Trademark Infringement and Unfair Competition

Mr. Markham and Mr. Bishop both have substantial experience in the law of trademark infringement and unfair competition. This law concerns not only the unauthorized use of trademarks, service marks, and trade dress, but also false advertising, trademark dilution, trademark tarnishment, “palming off,” unfair competition, and related offenses.

Businesses use trademarks, service marks and trade dress in order to distinguish their wares or services from those offered by other businesses. Trademark infringement is principally governed by the Lanham Act, which is codified at 15 U.S.C. §§ 1051 et seq. There are also various state statutes and common law doctrines that address trademark infringement. Among other things, the Lanham Act established a national registry of trademarks, service marks, and trade dress, so that a business can register a mark or trade dress in order to give constructive notice of its existence and eventually have it deemed “incontestable.”

A mark has value only if its holder rightly establishes it and actually uses it in order to make sales of goods or services, and its propriety and duration depend on a number of variables, some of which are beyond the control of the holder. The sole purpose of a mark is to distinguish the goods and services of one business from those of any other business, and this principle lies behind the many statutory provisions and common law doctrines that are sometimes a little overwhelming to businesses that simply wish to establish an appropriate or catchy name under which they can sell wares or render services.

There are various categories of trademark infringement, but the essential offense occurs when the following circumstances are in place: (1) one company, the rightful holder of a mark, sells or distributes a product or service under a given trademark or service mark that it has registered with the United States Patent and Trademark Office or has otherwise properly established; (2) another company, called the “infringer,” sells or distributes other products or services under the protected mark, or under a confusingly similar mark, and does so without the consent of the rightful holder; and (3) purchasers of the infringer’s products or services are thus misled into thinking that they have acquired products or services made by the rightful holder or its authorized licensee. Trademark infringement also occurs when a company sells its wares with “trade dress” (non-functional packaging) that is confusingly similar to the trade dress that another company has rightly registered or otherwise established.

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 distributor or supplier. Some infringers might even make or distribute goods or provide a service under a name that they do not know infringes a registered mark. In the internet era, however, it is possible to conduct an online name search at the United States Patent and Trademark Office within seconds, so that at least the original provider of a good or service should always know in advance whether it has established its business under a name or mark that is confusingly similar to a registered one. Less frequently, a business will innocently (or duplicitously) register a mark or trade dress that another business previously established by operation of common law, and there are well-settled rules for resolving this kind of confusion. There also exist doctrines that address the use by two businesses of the same or similar marks, but in different geographic regions or for different kinds of products or services.

Trademark infringement can occur when the infringer has acted in a blameless manner. Usually, but not always, an “innocent infringer” can negotiate a prompt settlement with an aggrieved trademark holder. The penalties for willful trademark infringement are far 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 court preserves broad discretion to impose appropriate penalties. In certain cases, the trial court can impose onerous statutory fines in lieu of compensatory damages.

One kind of trademark infringement is counterfeiting, which occurs when the counterfeiter sets out to make seemingly identical, unauthorized versions of the trademark holder’s products. A related legal wrong is that of “palming off,” which occurs when a business sells its products in a way that fools its customers into thinking that they are purchasing trademarked goods made or licensed by the trademark holder. Other trademark claims exist for “trademark dilution,” which can occur by ”blurring” or “tarnishment,” and which occurs when either (1) the value of a trademark 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 trademark to its holder is diminished because others have used it to identify their own inferior products or disreputable activities, thereby “tarnishing” the original mark. There also exist trademark claims to redress the false labeling of goods (false origin claims and false advertising claims). Many of these wrongs also constitute the common law tort of “unfair competition.”

The laws on trademark infringement are codified in various provisions of the Lanham Act and parallel state statutes, and there is a long line of ancient and evolving case law that sets forth independent principles and also explains how the Lanham Act is supposed to be enforced. The Lanham Act specifically authorizes emergency injunctive relief and seizure orders that even include an immediate seizure of the alleged wrongdoer’s assets, but also expressly allow a wronged defendant to sue the plaintiff for conducting a wrongful seizure.

There are significant, meaningful affirmative defenses to claims for trademark infringement, counterfeiting, and trademark dilution. One such affirmative defense lies in antitrust and is made on the ground that the trademark holder is prosecuting trademark infringement claims without regard to their outcome and only for the purpose of involving its direct competitors in ruinous litigation costs in order to run them out of business and monopolize given markets or lines of commerce. This affirmative defense is on the ground of antitrust abuse, and it also serves as an adequate basis for asserting counter-claims under Section 2 of the Sherman Act against the trademark plaintiff. Other affirmative defenses are that the trademark holder obtained its trademark by fraud, or that it uses its trademark in furtherance of its overall effort to mislead its customers about 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. The test is whether the customers of the second business are likely to conclude that it is affiliated with the business whose trade name has been registered. There are clear rules and doctrines that govern controversies over such matters.

Mr. Markham and Mr. Bishop have substantial experience in trademark infringement and unfair competition. Among other things, Mr. Markham acted as lead counsel for a San Diego wholesale operation in a series of substantial federal and state-court litigations for alleged product counterfeiting. It was one of the largest counterfeiting operations in U.S. history for a retail consumable products, and Mr. Markham’s client was alleged to be a ringleader and principal distributor of the products in question. Mr. Markham also represented a major hardware retailer against the nation’s largest hardware retailer in a substantial case for false advertising and unrelated antitrust offenses.