Addressing for the first time the issue of nominative fair use as a defense to trademark infringement, the U.S. Court of Appeals for the Third Circuit upheld nominative fair use as a defense that can be validly asserted once actual confusion is shown. Century 21 Real Estate Corp. v. Lending Tree, Inc., Case No. 03-4700, (3rd Cir. Oct. 11, 2005) (Michael, J.; Fisher, J., concurring in part and dissenting in part).

Lending Tree provides internet-based services, including a real estate referral network service that allows consumers to search for brokers in a selected geographical area. Many of the brokers are franchisees of leading real estate companies, such as Century 21. While the franchisees enter an agreement with Lending Tree, the real estate companies do not. Century 21 filed suit for Lanham Act violations and sought injunctive relief to stop Lending Tree’s use of its marks on the Lending Tree website to promote its real estate broker referral network. The district court turned away Lending Tree’s nominative fair use defense and issued a preliminary injunction. Lending Tree appealed.

The Third Circuit reversed. In considering "nominative fair use," the court examined the Supreme Court’s "classic fair use" decision in KP Permanent Make-Up. Classic fair use occurs when a defendant, who is not selling the goods trademarked by the plaintiff, uses the plaintiff’s mark to refer to the defendant’s product in a way that may be confusing but is nonetheless fair. Nominative fair use occurs when a defendant refers the plaintiff’s mark and product in order to better describe the defendant’s own product or services.

The Third Circuit, like the Ninth Circuit in New Kids on the Block, held that nominative fair use was an affirmative defense to trademark infringement. However, departing from the Ninth Circuit, which held that a likelihood of confusion analysis was not required in nominative fair use cases, the Third Circuit held that the burden of showing nominative fair use only shifted to the defendant until the plaintiff had shown likelihood of confusion. In doing so, the Third Circuit’s holding for nominative fair use was consistent with the Supreme Court’s rationale in KP Permanent Make-Up, Inc. for classic fair use, which required the plaintiff first satisfy its burden of showing likelihood of confusion.

Practice Note

Users of third party trademarks should understand that the nominative fair use defense is not well-settled law and is not treated uniformly in all circuits. While the Third and Ninth Circuits both recognize the defense, they each apply a different test, and it is unclear how other courts, or the Supreme Court, will ultimately treat nominative fair use as a defense to trademark infringement.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.