United States: Fair is Fair: Trademark Fair use Defense Does not Require Absence of Confusion

The U.S. Supreme Court has now resolved a conflict among federal appeals courts on (1) the role of evidence of likely consumer confusion in the analysis of whether a party accused of trademark infringement is making a "fair use" of a plaintiff's trademark; and (2) whether an accused party who asserts a "fair use" defense must prove that confusion is not likely to result from the concurrent uses of the trademarks. KP Permanent Make-Up, Inc. v. Lasting Impression I, Inc., Case No. 03-409 (decided December 8, 2004). The Supreme Court held that an accused party who successfully demonstrates fair use of another party’s trademark need not also affirmatively prove that consumer confusion is not likely to result from the concurrent uses; instead, the plaintiff always bears the burden to prove a likelihood of confusion.

Writing for a unanimous Court, Justice Souter explained that a trademark defendant can assert "fair use" even if there is a likelihood that the defendant’s mark will be confused with that of the plaintiff:

The ruling clarifies the boundaries of the fair use defense and resolves a circuit split on how the trademark fair use defense should be applied. The Supreme Court’s decision upholds rulings from the Second, Fourth, and Seventh Circuits and overturns Ninth Circuit law that would have substantially limited the fair use defense.

KP Permanent Make-Up (KP) and Lasting Impression are competitors in the permanent make-up industry, where pigment is injected into the skin to permanently color facial features or to mask scars or tattoos. Petitioner KP first starting using the term "microcolors" on advertising material in 1990 or 1991 and on pigment bottles in 1991. Lasting Impression registered the mark MICRO COLORS in 1993, and the registration became incontestable in 1999. Shortly thereafter, Lasting Impression sent a cease-and-desist letter to KP. In response, KP brought a declaratory judgment action in the U.S. District Court for the Central District of California, seeking to confirm its right to continue using "microcolors." KP asserted that it was making a "fair use" of the trademark because it used the term "microcolors" in a descriptive manner to describe KP’s own goods and because it was not seeking to take advantage of Lasting Impression’s trademark.

Lasting Impression claimed that KP’s fair use defense was inapplicable because KP’s use of the term "microcolors" caused confusion among consumers. Lasting Impression argued that a use cannot be fair if there is a likelihood of confusion between the marks in issue. The district court concluded that fair use does not require a lack of confusion between the marks. Instead, the defense only requires that a defendant use the mark within the bounds of 15 U.S.C. § 1115(b)(4): "the use of the name, term, or device charged to be an infringement is a use, otherwise than as a mark, . . . of a term or device which is descriptive of and used fairly and in good faith only to describe the goods or services of such party."

On appeal, however, the Ninth Circuit reversed the district court. Noting that trademark law exists to protect consumers, the Ninth Circuit concluded that if fair use is asserted by a defendant, a court must consider the likelihood of confusion between the competing marks along with the other elements of fair use. According to the Ninth Circuit, if there is actual confusion, or even a likelihood of confusion, a court must reject the fair use defense.

The Supreme Court’s Analysis

In a relatively short (12-page) opinion, the Supreme Court vacated the Ninth Circuit’s decision. The Court began by noting two points about the fair use statute:

• Section 1115(b)(4) places the burden of demonstrating likelihood of confusion on the party charging infringement.
• "Congress said nothing about likelihood of confusion in setting out the elements of the fair use defense in § 1115(b)(4)."

Looking to the legislative history, the Court also noted that the House Subcommittee on Trademarks declined to forward to Congress a proposal to expressly include, as an element of the defense under Section 1115(b)(4), that a descriptive use be "[un]likely to deceive the public." From these basic points, the Court found that a confusion analysis was not part of a fair use assessment.

The Court disposed of KP’s arguments that the defendant bears the burden of negating the existence or likelihood of consumer confusion and that the historical underpinnings of the fair use defense necessitate a confusion analysis. While the Court agreed that customer confusion is an important component of the trademark infringement analysis, it held that the existence of customer confusion does not preclude fair use; consumer confusion, without more, cannot defeat a fair use defense.

Finally, the Court noted the circular reasoning in Lasting Impression’s position. The fair use defense is necessary only when the plaintiff has shown, by a preponderance of the evidence, that confusion is likely, i.e., when the plaintiff has established its prima facie case of infringement. But under Lasting Impression’s theory, establishing a likelihood of confusion negates the fair use defense. In effect, under Lasting Impression’s theory, the only time a fair use defense is available is when it cannot succeed. The Court, citing the Fourth Circuit case of Shakespeare Co. v. Silstar Corp., concluded that "it defies logic to argue that a defense may not be asserted in the only situation where it even becomes relevant."

The Court summarized its ruling as follows:

[A] plaintiff claiming infringement of an incontestable mark must show likelihood of consumer confusion as part of the prima facie case . . . while the defendant has no independent burden to negate the likelihood of any confusion in raising the affirmative defense that a term is used descriptively, not as a mark, fairly, and in good faith.

Importantly, however, the Court did not expand the contours of fair use. It did not, for example, rule on the role of any other trademark infringement factors, such as commercial justification and strength of a plaintiff’s mark, in a fair use defense. Thus, while KP holds that "mere risk of confusion will not rule out fair use, … the door is not closed" on how to weigh the elements used in a fair use assessment.

Trademark holders always have faced the risk that another may fairly use their mark in a non-trademark, descriptive manner. The Supreme Court ruling in KP makes it potentially more difficult for trademark owners to prevail on claims that another party is misappropriating a trademark that is being used in a descriptive sense. Thus, at some level the Court has expanded the right of "descriptive use" and correspondingly reduced the field of exclusivity guaranteed by a trademark registration. According to the Court, a trademark holder knowingly accepts this risk when it identifies its product with a well-known descriptive word or phrase.

The decision also clarifies the burden faced by a trademark infringement defendant. A party asserting fair use has no independent obligation to negate the likelihood of confusion. The fair use defense operates independently of the confusion analysis, and can immunize a defendant’s use of a word or phrase even if customer confusion is established. That said, the defendant continues to bear the burden of demonstrating fair use as a defense, just as the plaintiff continues to bear the burden of showing likely confusion in the marketplace to establish infringement. Thus, clients must still be cognizant of potential confusion when adopting and using words similar or identical to another party’s trademark.

The Supreme Court acknowledged that the ultimate question of trademark infringement remains driven by an assessment of likely consumer confusion, and also that confusion is relevant to application of the fair-use defense. However, the Court rejected the notion that the burden of proof on the issue of confusion somehow shifts to the defendant when the defendant asserts a fair use defense. The Court further acknowledged that stronger and more famous marks are generally entitled to a broader scope of protection, which suggests that defendants who claim to be using a strong or famous mark in a merely descriptive sense may continue to face some difficulty in establishing a fair use defense.

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