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7 December 2022FeaturesTrademarksJulia Anne Matheson

Jack Daniel’s: Ninth Circuit's decision causes headaches

Americans love their dogs, their whiskey, and the First Amendment. In combination, these elements form the framework of one of the most consequential trademark cases to reach the US Supreme Court in nearly a decade, namely, Jack Daniel’s Properties v VIP Products.  SCOTUS is charged with resolving a split amongst the Circuit Courts (eg, the 9th Circuit versus everyone else) regarding the appropriate legal analysis to apply in evaluating trademark infringement claims involving commercial products with some parodic aka “expressive” content.

According to the Ninth Circuit, when there is a clash between the First Amendment and the US Trademark Act (aka the “Lanham Act”), the Constitution should always win. The Ninth Circuit’s (dog’s dinner of a…) decision upends the careful balance US courts have long maintained between protecting consumers and trademark owners from marketplace harm, on the one hand, while still recognising the value in, and offering protection to, commercial speech, on the other.

According to trademark owners, the Ninth Circuit’s interpretation undermines both the purpose and plain wording of the Lanham Act and establishes the Ninth Circuit as a haven for trademark infringers.

Who are the parties? Jack Daniel’s is a widely popular US brand of whiskey. The shape of its bottle and appearance of its label are iconic. VIP Products is a manufacturer of a line of dog toys, called “Silly Squeakers”, that mimic the unique and widely recognised trade dress (eg, bottle/can shape, label colours and design, and product name) of popular American liquor, beer, wine, and soda brands using so-called “poop humor”.

Its products include Mountain Drool (a Mountain Dew takeoff), Heini Sniff’n (a play on Heineken), Butt Wiper (a send-up of Budweiser that was successfully enjoined by that company in 2008), and, at issue in this case, a claimed “satire” of Jack Daniel’s iconic Old No. 7 Tennessee Sour Mash Whiskey trade dress,  the “Bad Spaniels” product. Consumers brands such as Campbell Soup, Levi Strauss, Patagonia, and Constellation Brands (think Corona, Robert Mondavi, and Svedka) as well as multiple intellectual property trade associations (eg, the INTA, AIPLA) filed amicus briefs in support of Jack Daniel’s second, and this time successful, petition for cert.

Conflict of interest

By way of background, the Lanham Act was enacted (and has since been amended) to serve several purposes. First, it is a consumer protection statute.  At their core, trademarks (an umbrella term that in the US includes the concept of trade dress, namely, the visual appearance of a product’s packaging) are commercial symbols that enable consumers to differentiate between products from different companies and thereby to make informed purchasing decisions.

It is also a statute designed to secure for owners of certain types of property—namely, registered and unregistered trademarks—protection against various types of unfair competition, including trademark and trade dress infringement, false advertising, passing off, dilution, and more.

The First Amendment of the US Constitution, on the other hand, guarantees the freedom of speech, of the press, the freedom of expression, assembly, and the right to petition the Government for a redress of grievances.

Since its inception, US courts have repeatedly emphasised that freedom of speech, while sacrosanct as a principle, is not absolute, in practice.  Free speech ends where harm to others begins. Thus, US courts recognise exceptions to free speech in cases of fraud, harassment, incitement to illegal conduct and imminent lawless action, child pornography, and most significantly in this instance, commercial speech.

In 1980, SCOTUS defined commercial speech as speech that “proposes a commercial transaction” and identified the legal framework for analysing restrictions upon commercial speech as one of “intermediate scrutiny”. Central Hudson Gas & Elec v Public Svs. Comm’n, 447 U.S. 557, 562 (1980). For commercial speech to qualify for First Amendment protection it must concern lawful activity and not be misleading.

Only then, are US courts required to evaluate the constitutionality of the challenged statute or regulation (in this case, the Lanham Act) by determining: (1) whether the asserted governmental interest is substantial; (2) directly advances the governmental interest asserted, and (3) is not more extensive than necessary to serve that interest.

Precedent set

Artistic works, such as films, video games, songs, and articles in magazines and newspapers, are protected speech under the First Amendment. Because trademarks can appear within the titles or body of artistic works, thereby implicating the trademark protections afforded by the Lanham Act, US courts have recognised a need for a standardised approach to trademark infringement analysis in such cases. Since it issued its landmark decision in 1989, the test articulated by the Second Circuit in Rogers v Grimaldi, 875 F.2d 994 (2d Cir. 1989) has largely governed these types of cases.

In that case, famous actor and dancer Ginger Rogers (after whom the case is named) filed suit against Alberto Grimaldi and MGM for the production and distribution in 1986 of a Federico Fellini film titled “Ginger and Fred” about two cabaret performers who emulated the famous routines of Fred Astaire and Ginger Rogers. In direct conflict were Rogers’ right to protect her celebrated name versus the right of the film’s creators to freedom of expression in evoking her famous pairing in the name of their film.

In affirming the lower court’s finding of no liability, the Second Circuit held that the Lanham Act does not bar even a “minimally relevant” use of a celebrity’s name in the title of an artistic work where the title does not explicitly denote authorship, sponsorship, or endorsement by a celebrity or explicitly mislead as to content. In other words, the Lanham Act’s prohibitions prevail over First Amendment protections only where the trademarks used in the artistic works or titles have “no artistic relevance” to the underlying work or are “explicitly misleading”, such that the public interest in avoiding consumer confusion outweighs the public interest in free expression.

The heightened standard for liability articulated in Rogers trumps successful infringement claims in all but the most egregious of cases. It supplants the Lanham Act’s traditional “likelihood of confusion” analysis and precludes liability where the use is “only implicitly misleading”.  For decades, US courts adopted this narrow, judicially created First Amendment exception to the Lanham Act’s provisions only for cases where the trademark’s commercial speech function was “inextricably intertwined” with other protected speech (eg, so-called “artistic” or “expressive” works).

Historically, traditional commercial products, even those involving humorous or parodic uses of marks (including dog toys), have been evaluated under traditional likelihood of confusion principles. Courts have repeatedly recognised that humour may, but does not always, reduce the likelihood of consumer confusion—that there are confusing parodies and non-confusing parodies—and humour is merely one of multiple factors to consider. The Ninth Circuit’s recent decision turns decades of this precedent on its head.

Let off the leash

In vacating the lower court’s finding of trademark infringement in Jack Daniel’s favour, the Ninth Circuit concluded that the Bad Spaniels dog toy qualifies as an expressive work entitled to heightened First Amendment protections because it incorporates humorous and/or parodic content.

Finding the “form” in which the parodic or humorous message is conveyed to be irrelevant, it conflated the definition of ordinary commercial products with that of “artistic” or “expressive” works, expanding the application of the Rogers’ First Amendment framework and protections to any product or service that contains any degree of discernable expression.

In reversing the district court’s infringing finding, the Ninth Circuit found the lower court had erred in finding trademark infringement without first subjecting Jack Daniel’s to the “heightened burden” of satisfying at least one of the two prongs of the Rogers test, by demonstrating that the defendant’s use of the mark/trade dress is either (1) not artistically relevant to the underlying work; or (2) explicitly misleads consumers as to the source of the utilitarian products.

It reversed the lower court’s finding of liability for dilution by tarnishment by misconstruing an exclusion for “noncommercial uses” to apply to commercial uses with some parodic/humorous content. Finally, it vacated the permanent injunction against VIP’s continued manufacture and sale of its Bad Spaniels dog toy, remanding the case for further proceedings.

The Ninth Circuit’s holding creates a new per se exception to the Lanham Act and to the Trademark Law Dilution Act for commercial products that implicate humour.  It deems irrelevant to the analysis concerns around consumer confusion and deception or a defendant’s intent. It rewards parasitic commercial activity that trades on the reputation and goodwill of popular brands provided the knock-offs include an element of humour.

The Ninth Circuit’s decision is directly at odds with the standing precedent from the vast majority of district courts (and several Circuit Courts). If allowed to stand, the Ninth Circuit will become the forum of choice for copycat hucksters chasing profit by trading upon the hard-earned goodwill and marketplace recognition of well-known brands, all under the guise of being funny.

Argument in the case is expected in early 2023, with a decision expected in late spring, early summer 2023, before the Court adjourns for the summer recess.

Julia Anne Matheson is trademark partner at Potomac Law Group. She can be contacted at  jmatheson@potomaclaw.com

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