License to Infringe? Penn State Roars Over Apparel Manufacturer’s Use of Trademarks Without Permission | Kohrman Jackson & Krantz LLP
Collegiate merchandise licensing is a thriving and lucrative business generated by the immense popularity and widespread support for college sports teams and institutions. Universities and colleges have devoted fan bases comprising of alumni, students and supporters who eagerly purchase branded products to show their allegiance. Licensing agreements allow companies to produce and sell a wide range of merchandise featuring college logos and symbols, generating substantial revenue streams for both the educational institutions and the licensed manufacturers. However, one unlicensed apparel manufacturer is taking the Nittany Lions to the mat in hopes of turning this multi-billion-dollar juggernaut on its head.
Pennsylvania State University v. Vintage Brand LLC
In 2021, Pennsylvania State University (Penn State) sued apparel manufacturer Vintage Brand LLC (Vintage) in the U.S. District Court for the Middle District of Pennsylvania, (Pennsylvania State University v. Vintage Brand LLC et al., case number 4:21-cv-01091), for counterfeiting and trademark infringement due to the unlicensed use of Penn State’s marks on apparel sold by Vintage. Recently, the Court dismissed Penn State’s counterfeit claim and wasn’t convinced by Penn State’s request to dismiss Vintage’s argument that the use of Penn State’s marks on Vintage apparel was “ornamental,” forcing the trademark infringement claim to proceed to trial.
The Court’s decision dismissing Penn State’s counterfeiting claim could make it harder for trademark licensors to assert such claims, as it found the evidence did not demonstrate Vintage’s use of Penn State’s marks was likely to cause confusion in the marketplace as to the origin of the apparel. In so ruling, the Court considered, among other things, that no rational consumer would expect or believe that a university would produce its own merchandise, at that no confusion as to the apparel’s origin reasonably existed because Vintage’s own brand markings is placed on the packaging of the apparel and on the apparel itself.
Trademark Infringement and Ornamental Defense
Generally, if you are a licensor and it is your licensee that is putting out goods bearing your mark, you can successfully challenge an unlicensed third-party that puts out the same goods bearing imitations of your mark. However, this opinion turns that understanding on its head and suggests that trademark licensors are in a completely different category from trademark owners who merchandise goods themselves. The Court’s decision also appears to suggest that a “disclaimer” or “prominent use” of the infringing company’s “mark” can preclude liability for counterfeiting.
The Court also agreed that Vintage’s “ornamental” defense in response to Penn State’s trademark infringement claim had enough merit to send the claim to trial as to certain marks. Unlicensed companies that sell merchandise, such as clothing, featuring the names, logos, and specific designs/mascots of schools and professional sports teams – who have registered trademarks – routinely claim that the trademarks are being used as mere ornamentation and not an indicator of the source or the merchandise, or that it is simply being used to express affiliation or admiration. This can potentially shield these unlicensed companies using protected marks from liability. Words, phrases, and designs that adorn articles of clothing (say, the front of a sweatshirt) in a merely decorative fashion can signify ornamental use.
Incontestable Trademarks and Defense
However, if a trademark is “incontestable,” in that, among other things, it is registered, has not been challenged within five years after registration, and has been continuously used in commerce for five consecutive years after registration, a third-party cannot defend against an infringement claim on the grounds that the mark is merely ornamental. In the case of certain Penn State marks, the Court found that Vintage was prohibited from presenting the “ornamental” defense as to most of Penn State’s marks at issue as they were incontestable.
Because most of Penn State’s marks were incontestable, the central issue will hinge on whether Vintage’s use of the marks cause a likelihood of confusion in the marketplace. Factors in determining confusion will likely involve showing similarity between the marks and those used on the infringing products, the strength of the marks, the intent of the alleged infringing party in using the marks, and evidence of actual consumer confusion.
Trademark Enforcement and Consumer Perception
Given these factors, companies must carefully assess whether the use of their trademarks by unlicensed apparel manufacturers creates a likelihood of confusion among consumers. In that analysis, consumer perception may play an important role in trademark disputes involving branded merchandise. It would be wise for trademark holders to consider how consumers interpret trademarked products and whether they may be misled into believing the products are officially licensed or endorsed.
Conclusion
The outcome of this legal battle could have broader implications for the licensing industry, particularly concerning the enforcement of trademark rights for merchandise and apparel and for the growing number of online apparel companies. The case underscores the complexity in determining whether the use of another’s trademark by clothing manufacturers constitutes infringement, is merely ornamental, and/or is likely to cause confusion. This ambiguity can make it challenging for trademark holders to enforce their rights effectively. Trademark holders must diligently protect their trademark rights and should consult with legal counsel if they have questions about how these recent developments might impact them.
