Monthly Archives: October 2014

Consumer Confusion and Trade Name Infringement

I’ve always wanted to invent my own brand of soda called Peepsi! However, I’m positive I’d get a cease and desist letter for trade name infringement from Pepsi before I could screw the cap on my first bottle. Although there is a difference between Peepsi and Pepsi, the consumer confusion would likely turn into a winnable trade name infringement case. Generally, infringing on a business’s trade name comes at the expense of a company’s good will it has established over time, in Pepsi’s case, over a century. So let us discuss consumer confusion and trade name infringement.

mcdowells-tshirt-coming-to-america-swatch

Consumer Confusion and Trade Name Infringement

In the famous movie “Coming to America” starring Eddie Murphy, John Amos played the role of Cleo McDowell, an entrepreneur who owned McDowell restaurants which eerily resembles McDonalds. In the film, he’s quoted as saying “… me and the McDonald’s people got this little misunderstanding. See, they’re McDonald’s… I’m McDowell’s. They got the Golden Arches, mine is the Golden Arcs. They got the Big Mac, I got the Big Mick. We both got two all-beef patties, special sauce, lettuce, cheese, pickles and onions, but their buns have sesame seeds. My buns have no seeds.” Great fodder for film but in real life this would hardly fly. Specifically, under 15 U.S.C §§ 1051 et seq., also known as the Lanham Act that governs consumer confusion cases, a specific set of guidelines “protects the owner of a federally registered mark against the use of similar marks if such use is likely to result in consumer confusion, or if the dilution of a famous mark is likely to occur.”[1]

Establishing Trade Name Infringement

Typically, in determining whether consumers were unjustly confused to the detriment of an established registered mark, a court will consider seven factors. In consideration of these seven factors, the court uses a balancing test in deciding whether consumer confusion has occurred. The seven major factors a court will use in determining the “likelihood of confusion,”, include (1) the similarity of the plaintiff’s and defendant’s goods or services, (2) the identity of retail outlets or purchasers, (3) the identity of advertising media, (4) the “strength” (for example, inherent distinctiveness) of the trade name, (5) the defendant’s intent, (6) the similarity of the trade names, and (7) the degree of care likely to be used by consumers. [2]

So in our hypothetical case involving Cleo’s McDowell restaurant, first a court will consider the fact that both McDonalds and McDowell’s are in the fast food industry, primarily selling hamburgers, specifically “two all-beef patties, special sauce, lettuce, cheese, pickles and onions.” Being that both entities are selling virtually identical products (minus the seeds), element one will likely go into McDonalds favor.

Second, the court would look at the fact that both restaurants use fast-food outlets to target and serve its customers. If Cleo were operating out of, let’s say a food truck instead of an actual fast-food restaurant, a court might give deference to that fact. However, here, both entities are using similar outlets which would likely serve as another blow to Cleo’s consumer confusion defense.

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Third, with regards to identity of the advertising media, presumably McDowell’s advertised primarily through community presence and its logo. As Cleo put it, “McDonalds has the gold arches, while his logo uses the golden arcs.” Here, the logo’s and even the typeface are extremely similar. This form of self-advertising media bears a striking resemblance in both restaurants which would likely land another check in McDonald’s favor.

Fourth, the court would determine the strength of the plaintiff’s own brand. Here, McDonald’s – having been in existence since the 1950’s – would have amassed a significant amount of good will under its brand by now. Though it is unknown how long Cleo McDowell’s franchise has been in existence, it unlikely pre-dates McDonalds.

Fifth, it is unclear that Cleo McDowell’s intent was to purposefully confuse consumers; however a court can and will infer intent by conduct. Specifically, the closeness of the brand, the logo, the type of food sold, the similarity in uniforms and the fact that when Cleo is first confronted by King Jaffe Joffer, he is seen reading a McDonald’s Operation Manual. [3]

Sixth, with regards to the similarity in trade names, a court will take into consideration the use of one’s family name in contrast to an existing trade name. However, courts have held that “the right of an individual to use his or her own name in connection with a business must yield to the need to eliminate confusion in the marketplace.” B.H. Bunn Co. v. AAA Replacement Parts Co., 451 F.2d 1254, 1266 (5th Cir. 1971) (“[O]ne may be forbidden to use even one’s own name, absent other distinctions, if the total effect of using it is to create confusion as to source.”) [4] Here, while Cleo used his family name, unfortunately there simply aren’t enough distinctions between the McDowell’s and McDonald’s brand to distinguish the similarities.

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Lastly, in establishing the degree of care likely to be used by consumers, all McDonald’s would need to establish is a “likelihood of confusion” arising from the defendant’s use of the same or similar name.” WSM, Inc. v. Hilton, 724 F.2d 1320, 1325 (8th Cir. 1984). [5] This could be satisfied constructively or literally. For instance, if a customer, on any occasion, entered McDowell’s thinking it was McDonald’s, or attempted to use a McDonald’s coupon, or even referred to Cleo’s “Big Mic” as a “Big Mac” when placing an order, it would likely satisfy the last element. [6]

Conclusion

In conclusion, given the totality of the circumstance resulting from the balancing test, a court would likely determine that Cleo’s restaurant is liable for customer confusion and trade name infringement. So remember that while you’d like your product to be recognized by the masses for what it is, there could be serious confusion for what it isn’t. My personal brand of soda, Peepsi, while specific and individual to me, is unlikely to be easily differentiated by a consumer. This causes consumer confusion and ultimately infringes on Pepsi’s established good will. So if you’re contemplating starting the next big burger franchise called Burger Queen, think again about how consumer confusion and trade name infringement.

[1]LANHAM ACT | WEX LEGAL DICTIONARY / ENCYCLOPEDIA | LII / LEGAL INFORMATION INSTITUTE, http://www.law.cornell.edu/wex/lanham_act (last visited Oct 23, 2014)

[2]REMEDIES FOR TRADE NAME INFRINGEMENT, http://www.fwlaw.com/news/189-remedies-trade-name-infringement (last visited Oct 23, 2014)

[3]COMING TO AMERICA – WIKIPEDIA, THE FREE ENCYCLOPEDIA, http://en.wikipedia.org/wiki/Coming_to_America#McDowell.27s (last visited Oct 23, 2014)

[4]REMEDIES FOR TRADE NAME INFRINGEMENT, http://www.fwlaw.com/news/189-remedies-trade-name-infringement (last visited Oct 23, 2014) See Basile S.P.A. v. Basile, 899 F.2d 35, 39 (D.C.Cir. 1990) (limiting right of watch manufacturer to use family name “Basile,” where prior user had obtained trademark over use of the name); Perini Corp. v. Perini Construction, Inc., 915 F.2d 121, 124 (4th Cir. 1990) (limiting second comer’s right to use family name “Perini,” where name had acquired secondary meaning in the construction industry through prior use); B.H. Bunn Co. v. AAA Replacement Parts Co., 451 F.2d 1254, 1266 (5th Cir. 1971) (“[O]ne may be forbidden to use even one’s own name, absent other distinctions, if the total effect of using it is to create confusion as to source.”)

[5]REMEDIES FOR TRADE NAME INFRINGEMENT, http://www.fwlaw.com/news/189-remedies-trade-name-infringement (last visited Oct 23, 2014)

[6]Id.

What’s in that End User License Agreement?

EULA

I recently updated my iPhone to the new iOS and  like any other software update, new service or application there was a lengthy user agreement that required me to click “OK” before proceeding. Not unlike just about everybody else on the planet, I agreed without actually reading the user agreement in order to proceed. It got me wondering, what exactly is this, and more importantly, what’s in that End User License Agreement (EULA) i just agreed to? Unfortunately, the former is easier to answer than the latter. Specifically, an End User License Agreement is a legal contract between a software application author or publisher and the end user of the software. Just to be clear, a contact is a legally binding agreement which creates an enforceable obligation by law, and a license is simply a grant by the holder of intellectual property to another to exercise a certain privilege.

So What the Hell’s In It?

On the most basic level, an end user license agreement is somewhat similar to a rental agreement where the user agrees to pay for the privilege of using the software. Additionally, in most cases, the end user is also agreeing not to inappropriately copy, alter, or disseminate the software without proper permission. Although, under 17 U.S.C. § 117, an end user is absolutely free to use, archive, re-sale and make backups of any proprietary software he or she has purchased.

More commonly, end user license agreements serve to limit the liability of the application developer in case the software essentially damages your computer, loses your data, or results in your iPhone being “bricked.” Speaking of Apple, it seems to be well settled among actual EULA readers that Apple’s end user license agreements tend to be some of the most far reaching over-broad agreements that exist. For example, Apples EULA for its eBook authoring software contains language restricting an author’s use of any and all content produced using Apple’s software! Huh? Yea, that means Apple essentially dictates what you can and cannot do with your content created by using their software! As Ed Bott noted, “[i]t’s akin to Microsoft trying to restrict what people can do with Word documents, or Adobe declaring that if you use Photoshop to export a JPEG, you can’t freely sell it.”

devil in the details

Everything but the Kitchen Sink!

Like my mother always said, “the devil is in the details,” however application developers and attorneys alike realize no one is likely to sift through those details which results in EULA’s containing so much content and legal jargon that end users simply won’t bother to read it. Often times a company’s end user license agreement is contrary to existing law. For instance, a EULA that restricts a user to making only one back up copy is clearly inconsistent with the rights granted under 17 U.S.C. § 117. Presumably, the lawyers who draft these agreements are fully aware of these conflicts; however, they choose to be cautiously over-broad than restrictively narrow. Take Apple iTunes end user agreement that prohibits “creating nuclear weapons!” Or other notoriously ridiculous EULA clauses like Google Chrome’s insanely pervasive EULA that essentially gives Google ownership rights over everything up to and including your first born child! Read ” …you give Google a perpetual, irrevocable, worldwide, royalty-free, and non-exclusive license to reproduce, adapt, modify, translate, publish, publicly perform, publicly display and distribute any Content which you submit, post or display on or through, the Services.”

Click Here and You’re Ours!

Interestingly enough, the creepiness of mysterious end user license agreements appears to be so ubiquitous that the creators of South Park did a skit on the perils of not reading  end user license agreements and the rights you inadvertently relinquish when you “Click Here to Accept!“

Bottom line, unless you’re insanely board or have infinite amounts of time on your hands, chances are you’re unlikely to carve 15 minutes to an hour out of your day to painstakingly analyze EULA’s before enjoying the brand new toy you just downloaded. I would suggest following Ed Bott’s blog who reads EULA’s so the rest of us won’t have to. Additionally, the makers of EULAlyzer have created free software that will scan end user license agreements specifically in search of inconspicuous language which unfairly binds users to unfair terms. Good luck!