One of the unavoidable elements of free trade is the fact that successful companies do not thrive in obscurity for long. While some circles consider imitation the sincerest form of flattery, it is an unwelcome development for successful business, with the potential to drain profits and tie up the entity in burdensome, time-consuming litigation. Thus, while the law supports open competition as a means of offering choices to consumers, it also advocates the protection of a business's own diligence, hard work, idea base, and its identity. The law does not permit the usurpation of the goodwill a business has built. Nonetheless, the vindication of these two goals – protecting the goodwill of an entity and defending the free market – has fostered an inherent tension within the judicial system. How far a company can go to capitalize on another's good fortune has been, and remains, a hotly contested issue. Consequently, successful businesses too often discover that their goodwill is being pilfered long after their profit base has been affected. Congress took steps to address these concerns in 1946 with the passage of the Lanham Act (codified at 15 U.S.C. § § 1051-1150), which replaced the less flexible and narrower Trade-Mark Act of 1920. The goal of the Lanham Act is to protect consumers and business competitors from deception and misrepresentation of products and services in interstate and foreign commerce. See Heald, "Federal Intellectual Property Law and the Economics of Preemption," 76 Iowa L. Rev. 959, 1002 (1991). The Act is structured to prevent the infringement of trademarks, which represent the goodwill of a business, and a product's trade dress, which is the overall image of a product. McDonald's Corp. v. Shop at Home, Inc., 82 F. Supp. 2d 801, 807 (M.D. Tenn. 2000). Additionally, and perhaps more importantly, section 43(a) of the Act (a 1989 amendment) addresses the broader cause of action for unfair competition, particularly in the context of false advertising, commercial disparagement, trademark dilution, misappropriation, and passing off. This article will explore two major areas of potential liability under the Lanham Act: infringement of trademarks and unfair competition. The Act gives businesses a potential sword with which to do battle in situations where competitors are usurping their assets. A knowledge of the Act also strengthens a business's long-term competitive strategy. Infringement of Trademarks A business's trademark is the core of its identity. The Lanham Act defines a trademark as a "word, name, symbol, or device, or any combination thereof" used by any entity or person "to identify and distinguish his or her goods, including a unique product, from those manufactured or sold by others and to indicate the source of the goods, even if that source is unknown." 15 U.S.C.A. §1127. Trademarks serve as the link between a business's product line and the marketplace. The trademark is the signature of a company, putting the outside world on notice of the quality and character of a particular product and thereby preventing consumer confusion. The protection of a company's trademark is crucial to the growth and development. Most courts assess the strength of a business's trademark by applying the test adopted by Judge Friendly in Abercrombie & Fitch Co. v. Hunting World, Inc., 537 F. 2d 4 (2d Cir. 1976). Under this test, trademarks are classified into four categories along a distinctiveness continuum: generic; descriptive; suggestive; and arbitrary or fanciful. Generic marks may never acquire Lanham Act protection; descriptive marks may acquire protection upon a showing of secondary meaning; and suggestive, arbitrary, and fanciful marks are inherently distinctive and thus subject to protection without any showing of secondary meaning. Trademarks obtain secondary meaning when the public identifies that mark with a specific source. See Inwood Laboratories, Inc. v. Ives Laboratories, Inc., 456 U.S. 844, 851 n.11 (1982). To prevail on an infringement claim, the claimant (i.e., the company) must demonstrate that it held a valid trademark and that the defendant unlawfully used a similar mark in commerce. See 15 U.S.C. § 1114(1). The linchpin in determining infringement is whether there a likelihood of confusion among an appreciable number of consumers as to the source, affiliation, or sponsorship of a good or service? See Ty, Inc. v. Jones Group, Inc., 237 F.3d 891 (7th Cir. 2001); Hormel Foods Corp. v. Jim Henson Productions, Inc., 73 F.3d 497, 502 (2d Cir. 1996). The Seven Factor Test for Determining Infringement While the tests courts apply in determining whether there is a likelihood of confusion exists vary slightly, the seven core factors are largely the same, containing mixed questions of fact and law. Courts employ these elaborate tests because they presume that the consumer would not have time to make a side-by-side comparison of the marks or dress. They apply the same factors in assessing the potential for confusion. See, Polaroid Corp. v. Polaroid Electronics Corp., 287 F.2d 492 (2d Cir. 1961). The initial factor courts consider is how similar the two marks are in their appearance, sound, or general impression that is fostered. For example, the Seventh Circuit found the marks "Dramamine" and "Bonamine" confusingly alike due to the similarity of letters, stress patterns, and acoustic properties of the letters. See G.D. Searle & Co. v. Chas. Pfizer & Co., 265 F.2d 385, 387 (7th Cir. 1959). The second factor used to evaluate whether there is infringement is the strength of the mark, or "its tendency to identify goods sold as emanating from a particular, even if anonymous, source." Mead Data Central, Inc. v. Toyota Motor Sales, U.S.A., Inc., 702 F. Supp. 1031, 1035 (S.D.N.Y. 1988). In other words, where does the mark land on a distinctiveness spectrum? Distinctive marks include fanciful marks and arbitrary marks. Fanciful marks, such as "Coppertone," "Exxon," "Clorox," and "Kodak," apply to coined words invented solely for use as trademarks. Arbitrary marks are common words applied in an unfamiliar way. Examples of arbitrary marks include: Amazon (for the on-line retailing bookstore); Horizon (banking services); and Apple (computers). Courts allow greater protection to fanciful and arbitrary marks because they foster the greatest amount of recognition within the public as to the origin of certain goods and services. See Frehling Enterprises, Inc. v. International Select Group, Inc., 192 F.3d 1330 (11th Cir. 1999). Consequently, marks that are similar are more likely to confuse the consumer. See King of the Mountain Sports, Inc. v. Chrysler Corp., 185 F.3d 1084, 1093 (10th Cir. 1999). Third, courts look at the proximity, or relatedness, of the goods. "Where goals are related or complementary, the danger of consumer confusion is heightened." AMF, Inc. v. Sleekcraft Boats, 599 F.2d 341, 350 (9th Cir. 1979). This factor delves into the types of products to which the parties apply their marks. "[A] 'closely related' product is one which would reasonably be thought by the buying public to come from the same source, or thought to be affiliated with, or sponsored by, the trademark owner." Sands, Taylor & Wood Co. v. Quaker Oats Co., 978 F.2d 947, 958 (7th Cir. 1992). This element is significant because, should the defendant and the plaintiff use their marks on the same or related kinds of products or services, a greater likelihood of confusion about the source of those goods arises. In weighing this factor, courts consider content, geographic distribution, market position, and audience appeal. See Major League Baseball Properties, Inc. v. Sed Non Olet Denarius, Ltd., 817 F. Supp. 1103, 1120 (S.D.N.Y. 1993). For example, proximity of products was the determining factor in CBS, Inc. v. Liederman 866 F. Supp. 763 (S.D.N.Y. 1994), aff'd per curiam, 44 F.3d 174 (2d Cir. 1995), where the court held that because one mark was intended to protect a television production studio in California, and another was to represent a restaurant in New York, no likelihood of confusion could be found. Although "an avid fan of television may be attracted to both places, it does not mean that they would visit one at the expense of the other. The individual would have two entirely different experiences." 866 F. Supp. at 767. As a fourth consideration, courts assess "whether the senior user of the mark is likely to enter the market in which the junior user is operating." Centaur Communications, Ltd. v. A/S/M Communications, Inc., 830 F.2d 1217, 1226 (2d Cir. 1987). One of the central tenets of trademark law is that a senior user's right to enter a related field in the future ought to be protected. See Scarves by Vera, Inc. v. Todo Imports, Ltd., 544 F.2d 1167, 1172 (2d Cir. 1976). Trademark law encourages free competition by preventing entities from using another company's goodwill to launch itself into a similar field or product line. This factor is challenging for courts as they must weigh the likelihood that the senior user will enter a particular market based on the types of products and services protected under a trademark. Courts must consider the state of events that existed at the time the intervening use commenced and assess whether the senior user's rights would have naturally expanded into the area of the junior user's mark. See Carnival Brand Seafood Co. v. Carnival Brands, Inc., 187 F.3d 1307 (11th Cir. 1999). Thus, while a cola manufacturer may enter a market for juices and bottled water (as Pepsi and Coca-Cola have done during the past few years), is it too remote for them to enter into a particular line of snack foods? Such a case would force the judge to undergo the difficult task of assessing the natural progression from one market into another. The fifth factor – whether actual confusion among consumers has occurred – is just as difficult to prove as the fourth. Because it would be unfair to penalize a party for seeking protection of its trademark rights before serious damage has occurred, courts have not made actual confusion an essential element that the claimant must prove to prevail under the Lanham Act. Nonetheless, courts find evidence of consumers who can testify about their confusion as to the origin of a product due to the presence of a junior trademark's similarity with a senior one very persuasive. See Carnival Corp. v. SeaEscape Casino Cruises, Inc., 74 F. Supp. 2d 1261 (S.D. Fla. 1999). Such conditions rarely exist though. As a sixth factor, courts inquire about the good or bad faith of a defendant, and whether the defendant "adopted its mark with the intention of capitalizing on plaintiff's reputation and goodwill and any confusion between [defendant's] and the senior user's product." W.W.W. Pharmaceutical Co. v. Gillette Co., 984 F.2d 567, 575 (2d Cir. 1993). In other words, what was the motive behind the defendant's application of a similar trademark? Courts almost always apply an estoppel theory in assessing this factor, weighing the amount of time and money the defendant has expended in promoting its mark, while interpreting the defendant's intentions. Bad faith will be inferred where the junior appropriator has knowledge of the complaining party's trademark, but nevertheless deliberately imitates such a mark. See Aunt Jemima Mills Co. v. Rigney & Co., 247 F. 407 (2d Cir. 1917). Hence, much of the burden in succeeding on this point rests with the defendant, who must explain the rationale behind its choice of trademarks. Finally, the seventh factor that courts consider is the sophistication of the consumers. Courts have long held that the more sophisticated the potential purchaser, and the more costly the goods or services in question, the more careful and discriminating the purchasers will be. See Comic Strip, Inc. v. Fox Television Stations, Inc., 710 F. Supp. 976, 979 (S.D.N.Y. 1989). Sophisticated consumers are, therefore, less likely to be misled or confused by similarities in the plaintiff's and defendant's marks. The burden of proving this factor rests with the claimant, who must demonstrate that the number of reasonably prudent purchasers likely to be confused by the similarity of the marks and products is appreciable. See BigStar Entertainment, Inc. v. Next Big Star, Inc., 105 F. Supp. 2d 185 (S.D.N.Y. 2000). Knowledge of the likelihood-of-confusion test is important because its application is not limited to infringement cases involving registered trademarks. The general principles qualifying a mark for protection under the Lanham Act are also at the heart of another large body of liability – unfair competition. Unfair Competition Originating from state common law, the federal law of unfair competition provides a company with redress for the improper conduct of a competitor. Specifically, the Lanham Act seeks to thwart the efforts of one business entity to damage the goodwill or other intangible trade values of another. To maintain a cause of action for federal unfair competition, which section 43(a) of the Lanham Act, a plaintiff must show that misleading or untruthful statements have been made for the purpose of commercial advertising or promotion, and that the defendant caused confusion via the use of "any word, term, name, symbol, or device, or . . . any false designation of origin, false or misleading description of fact, or false or misleading representation of fact." 15 U.S.C. § 1125(a)(1). While a general claim for unfair competition may be made, five specific subcategories of redress available to companies that may find their marks or trademarks improperly used or encroached upon by competitors: (1) "passing off" (also known as "palming off"); (2) false advertising; (3) commercial disparagement; (4) trademark dilution; and (5) misappropriation. Passing Off Passing off is the oldest theory of unfair competition. See Two Pesos v. Taco Cabana, Inc., 505 U.S. 763 (1992). Originating in about 1803 as an offshoot of the tort of fraud and deceit, passing off occurs when one makes a false representation or designation as to the origin of his goods or services, causing consumers confusion as to the source or affiliation of the goods or services. 15 U.S.C. § 1125(a)(1). Simply put, A is liable for passing off when he evokes the impression that his goods are the same as "B's." See, Two Pesos, Inc., 505 U.S. at 779, n.5 (Stevens, J., concurring). In what is referred to as reverse passing off, A sells B's goods under A's name. As is the case with trademark infringement claims, in both types of passing off the plaintiff must demonstrate that the public is likely to be confused by the similarity of the marks. See id. For example, the Second Circuit held that a publisher's adaptations of literary classics could constitute passing off as a result of the enormous similarity between the plaintiff's and the defendant's books, particularly in their abridgment and illustrations. See Waldman Publishing Corp. v. Landoll, Inc., 43 F.3d 775, 782-83 (2d Cir. 1994). Some high-profile companies have been linked to the tort of passing off. In 1981, Nike was accused of permitting professional athletes to doctor athletic shoes by shoe manufacturers other than Nike with Nike's trademark swoosh. Nike v. Rubber Manufacturers Association, Inc., 509 F. Supp. 919 (S.D.N.Y. 1981). During the 1980 Super Bowl, for example, two members of the Los Angeles Rams wore shoes manufactured by another company but had the Nike symbol taped over the real manufacturer's symbol. The court held "that this doctoring activity is precisely the sort of 'implied passing off' conduct which the Lanham Act prohibits: the use by a business competitor, for purposes of selling his own product, of a misbranded sample or representation of another manufacturer's goods." Id. at 924. Similarly, the Eighth Circuit held the Fruehauf Corporation, a leading manufacturer of semi-trailers, liable under the Lanham Act for passing off when it used photographs of another manufacturer's hopper grain trailer in sales literature promoting Fruehauf's own entry in that market. Truck Equipment Services Co. v. Fruehauf Corp., 536 F.2d 1210 (8th Cir. 1976). False Advertising The Lanham Act also provides redress for false advertising, or misrepresentations. See 15 U.S.C. § 1125(a)(1)(B). To constitute a commercial advertisement or promotion under the Act, a representation must be: "(1) commercial speech; (2) by a defendant who is in commercial competition with the plaintiff; (3) for the purpose of influencing consumers to buy the defendant's goods and services." Proctor & Gamble Co. v. Haugen, 222 F.3d 1262, 1273 (10th Cir. 2000). The name of the tort is a bit of a misnomer in that the advertising need not be false on its face. Rather, to prevail in a cause of action for false advertising, it is sufficient that the advertising is misleading by way of being "literally true, yet deceptive, or too ambiguous to support a finding of literal falsity." Herman Miller, Inc. v. Palazzetti Imports & Exports, Inc., 270 F.3d 298, 323 (6th Cir. 2000) quoting American Council of Certified Podiatric Physicians & Surgeons v. American Board of Podiatric Surgery, Inc., 185 F.3d 606, 613 (6th Cir. 1999). To establish a claim for false advertising, a plaintiff must prove that: (1) the defendant made false or misleading statements of fact concerning either his own product or the product of another; (2) the statement either actually deceives or tends to deceive a substantial portion of the intended audience; (3) the statement is material in that it will likely influence consumers' purchasing decisions; (4) the advertisements are in interstate commerce; and (5) a causal link exists between the alleged false advertising and harm to the plaintiff. See Clorox Co. of Puerto Rico v. Proctor & Gamble Commercial Co., 228 F.3d 24, 33, n.6 (1st Cir. 2000). For example, the designer Herman Miller sued Palazzetti Imports and Exports after Palazzetti began selling an exact replica of a chair and ottoman designed and made famous by the plaintiff. In its advertising, Palazzetti identified Herman Miller as the original designer, but did not mention that the furniture was a reproduction. See Herman Miller, Inc., supra 270 F.3d at 304-06. The court held that, although the advertising was not false, Palazzetti failed to fully disclose that it was offering reproductions of the famous furniture. The tort of false advertising is often confused with the practice of "puffery," which is a nonspecific boast, an exaggerated advertisement, "blustering[] and bolstering upon which no reasonable buyer would rely." Clorox Co. of Puerto Rico, supra, 228 F.3d at 33 (quotation omitted). An entity would cross into the area of false advertising rather than puffery if a representation is a more specific and measurable claim of superiority. If an advertisement is literally false, a court may grant relief without consideration of actual consumer reaction. However, in the absence of literal falsity, proof of actual deception must be established, the degree of which depends on the type of relief sought. To recover damages, evidence must show that a "significant portion" of the consumer population was deceived. See Herman Miller, Inc., supra 270 F.3d at 323. A plaintiff seeking injunctive relief must meet a lesser standard and demonstrate that the representations about the product have a tendency to deceive consumers. Id. For Herman Miller, failure to provide enough evidence to support a claim for damages or injunctive relief ultimately proved fatal to the plaintiff's claim. The court found only sparse evidence that a significant portion of the consumer public was actually deceived, or tended to be deceived. Id. Commercial Disparagement A cause of action for commercial disparagement lies when a false or deceptive representation of another's goods or services is made. The tort is designed to compensate a vendor for the pecuniary loss suffered from false statements attacking the quality of his or her goods or services, which ultimately may reduce their marketability. See U.S. Healthcare, Inc. v. Blue Cross of Greater Philadelphia, 898 F.2d 914, 924 (3d Cir. 1990). At common law, to prevail on a claim for disparagement, the plaintiff had to prove that: (1) the disparaging statement of fact was false or an incorrect statement of opinion; (2) no privileges were available; and (3) direct pecuniary loss was suffered as a result of the disparagement (or special damages). While little case law interpreting the commercial disparagement cause of action under the Lanham Act, the elements are presumably similar to those of a claim for false advertising. Currently, there is a split of authority as to whether a plaintiff must demonstrate that the defendant acted with actual malice. See Proctor & Gamble Co. v. Amway Corp., 242 F.3d 539 (5th Cir. 2001). In Proctor & Gamble Co. v. Amway, the Fifth Circuit held recently held that actual malice is not required to prevail on a claim for disparagement. Id. at 567. A claim for commercial disparagement was properly asserted in a situation involving a series of paid advertisements placed in print and broadcast media by two major health care insurance providers, U.S. Healthcare and Blue Cross, Blue Shield. Due to the development of health maintenance organizations (HMOs) in the insurance field, Blue Cross undertook an aggressive marketing campaign consisting of comparative advertisements attacking HMOs. See U.S. Healthcare v. Blue Cross, supra 898 F.2d at 917-18. The advertisements expounded on the disadvantages of U.S. Healthcare's HMO plan, including the limited number of choices available to the patient, restricted access to specialists, and that it was more expensive than the traditional health care plans. One advertisement from Blue Cross particularly struck the court's attention. Although following the same general theme and format of previous Blue Cross advertisements, this one seemed to be "a dramatic departure from the others in that it appears consciously designed to play upon the fears of the consuming public. The commercial features a grief-stricken woman who says, 'The hospital my HMO sent to me just wasn't enough. It's my fault.' The implication of the advertisement is that some tragedy has befallen the woman because of her choice of health care." Id. at 919. U.S. Healthcare did not let this tactic go without recourse. They ran an advertisement attacking Blue Cross's effort to tout the advantages of personal choice. As the Third Circuit pointed out, however, one piece particularly played upon the fears of the public: "[a]s solemn music plays, the narrator lists the shortcomings of Personal Choice while the camera pans from a Personal Choice brochure resting on the pillow of a hospital bed to distraught family members standing at bedside. The advertisement closes with a pair of hands pulling a sheet over the Personal Choice brochure." Id. at 920. The Third Circuit held that both of these advertisements created a cause of action under the Lanham Act in that the "advertisements all make representations about the competitor's product." Id. at 926. Trademark Dilution A cause of action for trademark dilution was added to Section 43 of the Lanham Act in 1995. Referred to as the Federal Trademark Dilution Act, it provides injunctive relief to an owner of a famous mark or trade name when a competitor makes commercial use of that mark which dilutes its distinctive quality. See 15 U.S.C. § 1125(c). The Act provides several factors courts may apply in determining whether a mark is distinctive or famous enough to warrant protection, including: (1) the degree of inherent or acquired distinctiveness; (2) the duration of the use of the mark in connection with the goods or services (usually for a significant period of time); (3) the duration of the advertising and publicity surrounding the mark; (4) the geographical extent of the mark's trading area; (5) the channels of trade used; (6) the degree of the mark's recognition (7) the nature and extent of use of the same or similar marks by third parties; and (8) whether the mark has been registered. See 15 U.S.C. § 1125(c)(1). The Act limits the relief available for dilution by specifically providing that the fair use of a famous mark in comparative commercial advertising; the non-commercial use of a mark; and news reporting concerning the mark, does not constitute dilution. See 15 U.S.C. § 1125(c)(4). Under the Act, a plaintiff has a cause of action only if it can establish the following elements: (1) the senior mark must be famous as well as distinctive; (2) the junior mark must be used in the commercial context; (3) the junior use must begin after the senior mark has become famous; and (4) the junior mark caused dilution of the distinctive quality of the senior mark. See Nabisco, Inc. v. PF Brands, Inc., 191 F.3d 208, 215 (2d Cir. 1999). Distinctiveness is crucial to the trademark concept and governs the degree of protection the mark commands. See V Secret Catalogue, Inc. v. Moseley, 259 F.3d 464, 469 (6th Cir. 2001). The levels of distinctiveness range from the lowest level of protection afforded generic words to be the most distinctive marks, which command the highest level of protection because they intrinsically relate to that product. Once a mark is determined to be famous and distinctive, the next query is whether the mark has been diluted. Dilution materially differs from likelihood of confusion in that "[e]ven in the absence of confusion, the potency of a mark may be debilitated by another's use . . . . [D]ilution is an infection, which if allowed to spread, will inevitably destroy the advertising value of the mark." See V Secret Catalogue, supra, 259 F.3d at 475, (quoting H.R. Rep. No. 104-374 (1995). Nonetheless, many of the factors considered in determining whether a mark has been diluted are similar to those applied in the likelihood-of-confusion test: distinctiveness; similarity of marks; proximity of the products and the likelihood of bridging the gap between the two; the interrelationship of the distinctiveness of the senior mark, similarity of the junior mark, and the proximity of the products; shared consumers and geographic locations; sophistication of the consumers; actual confusion; referential quality of the junior use; harm to the junior user and delay of the senior user; and the effect of the senior user's prior failure to protect its mark. See 259 F.3d at 476; Nabisco v. PF Brands, supra, 191 F.3d at 217-22. The Second Circuit applied these factors recently in Nabisco v. PF Brands, where Pepperidge Farms, producer of the familiar bite-sized, cheddar-flavored crackers shaped like goldfish, successfully enjoined Nabisco from producing a similar orange fish-shaped cracker. Nabisco's cracker resembled that of Pepperidge Farm's in size, color, and taste, although Nabisco's cracker was flatter and slightly larger. Even though Nabisco planned on selling its snack in the same box with other crackers of dissimilar shapes, following an analysis of the various factors, the court held that there was a substantial likelihood that Nabisco's use of its goldfish-shaped cheddar snack would dilute Pepperidge Farms' similar famous and distinct mark. Nabisco, 191 F.3d at 228-29. Misappropriation The tort of misappropriation has traditionally consisted of three basic elements: (1) investment of a significant amount of time, money, skill, or effort to create a product of commercial value; (2) appropriation of that value by another; and (3) injury by the plaintiff as a result. See Nadel v. Play-by-Play Toys & Novelties, Inc., 208 F.3d 368, 378 (2d Cir. 2000). Misappropriation is similar to passing off in that a company attempts to profit from the reputation of a competitor by misappropriating a trademark belonging to the competitor for its own benefit. See Proctor & Gamble v. Haugen, supra, 222 F.3d at 1280. A claim for misappropriation must arise from the theft of an idea that is original or novel because property law does not afford protection of the theft of that which is free and available to all. See Nadel v. Play-by-Play, supra, 208 F.3d at 378. To determine what constitutes a novel idea, the courts may consider several factors, including "the idea's specificity or generality (is it a generic concept or one of specific application?), its commonality (how many people know of this idea?), its uniqueness (how different is this idea from generally known ideas?), and its commercial availability (how widespread is the idea's use in the industry?)." Id. It follows that once an original or novel idea becomes so widely disseminated that it enters the course of common knowledge it may no longer be protectable. The plaintiff in Nadel was deemed to have a cause of action for the misappropriation of an idea he submitted to the defendant toy company. Nadel had pitched the idea to Play-by-Play for a plush monkey toy that sat upright, emitted sound, and spun on a flat surface. Play-by-Play later manufactured a Tasmanian Devil toy having similar properties as the plaintiff's idea in that it snarled, grunted, and spun around on a flat surface. Id. at 380. Play-by-Play maintained that the idea was not novel, but rather one of public domain, offering evidence that the concept had been used in similar plush toys on the market. The court held that the idea was original enough to warrant protection. Id. at 381. Defenses Commonly Asserted in Lanham Act Litigation The most frequent defense to a claim for trademark infringement is that the entity was authorized to use the mark. Generally, such a defense falls into one of two categories: fair use and abandonment. Under the doctrine of fair use, the defendant contends that it was free to use the mark for the limited purpose of describing a product or indicating the product's geographical origin. Thus, while trademarks protect the goodwill of an entity, they do not offer the company a monopoly over particular words or names. 15 U.S.C. § 1115(b)(4). According to the Second Circuit, "It is a generally accepted principle of the trademark law, furthermore, that a senior claim to a mark does not bar a junior from using the same words (or symbols) comprising the mark in their descriptive sense." Nabisco v. PF Brands, supra, 191 F.3d at 221. In assessing the fair use defense, courts weigh two factors against the likelihood of confusion that might exist should the defendant's mark be deemed valid. First, courts examine the manner in which the defendant uses the mark. Here, courts attempt to ascertain whether the defendant's use is strictly to describe the product or service or whether it has attempted to improperly steal some of the plaintiff's market share. Courts particularly consider how the word or symbol is featured on the product. For example, liability under the Lanham Act is likely to occur if the defendant has placed a word that is fundamental to the plaintiff's trademark in a similar position on the product or perhaps with the same font or color scheme. In contrast, if, for example, the plaintiff owns rights in the word "refreshing" for a particular soft drink, the defendant can use the word to describe its product, as long as it is not displayed in a similar way as the plaintiff's. As a second factor, courts consider whether the mark is being used in good faith. Similar to how the factor is applied in the likelihood of confusion test, courts assess whether the defendant is intentionally using the word or symbol as a means of capitalizing on the complaining party's reputation. See Golden Door, Inc. v. Odisho, 437 F. Supp. 956 (N.D. Cal. 1977). Abandonment is another defense. Although applicable only under narrow conditions, abandonment is possible when the junior user of a mark establishes that, because of nonuse or some other conduct or indication by the owner, the senior owner of the mark no longer intends to resume using the mark. See Restatement (Third) of Unfair Competition § 30. Although federal registration of a mark may preclude the inference of abandonment due to nonuse, rights in a trademark are acquired and maintained only through use. See Cerveceria Centroamericana, S.A. v. Cerveceria India, Inc., 892 F.2d 1021, 1023 (Fed. Cir. 1989). Thus, the court's analysis of an abandonment defense is made largely on a case-by-case basis, with much attention given to the trademark holder's occupation or business. Only then can it be determined what constitutes "use" of the mark in that particular field. See Stetson v. Howard D. Wolf & Assoc., 955 F.2d 847, 851 (2d Cir. 1992). Courts look to a party's acts or courses of conduct in determining the intention of a party, such as when the individual or entity announces that it is ceasing use of a mark. See Hiland Potato Chip Co. v. Culbro Snack Foods, Inc., 585 F. Supp. 17 (S.D. Iowa 1982). Under a 1996 amendment to the Lanham Act, nonuse for three consecutive years is prima facie evidence of the intent not to resume usage and thus, abandon the mark. See 15 U.S.C. §1127. Laches is another common defense to either a trademark infringement or unfair competition claim. As a general principle, reasonable diligence is to be used in seeking relief from the infringement of a trademark or to further prevent unfair competition. Thus, laches on the part of the plaintiff may bar his right to an accounting for profits and damages. This defense requires the defendant to prove three things: (1) the plaintiff had knowledge of the defendant's unauthorized use of a confusingly similar mark; (2) the plaintiff unreasonably delayed taking action; and (3) the defendant was unduly prejudiced as a result of the plaintiff's delay. See Restatement (Third) of Unfair Competition§ 31. Besides the three primary aforementioned defenses, other more common defenses are available to an entity that has been sued for violating the Lanham Act. Acquiescence, for example, is a popular defense to trademark infringement and occurs when there is a conscious consent to its use by others. As described in Sweetheart Plastics, Inc. v. Detroit Forming, Inc. 743 F.2d 1039, 1046 (4th Cir. 1984): As distinguished from laches, acquiescence constitutes a ground for denial of relief only upon a finding of conduct on the plaintiff's part that amounted to an assurance to the defendant, express or implied, that plaintiff would not assert his trademark rights against the defendant . . . Acquiescence may be inferred from the trademark owner's affirmative conduct toward the defendant. For example, . . . attempt[ing] to sell ingredients to the defendant to be used in making [the infringing] product . . . Finally, another defense employed by parties facing liability under the Lanham Act is "unclean hands." A defendant may escape culpability if he or she can successfully argue that the plaintiff used the mark "in violation of public policy," or if the claimant "engaged in other substantial misconduct directly related to the owner's assertion of rights in the trademark, trade name, collective mark, or certification mark." Restatement (Third) of Unfair Competition § 32. Remedies Under the Lanham Act For the successful plaintiff in an infringement or unfair competition action, recourse comes by way of injunctive relief and/or damages. Injunctions are perhaps the most common form of redress. See Vidal Sassoon, Inc. v. Bristol-Myers Co., 661 F.2d 272 (2d Cir. 1981). This is because, after finding the necessary evidence of a Lanham Act violation, the court needs to proceed no further than the consideration of four basic factors in determining whether to grant injunctive relief: (1) the plaintiff's likelihood of success on the merits; (2) the existence of irreparable injury to the plaintiff; (3) the respective hardship that the court's grant or denial will have on each party; and (4) the public interest. See Mattel, Inc. v. Azrak-Hamway International, Inc., 724 F.2d 357 (2d Cir. 1983). This analysis is far easier than that which is applied to the nebulous area of restoring the plaintiff back to the financial position he was in prior to the defendant's actions. Generally, the recovery of damages under the Lanham Act requires proof of actual confusion. See International Star Class Yacht Racing Association v. Tommy Hilfiger, U.S.A., Inc., 80 F.3d 749 (2d Cir. 1996). Once established, damages may include compensation for: lost sales or revenue; sales at lower prices; harm to market reputation; or expenditures to prevent, correct, or mitigate consumer confusion. See id. The court has great discretion in determining the amount of compensation owed to a successful plaintiff. Under the Lanham Act, the court bases the judgment on the nature of the harm done, and has the discretion to award any sum above the amount deemed as actual damages, but not exceeding three times that figure. See 74 Am. Jur.2d, "Trademarks and Tradenames" § 137. Thus, if the court finds that the amount of the recovery based on profits is either inadequate or excessive, it may enter judgment for an amount the court finds to be just in light of the circumstances surrounding the case. Additionally, a monetary award in the amount of the defendant's profits may be granted on a showing by the plaintiff that the defendant has been unjustly enriched, the plaintiff has sustained damages from the infringement, or an accounting is necessary to deter a willful infringer from infringing again. Thus, in line with the extensive discretion allowed the courts in providing monetary relief to a successful plaintiff in a Lanham Act case, courts sometimes permit plaintiffs to recover both the actual damages they can prove as well as the defendant's profits. However, plaintiffs are not allowed to obtain a double recovery for the same sales. An accounting of profits is not automatically granted upon a showing of trademark infringement. Instead, courts look at six factors in determining whether such redress is the best means of compensating the plaintiff: (1) whether the defendant intended to confuse or deceive; (2) whether sales were diverted; (3) the adequacy of other remedies; (4) any unreasonable delay by the plaintiff in asserting his rights; (5) the public interest in making the conduct unprofitable; and (6) whether it is a case of passing off. Likewise, the unavailability of actual damages as a remedy in a particular trademark infringement case does not preclude a plaintiff from recovering an accounting of a defendant's profits. See International Star Class Yacht Racing Association, supra, 80 F.3d at 749; Bishop v. Equinox Intern. Corp., 154 F.3d 1220 (10th Cir. 1998). Finally, in exceptional circumstances, the court may award reasonable attorney fees to the prevailing party. This happens rarely, as the trademark infringement must be malicious, fraudulent, deliberate or willful to support such an award. See Seatrax, Inc. v. Sonbeck International, Inc., 200 F.3d 358 (5th Cir. 2000). For example, an award of attorneys' fees was deemed appropriate in Porous Media Corp. v. Pall Corp., 110 F.3d 1329 (8th Cir. 1997), because the competitor intentionally set out to deceive or confuse the public through publication of false statements concerning its products, as well as in comparison to the manufacturer's products. Conclusion The stability of a free marketplace depends upon the confidence of its participants-both businesses and consumers. It cannot be self-regulated-it is too vast for that. The Lanham Act is one of the keys to the continuing stability, vitality, and growth of the free marketplace. By understanding this Act, attorneys can protect their clients and clients can become more successful by having their original ideas protected, thus stimulating further advances in business, science, and the arts. Clients should reap the benefits of their creativity, and achieve the growth and prosperity they deserve. Copyright 2002 Defense Research Institute, Inc. First published in the June 2002 issue of For The Defense. For subscription information call [800] 667-8108.