Notes & Comment
Vol. 2005, No. 1
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Trademarks and Copyrights
The U.S. Supreme Court: One Small Step for Trademarks, One (perhaps) Giant Leap for Copyrights
The U.S. Supreme Court recently issued one decision in trademark law and agreed to hear another case in copyright law. Like a centerfielder in baseball, the Court covers a lot of ground, deals with many issues; but unlike a centerfielder, they are responsible for everything between the foul lines. Intellectual property doesn't take up a lot of the high court's time (only about eight intellectual property decisions over the last four terms, half of those patent cases), so when the justices wade into IP waters it's worth taking a look.
On December 8, 2004, the Court issued a virtually unanimous decision on trademark law in the case KP Permanent Make-Up, Inc. v. Lasting Impression I, Inc., et al, No. 03-409. Two days later, the Court took up a more significant IP issue, granting review of the Ninth Circuit's copyright ruling regarding certain post-Napster peer-to-peer file sharing technology. Metro-Goldwyn-Mayer Studios Inc., et al., Petitioners v. Grokster, Ltd., et al. No. 04-480. The Court's decision to take up Grokster has potentially groundbreaking implications for copyright law in the internet era. (Please see our discussion of the appellate decision in Grokster in the August 2004 Notes and Comment feature.)
The KP Permanent Make-Up Trademark decision
This case, all things considered, does not represent landmark IP law. KP Permanent Make-Up, Inc. v. Lasting Impression I, Inc. involved use of the term “micro color” by competitors in the cosmetics industry. KP Permanent (KP) claimed to have used the term “micro color” since as early as 1990 in flyers and on bottles. Lasting Impression (Lasting) obtained a federal trademark registration for “Micro Colors” as part of a logo design in 1993, and gained “incontestable” status for that registration in 1999.
The same year, KP (again) used the term, this time in a ten page product brochure and that brochure, apparently, is what provoked the underlying litigation. The issue boiled down to whether KP had a “fair use” defense under federal trademark law to employ the descriptive term “microcolor” in the brochure. Lasting argued that in order for KP to assert fair use, it must first demonstrate that its use didn't cause consumer confusion -- it can't be fair use if consumers are confused by it. The trial court rejected Lasting's position, but the U.S. Court of Appeals for the Ninth Circuit ruled that KP indeed must prove that its fair use of “microcolor” also didn't cause consumer confusion.
Noting a considerable split of authority on the issue (three appellate courts favoring Lasting's position (the 9th, 6th and 5th Circuits); three supporting the position taken by KP (the 2nd, 4th and 7th Circuits), the Supreme Court reversed, holding that a party charged with infringing an incontestable descriptive trademark may assert the fair use defense without also proving that its use of the TM doesn't confuse the public.
The Court reasoned that even though “incontestability” status under the trademark statute treats the mark's owner as the presumed exclusive owner, the statute still requires the owner to prove trademark infringement, an element of which is likelihood of consumer confusion. Once the TM owner meets that burden, the matter shifts to the defendant, who is entitled to raise certain defenses, including fair use. The statute's fair use defense doesn't shift to the defendant the burden of disproving consumer confusion; that's an element of the TM owner's case.
What makes the case interesting is that it involved the use of an incontestable federal trademark by a competitor. Common law, the Court said, tolerates some degree of confusion from shared use of a descriptive mark (something less than arbitrary or fanciful). And certain facts helped KP's fair use case here: “micro color” was deemed a descriptive mark; KP had used the term prior to Lasting's federal TM filing in 1992; and KP used the term in 1999 not as a TM, but to describe its products in a brochure. The Court observed that when someone registers a “descriptive” mark, there is an inherent possibility of consumer confusion, “[T]here being no indication that the [federal trademark statute] was meant to deprive commercial speakers of the ordinary utility of descriptive words. ‘If any confusion results, that is a risk the plaintiff accepted when it decided to identify its product with a mark that uses a well known descriptive phrase.' [citations omitted].”
However, the Court concluded, evidence of consumer confusion can be relevant to determine if a defense of “fair use” is available. There might be times when the degree of consumer confusion makes the defense objectively unfair. In other words, a defendant claiming fair use of a descriptive mark need not disprove consumer confusion, but a plaintiff can try to defeat the defense by proving that the confusion is so great the defendant's shared use is not objectively fair.
In the end, KP Permanent Make-Up, Inc. v. Lasting Impression I, Inc. is a case that really only assigns burden of proof on the issue of consumer confusion when the fair use defense is raised in a trademark infringement case. It's a narrow decision the Court issued to settle a raging conflict between the federal appellate courts.
The Grokster Copyright Case
The Supreme Court's decision to review whether certain post-Napster peer-to-peer file sharing arrangements across the internet amount to copyright infringement, on the other hand, could result in the most significant copyright case the high court has thus far decided in the era of the internet. There is a conflict on the issue between at least the 7th and the 9th U.S. Courts of Appeal, and one can argue that the 9th Circuit has issued two contradictory opinions itself. But far more important than the circuit split here is the copyright issue at stake.
Certainly, the Court has taken up important copyright issues in recent years and all of the Court's copyright opinions have been adapted by lower courts to fit an increasingly digital world. Absent direction from the Supreme Court on how copyright law fits into the internet's way of doing things, lower courts continue to grapple with these issues lacking proper tools, using square pegs to fit round holes. For that reason alone, the Court's agreement to consider Grokster is a very big deal.
© Matthew Joseph 2005. Law Offices of Matthew Joseph, San Mateo, California, practices in the areas of intellectual property licensing, commercial real estate leasing, and corporate and business transactions. No legal advice is intended by the information provided herein and recipients should independently consult counsel before taking any action related to this subject matter.