Supreme Court's Jack Daniel's decision strengthens and expands trademark rights

In a second decision in as many months, the U.S. Supreme Court has limited and narrowed a significant exception to enforcement of an intellectual property right, resulting in the expansion and bolstering of such rights. The Jack Daniel’s Properties, Inc. v. VIP Products LLC (Jack Daniel’s) decision, which concerned a trademark dispute, comes on the heel of the high Court’s decision last month in Andy Warhol Foundation for the Visual Arts, Inc. v. Goldsmith (2023) 143 S.Ct. 1258, which expanded and strengthened copyright protection by limiting the defense of fair use to enforcement of copyrights.

The Jack Daniel’s decision addressed the tension between federal trademark law, known as the Lanham Act, and the First Amendment rights in expression. The specific issue embodying this tension was whether use of another’s trademark in a satirical and parodic manner as a source identifier exempts the use from claims of trademark infringement and dilution by the senior trademark owner.

By way of background, a trademark is any feature or attribute of a product or service that can act as a source identifier. Typically, a name or logo trademark can also be a scent, color, the shape of a product or its packaging, among other things. The standard for determining trademark infringement is “likelihood of confusion,” i.e., whether the average consumer is likely to be confused by an allegedly infringing mark. 15 U. S. C. §§1114(1)(A), 1125(a)(1)(A). Dilution applies to famous marks and is implicated where use of a similar mark can negatively impact the public’s perception of the famous mark.

VIP, defendant in the Jack Daniel’s case, was the maker of a squeaky, chewable dog toy, with a label that mimicked the shape and label of Jack Daniel’s whiskey bottle with a satirical play on words and phrases on Jack Daniel’s labels. For example, the words “Jack Daniel’s” become “Bad Spaniels” on the VIP product; and “Old No. 7 Brand Tennessee Sour Mash Whiskey” became “The Old No. 2 On Your Tennessee Carpet.”

Shortly following introduction of Bad Spaniels into the market, Jack Daniel’s contacted VIP and complained that its mark was confusingly similar to that of Jack Daniel’s. VIP responded by filing a lawsuit in federal court, seeking a declaration that Bad Spaniel’s did not infringe Jack Daniel’s trademarks. Jack Daniel’s countered that Bad Spaniel’s infringed Jack Daniel’s and diluted its famous trademark.

The main legal issue in the case was applicability of the “Roger’s test,” a judicially carved out exception to the Lanham Act, under which artistic expressions such as humorous and satirical plays on trademarks are exempt from trademark infringement and dilution claims. Under the Roger’s test, a trademark owner can overcome the Roger’s exception by establishing either that the challenged use of a mark has no artistic relevance to the underlying work or that it explicitly misleads as to the source or the content of the work.

VIP argued that Bad Spaniel’s was subject to the Rogers test because it was a parody and artistic expression of Jack Daniel’s mark, and was thus exempt from the likelihood of confusion analysis. In response to Jack Daniel’s argument that VIP had diluted its famous mark, VIP countered that its parody Bad Spaniels mark constituted “fair use” of Jack Daniel’s mark.

The district court sided with Jack Daniel’s. With respect to trademark infringement, the court ruled that because VIP had used the parody mark as a source identifier, it could not benefit from the Roger’s standard. With respect to VIP’s fair use defense to the claim of dilution of Jack Daniel’s mark, the court likewise held that the defense did not apply when an alleged infringer uses a famous mark as a source identifier.

The Ninth Circuit court of appeal reversed, holding that VIP’s infringement defense was subject to the Rogers test. The court of appeal explained that consumers would not likely be confused by Bad Spaniel’s because the artistic play and obvious humor of VIP’s mark would alert consumers as to the distinction between the products identified by the respective marks. The Ninth Circuit decision was in line with that of many other circuits and district courts around the country, which had similarly applied the Rogers test in such situations. For example, in Louis Vuitton Malletier S.A. v. Haute Diggity Dog, LLC, 507 F.3d 252 (4th Cir. 2007), the fourth circuit court of appeal ruled that dog toys resembling Louis Vuitton handbags did not infringe the Louis Vuitton mark because they were merely parodies of the handbags and the Louis Vuitton marks and trade dress. Likewise, in Tommy Hilfiger Li- censing, Inc. v. Nature Labs, LLC, 221 F. Supp. 2d 410, a New York federal court, applying second circuit precedent, dismissed Hilfiger’s claim of infringement on summary judgment, finding the use of the name “Timmy Holedigger” for a brand of pet perfume was a permissible parody of the Hilfiger name and thus did not infringe Hilfiger’s trademark.

Jack Daniel’s appealed the Second Circuit decision to the U.S. Supreme Court, which granted certiorari. The high Court subsequently reversed the second circuit ruling and discarded the essence of the Roger’s test that exempted parody on trademarks from liability for trademark infringement and dilution claims even if the parodic mark is used as a source identifier. With respect to dilution, the decision noted that adopting an expansive version of fair use would violate the statutory requirement which limits “fair use” to “parodying, criticizing, or commenting upon” a famous mark, §1125(c)(3)(A)(ii), so long as the use is not “as a designation of source for the person’s own goods or services.” §1125(c)(3)(A).

Conclusion

In Jack Daniel’s the Supreme Court discarded the Roger’s test as an affirmative defense to claims of trademark infringement and dilution, holding that there is no such parodic exemption if the mark is used as a source identifier. The decision thus significantly strengthens and expands trademark protection.