The VIP Products v. Jack Daniel’s trademark dispute resulted in new Supreme Court guidance on the interplay between parody and trademark rights. On remand, the District Court for the District of Arizona recently held that there was no likelihood of confusion between VIP’s “Bad Spaniels” trademark and Jack Daniel’s trademarks and trade dress, but that “Bad Spaniels” is likely to tarnish Jack Daniels’ famous marks.

Judge McNamee issued a permanent injunction enjoining VIP Products from manufacturing, advertising, selling or distributing the Bad Spaniels dog toy, as depicted below alongside a bottle of Jack Daniel’s whiskey:

Background

The dispute at issue in Jack Daniel’s arises from a conflict between the well-known whiskey company and a dog toy company (VIP) regarding VIP’s unauthorized use of Jack Daniel’s trademarks and trade dress in connection with a dog toy. The toy purportedly parodies the Jack Daniel’s brand by, for example, saying “Bad Spaniels” on the label instead of “Jack Daniel’s” and “The Old No. 2 on your Tennessee Carpet” instead of “Old No. 7” and “Tennessee Sour Mash Whiskey.”

In response to a cease-and-desist letter from Jack Daniel’s claiming that VIP was infringing and diluting its trademark rights, VIP filed a complaint in the District of Arizona seeking a declaration of non-infringement and no dilution. The District Court agreed with Jack Daniel’s, but the Ninth Circuit reversed, holding that VIP’s “humorous” use of Jack Daniel’s trademarks and trade dress qualified the toy as an “expressive work” entitled to heightened First Amendment protection. The Ninth Circuit analyzed the case by reference to the Rogers framework first developed by the Second Circuit Court of Appeals. The test offers heightened First Amendment protection from infringement claims to artistic works, including titles. The Ninth Circuit also held that VIP’s “humorous message” rendered its use of Jack Daniel’s marks “noncommercial”, absolving VIP of dilution liability as a matter of law.

The Supreme Court reversed this ruling. On the subject of infringement, the Court said that use of the Rogers inquiry, or any First Amendment threshold inquiry, is not appropriate when the allegedly infringing trademark is used for source identification holding that likelihood of confusion is the proper analysis. The Court noted that if the parody is sufficiently original, creating contrasts so that its message of ridicule or pointed humor becomes clear, a parody may be found not to create confusion.

On the subject of dilution, the Court determined that the statute’s fair use defense does not apply when the diluting mark is used to identify the source of the goods.

The Court remanded the judgment for further proceedings consistent with its opinion.

Judgment on Remand

On remand, Senior Judge McNamee held that: (1) VIP waived its constitutional challenge to the dilution statute by failing to amend its pleadings; (2) there was no likelihood of confusion between the “Bad Spaniels” trademark and Jack Daniel’s trademarks and trade dress, including because “Bad Spaniels” was a successful parody; and (3) the “Bad Spaniels” trademark is likely to tarnish Jack Daniel’s trademarks and trade dress by creating unsavory associations between Jack Daniel’s marks and dog feces.

Waiver. On remand, VIP raised a challenge to the constitutionality of the dilution statute, arguing that it violates the First Amendment. Jack Daniel’s objected to VIP’s argument, pointing out that VIP had not raised this issue at the trial court or on appeal. The trial court came to the same conclusion as Jack Daniel’s on this issue (i.e., VIP had waived the challenge), but for different reasons, saying that it was not properly before the Court because VIP had not amended its pleadings to assert its constitutional challenge as an affirmative defense. This decision highlights the importance of always remembering the basics – e.g., the Federal Rules of Civil Procedure require a party to state affirmatively any affirmative defense, and failure to do so waives the defense.

Infringement. The Supreme Court said that, in the context of parody, the question of whether the mark that is being parodied is also being infringed hinges on the likelihood of confusion. In other words, is the parody strong enough to establish a separate identity and thus avoid being confused with the original mark?

In the trial court’s analysis during the original trial, many of the likelihood of confusion factors weighed in favor of finding likelihood of confusion, including the strength of Jack Daniel’s marks, the similarity of the marks, and the relatedness of the goods. However, based on the Supreme Court’s comment that successful parody often helps to reduce the likelihood of confusion, the Court weighed the factors differently on remand. After determining that “Bad Spaniels” was a successful parody, several of the factors shifted to VIP’s favor – for example, the fame of the Jack Daniel’s marks and the similarity of the “Bad Spaniels” and Jack Daniel’s marks was necessary for the parody to succeed, so they no longer weighed in favor of finding likelihood of confusion.

The court commented that “neither party seizes a runaway victory upon reconsideration” of the likelihood of confusion analysis when accounting for the parody. However, by beginning with the premise that a successful parody is unlikely to be confusing, the court found that Jack Daniel’s did not prove likelihood of confusion by a preponderance of the evidence.

Dilution. Following the Supreme Court’s ruling that fair use (including parody) is not a defense to trademark dilution when the diluting mark is used as a source identifier, the court focused on the question of whether tarnishment, a form of dilution, was likely to occur as a result of VIP’s marketing of Bad Spaniels products. The court determined that it would, relying on Jack Daniel’s expert, who pointed to consumer research to establish that consumers are disgusted when food or beverage products are associated with defecation.

Because the Court found dilution liability, it entered a permanent injunction, enjoining VIP from manufacturing, advertising, importing, selling, or distributing the Bad Spaniels dog toy in the United States.

VIP Products has filed a notice of appeal to the Ninth Circuit Court of Appeals.