Smith v. Wal-Mart Stores, Inc.
537 F.Supp.2d 1302 (N.D.Ga. 2008)
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Rule of Law:
The use of a famous trademark in a parody for the purpose of commentary or criticism is protected non-commercial speech and does not constitute trademark infringement or dilution if it is unlikely to cause consumer confusion about the source or sponsorship of the goods.
Facts:
- Charles Smith, a vocal critic of Wal-Mart, created designs and slogans criticizing the company's business practices.
- Smith invented the portmanteau "Walocaust" (Wal-Mart + holocaust) and created designs featuring it, including one with a Nazi-style eagle grasping a smiley face.
- In July 2005, Smith began selling merchandise such as t-shirts, mugs, and bumper stickers with his "Walocaust" designs through the website CafePress.com.
- He set his sale prices approximately 30% above cost, hoping to cover his expenses for the website and domain name, but his revenues were ultimately less than his costs.
- After Wal-Mart sent cease-and-desist letters, Smith created a new parody, "Wal-Qaeda" (Wal-Mart + Al-Qaeda), and began creating and selling merchandise with it.
- Smith registered domain names like walocaust.com and wal-qaeda.com to host websites containing his criticism of Wal-Mart, links to other anti-Wal-Mart sites, and links to his merchandise.
- Smith's websites included disclaimers stating that the site was unaffiliated with Wal-Mart.
- The merchandise included slogans such as "WALAOCAUST. Come for the LOW prices[,] stay for the KNIFE fights" and "SUPPORT OUR TROOPS[.] BOYCOTT WAL-QAEDA."
Procedural Posture:
- Wal-Mart sent cease-and-desist letters to Charles Smith and the online retailer CafePress.
- In response, CafePress removed Smith's Wal-Mart-related merchandise from its website.
- On March 6, 2006, Smith filed an action in the U.S. District Court for the Northern District of Georgia, seeking a declaratory judgment that his activities were lawful.
- On April 28, 2006, Wal-Mart filed an answer and counterclaimed against Smith for federal and state trademark infringement, unfair competition, dilution, and cybersquatting.
- Both Smith and Wal-Mart filed cross-motions for summary judgment.
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Issue:
Does the sale of merchandise featuring parodies of a famous trademark, such as 'Walocaust' and 'Wal-Qaeda' for 'Wal-Mart', for the purpose of social and political commentary, constitute trademark infringement, dilution, and cybersquatting under the Lanham Act?
Opinions:
Majority - Timothy C. Batten, Sr.
No. The sale of merchandise featuring such parodies does not constitute trademark infringement, dilution, or cybersquatting. To be a successful parody, a work must both call to mind and differentiate itself from the original, communicating an element of satire or ridicule. The court found Smith's designs were successful parodies because they used Wal-Mart's imagery to evoke the company but juxtaposed it with scathing, critical commentary that no reasonable consumer would mistake for the company's own 'idealized image.' Applying the seven-factor likelihood of confusion test, the court concluded that no confusion was likely. The strength of Wal-Mart's famous mark actually decreases the likelihood of confusion, as consumers can more easily recognize the jest. Furthermore, the parody is considered non-commercial speech protected by the First Amendment, which exempts it from dilution by tarnishment claims, even though the merchandise was offered for sale. Smith's primary intent was to express a political message, not to engage in a commercial transaction.
Analysis:
This decision reinforces the strength of parody as a defense to trademark infringement and dilution claims, particularly when the parody serves as social or political commentary. The court's reasoning establishes that for parody cases, the fame of the senior mark can paradoxically weaken an infringement claim by making consumer confusion less likely. The ruling also clarifies that the sale of expressive goods does not automatically convert protected non-commercial speech into unprotected commercial speech for the purpose of dilution analysis, thereby protecting creators who use merchandise to spread a message.
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