Nominative fair use in the Seventh Circuit: a practical tool

Data Mgmt. Ass’n Int’l v. Enterprise Warehousing Solutions,
Inc., 2020 WL 7698368, No. 20 C 04711 (N.D. Ill Dec. 28, 2020)

Without resolving burden of proof issues, the court uses nominative fair use to quickly resolve a case where fair competition requires some use of the mark, but not as much as the defendant made.

DAMA-I, which runs a standardized data management
certification program whose exam is called the Data Management Fundamentals
Exam, sued EWS, which offers prep courses for the exam, for trademark
infringement. It sought an injunction against EWS’s use of any of its marks,
including suspension of EWS’s website, The court granted a
limited injunction against the use of the domain name and the use of “stylized
trademarks and graphics that resemble those marks.” But EWS “may continue to
use DAMA-I’s marks on a limited basis to describe its exam preparation course,
consistent with nominative fair use.”

DAMA-I has incontestable registrations for “CERTIFIED DATA
DAMA mark.

EWS’s allegedly infringing use includes referring to its
prep course as the “DAMA CDMP® Data Management Fundamentals exam preparation
course” and using DAMA-I’s marks, including its stylized mark, throughout the website.

Although the Seventh Circuit hasn’t formally adopted NFU,
the district court thought it was the right approach here. As the court pointed
out, the traditional multifactor test was ill-suited for this particular type
of inquiry: “EWS must use DAMA-I’s marks to describe its product—a product that
DAMA-I does not itself offer— making factors like the ‘similarity of the marks,’
the ‘strength of the plaintiff’s mark,’ the ‘relatedness of the products’ and
the ‘defendant’s intent to “palm off” its product as the plaintiff’s’

Is the product readily identifiable without the use of the mark?
DAMA-I argued that EWS has “no need to use any of the Marks” because the
official name of the test—the “Data Management Fundamentals Exam” —was not “trademarked.”

DAMA-I does not contend that the
official name of the exam is so widely known that use of the marks is redundant
or gratuitous, just that such use is technically avoidable. That the name of
the exam is not itself trademarked, however, suggests just the opposite—that
the name of the exam itself is not widely recognized independent of a connection
with DAMA-I’s registered marks. And if EWS were only allowed to use the exam’s
official name, lack of consumer awareness about that name would significantly
hinder EWS’s ability to reach its target audience. EWS’s prep course is
exclusively tailored to DAMA-I’s test, which individuals take in the hopes of
achieving DAMA-I’s CDMP certification, so using the marks at issue is the “most
straightforward, obvious and truthful way” for EWS to describe its product.

However, “EWS’s admittedly ‘liberal’ use of the marks, and
particularly its use of the domain name, go well beyond what could
reasonably be considered necessary to identify the exam to which its prep
course relates.” As the Ninth Circuit’s Tabari case indicates, unadorned
use of a mark (here, two marks together) in a domain name is often going to
suggest sponsorship or endorsement.  

And EWS’s use of the marks throughout its website “similarly
goes well beyond what is needed to make its advertisements intelligible to its target
audience and falsely creates the impression that DAMA-I officially sponsors its
prep course.” The marks “DAMA” and “CDMP” were used over twenty times on the
website’s landing page alone, and EWS also used a graphic that combines the
globe-like background of DAMA-I’s stylized trademark with the term “Certified
Data Management Professional” superimposed.

[W]hile EWS repeatedly warns
customers that they are purchasing only a prep course, and not the actual exam,
through disclaimers at the point of sale and throughout the website, it does
not go to similar lengths to dispel the potential (and understandable)
impression that DAMA-I sponsors the prep course offered at the
URL. Weighed against the totality of the domain name and repeated references to
DAMA-I, the logo at the top left and the confusingly worded
disclaimer at the bottom left of the website are relatively easily overlooked
and ineffective even if noticed.

The court applied a presumption of irreparable harm (now rebuttably
presumed due to the recently signed COVID relief law, though not when the court
was considering the issue). DAMA-I argued that, because it was not involved in
the development of EWS’s prep course curriculum, it “cannot vouch for the
quality or comprehensiveness of the course.” While “[i]t takes quite a leap to
conclude that DAMA-I will inevitably be scapegoated for a hypothetical test
taker’s disappointing performance,” the court was willing to make that leap
because inability to control the nature and quality of defendant’s goods is
inherently irreparable. [I have never seen why that is true if there is no
evidence that the defendant’s goods are actually bad—a risk is not itself the
materialization of that risk. But I guess that won’t matter much going
forward.] The court was unimpressed by DAMA-I’s alleged delay in seeking
relief, unwillingness to negotiate, or inability to approximate damages, which
itself suggested irreparable harm. “To be sure, DAMA-I could approximate its
monetary losses related to EWS’s unauthorized use of its marks using the
licensing fees paid by the authorized users referenced at oral argument. But
this type of calculation would only capture one facet of DAMA-I’s injury.” The
value of lost control can’t be reduced to dollars.

Likewise, “the onus on avoiding trademark infringement falls
on EWS, and DAMA-I has no obligation to negotiate with EWS about what
constitutes an acceptable use of DAMA-I’s marks.” DAMA-I could well have
avoided unnecessary litigation costs and months of alleged consumer confusion
if it had been more receptive to EWS’s offers to modify its use of DAMA-I’s
marks on its web site, but that isn’t the standard for irreparable harm, and
EWS could have offered more to DAMA-I.

And the delay here didn’t lull EWS into a false sense of
security. There were threat letters, and in light of the ongoing pandemic, “it
is understandable that a lawsuit did not immediately follow; when DAMA-I did
file its complaint, it also filed its motion for a preliminary injunction.”

But the scope of the resulting injunction was key, since a trademark
injunction, “particularly one involving nominative fair use, can raise serious
First Amendment concerns because it can interfere with truthful communication
between buyers and sellers in the marketplace.” A blanket injunction like the
one DAMA-I requested here “does not advance the Lanham Act’s purpose of
protecting consumers and preventing unfair competition.”

The court instead ordered EWS to suspend operations “at” its
current domain name [can it redirect? That seems like an important question];
prohibited its use of DAMA-I’s stylized marks or confusingly similar graphics;
and ordered EWS to “reduce” its use of the other marks: it can’t use any of the
text marks “more than five times on any web page or two times in any social
media or print advertisement, such restrictions exclusive of the use of any of
DAMA-I’s marks that may appear in quoted customer testimonials.” Though “the
proper remedy for infringing use of a mark on a site generally falls short of
entirely prohibiting use of the site’s domain name,” “EWS cannot legitimately
claim nominative fair use of a URL that is comprised solely of two of DAMA-I’s
incontestable marks, and it will not be disproportionately harmed by migrating
its operations to a different URL.”

Of note: there’s no real confusion analysis of the “five times/two times” rule; it seems to be what the court thinks is fair under the circumstances. 

from Blogger

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