Non-Infringing Trademark Use

Oftentimes there is a legitimate reason to use the registered mark of another. In the case of resellers, repair services, and after-market parts suppliers, where a use of the registered mark is required to describe your own goods or services in a manner that is not misleading or confusing as to source, such may be considered a fair, or nominative, use. For instance, ABC Auto Repair may advertise that they service foreign autos including BMW. However, this use is limited in scope to that which is reasonably necessary to describe or differentiate its product or service. Courts will generally evaluate the lawfulness of a defendant’s nominative use of a mark through the lens of three factors: (1) whether the plaintiff’s product was identifiable without use of the mark; (2) whether the defendant used more of the mark than necessary; and (3) whether the defendant accurately portrayed the relationship between itself and the plaintiff. So although ABC may use the BMW mark, it may not infer any affiliation, such as “authorized BMW repairs,” unless the statement is true.

In Swarovski, a January 2013 case decided by The Court of Appeals First Circuit, the issue of nominative or fair use was raised on appeal by the Defendant, who had been enjoined in its use of the Swarovski trademark in conjunction with its advertisement offering a sale of Swarovski crystal. By way of background, Plaintiff, Swarovski, is a world-famous manufacturer and distributor of crystal, jewelry and other luxury products with several registered federal trademarks for the mark “Swarovski,” which it has used in the United States since at least 1969. Swarovski sells its crystal products online, in Swarovski retail stores (including stores in New Hampshire, Massachusetts and Rhode Island), in small independent retailers and in authorized national retailers such as Macy’s, Bloomingdale’s and Nordstrom. The Defendant, Building #19, operated an off-price retail store acquiring products through secondary channels and reselling them at off-brand prices. It operates 11 retail stores located throughout New Hampshire, Massachusetts and Rhode Island. In the past, the Defendant had expended considerable funds advertising odd lot and other low cost, salvaged, and discontinued merchandise.

The advertisement Swarovski objected to read, “ONE DAY EVENT 11AM to 8PM, Tornado Hits Warehouse containing GENUINE SWAROVSKI® CRYSTAL Collectibles.” A disclaimer, in much smaller, un-bolded font, also appeared near the bottom of the ad, reading: “Disclaimer: Building #19 is selling GENUINE SWAROVSKI® CRYSTAL products BUT Building #19 is NOT an authorized dealer, has no affiliation, connection or association with SWAROVSKI® and the standard SWAROVSKI® limited warranty is not available to our customers. Swarovski sought an injunction prohibiting the use of its name. The Federal District Court granted a somewhat more limited remedy, enjoining the use of the Swarovski name in a font size larger than that used in the disclaimer, essentially fashioning a remedy similar to the second factor described above that defendant only use that portion of the mark as necessary to depict its services. However, there was no finding of a likelihood of confusion as to affiliation, which in a nominative use case, the Appeals Court identified as critical stating, “The fear is that a consumer glancing at Building #19’s proposed advertisement might mistakenly believe that Swarovski had some official association with the sale; perhaps that Swarovski sponsored the sale and so stood behind the goods as a direct seller, or that it had partnered with Building #19 in a way that might detract from its luxury status.” So the potential for confusion was not one of source–the crystal having really been manufactured by Swarovski–but rather one of endorsement or affiliation. But could this fear be properly mitigated by disclaimer? As the Court further stated, “Swarovski may not charge infringement against all unauthorized uses of the “Swarovski” name, but only those uses likely to cause consumer confusion, mistake or deception.” The trademark holder is not permitted a carte blanch prohibition of unauthorized, non-confusing uses. As there was no likelihood of confusion analysis of Defendant’s advertisement and, particularly in light of the disclaimer of affiliation, authorization, and warranty, no evidentiary finding made in support thereof; the issuance of the preliminary injunction was reversed and the case remanded back to the District Court for further proceedings.

Whether categorized as fair use or nominative use a business may be able to use the registered mark of another in limited circumstances provided there is no likelihood of confusion both as to source and affiliation. Then use must be truly nominative, that which is necessary to depict or differentiate the user’s goods or services, keeping the use limited to only that amount necessary and accurately portraying its relationship with the trademark owner. Of course, reasonable minds may differ on whether these caveats are met given each set of facts and circumstances. Therefore, seeking trademark legal counsel prior to any use is always advisable.

The information provided in this article is of a general nature and does not constitute legal advice.  This article may be considered Attorney Advertising.