Making a Case for the Trademark Misuse Doctrine1.
Preliminaries:
The rights conferred on trademark holders is exceedingly broad and
continues to grow in leaps and bounds as new technologies emerge and new
concepts arise, further extending the boundaries of entitlement beyond which
others may not traverse without the prior permission of the trademark holder2. As
appealing as this might seem on first scrutiny, an unhealthy situation arises if the
law does not impose a few significant restraints. Much like unbridled power which
is subject to abuse trademark holders will continue, if not constrained, to push
the boundaries of their rights as far as they can manage.
Being mindful of this potential for abuse, the courts in the United States
have attempted to introduce a number of restraints through concepts like the Fair
Use defense 3 , First Amendment justifications 4 and the First Sale doctrine 5 ,
sometimes beyond the statutory defenses provided by the Lanham Act. The
trademark misuse defense could also serve as an effective defense tool if
properly pleaded, and as argued in this paper, is in dire need of urgent
resuscitation and clear articulation by the courts6.
Although the concept of trademark misuse appears to lay claim to a long
ancestry hidden in remote decisions in the dim and obscure past, modern courts
have not been very enthusiastic in upholding this defense, at least not as they
1
John Onyido, Esq. [Associate Partner] S.P.A. Ajibade & Co., Legal Practitioners, Arbitrators and
Notaries Public, Lagos Nigeria, 2011.
2
The concept of famous trademarks and the evolving doctrine of trademark dilution as well as domain
name disputes are a few instances in which the traditional rights accruing to trademark holders have
become more expansive.
3
See Section 33 (b) Lanham Act in which the Fair Use defense is listed as a statutory defense to a
trademark infringement action. Also see When is Parody Fair Use? Richard Posner, 21 J. Legal Studies 67,
75 (1992).
4
“Trademarks as Speech: Constitutional Implications of the Emerging Rationale for the Protection of
Trade Symbols”, Robert C. Denicola, 1982 Wis. L. Rev. 158. Trademark Parody: A Fair Use and First
Amendment Analysis, Robert Shaughnessy, 1986 72 Va. L. Rev. 1079. Satiric Appropriation and the Law
of Libel, Trademark and Copyright: Remedies without Wrongs, Harriette K. Dorsen, 1986 65 B. U. L. Rev.
923.
5
Denbicare U.S.A. Inc. v. Toys ‘R Us, Inc. 84 F.3d 1143 (9 th Cir 1996). The concept of exhaustion of
intellectual property rights is sometimes supplemented or justified using the implied license rationale.
6
Revitalizing the doctrine of Trademark Misuse, William E. Ridgway, 21 Berkeley Tech. L. J. 1547 (2006).
1
have done in the field of Copyrights and Patent law. As far back as 1883, the
United States Supreme court considered a trademark misuse defense in
Manhattan Medicine v. Wood7. The court declined to enforce the claim because
the trademark holder sought the court’s aid with unclean hands and having made
false claims, had misled the public in the process.
In Clinton E. Worden & Co. v. California Fig Syrup Co8, the Supreme Court
refused to enforce a claim for trademark infringement because the trademark
owner had made false and misleading representations regarding the product
sought to be protected by the action. The court commented in part that:
“When the owner of a trademark applies for an injunction to restrain
the defendant from injuring his property by making false
representations to the public, it is essential that the plaintiff should
not in his trademark, or in his advertisements and business, be
himself guilty of any false or misleading representation…If the
plaintiff makes any material false statement in connection with the
property which he seeks to protect, he loses his right to claim the
assistance of a court of equity…”9
It is apparent that these early applications of the concept of trademark
misuse were premised on equitable notions, however they were limited in scope
and application and do not completely capture the trademark misuse concept as
sought to be articulated in this paper10.
Judicial Reluctance:
Unfortunately, this promising pedigree has not found a matching
enthusiasm in recent court decisions and marred by conflicting and contradictory
decisions, the consequence is that no clear concept of trademark misuse has
been delineated by the courts. Indeed, while one court held that the defense was
7
108 U.S. 218 (1883).
187 U.S.516 (1903).
9
Id at 528.
10
Generally, trademark misuse falls under the equitable concept of unclean hands, a broad category that
encompasses laches, acquiescence and estoppel by conduct.
8
2
a phantom defense 11 , another held that it had no precedence 12 . Some have
limited its application within the context of anti-trust and anti-competitive conduct.
In Carl Zeiss Stiftung v. V.E.B. Carl Zeiss, Jena 13, the court in construing 15
U.S.C. 1115 (b) (714) held that a court in the exercise of its equitable powers can
deny the enforcement of a trademark by the owner if there has been a violation
of anti-trust laws15.
That court however imposed two important requirements for such a claim
to succeed: Firstly, a trademark misuse defense must involve an anti-trust
violation and secondly, the subject trademark must have been the basic and
fundamental tool by means of which the anti-trust violation is accomplished and
not merely incidental to it.
In Coca-Cola v. Howard Johnson Co16. the defendant had argued as part
of its misuse defense to the suit that Coca-Cola’s conduct of requiring licensees
to comply with territorial restrictions and other tie-in requirements constituted
trademark misuse. The court concluded that the defendant had not made out a
sufficient connection between the Coca-Cola trademark and the alleged anti-trust
violations.
On the other hand, some courts favoring the equitable trademark misuse
doctrine seem to suggest that there must be a causal link between the
acquisition of the trademark rights and the alleged misuse. In Tveter v. A.B. TurnO-Matic 17 , the defendant argued that the plaintiff’s use of the words “patent
pending” on its products when none was actually pending amounted to
trademark misuse. The court rejected this argument because there was no
relationship between the acquisition of the trademark rights and the alleged
misuse.
11
Northwestern Corp. v. Compusource Distributors Inc., 115 F.Supp.2d 800 (E.D. Mich. 2000)
Juno Online Serv. v. Juno Lighting Inc., 979 F. Supp. 684, 687 – 691.
13
298 F. Supp. 684 (S.D.N.Y. 1969).
14
Section 33 (b) (7) of the Lanham Act.
15
That section preserves the defense stemming from anti-trust violations even when the relevant trademark
has acquired incontestable status.
16
386 F. Supp. 330, 335-337 (N.D. Ga. 1974).
17
633 F.2d 831, 838 – 839 (9th Cir. 1980).
12
3
But in Gynex Corp. v. Dilex Institute of Feminine Hygiene18, the court found
that there was trademark misuse even though no causal connection existed
between the acquisition and the alleged trademark misuse. In Gynex, the plaintiff
had set up a fraudulent health institute which it claimed had tested and approved
the plaintiff’s products. The court dismissed the action merely because the
plaintiff had come to court with unclean hands. Other courts have also held that a
trademark misuse defense can be maintained in respect of the plaintiff’s conduct
after it has acquired its rights in the trademark in question.
In United States Jaycees v. Cedar Rapids Jaycees19, that court stated that:
a “plaintiff will be disqualified from obtaining relief if it has dealt unjustly with the
defendant in the very transaction upon which its cause of action is based.” 20 The
court took the view that the trademark misuse doctrine need not be tied to antitrust principles. The plaintiff’s trademark ‘jaycees’ was never actually misused in
that case, the allegation of misuse only arose when the plaintiff tried to enforce
its trademark against the defendant in the plaintiffs unlawful bid to engage in
discriminatory practices.
Trademark misuse versus trademark related anti-trust claims:
It is usually the case that the factual basis for a trademark misuse claim
and a trademark related anti-trust claim are similar or identical and are normally
claimed together in most intellectual property/ anti-trust litigations, they are by no
means identical concepts. According to some authors a few important
distinctions still exist21.
1. Procedurally, the trademark misuse is a defense that when successfully
pleaded results in the unenforceability of a trademark until abatement of
the alleged misuse. A trademark related anti-trust defense is an affirmative
defense that could potentially lead to more extensive legal and equitable
reliefs and could be used offensively.
18
85 F.2d 103 (2d Cir. 1936).
614 F. Supp. 515 (N.D.Iowa), aff’d, 794 F.2d 397 (8th Cir. 1986).
20
Id at 517 – 518.
21
See Trademarks And Unfair Competition Law and Policy, Graeme B. Dinwoodie and Mark D. Janis,
2nd Ed. Aspen Publishers 2007, pgs 896 – 897.
19
4
2. A trademark misuse defense can be raised by any defendant in an action
for infringement whether or not harm is sustained, while a trademark
related anti-trust defense has to disclose individualized harm occasioned
by the plaintiff’s anti-trust violations.
3. The jurisprudence of trademark misuse is not clearly defined and its
parameters are largely uncertain. This is in stark contrast to anti-trust law
which is well developed and backed by comprehensive statutory
provisions and clear-cut judicial precedence.
4. The concept of trademark misuse is not based on any economic analysis
or on the idea of monopoly or market power while this is the lifeline of antitrust claims.
The misuse doctrine in Patent and Copyrights laws:
Unlike in the law of trademarks, the misuse doctrine is comparatively
clearly articulated in the law of patents and copyrights. The generally accepted
justification is that the property and monopoly rights granted to the holders of
these rights is much more involved than in trademarks, which applies to the
names, the device, designs and or packaging by means of which products are
identified rather than the products themselves.
Patents:
The most important case in this area is the case of Morton Salt Co. v. G.S.
Suppiger Co22. The plaintiff, which held a patent on a contraption for depositing
salt tablets in food cans attempted to lease them to commercial canners only on
the condition that they purchase salt from its subsidiary. The Supreme Court held
that it was illegal for a patent holder to tie the sale of a patented product to the
sale of an unpatented one. The court’s reasoning was predicated on equitable
and public policy grounds rather on anti-trust principles23.
22
23
314 U.S. 488 (1942)
But see Tool Works Inc. v. Independent Ink Inc., 547 U.S. 28; 126 S. Ct. 1281
5
The foregoing case was followed by a number of other cases that
elaborated on its rationale to suit different fact patterns. The courts unrestrained
public policy justifications for expanding the misuse doctrine in relation to patents
caused Congress to introduce the Patent Misuse Reform Act in 198824.
The Federal circuit has held in Virginia Panel Corp. v. MAC Panel Co25.,
that: “patent misuse is an affirmative defense to an accusation of patent
infringement, the successful assertion of which requires that the alleged infringer
show that the patentee has impermissibly broadened the physical or temporal
scope of the patent grant with anti-competitive effect”26.
Currently, it would appear that a three step analysis is required for a patent
misuse defense. i) Consideration of the practices specifically excluded from a
misuse analysis pursuant to 35 U.S.C. 271 (d), ii) ascertaining whether the
alleged practice constitutes a per se misuse and iii) in the absence of a finding in
line with steps one and two above, the court will embark on a rule of reason
analysis.27
Copyrights:
The checkered development of the misuse doctrine in Copyright law was
resolved in Lasercomb America Inc. v. Reynolds 28 , where that court drew a
correlative comparison with its development as a defense in Patent law and
concluded that the defense should also be available in relation to Copyrights in
35 U.S.C. 271 (d) limits the kinds of conduct that could give rise to patent misuse by providing that: “ No
patent owner otherwise entitled to relief for infringement or contributory infringement of a patent shall be
denied relief or deemed guilty of misuse or illegal extension of the patent right by reason of his having
done one or more of the following: (1) derived revenue from acts which if performed by another without
his consent would constitute contributory infringement of the patent; (2) licensed or authorized another to
perform acts which if performed without his consent would constitute contributory infringement of the
patent; (3) sought to enforce his patent rights against infringement or contributory infringement; (4) refused
to license or use any rights to the patent; or (5) conditioned the license of any rights to the patent or the sale
of the patented product on the acquisition of a license to rights in another patent or purchase of a separate
product, unless, in view of the circumstances, the patent owner has market power in the relevant market for
the patent or patented product on which the license or sale is conditioned.”
25
133 F.3d 860, 45 U.S.P.Q.2d 1225 (Fed. Cir. 1997).
26
Id at 868.
27
See The Concept of Misuse in Copyright and Trademark Law: Searching for a Concept of Restraint,
Raymond T. Nimmer and Murali Santhanam, published in Patents, Copyrights, Trademarks and
Literary Property Course Handbook Series, by Practicing Law Institute June 1998.
28
911 F.2d 970 (4th Cir. 1990).
24
6
much the same way as in Patent law. Interestingly, the court observed that a
distinction should be drawn between an anti-trust violation and the concept of
misuse simpliciter.
In its view:
While it is true that the attempted use of a copyright to violate antitrust law probably would give rise to a misuse of a copyright
defense, the converse is not necessarily true- a misuse need not be
a violation of anti-trust law in order to comprise an equitable
defense to an infringement action. The question is not whether the
copyright is being used in a manner violative of anti-trust law (such
as whether the licensing agreement is “reasonable”) but whether
the copyright is being used in a manner violative of the public policy
embodied in the grant of a copyright.29
In addition, the court observed that although the defense does no
invalidate the right to the monopoly it temporarily suspends the owners’ ability to
enforce his copyright until the misuse is purged.
In Re Independent Service Organizations Antitrust Litigation 30, the court
upheld the following requirements as alternative modes of establishing a
copyright infringement defense:
1.) That the copyright holder violated anti-trust laws or 2) the copyright holder
violated the public policy justifications underpinning copyright law or extended the
copyright monopoly beyond its scope.
A modern articulation of the doctrine of trademark misuse:

It has been suggested that the doctrine of trademark misuse should be
based on either or both of the following requirements: a) that the
trademark holder has wrongfully asserted his rights as granted by law and
29
30
Id at 978.
964 F. Supp. 1469 (D. Kan 1997).
7
or b) that the assertion of rights in the trademark is unrelated to the
adjudication of the claim on which the assertion of right is based31.
I. Wrongful assertion of rights:
As already observed, one of the primary objectives of the law of
trademarks is the protection of the public through the avoidance of consumer
confusion. It therefore follows that if use of a trademark by another is essentially
for a non commercial purpose and the possibility of consumer confusion is
remote or clearly non-existent, there is nothing to be gained by extending the
rights of a trademark holder beyond the scope of protection accorded by both
statute and the common law.
Good examples of trademark use not giving rise to consumer confusion
would include the fair use of trademarks, whether descriptively
32
or
nominatively33. According to the Restatement (Third) of Unfair Competition:
In an action for infringement of a trademark, trade name, collective
mark, or certification mark, it is a defense that the term used by the
actor is descriptive or geographically descriptive of the actor’s
goods, services or business, or is the personal name of the actor or
a person connected with the actor, and the actor has used the term
fairly and in good faith solely to describe the actor’s goods, services,
or business or to indicate a connection with the named person.34
Important factors to keep in mind are that use is otherwise than as a
product identifier, and that such use was merely descriptive and in good faith.
Apart from the Fair Use Doctrine, one can also refer to use of a trademark
in pure speech either as parodies 35 , satire 36 , art 37 , or news commentary and
comic speech38, all of which fall under the First Amendment rubric.
See “Revitalizing the Doctrine of Trademark Misuse”, supra at 1566 – 1583. That author has argued,
quite cogently, that these elements of the defense should be presumed to exist in particular instances
involving expressive works and critiques falling under First Amendment protection.
32
KP Permanent Make-Up, Inc. v. Lasting Impression I, Inc. 543 U.S. 111 (2004).
33
R.G. Smith v. Chanel, Inc. 402 F.2d (9 th Cir. 1968).
34
Section 33 (b) (4) of the Lanham Act preserves this defence.
35
Mastercard Int’l Inc v. Nader 2000 Primary Comm., Inc., 2004 WL 434404, 70 U.S.P.Q. 2d 1046.
36
See Harriette K. Dorsen supra at 923.
31
8
The First Amendment extends due protection to the expressive elements
of a work appropriating a trademark in order to protect free speech. The courts
have held that the Lanham Act should be construed very narrowly in this instance
even if alternative modes of expression exist. The Lanham Act would only be
given credence where the public interest in avoiding consumer confusion
exceeds the public interest in free expression.
Application of a misuse doctrine to these areas, even though somewhat
addressed by other legal concepts will strengthen defenses available to
defendants against trademark infringement actions that constitute a wrongful
assertion of rights. It will discourage the possible abuse and over extension of the
rights conferred by such trademarks.
Moreover, the Fair Use Doctrine is still a fledgling concept in trademark law
unlike in Copyrights, and its contours are still vague and unexplored and even in
the face of First Amendment protections, trademark holders are not sufficiently
deterred from an unwholesome desire to extinguish any semblance of
unauthorized use of their marks.
2. Assertion of rights for an improper purpose:
A sound misuse doctrine should operate effectively in scenarios were the
assertion of a trademark right is unrelated to the adjudication of the claim upon
which it is based. This generally involves attempts to assert trademark rights in a
manner that contradicts the public policy behind trademark law, where for
instance the trademark holder is guilty of misrepresentations and improper
conduct39.
There is however no reason for not extending the remedy to instances in
which the trademark holder has knowingly filed a baseless, frivolous, vexatious
and or harassing lawsuit to intimidate and emasculate the defendant using the
37
Rogers v. Grimaldi 875 F.2d 994 (2d Cir. 1989)
Yankee Pub. Inc. v. News America Pub. Inc., 809 F.Supp. 267 (S.D.N.Y. 1992).
39
Northwestern Corp. v. Gabriel Mfg. Co. Inc., 48 U.S.P.Q. 1902 (N.D. Ill. 1998).
38
9
instrumentality of a trademark 40 . It should presumably constitute a misuse of
trademark to falsely state that a trademark is registered when it is not or that a
registration extends to a certain class of goods when in fact this is untrue41.
The courts should discourage as much as possible the wrongful use of the
legal machinery to achieve an unwholesome objective which wastes the time and
resources of both the society and the defendant who is compelled to defend a
baseless action. The internet domain name disputes provides a good example of
how this abuse if left unchecked could result in far-reaching consequences for
the defendant, some of whom have unjustifiably lost their domain names based
on spurious allegations of possible trademark infringement claims42.
It can safely be suggested that if in reaction to a plaintiff’s “Cease and
Desist” letter, the defendant provides a clear and accurate outline of available
defenses sounding in possible First Amendment or Fair Use justifications and the
certainty that any consumer confusion is unlikely to be occasioned, a plaintiff who
unreasonably proceeds with the alleged trademark infringement action runs the
risk of exposure to a misuse claim43.
See Rest 2d Torts Section 682 to the effect that: “ One who uses a legal process, whether criminal or civil,
against another primarily to accomplish a purpose for which it is not designed, is subject to liability to the
other for harm caused by the abuse of process.” However, unlike an abuse of process action stricto sensu
which is predicated on the improper use of a court process after it has been initiated, the trademark misuse
defense could potentially rely on conduct prior to or subsequent to the issuance of the summons. The only
requirement should be some connection to the use of the trademark sought to be enforced. See Williams v.
Williams, 23 N.Y.2d 592, 298 N.Y.S.2d 473, 246 N.E.2d 333 (1969). Per Ogbuagu J.S.C. in Abubakar v.
Bebeji Oil and Aliied Products Ltd. (2007) LPELR- SC. 110/2001; 18 N.W.L.R. (Pt. 1066); (2007) 2 S.C.
48. “There is an abuse of process of court where the process of the court has not been used bona fide and
properly. The circumstances in which abuse of court process can arise has been said to include the
following: … (e) Where there is no iota of law supporting a court process or where it is premised on
frivolity or recklessness. The abuse lies in the inconvenience and inequities involved in the aims and
purposes of the action.” The learned justice placed reliance on the earlier decision of Okorodudu v.
Okoromadu (1977) 3 S.C. 21. Also see- Duwin Pharmaceutical and Chemical Co. Ltd v. Beneks
Pharmaceutical and Cosmetics Ltd. (2008) 1-2 S.C. 68. It is an abuse of process to resort to self help or
instigate police action after obtaining an Anton Piller Order ex parte.
41
Section 61 Nigerian Trade Marks Act Cap. T13 Laws of the Federation of Nigeria 2004 Vol. 15. A
general power of rectification is also conferred on the Registrar of Trademarks under Section 38 of that Act.
42
The process by which a domain name holder is wrongly deprived of its domain name is termed ‘reverse
domain name hijacking’. See UDRP Rule 1, ICANN, Uniform Domain Name Dispute Resolution Policy
(Oct. 24, 1999). Applying the Trademark Misuse Doctrine to Internet Domain Name Disputes. Stephen J.
Davidson and Nicole A. Engisch. 1996, published in Patents, Copyrights, Trademarks, and Literary
Property Course Handbook Series, PLI March 1997.
43
Possible objections that could arise to this would entail conflict with the Noerr-Pennington doctrine
which would shield would be litigants from liability unless the actions constitutes a sham litigation. See
Professional Real Estate Investors, Inc. v. Columbia Pictures 508 U.S. 49 (1993).
40
10
Appropriate Remedies:
Generally, the effect of successfully raising a trademark misuse defense is
to momentarily stall the ability of the trademark holder from asserting his
trademark until the conduct giving rise to the misuse is purged. It constitutes a
complete defense to an infringement action. Most courts have however, held that
a trademark misuse defense cannot support an affirmative claim against a
trademark holder in an infringement action44
However, if an effective misuse defense is to be established a more
aggressive penalty is needed which sends the desired message to unscrupulous
trademark holders to carefully consider their intended cause of action before they
are embarked upon. It is suggested in this paper that if a misuse defense is
upheld by the courts the defendant should be entitled to attorney fees and costs
related to defending the action45. The mere fact that the action was brought in
bad faith and is unjustifiable should ground a claim for attorney fees pursuant to
Section 35 of the Lanham Act46. A statutory provision similar to that contained in
Section 512 (f) of the DMCA has been suggested as a useful tool which could be
added to the Lanham Act to strengthen the defendant’s arsenal against
unscrupulous trademark rights holders47.
44
See for example: Ford Motor Co. v. Obsolete Ford Parts, Inc., 318 F.Supp.2d 516 (E.D. Mich. 2004)
The Copyright Act allows for recovery of attorney fees by the prevailing party to a lawsuit by virtue of
15 U.S.C. 505. See Carbonell v. INS, 429 F.3d 894, 897- 898 (9th Cir. 2005).
46
This section merely refers to a prevailing party being entitled to attorney fees in cases involving
intentional infringement and counterfeiting especially if bad faith can be established. Presumably if the
defendant is the successful party he should in principle and in the appropriate circumstances be entitled to
recover reasonable attorney fees for defending the suit. See Conopco Inc. v. Campbell Soup co., 95 F.3d
187 (2d Cir. 1996). Also see TIMES of June 25 2005, reporting that Sears was ordered to pay $2.5. Million
in a trademark lawsuit against Menard’s since the action was “so lacking in merit as to make this an
exceptional case justifying an award of reasonable attorney’s fees and expenses.” See generally Dinwoodie
and Janis supra at 853. However, in Lasercomb, id at 979 involving a copyright action, the court
commented that: “This holding, of course, is not an invalidation of Lasercomb’s copyright. Lasercomb is
free to bring a suit for infringement once it has purged itself of the misuse…Because of this holding, we do
not reach the other defences to copyright infringement advanced by appellants. Although we find misuse of
copyright, we reject the contention of appellants- that they should recover attorney fees from Lasercomb
under 17 U.S.C.A. 505 because Lasercomb brought this action in bad faith. Given the conduct of
defendants and the obscurity of their defences, we find such a position completely untenable.”
47
17 U.S.C. 512 (f) provides that: “Any person who knowingly misrepresents under this section (1) that
material or activity is infringing…shall be liable for any damages, including costs and attorney’s fees,
incurred by the alleged infringer, by any copyright owner or copyright owner’s authorized licensee, or by a
service provider, who is injured by such misrepresentation, as the result of the service provider relying
upon such misrepresentation in removing or disabling access or activity claimed to be infringing…”
45
11
Concluding Remarks:
It is apparent as highlighted above that the concept of trademark misuse
although a very promising tool, requires substantial clarification by the courts.
The manner in which the concept has so far been applied in patents and
copyright law could serve as guideposts in this regard to bring some consistency
to the process, without ignoring the unique differences between these various
aspects of intellectual property law.
The concept of trademark misuse should continue to serve as a complete
defense to a trademark infringement action whenever a defendant can
successfully establish that a trademark holder is asserting his rights wrongfully
and for an improper purpose. There is sufficient justification and case law to state
unequivocally that there is no need to make this defense dependent on an antitrust allegation, as the two concepts have developed separately. It is also
necessary to augment this defense with stronger remedies like payment of
attorney fees for the successful defendant as well as related costs for the action.
In this manner frivolous lawsuits can be discouraged.
12