Evolution of Nominative Fair Use - From Ninth to Third
The concept of fair use in US trademark law for many years meant statutory fair use, set forth in the Lanham Act as a defence to claims for trademark infringement. In 1992 the US Court of Appeals for the Ninth Circuit adopted another kind of fair use defence, referred to as nominative fair use. This defence has been slow to spread beyond the Ninth Circuit, but that may be changing. In October 2005 the Third Circuit expressly recognized nominative fair use as a defence and developed a test that is similar to but distinct from the Ninth Circuit's approach. This article will briefly outline the evolution of nominative fair use as a recognized defence to infringement claims.
Traditional statutory fair use
The traditional fair use defence appears in Section 33(b)(4) of the Lanham Act, 15 USC §1114(b)(4). The statute provides, in relevant part, that:
'[s]uch conclusive evidence of the right to use the registered mark shall be subject to proof of infringement as defined in Section 32, and shall be subject to the following [defences] or defects: ... (4) That the use of the name, term or device charged to be an infringement is a use, otherwise than as a mark, of the party's individual name in his own business, or of the individual name of anyone in privity with such party, or 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.'
The most common example of this defence is the case in which a defendant uses a term, not as a trademark, to describe its goods or services. Trademark owners often complain that such apparently descriptive uses cause confusion nonetheless and they often also challenge the defendant's good faith in its use of the term. In KP Permanent Make-Up Inc v Lasting Impression I Inc, the US Supreme Court held that the defendant, facing such a challenge to its descriptive use, 'has no independent burden to negate the likelihood of any confusion', because it is the plaintiff's burden to prove that a likelihood of confusion exists. The court also recognized that some level of consumer confusion may be compatible with descriptive fair use and will not necessarily prevent the defendant from relying on the defence.
Ninth Circuit's creation of nominative fair use defence
The Ninth Circuit created a new category of fair use - nominative fair use - in its 1992 decision in New Kids on the Block v News America Publishing Inc, 971 F 2d 302 (9th Cir 1992). The court defined classic, statutory fair use based on Section 33(b)(4) as the case in which a defendant uses the plaintiff's trademark to refer to something other than the plaintiff's product. But what happens when the defendant uses the plaintiff's mark to refer to the plaintiff? In New Kids, the plaintiff was a musical group that complained about a poll run by two newspapers. In that poll, the newspapers asked their readers to identify their favourite band members with questions such as 'Which of the New Kids on the Block would you most like to move next door?'. The court recognized that this was not a classic fair use; the newspapers used the plaintiff's mark for the purpose of identifying the plaintiff. The court held that defendants in such cases can rely on a nominative fair use defence, provided they meet three requirements:
- The product or service must be one not readily identifiable without use of the trademark;
- Only so much of the mark or marks may be used as is reasonably necessary to identify the product or service; and
- The user must do nothing that would, in conjunction with the mark, suggest sponsorship or endorsement by the trademark holder.
The Ninth Circuit has consistently applied the nominative use defence since New Kids. For example, the court applied the defence in a metatag case involving a former 'Playmate of the Year'. Here, the Ninth Circuit held that it was permissible for Terri Welles to use the words 'playboy' and 'playmate' in metatags, because those words 'imply no current sponsorship or endorsement by [Playboy]. Instead, they serve to identify Welles as a past [Playboy] 'Playmate of the Year''. The court observed that nominative uses are important to encourage the free flow of information:
'Forcing Welles and others to use absurd turns of phrase in their metatags, such as those necessary to identify Welles, would be particularly damaging in the internet search context. Searchers would have a much more difficult time locating relevant websites if they could do so only by correctly guessing the long phrases necessary to substitute for trademarks … Precluding their use would have the unwanted effect of hindering the free flow of information on the Internet, something which is certainly not a goal of trademark law.'
The court also noted that in cases involving nominative use, the three-factor New Kids test is applied instead of the traditional likelihood of confusion analysis.
Third Circuit's recognition of nominative fair use
In Century 21 Real Estate Corporation v LendingTree Inc, the Third Circuit became only the second circuit to recognize expressly and apply the nominative fair use defence (see Nominative fair use defence recognized by Third Circuit).The defendant, LendingTree, operates a website that provides a referral network for real estate brokers, mortgage lenders and others serving consumers in the residential real estate market. Included in the real estate broker referral service are franchisees of major real estate brokerage franchise systems, including franchisees of Century 21 Real Estate Corporation, Coldwell Banker Real Estate Corporation and ERA Franchise Systems Inc.
These three franchisors objected to LendingTree's use of the CENTURY 21, COLDWELL BANKER and ERA marks, in both capital letter and logo formats, on its website and in printed marketing materials. LendingTree typically used the marks to identify real estate agents who participate in its referral network. For example, LendingTree stated that it is:
'[r]epresented by large independent real estate companies and members of major franchises - Coldwell Banker, Century 21, Prudential, ERA, ReMAX, GMAC … and Realty Executives.'
The franchisors argued that LendingTree's use of the marks created confusion about affiliation between the franchisors and LendingTree. Following a hearing on the franchisors' motion for a preliminary injunction, LendingTree modified its use of the marks to some extent and it also added a disclaimer of non-affiliation between itself and the franchisors.
The district court concluded that even this modified use was likely to cause confusion and it therefore held that the nominative use defence did not shield LendingTree.
In a two-to-one vote, the Third Circuit reversed the preliminary injunction and remanded the case for further proceedings. In reaching its decision, the court made the following determinations regarding trademark cases involving nominative fair use:
- Recognition of nominative fair use: The court recognized nominative fair use, which it defined as occurring when the defendant uses the plaintiff's trademark to refer to the plaintiff or its products, where the only practical way to refer to something is to use the trademark term. The court gave the example of the car mechanic who describes his auto repair services by referring to the brands of cars he specializes in repairing.
- Plaintiff's burden to prove likelihood of confusion: In cases involving nominative fair use, the plaintiff retains the initial burden of proving a likelihood of confusion. However, the court modified the list of factors to be considered in the likelihood of confusion analysis. Two factors - similarity of the marks and strength of the plaintiff's mark - should not be considered at all, as they are present by definition in most if not all nominative fair use cases and their consideration would skew the analysis in favour of finding confusion to be likely. Other factors - channels of trade, target markets - could be relevant in some nominative fair use cases, but the court concluded they were not relevant in LendingTree. The court identified only four factors as relevant in this case:
o the care and attention expected of consumers;
o the defendant's intent in adopting the mark (whether the defendant's nominative use was executed in a manner intended to cause consumers to believe that there was some affiliation between the parties);
o the length of time the defendant has used the marks without evidence of actual confusion; and
o the evidence of actual confusion.
- Defendant's burden to prove that its use is fair: If the plaintiff establishes a likelihood of confusion using these factors, then the burden shifts to the defendant to satisfy a three-pronged test, which is similar but not identical to the Ninth Circuit's nominative fair use test from the New Kids on the Block decision:
o Use of the plaintiff's mark is necessary to describe both the plaintiff's product or service and the defendant's product or service. (The Ninth Circuit focuses only on the plaintiff's product or service.)
o The defendant uses only so much of the plaintiff's mark as is necessary to describe the plaintiff's product.
o The defendant's conduct or language reflects the true and accurate relationship between the plaintiff's and the defendant's products or services. (The Ninth Circuit requires the defendant to show that its use does not create confusion as to sponsorship or endorsement.)
- Coexistence of fair use and confusion: Relying on language in the Supreme Court's KP Permanent Make-Up decision concerning traditional, statutory descriptive fair use, the court recognized that a nominative fair use may coexist with some level of confusion. (In contrast, the Ninth Circuit requires that the defendant relying on nominative fair use as a defence show that its use does not create confusion about sponsorship or affiliation by the plaintiff.)
The dissenting judge concurred with the majority's conclusion that the case should be remanded, but dissented from the court's creation of a two-step analysis for nominative use cases (first step, the plaintiff proves likelihood of confusion; second step, the defendant proves that its nominative use was fair). The dissent argued that the question of nominative use is one of likely confusion and not an affirmative defence, and that the two-step process places on the defendant the burden of negating likely confusion.
The franchisors' petition for rehearing was denied in December.
The Ninth and Third Circuits remain the only circuits to have expressly recognized and applied nominative fair use as a defence to infringement.
Three other circuit courts have commented on or obliquely referred to the defence:
- In PACCAR Inc v Telescan Technologies LLC, the Sixth Circuit observed that it has never followed the nominative fair use analysis developed by the Ninth Circuit, instead applying the traditional likelihood of confusion analysis;
- In Chambers v Time Warner Inc, the Second Circuit noted that the district court had applied the standard for nominative fair use as articulated by the Ninth Circuit, but found that the court improperly dismissed the plaintiff's claims because they were broader than the single example to which the district court applied the doctrine; and
- In Pebble Beach Co v Tour 18 I Limited, the Fifth Circuit discussed New Kids and the nominative use doctrine, and appeared at least implicitly to endorse some form of the defence.
This article has been reprinted with permission from the March 22, 2006 edition of the World Trademark Law Report. © 2002-2006, Globe Business Publishing Ltd.