type might have sufficed. And why is this relevant? The
answer is clear: the willful overuse of plaintiffs’ marks may
evidence bad-faith intent and is more likely to confuse. Indeed,
Searle itself affirmed an injunction that enjoined the defendant
from setting the mark apart in larger or differently colored type,
and required it to use “®” and a disclaimer. See 715 F.2d at
839, 843. As such, the majority’s prominence inquiry again is
nothing more than part of the Lapp analysis.21
did not use the marks to refer to itself. I will emphasize that this
determination is not for this Court to make and should be made
by the District Court upon remand.
21
The majority is also unclear regarding the phrasing of
the second prong, which asks “[i]s only so much of the
plaintiff’s mark used as is necessary to describe plaintiff’s
products or services?” Maj. Op. at 41 (emphasis added). Later
in the opinion, the majority states “the proper focus under this
prong is on whether only so much of plaintiff’s mark as is
reasonably necessary to identify plaintiff’s product or service
has been used by defendant.” Id. at 45 (emphasis on
“reasonably” added). There may be worlds of difference
between what is “necessary” and what is “reasonably
necessary.” Although I read the majority’s second statement as
70
Like the first two prongs, the majority’s third prong is
again nothing more than a likelihood of confusion inquiry. It
asks, “Does the defendant’s conduct or language reflect the true
and accurate relationship between plaintiff and defendant’s
products or services?” By its own terms, the third prong looks
to the truthfulness of the use of the mark and the defendant’s
conduct in describing the relationship between the parties and
their goods/services. But this truthfulness inquiry is identical to
the statutory test of infringement under Lanham Act § 32(1)(a),
which asks whether the use is “likely to cause confusion, or to
cause mistake, or to deceive.” Lanham Act § 32(1)(a), 15
U.S.C. § 1114(1)(a) (emphasis added). Similarly, Section
43(a)(1)(A) asks whether the use is “likely to cause confusion,
or to cause mistake, or to deceive as to the affiliation,
connection, or association of such person with another person.”
Id. § 43(a)(1)(A), 15 U.S.C. § 1125(a)(1)(A) (emphasis added).
By its plain language, the Lanham Act looks to the truthfulness
of the parties’ affiliation as crucial parts of the infringement
analysis. In other words, truthfulness is a part of the likelihood
of confusion analysis, and the majority’s formulation to the
contrary is irreconcilable with the statute.
Moreover, the majority’s third fair use prong is
substantively identical to its own “intent” Lapp factor. The
majority’s third fair use prong asks whether “the defendant’s
conduct or language reflect[s] the true and accurate relationship
between plaintiff and defendant’s products or services.” Maj.
Op. at 41 (emphasis added). This inquiry is identical to the
majority’s intent test under Lapp, which states “the key inquiry
clarification of the meaning of “necessary,” the majority is not
clear on this important point.
71
is whether the mark is being used so as to convey a connection
between the parties that may not exist.” Id. at 36 (emphasis
added). Whether one calls uses the words “connection” or
“relationship,” it is obvious that the majority’s third fair use
prong and its Lapp intent inquiry are identical.22 As the majority
places identical likelihood of confusion factors on both sides of
the equation, there can be no doubt that the majority expects
defendant to prove nonconfusion.
In sum, the “nominative fair use” defense is nothing more
than a venture into Lapp territory, namely, intent as shown
through the defendant’s purpose, prominence, and truthfulness
in connection with plaintiffs’ marks.23 Although it is troubling
22
The identity of the Lapp analysis and the affirmative
defense is further underscored by the majority’s additional
descriptions of the Lapp “intent” inquiry: whether “the
defendant made use of the plaintiff’s mark with the very purpose
of causing consumers to think the plaintiff endorses or sponsors
plaintiff’s good or service,” Maj. Op. at 35 (emphasis added),
and whether defendant “used the mark with the intent to confuse
the public as to the relationship between the defendant and the
plaintiff.” Id. at 37 (emphasis in original).
23
Just like the majority, the Ninth Circuit’s first two
“nominative fair use” prongs looks to purpose and prominence.
The Ninth Circuit’s third prong embraces truthfulness and more,
unabashedly requiring that “the user must do nothing that would,
in conjunction with the mark, suggest sponsorship or
endorsement by the trademark holder.” New Kids, 971 F.2d at
308. Try as it might to dress up the Ninth Circuit’s test in new
clothes, the test was and remains an inquiry into likelihood of
confusion, and the majority repeats the Ninth Circuit’s error of
placing the burden of negating confusion onto the defendant.
72
that the majority would permit plaintiffs to establish likely
confusion based on one Lapp factor alone, it is even more
disturbing that the majority would require the defendant to
dispel that finding through an affirmative defense looking to the
same likelihood of confusion considerations.24
B.
Not only does the majority’s test run afoul of KP
Permanent and the Lanham Act by placing upon defendant a
burden of negating confusion, but it is also judicially
unmanageable. On remand, the District Court will be required
to consider the purpose, prominence, and truthfulness of the
defendant’s conduct as part of the plaintiffs’ likelihood of
confusion case. It will also be required to look to the same
factors when entertaining the defendant’s affirmative defense.
This makes no sense. The majority points to no meaningful
distinctions between the kinds of “intent” that might be relevant
to likelihood of confusion, and those which might be relevant to
the affirmative defense. This is because they are identical. I
respectfully submit that District Courts will not be able to make
heads or tails of how to conduct the analysis.
24
Ironically, the majority criticizes the District Court in
Liquid Glass Enterprises, Inc. v. Dr. Ing. h.c.F. Porsche AG, 8
F. Supp. 2d 398 (D.N.J. 1998), suggesting that the Court
“conflated the [New Kids] test with the plaintiff’s burden of
proving likelihood of confusion.” Maj. Op. at 15. Yet the
majority’s test stands guilty of the same accusation that it aims
at Liquid Glass.
73
The practical effect of the majority’s bifurcated analysis
is that the nominative fair use defense will almost always be
available only in cases where it is unneeded. Where a court
finds the use to be made with the intent to confuse, then a
finding of likelihood of confusion will often follow. According
to the majority, in such a case, a defendant could then assert
nominative fair use. However, such a defense would be hollow
indeed, because the entire “nominative fair use” defense asks
whether the use was made with the intent to confuse. Thus, a
defendant found to have caused likely confusion due to
illegitimate purpose, overly prominent use, or untruthfulness
will be unable to assert a successful “nominative fair use”
defense. Conversely, in cases where the alleged nominative use
is made with good-faith purpose, is not overly prominent, and is
truthful, then a plaintiff will likely fail in proving its case of
likely confusion. In that case, the defense will be unneeded.25
25
Trying to find some use for its affirmative defense, the
majority argues that “[i]t is the circumstance in which a court
does not find bad intent but does find confusion that a
nominative fair use defense will be most useful.” Maj. Op. at
38-39 n.7 (some emphasis added). Ironically, such a use would
be almost the only circumstance where a nominative fair use
defense would even theoretically be available. If likelihood of
confusion exists due to bad intent, the defense will be
unavailable because the intent is bad. If likelihood of confusion
doesn’t exist, then the defense won’t needed. This leaves the
circumstance noted by the majority: if likelihood of confusion
is somehow shown despite a lack of bad intent, defendant can
point to its good intent to prevail. But considering that a key
inquiry in a nominative use case is why the defendant has used
the plaintiff’s mark (purpose) and how it has been used
(prominence and truthfulness), it is hard to imagine a case where
74
The result will certainly be that the nominative fair use
defense, as formulated by the majority, will remain unavailable
in many of the cases where it is needed due to a bad-faith intent
to confuse. The Supreme Court frowned heavily on this
absurdity in KP Permanent where it held, “‘[I]t defies logic to
argue that a defense may not be asserted in the only situation
where it even becomes relevant.’” 125 S. Ct. at 549 (quoting
Shakespeare Co. v. Silstar Corp., 110 F.3d 234, 243 (4th Cir.
1997)). The Court further noted that “it would make no sense
to give the defendant a defense of showing affirmatively that the
plaintiff cannot succeed in proving some element (like
confusion).” Id. Yet this is exactly what the majority has done.
necessary, non-prominent, and truthful use would be likely to
confuse.
Such a finding under the facts of this case would appear
to require highly unsophisticated consumers and an abundance
of actual confusion evidence. But this hypothetical possibility
– notably, circumstances not present in this case, possibly
rendering the majority’s approach as nothing more than dicta –
does not warrant the majority’s invention of an affirmative
defense that duplicates likelihood of confusion intent inquiries
and places upon defendant an affirmative burden of showing
good faith. In any case, the majority’s unlikely scenario of
likely confusion despite good faith may not warrant a complete
bar on such use, and under appropriate circumstances, may merit
at most a constrained remedy that continues to permit such
truthful use, such as ordering clarifying language or a
disclaimer, as happened in Searle. Cf. 715 F.2d at 839, 843.
75
C.
The majority’s bifurcated analysis appears to arise from
a failure to recognize that KP Permanent addresses several
issues, only the first of which is applicable to this case, namely,
the Supreme Court’s holding that a defendant bears no burden
of negating confusion. KP Permanent’s second holding
concerns matters peculiar to the statutory descriptive fair use
test, a test with no bearing in the present context.
The first issue in KP Permanent, and the one that controls
the outcome of this case, regards which party bears the burden
of demonstrating a likelihood of confusion. As the majority
recognizes, KP Permanent clearly holds that this burden belongs
to a plaintiff alone. Nothing in the Lanham Act requires a
defendant to negate a likelihood of confusion.26 As held by the
26
Lanham Act § 32(1)(a) states that “[a]ny person who
shall, without the consent of the registrant--(a) use in commerce
any reproduction, counterfeit, copy, or colorable imitation of a
registered mark in connection with the sale, offering for sale,
distribution, or advertising of any goods or services on or in
connection with which such use is likely to cause confusion, or
to cause mistake, or to deceive . . . shall be liable in a civil
action by the registrant . . . .” Lanham Act § 32(1)(a), 15 U.S.C.
§ 1114(1)(a). Similarly, Section 43(a)(1)(A) asks whether the
use is “likely to cause confusion, or to cause mistake, or to
deceive as to the affiliation, connection, or association of such
person with another person.” Id. § 43(a)(1)(A), 15 U.S.C. §
1125(a)(1)(A). Compare this language to the majority’s
affirmative “nominative fair use” defense – which asks whether
“defendant’s conduct or language reflect[s] the true and
accurate relationship between plaintiff and defendant’s products
76
Supreme Court, the Act requires that the burden remain on
plaintiffs: in that case, the Court held the statute “places a
burden of proving likelihood of confusion (that is, infringement)
on the party charging infringement even when relying on an
incontestable registration.” KP Permanent, 125 S. Ct. at 548.
Thus, held the Court, “the burden of proving likelihood of
confusion rests with the plaintiff.” Id. at 550.
The Court further held that it would be incoherent to
place upon defendant the burden of showing nonconfusion:
[A] look at the typical course of litigation in an
infringement action points up the incoherence of
placing a burden to show nonconfusion on a
defendant. If a plaintiff succeeds in making out a
prima facie case of trademark infringement,
including the element of likelihood of consumer
confusion, the defendant may offer rebutting
evidence to undercut the force of the plaintiff’s
evidence on this (or any) element, or raise an
affirmative defense to bar relief even if the prima
facie case is sound, or do both. But it would
make no sense to give the defendant a defense of
showing affirmatively that the plaintiff cannot
succeed in proving some element (like
confusion); all the defendant needs to do is to
leave the factfinder unpersuaded that the plaintiff
has carried its own burden on that point. A
or services.” Maj. Op. at 41 (emphasis added). It’s the same
inquiry, and it improperly places the burden of negating
confusion on defendant.
77
defendant has no need of a court’s true belief
when agnosticism will do.
Id. at 549. For the reasons noted above, I conclude that the
majority’s bifurcated analysis and the phrasing of its
“nominative fair use” defense violate this first and clear holding
of KP Permanent, by placing the burden of showing
nonconfusion on defendant.
A second issue in KP Permanent, in contrast, has no
bearing to this case. That issue was what role, if any, a finding
of likely confusion may play when a defendant asserts the
statutory affirmative defense of descriptive fair use under
Lanham Act § 33(b)(4). The statutory defense asks whether
“the use of the name, term, or device charged to be an
infringement is a use, otherwise than as a mark, . . . of a term or
device which is descriptive of and used fairly and in good faith
only to describe the goods or services of such party, or their
geographic origin.” Lanham Act § 33(b)(4), 15 U.S.C.
§ 1115(b)(4). Unlike the present dispute, which asks whether
defendant created a likelihood of confusion by using the
plaintiffs’ marks to refer at least in part to plaintiffs, a
descriptive fair-use defense would ask whether a defendant may
use a trademark (e.g., “BEST PRICE”) in its primary descriptive
sense (e.g., “we offer the best price on breakfast cereal”). In the
latter case, a threshold inquiry and key distinguishing fact is that
defendant would allege that it is not using the plaintiff’s marks
to refer to plaintiff at all, but is instead using the mark in a
descriptive way without reference to the plaintiff.
In KP Permanent, the alleged infringer argued that it used
variations of the term “micro color” to refer to its goods in a
78
descriptive way without reference to the trademark owner. The
question before the Court was whether a finding of likely
confusion would foreclose assertion of the statutory descriptive
fair use defense.27 The Court held that it would not, concluding
that “our holding that fair use can occur along with some degree
of confusion does not foreclose the relevance of the extent of
any likely consumer confusion in assessing whether a
defendant’s use is objectively fair.” 125 S. Ct. at 550.
Despite the majority’s suggestions to the contrary, the
Court’s second holding is not earth-shattering – the Court
merely held that even though a finding of likely confusion
would not foreclose assertion of the statutory descriptive fair use
defense, courts might nonetheless factor the extent of confusion
into determining whether the purportedly descriptive use was
not fair. In the context of descriptive fair use, the Court’s
statement makes sense because the extent of confusion might be
relevant to determining whether a the mark was “used fairly” or
“otherwise than as a mark.” Lanham Act § 33(b)(4), 15 U.S.C.
§ 1115(b)(4). But descriptive fair use and nominative use are
very different animals: in descriptive fair use, the key inquiry is
whether a plaintiff’s mark is being used in a descriptive sense,
but in nominative use cases, courts ask one question alone: is the
defendant’s use likely to confuse? 28 Indeed, even while noting
27
Underlying the case was a long-standing circuit split
over whether a finding of likely confusion foreclosed a statutory
descriptive fair use defense. See KP Permanent, 125 S. Ct. at
547 (collecting cases).
28
Descriptive fair use and nominative use “are quite
different from each other and bear little resemblance except that
both are types of non-infringing use.” 2 J. Thomas McCarthy,
79
that some cases had treated the extent of confusion as a relevant
consideration in descriptive fair use cases, the Supreme Court
immediately and unequivocally cautioned that “[c]ertainly one
cannot get out of [such cases] any defense burden to negate
[confusion] entirely.” 125 S. Ct. at 549.
It makes no sense to force the square peg of KP
Permanent’s second holding about descriptive fair use into the
round hole of nominative use. Nominative use is nothing more
than an inquiry into likely confusion. By reading KP Permanent
to permit a bifurcated analysis where confusion is the central
focus on each side, the majority reads KP Permanent to hold that
both: 1) defendant bears no burden of negating confusion, and
2) defendant bears a burden of negating confusion. Nor might
the majority justify its defense by characterizing it as an inquiry
into good faith. As stated by the Supreme Court, “Nor would it
make sense to provide an affirmative defense of no confusion
plus good faith, when merely rebutting the plaintiff’s case on
McCarthy on Trademarks and Unfair Competition, § 11:45 (4th
ed. 2005). As stated by the Ninth Circuit in distinguishing
nominative use from descriptive (or classic) fair use:
The distinction between classic and nominative
fair use is important for two reasons: (1) classic
and nominative fair use are governed by different
analyses; and (2) the classic fair use analysis only
complements the likelihood of customer confusion
analysis set forth in Sleekcraft, whereas the
nominative fair use analysis replaces the
Sleekcraft analysis.
Cairns, 292 F.3d at 1150. In other words, descriptive fair use
looks beyond confusion considerations whereas nominative use
looks only to a likelihood of confusion.
80
confusion would entitle the defendant to judgment, good faith
or not.” Id. Indeed, good faith is merely the flip side of bad
faith, and as discussed previously, the intent factor has always
remained part of the plaintiff’s case under Lapp.
The majority’s attempt to rely on KP Permanent in
support of its bifurcated analysis is further and finally belied by
the fact that the Court took pains to note that it was not
addressing nominative use. See id. at 546 n.3 (“Nor do we
address the Court of Appeals’s discussion of ‘nominative fair
use.’”). The majority’s transplantation of the Supreme Court’s
comments about descriptive fair use into the nominative use
context is no more effective than replacing a healthy human
heart with one from another species. In short, classic fair use is
a defense. Nominative use is not.
III.
Merely criticizing the majority’s approach would be
hollow commentary without providing in addition an outline on
how nominative use analysis can proceed in a fashion consistent
with the Lanham Act, KP Permanent, Prestonettes, Searle, and
this Court’s long-standing Lapp test. Needless to say, because
the nominative use analysis is an inquiry into the likelihood of
confusion, the burden must remain with plaintiffs, although – as
in any trademark infringement case – defendant remains free to
put on arguments and evidence to rebut those put forth by
plaintiffs. I start as I must with reference to our standard ten
factors, as phrased in our decision in A & H Sportswear, Inc. v.
Victoria’s Secret Stores, Inc.:
81
(1) the degree of similarity between the
owner’s mark and the alleged infringing mark;
(2) the strength of the owner’s mark;
(3) the price of the goods and other factors
indicative of the care and attention expected of
consumers when making a purchase;
(4) the length of time the defendant has used
the mark without evidence of actual confusion
arising;
(5) the intent of the defendant in adopting the
mark;
(6) the evidence of actual confusion;
(7) whether the goods, competing or not
competing, are marketed through the same
channels of trade and advertised through the same
media;
(8) the extent to which the targets of the
parties’ sales efforts are the same;
(9) the relationship of the goods in the minds
of consumers, whether because of the
near-identity of the products, the similarity of
function, or other factors;
82
(10) other facts suggesting that the consuming
public might expect the prior owner to
manufacture both products, or expect the prior
owner to manufacture a product in the defendant’s
market, or expect that the prior owner is likely to
expand into the defendant’s market.
237 F.3d 198, 215 (3d Cir. 2000) (discussing Interpace Corp. v.
Lapp, Inc., 721 F.2d 460 (3d Cir. 1983)).29 The majority is
correct that the factors may be tailored to the circumstances:
“[n]ot all factors will be relevant in all cases,” and “different
factors may properly be accorded different weights depending
on the particular factual setting.” Id.I agree with the majority that Lapp factors one and two
are unlikely to carry any weight in a nominative use case. In a
case where a defendant is using a plaintiff’s mark to refer to the
plaintiff, the use will always be identical.30 Moreover, it makes
little sense to give weight to factor two, the strength of the mark,
as nominative uses will be made with both weak and strong
marks.
29
This updated formulation post-dates Lapp and addresses
both competitive and non-competitive uses.
30
“When a defendant uses a trademark nominally, the
trademark will be identical to the plaintiff’s mark, at least in
terms of the words in question. Thus, application of the [normal
multi-factor] test, which focuses on the similarity of the mark
used by the plaintiff and the defendant, would lead to the
incorrect conclusion that virtually all nominative uses are
confusing.” Playboy Enterprises, Inc. v. Welles, 279 F.3d 796,
801 (9th Cir. 2002).
83
The majority focuses in this case on only four of the ten
Lapp factors (factors three through six), but agrees that in some
cases, the remaining factors (seven through ten) might be
relevant. I believe it is important to explore circumstances
where Lapp factors seven through ten may be pertinent. In this
case, much of the parties’ services, customers, advertising, and
markets are similar and may be in some regards identical.
Although the degree of identity or similarity is for the District
Court to determine in the first instance, the majority correctly
concludes that to the extent the parties share identical services,
customers, advertising, and markets, such identity lacks value in
determining the likelihood of confusion. See Maj. Op. at 33 (“it
would almost be expected that [defendant] and most other
defendants in a nominative use case would market themselves
through a media in which the marks to which they are referring
would be easily recognized and have meaning or relevance,
namely channels similar to those used by plaintiff”). However,
to the extent that the parties’ services, customers, advertising,
and markets are different, factors seven through ten may counsel
against a likelihood of confusion. Compare this case to one
involving a newscaster. What if the hypothetical newscaster
used plaintiffs’ logos as part of a newscast about plaintiffs?
Regardless of First Amendment issues, the differences between
the parties’ services would themselves counsel against a
likelihood of confusion. Thus, as recognized by the majority,
factors seven through ten are not per se irrelevant, and the door
remains open to them in relevant cases.
In light of these considerations, I recommend that in
cases involving colorable nominative use – i.e., where a
defendant has used a plaintiff’s mark to refer at least in part to
the plaintiff – the District Court consider Lapp factors three
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through ten, slightly reworded and renumbered one through
eight:
1. The price of the goods or services and other
factors indicative of the care and attention expected of
consumers when making a purchase. As noted by the majority,
this remains a relevant inquiry. The cheaper the goods or the
less sophisticated the consumers, the more likely that a use may
confuse. This factor will require careful attention by the District
Court on remand. People buying and selling homes might be
likely to take especial care in choosing an agent, but the use here
may also give rise to concerns under the “initial interest
confusion” doctrine. See Checkpoint Sys., Inc. v. Check Point
Software Techs., Inc., 269 F.3d 270, 292 (3d Cir. 2001) (holding
initial interest confusion actionable under the Lanham Act); see
also Lamparello v. Falwell, – F.3d –, Nos. 04-2011, 04-2122,
2005 WL 2030729, at *6 (4th Cir. Aug. 24, 2005) (quoting
Checkpoint and noting limitations on initial interest doctrine
where use was for criticism or commentary rather than profit).
2. The length of time the defendant has used the
mark without evidence of actual confusion arising. “If a
defendant’s product has been sold for an appreciable period of
time without evidence of actual confusion, one can infer that
continued marketing will not lead to consumer confusion in the
future.” Versa Prods., 50 F.3d at 205. “The longer the
challenged product has been in use, the stronger this inference
will be.” Id.
3. The intent of the defendant in using the mark. As
noted by the majority, “the key inquiry is whether the mark is
being used so as to convey a connection between the parties that
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may not exist.” Maj. Op. at 36. Although I disagree with the
majority’s bifurcation and duplication of the intent inquiry, there
can be no doubt that this inquiry is crucial and may include, as
noted by the majority, “myriad” factors. See Maj. Op. at 38.
Thus, the District Court should inquire as to the nature of the
defendant’s conduct and the accuracy of its use of the plaintiffs’
marks (akin to the majority’s third “nominative fair use” prong).
These inquiries extend further to looking to the purpose of the
use (akin to the majority’s first “nominative fair use” prong),31
and to whether defendant “took too much” with an eye towards
creating consumer confusion (i.e., the second “nominative fair
use” prong), such as a competitor using a plaintiff’s mark in
logo form, larger type, or different colors, in a way designed to
draw attention above and beyond proper nominative use.
Indeed, this factor was expressly considered in Searle, where we
enjoined the defendant from setting the mark apart in larger or
differently colored type, and required it to use “®” and a
disclaimer. 715 F.2d at 839, 843.
4. The evidence of actual confusion. The “more
evidence of actual confusion that a plaintiff can muster, the
stronger the likelihood of confusion in the future, but lack of
evidence of actual confusion,” at least where the time period is
short or the circumstances do not indicate that such evidence
should have been available, “does not raise an inference that
there is no likelihood of confusion.” Versa Prods., 50 F.3d at
205. Here, plaintiffs concede for purposes of this motion that
31
But as noted, I cannot ascribe to the majority’s
conjunctive phrasing that would require that the use be
necessary to describe both a plaintiff’s product or service and a
defendant’s product or service. See supra note 11.
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there is no such evidence, which for present purposes weighs in
defendant’s favor.
5. Whether the goods or services, competing or not
competing, are marketed through the same channels of trade and
advertised through the same media. Where the parties are
competitors and the channels of trade or media are identical, this
factor has no relevance because competitors by nature use
identical channels and media. However, to the extent that the
parties are not competitors, as in the case of the hypothetical
broadcaster, or the parties use differing channels of trade or
media, this factor lessens the likelihood of confusion because of
differences in the target audiences and the places where
consumers will see the marks used. In this case, defendant and
plaintiffs are not identical competitors but appear to compete in
some respects. They also appear to use websites geared towards
similar audiences. The extent that the parties are or are not
competitors, or do or do not have identical channels of trade or
media, should be determined by the District Court upon remand.
If identical, then this factor has no weight. If only slightly
different, the factor has some but little bearing in reducing the
likelihood of confusion. And the greater the differences, the
more weight the District Court should place on this factor.
6. The extent to which the targets of the parties’ sales
efforts are the same. The rationale behind factor six is similar
to that for factor five. In a nominative use case, the mere fact
that the parties target identical customers has no bearing. But to
the extent the targeted customers differ, that lessens the
likelihood of confusion. Upon remand, the District Court
should determine the extent to which the targeted customers are
identical or not.
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7. The relationship of the goods or services in the
minds of consumers, whether because of the near-identity of the
products or services, the similarity of function, or other factors.
The same rationale applies. The mere fact that the goods or
services are identical has no probative value because
competitors may oftentimes make otherwise nonconfusing
nominative use. But to the extent the goods or services differ,
that lessens the likelihood of confusion. Upon remand, the
District Court should determine the extent to which the parties’
services are similar or not.
8. Other facts suggesting that the consuming public
might expect the prior owner to provide both products or
services, or expect the prior owner to provide a product or
service in the defendant’s market, or expect that the prior owner
is likely to expand into the defendant’s market. This factor asks
whether consumers would expect plaintiffs to offer defendant’s
services, or offer services in defendant’s market, or to expand
into defendant’s market. The same rationale applies here as for
factors five, six, and seven; namely, to the extent that the
consuming public expects plaintiffs to offer defendant’s
services, to offer services in the defendant’s market, or to
expand into the defendant’s market, this factor has no bearing.
But the less the consuming public would expect such conduct
from plaintiffs, the more this factor cuts against a likelihood of
confusion. Upon remand, the District Court should consider this
factor as well.
IV.
The test outlined above best satisfies KP Permanent’s
requirement that plaintiffs bear the burden of establishing a
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likelihood of confusion. It also satisfies the requirements of the
Lanham Act, Prestonettes, and Searle, which provide that
nominative use is use that is not likely to confuse. Unlike the
majority’s approach, this test is judicially manageable because
it does not bifurcate and duplicate the analysis.
The majority objects that it would be unfair to deprive a
defendant of a nominative fair use defense. This complaint
rings hollow: defining “fair use” in terms of nonconfusion does
not give the majority license to place on defendant’s shoulders
a burden that it should not bear. It is therefore the majority’s
formulation that is “unfair.”
Moreover, the majority is simply wrong that defendants
will have no way of undercutting a charge of infringement. As
the Supreme Court noted in KP Permanent in response to this
very objection, a defendant remains free to “offer rebutting
evidence to undercut the force of the plaintiff’s evidence on”
likelihood of confusion. KP Permanent, 125 S. Ct. at 549. As
the Supreme Court held, “all the defendant needs to do is to
leave the factfinder unpersuaded that the plaintiff has carried its
own burden on that point. A defendant has no need of a court’s
true belief when agnosticism will do.” Id.V.
For the reasons discussed above, I cannot join in the
majority’s formulation of a bifurcated test because it runs afoul
of the Lanham Act, KP Permanent, Prestonettes, and Searle,
each of which make it clear that the burden in nominative use
cases remains with plaintiffs. Because the majority’s test
impermissibly places the burden of negating confusion on
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defendant, and is in addition judicially unmanageable, I
respectfully dissent. I nevertheless join in the judgment
remanding the case for further proceedings.
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