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Kandis Koustenis

Author Archives: Kandis M. Koustenis

  1. Flummoxed By Fame – Well-Known Marks & Flanax

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    The “well-known marks” doctrine (also known as the “famous marks” doctrine), protects a trademark in a country where it has never been used, so long as the mark enjoys fame and renown sufficient to cross borders. We previously discussed the well-known marks principle and the fact that U.S. courts disagree about its application in the United States. Well, thanks to a recent case involving pain relievers called FLANAX, the Supreme Court may soon accept an invitation to resolve this issue.

    This is a pretty big deal for two reasons. First, this legal doctrine serves as an exception to the fundamental principle of trademark law – called the territoriality principle – that a trademark has a separate legal existence in each country. Second, the doctrine originated in a treaty signed by the United States. Owners of famous U.S. brands take advantage of this doctrine to enforce their trademark rights when they haven’t used their brand in other treaty countries.

    So, the well-known marks doctrine turns the territorial, use-based protection standard we’ve been living with on its head when it comes to protection for a small list of exclusive and famous brands. It’s important to get it right.

    The Fight for FLANAX

    In late October, a company called Belmora asked the Supreme Court to review a decision from the U.S. Court of Appeals for the Fourth Circuit that cancelled Belmora’s U.S. trademark based on a competitor’s rights to the same mark in a different country.

    Belmora owns a U.S. trademark registration for FLANAX for naproxen sodium pain reliever, and has used this mark in the U.S. for over ten years. Its competitor Bayer, however, has sold a naproxen sodium pain reliever under the FLANAX name since the 1970s – in Mexico.

    Two years after Belmora received its U.S. registration for FLANAX, Bayer filed a petition to cancel Belmora’s registration with the Trademark Trial and Appeal Board (TTAB). Bayer based its trademark cancellation request on a variety of theories, including the well-known marks doctrine. Although the TTAB dismissed most of Bayer’s claims, it granted its petition to cancel Belmora’s trademark registration because – even though Bayer did not use the FLANAX mark in the U.S. – there was evidence of Belmora “invoking the reputation” of Bayer’s Mexican FLANAX product to sell Belmora’s FLANAX product in the United States.

    After the TTAB canceled the registration, Belmora appealed to the district court in the Eastern District of Virginia, which consolidated the case with a separate lawsuit for unfair competition Bayer filed against Belmora. The district court disagreed with the TTAB’s cancellation of Belmora’s mark (and dismissed Bayer’s other claims) because Bayer does not use the FLANAX trademark in the United States.

    Bayer successfully appealed to the Fourth Circuit Court of Appeals, which agreed with the TTAB’s cancellation of Belmora’s FLANAX registration.

    Will the Supreme Court Heal this Headache?

    Although Bayer’s did not rely on the well-known marks doctrine on appeal, both Belmora’s petition to the Supreme Court and a “friend of the court” brief filed by the International Trademark Association explicitly invite the Supreme Court to review the doctrine and resolve the current split among U.S. courts about whether it should be recognized in this country.

    As we explained in our prior post, the lower courts disagree on this question. The Ninth Circuit’s decision in Grupo Gigante applied the well-known marks doctrine as a limited exception to the territoriality principle – the fundamental principle that a trademark has a separate legal existence in each sovereign territory. The Ninth Circuit applied this exception in Grupo Gigante because the Mexican trademark enjoyed cross-border recognition among a substantial percentage of U.S. consumers. In ITC v. Punchgini, however, the Second Circuit refused to apply the well-known marks exception because it determined that U.S. trademark law did not recognize the well-known marks doctrine and, therefore, could not be applied absent congressional action. In the Person’s case, the Federal Circuit similarly refused to recognize the well-known marks doctrine under U.S. law.

    The Fourth Circuit decision in the FLANAX case adds to the disagreement among Federal appellate courts, and increases the legal confusion. Rather than adopt one of the existing appellate court rationales, the Fourth Circuit articulated yet a third way to analyze whether a foreign trademark owner may pursue claims under the U.S. trademark act. The Fourth Circuit found that Bayer’s allegation of lost sales in Mexico was sufficient to challenge Belmora’s U.S. trademark rights, and that Bayer need not demonstrate any rights or consumer recognition in the United States.

    These varied and inconsistent decisions on the territorial limits of U.S. trademark law create significant uncertainty for brand owners. Brand owners are sure to be watching this case and the Supreme Court’s opportunity to bring clarity to this issue.

  2. Dilution of Famous Trademarks

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    Part 1 of this series about famous marks discussed the well-known marks doctrine. This post discusses trademark dilution.

    Famous Brands and Dilution

    Owners of famous marks can prevent others from using marks that “dilute” the famous mark under federal law. See 15 U.S.C. § 1125(c). Prior to 1996, trademark owners relied on state laws that may or may not have provided protection from dilution. In contrast to trademark infringement, trademark dilution may occur regardless of actual or likely confusion, competition or economic injury.

    So how famous is famous? The short answer is: really famous. Early case law under the federal dilution statute recognized marks that achieved fame in a particular niche market as “famous.” But niche fame is no longer sufficient under federal dilution law. Essentially, the mark must enjoy nationwide fame and renown.

    According to the statute, a mark is “famous” when it is “widely recognized by the general consuming public of the United States as a designation of source of the goods or services of the mark’s owner.” The statute also suggests certain factors courts may consider to determine whether a mark attained fame, including: (1) the duration, extent, and geographic reach of advertising and publicity of the mark, whether advertised or publicized by the owner or third parties; (2) the amount, volume, and geographic extent of sales of goods or services offered under the mark; and (3) the extent of actual recognition of the mark.

    I’m Not Confused, But You’re A Little Blurry

    Trademark dilution does not require a likelihood of consumer confusion. Instead, dilution happens by “tarnishment” or “blurring.” We’ll save dilution by tarnishment for another day and focus on dilution blurring.

    Dilution by blurring is the gradual diminishment in the public’s perception of a famous mark’s ability to clearly signify a unique, singular or particular source. The classic case of dilution by blurring involves an unrelated product adopting a famous name or trademark as its own – DuPont shoes, for example. The federal statute lists six factors to help determine dilution by blurring: (1) the degree of similarity between defendant’s mark and the famous mark; (2) the distinctiveness of the famous mark; (3) whether the famous mark’s owner has substantially exclusive use of the mark; (4) the degree of recognition of the famous mark; (5) whether the defendant intended to create an association with the famous mark; and (6) actual association between the defendant’s mark and the famous mark.

    Fame and Parody: You Mock Me!

    The statute also provides exceptions as to what may constitute dilution. One of these exceptions is fair use, which includes “identifying and parodying, criticizing, or commenting upon the famous mark owner or the goods or services of the famous mark owner.” Parody is communicating some element of satire, ridicule, joking or amusement by juxtaposing an irreverent representation of a trademark with the idealized image created by the mark’s owner.

    Not surprisingly, dilution and parody present a unique challenge for famous mark owners. Indeed, fame and recognition can make it less likely that a third party’s use of parody will impair the distinctiveness of a famous mark. A good example is luxury brand Louis Vuitton, which has had its fair share of parody woes.

    In the Haute Diggity Dog case, Louis Vuitton brought an unsuccessful dilution claim against a pet toy company’s use of the famous Louis Vuitton mark in connection with a line of stuffed pet toys, which parody high-end brands of products such as perfume, shoes, jewelry and handbags. In addition to the Louis Vuitton parody, the pet toys included Chewnel No. 5 (Chanel No. 5), Jimmy Chew (Jimmy Choo), Sniffany & Co. (Tiffany & Co.), and Dogior (Dior).

    Haute Diggity Dog’s parody consisted of a stuffed toy in the shape of a handbag, which used “Chewy Vuiton” instead of Louis Vuitton, and a CV logo instead of the LV logo. The court concluded that Haute Diggity Dog’s use of the “Chewy Vuiton” mark was a successful parody that separated itself from the Louis Vuitton marks in order to make fun of them and, therefore, did not blur the distinctiveness of the famous Louis Vuitton mark.

    Trademark Dilution and The First Amendment

    Louis Vuitton made other trips to court over parody marks. Most recently, a federal district court in New York rejected its trademark dilution claims against handbag company My Other Bag (MOB) because MOB’s reference to the famous mark constituted parody protected by fair use.

    MOB sells bags that on one side say “My Other Bag . . . .” and on the other a design similar to the famous Louis Vuitton logo design. MOB sells bags using other luxury brands’ designs, not just Louis Vuitton.

    Similar to the court’s analysis in Haute Diggity Dog, the MOB court noted that a successful parody communicates to the consumer that an entity separate and distinct from the famous trademark owner is poking fun at the famous mark or its owner. A parody thus conveys two simultaneous, but contradictory, messages that it is the famous mark but also that it is not the famous mark. Thus, the mere fact that consumers will associate the MOB bag with Louis Vuitton does not mean that dilution by blurring will occur. The question is whether the kind of association MOB creates is likely to impair the distinctiveness of the famous marks.

    The MOB court focused on the “joke” inherent in the MOB bags, noting that LV’s sense of humor (or lack thereof) does not delineate the parameters of its rights under trademark law, and advising that “in some cases it is better to accept the implied compliment in a parody and to laugh than it is to sue.”

    Louis Vuitton Fights On

    Louis Vuitton appealed the MOB decision to the Second Circuit Court of Appeals. A group of law professors filed an amicus (“friend of the court”) brief in support of MOB which argued, among other things, that the application of dilution law to parody is an unconstitutional content-based restriction on non-misleading commercial speech.

    In its August reply brief, Louis Vuitton asserted that the case has “never been about any supposed ‘artistic’ activity by MOB” and added that it is not “a watershed First Amendment moment that the crusading law professor amici would have the court believe.”

    Together with the Supreme Court’s recent decision to review the Slants case, this appeal makes plain that the intersection of the First Amendment and trademark law is an issue to watch.

  3. Trademark Tools and the Price of “Fame”

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    Everyone may have his or her fifteen minutes, but there’s always a price to pay for fame. For brand owners, fame brings special challenges as it brings imitators, fans, and social commentary. This is the first in a series of posts about trademark law tools that are specific to famous marks.

    I recently moderated a Table Topic on famous and well-known trademarks at the INTA Trademark Administrators & Practitioners Meeting in Washington, DC. At the round table, practitioners from the U.S., Turkey, and South America discussed the importance to brands of protection of famous marks through a variety of means including the well-known marks doctrine.

    Famous Brands and the Well-Known Marks Doctrine

    The well-known marks doctrine is an international trademark law concept under which a trademark (or service mark) is protected within a country even though the mark is not actually used or registered in that country, so long as that mark is well known there.

    Its primary basis is Article 6bis of the Paris Convention treaty, which the U.S. signed. Article 6bis provides that signatory countries will prohibit the use of a confusingly similar trademark to a mark that is well known in that country (and used on similar goods), even though the well-known mark is not registered or used in that country.

    But What About Use it or Lose it?

    Although the U.S. generally requires that a company use its marks in the U.S. to claim trademark protection, the well-known marks doctrine is an exception that general rule. Under the well-known marks doctrine, if a mark used only on products or services sold outside the U.S. is so famous that its reputation is well known in the U.S., then that mark should be legally recognized. If someone used a confusingly similar mark in the U.S., then the famous mark owner could successfully take action against the newcomer.

    Unfortunately, U.S. acceptance and application of the well-known marks doctrine is neither consistent nor uniform. Indeed, U.S. Courts of Appeals are split on the issue.

    Do as I Say, Not As I Do

    The U.S. Court of Appeals for the Ninth Circuit applied the well-known marks doctrine when it held that a company that enjoyed great renown in Mexico for its GIGANTE grocery stores could prevent another company from operating GIGANTE stores in California. The Mexican company had no use in the U.S., but its cross-border renown was able to stop a third-party from using the GIGANTE mark for its rival grocery stores.

    In 2007 however, the U.S. Court of Appeals for the Second Circuit held in a case called ITC v. Punchgini, that, notwithstanding its treaty obligations, the U. S. did not implement the well-known marks doctrine in its federal trademark law. (Full disclosure: I represented the plaintiffs in the case.) The case involved a famous restaurant in India known as BUKHARA and its efforts to stop former employees from opening their own BUKHARA restaurant in New York City. The Second Circuit found, in reviewing the U.S. trademark law of the Lanham Act, no clear congressional intent to incorporate a famous marks exception into federal unfair competition law.

    The Second Circuit recognized that cogent policy arguments existed in favor of recognizing the well-known marks doctrine and that U.S. companies routinely prevailed upon countries outside the U.S. to protect their well-known marks. Nevertheless, it said that those arguments should be directed to Congress, not the court.

    The Second Circuit’s decision created a split of authority among the circuits. Many do not agree with the Second Circuit’s rationale, particularly in light of the fact that the U.S. routinely encourages its foreign partners to recognize the well-known marks doctrine to protect famous U.S. marks.

    As one leading trademark commentator Professor J. Thomas McCarthy put it:

    The United States has for decades in trade discussions strongly urged other nations to recognize American marks under the well-known marks rule. If the U.S. does not itself apply the rule domestically to foreign trademarks well-known in the U.S., the U.S. could be accused of hypocrisy. (“Do as I say, not as I do.”)

    Until the Supreme Court speaks or Congress acts, the circuit split means that claims under the well-known marks doctrine in U.S. Courts will be treated very differently depending on their geographic location.

    I Get By on a Little Help From My Friends

    Despite the inconsistent application here, jurisdictions outside the U.S. have stepped up to the plate to protect well-known marks. A few examples:

    • In 2005 the well-known STARBUCKS trademark had not been used on coffee shops in Russia. That year, an entrepreneur in Russia registered the STARBUCKS coffee trademark and logo and offered to sell the Russian rights to the U.S. owner of the mark for $600,000. Russian authorities ruled that the Russian registration was “pirated” and cancelled it at the behest of the U.S. owner.
    • In 2005, Walt Disney Enterprises was successful in preventing an Iranian from registering in Iran MICKEY MOUSE (in Farsi) along with an image of the famous mouse.
    • In 2014, as the U.S. maker of TESLA electric vehicles prepared to introduce its products to China, it found that a Chinese person registered the TESLA mark for autos in China in 2006, three years after Tesla’s first U.S. use in 2003. Chinese authorities invalidated the registration at the U.S. company’s request.

    How Famous is Famous?

    Let’s say you need to prove your brand is famous under the well-known marks doctrine. How famous is famous? In the U.S., the Ninth Circuit holds that a brand must be known to a “substantial percentage” of persons in the relevant American market. Important factors to consider are intentional copying by defendant and whether U.S. customers are likely to be confused into thinking that they are buying products or services coming from or affiliated or connected with the foreign owner of the mark.

    In 1999, the “Joint Recommendation Concerning Provisions on the Protection of Well-Known Marks” of the World Intellectual Property Owners Organization (WIPO) published six guidelines for renown under the well-known marks doctrine:

    (1) Degree of knowledge or recognition of the mark in the relevant sector of the public;

    (2) Duration, extent and geographical area of any use of the mark;

    (3) Duration, extent and geographical area of any promotion of the mark, including advertising or publicity and the presentation, at fairs or exhibitions, or the goods and/or services to which the mark applies;

    (4) Duration and geographical area of any registrations, and/or any application for registration, of the mark, to the extent that they reflect use or recognition of the mark;

    (5) Record of successful enforcement of rights in the mark, in particular, the extent to which the mark was recognized as well known by competent authorities; and

    (6) Value associated with the mark.

    While the power of famous marks to use the well-known marks doctrine in the U.S. is up in the air, the power of famous marks is still protected under U.S. trademark dilution laws, which is the next topic in this series.