Trademark Unfair Competition

What Is Trademark Unfair Competition?

Trademark Unfair competition is a commercial tort.  It is difficult to define specifically, but it has become an umbrella for a wide range of distinct business torts, including infringement and trade secret infringement, among others.  It is clear that no inflexible rule can be used to define what constitutes unfair competition.  “It would be impossible to draft in advance detailed plans and specifications of all acts and conduct to be prohibited, … since unfair or fraudulent business practices may run the gamut of human ingenuity and chicanery.”  People ex rel. Mosk v. National Research Co. of Cal., 201 Cal. App. 2d 765, 772, 20 Cal. Rptr. 516, 133 U.S.P.Q. 413 (3d Dist. 1962).

Early in history, unfair competition relief came for trademark infringement and false advertising if the parties were direct competitors.  The modern view is that a trademark can be infringed by a non-competitor using non-competitive goods or services if there was a likelihood of confusion over sponsorship, affiliation, or connection.  Some states, including New York, require a showing of “bad faith” to prove unfair competition.

Public Policy of Free Market Competition

It is basic public policy that our economy is best served and advanced by free competition.  From free competition comes the “copying” of business and technological ideas and creative works.  Once ideas, inventions and writings are disclosed to the public, they are in the public domain and may be freely copied.  When a creative work, business symbol or other creation or invention is not protected by any form of intellectual property, it is in the “public domain”

The imitation of a business idea that is not protected by intellectual property is the essence of free competition.  In fact, a second comer imitating the first and offering a similar product or service at a lower price and/or with better quality is encouraged—and in fact, is essential in a competitive economy.  After that idea is protected by intellectual property, the party seeking to exclude the other party has the burden to prove its entitlement to said intellectual property—such as patents, trademarks or copyrights.  In other words, the burden to prove validity and infringement is on the party attempting to exclude another from use of a particular trademark, patent or copyright.  Unless a plaintiff can establish that the defendant infringed on its trademark, the law will tolerate a competitor’s copying.  Streetwise Maps, Inc. v. Van Dam, Inc., 159 F.3d 739, 741, 48 U.S.P.Q.2d 1503 (2^nd Cir. 1998).

Some Examples of Trademark Unfair Competition

Perhaps the best way to help to define unfair competition is to provide examples.  Some examples of unfair competition include (a non-exhaustive list):  trademark infringement; infringement of service marks; dilution of trademarks; use of confusingly similar business names; use of confusingly similar titles of creative works; confusing use of names and images of distinctive characters; infringement of trade dress in the distinctive configuration of packaging or product; misappropriation of valuable and time-critical business information; “bait and switch” selling tactics; false advertising; theft of trade secrets; sending bad faith cease and desist letters.

Business conduct can often be aggressive—and even distasteful—without constituting unfair competition.  “The lack of business ethics displayed by the defendant … invites and receives the condemnation of all who love fair play and scorn chicanery and deceit.  But unfortunately there is much that is unethical that is not enjoyable. … Courts cannot correct all unfair practices brought to their attention any more than legislation can correct all social maladjustments.”  Philadelphia Dairy Products v. Quaker City Ice Cream Co., 306 Pa. 164, 159 A. 3, 6, 84 A.L.R. 466 (1932).

Trademark Unfair Competition is Constantly Changing

Trademark unfair competition is a constantly changing body of law—adapting to technological, social and political changes—and the courts have power to define what unfair competition is.  So aside from unfair competition categorized and named—trademark infringement, false advertising, misappropriation, etc.—judges have equitable power and discretion to create remedies depending on the situation.  However, this discretion is not limitless.  The creation of new legal dimensions for unfair competition must come from prior legal precedent and legislative policy.  As the Third Circuit stated, “preventing deception of the public is itself in the public interest.  The public interest is not something the courts and judges can know by feeling the vibrations from the cosmos.  Rather, it is reflected in the law of some appropriate sovereignty.”  SK & F, Co. v. Premo Pharmaceutical Laboratories, Inc., 625 F.2d 1055, 1067, 206 U.S.P.Q. 964, 1980-2 Trade Cas. (CCH) ¶ 63361 (3d Cir. 1980).

Federal Lanham Act and Trademark Unfair Competition

After some uncertainty as to whether or not state-by-state unfair competition laws were appropriately protecting against the confusing use of distinctive marks, the Federal Lanham Act (§ 43(a)) has become the most common protection against infringement of trademarks, both registered and unregistered.  Federal law and federal courts are now the primary source of case law precedent on infringement of trademarks.

Confusion between Antitrust Law and Unfair Competition

Simply put, while antitrust law prohibits too little competition, unfair competition law forbids too much.  It almost seems as though the antitrust and unfair competition laws are “schizophrenic.”  However, they both reflect the judicial system’s method of preserving—and controlling competition.  A competitor must prevail in the marketplace on the merits (best product, price, etc.) and not by using tactics to confuse or deceive.  And unlike for antitrust laws, for unfair competition the market power of the defendant is not necessary for a violation.

Just because there is unfair competition does not mean there is a violation of antitrust laws.  Were that the case, any time someone proved unfair competitive conduct caused damage to only one competitor, all unfair competition would fall under antitrust law.  Another way to look at it is that antitrust laws are designed to protect the process of competition, not the continued prosperity of a competitor.  So for an antitrust violation, a plaintiff must show injury as a competitor, as well as harm to competition in general.  L.A. Draper & Son v. Whellabrator-Frye, Inc., 735 F.2d 414, 421 1984-2 Trade Cas. (CCH) ¶ 66084, 39 Fed. R. Serv. 2d 733 (11^th Cir. 1984).

Uniform Deceptive Trade Practices Act

The Illinois statute dealing with unfair competition is the Uniform Deceptive Trade Practices Act (815 ILCS 510 et. seq.).  This act prohibits false and fraudulent advertisements, and a private person can bring an action for damages caused by the deceptive trade practice(s) of another.  The act provides a business with a private cause of action against anyone who:

• Passes off goods or services as those of another
• Causes likelihood of misunderstanding as to the source or certification of goods or services
• Causes likelihood of misunderstanding as to affiliation with or certification by another
• Uses deceptive representations of the geographic origins of goods or services
• Represents that goods are original or new if they are used or secondhand
• Represents that goods or services are of a particular quality, if they are of another
• Disparages the goods, services, or business of another by false or misleading representations
• Advertises goods or services with intent not to sell them as advertised, or in supply expected to meet public demand without disclosing a limitation of quantity
• Makes false or misleading statements concerning price reduction

Illinois Consumer Fraud and Deceptive Practices Act

Unfair competition claims might often be asserted with additional, fraud-related claims.  The Illinois Consumer Fraud and Deceptive Practices Act also protects business and individuals, and allows them to seek damages, when conducting trade or commerce, for: fraud, deception, false pretense, false promise, misrepresentation or concealment of facts.  The elements of a claim under the Illinois Consumer Fraud Act include:

• A deceptive act or practice by the defendant
• The defendant intended the plaintiff to rely on the deception
• The deception occurred in the course of trade or commerce
• The deception caused actual damages to the plaintiff

Conclusion

As a simple rule, imitating or copying something that is in the public domain is essential in a competitive economy.  Legally protected rights, such as trademarks, are the exceptions to the freedom to copy and imitate.  In the absence of a legally defined exclusive right and without unethical behavior or illegality present, copying is permitted and encouraged, and will not be considered unfair competition.  Moreover, it is confusion, not copying, that creates liability for unfair competition in the trademark context.

Competition can be lawful and is actually encouraged by law, but when competition becomes unfair and when competitors actions improperly and unfairly threaten the life of a business, unfair competition could be present.

Our Chicago trademark attorneys handle cases in state and federal courts throughout Illinois, including Cook, DuPage, Kane and Will Counties.  For additional information about our trademark unfair competition lawyers and to discuss your unfair competition or deceptive trade practices case, please contact one of our Chicago business litigators at 312-789-5676.