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BREAKING NEWS: 
SUPREME COURT RESOLVES SPLIT BETWEEN FEDERAL COURTS ON BURDEN OF PROOF IN TRADEMARK INFRINGEMENT ACTIONS WHEN AFFIRMATIVE DEFENSE OF FAIR USE IS RAISED

On December 8, 2004, the United States Supreme Court issued an opinion in the matter of K.P. Permanent Make-Up v. Lasting Impression1, unanimously holding that in cases of alleged trademark infringement, an alleged infringer bears no burden of demonstrating the absence of likelihood of consumer confusion in order to prevail on the affirmative defense of fair use under Section 33 of the Trademark (Lanham) Act, 15 U.S.C. §1115(b)(4). The decision resolved a split amongst the federal courts of appeal on the burden of proof carried by defendants asserting the fair use defense. In reaching that conclusion, the Court also expressly held that some degree of consumer confusion must be compatible with fair use, particularly when a descriptive term is at issue. However, the Court further explained that its holding did not foreclose the relevance of an inquiry into the extent of any likely consumer confusion in assessing whether a defendant's use is objectively fair. Thus, while the split in the circuits has been resolved, the factual scenarios under which the fair use defense may trump a trademark infringement claim must be assessed on a case-by-case basis.

An examination of the facts in K.P. Permanent Make-Up v. Lasting Impression is instructive. In 1990, K.P. Permanent Make-Up (“K.P.”) claimed to have commenced use of “microcolor” to describe features of its permanent make-up. The term first appeared on K.P.’s flyers, and began appearing a year later on its products, primarily bottles of permanent make-up pigment. K.P. did not seek to register “microcolor” as a trademark with the United States Patent and Trademark Office (“PTO”). In 1992, Lasting Impression (“Lasting”), a direct competitor in the permanent make-up industry, unaware of K.P. Permanent’s alleged use of the term “microcolor,” sought to register a trademark that included the term “Micro Colors” to identify its products.2 The PTO registered Lasting’s mark in 1993, and in 1999 the registration became incontestable under the Lanham Act, 15 U.S.C. §1065. It was also in 1999 that K.P. decided to substantially expand its use of the term “microcolor,” releasing a ten-page advertising brochure that featured “microcolor” in large, stylized typeface. This prompted Lasting to send a protest letter to K.P. demanding that it cease all use of the “microcolor” term. K.P. in turn filed a complaint against Lasting in the Central District of California, seeking declaratory judgment that its use of “microcolor” infringed no exclusive right of Lasting. Lasting answered the complaint and counterclaimed for trademark infringement.

K.P. sought summary judgment on the infringement counterclaim, based on the statutory affirmative defense of fair use, 15 U.S.C. §1115(b)(4). The affirmative defense of fair use to a claim of trademark infringement is available provided the mark at issue “is descriptive of and used fairly and in good faith only to describe the goods or services” of a business.3 After finding that Lasting had conceded that K.P. used the term only to describe its goods and not as a mark, the District Court held that K.P. was acting fairly and in good faith because undisputed facts showed that K.P. had employed the term “microcolor” continuously from a time before Lasting adopted the two-word, plural variant as a mark. Without enquiring whether the practice was likely to cause confusion, the court concluded that K.P. had made out its affirmative defense under §1115(b)(4) and entered summary judgment for K.P. on Lasting's infringement claim.

Lasting appealed to the Ninth Circuit on the ground that the District Court erred by failing to consider whether K.P.’s practice of using “microcolor” was likely to cause consumer confusion.4 The Ninth Circuit, siding with Lasting,5 determined that “no use could be recognized as fair where any consumer confusion was probable.”6 The Ninth Circuit accordingly reversed the lower court’s verdict because the trial court had not given consideration to Lasting’s claim of likelihood of confusion and in so doing the Court apparently placed the burden on K.P. to establish the absence of consumer confusion. K.P. petitioned the Supreme Court for a writ of certiorari, which was granted on Jan. 9, 2004.

Following oral argument, the Supreme Court, per Justice Souter, delivered the unanimous decision of the Court reversing and remanding the case back to the Ninth Circuit. After discussing the factual and procedural history of the case, Justice Souter made reference to those sections of the Lanham Act pertaining to infringement, incontestability, and fair use. The Court then discussed two points that it deemed immediately evident: (i) that “Section 1115(b) places a burden of proving likelihood of confusion (that is, infringement) on the party charging infringement even when relying on an incontestable registration; and (ii) Congress remained silent insofar as disproving likelihood of confusion when setting out the elements of the fair use defense in §1115(b)(4).”7

Lasting had argued that the term “used fairly [in Section 1115(b)(4)] is an oblique incorporation of a likelihood-of-confusion test developed in the common law of unfair competition.”8 Adopting a strict reading of the Lanham Act, the Court quickly disposed of Lasting’s argument, stating that “it takes a long stretch to claim that a defense of fair use entails any burden to negate confusion.”9 Expressing further skepticism toward Lasting’s position (and the Ninth Circuit’s holding), the Court went on to say that it is “just not plausible” that Congress would have used such disparate phraseology in (a) §1114, “likely to cause confusion, or to cause mistake, or to deceive,” to describe the requirement that a trademark owner show a likelihood of consumer confusion, and in (b) §1115(b)(4) “used fairly” to demonstrate fair use. The incongruity in word choice, the Court observed, could not conceivably suggest a unity of meaning.

In addition, the Court commented that the common law of unfair competition, such as the Lanham Act, “also tolerated some degree of confusion from a descriptive use of words contained in another person's trademark.”10 However, the Court appears to have limited the breadth of its holding by stating that: “It suffices to realize that our holding that fair use can occur along with some degree of confusion does not foreclose the relevance of the extent of any likely consumer confusion in assessing whether a defendant's use is objectively fair.” The Court also explained that “we do not rule out the pertinence of the degree of consumer confusion under the fair use defense, [and] we likewise do not pass upon the position . . . that the ‘used fairly’ requirement in §1115(b)(4) demands only that the descriptive term describe the goods accurately.”

Thus, the Court’s opinion, which resolves a split between the circuits by making clear that trademark infringement plaintiffs must bear the burden of proving likelihood of confusion, also announces a policy that “[s]ome possibility of consumer confusion must be compatible with fair use.”11 However, it goes on to suggest that courts may consider the degree of likelihood of confusion as established by the plaintiff as well as the manner of defendant’s use of the term at issue when assessing the viability of a fair use defense.12

Thus, whether ostensible fair use of a mark can overcome a charge of trademark infringement will likely be assessed on a case-by-case basis dependent, in part, on the degree of likelihood of confusion arising from defendant’s use of a term over which a trademark owner claims exclusive rights.

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1 No. 03-409, 2004 WL 2804921 (Dec. 8, 2004).

2  While the two marks varied slightly, all further references in this article will simply   be to the “microcolor” mark.

3 15 U.S.C. § 1115(b)(4).
4  Id.
5 K.P. Permanent Make-Up, Inc. v. Lasting Impression I, Inc., 328 F.3d 1061 (2003).
6 Id. at 1072. (Specifically noting that “K.P. can only benefit from the fair use defense if there is no likelihood of confusion between K.P.'s use of the term ‘microcolor’ and Lasting’s mark.”)

7 K.P. Permanent, 2004 WL 2804921, at *4.
8 Id.
9 Id.

10 Id.
11 K.P. Permanent, 2004 WL 2804921, at *6.
12 Indeed, in its final footnote, the Court directed the lower court on remand to pay special attention to K.P.’s use of the microcolor mark. In particular, the Court suspected that Lasting had made certain concessions at the trial level vis-à-vis K.P.’s use of ‘microcolor’ on bottles and flyers in the early 1990s, not as to the stylized version of “microcolor” that appeared in K.P.’s 1999 brochure. K.P. Permanent v. Lasting, No. 03-409, 2004 WL 2804921, at *7 n.6 (Dec. 8, 2004). The Court also explicitly noted that “the fair use analysis of K.P.'s employment of the stylized version of ‘microcolor’ on its brochure may differ from that of its use of the term on the bottles and flyers.” Id.