KP Permanent Make-up, Inc. v. Lasting Impressions, Inc.

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LII note: The U.S. Supreme Court has now decided KP Permanent Make-up, Inc. v. Lasting Impressions, Inc..

Oral argument: 
October 5, 2004
Court below: 
United States Court of Appeals for the Ninth Circuit

 

KP Permanent Make-up, Inc. v. Lasting Impressions, Inc., MCN International, Inc. tests whether a showing of the absence of a likelihood of confusion is necessary before a defendant may invoke the classic fair use defense in a trademark infringement suit. By statute, incorporating cases at common law, there appears to be no such requirement. In this case, the Court will determine whether the Ninth Circuit erred in applying such a rule.

Questions as Framed for the Court by the Parties 

Does the classic fair use defense to trademark infringement require the party asserting the defense to demonstrate an absence of likelihood of confusion, as is the rule in the Ninth Circuit, or is Fair Use an absolute defense, irrespective of whether or not confusion may result, as is the rule in other Circuits?

Facts 

KP Permanent Make-up, Inc. ("KP") and Lasting Impressions, Inc. ("LI") are direct competitors in the business of supplying and distributing pigment colors for use in permanent make-up. KP Permanent Make-up, Inc. v. Lasting Impression, Inc., 328 F.3d 1061, 1065 (9th Cir. 2001). Their dispute is over an incontestable, registered trademark owned by LI consisting "of the term ‘micro colors,' set in white, within a black box." Id. LI began using the trademark in April 1992, and registered it as a design and word mark in May 1993. Id. KP has used the same term on its pigment bottles since 1991: "micro color" appears in capital letters on KP's pigment bottle labels before the name of the actual color. Id. In 1999, KP expanded its use of the term by placing a stylized version on its marketing brochures. Id. at 1066. In March 2000, KP sought declaratory relief for its use of the term, and LI counterclaimed against KP for trademark infringement, unfair competition, and false advertising.

The U.S. District Court for the Central District of California concluded that LI's black and white "micro color" logo was a valid and protected mark, but that the words "micro color" were generic, and, if not generic, descriptive. See id. at 1065 (see Park ‘N Fly, Inc. v. Dollar Park and Fly, Inc., 469 U.S. 189, 194 (1985) (stating that generic terms cannot be registered as trademarks; descriptive marks must show a secondary meaning or have become distinctive of the goods in commerce.)). Furthermore, the court determined that neither party had acquired secondary meaning in the term "micro color." Id. KP's use was therefore protected under the "fair use" defense. See 15 U.S.C. § 1115(b)(4). The court declined to discuss KP's "prior use" contention or the issue of "likelihood of confusion." KP Permanent Make-up, 328 F.3d at 1065.

The Ninth Circuit reasoned that because the term "micro color" was the most salient feature of the mark, the words themselves, and not just the logo, should be the focus of the inquiry into the mark's validity. Id. at 1069. Furthermore, because the mark had been registered there was a presumption that it was not generic, and the District Court erred in placing the burden of proof on LI. See id. (quoting Coca-Cola Co. v. Overland, Inc., 692 F.2d 1250, 1254 (9th Cir. 1982)). The test for whether a mark is generic is whether a "buyer would understand the word[s] to refer to the source of the good…. [I]f the disputed term is identified with all such goods or services, regardless of their suppliers, it is generic." Id. (quoting Park 'N Fly, Inc. v. Dollar Park & Fly, Inc., 718 F.2d 327, 330 (9th Cir. 1983), rev'd, 469 U.S. 189). Reviewing the evidence that KP had presented, and looking at "the words themselves," the court found that a jury could not conclude that "micro colors" satisfied this test. Id. at 1069-70.

Turning to the issue of whether the words were descriptive, the Ninth Circuit again noted that LI's trademark referred not only to the logo, but to the words themselves. Id. at 1071. This fact disposed of the question of descriptiveness, because incontestable registration is conclusive evidence that a mark is non-descriptive or has acquired secondary meaning. Id. The Ninth Circuit then remanded the case to the District Court in order to determine whether KP had a "fair use" defense. Id. at 1072. The court ruled that, when conducting this analysis, the District Court needed to take into account whether there was a likelihood of confusion between KP's use of the term "micro color" and LI's mark. This was because the instant case implicated the classic, and not the normative, fair use defense. Id. ("KP is using the term "micro color" to describe its own products, not that of [LI].").

Analysis 

Significance of the Case:
The decision in this case will impact descriptive trademark owners and their competitors when trying to describe their products or services. If the Supreme Court retains the likelihood of confusion test used by the Ninth Circuit, it will substantially dilute, if not effectively abolish, the usefulness of the fair use defense because the plaintiff probably would not be suing the defendant at all if there were not some possible likelihood of confusion.
Without a viable fair use defense, it would be easier for descriptive trademark owners to monopolize the market and make it difficult for competitors to describe their own products or services. A competitor may have to use less accurate or overly lengthy descriptions. Furthermore, if proof of the absence of confusion becomes universally necessary for a successful fair use defense, summary judgment, a judicial holding rendered when the case presents no question of fact, would become rare because of the necessary fact-intensive inquiry. Defendants would have the difficult task of proving a negative to maintain a defense, and lawsuits would become more costly and protracted.
In the early part of the 20th century, Congress left trademark protection within the purview of state common law, which resulted in non-uniformity and uncertainty. See Park ‘N Fly, 469 U.S. 189. Congress enacted the Lanham Trade-Mark Act in 1946 to expressly protect trademarks against infringement and unfair competition in commerce. S.Rep No. 1333, 79th Cong., 2d Sess. 5 (1946).
The Lanham Act distinguishes between marks that are "generic," using a common descriptive name, and "merely descriptive," merely describing qualities and characteristics of goods and services. Park ‘N Fly, 469 U.S. at 194. "Generic" terms cannot be registered for protection from infringement, and registration is revocable should a mark become "generic," whereas "merely descriptive" marks must show secondary meaning, that the mark has become distinctive of the goods in commerce, in order for an applicant to obtain registration of the mark. Id. Although a plaintiff obtains registration for a certain term, it cannot deprive other parties from use of a term in its original descriptive sense. Restatement (Third) of Unfair Competition § 28 (1995).
The Lanham Act lists several defenses in response to a plaintiff's action to enjoin use of a registered mark, one of which is the "fair use defense." 15 U.S.C.A. § 1115(b). Under the label of "fair use," there are two types of non-infringing uses of another's mark: "classic fair use," at issue in this case, where a defendant uses the plaintiff's mark in a non-trademark, descriptive sense to describe defendant's own goods or services, McCarthy, J. Thomas, Trademarks and Unfair Competition § 23:11 (4th ed.); KP Permanent Make-Up, 328 F.3d 1061; and "nominative fair use," where a defendant uses the plaintiff's mark to identify plaintiff's, rather than defendant's, goods and services. Id.

A "likelihood of confusion" occurs when consumers would probably confuse the source of the mark. Two Pesos, Inc. v. Taco Cabana, Inc., 505 U.S. 763, 766 (1992). Although the defendant has the burden of proving either of the fair use defenses to rebut a necessary element of a plaintiff's claim of infringement, the plaintiff still has the burden of proving a likelihood of confusion in order to subject the defendant to liability. Restatement (Third) of Unfair Competition § 28 (1995). The plaintiff's proof of a likelihood of confusion does not, however, rebut a fair use defense. Restatement (Third) of Unfair Competition § 28 (1995).

Discussion 

As a matter of statutory construction, the statute that establishes the fair use defense does not require proof of the absence of likelihood of confusion and the inclusion of such a requirement would place a severe and inappropriate burden on the defendant. 15 U.S.C. § 1115(b)(4). Historically, it was not part of the defense. Considering the history and the plain text of the statute, the fair use defense does not require proof of the absence of likelihood of confusion.

Moreover, while the circuit courts have split over how to construct the Lanham Act's enumerated fair use defenses against the statute's standard of infringement liability, which involves a likelihood of confusion inquiry, the Court will likely hold that Defendant need not prove the absence of a likelihood of confusion, because to do otherwise would effectively negate the defense. Although the Ninth Circuit found the likelihood of confusion analysis applicable only where the classic fair use defense is asserted because nominative fair use analysis displaces the likelihood of confusion analysis, KP Permanent Make-Up, 328 F.3d at 1072, the Fourth and Fifth Circuits have found that allowing a likelihood of confusion finding to trump a fair use defense would negate the defense.

Furthermore, the Court will likely hold that, although the elements of the likelihood of confusion test are also relevant to establishing the defense of fair use, the particular facts of a case are probative in the inquiry, and the complete absence of a likelihood of confusion is not necessary to successfully assert the defense. Courts must balance the parties' interests and use of the term or mark.

Conclusion 

Section 33(b)(4) of the Lanham Act does not mention any requirement to prove the absence of the likelihood of confusion to allow a fair use defense. The statute that describes the fair use defense does not require proof of the absence of likelihood of confusion. 15 U.S.C. § 1115(b)(4). At common law, the predecessor to the fair use defense succeeded even in cases where there was proof of some consumer confusion. William R. Warner & Co. v. Eli Lilly & Co., 265 U.S. 526 (1924); Howe Scale Co. v. Wyckoff, Seamans, & Benedict, 198 U.S. 118 (1905).

The Fourth Circuit, realizing that a trademark holder is unlikely to sue in cases where there is no possibility of consumer confusion, noted: "It defies logic to argue that a defense may not be asserted in the only situation where it even becomes relevant." Shakespeare Company v. Silstar Corporation of America, 110 F.3d 234, 243 (4th Cir. 1997). The Fifth Circuit has also held that if the defendant proves the elements of the fair use defense, he is entitled to prevail even if there is a likelihood of confusion because "to hold otherwise would effectively eviscerate the fair-use defense". Soweco, Inc. v. Shell Oil Co., 617 F.2d 1178, 1181 (5th Cir. 1980), cert. denied, 450 U.S. 981 (1981).

According to Norm St. Landau, Professor of "The Law of Branding: Trademarks, Trade Dress, and Unfair Competition" at Cornell Law School, elements of the likelihood of confusion inquiry are usually relevant to any analysis of the fair use defense. Indeed, in both analyses of the classic and nominative fair uses, a balancing test is performed, wherein the defendant's interest in a descriptive sense of the term is balanced against the plaintiff's interest in its mark's secondary meaning. The particular facts of a case are probative in this balancing inquiry. Given this case's fact-heavy analysis, Professor St. Landau finds relevant such facts as "whether Petitioner KP changed the manner of using its mark" since it first began using ‘micro colors'." In addition, he noted that "whether [Petitioner] is using ‘micro colors' in its plain English meaning is probative of whether [Petitioner] meant to trade off the reputation and good will of [Respondent]." Interview with Norm St. Landau, Professor, Cornell Law School, in Ithaca, New York (September 21, 2004).

A defendant's good-faith exercise in the use of its mark does not establish "fair use" if there is a likelihood of confusion with plaintiff's mark. Several elements of the likelihood of confusion test, such as strength of plaintiff's mark, a secondary meaning associated with plaintiff's mark, and commercial reasonableness of defendant's use, are relevant to establishing the defense of fair use. Restatement (Third) of Unfair Competition § 28 (1995). Thus, despite Petitioner's first-in-time use of the term "micro colors" in 1990 marketing materials, its adoption of a new term and stylized format after Respondent's registration may be probative of Petitioner's intent to unfairly benefit from Respondent's mark.

Moreover, the classification of the fair use defense as classic or nominative will necessarily involve factors of the likelihood of confusion inquiry. Even if it is agreed that Petitioner's defense is not nominative, it is still not conclusive that it is a classic fair use defense. To be considered a classic fair use defense, the defendant must be using the mark for non-trademark, descriptive purposes. McCarthy, J. Thomas, Trademarks and Unfair Competition § 23:11 (4th ed.). To determine whether the Petitioner is using the mark for trademark purposes under the guise of mere descriptive purposes, a fact finder must examine such case-specific facts as Petitioner's manner of use and extent of likely or actual consumer confusion, both of which are elements of a likelihood of confusion inquiry.

Written by: 

Jillian Bossmann

Marc Lewinstein

Randy Whattoff

Viravyne Chhim