Trademark Infringement Kis v Foto Fantasy Kis v

Trademark Infringement Kis v. Foto Fantasy

Kis v. Foto Fantasy Background n Kis and Foto Fantasy are manufacturers that compete in the mall photo booth market. n Foto Fantasy’s booths (a. k. a. “Portrait Studios”) produce sketch images, not photographs. They can sketch the user or a photograph scanned into the machine. – Kis’s booths produce photos, not sketches. n On the exterior of the Portrait Studios there are sketch images of celebrities (Tom Cruise, Marilyn Monroe, Bill Clinton) and non-celebrities. There is also a sign: “SCAN IN YOUR FAVORITE CELEBRITIES”.

Kis v. Foto Fantasy Case Result n Kis sues Foto Fantasy for false endorsement (Lanham Act 15 U. S. C. A. § 1125) and attempted monopolization (Sherman Act) in 2001. n In a bench trial, the Court dismisses both claims: – Plaintiff lacked standing for a Lanham act claim. n Even with standing, failed to meet the burden of proof. – There were insufficient facts to support an antitrust claim under the Sherman Act. n Affirmed by the 5 th Circuit. Supreme Court denied certiorari.

Court’s Findings Lanham Act Claim n Plaintiff’s evidence was a survey done by Dr. Daniel Howard. n Court dismissed claim due to standing. The evidence failed to show: – – – n Direct injury Lost profits (damages) Low risk of duplicative damages Even if the plaintiff had standing, plaintiff did not satisfy the burden of proof. Failed to show: – Likely consumer confusion regarding the celebrities’s association with the Portrait Studios.

Dr. Daniel Howard n Professor at SMU. n Areas of expertise: – – n Consumer behavior Advertising Marketing research Retail marketing Produced a survey to support plaintiff’s false endorsement claim. – Wanted a survey to determine amount of actual confusion

Howard’s Survey Pretest n Downloaded Foto Fantasy’s statement of demographics. Then spent three days observing users and potential users of a Portrait Studio located in Grapevine Mills Mall, Texas. – 30 used another 120 showed interest – Decided that the demographic statement was about accurate. n Divided a sample of people found at the SMU student center into two groups —adults ages 18 -42 and adolescents ages 13 -17. n Defendant argues that the sample was inaccurate because it was mostly white (Anglo), not randomly selected, lacked ethnic, economic, and geographic diversity. – Both groups believe endorsement means a business relationship or reception of money. – Both groups agreed (in slightly different proportions) to two statements. – He concludes that ‘endorses or approves’ is indicative of a favorable opinion and an existing business relationship. n Court says that the pretest has serious methodological issues, but since it is of marginal relevance to the case, it does not need to be stricken.

Howard’s Survey Field Study n Conducted at North. Park Mall, an upscale shopping mall in north Dallas. – He selected 224 customers that matched the demographic list and his observations at Grapevine Mills Mall. – He randomly divided the consumers into either an experimental or control group. – Each group received two packets with survey material. The only difference between the packets was the inclusion of an identified Tom Cruise sketch. n n But, might be swayed by the quality of the sketch—regardless of who it was. Howard concludes that the Tom Cruise sketch captured the consumers’ attention and made consumers more likely to purchase portraits. – Also concludes that ½ people believe Cruise ‘endorses or approves’ of Portrait Studios.

Defendant’s Criticism Howard’s Field Study – Not a proper survey universe: n n Did not mirror actual consumers. Point to Amstar Corp. v. Domino’s and Jaret International, Inc. v. Promotion in Motion. – Court: cases are not applicable. – Leading questions resulted in a “demand effect” that skewed the data. – Court: control group takes care of this. – Did not reflect actual market conditions: n n n The picture of the Portrait Studio did not represent reality. Tom Cruise’s portrait was exaggerated. The celebrities were identified. – Court: Dr. Howard tried to get the participants in the frame of mind that a consumer would have. And, Cruise and Monroe are well-known without being identified. – However, Court ends up reducing the survey’s weight for similar reasons.

Court’s Findings Howard’s Field Study n Allows the survey in under Daubert. – Methodological flaws and criticism raised by the defense goes to the weight of the survey. n Court later says that the survey is not persuasive evidence of direct injury caused by the Tom Cruise sketch. n The survey’s description of real world conditions is limited. n Plaintiff failed to produce evidence of actual harm. – “The various celebrity sketch images must be viewed together as they are displayed in public. In that context, there is not a likelihood of confusion…” – Not a single user was shown to have chosen a Portrait Studio over a Kis photo booth due to confusion regarding celebrity endorsement.

Future Claims General Recommendations n Be aware of the audience for whom the study is attempting to persuade. – Social scientists procuring evidence for trials must be aware of legal standards. n To effectively explain real world conditions, a social scientist must show ‘but for’ causation. – This may be easier when the real conditions are mirrored as closely as possible. n A proper survey universe is an important way to limit bias. – Howard’s pretest had serious flaws.

Better Studies? Examples n Alternate experiments to show ‘but for’ causation and actual harm: – Instead of using a packet, use two real Portrait Studios: one with celebrity pictures on the outside, another without pictures. Ask about Tom Cruise’s affiliation, the likelihood they would buy a sketch, etc. – Put a Kis photo booth next to a Portrait Studio. Offer consumers coupons for one free sketch or picture (provided they comply with a survey after). Note their choice and question their preferences, Tom Cruise’s affiliation, etc. n Are there causation and sampling errors with these studies?

Trademark Infringement Squirto. Co v. Seven-Up

Squirt v. Quirst Background n ‘Squirt’ was trademarked in 1937. It has been used by Squirt. Co continuously since. – Carbonated grapefruit drink. – Squirt. Co has advertised Squirt on a national basis (e. g. “Put a Little Squirt in Your Life”). n ‘Quirst’ was coined by an advertising agency (“qu ench” and “th irst”) and adopted by 7 -Up in 1978. – Noncarbonated lemonade drink. n Plan to expand to other flavors, like grape. – Has a $2. 2 Million budget for advertising. n Budget was created after they were sued.

Squirt v. Quirst Case Result n Squirt. Co sued 7 -Up in 1978 under the Lanham Trademark Act (15 U. S. C. A. § 1114(1)). – Requested an injunction on the name ‘Quirst’ and damages for tortious infringement. n Federal District Court in Missouri concluded plaintiff was entitled to an injunction, but not a claim of tortious infringement. – 8 th Circuit affirms the injunction and remands the tortious infringement claim. n n No finding of facts were provided by the lower court in dismissing the tort claim. 7 -Up discontinues Quirst.

Court’s Findings Case Result n The legal standard was whether the Quirst mark resembled the Squirt mark so that it was “likely to cause confusion, or to cause mistake, or to deceive. ” (15 U. S. C. A. § 1114(1)) – Products that compete directly in the same market need to show less likelihood of confusion. n The District Court concluded: “the presence of the strong and distinct Squirt trademark, the extensive similarity between the Squirt and Quirst marks, the close competitive proximity and similarity between the products, the low to moderate degree of care likely to be exercised by the purchasers of soft drinks and the Maritz, Chicago and Phoenix surveys, are all signs of a likelihood of confusion”.

Maritz Study 7 -Up n Conducted at grocery stores in Phoenix. n Customers were asked to recall what brand of soft drink they had purchased. – 50 cent coupons were given to stimulate purchases of non-cola soft drinks. Respondents were asked if they had used the coupons. – 98 of 98 who said Quirst had Quirst – 65 of 70 who said Squirt had Squirt n 3 of 70 actually had Quirst – 7 miscellaneous errors (Sprite/Shasta) n 7 -Up says only 3 out of 175 were confused. Argues this shows de minimis confusion.

Criticism Maritz Study n Squirt. Co does not argue against the survey, but rather says that 3/70 (4. 3%) is actual confusion and not de minimis. n Court says that this is not actual confusion (could be other factors at play) but that this is evidence of likely confusion. n Issues not raised: – Causation dilemma: n n Does not remembering the brand you just bought really speak to confusion between Squirt and Quirst? Lower court’s idea: a man and his money. – Does the coupon have any bearing? n Presumably increased sales among more inexperienced non-cola consumers. – Do local factors come into play?

Chicago and Phoenix Study Squirt. Co n Chicago: – Women 25 and older were interviewed randomly as they left Zayre’s department stores (n = 152). n The subjects listened to four radio commercials, including one by Squirt and one by Quirst. – Each was asked: “Do you think Squirt and Quirst are put out by the same company or by different companies? ” and “What makes you think that? ” n n 34% same company, 55% different companies, 11% didn’t know. Phoenix: – Similar study was done at Phoenix grocery stores with women 25 and older who had bought soft drinks that day (n = 476). – Subjects were asked questions about brand awareness and what type of soda they had purchased that day. – The subjects were told “Among the soft drinks on the market is a noncarbonated, lemonade flavored soft drink called Quirst. Another Soft drink on the market is a carbonated, grapefruit flavored soft drink called Squirt”. n n Subjects asked same two questions as in the Chicago survey, but in the form of a questionnaire. 23% same company, 34% different companies, 43% didn’t know.

Criticism Chicago and Phoenix Study n 7 -Up’s arguments: – The question was dichotomous and encouraged guessing. n “Do you think Squirt and Quirst are put out by the same company or by different companies? ” – ‘Put out by’ was ambiguous because both companies had a common bottler. – Chicago survey was not a representative universe. n Women were coming out of a department store and had not purchased soft drinks that day. – No pictures of the cans—survey was done totally by sound. n Issues not raised: – Was there sampling bias? n Why only women over 25? – Is there reactivity (Chicago study)? – Do local factors come into play? – Is there a testing effect?

Court’s Findings Social Science Evidence n All three studies show that there is likely confusion between the marks. n Little actual confusion can be evidence to show that there is much possible confusion. – 3/70 might mean a high likelihood of confusion. n Similarity in sound and spelling was significant. n Phoenix and Chicago surveys would have been more persuasive if pictures of cans were shown. – 45% of people in Chicago and Phoenix surveys mentioned this similarity unprompted when responding to question 2 (“What makes you think that”).

Future Claims General Recommendations n n Sometimes a court will decide a case before the social science evidence is presented. Interpretation of the evidence is important. – Maritz contended that actual confusion was 3/175. The Court said 3/70. This may have impacted whether the confusion was de minimis. n Whenever interviewing people directly, be aware of reactivity and testing effects.

Better Studies? Examples n Maritz’s data should be interpreted better. – The actual confusion of consumers who purchased Squirt but said Quirst (3) should be compared to those that purchased Squirt but said Sprite (2). n n Actual confusion due to the similarity in marks may have been less than hypothesized ~ 1/175. Chicago and Phoenix surveys should be done with television commercials and radio commercials. – Researchers may have been wary because 7 -Up is clearly printed on the Quirst can. n Chicago study should be done with written questions, not an interviewer recording the results.