United States - The Supreme Court Clarifies the Burden of the Fair Use Defense; Ninth Circuit Demonstrates the Force of Trademark Registration Incontestability

The U.S. Supreme Court clarified the relationship between the fair use defense and proof of likelihood of confusion in a unanimous decision in KP Permanent Makeup, Inc. v. Lasting Impression I, Inc. The Supreme Court held that the party asserting the fair use defense has no burden to prove confusion unlikely or to negate any likelihood of confusion of source, in order to satisfy its burden of proof, since the burden of proving likely confusion from the objectionable use remains with the trademark holder. The Court recognized that some possibility of consumer confusion is compatible with fair use, and attributed the confusion resulting from a fair use as a risk that the trademark registrant runs when it decides to identify its product with a mark employing a descriptive phrase.

The fair use defense becomes particularly important when the trademark holder’s registration enjoys incontestability, which makes the defense of mere descriptiveness unavailable, as in the KP Permanent Makeup case. Both parties in the KP Permanent Makeup case sold permanent makeup, also known as micropigmentation, a mixture of pigment and liquid for injection under the skin, either as permanent eyeliner or for other cosmetic purposes. Lasting Impression obtained a U.S. federal trademark registration in 1993 for Micro Colors and Design, without disclaimer of the wording in the mark, in connection with “color pigments”. The registration became incontestable in 1999 under 15 U.S.C. §1065, since the registration was more than 5 years old and the registrant filed the appropriate declaration that was accepted by the U.S. Patent and Trademark Office. Lasting Impression later sent KP Permanent Makeup a cease and desist letter claiming that use of MICROCOLORS infringed its registered MICRO COLORS & Design trademark. The litigation began when KP Permanent Makeup filed a complaint seeking a declaratory judgment of non-infringement, to which Lasting Impression counterclaimed for infringement.

The Supreme Court decision expressly avoided deciding whether the degree of consumer confusion and the strength of the registrant’s mark, the commercial justification for use of the mark, can all be relevant to whether a defendant’s use is objectively fair. The decision states that accuracy in describing the goods has to be a consideration in assessing the fair use defense, but stopped short of adopting the Solicitor General’s argument that accuracy in description has to be the sole consideration.

This decision resolved a legal disagreement among the U.S. Circuit Courts of Appeals over the relationship between fair use and likely confusion. Like the Ninth Circuit in the decision the Supreme Court overturned, the Sixth and Fifth Circuits had in other cases ruled that fair use could not co-exist with confusion; the Second, Fourth and Seventh Circuits had in other cases previously ruled that likely confusion and fair use could co-exist. By its holding the Supreme Court simplified the fair use defense, potentially making it a stronger defense tool to establish summary judgment, avoiding extensive litigation and trial in trademark cases. Just how much stronger is unclear in view of the issues the high Court did not reach, and its remand to the lower courts for further consideration of the fair use defense, properly applied.

The fair use defense, as defined in the federal Lanham Trademark Act, 15 U.S.C. §1115(b)(4), is available to a party whose "…use of the term, or device charged to be an infringement is a use, otherwise than as a mark,… which is descriptive of and used fairly and in good faith only to describe the goods or services of such party…"

On remand of the case to the Ninth Circuit, that Court maintained its reversal of the District Court’s grant of summary judgment on grounds of no likely confusion and of fair use, holding that there are genuine issues of fact on both that remain for determination at trial. The Ninth Circuit Court pointed out that the factual nature of likelihood of confusion generally disfavors summary judgment because a full record is usually required to fully assess the facts. On the fair use issue, the Ninth Circuit held that relevant factors for consideration by the fact finder on the fairness of the use are the degree of likely confusion, the strength of the trademark, the descriptive nature of the term for the product or service being offered by the defendant, the availability of adequate descriptive terms, the extent of the use of the term prior to the registration of the mark, and any difference among the times and contexts in which the defendant has used the term.

The Ninth Circuit’s opinion on remand devotes more attention to its holding that the words “micro colors” are the most salient feature of the word and design mark and so benefit from the incontestability provision and its presumption of validity, as well as its summary rejection of the defense that “micro colors” is not generic for micropigmentation products and services. The latter holding demonstrates the force that incontestability can have. The Ninth Circuit did not discuss the fact that the registration used the term “colors” generically, and it seems to dwell on the word “micropigmentation” as the sole generic wording for the cosmetic products and services, in rejecting “as highly doubtful” defendant’s statement that micro colors is an abbreviation for micro pigmentation colors, and that the terms micro colors, pigment colors, and micro pigments, are all synonyms. In so doing, the opinion does not discuss the fact that the term pigmentation itself denotes a colored material. In any event, the close distinctions drawn against the defendant bearing the burden of the affirmative defense bear out the advantages of the registration and incontestability.