[About the author: Scott Lesowitz is a Harvard Law School graduate and former Assistant United States Attorney based in Los Angeles, California. His e-mail address is email@example.com, and his phone number is 323-452-9909.]
This page provides a general overview of disputes related to trademark infringement, false advertising, and false description. The page discusses what trademarks are, trademark infringement lawsuits, false advertising and false description, and concludes with a discussion on foreign uses of trademarks.
Trademark infringement relates to the unauthorized use of something like a name, logo, or design that consumers associate with a certain manufacturer, service provider, or seller. Trademark law traditionally protects against actions that will likely confuse consumers about who manufactured, sold, or provided goods or services.
Claims for false advertising and false description are distinct from trademark infringement claims. They technically do not require the wrongful use of a trademark.
This site’s focus is on California law and the federal law in the Ninth Circuit, as the author practices in Los Angeles, California. Please note that this page does not discuss or list all possible grounds for litigation related to trademarks or unfair competition or under the Lanham Act.
A trademark is a word, name, symbol, or device, that has the effect of distinguishing goods or services as being made, sold, or offered by a certain source. 15 U.S.C. § 1127. A distinctive appearance or ornate packaging that consumers associate with a given manufacturer or seller may receive trademark protection. (Note that this page loosely uses the word “trademark” to refer to all types of marks, including service marks.)
Consumers do not need to know the specific identity of the manufacturer or seller who uses the trademark. It is enough that consumers will likely believe that all products or services with the trademark are made by or sold by the same person or entity. Fleischmann Distilling Corp. v. Maier Brewing Co., 314 F.2d 149, 155 (9th Cir. 1963).
Legally protectable trademark rights may exist even if the trademark has never been registered with the U.S. Patent and Trademark Office. Generally, the first person or entity to use the mark in commerce in a geographic location holds trademark rights over any later users in that location for any lines of business or products for which the mark has been used. However, trademark registration
Words or phrases are less likely to receive trademark protection if they seem generic or overly descriptive. For example, if you offered a calculator application for cellphones and marketed it under the names “Math Calculation Device” or “Calculator Application,” you would probably receive no enforceable trademark rights.
Trademark infringement generally relates to the unauthorized use of a trademark in a manner that is likely to cause confusion as to the source or seller of a product or service. Trademark infringement may occur when the alleged wrongdoer uses a trademark in connection with an actual or contemplated sale, distribution, or advertisement of a good or service, AND this use of the trademark is likely to cause confusion, mistake, or deception related to the identity or affiliations of the seller, maker, or offeror of the good or service. 15 U.S.C. § 1114(1).
If the defendant did not intend to violate the plaintiff’s trademark rights and did not know that any violation would occur, a court may still find that the defendant committed infringement and may order the defendant not to use the trademark in the future. However, the plaintiff may not receive any monetary damages if the defendant acted unknowingly. 15 U.S.C. § 1114(1). Damages and injunctions in trademark lawsuits are discussed further below.
Whether there is a likelihood of confusion is not always clear. Within the Ninth Circuit (which includes California), federal courts consider and balance the following factors in determining whether a trademark infringement has occurred:
• The strength of the plaintiff’s trademark (fanciful marks that do not describe the product or service are more likely to be protected),
• The similarity between the plaintiff’s and the defendant’s marks (for example, infringement is more likely to occur if the defendant uses the exact same business name as the plaintiff rather than a name that is merely similar),
• Any evidence of actual confusion (evidence that specific consumers were confused is not always required, as courts generally understand that proving actual incidents of confusion may be unrealistic),
• Similarities in the plaintiff’s and the defendant’s marketing channels (the more similarities the more likely there will be a finding of infringement),
• The similarity between the plaintiff’s and the defendant’s goods or services (higher similarity makes infringement more likely),
• The likely degree of care of the consumers of the goods or services offered (courts assume sophisticated consumers are less likely to be confused), and
• Whether the defendant had bad intent.
Adidas America, Inc. v. Skechers USA, Inc., 890 F.3d 747, 755 (2018); Stone Creek, Inc. v. Omnia Italian Design, Inc., 875 F.3d 426, 431-432 (9th Cir. 2017); Perfumebay.com Inc. v. eBay, Inc., 506 F.3d 1165, 1176 (9th Cir. 2007); Brookfield Communications, Inc. v. West Coast Entertainment Corp., 174 F.3d 1036, 1060 (9th Cir. 1999); AMF, Inc. v. Sleekcraft Boats, 599 F.2d 341 (9th Cir. 1979); Paul Sachs Originals Co. v. Sachs, 325 F.2d 212, 215 (9th Cir. 1963).
A plaintiff may sue regarding false descriptions or false advertisements even if the plaintiff does not have legally recognized trademark rights. 15 U.S.C. § 1125(a); U-Haul Intern., Inc. v. Jartran, Inc., 681 F.2d 1159 (9th Cir. 1982).
It is notable that the misrepresentations need not be related specifically to the plaintiff’s goods or services. For example, let’s say Company A and Company B each sell Nike shoes and are competitors. Company B falsely tells customers that Nike has certified Company B as a distinguished seller of Nike shoes. Company A may be able to successfully sue Company B even though Company B said nothing about Company A or Company A’s goods or services. Of course, if Company B told customers false information about Company A, that also could be grounds for a lawsuit.
A successful plaintiff in a lawsuit involving trademark infringement, false descriptions, or false advertising, may receive an injunction barring the defendant from committing future wrongs, such as any further use of the trademark or making the same false statements in the future. This is significant because an injunction is a court order. Violating a court order can lead to a finding of contempt of court and significant penalties.
Before trial, the plaintiff may seek a preliminary injunction in which the court orders the defendant not to perform certain acts pending trial. This is significant as it can take a long time to get to trial.
The granting of any injunction requires a threat of continuing injury. If a plaintiff prevails at trial, a permanent injunction will likely be granted.
A plaintiff seeking a preliminary injunction has yet to prove the plaintiff’s case to a judge or jury. Therefore, the plaintiff must make a strong showing at the time of requesting the preliminary injunction that the plaintiff has a fair chance of winning at trial, that the plaintiff will suffer irreparable harm if a preliminary injunction is not granted, and that it is equitable and in the public interest to grant the preliminary injunction. Alliance for the Wild Rockies v. Cottrell, 632 F.3d 1127, 1131-1132 (9th Cir. 2011). A preliminary injunction provides a significant benefit and advantage to the plaintiff. Courts realize this and tend to act cautiously in granting preliminary injunctions.
Unless the defendant is found to have acted unknowingly in committing an act of infringement, a successful plaintiff may receive money damages for trademark infringement, false description, and false advertising.
Damages may be measured by the amount of the defendant’s profits, the amount of the actual damages that the plaintiff suffered, or in the case of trademark infringement, the amount of what a reasonable royalty would have been for the defendant to have used the plaintiff’s trademarks.
The winning party may obtain its reasonable attorneys’ fees if the case is found to be “exceptional.” A case is more likely to be “exceptional” if the losing party took unreasonable positions in the litigation or if the defendant’s behavior that caused the lawsuit was especially wrongful.
In cases where the defendant has acted intentionally, with malice, or with fraud, the plaintiff may be eligible to receive punitive damages. Punitive damages are designed to punish the defendant and may be greater than the amount of actual damages proved.
In cases involving counterfeit goods, a plaintiff may be entitled to elect to pursue statutory damages. In the case of statutory damages, damages do not have to be tied to either the plaintiff’s losses or the defendant’s profits.
An important concept of American trademark law is the “territoriality principle.” There are two important parts of this principle.
The first part is that the rights to use a trademark in a country accrue from use of the trademark in that country’s commerce. Therefore, trademark rights can only accrue in the United States through use of the trademark in United States commerce. (What constitutes United States commerce is discussed more later in this section.)
The second important part of the “territoriality principle” is that the trademark rights in each country are considered separate even when only one business has used the mark. This means that if Company A is an American company that sells Product X in the United States and Canada, the United States would consider Company A’s trademark rights to Product X in the United States and Canada to be separate and distinct.
Before exploring this further, one practical area of law that is worth discussing now is the sale of so-called grey market goods. This usually refers to when someone purchases foreign versions of an American brand and then resells the foreign versions in the United States. There would seem not to be a problem with trademark infringement in this case. Trademark infringement is about making false associations or false designations regarding the identity of the maker or seller of goods or services.
In fact, most courts recognize that if the foreign version of the product is identical to the American version, there can be no trademark infringement, regardless of what the brand owner’s rules are regarding resales in the United States. However, courts often find actual sales of grey market goods to constitute trademark infringement. This is because foreign versions of goods are often not identical to the versions sold in the United States. The threat of trademark infringement lawsuits can deter all sales of grey market goods.
Courts seize upon seemingly small differences to find that the domestic and foreign versions of a product are different. These differences will often occur when adapting the packaging of a product to a foreign country, especially a country where English is not the dominant language.
For example, in Hokto Kinoko Co. v. Concord Farms, Inc., 738 F.3d 1085 (9th Cir. 2013), the Ninth Circuit found that a foreign-version of a product was sufficiently different than the domestic version to allow for a finding of trademark infringement. The differences were the language used on the packaging (English versus Japanese), the foreign packaging using the metric system for the measurements listed on the packaging, and the differences in the certification requirements the products were designed to satisfy.
Courts often find it significant that there are differences in the warranties and services provided to purchasers of the products destined for the United States market versus foreign markets. See Beltronics USA, Inc. v. Midwest Inventory Distribution, LLC, 562 F.3d 1067 (10th Cir. 2009); S. D. P. Nestle, S.A. v. Casa Helvetia, Inc., 982 F.2d 633, 644 n.7 (1st Cir. 1992). Courts within the Ninth Circuit have agreed with this position regarding warranties and services. See HM Electronics, Inc. v. R.F. Technologies, Inc., 2013 WL 12074966 (S.D. Cal. 2013). This is even though the brand owner controls what warranty rights to give or to recognize.
Returning to accrual of trademark rights and the territoriality principle and going into further depth on that subject, under United States trademark law, only use of the trademark in United States commerce causes trademark rights to accrue in the United States. Use of a trademark in a foreign country will not create priority to use the mark in America. (There is an exception in the Ninth Circuit for famous marks that is discussed in greater detail later in this section. This exception for famous marks has not been adopted by any other federal appellate court.) Also, registering a trademark in a foreign country generally does not cause trademark rights to accrue in the United States. However, note that a foreign trademark owner can file an intent-to-use application in the United States to help protect its rights while preparing to enter the United States market.
One consequence of these legal principles is that courts in the United States may consider one entity to be the exclusive owner of the right to use a mark in the United States while recognizing there to be another exclusive owner of the right to use the mark elsewhere. A court in the United States may recognize multiple businesses as owning exclusive rights to use the same trademark within different geographic areas.
Assuming that a trademark is not famous, what constitutes use in United States commerce in American trademark infringement litigation? Must a business always have a physical presence in the United States to earn trademark rights in the United States? The answer is no.
For example, a foreign company using a trademark while selling items over the Internet to people in the United States would be using that mark in commerce in the United States. (Whether the amount of commerce is sufficient is a different question. Usually, if the sales are to genuine customers, the number of sales required is relatively low.) In fact, one court held that distribution of software for free to Americans over the Internet was sufficient for the accrual of trademark rights within the United States. Planetary Motion, Inc. v. Techsplosion, Inc., 261 F.3d 1188 (11th Cir. 2001). However, in the Planetary Motion case, the court emphasized that the amount of distribution was large.
A well-known case that is considered to represent a far-reaching view of what constitutes use in commerce in the United States is International Bancorp, LLC v. Soc. d. Bains, 329 F.3d 359 (4th Cir. 2003). In that case, the largest casino operator in Monte Carlo asserted that it held enforceable trademark rights in the United States. The majority agreed. While merely advertising in the United States would not be enough to accrue trademark rights in the United States, the majority held that more than mere advertising had occurred. United States citizens traveled to the casino and gambled there. This constituted foreign trade. The majority analogized the “use in commerce” requirement in the United States trademark laws to commerce falling under the Commerce Clause of the United States Constitution. As the Commerce Clause has been interpreted quite broadly, this gives wide scope to “use in commerce” under the federal trademark statutes (the Lanham Act).
The dissenting opinion was blistering. It called the majority’s opinion an “unprecedented conclusion.” It stated that the “foreign trademark” had only been used to “sell services in a foreign country” and that the trademark was “never used” in the United States.
It should be noted that a lower level of use of the trademark in the United States is required to oppose a registration at the United States Patent and Trademark Office than to pursue litigation for trademark infringement in a court. That said, the opposer of the registration still must be able to show that it has made some use of the trademark in the United States.
As referenced above, in 2004, the Ninth Circuit Court of Appeals (which includes California) recognized a “famous-mark” exception to the territoriality principle of trademark rights. Grupo Gigante SA v . Dallo & Co. Inc., 391 F.3d 1088, 1094 (9th Cir. 2004). The Ninth Circuit did not reject the traditional “territoriality principle” of trademark rights. However, the court held that in the case of famous trademarks, to not recognize domestic trademark rights for the foreign business could lead to “consumer confusion and fraud.” Businesses in the United States could otherwise seize upon consumer confusion about their association (or lack thereof) to a famous foreign brand.
The Ninth Circuit noted an example of a trial court in New York that recognized domestic trademark rights to a French company in the name of its high-end Paris restaurant. In that case, people unassociated with either the Paris restaurant or the French company opened a restaurant in New York and gave it the same name as the famous Paris restaurant. The “imposter” restaurant earned business from people in the United States thinking that they were eating at the American location of the high-end Paris restaurant.
The Ninth Circuit is the only federal appellate court to recognize a “famous-mark” exception. After the Ninth Circuit recognized the “famous-mark” exception in 2004, the Second Circuit specifically found that there is no “famous-mark” exception to the territoriality principle. ITC Ltd. v. Punchgini, Inc., 482 F.3d 135, 157-165 (2nd Cir. 2007). This means that a federal trial court within the Ninth Circuit, which includes California, would have to consider the “famous-mark” exception to be a part of United States trademark law. In contrast, a federal trial court within the Second Circuit would have to consider there to be no “famous-mark” exception in United States trademark law. (The division between the Second Circuit, which includes New York, and the Ninth Circuit, which includes California, is interesting to the author as he is licensed to practice in California and New York.)
The Trademark Trial and Appeal Board (TTAB) is the body within the U.S. Patent and Trademark Office that decides disputes over whether the office should grant or cancel a trademark registration. The TTAB does not recognize a “famous-mark” exception for foreign trademark holders. Bayer Consumer Care AG v. Belmora LLC, 90 U.S.P.Q.2d 1587, 1591 (T.T.A.B. 2009).
There are numerous international conventions and treaties regarding trademark rights. The United States is a member to some of the treaties but not others. Even when the United States is a member, how that membership should affect individual court cases is controversial. Courts often take a narrow view.
That said, courts in America allow foreign trademark holders to sue in the United States for acts committed in the United States that violate their foreign trademark rights. People can perform acts inside the United States that are considered to target, or unreasonably affect, a foreign market. For an interesting example involving cybersquatting, see Harrods Ltd. v. Sixty Internet Domain Names, 302 F.3d 214 (4th Cir. 2002).
[About the author: Scott Lesowitz is a Harvard Law School graduate and former Assistant United States Attorney based in Los Angeles, California. His e-mail address is firstname.lastname@example.org and his phone number is 323-452-9909. This page is for educational purposes only. No legal advice or assistance are given.]