Recent Court Decisions Offer Conflicting Guidance on Trademarks

While imitation may be the sincerest form of flattery, every business expects rivals to keep hands off its trademarks. A recent decision by the U.S. Court of Appeals for the 11th Circuit and an earlier ruling by the trial court in the same case send a mixed message for trademark holders, said David P. Hathaway, chair of the Litigation Department at Dean Mead in Orlando and a frequent adviser to clients on trademark matters.

The case involved the Savannah College of Art and Design, popularly known as SCAD, an 11,000-student art and design school with campuses in Savannah and Atlanta. SCAD is world-renowned for its art education, but its sports teams might be something of an afterthought. Perhaps that explains why a sportswear website could sell fan clothing with the school’s logo for five years without the school noticing.

Sportswear Inc. started selling SCAD apparel in 2009. Trouble began in 2014 when SCAD, tipped off by a parent who had been looking online for sportswear with the SCAD logo discovered that Sportswear Inc. was selling apparel emblazoned with the school’s logo without permission. The school, which had granted rights to sell its apparel to another company, sued in U.S. District Court in 2015. Given what must have seemed to the school like a blatant theft of its name and logo, perhaps it was confident that it would prevail.

Court initially tosses SCAD’s infringement suit

But the federal district court thought so little of SCAD’s claim that it didn’t even let it get to trial, dismissing it on summary judgment. The court explained that while SCAD had long ago registered its trademarks for “educational services,” it had not filed a registration for apparel or goods.

Oddly, the school also was unable to show when it began using the trademark on the apparel it licensed, which meant it couldn’t establish ownership by virtue of using the logo first. With neither a registration for goods, nor proof that it used the logo on apparel prior to 2009 when Sportswear Inc. began selling it, SCAD lost.

Hathaway called the ruling “shocking.” He explains that it was a “technical ruling” based on little-cited case law. He also found it odd that SCAD couldn’t show that it had used the logo prior to 2009, which would have at least established common law ownership.

But SCAD won a reprieve – maybe. In October, the 11th Circuit reversed the dismissal of the lawsuit and sent the case back to the lower court with instructions to use different case law in assessing whether SCAD could protect its trademark for apparel. While SCAD won this round, Hathaway said the court’s tortured explanation for its decision offers scant comfort for any business whose marks are not secured with federal registration. Here’s why.

Appeals court: Service registration protects trademark for goods

The appeals court relied on a more than 40-year-old National Hockey League appellate decision that protected NHL emblems from being used without permission by a sportswear company. The court ruled in that case that even if a mark is federally registered only for services, the owner of the mark is entitled to broader protection in order to prevent confusion about its ownership.

In other words, the court in the NHL case said if you register a mark for services – education in the case of SCAD, sports entertainment in the case of the NHL teams – it automatically extends to goods such as apparel. The SCAD appellate court read the prior decision this way: “The holder of a federally registered service mark need not register that mark for goods – or provide evidence of prior use of that mark on goods” to protect against its infringement on the use of goods. The holder of a service mark has “monopolistic protection” of its mark, the 11th Circuit said.

Hathaway said he found the appellate court’s ruling as shocking as the lower court’s ruling because it generally is accepted by lawyers that service marks do not automatically extend to goods. The judges in the NHL case did not offer much explanation for this departure in interpreting trademark law, other than to say that taking a free ride on another’s registered trademark “simply feels wrong.”

Registration for services and goods removes all doubt

The 11th Circuit expressed skepticism at the other court’s lack of analysis to justify its decision but said it was obliged to follow precedent. Hathaway says it would have been much easier to rule that, on the facts of this case, given that this was a college that has sports teams, the registration for services could be extended to these particular goods. He thinks that is probably what the NHL opinion was getting at with regard to a pro hockey team and the sale of emblems many years ago.

Sportswear Inc. could ask for a hearing before the full 11th Circuit or petition the U.S. Supreme Court to review the decision. And even with the guidance provided by the 11th Circuit, there is no guarantee the trial court will render a decision favoring SCAD, and other circuits might disregard this decision. But if other courts follow the reasoning of the 11th Circuit, it will make it surprisingly easier to protect trademarks.

In the meantime, here are the takeaways, said Hathaway:

• Obtain federal registration that covers any manner you might ever use marks. If SCAD had done this from the beginning, we wouldn’t be writing about the school here.
• Don’t rely on common law ownership, that is, establishing rights to a mark by being the first to use it. The SCAD case shows it can be difficult to prove first use.
• Monitor use of your mark. Sportswear Inc. had been using the SCAD marks for five years before the school noticed, and then only because a parent alerted the school.
• Finally, don’t assume that your service mark registration extends to goods, regardless of what the 11th Circuit decision said. We suspect that this legal principle is far from settled. Inventory your marks and be sure that your intellectual property is protected with appropriate registrations.

To gain more insight from the attorney in this article, we invite you to contact David P. Hathaway at dhathaway@www.deanmead.com. He is the chair of Dean Mead’s statewide litigation department.