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The U.S. Supreme Court has decided an important case regarding the scope of the fair use defense in trademark infringement actions. In KP Permanent Make-Up v. Lasting Impression I, 04 C.D.O.S. 10722, a unanimous court, vacating a decision of the Ninth Circuit U.S. Court of Appeals, held that a party raising the affirmative defense of fair use to a claim of trademark infringement does not have the burden to negate any likelihood that the practice complained of will confuse consumers. In fact, the defense is available even if there is “some possibility of consumer confusion.” The Dec. 8 decision continues the recent line of Supreme Court trademark decisions systematically limiting the use of trademark law to suppress competition. In acknowledging that the law tolerates some possibility of consumer confusion in order to protect the public’s access to descriptive terms used in their primary, descriptive sense, the case affirms that trademark law cannot be used to impede the free flow of truthful information required to compete effectively in the marketplace. The parties to the case are competitors in the micropigmentation, or permanent make-up, industry. Lasting Impression I Inc., owner of an incontestable federal registration for the mark MICRO COLORS for color pigments, challenged the descriptive use of the phrase “micro colors” by KP Permanent Make-Up to describe its selection of pigments. KP sought a declaratory judgment that its use of “micro colors” was lawful. Lasting Impression counterclaimed, alleging trademark infringement. The U.S. District Court for the Central District of California granted summary judgment to KP based on the affirmative defense of fair use. Lasting Impression appealed, and the Ninth Circuit reversed, holding that the defense of fair use is available only where a defendant can demonstrate no likelihood of confusion. The Supreme Court granted KP’s petition for certiorari on the issue of whether the classic fair use defense to trademark infringement requires the party asserting the defense to demonstrate an absence of likelihood of confusion. In a strongly worded opinion written by Justice David Souter, the Supreme Court unanimously held that it does not, and further that the defense is available even if some consumer confusion is possible. The Supreme Court, however, did not entirely dismiss the relevance of consumer confusion to the fair use calculus. In particular, the court’s decision expressly “does not foreclose the relevance of the extent of any likely consumer confusion in assessing whether a defendant’s use is objectively fair.” The high court provided no further guidance on this point, and the issue is left to the specific facts and circumstances of a particular case. The decision in the KP case is the logical extension of the Supreme Court’s line of trademark law decisions over the past decade, which have systematically limited the use of trademark law to suppress competition. The court has repeatedly protected the basic free market principle that, within carefully defined limits, competitors should be free to copy the products of others and imitate their marketing techniques. This principle results in lower prices and more abundant supply. It is within this limitation that the court recognizes intellectual property rights of exclusion. For example, in the areas of color and product design trade dress, the high court has required proof of acquired distinctiveness before the owner can claim exclusivity ( Qualitex v. Jacobson, 514 U.S. 159 (1995), and Wal-Mart Stores v. Samara Brothers, 529 U.S. 205 (2000)). Likewise, where the product design is also the subject of a utility patent, the patent will weigh as heavy evidence that the design is functional and therefore free to be copied ( TrafFix Devices v. Marketing Displays, 532 U.S. 23 (2001)). The Supreme Court further has narrowly interpreted the Federal Trademark Dilution Act, requiring a plaintiff to prove actual dilution, rather than a mere likelihood of dilution, thus making it more difficult for owners of famous marks to exclude non-competing uses of a mark ( Moseley v. Victoria’s Secret Catalogue, 537 U.S. 418 (2003)). In the view of many trademark practitioners, the court’s strict construction of the federal anti-dilution statute has virtually nullified it as a practical matter. The KP decision continues this line of cases, maintaining the important policy balance created by the fair use defense and preventing the use of trademark law to impede the free flow of truthful information required to compete effectively in the marketplace. The mark in issue — micro colors — is an incontestably registered descriptive term. Any right to exclusivity of a descriptive term must, as with color and product design trade dress, be based on acquired distinctiveness (which is statutorily presumed where, as here, the mark is incontestably registered). Second, the Supreme Court’s decision makes clear that the right to exclusivity is limited by the legitimate competitive need of others to make “fair use” of the term, that is, to use the language in its primary descriptive sense to tell potential purchasers about the product. The high court’s decision in the KP case is notable in its explicit recognition that some consumer confusion will be tolerated in order to balance the sometimes competing policy goals of trademark law. In particular, to advance the goals of protecting consumers from confusion and promoting product quality, trademark law accords some exclusivity of use to trademark owners and makes unlawful the use by others of confusingly similar trademarks; the exclusivity of use reduces consumer confusion and also promotes product quality by securing the benefits of goodwill to the trademark owner. The exclusivity, however, is carefully limited to also promote the competing goals of free competition and ready access to reliable information. The Supreme Court’s decision in the KP case, consistent with the high court’s holdings in earlier trademark cases, protects free market principles and affirms that a trademark owner’s exclusivity does not extend so far as to prohibit the fair use by third parties of an inherently descriptive term used in its primary, descriptive sense, even if some confusion results. The court said the trademark statute was not intended to “deprive commercial speakers of the ordinary utility of descriptive words.” Thus, where a party adopts a descriptive term as its mark, trademark law will permit some degree of consumer confusion. As the court explained, the possibility of confusion is the risk the trademark owner assumes by selecting a descriptive term as its mark. In the wake of the Supreme Court’s decision, trademark owners selecting new marks should heed the court’s warning that a party that adopts a descriptive term to identify its product bears the risk that confusion may result. Descriptive terms must remain available in the public domain for use in their primary, descriptive sense to communicate relevant facts to consumers. Thus, while a trademark owner that adopts a descriptive term as its mark may gain the benefit of its immediate communicative value, the owner assumes the risk that others may use the same term to describe possibly competing products. On the other side, those considering descriptive uses of a term that another has adopted as its mark may take some comfort in the court’s opinion, but should proceed with caution, as the court’s opinion made clear that the extent of consumer confusion remains relevant to a fair use analysis. Even if a party is using a term in its primary descriptive sense to communicate relevant facts to consumers about its products, that use must be “fair” and in good faith in order to qualify for the fair use defense. The extent of any likely consumer confusion will be relevant to determining whether a particular use is objectively fair. The degree of confusion that will be tolerated will depend on the case and the underlying likelihood of confusion, which remains the trademark owner’s burden to prove. It is important to note that the high court’s decision is limited to the applicability of the fair use defense to descriptive uses of an inherently descriptive term that one party has adopted as its mark. The decision does not reach the nominative fair use defense, developed in the Ninth Circuit, which affords a party the right to use another’s mark, even if it is inherently distinctive, when (i) there is no readier way to refer to the product in question without using the owner’s mark; (ii) the defendant only uses as much of the mark as is reasonably necessary to identify the owner’s product; and (iii) the defendant does not imply sponsorship by or affiliation with the trademark owner. The principles and delicate policy balance underlying the Supreme Court’s decision in the KP case suggest a similar treatment of the nominative fair use defense, though it remains to be seen whether the logic of the KP decision will be extended beyond its current limits. Laura Gustafson is a senior associate with Pillsbury Winthrop in San Francisco, where she focuses on intellectual property protection and counseling, licensing and advertising issues.

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