June 2009 Issue
Civil Cases
Lorillard Tobacco Co. v. S&M Brands, Inc.,
2009 WL 1351639 (E.D. Va. May 13, 2009)
ABSTRACT
Holding that the Fourth Circuit does not recognize the defense of nominative fair use, the Eastern District of Virginia granted plaintiff’s motion for a preliminary injunction against defendant’s advertisements that displayed plaintiff’s trademark for cigarettes. The court, however, denied the plaintiff’s motion for a preliminary injunction against the defendant’s planned advertisements that also displayed plaintiff’s trademark, but included conspicuous language comparing the defendant’s cigarettes with the plaintiff’s.
CASE SUMMARY
FACTS
Plaintiff Lorillard Tobacco Co. (“Lorillard”) sells cigarettes under the NEWPORT name and mark, and Defendant S&M Brands, Inc. (“S&M”) is a competitor, offering its cigarettes at a slightly lower price under the BAILEY’S trademark. S&M ran advertisements displaying a portion of Lorillard’s NEWPORT mark in Lorillard’s stylized font and orange coloring, and in a manner which partially obscured the NEWPORT mark by an image, similar to the way Lorillard frequently displays its mark (the “Initial Advertisements”). The Initial Advertisements included a disclaimer written in “miniscule” font, stating that “Newport is a registered trademark of Lorillard Licensing Co., LLC.”
ANALYSIS
As an initial matter, the court rejected S&M’s claim that the case was moot because it had removed the Initial Advertisements, noting that although S&M had removed the ads, it was not clear that the offending conduct would not recur, particularly in light of S&M’s claim in responding to Lorillard’s demand letter that its conduct was not infringing. The court explained that a party’s voluntary cessation of allegedly infringing conduct does not necessarily moot a case or deprive the court of its power to determine the legality of the conduct.
The court granted Lorillard’s motion for a preliminary injunction with respect to the Initial Advertisements, holding that all three factors—the balance of the harms, Lorillard’s likelihood of success on the merits, and the public interest—tipped in favor of Lorillard. Apparently resting on its argument that the issue was moot and focusing entirely on the Planned Advertisements, S&M failed to argue how the balancing of the harms weighed in its favor with respect to the Initial Advertisements. Accordingly, accepting Lorillard’s likelihood-of-confusion evidence, the court presumed Lorillard would likely suffer irreparable harm if it did not enjoin the Initial Advertisements.
Notably, in determining Lorillard’s likelihood of success on the merits, the court rejected outright S&M’s nominative-fair-use defense. The court first acknowledged the viability of the “classic” or “statutory”
fair-use defense, which allows a defendant to use the plaintiff’s mark to describe the defendant’s goods and services or country of origin. It then turned to the nominative-fair-use defense, finding that “the evolved common law understanding of ‘nominative fair use’ may stand as a more appropriate form of defense [than ‘classic’ fair use]” in this case. Nevertheless, the court held that while the Third and Ninth Circuits recognize the defense in varying forms, the Fourth Circuit has not recognized the defense in any form. With no fair-use defense available, and having already established that the Initial Advertisements were likely to result in consumer confusion, the court held that Lorillard had demonstrated a likelihood of success on the merits.
Finally, because the public’s interest favored fair competition and truthful advertising, the court held that this factor tipped in Lorillard’s favor given its likelihood-of-confusion showing. Concluding that all three factors favored Lorillard, the court granted Lorillard’s motion for a preliminary injunction against the Initial Advertisements.
Before it addressed Lorillard’s motion to enjoin the Planned Advertisements, the court noted that courts often lack jurisdiction over planned advertising campaigns because they do not present a case or controversy. Here, however, S&M’s preprinted advertisements and pledge that it would release the Planned Advertisements shortly were enough to create a case or controversy with respect to those ads.
However, the court refused to preliminarily enjoin S&M’s Planned Advertisements, emphasizing that the ads were unlikely to result in consumer confusion because of the conspicuous language asking consumers to “[c]ompare Bailey’s to our competitor Newport Cigarettes.” The court found that “the advertisement’s use of the word ‘compare’ serves as a form of disclaimer to guard against brand confusion, rather than inviting it.”CONCLUSION
Many practitioners likely view the nominative-fair-use defense as settled trademark law. But this decision suggests that the defense is not available in the Fourth Circuit.
