Unfair competition is a legal claim. It is not exclusive to legal disputes revolving around trademark law. However, when a registered trademark is infringed, the party claiming infringement may include a claim of unfair competition in an infringement complaint.
This Article will discuss the elements of this claim under US law. It will conclude with the application of the law to trademark-related legal disputes specifically.
What Is Unfair Competition?
“Unfair competition” is an allegation raised in civil litigation. It is the allegation that a party has engaged in deceptive, wrongful, or fraudulent business practices. These practices must have caused economic injury to the complaining party to be “unfair.”
To be unfair, these practices must have confused or deceived consumers. Practices that either cause economic loss to a complaining party or that have harmed its reputation among consumers may trigger a claim of unfair competition.
Claims of unfair competition may be brought either in Federal Court or in Michigan or other state courts.
What Actions Constitute Unfair Competition?
What are those unfair practices, specifically?
Bluntly, they are whatever a court considering a complaint of unfair competition says that it is. However, when a business makes false statements or passes off its own goods or services for those of another, that may be unfair competition.
That said, some activities which have been held to constitute unfair competition or trade practices include:
- Misleading, deceptive, and false advertising;
- “Bait and switch” selling tactics;
- Unauthorized substitution of one brand of goods to another;
- Theft of trade secrets;
- “Passing off” goods in a way that hides their true origin;
- Use of confidential information to solicit customers;
- Trade libel or rumor mongering;
- Breaches of restrictive covenants;
- False representation of products or services; and
- Misappropriation of trade secrets.
Under the Common Law (judge-made, non-statutory law), the elements of unfair competition are:
- A confusing similarity in the appearance of the goods involved;
- The name or symbol in question must be in use in commerce;
- It must also identify a specific source.
- That “source” must have suffered some economic injury, such a decrease in sales or reduction in customer good will;
- The infringer must have intended to deceive the public—and the public must actually be confused.
Liability for unfair competition can result in an injunction prohibiting further action of that sort. It can also result in an order to pay attorney’s fees and costs, punitive damages, and damages compensating the victim for the injury suffered.
Thus, the cost of unfair competition can be extensive—to you.
What Does Unfair Competition Mean in the Trademark Context?
Unfair competition is a form of trademark infringement. It generally involves:
- The copying or unlicensed use of a trademark;
- Packaging or marketing goods so as to give the appearance of another registered trademark;
- Other activities resulting in a likelihood of confusion regarding the source of goods or services;
- Or resulting in the dilution of the value of the registered trademark.
The purpose of US trademark registration is, in fact, to prevent the sort of consumer confusion that unfair competition causes.
Unlike copyright or patent registration, the purpose of trademark registration is to ensure that consumers buying goods or services are not confused as to what they are buying—and from whom.
Thus, the concepts of unfair competition and trademark infringement are deeply intertwined.
Do You Need to Register a Trademark Before Suing for Unfair Competition?
In order to file a lawsuit for trademark infringement in Federal Court, you must first have registered your trademark with the US Patent and Trademark Office (USPTO). This a requirement of the US Trademark Act (Lanham Act) that has been reinforced by US Supreme Court caselaw.
However, as noted above, it is possible to file “common law” claim for unfair competition in Michigan or other state courts, outside of the Federal context.
This relief will be sought in a Michigan (or other) State court and will enjoin the unfair competitor’s activity only within Michigan or whichever state in which the suit is filed.
Your relief, however, if the victim of unfair competition, will always be most complete when you are able to invoke Federal law as the basis of a claim filed in Federal Court.
Unfair Competition and Trademark Law: The Bottom Line
The bottom line is that, if you are engaged in trade and utilizing a trade name, there is no reason not to seek the ongoing protection afforded by US trademark registration.
Your business name, product name, slogan, logo, or other brand identification and sourcing will best survive its day in court if your claim for unfair competition or other form of trademark infringement is fueled by a registration certificate issued by the USPTO.
Noble Path Trademark Law is a boutique US law practice located in Metro Detroit and assisting entrepreneurs, solopreneurs, artists, musicians, start-ups, and larger enterprises with robust intellectual property portfolios, and others in all industries with trademark registration, trademark renewal, trademark monitoring, and Office Action refusal response matters.
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