Smith v. Wal-Mart – No. 1:06-cv-526 (March 20, 2008)
PARTIES:
• Plaintiff: Charles Smith
• Defendant: Wal-Mart
FACTS:
• Wal-Mart has used the smiley face since the 1970s
• Smith was making and selling T-shirts, beer steins, and other items with the slogan “Wal-ocaust†and “Wal-Qaedaâ€
o Smith only sold 62 T-shirts, including 15 to one of Wal-Mart’s outside law firms
• Smith also owned the domain name www.walocaust.com and www.walqaeda.com
• Smith sold his items on www.cafepress.com for a 30% markup but he never advertised o marketed his goods beyond telling family, friends, and some internet discussion groups; he did not claim exclusive rights to his designs and offered free downloadable copies so users could print their own stickers containing his slogans
• Wal-Mart sent letters to Smith demanding that he stop producing and selling his merchandise (On December 28, 2005 and February 1, 2006) and that he stop using the domain names www.walocaust.com and www.walqaeda
• Smith refused
PROCEDURAL HISTORY:
• Smith brought a declaratory judgment action on March 6, 2006, against Wal-mart asking the judge find that Smith was entitled to sell his anti-Wal-Mart products and maintain his related domain names
• Wal-Mart filed counterclaims on April 28, 2008, alleging
o (1) trademark infringement
o (2) unfair competition
o (3) trademark dilution by tarnishment (not by blurring)
o (4) cybersquatting
• Wal-Mart claimed that Smith was diluting its marks and tarnishing them via negative connotations with the Nazi regime and al-Qaeda
• Wal-Mart moved for summary judgment
ISSUE:
• Whether Smith’s parody websites were protected speech and whether Wal-Mart had a right in the smiley face
RULES/REASONING:
• (1) Trademark protection is available only to distinctive marks – those that serve to identify the source of goods or services
o A mark that is not inherently distinctive may acquire distinctiveness or secondary meaning by becoming associated in the minds of the public with the products or services offered by the proprietor of the mark
o Trademark protection is available only to distinctive marks, and to establish a common-law right in the smiley face, Wal-Mart must show that is has imbued the mark with secondary meaning
 Court considers strength of the mark – the stronger the mark, the greater the protection that is afforded
• Length and nature of the mark’s use
• Nature and extent of advertising and promotion of the mark
• Efforts of the proprietor to promote a conscious connection between the mark and the business
• Degree of actual recognition by the public that the mark designates the proprietor’s product
o Because Wal-Mart offered no evidence of the above factors, the court concluded that the smiley face was not entitled to trademark protection
• To prove Smith committed trademark infringement or cybersquatting or unfair competition, Wal-Mart must show that Smith’s use of its marks is likely to cause an appreciable number of consumers to be confused about the source, affiliation, or sponsorship of Smith’s products
o Court considers:
 Strength of the mark – measure of its distinctiveness
• Smith conceded this point
 Whether designs that incorporate the registered mark are similar
• Smith’s uses depart significantly from Wal-Mart’s
 Whether products sold by parties are similar
• The products are drawn from like categories but the merchandise is also distinguishable in its composition, function, and design so this factor is neutral
 Whether retail outlets and purchasers are similar
• Wal-Mart sells mostly through its chains whereas Smith sells online and even where Wal-Mart sells online, it is not at www.cafepress.com
 Whether parties use the same advertising media
• Wal-Mart spends lots of money in advertising whereas Smith does not advertise other than to family, friends, and online discussion groups
 Whether defendant intended to usurp the mark
• Smith acted in good faith intent because his intent was to parody Wal-Mart while avoiding consumer confusion
 Whether consumers were actually confused
• Court looked at consumer confusion:
o Wal-Mart used expert study which consisted of interviews of 500 consumers – 48% suffered point-of-sale confusion, 41% indicated Website confusion, and 12% were less likely to shop at Wal-Mart after seeing Smith’s designs
o The court, however, gave no weight to this expert testimony because it contained numerous substantial flaws
 Also look at whether it was a parody
• Parody – a simple form of entertainment conveyed by juxtaposing the irreverent representation of the mark with the idealized image created by the mar’s owner; must call to mind the original and communicate element of satire, ridicule, joking, or amusement
• An effective parody will diminish the likelihood of confusion
 The fact that the real Wal-Mart name and marks are strong and recognizable makes it unlikely that a parody – particularly one that calls to mind the genocide of millions of people, another that evokes the name of a notorious terrorist organization…will be confused with Wal-Mart’s real products
• (2) Trademark Dilution by tarnishment – an injury occurs when a trademark is portrayed in an unwholesome or unsavory context likely to evoke unflattering thoughts about the owner’s product
o Dilution applies to famous and distinctive marks
o Smith conceded that Wal-Mart’s marks are strong, famous, and distinctive
 Tarnishment caused by a parody which satirizes a product or image is not actionable under anti-dilution statutes because of the free speech protections of the First Amendment
o A claim of dilution applies only to purely commercial speech; even if the speech benefits the speaker economically, it is noncommercial so long as it consists primarily of noncommercial elements – such as religious or political commentary
o Smith’s products qualified as protected noncommercial speech because his goal was to criticize Wal-Mart, not to make a profit from his products
HOLDING:
• Yes. The websites were protected free speech. No. Wal-Mart was not entitled to trademark protection in the smiley face. (Smith wins on all counts)
PARTIES:
• Plaintiff: Charles Smith
• Defendant: Wal-Mart
FACTS:
• Wal-Mart has used the smiley face since the 1970s
• Smith was making and selling T-shirts, beer steins, and other items with the slogan “Wal-ocaust†and “Wal-Qaedaâ€
o Smith only sold 62 T-shirts, including 15 to one of Wal-Mart’s outside law firms
• Smith also owned the domain name www.walocaust.com and www.walqaeda.com
• Smith sold his items on www.cafepress.com for a 30% markup but he never advertised o marketed his goods beyond telling family, friends, and some internet discussion groups; he did not claim exclusive rights to his designs and offered free downloadable copies so users could print their own stickers containing his slogans
• Wal-Mart sent letters to Smith demanding that he stop producing and selling his merchandise (On December 28, 2005 and February 1, 2006) and that he stop using the domain names www.walocaust.com and www.walqaeda
• Smith refused
PROCEDURAL HISTORY:
• Smith brought a declaratory judgment action on March 6, 2006, against Wal-mart asking the judge find that Smith was entitled to sell his anti-Wal-Mart products and maintain his related domain names
• Wal-Mart filed counterclaims on April 28, 2008, alleging
o (1) trademark infringement
o (2) unfair competition
o (3) trademark dilution by tarnishment (not by blurring)
o (4) cybersquatting
• Wal-Mart claimed that Smith was diluting its marks and tarnishing them via negative connotations with the Nazi regime and al-Qaeda
• Wal-Mart moved for summary judgment
ISSUE:
• Whether Smith’s parody websites were protected speech and whether Wal-Mart had a right in the smiley face
RULES/REASONING:
• (1) Trademark protection is available only to distinctive marks – those that serve to identify the source of goods or services
o A mark that is not inherently distinctive may acquire distinctiveness or secondary meaning by becoming associated in the minds of the public with the products or services offered by the proprietor of the mark
o Trademark protection is available only to distinctive marks, and to establish a common-law right in the smiley face, Wal-Mart must show that is has imbued the mark with secondary meaning
 Court considers strength of the mark – the stronger the mark, the greater the protection that is afforded
• Length and nature of the mark’s use
• Nature and extent of advertising and promotion of the mark
• Efforts of the proprietor to promote a conscious connection between the mark and the business
• Degree of actual recognition by the public that the mark designates the proprietor’s product
o Because Wal-Mart offered no evidence of the above factors, the court concluded that the smiley face was not entitled to trademark protection
• To prove Smith committed trademark infringement or cybersquatting or unfair competition, Wal-Mart must show that Smith’s use of its marks is likely to cause an appreciable number of consumers to be confused about the source, affiliation, or sponsorship of Smith’s products
o Court considers:
 Strength of the mark – measure of its distinctiveness
• Smith conceded this point
 Whether designs that incorporate the registered mark are similar
• Smith’s uses depart significantly from Wal-Mart’s
 Whether products sold by parties are similar
• The products are drawn from like categories but the merchandise is also distinguishable in its composition, function, and design so this factor is neutral
 Whether retail outlets and purchasers are similar
• Wal-Mart sells mostly through its chains whereas Smith sells online and even where Wal-Mart sells online, it is not at www.cafepress.com
 Whether parties use the same advertising media
• Wal-Mart spends lots of money in advertising whereas Smith does not advertise other than to family, friends, and online discussion groups
 Whether defendant intended to usurp the mark
• Smith acted in good faith intent because his intent was to parody Wal-Mart while avoiding consumer confusion
 Whether consumers were actually confused
• Court looked at consumer confusion:
o Wal-Mart used expert study which consisted of interviews of 500 consumers – 48% suffered point-of-sale confusion, 41% indicated Website confusion, and 12% were less likely to shop at Wal-Mart after seeing Smith’s designs
o The court, however, gave no weight to this expert testimony because it contained numerous substantial flaws
 Also look at whether it was a parody
• Parody – a simple form of entertainment conveyed by juxtaposing the irreverent representation of the mark with the idealized image created by the mar’s owner; must call to mind the original and communicate element of satire, ridicule, joking, or amusement
• An effective parody will diminish the likelihood of confusion
 The fact that the real Wal-Mart name and marks are strong and recognizable makes it unlikely that a parody – particularly one that calls to mind the genocide of millions of people, another that evokes the name of a notorious terrorist organization…will be confused with Wal-Mart’s real products
• (2) Trademark Dilution by tarnishment – an injury occurs when a trademark is portrayed in an unwholesome or unsavory context likely to evoke unflattering thoughts about the owner’s product
o Dilution applies to famous and distinctive marks
o Smith conceded that Wal-Mart’s marks are strong, famous, and distinctive
 Tarnishment caused by a parody which satirizes a product or image is not actionable under anti-dilution statutes because of the free speech protections of the First Amendment
o A claim of dilution applies only to purely commercial speech; even if the speech benefits the speaker economically, it is noncommercial so long as it consists primarily of noncommercial elements – such as religious or political commentary
o Smith’s products qualified as protected noncommercial speech because his goal was to criticize Wal-Mart, not to make a profit from his products
HOLDING:
• Yes. The websites were protected free speech. No. Wal-Mart was not entitled to trademark protection in the smiley face. (Smith wins on all counts)