Century 21 Real Estate Corp. v. Lendingtree, Inc.
425 F.3d 211 (2005)
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Rule of Law:
In a trademark infringement case where a defendant asserts a nominative fair use defense, the plaintiff must first prove that the defendant's use is likely to cause consumer confusion. If the plaintiff meets this burden, the burden then shifts to the defendant to prove its use was fair under a three-part test.
Facts:
- Century 21, Coldwell Banker, and ERA (CCE) are real estate companies that oversee large franchise systems.
- LendingTree (LT) is an internet-based business that provides consumers with a real estate referral service, connecting them with brokers.
- LT's referral network included at least 257 franchisees of CCE's real estate companies.
- On its website, LT stated that its network gave consumers access to brokers from 'leading real estate companies, including Coldwell Banker, ERA and Century 21.'
- LT's website also featured an image of a 'For Sale' sign resembling a Coldwell Banker sign with LT's phone number at the bottom.
- LT also used printed marketing materials stating that it was 'affiliated with' brokers from companies including CCE.
Procedural Posture:
- CCE's in-house counsel sent letters to LT demanding it stop using CCE's trademarks on its website.
- LT made some changes but continued using CCE's marks in block letter form on other webpages.
- CCE commenced an action in the U.S. District Court for the District of New Jersey for trademark infringement and unfair competition.
- CCE applied for a preliminary injunction against LT's use of its marks.
- After the suit was filed, LT voluntarily implemented further modifications to its website, including changing a sign's color and adding disclaimers.
- The District Court granted CCE's motion for a preliminary injunction, finding LT's use was likely to cause consumer confusion and that the nominative fair use defense did not apply.
- LT (Appellant) appealed the issuance of the preliminary injunction to the U.S. Court of Appeals for the Third Circuit, with CCE as Appellees.
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Issue:
In a trademark infringement case where the defendant claims nominative fair use, must the plaintiff first establish a likelihood of consumer confusion before the burden shifts to the defendant to prove that its use of the mark was fair?
Opinions:
Majority - Rendell, Circuit Judge.
Yes. In a trademark infringement case involving a nominative fair use defense, the court adopts a two-step approach where the plaintiff must first prove a likelihood of confusion, after which the burden shifts to the defendant to prove its use was fair. The court rejects the Ninth Circuit's approach of replacing the likelihood of confusion analysis with a nominative fair use test. Instead, it holds that likelihood of confusion is a key element of the plaintiff's case under the Lanham Act. However, the traditional ten-factor likelihood of confusion test (the 'Lapp' factors) must be tailored for the nominative use context, as some factors are unworkable. Once a plaintiff proves likely confusion, the defendant can still prevail by proving its use was fair under a new three-part test: (1) the use of the plaintiff's mark is necessary to describe both parties' products/services; (2) only so much of the mark is used as is necessary; and (3) the defendant's conduct and language accurately reflect the true relationship between the parties.
Concurring - Fisher, Circuit Judge.
Yes. While concurring in the judgment to remand, the analysis should not be a bifurcated test. Proper nominative use is simply use that is not likely to cause confusion, and the inquiry should be a single, modified likelihood of confusion test where the plaintiff always retains the burden of proof. The majority's two-step approach improperly shifts the burden to the defendant to negate confusion, contrary to Supreme Court precedent in KP Permanent Make-Up. The factors the majority places in its 'fairness' defense are simply inquiries into the defendant's intent and good faith, which are already part of the traditional likelihood of confusion analysis. Creating a separate affirmative defense is judicially unmanageable, as it requires courts to analyze the same issues of intent and truthfulness on both sides of the analytical divide.
Analysis:
This case establishes a new, bifurcated framework for analyzing the nominative fair use defense in the Third Circuit, diverging from the Ninth Circuit's established test. By requiring the plaintiff to first prove a likelihood of confusion before the defendant must prove fairness, the decision preserves the traditional structure of a trademark infringement claim. The creation of a modified, three-part fairness test provides a specific framework for defendants to justify their use of another's trademark, even if some consumer confusion is likely. This approach will influence how future cases involving comparative advertising, commentary, and referential use of trademarks are litigated, emphasizing the plaintiff's initial burden while providing a clear safe harbor for defendants engaged in legitimate nominative use.
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