One genre of trademark infringement cases has bedeviled the federal courts for years. This recurring situation has not prevented courts from reaching a just result, but it has created unnecessary work in addressing the proper legal standard to judge these cases. The troublesome facts presented by these cases are that the accused infringer uses the trademark owner’s mark to identify the trademark owner’s goods or services by their trademarked name. For example, a real estate company might advertise the services of various mortgage companies on its website using those companies’ trademarks as follows: “Let us find you the perfect home. If you need financing, check out the favorable rates provided by the lenders Money Tree, First Mortgage Company, and Second Mortgage Company.”
This use of the lenders’ trademarks to refer to them by name, dubbed “nominative use” or “referential use,” has not just split but has splintered the federal courts. Indeed, one court of appeals treats such nominative use as an affirmative defense that the defendant must prove. Under this court’s view, nominative use is like descriptive fair use and can avoid liability even if the use of the trademark is likely to cause confusion—so long as such nominative use is “fair.” Another court of appeals treats nominative use as a special type of noninfringing use that must be judged by its own exclusive set of factors that differs from the usual multifactor likelihood of confusion test.
Faced with these two conflicting views, still other courts of appeals have charted a new course between these extremes. The Second Circuit rejected the Third Circuit’s view that nominative use is a separate affirmative defense but also declined to adopt the Ninth Circuit’s view that nominative use requires its own set of exclusive infringement factors. Many other courts of appeals appear to be taking a “wait and see” approach until the law is sorted out. These courts have neither adopted nor rejected nominative use as a recognized defense or as meriting its own set of infringement factors. Courts with this view include the Fourth, Sixth, District of Columbia, and Eleventh Circuits.
This article will demonstrate that nominative use is not an actual affirmative defense. Instead, it is a type of noninfringing use that merits consideration of additional factors to determine the ultimate issue of infringement.
“Nominative use” was recognized by the courts before it was named. In 1924, the U.S. Supreme Court was presented with an appeal by a reseller of perfume that rebottled the genuine article in smaller bottles. The reseller labeled them with the following decree: “Prestonettes, Inc., not connected with Coty, states that the contents are Coty’s—(giving the name of the article) independently rebottled in New York.” The Supreme Court permitted this use of Coty’s mark and opined that the plaintiff “could not prevent or complain of” the defendant’s “stating the nature of the component parts and the source from which they were derived if it did not use the trade mark in doing so.” The Supreme Court went on to observe that a trademark right does not confer a right to “prohibit the use of the word or words” and is “not a copyright.” The essence of the trademark right is to “protect the owner’s good will against the sale of another’s product as his.” Framing the question as “whether the plaintiff has the naked right . . . to prohibit the defendant from making even a collateral reference to the plaintiff’s mark,” the Court held that there was no infringement because the defendant was only using the word “to tell the truth.”
Fast forward to 1991: the owner of the BOSTON MARATHON trademark obtained a preliminary injunction preventing a local news station’s use of the mark during live coverage of that event. The owner claimed that the public would wrongly, and confusedly, think the defendant’s broadcast “has the plaintiff’s official ‘O.K.’ or imprimatur.” On appeal, the First Circuit disagreed and reasoned that the district court had an “excellent reason” for thinking that “Channel 5’s use of the words ‘Boston Marathon’ would not confuse the typical Channel 5 viewer.” Those words “do more than call attention to Channel 5’s program; they also describe the event that Channel 5 will broadcast.” Common sense suggests that a viewer would not think Channel 5 had some “special approval.” In “technical trademark jargon,” the use of these words was “fair use.”
Against this backdrop, two newspapers conducted polls of their readers asking, “Which one of the New Kids is the most popular?” The boy band New Kids on the Block sued for infringement, claiming that the newspapers were trading on the popularity of the band’s mark and name. The Ninth Circuit, after conducting a sweeping review of trademark jurisprudence dating back to the Middle Ages and concluding with the First Circuit’s decision in the Boston Marathon case, christened a new name for an old concept, dubbed “nominative use” of a mark.
According to the judge, we can “generalize a class of cases where the use of the trademark does not attempt to capitalize on consumer confusion or to appropriate the cachet of one product for a different one.” “Such nominative use of a mark—where the only word reasonably available to describe a particular thing is pressed into service—lies outside the strictures of trademark law.” It does not implicate the source-identification function and purpose of trademark law, nor does it constitute unfair competition. It “is fair because it does not imply sponsorship or endorsement by the trademark holder.”
To judge this class of cases, the court fashioned a three-factor test:
[W]here the defendant uses a trademark to describe the plaintiff’s product, rather than its own, we hold that a commercial user is entitled to a nominative fair use defense provided [it] meets the following three requirements: First, the product or service in question must be one not readily identifiable without use of the trademark; second, only so much of the mark or marks may be used as is reasonably necessary to identify the product or service; and third, the user must do nothing that would, in conjunction with the mark, suggest sponsorship or endorsement by the trademark holder.
Although described as a “defense” in a later case, the judge clarified that nominative use is not an affirmative defense that defendants must prove. Instead, these are a special class of cases that require their own separate infringement test, namely consideration of the three above factors to the exclusion of all others. Per the court: “We’ve long held that such use of the trademark is a fair use, namely nominative fair use. And fair use is, by definition, not infringement.”
The Third Circuit entered the fray when it took up an appeal from an internet real estate referral service that used the plaintiff’s real estate marks to make referrals on its website. In that case, LendingTree’s website claimed that it “helps consumers identify and select qualified lenders, real estate brokers, auto insurers, and other financial service companies.” The alleged infringement arose from LendingTree’s use of Coldwell Banker’s “For Sale” sign with the corporate logo partially obscured by the word “SOLD” as well as statements on its “‘Find a Realtor’ homepage” and “Help Center” that LendingTree will “give you access to a national network of brokers representing the country’s leading real estate companies” and that LendingTree is “represented by large independent real estate companies and members of major franchises—Coldwell Banker, Century 21, Prudential, ERA, ReMAX, GMAC . . . , and Realty Executives.” Unlike the fact pattern in New Kids, LendingTree’s use of the plaintiff’s mark unquestionably was a “commercial use.”
After an extensive discussion of the Ninth Circuit’s New Kids decision, the Third Circuit extended that reasoning to recognize “nominative fair use” as an affirmative defense to trademark infringement. The court agreed with the Ninth Circuit that a distinct analysis is needed for nominative fair use cases. However, it disagreed with the suggestion that nominative fair use simply requires a replacement test for judging likelihood of confusion. The court did not “see nominative fair use as so different from classic fair use as to warrant such different treatment.” The court took issue with the Ninth Circuit’s assumption that nominative use makes it clear to consumers that the plaintiff, not the defendant, is the source of the trademarked product or service. Since the defendant’s ultimate purpose in using the plaintiff’s mark in a nominative use case is to promote its own products or services, the court found that even an accurate nominative use could “potentially confuse consumers about the . . . endorsement or sponsorship of the defendant’s products or services.” As a result, it determined that nominative fair use should be a true, affirmative defense to infringement. In other words, a defendant may avoid a plaintiff’s prima facie case for infringement if the defendant can prove that its nominative use of the plaintiff’s marks was “fair.”
To judge fairness, the court fashioned a three-part test: (1) whether the use of the plaintiff’s mark is necessary to describe the plaintiff’s product or service and the defendant’s product or service; (2) whether only so much of the plaintiff’s mark is used as is necessary to describe the plaintiff’s product or service; and (3) whether the defendant’s conduct or language reflects the true and accurate relationship between the plaintiff and the defendant’s products or services. These three factors were modeled on and reminiscent of the New Kids factors.
Faced with two conflicting views of nominative use—one as an affirmative defense and another as a type of noninfringing use—the Second Circuit decided an appeal from the owner of a certification mark. The owner complained that a defendant misrepresented the certification mark to promote the defendant’s training services. The Second Circuit focused on the defendant’s “nominative fair use” defense, specifically, “how the district court should assess likelihood of confusion on remand.” The court noted that rather than applying the traditional Polaroid factors, the district court exclusively applied the three New Kids factors. The Second Circuit noted that the Ninth Circuit does not treat nominative fair use as an affirmative defense since a defendant is not protected from liability once a likelihood of confusion is found. By contrast, the Third Circuit affords broader protection and recognizes nominative fair use as an affirmative defense that may be asserted despite a likelihood of consumer confusion.
After considering both points of view, the Second Circuit rejected the Third Circuit’s treatment of nominative fair use as an affirmative defense and reasoned that the Lanham Act sets forth numerous affirmative defenses to infringement claims to be asserted even if the plaintiff has established a likelihood of confusion. “Nominative use” is not listed as one of them. Further, the Third Circuit’s analysis was based on a rationale for descriptive fair use. The Second Circuit noted that nominative use is trademark use of a mark in its trademark sense, not descriptive use of a term in its ordinary dictionary meaning sense. Therefore, the rationale for recognizing a defense to avoid liability once a likelihood of confusion is established does not apply. Instead, the Second Circuit held that the special nominative use factors adopted by both the Third Circuit and the Ninth Circuit must be considered in addition to the Polaroid factors.
In the face of what now has become a three-way split in the case law, unsurprisingly other courts have taken a measured approach to recognizing the defense of nominative use until the parameters of that defense are sorted out. These courts recognize the problem that “nominative use” presents to their traditional analysis but have not yet committed to how to resolve it.
Typical of this approach, the Fourth Circuit has said, “In the context of a referential or nominative type of use, the application of the traditional multi-factor test is difficult because often many of the factors ‘are either unworkable or not suited or helpful as indicators of confusion in this context.’” Consideration of the similarity of the marks will always suggest the presence of confusion. The Fourth Circuit significantly noted, however, “We hasten to add that we are 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[,] . . . and we leave it for another day.”
To the same effect, the Sixth Circuit is “not inclined to adopt the Ninth Circuit’s analysis.” More recently, the D.C. Circuit offered, “we need not resolve today, which approach our court should adopt,” adding that “[w]hat we can say” is that “under no formulation can a court ignore the nominative fair use factors altogether.” And finally, the Eleventh Circuit remarked, “[w]e have not yet addressed whether nominative fair use is an affirmative defense to trademark infringement,” observing that other courts of appeals have disagreed about how to evaluate such claims.
In the author’s view, two dispositive issues emerge: (1) Should “nominative use” be recognized as a separate defense, and (2) What factors should be used to judge it?
The first is a threshold issue. It is either a negative defense that negates one or more elements of a plaintiff’s infringement claim or an affirmative defense that avoids it notwithstanding an established likelihood of confusion. The second issue goes to how the defense, whether negative or affirmative, should be judged.
The first issue must be resolved against recognition of a separate defense. After the threshold issue is resolved, the emerging consensus to judge it is that the New Kids factors must at least be considered, though not to the exclusion of others. These points are discussed below.
At this point, the Third Circuit stands alone in recognizing nominative use as an affirmative defense. Other courts have not adopted this position for various reasons. First, the defense lacks a statutory basis. As the Second Circuit observed, while the Lanham Act recognizes a number of defenses that will avoid liability to a proven case of infringement, “nominative use” is not mentioned. However, Congress chose not to codify the concept of nominative fair use, which predated the passage of the Lanham Act in 1946, as a separate defense.
Additionally, Congress formally recognized “nominative fair use” as a defense when it amended the Lanham Act to recognize a cause of action for commencing use of a mark that is likely to cause dilution of a famous mark. While it did so in the Federal Trademark Dilution Act, however, Congress left unchanged the prior defenses to the infringement section of the Lanham Act. As one especially observant commentator noticed, the prior version of that act referred to the defenses as applicable to this “section,” while the amended act referred to the defenses as applicable only to this “subsection.” This word choice suggests that Congress did not intend to extend the nominative fair use defense to the infringement section.
Perhaps in recognition of this statutory unmooring, the Third Circuit attempted to tether nominative use to the language of the statute by holding that the ultimate purpose of a defendant’s use of the plaintiff’s mark in a nominative use case is “to describe its own product or services.” But this justification seems to stretch the language of the descriptive fair use statute beyond its wording. In trademark law, the word “describe” has a well-known meaning associated with using a word, term, or device according to its primary “descriptive” meaning, not its “secondary meaning” sense, or in other words using a common word as a trademark. The point of “nominative use” is using a word according to its trademark meaning. That is contrary to the non-trademark use concept recognized by the classic fair use defense.
Even if one considers the legislative history as inconclusive, a second problem with nominative use as an affirmative defense is that interpretation risks defeating congressional intent. As the Second Circuit observed, the modern test of infringement is whether “the defendant’s use is likely to cause confusion not just as to source, but also as to sponsorship, affiliation or connection.” This departs from the common law, under which trademark infringement law protected only source confusion. More than 100 years of history and development of the trademark law protects marks against sponsorship or endorsement confusion. To the extent that the Third Circuit recognizes an affirmative defense to a proven case of infringement, that court’s recognition of the defense appears at odds with this history, especially when considering that most commercial uses of another’s trademark implicate sponsorship confusion.
Setting aside these doctrinal issues, the dissent in the Third Circuit’s decision gets to the biggest problem of all in recognizing nominative use as an affirmative defense. The defense is “judicially unmanageable” because the prima facie infringement case is predicated on proving a likelihood of confusion. Under the Third Circuit’s test, after the plaintiff meets its burden to show a prima facie case of confusion, the burden then shifts to the defendant to avoid liability. A defendant may do so by proving that its use is “fair.” But this is where the problem arises: To prove “fairness,” according to the Third Circuit, the district court should consider its three factors on whether use of the plaintiff’s mark is necessary, only so much is used as is necessary, and the defendant’s conduct or language reflects the “true and accurate relationship” between the plaintiff and the defendant’s products or services.
The first and second factors closely resemble the New Kids factors, while the third factor only arguably restates it. Under the third factor, a defendant avoids liability if the defendant’s conduct or language “reflect[s] the true and accurate relationship between plaintiff and defendant’s products or services.” Proving such a “true and accurate relationship” seems invitingly similar to disproving confusion as to “sponsorship.” The two tests seem to present two different sides of the same coin. As the author of the New Kids factors observed, the third factor “speaks directly to the risk of [sponsorship] confusion, and the others do so indirectly.” If it can be accepted that the Third Circuit’s test effectively places the burden on opposing parties to prove the same issue, that test does seem judicially unmanageable.
A leading reason for recognizing the defense is to avoid chilling expression. Some believe that trademark owners can be overly aggressive in policing their marks. Another stated reason for recognizing the defense is that it already exists in dilution cases. Recognizing it as a defense to infringement would avoid an inconsistency in the law as regards the two causes of action. While both these concerns are legitimate, upon closer scrutiny they do not justify recognition of a separate defense.
First, with regard to overly zealous enforcement of rights that chill expression, this concern would appear to be misplaced as it relates to the commercial use in the Third Circuit’s decision that gave rise to the affirmative defense. That case involved commercial speech to propose a commercial transaction, not a claim by an artist, a sculptor, or even a newspaper. While commercial speech is entitled to First Amendment protection, that protection has never been understood to extend to deceptive speech. In other words, “Whatever first amendment rights you may have in calling the brew you make in your bathtub ‘Pepsi’ are easily outweighed by the buyer’s interest in not being fooled into buying it.”
More importantly, in bedrock areas implicating freedom of expression, the law already vigorously protects expressive forms of nominative use in noncommercial contexts. The Rogers balancing test protects use in artistic works. Use to comment on or criticize the trademark owner is protected as noncommercial use. Use to parody the trademark owner is likewise a protected form of nominative use. In these cases, the line is drawn between amusing and confusing. While aggressive policing of trademark rights has legitimate concerns, smaller defendants have a potent weapon to combat trademark misuse. Social media is a great equalizer that levels the playing field. In today’s digital world, trademark owners should be especially conscious of their reputations and recognize that every communication may end up in the defendant’s social media post and go viral. In recognition of this fact, smart brand owners arguably have a strong incentive not to overreach.
Finally, the view exists that as nominative use is a defense to dilution, it must be a defense to infringement because plaintiffs often join both causes of action in a single complaint. While different treatment of nominative fair use creates a dichotomy in the law, upon closer inspection, this dichotomy actually is justified. Dilution law and infringement serve different purposes. While in both actions the defendant’s interest in nominative use of the plaintiff’s mark is pitted against the trademark owner’s right to exclude another from misappropriating its goodwill, infringement law serves an additional purpose. That purpose is to protect consumers from confusion. In contrast, dilution law serves only to protect the mark itself. Under these circumstances, it is fair for the law to put its finger on the scales of justice and recognize nominative use as an affirmative defense to dilution but only a negative defense to infringement. In a real sense, the public’s interest in avoiding confusion tips the balance against recognition of nominative use as a separate defense.
Further, the elements required to prove a prima facie nominative fair use defense to dilution differ from the elements required to prove a prima facie case of such likely dilution. Dilution “avoids” liability for blurring by dilution (or tarnishment) rather than simply negating it. A prima facie case of dilution is proven by ownership of a famous mark, and that the defendant’s use of that famous mark is likely to impair the distinctiveness of the mark or harm its reputation by association with a mark used by the defendant.
Notably, the defendant is not required to negate blurring or tarnishment. A defendant therefore might choose to admit blurring or tarnishment but claim one of the safe harbor defenses in the dilution statute to avoid liability. In contrast, to avoid infringement liability under the Third Circuit’s test, the defendant in an infringement action must prove that its conduct or language “reflect[s] the true and accurate relationship” between the parties, which, as noted above, is very similar, if not identical, to the flip side of the plaintiff’s burden to prove “sponsorship or endorsement” confusion.
Additionally, courts appear to be handling the dichotomy now. Many trademark cases are resolved on motions for preliminary injunctions or by bench trials. Trial judges will be able to distinguish the two legal concepts and apply the law correctly, especially aided by briefing from the parties. In jury trials, proper jury instructions also will lessen the risk of confusion. For example, in Anheuser-Busch, Inc. v. L & L Wings, Inc., a case that predated the federal dilution laws, the plaintiff claimed that the defendant’s slogan “This Beach is for You!” on T-shirts infringed the plaintiff’s trademark rights. The defendant argued that its use of the plaintiff’s famous slogan was to “parody” or poke fun at the plaintiff. If this case were tried today, the plaintiff would probably bring both trademark infringement and trademark dilution claims while the defendant would argue that its use of the plaintiff’s famous slogan is allowed as lawful parody. To prevent jury error, the jury could be instructed: “Parody is never a defense to infringement if a likelihood of confusion exists. On the other hand, even if you find that confusion exists, you may find that the defendant is not liable for causing likely dilution of the plaintiff’s mark if the defendant proves that it is using the plaintiff’s mark to make a social comment about the plaintiff or to poke fun at the plaintiff or its famous slogan.” By instructing the jury on the different application of the law to the two types of trademark claims, the jury will avoid error.
Although nominative use is not an affirmative defense to infringement but only a defense that negates one or more elements of the plaintiff’s case, this discussion would not be complete without considering the legal test that should be used to judge these types of infringement cases. Indeed, the two issues are inextricably intertwined, and both have splintered the courts. In fact, during the three decades since the words “nominative use” first appeared, a path forward may have begun to emerge. As noted in the discussion above, many courts of appeals have observed that the traditional multifactor test is poorly suited to judge nominative uses of the plaintiff’s marks. In these cases, the marks are always identical, and since most cases involve claims of sponsorship confusion, the parties’ goods or services are related. With these two factors met, the defendant is at an immediate disadvantage. Further, many courts hold that while bad faith, without more, may prove infringement, evidence of good faith offered under the “intent” factor is not a defense to infringement. For these reasons, the Second and D.C. Circuits are correct to consider the additional factors from the Ninth and Third Circuits, but not as exclusive factors in nominative cases.
This follows for several reasons. First, considering the nominative use factors to the exclusion of all others runs the risk of eliminating important factors. For example, intent has always been an important factor in trademark infringement and unfair competition cases, as the essence of the wrong is unfair competition or misappropriating the goodwill of others. Eliminating this factor is at odds with centuries of law. Another persuasive factor is evidence of actual confusion. Indeed, this factor is often dispositive; if consumers are actually confused, then one may easily conclude that consumers are likely to be confused. The problem with the Ninth Circuit’s approach is that it overly simplifies a more nuanced question. This may well explain why no other circuit has embraced it.
Dispensing with the traditional multifactor test seems unnecessary. All circuits recognize that the multifactor confusion test is only a guide. These judicially created factors are not intended to be exhaustive or mandatory. And they are not always weighted equally, nor are they all relevant in every case. They are to be applied flexibly with due consideration to the facts of each case, not a rote checklist. For this reason, the Second Circuit’s approach seems consistent with this established precedent. Without doing so, the ultimate decision maker cannot get the full picture. As the D.C. Circuit observed, a district court should not ignore the nominative fair use factors altogether.
Finally, if it can be accepted that nominative use is a negative rather than affirmative defense, a final procedural question arises: How and when should the defendant raise the defense to ensure that the additional nominative use factors are considered? The answer to this question is Federal Rule of Civil Procedure 8(b)(1)(A). That rule requires a party responding to a pleading to state “in short and plain terms its defenses to each claim asserted against it.” This rule exists separate from Rule 8(c), which requires a party responding to a pleading to “affirmatively state any avoidance or affirmative defense.” In the author’s view, Rule 8(b)(1)(A) is intended as the vehicle for raising negative defenses, while Rule 8(c) is the vehicle for raising affirmative defenses.
According to other commentators, it is generally understood that a negative defense is not waived if not separately pleaded. Indeed some courts have gone so far under Rule 12(f) to strike a separately pleaded negative defense as “redundant” or unnecessary. Those courts do not read “defenses” in Rule 8(b)(1)(A) as extending to negative defenses. However, other courts recognize that “negative” defenses may be pleaded separately if labeled as “defenses.” In the author’s view, a plain reading of the Federal Rules supports the separate pleading of negative defenses.
To avoid inadvertently conflating an affirmative defense with a negative one, however, a careful pleader therefore might plead nominative use as a negative defense as follows:
First Defense: Nominative Use
Defendant is using Plaintiff’s mark to identify Plaintiff’s goods and services rather than its own, which negates a likelihood of confusion.
In this way, a defendant will be able to signal from the outset of a trademark infringement dispute that the facts do not present the usual “garden variety” type of infringement case but justify consideration of additional factors to assess the likelihood of confusion.
In the best of cases, nominative use is challenging because it inherently involves employing the trademark owner’s mark as a shorthand reference to the trademark owner’s product or service. As a result, it frustrates the application of the standard multifactored confusion factors in a mechanical or robotic manner. But the challenging nature of the doctrine does not justify the creation of a new affirmative defense predicated on proving the “true and accurate” relationship between the parties. However well-intentioned, doing so overlooks the inherent tension that exists between “deceptive” use coexisting with use that “truly and accurately” describes the relationship between the parties.
Given the many forms that “nominative use” may take, the law is better served by treating nominative fair use as a type of nonconfusing use like other equally, not actionable types of nonconfusing uses, such as noncommercial uses or parodies. Finally, the challenges presented by nominative use cases that may disadvantage a defendant can be offset by considering the nominative use factors recognized by both the Ninth Circuit in its New Kids decision and the Third Circuit in its Century 21 decision as additional factors to prevent lowering the bar for finding trademark infringement. In this way, a defendant’s rights can be better protected. This approach should harmonize the law and help bring clarity to a troublesome issue that has split the federal courts.
©2022. Published in Landslide, Vol. 14, No. 3, March/April 2022, by the American Bar Association. Reproduced with permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association or the copyright holder.
