Trademark Infringement and Unfair Competition

Mr. Markham has substantial experience in the law of trademark infringement and unfair competition. This law concerns the establishment, protection, and unauthorized use of trademarks, service marks, and trade dress. It also establishes civil offenses and expansive civil remedies for trademark infringement, trademark dilution (by tarnishment or blurring), palming-off, and other kinds of unfair competition.

To distinguish its products or services from those offered by other businesses, a business can use trademarks (for its products), service marks (for its services), and trade dress (for its products or services).[1]A trademark typically refers to a distinctive name, logo, or design that a business stamps onto its products before selling them. A business uses these marks to distinguish its products from those … Continue reading

The law of trademarks protects marks and trade dress from infringement. It is set forth in the federal Lanham Act, 15 U.S.C. §§ 1051 et seq., parallel state statutes, and a series of legal doctrines first established in England and later adopted and developed by the federal courts and every state of the United States.

The principal purpose of a mark is to distinguish a seller’s goods or services from those of any other seller. This principle lies behind the many statutory provisions and common law doctrines that govern the use, registration, and infringement of marks. Relatedly, a mark has value and is recognized in the law only if its holder uses it to sell products or services (or has a well-founded, present intention of using it to sell products or services in the near future).

To establish a mark, a company must be the first to use it to sell its goods or services. This is called priority of use. 

A mark cannot be a generic term that merely describes a product category, such as “bottled drinking water.” Relatedly, a descriptive term or phrase that merely identifies a product’s features or function usually cannot become a mark (e.g., “flashlight with five settings”), but such a term or phrase can become a mark if it acquires a “secondary meaning” by continued use. That occurs only when customers primarily associate the descriptive term or phrase with products made by the seller that uses the term or phrase. 

One way a seller can establish its mark is to have it placed in a national registry of marks maintained by the United States Patent and Trademark Office (the “USPTO”). California also maintains its own registry of marks, as do other states. The USPTO and state registrars ordinarily will not register a mark already registered by another holder or confusingly similar to a previously registered mark.

Registering a mark establishes a legal presumption that its holder owns it, claims the exclusive right to use it, and can lawfully use it. But this presumption can be overcome. If another seller (the “first seller”) uses a mark to sell goods or services in the United States without registering it, and if a second seller subsequently registers the same mark or a closely similar one, the first seller can establish its exclusive right to use the mark upon making specified showings, so long as it diligently enforces its rights. To avert this complication, every business should promptly register its marks with the USPTO. 

Mere registration of a mark, then, does not trump priority of use. Rather, it gives constructive, nationwide notice that a particular seller claims ownership of a mark and the exclusive right to use it. It also establishes the date when the registrant claimed ownership of the mark, and it bars a subsequent user of the same mark from asserting that it is an innocent infringer.

Registration also lays a foundation to have a mark subsequently deemed incontestable. To attain this distinction, the registrant of a mark must make specified showings listed in the Lanham Act at 15 U.S.C. § 1065. To do so, the registrant must submit a declaration to the USPTO during the year that follows the initial five-year term of the mark’s registration. Once a mark becomes “incontestable,” it enjoys more expansive presumptions and greater protections, but it still can be invalidated on specific statutory grounds, which include abandonment, prior and continuous use by another seller, and fair use.

There are various categories of trademark infringement.

Direct trademark infringement occurs when the following circumstances are in place: (1) one company (the “rightful holder”), properly sells or distributes a product or service under its own lawfully established mark; (2) another company (the “infringer”) sells or distributes other products or services under the same mark or a confusingly similar one, doing so without the rightful holder’s consent; and (3) purchasers of the infringer’s products or services are thus likely to be misled into believing that, by purchasing the infringer’s products or services, they will receive products or services made or licensed by the rightful holder. Direct trademark infringement also occurs when a company sells its wares with trade dress that belongs to another company.

One kind of trademark infringement is product counterfeiting, which occurs when the counterfeiter sells products that bear the marks and trade dress of another company, doing so without its consent. A related legal wrong is that of palming off, or passing off, which occurs when a seller falsely represents that its products are made or licensed by another seller (invariably, a seller that has a good reputation and whose products are widely appreciated).

Contributory trademark infringement occurs when a company either induces another to sell products under an infringing mark or furnishes products to a customer that it knows or should know will sell them under an infringing mark.

Vicarious trademark infringement occurs when one company has a close relationship with an infringer (e.g., a partner or joint-venturer) and is therefore deemed legally responsible for the infringer’s offense.

Other trademark claims exist for trademark dilution, which can occur by blurring or tarnishment, and which occurs when either (1) the value of a mark to its holder is diminished because others have used it to describe unrelated products or services, thereby “blurring” the special distinction of the original mark; or (2) the value of a mark to its holder is diminished because others have used it to identify their own inferior products or disreputable activities, thereby “tarnishing” the original mark. These wrongs can often be challenged under various state laws as different species of unfair competition.

The trademark laws aim to deter, prevent, and redress infringement of marks and trade dress. The rightful holder of a mark or trade dress typically invests substantial time and money to develop and offer its products and services, and it understandably does not wish to have its products or services tainted by inferior offerings that a competitor might provide under the same mark or a confusingly similar mark. Nor does a holder wish to have its products confused with completely different kinds of products sold under the same or a confusingly similar mark. That is called blurring.

Nor should one business try to palm off its products or services as those of another firm that has acquired a good reputation by the excellence of its offerings. That would be unfair and is a form of “reaping what another has sown.”

It is on these and related grounds that trademark law protects marks and trade dress.

An infringer might sometimes have no knowledge that it is dealing in “infringing goods,” in which case it is said to act as an innocent infringer that has acquired the infringing products in good faith from its own supplier. Usually, but not always, an innocent infringer can negotiate a prompt settlement with an aggrieved trademark holder.

The penalties for willful trademark infringement tend to be more severe. A willful infringer can be (1) permanently enjoined from committing further infringements; (2) ordered to disgorge its illicit profits to the trademark holder or, in the alternative, required to recompense the trademark holder for the holder’s own lost profits and also ordered to recompense the holder for harm to its goodwill; (3) ordered to reimburse the holder for the expense that it incurred to curtail the infringement; and (4) ordered to pay up to treble the amount of the trademark holder’s damages, as well as the trademark holder’s attorney’s fees and costs. In trademark cases, the courts preserve broad discretion to impose appropriate penalties. In certain cases, a trial court can impose onerous statutory fines in lieu of compensatory damages.

 The Lanham Act specifically authorizes emergency injunctive relief and seizure orders, which can even entail the immediate seizure of the alleged wrongdoer’s infringing products. At the same time, a defendant whose assets are wrongly seized under an improperly obtained seizure order can recover obtain damages for their wrongful seizure.

There are significant, meaningful affirmative defenses to claims for trademark infringement, counterfeiting, and trademark dilution.

In some cases, a defendant can properly assert that the trademark plaintiff has abused its mark by prosecuting trademark claims that greatly exceed its legitimate trademark rights, doing so merely to involve its competitors in onerous litigation costs calculated to run them out of business, or to force them to enter into settlement agreements that constitute unlawful restraints of trade under federal and state antitrust laws. If appropriate, these allegations can support one or more counterclaims against the trademark plaintiff for unlawful restraint of trade, unlawful monopolization, or attempted monopolization in violation of Sections 1–2 of the Sherman Act (15 U.S.C. §§ 1–2).

Other affirmative defenses are that the trademark holder obtained its mark by fraud, or that it uses its mark in furtherance of a larger scheme to mislead its customers about the nature or characteristics of its products.

It sometimes occurs that one business first began to use a name, but then a second business was the first to register the name as a protected trademark. On other occasions, the names of two different businesses might be confusingly similar and thereby cause customers to think that they are affiliated entities. There are clear rules and doctrines that govern controversies over such matters.

Mr. Markham has substantial experience litigating claims that arise under the trademark laws of the United States and California.  Among other things, he acted as lead counsel for a San Diego wholesale operation in a series of substantial federal litigations for alleged product counterfeiting. It was one of the largest counterfeiting operations in U.S. history for a retail consumable products. Mr. Markham’s client was alleged to be a ringleader and principal distributor of the products in question. The claims against it were confidentially settled on comparatively lenient terms.