VIP Products LLC v. Jack Daniel's Properties Inc.

In decade-long trademark dispute stemming from dog toy company’s humorous imitation of Jack Daniel’s whiskey bottle, Ninth Circuit vacates injunction in favor of Jack Daniel’s and remands to district court for entry of judgment in favor of dog toy company on trademark dilution claim, finding that dilution by tarnishment must be demonstrated with respect to only famous marks and that district court’s failure to consider allegedly infringing product’s parodic nature required reversal.

VIP Products LLC makes novelty dog toys, including “Silly Squeakers,” a line of chewable, squeaky, rubber toys, most of which are designed to resemble and parody popular alcoholic beverage brands. In 2014, VIP introduced the “Bad Spaniels” toy, which was designed to resemble and poke fun at the iconic Jack Daniel’s whiskey bottle. VIP used the same shape as a Jack Daniel’s bottle and a similar font and replaced “Jack Daniel’s” with “Bad Spaniels,” and “Old No. 7 Brand Tennessee Sour Mash Whiskey” with “Old No. 2 on Your Tennessee Carpet.” Jack Daniel’s Properties Inc., which holds registered trademarks in the Jack Daniel’s brand name, “Old No. 7,” and in the stylized label and the shape of the bottle, sent a cease-and-desist letter demanding that VIP stop selling the Bad Spaniels toy. In response, VIP brought suit, seeking a declaratory judgment that its Bad Spaniels product did not infringe or dilute Jack Daniel’s trademarks. Jack Daniel’s, in turn, asserted counterclaims under the Lanham Act for trademark infringement and trademark dilution.

On VIP’s motion for summary judgment, the district court rejected VIP’s primary argument that the Second Circuit’s decision in Rogers v. Grimaldi—which holds that expressive works cannot create liability for trademark infringement unless the challenged use of the mark “has no artistic relevance to the underlying work” or “explicitly misleads as to the source or the content of the work”—applied, holding that the Rogers test was inapplicable when an alleged infringer has used the parodic or otherwise mimicked imitation of the mark for source identification. Instead, a court must engage in a traditional trademark analysis as to whether there is a likelihood of confusion. The court likewise rejected VIP’s argument that the Jack Daniel’s dilution claim failed because Bad Spaniels was a parody and therefore made fair use of Jack Daniel’s marks, finding that parodies only fall within the fair-use exclusion when they are not used as “a designation of source for the [alleged diluter’s] own goods.” Following a subsequent bench trial, the district court found infringement, partly in reliance on consumer survey responses evidencing confusion about the source of the Bad Spaniels toy, and dilution by tarnishment.

The Ninth Circuit reversed, holding that Rogers applied because Bad Spaniels “communicate[d] a humorous message” and was an expressive work. On the dilution claim, the appellate court found that because Bad Spaniels was a parody, its uses of Jack Daniel’s marks were “noncommercial” and therefore were shielded from liability, and it awarded judgment to VIP. On remand, the district court entered judgment for VIP on both claims, and the Ninth Circuit summarily affirmed the dilution judgment.

The U.S. Supreme Court granted certiorari to review the Ninth Circuit’s rulings and subsequently vacated and remanded both the infringement and dilution claims back to the district court. The Supreme Court held that Rogers did not apply when an alleged infringer uses a trademark as a designation of source for the infringer’s own goods, as VIP did with Bad Spaniels, and that the federal Lanham Act’s noncommercial-use exception does not shield source-identifying parody. The Court then vacated and remanded. (Read our summary of the Supreme Court’s decision here.)

On remand, the district court found VIP liable for dilution by tarnishment but not infringement and entered a permanent injunction in favor of Jack Daniel’s on the dilution claim. The court found that VIP’s successful parody by imitation meant there was no likelihood of consumer confusion and therefore no infringement, but that parody did not exempt it from the dilution claim and that VIP’s imitation of Jack Daniel’s trademarks and trade dress met the three-factor dilution analysis of fame, similarity and reputational harm under the Trademark Dilution Revision Act (TDRA).

On this latest appeal to the Ninth Circuit, the appellate court vacated the district court’s finding of dilution by tarnishment and the accompanying permanent injunction and remanded the case back to the district court for entry of judgment in VIP’s favor.

The appellate court explained that the TDRA permits the owner of a distinctive and famous mark to enjoin a use of a junior mark in commerce that is likely to cause dilution by tarnishment, regardless of confusion, competition or actual economic injury, and that tarnishment is an association arising from the similarity between a junior mark or trade name and a famous mark that harms the famous mark’s reputation. Jack Daniel’s bore the burden of proving the three elements essential to the claim: 1) that the relevant senior mark was famous, 2) that the accused mark was similar and 3) that the association was likely to damage the famous mark’s reputation.

The Ninth Circuit explained that the fame analysis must be mark-specific. The district court should have determined which of the Jack Daniel’s marks were famous for purposes of dilution by tarnishment before moving forward with the rest of the analysis. Noting that a mark is famous “if it is widely recognized by the general consuming public of the United States as a designation of source of the goods or services of the mark’s owner,” the appellate court found that the only marks Jack Daniel’s proved to be famous were “Jack Daniel’s” and its registered trade dress in the bottle shape; the record did not establish that “Old No. 7” was famous. Since the TDRA does not permit a plaintiff to borrow fame from one mark to establish the fame of another, and since the district court had improperly grouped the asserted marks together, the court eliminated the non-famous marks from its tarnishment analysis.

The court then turned to whether Jack Daniel’s established a likelihood that Bad Spaniels and the toy’s trade dress harmed the reputation of the “Jack Daniel’s” mark and its registered trade dress—the only two marks found to be famous for purposes of the tarnishment analysis. The Ninth Circuit explained that, in evaluating whether the Bad Spaniels toy tarnishes the Jack Daniel’s mark, the district court relied on the testimony of a Jack Daniel’s expert, Dr. Itamar Simonson, to conclude that “[b]ecause Jack Daniel’s produces a product intended for human consumption, association of Jack Daniel’s marks with something like dog feces is” not only tarnishing but “particularly detrimental.” The Ninth Circuit rejected Dr. Simonson’s findings, as he did not conduct any studies on Bad Spaniels specifically and relied solely on generic consumer psychology research to conclude that “VIP’s introduction of ‘Bad Spaniels’ into the marketplace resulted in reputational harm to Jack Daniel’s trademarks and trade dress.” To the extent Dr. Simonson’s testimony established any negative association, it was between some broad concept of defecation and consumption of food and drink products, not the specific marks, products and brands at issue in the trademark dilution analysis—namely the famous “Jack Daniel’s” mark and associated bottle trade dress, and the allegedly dilutive “Bad Spaniels” mark—and VIP’s use of dissimilar elements such as “poo by weight” or “Old No. 2.” The court also reasoned that, whatever tarnishing effect there might be from associating a consumable product such as whiskey with bodily excrement, no such association could be created from a parodic dog toy.

Next, the appellate court discussed parody. While parody did not automatically defeat the tarnishment claim under the Supreme Court’s ruling that a source-identifying parody cannot rely on the TDRA’s noncommercial-use exception, courts are not required to completely disregard parody when evaluating tarnishment. Here, the Ninth Circuit treated parody as a relevant circumstance, because it communicates two messages at once: It evokes the original while making clear that it is not the original. Bad Spaniels’ conspicuous substitutions and humor made its parodic purpose obvious, which bears on whether consumers would view the product as a joke rather than as an unsavory version of Jack Daniel’s whiskey. The district court had recognized Bad Spaniels’ parodic character in its infringement analysis, but VIP’s expert, Dr. Simonson, did not account for that “humorous difference” in assessing whether Bad Spaniels harms the reputation of the famous  Jack Daniel’s marks. The Ninth Circuit found that “[f]ailing to consider the effect of VIP’s obvious parody on the likelihood of tarnishment was a critical misstep, and the district court erred in adopting the conclusions that followed.”

Because Jack Daniel’s failed to prove both fame for “Old No. 7” and likelihood of reputational harm to the “Jack Daniel’s” mark or its registered trade dress, it had not satisfied its burden under the TDRA and was not entitled to injunctive relief for dilution by tarnishment.

Summary prepared by Tal Dickstein and Jessica Manavi