We Always Beat X's prices: A Look at Nominative Fair Use in the Fifth Circuit
As a trademark lawyer, I'm always on the lookout for real-world examples that illustrate trademark concepts. Recently, while driving along the highway, I spotted a sign that caught my eye. The sign, belonging to a retail business, touted: "We always beat X's prices by at least $500." What made this sign particularly intriguing was its use of a competitor's name and logo—let's call the competitor "X."
With these facts in mind, I would like to explore the concept of nominative fair use in trademark law, particularly as it is applied in the Fifth Circuit.
Understanding Nominative Fair Use
Nominative fair use is a doctrine in trademark law that allows a party to use another's trademark to refer to the trademark owner's goods or services. This concept originated in the Ninth Circuit with the New Kids on the Block case but has since been adopted by other circuits, including the Fifth Circuit (albeit subject to a different analysis). See New Kids on the Block v. News America Publishing, Inc., 971 F.2d 302 (9th Cir. 1992).
The doctrine is distinct from classic fair use. While classic fair use involves using a term in its descriptive sense, nominative fair use involves using a mark to refer to the actual trademarked product or service.
Nominative Fair Use in the Fifth Circuit
The Fifth Circuit was among the first circuits to adopt the nominative fair use doctrine after its inception in the Ninth Circuit. See Pebble Beach Co. v. Tour 18 I Ltd., 155 F.3d 526, 546 (5th Cir. 1998). In Pebble Beach Co., the Fifth Circuit established its own test for nominative fair use, drawing from the Ninth Circuit's approach but with some key differences.
According to Pebble Beach, for a use to qualify as nominative fair use:
The defendant may only use so much of the mark as necessary to identify the product or service.
The defendant may not do anything that suggests affiliation, sponsorship, or endorsement by the markholder.
Importantly, the Fifth Circuit's approach differs from some other circuits in that it doesn't treat nominative fair use as a separate defense. Instead, these factors are considered in conjunction with the traditional likelihood of confusion analysis.
Applying the Doctrine to the Highway Sign
Let's consider the highway sign in light of these factors:
Necessity of use: The business is using X's name and logo to identify X's prices, which they claim to beat. This could be seen as necessary to make the price comparison. However, the business used “X’s” logo, which some courts hold to be excessive when words alone would have sufficed.
Suggestion of affiliation: The business likely satisfies this requirement. “We always beat X's prices . . . ” indicates X and the business are competitors. It is difficult to imagine customers would perceive this language as suggesting affiliation, sponsorship, or endorsement.
Moreover, the Pebble Beach decision states that "by definition, the defendant cannot use the mark to identify its goods because this would not be a nominative use." Id. at 546. The highway sign business isn't using X's mark to identify X's products, but rather to make a comparison with its own offerings.
Likelihood of Confusion Analysis
In the Fifth Circuit, these nominative fair use factors would be considered alongside the circuit's traditional likelihood of confusion factors. The court would likely consider elements such as the similarity of the marks, the similarity of the goods/services, whether there is evidence of actual confusion, the defendant's intent, and the degree of care exercised by potential customers.
The use of X's actual logo, rather than just the name, could increase the likelihood of confusion. However, the comparative nature of the advertisement might mitigate this risk.
Potential Outcomes and Considerations
The legality of the highway sign would ultimately depend on a careful balancing of these factors. While the price comparison itself might be considered necessary, the use of X's logo could be seen as overstepping.
Businesses engaging in comparative advertising should be cautious about using competitors' logos, as this could tip the scales against a finding of nominative fair use. Using the competitor's name in plain text might be a safer approach.
Additionally, a different conclusion might be reached in other parts of the country, where different circuits analyze nominative fair use differently.
Conclusion
The concept of nominative fair use in the Fifth Circuit provides a nuanced framework for evaluating the use of others' trademarks in comparative advertising. While it allows for legitimate referential use, it sets clear boundaries to prevent consumer confusion and unauthorized implications of affiliation.
As trademark law continues to evolve, businesses should stay informed about these concepts to navigate the fine line between effective marketing and trademark infringement. Whether you're a business owner crafting a new advertisement or a fellow trademark enthusiast, I hope this real-world example sheds some light on the complexities of nominative fair use in the Fifth Circuit.
Have you encountered similar advertisements in your area? How do you think they would fare under this legal analysis? I would love to hear your thoughts and experiences in the comments below. If you would like to discuss your advertising with an experienced trademark attorney, please schedule a consultation here.
