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Intellectual Property and Technology
December 14, 2004
 
In this Issue...
Supreme Court Allows Fair Use Defense To Trademark Infringement Even If Some Confusion Is Likely
 
 December 14, 2004
 
Stephen J. Jeffries- Washington
Paul F. Kilmer- Washington

Courts have long recognized that a company can use a competitor’s federally-registered trademark without liability for infringement, if the competitor’s use is a “fair use.” The Trademark Act of 1946, commonly known as the Lanham Act, expressly permits fair use as an affirmative defense, but it applies only in limited circumstances – essentially when the competitor is accurately and in good faith describing its products, such as by stating that they are compatible with the trademarked goods. The boundaries of the defense have been unclear. In particular, several federal appeals courts have disagreed about whether an accused infringer can take advantage of the fair use defense if its use of the federally registered trademark might cause some consumer confusion about the source of its products.

Last week, the United States Supreme Court resolved that disagreement, ruling that the use of a registered trademark by a competitor of the trademark owner might be permissible as a fair use, even if the use might cause some consumer confusion. KP Permanent Make-Up, Inc. v. Lasting Impression I, Inc., No. 03-409 (December 8, 2004).

The KP Permanent case arose from a dispute between two competing manufacturers of permanent cosmetic makeup products. Lasting Impressions obtained a federal registration of the mark MICRO COLORS in 1992; the registration became incontestable in 1999. For its part, KP Permanent had been using the term “microcolor” in advertising for its competing products since at least as early as 1991. In 1999, it produced a brochure that prominently featured the term “microcolor,” which provoked a lawsuit from Lasting Impressions in federal court in Southern California.

KP Permanent filed a motion for summary judgment, arguing that its use of “microcolor” was a fair use because it was using the term only to describe its products, and not as a trademark, and also because it had been using the term since before Lasting Impressions obtained its federal registration. The trial court found that KP Permanent’s use was fair and entered summary judgment dismissing Lasting Impressions’ claims. The Court of Appeals for the Ninth Circuit reversed, holding that KP Permanent’s use could not be fair unless KP Permanent proved that there is no likelihood of confusion between its use of the term “microcolor” and Lasting Impressions’ registered trademark. KP Permanent appealed to the Supreme Court.

In an opinion delivered by Justice Souter, the Court reversed the Court of Appeals’ ruling, holding that the Lanham Act does not require an accused infringer to prove the absence of consumer confusion. The Court’s decision was based largely on the text of the Lanham Act, which expressly requires a trademark owner claiming infringement to prove a likelihood of consumer confusion, even when its registration has become incontestable. By contrast, the provision in the statute that creates the fair use defense does not require the defendant to prove the lack of confusion. Reasoning that it would make no sense to require a defendant to prove the absence of confusion when the statute expressly requires the plaintiff to prove that confusion is likely, the Court ruled that a defendant could establish the fair use defense even if some consumer confusion was probable. The Court observed, too, that its reading of the Lanham Act was consistent with the common law, which permitted some degree of confusion from a descriptive use of a word or phrase that another entity has used as a trademark.

The Court’s decision clarifies the burden of proof in the fair use context; but it does not create significant new loopholes for infringers. The Court emphasized, for instance, that while the mere risk of confusion will not rule out fair use, the presence of significant actual confusion might foreclose the defense. The Court also suggested that there might be situations in which a word or phrase that was once descriptive might become so associated with a particular mark that it cannot realistically be used by another in the descriptive sense. Because neither of those situations was before the Court in KP Permanent, we will need to wait for courts to further flesh out the scope of the fair use defense in future cases.

For more information, e-mail Stephen Jeffries, Paul Kilmer or Edward Naughton at stephen.jeffries@hklaw.com, paul.kilmer@hklaw.com or edward.naughton@hklaw.com, respectively, or call toll free, 1-888-688-8500.