April 28, 2017

The Lanham Act: Trademark Protection and Online Seller Enforcement


Trademark Infringement, False Advertising Among Claims

Trademarks, essentially source identifiers, are extremely valuable to manufacturers and their brands. Therefore, it is critical that manufacturers protect and enforce them.

Since 1946—including several amendments—the Lanham Act has served as the source of trademark (and unfair competition) protection in this country. Codified at U.S.C. §§ 1051 et seq., the Lanham Act prohibits, among other things, trademark infringement, trademark dilution and false advertising.

In 1999, a section covering cybersquatting, also went into effect.

The Lanham Act is crucial to many of the topics discussed on our blog, including the fight against unauthorized sales.

While the Lanham Act provides manufacturers and brands a cause of action for trademark infringement, the First Sale Doctrine defense often stands in the way. However, as discussed in the hyperlinked blog post, there are exceptions.

Specifically, resellers are not immune from trademark liability under the Lanham Act if they offer for sale goods that are not genuine (i.e. “materially different” than those sold by the trademark holder).[1] Manufacturers’ products are not “genuine” if they are not distributed under manufacturer-established quality controls.

It is, therefore, important for manufacturers to adopt policies and procedures that create the potential infringement claims under the Lanham Act.

Lanham Act Liability

The standard for trademark infringement is whether alleged misuse of a mark creates a “likelihood of confusion” among consumers.

In the unauthorized sales context, manufacturers will need to show that third parties are improperly suggesting to consumers that the products they are selling carry the same characteristics and quality controls as the manufacturers’ genuine products.

Beyond unauthorized sales, traffic diversion schemes and other misleading websites can also lead to liability under the Lanham Act. For example, bad actors may find themselves on the hook for misrepresentation of association or false advertising.

We often seen this when companies use others’ trademarks to attract attention to their own websites and products. Many times, website owners or authors will fail to disclose—in a product review, for example—their true affiliations and financial interests.

By virtue of 15 U.S.C. § 1125(a)(1)(A), Congress has declared that:

“[a]ny person who, on or in connection with any goods or services . . . uses . . . any false designation of origin, false or misleading description of fact, or false or misleading representation of fact, which . . . is likely to cause confusion, or to cause mistake, or to deceive as to the affiliation, connection, or association of such person with another person or as to the origin, sponsorship, or approval of his or her goods, services, or commercial activities by another person . . . shall be liable in a civil action by any person who believes that he or she is or is likely to be damaged by such act.”

Thus, when websites or articles mislead consumers about the website and/or author’s affiliation with a manufacturer’s products—specifically, drawing potential consumers in only to advertise other products—they can be liable to the manufacturer for its damages under the Lanham Act.

Moreover, the Lanham Act expressly prohibits “commercial advertising or promotion” that “misrepresents the nature, characteristics, qualities, or geographic origin of his or her or another person’s goods, services, or commercial activities.” See 15 U.S.C. § 1125(a)(1)(B).

Thus, a website owner can be liable for damages to a manufacturer under this statute and potentially under analogous state laws.

Additionally, sellers of counterfeits can be liable under the Lanham Act, including for special damages. Beyond actual damages, ill-gotten profits, potential treble damages and attorneys’ fees, the Lanham Act also provides for statutory damages ($1,000-$200,000 per good).

All in all, manufacturers must work to protect their brands and reputations. They must be mindful of unauthorized sellers or other bad actors who may be violating the Lanham Act.

While not absolutely necessary, for best protection, it is beneficial for manufacturers to register their trademarks and actively enforce them.

[1] Beltronics USA, Inc. v. Midwest Inventory Distrib., LLC, 562 F.3d 1067, 1072 (10th Cir. 2009) (quoting Davidoff & CIE, S.A. v. PLD Int’l Corp., 263 F.3d 1297, 1302 (11th Cir. 2001)).

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