Trademark & Copyright Law Blog : Intellectual Property Lawyers & Attorneys : Foley Hoag Law Firm : Washington D.C., Boston

A version of this article, which was co-authored by Anthony E. Rufo, was reprinted in the World Trademark Review.

How can the owners of famous trademarks enforce their rights without being given the dreaded “trademark bully” label? The answer lies in knowing where to draw the line, and in exercising diplomacy in letting people know when the line has been crossed.

Many brand owners tolerate minor third party uses of their marks, including unauthorized parodies, fan clubs and the like, which are undertaken in good faith. But brand owners must act to protect their rights when third parties go too far. Potential red flags include actual confusion, complaints from customers, impact on sales, and formal trademark filings by third parties. In these circumstances, a line has been crossed and trademark owners can and should consider taking action. To protect themselves from bullying accusations, however, trademark owners would do well to emphasize in all of their communications the specific “over the line” factors that drove them to action.

North Face’s 2009 lawsuit against the “South Butt” defendants illustrates these principles. The defendants claimed that their use of THE SOUTH BUTT name and “arc” logo on clothing was a parody of THE NORTH FACE. A parody defense can put brand owners in a difficult position, because no one wants to be perceived as not getting the joke. In fact, a savvy brand owner knows that embracing those in the marketplace who are poking a little fun can often make for excellent public relations. So why was filing suit the right thing for North Face to do? Because the defendants repeatedly tried to register THE SOUTH BUTT as a trademark for clothing, which could have potentially curtailed North Face’s own rights and made future policing efforts against third parties more difficult.

In contrast, the Coca-Cola fan site on Facebook did not cross any obvious lines - it was created by two guys who just happened to love Coke. So what did Coca-Cola do about these individuals representing its brand to millions of social media subscribers? It decided to make the Facebook fan page the “real thing” and sponsor its creators, inviting them to meet with Coca-Cola executives in Atlanta and collaborate on marketing initiatives. This was a brilliant (and popular) strategy because the Facebook page posed no commercial threat, and Coca-Cola was able to support its biggest fans rather than shut down their Facebook site.

So what can you learn from these examples as a brand owner? If an infringer crosses the line and you have to enforce your rights, try to stay ahead of the spin and make sure the public knows you were left with little choice. If no line is crossed, consider whether a marketing-driven approach might be preferable to legal action. While you may not be able to escape the “trademark bully” label in all situations, careful line-drawing and tailored communications can help you manage the risks and, hopefully, portray your brand enforcement efforts in a positive light.

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As previously reported, North Face sued South Butt for trademark infringement and dilution for using the name THE SOUTH BUTT and an arc designed to evoke the well-known logo for THE NORTH FACE. On the eve of a preliminary injunction hearing, the parties reported that they had settled their claims.

The Court thereafter entered two consent injunctions - one against the South Butt defendants (PDF), and another against a store that sold the allegedly infringing products (PDF). South Butt thereafter abandoned its federal trademark application for THE SOUTH BUTT (PDF), which will result in judgment being entered against South Butt in the trademark opposition proceeding before the Trademark Trial and Appeal Board because North Face did not consent to the abandonment.

So it is all over for South Butt, right? Not so fast. Although the terms of the settlement are confidential, there are a number of red flags suggesting that things may not be what they seem.

First and foremost, South Butt is still selling clothing bearing the accused mark THE SOUTH BUTT through its website. In the absence of North Face's permission, this would constitute a clear violation of the April 12 consent injunction against the South Butt defendants and subject them to contempt of court proceedings. Given the posture of the case, it is clear that North Face is allowing South Butt to continue selling accused products through its website in this manner.

What should we make of this? It is possible that North Face is allowing South Butt to continue to sell merchandise bearing the mark THE SOUTH BUTT under license from North Face, most likely for a royalty. Alternatively, North Face may be allowing South Butt to run out its inventory of accused products, either with or without a license.

The fact that the disclaimers of affiliation with North Face, such as they were, no longer appear on the website would normally point in the direction of a license. In this unusual case, however, it is possible that the disclaimers were removed because North Face found them offensive and did not wish to draw any attention to its association with South Butt. (According to the Answer (PDF), South Butt's website carried the following disclaimer: "We are not in any fashion related to nor do we want to be confused with The North Face Apparel Corp. or its products sold under "The North Face" brand. If you are unable to discern the difference between a face and a butt, we encourage you to buy North Face products.")

Second, the consent injunctions are subject to an important qualifier: "without the express written permission of The North Face." Thus, the injunctions themselves contemplate that North Face may give written permission for the defendants to use THE SOUTH BUTT as a trademark going forward, and it appears that this has occurred.

Third, the consent injunction against the store provides that the injunction will become permanent "unless a final non-appealable judgment is entered against The North Face" finding that South Butt has not engaged in any trademark violations, and further provides that the injunction shall "immediately dissolve without further order of the Court upon on a voluntary dismissal by Plaintiff of this action against the remaining Defendants." This language would appear to contemplate that the case might resolve unfavorably to North Face, despite the fact that the parties have already reported the case as settled.

How can this be? As in the case of the dog that did not bark, the court papers contain a significant omission -- judgment has not been entered, and North Face's claims against the South Butt defendants have not been dismissed. Therefore, despite the entry of the consent injunctions, the case remains open and the dispute has not been fully and finally adjudicated. It is possible that the parties are attempting to resolve their claims through means of alternative dispute resolution and have agreed to forgo litigation in the interim. It is also possible that certain settlement terms are subject to time periods which have not yet run, and that a consent judgment or dismissal will be filed at later time as dictated by the settlement terms.

While South Butt may have won this round, it appears to have made some significant concessions to North Face. More importantly, the last chapter of this trademark saga may not have been written. While there is no telling how this dispute will ultimately play out, particularly now that it is out of the public spotlight, fans of South Butt products should probably get them while they can -- just in case.

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In a lawsuit that has grabbed the attention of the trademark community, The North Face Apparel Corp. sued The South Butt, LLC, its founder (college student Jimmy Winkelmann), and a pharmacy that sold allegedly infringing goods for using the mark THE SOUTH BUTT on clothing that resembled the style of clothing sold under the well-known mark THE NORTH FACE. According to the Complaint (PDF), South Butt repeatedly attempted to register THE SOUTH BUTT as a trademark and offered to sell its business to North Face for $1 million. The Answer (PDF) describes Jimmy Winkelmann as a "cherubic teenager, budding entrepreneur and college freshman from the heartland of America" who "founded his company with parodic respect for Plaintiff." North Face moved for a preliminary injunction, and its motion was scheduled to be heard on April 12, 2010.

In a court filing (PDF) made on April 5, 2010, the pharmacy defendant advised the Court that all parties had reached a settlement of the case. While the terms of the settlement were not disclosed, it appears that SOUTH BUTT clothing continues to be sold on the South Butt website and is featured on the South Butt Facebook page.

Regardless of the settlement terms, the fact that the case was settled without a judicial decision as to the underlying parody issue represents a lost opportunity for trademark owners and parodists alike. In 2006, the Trademark Dilution Revision Act (TDRA) articulated for the first time the requirements for parody as "fair use" of a famous mark, explicitly stating that the use must be "other than as a designation of source for the person's own goods or services." 15 U.S.C. Section 1125(c)(3)(A).

Courts have not adopted a consistent approach to parody of famous marks under the TDRA. In one of the early parody cases construing the TDRA, the Fourth Circuit held that dog chew toys bearing the name CHEWY VUITON did not dilute the famous LOUIS VUITTON mark. Louis Vuitton Malletier S.A. v. Haute Diggity Dog, LLC, 507 F.3d 252 (4th Cir. 2007) (PDF). While the Court acknowledged that the defendant used CHEWY VUITON as a designation of source for its dog toys, and that the statutory fair use language therefore did not apply, it proceeded to find that the defendant was engaged in a successful parody because under the dilution factors it intended to create a parody and that is how the association would be perceived. Id. at 266-67.

This stands in contrast to the recent CHARBUCKS case, in which the Second Circuit found that the use of the CHARBUCKS mark on coffee could not escape liability for diluting the famous STARBUCKS mark based on a parody defense because CHARBUCKS was used as a source identifier and was too subtle to constitute a parody. Starbucks Corp. v. Wolfe’s Borough Coffee, Inc., 588 F.3d 97 (2d Cir. 2009) (PDF).

The North Face v. South Butt case presented an opportunity for the Eight Circuit to address the differing approaches to parody head-on. Assuming that the settlement is consummated, that opportunity will be lost, and the case law in this area will remain inconsistent. The owners of famous brands and their parodists will have to wait until another day for the courts to further articulate the requirements for parody under the TDRA.

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