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You Want To Use Someone Else’s Service Mark On Your Goods? Think Twice In The Eleventh Circuit

property_of_your_name_university_t_shirt-300x263I get questions like this: “I know “FedEx” is a registered service mark of a great company that provides delivery services, alright, but I want to use that name on t-shirts – they aren’t a t-shirt company! – and sell them at the fundraiser. That’s okay, right?” Until recently, I might have said yes, depending….

Generally, a trademark serves to identify and distinguish the source and quality of a tangible product, while a service mark functions to identify and distinguish the source and quality of an intangible service. In some jurisdictions (including the Second Circuit), failure to register a service mark also in goods may preclude bringing a successful infringement claim for use of the mark on goods.

An October 2017 ruling from a three-judge panel of the Eleventh Circuit Court of Appeals (which covers Alabama, Florida and Georgia) settled the question, at least for now:  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 — in order to establish the unrestricted validity and scope of the service mark, or to protect against another’s allegedly infringing use of that mark on goods. SeeSavannah College of Art and Design, Inc. [“SCAD”] vs. Sportswear, Inc., d/b/a Prep Sportswear.

You got that?! Wow.

Here’s what happened:

Savannah College of Art & Design, or SCAD, is a private, non-profit college in Georgia, founded in 1978. Although known primarily as an art school, SCAD also fields athletic teams in a variety of sports.

Prep Sportswear is an online retailer of ‘fan” clothing since 2003, selling items like t-shirts, sweatshirts and ball caps through its online portal. When a customer places the order through the merchant portal, Prep Sportswear then imprints the purchased goods with the selected emblem, mascot, or name, “made-to-to order” so to speak, as it maintains no inventory other than the un-logo’d garments. After the customer checks out online, Prep Sportswear ships out the product in a package indicating that it was delivered from a Prep Sportswear facility.

Prep Sportswear sometimes – but not always – licenses the use of the brand from the rights holder. Among the “made to order” items that Prep Sportswear sold was a t-shirt imprinted with the names “SCAD” and “Savannah College of Art & Design.” However, Prep Sportswear forgot to license the use of “SCAD” and “Savannah College of Art & Design” from SCAD.

When SCAD learned of Prep Sportswear’s unlicensed use of the names, it sued for trademark infringement.

The U.S. District Court for the Northern District of Georgia, relying on Crystal Entertainment & Filmworks, Inc. v. Jurado (“Jurado”) – an Eleventh Circuit case involving a dispute over common-law trademark rights to a band name – concluded that SCAD had failed to establish that it had enforceable rights in its existing marks that extended to apparel. SCAD, which validly registered its marks only in connection with the provision of “education services,” did not show that it had used its marks on apparel earlier than Prep Sportswear in order to claim common-law ownership (and priority) over its marks for “goods.” The district court granted summary judgment in favor of Prep Sportswear. (citation omitted).

SCAD appealed and the issue on appeal was whether SCAD had enforceable service mark rights that extend to goods.

Federal trademark law, as codified by the Lanham Act, provides different types of statutory protection: 15 U.S.C. § 1114(1)(a) guards against “infringement,” which is the “reproduction, counterfeit, copy, or colorable imitation of a registered mark,” while 15 U.S.C. § 1125(a) protects against “false designation of origin,” sometimes referred to as “a federal cause of action for unfair competition.” A claim for infringement under §1114(1)(a) lies only for federally-registered marks, while a claim under §1125(a) is broader and may also be based on unregistered (i.e., common-law) marks. (citations omitted).

The Court distinguished Jurado as the controlling case law,

“In Jurado, neither party had a federally-registered trademark, and as a result both sides could only assert common-law trademark rights. That is why priority of use became a critical issue in that case. * * * Because SCAD’s claims revolve around federally-registered marks, Jurado cannot inform our analysis of the infringement claim under § 1114, a provision which requires a federally-registered mark, or under § 1125, a provision which can apply to a federally-registered mark,”

and determined that other Eleventh Circuit precedent prevails:

“One of our older trademark cases, Boston Prof’l Hockey Ass’n, Inc. v. Dallas Cap & Emblem Mfg., Inc. (“Boston Hockey”) controls, as it extends protection for federally-registered service marks to goods. Although Boston Hockey does not explain how or why this is so, it constitutes binding precedent that we are bound to follow.

“Under the district court’s rationale, the infringement claim under § 1114 necessarily failed because the limited federal registrations for “education services” meant that SCAD did not have rights as to “goods,” and SCAD did not provide evidence showing that it used its marks on apparel before Sportswear.

Boston Hockey, though in our view lacking critical analysis, implicitly but necessarily supports the proposition that 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—in order to establish the unrestricted validity and scope of the service mark, or to protect against another’s allegedly infringing use of that mark on goods. On remand, the district court will have to review SCAD’s claims under § 1114 and § 1125 in light of Boston Hockey.”

While recognizing the binding precedent of Boston Hockey, the Court grappled with the fact that “Boston Hockey does not provide any basis for extending service mark rights to goods.”

First, the Court noted that other circuits have held that service marks do not by their nature extend to goods or products. (citations omitted).

Second, a right in a mark is not a “right in gross” – i.e., there is no property interest in a service mark apart from the business or trade in connection with which it is employed; Boston Hockey seems to provide the holder of a service mark with a form of monopolistic protection, a so-called “independent right to exclude,” although the Lanham Act and its legislative history fails to show congressional intent to bestow such broad property rights on trademark owners. (citations omitted).

And third, it is well-settled that trademark (and service mark) rights are derived through use, and the Eleventh Circuit had not critically analyzed whether the procedural advantages of a mark’s registration can serve as a basis for expanding the scope of service mark protection to a tangible good or product. (citations omitted).

The Court expressed its conundrum:

“We recognize that, as to federally-registered trademarks, we have not limited protection to the actual product or products listed in the certificate of registration. ‘The remedies of the owner of a registered trademark,’ we have held, ‘are not limited to the goods specified in the certificate, but extend to any goods on which the use of an infringing mark is ‘likely to cause confusion.’” * * * Yet extending the scope of a registered trademark (which identifies “goods”) to a different product appears to be qualitatively different from extending the scope of a registered service mark (which identifies “services”) to a different category of “goods.

“There may be a sound doctrinal basis for what Boston Hockey did. But unless the concept of confusion completely swallows the antecedent question of the scope of a registered mark, we have yet to hear of it.

“On some level, we understand that allowing a party to “take a free ride on another’s registered trademark,” simply feels wrong. Trademark rights, however, do “not confer a right to prohibit the use of [a] word or words” generally and exist “to protect the owner’s good will against the sale of another’s product as his.” (citations omitted).

And this rather harsh conclusion:

“If Boston Hockey did not exist, the district court’s rationale might provide a reasonable way of analyzing the alleged infringement of registered service marks through their use on goods. But Boston Hockey is in the books, and it compels reversal of summary judgment in favor of Sportswear. Although there may be “error in [that] precedent, * * *  we do not have the authority, as a later panel, to disregard it. The case is remanded to the district court for further proceedings consistent with this opinion.” (citation omitted).

The take-away? At least in the Eleventh Circuit, reconsider before appropriating another’s registered service mark as a trademark in unrelated goods. And by the way: FedEx has covered itself by registering a trademark in the FedEx Collection, catalog services featuring promotional items, namely, shirts, hats, caps, jackets, pens, cups, trucks, airplanes, scarfs, key chains and umbrellas.