If infringement falls in a forest….

Can there be “infringement” of a trademark without confusion?

As she is so apt to do, and to do so well, Pamela Chestek asks that question in this post, entitled Infringement Without Confusion?, which is about something completely different from what I thought it was going to be about, because I know that, in New York at least, the answer can be yes.

That’s not the question Pamela is asking.   But this is a great opportunity, and given the name of this blog and what I say up in the right-hand-corner there, a good place, to unpack a few things about this thing, and address what I thought she meant before proceeding to what she meant, as well as to what’s going on in the comments to her post.   The … confusion on my part is not, in fact, irrelevant.

What was I thinking of when I read the question?  New York’s famous, or perhaps infamous, state-law tort of unfair competition by “wrongful misappropriation,” of course.  To wit: In New York, the “essence of unfair competition . . . is the bad faith misappropriation of  the labors and expenditures of another, likely to cause confusion or to deceive purchasers as to the origin of the goods.” Nabisco, Inc. v. PF Brands, Inc., 50 F. Supp. 2d 188, 212 (S.D.N.Y. 1999).

To assert an unfair competition claim, a plaintiff must demonstrate (1) a likelihood of confusion, and (2) the defendant’s bad faith. Kraft Gen. Foods, Inc. v. Allied Old English, Inc., 831 F. Supp. 123, 135 (S.D.N.Y. 1993). Unlike a claim for trademark infringement, proof of secondary meaning ,or, indeed, of a protectable mark at all) is not required. Tri-Star Pictures, Inc. v. Unger, 14 F. Supp. 2d 339, 364 (S.D.N.Y. 1998). Ok, very nice.  But is “infringement without confusion” the same thing as “confusion without secondary meaning”?   Well, how would it be different?  Once you’re dealing with logical dead-ends, after all, they start to look quite similar, and end up in more or less the same place.

After all, the premise of confusion is a baseline of association — in trademark law, we call that secondary meaning, or… a protectable mark.   Same place.   Indeed, pointier heads than that of LIKELIHOOD OF CONFUSION® have long pondered what the heck it means to have a likelihood of confusion without secondary meaning, or without a protectable mark.   As one academic treatment of this odd creature put it,

Some legal theories, like the proverbial vampire, refuse to die. The common law tort of misappropriation is one such legal theory, and the recent Restatement (Third) of Unfair Competition (Restatement) may finally lead to the demise of this outdated cause of action.

Regrettably, the “recent” referred to in that quote was 1993.  The tort, and the illogic, live on, and you can see it in action every time a judge or, in the Second Circuit, a trio of them reaches for it.  It never makes any sense in action; it’s just stuck in there to bridge some gap of logic, not with logic, but with Magical Judicial Filler, and to get to the desired result for the desired party.   That’s the way it goes.

And now to Pamela’s question.  Let’s see if I’m right that it is, in fact, related — or at least, as we say, not unrelated:

It’s a simple case, but simple doesn’t mean you get to take shortcuts on the legal rationale.

Okay — already you know I’m onto something!  Shh, ok, listen:

At the end of 1998 Ford and ThermoAnalytics entered into a License Agreement for RadTherm software for heat mapping. . . . The agreement provided that “FGTI … shall have ownership of all copyright, trade secret, patent, trademark and other intellectual or industrial property rights therein or associated therewith.” There was also this “Trademark Notice” clause:

All trademarks and trade names identifying FGTI Licensed Software or FGTI or Ford businesses are, and will remain the exclusive property of FGTI and Ford respectively. [ThermoAnalytics] shall not take any action that jeopardizes the Marks, and acquires no rights in the Marks except in the limited use rights specified below. [ThermoAnalytics] shall be limited to using the Marks exclusively to advertise and promote FGTI Licensed Software.

In 2000, ThermoAnalytics released version 5.0 of RadTherm but claimed it was an entirely different work [but] continued to pay royalties to Ford for 13 more years, finally terminating the agreement in March, 2014. ThermoAnalytics . . . called the new software “RadTherm,” even after the lawsuit was filed. ThermoAnalytics had also registered the RADTHERM trademark in 2000.

Ford brought suit against ThermoAnalytics [seeking]  relief . . .  under § 43(a) of the Lanham Act . . .

As Pamela explains, the contract was clear:  Under the contract, Ford owns the RADTHERM trademark. “But it’s after that where things go wrong,” she continues:

From there, the court found infringement (internal citations and quotation marks omitted):

“Here, Defendant terminated the License Agreement on March 1, 2014. Section 11.1 of the Agreement, “Effects of Termination,” states ‘the obligation to pay Royalties to FGTI shall survive until Licensee ceases to market, sell, and support the FGTI Licensed Software, Licensee Licensed Software or Jointly Owned Software.’ However, despite sending its last royalty payment in March of 2014 and being given a written demand to cease use of the Trademark in February of 2014, Defendant continued to use the RADTHERM mark until April of 2015. In fact, during oral argument, Plaintiffs revealed to the Court that, despite ‘officially’ changing the name of the software to TAITHERM, Defendant still uses the original name, RADTHERM, as a reference for its newly branded software on Defendant’s website. It’s even used in the URL. Therefore, Plaintiffs have provided clear and substantial evidence of unauthorized use to establish liability.Defendant has brought no evidence or defense sufficient to raise a genuine issue of material fact as to liability. Accordingly, the Court will grant Plaintiffs’ Motion with regard to this Count.”

It sounds simple enough on its face but the court missed a pretty significant step – Ford did indeed establish unauthorized use, but where was the liability? The only liability under the Lanham Act is for confusion but the court took a shortcut on that. Indeed, “typically, where an ex-licensee continues to use the licensed trademark, the continued use by itself creates a likelihood of confusion under the Lanham Act.” But this isn’t the “typical” case; the case law arose with respect to the franchise model, where the breaching party is an ex-licensee holding over and there is use of the same trademark by other licensees. Yes, in that situation there is absolutely confusion. But this was not that “typical” case, Ford did not have its own RADTHERM software. Instead, for fifteen years the only software distributed under the trademark RADTHERM was ThermoAnalytics’ software. What Ford product, exactly, was ThermoAnalytics sofware supposed to be confused with? There wasn’t any.

So here’s the money graf:

I have no problem finding that, by contract, FGTI was the owner of the RADTHERM trademark and that ThermoAnalytics had to cease using the trademark when the agreement terminated. I also agree with the court’s conclusion that, because by agreement the RADTHERM mark could be used only to advertise and promote FGTI Licensed Software, the use of the mark for a different codebase was a breach of contract. But, I do have a problem with the theory that there was a Lanham Act violation, because there can’t be any confusion. Some may consider it a flaw that the Lanham Act doesn’t provide a claim for ownership per se (I do), but there isn’t one, there are only legal claims for confusion. . . . At the end of the day the contract did what it was supposed to do. Ford is the owner of the copyright and trademark for the RADTHERM software and absent the agreement it wouldn’t have owned either. But what Ford did accomplish with its faux Lanham Act claim was federal jurisdiction. The only claims here were for breach of contract and this case should have been in state court.

Wow!  Are you loving this yet?  Because if you’re not, it gets better!  First, the pseudonymous Lori writes, in the comments, as follows:

“What Ford product, exactly, was ThermoAnalytics sofware supposed to be confused with? There wasn’t any” In the licensing world, that statement sends chills down your spine. “Ford did not have its own RADTHERM software” – yes it did. The Radtherm product WAS Ford’s product, it was produced and distributed by a licensee, exclusively under license. From the licensor’s standpoint – I contracted with a licensee to have a product made under a brand I owned.

Pam’s got a response to that; read it there.  Then comes my friend Bob Cumbow, who writes:

Trademark infringement is not based on confusion between two products, but rather on confusion as to the source, sponsorship, or affiliation of a single product. As I read it, Ford was complaining that TheroAnalytics’ behavior was likely to confuse consumers into thinking that Thero rather than Ford was the source of the RADTHERM product. That sounds like Lanham Act confusion to me.

Pam’s ready for that too, and Bob’s ready for Pam, and her conclusion is this:

The problem for me is characterizing this as a “license” arrangement. There was software, Ford owned it, ThermoAnalytics paid a royalty to Ford on what it sold. There was no express trademark license, just an agreement on who owned the trademark. I don’t disagree with the case law on terminating licensees, I disagree it was the relevant law to apply in this fact pattern.

So at the end of the day is there any similarity to Pam’s question and mine?  Maybe a little bit (uh oh — here comes some Magical Blogger Filler!). Here’s what I’m thinking.  Very conceptual. This wasn’t, as Pam says, a real trademark license, just a flat-footed statement of who supposedly “owns” the trademark.

And what, after all, is at the core of both a real trademark license and real trademark ownership?  Class?

GOODWILL.

And, indeed, there is no recital or other indication of a bona fide concern regarding the administration — i.e., establishment and maintenance of or a threat to — goodwill in either the arrangement described in Pam’s blog post in the New York tort of Unicorn Horn Misappropriation.

• This is why Pam’s concerns about the outcome described above are legitimate.
• This is what happens when you don’t have lawyers with genuine understanding of intellectual property doing the corporate work.
• And, YES, this is what happens when judges are allowed to use Genuine Licensed Radtherm Filler to irradiate, clean out and
  • give judicial life to Trademarks-that-Aren’t
  • remedy Confusion-that-Isn’t, and
  • Turn Boring Old State Contract Claims into Exciting Federal Court Trademark Claims.

And if that’s at all confusing to you, well, that’s confusion enough!

Originally posted 2015-11-16 18:08:53. Republished by Blog Post Promoter