Idea Transcript
The Long Road to Resolving Conflicts Between Trademarks and Geographical Indications Burkhart Goebel and Manuela Groeschl The New Chinese Trademark Law 中国新商标法 Paul Kossof Trademark Licensing: The Once and Future Narrative Neil Wilkof Commentary: Judge Richard Posner and Consumer Surveys Jerre B. Swann Commentary: Let’s Kill the “Naked License” Defense Pamela S. Chestek
July–August, 2014
Vol. 104 No. 4
918
Vol. 104 TMR
COMMENTARY JUDGE RICHARD POSNER AND CONSUMER SURVEYS By Jerre B. Swann ∗ Judge Richard Posner is a giant in recognizing the informational value of trademarks. In the 100th Anniversary edition of The Trademark Reporter, I cited the reprinting of “The Economics of Trademark Law,” 1 Judge Posner’s seminal article co-authored with Professor William Landes, as one of the highlights of my twoyear stint as editor of that journal. 2 In his recent opinion in Kraft Foods Group Brands LLC v. Cracker Barrel Old Country Store, Inc., 3 he again exhibits his prowess by expertly analyzing from an economic standpoint the potentially negative impact on the Cracker Barrel brand for cheese if Cracker Barrel Old Country Store (CBOCS) moved from its restaurant shop locations into mainstream grocery stores with CBOCS hams. 4 ∗ Counsel, Kilpatrick, Townsend & Stockton, LLP, Atlanta, Georgia, Associate Member, International Trademark Association; former Editor-in-Chief of The Trademark Reporter. 1. 78 TMR 267 (1988). 2. 101 TMR 23 (2011). 3. 735 F.3d 735 (7th Cir. 2013). 4. Id. at 739: A trademark’s value is the saving in search costs made possible by the information that the trademark conveys about the quality of the trademark owner’s brand. The brand’s reputation for quality depends on the owner’s expenditures on product quality and quality control, service, advertising, and so on. Once the reputation is created, the firm will obtain greater profits because repeat purchases and word-of-mouth endorsements will add to sales and because consumers will be willing to pay a higher price in exchange for a savings in search costs and an assurance of consistent quality. These benefits depend on the firm’s ability to maintain consistent quality. When a brand’s quality is inconsistent, consumers learn that the trademark does not enable them to predict their future consumption experiences from their past ones. The trademark does not reduce their search costs. They become unwilling to pay more for the branded . . . good. . . . The particular danger for Kraft of CBOCS’s being allowed to sell food products through the same outlets under a trade name confusingly similar to Kraft’s “Cracker Barrel” is that if CBOCS’s products are inferior in any respect to what the consumer expects—if a consumer has a bad experience with a CBOCS product and blames Kraft, thinking it the producer—Kraft’s sales of Cracker Barrel cheeses are likely to decline; for a consumer who thinks Kraft makes bad hams may decide it probably makes bad cheese as well. Judge Posner’s focus on “quality” is reminiscent of Frank I. Schechter’s early twentieth century selling power construct in The Rational Basis of Trademark Protection, 40 Harv. L. Rev. 813, 818 (1927) (“The true functions of the trademark are to identify a product as
Vol. 104 TMR
919
In dicta, however, Judge Posner gratuitously offers as to a traditional Eveready survey (reflecting that approximately 25 percent of respondents believed that the company that put out CBOCS hams also put out cheese): Consumer surveys conducted by party-hired expert witnesses are prone to bias. There is such a wide choice of survey designs, none fool-proof, involving such issues as . . . [the] phrasing of questions in a way that is intended to elicit the surveyor’s desired response . . . from the survey respondents. 5 Judge Posner, historically, has referred to consumer surveys as “black art[ ]. . . .” 6 Judge Posner’s comments do not reflect the extensive cognitive underpinnings of survey research or the history and evolution of survey science. He ignores, inter alia, that: 1. Plaintiff’s expert in Kraft adopted an improved version (adding a control cell) of the survey design endorsed by the Seventh Circuit in Union Carbide Corp. v. Ever-Ready, Inc. 7— the genesis of the Eveready format. 8 2. The original Eveready format is particularly appropriate where the source of a top of mind senior mark may (for some consumers) be anonymous and the product categories are somewhat different. 9 3. The Eveready format has been repeatedly approved by federal courts and the trademark office as the gold standard for top of mind marks. 10 satisfactory and thereby stimulate further purchases by the consuming public.”). The source/quality brands of that era no longer meet consumer needs, and the selling power of today’s brands is their broader signal of a total “experience.” Jerre B. Swann, The Evolution of Dilution in the United States from 1927 to 2013, 103 TMR 721, 749-56 (2013). 5. Id. at 741 (emphasis in the original). Judge Posner also referred to “sample selection and size [and the] presentation of the allegedly confusing products to the consumers involved in the survey,” but in my experience, such issues are routinely resolved by the courts. E.g., as to distorted stimuli, see Scotts Co. v. United Indus. Corp., 315 F.3d 264, 276-81 (4th Cir. 2002); Waddington N. Am. Bus. Trust v. EMI Plastics, Inc., 2002 U.S. Dist. LEXIS 16634, *22-25 (E.D.N.Y. 2002); Learning Network, Inc. v. Discovery Commc’ns, Inc., 153 F. Supp. 2d 785 (D. Md. 2001). 6. Indianapolis Colts v. Metro. Baltimore Football, 34 F.3d 410, 416 (7th Cir. 1994). 7. 531 F.2d 366, 385-88 (7th Cir. 1976). 8. The format is set forth and discussed in my chapter, Likelihood of Confusion, in Trademark and Deceptive Advertising Surveys 56-64 (Shari Seidman Diamond & Jerre B. Swann eds., 2012). 9. When asked, e.g., who put out an “Ever-Ready” labeled lamp, only .6 percent of respondents said Union Carbide; 54.6 percent answered, however, that the same company that put out Ever-Ready lamps also put out batteries. Union Carbide, 531 F.2d at 386. 10. 6 J. Thomas McCarthy, Trademarks and Unfair Competition § 32:175 (4th ed. 2008). For a sampling of cases since 2009, see Bobrick Washroom Equip., Inc. v. Am. Specialties, Inc., 2012 U.S. Dist. LEXIS 111465, *48-51 (C.D. Cal. 2012); Water Pik, Inc. v. Med-Sys., Inc., 2012 U.S. Dist. LEXIS 1374, *5-7, 11-13, 19-23 (D. Colo. 2012); The Gap, Inc. v. G.A.P. Adventures Inc., 2011 U.S. Dist. LEXIS 71675, *20-21, *23-26 (S.D.N.Y. 2011); General Motors Co. v. Urban Gorilla, LLC, 2010 U.D. Dist. LEXIS 136711, *53-55, *57 (D.
920
Vol. 104 TMR a. The format is firmly grounded in cognitive psychology; 11 it has been repeatedly tested and peer reviewed; with control cell methodology, it has a known error rate; and it has been generally accepted in the scientific community. 12
Utah 2010); Fiji Water Co., LLC v. Fiji Mineral Water USA, LLC, 2010 U.S. Dist. LEXIS 109155, *30-33 (C.D. Cal. 2010); Re/Max Int’l, Inc. v. Trendsetter Realty, LLC, 2009 U.S. Dist. LEXIS 79356, *50-52, *55-58 (S.D. Tex. 2009); Clinique Labs. LLC v. Absolute Dental, LLC, 2011 T.T.A.B. LEXIS 161, *32-39 (T.T.A.B. 2011). 11. To summarize my oral remarks with respect to the Eveready format at the Practicing Law Institute (PLI)’s Advanced Trademark Law Annual Review 2014: 1. For a likelihood of confusion to arise, there must be appreciable opportunities for a comparison of the senior and junior brands; 2. For top of mind marks that are easily accessible in memory, the comparison can take place in the mind: a. Top of mind marks exist in memory as elaborate schemas (“clusters” of information) with source identifying (reputational) nodes at their center, strongly linked to products or services in connection with which they are used and also linked to multiple associations engrafted by advertising, word of mouth or experience; a highly simplified schema of the adidas mark is as follows: team focus; team sponsor high quality
adidas, three stripes
Olympics sponsor
athletic shoes and wear soccer
$100 price point b. “The[se] cognitive networks in one’s memory . . . play a fundamental and often decisive role in interpreting incoming information from the outside world.” Wayne D. Hoyer & Deborah J. MacInnis, Consumer Behavior 102, 115-16 (3d ed. 2004). c. Survey respondents, shown the junior mark and asked “who makes or puts this out” search their memory and identify the stimulus “based on its similarity to what [they] already know.” Id. d. “When stimulus information offers a sufficient match to a [brand] schema possessed by the perceiver, the schema is called up from memory and used . . . to guide inferences,” Carlston & Smith, Principles of Mental Representation, in Social Psychology: Handbook of Basic Principles 196 (E. Tory Higgins & Arie W. Kruglanski eds. 2007)—a process known as “pattern matching.” Jacob Jacoby, The Psychological Foundations of Trademark Law, 91 TMR 1013, 1035, 1037 (2001). e. “Reviews of ‘why do you say that’ answers typically reveal that senior mark responses to the ‘who makes or puts out’ question have occurred because (a) ‘stored knowledge’ of a senior mark is ‘accessible’ in a respondent’s memory, and (b) there is a ‘fit between the stored knowledge and the [junior stimulus’”—that pattern matching has occurred]. Jerre B. Swann, Likelihood of Confusion Studies and the Straightened Scope of Squirt, 98 TMR 739, 746 (2008) (quoting E. Tory Higgins, Knowledge Activation: Accessibility, Applicability and Salience in Higgins & Kruglanski, Handbook 135 (1996)). Condensed from Jerre B. Swann, Likelihood of Confusion Surveys, in PLI’s Intellectual Property Course Handbook Series No. G-1176 (2014). 12. See Swann, Likelihood of Confusion, supra note 8, at 62-64.
Vol. 104 TMR
921
b. Because there is so much law, an Eveready design is less subject to expert manipulation than is other scientific evidence 13 (and none was evident here); 4. Contrary, therefore, to Judge Posner’s observations, there is a narrow choice of likelihood of confusion survey formats for top of mind marks; 14 for such marks, Eveready is as foolproof as a survey format can be; the questions in Kraft were phrased as they have been for almost 40 years; and there was no showing of bias. Even the most cursory research would have revealed, therefore, that Judge Posner’s opening remarks as to the Kraft survey are too broad. As recently as 2007, I successfully argued before the Seventh Circuit that an Eveready format not only suggested a twenty-seven percent confusion rate, but also demonstrated relevant “pattern matching” 15 between defendant’s “Hogs on the High Seas” and plaintiff’s HOG acronym for Harley Owners Group—that is, that the reported confusion was directly relevant to the issues on appeal. 16 Nonetheless, compounding his error, Judge Posner immediately followed his “bias” and “manipulation-of-thequestions” concerns with the observation that: [the survey expert] asked whether the company that makes the ham also makes other products—and if so what products. About a quarter of the respondents said cheese. It is difficult to know what to make of this. The respondents may have assumed that a company with a logo that does not specify a particular product doesn’t make just sliced spiral ham. So now they have to guess what else such a company would make. Well, maybe cheese. 17 Judge Posner gives insufficient weight to controls. Here, the Kraft expert used Smithfield hams as the stimulus in a separate cell, and eliminated any concern that respondents in the test cell might simply have guessed that a ham company also sold cheese. 13. See, e.g., Smith v. Wal-Mart Stores, Inc., 537 F. Supp. 2d 1302, 1331-32 (N.D. Ga. 2008) (whereas the question in Union Carbide, “who do you think puts out [this] lamp?,” was neutral, Wal-Mart’s expert changed the wording to “which company or store puts out [the Wal*ocaust t-shirt], and the Court properly found that the altered question “improperly led respondents to limit their answers to companies or stores”); see also McNeil-PPC, Inc. v. Merisant Co., 2004 U.S. Dist. LEXIS 2773, *59-60 (D.P.R. 2004) (as to an even more convoluted “who puts out” question, the expert “testified that he was guided by the . . . survey in Eveready. . .[, but the Court noted that t]he actual question asked in Eveready was much simpler. . .. The differences . . . are material, and likely influenced responses.”). 14. As reflected in note 13, supra, experts (looking for an advantage) occasionally vary wording, but such efforts as to the Eveready format are generally unavailing. 15. See supra note 11, ¶ 2.d.-e. 16. H-D Michigan, Inc. v. Top Quality Serv., Inc., 496 F.3d 755, 758 (7th Cir. 2007). 17. Kraft, 735 F.3d at 742.
922
Vol. 104 TMR
Judge Posner did acknowledge that, from the control, it was “plausible” that “the name ‘Cracker Barrel’ on the ham . . . had triggered [respondents’] recollection of Cracker Barrel cheese, rather than the word ‘ham’ being the trigger,” but he then inexplicably questioned the “relevance” of that inference: Kraft’s concern is not that people will think that Cracker Barrel cheeses are made by CBOCS but that they will think that CBOCS ham is made by Kraft, in which event if they have a bad experience with the ham they’ll blame Kraft. 18 As a matter of trademark law, Kraft would be concerned with any perceived “affiliation” by consumers between Cracker Barrel cheese and CBOCS ham 19 that might divest Kraft of its sole control as to the reputation of Cracker Barrel cheese (just as Union Carbide was concerned with any linkage between Ever-Ready lamps and Eveready batteries). Judge Posner saved, however, his perhaps most confounding remarks for his suggested “attractive alternative” to survey evidence: in some [stores, absent the preliminary injunction entered in the case,] Kraft Cracker Barrel cheese would have been displayed side by side with CBOCS hams . . . while in other stores the cheeses and the hams would have been displayed in different areas of the store, and still other grocery stores would have carried CBOCS hams but not Kraft Cracker Barrel cheese. By examining the “lift” (greater sales) if any that CBOCS hams obtain by proximity to the Kraft Cracker Barrel label, an expert witness might be able to estimate the extent of consumer confusion. 20 Judge Posner errs in two respects: (a) legally, he appears to be seeking evidence of actual confusion (or the impact of such confusion) in the context of a likelihood of confusion statute that recognizes the difficulty of proving actual damages; and (b) cognitively, since Cracker Barrel for cheese is for many consumers a top of mind brand, it would frequently exist in mental proximity with CBOCS hams, 21 wherever they are encountered, making it effectively impossible to ascertain any additional lift from the physical proximity of the products. Judge Posner would,
18. Id. 19. Section 43(a) of the Lanham Act proscribes conduct that is likely to cause confusion . . . as to [i] affiliation . . ., or as to [ii] origin, [or as to iii] sponsorship, or approval,” and concepts of forward and reverse confusion, initial interest confusion and post-sale confusion further broaden the likelihood of confusion analysis. 20. Kraft, 735 F.3d at 742 (emphasis supplied). 21. See supra note 11.
Vol. 104 TMR
923
in effect, substitute a wholly uncertain and unworkable measure 22 for one with almost forty years of successful application, and there would be no control for market-related reasons for a short-term or seasonal increase in sales having nothing to do with confusion. 23 It is difficult even to speculate why in Kraft Judge Posner ran so strongly against a current initiated and still flowing strongly in his own Circuit. Perhaps he was concerned about the percentage differences reported by the plaintiff’s and the defendant’s experts, but that difference was explained by the latter’s use only of malls in close proximity to a CBOCS restaurant, whereas the hams were to be distributed nationwide. 24 Perhaps he misunderstood the rigor of Kraft’s effort—referring at junctures to “emailed . . . photographs” and “ask[ing questions by] email,” 25 as if the survey was conducted on the unsophisticated level of spam, but while respondents are recruited for an Internet study by email, the study itself—separately accessed via a link provided in the email—can be (and was here) as controlled and structured as a mall intercept or telephone survey26 and has been shown to produce comparable results. 27 Judge Posner thus erred not only as to his questioning of the Eveready format, but he may also have erred in the only respects that I can postulate for his error.
22. See Shari Seidman Diamond & David J. Franklin, Trademark Surveys: An Undulating Path, 92 Texas L. Rev. 2029, 2065 (2014) (Judge Posner’s “hypothetical study would require, among other things, control of sufficient purchasing settings to manipulate placement of products or a purchasing environment that happened naturally to provide at least quasi-random variation in whether the store carried the allegedly infringing product or, if it did, how closely the products were placed in the store. It is hard to imagine that this study could be carried out under appropriately controlled conditions and produce defensible conclusions about the cause of differences or lack of differences between conditions, let alone that it could be conducted in a reasonable period of time.”). 23. In 1993, in criticizing Dr. Hans Zeisel, the father of consumer research for litigation purposes, Judge Posner fully appreciated the need for “control groups,” Free v. Peters, 12 F.3d 700, 706 (7th Cir. 1993); a need that Dr. Zeisel’s disciple and successor, Dr. Shari Seidman Diamond, ably addressed in 1996. Shari Seidman Diamond & Judith N. Levi, Improving Decisions on Death by Revising and Testing Jury Instructions, 79 Judicature 224 (March–April 1996). Judge Posner’s seeming lack of familiarity with controls, both in assessing the work of Kraft’s expert and in crafting his alternative, is thus puzzling. 24. Courts hate dueling experts (see, for example, Dallas Cowboys Football Club, Ltd. v. America’s Team Props., Inc., 616 F. Supp. 2d 622 (N.D. Tex. 2009)), but this problem is not limited, in my experience, to the survey arena and is not a ground for effectively disregarding all survey undertakings. 25. Kraft, 735 F.3d at 742. 26. See Roger Tourangeau & Shari Seidman Diamond, Internet Surveys for Evaluating Trademark Infringement and Deceptive Advertising, in Trademark and Deceptive Advertising Surveys (Shari Seidman Diamond & Jerre B. Swann eds., 2012). 27. See Stephen Ansolabehere & Brian Schaffer, Does Survey Mode Still Matter? Findings from a 1010 Multi-Mode Comparison (2011).