By Christopher A. Brown
Woodard, Emhardt, Moriarty, McNett & Henry LLP
Recently, a question of trademark law came to me with its particular application to newspapers and other periodicals. In brief, the issue concerned the publication’s potential for trademark infringement liability when an advertiser provides the publication with copy that improperly uses someone else’s trademark.
More specifically, suppose that a business (OneCorp.) arranges with the News to place an ad, and provides copy that features its product and uses a trademark to identify that product. Another business (TwoCorp.) claims that it owns that mark, and that it cannot be used by OneCorp. If the News runs the ad, associating the mark with OneCorp.’s product, will the News be liable for trademark infringement? Also, does it matter whether TwoCorp. notified the News before publication that it claimed ownership of the mark?
Trademark law background
Federal and state trademark law protects both businesses and consumers from confusion arising from similar names or symbols on similar goods or services. A mark can be any word, logo, symbol or other identifying matter that identifies the source of goods or services (not the goods or services themselves) and is capable of distinguishing that source from other sources. One could not obtain protection for the words “cola” or “drink” applied to cola beverages, and could obtain only very limited protection (if any) for “bubbly” or “fizzy” for them, because those terms define the product or a characteristic of it.
Multiple sellers of cola beverages have to use those words in order to describe their respective products. “Coke,” on the other hand, does not describe the product, but identifies a particular source of beverages, the Coca-Cola Company.
The law provides redress for unauthorized uses of another’s mark or an imitation of it if the use is likely to cause confusion, deception or mistake as to the source of goods or services. The “ordinary” or “usual” case concerns use by a competitor or a new entrant into the market, and focus on whether the second user’s mark, his or her products, and other factors make it likely that consumers will be confused as to who is the source of the product they are buying. Consumers should be able to assume that each time they choose “Coke” they are getting a product from the Coca-Cola Company they are accustomed to.
The Coca-Cola Company should be able to keep others from riding on their products’ reputations. If the mark is famous (“Coke” or “Lego,” for example), then the owner can stop others from using the mark or similar items on unrelated products, if that use would dilute its established fame. Anyone creating or passing on the confusion or the dilution can be held liable.
The “innocent infringer” defense
Accordingly, a newspaper that prints a mark in an ad, where unauthorized by the mark’s actual owner, and that raises a likelihood of confusion as to the source of a product, can be liable for trademark infringement. That’s the bad news. However, the federal trademark statute (15 USC 1114(2)) limits punishment for “paid advertising matter in a newspaper, magazine, or other similar periodical,” so long as the publisher is an “innocent infringer.” Only an injunction and no money damages or other remedy can be levied against that “innocent” publisher.
Very few reported court opinions that have addressed this part of the statute were found. The following examples illustrate courts’ views on applying this “innocent infringer” defense.
In the case of World Wrestling Federation Inc. v. Posters Inc., a 2000 opinion from a federal district court in Illinois, the WWF sued a printer (among others) over posters of wrestlers. The printer argued in a pre-trial motion that it was an innocent infringer based on an unsigned letter from another defendant stating that that defendant had the right to reproduce the posters and held the printer harmless for its services. The court left the ultimate question of “innocent infringement” for later determination, but it provided a base-line rule for that question.
The printer would have to show that it did not actually know that the posters infringed, and that it did not recklessly disregard a high probability that they infringed, in order to be an “innocent infringer.” That standard is patterned after the “actual malice” standard for libel established in the Supreme Court’s 1964 opinion in New York Times v. Sullivan.
While that holding from the Chicago federal district court is good for newspapers in that it sets a relatively low bar for “innocence,” it is not necessarily a universal standard. It would seem likely that other federal courts would find that opinion persuasive, particularly courts in the same judicial circuit, i.e. in Illinois, Wisconsin and Indiana. However, no federal court is bound by that opinion.
In fact, the 5th Circuit Court of Appeals (with jurisdiction in Louisiana, Mississippi and Texas) took another view. In Dial One of the Mid-South Inc. v. BellSouth Telecommunications Inc., BellSouth’s telephone directories listed “U.A. Durr” as a franchisee of Dial One, when he was not. Apparently BellSouth had notice that Durr was no longer a franchisee, although the court did not make clear how the company obtained that knowledge. BellSouth argued that the “actual malice” standard applied, but the court rejected that argument. Instead, it held that an “innocent” infringer is one who behaves with “objective reasonableness,” regardless of the infringer’s actual knowledge or state of mind.
In other words, it mattered less what the defendant actually knew than what the defendant actually did. Because its course of action was found not to be reasonable under the circumstances, it was liable for more than $150,000 in damages.
This case may have been influenced by the nature of the telephone directory itself, which is published once annually and is referred to frequently by consumers. An error raises the potential for confusion or reputation damage that is relatively long-lasting. Accordingly, what is “reasonable” in the case of a newspaper and its daily cycle may not be reasonable for a yearly telephone directory. Nonetheless, this appellate court gives a higher standard invoking the innocent infringer defense.
A California federal court held eBay to be an innocent infringer in a case featuring allegedly pirated DVDs. In its 2001 opinion in Hendrickson v. eBay Inc., the court noted that a plaintiff wrote to eBay to complain from a copyright standpoint, but apparently did not include his trademark concerns.
Discussing a prior order in the case, the court stated that it reached the “innocent infringer” conclusion on trademark issues (at least in part) for two reasons. First, the facts showed that eBay had no knowledge of a potential trademark violation before the plaintiff filed his suit, despite some notification of a potential copyright violation. Second, the court held that eBay has no affirmative duty to monitor its own website for potential violations. This case appears to suggest that to be “innocent” a website or newspaper need not affirmatively check for violations, and a relatively specific allegation of a trademark violation is needed to bring “innocence” even into question.
What to do?
This type of problem for a newspaper may come up relatively infrequently. Even so, a newspaper or other periodical has substantial incentive to take steps to remain within the shelter provided by the “innocent infringer” provision of the trademark law. Taking such steps might avoid a lawsuit altogether, with the financial and opportunity costs beyond liability itself that can be involved in merely being drawn into a trademark dispute. Of course, if a plaintiff insists on a lawsuit, staying “innocent” at least removes money damages from the equation, and if the periodical stops publishing the offending material, then the suit should become moot.
One approach might be thought of as “zero tolerance.” When the periodical receives a credible and concrete allegation that a trademark is being or may be used by another without authorization, the periodical can refuse or withdraw the advertisement immediately. It is understood that eBay uses just such a system. If it receives a notification that an auction or sale is using a trademark without the consent of the mark’s owner, it stops the auction and advises the parties. In this way, eBay seeks to keep itself out of any dispute between two parties, letting them resolve the dispute as they will. That policy clearly limits the chance of being drawn into a lawsuit. It also may limit revenues from advertising or sales, based solely on the word of another, who may have an ax to grind.
Another approach is to obtain indemnity from advertisers for costs incurred from litigation of these kinds of trademark issues. The contract between the periodical and the advertiser could include a clause requiring the advertiser to assume the defense of the newspaper and/or to reimburse the newspaper for costs incurred in defending such a trademark lawsuit. Such contractual solutions are common with respect to intellectual property, and particularly with property that is exclusively in the hands of one party, since that party has all of the information concerning it.
In the case of advertising or information for advertising provided by an advertiser to a newspaper, the newspaper has little or no ability to investigate or judge whether the advertiser has the right to use marks or phrases in the advertising. The burden of making sure he or she is entitled to use the advertising can be borne by the advertiser through his or her contract with the newspaper. Some advertisers may balk at such a provision, however, and the newspaper may have to make the business decision of whether to insist on the provision (e.g. for new advertisers) or to waive it.
It should be unusual for a newspaper to be sued over this issue at all, since the putative trademark owner has an action against the advertiser. The owner should not need to sue the newspaper. Further, as noted above if the newspaper stops printing the alleged infringement and is otherwise an “innocent infringer,” a suit does not result in damages and no injunction is necessary because the printing has ceased. Absent other factors, a plaintiff should understand that there is nothing to be gained by such a suit, unless of course there is some evidence that the newspaper was not an innocent infringer in the first place.
Just as there may be cases in which a newspaper is not an innocent infringer, there is also the possibility that the accusing business (TwoCorp. in the above scenario) does not have a legitimate claim to the mark. In that situation, the News has lost advertising revenue for no reason. While the federal trademark law is silent on this issue, Indiana law (like that of most states) provides the ability to sue for intentional interference with a contract or with a business relationship.
Where it can be proven that someone intentionally impedes another’s performance of his or her obligations under a contract, or goes beyond reasonable competition to block a business relationship, the person harmed can sue for the damages they have sustained. Indiana also has a relatively broad concept of “unfair competition,” which may be used in an appropriate case to redress a false representation concerning a trademark. Accordingly, it is wise to always document allegations concerning advertising or trademarks as thoroughly as possible.
Insurance coverage may be available
A full discussion of insurance in trademark cases is well beyond the scope of this article. Nonetheless, it is worth noting that many business liability policies include coverage for “advertising injury.” In the past, such coverage would routinely include disputes involving others’ trademarks, so that trademark infringement litigation could be handled or paid for by insurance. Depending on the wording of the policy and the coverage sought, copyright issues may or may not be covered.
There may be a trend developing that is moving some insurance companies to reduce or eliminate “advertising injury” coverage, or to negotiate such coverage separately rather than including it with general coverage. Whenever a newspaper or periodical publication renews or shops around for insurance, it should be aware of whether and to what extent a policy covers trademark and/or copyright issues.
Newspapers and other periodicals are at minimal risk for involvement in a trademark lawsuit so long as they remain “innocent” trademark infringers. If that is the case, and a newspaper is sued for trademark infringement, then the only remedy available to the trademark owner is an injunction to prevent the newspaper from further publication of the mark. If the newspaper is on notice of a problem, and does not act reasonably to address it, it may be liable for the full range of monetary damages authorized by the trademark laws.
Christopher A. Brown is a partner in the firm of Woodard, Emhardt, Moriarty, McNett & Henry LLP in Indianapolis, specializing in patent, trademark and copyright issues.