Property, intangible

a blog about ownership of intellectual property rights and its licensing

Winning With No Trademark at All

In the United States we often think of “unfair competition” as a claim that is for infringement of an unregistered trademark, but the theory is broader than that. Los Defensores v. Gomez is the rare case where there was an unfair competition claim not involving a trademark, and it was successful.

Plaintiff-respondent Los Defensores is an “attorney joint advertising group” focusing on the Spanish-speaking market in Southern California. It has spent $123 million since 1984 advertising the telephone number “1-800-636-3636.” When a focus group was asked if they “knew of the telephone number of any group of lawyers,” according to the complaint the “overwhelming response was ‘636-3636.’”

Defendants Rosa Gomez and Armando Vero registered a number of 636-3636 telephone numbers in different area codes. When they received a call, they would answer “Law office — how can I help you?” and avoid clarifying when asked whether they were associated with Los Defensores. They referred the calls to the law firm of Amamgbo & Associates and were paid salaries of approximately $12,800 a month for the referrals.

Los Defensores sued Gomez, Vero and Amamgbo. Gomez and Vero were deposed, so there is some evidence in the case, but the court ultimately defaulted Vero and Gomez as a sanction for failing to produce financial documents. The court awarded damages to Los Defensores and Gomez, Vero and Amamgbo appealed on varous bases, including that the complaint did not state a claim upon which relief could be granted.

The complaint, in California state court, alleged common law unfair competition and passing off. The court summarizes the theory this way:

Although the term “unfair competition” applies to several types of misconduct, the tort of unfair competition pertinent here is the act of passing off one’s goods as those of another. That tort developed as a equitable remedy against the wrongful exploitation of trade names and common law trademarks that were not otherwise entitled to legal protection. Injunctive relief and damages are available for common law unfair competition involving fraud or an intent to mislead consumers.

The purpose of the equitable doctrine is to prevent unfair competition through misleading or deceptive use of a term exclusively identified with claimant’s product and business, affording judicial protection whenever the name and the business through continued association become synonymous in the public mind; and submerges the primary meaning of the name in favor of its meaning as a word identifying that business. The crucial element is the mental association in the buyer’s mind between the mark used in connection with the product and a single source of origin.

Under the doctrine, even a term or mark with a common meaning may trigger the crucial mental association when it acquires a “secondary meaning,” that is, becomes identified in the relevant marketplace with a product from a unique or particular source. … Thus, secondary meaning is a shorthand phrase which describes the existence of conditions from which public confusion will flow if the defendant is permitted to pursue his deceptive scheme. If words have been used or employed in such a manner that the public has learned to associate them with the thing described, they acquire a secondary meaning. If an association is thereby formed in the minds of the public which fixes plaintiffs as the source of something of a particular nature to be available in a particular place, this is sufficient.

(Lots of quotation marks removed; emphasis added.) The court elaborated on how this differs from trademark infringement:

Appellants contend that the unfair competition claim is premised on the “flawed theory” that respondent has rights of ownership or control over appellants’ own telephone numbers. We disagree. Respondent’s claim is predicated not on its ownership or control of phone numbers containing the pertinent numerical string, but on its right to prevent deceptive conduct aimed at consumers by exploiting the numerical string after it has acquired a secondary meaning. As our Supreme Court has explained, an unfair competition claim “does not depend on the ownership by plaintiffs of any particular word, phrase, or device, as a trademark…. The right of action in such a case arises from the fraudulent purpose and conduct of the defendant and the injury cause by the plaintiffs thereby, and it exists independently of the law regulating trademarks or of the ownership of such trademark by the plaintiffs. The gist of such an action is not the appropriation and use of another’s trademark, but the fraudulent injury to and appropriation of another’s trade.”

(All sorts of ellipses and quotation marks removed.) Thus, a claim for unfair competition does not require proof that one owns a word or phrase capable of trademark significance, only that there is an association and that the defendant acted with culpability. It therefore is a claim that can be brought for use of a generic term that has “de facto secondary meaning” if there is deception by the defendant.

Here, on a default judgment, the plaintiff showed that there was secondary meaning in the telephone number. The defendants’ conduct was also misleading; they used the number string to pass themselves off as affiliated with the plaintiff and engaged in misleading conduct — while they hadn’t affirmatively represented themselves as the plaintiff, they had a duty to disclose material facts but did not do so, which was fraudulent. Thus the plaintiff had successfully stated a claim for unfair competition and the damages award stood.

Los Defensores, Inc. v. Gomez, B240725 (Cal. App. Ct. Jan. 24, 2014)

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