United States: Second Circuit Expands Split On Nominative Fair Use

Last Updated: November 17 2016
Article by Paul C. Llewellyn and Kyle D. Gooch

This article first appeared here in the INTA Bulletin on November 15, 2016.

U.S. courts generally agree that, depending on the circumstances, certain types of nominative use—using another's trademark to refer to the trademark owner's goods or services—do not constitute trademark infringement. Indeed, these uses are often lauded as an important aspect of comparative advertising. Federal appeals courts are divided, however, as to how nominative use fits into the doctrinal framework for trademark infringement claims, and how to assess whether a particular nominative use is a non-infringing fair use. A decision handed down in May this year by the U.S. Court of Appeals for the Second Circuit, International Information Systems Security Certification Consortium, Inc. v. Security University, LLC, 823 F.3d 153 (2d Cir. 2016), highlights the divisions among federal appellate courts on this issue, adopting an approach different from the three distinct tests of the three other courts of appeals that have weighed in on the issue.

The Ninth Circuit's New Kids on the Block Test

The U.S. Court of Appeals for the Ninth Circuit led the way in identifying nominative use as a distinct concept in trademark law and developing a framework for its application. In the leading case of New Kids on the Block v. News America Publishing, Inc., 971 F.2d 302 (9th Cir. 1992), Judge Kozinski coined the term "nominative use" to describe instances when a trademark is "used only to describe the thing, rather than to identify its source." Id. at 306, 308. The court held that a nominative use was non-confusing, and therefore legally permissible, if the defendant meets three requirements:

  1. "The product or service in question must be one not readily identifiable without use of the trademark";
  2. "Only so much of the mark or marks may be used as is reasonably necessary to identify the product or service"; and
  3. "The user must do nothing that would, in conjunction with the mark, suggest sponsorship or endorsement by the trademark holder."

Id. at 308 (capitalization altered). Analogizing to the "classic fair use" defense, the Ninth Circuit referred to this new defense as a "nominative fair use defense." Id. Under the Ninth Circuit's approach in New Kids on the Block, this three-factor test replaces the traditional likelihood of confusion test—known in that circuit as the Sleekcraft test, from AMF Inc. v. Sleekcraft Boats, 599 F.2d 341 (9th Cir. 1979)—in cases in which the defendant invokes a nominative fair use defense.

The Ninth Circuit originally suggested that the defendant had the burden of proving that its nominative use was fair under the three-part test. See New Kids on the Block, 971 F.2d at 308. However, the court has since overruled its prior position on this issue. Now, a defendant asserting a nominative fair use defense "need only show that it used the mark to refer to the trademarked good," at which point the "burden then reverts to the plaintiff to show a likelihood of confusion." Toyota Motor Sales, U.S.A., Inc. v. Tabari, 610 F.3d 1171, 1182 (9th Cir. 2010).

Despite calling nominative fair use a "defense," the Ninth Circuit approach considers the issue as a part of the plaintiff's burden of establishing a likelihood of confusion. Put another way, the Ninth Circuit views the question of whether a nominative use is fair use and the question of whether the use is confusing as two sides of the same coin, by determining whether the plaintiff can prove "(1) the product was 'readily identifiable' without use of the mark; (2) defendant used more of the mark than necessary; or (3) defendant falsely suggested he was sponsored or endorsed by the trademark holder." Adobe Systems Inc. v. Christenson, 809 F.3d 1071, 1081 (9th Cir. 2015) (citing Toyota).

Fifth Circuit—A Supplement to Likelihood of Confusion

The first circuit to adopt the Ninth Circuit's "nominative use" concept was the U.S. Court of Appeals for the Fifth Circuit, in Pebble Beach Co. v. Tour 18 I Ltd., 155 F.3d 526 (5th Cir. 1998). There, the court recognized that a nominative use is not infringing as long as it does not create a likelihood of confusion. Unlike the Ninth Circuit, however, the Fifth Circuit held that, to qualify as nominative fair use—i.e., for the defendant "to avail itself of the shield of nominative use"—the use must meet only two of the three New Kids factors:

  1. The defendant "may only use so much of the mark as necessary to identify the product or service"; and
  2. The defendant "may not do anything that suggests affiliation, sponsorship, or endorsement by the markholder."

Id. at 546. The court declined to adopt the third New Kids factor—"the product or service in question must be one not readily identifiable without use of the trademark"—because it would "always be satisfied" in cases involving "direct comparative advertising used to identify what was copied" between two products, which was the case in Pebble Beach. Id. at 546 n.14. But the court left open the possibility that the third factor might be required in other circumstances. Id.

Also unlike the Ninth Circuit, the Fifth Circuit held that the nominative use factors do not replace the normal likelihood of confusion factors (referred to in the Fifth Circuit as "digits of confusion"). The Fifth Circuit held that district courts should "ordinarily" consider the nominative use factors "in conjunction with its likelihood of confusion analysis to avoid lowering the standard for confusion," but "declined to require any particular method" for doing so. Bd. of Supervisors for Louisiana State Univ. Agric. & Mech. Coll. v. Smack Apparel Co., 550 F.3d 465, 489 (5th Cir. 2008).

Third Circuit—An Affirmative Defense

The U.S. Court of Appeals for the Third Circuit took yet another, different approach to nominative use in Century 21 Real Estate Corp. v. Lendingtree, Inc., 425 F.3d 211 (3d Cir. 2005). There, as a matter of first impression in that circuit, the court agreed with the Ninth Circuit that "a distinct analysis is needed for nominative fair use cases." Id. at 220. But the court disagreed that the analysis should "supplant the likelihood of confusion test entirely." Id.

The Third Circuit adopted a "two-step approach in nominative fair use cases." Id. at 222. First, the plaintiff has the initial burden of proving a likelihood of confusion. But the court recognized that not all of the normal likelihood of confusion factors—known as the "Lapp factors" in this circuit, from Interpace Corp. v. Lapp, Inc., 271 F.2d 460 (3d Cir. 1983)—are applicable in the nominative use context. Century 21, 425 F.3d at 224. Accordingly, under the Third Circuit's approach, courts in nominative use cases should not take into consideration the similarity of the parties' marks and the strength of the plaintiff's mark—two factors that the Court of Appeals held were "either unworkable or not suited or helpful as indicators of confusion in this context." Id. at 224. Instead, courts in the Third Circuit should focus on the Lapp factors that are most relevant to nominative use cases, including "the price of the goods" and other factors relating to purchaser care, "the intent of the defendant," and "evidence of actual confusion." Id. 225–26.

If the plaintiff is successful in meeting its initial burden to show a likelihood of confusion under the relevant Lapp factors, the burden then shifts to the defendant to show that the nominative use "is nonetheless fair." Id. at 222. To show fair use, the defendant must show:

  1. "That the use of plaintiff's mark is necessary to describe both the plaintiff's product or service and the defendant's product or service";
  2. "That the defendant uses only so much of the plaintiff's mark as is necessary to describe plaintiff's product"; and
  3. "That the defendant's conduct or language reflect the true and accurate relationship between plaintiff and defendant's products or services."

Id. (capitalization altered). In this way the Third Circuit treats nominative fair use as a true affirmative defense, akin to the statutory affirmative defense for classic fair use. See KP Permanent Make-Up, Inc. v. Lasting Impression I, Inc., 543 U.S. 111 (2004) (holding that a defendant asserting descriptive fair use defense has burden of establishing defense only after the plaintiff carries an initial burden to show likelihood of confusion). Under the Third Circuit approach, the question of whether the use is confusing or not is separately considered from the question of whether the use is fair or not.

Second Circuit Takes Its Own Approach

In its recent Security University decision, the U.S. Court of Appeals for the Second Circuit established its own approach for evaluating nominative use. In doing so, it expressly rejected certain aspects of the approaches taken by both the Third and Ninth Circuits.

The court first rejected the Third Circuit approach of considering nominative fair use as an affirmative defense. The court noted that the defense of classic fair use is found in Section 33(b)(4) of the Lanham Act. Security Univ., 823 F.3d at 167 (citing 15 U.S.C. § 1115(b)(4)). "If Congress had wanted nominative fair use to constitute an additional affirmative defense," the court reasoned, "it would have provided" for it in the Act. Id.

The court also rejected the Ninth Circuit approach of replacing the traditional likelihood of confusion test with a new test in nominative use cases. The court emphasized that district courts are required to consider each of the likelihood of confusion factors—known as the Polaroid factors; in this circuit, from Polaroid Corp. v. Polarad Electronics Corp., 287 F.2d 492 (2d Cir. 1961)—when considering whether a use, nominative or not, is confusing. However, the court also recognized that many of its Polaroid confusion factors "are a bad fit" in nominative use cases. District courts may decide that certain Polaroid factors are inapplicable in a given context.
Id. at 165.

The Second Circuit did agree with both the Third and Ninth Circuits that the three factors set forth in New Kids and Century 21 are relevant when evaluating nominative use. (Notably, despite differences in wording, the court found that the three factors in New Kids and Century 21 were essentially the same, referring to both formulations in its opinion.) This means that, in addition to the regular Polaroid factors, district courts in the Second Circuit must also consider these factors when deciding whether a nominative use is confusing or not.

Other Circuits

Three other circuits have discussed nominative fair use but have not adopted a framework for its application.

The First Circuit has noted the split in approaches between the Ninth and Third Circuits, but has so far refrained from "endorsing any particular approach to the nominative fair use doctrine." Swarovski Aktiengesellschaft v. Bldg. No. 19, Inc., 704 F.3d 44, 53 (1st Cir. 2013).

Similarly, the Fourth Circuit recognized issues raised by nominative use in 2012, but emphasized that because the question was not presented by the case before it, the court was "not adopting a position about the viability of the nominative fair-use doctrine as a defense to trademark infringement or whether this doctrine should formally alter our likelihood of confusion test in some way." Rosetta Stone Ltd. v. Google, Inc., 676 F.3d 144, 155 (4th Cir. 2012); see also Radiance Found., Inc. v. NAACP, 786 F.3d 316 (4th Cir. 2015) (reversing injunction because the district court erred in holding that the defendant's nominative use "was not fair use," but without expressly adopting any particular version of the nominative fair use doctrine).

In a 2003 case, the Sixth Circuit expressed some skepticism about the Ninth Circuit's approach to nominative fair use, but avoided the issue by holding that the defendant's use would not meet the criteria for nominative fair use. See PACCAR Inc. v. TeleScan Techs., L.L.C., 319 F.3d 243, 256 (6th Cir. 2003) ("This circuit has never followed the nominative fair use analysis.... We are not inclined to adopt the Ninth Circuit's analysis here. Even if we were to do so, [the defendant's] use of [the plaintiff's] trademarks does not fall within the nominative fair use defense.").

Looking to the Supreme Court

While there is broad agreement that certain nominative uses are non-infringing, the courts of appeals are divided on how to approach the issue. The table below summarizes the circuits' different approaches.

The appellee in Security University recently requested that the U.S. Supreme Court review the Second Circuit's decision. See Petition for Writ of Certiorari, Sec. Univ., LLC v. Int'l Info. Sys. Sec. Certification Consortium, Inc., No. 16-352 (U.S. Sept. 15, 2016), 2016 WL 5048645. The petitioner argues that the courts of appeals are "splintered over the proper approach to nominative fair use," that "the issue is extraordinarily important to competition and speech interests," and that the current conflict among the circuits is "a mess only [the Supreme] Court can sort out." Id. at *11, 23 (capitalization altered). Time will tell whether the Supreme Court takes this opportunity to bring uniformity to this important issue in U.S. trademark law.

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