R. G. Smith v. Chanel, Inc.
402 F.2d 562 (1968)
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Rule of Law:
A party may use a competitor's trademark in its advertising to identify the competitor's product that it has copied, so long as the advertising is truthful and does not create a reasonable likelihood of confusion as to the source, identity, or sponsorship of the advertiser's product.
Facts:
- R. G. Smith, under the business name Ta'Ron, Inc., created a fragrance named 'Second Chance'.
- Chanel, Inc. manufactured and sold a famous, unpatented perfume known as 'Chanel No. 5'.
- Smith published an advertisement in a trade journal claiming that 'Second Chance' duplicated '100% perfect the exact scent' of 'Chanel No. 5' at a much lower price.
- The advertisement suggested a 'Blindfold Test,' challenging customers to 'try to detect any difference between Chanel #5 (25.00) and Ta’Ron’s 2nd Chance. $7.00.'
- An order form in the ad listed 'Second Chance' with '*(Chanel #5)' written below it, and an asterisk noted that 'Chanel #5' was the 'Registered Trade Name of Original Fragrance House.'
- For the purposes of the legal proceedings, Chanel, Inc. conceded that Smith had the right to copy the unpatented formula and assumed that Smith's product was an equivalent.
- Chanel, Inc. also disclaimed any contention that the packaging or labeling of 'Second Chance' was misleading or confusing.
Procedural Posture:
- Chanel, Inc. sued R. G. Smith in the United States District Court for the Northern District of California for trademark infringement and unfair competition.
- The district court granted a preliminary injunction in favor of Chanel, Inc., prohibiting Smith from making any reference to 'Chanel No. 5' in his advertising.
- Smith, as appellant, appealed the district court's grant of the preliminary injunction to the United States Court of Appeals for the Ninth Circuit.
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Issue:
Does a competitor's use of a trademark in advertising to identify the trademark owner's unpatented product as the one being copied constitute trademark infringement or unfair competition, when the advertising does not create a likelihood of confusion as to the product's source?
Opinions:
Majority - Browning, Circuit Judge
No. A competitor may use another's trademark to truthfully identify the product they have copied, provided it does not create confusion as to source or sponsorship. The court reasoned that since Chanel's perfume was unpatented, Smith had a legal right to copy it. To exercise this right meaningfully, Smith must be able to inform the public what he has copied, and the most effective way to do so is by using the original product's trademark. The primary legal function of a trademark is to identify the source of goods, not to grant a monopoly over the product itself. Prohibiting such comparative advertising would stifle competition and deprive consumers of information about lower-priced, equivalent products, effectively extending the trademark monopoly to cover the unpatented product. The public interest in competition outweighs the trademark owner's interest in preventing a competitor from taking a 'free ride' on the goodwill of the mark, so long as there is no misrepresentation or consumer confusion.
Analysis:
This case is a foundational decision for the doctrine of nominative fair use in American trademark law. It establishes the critical principle that a trademark can be used by a competitor for the purpose of referring to the trademark owner's product, a practice essential for comparative advertising. The decision prioritizes the public policies of promoting free competition and ensuring consumer access to information over a trademark holder's desire for absolute control over their mark. This precedent protects a wide range of communicative acts, from advertising to journalism and parody, by allowing reference to trademarked goods without infringing, provided the use is not misleading about sponsorship or endorsement.
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