TO SEARCH OR NOT TO SEARCH

By Stephen J. Quigley 

Stephen Quigley practices law with the law firm of Abelman, Frayne and Schwab in New York City and is also a member of the Public Relations committee of the International Trademark Association ("INTA”).  INTA is a not-for-profit association of trademark owners and advisors dedicated to promoting trademarks as essential to world commerce." 

Increasingly, the determination of good or bad faith in a trademark case will take into consideration whether a trademark search was conducted.  Since a finding of bad faith can force the infringer to forfeit the “unjust profits” it earned from using the infringing mark, forgoing a search could prove to be costly.   

Neither the trademark law nor the Patent and Trademark Office require a trademark search before using or filing an application to register a mark.  Nonetheless, the courts have consistently held that relying on competent counsel’s review of a trademark search is an indicia of good faith, even if the mark is ultimately found to be infringing.  Turning this issue around, the Second Circuit Court of Appeals in New York in 1996 delivered a clear warning to trademark owners by suggesting that a party’s failure to conduct a trademark search could support a finding that its mark was adopted in bad faith.  

            The case involved Tommy Hilfiger U.S.A.’s selection of the mark STAR CLASS for a clothing line.  STAR CLASS had long been used as a trademark by the International Star Class Yacht Racing Association (“ISCYRA”).  Since the ISCYRA had not registered STAR CLASS, this mark did not surface in the knock-out search of the Trademark Office records by Hilfiger’s attorney.  Hilfiger declined the attorney’s recommendation that a wider search be conducted. 

The ISCYRA sued Hilfiger and the District Court issued a permanent injunction against Hilfiger’s use of “STAR CLASS”.  On appeal, the issue that generated the most interest was whether Hilfiger’s failure to heed its lawyer’s advice and obtain a full trademark search for STAR CLASS could be regarded as bad faith.  The Court’s language left little doubt that it strongly disapproved of Hilfiger’s actions: 

Given Hilfiger’s awareness that it was copying “authentic details…from the sport of competitive sailing,” it should have shown greater concern for the possibility that it was infringing on another’s mark.  Hilfiger’s choice not to perform a full search under these circumstances reminds us of two of the famous trio of monkeys who, by covering their eyes and ears, neither saw nor heard any evil.  Such willful ignorance should not provide a means by which Hilfiger can evade its obligations under trademark law. 

International Star Class Yacht Racing v. Tommy Hilfiger U.S.A., 80 F.3d 749, 753-754 (2d Cir. 1996). 

On remand, the District Court found that the standard industry practice was to conduct only knock-out searches – comprehensive searches were reserved for marks under serious consideration for registration.  On the subsequent appeal, the Court of Appeals was still not satisfied that the District Court’s opinion accurately reflected the industry practice concerning searches and remanded the case yet again to allow the ISCYRA the opportunity to present evidence as to the industry practice.  The district court still refused to find bad faith because:

            - the prominent use of the “Tommy Hilfiger” name on the garments, and not the words “Star Class” drove the sales of Hilfiger’s goods;

            - there was no showing that Hilfiger willfully intended to cause confusion or deception or to profit from the ISCYRA’s reputation, or that he had any knowledge of the STAR CLASS mark;

            - Hilfiger intended to use STAR CLASS as a decoration;

            - STAR CLASS is a weak mark;

        - under the customary practice in 1994, there was no need for a more extensive search. 

International Star Class Yacht Racing v. Tommy Hilfiger U.S.A., 1999 U.S. Dist. Lexis 2147 (S.D.N.Y. 1999). 

Although the Court of Appeals was still not fully satisfied, it nonetheless affirmed the District Court’s finding that Hilfiger did not act in bad faith. International Star Class Yacht Racing v. Tommy Hilfiger U.S.A., 205 F.3d 1323 (2d Cir. 2000). (The opinion is reported at 2000 U.S. App. Lexis 660.) 

Presented with two opportunities subsequent to the Hilfiger case, the Second Circuit declined to extend its suggestion of bad faith into a legal principle.  The first involved Prime Hospitality Corp.’s selection of “Sports Authority Food, Spirits & Sports” as the name of a chain of restaurants without conducting either a Trademark Office scan or a full search.  Sports Authority, Inc. sued for infringement based on its SPORTS AUTHORITY mark.  The Court, while noting that “there is little evidence of good faith on the part of Prime,” ultimately concluded that the failure to search did “not conclusively point to a finding of either good or bad faith.” Sports Authority Inc. v Prime Hospitality Corp., 89 F.3d 955, 964 (2d Cir. 1996).  In Streetwise Maps, Inc. v. VanDam, Inc., 159 F.3d 739, 746 (2d Cir. 1998), the Court simply stated that the defendants’ failure to perform a search did not, standing alone, prove that they acted in bad faith. 

Other courts have been less ambivalent. 

            •  The 11th Circuit Court of Appeals labeled the failure to search “intentional blindness” and a factor to be considered in the evaluation of bad faith.  Frehling Enterprises, Inc. v. International Select Group, Inc., 192 F.3d 1330, 1340 (11th Cir. 1999), cert. denied 530 U.S. 1214 (2000).    

            •  In Maryland, the district court found that the defendant acted in “blind disregard of the peril it faced” by ignoring its attorney’s recommendation that a search be obtained.  This “willful disregard unquestionably bears on the question of an infringer’s bad faith.” A.C. Legg Packing Co. v. Olde Plantation Spice Co., 61 F.Supp.2d 426, 431-432 (D. Md. 1999).   

            •  In Virginia, the court branded the failure to search as “willful ignorance.”  The Teaching Company Limited Partnership v. Unapix Entertainment, Inc., 87 F.Supp.2d 567, 590 (E.D. Va. 2000).   

            • Even New York courts have interpreted Hilfiger to stand for the proposition that a failure to conduct a trademark search, especially when counsel advises otherwise, indicates bad faith (Something Old, Something New Inc. v. QVC Inc., 53 USPQ2d 1715, 1722 (S.D.N.Y. 1999)) and that failing to undertake the “very obvious and simple precaution” of a trademark search is relevant to the issue of good faith.  First Jewelry Co. of Canada v. Internet Shopping Network, 53 USPQ2d 1839, 1843 (S.D.N.Y. 2000). 

On the other hand, to the Third Circuit Court of Appeals, the failure to search was no more than “careless” and not sufficiently egregious to warrant a finding of bad faith. SecuraComm Consulting Inc. v. Securacom Inc., 166 F.3d 182, 188-189 (3d Cir. 1999).   

In what direction is the law moving?  There are a number of reputable firms that can produce a full trademark search report in as few as 24 hours.  In addition, the Internet stores a wealth of potentially valuable references to companies and brands.  With the ease of accessing information, it is likely that more and more courts will find that an accused infringer’s failure to conduct an appropriate investigation of its proposed mark is a criterion of bad faith.


JurisNotes.Com - The Law in Brief
Copyright ©  JurisNotes.Com