Half-Measure in Trademark Nominal Use Case: No Clear Test - Intellectual Property Law - U.S. First Circuit
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Half-Measure in Trademark Nominal Use Case: No Clear Test

In the penultimate episode of Breaking Bad's third season, Mike warns the chemistry teacher turned meth-cooker protagonist, "No more half-measures, Walter." Half-measures leave behind loose ends and can lead to confusion or worse.

Though we're certain that the judges of the First Circuit have very demanding schedules, they ought to take a day off and watch a few episodes. In a per curium decision released last week, they passed when given a chance to clear up confusion regarding the proper test for nominal use of a trademark. While some might laud them for exercising judicial restraint, others will wonder if it would have been more prudent to clarify the law once and for all.

Swarovski makes fancy crystals. A storm hit a warehouse in which many of those crystals were stored. A salvage company picked through the ruins after the insurance covered the losses and rescued $500,000 worth of authentic, undamaged, Swarovski crystals and sold the lot to a discount retailer, Building #19 ("B19").

B19 advertised a sale of these crystals in the newspaper. The ad screamed "Swarovski" in large font, followed by a cartoon, a "One Day Only Sale" warning, and B19's own name.

Swarovski sent a cease-and-desist letter and filed a complaint alleging, among other things, trademark infringement. B19 voluntarily agreed to cease advertising and selling the crystals. About four months later, it had a change of heart and presented a proposed advertisement to the luxury crystal manufacturer, seeking suggestions on how to avoid consumer confusion. The proposed ad contained a disclaimer warning that B19 was not an authorized dealer.

Swarovski filed a motion for a preliminary injunction, which the court expedited due to B19's plan to hold a Mother's Day sale. Instead of providing the traditional written opinion, noting the need for a speedy resolution, the court provided an oral decision that allowed the ad so long as "Swarovski" appeared no larger in the heading than it did in the disclaimer. B19 appealed.

The issue here wasn't traditional trademark infringement. B19 wasn't slapping Swarovski on its own bootleg products, nor was it using a bastardized unauthorized version of the trademark. It was simply using a trademark as necessary to sell authentic goods. However, there is a three part test used in some circuits to see if there is confusion of endorsement or affiliation.

  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.

The Third Circuit adopted this "nominal fair use" test but requires that the plaintiff first succeed on the traditional confusion test. The Ninth Circuit replaces the traditional test completely with this test in nominal use cases.

The First Circuit noted that the lower court half-heartedly addressed both tests before announcing its "smaller font" resolution. That seems to indicate a use of the second factor of the nominal test. It also seemed to indicate a confusion on the state of the law.

Instead of clarifying, the First Circuit kicked the case back on other grounds. The lower court failed to address two important factors for an injunction: likelihood of confusion and whether irreparable injury was likely to occur without intervention.

Avoiding the issue and propagating confusion or practicing admirable judicial restraint? It's a fine line, isn't it?

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