Trademark Infringement Kis v. Foto Fantasy. Kis v. Foto Fantasy Background Kis and Foto Fantasy are...

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Trademark Infringement Trademark Infringement Kis v. Foto Fantasy Kis v. Foto Fantasy

Transcript of Trademark Infringement Kis v. Foto Fantasy. Kis v. Foto Fantasy Background Kis and Foto Fantasy are...

Trademark Trademark InfringementInfringement

Kis v. Foto FantasyKis v. Foto Fantasy

Kis v. Foto FantasyKis v. Foto FantasyBackgroundBackground

Kis and Foto Fantasy are manufacturers that compete Kis and Foto Fantasy are manufacturers that compete in the mall photo booth market.in the mall photo booth market.

Foto Fantasy’s booths (a.k.a. “Portrait Studios”) Foto Fantasy’s booths (a.k.a. “Portrait Studios”) produce sketch images, not photographs. They can produce sketch images, not photographs. They can sketch the user or a photograph scanned into the sketch the user or a photograph scanned into the machine. machine. – Kis’s booths produce photos, not sketches.Kis’s booths produce photos, not sketches.

On the exterior of the Portrait Studios there are sketch On the exterior of the Portrait Studios there are sketch images of celebrities (Tom Cruise, Marilyn Monroe, Bill images of celebrities (Tom Cruise, Marilyn Monroe, Bill Clinton) and non-celebrities. There is also a sign: Clinton) and non-celebrities. There is also a sign: “SCAN IN YOUR FAVORITE CELEBRITIES”.“SCAN IN YOUR FAVORITE CELEBRITIES”.

Kis v. Foto FantasyKis v. Foto FantasyCase ResultCase Result

Kis sues Foto Fantasy for false endorsement Kis sues Foto Fantasy for false endorsement (Lanham Act 15 U.S.C.A. § 1125) and attempted (Lanham Act 15 U.S.C.A. § 1125) and attempted monopolization (Sherman Act) in 2001.monopolization (Sherman Act) in 2001.

In a bench trial, the Court dismisses both In a bench trial, the Court dismisses both claims:claims:– Plaintiff lacked standing for a Lanham act claim.Plaintiff lacked standing for a Lanham act claim.

Even with standing, failed to meet the burden of proof.Even with standing, failed to meet the burden of proof.

– There were insufficient facts to support an antitrust There were insufficient facts to support an antitrust claim under the Sherman Act.claim under the Sherman Act.

Affirmed by the 5Affirmed by the 5thth Circuit. Supreme Court Circuit. Supreme Court denied certiorari.denied certiorari.

Court’s FindingsCourt’s FindingsLanham Act ClaimLanham Act Claim

Plaintiff’s evidence was a survey done by Dr. Daniel Plaintiff’s evidence was a survey done by Dr. Daniel Howard.Howard.

Court dismissed claim due to standing. The evidence Court dismissed claim due to standing. The evidence failed to show:failed to show:– Direct injuryDirect injury– Lost profits (damages)Lost profits (damages)– Low risk of duplicative damagesLow risk of duplicative damages

Even if the plaintiff had standing, plaintiff did not Even if the plaintiff had standing, plaintiff did not satisfy the burden of proof. Failed to show:satisfy the burden of proof. Failed to show:– Likely consumer confusion regarding the celebrities’s Likely consumer confusion regarding the celebrities’s

association with the Portrait Studios.association with the Portrait Studios.

Dr. Daniel HowardDr. Daniel Howard

Professor at SMU.Professor at SMU.

Areas of expertise:Areas of expertise:– Consumer behaviorConsumer behavior– AdvertisingAdvertising– Marketing researchMarketing research– Retail marketingRetail marketing

Produced a survey to Produced a survey to support plaintiff’s false support plaintiff’s false endorsement claim.endorsement claim.– Wanted a survey to Wanted a survey to

determine amount of actual determine amount of actual confusionconfusion

Howard’s SurveyHoward’s SurveyPretestPretest

Downloaded Foto Fantasy’s statement of demographics. Then spent Downloaded Foto Fantasy’s statement of demographics. Then spent three days observing users and potential users of a Portrait Studio three days observing users and potential users of a Portrait Studio located in Grapevine Mills Mall, Texas.located in Grapevine Mills Mall, Texas.– 30 used and another 120 showed interest30 used and another 120 showed interest– Decided that the demographic statement was about accurate.Decided that the demographic statement was about accurate.

Divided a sample of people found at the SMU student center into Divided a sample of people found at the SMU student center into two groups—adults ages 18-42 and adolescents ages 13-17.two groups—adults ages 18-42 and adolescents ages 13-17.

Defendant argues that the sample was inaccurate because it was mostly white Defendant argues that the sample was inaccurate because it was mostly white (Anglo), not randomly selected, lacked ethnic, economic, and geographic (Anglo), not randomly selected, lacked ethnic, economic, and geographic diversity.diversity.

– Both groups believe endorsement means a business relationship or Both groups believe endorsement means a business relationship or reception of money.reception of money.

– Both groups agreed (in slightly different proportions) to two statements.Both groups agreed (in slightly different proportions) to two statements.– He concludes that ‘endorses or approves’ is indicative of a favorable He concludes that ‘endorses or approves’ is indicative of a favorable

opinion and an existing business relationship. opinion and an existing business relationship.

Court says that the pretest has serious methodological issues, but Court says that the pretest has serious methodological issues, but since it is of marginal relevance to the case, it does not need to be since it is of marginal relevance to the case, it does not need to be stricken.stricken.

Howard’s SurveyHoward’s SurveyField StudyField Study

Conducted at NorthPark Mall, an upscale shopping mall in Conducted at NorthPark Mall, an upscale shopping mall in north Dallas.north Dallas.– He selected 224 customers that matched the demographic list He selected 224 customers that matched the demographic list

and his observations at Grapevine Mills Mall.and his observations at Grapevine Mills Mall.– He randomly divided the consumers into either an experimental He randomly divided the consumers into either an experimental

or control group.or control group.– Each group received two packets with survey material. The only Each group received two packets with survey material. The only

difference between the packets was the inclusion of an difference between the packets was the inclusion of an identified Tom Cruise sketch. identified Tom Cruise sketch.

But, might be swayed by the quality of the sketch—regardless of But, might be swayed by the quality of the sketch—regardless of who it was.who it was.

Howard concludes that the Tom Cruise sketch captured the Howard concludes that the Tom Cruise sketch captured the consumers’ attention and made consumers more likely to consumers’ attention and made consumers more likely to purchase portraits.purchase portraits.– Also concludes that ½ people believe Cruise ‘endorses or Also concludes that ½ people believe Cruise ‘endorses or

approves’ of Portrait Studios.approves’ of Portrait Studios.

Defendant’s CriticismDefendant’s CriticismHoward’s Field StudyHoward’s Field Study

– Not a proper survey universe:Not a proper survey universe: Did not mirror actual consumers.Did not mirror actual consumers. Point to Point to Amstar Corp. v. Domino’sAmstar Corp. v. Domino’s and and Jaret International, Jaret International,

Inc. v. Promotion in MotionInc. v. Promotion in Motion..– Court: cases are not applicable.Court: cases are not applicable.

– Leading questions resulted in a “demand effect” that Leading questions resulted in a “demand effect” that skewed the data.skewed the data.

– Court: control group takes care of this.Court: control group takes care of this.

– Did not reflect actual market conditions:Did not reflect actual market conditions: The picture of the Portrait Studio did not represent reality.The picture of the Portrait Studio did not represent reality. Tom Cruise’s portrait was exaggerated.Tom Cruise’s portrait was exaggerated. The celebrities were identified.The celebrities were identified.

– Court: Dr. Howard Court: Dr. Howard triedtried to get the participants in the frame of to get the participants in the frame of mind that a consumer would have. And, Cruise and Monroe are mind that a consumer would have. And, Cruise and Monroe are well-known without being identified.well-known without being identified.

– However, Court ends up reducing the survey’s weight for However, Court ends up reducing the survey’s weight for similar reasons.similar reasons.

Court’s FindingsCourt’s FindingsHoward’s Field StudyHoward’s Field Study

Allows the survey in under Allows the survey in under DaubertDaubert..– Methodological flaws and criticism raised by the defense Methodological flaws and criticism raised by the defense

goes to the weight of the survey.goes to the weight of the survey. Court later says that the survey is not persuasive evidence Court later says that the survey is not persuasive evidence

of direct injury caused by the Tom Cruise sketch.of direct injury caused by the Tom Cruise sketch.

The survey’s description of real world conditions is The survey’s description of real world conditions is limited.limited.– ““The various celebrity sketch images must be viewed The various celebrity sketch images must be viewed

together as they are displayed in public. In that context, together as they are displayed in public. In that context, there is not a likelihood of confusion…”there is not a likelihood of confusion…”

Plaintiff failed to produce evidence of actual harm.Plaintiff failed to produce evidence of actual harm.– Not a single user was shown to have chosen a Portrait Not a single user was shown to have chosen a Portrait

Studio over a Kis photo booth due to confusion regarding Studio over a Kis photo booth due to confusion regarding celebrity endorsement. celebrity endorsement.

Future ClaimsFuture ClaimsGeneral RecommendationsGeneral Recommendations

Be aware of the audience for whom the study is Be aware of the audience for whom the study is attempting to persuade.attempting to persuade.– Social scientists procuring evidence for trials must be Social scientists procuring evidence for trials must be

aware of legal standards.aware of legal standards.

To effectively explain real world conditions, a social To effectively explain real world conditions, a social scientist must show ‘but for’ causation.scientist must show ‘but for’ causation.– This may be easier when the real conditions are mirrored This may be easier when the real conditions are mirrored

as closely as possible.as closely as possible.

A proper survey universe is an important way to limit A proper survey universe is an important way to limit bias.bias.– Howard’s pretest had serious flaws.Howard’s pretest had serious flaws.

Better Studies?Better Studies?ExamplesExamples

Alternate experiments to show ‘but for’ causation and Alternate experiments to show ‘but for’ causation and actual harm:actual harm:

– Instead of using a packet, use two real Portrait Studios: Instead of using a packet, use two real Portrait Studios: one with celebrity pictures on the outside, another one with celebrity pictures on the outside, another without pictures. Ask about Tom Cruise’s affiliation, the without pictures. Ask about Tom Cruise’s affiliation, the likelihood they would buy a sketch, etc.likelihood they would buy a sketch, etc.

– Put a Kis photo booth next to a Portrait Studio. Offer Put a Kis photo booth next to a Portrait Studio. Offer consumers coupons for one free sketch or picture consumers coupons for one free sketch or picture (provided they comply with a survey after). Note their (provided they comply with a survey after). Note their choice and question their preferences, Tom Cruise’s choice and question their preferences, Tom Cruise’s affiliation, etc.affiliation, etc.

Are there causation and sampling errors with these Are there causation and sampling errors with these studies?studies?

Trademark Trademark InfringementInfringement

SquirtoCo v. Seven-UpSquirtoCo v. Seven-Up

Squirt v. Quirst Squirt v. Quirst BackgroundBackground

‘‘Squirt’ was trademarked in 1937. It has been Squirt’ was trademarked in 1937. It has been used by SquirtCo continuously since.used by SquirtCo continuously since.– Carbonated grapefruit drink.Carbonated grapefruit drink.– SquirtCo has advertised Squirt on a national basis SquirtCo has advertised Squirt on a national basis

(e.g. “Put a Little Squirt in Your Life”).(e.g. “Put a Little Squirt in Your Life”).

‘‘Quirst’ was coined by an advertising agency Quirst’ was coined by an advertising agency (“(“ququ ench” and “th ench” and “th irstirst”) and adopted by 7-Up ”) and adopted by 7-Up in 1978.in 1978.– Noncarbonated lemonade drink.Noncarbonated lemonade drink.

Plan to expand to other flavors, like grape.Plan to expand to other flavors, like grape.– Has a $2.2 Million budget for advertising.Has a $2.2 Million budget for advertising.

Budget was created after they were sued.Budget was created after they were sued.

Squirt v. Quirst Squirt v. Quirst Case ResultCase Result

SquirtCo sued 7-Up in 1978 under the Lanham SquirtCo sued 7-Up in 1978 under the Lanham Trademark Act (15 U.S.C.A. § 1114(1)).Trademark Act (15 U.S.C.A. § 1114(1)).– Requested an injunction on the name ‘Quirst’ and Requested an injunction on the name ‘Quirst’ and

damages for tortious infringement.damages for tortious infringement.

Federal District Court in Missouri concluded plaintiff Federal District Court in Missouri concluded plaintiff was entitled to an injunction, but not a claim of was entitled to an injunction, but not a claim of tortious infringement.tortious infringement.– 88thth Circuit affirms the injunction and remands the tortious Circuit affirms the injunction and remands the tortious

infringement claim.infringement claim. No finding of facts were provided by the lower court in No finding of facts were provided by the lower court in

dismissing the tort claim.dismissing the tort claim.

7-Up discontinues Quirst.7-Up discontinues Quirst.

Court’s FindingsCourt’s Findings Case Result Case Result

The legal standard was whether the Quirst mark The legal standard was whether the Quirst mark resembled the Squirt mark so that it was “likely to resembled the Squirt mark so that it was “likely to cause confusion, or to cause mistake, or to deceive.” cause confusion, or to cause mistake, or to deceive.” (15 U.S.C.A. § 1114(1)) (15 U.S.C.A. § 1114(1)) – Products that compete directly in the same market need Products that compete directly in the same market need

to show less likelihood of confusion.to show less likelihood of confusion.

The District Court concluded: “the presence of the The District Court concluded: “the presence of the strong and distinct Squirt trademark, the extensive strong and distinct Squirt trademark, the extensive similarity between the Squirt and Quirst marks, the similarity between the Squirt and Quirst marks, the close competitive proximity and similarity between close competitive proximity and similarity between the products, the low to moderate degree of care the products, the low to moderate degree of care likely to be exercised by the purchasers of soft drinks likely to be exercised by the purchasers of soft drinks and the Maritz, Chicago and Phoenix surveys, are all and the Maritz, Chicago and Phoenix surveys, are all signs of a likelihood of confusion”.signs of a likelihood of confusion”.

Maritz StudyMaritz Study7-Up7-Up

Conducted at grocery stores in Phoenix.Conducted at grocery stores in Phoenix.– 50 cent coupons were given to stimulate purchases of 50 cent coupons were given to stimulate purchases of

non-cola soft drinks. Respondents were asked if they non-cola soft drinks. Respondents were asked if they had used the coupons.had used the coupons.

Customers were asked to recall what brand of soft Customers were asked to recall what brand of soft drink they had purchased.drink they had purchased.– 98 of 98 who said Quirst had Quirst98 of 98 who said Quirst had Quirst– 65 of 70 who said Squirt had Squirt65 of 70 who said Squirt had Squirt

3 of 70 actually had Quirst3 of 70 actually had Quirst– 7 miscellaneous errors (Sprite/Shasta)7 miscellaneous errors (Sprite/Shasta)

7-Up says only 3 out of 175 were confused. Argues 7-Up says only 3 out of 175 were confused. Argues this shows de minimis confusion.this shows de minimis confusion.

CriticismCriticismMaritz StudyMaritz Study

SquirtCo does not argue against the survey, but rather SquirtCo does not argue against the survey, but rather says that 3/70 (4.3%) is actual confusion and not de says that 3/70 (4.3%) is actual confusion and not de minimis.minimis.

Court says that this is not actual confusion (could be Court says that this is not actual confusion (could be other factors at play) but that this is evidence of likely other factors at play) but that this is evidence of likely confusion.confusion.

Issues not raised:Issues not raised:– Causation dilemma:Causation dilemma:

Does not remembering the brand you just bought really speak to Does not remembering the brand you just bought really speak to confusion between Squirt and Quirst?confusion between Squirt and Quirst?

Lower court’s idea: a man and his money. Lower court’s idea: a man and his money. – Does the coupon have any bearing?Does the coupon have any bearing?

Presumably increased sales among more inexperienced non-Presumably increased sales among more inexperienced non-cola consumers.cola consumers.

– Do local factors come into play?Do local factors come into play?

Chicago and Phoenix Chicago and Phoenix StudyStudySquirtCoSquirtCo Chicago:Chicago:

– Women 25 and older were interviewed randomly as they left Women 25 and older were interviewed randomly as they left Zayre’s department stores (n = 152).Zayre’s department stores (n = 152).

The subjects listened to four radio commercials, including one by The subjects listened to four radio commercials, including one by Squirt and one by Quirst.Squirt and one by Quirst.

– Each was asked: “Do you think Squirt and Quirst are put out by Each was asked: “Do you think Squirt and Quirst are put out by the same company or by different companies?” and “What makes the same company or by different companies?” and “What makes you think that?”you think that?”

34% same company, 55% different companies, 11% didn’t know.34% same company, 55% different companies, 11% didn’t know.

Phoenix:Phoenix:– Similar study was done at Phoenix grocery stores with women 25 Similar study was done at Phoenix grocery stores with women 25

and older who had bought soft drinks that day (n = 476).and older who had bought soft drinks that day (n = 476).– Subjects were asked questions about brand awareness and what Subjects were asked questions about brand awareness and what

type of soda they had purchased that day.type of soda they had purchased that day.– The subjects were told “Among the soft drinks on the market is a The subjects were told “Among the soft drinks on the market is a

non-carbonated, lemonade flavored soft drink called Quirst. non-carbonated, lemonade flavored soft drink called Quirst. Another Soft drink on the market is a carbonated, grapefruit Another Soft drink on the market is a carbonated, grapefruit flavored soft drink called Squirt”. flavored soft drink called Squirt”.

Subjects asked same two questions as in the Chicago survey, but in Subjects asked same two questions as in the Chicago survey, but in the form of a questionnaire.the form of a questionnaire.

23% same company, 34% different companies, 43% didn’t know.23% same company, 34% different companies, 43% didn’t know.

CriticismCriticismChicago and Phoenix StudyChicago and Phoenix Study

7-Up’s arguments:7-Up’s arguments:– The question was dichotomous and encouraged guessing.The question was dichotomous and encouraged guessing.

““Do you think Squirt and Quirst are put out by the same company or Do you think Squirt and Quirst are put out by the same company or by different companies?”by different companies?”

– ‘‘Put out by’ was ambiguous because both companies had a Put out by’ was ambiguous because both companies had a common bottler.common bottler.

– Chicago survey was not a representative universe.Chicago survey was not a representative universe. Women were coming out of a department store and had not Women were coming out of a department store and had not

purchased soft drinks that day.purchased soft drinks that day.– No pictures of the cans—survey was done totally by sound.No pictures of the cans—survey was done totally by sound.

Issues not raised:Issues not raised:– Was there sampling bias?Was there sampling bias?

Why only women over 25?Why only women over 25?– Is there reactivity (Chicago study)?Is there reactivity (Chicago study)?– Do local factors come into play?Do local factors come into play?– Is there a testing effect?Is there a testing effect?

Court’s FindingsCourt’s FindingsSocial Science EvidenceSocial Science Evidence

All three studies show that there is likely confusion All three studies show that there is likely confusion between the marks.between the marks.

Little actual confusion can be evidence to show that Little actual confusion can be evidence to show that there is much possible confusion.there is much possible confusion.– 3/70 might mean a high likelihood of confusion.3/70 might mean a high likelihood of confusion.

Similarity in sound and spelling was significant.Similarity in sound and spelling was significant.– 45% of people in Chicago and Phoenix surveys 45% of people in Chicago and Phoenix surveys

mentioned this similarity unprompted when responding mentioned this similarity unprompted when responding to question 2 (“What makes you think that”).to question 2 (“What makes you think that”).

Phoenix and Chicago surveys would have been more Phoenix and Chicago surveys would have been more persuasive if pictures of cans were shown.persuasive if pictures of cans were shown.

Future ClaimsFuture ClaimsGeneral RecommendationsGeneral Recommendations

Sometimes a court will decide a case before Sometimes a court will decide a case before the social science evidence is presented.the social science evidence is presented.

Interpretation of the evidence is important.Interpretation of the evidence is important.– Maritz contended that actual confusion was 3/175. Maritz contended that actual confusion was 3/175.

The Court said 3/70. This may have impacted The Court said 3/70. This may have impacted whether the confusion was de minimis.whether the confusion was de minimis.

Whenever interviewing people directly, be Whenever interviewing people directly, be aware of reactivity and testing effects.aware of reactivity and testing effects.

Better Studies?Better Studies?ExamplesExamples

Maritz’s data should be interpreted better.Maritz’s data should be interpreted better.– The actual confusion of consumers who purchased Squirt The actual confusion of consumers who purchased Squirt

but said Quirst (3) should be compared to those that but said Quirst (3) should be compared to those that purchased Squirt but said Sprite (2).purchased Squirt but said Sprite (2).

Actual confusion due to the similarity in marks may have Actual confusion due to the similarity in marks may have been less than hypothesized ~ 1/175.been less than hypothesized ~ 1/175.

Chicago and Phoenix surveys should be done with Chicago and Phoenix surveys should be done with television commercials and radio commercials. television commercials and radio commercials. – Researchers may have been wary because 7-Up is Researchers may have been wary because 7-Up is

clearly printed on the Quirst can.clearly printed on the Quirst can.

Chicago study should be done with written questions, Chicago study should be done with written questions, not an interviewer recording the results.not an interviewer recording the results.