DATELINE: January 25, 2007, Chicago
12345 9 or 10
Money can't buy you back the love that you had then
Feist, from the Reminder (aka the iPod Nano song)
On August 8, 2007, Johnson & Johnson (J&J) filed suit against the American Red Cross (ARC) over alleged trademark infringements by ARC. As we understand the dispute, J&J claims that it owns the trademark for the "Red Cross" symbol before ARC even came into existence. Despite its alleged ownership, J&J acknowledges that ARC has certain rights in the trademark which were acquired through act of Congress and licensing agreements with J&J. According to J&J's complaint, ARC and its licensees have been using the trademark to promote commercial products that compete with J&J's line of products. J&J contends that this use exceeds ARC's right to use the trademark in furtherance of its charitable mission.
ARC responded on September 20, 2007, with a 48-page answer. Not only does ARC...
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deny most of J&J allegations, but it looks to the trademark's long and twisted history, counterclaiming that J&J is expanding what ARC claims is a limited grandfathered right on the part of J&J to use the trademark. In other words, ARC's counterclaims turns J&J claims on their head. According to ARC's view of the history, it is J&J who is violating ARC's trademark.
The dispute is based on ARC's decision to license the right to use the trademark to certain commercial enterprises, permitting one to manufacture and sell first aid and emergency preparedness kits bearing the Red Cross trademark. J&J contends that this is outside of ARC's charitable mission, and therefore not permitted under the rules govering ARC's usage. In its answer, ARC contends that J&J acquiesced to such sales long ago.
Not being experienced in the intricacies of trademark law or knowleagable regarding the trademark's long and convoluted history, we do not take a position on the merits of either side's claims, but we do believe the lawsuit offers two clear lessons for charities.
LESSON 1: Charities must consider intellectual property when they develop their own property and before they use the intellectual property of others.
Over the last two decades, the commercial world has become much more attuned to the value of brand names, images, and ideas embedded in different types of media. Enterprises are monitoring media and distribution channels to make sure that others are not infringing on the enterprise's rights through the unauthorized use of property. When an enterprise encounters someone violating its rights, it is often quick to ask the violator to cease and desist. Depending on the response and the degree of past infringement, the enterprise may decide to sue for monetary damages. With its lawsuit, J&J has demonstrated that commercial enterprises will not be dissuaded from pursing legal remedies just because the alleged infringer possesses a charitable halo. In fact, an organization like J&J may have no choice but to commence legal action. Failure to do so could jeopardize its interests in a trademark or other intellectual property. Moreover, failure to stop use of the trademark in the commercial marketplace could result in consumers mistakenly confusing a commercial enterprise's products with products made by another company. This represents a particularly serious problem when the other products are inferior in quality.
In reading ARC's complaint, it is apparent that ARC believes that doing good deeds should buy it some relief. Much of the first portion of its answer to J&J's complaint focuses on its charitable efforts. For example, the first section of ARC's answer states:
From its inception over a Century ago, the Red Cross has been charged with developing and maintaining a "system of national and international relief in time of peace," applying that system "in mitigating the sufferings caused by pestilence, famine, fire, floods, and other great national calamities," devising and carrying out "measures for preventing the same," and generally "promot[ing] measures of humanity and welfare of mankind."
Later in the answer, ARC states:
The fact is that J&J's lawsuit has had the effect of interfering with and impeding the Red Cross' preparedness and health and safety mission, diverting attention and resources away from vital activities, and during hurricane season at that. Even now, after the sixth anniversary of September 11, the vast majority of Americans remain unprepared for national disaster. The distribution and sale of these Red Cross products, which J&J now seeks to stop, is aimed at making it easier for Americans to purchase these life-saving, emergency and health and safety products and putting preparedness in the hands of the American public.
That is fine, but ARC isn't entitled to any special rights just because it does good. In short, we view this line of argument as irrelevant.
ARC's focus on its activities, however, is relevant to the extent that ARC is arguing supporting the distribution of these kits is part of its charitable mission. In J&J's view, this is an expansive reading of ARC's mission because it permits ARC to then enter a competitive and commercial marketplace. J&J argues that ARC's charitable mission is limited to activities that commercial enterprises do not perform. This discourse is legitimate given the need to define "charitable mission."
LESSON 2: Charities must understand the nature of voluntary partnerships between commercial enterprises and charities. We hear lots of talk about the new philanthropy, social entrepreneurship and other related buzz words. Although some of the commercial enterprises that enter into these partnerships do so in part to accomplish good deeds, there is often an expectation that such partnerships will produce profits. The nonprofit partners should not be naïve in assessing motivations. There is a good chance a commercial partner will enforce its rights if a nonprofit doesn't live up to its side of the bargain, no matter how noble the cause.
Some of the commentary that has been written about this dispute claims that J&J's decision to file the suit was a terrible public relations move. We don't think so, particularly when it specifies that any proceeds from the suit will be donated to charity. Nonprofits can't have it both ways.
There is a third lesson here: this one being for commercial enterprises. Nonprofits may wear halos, but they too will enforce their rights and can be junkyard dogs when doing so. ARC's answer sets out some persuasive arguments that newspaper accounts have seemingly discounted—probably because much of the information in ARC's answer is new in terms of the public dispute. The question: Is ARC is the mouse that roared? Time will tell.
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