On March 19, 2010, the Food and Drug Administration issued final regulations imposing significant restrictions on tobacco product marketing and labeling. The regulations (21 CFR 1140.16(a)) will outlaw tobacco brand names introduced since January 1, 1995 if they are the same as ANY OTHER trade name or brand name - for ANY product at all. If the FAA made this rule Delta Airlines would have to change its name because of Delta Dental and Delta Faucets. The FDA states it is "aware of concerns regarding this provision and is considering what changes, if any, would be appropriate" and there is no assurance any changes will be made.
This rule contradicts fundamental trademark law under which companies obtain trademark rights just from using a trademark - registration is not required. These rights are called "common law" trademark rights. The concept dates back at least to the 1200's when England enacted the first trademark law; although there is evidence the Romans used trademarks too.
A fundamental principle of trademark law is infringement occurs only when two marks are confusingly similar. The same word can be used for many uses if it is not likely to cause confusion, and is why Delta Airlines and Delta Faucets co-exist.
The trademark case between the makers of Baileys Irish Cream and Bailey’s cigarettes is an excellent case study (IDV North America et al v. S & M Brands, Inc., 26 F. Supp 2d 815 (EDVA 1998.) Since 1979 IDV was the exclusive North American distributor of Baileys Irish Cream liqueurs, which it marketed as a premium product. In 1994 S & M Brands introduced Bailey’s cigarettes as an inexpensive “generic” cigarette. Mac and Steven Bailey own S & M Brands, hence the name of their product. IDV sued S & M Brands claiming trademark infringement. The court listed factors to consider in determining whether the public was likely to be confused “as to the source or sponsorship of the goods” including: 1) the distinctiveness of the mark used first, 2) the similarity of the marks, 3) the similarity of the goods/services, 4) whether the goods are sold in similar channels, 5) the intent of the second user, and 6) whether there was actual confusion.
The court reviewed the factors and held IDV did not meet “its burden of showing that [S & M’s] use of the Bailey’s mark for its cigarettes is likely to cause confusion among customers.” Today, S & M Brands continues to market Bailey’s cigarettes.
The foundation for trademark analysis is completely missing from new FDA regulation 21 CFR § 1140.16(a):
A manufacturer shall not use a trade or brand name of a nontobacco product as the trade or brand name for a cigarette or smokeless tobacco product, except for a tobacco product whose trade or brand name was on both a tobacco product and a nontobacco product that were sold in the United States on January 1,1995.
The regulation does not refer to “likelihood of confusion.” Perhaps this is a loophole in the regulations. In the “Baileys” case the court disregarded the fact the name of the liqueur does not have an apostrophe and the name of the cigarettes does, so maybe for FDA purposes small distinctions such as adding an “e” or an “s” to a word would distinguish it from a non-tobacco use.
“New” (by that I mean trademarks introduced after January 1, 1995 – or whatever other date the FDA settles on) trademarks for tobacco products will be virtually worthless under this regulation because it prohibits a tobacco product name unless it is completely unique in the universe of brand names and trade names. Even if there is zero chance of confusion, if the same brand name is subsequently used for anything at all, that subsequent use will pre-empt the tobacco use.
For example, if a tobacco product manufacturer creates the brand name "GILIQUIDD" for cigarettes, and someone later starts selling GIILIQUIDD hair brushes or opens a GILIQUIDD lemonade stand, the tobacco company's brand name becomes illegal. The tobacco company has no way to challenge the subsequent use because there is no likelihood of confusion.
Trademarks constitute a property right that can be bought and sold. How will the FDA compensate trademark owners whose property is deprived because their existing marks are made illegal under this regulation? What about “new” unique marks that fall victim to a future use by an unrelated party? What are the First Amendment implications? What company would qualify a new brand with the various states if the name can be taken away anytime someone opens a lemonade stand under the same name?
The benefit to grandfathered trademark owners cannot be overstated. The regulation builds a fence around their brands and any newcomers risk their product name to the uncontrollable actions of unrelated parties. It seems unlikely there will be any newcomers as long as this regulation is in effect.
