To Sue or Not to Sue for Trademark Infringement

Infringement can strip the trademark of its value by causing "confusion among consumers" as to the identity and origin of the client's product.

A strong trademark can be a company's most significant asset. Infringement, however, can strip the trademark of its value by causing "confusion among consumers" as to the identity and origin of the client's product.

Small to mid-size corporations faced with such damaging infringement may have a serious budgeting challenge. If the infringer ignores corporate counsel's cease-and-desist letter, their clients will be forced to file suit to halt the infringement. To succeed in the litigation, the trademark's owner will be required to prove, among other things, that the infringer's use of a mark is likely to cause consumer confusion.

But the price of success may be prohibitively expensive. Absent evidence of actual confusion, an aggrieved plaintiff will typically need to prove confusion with so-called consumer survey evidence. Such evidence may cost a plaintiff $100,000 or even more. This steep cost, on top of legal fees, may be too high a barrier for a small business, leaving their intellectual property vulnerable to misappropriation by more powerful infringers.

Does the Law Protect The Mark?

The first step in proving trademark infringement is to show that the trademark at issue is protectable. If the mark is used in commerce and is capable of distinguishing and identifying the source of goods or services, the mark is "distinctive."

Distinctiveness is a relative term. In general, the amount of protection given to the mark corresponds to its level of distinctiveness. The highest level of protection goes to fanciful marks , which are considered highly distinctive. These marks comprise a collection of letters/symbols with no meaning other than to identify the user's goods. Consider "Kodak" film.

Strong protection is also afforded to so-called arbitrary marks, words with an ordinary meaning that bear no relation to the product they identify. For example, "Apple" Computers.

Somewhat less distinctive — but still protected — are suggestive marks; marks that hint at, but do not describe, the characteristics of the goods or services such as "Tide" laundry detergent.

Marks that are merely descriptive of the product are, however, not viewed as distinctive and receive little or no protection.

Registering your mark with the U.S. Patent and Trademark Office is likely to provide significant advantages in prosecuting an infringement claim. Federal trademark registration is prima facie evidence of the validity of a mark, and can satisfy the "use in commerce" on a national basis. Registration establishes a presumption as to the incontestability and distinctness of the mark and allows for remedies not otherwise available, such as attorney fees and costs.

Likelihood of Confusion

Assuming that a mark qualifies for trademark protection, the battleground shifts to whether the infringing mark is likely to confuse consumers as to the source of goods. Courts analyze many factors in assessing whether there is a likelihood of confusion. These include such things as the strength of the mark, similarity of the marks and the products, where and how the products are sold, the consumer's care in selecting the products, and the consumer's reaction to the marks.

The area of use is also important. Confusion is more likely where products with similar marks are distributed in the same geographic market and are in direct competition or are sold through the same marketing channels. In one case, Ty v. Jones Group, 237 F.3d 891 (7th Cir. 2001), the Seventh Circuit found a likelihood of confusion with plaintiff's "Beanie Babies" and defendant's "Beanie Racers" products. Both were sold only to specialty retailers in overlapping geographic areas, placed in the same sections of such stores, advertised in the same or similar magazines and were produced in limited numbers and periodically retired to make them collectible.

The likelihood of confusion increases where consumers exercise less care in making purchasing decisions, where the mark is very strong and where the defendant actually intended to "palm off" its products as those of another.

Even if these factors favor a finding of a likelihood of confusion, it is critical to have some evidence of consumer reaction to the marks. Evidence of actual consumer confusion is the best evidence. But it is rare. Therefore, plaintiffs generally try to demonstrate a likelihood of confusion through the use of consumer surveys. Their use is so prevalent in trademark cases that the failure to provide a survey may suggest that the survey was performed but that it failed to prove confusion.

Proving Likelihood of Confusion Can Be Expensive

The favorable survey, therefore, is critical to success in the litigation, and it is essential that such a survey be well-designed and meet the court's strict standards for expert testimony. While there are many types of acceptable surveys, the costs for a well-designed survey could easily exceed $100,000. Although the use of Internet-based surveys could lower this expense, the survey is not the area to cut costs. An unacceptable survey can doom even the largest trademark case.

For example, a poorly designed survey could inaccurately show a lack of confusion, sending you back to square one with a new approach. Or worse, a survey might strongly suggest confusion, but later be shown to have some bias that damages an expert's credibility. Indeed, in Water Pik. v. Med-Systems, 726 F.3d 1136 (10th Cir. 2013), the court found the methodology in plaintiff's survey so flawed that the court survey suggested an insignificant likelihood of confusion.

Moreover, a well-funded defendant will likely have a survey conducted by an expert of its own. Without evidence of actual confusion, failing to have survey evidence can be devastating and result in a finding that there is no likelihood of confusion.

Damages Available

If your client is able to prove infringement, it's time to talk damages. Under federal law, wide-ranging relief is available for infringement, including the recovery of defendant's profits and costs, and, in cases where the infringement is malicious, fraudulent, deliberate or willful, attorney fees can be recovered. Statutory damages, rather than actual damages and profits are also available to remedy infringement.

Is It Worth the Fight?

Advising clients as to whether to bring a trademark action requires fine economic and legal judgments. There is no question that bringing a trademark action requires a substantial war chest. Budgeting for that expense is elementary when an infringer responds to your cease-and-desist letter with a peek under the tent of its defenses. An infringer with substantial defenses is likely to present them cogently in an attempt to stave off a suit. At that point, the trademark holder can more accurately assess the fight it will face.

Don't forget that there are other dangers in not protecting trademarks. While courts have held that the failure to file suit to protect trademark rights does not constitute abandonment of the mark, permitting a third party's infringement could lead to the finding that the trademark owner had abandoned certain uses of the mark, and could hamper its ability to later expand the mark's use to identify other products.

 

Contributing Author

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Peter Stamatis

Peter Stamatis is a corporate litigator and principal of Stamatis and Shonder, based in Chicago. 

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Contributing Author

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Steven Shonder

Steven Shonder is a corporate litigator and principal of Stamatis and Shonder, based in Chicago.

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