Trademark Searches and Bad Faith

by Stephen J. Quigley

There are various reasons for not conducting a trademark search when a new mark is under consideration: they’re expensive, it takes too much time for the report to be compiled and an opinion rendered, they’re often immense and loaded with irrelevant and inconsequential references.

Forgoing A Search Could Be Extremely Costly

While these may be valid criticisms, proceeding without a search can be risky. Neither the Trademark Act nor the Patent and Trademark Office require an applicant to conduct or receive a trademark search before using or filing an application to register a mark. However, whether or not a trademark search had been conducted will be a factor in a court’s determination of an accused infringer’s good or bad faith in a trademark infringement case. Since a court’s finding of bad faith can force the infringer to forfeit the profits it earned from using the infringing mark, as well as attorneys’ fees,¹ forgoing a search could be extremely costly.

Adopted In Bad Faith?

Courts have consistently held that relying on competent counsel’s review of a trademark search is an indicia of good faith,² even if the search itself was inadequate.³ The potential consequences of a failure to undertake a search was brought to the forefront in a 1996 opinion in International Star Class Yacht Racing Association v. Tommy Hilfiger U.S.A., Inc., 80 F.3d 749, 38 USPQ2d 1369 (2d Cir. 1996), where the Court suggested that the accused infringer’s failure to conduct a trademark search could support a finding that its mark was adopted in bad faith. The case involved Tommy Hilfiger U.S.A.’s adoption of the mark STAR CLASS for a clothing line. STAR CLASS had long been used as a trademark by the International Star Class Yacht Racing Association (“ISCYRA”). Since the ISCYRA had not registered STAR CLASS, this mark did not surface in the “knock-out” search of the Trademark Office records by Hilfiger’s attorney. (A knock-out search generally involves a brief scan of the Trademark Office’s on-line database for existing registrations and applications that are identical to the proposed mark.) Hilfiger declined its attorney’s recommendation to conduct a broader and more comprehensive search.

The ISCYRA sued for trademark infringement and the District Court issued a permanent injunction against Hilfiger’s use of STAR CLASS. On appeal, the issue that generated the most interest was whether Hilfiger’s failure to heed its lawyer’s advice and obtain a full trademark search for STAR CLASS could be regarded as bad faith infringement. The Court left little doubt that it strongly disapproved of Hilfiger’s actions:

Given Hilfiger’s awareness that it was copying “authentic details…from the sport of competitive sailing,” it should have shown greater concern for the possibility that it was infringing on another’s mark. Hilfiger’s choice not to perform a full search under these circumstances reminds us of two of the famous trio of monkeys who, by covering their eyes and ears, neither saw nor heard any evil. Such willful ignorance should not provide a means by which Hilfiger can evade its obligations under trademark law.⁴

On remand, the District Court found that the standard practice at that time for adopting new trademarks was to conduct only knock-out searches – comprehensive searches were reserved for marks under serious consideration for registration. On the subsequent appeal, the Court of Appeals was not satisfied that the District Court’s opinion accurately reflected the industry practice concerning searches and again remanded the case to allow the ISCYRA the opportunity to present evidence as to the industry practice. The District Court, however, still refused to find bad faith because:

- the prominent use of the “Tommy Hilfiger” name on the garments, and not the words “Star Class” drove the sales of Hilfiger’s goods;

- there was no showing that Hilfiger willfully intended to cause confusion or deception or to profit from the ISCYRA’s reputation, or that Hilfiger had any knowledge of the STAR CLASS mark;

- Hilfiger intended to use STAR CLASS as a decoration;

- STAR CLASS is a weak mark;

- under the prevailing practice in 1994 for clearing proposed trademarks, there was no need for a more extensive search.⁵

Although the Court of Appeals was still not fully satisfied, it nonetheless affirmed the District Court’s finding that Hilfiger did not act in bad faith.⁶)

Other Courts

While not disagreeing with the rationale in the Second Circuit’s Hilfiger opinion, other courts have not framed the failure to obtain a search in comparably strong terms. For example, in a 2007 opinion, the Fourth Circuit agreed with the District Court’s reasoning that “[a]t most, the failure to conduct a search is probative of Dollar Tree’s carelessness, which even if true, has little bearing on the likelihood that its allegedly infringing mark will confuse the public.”⁷ In a Third Circuit opinion, the failure to search was found to have been no more than “careless” and not sufficiently egregious to warrant a finding of bad faith.⁸ A California District Court declined to accept the plaintiff’s proposition that failure to conduct a trademark search constituted willful infringement: “[Plaintiff] has simply failed to provide this Court with any evidence, overwhelming or otherwise, that would make [Defendant’s] failure to perform a trademark search comparable to the substantial degree of indifference by the [infringing party in Sands⁹] to perform any investigation. Therefore, what evidence or suggestion there may be that Thane’s failure to conduct a trademark search is indicative of Thane’s bad faith is weak at best.”¹⁰ In a case pre-dating Hilfiger, the Seventh Circuit regarded the failure to search very weak evidence of bad faith.¹¹

Even the Second Circuit, when presented with a similar issue subsequent to Hilfiger, has declined to extend its suggestion of bad faith into a legal principle. An opinion issued shortly after Hilfiger concerned Prime Hospitality Corp.’s selection of “Sports Authority Food, Spirits & Sports” as the name of a chain of restaurants without conducting either a knock-out scan or a full search. Sports Authority, Inc. sued for infringement based on its SPORTS AUTHORITY mark.

While noting that “there is little evidence of good faith on the part of Prime,” the Court ultimately concluded that the failure to search did “not conclusively point to a finding of either good or bad faith.”¹² Two years later, the Court simply stated that the defendants’ failure to perform a search did not, standing alone, prove that they acted in bad faith.¹³

What Does This Mean?

The principle to be drawn from these cases is that an infringer’s failure to conduct a trademark search, whether a knock-out or full search, will not by itself lead to a finding of bad faith. However, failure to undertake the “very obvious and simple precaution”¹⁴ of a search will be a factor considered in determining whether a bad faith finding is warranted. Courts have used terms such as “intentional blindness,”¹⁵ “blind disregard of the peril it faced”¹⁶ and “willful ignorance”¹⁷ to describe the accused infringer who did not conduct a search prior to adopting a mark. In at least one instance, the failure to conduct a trademark search before registering a domain name was a factor favoring a finding of bad faith.¹⁸

In what direction is the law moving?

A leading commentator has stated that “failure to search at all, because of the legal risks and cost of infringement, is nothing more than business Russian roulette.”¹⁹ The entire Trademark Office database of registrations and applications is available on-line and there are a number of reputable firms that can produce a full trademark search report and post it on a computer terminal in under 24 hours (at approximately double the cost of the standard four to five day turn-around). In addition, an Internet may reveal a wealth of potentially valuable references to companies and brands. With the ease of accessing information, it is likely that courts will increasingly find that an accused infringer’s failure to conduct an appropriate search before adopting its proposed mark is a clear indicator of bad faith.

Author: Stephen Quigley (squigley@ostrolenk.com)is of Counsel at Ostrolenk, Faber, Gerb & Soffen LLP, New York where he maintains an active Intellectual property practice. . In the course of his practice he handles all aspects of trademarks, including prosecution of domestic and foreign trademark applications, ex parte and inter partes proceedings before the Trademark Trial and Appeal Board of the U.S. Patent and Trademark Office, litigation in the federal courts, and licensing. Stephen also counsels clients on and litigates copyright matters.

1. George Basch Co., v. Blue Coral, 968 F.2d 1532, 1540, 23 USPQ2d 1351, 1358 (2d Cir.), cert. denied, 506 U.S. 991 (1992). [↩]
2. Lucent Information Management, Inc. v. Lucent Technologies, Inc., 186 F.3d 311, 318, 51 USPQ 2d 1545, 1550 (3d Cir. 1999), cert. denied, 528 U.S. 1106 (2000); W.W.W. Pharmaceutical Co. v. Gillette Co., 984 F.2d 567, 575, 25 USPQ2d 1593, 1599 (2d Cir. 1993). [↩]
3. Star Industries, Inc. v. Bacardi & Co. Ltd. 412 F.2d 373, 388 n.3, 75 USPQ2d 1098, 1106 n.3 (2d Cir. 2005), cert. denied, 547 U.S. 1019 (2006). [↩]
4. Id. at 753-754, 38 USPQ2d at 1372-73. [↩]
5. International Star Class Yacht Racing Association v. Tommy Hilfiger U.S.A., Inc., 1999 U.S. Dist. Lexis 2147 (S.D.N.Y. 1999). [↩]
6. International Star Class Yacht Racing Association v. Tommy Hilfiger U.S.A., Inc., 205 F.3d 1323 (2d Cir. 2000). (The opinion is reported at 2000 U.S. App. Lexis 660. [↩]
7. Renaissance Greeting Cards, Inc. v. Dollar Tree Stores, Inc., 227 Fed. Appx. 239, 245 (4th Cir. 2007). [↩]
8. SecuraComm Consulting, Inc. v. Securacom, Inc., 166 F.3d 182, 188-189, 49 USPQ 2d 1444, 1450 (3d Cir. 1999). [↩]
9. Sands, Taylor & Wood Co. v. Quaker Oats Co., 978 F.2d 947, 24 USPQ2d 1001 (7^th Cir. 1992). [↩]
10. Thane Int’l, Inc. v. Trek Bicycle Corp., 53 USPQ2d 1523, 1533 (C. D. Cal. 1999), rev’d on other grounds, 305 F.3d 894 (9^th Cir. 2002). [↩]
11. Sands, Taylor & Wood Co. v. Quaker Oats Co., 978 F.2d at 961-62, 24 USPQ2d at 1014. [↩]
12. The Sports Authority, Inc. v Prime Hospitality Corp., 89 F.3d 955, 964, 39 USPQ2d 1511, 1517 (2d Cir. 1996). [↩]
13. Streetwise Maps, Inc. v. VanDam, Inc., 159 F.3d 739, 746, 48 USPQ2d 1503, 1508-09 (2d Cir. 1998). Also see Savin Corp. v. Savin Group, 391 F.3d 439, 460, 73 USPQ2d 1273, 1286 (2d Cir. 2004); 24 Hour Fitness USA, Inc. v. 24/7 Tribeca Fitness, LLC, 447 F. Supp. 2d 266, 282 (S.D.N.Y. 2006), aff’d, ___ F.3d ____, 2007 U.S. App. Lexis 21268 (2d Cir. 2007). [↩]
14. First Jewelry Co. of Canada, Inc. v. Internet Shopping Network, LLC, 53 USPQ2d 1838, 1843 (S.D.N.Y. 2000). [↩]
15. Frehling Enterprises, Inc. v. International Select Group, Inc., 192 F.3d 1330, 1340 52 USPQ2d 1447, 1453 (11^th Cir. 1999), cert. denied 530 U.S. 1214 (2000). [↩]
16. A.C. Legg Packing Co. v. Olde Plantation Spice Co., 61 F.Supp.2d 426, 431-432 (D. Md. 1999). [↩]
17. The Teaching Company Limited Partnership v. Unapix Entertainment, Inc., 87 F.Supp.2d 567, 590 (E.D. Va. 2000); A.C. Legg Packing Co. v. Olde Plantation Spice Co., 61 F.Supp.2d at 434. [↩]
18. Eurotech, Inc. v. Cosmos European Travels Aktiengesellschaft, 213 F. Supp. 2d 612, 625 (E.D. Va. 2002). [↩]
19. Jerome Gilson, Gilson on Trademarks (2007), §3.01[2]. [↩]