Will the Jack Daniel’s case cause “Lotso” issues for Disney?

On June 20, 2023, the Supreme Court granted certiorari in Diece-Lisa Indus v Disney Store USA, and remanded for further consideration in light of its ruling in Jack Daniel's Properties v VIP Prod, 143 S. Ct. 1578 (2023) (hereinafter “Jack Daniel’s”). No. 22-347, 2023 WL 4065179, at *1 (US June 20, 2023).

The case involves allegations that Disney’s “Lots-o’-Huggin’ Bear” from the Toy Story 3 film (and subsequent media and merchandise) infringes Diece-Lisa’s trademark for “Lots of Hugs” in connection with a wearable stuffed animal sold by Diece-Lisa (Diece-Lisa Indus v Disney Enterprises, No. CV2009147TJHJCX, 2021 WL 3355284, at *1 (CD Cal. July 7, 2021), aff'd sub nom. Diece-Lisa Indus, v Disney Store USA, No. 21-55816, 2022 WL 2072727 (9th Cir. June 9, 2022), certiorari granted, judgment vacated, No. 22-347, 2023 WL 4065179 (US June 20, 2023)).

The Ninth Circuit previously found that the Rogers test mandated dismissal of the suit, but the Supreme Court’s Jack Daniel’s decision appears to have breathed new life into the case.

On remand, the key question is whether the Jack Daniel’s decision will cause “Lotso” problems for Disney or whether the Ninth Circuit’s application of the Rogers test will remain largely unchanged.

The Rogers test and the Jack Daniel’s decision

At the heart of both decisions is the Rogers test, which is intended to protect First Amendment rights and shield works of artistic expression from claims of trademark infringement unless certain exceptions are met.

Under the Rogers test, which was originally devised by the Second Circuit, an infringement claim against an “expressive work” must be dismissed unless the plaintiff can show that the use of the mark either: (i) “has no artistic relevance to the underlying work” or (ii) “explicitly misleads as to the source or the content of the work” (Rogers v Grimaldi, 875 F.2d 994, 999 (2d Cir. 1989)).

In essence, the Rogers analysis occurs prior to a likelihood of confusion analysis when expressive works—such as humour, parody or criticism—are involved, and the likelihood of confusion analysis is not reached unless the plaintiff can show that at least one prong of the Rogers test is met. This is a high bar for a trademark owner to meet, and the Rogers test has previously precluded a fair number of infringement claims.

But, in the Supreme Court’s unanimous opinion in Jack Daniel’s, the court held that the Rogers test applies—if at all—only to “non-trademark uses”, where a defendant uses a mark in a “non-source-identifying way” (Jack Daniel's, 143 S. Ct. at 1588).

Accordingly, the Rogers test may only “kick[] in when a suit involves solely non-trademark uses of [a] mark.” Id. at 1589 (internal quotation marks omitted).

If the defendant’s use of the mark acts even in part as a source identifier, then the Rogers test serves “no proper role”.

As a result, the Jack Daniel’s case has cabined the Rogers test and made it easier for trademark plaintiffs to at least reach the likelihood of confusion analysis.

Application of the Jack Daniel’s decision to Diece-Lisa v Disney

In the Jack Daniel's case, the alleged expressive work was a consumer product—a dog toy. In Diece-Lisa v Disney, the question of what constitutes the work is less clear cut. The driving force behind the alleged reverse confusion is the Toy Story 3 movie, which uses the Lotso Bear character as part of a larger whole and not as a source identifier.

The same goes for any subsequent media (eg, video games) in which the character appears. Consequently, claims based on media including the character are more aligned with cases discussing traditional "expressive works" and the Ninth Circuit’s application of the Rogers test is likely to remain the same as in its prior decision.

That said, there is a very heavy merchandising component to Disney's business, and the Lotso Bear character also seems to be sold as a stand-alone toy. In that case, Disney’s use of the mark more closely aligns with the Jack Daniel’s case, and the Rogers test may not bar Diece-Lisa’s claim as to such merchandise.

But, even if the Rogers test is inapplicable to claims based on the merchandise, the outcome of the likelihood of confusion test is uncertain. Most of the inquiry will focus on the extent to which the merchandise causes reverse confusion, but the media may also be relevant to determining reverse confusion even if a claim based on the media is barred by the Rogers test.

Diece-Lisa is likely to argue that, even if the Rogers test prevents a claim based on the media, the merchandise cannot be considered in a vacuum because the media was pivotal in popularising the merchandise.

In other words, Diece-Lisa may assert that the primary reason the merchandise has consumer appeal in the first place is because of its prominent role in the movie, and therefore the movie is relevant to the likelihood of confusion analysis.

Disney, however, may argue that a claim based on the merchandise must analyse likelihood of confusion solely with respect to the merchandise and independently of the media. Ultimately, the court may have to decide what remains relevant to the likelihood of confusion analysis if the Rogers test is found to be inapplicable to some, but not all, of the claims.

How the ruling may influence trademark litigation

The First Amendment is vitally important, but the Supreme Court has made clear that it does not excuse the use of another’s trademark as a source identifier for one’s own products, humorous or not.

The Jack Daniel’s decision has created greater uncertainty for parodists and creators of expressive works, who will now need to ask themselves if the use of another's trademark, or obvious variant thereof, is used "solely" in an expressive manner (for example, in parody or critical commentary about the trademark owner or its genre), or if it is really just being used to grab attention and sell products.

At the same time, the decision has made it easier for trademark plaintiffs to reach the actual merits of the case—the likelihood of confusion analysis—rather than have their claims dismissed based on Rogers.

Tom Polcyn is a partner and co-chair of the IP Practice Group at Thompson Coburn. He can be contacted at  tpolcyn@thompsoncoburn.com

Alex Weidner is an associate at Thompson Coburn. He can be contacted at  aweidner@thompsoncoburn.com