Swarovski Aktiengesellschaft v. Building No. 19 – Nominative Fair Use
Nominative Fair Use – This case highlighted the fact that trademark law is constantly evolving – the major issue was so-called “nominative” use of a trademark, i.e., use of a trademark to refer to the trademark holder’s own goods in an advertisement by a seller not affiliated with the trademark holder. The United States Court of Appeals for the First Circuit recently decided the very interesting case of Swarovski Aktiengesellschaft v. Building No. 19. As the First Circuit noted, different circuits of the United States have fashioned different rules for dealing with this type of use – thus the matter may well have to be resolved by the Supreme Court at some point.
Background of the Case
Building # 19 was a type of discount store doing business primarily in the New England area – New Hampshire, Massachusetts, and Rhode Island. The store often acquired high-end merchandise such as Hummel dolls through non-traditional means and then sold them to an eager public. As part of its business model, Building # 19 spent millions of dollars in advertising. * Photo – Public Website – Facebook Screengrab
World-Famous Swarovski Brand Crystal
Advertising was the source of the dispute here. At some point in the past, a violent storm struck a warehouse containing world-famous Swarovski brand crystal. As luck would have it, a good amount of the crystal was undamaged, intact in its original packaging, and still contained genuine certificates of authenticity. Building # 19 bought approximately half a million dollars’ worth of this crystal as salvage from the insurer of the damaged warehouse.
Playing up the publicity angle, Building # 19 then began heavily advertising its possession and limited-time sale of the Swarovski crystal. The advertisements prominently featured the word Swarovski in large font, and used small font to disclaim any affiliation with the Swarovski corporation.
Swarovski then successfully filed for an injunction to prevent defendant from using the trademark, and Building # 19 appealed from the District Court order. In a form of rough justice, due to the time pressures involved, the court order stated that the word Swarovski in the advertisement could only be as large as the font used to disclaim affiliation.
The First Circuit noted that “confusion” is a key element of any trademark infringement plaintiff’s case, but that the circumstances are a bit unusual here. In a typical case, a defendant has used the plaintiff’s mark to pass off inferior or shoddy goods, confusing the customer as to the authenticity or source. Here, the defendant used the plaintiff’s mark to describe the plaintiff’s own (authentic) products! This form of use was called “nominative” use, from the Latin “to name.”
The confusion, therefore, was not as to source, but in the Court’s eyes, as to endorsement or affiliation. There was potentially the problem that a consumer might think Building # 19 was somehow endorsed by or affiliated with Swarovski.
Clearly there was some tension between correctly identifying a product and a suggestion of endorsement or affiliation. The solution was a principle of “nominative fair use.” The Third and Ninth Circuit have already crafted rules to handle the situation, but the First Circuit, and others have not crafted a specific rule, although they recognized the principle. The Third and Ninth Circuit focus on whether the product was identifiable without the mark, whether the defendant used of the mark than was necessary, and whether the defendant correctly characterized its relationship with the plaintiff.
Ultimately the First Circuit declined to explicitly adopt this test, but also remanded to the lower court for more findings about the actual likelihood of confusion.