Chapter 6: Intellectual Property Rights 21
Chapter 6
Intellectual Property Rights
Introduction
Laws protecting patents, trademarks, and copyrights are designed to protect and reward inventive and artistic creativity. These laws limit the economic freedom of some individuals, but they protect the freedom of others to enjoy the fruits of their labors—in the form of profits.
The study of intellectual property law is important because intellectual property is of increasing importance in the United States and internationally. Television shows, movies, and software are forms of intellectual property. The protection of intellectual property relating to computers posed difficulties for the courts because the legislators who drafted patent, trademark, and copyright laws did not envision computers. Previous laws have had to be amended, or new laws created, to serve the needs of a computer generation.
Chapter Outline
I. Trademarks and Related Property
A trademark is a distinctive word, symbol, sound, or design that identifies the manufacturer as the source of particular goods and distinguishes it products from those made or sold by others.
Case Synopsis—Case 6.1: Coca-Cola Co. v. Koke Co. of America
The Coca-Cola Co. sought to enjoin The Koke Co. of America and other beverage companies from, among other things, using the word Koke for their products. Koke contended that the Coca-Cola trademark was a fraudulent representation and that Coca-Cola was thus not entitled to an injunction. Koke alleged that Coca-Cola, by its use of the Coca-Cola name, represented that the beverage contained cocaine (from coca leaves). The court granted the injunction against Koke, but an appellate court reversed. Coca-Cola appealed to the United States Supreme Court.
The United States Supreme Court upheld the trial court’s decision. The Supreme Court acknowledged that before 1900 Coca-Cola’s good will was enhanced by the presence of a small amount of cocaine, but that the cocaine had long been eliminated from the drink. The Court underscored that Coca-Cola was not “a medicine” and that its attraction did not lay in producing “a toxic effect.” Since 1900 sales had increased. The name had come to characterize a well known beverage to be had almost anywhere “rather than a compound of particular substances.” The Court noted that before this suit was brought Coca-Cola had advertised that the public would not find cocaine in Coca-Cola. “[I]t would be going too far to deny the plaintiff relief against a palpable fraud because possibly here and there an ignorant person might call for the drink with the hope for incipient cocaine intoxication.”
......
Notes and Questions
Until 1903, the amount of active cocaine in each bottle of Coke was equivalent to one “line” of cocaine, and, “many years before this suit was brought,” as the Supreme Court put it, Coca-Cola was advertised as an “ideal nerve tonic and stimulant.” In the first part of this century, the word Dope was understood to mean Coke. If a customer asked for a “Dope,” he or she was given a Coke. Koke attempted to associate the word with its product, and Coca-Cola also sought to stop this, arguing that people would be confused if they ordered a Dope, expecting a Coke, and got something else. The Supreme Court refused relief, concluding that Dope was not a sufficiently descriptive term. The court found that the word had no clear connection to Coke.
The name “Coke” was not registered as a trademark until 1945.
What, if any, harm could the Coca-Cola Company have suffered as a result of the Koke Company’s use of the Name “Koke” to market its products? The use of the name “Koke” may have created confusion in the mind of customers who could not distinguish “Koke” from “Coca-Cola.” Such confusion could result in lost sales for Coca-Cola. Confusion could also damage the reputation and goodwill associated with the Coca-Cola Company.
Suppose that the trial court had found that 25 percent of all adult Coca-Cola drinkers believed that Coca-Cola contained cocaine, despite the fact that cocaine was not listed among the soft drink’s ingredients. In that situation, should the court deny Coca-Cola’s request for an injunction against Koke? Probably not. Proving that many customers have a mistaken belief regarding a product is not the same as proving that the seller has fraudulently misrepresented the product.
Should the principles applied in this case to the confusingly similar product of a domestic manufacturer also apply to the goods of foreign producers? Why or why not? Yes, particularly if they are sold in the United States, where those principles apply under the law, and especially now, when products are easily imported, often at lower prices than similar goods can be obtained domestically, the same rules should be applied to all goods to insure a “level playing field” in the marketplace. No, different rules should apply to products made in different places, particularly if they are not sold in the United States or in any other locale in which those principles might apply, and with due consideration to the cultural and economic characteristics of those locales.
Additional Cases Addressing this Issue —
Consumer Confusion
Recent cases involving a sufficient likelihood of confusion to support an injunction against a non-owner’s use or alteration of a trademark include the following.
• Zino Davidoff SA v. CVS Corp., 571 F.3d 238 (2d Cir. 2009): The owner of the trademark “cool water” for fragrances would suffer irreparable harm in the absence of a preliminary injunction against a retail drugstore chain's sales of its product with the unique production code (UPC) removed, which increased the risk that consumers would unwittingly buy a counterfeit or defective product.
• TGI Friday’s Inc. v. Great Northwest Restaurants, Inc., __ F.Supp.2d __ (N.D. Tex. 2009): Restaurant franchisees cannot use “TGI Friday's” trade and service marks after the termination of their franchise agreement, even if franchisees continued to meet standards that franchisor required, because it is inevitable that customers will be confused into believing that they are dining at such restaurants.
• Productive People LLC v. Ives Design, __ F.Supp.2d __ (D. Ariz. 2009): A preliminary injunction is appropriate because there is complete identity between the allegedly infringing “www.namedrop.com” and the company's use of “namedrop” as a trademark when both parties use the Web as their primary marketing channel.
• Red Head Inc. v. Fresno Rock Taco LLC, __ F.Supp.2d __ (N.D. Cal. 2009): A corporation was entitled to a preliminary injunction barring a restaurant from further use of the corporation's trademarks, trade dress, and the name and likeness of musician Sammy Hagar after the restaurant breached their license agreement by, among other things, failing to pay royalties.
A. Statutory Protection of Trademarks
1. Trademark Dilution
• Statutory protection of trademarks and related property is provided at the federal level by the Lanham Trademark Act of 1946 (amended by the Federal Trademark Dilution Act of 1995 and the Trademark Dilution Revision Act of 2006), which incorporates the common law of trademarks.
• Many states also have trademark statutes.
• The dilution cause of action protects certain marks from unauthorized use regardless of a showing of competition or a likelihood of confusion.
• To state a claim for trademark dilution, a plaintiff must prove—
The plaintiff owns a famous mark that is distinctive.
The defendant is using a mark in commerce that allegedly is diluting the famous mark.
The marks’ similarity gives rise to an association between them.
The association is likely to impair the distinctiveness of the famous mark or to harm its reputation.
2. The Marks Need Not Be Identical
A famous mark may be diluted by the unauthorized use of an identical or a similar mark.
Additional Background—The Federal Trademark Dilution Act
Congress passed the Federal Trademark Dilution Act in 1995 as an amendment to 15 U.S.C. § 1125. The following is the complete statute (15 U.S.C.A. § 1125), as amended, with some of the historical notes, as the statute appears on Westlaw.
UNITED STATES CODE
TITLE 15. COMMERCE AND TRADE
CHAPTER 22—TRADEMARKS
SUBCHAPTER III—GENERAL PROVISIONS
§ 1125. False designations of origin and false descriptions forbidden
(a) Civil action
(1) Any person who, on or in connection with any goods or services, or any container for goods, uses in commerce any word, term, name, symbol, or device, or any combination thereof, or any false designation of origin, false or misleading description of fact, or false or misleading representation of fact, which--
(A) 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, or as to the origin, sponsorship, or approval of his or her goods, services, or commercial activities by another person, or
(B) in commercial advertising or promotion, misrepresents the nature, characteristics, qualities, or geographic origin of his or her or another person’s goods, services, or commercial activities, shall be liable in a civil action by any person who believes that he or she is or is likely to be damaged by such act.
(2) As used in this subsection, the term “any person” includes any State, instrumentality of a State or employee of a State or instrumentality of a State acting in his or her official capacity. Any State, and any such instrumentality, officer, or employee, shall be subject to the provisions of this chapter in the same manner and to the same extent as any nongovernmental entity.
(b) Importation
Any goods marked or labeled in contravention of the provisions of this section shall not be imported into the United States or admitted to entry at any customhouse of the United States. The owner, importer, or consignee of goods refused entry at any customhouse under this section may have any recourse by protest or appeal that is given under the customs revenue laws or may have the remedy given by this chapter in cases involving goods refused entry or seized.
(c) Remedies for dilution of famous marks
(1) The owner of a famous mark shall be entitled, subject to the principles of equity and upon such terms as the court deems reasonable, to an injunction against another person’s commercial use in commerce of a mark or trade name, if such use begins after the mark has become famous and causes dilution of the distinctive quality of the mark, and to obtain such other relief as is provided in this subsection. In determining whether a mark is distinctive and famous, a court may consider factors such as, but not limited to--
(A) the degree of inherent or acquired distinctiveness of the mark;
(B) the duration and extent of use of the mark in connection with the goods or services with which the mark is used;
(C) the duration and extent of advertising and publicity of the mark;
(D) the geographical extent of the trading area in which the mark is used;
(E) the channels of trade for the goods or services with which the mark is used;
(F) the degree of recognition of the mark in the trading areas and channels of trade used by the marks’ owner and the person against whom the injunction is sought;
(G) the nature and extent of use of the same or similar marks by third parties; and
(H) whether the mark was registered under the Act of March 3, 1881, or the Act of February 20, 1905, or on the principal register.
(2) In an action brought under this subsection, the owner of the famous mark shall be entitled only to injunctive relief unless the person against whom the injunction is sought willfully intended to trade on the owner’s reputation or to cause dilution of the famous mark. If such willful intent is proven, the owner of the famous mark shall also be entitled to the remedies set forth in sections 1117(a) and 1118 of this title, subject to the discretion of the court and the principles of equity.
(3) The ownership by a person of a valid registration under the Act of March 3, 1881, or the Act of February 20, 1905, or on the principal register shall be a complete bar to an action against that person, with respect to that mark, that is brought by another person under the common law or a statute of a State and that seeks to prevent dilution of the distinctiveness of a mark, label, or form of advertisement.
(4) The following shall not be actionable under this section:
(A) Fair use of a famous mark by another person in comparative commercial advertising or promotion to identify the competing goods or services of the owner of the famous mark.
(B) Noncommercial use of a mark.
(C) All forms of news reporting and news commentary.
(July 5, 1946, c. 540, Title VIII, s 43, 60 Stat. 441.)
(As amended Nov. 16, 1988, Pub.L. 100-667, Title I, s 132, 102 Stat. 3946; Oct. 27, 1992, Pub.L. 102-542, s 3(c), 106 Stat. 3568; Jan. 16, 1996, Pub.L. 104-98, s 3(a), 109 Stat. 985.)
HISTORICAL AND STATUTORY NOTES
Derivation. Act Mar. 19, 1920, c. 104, s 3, 41 Stat. 534.
References in Text. Acts March 3, 1881, and February 20, 1905, referred to in subsec. (c)(1)(H), (3), are acts Mar. 3, 1881, c. 138, 21 Stat. 502 and Feb. 20, 1905, c. 592, 33 Stat. 724, which were repealed insofar as inconsistent with this chapter by act July 5, 1946, c. 540, s 46(a), 60 Stat. 444. Act Feb. 20, 1905, was classified to sections 81 to 109 of this title.
1996 Amendments. Subsec. (c). Pub.L. 104-98, s 3(a), added subsec. (c).
1992 Amendments. Subsec. (a). Pub.L. 102-542, s 3(c), redesignated existing provisions as par. (1) and, in par. (1), as so redesignated, substituted “(A)” and “(B)” for “(1)” and “(2)”, respectively, and added par. (2).
1988 Amendment. Subsec. (a). Pub.L. 100-667, s 132, substituted provisions which related to liability in civil action for any person who uses in commerce any word, term, name, symbol, or device, or any false designation of origin, false or misleading description of fact or false or misleading representation of fact in manner likely to cause confusion, or mistake, or deceive as to affiliation of such person with another person, for provisions which related to false designations of origin and false descriptions.
B. Trademark Registration